Westpac Banking Corporation · ASX:WBC
Westpac Banking — H1 2015 Earnings Presentation
147 slides from Westpac Banking's earnings presentation, May 4, 2015
Slide 1: Westpac Banking Corporation
For personal use only Westpac Banking Corporation ABN 33 007 457 141.
Slide 2: Westpac First Half 2015 result index
Westpac First Half 2015 result index For personal use only Presentation of First Half 2015 Result 3 Investor Discussion Pack of First Half 2015 Result 33 Strategy 34 Overview 37 Performance discipline 38 Service revolution 45 Digital transformation 47 Targeted growth 50 Workforce revolution 51 Susta
Slide 3: 2015 Interim Financial Results
For personal use only 2015 Interim Financial Results Brian Hartzer Chief Executive Officer Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 4: Operating divisions delivering, bottom line lower
Operating divisions delivering, bottom line lower For personal use only • Solid operating performance, especially retail and business banking • Cash earnings affected by ‒ Derivative adjustments1 ‒ Lower Treasury earnings • Strength a hallmark of the Group • Positive economic outlook but some near-t
Slide 5: Headline results
Headline results For personal use only Change Change 1H15 1H15-1H14 1H15-2H14 Cash earnings $3,778m 0% (2%) Cash EPS1 121.3c 0% (2%) Reported NPAT $3,609m 0% (8%) NIM (excl. Treasury and Markets) 2.01% 0bps 0bps Impairment charge to avg. gross loans 11bps (1bp) 0bps Return on equity2 15.8% (67bps) (
Slide 6: Solid performance across operating divisions
Solid performance across operating divisions For personal use only Cash earnings ($m) 1H14 2H14 1H15 Operating divisions1 3,671 3,766 3,819 Cash earnings growth 4.0% 2.6% 1.4% Core earnings growth2 1.7% 3.2% 2.2% Group businesses3 101 90 44 Derivative adjustments4 0 0 (85) Total Group 3,772 3,856 3,
Slide 7: Strength a hallmark
Strength a hallmark For personal use only Stable funding ratio1 (%) Total liquid assets3 ($bn) 127 134 137 83.4 83.2 83.2 77.0 103 FY11 1H14 2H14 1H15 FY11 1H14 2H14 1H15 Stressed assets to TCE2 (%) Common equity Tier 1 capital ratio (%) 2.5 8.8 9.0 8.8 7.4 1.4 1.2 1.1 FY11 1H14 2H14 1H15 FY11 1H14
Slide 8: Prudent capital management
Prudent capital management For personal use only • Strongly capitalised and Common equity Tier 1 capital ratio (%) moving to upper end of Preferred range preferred range 8.75% – 9.25% ‒ 1.5% discount applied 9.1 9.3 to DRP market price 8.7 8.8 9.0 8.8 8.2 7.7 ‒ Partially underwriting DRP 7.4 ‒ Adds
Slide 9: Balancing growth, productivity and return
Balancing growth, productivity and return For personal use only Mortgages1 and household deposits2 system NIM (excl. Treasury and Markets) (%) multiple (x) Household deposits Mortgages 1.3 2.01 2.01 2.01 1.0 1.0 1.0 0.9 0.9 1H14 2H14 1H15 1H14 2H14 1H15 Expense growth (%) ROE (%) 3.3 16.5 16.4 15.8
Slide 10: Consistent growth in retail and business banking cash earnings
Consistent growth in retail and business banking cash earnings For personal use only Westpac RBB ($m) St.George ($m) Westpac NZ1 ($NZm) 1,350 1,330 837 1,253 806 441 769 432 432 1H14 2H14 1H15 1H14 2H14 1H15 1H14 2H14 1H15 1 In A$ 1H15 cash earnings $413m (up 4% on 2H14 and 5% on 1H14). 10 | Westpac
Slide 11: Steadily building customer franchise
Steadily building customer franchise For personal use only Total consumer satisfaction1 Customer numbers (#m) Customers with a wealth (%) product2 (%) WRBB SGB Peers WRBB SGB WRBB SGB Peers 10.1 9.8 21.8 9.3 86.6 3.7 19.5 3.6 3.2 83.7 83.7 17.1 83.0 81.7 14.6 6.1 6.2 6.4 12.3 Mar-13 Mar-14 Mar-15 1H
Slide 12: BT growing franchise, although earnings down from insurance claims
BT growing franchise, although earnings down from insurance claims For personal use only BT cash earnings ($m) FUM and FUA ($bn) FUM FUA Funds Management Insurance Capital & other 125 107 113 103 Up 2% 82 89 Down 2% Up 26% 459 451 441 11 29 Up 17% 26 174 131 1H14 2H14 1H15 150 Insurance premiums ($m
Slide 13: Lower WIB earnings impacted by derivative adjustments
Lower WIB earnings impacted by derivative adjustments For personal use only Cash earnings components ($m) Core earnings up 4% 67 (25) (23) (2) (25) 717 709 (85) 624 Lower impairment benefit Down 1% Down 13% 2H14 Net II Non-II Expenses Impairments Tax & NCI 1H15 before Derivative 1H15 derivative adju
Slide 14: Strategy/Outlook
For personal use only Strategy/Outlook Brian Hartzer Chief Executive Officer Westpac Banking Corporation ABN 33 007 457 141.
