Westpac Banking Corporation · ASX:WBC
Westpac Banking — FY2021 Earnings Presentation
132 slides from Westpac Banking's earnings presentation, Nov 1, 2021
Slide 1: Westpac FY21 Presentation and Investor Discussion Pack
ASX Release Level 18, 275 Kent Street Sydney, NSW, 2000 1 November 2021 Westpac FY21 Presentation and Investor Discussion Pack Westpac Banking Corporation (“Westpac”) today provides the attached Westpac FY21 Presentation and Investor Discussion Pack. For further information: David Lording Andrew Bow
Slide 2: Fix. Simplify. Perform.
Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 38 for definition. Results principally cover the 2H21, 1H21 and 2H20 periods. Comparisons of 2H21 versus 1H21 (unless otherwise stated). Fix. Simplify. Perform.
Slide 3: Westpac 2021 Full Year Results Index
Westpac 2021 Full Year Results Presentation Investor Discussion Pack of 2021 Full Year Results 3 35 2021 Full Year Overview Strategy 36 37 Results Index Results Customer franchise 38 43 Governance and risk management 51 Sustainability 53 Earnings drivers 58 Revenue 59 Expenses 62 Impairment charges
Slide 4: Peter King
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: FY21 Results – Overview
FY21 Results – Overview. Good progress • Fix: CORE program on track, strengthened financial crime on strategic • Simplify: 4 businesses sold, digital mortgage origination platform implemented, progressing banking simplification priorities • Perform: Mortgage momentum, business lending stabilised, so
Slide 6: FY21 Earnings snapshot
FY21 Earnings snapshot. Change FY21 FY20 FY21–FY20 Reported net profit $5,458m $2,290m 138% Cash earnings Core earnings $7,755m $7,926m (2%) Cash earnings1 $5,352m $2,608m 105% Impairment (charge)/benefit $590m ($3,178m) Large Cash EPS2 146.3c 72.5c 102% Return on equity3,4 7.6% 3.8% 3.7ppts Dividen
Slide 7: Our strategy
Our strategy. Purpose Helping Australians and New Zealanders Succeed Markets, products, Banking for consumer, business and institutional customers customers Strategic Priorities FIX SIMPLIFY PERFORM Address outstanding issues Streamline & focus the business Sustainable long-term returns • Risk manag
Slide 8: A simpler, stronger bank
A simpler, stronger bank. Australian Life Sale announced Sale completed Auto Finance Coinbase Portfolio NZ Life LMI NZ Wealth simplification Advisory Super, General Vendor Platforms, Zip Insurance Finance Pacific 1Q21 2Q21 3Q21 4Q21 FY22 Reduced Mumbai & Jakarta Over FY21 Close correspondent branche
Slide 9: Changing the way we work
Changing the way we work. Performance Faster decision making, focus on returns, highly engaged workforce • New management team in place culture • Organisational Health Index (OHI) score increased 4 points to 74 over 2021 • Significant improvement in Leadership, Accountability and Direction in OHI ou
Slide 10: Consumer – improved franchise strength
Consumer – improved franchise strength. Customer acquisition Renewed Westpac App Spend & Save accounts for • New iOS app rolled out Millennial MFI Share1 18-29 yrs (#’000s) • Improved usability and new functions 118 • 145k accounts opened using new 5 minute 13.5% 102 88 process 12.5% • Westpac App r
Slide 11: Consumer – focused on speed
Consumer – focused on speed. Process improvements & digitisation Underway in FY22 • Digital mortgage origination platform rolled out1 • Digital mortgage origination platform rolling out to brokers - 90% of customers track applications digitally - ~10% of Brokers using new platform - 75% of customers
Slide 12: Business – lending stabilised
Business – lending stabilised. Business lending settlements Simplified processes – faster decisions (rolling six months, indexed Mar-20 = 100) 125 • >100 process and policy improvements • Reduced average time to decision ~3 days to 13 in 2H21 100 Changed credit policy 75 • Policy largely restored to
Slide 13: WIB – refocused business
WIB – refocused business. Treasury & Markets income ($m)1 Addressed issues Non-customer income Customer income Treasury income • Closed out all matters in AUSTRAC’s statement 1,022 984 851 880 of claim 800 174 148 741 114 75 127 25 • Improved real-time screening for Anti Money- 420 363 335 455 340 L
Slide 14: NZ – strong contribution
NZ – strong contribution. Strengthening foundations Simplified portfolio • Strong balance sheet, well capitalised • Divested Wealth Advisory and announced sale of Life Insurance businesses • Addressing risk and regulatory issues • Digital banking experience being refreshed Loans (NZ$bn) Deposits (NZ
Slide 15: Capital management
