Slide 1: 2017 Full Year Financial Results
For personal use only 200 years proudly supporting Australia 2017 FULL YEAR FINANCIAL RESULTS Westpac Banking Corporation ABN 33 007 457 141
Slide 2: Westpac Full Year 2017 result index
Westpac Full Year 2017 result index 2017 Full Year Result Presentation 3 Image on right For personal use only Investor Discussion Pack of 2017 Full Year Result 25 Bank of New South Wales Maldon Branch, Victoria 1870 Strategy 26 Overview 32 Performance discipline 35 Service leadership 38 Digital tran
Slide 3: Brian Hartzer, Chief Executive Officer
For personal use only 200 years proudly supporting Australia BRIAN HARTZER CHIEF EXECUTIVE OFFICER Financial results based on cash earnings unless otherwise stated. Refer page 33 for definition. Results principally cover the FY17, FY16 and 2H17 and 1H17 periods. Comparison of 2H17 Westpac Banking Co
Slide 4: Strong franchise – solid result
Strong franchise – solid result 4 • Cash earnings up 3% over the year and 1% over the half For personal use only • Continued discipline: Focus on strength and return over growth • Operating divisions all performing well • Strategy delivering for customers and increasing franchise value • Review of p
Slide 5: Headline results
Headline results 5 Change Change For personal use only FY17 FY17 – FY16 2H17 – 1H17 Reported net profit after tax $7,990m 7% 5% Cash earnings $8,062m 3% 1% Cash EPS1 239.7c 2% - Common equity Tier 1 capital ratio2 10.6% 108bps 59bps Return on equity (ROE)3 13.8% (22bps) (36bps) Net tangible assets p
Slide 6: Portfolio of businesses delivering
Portfolio of businesses delivering 6 Cash earnings (% change) For personal use only Division Comments 2H17 – 1H17 FY17-FY16 2H17-1H17 • Core earnings up 5%; net interest income up 7% Consumer Bank 4 5 • Credit cards and customer refunds a drag on non- interest income • Core earnings up 5%; net inter
Slide 7: Our strategy for creating value is delivering
Our strategy for creating value is delivering 7 For personal use only • Material increase in capital; CET1 capital ratio up 108 basis points Strong • Asset quality improved; impaired assets at 22bps of gross loans Balance sheet • Prioritised strength and return above growth • Customer numbers up 3.4
Slide 8: Five year balance sheet build largely complete
10 year balance sheet build largely complete 8 For personal use only CET1 Capital ($bn and %) Liquidity ratios1 (%) 55 CET1 capital ($bn) LCR NSFR 10.6 134 CET1 capital ratio (%) 121 124 105 109 50 10.5 103 45 9.5 9.5 100% regulatory minimum 9.5 40 9.1 9.0 Sep-14 Sep-15 Sep-16 Sep-17 35 8.5 Impaired
Slide 9: Dividend
94 cent Dividend 9 For personal use only Dividends per ordinary share (cents) Dividend considerations Special dividend • Sustainability of the payout ratio over the medium term 10 10 • Strong CET1 capital ratio • Surplus franking credits • Bank Levy equivalent to 2 cents per share 93 94 94 94 94 94
Slide 10: Good momentum on service
Good momentum on service 10 For personal use only Better services Service metrics1 • Materially improved mobile useability • Credit cards: New payment plans, decrease limits #1 #2 online, spending and fee alerts Consumer Consumer • New Corporate online portal customer NPS satisfaction Improved avail
Slide 11: Disciplined management
Disciplined management 11 For personal use only Australian mortgage growth1 (annual %) Australian mortgages interest only flows (% of total) Westpac investor (APRA definition) Westpac total mortgages 50 System mortgages 2 43 26 7.6 6.4 6.0 6.5 5.9 5.7 6.6 4.1 4.5 Sep-16 Mar-17 Sep-17 2Q17 3Q17 4Q17
Slide 12: Outlook