Slide 15: Westpac vision
Westpac vision For personal use only To be one of the world’s great service companies, helping our customers, communities and people to prosper and grow 15 | Westpac Group Half Year 2015 Presentation & Investor Discussion Pack
Slide 16: Our strategic priorities will deliver for all stakeholders
Our strategic priorities will deliver for all stakeholders For personal use only Performance Service Digital Targeted Workforce Discipline Revolution Transformation Growth Revolution Strategic Priorities Region’s One of the Best World’s 21st Building new Talent Performing Great Century Growth Factor
Slide 17: Expectations for operating environment
Expectations for operating environment For personal use only Global economic conditions are mixed Outlook for Australia remains positive Economy currently in transition, expect 2015 GDP growth around 2.2% - Expect uneven growth across industry sectors and geographies - Lift in consumer and business
Slide 18: Well positioned for our third century
Well positioned for our third century For personal use only Drivers of value in good shape, each division has a clear strategy and is performing well High quality management team continuing to manage the business in a balanced way Service Revolution program well underway, delivering a better experie
Slide 19: 2015 Interim Financial Results
For personal use only 2015 Interim Financial Results Peter King Chief Financial Officer Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 20: Solid performance before Treasury and derivative adjustments
Solid performance before Treasury and derivative adjustments For personal use only Cash earnings ($m) 59 (73) 3,856 (32) (32) 3,778 Down 2% 2H14 Operating Expenses Impairment Tax & NCI 1H15 income charges Income/Expenses ($m) 1H15- 1H15- 1H14 2H14 1H15 1H14 (%) 2H14 (%) Total operating income 9,859
Slide 21: $159m drag from infrequent and volatile items
$159m drag from infrequent and volatile items For personal use only Reported profit versus cash earnings ($bn) Cash earnings impact of infrequent/volatile items ($m) Reported profit Cash earnings 2H13 1H14 2H14 1H15 Asset sales (Hastings/Visa 21 30 29 6 3.94 shares) 3.86 3.77 3.78 Performance fees 4
Slide 22: Areas of interest in result
Areas of interest in result For personal use only Features of Disciplined growth/margin Investor property Markets and outcomes regulation Treasury income Asset quality Expenses a highlight and Capital tightly managed sector deep dives considerations 22 | Westpac Group Half Year 2015 Presentation & I
Slide 23: Markets customer income higher offset by derivative valuation adjustments
Markets customer income higher offset by derivative valuation adjustments1 For personal use only Markets income by component ($m) Customer Market risk Derivative valuation Total income related income adjustments1 531 528 455 470 449 420 380 389 140 147 84 72 67 (1) (22) (153) 2H13 1H14 2H14 1H15 2H1
Slide 24: Treasury income lower, substantial rebasing from GFC highs
Treasury income lower, substantial rebasing from GFC highs For personal use only Treasury income ($m) Historical view Last five halves 1000 970 Treasury income ($m) 20.0% % of Group income 376 900 18.0% 800 756 16.0% 720 700 14.0% 303 618 600 577 12.0% 473 201 500 10.0% 400 8.0% 170 306 5.8 123 4.5
Slide 25: Sound new lending growth offset by higher run-off
Sound new lending growth offset by higher run-off For personal use only Australian mortgage lending1,2 ($bn) Managing investment property lending growth 37.0 (25.2) • APRA indicated potential capital requirements if 36.9 (23.9) 362.8 investor property lending growth above 10% 351.0 338.0 benchmark U
Slide 26: NIM excluding Treasury and Markets well managed
NIM excluding Treasury and Markets well managed For personal use only Net interest margin (NIM) movement (%) NIM down 1bp NIM excl. 2.11 Treasury & 2.06 (6bps) 3bps (1bp) (1bp) (1bp) 5bps 2.05 Markets 0.10 0.05 0.04 Treasury & 2.01 2.01 2.01 Markets impact NIM excl. Treasury & Markets flat on NIM 1H
Slide 27: Well controlled expenses in 1H15
Well controlled expenses in 1H15 For personal use only Composition of expense growth per half (%) Expense movements ($m) Operating expenses Amortisation 144 (113) FX Lloyds 19 4,231 23 4,254 4,212 4,181 3.3 4,065 2.9 2.9 0.9 0.6 0.7 Up 0.6% Up 0.7% Up 0.4% 0.6 0.8 1.7 0.1 1.2 0.6 1H15 pre FX Product
Slide 28: Asset quality a highlight
Asset quality a highlight For personal use only Stressed exposures as a % of TCE Stressed exposure by industry over last 3 halves ($bn) 3.5 Watchlist & substandard 1H15 lower stressed exposure 90 days past due and not impaired 3.0 Impaired 1H15 higher stressed exposure 3.20 2.5 3.09 2.0 2.48 1.5 2.1
Slide 29: Sector deep dives
Sector deep dives For personal use only Commercial property portfolio Mining portfolio TCE $64.8bn TCE $11.7bn Lending $50.5bn Lending $7.0bn % of Group TCE 7.11% % of Group TCE 1.28% % of portfolio graded as stressed1,2 1.75% % of portfolio graded as stressed1,2 3.67% % of portfolio in impaired2 0.
Slide 30: Impairments up off a low base, strong provisioning cover
Impairments up off a low base, strong provisioning cover For personal use only Impairment charge movements ($m) Individually assessed Collectively assessed New IAPs Write-backs Write-offs direct Other movements in Total & recoveries collective provisions 555 349 335 293 409 382 331 371 330 341 309 3
Slide 31: Capital drivers and considerations
Capital drivers and considerations For personal use only Common equity Tier 1 ratio (% and bps) Known capital impacts 12.73 • RBNZ changes to investment property loans • Changes in IRRBB calculations Organic Other items • Adjustment for wealth leverage4 (Westpac 109 (72) Group not affected) (7) (12)
Slide 32: Considerations for 2H15
Considerations for 2H15 For personal use only All divisions continuing to show good momentum Disciplined growth in housing, business lending, household deposits and wealth to continue Asset competition expected to continue with lower funding and deposit costs helping to offset. Aiming for flat margi
Slide 33: Investor Discussion Pack
For personal use only 2015 Interim Financial Results Investor Discussion Pack Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 34: Strategy
For personal use only 2015 Interim Financial Results Strategy Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 35: Our strategic priorities will deliver for all stakeholders
Our strategic priorities will deliver for all stakeholders For personal use only Performance Service Digital Targeted Workforce Discipline Revolution Transformation Growth Revolution Strategic Priorities Region’s One of the Best World’s 21st Building new Talent Performing Great Century Growth Factor
Slide 36: Westpac stands for
STRATEGY Westpac stands for For personal use only Service focussed Strategically well placed Focussed on core markets • Our vision is to be one of the world’s great • No 1 or 2 position across key markets with all • Major Australian bank most focussed on service companies, helping our customers, div
Slide 37: Overview
For personal use only 2015 Interim Financial Results Overview Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 38: Westpac Group at a glance, Australia's First Bank
PERFORMANCE DISCIPLINE Westpac Group at a glance, Australia’s First Bank For personal use only • Australia’s first bank and first company, opened in 1817 Westpac WRBB SGB BT WIB • Australia’s 2nd largest bank, and 12th largest bank in the world, ranked NZ by market capitalisation1 Westpac Retail St.