Capital management. Operating capital considerations Strong capital • Still working to APRA’s unquestionably strong 10.5% • Pro forma CET1 of 11.8% after buy-back and expected • Management buffer and operating range will be reset once asset sales APRA rules finalised • Off-market share buy-back of u
Slide 16: Fully franked final dividend – 60 cps
Fully franked final dividend – 60 cps. Dividend considerations • Medium term outlook for return and growth • Sustainable payout ratio ~60-75% (ex notable items) • Final dividend yield 4.6%1, fully franked 6.6%1 • Seek to neutralise DRP (arrange to purchase shares on market), no discount on DRP marke
Slide 17: Michael Rowland
Michael Rowland Chief Financial Officer Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 30 for definition. Results principally cover the 1H20, 2H19 and 1H19 periods. Comparison of 1H20 versus 2H19 (unless oth
Slide 18: 2H21 results summary
2H21 results summary. • Cash earnings down 49% from higher notable items • Core earnings ex notable items down 15% - Margins down 9bps from competition and low rates - Treasury & Markets contribution down 16% - Costs up 9% mainly from Fix strategic priority • Balance sheet strength maintained - Cred
Slide 19: Notable items and simplification impacts
Notable items and simplification impacts. Notable items Notable items ($m after tax) FY20 FY21 2H21 • Lower remediation provisions in Business and Consumer, higher AUSTRAC proceedings (1,442) - - in New Zealand and Advice • Provisions for outstanding regulatory investigations Remediation and litigat
Slide 20: 2H21 earnings
2H21 earnings. Cash earnings ($m) 2H21 – 1H21 282 3,819 (209) (109) 3,537 (464) 251 3,134 (1,319) (154) Core earnings down 15% 1,815 Down 18% ex notable items Down 49% 1H21 1H21 1H21 ex Net interest Non-interest Expenses Impairment Tax 2H21 ex 2H21 2H21 notable items 1 notable items 1 income income
Slide 21: Lending dynamics
Lending dynamics. Loans ($bn) 5.3 0.0 710.8 4.9 (1.7) 15.0 (3.0) 0.3 693.1 690.0 Australian mortgages Australian mortgages composition (% of book) 50% 46% 40% 34% 40% 30% 20% 10% IPL IO 16% 0% Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 2 Sep-20 Mar-21 Mortgages - Mortgages1 - Business Institutional Personal
Slide 22: Australian mortgages
Australian mortgages. Mortgage lending movements ($bn) Mortgage annualised change (%) 12.0 2H20 1H21 2H21 2.6 Owner occupied 2 7 11 (3.5) Investor1 (8) (7) (4) (4.7) 1H20 2H20 1H21 2H21 Mortgage lending flows ($bn) Mortgage composition (% of total) 10 (18) 35 (15) Stock Stock Flow 456 Sep-20 Sep-21
Slide 23: Margins
Margins. Net interest margin (% and bps) • Competitive pressure (6bps) Month of Sep-21 NIM ex Treasury, Markets & • Mix shift to fixed rate lending (3bps) notable items: ~1.80% vs 2H21 1.87% 2.09 (2bps) 2.07 (11bps) 3bps (2bps) (1bp) 4bps (2bps) 1.98 1bp 1.99 Treasury & Markets 0.13 0.13 impact on N
Slide 24: Non-interest income – down 6% excluding notable items
Non-interest income – down 6% excluding notable items.1 Net fees1 up $11m 1% Wealth & insurance1 down $54m 8% Trading and other1 down $66m 14% • Higher institutional fees from lending • Higher LMI and General Insurance • Difficult trading conditions and undrawn line fees • Funds income down from rep
Slide 25: 2H21 expenses
2H21 expenses. Expenses ($m) 2H21 – 1H21 Mainly investment in: financial crime 1,602 7,302 capabilities and systems, product governance, data and regulatory capital changes Lower leave utilisation from COVID-19 restrictions 5,981 (745) 140 55 5,700 131 138 5,236 Mortgage related volumes and COVID-19
Slide 26: Clear path to $8bn cost target
Clear path to $8bn cost target.1 Expenses ($bn)2 Drivers of cost out Notable items 3 Reduce • Complete major Fix items Specialist businesses notable items • Complete divestments 13.3 Fix - non recurring Portfolio • Exit Superannuation, Investments & WBC ongoing 2.3 simplification Platforms, and West
Slide 27: Select cost reset targets
Select cost reset targets.1 Metric Baseline FY21 FY24 Portfolio • Sale of non-core businesses 1 under sale 3 under sale 8 transactions simplification • Completion of sales agreement 4 completed completed • Mortgages processed on digital 32%2 86%2 100% origination platform2 Business • Consumer sales
Slide 28: Credit quality metrics improved
Credit quality metrics improved. Stressed exposures as a % of TCE1 Australian mortgage delinquencies (%) 3.20 4.0 90+ day delinquencies Watchlist & substandard 30+ day delinquencies 90+ day past due (dpd) and not impaired 3.0 30+ day delinquencies ex-COVID-19 deferral support Impaired 2.20 2.0 1.57
Slide 29: Impairment provisions
Impairment provisions. Total impairment provisions1 ($m) Provision coverage Overlay 2 Stage 1 CAP 3 Stage 2 CAP 3 Sep-19 Sep-20 Mar-21 Sep-21 Stage 3 CAP 3 Stage 3 IAP 4 Provisions to Credit 107bps 171bps 159bps 140bps RWA 6,159 5,788 Provisions to TCE 37bps 58bps 51bps 44bps 708 5,508 795 5,007 IAP
