Westpac Banking Corporation · ASX:WBC
Westpac Banking — H1 2021 Earnings Presentation
118 slides from Westpac Banking's earnings presentation, May 3, 2021
Slide 1: Westpac 1H21 Presentation and Investor Discussion Pack
ASX Level 18, 275 Kent Street Sydney, NSW, 2000 Release 3 MAY 2021 Westpac 1H21 Presentation and Investor Discussion Pack Westpac Banking Corporation (“Westpac”) today provides the attached Westpac 1H21 Presentation and Investor Discussion Pack. For further information: David Lording Andrew Bowden G
Slide 2: Presentation and Investor Discussion Pack
Presentation and Investor Discussion Pack 2021 INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2021 WESTPAC BANKING CORPORATION ABN 33 007 457 141 Fix. Simplify. Perform. Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherw
Slide 3: Westpac 2021 Interim Results Index
Westpac 2021 Interim Results Presentation Investor Discussion Pack of 2021 Interim Results 3 30 2021 Interim Overview Strategy 31 32 Results Index Results 35 Customer franchise 39 Risk governance 44 Sustainability 46 Earnings drivers 51 Revenue 52 Expenses 55 Impairment charges 56 Credit quality and
Slide 4: Peter King, Chief Executive Officer
Peter King Chief Executive Officer Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 30 for definition. Results principally cover the 1H20, 2H19 and 1H19 periods. Comparison of 1H20 versus 2H19 (unless otherwis
Slide 5: 1H21 Results – Overview
1H21 Results – Overview. Good progress • Mortgages – on track for major bank system growth in 2H21 on strategic • Simplifying portfolio – 3 more sales priorities • Cost reset commenced • CORE program expanded – financial and non-financial risk Earnings • Cash earnings $3.5bn, up $1.9bn • Cash ROE 10
Slide 6: 1H21 Earnings snapshot
1H21 Earnings snapshot. Change Change 1H20 2H20 1H21 1H21–2H20 1H21–1H20 Reported net profit $1,190m $1,100m $3,443m 213% 189% Cash earnings1 $993m $1,615m $3,537m 119% 256% Impairment (charge)/benefit ($2,238m) ($940m) $372m na na Cash EPS2 27.7c 44.7c 97.1c 117% 251% Return on equity3,4 2.9% 4.7%
Slide 7: Refreshed executive team and new operating model
Refreshed executive team and new operating model. Executive team Lines of Business operating model New to role New to Westpac Mortgages Consumer Consumer finance Banking Everyday banking Peter King Scott Collary Rebecca Lim Chief Executive Chief Operating Group General Consumer customer engagement O
Slide 8: Our strategy
Our strategy. Purpose Helping Australians and New Zealanders Succeed Markets, products, Banking for consumer, business and institutional customers customers FIX SIMPLIFY PERFORM Address outstanding issues Streamline & focus the business Sustainable long-term returns Priorities • Risk management • Ex
Slide 9: Fix
Fix. Risk management and culture Financial crime program Capability and capacity Capability and capacity • Added over 100 resources for credit • 60% increase in team decisioning, risk reporting and stress testing • More than doubled people investigating and reporting on financial crime CORE1 Program
Slide 10: Simplify
Simplify. Portfolio and Geographic simplification Customers Business sold Announced Completion targeted • New Westpac app - faster and simpler Zip Co Ltd. Oct 2020 Oct 2020 • Bringing 1,000 roles (including voice) back to Vendor Finance Aug 2020 Aug 2021 Australia ~50% complete Westpac Pacific Dec 2
Slide 11: Perform – Mortgages, change via Lines of Business
Perform – Mortgages, change via Lines of Business. Rolling quarterly mortgage applications1 Simplify processes (indexed July-19 = 100) • Reduced forms and documents by 80 150 • 60 process and policy changes 125 100 Enhance credit decisioning 75 • ~68% of mortgages are credit auto-decisioned 50 Jul-1
Slide 12: Perform – competitive cost base
Perform – competitive cost base.1 Targeting $8bn by FY24. Continued investment – $3.5-$4bn over 3 years. Expenses ($bn)2 • Targeting a cost base of $8bn by FY24 12.7 • Targets embedded in leader scorecards 0.9 Specialist Businesses • Expect to invest $3.5bn to $4bn over 3 years Notable items • Sourc
Slide 13: 1H21 fully franked dividend - 58 cps
1H21 fully franked dividend - 58 cps. Dividend considerations Dividends per ordinary share (cents) • Medium term outlook for return and growth 94 94 94 80 • Sustainable payout ratio ~60-65% 58 • Dividend yield 4.8%1 COVID-19 31 • Seek to neutralise DRP (arrange to purchase shares on market), no disc
Slide 14: Michael Rowland, Chief Financial Officer
Michael Rowland Chief Financial Officer Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 30 for definition. Results principally cover the 1H20, 2H19 and 1H19 periods. Comparison of 1H20 versus 2H19 (unless oth
Slide 15: 1H21 earnings
1H21 earnings. Cash earnings ($m) 1H21 – 2H20 1,312 (348) 3,819 (282) 3,537 1,220 2,835 (59) 58 21 Core earnings up $20m 1,615 Up 35% More than doubled, up $1,922m 2H20 2H20 2H20 excl. Net interest Non-interest Expenses Impairment Tax 1H21 excl. 1H21 1H21 1 notable items notable items 1 income incom