Outlook 12 • Global growth improved in 2017, further improvement likely in 2018 For personal use only • Australian growth likely to remain sound but slowing through 2018 − Supported by growth in resources, services and infrastructure − Some moderation from soft income growth and slowing construction
Slide 13: Peter King, Chief Financial Officer
For personal use only 200 years proudly supporting Australia PETER KING CHIEF FINANCIAL OFFICER Financial results based on cash earning unless otherwise stated. Refer page 33 for definition. Results principally cover the FY17, FY16 and 2H17 and 1H17 periods. Comparison of 2H17 Westpac Banking Corpor
Slide 14: Results at a glance
Results at a glance 14 For personal use only Cash earnings movements ($m) Infrequent/volatile items ($m) Revenue up $34m Cash earnings impact 2H16 1H17 2H17 (103) 133 (36) 4,045 4,017 (339) 637 Asset sales (4) 4 0 (169) Performance fees/ (95) 22 0 (3) manager revaluation Group CVA1 3 15 20 Provision
Slide 15: Margins resilient
Margins resilient 15 For personal use only Net interest margin movement (% and bps) 7bps 0bp 2bps (2bps) 0bp (1bp) 2.11 (3bps) 2.10 2.07 0.07 0.04 0.07 Treasury & Markets impact on NIM 2.04 2.06 2.00 NIM excl. Treasury & Markets 2H16 1H17 Loans Customer Term Bank Levy Capital & Liquidity Treasury &
Slide 16: Non-interest income
Non-interest income 16 For personal use only Non-interest income ($m) Wealth/insurance non-interest income ($m) Fees and Commissions Wealth/Insurance 30 (56) Trading Other Down 4% 75 Down 9% 2 (13) 924 3,068 Cyclone 2,905 43 886 25 2,784 Debbie claims 27 514 713 $37m in 1H17 504 -29% 970 886 Up 4% 9
Slide 17: Markets & Treasury – soft 2H17
Markets & Treasury1 – soft 2H17 17 For personal use only Markets non-customer and Treasury income ($m) Markets customer income ($m) Markets non-customer Treasury 504 473 482 462 465 447 436 401 362 247 339 142 266 131 89 203 147 72 259 250 257 231 119 131 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16
Slide 18: Expenses well managed
Expenses well managed 18 For personal use only Movement in expenses ($m) Divisional expense growth 2H17 – 1H17 $m % Consumer Bank 79 5 143 (144) 54 4,604 Business Bank 17 2 50 BTFG 20 3 4,501 WIB 9 1 New Zealand (in NZ$) (11) (2) Group Businesses (3) (1) Consistency in productivity (annual savings $
Slide 19: Investment spend
Investment spend 19 For personal use only Total investment spend (expensed and capitalised) ($m) Capitalised software balance and amortisation1 ($bn) Capitalised software Annual software amortisation 700 2.71 676 % of 2H17 spend 580 527 11% 1.93 1.92 1.86 27% 62% 0.57 0.62 Growth & productivity 0.39
Slide 20: Australian mortgage trends
Australian mortgage trends 20 Mortgage portfolio ($bn) Switching from I/O to P&I1 ($m) For personal use only 2H16 1H17 2H17 2H17 $18.6bn Customer initiated New lending 40.2 37.0 40.3 Reached end of I/O period Run-off 26.8 27.3 27.0 7,913 Net flows 13 10 13 4,261 2,368 2,604 Fixed (% of book) 17 18 2
Slide 21: Australian mortgage deep dive
Australian mortgage deep dive 21 Australian mortgage lending1 by origination date, dynamic LVR2 (%) For personal use only 2015+ 2011-14 <2011 78 69 46 43 24 11 16 7 6 >80 60-80 <=60 >80 60-80 <=60 >80 60<=80 <=60 Dynamic LVR bands (%) % of portfolio 41 33 26 Westpac interest 7.25 6.80 6.80 rate floo
Slide 22: Asset quality remains sound
Asset quality remains sound 22 For personal use only Stressed assets as a % of TCE1 Corporate/business stressed exposure by sector ($bn) Watchlist & substandard 2.5 Sep-16 Sep-17 90+ day past due and not impaired 3.20 Impaired 2.0 2.48 1.5 2.17 2.07 1.0 1.45 1.60 1.24 1.24 1.20 0.5 1.14 0.85 0.99 1.