Slide 30: Credit impairment charge / (benefit) composition
Credit impairment charge / (benefit) composition. ($m) Individually assessed provisions Collectively assessed provisions Total Write-backs Write-offs Other movement New IAPs & recoveries direct in CAP 2,238 1,619 940 466 438 438 351 318 366 283 296 144 (170) (147) (194) (203) (218) (372) (640) (777)
Slide 31: Capital drivers
Capital drivers. Risk weighted assets ($bn) Pro forma CET1 capital ratio (% and bps) 10.2 (2.8) (0.6) 1.0 436.7 428.9 12.32 (80) Mainly higher mortgage lending and implementation of 25% mortgage risk weight floor 29 11.81 Mar-21 Credit Market IRRBB Other and Sep-21 RWA RWA operational RWA CET11 capi
Slide 32: Off-market share buy-back
Off-market share buy-back. • Up to $3.5bn off-market share buy-back to be undertaken via a tender process: - Efficient form of capital management - Shares bought back at a discount to market price - Reduces share count - Supports EPS, DPS and return metrics - Distributes franking credits • Nominated
Slide 33: FY22 Considerations
FY22 Considerations.1 • Mortgages growing at system Lending • Build on momentum in business lending • Margins expected to be lower. Exit margin2 excl. Tsy & Markets ~1.80% Net interest margin • Tractor expected to have reduced impact as capital moves to 3yr hedge vs 1yr • Removal of CLF • Benefit fr
Slide 34: Peter King
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 35: FY22 Priorities – Shift to simplify and perform
FY22 Priorities – Shift to simplify and perform. Fix • Improve risk management – Successful delivery of CORE – Working to close out customer remediation and regulatory investigations Simplify • Portfolio simplification – Complete business sales, focus on Superannuation and Platforms – Close 3 intern
Slide 36: Investor Discussion Pack
Investor Discussion Pack Fix. Simplify. Perform.
Slide 37: Overview
Overview Afestpac GRouP
Slide 38: Westpac Group at a glance
Westpac Group at a glance. Strategy Our Purpose: Helping Australians and New Zealanders Succeed. Operating divisions • Now in its 205th year, Australia’s • Unique portfolio of brands first bank and oldest company, providing banking across opened 1817 consumer, business and Consumer • Australia’s 2nd
Slide 39: 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 FY21 FY21-FY20 2H21-1H21 performance at both a Group and divisional level ($m) (%) (%) • This measure has b
Slide 40: FY21 cash earnings
FY21 cash earnings. Results Change Cash earnings FY21 – FY20 ($m) FY21- Impairment benefit from FY20 FY21 FY20 improved economic outlook ($m) ($m) (%) and credit quality metrics Net interest 3,294 increase in FTE to 17,086 16,714 (2) income support enhanced risk 3,768 (629) NIM down 8bps mostly from
Slide 41: 2H21 cash earnings
2H21 cash earnings. Results Change Cash earnings 2H21 – 1H21 ($m) 2H21- 1H21 2H21 1H21 ($m) ($m) (%) AIEA up 2%. NIM down 9bps, Mostly from lower markets Increase of 1,396 FTE to support Net interest mostly from lower lending income and lower contribution 8,469 8,245 (3) customers, and our risk and
Slide 42: Notable items in FY21 and FY20
Notable items in FY21 and FY20. Results In FY21 and FY20, the Group recognised certain items that do not reflect on-going performance and are known throughout this FY21 notable items Specialist Group document as “notable items” which relate to the following: ($m) Consumer Business WIB NZ2 Businesses
Slide 43: FY21 financial snapshot
FY21 financial snapshot. Results Change Change Change Change FY21 FY21 – FY20 2H21 - 1H21 FY21 FY21 – FY20 2H21 - 1H21 Earnings1 Balance sheet Earnings per share (cents) 146.3 102% (49%) Total assets ($bn) 935.9 3% 5% Common equity Tier 1 (CET1) capital Core earnings ($m) 7,755 (2%) (39%) 12.32 119b
Slide 44: Supporting customers, communities and our people
Supporting customers, communities and our people. Customer franchise Continued to support customers through COVID-19. New and ongoing support to customers Supporting our people • New support for eligible customers announced in July 2021 including1: • Supporting vaccine rollout – Short term deferrals
Slide 45: 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 5.6 3.2 Consumer 29.1% 7.7 1.3 7.5 0.9 7.4 -3.3 7.4 15.0% 15.7% 12.2% 7.4 5.2% Feb-19 Aug-19 Feb-20
Slide 46: Continued migration to digital
Continued migration to digital. Customer franchise Less physical More digital Australian ATMs (#) Australian branches (#)1 Digitally active customers (#m) Accounts with eStatements In FY20 we sold 740 non-branch At 30 September 2021 ATMs to Prosegur with a further 28 sold Number (#m) eStatements (%)
