Westpac Banking Corporation · ASX:WBC
Westpac Banking — Debt Investor Presentation (May 2020)
57 slides from Westpac Banking's debt investor presentation, May 2020
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation For the six months ended 31 March 2020
Slide 2: Disclaimer
Disclaimer. The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (“Westpac”) (ABN 33 007 457 141) and its activities. It should not be reproduced, distributed or transmitted to any person without the consent of Westpac and is not
Slide 3: 1H20 overview
1H20 overview. COVID-19 • Protecting our people • Helping customers - relief packages, continuing to lend • Remaining open for business Remaining strong • Strong capital, funding and liquidity • Term Funding Facility provides additional liquidity • Well progressed on TLAC Earnings significantly • Re
Slide 4: COVID-19 Australian Government support measures
COVID-19 Australian Government support measures. Reserve Bank of Australia (RBA) Australian Federal Government and Australian Federal Government and RBA supporting market liquidity State Governments providing stimulus stimulus packages ($bn) • Cash rate cut to 25bps • JobKeeper Payment - wage subsid
Slide 5: Westpac COVID-19 response
Westpac COVID-19 response Keeping our people safe Supporting consumers Protecting those coming into work; social distancing and There when you need us with >90% of Branches open, enhanced cleaning ATM availability 99% in March ~22k employees working from home $39bn in mortgage balances deferred, 105
Slide 6: Customer support for mortgages
Customer support for mortgages1. Repayment relief for Australian home loan customers. Total mortgage portfolio Repayment relief provided Repayment relief criteria 1.6m accounts 105k accounts 3 months with review Initial 3 month repayment deferral on home loan repayments with $446bn balances $39bn ba
Slide 7: Liquidity coverage ratio
Liquidity coverage ratio. Liquidity at exceptionally high levels. Liquidity coverage ratio (LCR)1 (%) Liquidity coverage ratio (LCR)1 ($bn and %) 30 September 2019 31 March 2020 LCR 127% LCR 154% 200.0 190.9 154 143.9 150.0 123.6 113.4 138 100.0 134 134 133 127 125 124 127 121 50.0 114 0.0 Net cash
Slide 8: Balance sheet funding
Balance sheet funding. Net stable funding ratio at 117%. Net stable funding ratio (NSFR) ($bn) Funding composition (%) Key developments By residual maturity • Customer deposits, 63% of total funding 627.7 5 5 5 – Strong growth in customer deposits, up $19.3bn Wholesale 536.6 9 7 7 in 1H20, compared
Slide 9: Long term wholesale funding
Long term wholesale funding. $12.9bn issued in 1H20. Term debt issuance and maturity profile1,2,3 ($bn) • $12.9bn new long term wholesale funding raised Covered bond Hybrid Senior/Securitisation Sub debt • Majority of new issuance in senior unsecured 42 Issuance Maturities bonds (44%) and covered bo
Slide 10: Tier 2 capital
Tier 2 capital. Well progressed on TLAC requirements. Westpac Tier 2 issuance and calls/maturities1,2 (notional amount, A$m) 3 Tier 2 maturities Approx. TLAC requirement based on RWAs at 31 March 2020 5,000 Issuance Maturities 4,000 3,000 2,000 4,209 2,423 2,423 2,660 1,000 2,241 2,019 1,090 1,343 1
Slide 11: 1H20 key metrics
1H20 key metrics. Disappointing earnings, strong balance sheet. Change 1H20 – Impairment charges and stressed exposures2 (bps) Financial metrics 1H20 2H19 2H19 80 500 Impairment charge to average loans annualised (lhs) Stressed exposures to TCE (rhs) 62bps 400 Reported net profit $1,190m $3,611m (67
Slide 12: COVID-19 provision reflects 3 key drivers
