Westpac Banking Corporation · ASX:WBC
Westpac Banking — H1 2020 Earnings Presentation
132 slides from Westpac Banking's earnings presentation, May 4, 2020
Slide 1: Westpac 1H20 Presentation and Investor Discussion Pack
ASX Release Level 18, 275 Kent Street Sydney, NSW, 2000 4 MAY 2020 Westpac 1H20 Presentation and Investor Discussion Pack Westpac Banking Corporation (“Westpac”) today provides the attached Westpac 1H20 Presentation and Investor Discussion Pack. For further information: David Lording Andrew Bowden G
Slide 2: Financial results basis note
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 otherwise stated).
Slide 3: Westpac 2020 Interim Results Index
Westpac 2020 Interim Results Index 2020 Interim Results Presentation 3 Investor Discussion Pack of 2020 Interim Results 25 Strategy 26 Results 29 COVID-19 34 Customer franchise 41 Digital transformation 44 Sustainability 49 Governance and risk management 54 Earnings drivers 60 Revenue 61 Expenses 64
Slide 4: Interim Results Presentation – Peter King
2020 Interim Results Presentation 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
Slide 5: 1H20 Results – Overview
1H20 Results – Overview. COVID-19 • Protecting our people • Helping customers - relief packages and continuing to lend • Remaining open for business Disappointing • Result reflects environment and our own issues earnings, strong • $2.2bn impairment charge, $1.0bn (after tax) charge balance sheet for
Slide 6: Westpac COVID-19 response
Westpac COVID-19 response. 1 Keeping our people safe Supporting consumers Protecting those coming into work; social distancing and There when you need us >90% of Branches open, ATM enhanced cleaning availability 99% in March ~22k employees working from home $39bn in mortgage balances deferred, 105k
Slide 7: 1H20 Earnings snapshot
1H20 Earnings snapshot. Change Change 1H20 1H20 – 2H19 1H20 – 1H19 Reported net profit $1,190m (67%) (62%) Cash earnings1 $993m (72%) (70%) Core earnings $4,181m (25%) (17%) Impairment charge to average loans2 62bps 49bps 53bps Cash EPS3 27.7c (73%) (71%) Return on equity4,5 2.9% Large Large Net int
Slide 8: 1H20 divisional snapshot
1H20 divisional snapshot. % Change 1H20 – 2H19 As As Excl. notable 1H20 Cash earnings ($m) reported reported items1 Consumer $1,410 (18%) (20%) Business $604 (46%) (43%) Westpac Institutional Bank $175 (63%) (63%) New Zealand (NZ$) $281 (39%) (41%) Group Businesses ($1,477) Large Large 1 Notable ite
Slide 9: Strong balance sheet
Strong balance sheet. Movements in funds 1H20 ($bn) (%) Sep-19 Mar-20 Sources of funds CET1 capital ratio 10.67 10.81 6 9 Uses of funds Total regulatory capital ratio 15.63 16.29 3 4 CET1 capital ratio 15.9 15.8 (Internationally comparable)1 31 Customer deposit to 73.4 75.6 19 loan ratio LCR2 127 15
Slide 10: Our priorities
Our priorities. Protecting and building value for the long term • Simplify products, reduce customer pain points Customer Best in service, • Grow customer base franchise best place to work • Highly motivated employees • Support communities • Simplified portfolio, strong balance sheet Performance Sus
Slide 11: Simplifying how we run the bank
Simplifying how we run the bank. A new Specialist Businesses division • All businesses profitable and performing but Indicative Superannuation ‒ Require increased scale FY19 revenue Wealth platforms ‒ Returns not consistent with risk profile contribution (%) Investments • Jason Yetton to lead Specia
Slide 12: Interim Results Presentation – Gary Thursby
2020 Interim Results Presentation Gary Thursby Acting 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. Comp
Slide 13: 1H20 result snapshot
1H20 result snapshot. Cash earnings ($m) 1H20 – 2H19 • $97m Group life insurance DAC • $140m General insurance bushfire, 76 (402) 377 3,930 and storm claims 3,553 (167) (1,777) 618 2,278 (1,285) Down 42% 993 Down 72% 2H19 2H19 1 2H19 excl. Net interest Non-interest Expenses Impairment Tax 1H20 excl.