Slide 47: Launched new app
Launched new app. Customer franchise Customer-centric design. Fast Sign-in Quick Interactive Accessible Access to whole Pay instantly Drag & drop For all of banking with less clicks to transfer customers NEW AND ENHANCED FEATURES • Smart Search - a quick way to navigate the app and initiate payments
Slide 48: Making it easier for customers
Making it easier for customers. Customer franchise Simpler processes, more digital and updated products. Improved customer offerings Simplified products and fees Subscription Credit - Flex • $1k limit. Fast approval <10min REDUCING FEES AND COMPLEXITY • Instant Digital Card straight to mobile wallet
Slide 49: Digital mortgage origination
Digital mortgage origination. Customer franchise One process, major brands. Discover Apply Use • New search optimised • Apply online 24/7 for all • Auto-routing to available • Automated • See which offset account calculators for repayments, brands via one process lenders for faster comprehensive cre
Slide 50: Launching Banking-as-a-Service
Launching Banking-as-a-Service. Customer franchise A long-term opportunity to expand our customer base via a low cost model. THE OPPORTUNITY THE BUSINESS VALUE FOR WESTPAC • Banking is increasingly becoming embedded in • Using 10x Westpac has built (and is piloting) a Acquire new customers in a de
Slide 51: Customer remediation
Customer remediation. Customer franchise Significant acceleration of remediation payments in FY21 Provisions for customer compensation and associated costs • In FY21 we paid or offered over $1bn to approximately 1 million Net provisions of $311m raised in FY21 including for: customers and substantia
Slide 52: Customer Outcomes and Risk Excellence (CORE) program
Customer Outcomes and Risk Excellence (CORE) program. Governance • Strengthening risk governance, accountability and risk culture Over one third of CORE activities completed, submitted • 19 workstreams, 80 deliverables and 327 activities and closed1 • Group Executive accountability, including remune
Slide 53: Strengthening the management of risk via CORE
Strengthening the management of risk via CORE. Governance EMBEDDING THREE STRONGER CULTURE AND CLEAR END-TO-END RISK DATA QUALITY AND LINES OF DEFENCE OVERSIGHT AND ACCOUNTABILITIES MANAGEMENT MANAGEMENT (3LOD) IMPROVING EXECUTION senior Improving data through the Changes to 600 leaders Ke
Slide 54: Climate Action Plan progress
Climate Action Plan progress. Sustainability Committed to managing our business in alignment with the Paris Agreement and the need to transition to a net zero economy by 2050. Progress and targets Financed emissions profile Focus areas Target by FY21 Progress • We conducted analysis to estimate emis
Slide 55: Climate-related disclosures – scenario analysis
Climate-related disclosures – scenario analysis. Sustainability Transition risk – key points Managing climate-related risk • Transition climate risk includes regulatory, market and technology changes when • We continue to integrate climate-related risks and opportunities into our moving to a greener
Slide 56: Climate-related metrics
Climate-related metrics. Sustainability Lending to climate change solutions Electricity generation exposure Lending to electricity generation ($bn, TCE) (% of TCE)1 in Australia and New Zealand (% of total) 10.9 90% 10.1 79% 2.8 80% 9.1 9.3 0.7 70% 4.3 Renewable energy 60% 13.2 Gas 50% Black coal 40
Slide 57: Respecting and advancing human rights
Respecting and advancing human rights. Sustainability Progressing our Human Rights Position Statement and 2023 Action Plan. Salient human rights Progress in Full Year 2021 Our approach issues Financial services provider • Customer vulnerability and • Supported customers identified as being at increa
Slide 58: Inclusion and Diversity
Inclusion and Diversity. Sustainability Strategy focused on 3 key areas and a culture of inclusion. GENDER CULTURAL DIVERSITY INDIGENOUS REPRESENTATION Women in leadership • Seek to understand the cultural diversity of our • Appointed 172 new Aboriginal and/or Torres • Maintain our target of 50% wom
Slide 59: Earnings drivers
Earnings drivers Afestpac GRouP
Slide 60: Composition of lending and deposits
Composition of lending and deposits. Revenue Lending up 2% and deposits grew 4% over the year. Composition of lending (% of total) Gross loans1 ($bn) Australian mortgage lending4 ($bn) +NZ$2.0bn <1 5.3 (1.0) 715.4 61 (49) 12.5 (1.3) 4.9 Aust. mortgages 698.7 695.0 456 441 444 13 Aust. business 2 Up
Slide 61: Net interest margin
Net interest margin. Revenue Down 7bps excluding Treasury & Markets and notable items. Net interest margin (NIM) movement (%, bps) Net interest margin (%) NIM excl. Treasury & Markets Treasury & Markets impact on NIM NIM NIM excl. Treasury & Markets 2.09 (2bps) 2.07 (11bps) 2.03 3bps (2bps) 1.99 0.1