Slide 39: 1H15 financial snapshot
PERFORMANCE DISCIPLINE 1H15 financial snapshot For personal use only Change1 Change1 Change1 Change1 1H15 1H15 – 1H14 1H15 – 2H14 1H15 1H15 – 1H14 1H15 – 2H14 Balance sheet Earnings2 Total assets ($bn) 796 9% 3% EPS3 (cents) 121.3 0% (2%) Common equity Tier 1 capital 8.8 (6bps) (21bps) ratio (APRA b
Slide 40: 1H15 cash earnings summary
PERFORMANCE DISCIPLINE 1H15 cash earnings summary For personal use only Cash earnings Cash earnings 1H15 – 2H14 ($m) Cash earnings1H15 - 1H14 ($m) 1H15 % chg1 % chg1 ($m) 1H15-1H14 1H15-2H14 115 (56) (73) (32) 257 (96) (189) 3,856 (32) 3,778 3,772 34 3,778 0 Net interest income 6,934 4 2 Non-interes
Slide 41: Actively managing returns
PERFORMANCE DISCIPLINE Actively managing returns For personal use only 1H15 Return on average interest-earning 1H15 2H13 1H14 2H14 ex deriv. assets (AIEA) (%) Actual adjust.1 Net interest income (margin) 2.12 2.11 2.06 2.05 2.05 Derivative adjustments - - - (0.04) - Non-interest income 0.99 1.00 0.9
Slide 42: Retail and business banking engine room of growth
PERFORMANCE DISCIPLINE Retail and business banking engine room of growth For personal use only 1H15 divisional contribution to cash earnings1 ($m) 1H15 divisional contribution to core earnings1 ($m) 3,856 20 31 (8) (85) (8) 16 (44) 5,780 37 34 (13) (122) 40 29 (19) 5,766 3,778 WIB total (93) WIB tot
Slide 43: Continued to grow dividend
PERFORMANCE DISCIPLINE Continued to grow dividend For personal use only • 1H15 ordinary dividends of 93 cents, up 1% (up 3% on 1H14) Dividends per share (cents) • Payout ratio of 77% (ex derivative adjustments payout ratio 75%) – Acting to increase capital ratios by issuing shares to satisfy the Spe
Slide 44: Cash earnings and reported net profit reconciliation
PERFORMANCE DISCIPLINE Cash earnings and reported net profit reconciliation For personal use only Cash earnings policy1 Reported net profit and cash earnings1 adjustments ($m) • Westpac Group uses a measure of performance referred to as cash earnings to assess financial performance at both a Group a
Slide 45: Delivering digital innovation for customers
SERVICE REVOLUTION Delivering digital innovation for customers For personal use only Westpac Live won Best Innovative St.George won the Best ‘St.George Fingerprint logon’ won Online Banking Service in Money New Innovative Product the Security & Fraud Management Magazine’s 2015 Best of the Best for i
Slide 46: Steadily building customer franchise
SERVICE REVOLUTION Steadily building customer franchise For personal use only Customer numbers and depth of Initiatives to drive customer growth Customer satisfaction relationship and satisfaction Customer numbers (#m) Total consumer satisfaction2 (%) Smart ATMs as a % of ATM network WRBB SGB WRBB S
Slide 47: Digital transformation is reshaping the company
DIGITAL TRANSFORMATION Digital transformation is reshaping the company For personal use only Supporting the service revolution Digital transformation Building technology architecture for the future Delivering digital solutions that improve Migration to digital is removing • Material upgrade in techn
Slide 48: Digital transformation continues
DIGITAL TRANSFORMATION Digital transformation continues For personal use only 3.1m 300K >13% 2.5% >200% consumers business customers increase in active increase in digital digital sales as a migrated to migrated to digital customers in gross productivity % of retail sales Westpac Live Westpac Live 1
Slide 49: Our customer focused technology strategy continues to deliver
DIGITAL TRANSFORMATION Our customer focused technology strategy continues to deliver For personal use only We are building a world-class technology leadership team focused on developing our target architecture and transforming our infrastructure. The team continues to drive efficiencies to create th
Slide 50: Building new growth highways
TARGETED GROWTH Building new growth highways For personal use only • Helping to deepen customer relationships while providing high quality earnings and low capital intensive growth • Proven track record of delivering wealth/insurance products to customers1 Targeted • Technology providing better cust
Slide 51: Workforce revolution
WORKFORCE REVOLUTION Workforce revolution For personal use only LTI2 frequency rate ‘Workforce revolution’ is a program Women in leadership positions1 (%) (rolling 12 months) (#) to further transform Westpac’s workforce to encourage and retain the best talent 44 1.8 43 1.4 • ‘Building a high perform
Slide 52: Continued sustainability leadership
SUSTAINABLE FUTURES Continued sustainability leadership For personal use only Sustainability strategic priorities 1H15 progress Priority Objectives 1H15 progress 1 Help improve the way people work and live as our society changes • Women in leadership steady at 44%, and up from 1 • Ensure our workfor
Slide 53: Helping communities prosper and grow
SUSTAINABLE FUTURES Helping communities prosper and grow For personal use only Supporting communities1 Income tax expense on a cash earnings 1H14 2H14 1H15 basis ($m) $46bn Funding Provide loans to help millions of new lending2 Notional income tax based on the economic Australians own their home or
Slide 54: Earnings Drivers
For personal use only 2015 Interim Financial Results Earnings Drivers Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 55: Net operating income up 1%
REVENUE Net operating income up 1% For personal use only • Net operating income up 1% Net operating income movement half on half ($m) • Net interest income up 2% – AIEA1 growth of 3% mostly from rise in Australian mortgages (86) 245 (103) 10 10 (11) (45) (10) 10,020 – Customer deposit growth of 3%,
Slide 56: Loan growth predominantly from Australian mortgages and institutional