Slide 14: Notable/infrequent/volatile items
Notable/infrequent/volatile items. Notable items ($m after tax) Infrequent/volatile items ($m after tax) 1H19 2H19 1H20 1H19 2H19 1H20 AUSTRAC matters - - (1,027) Group DVA1 (11) (41) (68) Asset write-downs - - (70) Remediation & litigation (617) (341) (258) Group life insurance DAC2 - - (68) Wealth
Slide 15: Margins well managed
Margins well managed. Net interest margin (bps) 4bps (5bps) 3bps 2.16 1bp (1bp) (2bps) 3bps 2.16 (3bps) 2.13 2.13 0.09 0.12 Treasury & Markets 0.09 0.12 impact on NIM 2.04 2.07 Flat 2.04 NIM excl. Treasury 2.01 & Markets 2H19 2H19 2H19 excl. Loans Customer Short-term Capital & Liquidity Treasury & 1
Slide 16: Non-interest income
Non-interest income. Down 16%, 18% excluding notable items1 Net Fees 5% Wealth and Insurance 42% Trading and Other 4% • WIB lower syndication • Higher bushfire & storm claims • Trading - higher FX trading offset by • Cards lower from higher reward • DAC write-off in group life insurance DVA and lowe
Slide 17: 1H20 expenses
1H20 expenses. Up 23%, 3% excluding notable items1 Expenses ($m) 1H20 – 2H19 1,190 6,160 4,990 (187) 144 (188) 99 4,970 98 4,803 14 Up 1% Up 3% 2 2H19 2H19 2H19 excl. BAU Structural Investment Reg. & Asset write 1H20 excl. 1H20 1H20 notable notable productivity Compliance downs notable notable items
Slide 18: Credit quality – early signs of stress
Credit quality – early signs of stress. Stressed exposures as a % of TCE1 Mortgage delinquencies – 30 and 90 days2 3.0 3.20 Watchlist & substandard 90+ day past due 30+ day past due 90+ day past due and not impaired 2.0 Impaired 1.0 2.07 0.0 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 1.
Slide 19: 1H20 Impairment charge composition
1H20 Impairment charge composition. ($m) Individually assessed provisions Collectively assessed provisions Total Write-backs Write-offs Other movement New IAPs1 & recoveries direct in CAP2 Lifts provisions and coverage Total ECL provisions $5,766 2,238 IAP to impaired assets 50% CAP to CRWA3 140bps
Slide 20: 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 sectors as % of total TCE Q3 Forecast base case 0.1 Cultural & recreational services 2020 (peak) 2020 2021 5.0
Slide 21: Support packages
Support packages. Australia New Zealand Mortgages Business Accounts 7% of total accounts 105k Mortgage relief package accounts 15k Relief packages to customers 31k Balances 9% of total balances $39bn Relief package balances $8bn Mortgage relief package balances NZ$6bn Owner-occupier 66% Temporary bu
Slide 22: CET1 ratio 10.81%
CET1 ratio 10.81%. CET1 capital ratio (% and bps) 15.81 51 (57) 18 62 (30) (29) 10.81 10.64 10.67 (1) Up 14 bps Mar-19 Sep-19 Cash 2H19 Ordinary 1 Capital Capital raising RWA model Notable items2 Mar-20 Mar-20 earnings ex dividend RWA deductions and changes and Int. Comp notable items (net of DRP) g
Slide 23: Considerations for 2H20 – significant uncertainty
1 Considerations for 2H20 – significant uncertainty. Line item Considerations that may impact earnings in 2H20 • Low interest rates expected to impact deposit spreads and returns on hedged Net interest capital/deposit balances partly offset by lower short term funding costs income • Lower new lendin
Slide 24: Interim Results Presentation – Peter King
2020 Interim Results Presentation 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
Slide 25: Summary
Summary. COVID-19 • Prioritise protecting our people • Continue supporting customers • Backing the economy Challenging • Operating environment expected to deteriorate outlook • Continue to bias long-term strength • Various headwinds on earnings Simplifying the • Finalise new structure business • Beg
Slide 26: Investor Discussion Pack
Investor Discussion Pack 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. Comparisons of 1H20 versus 2H19 (unless otherwise stated)
Slide 27: Strategy
Strategy 1 Al #estpac Grol
Slide 28: Our agenda
