(Adds comments from CEO and analysts) Westpac (WBC) lowered its...

(Adds comments from CEO and analysts)

Westpac (WBC) lowered its return on equity target on Monday, squeezed by lower interest rates and higher funding costs, after reporting a flat annual cash profit.

Australia's second-biggest bank by market value reported cash profit of A$7.82 billion ($6 billion) for the year ended Sept. 30, unchanged from a year earlier and in line with an average estimate of a 0.1 percent rise from 14 analysts surveyed by Thomson Reuters I/B/E/S.

The cash profit figure excludes one-offs and non-cash accounting items.

Australian bank margins have been under pressure from higher wholesale funding and deposit costs, as well as regulatory changes requiring them to hold more capital against their mortgage books to provide a more level playing field for smaller rivals.

Westpac announced a final, fully-franked dividend of $A0.94 per share, the same as the previous year.

“There are no real surprises," Shaw and Partners analyst David Spotswood said. "Everything has come in pretty much in line.”

Westpac said it would lower its return on equity (ROE) target to 13-14 percent from 15 percent for the medium term given lower interest rates and higher regulatory capital requirements. It reported a 14 percent ROE for the year ended Sept. 30, down from 15.8 percent a year earlier.

Westpac Chief Executive Brian Hartzer said on Monday the outlook for Australia remained positive overall, with gross domestic product expected to grow around 3 percent in 2017. But he said housing credit growth was likely to ease a little as price growth slowed.

Investors in Australian banks have expressed concern about the sustainability of rising property prices, particularly in Sydney and Melbourne, where Asian investors have purchased many inner city apartments.

Westpac said there had been a small rise in consumer and business delinquencies over the last year that suggested the asset quality cycle had turned negative.

Impairment charges rose by 49 percent to A$1.124 billion compared with the prior year, although A$231 million of the rise was attributed to exposure to a select group of institutional clients.

Westpac is the last of the big banks reporting results for the year ended Sept. 30. Rival National Australia Bank (NAB) (NAB) posted a 2 percent rise in cash earnings, while ANZ reported an 18 percent decline.

($1 = 1.3011 Australian dollars)