Slide 62: Non-interest income
Non-interest income. Revenue Non-interest income contributors1 ($m) Net fee income (ex notable items) ($m) Fees Wealth and insurance Trading Facility fees Net transaction fees Other non-risk fee income Other Businesses sold Notable items 902 Up 3% Up 1% Up 25% 2,330 Down 14% 61 778 804 815 1,675 1,8
Slide 63: Expenses
Expenses. Expenses Expense movements FY21 – FY20 ($m) FTE (#) Mainly from spend on CORE, financial crime capabilities, product 2,347 13,283 12,700 998 40,143 (2,539) governance and data management 692 1,604 544 10,936 10,161 138 93 36,849 10,161Up $775m or 8% 10,392 Up 3,294 or 9% Fix 1 BAU Investme
Slide 64: Expenses
Expenses. Expenses Expense movements 2H21 – 1H21 ($m) FTE (#) 1,602 7,302 666 40,143 522 208 (745) 38,747 5,981 131 140 5,700 193 5,236 Up $464m or 9% Up 1,396 or 4% 1H21 reported Notable 2H21 reported Notable items Ongoing expenses Investments (ex 1H21 ex-notable 2H21 ex-notable Fix Investments (ex
Slide 65: 2H21 impairment benefit of $218m
2H21 impairment benefit of $218m. Impairment charges Higher CAP release driven by resilient portfolio and refresh of portfolio overlays. Impairment charges ($m) Individually assessed Collectively assessed Total New Write-backs & Write-offs Other mvmts 2,238 IAPs recoveries direct in CAP 1,619 940 35
Slide 66: Credit quality and provisions
Credit quality and provisions
Slide 67: Provisions
Provisions. Credit quality Provisions for impairments Total impairment provisions4 ($m) 5 Sep-20 Mar-21 Sep-21 Overlay Stage 1 CAP Stage 2 CAP Stage 3 CAP Loan provisions to gross loans (bps) 88 79 70 Stage 3 IAP Impaired asset provisions to impaired assets (%) 41 47 54 6,159 Collectively assessed p
Slide 68: Provision cover by portfolio category
Provision cover by portfolio category. Credit quality Revised methodology for determining significant increase in credit risk1. Exposures as a % of TCE Provisioning to TCE (%) Mar-20 Sep-20 Mar-21 Sep-21 Stage 1 decreased as a result of larger TCE Stage 1 provisions transfer to Stage 2 92.25 mostly
Slide 69: Portfolio composition
Portfolio composition. Credit quality Asset composition (%) Loan composition at 30 September 2021 (% of total) Total assets ($936bn) Sep-19 Sep-20 Sep-21 Loans 79 76 76 Housing Investment securities 8 10 9 Trading securities and financial assets at fair value through income statement 4 4 2 17 Busine
Slide 70: Loan portfolio composition
Loan portfolio composition. Credit quality Exposures at default1 by sector ($bn) Top 10 exposures to corporations and NBFIs5 (% of TCE) Finance & insurance 2 The single largest corporation/NBFI exposure Government admin. & defence is 0.29% of TCE Property3 Includes securities 1.2 1.1 1.0 1.1 1.0 hel
Slide 71: Credit quality
Credit quality. Credit quality Stressed exposures down 24bps in 2H21. Stressed exposures as a % of TCE Movement in stress categories (bps) 191 (7) 3.20 Watchlist and • Improvement driven in part by rating upgrades (14) 2 (12) substandard across business lending portfolios 160 0 2 (8) (18) • Increase
Slide 72: Credit quality improved across most sectors
Credit quality improved across most sectors. Credit quality Corporate and business stressed exposures by industry sector ($bn) Sep-20 Mar-21 Sep-21 2.0 Mostly one institutional 1.8 exposure related to a fraud in equipment 1.6 leasing 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Property Accommodation, cafes busi
Slide 73: 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) (%) Sep-20 Mar-21 Sep-21 Total committed exposures $9.8bn $9.7bn $9.6bn 7 6 (TCE) Accommodation Lending $
Slide 74: Commercial property
Sectors in focus. Credit quality Commercial property. Commercial property Commercial property exposures % of TCE and % in stress Sep-20 Mar-21 Sep-21 Total committed exposures $65.9bn $67.4bn $70.0bn Commercial property as % of TCE (lhs) Commercial property % in stress (rhs) 8 20 Lending $51.9bn $52
Slide 75: Retail trade
Sectors in focus. Credit quality Retail trade. Retail trade Retail trade exposure by sub-sector (TCE) ($bn) Sep-20 Mar-21 Sep-21 Sep-20 Mar-21 Sep-21 Total committed exposures $15.0bn $13.9bn $14.0bn 7.0 6.4 6.2 Lending $9.5bn $8.7bn $8.6bn 4.4 4.0 4.2 3.6 3.4 3.6 As a % of Group TCE 1.41 1.30 1.24
Slide 76: Australian consumer finance
Australian consumer finance. Credit quality 1.8% of Group loans. Australian consumer finance portfolio1 Australian consumer finance 90+ day delinquencies (%) Sep-20 Mar-21 Sep-21 Lending $15.7bn $15.0bn $13.2bn 2.50 1.76 30+ day delinquencies (%) 3.62 3.58 3.26 1.50 90+ day delinquencies (%) 2.09 1.