Our agenda. Strategy Our Vision To be one of the world’s great service companies, helping our customers, communities and people, to prosper and grow CEO Priorities Customer franchise Performance disciplines Digital transformation Risk management • Simplify products for customers • A simplified portf
Slide 29: Westpac Group at a glance
Westpac Group at a glance. WBC Strategy Australia’s First Bank. listed on ASX & NZX • In its 204th year, Australia’s first • Unique portfolio of brands bank and first company, opened providing a full range of financial Four operating divisions 1817 services across consumer, Consumer business and ins
Slide 30: Results
) Ai#estpac GRowe |
Slide 31: Cash earnings and reported net profit reconciliation
Cash earnings and reported net profit reconciliation. Results Cash earnings1 policy • Westpac Group uses a measure of performance referred to as cash earnings to assess financial 1H20 % chg % chg performance at both a Group and divisional level ($m) 1H20-2H19 1H20-1H19 • This measure has been used i
Slide 32: 1H20 cash earnings
1H20 cash earnings. Results Impacted by higher impairment charges and notable items. % % Cash earnings 1H20 – 2H19 ($m) Change Change Higher insurance claims, write-off of Higher regulatory & compliance Mostly higher provisions 1H20 1H20- 1H20- DAC1 and lower fee income spend and asset write-downs i
Slide 33: Notable items in 1H20 and 2H19
Notable items in 1H20 and 2H19. Results In 1H20 and 2H19, the Group raised certain provisions known AUSTRAC throughout this document as “notable items” which relate to the matters following: 1H20 notable items ($m) Consumer Business NZ2 GB3 GB3 Group Estimated customer refunds, payments, associated
Slide 34: 1H20 financial snapshot
1H20 financial snapshot. Results Change Change Change Change 1H20 1H20- 2H19 1H20- 1H19 1H20 1H20- 2H19 1H20- 1H19 Earnings1 Balance sheet Total assets ($bn) 967.7 7% 9% Earnings per share (cents) 27.7 (73%) (71%) Common equity Tier 1 (CET1) capital 10.8 14bps 17bps Core earnings ($m) 4,181 (25%) (1
Slide 35: COVID-19
COVID-19 1 Al #estpac
Slide 36: Trends in activity
Trends in activity. COVID-19 Impact of COVID-19 restrictions on activity. Calls to customer assist team1 (# per day) ATM weekly transactions3 (#) EFTPOS weekly transactions6 (#) Business Consumer Compared to Feb, avg Compared to Feb, avg Bus Jan 2020 Avg Cons Jan 2020 Avg weekly transactions in week
Slide 37: Responding to COVID-19
Responding to COVID-19. COVID-19 Helping our people work from home Focussing on health and wellbeing Protecting our people • Increased capability with ~22,000 Australian • Hygiene and social distancing practices allowing corporate site-based1 employees working from ~4,000 employees to continue opera
Slide 38: Responding to COVID-19
Responding to COVID-19. Supporting consumers1 Supporting businesses1 Supporting our NZ customers2 3 • Three months – ability to defer mortgage • Six months – ability to defer repayments across Businesses repayments. Option to extend by a further 3 loans. Business customers with a TCE of less • Three
Slide 39: Customer support for mortgages
Customer support for mortgages.1 COVID-19 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
Slide 40: Customer support for small business
Customer support for small business.1 COVID-19 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
Slide 41: Customer support in New Zealand
Customer support in New Zealand.1 COVID-19 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 $400k average loan size 74% owner-occupier
Slide 42: Customer franchise
Customer franchise }, Allfestpac croup |s
Slide 43: Customer franchise
Customer franchise. Customer franchise MFI Share1,2 Net Promoter Score (NPS)2 Westpac St.George brands Peers Consumer 29.2% -1.3 -6.2 -7.2 16.3% -10.0 14.1% 12.1% -11.2 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Westpac St.George brands Peers Peer 1 Peer 2 Peer 3 Westpac Group 5.9 Business -14.6 Cust
Slide 44: Helping customers through natural disasters
