Westpac Banking Corporation · ASX:WBC
Westpac Banking — Westpac Banking Cp Ord — FY2022 Earnings Presentation
138 slides from Westpac Banking's earnings presentation, Nov 7, 2022
Slide 1: Basis of presentation of financial results
Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 42 for definition. Results principally cover the 2H22, 1H22 and 2H21 periods. Comparisons of 2H22 versus 1H22 (unless otherwise stated).
Slide 2: Westpac 2022 Full Year Results Index
Westpac 2022 Full Year Results Presentation Investor Discussion Pack of 2022 Full Year Results 3 36 2022 Full Year Overview Results 37 39 Results Index Customer franchise CORE 43 48 Sustainability 50 Earnings drivers 60 Revenue 61 Expenses 65 Impairment charges 68 Credit quality and provisions 69 Au
Slide 3: Peter King, Chief Executive Officer
Peter King Chief Executive Officer
Slide 4: FY22 Steady progress
FY22 Steady progress. Well advanced on Fix and Simplify strategic priorities Solid Financial Performance Core earnings growth across all banking segments in 2H22 Strong balance sheet heading into more challenging outlook Positioning Westpac for the future 4 Westpac Group 2022 Full Year Results Prese
Slide 5: FY22 Earnings snapshot
FY22 Earnings snapshot. Change FY21 FY22 FY22 – FY21 Reported net profit $5,458m $5,694m 4% Dividends per share (interim and final) $1.18 $1.25 6% Cash earnings1 $5,352m $5,276m (1%) Notable items2 ($1,601m) ($1,292m) (19%) Cash earnings basis excluding notable items Revenue $20,374m $19,895m (2%) N
Slide 6: FY22 Core earnings growth of 3%
FY22 Core earnings1 growth of 3%. 9,725 9,458 109 515 Down 79% Contribution of businesses sold 9,616 Excluding notable items 8,943 and businesses sold Up 8% FY21 FY22 1 Excluding notable items. 6 Westpac Group 2022 Full Year Results Presentation & Investor Discussion Pack
Slide 7: Fix Priority – reducing risk
Fix Priority – reducing risk. Customer Outcomes & Risk Excellence (CORE) program on track1 Addressing past issues Sep-21 Mar-22 Sep-22 Design 14 major customer remediation programs closed in FY22 with $567m returned to customers, 8 major programs remain open 76% 99% 100% Settled 7 regulatory proceed
Slide 8: Simplify Priority – moving to further simplify banking
Simplify Priority – moving to further simplify banking. Portfolio Geographic Banking simplification simplification simplification 3 businesses exited in FY22 2 27 Co-located branches Products reduced by more than 150 Asian Total of offices closed Enabled self 7 business service for Digital mortgage
Slide 9: Movements in core earnings by segment
Movements in core earnings by segment. FY22 – FY21 ($m) 98 124 (406) 232 26 466 9,725 9,458 (273) Up 3% FY21 core Consumer Business WIB NZ (A$) ex SB ex Group Businesses FY22 core earnings ex businesses businesses Businesses sold earnings ex notable items sold sold notable items 2H22 – 1H22 ($m) 84
Slide 10: Consumer – better franchise performance
Consumer – better franchise performance. Performance Australian mortgages ($bn) • Improved mortgage growth • Growing main bank relationships • Margin 17bps lower on year, up 7bps over 2H22 455.7 Up 1% 458.4 Up 2% 467.6 • Expenses1 down 3% over the year • Credit quality in good shape Sep-21 Mar-22 Se
Slide 11: Business – sustainable growth
Business – sustainable growth. Performance Net loans ($bn) • Significantly higher core earnings • Benefit from 157% deposit to loan ratio and higher deposit spreads 80.9 Up 5% 84.9 • Margin 7bps lower on year, up 74bps over 2H22 78.4 Up 3% • Expenses1 down 12% over the year • Reduction in Fix projec
Slide 12: WIB – deepening relationships
WIB – deepening relationships. Performance Net loans ($bn) • Reset the business model, reduced risk • Loans up 26%, >80% to existing customers • Core earnings much higher, ROE up Up 15% 85.2 67.7 Up 9% 74.0 • Expanding carbon trading desk Sep-21 Mar-22 Sep-22 Simplification and digital Core earnings
Slide 13: NZ – reset in progress
NZ – reset in progress. Performance Net loans (NZ$bn) • Lending up 5% over the year • Broad based growth • Margin flat on year, up 5bps over 2H22 92.6 Up 2% 94.0 Up 3% 96.8 • Leading participant in sustainable transactions1 in NZ Sep-21 Mar-22 Sep-22 Simplification and digital Core earnings excludin
Slide 14: Revised cost target of $8.6bn by FY24
Revised cost target of $8.6bn by FY24.1 Expenses, ex Specialist Businesses ($bn) 11.8 We are committed to reducing costs by FY24 Notable items • We revised our FY24 Target as Ongoing & Fix 1.7 ‒ Inflation2 higher than initially assumed ‒ Persistence of some regulatory and 9.7 compliance costs beyond
Slide 15: Becoming a net-zero, climate resilient bank
Becoming a net-zero, climate resilient bank. Reducing our direct Helping customers Collaborating operational emissions transition to net-zero for impact • Reduced scope 1 and 2 direct • Joined Net-Zero Banking Alliance • Participated in the Australian operational emissions by 70% (NZBA) Industry Ene
Slide 16: Fully franked final dividend – 64cps
Fully franked final dividend – 64cps. Payment considers Sustainable Final dividend yield Medium term Shares issued payout ratio range 6.2%1, fully outlook for return to satisfy DRP ~60 – 75% franked 8.8%1 and growth Dividends per ordinary share (cents) Dividend payout ratio (%) 2H FY21 FY22 Up 6% 12
Slide 17: Michael Rowland, Chief Financial Officer
Michael Rowland Chief Financial Officer
Slide 18: 2H22 results summary
2H22 results summary. • Core earnings excluding notable items up 12% on 1H22 • Costs1 down 2%, FTE 3% lower • Revenue1 up 5%, higher margins Strong core earnings momentum • Margin ex Treasury & Markets up 10bps • CET1 capital ratio 11.3%, pro forma2 11.4% • LCR and NSFR well above regulatory minimum