REVENUE Loan growth predominantly from Australian mortgages and institutional For personal use only • Westpac Group loans up 4% (up 3% excluding foreign exchange Net loans ($bn) translation impacts) • Australian mortgage lending up 3% – Small rise in new lending although run-off increased 6% reflect
Slide 57: Australian mortgages driver of lending growth
REVENUE Australian mortgages driver of lending growth For personal use only • Australian mortgage market share1 of 23.1% Australian mortgage lending volumes2,3 ($bn) – Grew at 0.9x system1 • 3% lift in balances 37.0 ( 25.2) – Higher new lending volumes 36.9 ( 23.9) 362.8 – Partly offset by run-off o
Slide 58: Business remains subdued, with high repayment levels continuing
REVENUE Business remains subdued, with high repayment levels continuing For personal use only • Westpac Group business lending up 4%, primarily driven by institutional Australian business banking customers5 (#000) customers • WIB business balances up 6% – Majority of growth in corporate and institut
Slide 59: Consumer finance supported by growth in auto finance
REVENUE Consumer finance supported by growth in auto finance For personal use only • Total Australian consumer finance up 3% to $21.1bn Australian credit card and personal loan applications4 (#’000) • Growth across both personal lending and credit cards modest – Applications for credit cards down 4%
Slide 60: High quality deposit focus, liquidity coverage ratio higher at 114%
REVENUE High quality deposit focus, liquidity coverage ratio higher at 114% For personal use only • Liquidity coverage ratio1 higher at 114% Liquidity coverage ratio • Customer deposit LCR outflow favourable movements reflects quality improvements within the deposit book including Sep-145 Mar-15 – S
Slide 61: Delivered good growth across the New Zealand portfolio
REVENUE Delivered good growth across the New Zealand portfolio For personal use only • Mortgage growth of 3% Balance sheet (NZ$bn) – Good growth in a competitive market – Proportion of fixed rate mortgages now 73% of the portfolio Change 1H14 2H14 1H15 1H15-2H14 (%) – 83% of the portfolio in <80% LV
Slide 62: Flat net interest margin excluding Treasury and Markets
REVENUE Flat net interest margin (NIM) excluding Treasury and Markets For personal use only • NIM down 1bp to 2.05% due to lower Treasury income Net interest margin (%) • NIM up across WRBB (1bp), New Zealand (2bps), and slightly down in St.George (2bps). Most margin pressure in WIB (down 11bps) NIM
Slide 63: Non-interest income impacted by derivative adjustments
REVENUE Non-interest income impacted by derivative adjustments For personal use only • Non-interest income down 2% Non-interest income ($m) – Fees and commissions up 1% to $1,478m, mostly from seasonally higher points redemption income associated with credit cards Fees and commissions – Wealth and i
Slide 64: Markets and Treasury income
REVENUE Markets and Treasury income: lift in customer business, treasury and derivative valuation adjustments lower1 For personal use only • Markets income down 4% (down 15% 1H15/1H14) Markets income by activity ($m) ‒ Market volatility saw a lift in customer flow, with customer income up 8%, while
Slide 65: Expense growth well controlled
EXPENSES Expense growth well controlled, expense to income ratio at lower end of global peers For personal use only Components of expense growth (%) Expense movement ($m) Operating expenses Amortisation FX translation Lloyds 144 (113) 63 (13) 4,212 (31) 4,231 23 4,254 4,181 3.3 4,065 2.9 2.9 2.0 0.6
Slide 66: Disciplined investment spend, focused on growth and productivity
EXPENSES Disciplined investment spend, focused on growth and productivity For personal use only Investment spend Investment spend Investment spend 1H14 2H14 1H15 1H14 2H14 1H15 1H14 2H14 1H15 capitalised ($m) expensed ($m) capitalised ($m) Capitalised software Growth and productivity 169 166 148 Gro
Slide 67: Productivity savings of $113m
EXPENSES Productivity savings of $113m For personal use only • Bank Now/FreshStart branches now $1.4bn saved from efficiency programs since FY09 ($m) 30% of Australian branches1 • Smart ATMs process 23% of deposits in 1,439 113 WRBB and 33% of deposits in Westpac 117 102 NZ 225 • Complaints for reta
Slide 68: Improvements in asset quality leading to low impairment charges
IMPAIRMENT CHARGES Improvements in asset quality leading to low impairment charges For personal use only Impairment charges to average gross loans1 (bps) Impairment charge movements ($m) 9 1 341 Impairment charge 11 (12) 23 100 309 Impairment charge inc. interest adjustment 75 80 88 New IAPs, New IA
Slide 69: Asset Quality
For personal use only 2015 Interim Financial Results Asset Quality Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 70: High quality portfolio with bias to secured consumer lending
ASSET QUALITY High quality portfolio with bias to secured consumer lending For personal use only Asset composition as at 31 March 2015 (%) Cash and balances with central banks Total assets On balance sheet lending Receivables due from other financial institutions Housing Trading securities, financia
Slide 71: A well diversified portfolio across industries and large exposures
ASSET QUALITY A well diversified portfolio across industries and large exposures For personal use only Top 10 exposures to corporations and NBFIs6 Exposures at default1 by sector2 ($m) as a % of total committed exposures7 (%) Finance & insurance3 Largest corporation/NBFI single name exposure represe
Slide 72: Commercial property portfolio well diversified
ASSET QUALITY Commercial property portfolio well diversified For personal use only Commercial property portfolio Commercial property by region (%) Total committed exposure (TCE) $64.8bn NSW & ACT 16 Lending $50.5bn VIC QLD Commercial property as a % of Group TCE 7.11% 45 11 SA & NT Average risk grad
Slide 73: Mining portfolio relatively underweight