Helping customers through natural disasters. Customer franchise First bank to publicly announce a community response to bushfires in November 2019. In 2019/2020 Australia faced unprecedented bushfires. The impact on individuals and communities was devastating. Westpac supported people, businesses an
Slide 45: Digital transformation
Digital transformation }, Allfestpac croup |s
Slide 46: Continued migration to digital
Continued migration to digital. Digital transformation Reducing cost to serve. Digitally active customers (#m) Accounts with eStatements eWallet transactions1 (#m) Digital transactions2 (#m) Number (#m) eStatements (%) Apple Pay launched in December 2019 for regional brands and 28 257 267 57 April 2
Slide 47: Customer Service Hub
Customer Service Hub. Digital transformation Westpac 1st Party roll-out complete with significant improvements to the customer and banker experience. Re-engineering the home ownership process Digitising end-to-end home loan origination Capabilities delivered Customer digital upload and Customer acce
Slide 48: Customer Service Hub
Customer Service Hub. Digital transformation Delivering an end-to-end digital customer experience. Upload documents Easily track Online loan Get started online Digital approval alert online loan progress acceptance 47 Westpac Group 2020 Interim Results Presentation & Investor Discussion Pack
Slide 49: Panorama
Panorama. Digital transformation Supporting advisers and investors. FUA on Panorama ($m) Investors on Panorama (#) BT Open pricing structure 54,781 success since 1st October 2018 24,700 23,387 44,314 An increase of: • 1,052 active advisers on Panorama 17,041 32,444 • 16,170 Asgard Open accounts1 12,
Slide 50: Sustainability
Sustainability ) Ai#estpac GRowe |
Slide 51: Continued sustainability leadership
Continued sustainability leadership. Sustainability Westpac’s sustainability priority areas 1H20 outcomes (unless otherwise stated) • Delivered financial capability communications for different demographic segments including for young Australians, in partnership with Year 13; women, via Ruby Connect
Slide 52: Updated key sustainability statements
Updated key sustainability statements. Sustainability Climate change Human rights Modern slavery 51 Westpac Group 2020 Interim Results Presentation & Investor Discussion Pack
Slide 53: Climate-related metrics
Climate-related metrics. Sustainability Climate change solutions exposure Electricity generation exposure Total scope 1, 2 and 3 emissions ($bn, TCE) (% of TCE)1,2 at 30 September 2019 (tCO2e, 000s)3 9.7 0.9 1.4 9.1 9.3 229 Renewable energy 8.7 7.0 Gas 219 13.7 TCE Black coal 208 $3.9bn Brown coal 7
Slide 54: Climate-related disclosures – scenario analysis
Climate-related disclosures – scenario analysis. Sustainability Alignment with the TCFD Transition risk – key points • Westpac continues to integrate the consideration of climate-related risks • Westpac assessed potential transition risks (policy, legal, technology and and opportunities into its ope
Slide 55: Governance and risk management
Governance and risk management
Slide 56: Enhancing non-financial risk management
Enhancing non-financial risk management. Governance and risk management For an even stronger bank. • Committed to enhancing non-financial risk management across the organisation • Strengthened Board oversight, increased management resources • Key programs of work underway to address shortcomings and
Slide 57: Culture, Governance and Accountability plans
Culture, Governance and Accountability plans. Governance and risk management CGA remediation plan progressing; reassessment underway with significant program reset. Background: • Westpac completed a Culture, Governance and Accountability (CGA) self-assessment in 2018 • Implementation of the 45 recom
Slide 58: AUSTRAC Response Plan and proceedings
AUSTRAC Response Plan and proceedings. Governance and risk management 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 • Outstandin