COVID-19 provision reflects 3 key drivers. Change in economic forecasts and scenario weights $1,135m Sector overlays $446m Changed economic forecasts Changed scenario weights (%) High risk as % of total TCE Forecast base case Q3 2020 (peak) 2020 2021 Cultural & recreational services 10.0 5.0 0.1 GDP
Slide 13: Key capital ratios
Key capital ratios. Capital buffers provide ability to support economy during stress. % Mar-19 Sep-19 Mar-20 10.8% CET1 capital ratio at 31 March 2020 0.3% Buffer CET1 capital ratio 10.6 10.7 10.8 10.5% unquestionably 2.5% 2.8% Buffer $12.0bn strong benchmark Unquestionably Strong expectation Additi
Slide 14: Australian economic snapshot
Australian economic snapshot. Government well positioned to provide support. Key Statistics GDP Federal Budget % ann % ann % of Underlying cash balance $bn 10 10 GDP 2.2% GDP as at 2019 Q4 8 Westpac fc/s 8 4 40 to end 2023 6 6 0 0 -9.3% Forecast Australian GDP Q3 2020 4 4 -4 -40 2 2 0 0 -8 -80 5.2%
Slide 15: Additional information
Additional information Westpac Banking Corporation ABN 33 007 457 141 },Alfestpac Group |\
Slide 16: 1H20 impairment charges
1H20 impairment charges. Higher collectively assessed provisions the main driver of increase. Impairment charges ($m) Impairment 1H19 ($m) 1H20 ($m) Drivers of 1H20 charge charge ($m) Individually assessed Collectively assessed Total New Write-backs & Write-offs Other mvmts Individually assessed IAP
Slide 17: Increase in provisions
Increase in provisions. Responding to the impact of COVID-19 and the deteriorating economic outlook. Provisions for impairments Total impairment provisions ($m) Mar-19 Sept-19 Mar-20 Overlay 1 Loan provisions to gross loans (bps) 56 54 80 Stage 1 CAP Impaired asset provisions to impaired assets (%)
Slide 18: Provision cover by portfolio category
Provision cover by portfolio category. Coverage increasing across the portfolio. Exposures as a % of TCE Provisioning to TCE (%) Sep-181 Mar-19 Sep-19 Mar-20 Fully performing portfolio Stage 1 provisions 95.77 95.72 Small cover as low probability of default (PD) 0.18 0.09 0.09 0.12 95.66 Fully perfo
Slide 19: Portfolio composition
Portfolio composition. Weighted towards prime residential mortgage lending. Asset composition (%) Lending composition at 31 March 2020 (% of total) Total assets ($968bn) Mar-19 Sep-19 Mar-20 Total loans $720bn Loans 80 79 74 Available-for-sale securities and investment securities 8 8 9 Housing Tradi
Slide 20: Loan portfolio composition
Loan portfolio composition. Composition remains consistent half on half. Exposures at default1 by sector ($bn) Top 10 exposures to corporations and NBFIs6 (% of TCE) 2 Finance & insurance The single largest corporation/NBFI 3 exposure represents Government admin. & defence 0.3% of TCE Reflects incre
Slide 21: Customer support for small business
Customer support for small business1. Helping small businesses with their cash flow needs. Approvals Repayment relief approvals by state (%) 31k repayment relief packages approved for small business customers NSW & ACT 10 Provides up to 6 months repayment deferral with interest capitalising 10 28 Eq
Slide 22: Stressed exposures up 12bps
Stressed exposures up 12bps. Driven by an increase in Watchlist and Impaired exposures. Stressed exposures as a % of TCE Movement in stress categories (bps) 6 132 3.20 3 2 1 7 120 3.09 5 (2) Watchlist & substandard 110 0 1 90+ day past due (dpd) and not impaired 2.48 Impaired 2.17 Mainly due to an i
Slide 23: Corporate and business stressed exposures
Corporate and business stressed exposures. By industry. Corporate and business stressed exposures by industry ($bn) 2.0 Mar-19 Sep-19 Mar-20 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Services1 Agriculture, forestry & Manufacturing Mining Transport & storage Finance & insurance Wholesale & Property Acc