ASSET QUALITY Mining portfolio relatively underweight For personal use only Mining portfolio Mining portfolio • Westpac’s direct exposure to mining (category includes energy and TCE $11.7bn resources sector) 1.3% of Group TCE at 31 March 2015 • A high quality portfolio Lending $7.0bn ‒ Diversified b
Slide 74: Portfolio stress continues to reduce
ASSET QUALITY Portfolio stress continues to reduce For personal use only Stressed exposures as a % of TCE and provisions1 ($bn) Provisioning coverage ratios 1H14 2H14 1H15 Impaired (lhs) 90+ days past due and not impaired (lhs) Collectively assessed Watchlist & substandard (lhs) provisions to credit
Slide 75: Improvement in portfolio quality across most sectors
For personal use only 75 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Property & business services Retail lending Wholesale & Retail Trade Agriculture, forestry & fishing Manufacturing across most sectors Stressed exposures by industry ($bn) 1H14 Transport & storage Accommodation, cafes 2H14 & restaurants | West
Slide 76: Provision cover by portfolio category
ASSET QUALITY Provision cover by portfolio category For personal use only Exposures as a % of TCE Provisioning to TCE (%) 2H13 1H14 2H14 1H15 Fully performing portfolio • Small cover as low probability of default (PD) 0.23 0.23 0.22 0.22 98.40 • Includes economic overlay 98.63 Collective provisions
Slide 77: Australian unsecured lending portfolio continues to perform well
ASSET QUALITY Australian unsecured lending portfolio continues to perform well For personal use only • Total Australian consumer unsecured 90+ day delinquencies increased 18bps to 120bps (up Australian unsecured lending 90+ days delinquencies (%) 5bps 1H14/1H15) Credit cards Personal loans (excl Aut
Slide 78: High levels of borrower equity support
ASSET QUALITY High levels of borrower equity support Australian mortgage portfolio For personal use only 1H14 2H14 1H15 1H15 Australian mortgage portfolio Australian housing loan-to-value ratios (LVRs) 2 (%) balance balance balance flow1 Total portfolio ($bn) 338.0 351.0 362.8 37.0 1H15 drawdowns LV
Slide 79: Mortgage customers continuing to repay ahead of schedule
ASSET QUALITY Mortgage customers continuing to repay ahead of schedule For personal use only Borrower repayments Australian home loan customers ahead on repayments1,2 (%) • Australian mortgage customers continue to display a cautious approach to debt levels, taking advantage of historically low Mar-
Slide 80: Australian investment property portfolio sound origination profile
ASSET QUALITY Australian investment property portfolio sound origination profile For personal use only • Investment property loans (IPLs) are 46.3% of Westpac’s Australian mortgage portfolio Strong origination standards • Compared to owner-occupied applicants, IPL applicants are on average • All IPL
Slide 81: Australian mortgage delinquencies at low levels
ASSET QUALITY Australian mortgage delinquencies at low levels For personal use only Australian mortgage portfolio 1H14 2H14 1H15 Australian mortgages delinquencies (%) 30+ days delinquencies (bps) 128 108 124 90+ days delinquencies (bps) 50 47 47 90+ Past Due Total 90+ First Home Buyer 90+ days deli
Slide 82: Lenders mortgage insurance
ASSET QUALITY Lenders mortgage insurance For personal use only • Lenders mortgage insurance (LMI) provides benefits to the Westpac Group Lenders mortgage insurance – Risk transfer / loss mitigation LVR Band • LVR ≤80% • LVR >80% to ≤ 90% • LVR >90% • Low Doc LVR ≤60% • Low Doc LVR >60% to ≤ 80% – Im
Slide 83: Mortgage portfolio stress testing outcomes
ASSET QUALITY Mortgage portfolio stress testing outcomes For personal use only • Westpac regularly conducts a range of portfolio stress tests as part Australian mortgage portfolio stress testing of its regulatory and risk management activities as at 31 March 2015 • The Australian mortgage portfolio
Slide 84: Funding and Liquidity
For personal use only 2015 Interim Financial Results Funding and Liquidity Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 85: Strong liquidity position
FUNDING & LIQUIDITY Strong liquidity position For personal use only • Westpac’s Liquidity Coverage Ratio (LCR) Pro forma % Mov’t 1H15 – Liquidity Coverage Ratio ($m) as at 1H15 114% as at 2H14 pro forma 2H14 • The LCR requires banks to hold 100% of High Quality Liquid Assets1 (HQLA) 59 57 (3) their
Slide 86: Sound funding profile, stable sources providing 83% of all funding
FUNDING & LIQUIDITY Sound funding profile, stable sources providing 83% of all funding For personal use only • Stable Funding Ratio maintained at Maintaining a stable funding profile 83.2% as the Group continues to focus on funding growth through stable funding Funding composition by residual maturi
Slide 87: Wholesale term issuance well diversified
FUNDING & LIQUIDITY Wholesale term issuance well diversified, benefit from broad product capabilities For personal use only 1H15 new term issuance composition1 (%) Australian covered bond issuance5 Remaining capacity By type By tenor 2,3 By currency (8% cap & over-collateralisation) ($bn) Issued ($b
Slide 88: Capital
For personal use only 2015 Interim Financial Results Capital Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 89: Current capital considerations
CAPITAL Current capital considerations For personal use only Westpac preferred capital range Common equity Tier 1 capital ratio (%) • Westpac’s preferred common equity Tier 1 (CET1) capital range is 8.75% Reported CET1 capital ratio DRP and DRP underwrite - 9.25%. The management buffer above regulat
Slide 90: Capital strength maintained while supporting growth
CAPITAL Capital strength maintained while supporting growth For personal use only Key movements in capital Key capital ratios (%) • Organic movements were 1H14 2H14 1H15 – Cash earnings net of ordinary dividends paid (+109bps) – 2014 final dividend (-72bps) Common equity Tier 1 capital ratio 8.8 9.0
Slide 91: Global peer comparison of Basel III CET1 capital ratios