Slide 59: Royal Commission response plan
Royal Commission response plan. Governance and risk management 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 I
Slide 60: Customer remediation
Customer remediation. Governance and risk management. Accelerating customer refunds: Provisions for customer refunds, payments and associated costs: • Extensive product, process and policy reviews as part of our ongoing • Provisioned $258 million (after tax) in 1H20 for estimated customer ‘get it ri
Slide 61: Earnings drivers
Earnings drivers ) Ai#estpac GRowe |
Slide 62: Composition of lending and deposits
Composition of lending and deposits. Revenue Composition of lending (% of total) Gross loans ($bn) Australian mortgage lending2 ($bn) +3% in NZ$ 31 (34) 2 447 449 446 Aust. mortgages 718.4 6.9 724.9 717.9 (3.2) (2.6) 5.4 12 Aust. business 2 9 Aust. institutional Up 1% Aust. other consumer 13 62 New
Slide 63: Net interest margin
Net interest margin. Revenue Down 3bps excluding Treasury & Markets. Net interest margin (NIM) movement (%) Net interest margin (%) Treasury & Markets impact on NIM NIM excl. Treasury & Markets NIM NIM excl. Treasury & Markets Restated for adoption of AASB 9 and 15 4bps (5bps) 3bps 2.16 1bp (1bp) (2
Slide 64: Non-interest income
Non-interest income. Revenue Impacted by higher insurance claims, a write-down of DAC1 and lower fees. Non-interest income contributors ($m) Net fee income ($m) Fees Wealth and insurance Trading Other Facility fees Net transaction fees Other non-risk fee income Notable items 1,988 826 829 755 1,714
Slide 65: Expenses
Expenses. Expenses Up 1% ex notable items and asset write-downs. Productivity savings ($m) Expense movements 1H20 – 2H19 ($m) 1,190 6,160 4,990 (187) 4,803 144 (188) 14 98 99 4,970 Up 1% excl. asset write-downs 259 188 Up 23% 173 146 131 2H19 notable items expenses notable items Regulatory/ Asset wr
Slide 66: Investment spend
Investment spend. Expenses Increased investment on risk management and regulatory change. Investment spend mix ($m) Investment spend ($m) Capitalised software2 Other technology 1H19 2H19 1H20 Capitalised software balance ($bn) Regulatory change Expensed 331 277 296 Amortisation ($bn) Growth and prod
Slide 67: 1H20 impairment charges
1H20 impairment charges. 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 Indivi
Slide 68: Credit quality and provisions
Credit quality and provisions
Slide 69: Increase in provisions
Increase in provisions. 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
Slide 70: Provision cover by portfolio category
Provision cover by portfolio category. Credit quality 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 95.72 Small cover as low probability of default (PD) 0.18 0.09 0.09 0.12 95.66 95
Slide 71: Portfolio composition
Portfolio composition. Credit quality 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 $720bn Loans 80 79 74 Available-for-sale securities and investment securities 8 8
Slide 72: Loan portfolio composition
Loan portfolio composition. Credit quality Composition remains consistent half on half. Exposures at default1 by sector ($bn) Top 10 exposures to corporations and NBFIs6 (% of TCE) 2 Finance & insurance The single largest corporation/NBFI exposure represents Government admin. & defence 0.3% of TCE R
Slide 73: Stressed exposures up 12bps
Stressed exposures up 12bps. Credit quality Driven by an increase in Watchlist and Impaired exposures. Stressed exposures as a % of TCE Movement in stress categories (bps) 6 132 3 2 1 7 120 5 (2) Watchlist & substandard 110 0 1 90+ day past due (dpd) and not impaired 2.17 Impaired Mainly due to an i
Slide 74: Corporate and business stressed exposures
Corporate and business stressed exposures. Credit quality 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 Utilities business services Transport & storage Mining W
Slide 75: Commercial property
Sectors in focus. Credit quality 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 $52.