Slide 23: Impairment charge components
Impairment charge components ($m) 23 Individually assessed provisions Collectively assessed provisions Total For personal use only Other movement Write-backs Write-offs New IAPs in Collective & recoveries direct provisions 667 525 471 484 493 463 443 457 418 412 364 341 360 330 293 273 256 246 (48)
Slide 24: Considerations for FY18
Considerations for FY18 24 • Remaining disciplined on growth/return For personal use only • Expect system lending growth to moderate • Exit margin (Sept 17 month) higher than 2H17. FY18 margin will be impacted by more mortgage switching from interest only to principal & interest • Headwinds from cha
Slide 25: Investor Discussion Pack
For personal use only 200 years proudly supporting Australia Investor Discussion Pack Financial results based on cash earnings unless otherwise stated. Refer page 33 for definition. Results principally cover the FY17, FY16 and 2H17 and 1H17 periods. Comparison of 2H17 Westpac Banking Corporation ver
Slide 26: Strategy
For personal use only 200 years proudly supporting Australia Strategy
Slide 27: Westpac Group at a glance
WBC Westpac Group at a glance: Australia’s First Bank listed on ASX & NZX Strategy 27 • In its 200th year, Australia’s first bank and first company, opened 1817 Consumer Business BT Financial Westpac Westpac For personal use only Bank Bank Group Institutional New Zealand • Australia’s 2nd largest ba
Slide 28: Progress on our strategic agenda
Progress on our strategic agenda Strategy 28 For personal use only Our To be one of the world’s great service companies, Vision: helping our customers, communities and people to prosper and grow Strategic Priorities Performance Service Digital Targeted Workforce Discipline Leadership Transformation
Slide 29: Areas of comparative advantage
Areas of comparative advantage Strategy 29 For personal use only Clear strategic position Conservative balance sheet • Asset quality • Seeking to differentiate on service − Lowest impaired assets of peers (0.22% of gross loans); well • No. 1 or 2 position across key markets - all divisions well plac
Slide 30: Consistent performer over the long term
Consistent performer over the long term Strategy 30 For personal use only Cash earnings ($bn) Cash earnings per share (cents) 245.4 248.2 235.5 239.7 8.1 227.8 7.8 7.8 209.3 214.8 7.6 189.4 198.3 197.8 163.7 7.1 6.6 6.3 5.9 5.0 4.7 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 3.5 Common eq
Slide 31: A conservative, high quality bank
A conservative, high quality bank Strategy 31 Individually assessed provisions to Collectively assessed provisions to For personal use only Impaired assets to gross loans1 (%) impaired assets1 (%) credit RWA1 (bps) 0.43 0.41 47.7 45.5 46.3 86 0.30 36.1 79 0.22 76 73 Peer 1 Peer 2 Peer 3 WBC Peer 1 P
Slide 32: Overview
For personal use only 200 years proudly supporting Australia Overview
Slide 33: Cash earnings and reported net profit reconciliation
Cash earnings and reported net profit reconciliation Results 33 Reported net profit and cash For personal use only Cash earnings1 policy earnings adjustments ($m) • Westpac Group uses a measure of performance referred to as cash earnings to assess financial performance at both a Group and divisional
Slide 34: FY17 financial snapshot
FY17 financial snapshot Results 34 For personal use only Change Change Change Change FY17 FY17 – FY16 2H17 – 1H17 FY17 FY17 – FY16 2H17 – 1H17 Earnings1 Balance sheet Total assets ($bn) 851.9 2% 1% Earnings per share (cents) 239.7 2% - Common equity Tier 1 10.56 108bps 59bps Core earnings ($m) 12,45
Slide 35: Cash earnings up 3% over the year and 1% on prior half
Cash earnings up 3% over the year and 1% on prior half Performance discipline 35 For personal use only % chg % chg Cash earnings features of FY17 – FY16 ($m) FY17 FY17- 2H17 - ($m) FY16 1H17 AIEA1 up 4%, Additional investment and higher margins down 4bps regulatory and compliance costs Net interest
Slide 36: Dividends
Dividends Performance discipline 36 For personal use only Key dividend considerations for 2H17 Dividends (cents per share) • Sustainability of payout ratio over medium term. Based on current Special dividend financial position/growth a payout ratio of 70-75% is considered sustainable 10 10 • CET1 ca
Slide 37: Uplift in Consumer and Business divisions
Uplift in Consumer and Business divisions Performance discipline 37 For personal use only 2H17 divisional1 cash earnings movements ($m) 2H17 divisional1 core earnings movements ($m) 77 (29) (196) 83 (23) 6,260 122 55 (98) 82 (96) 46 (64) 6,191 4,017 4,045 Up 1% Down 1% 3 1H17 CB BB BTFG WIB NZ 2 Oth
Slide 38: Building long term franchise value
Building long term franchise value Service leadership 38 For personal use only Australian banking customer numbers (#m) Australian customers with a wealth product2 (%) Consumer Bank Business Bank Westpac brand St.George brands Peers 10.44 10.62 10.84 9.90 9.94 10.09 10.26 1.69 1.71 1.73 1.45 1.48 1.