Slide 19: Notable items and simplification impacts
Notable items and simplification impacts. Notable items Contribution of businesses sold1 ($m after tax) 1H22 2H22 ($m) FY21 1H22 2H22 Core earnings 515 74 35 Remediation and litigation (65) (68) Cash earnings 389 57 16 Write-down of assets & accelerated branch closure (154) (129) Included in busines
Slide 20: 2H22 Cash earnings 2H22 – 1H22
2H22 Cash earnings ($m) 2H22 – 1H22. $45m reduction from businesses sold 564 (117) 100 (57) (124) 3,467 (1,286) 3,095 6 3,101 Core earnings up 12% 2,181 Up 12% Down 30% 1 1H22 1H22 1H22 ex Net interest Non-interest Expenses Impairment Tax & NCI 2H22 ex 2H22 2H22 notable notable income income charges
Slide 21: Movement in lending
Movement in lending ($bn). 11.2 (2.1) (0.3) (1.8) 739.6 10.5 (1.4) 3.9 719.6 Up $2.8bn in NZ$ 710.8 Up $20bn or 3% Sep-21 Mar-22 Mortgages Mortgages Business Institutional New Personal Auto Sep-22 - Owner - Investor 1 Zealand (ex Auto) occupier (in A$) Improved risk profile of the portfolio over las
Slide 22: Australian mortgages – improved growth
Australian mortgages – improved growth. Mortgage lending flows ($bn) 33 6 (17) (12) 468 458 Up 2% Mar-22 New lending ex Net Property sale and Paydown Sep-22 refinance refinance other Mortgage time to right (days)1 Mortgage growth (major bank system multiple2) Third party Proprietary 1.1x 1.0x 11.7 9
Slide 23: Margins up
Margins up. Treasury & Markets impact on NIM Net interest margin (% and bps) NIM excl. Treasury & Markets 0bps 2bps (6bps) (5bps) 1.90 1.85 24bps 0.10 0.15 (9bps) (5bps) 4bps 1.80 1.70 Cyclical impact from Exit margin 1.85%1 rate lag effects 1H22 Loans Customer Funding Capital & other Liquid assets
Slide 24: Margin drivers – ex Treasury & Markets
Margin drivers – ex Treasury & Markets. Westpac – 2H22 movement Industry – 1H23 considerations1 Tailwinds Interest rates • 3yr swap rates increased ~150bps Impact of higher rates still to fully flow through on deposits • Compression from competition, Lending switching and mix (9bps) (14bps) High
Slide 25: Non-interest income down 4%
Non-interest income down 4%.1 Net fees1 2% Wealth1 5% Trading and other1 17% • Higher provisions for credit card • Higher duration cash managed • Lower DVA2 as credit spreads customer remediation revenue widened • Increased scheme fees and reward • Market volatility drove lower costs driven by highe
Slide 26: 2H22 – 1H22 expenses
2H22 – 1H22 expenses ($m). 452 (368) 390 5,425 5,366 (231) (3) (121) 5,135 (48) (12) 5,035 Mainly increase in wages and variable reward Down 2% ex notable items Up 1% 1H22 1H22 1H22 ex Ongoing Cost reset Investment Fix SB ex Impact of 2H22 ex 2H22 2H22 notable notable expenses benefits ex Fix busine
Slide 27: Credit quality metrics improved
Credit quality metrics improved. Stressed exposures as a % of TCE1 Australian mortgage delinquencies (%) 1.91 4.0 30+ day delinquencies 90+ day delinquencies Watchlist & substandard 90+ day past due 3.0 and not impaired Impaired 2.0 0.85 1.36 1.21 1.0 1.20 0.75 1.08 1.10 1.07 1.05 0.49 0.0 Sep-19 Ma
Slide 28: Impairment provisions – 2H22
Impairment provisions – 2H22. Total impairment provisions1 ($m) Overlays lower Overlays Stage 1 CAP2 Stage 2 CAP2 Stage 3 CAP2 Stage 3 IAP3 • COVID-19 released • Construction reduced 4,999 • New mortgage overlay 4,675 4,625 647 • Some overlays reflected in 700 modelled economic scenarios 3,922 1,136
Slide 29: Credit impairment charge / (benefit) composition
Credit impairment charge / (benefit) composition. ($m). Individually assessed provisions Collectively assessed provisions Total Write-backs Write-offs Other movement New IAPs & recoveries direct in CAP 466 318 296 218 228 196 144 123 139 97 (10) (17) (138) (194) (203) (166) (218) (372) (640) (777) 1
Slide 30: Changing credit cycle in perspective
Changing credit cycle in perspective. Portfolio Most customers Well quality improved well prepared provisioned • Lower risk in portfolio • Mortgages • Provision balances 18% higher − 68% ahead of repayments than pre COVID-19 levels • Stress lower − Offset balances remain high • 45% weight to downsid
Slide 31: Capital within operating range
Capital within operating range. CET1 capital ratio operating range of 11.0 – 11.5% from 1 January 2023. CET1 Capital (%, bps) 73bps (45bps) (38bps) 11.33 18bps 11.29 (12bps) Mar-22 Cash Dividend RWA Other Divest- Sep-22 earnings ments IRRBB RWA ($bn) Other capital considerations Optionality and 43 4
Slide 32: 1H23 Considerations
1H23 Considerations.1 • System credit growth expected to slow – targeting growth around major bank system Net interest • Exit margin2 excl. Tsy & Markets for Sept 2022 ~1.85% income • Headwinds on margin with pressure from competition and higher wholesale funding costs Non-interest • Full period imp
Slide 33: Peter King, Chief Executive Officer
Peter King Chief Executive Officer
Slide 34: FY23 – Solid outlook, some uncertainty
FY23 – Solid outlook, some uncertainty. Unemployment Credit growth Housing prices Most customers Effects will to return to expected likely to decline well prepared be uneven historic levels to ease further Australian economic forecasts1 Dec-22 Dec-23 Cash rate 3.10% 3.85% GDP 3.4% 1.0% Terms of trad
Slide 35: FY22 Steady progress
FY22 Steady progress. Well advanced on Fix and Simplify strategic priorities Solid Financial Performance Core earnings growth across all banking segments in 2H22 Strong balance sheet heading into more challenging outlook Positioning Westpac for the future 35 Westpac Group 2022 Full Year Results Pres
Slide 36: Investor Discussion Pack
Investor Discussion Pack Fix. Simplify. Perform.