Slide 76: Retail trade
Sectors in focus. Credit quality Retail trade. Retail trade Retail trade exposure by sub-sector (TCE) ($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
Slide 77: Australian Agriculture, Forestry and Fishing
Sectors in focus. Credit quality Australian Agriculture, Forestry and Fishing. Australian Agriculture, Forestry and Fishing Australian Agriculture portfolio composition (TCE) (%) Mar-19 Sep-19 Mar-20 Grain 3 22 Beef & Sheep Total committed exposure (TCE) $10.9bn $11.2bn $11.8bn 4 5 Horticulture 31 L
Slide 78: Accommodation, cafes and restaurants and Construction
Sectors in focus. Credit quality 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
Slide 79: Manufacturing and Mining
Sectors in focus. Credit quality 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 Metal Product (TCE) 24 Australia 23 Non-
Slide 80: Services and Transport & Storage
Sectors in focus. Credit quality 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 Se
Slide 81: Australian consumer unsecured lending
Australian consumer unsecured lending. Credit quality 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 $18.4bn 1.97% 2.00 30+ day delinquencies (%) 4.08 3.68 4.22 Consumer unsecured 90+ day delinquencies 1
Slide 82: Australian mortgage credit quality
Australian mortgage credit quality
Slide 83: Australian mortgage portfolio performance
Australian mortgage portfolio performance. Mortgage asset quality Delinquencies rising from early impact of COVID-19 disruption. Australian mortgage portfolio Major banks’ total residential mortgage impaired and past due loans ≥ 90days ($bn and %)2 Mar-19 Sep-19 Mar-20 0.91 6 0.87 1.00 Impaired asse
Slide 84: Australian mortgage portfolio composition
Australian mortgage portfolio composition. Mortgage asset quality 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 (%) Total portfolio ($bn) 447.2 449.2 4
Slide 85: Australian mortgage portfolio
Australian mortgage portfolio. Mortgage asset quality Majority of borrowers have built significant equity. Australian housing loan-to-value ratios (LVRs) (%) Australian housing loan-to-value ratios (LVRs) (%) 100 % of total portfolio 1H20 drawdowns LVR at origination 90 Portfolio LVR at origination
Slide 86: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting. Mortgage asset quality Policy on a tightening bias. Australian mortgage portfolio by Current credit policy year of origination (% of total book) Calendar year • Borrower’s income verified via payslips or tax returns with other supporting documentation such
Slide 87: Australian mortgage portfolio repayment buffers
Australian mortgage portfolio repayment buffers. Mortgage asset quality 70% of customers ahead of scheduled repayments. Variable mortgage interest rates1 (%) Offset account balances2 ($bn) • Loans assessed at Owner occupied Investor Buffer . Linked to I/O mortgages Linked to P&I mortgages . the high
Slide 88: Interest only mortgages
Interest only mortgages. Mortgage asset quality 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 delinquencie
Slide 89: Australian investment property portfolio
Australian investment property portfolio. Mortgage asset quality 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 o
Slide 90: Australian mortgage deep dive
Australian mortgage deep dive. Mortgage asset quality 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 >$250k 7 6
Slide 91: Lenders mortgage insurance arrangements
Lenders mortgage insurance arrangements. Mortgage asset quality Separately capitalised to the bank. Lenders mortgage insurance (LMI) Lenders mortgage insurance arrangements • Where mortgage insurance is required, mortgages are insured through Westpac’s captive mortgage LVR Band insurance insurer, We
Slide 92: Capital, funding and liquidity
Capital, funding and liquidity
Slide 93: Update on capital management
Update on capital management. Capital, Funding and Liquidity Capital buffers provide ability to support economy during stress. Adjustment to capital expectations Update on capital • As part of its response to COVID-19, APRA has adjusted its 10.8% CET1 capital ratio at 31 March 2020 expectations for
Slide 94: CET1 capital ratio of 10.8%
CET1 capital ratio of 10.8%. Capital, Funding and Liquidity Capital update Other future developments • CET1 capital ratio of 10.81%, up 14bps from 30 September 2019 • As part of its COVID-19 response, APRA has delayed the implementation of the Basel III capital reforms to 1 January 2023 and changes
Slide 95: Key ratios