Slide 16: Notable items and simplification impacts
Notable items and simplification impacts. Notable items Notable items ($m after tax) 1H20 2H20 1H21 • Remediation higher in Advice and Specialist Businesses, lower in AUSTRAC proceedings (1,027) (415) - Business • Settled historical disputes Remediation and litigation (258) (182) (276) • Write-off o
Slide 17: Lending dynamics
Lending dynamics. Loans ($bn) 8.8 (6.4) (3.3) 693.1 (3.9) 1.6 (0.6) 0.7 690.0 Australian mortgages Sep-20 Mortgages - Mortgages - Business Institutional New Zealand Other Provisions Mar-21 Owner occupier Investor 1 Australian mortgage flows ($bn) Aust mortgage composition (% of total) 5 (16) Stock S
Slide 18: Margins
Margins. Net interest margin (% and bps) 2Q21 NIM excl. Treasury, Markets & Notables: 1.97% Month of Mar-21 NIM excl. Treasury, Markets & Notables: 1.96% 2bps (2bps) 1bp - 2.07 2bps 2.09 1bp 2.04 (4bps) 6bps 2.03 0.13 Treasury & Markets 0.13 impact on NIM 0.13 0.13 1.90 1.91 Up 3bps 1.94 1.96 NIM ex
Slide 19: Non-interest income – up 3% excluding notable items
Non-interest income – up 3% excluding notable items.1 Net fees1 up $26m 3% Wealth & insurance1 up $8m 1% Trading and other1 up $24m 5% • Higher cards from improved activity • Higher insurance weather claims ($55m) • Lower customer and non-customer income • End of COVID-19 merchant waivers • Funds up
Slide 20: 1H21 expenses
1H21 expenses. Down 9%, flat excluding notable items.1 Expenses ($m) 1H21 – 2H20 6,540 (1,283) 745 5,981 5,257 (99) 119 (35) 5,236 (6) Flat (down $21m) Down 9% 2H20 2H20 2H20 excl. Ongoing Investment Risk & COVID-19 1H21 excl. 1H21 1H21 notable notable expenses (ex. Risk & Compliance notable notable
Slide 21: Credit quality metrics improved
Credit quality metrics improved. Stressed exposures as a % of TCE1 Australian mortgage delinquencies and hardship (%, $bn) 4.0 8 3.20 Hardship balances $bn (RHS) Watchlist & substandard 90+ day past due total % (LHS) 3.0 6 90+ day past due (dpd) and not impaired Impaired 2.0 4 2.17 1.0 2 2.07 1.91 0
Slide 22: Asset quality
Asset quality. Corporate and business stressed exposures by industry sector ($bn) 2.0 Mar-20 Sep-20 Mar-21 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1 Accommodation, cafes Wholesale & Agriculture, forestry & Construction Property Mining Manufacturing Finance & insurance business services Transport & s
Slide 23: Credit impairment charge / (benefit) composition
Credit impairment charge / (benefit) composition. ($m) Individually assessed provisions Collectively assessed provisions Total Write-backs Write-offs Other movement New IAPs¹ & recoveries direct in CAP2 2,238 1,619 940 438 438 351 318 366 283 144 (170) (147) (194) (372) (640) 1H20 2H20 1H21 1H20 2H2
Slide 24: Impairment provisions
Impairment provisions. Total impairment provisions1 ($m) Provision coverage Overlay Sep-19 Sep-20 Mar-21 Stage 1 CAP Stage 2 CAP Provisions to Credit RWA 109bps 171bps 159bps Stage 3 CAP Individually assessed provisions (Stage 3) Provisions to TCE 37bps 58bps 51bps 6,159 5,788 IAP2 to Impaired asset
Slide 25: Capital drivers
Capital drivers. CET11 capital ratio (% and bps) Expected divestment CET1 benefit (bps)3 20 12 (1) 8 12.34 82 11.13 Coinbase4 7 Vendor Finance - Sep-20 Cash RWA Capital FX Divestments Mar-21 earnings movement deductions translation and other impact Westpac Pacific5 6 Risk weighted assets ($bn) Gener
Slide 26: Targeting $8bn cost base by FY24
Targeting $8bn cost base by FY24.1 Cost target excluding notable items ($m)2 Pathway to $8bn Expenses (ex notables) expected to rise in FY21 compared to FY20. Specialist • Exit non-core businesses Targeting to reduce from FY22 onwards Businesses • Digital focus, reduce products and cost to serve Dig
Slide 27: Select cost reset targets
Select cost reset targets.1 Metric Baseline 1H21 FY24 Specialist 1 under sale 4 under sale 7 transactions • Exit non-core businesses Businesses agreement agreement completed • Mortgages processed on digital 32%2 62%2 100% origination platform2 Digitise & streamline for • Consumer sales via digital3
Slide 28: 2H21 Considerations
2H21 Considerations.1 • Maintain mortgage momentum Lending • Stabilise Business lending Net interest • Headwinds from competitive market continued flow through of low rates margin Non-interest • Improved economic activity and consumer spending income • Impact of simplification to flow through • FY21
Slide 29: Peter King, Chief Executive Officer
Peter King Chief Executive Officer Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 30 for definition. Results principally cover the 1H20, 2H19 and 1H19 periods. Comparison of 1H20 versus 2H19 (unless otherwis
Slide 30: Good progress – more to do
Good progress – more to do. Economic outlook positive 2H21 Priorities End 2021 • Grow core businesses Latest1 Forecasts ‒ Continue mortgage improvement. Grow at major bank system in 2H21 GDP growth (1.1%) 4.5% ‒ Apply mortgage success to business Housing credit growth 4.1% 6.5% lending • Specialist
Slide 31: Investor Discussion Pack
Investor Discussion Pack Fix. Simplify. Perform.
