Some will still face challenges as the economic impact of the war is felt in Australia this year, while growth slows and fuel costs remain elevated, Westpac said on Tuesday.
The nation's second-largest bank also warned that the federal government needs to ensure Australia is better prepared for future events, including ongoing investment in a reliable, sustainable energy system.
"As a country, we must embrace the opportunity for genuine reform to ensure the nation remains competitive," bank boss Anthony Miller said in a statement a week out from the federal budget.
"Our stability sets us apart, but only when combined with more efficient and effective regulation.
"Boosting productivity must be the country's priority, particularly through an uplift in skills and training alongside a committed and inclusive adoption of AI and other emerging technologies."
Westpac on Tuesday delivered a slight increase in interim earnings, with its headline profit rising three per cent to $3.4 billion in the six months to March 31.
Its net profit excluding big items rose one per cent to $3.5 billion on revenue of $11.3 billion.
"While our customers are resilient and stress levels have declined, we've taken a prudent approach and increased our provisions," Mr Miller said.
In April, Westpac warned that the conflict, which erupted on February 28 when the US attacked Iran, had dented earnings from its treasury and markets trading division as global volatility increased.
But during the half year, more Australians turned to Westpac for their mortgage needs, with housing loans rising seven per cent year-on-year.
Business lending also increased by 16 per cent.
"Westpac is well-positioned to deal with the impacts of ongoing conflict," Mr Miller said.
The bank's core net interest margin, which reflects the profitability of its lending business, dipped slightly as the performance of its treasury division weighed.
Westpac will pay shareholders an interim dividend of 77 cents, up one cent from the previous corresponding half.
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