Key ratios. Capital, Funding and Liquidity % Mar-19 Sep-19 Mar-20 Key capital ratios (%) Level 1 Level 2 CET1 capital ratio 10.6 10.7 10.8 16.7 Additional Tier 1 capital 2.2 2.2 2.1 16.3 13.3 12.9 11.1 10.8 Tier 1 capital ratio 12.8 12.8 12.9 Tier 2 capital 1.8 2.8 3.4 CET1 Tier 1 Total CET1 Tier 1
Slide 96: Risk weighted assets
Risk weighted assets. Capital, Funding and Liquidity Increase from higher operational risk and interest rate risk in the banking book. • At 31 March 2020 RWA movements linked to slowing in activity was limited Risk weighted assets ($bn) but may rise in future periods. APRA’s RWA treatment of COVID-1
Slide 97: 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 98: 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% Standard Chartered Credit Agricole SA Norinchukin Bank JPMorgan Chas
Slide 99: Liquidity coverage ratio
Liquidity coverage ratio. Capital, Funding and Liquidity Liquidity at exceptionally high levels. Liquidity coverage ratio (LCR)1 (%) Liquidity coverage ratio (LCR)1 ($bn and %) 30 September 2019 31 March 2020 LCR 127% LCR 154% 200.0 190.9 154 143.9 150.0 123.6 113.4 138 100.0 134 134 133 127 125 124
Slide 100: Balance sheet funding
Balance sheet funding. Capital, Funding and Liquidity Net stable funding ratio at 117%. Net stable funding ratio (NSFR) ($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
Slide 101: Long term wholesale funding
Long term wholesale funding. Capital, Funding and Liquidity $12.9bn issued in 1H20. Term debt issuance and maturity profile1,2,3 ($bn) • $12.9bn new long term wholesale funding raised Covered bond Hybrid Senior/Securitisation Sub debt • Majority of new issuance in senior unsecured 42 Issuance Maturi
Slide 102: Tier 2 capital
Tier 2 capital. Capital, Funding and Liquidity Well progressed on TLAC requirements. Westpac Tier 2 issuance and calls/maturities1,2 (notional amount, A$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
Slide 103: Divisional results
Divisional results }, Allfestpac croup |s
Slide 104: Divisional contributions
Divisional1 contributions. Divisional Results 1H20 divisional core earnings movements ($m) 1H20 divisional cash earnings movements ($m) 377 3,930 (347) 539 6,101 (362) (153) 3,553 (538) 5,562 (75) (52) 149 5,608 (1,427) (295) (198) (274) 4,181 2,278 (1,285) Down 8% ex notable items Down 42% ex notab
Slide 105: Consumer 1H20 performance
Consumer 1H20 performance. Consumer Cash earnings ($m) Change Key financial metrics 1H19 2H19 1H20 on 2H19 Higher severe Increased investments including Revenue2 ($m) NIM up due to repricing 4,469 4,678 4,490 (4%) weather related customer service hub and risk, partly offset by reduced insurance clai
Slide 106: Business 1H20 performance
Business 1H20 performance. Business Cash earnings ($m) Change Key financial metrics 1H19 2H19 1H20 on 2H19 Lower wealth revenue Mostly from NIM down from lower deposit partly offset by higher write-down of Revenue1 ($m) 3,233 3,259 3,144 (4%) spreads and AIEA down 1% merchant income certain assets N
Slide 107: WIB 1H20 performance
WIB 1H20 performance. Westpac Institutional Bank Cash earnings ($m) Change Key financial metrics 1H19 2H19 1H20 on 2H19 NIM down due to Increased spending on risk, regulatory lower deposit and compliance programs and higher Revenue ($m) 1,425 1,310 1,258 (4%) spreads technology costs Net interest ma
Slide 108: NZ 1H20 performance
NZ 1H20 performance1. New Zealand Cash earnings ($NZm) Change Key financial metrics 1H19 2H19 1H20 on 2H19 Lower fee income mostly Increased spending on risk, regulatory and due to product compliance programs along with Revenue ($NZm) 1,248 1,167 1,162 Flat simplification restructuring expenses Net
Slide 109: NZ balance sheet drivers
NZ balance sheet drivers. New Zealand New Zealand net loans (NZ$bn) New Zealand deposits (NZ$bn) 1.5 1.3 87.0 82.1 84.2 3.3 69.1 64.2 64.5 1.3 Up 3% Up 7% Mar-19 Sep-19 Consumer Business Mar-20 Mar-19 Sep-19 Consumer Business Mar-20 New Zealand customer loans (NZ$bn) and % of total New Zealand custo
Slide 110: Stressed exposures
Stressed exposures. New Zealand Business stressed exposures as a % of New Zealand business TCE Watchlist & substandard 90+ day past due and not impaired Impaired Property 7 14 Manufacturing 4 5.5 5 4.9 Agriculture, 4.4 15 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 111: Consumer portfolio
Consumer portfolio. New Zealand 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 0.5 1.0 0.27 0.5 0.0 0.0 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar
Slide 112: Economics
Economics ) Ai#estpac GRowe |
Slide 113: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts. Economics 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 headl