Slide 32: Overview
Overview AIfestpac Group
Slide 33: Westpac Group at a glance
Westpac Group at a glance. WBC Strategy Helping Australians and New Zealanders Succeed. listed on ASX & NZX Operating divisions • In its 205th year, Australia’s first • Unique portfolio of brands bank and first company, opened providing a range of financial 1817 services across consumer, Consumer •
Slide 34: Portfolio simplification
Portfolio simplification. Strategy Executing our FY21 strategic priorities. Businesses included in the Specialist Business division Brands Expected Businesses in Specialist Business division Business Unit Business overview Status Announced completion operate under the following brands: Vendor Financ
Slide 35: Westpac New Zealand review
Westpac New Zealand review. Strategy Westpac is reviewing the most appropriate ownership structure for its New Zealand operations. The business has been a valuable contributor for many years. The review is ongoing. Rationale for the review Contribution to Westpac Group • Banking is increasingly a lo
Slide 36: Cash earnings and reported net profit reconciliation
Cash earnings and reported net profit reconciliation. Results Cash earnings1 policy Change Change • Westpac Group uses a measure of performance referred to as cash earnings to assess financial 1H21 1H21-2H20 1H21-1H20 performance at both a Group and divisional level ($m) (%) (%) • This measure has b
Slide 37: 1H21 cash earnings
1H21 cash earnings. Results Change Change Cash earnings 1H21 – 2H20 ($m) Lower restructuring expenses, some COVID-19 1H21- 1H21- expenses and timing of project spend partly offset by 1H21 2H20 1H20 Increased merchant revenue increased FTE for risk, compliance and volumes ($m) (%) (%) and higher weal
Slide 38: Notable items in 1H21 and 2H20
Notable items in 1H21 and 2H20. Results 1H21 notable items Specialist Group In 1H21 and 2H20, the Group recognised certain costs/provisions ($m) Consumer Business WIB NZ2 Businesses Businesses Group known throughout this document as “notable items” which relate to the following: Net interest income
Slide 39: 1H21 financial snapshot
1H21 financial snapshot. Results Change Change Change Change 1H21 1H21 – 2H20 1H21 - 1H20 1H21 1H21 – 2H20 1H21 - 1H20 Earnings1 Balance sheet Earnings per share (cents) 97.1 117% 251% Total assets ($bn) 889.5 (2%) (8%) Common equity Tier 1 (CET1) capital Core earnings ($m) 4,818 29% 15% 12.34 121bp
Slide 40: Customer franchise
Customer franchise. Customer franchise MFI Share1,2 Customer satisfaction (CSAT)2 Net Promoter Score (NPS)2 Westpac St.George brands Peers Westpac St.George brands Peers Westpac St.George brands Peers 7.7 3.1 7.6 1.9 Consumer 29.6% 1.1 7.5 7.4 -0.8 7.3 -7.3 14.6% 15.6% 11.6% 5.4% Aug-18 Feb-19 Aug-1
Slide 41: Helping Australians and New Zealanders Succeed
Helping Australians and New Zealanders Succeed. Customer franchise COVID-19 support Natural disasters Helping customers • Supported customers to defer over $70bn • Announced a $10m Flood Support Fund to • $5.6bn of loans to first home buyers in of lending via COVID-19 deferral packages provide emerg
Slide 42: Continued migration to digital
Continued migration to digital. Customer franchise Less physical More digital Australian ATMs (#) Australian branches (#) Digitally active customers (#m) Accounts with eStatements In FY20 we sold 740 non-branch Number (#m) eStatements (%) ATMs to Prosegur 60 62 55 57 971 955 931 929 5.09 5.15 52 2,2
Slide 43: Mortgages: Digital capabilities delivered
Mortgages: Digital capabilities delivered1. Customer franchise Discover Apply Use • New, search optimised • Apply online 24/7 • Customers know what they • Track status through to • Switch to fixed rate for calculators can afford settlement existing customers • Pre-filled for existing • Property insi
Slide 44: Customer remediation
Customer remediation. Customer franchise Progressing customer refunds: Provisions for customer refunds, payments and associated costs: • Conducted extensive product, process and policy reviews Additional provisions of $241m raised in 1H21 including for: • Over $200 million in remediation payments ha
Slide 45: Strengthening risk governance and oversight