Slide 77: Australian mortgage delinquencies
Australian mortgage delinquencies. Mortgage credit quality Customers in deferral leading to a rise in early cycle arrears. Australian mortgage portfolio Sep-20 Mar-21 Sep-21 • 30+ day delinquencies increased 41bps to 220bps, driven by accounts granted COVID-19 Total portfolio 30+ day delinquencies (
Slide 78: Australian mortgage portfolio hardship and deferrals
Australian mortgage portfolio hardship and deferrals. Mortgage credit quality COVID-19 deferral loans increasing hardship balances. Australian mortgage repayment deferrals - treatment Australian mortgage hardship1 balances (% of portfolio) Deferrals provided Deferrals provided Mar20-Mar21 Jun21-Oct2
Slide 79: Australian mortgage portfolio composition
Australian mortgage portfolio composition. Mortgage credit quality Increased flows into fixed rate loans. Sep-20 Mar-21 Sep-21 2H21 Australian mortgage portfolio and 2H21 flow by Australian mortgage portfolio balance balance balance Flow1 product and repayment type (%) Total portfolio ($bn) 440.9 44
Slide 80: Australian mortgage portfolio
Australian mortgage portfolio. Mortgage credit quality House price rises have increased borrower equity; Serviceability buffers have lifted. Australian housing loan-to-value ratios (LVRs) (%) Serviceability assessment 100 Customer rate4 (%) 2H21 drawdowns LVR at origination Portfolio LVR at originat
Slide 81: Australian mortgage portfolio repayment buffers
Australian mortgage portfolio repayment buffers. Mortgage credit quality Australian home loan customers ahead on repayments1 Offset account balances2 ($bn) (% by balances) Linked to I/O mortgages Linked to P&I mortgages Sep-20 Mar-21 Sep-21 51 46 48 27 27 28 40 41 42 37 39 39 24 24 23 35 36 33 31 20
Slide 82: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting. Mortgage credit quality Credit policy at October 2021 Australian mortgage portfolio by • Income verified via payslips, tax returns or salary credits, with other supporting year of origination (% of total book) documentation such as PAYG payment summaries o
Slide 83: Australian mortgages
Australian mortgages. Mortgage credit 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 64 <$100k $100k - $250k >$250k 1 2 1 7 21 1 2 29 3 31 25 10
Slide 84: Capital, funding and liquidity
Capital, funding and liquidity
Slide 85: Capital management
Capital management. Capital, funding and liquidity Rationale for off-market share buy-back Capital overview ($bn) • Westpac has a strong capital position. Its CET1 capital ratio of CET1 capital above 10.5% CET1 capital at 10.5% 12.32% reflects $8.0 billion of capital above APRA’s unquestionably 53.8
Slide 86: Off-market share buy-back: key details
Off-market share buy-back: key details. Capital, funding and liquidity Key features • Off-market share buy-back of up to $3.5bn • Size of share buy-back is up to approximately 4.2% of issued capital1 • Share buy-back price consists of capital component and fully-franked dividend • Details in share b
Slide 87: CET1 capital ratio 12.32%
CET1 capital ratio 12.32%. Capital, funding and liquidity • CET1 capital ratio of 12.32%, down 2bps from 31 March 2021 • 26bps benefit from the divestment of Coinbase Inc., and the sales of Westpac General Key capital ratios1 (%) Sep-20 Mar-21 Sep-21 Insurance and Westpac Lenders Mortgage Insurance
Slide 88: Risk weighted assets
Risk weighted assets. Capital, funding and liquidity Increase from higher credit risk RWA. Risk weighted assets ($bn) Commentary • RWA increased $7.8bn over 2H21, mostly from higher credit risk RWA 437.9 10.2 (2.8) (0.6) 1.8 (0.8) 436.7 (CRWA), partly offset by non-credit risk 428.9 • CRWA increased
Slide 89: Regulatory capital changes
Regulatory capital changes. Capital, funding and liquidity Scheduled implementation of Basel III reforms in Australia deferred by one year. Implementation Change Details Immediately RBNZ dividend restrictions • Banks are able to pay up to a maximum 50% of their earnings as dividends to shareholders
Slide 90: 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 91: 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 China Merchants Bank Royal Bank of Canada 10% Agricultural Bank of .. Standard Chartered Credit Agricole SA Westpa
Slide 92: Liquidity and funding
Liquidity and funding. Capital, funding and liquidity Increase in key ratios. Liquidity coverage ratio1,2 (LCR) (quarterly average, $bn) Net stable funding ratio (NSFR) ($bn) Mar 2021: LCR 124% Sep 2021: LCR 129% NSFR at 30 September 2021: 125% 174 Net cash outflows (NCOs) 165 651 Other flows2 10 37
Slide 93: Balance sheet funding
Balance sheet funding. Capital, funding and liquidity Increase in customer deposits. Funding composition (%) Movement in funding sources Customer deposits to net loans ratio (%) Sep19 – Sep21 (A$) By residual maturity Customer deposits Net loans Customer deposits to net loans ratio 5 4 6 W’sale onsh
Slide 94: Long term wholesale funding
