Interest rates are hitting bank profits with Westpac’s full-year cash profit falling 15% to $6.85 billion.

The major bank has cut its final dividend from 94 cents to a fully franked 80 cents and announced $2.5 billion in capital raising.

Westpac CEO Brian Hartzer tells Ross Greenwood he is hoping confidence will return to the economy.

“We’re getting to a point where rates at this level… we can’t really adjust our deposit rates down much more, despite there being pressure on lending rates, so that does squeeze our margins.

“The other things we are dealing with is slow loan demand… it’s a very competitive market out there.

“The other big feature here is that we have encouraged significant costs associated with extra regulatory requirements.

“All of that adds up and has made it a very difficult year for us.”

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Image: Getty/Peter Parks