For personal use only 91 Handelsbanken 4 SEB 4 4 Nordea 4 30 September 2014. Danske Bank DnB 4 4 UBS 4 CBA Intesa Sanpaolo 4 Lloyds 4 2 WBC 12.7 5 ANZ 4 United Overseas Bank Deutsche Bank4 4 DBS 4 Rabobank 4 Natixis 5 NAB | Westpac Group Half Year 2015 Presentation & Investor Discussion Pack top qua
Slide 92: Internationally comparable capital ratio
CAPITAL Internationally comparable capital ratio For personal use only • APRA has a conservative stance in setting capital standards, resulting in a significant variance between capital measured under APRA and the Basel III Framework • In August 2014 the ABA1 released a report prepared by PwC titled
Slide 93: RWA movements
CAPITAL RWA movements For personal use only RWA movements RWA movements ($bn) • Total RWA increased 4.7% 21.6 (1.1) 0.8 (5.7) • Credit RWA increased 7.7% or $21.6bn (0.2) 346.8 − $7.4bn from methodology changes including $8.5bn from changes in 331.4 probability of default (PD) estimates for mortgage
Slide 94: Actively managing capital across Group and business units
CAPITAL Actively managing capital across Group and business units to optimise returns For personal use only Actively managing returns ROE and CET1 capital ratios (%) Return on average interest-earning assets (AIEA) (%) • Returns impacted by methodology change 1H14 2H14 1H15 1H151 CET1 ROE for deriva
Slide 95: Divisional Summary
For personal use only 2015 Interim Financial Results DIVISIONAL SUMMARY Westpac Banking Corporation ABN 33 007 457 141. Comparison of 1H15 versus 2H14 cash earnings basis (unless otherwise stated)
Slide 96: Differentiated by our strong portfolio of brands
DIVISIONAL SUMMARY Differentiated by our strong portfolio of brands For personal use only Westpac Group Westpac Retail & Business Banking Contribution to 1H15 cash earnings (%) WRBB Australian national brand for consumer and business banking, SMEs and commercial Westpac RBB customers under the Westp
Slide 97: WRBB delivers another disciplined 1H15 result
WRBB WRBB delivers another disciplined 1H15 result For personal use only Cash earnings movement 1H15 - 1H14 ($m) Key financial metrics 1H15 - 2H14 Cash 5 2% • Up $20m to $1,350m 125 19 (46) 16 (37) 1,330 61 (29) (11) (6) 1,350 earnings 1,253 Core 2% • Up $37m to $2,150m with 2% revenue growth ea
Slide 98: WRBB consistently delivering high quality results
WRBB WRBB consistently delivering high quality results For personal use only Revenue ($m) Core earnings ($m) Cash earnings ($m) 3,835 2,150 1,350 3,769 2,113 1,330 3,625 2,015 1,253 3,570 1,982 1,217 3,438 1,873 1,143 1H13 2H13 1H14 2H14 1H15 1H13 2H13 1H14 2H14 1H15 1H13 2H13 1H14 2H14 1H15 Loans (
Slide 99: A leading customer franchise driving growth
WRBB A leading customer franchise driving growth For personal use only Consumer banking highlights Key performance metrics • Leading customer franchise maintained with equal #1 in customer satisfaction1 Change of the majors, record customer growth, maintained market leading wealth 1H14 2H14 1H15 on
Slide 100: Transformation of network delivering gains
WRBB Transformation of network delivering gains For personal use only Active digital customers (#m) Digital sales (#’000) Sales FTE / Total FTE (%) 152 59 2.70 145 2.63 135 57 2.53 107 55 2.45 52 2H13 1H14 2H14 1H15 2H13 1H14 2H14 1H15 2H13 1H14 2H14 1H15 Bank Now improvements delivered Deposits thr
Slide 101: 1H15 delivered 4% cash earnings growth
1H15 delivered 4% cash earnings growth For personal use only Cash earnings movement 1H15 – 1H14 ($m) Key financial metrics 1H15 – 2H14 121 13 (65) Cash (20) (12) 806 11 12 (15) 837 4% • Up $31m to $837m 14 9 earnings 769 Core 3% • Up $34m to $1,312m with 1% revenue growth earnings • Up $14m to $
Slide 102: St.George building strong track record for delivering
St.George building strong track record for delivering For personal use only Cash earnings contribution (%) Cash earnings ($m) Core earnings ($m) 837 1,278 1,312 806 STG 769 1,209 1,167 6 688 699 1,108 5 BoM 14 BankSA 8 RAMS 67 Lloyds 1H13 2H13 1H14 2H14 1H15 1H13 2H13 1H14 2H14 1H15 Loans ($bn) and
Slide 103: St.George delivering across key metrics
St.George delivering across key metrics For personal use only Consumer banking highlights Key performance metrics • Customer service revolution and continued innovation is delivering a Change better customer experience. Customer satisfaction1 and NPS2 equal to or 1H14 2H14 1H15 on 2H14 ahead of all
Slide 104: Investment, innovation and customer focus delivering sustainable growth
Investment, innovation and customer focus delivering sustainable growth across brands For personal use only Strong customer growth (#m) Bank of Melbourne continuing to Lloyds acquisition a solid performer grow market share • Positive cash earnings growth supporting • Acquired capital finance busines
Slide 105: Consistent wealth results up 2%
Consistent wealth results up 2% (up 7% before performance fees) For personal use only Cash earnings movement ($m) Movement 1H15 - 1H14 Revenue up $15 (1%) BTFG cash earnings tend to be seasonal, given insurance claims and fund activity, and are best compared to prior corresponding period (1H14) 86 (
Slide 106: Franchise growth continues
Franchise growth continues For personal use only Cash earnings movement ($m) Movement 1H15 - 2H14 Revenue up $2 (flat) • Funds management income up 4%, up 1% when adjusted for BTIM performance fees 9 31 5 (67) • Asset markets stronger positively impacting 459 24 (15) 6 (1) 451 FUM/FUA related income
Slide 107: Growth across funds management business
Growth across funds management business For personal use only FUM and FUA drivers FUA ($bn) • FUM related revenue increased 9% on 2H14 supported by BT Wrap/Asgard Corporate Super Other – Positive foreign exchange translation impacts for funds held outside Australia by JOHCM and revaluation of Ascalo
Slide 108: Insurance portfolio continues to expand