Strengthening risk governance and oversight. Risk governance CORE Program; Integrated Plan delivery on track. Integrated Plan Activity progress • A comprehensive and integrated program of work designed to Of the 327 activities, 82 have been submitted to Promontory for strengthen risk governance and
Slide 46: CORE: Integrated Plan governance and oversight
CORE: Integrated Plan governance and oversight. Risk governance Clear lines of accountability. Independent assurance by Promontory. CORE Program governance structure Approval of the Integrated Plan and material 19 CORE Program workstreams: Board Board changes. Ongoing governance and oversight 1 Boar
Slide 47: Committed to action on climate change
Committed to action on climate change. Sustainability Committed to managing our business in alignment with the Paris Agreement and a transition to a net zero economy by 2050. Progress and targets Participating in Focus areas Target Year Progress • United Nations Environment Programme Finance Initiat
Slide 48: Climate-related disclosures – scenario analysis
Climate-related disclosures – scenario analysis. Sustainability Transition risk – key points Alignment with the TCFD • Transition climate risk includes domestic and market changes when moving to • We continue to integrate the consideration of climate-related risks and a greener economy, which can re
Slide 49: Climate-related metrics
Climate-related metrics. Sustainability Lending to climate change solutions Electricity generation exposure Lending to electricity generation ($bn, TCE) (% of TCE)1 at 30 September 2020 in Australia and New Zealand (% of total) 80% 10.1 10.0 9.1 9.3 2.8 0.6 70% 6.4 Renewable energy 60% 7.0 Gas 50% 1
Slide 50: Respecting and advancing human rights
Respecting and advancing human rights. Sustainability Progressing our Human Rights Position Statement and 2023 Action Plan. Salient human rights issues Progress in First Half 2021 • Vulnerable groups may be impacted by misuse of our services by others • Supported customers at increased risk of vulne
Slide 51: Diversity and inclusion
Diversity and inclusion. Sustainability Diversity and inclusion strategy focused on 3 key pillars. GENDER CULTURAL DIVERSITY INDIGENOUS PARITY It starts with respect • Seeking to better identify and understand the • Updating our Reconciliation Action Plan • Elevated our Sexual Harassment Policy to a
Slide 52: Earnings Drivers
Earnings Drivers AIfestpac Group
Slide 53: Composition of lending and deposits
Composition of lending and deposits. Revenue Lending down 1% and deposits 1% lower over 1H21. Composition of lending (% of total) Gross loans1 ($bn) Australian mortgage lending4 ($bn) +NZ$2.5bn 42 (39) 1 724.9 446 444 698.7 441 Aust. mortgages 5.1 (6.0) (3.9) 1.6 (0.5) 695.0 12 Aust. business 2 8 Au
Slide 54: Net interest margin
Net interest margin. Revenue Up 3bps excluding Treasury & Markets and notable items. Net interest margin (NIM) movement (%) Net interest margin (%) NIM NIM excl. Treasury & Markets 2.13 2bps 2.09 2bps (2bps) 1bp 2.07 0.12 6bps 1bp 2.04 (4bps) 2.09 2.03 0.13 0.13 1.96 0.13 0.13 1H16 2H16 1H17 2H17 1H
Slide 55: Non-interest income
Non-interest income. Revenue Non-interest income contributors ($m) Net fee income1 (ex notable items) ($m) Fees Wealth and insurance Trading Other Facility fees Net transaction fees Other non-risk fee income 2,330 Up 11% Up 25% 1,988 Down 14% 1,865 582 Up 3% 16 1,675 947 902 443 251 10 101 804 453 6
Slide 56: Expenses
Expenses. Expenses Expense movements 2H20 – 1H21 ($m) FTE (#) 6,540 (1,283) 1,164 398 (69) 405 38,747 745 5,981 36,849 5,257 (99) (6) 119 (35) 5,236 Up 1,898 or 5% expenses Down $21m or flat 2H20 reported 2H20 ex-notable 1H21 ex-notable Investment (ex. 1H21 reported Notable Notable items Compliance
Slide 57: Impairment benefit in 1H21
Impairment benefit in 1H21. Impairment charges Lower new IAPs, lower stress, better economic outlook. Impairment charges ($m) Individually assessed Collectively assessed Total New Write-backs & Write-offs Other mvmts 2,238 IAPs recoveries direct in CAP 1,619 940 535 438 438 461 351 283 318 366 170 1
Slide 58: Credit quality and provisions
Credit quality and provisions
Slide 59: Australian deferrals