Slide 37: Overview
Overview Wlfestpac Group
Slide 38: Westpac Group at a glance
Westpac Group at a glance. Overview Our brands • Australia’s first bank and oldest company founded in 1817 • Repositioning business portfolio to focus on banking • Australia’s 3rd largest bank and 37th largest bank in the world, ranked by market capitalisation1 • Strong market share in key products
Slide 39: 2H22 cash earnings
2H22 cash earnings. Results Change Cash earnings 2H22 – 1H22 ($m) 2H22 – 1H22 2H22 1H22 ($m) ($m) (%) NIM1 excluding Treasury and Markets Lower income following the Predominantly due to the loss up 10bps from higher deposit spreads sale of businesses, lower on the completion of the sale Net interest
Slide 40: FY22 cash earnings
FY22 cash earnings. Results Cash earnings FY22 – FY21 ($m) Change FY21 FY22 FY22 – 8% AIEA growth mostly from Loss of income from businesses Moved from impairment benefit in ($m) ($m) FY21 (%) liquid assets. Average loans up sold, lower markets trading FY21 to an impairment charge in 4%. NIM down 15
Slide 41: FY22 financial snapshot
FY22 financial snapshot. Results Change Change Change Change FY22 FY22 – FY21 2H22 – 1H22 FY22 FY22 – FY21 2H22 – 1H22 Earnings1 Balance sheet Earnings per share (cents) 148.0 1% (27%) Total assets ($bn) 1,014 8% 5% Common equity Tier 1 (CET1) Core earnings ($m) 8,210 6% (21%) 11.29 (103bps) (4bps)
Slide 42: Cash earnings and reported net profit reconciliation
Cash earnings and reported net profit reconciliation. Results Change Change Cash earnings1 policy FY22 FY22 – FY21 2H22 – 1H22 • Westpac uses a measure of performance referred to as cash earnings to assess financial ($m) (%) (%) performance at both a Group and segment level • To calculate cash earni
Slide 43: Customer franchise
Customer franchise. Customer franchise MFI share1,2 Customer satisfaction (CSAT)2 Net Promoter Score (NPS)2 Westpac St.George brands Westpac St.George brands Peers Westpac St.George brands Peers 6.3 16.4% 16.3% 5.4 Consumer 15.6% 15.7% 3.5 5.4% 5.2% 5.3% 5.3% 7.6 1.1 7.6 -0.1 10.2% 10.5% 11.0% 11.0%
Slide 44: Continued migration to digital
Continued migration to digital. Customer franchise Less physical More digital Australian ATMs (#) Australian branches (#)1 Digitally active customers3 (#m) Accounts with eStatements At 30 September 2022 5.48 Number (#m) eStatements (%) 1,399 we had 27 co-located branches 5.31 64 1,352 5.24 62 1,270
Slide 45: Investing in the Westpac digital experience
Investing in the Westpac digital experience. Customer franchise Westpac app functionalities Digital Mortgage Personal Financial Management • Market leading user experience and • Launched capability to provide • Launched embedded personal financial best in class search and navigation unconditional ho
Slide 46: Investing in the Westpac digital experience
Investing in the Westpac digital experience. Customer franchise EFTPOS Now EFTPOS Air Safety and security Next generation smart terminals • Launching EFTPOS Air, ‘Tap on Phone’ • Dynamic CVC used by ~13,000 • Improved experience for merchants and technology, turning a NFC-enabled customers per day,
Slide 47: Our cyber security protection
Our cyber security protection. Customer franchise Customers Core Security • Significant increase in our cyber investment and capability since 2014 • Common cyber threats drive increasing threat volumes System Security • Participate in and support 12 cyber Data information sharing communities includi
Slide 48: Customer Outcomes and Risk Excellence (CORE) Program
Customer Outcomes and Risk Excellence (CORE) Program. CORE CORE activities progress1 Sep-21 Mar-22 Sep-22 • CORE program in place to address enforceable Design 76% 99% 100% undertaking with APRA signed December 2020 • Aims to strengthen risk Implement 40% 63% 87% governance, improve accountability a
Slide 49: CORE program: Measuring progress towards five target states
CORE program: Measuring progress towards five target states. CORE Key employee survey results (% score out of 100) Issues raised by first line risk management We are a well-run 1 “People constructively “Clear in how expected (Not 2nd or 3rd lines) (%) business where risk challenge…” to manage risks”
Slide 50: Our commitment to sustainability
Our commitment to sustainability. Sustainability FY22 progress. Helping when Backing a stronger Collaborating it matters most Australia and NZ for impact • Supported 1,600+ customers impacted • Over $3.8 billion in new lending1 to • Joined Net-Zero Banking Alliance by floods in NSW and QLD with a cl
Slide 51: Our plan to become a net-zero, climate resilient bank
Our plan to become a net-zero, climate resilient bank. Sustainability Progress • Joined NZBA in July 2022 01 Net-zero, climate resilient operations • Set interim 2030 financed emissions • Agreements in place to source the equivalent of 100% of our Australian targets for five sectors in our lending e
Slide 52: Net-zero, climate resilient operations
Net-zero, climate resilient operations. Sustainability Targets Progress Westpac Group Operational GHG4 Emissions5 (tCO2-e) Before carbon offsets Reduce Scope 1 and 2 GHG Thousands 70% reduction 29% reduction emissions by 85% by 2025 and since 2016 in 2022 250 Scope 1 and 2 GHG 90% by 2030 against 20
Slide 53: Supporting customers' transition to net-zero
Supporting customers’ transition to net-zero. Sustainability FY22 highlights Investing in the opportunity • Largest bank lender to greenfield renewable energy projects in Building banker capability Australia over the past five years1 • ~3,000 employees completed ESG fundamentals training • Achieved