Insurance portfolio continues to expand For personal use only Premiums ($m) Insurance loss rates (%) General insurance gross written premiums General insurance loss rate Life in-force premiums Life insurance loss rates Up 13% 62 792 827 734 685 45 31 32 32 34 Up 8% 29 30 218 227 235 246 2H13 1H14 2H
Slide 109: Strategy driving long term growth
Strategy driving long term growth For personal use only Insurance – continued targeted growth Panorama – a 360 degree view • Helping customers across the banking network • Panorama, BT's new investment platform, will provide advisers and • Strong focus on innovation, enhancing customer experience an
Slide 110: Solid performance across key metrics
Solid performance across key metrics For personal use only Delivering on the service revolution Key performance metrics • Life Insurance claims team consistently rated Claims Management Analysis Programme A+ since 2011. CMAP is an independently Change conducted assessment of our claims department pr
Slide 111: Lower WIB earnings impacted by derivative adjustments
Lower WIB earnings impacted by derivative adjustments For personal use only Cash earnings movement ($m) Movement 1H15 – 2H14 67 (25) (23) • Lower cash earnings mainly due to the impact of 717 (2) (25) 709 (85) methodology changes to derivative adjustments Cash that reduced cash earnings by $85m 624
Slide 112: Customer revenue supported by lift in customer activity
Customer revenue supported by lift in customer activity across the business For personal use only • Customer revenue1 up 1% supported by Lift in customer revenue Lift in Financial Markets customer sales ‒ Strong customer flow in FX and Fixed Income businesses Customer revenue1 ($m) Financial Markets
Slide 113: Delivering for customers in key growth sectors
Delivering for customers in key growth sectors For personal use only WIB/Australian retail and business Infrastructure China and broader Asian Region banking partnership • Partnership revenue up 2% • Revenue up 40% • Increasing levels of customer activity • WIB’s financial market activity with retai
Slide 114: Innovative solutions and new capabilities to support WIB customers
Innovative solutions and new capabilities to support WIB customers For personal use only Maintained focus on delivering for customers Solutions and capabilities for customers – 1H15 highlights • 80% of WIB revenue 1H15 revenue composition3 (%) Corporate Mobile & Corporate Online from customer busine
Slide 115: Risk management continues to be a competitive advantage
Risk management continues to be a competitive advantage For personal use only Impairments: (charges) / benefits ($m) Stressed exposures as a % of TCE New IAPs Write-backs Change in CAP Total impairment Impaired 90+ days past due not impaired Watchlist & substandard and recoveries benefit 125 4.6 104
Slide 116: Institutional market leadership
Institutional market leadership 11 years as Number 1 Lead Domestic Transactional Bank1 For personal use only Global Transactional Financial Services. Markets. Relationship. Insight. No.1 Lead No.1 Australian Bank No.1 Debt House in No.2 Lead Relationship No.1 Most Useful Transactional Bank in for FX
Slide 117: NZ delivers a solid performance across return, growth, productivity and strength
New Zealand NZ delivers a solid performance across return, growth, productivity and strength For personal use only Cash earnings movement (NZ$m) Key financial metrics 1H15 - 2H14 (NZ$m) 26 1 (5) (18) 23 5 (10) Cash (9) 2% • Cash earnings of $441m up $9m 441 earnings 432 (4) 432 0 Core • Up $18m to
Slide 118: Investment delivering improvement in key operating metrics
New Zealand Investment delivering improvement in key operating metrics and enhancing the customer experience For personal use only Everyday banking, changing how customers bank Key performance metrics Number of deposits via Smart ATM’s • Providing enhanced flexibility with (‘000) 1,066 24/7 capabili
Slide 119: Delivering on digital leadership and leveraging partnerships
New Zealand Delivering on digital leadership and leveraging partnerships For personal use only New internet banking platform Partnerships providing value for customers • Launched Westpac One, a new internet and mobile banking platform providing customers more functionality and a consistent experienc
Slide 120: Delivering returns through growth and productivity
New Zealand Delivering returns through growth and productivity whilst optimising the balance sheet For personal use only Cash earnings (NZ$m) Core earnings (NZ$m) Net interest margin (%) 640 2.34 441 432 432 622 2.32 400 602 600 2.29 2.28 368 2.27 580 1H13 2H13 1H14 2H14 1H15 1H13 2H13 1H14 2H14 1H1
Slide 121: Mortgage portfolio quality remains strong
New Zealand Mortgage portfolio quality remains strong For personal use only Portfolio highlights New Zealand mortgage portfolio by region (%) • Mortgage portfolio NZ$40.7bn, up 3% Auckland Wellington Christchurch Rest of New Zealand • The proportion of fixed rate mortgages remains at 73%, as the out
Slide 122: Stable asset quality with a small increase in business stressed assets
New Zealand Stable asset quality with a small increase in business stressed assets For personal use only • Total business stressed exposures as a % of business TCE is at 3.56%, Movement in impairment charges (NZ$m) up 30bps (down 20bps on 1H14) • Business impaired exposures increased to 1.07% of bus
Slide 123: Westpac Pacific solid earnings contribution, up 4%
Westpac Pacific solid earnings contribution, up 4% For personal use only Cash earnings movement ($m) Movement 1H15 – 2H14 • Strong net interest income performance, partly offset by the 13 (9) Cash impact of FX controls introduced in PNG in July 2014 65 (22) 4% flat (5) 4 (1) 59 earnings • Translat
Slide 124: Economics
For personal use only 2015 Interim Financial Results Economics Westpac Banking Corporation ABN 33 007 457 141.