Australian deferrals. Credit quality Total mortgage deferral packages provided (% by balances) Mortgage deferrals update Returned to normal • 139k accounts had returned to full payments or paid down their loan repayment or paid down ($50.8bn in balances) Restructured • 9.6k accounts required further
Slide 60: New Zealand deferrals
New Zealand deferrals. Credit quality Total mortgage deferral packages provided (% by balances) Mortgage deferrals update • 29k mortgage accounts supported with NZ$6.5bn in balances (~11% Returned to normal of eligible mortgage lending) repayment or paid down • 1.6k accounts required further assista
Slide 61: Provisions lower from improved outlook
Provisions lower from improved outlook. Provisions Provisions for impairments Total impairment provisions ($m) 4 Mar-20 Sep-20 Mar-21 Overlay Loan provisions to gross loans (bps) 80 88 79 Stage 1 CAP Impaired asset provisions to impaired assets (%) 50 41 47 Stage 2 CAP 6,159 Collectively assessed pr
Slide 62: Provision cover by portfolio category
Provision cover by portfolio category. Credit quality Exposures as a % of TCE Provisioning to TCE (%) Stage 1 exposures Sep-19 Mar-20 Sep-20 Mar-21 increased, mainly mortgages and Stage 1 provisions institutional TCE growth 92.10 93.10 Fully performing portfolio 95.72 95.77 Small cover as low probab
Slide 63: Portfolio composition
Portfolio composition. Credit quality Asset composition (%) Loan composition at 31 March 2021 (% of total) Total assets ($889bn) Mar-20 Sep-20 Mar-21 Loans 74 76 77 Available-for-sale securities and investment securities 9 10 10 Housing Trading securities and financial assets at fair value 3 4 2 17
Slide 64: Loan portfolio composition
Loan portfolio composition. Credit quality Exposures at default1 by sector ($bn) Top 10 exposures to corporations and NBFIs5 (% of TCE) 2 Finance & insurance The single largest corporation/NBFI Government admin. & defence exposure is 0.3% of TCE 3 Property Includes securities 1.1 1.0 1.1 1.0 held in
Slide 65: Stressed exposures down 31bps in 1H21
Stressed exposures down 31bps in 1H21. Credit quality Decrease in impaired, 90+ days past due and not impaired and watchlist. Stressed exposures as a % of TCE Movement in stress categories (bps) 3.20 Watchlist and • Upgrades in business lending following reviews 22 191 (7) (14) substandard coupled w
Slide 66: Corporate and business stressed exposures
Corporate and business stressed exposures. Credit quality Corporate and business stressed exposures by industry sector ($bn) Increase reflects small number of names mainly Mar-20 Sep-20 Mar-21 in business division Reduction in part due to 2.0 lower stress in motor vehicle 1.8 retailing and services
Slide 67: Sectors in focus
Sectors in focus. Credit quality Accommodation, cafes & restaurants and Construction. Accommodation, cafes and restaurants Portfolio security composition3 (TCE) (%) Portfolio by sub-sector (TCE) (%) Mar-20 Sep-20 Mar-21 Total committed exposures Accommodation $9.7bn $9.8bn $9.7bn 8 6 (TCE) Pubs, Tav
Slide 68: Sectors in focus: Commercial property
Sectors in focus. Credit quality Commercial property. Commercial property Commercial property exposures % of TCE and % in stress Mar-20 Sep-20 Mar-21 Total committed exposures (TCE) $67.6bn $65.9bn $67.4bn Commercial property as % of TCE (lhs) Commercial property % in stress (rhs) 8 20 Lending $52.7
Slide 69: Sectors in focus: Retail trade
Sectors in focus. Credit quality Retail trade. Retail trade Retail trade exposure by sub-sector (TCE) ($bn) Mar-20 Sep-20 Mar-21 Mar-20 Sep-20 Mar-21 Total committed exposures (TCE) $15.5bn $15.0bn $13.9bn 7.0 7.0 6.4 Lending $11.1bn $9.5bn $8.7bn 4.6 4.4 4.0 3.8 As a % of Group TCE 1.43 1.41 1.30 3
Slide 70: Australian consumer finance
Australian consumer finance. Credit quality 2% of Group loans. Australian consumer finance portfolio1 Total consumer finance 90+ day delinquencies (%) Mar-20 Sep-20 Mar-21 Lending $18.4bn $15.7bn $15.0bn 2.50 1.92% 30+ day delinquencies (%) 4.22 3.62 3.58 1.50 Consumer unsecured 90+ day 90+ day deli
Slide 71: Australian mortgage delinquencies
Australian mortgage delinquencies. Mortgage asset quality Lower over the half in line with hardship balances. Australian mortgages Mar-20 Sep-20 Mar-21 Australian mortgage delinquencies (%) Total portfolio 30+ day delinquencies (bps) 188 214 179 4.0 90+ day past due total 30+ day past due total Tota