Slide 54: Targets set for five sectors in our lending portfolio
Targets set for five sectors in our lending portfolio. Sustainability Sector targets in line with our NZBA commitment. For details on our targets and target-setting approach refer to our ‘Net-Zero 2030 Targets and Financed Emissions – our methodology and approach’. We continue to integrate and opera
Slide 55: Understanding our financed emissions
Understanding our financed emissions. Sustainability Our approach to reporting our estimated financed emissions. Refer to our ‘Net-Zero 2030 Targets and Financed Emissions – our methodology and approach’ disclosure on our website for more information on our financed emissions analysis, including dat
Slide 56: Climate-related metrics
Climate-related metrics. Sustainability TCE exposure to customers in the Energy Sector Value Chain ($bn)1. For more information, refer to our 2022 Sustainability Index and Datasheet and ‘Net-Zero 2030 Targets and Financed Emissions – our methodology and approach’ disclosures. Apart from Thermal coal
Slide 57: Physical and transition risk metrics
Physical and transition risk metrics. Sustainability Analysis suggests that overall potential risk exposures are likely to be low. Potential transition risk exposure to 2030 and 2050 Potential physical risk1 exposure in our Australian in our Australian business and institutional lending mortgage por
Slide 58: Comprehensive sustainability reporting
Comprehensive sustainability reporting. Sustainability A suite of disclosures for more information and depth. Available at westpac.com.au/sustainability 58 Westpac Group 2022 Full Year Results Presentation & Investor Discussion Pack
Slide 59: Strengthening diversity and inclusion
Strengthening diversity and inclusion. Sustainability Building a workforce that reflects the diversity of our customers. Gender Equality Diversity, Equity & Inclusion Indigenous Representation Targets Building a workforce where our people feel Focusing on Meaningful Careers valued, respected and saf
Slide 60: Earnings drivers
Earnings drivers Wlfestpac Group
Slide 61: Composition and movement in lending
Composition and movement in lending. Revenue Composition of loans1 (% of total) Movement in gross loans ($bn) 4 11 (2) (2) 744 4 <1 724 9 Australian mortgages 715 8 2 Australian business Up NZ$2.8bn 11 Institutional Up 3% $744bn Australian other consumer 63 New Zealand mortgages Up 4% 12 New Zealand
Slide 62: Composition and movement in deposits
Composition and movement in deposits. Revenue Composition of deposits (% of total) Customer deposits ($bn) Term deposits Savings Transaction 19 601 613 580 550 Households 240 247 252 217 $613bn Businesses 55 26 191 207 217 199 Institutional 142 134 137 162 Mar-21 Sep-21 Mar-22 Sep-22 Customer deposi
Slide 63: Net interest margin
Net interest margin. Revenue Treasury & Markets impact on NIM Net interest margin (% and bps) NIM excl. Treasury & Markets 28bps 0bps 2bps (6bps) (5bps) 1.90 1.85 (14bps) 24bps 0.10 0.15 (9bps) (5bps) 4bps 1.80 1.70 Exit margin 1.85% Cyclical impact from rate lag effects 1H22 Loans Customer Funding
Slide 64: Non-interest income
Non-interest income.1 Revenue Non-interest income by type ($m) Non-interest income by segment ($m) Fees Wealth management Trading Other WIB Consumer Business SB NZ GBU 1,652 Up 2% 1,613 Down 4% Up 2% Down 4% 1,541 1,652 1,613 1,574 3 1,574 1,541 18 75 145 36 139 62 131 32 123 35 453 339 128 262 281
Slide 65: Expenses
Expenses. Expenses Expense movements 2H22 – 1H22 ($m) FTE (#) 5,366 390 5,425 38,823 (231) (3) (597) 5,135 84 (121) (48) (49) 33 (734) (12) 5,035 37,476 Down $100m or 2% Down 1,347 or 3% 1H22 Notable 1H22 ex- Ongoing Investments Fix Specialist Businesses 2H22 ex- Notable 2H22 Mar-22 BAU Investments
Slide 66: Investment and capitalised software
Investment and capitalised software. Expenses Investment spend mix ($m) Perform Simplify Fix Investment spend ($m) FY21 FY22 Expensed 1,222 883 2,019 1,987 Capitalised1 797 1,104 Total investment spend 2,019 1,987 1,720 Capitalisation of investment increased with higher spend on platforms and infras
Slide 67: Select cost reset targets
Select cost reset targets.1 Expenses Metric FY20 baseline FY22 FY24 target 7 completed Portfolio • Sale of non-core businesses 1 under sale 11 transactions simplification agreement 2 under sale completed8 • Completion of sales agreement • Mortgages processed on digital 32% 82% 100% origination platf
Slide 68: 2H22 impairment charge of $196m
2H22 impairment charge of $196m. Impairment charges Impairment charges ($m) Individually assessed Collectively assessed Total New Write-backs & Write-offs Other mvmts IAPs recoveries direct in CAP 940 466 438 283 318 296 366 144 218 228 139 196 97 123 (10) (17) (147) (194) (203) (166) (138) (218) (3
Slide 69: Credit quality and provisions
Credit quality and provisions
Slide 70: Provisions for expected credit loss
Provisions for expected credit loss. Credit quality Key ratios Total provisions for expected credit losses1 ($m) Sep-21 Mar-22 Sep-22 Overlay Stage 1 CAP Stage 2 CAP Provisions to gross loans (bps) 70 65 62 Stage 3 CAP Stage 3 IAP Impaired asset provisions to impaired assets (%) 54 48 48 COVID-19 6,
Slide 71: Provision cover by portfolio category
Provision cover by portfolio category. Credit quality Exposures as a % of TCE Provisioning to TCE (%) Sep-21 Mar-22 Sep-22 Fully Stage 1 reduction driven Stage 1 provisions performing by changes to modelled 92.10 91.65 portfolio 87.73 outcomes 92.25 Fully performing portfolio Small cover as low prob
Slide 72: Credit quality metrics improved