Slide 39: Building long term franchise value – customer service
Building long term franchise value – customer service Service leadership 39 Customer satisfaction1 For personal use only Customer complaints (#) Consumer and New Zealand (%), Business (mean) Australian retail (CB, BB and BT) Westpac St.George brands Peers Consumer 83.8% 82.0% 80.8% 80.1% Down 7% 79.
Slide 40: Actively responding to digital opportunities
Actively responding to digital opportunities1 Digital transformation 40 Westpac is actively responding to digital threats and opportunities through three streams of work. For personal use only These streams seek to encourage digital innovation inside, adjacent and outside the Group. In this way West
Slide 41: Reinventure – Investing in new technology businesses
Reinventure – Investing in new technology businesses1 Digital transformation 41 For personal use only Westpac has committed $100m to Reinventure, an independently run venture capital fund. The operation allows Westpac to gain access to emerging fintech business models, adjacent business opportunitie
Slide 42: Significant momentum in Customer Service Hub
Significant momentum in Customer Service Hub Digital transformation 42 For personal use only Strategy Phase 1 Re-engineering the home loan process: Digitising the end-to-end home loan origination experience by 2020 Customer access Banker dashboard Application tracker via any channel Single point for
Slide 43: Customers continue to migrate to digital
Customers continue to migrate to digital Digital transformation 43 For personal use only Digitally active customers1 (#m) Digital sales1 (#’000’s) 4.53 469 433 425 4.33 367 347 4.18 4.05 273 3.96 3.84 Up 5% Up 10% Up 8% Up 8% Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 1H15 2H15 1H16 2H16 1H17 2H17 Br
Slide 44: Mobile is our dominant channel
Mobile is our dominant channel….. Digital transformation 44 Improve mobile app useability For personal use only 72% of digitally active customers use mobile Building out mobile Strategy of building out Improve mobile specific capabilities for mobile capabilities and app useability banking on the go
Slide 45: Increasing use of self-serve options is driving efficiency
Increasing use of self-serve options is driving efficiency Digital transformation 45 For personal use only Online overseas notifications (#’000’s) Westpac card activation (%) Online password change/reset (#’000’s) 284 Digital Branch and contact centre 1,348 1,179 212 210 944 988 53 50 49 161 63 58 7
Slide 46: New digital services launched over the last months
New digital services launched over the last 6 months Digital transformation 46 For personal use only Categorisation of spend Cardless cash at any Activate card with NFC1 Connect2 across (St.George brands only) Westpac Group ATM (Westpac brands only) all brands • Transaction, savings and • Cardless c
Slide 47: Helping customers manage their finances
Helping customers manage their finances Digital transformation 47 For personal use only Keeping on top of Control over Choice and flexibility Help managing credit card repayments spending in credit limits my debt • Credit card reminder • Customers can add • Customers can request a • SmartPlan is a n
Slide 48: Workforce revolution delivering
Workforce revolution delivering Workforce revolution 48 For personal use only Major workforce developments Women in leadership positions1 (%) Staff engagement2(%) • Achieved 50% women in leadership 50 Westpac Global high performing norm 48 • Employee engagement up 10 percentage points to 46 77 79%,
Slide 49: Continued sustainability leadership
Continued sustainability leadership Sustainable futures 49 For personal use only Strategic priorities and 2H17 progress highlights Leading track record • Most sustainable bank globally in the 2017 1 Embracing societal change Dow Jones Sustainability Index for the • Achieved goal of 50% women in lead