Slide 72: Australian mortgage portfolio composition
Australian mortgage portfolio composition. Mortgage asset quality Owner occupiers driving new flows; more customers choosing fixed rates. Mar-20 Sep-20 Mar-21 1H21 Australian mortgage portfolio and 1H21 flow by Australian mortgage portfolio balance balance balance Flow1 product and repayment type (%
Slide 73: Australian mortgage portfolio
Australian mortgage portfolio. Mortgage asset quality Majority of borrowers have significant equity. Australian housing loan-to-value ratios (LVRs) (%) Serviceability assessment rate4 (%) 100 1H21 drawdowns LVR at origination Portfolio LVR at origination Portfolio dynamic LVR 1 90 2.50% buffer appli
Slide 74: Australian mortgage portfolio repayment buffers
Australian mortgage portfolio repayment buffers. Mortgage asset quality >70% of customers remain ahead of scheduled repayments. Australian home loan customers ahead on repayments1 Offset account balances2 ($bn) (% by balances) Linked to I/O mortgages Linked to P&I mortgages Mar-20 Sep-20 Mar-21 46 4
Slide 75: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting. Mortgage asset quality Australian mortgage portfolio by Credit policy at April 2021 year of origination (% of total book) • Income verified via payslips or tax returns with other supporting documentation such as PAYG income statements and salary credits to
Slide 76: Australian mortgages: interest only and investment property lending
Australian mortgages. Mortgage asset quality Interest only and investment property lending. I/O lending by dynamic LVR1 and income band (%) Investment property portfolio by number of properties per customer (%) Applicant gross income bands <$100k $100k - $250k >$250k 1 55 2 1 7 1 17 2 33 3 10 25 27
Slide 77: Lenders mortgage insurance arrangements
Lenders mortgage insurance arrangements. Mortgage asset quality WLMI continues to provide mortgage insurance to Westpac. Lenders mortgage insurance (LMI) Lenders mortgage insurance arrangements from 1 October 2020 • Where mortgage insurance is required, mortgages LVR Band Insurance are insured throu
Slide 78: Capital, funding and liquidity
Capital, funding and liquidity
Slide 79: CET1 capital ratio 12.3%
CET1 capital ratio 12.3%. Capital, Funding and Liquidity Key capital ratios (%) Mar-20 Sep-20 Mar-21 • CET1 capital ratio of 12.34%, up 121bps from 30 September 2020 • RWA declined 20bps mostly from lower credit RWA due to a reduction in lending and improved credit metrics CET1 capital ratio 10.8 11
Slide 80: Risk weighted assets
Risk weighted assets. Capital, Funding and Liquidity Decrease from lower credit risk RWA. Risk weighted assets ($bn) Commentary • RWA decreased $9.0bn over 1H21, mostly from lower credit RWA 443.9 437.9 (12.3) (CRWA), partly offset by non-credit risk 0.7 2.9 0.0 (0.3) 428.9 • CRWA reduced $12.3bn du
Slide 81: Internationally comparable capital ratio reconciliation
Internationally comparable capital ratio reconciliation. Capital, Funding and Liquidity APRA’s Basel III capital requirements are more conservative than those of the Basel Committee on Banking Supervision (BCBS), leading to lower reported capital ratios by Australian banks. In July 2015, APRA publis
Slide 82: Well placed on internationally comparable CET1 and leverage ratios
Well placed on internationally comparable. Capital, Funding and Liquidity CET1 and leverage ratios. Common equity Tier 1 ratio (%)1 20% 15% China Construction Bank Toronto Dominion Bank 10% China Merchants Bank Royal Bank of Canada Agricultural Bank of .. Standard Chartered Credit Agricole SA Raboba
Slide 83: Liquidity and funding
Liquidity and funding. Capital, Funding and Liquidity LCR lower from reduction in CLF and NCO overlay; NSFR little changed. Liquidity coverage ratio1 (LCR) (quarterly avg, $bn) Net stable funding ratio (NSFR) ($bn) Sep 2020: LCR 151% Mar 2021: LCR 124% NSFR at 31 March 2021: 123% 182 11 165 625.2 10
Slide 84: Balance sheet funding
Balance sheet funding. Capital, Funding and Liquidity Shift in balance sheet: higher customer deposits, lower offshore wholesale funding Funding composition (%) Significant balance sheet Customer deposits to net loans ratio (%) By residual maturity changes in the last 18 months Customer deposits Net