Credit quality metrics improved. Credit quality Stressed exposures as a % of TCE Movement in stress categories (bps) Watchlist and • Deterioration mostly due to downgrade of one large 136 (5) substandard customer in Australian business to watchlist (12) (1) (8) 90+ day past due • Reduction from 13bp
Slide 73: Portfolio composition
Portfolio composition. Credit quality Total committed exposure (TCE) by risk grade at 30 September 2022 ($m) Standard and Poor’s risk grade1 Australia NZ / Pacific Asia Americas Europe Group % of total AAA to AA- 207,929 22,192 1,145 13,890 568 245,724 20% A+ to A- 37,923 5,509 1,275 4,386 6,474 55,
Slide 74: Loan portfolio composition
Loan portfolio composition. Credit quality Exposures at default1 by sector ($bn) Top 10 institutional exposures to corporations and NBFIs5 (% of TCE) Finance&&insurance Finance insurance 2 1.2 1.2 1.1 1.1 Government admin. & 1.1 1.0 1.0 1.0 1.0 Government admin. & defence defence Sep-21 Property Pro
Slide 75: Credit quality across sectors
Credit quality across sectors. Credit quality Corporate and business stressed exposures by industry sector ($bn) 2.0 Sep-21 Mar-22 Sep-22 1.8 Increase driven by downgrade of one 1.6 exposure to watchlist 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Accommodation, & restaurants trade fishing& fishing Manufacturin
Slide 76: Sectors in focus: accommodation, cafes and restaurants; construction
Sectors in focus: accommodation, cafes and restaurants; Credit quality construction. Accommodation, cafes and restaurants Sep-21 Mar-22 Sep-22 Portfolio security composition3 (TCE) (%) Portfolio by sub-sector (TCE) (%) Total committed exposure 9.6 9.9 10.2 5 Accommodation (TCE) ($bn) 5 Fully Secured
Slide 77: Sectors in focus: commercial property
Sectors in focus: commercial property. Credit quality Commercial property Commercial property exposures % of TCE and % in stress Sep-21 Mar-22 Sep-22 Commercial property as % of TCE (lhs) 8 Commercial property % in stress (rhs) 20 TCE ($bn) 70.0 74.3 76.1 18 16 6 Lending ($bn) 51.7 56.5 60.0 14 12 A
Slide 78: Sectors in focus: agriculture; mining; retail trade
Sectors in focus: Australian agriculture; mining including Credit quality oil & gas; retail trade. Australian agriculture Mining (incl. oil and gas) Retail trade Sep-21 Mar-22 Sep-22 Sep-21 Mar-22 Sep-22 Sep-21 Mar-22 Sep-22 TCE ($bn) 13.0 13.4 13.7 TCE ($bn) 8.4 8.4 7.9 TCE ($bn) 14.0 12.5 11.9 Len
Slide 79: Australian consumer finance
Australian consumer finance. Credit quality Australian consumer finance portfolio1 Australian consumer finance delinquencies (%) 6.00 90+ day delinquencies 30+ day delinquencies Sep-21 Mar-22 Sep-22 Lending ($bn) 13.4 12.8 11.7 5.00 4.00 As a % of Group loans 1.9 1.8 1.6 3.00 30+ day delinquencies (
Slide 80: Australian mortgage delinquencies
Australian mortgage delinquencies. Mortgage credit quality Australian mortgage portfolio Sep-21 Mar-22 Sep-22 Australian mortgage delinquencies (%) Total portfolio 30+ day delinquencies (bps) 220 147 121 90+ day delinquencies 30+ day delinquencies 4.0 Total portfolio 90+ day delinquencies, including
Slide 81: Australian mortgage portfolio composition
Australian mortgage portfolio composition. Mortgage credit quality Sep-21 Mar-22 Sep-22 2H22 Australian mortgage portfolio and 2H22 flow by Australian mortgage portfolio balance balance balance flow1 product and repayment type (%) Total portfolio ($bn) 455.6 458.3 467.6 56.4 Sep-21 (Portfolio) Owner
Slide 82: Australian mortgage portfolio loan-to-value ratios
Australian mortgage portfolio loan-to-value ratios. Mortgage credit quality Australian housing loan-to-value ratios (LVRs) (%) Serviceability assessment creates a buffer for borrowers 100 • Loans are assessed at the higher of 2H22 drawdowns LVR at origination 90 Portfolio LVR at origination − The cu
Slide 83: Australian mortgage portfolio repayment buffers
Australian mortgage portfolio repayment buffers. Mortgage credit quality Offset account balances1 ($bn) Australian home loan customers ahead on repayments2 (% by accounts) Linked to I/O mortgages Linked to P&I mortgages . 53 Sep-21 Mar-22 Sep-22 51 53 46 48 33 33 33 40 41 42 37 39 39 36 25 25 25 15
Slide 84: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting. Mortgage credit quality Credit policy at September 2022 Australian mortgage portfolio by • Verified via payslips, tax returns or salary credits, with other supporting documentation such year of origination (% of total book) Income as PAYG payment summaries
Slide 85: Australian interest only and investment property lending
Australian interest only and investment property lending. Mortgage credit quality Interest only (I/O) lending by dynamic LVR1 and income Investment property portfolio by number of properties band (% of total I/O lending) per customer (%) Applicant gross income bands 11 60 <$100k $100k – $250k >$250k
Slide 86: Capital, funding and liquidity
Capital, funding and liquidity
Slide 87: CET1 capital ratio 11.3%, pro forma 11.4%
CET1 capital ratio 11.3%, pro forma1 11.4%. Capital, funding and liquidity Level 2 CET1 capital ratio movements (%, bps) Key capital ratios (%) Sep-21 Mar-22 Sep-22 Largely due to non-credit Capitalised software Divestments mainly includes Level 2 CET1 capital ratio 12.3 11.3 11.3 RWA, mainly IRRBB2
Slide 88: Risk weighted assets
Risk weighted assets. Capital, funding and liquidity Risk weighted assets (RWA) ($bn) 15.1 1.2 (0.8) 477.6 460.0 2.4 (0.3) • RWA up $17.7bn over 2H22 436.7 • IRRBB RWA up $15.1bn (36bps impact on capital) mainly from a 3Q22: $15.8bn higher regulatory embedded loss from increased market rates, in 4Q2