Slide 114: The Australian economy
The Australian economy. Economics Population 25.5 million. Australian population Australian GDP and employment composition Population 246k Output 2019 - sector contribution to GDP (%)1 Mining Northern 10 Manufacturing 19 Territory Population 5.1m 6 Construction Queensland Transport, Utilities Wester
Slide 115: A difficult period ahead for the Australian economy
A difficult period ahead for the Australian economy. Economics 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 2
Slide 116: Australian Government support measures
COVID-19 Australian Government support measures. Economics 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 - w
Slide 117: Australian housing market
Australian housing market. Economics 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) Index 230 Rest of Australia Other capitals Sydney-Melbourne 2
Slide 118: The New Zealand economy
The New Zealand economy. Economics 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, $114bn 3 35% of
Slide 119: New Zealand emerging from temporary lockdown
New Zealand emerging from temporary lockdown. Economics Unemployment expected to peak at 9.5%. Dec 2020 Economic indicators Current forecast New Zealand GDP Consumer & business confidence % ann % ann Index Index 0.25% 12 Westpac 12 140 Consumer confidence (left axis) 100 Cash rate -0.50% (9 Apr) 10
Slide 120: New Zealand housing market
New Zealand housing market. Economics Strong price momentum yet to reflect COVID-19 lockdown measures. New Zealand dwelling prices by region Annual house price growth Index Index 20 % % 20 2300 2300 Forecast Auckland 15 15 2100 2100 1900 Canterbury 1900 10 10 1700 1700 Wellington 5 5 1500 1500 0 0 1
Slide 121: New Zealand Government support measures
COVID-19 New Zealand Government support measures. Economics Reserve Bank of New Zealand New Zealand Government providing New Zealand fiscal support package supporting market liquidity stimulus ($NZ bn) • Cash rate cut to 25bps • NZ$8bn to NZ$12bn subsidy for wages 1.4 • Large scale asset purchases (
Slide 122: Appendix and Disclaimer
Appendix and Disclaimer » |, allfestpac cRouP |s
Slide 123: Appendix 1: Cash earnings adjustments
Appendix 1: Appendix 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) comp
Slide 124: Appendix 2: Reinventure – Investing in fintech businesses
Appendix 2: Appendix Reinventure – Investing in fintech businesses.1 Westpac has committed $150m to 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 co
Slide 125: Appendix 3: Sustainability
Appendix 3: Appendix Sustainability. Industry awards1 Sustainability indexes1 Inclusion and diversity recognition1 A member of DJSI World, DJSI Received “B” rating in the 2019 Asia Pacific, and DJSI Australia Included in the 2020 CDP for our response to climate Indexes since 2002 Bloomberg Gender Eq
Slide 126: Appendix 3: Sustainability commitments and partnerships
Appendix 3: Appendix Sustainability. Key commitments and partnerships1 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 Pri
Slide 127: Appendix 4: Definitions – Divisions
Appendix 4: Appendix Definitions – Divisions. Westpac Institutional Bank (WIB) delivers a broad range of financial products and services to corporate, institutional and government customers operating in, Consumer is responsible for sales and service to consumer customers in Australia. or with connec
Slide 128: Appendix 4: Definitions – Credit quality
Appendix 4: Appendix Definitions – Credit quality. Includes facilities where: For financial assets where there has been a significant increase in credit risk • contractual payments of interest and / or principal are 90 or more calendar Stage 2: Lifetime ECL since origination but where the asset is s
Slide 129: Appendix 4: Definitions – Earnings, capital and liquidity
Appendix 4: Appendix Definitions – Earnings, capital and liquidity. Earnings Drivers As defined by APRA (unless stated otherwise). Tier 1 capital divided by ‘exposure measure’ and expressed as a percentage. ‘Exposure measure’ is the sum of on- Leverage ratio balance sheet exposures, derivative expos
Slide 130: 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 131: Investor Relations Team
Investor Relations Team. Contact us Contact Us. Andrew Bowden Nicole Mehalski www.westpac.com.au/investorcentre Head of Investor Relations Head of Institutional Annual reports +61 2 8253 4008 +61 2 8253 1667 Presentations and webcasts andrewbowden@westpac.com.au nicole.mehalski@westpac.com.au 5 year
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