Slide 85: Long term wholesale funding
Long term wholesale funding. Capital, Funding and Liquidity Funding in 1H21 limited to meeting TLAC and capital needs. Term Funding Facility1 (TFF) ($bn) Term debt issuance and maturity profile2 ($bn) Funding for Lending 30 Programme (NZ) Issuance Maturities 37 Supplementary 37 Term Funding Facility
Slide 86: Divisional Results
Divisional Results AIfestpac Group
Slide 87: Divisional contributions
Divisional1 contributions. Divisional results Specialist Group 1H21 ($m) Consumer Business WIB NZ Businesses Businesses Group Operating income 4,457 2,356 1,046 1,163 937 840 10,799 Expenses (2,270) (1,170) (698) (500) (740) (603) (5,981) Core earnings 2,187 1,186 348 663 197 237 4,818 Impairment (c
Slide 88: Consumer 1H21 performance
Consumer 1H21 performance. Consumer Cash earnings ($m) Key financial metrics Improved economic outlook Change and improved asset quality Mostly increased spending on risk and 1H20 2H20 1H21 on 2H20 compliance and higher operational costs Revenue ($m) 4,560 4,560 4,457 (2%) 679 (154) Net interest mar
Slide 89: Business 1H21 performance
Business 1H21 performance. Business Cash earnings ($m) Change Key financial metrics 1H20 2H20 1H21 on 2H20 Lower collectively assessed provisions 803 (234) from improved economic outlook and Revenue ($m) 2,455 2,268 2,356 4% improved asset quality Net interest margin (%) 3.05 2.93 3.17 24bps 25 920
Slide 90: WIB 1H21 performance
WIB 1H21 performance. Westpac Institutional Bank Cash earnings ($m) Change Key financial metrics 1H20 2H20 1H21 on 2H20 Lower restructuring costs Lower new impaired assets and reduced professional and lower CAPs from Revenue ($m) 1,161 1,132 1,046 (8%) services expenses improved economic outlook Net
Slide 91: New Zealand 1H21 performance
New Zealand 1H21 performance1. New Zealand Cash earnings (NZ$m) Change Key financial metrics 1H20 2H20 1H21 on 2H20 Gain on sale of Wealth Advisory Primarily higher spend on technology Revenue (NZ$m) 1,162 1,120 1,245 11% business and higher cards income, and risk, regulatory and compliance partly o
Slide 92: New Zealand balance sheet
New Zealand balance sheet. New Zealand Net loans (NZ$bn) Deposits (NZ$bn) 88.0 3.0 (0.4) 90.6 87.0 71.0 1.0 2.1 74.1 69.1 Up 3% Up 4% Mar-20 Sep-20 Consumer Business Mar-21 Mar-20 Sep-20 Consumer Business Mar-21 Loans (NZ$bn) and % of total Customer deposits (NZ$bn) and % of total Business 74 Transa
Slide 93: New Zealand stressed exposures
New Zealand stressed exposures. New Zealand Business stressed exposures as a % of business TCE Property Watchlist & substandard 90+ day past due and not impaired Impaired Manufacturing 17 19 Agriculture, forestry 5.5 4 & fishing 4.9 4 9 Wholesale trade 4.4 3.3 3.4 3.3 3.1 3.2 2.9 2.6 2.8 Constructio
Slide 94: New Zealand consumer portfolio
New Zealand consumer portfolio. New Zealand Mortgage 90+ day delinquencies1 (%) Unsecured consumer 90+ day delinquencies1 (%) 0.6 90+ day past due (ex-hardship) 3.0 90+ day past due (ex-hardship) 90+ day past due 90+ day past due 0.5 0.4 Introduction of changes to 2.0 Introduction of changes to 1.91
Slide 95: Specialist Businesses 1H21 performance
Specialist Businesses 1H21 performance. Specialist Businesses Cash earnings ($m) Change Decrease in COVID-19 support costs, Key financial metrics 1H20 2H20 1H21 on 2H20 Higher Life Insurance, timing of project spend LMI and funds income Average funds ($bn) 203.8 191.1 205.6 8% and seasonality of spe
Slide 96: Panorama
Panorama. Specialist Businesses Supporting advisers and investors. Panorama UX FUA on Panorama2 ($m) Investors on Panorama2 (#) supports both advised and direct BT Wrap migration BT Wrap migration to consumer 115,369 investment and 49,593 superannuation propositions 31,240 67,109 23,387 24,700 54,78
Slide 97: Economics
Economics AIfestpac Group
Slide 98: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts. Economics Key economic indicators (%) Key economic indicators (%) 2019 2020 2021F 2022F 2019 2020 2021F 2022F at April 2021 at April 2021 World GDP1 2.8 -3.3 5.9 4.5 Australia Credit growth Australia GDP2 2.2 -1.1 4.5 3.0 Total – year end 2.4 1.8 4.6 5.