Slide 89: CET1 capital ratio operating range
CET1 capital ratio operating range. Capital, funding and liquidity CET1 capital ratio of 10.5% Unquestionably 11.29% at Sep-22 strong benchmark Operating range 11.0% -11.5% Management buffer CET1 capital operating range Buffer 0.75% Countercyclical • We will seek to operate with a CET1 capital ratio
Slide 90: Regulatory capital changes
Regulatory capital changes. Capital, funding and liquidity Implementation Change Details • Progressive implementation from 1 January 2022 to 1 July 2028 • IRB banks (including WNZL) subject to an 85% output floor of RWA required under the standardised approach applicable from Current and 1 January 2
Slide 91: Internationally comparable capital ratio reconciliation
Internationally comparable capital ratio reconciliation. Capital, funding and liquidity APRA’s Basel III capital requirements are more conservative than those of the Basel Committee on Banking Supervision (BCBS), leading to lower reported capital ratios by Australian banks. In July 2015, APRA publis
Slide 92: Well placed on internationally comparable capital
Well placed on internationally comparable. Capital, funding and liquidity Common equity Tier 1 ratio (%)1 20% 15% 10% Agricultural Bank of China China Construction Bank Toronto Dominion Bank China Merchants Bank Royal Bank of Canada Standard Chartered Credit Agricole SA Norinchukin Bank Societe Gene
Slide 93: Balance sheet funding
Balance sheet funding. Capital, funding and liquidity Maintained a high level of customer deposit funding in FY22. Funding composition (%) Customer deposits and net loans ($bn) By residual maturity Wholesale onshore <1yr1 Customer deposits Net loans Customer deposits to net loans ratio (%) 5 5 4 6 6
Slide 94: Liquidity coverage ratio 132%
Liquidity coverage ratio 132%. Capital, funding and liquidity CLF reduction almost complete. Liquidity coverage ratio1 (LCR) (quarterly average, $bn) Liquidity coverage ratio1 (quarterly average, %) September qtr 2021 March qtr 2022 September qtr 2022 4 LCR 129% LCR 137% LCR 132% 137 5 132 197 191 (
Slide 95: Long term wholesale funding
Long term wholesale funding. Capital, funding and liquidity $43 billion in new term funding, including $4 billion pre-funding. Term debt issuance and maturity profile1 ($bn) Issuance Maturities 43 38 40 37 35 Funding for Lending Programme (NZ) 32 34 32 31 29 Term Funding Facility (Aus) 12 18 24 21 S
Slide 96: Tier 2 capital issuance and maturities
Tier 2 capital issuance and maturities. Capital, funding and liquidity Well positioned to meet LAC requirements. Westpac Tier 2 issuance and calls/maturities1,2,3 (notional amount, A$bn) 14.0 Issuance Maturities 12.0 FY23 issuance expected to be 10.0 approx. $4–5 billion1 subject 8.0 to market condi
Slide 97: Segment results
Segment results Wlfestpac Group
Slide 98: Segment contributions
Segment1 contributions. Segments Specialist Group FY22 cash earnings ($m) Consumer Business WIB NZ2 Businesses Businesses Group Net interest income 8,985 3,027 1,110 2,106 474 903 16,605 Non-interest income 612 329 1,139 397 (152) 71 2,396 Expenses (4,689) (1,896) (1,181) (1,072) (1,047) (906) (10,7
Slide 99: Consumer 2H22 performance
Consumer 2H22 performance. Consumer Cash earnings ($m) Change Key financial metrics 2H21 1H22 2H22 on 1H22 Simplification initiatives, organisational redesign and completion of some Revenue ($m) 4,985 4,701 4,896 4% AIEA up 1%, NIM up 7bps from regulatory projects higher deposit spreads, partly offs
Slide 100: Business 2H22 performance
Business 2H22 performance. Business Cash earnings ($m) Change Key financial metrics 2H21 1H22 2H22 on 1H22 Simplification, organisational Revenue ($m) 1,625 1,486 1,870 26% redesign and completion of risk Impairment benefit from release and compliance programs in overlays no longer required, partly
Slide 101: WIB 2H22 performance
WIB 2H22 performance. Westpac Institutional Bank Cash earnings ($m) Change Key financial metrics 2H21 1H22 2H22 on 1H22 DVA charge and lower customer Higher staff expenses, payments and Revenue ($m) 1,084 1,069 1,180 10% markets income, partly offset by higher technology investments and uplift in no
Slide 102: New Zealand 2H22 performance
New Zealand 2H22 performance.1 New Zealand Cash earnings (NZ$m) Change Key financial metrics 2H21 1H22 2H22 on 1H22 Increased regulatory, risk and Revenue (NZ$m) 1,218 1,389 1,320 (5%) Loss of income following compliance expenses, and higher the sale of NZ life insurance technology resilience costs
Slide 103: New Zealand balance sheet
New Zealand balance sheet. New Zealand Net loans (NZ$bn) Deposits (NZ$bn) 1.0 96.8 1.8 0.9 (1.4) 94.0 78.4 77.9 92.6 75.9 Up 3% Down 1% Sep-21 Mar-22 Consumer Business Sep-22 Sep-21 Mar-22 Consumer Business Sep-22 Loans (NZ$bn) and % of total Customer deposits (NZ$bn) and % of total Up 2% Up 2% Up 3
Slide 104: New Zealand business exposures
New Zealand business exposures. New Zealand Business stressed exposures as a % of business TCE Business TCE by industry sector % 5.5 Impaired Finance & insurance 90+ day past due and not impaired Agriculture, Forestry and Fishing Watchlist & substandard 4 4.4 3 11 Property 3 4 27 Government administ
Slide 105: New Zealand consumer portfolio
New Zealand consumer portfolio. New Zealand Mortgage 90+ day delinquencies1 Unsecured consumer 90+ day Mortgage portfolio Sep-21 Sep-22 (%) delinquencies1 (%) 0.6 3.0 0.5 Total portfolio ($bn) 60.9 63.8 0.4 2.0 0.3 Owner occupied (OO) (%) 72.3 73.3 0.2 1.0 0.22 1.03 0.1 Investment property loans 27.