Slide 24: Sectors in focus: Commercial property
Sectors in focus. Commercial property. Commercial property Commercial property exposures % of TCE and % in stress Mar-19 Sep-19 Mar-20 Total committed exposures (TCE) $66.9bn $66.9bn $67.6bn 10 Commercial property as % of TCE (lhs) 20 Commercial property % in stress (rhs) Lending $52.3bn $51.7bn $52
Slide 25: Sectors in focus: Retail trade
Sectors in focus. Retail trade. Retail trade Retail trade exposure by sub-sector (TCE) ($bn) Mar-19 Sep-19 Mar-20 Mar-19 Sep-19 Mar-20 Total committed exposures (TCE) $16.0bn $16.0bn $15.5bn 7.0 7.0 Lending $11.5bn $11.6bn $11.1bn 6.4 5.0 4.8 4.6 4.7 Retail trade as a % of Group TCE 1.53 1.52 1.43 4
Slide 26: Sectors in focus: Agriculture, Forestry and Fishing
Sectors in focus. Australian Agriculture, Forestry and Fishing. Australian Agriculture, Forestry and Fishing Australian Agriculture portfolio composition (TCE) (%) Mar-19 Sep-19 Mar-20 Grain Total committed exposure (TCE) $10.9bn $11.2bn $11.8bn 3 22 Beef & Sheep 4 Lending $8.6bn $9.1bn $9.4bn 5 Hor
Slide 27: Sectors in focus: Accommodation and Construction
Sectors in focus. Accommodation, cafes and restaurants and Construction. Accommodation, cafes and restaurants Portfolio security composition (TCE) (%) Portfolio by sub-sector (TCE) (%) Sep-19 Mar-20 Total committed exposures 6 Accommodation $9.6bn $9.7bn 4 (TCE) Fully Secured Lending $8.6bn $8.7bn 2
Slide 28: Sectors in focus: Manufacturing and Mining
Sectors in focus. Manufacturing and Mining. Manufacturing Portfolio by region (TCE) (%) Portfolio by sub-sector (TCE) (%) Sep-19 Mar-20 Food, Beverage and Tobacco Machinery and Equipment Total committed exposures 21 4 $30.6bn $30.0bn 17 18 Asia (TCE) 24 Metal Product Australia 23 Non-Metallic Minera
Slide 29: Sectors in focus: Services and Transport & Storage
Sectors in focus. Services and Transport & Storage. Services1 Portfolio security composition (TCE) (%) Portfolio by sub-sector (TCE) (%) Sep-19 Mar-20 Total committed exposures Education $22.4bn $23.2bn (TCE) 20 17 28 Lending $15.3n $15.8bn Fully Secured Health & Community Services Services as a % o
Slide 30: Australian consumer unsecured lending
Australian consumer unsecured lending. 3% of Group loans. Australian consumer unsecured lending portfolio1 90+ day delinquencies (%) Mar-19 Sep-19 Mar-20 3.00 Lending $20.7bn $19.5bn $18.4bn 1.97% 2.00 30+ day delinquencies (%) 4.08 3.68 4.22 Consumer unsecured 90+ day delinquencies 1.00 up 20bps mo
Slide 31: New Zealand stressed exposures
New Zealand stressed exposures. Business stressed exposures as a % of New Zealand business TCE Watchlist & substandard 90+ day past due and not impaired Impaired Property 7 14 4 5 Manufacturing 5.5 4.9 15 Agriculture, 4.4 forestry & fishing 3.3 3.4 3.3 Wholesale trade 3.1 2.9 3.2 5.0 2.3 2.4 4.0 Con
Slide 32: New Zealand consumer portfolio
New Zealand consumer portfolio. Introduction of new hardship treatment impacting delinquencies. Mortgage 90+ day delinquencies1 (%) Unsecured consumer 90+ day delinquencies1 (%) 1.0 2.0 Introduction of changes to Introduction of changes to the reporting of hardship the reporting of hardship 1.59 1.5
Slide 33: Australian mortgage portfolio performance
Australian mortgage portfolio performance. Delinquencies rising from early impact of COVID-19 disruption. Australian mortgage portfolio Major banks’ total residential mortgage impaired and past due loans ≥ 90days ($bn and %)2 Mar-19 Sep-19 Mar-20 0.91 6 0.87 1.00 0.79 Impaired assets (lhs) 5 0.72 0.