Slide 125: Australian and New Zealand economic forecasts
ECONOMICS Australian and New Zealand economic forecasts For personal use only Calendar year Key economic indicators1 (%) as at April 2015 2013 2014f 2015f 2016f World GDP 3.3 3.2 3.5 4.1 Australia GDP 2.1 2.7 2.2 3.0 Private consumption 2.0 2.8 2.4 3.2 Business investment2,3 -8.0 -4.3 -7.4 -1.2 Unem
Slide 126: Australia remains well-placed relative to developed economies
ECONOMICS Australia remains well-placed relative to developed economies For personal use only Net public debt levels as a % of GDP 2013 Australia’s economy: diversified and flexible 110.7 Sector contribution to GDP (%)1 83.1 87.6 Manufacturing 81.3 5.7 8.4 Construction 60.4 55.7 11.9 8.6 Mining Rura
Slide 127: Australia's economic transition from mining to non-mining
ECONOMICS Australia’s economic transition from mining to non-mining For personal use only Australian growth mix: contributions to GDP growth (%) Investment: share of Australian economy (% of GDP) % of mining, CAPEX ppts 2012 2013 2014e 2015f 2016f ann% 4 4 GDP 15 housing investment business investme
Slide 128: Australian state economies
ECONOMICS Australian state economies shift in growth with NSW the pace setter For personal use only • Domestic demand growth is shifting from the Domestic demand (% ann) Business investment by state ($bn) mining states of WA and Qld, to NSW and, to a lesser extent, Victoria Dec-13 yr Dec-14 yr Equip
Slide 129: Australian labour market
ECONOMICS Australian labour market For personal use only Unemployment rates (%) Australia: employment by sector (annual change, ’000) % Australia Canada UK US Euro 14 Business services 12 Leisure & hospitality 10 8 Construction 6 Finance & real estate 4 2 Retail 0 Feb-99 Feb-03 Feb-07 Feb-11 Feb-15
Slide 130: Australia's population growth
ECONOMICS Australia’s population growth For personal use only • Australia’s population is just over 23 million and growing at a Population growth (%) comparatively rapid pace ‒ Population growth was 1.8% in 2013, a touch above Australia’s long % % run average pace of 1.4% and well above world popula
Slide 131: Interest rates to remain low, AUD high relative to fundamentals
ECONOMICS Interest rates to remain low AUD high relative to fundamentals For personal use only Major countries’ policy rates (%) Australian dollar (AUD/USD) % Australia UK Canada US Euro USD USD 8 1.20 Fair value band 1.20 AUD/USD actual & forecast 7 1.10 1.10 6 1.00 F’casts 1.00 5 0.90 0.90 4 0.80
Slide 132: Credit growth picking up at a modest pace
ECONOMICS Credit growth picking up at a modest pace For personal use only Business confidence and consumer confidence (net balance) Australian private sector credit growth (% ann) Consumer (lhs) Business * (rhs) % annual % annual Housing Total credit Business 130 monthly 30 25 Forecasts 25 end 2015
Slide 133: Australian commercial property market
ECONOMICS Australian commercial property market For personal use only Australian commercial investment sales over $5 million Total vacancy rates in capital cities (%) ($’000) NSW Vic Qld SA WA ACT Brisbane CBD Perth CBD 30 35 Recent sector activity Sydney CBD Melbourne CBD 25 30 largely in NSW and V
Slide 134: China growth remains a positive for Australia
ECONOMICS China growth remains a positive for Australia For personal use only • As a $US7 trillion economy, China grew at 10%. As a $US10 trillion Real GDP % ann 2012 2013 2014f 2015f 2016f economy, Westpac expects China to grow at 7.1% China 7.7 7.7 7.4 7.1 7.3 • Represents an equivalent incrementa
Slide 135: Australian housing market sound fundamentals
ECONOMICS Australian housing market sound fundamentals For personal use only • Australian housing market continues to face a significant structural Population versus dwelling stock (annual average change ‘000) undersupply • Persistently low level of new building over the last decade has combined pop
Slide 136: Price growth and activity
ECONOMICS Price growth and activity some moderation, wide range of conditions For personal use only • Price growth and activity have moderated somewhat since the start of Capital city dwelling prices 2015 but remains robust at around 8% yr nationally • Growth rates continue to vary significantly bet
Slide 137: Investment property lending remains buoyant
ECONOMICS Investment property lending remains buoyant For personal use only • Investor housing activity is buoyant, responding to low vacancy rates, solid rental yields, and low interest rates, including low fixed rates that Dwelling turnover also offer the opportunity to hedge interest rate risk th
Slide 138: Australian households a cautious approach to household finances
ECONOMICS Australian households a cautious approach to household finances For personal use only Australian households: debt to income ratio (%) Consumer survey: ‘Wisest place for savings’ % total (gross) debt 70 % shares % 70 180 total debt net of offset accounts real estate 60 deposits 60 130 total
Slide 139: New Zealand domestic demand to underpin growth
ECONOMICS New Zealand domestic demand to underpin growth For personal use only • The economy grew by 3.3% over 2014 - its fastest pace in seven years. New Zealand GDP growth and forecast (%) Growth is expected to remain strong over 2015 and 2016 • Growth is being support by robust domestic demand. C
Slide 140: New Zealand housing market remains firm
ECONOMICS New Zealand housing market remains firm For personal use only • Housing market activity slowed in 2014 following the introduction of New Zealand house price inflation (annual %) restrictions on high loan-to-value lending. It picked up again in late 2014 as the impact of lending restriction
Slide 141: Appendix & Disclaimer
For personal use only 2015 Interim Financial Results Appendix & Disclaimer Westpac Banking Corporation ABN 33 007 457 141.
Slide 142: Appendix 1: Cash earnings adjustments
Appendix 1: Cash earnings adjustments For personal use only Cash earnings adjustment 1H14 2H14 1H15 Description Reported net profit 3,622 3,939 3,609 Reported net profit after tax attributable to owners of Westpac Group Earnings on certain Westpac Banking Corporation shares held by Westpac in the we
Slide 143: Appendix 2: Definitions
Appendix 2: Definitions For personal use only Westpac’s divisions Financial performance Is a measure of the level of profit that is generated by ongoing operation and Westpac Retail & Business Banking is responsible for sales and service to Westpac RBB or is therefore available for distribution to s
Slide 144: Appendix 2: Definitions (continued)
Appendix 2: Definitions (continued) For personal use only Asset quality Key metrics TCE Total committed exposures Net Promoter Score measures the net likelihood of recommendation to others Stressed loans are the total of watchlist and substandard, 90 days past due of the customer’s main financial in
Slide 145: Appendix 2: Definitions (continued)
Appendix 2: Definitions (continued) For personal use only Key metrics (continued) Key metrics (continued) Source: DBM Consultants Business Financial Services Monitor, March 2013- Customer 2015, 6MMA. MFI customers, all businesses. The Customer Satisfaction satisfaction – score is an average of custo
Slide 146: Investor Relations Team
Investor Relations Team For personal use only Equity Investor Relations For further information on Westpac Andrew Bowden Leigh Short www.westpac.com.au/investorcentre click on ‘Analysts’ Centre’ Head of Investor Relations Senior Manager • Annual reports +61 2 8253 4008 +61 2 8253 1667 • Presentation
Slide 147: Disclaimer
Disclaimer For personal use only The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (Westpac) and its activities. The information is supplied in summary form and is therefore not necessarily complete. It is not intended that it