Slide 106: Specialist Businesses 2H22 performance
Specialist Businesses 2H22 performance. Specialist Businesses Cash earnings ($m) Change Reduction in transitional service payments Key financial metrics 2H21 1H22 2H22 on 1H22 related to businesses sold and lower life insurance income Average funds ($bn) 223.8 224.9 209.5 (7%) Lower income from redu
Slide 107: BT Panorama
BT Panorama. Specialist Businesses Panorama Platform FUA on BT Panorama3 ($m) Investors on BT Panorama3 (#) Increased Panorama capabilities FUA Investors 250,809 • Improved mobile app functionality, with BT 104,779 105,012 234,948 236,741 BT Wrap migration BT Wrap migration Panorama winning Best Mob
Slide 108: Economics
Economics Wlfestpac Group
Slide 109: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts. Economics Key economic indicators (%) 2021 2022 2023 Calendar years at November 2022 Q3 Q4 Q1 Q2 Q3F Q4F Q1F Q2F 2020 2021 2022F 2023F World GDP1 - - - - - - - - -3.0 6.0 3.2 3.0 Australia GDP2 4.1 4.5 3.3 3.6 6.7 3.4 3.0 2.2 -0.7 4.5 3.4 1.0 Unemployme
Slide 110: Global market backdrop
Global market backdrop. Economics Central banks responding aggressively to inflation. Fed Funds and RBA Cash Rate (%) Global inflation (ann %) % Cash Rate Fed Funds (midpoint) % ann% ann% Australia G7 9 9 20 20 8 8 Westpac f’casts 7 to Dec-23 7 15 * CPI inflation; ‘G7’ is GDP- 15 6 6 weighted avg of
Slide 111: RBA tightening cycle to continue
RBA tightening cycle to continue. Economics Labour market remains key risk to policy. CPI inflation (%) Job vacancies (% of labour force) and Unemployment rate (%) % % Core CPI, %qtr Headline CPI %yr %^ 9 9 % Vacancies* (ABS survey), lhs Core CPI, avg RBA %yr 3.5 -3 8 Westpac f’casts to 8 Unemployme
Slide 112: Australian economy: slower growth expected in 2023
Australian economy: slower growth expected in 2023. Economics Higher rates and high inflation to impact. Australia’s growth mix (ppts, annual) Australia’s GDP profile (index) ppts annual contributions to GDP growth, year end ppts annual Index pre COVID-19 forecast current forecast Index 6 6 112 112
Slide 113: Commodities: demand shifting, supply remains tight
Commodities: demand shifting, supply remains tight. Economics Terms of Trade at record high in 2Q22. Australian commodity prices (index) Terms of Trade (index) 2012=100 2012=100 index index Westpac f’casts Westpac estimate 3Q22 320 to Dec-23 520 140 140 Iron ore Met coal 470 67% above long run avg W
Slide 114: Australian housing market
Australian housing market. Economics Entering a significant correction phase; stabilisation expected late 2023. Australian dwelling prices (%, 3 month annualised) % 40 ‘Delta’ 35 2019 COVID-19 Macro-prudential election 30 measures 25 Macro- prudential 20 measures 15 10 5 0 -5 -10 rate cuts -15 rate
Slide 115: Australian housing market
Australian housing market. Economics Slowdown in activity in response to higher rates. Mortgage interest rates (%) Housing finance approvals by segment ($bn) % % $bn Value of housing finance $bn Variable* 3 year fixed 9 9 18 First home buyers 18 8 8 16 16 Upgraders 7 7 14 14 Investors 6 6 12 12 5 5
Slide 116: Australian housing market
Australian housing market. Economics Rental market continues to tighten. Affordability: Australia (%) Westpac Rental vacancy rates (% quarterly, annual average) f’casts to % % Sydney Melbourne Dec-23 % 8 Sydney Melbourne Perth Brisbane latest month % 8 35 2017 peaks 35 (where 7 available) 7 30 30 6
Slide 117: The Australian economy
The Australian economy. Economics Population 26 million. Australian population Australian GDP and employment composition Output by sector 2021 – 22 (% contribution to GDP)1 NT Mining 250k 11 Manufacturing 19 QLD 7 Construction WA 5.3m Transport, Utilities 2.8m SA 8 Wholesale, Retail 9 1.8m Agricultu
Slide 118: New Zealand economic overview
New Zealand economic overview. Economics Interest rates rising in response to firm economy activity and increasing inflation. New Zealand GDP ($bn) Consumer prices (% year) %yr %yr $bn $bn 80 80 9 Westpac 9 Westpac forecasts 8 8 forecasts 75 75 7 7 ‘Red Traffic light’ 6 6 70 (Omicron) 70 5 5 Initial
Slide 119: New Zealand economic activity
New Zealand economic activity. Economics Demand has remained firm in recent months. Manufacturing conditions (index) and Residential dwelling consents (annual, total) Service sector conditions (index) Index Annual total Annual total Index 70 Delta 70 30000 30000 Initial COVID-19 Auckland lockdown lo
Slide 120: New Zealand inflation and interest rates
New Zealand inflation and interest rates. Economics Demand and supply pressures widespread, interest rates to continue pushing higher. Inflation (% yr) Strong demand and shortage of supplies %yr %yr % of business highlighting % of business highlighting a 8 8 100 a lack of demand as a lack of supplie
Slide 121: New Zealand exports
New Zealand exports. Economics Commodity price strength expected to be sustained, services exports recovery in train. NZ export commodity prices (index) Farmgate milk price ($/kg Ms) Index = 100 in 1986 Index = 100 in 1986 $/kg Ms $/kg Ms 450 450 12 12 400 400 Forecast 10 10 350 350 300 300 8 8 250