Slide 99: The Australian economy
The Australian economy. Economics Population 25.7 million. Australian population Australian GDP and employment composition Output 2020 - sector contribution to GDP1 (%) NT Mining 245k 10 Manufacturing 19 QLD 6 Construction WA 5.2m Transport, Utilities 2.7m SA 8 Wholesale, Retail 1.8m 10 Agriculture
Slide 100: The Australian economy: recovery well under way
The Australian economy. Economics Recovery well under way and stronger than expected. Australia’s GDP profile (index) GDP growth year end contributions (ppts) Index ppts ann ppts ann Pre covid forecast Current forecast Index 2019 2020 2021f 2022f 112 112 5 5 Dec 2019 = 100 Westpac 4 4 108 f’casts 10
Slide 101: The Australian economy: momentum in consumer and housing
The Australian economy. Economics Momentum in consumer and housing. Consumer spending: broad categories Residential property: listings and sales (‘000s) Essential services Index Durables Index ‘000s new listings (lhs) sales (lhs) ‘000s Latest vs pre-COVID: 120 Discretionary services 120 31 33 Basic
Slide 102: The Australian economy: still a long way from potential
The Australian economy. Economics Positive signs but still a long way from potential. Unemployment rate (%) Business confidence and investment % % % yr end Net Bal. Westpac f’casts 9 9 Business investment real, non-mining, lhs to Dec-23 30 30 8 8 Business confidence, adv 2qtrs, rhs 20 20 7 7 10 10 6
Slide 103: The Australian economy: commodity prices
The Australian economy. Economics Commodity prices expected to remain higher for longer. World growth post COVID-19 (% yr) Australian commodity prices (index) %yr Westpac %yr 2012=100 Iron ore Met coal 2012=100 f’casts 7 China Other Advanced Total 7 160 Thermal coal Brent Westpac 160 6 6 f’casts to
Slide 104: Australian housing market
Australian housing market. Economics Housing market in strong, broad-based upswing led by owner-occupiers. Australian dwelling prices (index) Housing finance approvals by segment ($bn) Index All dwellings (index, Jan 2004 = 100) $bn $bn 230 230 45 45 Rest of Australia 'Upgraders' 40 40 210 210 Inves
Slide 105: Australian housing market: affordability
Australian housing market. Economics Affordability issues to re-emerge in Sydney and Melbourne. Affordability: Australia (%) Mortgage interest rates (%) Westpac % % Share of average income required to raise a f’casts to % % 35 35 Variable* 3 year fixed deposit over 5yrs and pay mortgage over first D
Slide 106: The New Zealand economy
The New Zealand economy. Economics Population 5.1 million. Regional GDP Economy Output 2020 - sector shares of GDP (%) Total nominal GDP 2020: $322 bn Primary industries 11 6 Construction 6 Total nominal GDP 2019: $303bn 3 Electricity, gas, and water 10 Northland, $8bn 9 Manufacturing 4% of populati
Slide 107: The New Zealand economy: recovery well advanced
The New Zealand economy. Economics Recovery well advanced. Dec 2021 Economic indicators Current forecast New Zealand GDP ($bn) Business activity surveys (index) $bn $bn Index Index 0.25% 70 70 Cash rate 0.25% 75 Westpac 75 (14 Apr 2021) forecasts 65 65 70 70 60 60 4.9% Unemployment 4.9% 55 55 (Dec q
Slide 108: New Zealand housing market
New Zealand housing market. Economics Major policy shift. Changes to housing market policies New Zealand dwelling prices (index, Jan 2007 = 1000) • The Government has announced a suite of new housing market policies affecting Index Index both demand and supply Auckland • The most significant changes
Slide 109: Appendix and Disclaimer
Appendix and Disclaimer AIfestpac Group
Slide 110: Appendix 1: Cash earnings adjustments
Appendix 1: Appendix Cash earnings adjustments. Cash earnings adjustment ($m) 1H20 2H20 1H21 Description Reported net profit 1,190 1,100 3,443 Net profit attributable to owners of Westpac Banking Corporation Fair value on economic hedges (which do not qualify for hedge accounting under AAS) comprise
Slide 111: Appendix 2: Reinventure – Investing in fintech businesses
Appendix 2: Appendix Reinventure – Investing in fintech businesses1. Westpac has invested $150m in fintech venture capital fund, Reinventure. Reinventure enables Westpac to access insights and adjacent business opportunities, both in Australia and offshore. The model also helps Westpac to source com
Slide 112: Appendix 3: Sustainability
Appendix 3: Appendix Sustainability. Industry recognition Sustainability indexes Inclusion and diversity recognition Received “B” rating in the 2020 Recognised by the CDP for our response to Member of the DJSI Bloomberg Gender Equality Climate Change, announced Indexes since 2002 Index for the 5th c
Slide 113: Appendix 3: Sustainability commitments and partnerships
Appendix 3: Appendix Sustainability. Key commitments and partnerships Principles for Responsible Banking Principles for Responsible Investment UN Sustainable Development Goals Paris Climate Agreement Signatory 2019 Signatory (2007) CEO Statement of Commitment (2015) Supporter (2015) The Equator Prin
Slide 114: Appendix 4: Definitions – Credit quality
Appendix 4: Appendix Definitions – Credit quality. For financial assets where there has been a significant increase in credit risk Includes facilities where: Stage 2: Lifetime ECL since origination but where the asset is still performing a provision for lifetime • contractual payments of interest an
Slide 115: Appendix 4: Definitions – Divisions, earnings drivers, capital and liquidity
Appendix 4: Appendix Definitions – Divisions, earnings drivers, capital and liquidity. Divisions Capital and liquidity Consumer provides banking products and services to Australian personal customers, Capital ratios As defined by APRA (unless stated otherwise) Consumer including mortgages, credit ca
Slide 116: Appendix 4: Definitions – Other
Appendix 4: Appendix Definitions – Other. Branch Net Promoter Score measures the net likelihood of recommendation to others of the Branch transactions are typically withdrawals, deposits, transfers and payments transactions customer’s main financial institution for retail or business banking. Net Pr
Slide 117: Investor Relations Team
Investor Relations Team. Contact us Contact Us. Andrew Bowden Jacqueline Boddy www.westpac.com.au/investorcentre Annual reports Head of Investor Relations Head of Debt Investor Relations Presentations and webcasts +61 2 8253 4008 +61 2 8253 3133 +61 438 284 863 +61 448 064 012 5 year financial summa
Slide 118: Disclaimer
Disclaimer Disclaimer 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 be relied