Slide 34: Australian mortgage portfolio composition
Australian mortgage portfolio composition. Shift towards owner occupied, principal & interest lending continues. Mar-19 Sep-19 Mar-20 1H20 Australian mortgage portfolio balance balance balance Flow1 Australian mortgage portfolio by State (%) 5 Total portfolio ($bn) 447.2 449.2 445.7 30.4 Australian
Slide 35: Australian mortgage portfolio
Australian mortgage portfolio. Majority of borrowers have built significant equity. Australian housing loan-to-value ratios (LVRs) (%) Australian housing loan-to-value ratios (LVRs) (%) 100 % of total portfolio 1H20 drawdowns LVR at origination 90 Portfolio LVR at origination 41 % of total portfolio
Slide 36: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting. Policy on a tightening bias. Australian mortgage portfolio by Current credit policy year of origination (% of total book) Calendar year • Borrower’s income verified via payslips or tax returns with other supporting documentation such as PAYG income stateme
Slide 37: Australian mortgage portfolio repayment buffers
Australian mortgage portfolio repayment buffers. 70% of customers ahead of scheduled repayments. Variable mortgage interest rates1 (%) Offset account balances2 ($bn) • Loans assessed at Owner occupied Investor Buffer . Linked to I/O mortgages Linked to P&I mortgages . the higher of the Serviceabilit
Slide 38: Interest only mortgages
Interest only mortgages. I/O has reduced to 23% of the portfolio. Australian I/O loan portfolio ($bn) Australian mortgage delinquencies (%) • 73% weighted average LVR of interest only I/O performing loans balance (lhs) I/O P&I loans at origination1 200 I/O 90+ day delinquencies balance (rhs) 14 2.0
Slide 39: Australian investment property portfolio
Australian investment property portfolio. Portfolio composition little changed. Investment property lending (IPL) portfolio Mar-19 Sep-19 Mar-20 Investment property portfolio by number of properties LVR of IPL loans at origination (%) 73 72 72 per customer (%) Weighted 1 LVR of new IPL loans in the
Slide 40: Australian mortgage deep dive
Australian mortgage deep dive. Equity buffers have increased for more recent vintages. Australian mortgage lending1 by origination date, dynamic LVR2 and income bands (%) Chart may not add due to rounding Year of origination <2011 2011-14 2015+ Gross income bands 75 >$250k 7 64 $100k - $250k 10 31 4
Slide 41: Lenders mortgage insurance arrangements
Lenders mortgage insurance arrangements. Separately capitalised to the bank. Lenders mortgage insurance (LMI) Lenders mortgage insurance arrangements • Where mortgage insurance is required, mortgages are insured through Westpac’s captive mortgage LVR Band insurance insurer, Westpac Lenders Mortgage
Slide 42: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts. Calendar year Key economic indicators (%) at April 2020 2018 2019 2020F World GDP1 3.6 2.8 -3.0 Australia GDP2 2.2 2.2 -5.0 Private consumption2 2.0 1.2 -9.5 Business investment2,3 -0.8 -1.2 -6.0 Unemployment – end period 5.0 5.2 7.3 CPI headline – year
Slide 43: The Australian economy
The Australian economy. Population 25.5 million. Australian population Australian GDP and employment composition Population 246k Output 2019 - sector contribution to GDP (%)1 Mining Northern 10 Manufacturing Territory 19 Population 5.1m 6 Construction Queensland Transport, Utilities Western Populati
Slide 44: A difficult period ahead for the Australian economy
A difficult period ahead for the Australian economy. Unemployment forecast to peak at 9.1%. Dec 2020 Economic indicators Current forecast Australian GDP Consumer & business confidence % ann % ann net bal. monthly net bal. 0.25% 10 10 Cash rate 0.25% Westpac fc/s 130 30 (9 Apr) 8 8 to end 2023 6 6 11
Slide 45: Australian housing market
Australian housing market. Turnover expected to slow in response to COVID-19 restrictions. Australian dwelling prices Rental vacancy rates All dwellings (index, Jan 2004 = 100) Rental vacancy rates (%, quarterly, annual average) % Sydney Brisbane Melbourne Perth Index 230 Rest of Australia Other cap