Slide 122: New Zealand housing market
New Zealand housing market. Economics The housing market is cooling as interest rates rise. Monthly house sales and prices (% yr) New Zealand dwelling prices (index) Sales %yr Index Index 14,000 Sales (lhs) 40 Auckland House prices (rhs) 2750 2750 12,000 30 Canterbury 10,000 2250 2250 20 Wellington
Slide 123: The New Zealand economy
The New Zealand economy. Economics Population 5.1 million. Regional GDP Economy Output 2022 - sector shares of GDP (%) Total nominal GDP 2021: $350bn Primary industries 11 6 Construction 7 Total nominal GDP 2019: $303bn 3 Electricity, gas, and water 10 Manufacturing Northland, $8bn 9 4% of populatio
Slide 124: Appendix and Disclaimer
Appendix and Disclaimer Wlfestpac Group
Slide 125: Appendix 1: Cash earnings adjustments and notable items
Appendix 1: Cash earnings adjustments and notable items. Appendix Cash earnings adjustment ($m) 2H21 1H22 2H22 Description Reported net profit 2,015 3,280 2,414 Net profit attributable to owners of Westpac Banking Corporation Fair value on economic hedges (which do not qualify for hedge accounting u
Slide 126: Appendix 2: Cash earnings ex notable items
Appendix 2: Cash earnings ex notable items.1 Appendix Change Change 2H21 ($m) 1H22 ($m) 2H22 ($m) 2H22 – 1H22 (%) 2H22 – 2H21 (%) Net interest income 8,189 8,021 8,585 7 4 Non-interest income 1,849 1,703 1,586 (7) (14) Net operating income 10,038 9,724 10,171 5 1 Expenses (5,700) (5,135) (5,035) (2)
Slide 127: Appendix 3: Customer remediation
Appendix 3: Customer remediation. Appendix Milestones in FY22 Provisions for customer compensation and associated costs • Paid or offered $567 million to Net provisions raised in FY22 for approximately 2 million customers • Refunds associated with certain ongoing advice fees charged by • 14 major re
Slide 128: Appendix 4: Portfolio simplification progress
Appendix 4: Portfolio simplification progress. Appendix Divestment CET1 benefit Transactions completed Announced Completed (bps, $m1) Zip Co Ltd. Oct 2020 Oct 2020 Realised 8bps, ~$350m Coinbase Inc. May 2021 May 2021 Realised 7bps, ~$300m Westpac NZ Wealth Advisory Nov 2020 Dec 2020 – Westpac Gener
Slide 129: Appendix 5: Reinventure – investing in fintech businesses
Appendix 5: Reinventure – investing in fintech businesses. Appendix 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 to
Slide 130: Appendix 6: Sustainability
Appendix 6: Sustainability. Appendix Industry recognition Sustainability indexes Inclusion and diversity recognition Achieved highest ISS QualityScore for Member of the DJSI Indices Recognised by the Bloomberg Gender Environment and Social dimensions since 2002 Equality Index for the 6th consecutive
Slide 131: Appendix 6: Sustainability
Appendix 6: Sustainability. Appendix Key commitments and partnerships Principles for Responsible Banking Principles for Responsible Investment UN Sustainable Development Goals Paris Climate Agreement Climate Measurement Standards Initiative Signatory 2019 Signatory (2007) CEO Statement of Commitment
Slide 132: Appendix 6: Sustainability – footnotes
Appendix 6: Sustainability – footnotes. Sustainability Our commitment to sustainability. 1. Figure is cumulative since 2020. New lending represents the total of new and increases in lending commitments, excluding refinances. Taking us to over $3.8 billion towards our target of $15 billion by 2030 an
Slide 133: Appendix 6: Sustainability – footnotes
Appendix 6: Sustainability – footnotes. Sustainability Targets set for five sectors in our lending portfolio. 1. Financed emissions are the Group’s Scope 3 emissions attributable to its lending portfolios. We aim to achieve these targets by 30 September 2030. 2. Upstream oil and gas includes explora
Slide 134: Appendix 7: Definitions – credit quality
Appendix 7: Definitions – credit quality. Appendix 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 135: Appendix 7: Definitions – segments, earnings drivers, capital and liquidity
Appendix 7: Definitions – segments, earnings drivers, capital and Appendix liquidity. Segments Capital and liquidity Consumer provides banking products and services, including mortgages, credit Capital ratios As defined by APRA (unless stated otherwise) Consumer cards, personal loans, and savings an
Slide 136: Appendix 7: Definitions – other
Appendix 7: Definitions – other. Appendix Source: DBM Consultants Consumer Atlas, August 2022 (2H22), February 2022 Branch Consumer MFI Branch transactions are typically withdrawals, deposits, transfers and payments (1H22), August 2021 (2H21), February 2021 (1H21), 6MMA. MFI Banking Group transactio
Slide 137: Investor Relations Team
Investor Relations Team. Contact us Contact us. Andrew Bowden Jacqueline Boddy General Manager Investor Relations Head of Debt Investor Relations Louise Coughlan Catherine Garcia Head of Ratings Agencies and Analysis Head of Institutional Investors Andrea Jaehne Rebecca Plackett Director, Ratings Ag
Slide 138: 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
Westpac Banking Cp Ord — FY2022 Earnings Presentation on 6ix