"will Westpac's Risk Management Department take away earnings and plow them into loan loss reserves"

IMO reserves for bad debts will increase a bit due to current econimic conditions, which only makes sense, but not enough to seriously affect earnings.

Such reserves have to be adjusted annually based on actual experience over the year, so if they over do it, over-reserves will be corrected at fiscal year end and restored to earnings.

"Will Westpac's Stock Price recover in the next two year period?"

Yes, slowly, as economic conditions improve.

Long WestPac, NAB.