Slide 46: The New Zealand economy
The New Zealand economy. Population 4.9 million. Regional GDP Economy Total nominal GDP 2018: $311bn Output 2019 - sector shares of GDP (%) Primary industries Northland, $8bn 4 7 Construction 4% of population 11 7 Electricity, gas, and water 5 3 Food manufacturing Auckland, $114bn 3 35% of populatio
Slide 47: New Zealand emerging from temporary lockdown
New Zealand emerging from temporary lockdown. Unemployment expected to peak at 9.5%. Dec 2020 Economic indicators Current forecast New Zealand GDP Consumer & business confidence % ann % ann Index Index 0.25% 12 Westpac 12 140 Consumer confidence (left axis) 100 Cash rate -0.50% (9 Apr) 10 Previous G
Slide 48: New Zealand housing market
New Zealand housing market. Strong price momentum yet to reflect COVID-19 lockdown measures. New Zealand dwelling prices by region Annual house price growth Index Index 20 % % 20 2300 2300 Forecast Auckland 15 15 2100 2100 1900 Canterbury 1900 10 10 1700 1700 Wellington 5 5 1500 1500 0 0 1300 Other
Slide 49: COVID-19 New Zealand Government support measures
COVID-19 New Zealand Government support measures. Reserve Bank of New Zealand New Zealand Federal Government and New Zealand fiscal support package supporting market liquidity State Governments providing stimulus ($NZ bn) • Cash rate cut to 25bps • NZ$8bn to NZ$12bn subsidy for wages 1.4 • Large sca
Slide 50: Customer support in New Zealand
Customer support in New Zealand1. Repayment relief for New Zealand home loan and business customers. Total mortgage portfolio Approvals Mortgage customer support packages by LVR (%) 182k customers 15k customers 5 1 0% - 60% $291k average loan size $400k average loan size 74% owner-occupier 83% owner
Slide 51: AUSTRAC Response Plan and proceedings
AUSTRAC Response Plan and proceedings. Overview Response Plan across three areas Status of proceedings • In 2018 Westpac self reported to AUSTRAC a 1. Immediate fixes: • Since 20 November 2019, Westpac has been failure to report certain international funds • Outstanding IFTIs reported to AUSTRAC in
Slide 52: Royal Commission response plan
Royal Commission response plan. Implementing recommendations where we can. Legislative status Implementation Progress • Royal Commission’s Final Report released • Westpac is focused on implementing in February 2018, with 76 recommendations where we can Implementation Implemented underway recommendat
Slide 53: Customer remediation
Customer remediation. Accelerating customer refunds: Provisions for customer refunds, payments and associated costs: • Extensive product, process and policy reviews as part of our ongoing • Provisioned $258 million (after tax) in 1H20 for estimated customer ‘get it right, put it right’ initiatives r
Slide 54: Appendix 1: Cash earnings adjustments
Appendix 1: Cash earnings adjustments. Cash earnings 1H19 2H19 1H20 adjustment $m $m $m Description Reported net profit 3,173 3,611 1,190 Net profit attributable to owners of Westpac Banking Corporation Fair value on economic hedges (which do not qualify for hedge accounting under AAS) comprise: • T
Slide 55: Appendix 2: Internationally comparable capital ratio reconciliation
Appendix 2. Internationally comparable capital ratio reconciliation. 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 published a study that co
Slide 56: Appendix 3: Internationally comparable CET1 and leverage ratios
Appendix 3. Internationally comparable CET1 and leverage ratios. Common equity Tier 1 ratio (%)1 20% 15% China Construction Bank Toronto Dominion Bank China Merchants Bank Royal Bank of Canada 10% [CATEGORY NAME] Standard Chartered Credit Agricole SA Norinchukin Bank Societe Generale JPMorgan Chase
Slide 57: More information
More information. www.westpac.com.au/investorcentre + - X Contact our Global Funding Team Curt Zuber Alexander Bischoff Jacqueline Boddy Treasurer, Westpac Banking Corporation Head of Balance Sheet Management and Global Funding Head of Debt Investor Relations +61 2 8253 4230 +61 2 8253 4314 +61 2 82
Westpac Banking — Debt Investor Presentation (May 2020) on 6ix