Long term wholesale funding. Capital, funding and liquidity Returning to more normal funding activities in FY22. Term debt issuance and maturity profile1 ($bn) Issuance composition prior to Covered bond Hybrid Senior/Securitisation COVID-19 Subordinated debt Term Funding Facility (Aus) Funding for L
Slide 95: Tier capital issuance
Tier 2 capital issuance. Capital, funding and liquidity Progress towards meeting TLAC requirements ahead of time. Westpac Tier 2 issuance and calls/maturities1,2 (notional amount, A$bn) 8.0 Issuance Maturities 6.0 6.2 FY22 Tier 2 issuance expected to be approx. $5-7billion 5.8 (including buffer abov
Slide 96: Divisional results
Divisional results Afestpac GRouP
Slide 97: Divisional contributions
Divisional1 contributions. Divisional results Specialist Group FY21 ($m) Consumer Business WIB NZ Businesses Businesses Group Operating income 8,893 4,614 2,021 2,310 1,993 1,207 21,038 Expenses (4,622) (2,530) (2,574) (1,062) (1,477) (1,018) (13,283) Core earnings 4,271 2,084 (553) 1,248 516 189 7,
Slide 98: Consumer 2H21 performance
Consumer 2H21 performance. Consumer Cash earnings ($m) Key financial metrics Change Higher spend on risk and on 1H21 2H20 1H21 2H21 compliance programs including NIM 10bps lower from asset financial crime and our CORE Revenue ($m) 4,560 4,457 4,436 - spread compression, partly program offset by lowe
Slide 99: Business 2H21 performance
Business 2H21 performance. Business Cash earnings ($m) Change Higher spend on risk and compliance Key financial metrics 2H20 1H21 2H21 on 1H21 programs including financial crime, our NIM 10bps lower (ex notable CORE program and risk Revenue ($m) 2,268 2,356 2,258 (4%) items 14bps) from asset spread
Slide 100: WIB 2H21 performance
WIB 2H21 performance. Westpac Institutional Bank Cash earnings ($m) Change Lower non-customer Key financial metrics 2H20 1H21 2H21 on 1H21 Margins down 3bps, markets income 256 1% AIEA down Revenue ($m) 1,132 1,046 975 (7%) Higher risk, compliance 26 256 (9) (62) and legal costs Net interest margin
Slide 101: New Zealand 2H21 performance
New Zealand 2H21 performance1. New Zealand Cash earnings (NZ$m) Change Key financial metrics 2H20 1H21 2H21 on 1H21 1H21 included a gain on the sale of Primarily higher spend on technology Wealth Advisory business. Cards and Revenue (NZ$m) 1,120 1,245 1,218 (2%) and risk and compliance programs insu
Slide 102: New Zealand balance sheet
New Zealand balance sheet. New Zealand Net loans (NZ$bn) Deposits (NZ$bn) 90.6 2.3 (0.3) 92.6 88.0 74.1 0.7 1.1 75.9 71.0 Up 2% Up 2% Sep-20 Mar-21 Consumer Business Sep-21 Sep-20 Mar-21 Consumer Business Sep-21 Loans (NZ$bn) and % of total Customer deposits (NZ$bn) and % of total Business 74 Up 2%
Slide 103: New Zealand business exposures
New Zealand business exposures. New Zealand Business stressed exposures as a % of business TCE Business TCE by industry sector % Agriculture, Forestry and Fishing Watchlist & substandard 90+ day past due and not impaired Impaired Rental, Hiring and Real Estate Services Finance and Insurance 17 22 Pu
Slide 104: 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 the
Slide 105: Specialist Businesses 2H21 performance
Specialist Businesses 2H21 performance. Specialist Businesses Cash earnings ($m) Lower life insurance income (valuation of policyholder liabilities), lower funds income (margin compression) Change and partly offset by lower claims in GI and LMI Key financial metrics 2H20 1H21 2H21 on 1H21 Average fu
Slide 106: BT Panorama
BT Panorama. Specialist Businesses Supporting advisers and investors. Panorama Platform FUA on BT Panorama1 ($m) Investors on BT Panorama1 (#) Improved Panorama functions BT Wrap migration BT Wrap migration 234,948 • Updated mobile app providing advisors and 104,779 investors improved security and n
Slide 107: Economics
Economics Afestpac GRouP
Slide 108: 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 October 2021 at October 2021 World GDP1 2.8 -3.3 5.4 4.6 Australia Credit growth Australia GDP2 2.1 -0.9 0.0 7.4 Total – year end 2.4 1.8 5.
Slide 109: The Australian economy
The Australian economy. Economics Re-opening underway on high vaccination rates; activity to bounce back in 2022. Australian vaccinations (%) Australia’s GDP profile (index) % Aus NSW Vic Qld WA Index 80 pre COVID-19 forecast current forecast Index 112 112 90% of adults Dec 2019 = 100 70 80% of adul
Slide 110: The Australian economy
The Australian economy. Economics Consumer well placed to rebound. Australia’s growth mix Consumer sentiment (index, monthly) ppts ann contributions to GDP growth, year end ppts ann net bal. Consumer mood remarkably 8 8 130 7.4 resilient, even at epicentre of 2019 2020 2021f 2022f ‘delta’ shock … 6
Slide 111: The Australian economy
The Australian economy. Economics Rebound likely to see tightening in labour markets in 2022. Unemployment rate (%) Business confidence and employment intentions (qtly) % net bal. net bal. 9 40 Business employment, next 12mths 40 Westpac Peaked: Business confidence f’casts to 30 30 8 July 2020 at 7.
Slide 112: The Australian economy
The Australian economy. Economics Iron ore finding new equilibrium; demand pushing coal higher in the short term. World growth post COVID-19 (% yr) Australian commodity prices (index) %yr Westpac 2012=100 2012=100 7 other developing China forecast Westpac 6 320 320 f’casts to 5 Dec-22 4 270 270 3 Ir
Slide 113: Australian housing market
Australian housing market. Economics Activity picking up as restrictions ease in NSW and Victoria. Australian dwelling prices (3month annualised) % 40 2019 COVID-19 ‘Delta’ 35 Macro-prudential election 30 measures Macro- 25 prudential 20 measures 15 10 5 0 -5 rate cuts -10 -15 Oct-13 Oct-14 Oct-15 O
Slide 114: Australian housing market
Australian housing market. Economics Activity levels to respond to macroprudential measures. Residential property: sales vs listings Housing finance approvals by segment ($bn) ‘000s new listings (lhs) sales (lhs) ‘000s $bn value of housing finance $bn 33 31 18 18 31 16 First home buyers 16 29 29 14
Slide 115: Australian housing market
Australian housing market. Economics Affordability challenges emerging in Sydney and Melbourne. Affordability: Australia (%) Westpac Mortgage interest rates (%) f’casts to % Sydney Melbourne Dec-22 % % % 35 35 Variable* 3 year fixed 2017 peaks 10 10 30 30 8 8 25 25 6 6 20 20 4 4 Share of average inc
Slide 116: Population 25.7 million
The Australian economy. Economics Population 25.7 million. Australian population Australian GDP and employment composition Output by sector 2020-21 (% contribution to GDP)1 NT Mining 247k 11 Manufacturing 18 QLD 6 Construction WA 5.2m Transport, Utilities 2.7m SA 8 Wholesale, Retail 10 1.8m Agricult
Slide 117: The New Zealand economy overview
The New Zealand economy overview. Economics The recovery has been faster than expected and interest rates are on the rise. New Zealand GDP Official Cash Rate $bn $bn % % 75 Westpac forecasts 75 4 4 Westpac forecasts 70 70 3 3 65 65 2 2 Pre-Covid trend 60 60 1 1 Current forecast 55 55 0 0 2018 2020 2
Slide 118: New Zealand economic outlook
New Zealand economic outlook. Economics Lockdown conditions are dampening activity, but the medium-term outlook remains firm. Weekly retail spending by region • The increase in the Covid Alert Level in August has continued for longer than expected. This is weighing on activity in parts of the countr
Slide 119: New Zealand policy outlook and COVID response
New Zealand policy outlook and COVID response. Economics The approach to COVID is shifting to management, while interest rates are on the rise. Monetary policy COVID-19 response • The RBNZ increased the Official Cash Rate to 0.50% in October. Westpac • New Zealand’s approach to managing COVID is shi
Slide 120: New Zealand housing market
New Zealand housing market. Economics Higher interest rates expected to cool the market. • The Delta outbreak is weighing on house sales, but price growth remains New Zealand dwelling prices (index, Jan 2007 = 1000) firm Index Index • Westpac Economics expect that house prices will continue to rise
Slide 121: The New Zealand economy
The New Zealand economy. Economics Population 5.1 million. Regional GDP Economy Output 2021 - 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, $8bn 9 Manufacturing 4% of populati
Slide 122: Appendix and disclaimer
Appendix and disclaimer Afestpac GRouP
Slide 123: Appendix 1: Cash earnings adjustments
Appendix 1: Appendix Cash earnings adjustments. Cash earnings adjustment ($m) 2H20 1H21 2H21 Description Reported net profit 1,100 3,443 2,015 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 124: Portfolio simplification progress
Appendix 2: Appendix Portfolio simplification progress. Expected divestment Transactions completed Announced Completed CET1 benefit (bps) Zip Co Ltd. Oct 2020 Oct 2020 Realised 8 Coinbase Inc. May 2021 May 2021 Realised 7 Westpac General Insurance Dec 2020 Jul 2021 Realised 12 Vendor Finance Aug 202
Slide 125: Reinventure – Investing in fintech businesses
Appendix 3: Appendix Reinventure – Investing in fintech businesses1. Westpac has committed $150m in fintech venture capital funds, managed by Reinventure. Reinventure enables Westpac to access insights and adjacent business opportunities, both in Australia and offshore. The model also helps Westpac
Slide 126: Sustainability
Appendix 4: 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 Indices since 2002 Index for the 5th c
Slide 127: Key commitments and partnerships
Appendix 4: 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 128: Definitions – Credit quality
Appendix 5: 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 129: Definitions – Divisions, earnings drivers, capital and liquidity
Appendix 5: 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 130: Definitions – Other
Appendix 5: 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 131: Investor Relations Team
Investor Relations Team. Contact us Contact us. Andrew Bowden Neil Wesley Head of Investor Relations Head of Institutional Investor Relations Louise Coughlan Jacqueline Boddy Head of Ratings Agencies and Analysis Head of Debt Investor Relations Andrea Jaehne Alec Leithhead Director, Ratings Agencies
Slide 132: 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