Slide 50: Continue to strengthen sustainability governance
Continue to strengthen sustainability governance Sustainable futures 50 • Updated the Group’s sustainability For personal use only Climate change Human rights Reconciliation governance frameworks responding to material sustainability topics (issues and opportunities) which included updates to: − Cli
Slide 51: Supporting the transition to a sustainable economy
Supporting the transition to a sustainable economy Sustainable futures 51 CleanTech and environmental Mining portfolio to total lending For personal use only Electricity generation exposure (%)1 services exposure (%)1,2 TCE (%) 2 1 TCE at 30 September 2017 $7.0bn 1 Renewable energy 3 4 Green buildin
Slide 52: Actively supporting Australia
Actively supporting Australia Sustainable futures 52 For personal use only Supporting communities1 Income tax expense on a cash earnings basis ($m) FY16 FY17 $101bn • Provide loans to help Australians own Backing new lending2 Notional income tax based on the Australian company their home or grow the
Slide 53: Earnings Drivers
For personal use only 200 years proudly supporting Australia Earnings Drivers
Slide 54: Net operating income flat over the half
Net operating income flat over the half Revenue 54 For personal use only Net operating income movement ($m) 162 (97) 38 (209) 156 168 (170) 199 18 10,761 (16) 10,795 10,600 30 (84) Net interest flat Non-interest up 6% Net interest up 4% Non-interest down 9% 1 1 2H16 AIEA Margins Fees & Wealth Tradin
Slide 55: Composition of lending
Composition of lending Revenue 55 For personal use only Composition of lending (% of total) Net loans ($bn) 2.2 3.2 2.5 1.1 0.9 684.9 666.9 10.3 661.9 Aust. mortgages 10.4 New Zealand lending up 3.3 Aust. business NZ$0.8bn 8.7 Aust. institutional Aust. other consumer Up 3% 13.1 62.3 New Zealand lend
Slide 56: Customer deposits
Customer deposits Revenue 56 For personal use only Customer deposit mix ($bn) and % of total Customer deposit composition ($bn) Term deposits Savings Online Transaction CB BB WIB BTFG, NZ & Other 467 479 487 479 487 467 Up 3% Up 2% 142 87 87 91 130 136 88 94 89 84 92 96 29% 111 112 115 39% 64 60 58
Slide 57: Net interest margin up 3bps
Net interest margin up 3bps; rise in asset spreads partly offset by Bank Levy and lower Treasury income Revenue 57 For personal use only Net interest margin (NIM) movement (%) Net interest margin (NIM) (%) NIM excl. Treasury & Markets Treasury & Markets impact on NIM NIM NIM excl. Treasury & Markets
Slide 58: Non-interest income down 9%
Non-interest income down 9% from lower markets income and provision for customer refunds and payments Revenue 58 For personal use only Non-interest income contributors ($m) Fees and commissions income1 ($m) Provision for customer refunds and payments and lower card income, partly offset by higher bu
Slide 59: Wealth, insurance, markets and Treasury income
Wealth, insurance, markets and Treasury income Revenue 59 For personal use only Wealth management income ($m) Insurance income ($m) Fund flows partly offset by Customer refunds Hastings Higher premiums 339 665 Cyclone Debbie 305 margin compression and revaluation of performance 622 and lower claims
Slide 60: Expenses up 2% from investments and regulatory costs
Expenses up 2% from investments and increased regulatory and compliance costs Expenses 60 For personal use only Expense movements ($m) FTE run versus change (#) 143 (144) 50 4,604 4,501 54 35,580 (296) 6 35,290 (210) 16 35,096 Run: ongoing operations Change: project based Up 2% 1H17 1 Ongoing Produc
Slide 61: Investment spend focused on growth and productivity
Investment spend focused on growth and productivity Expenses 61 For personal use only Total investment spend mix (% of total) Investment spend ($m) Investment spend capitalised1 ($m) 2H16 1H17 2H17 2H16 1H17 2H17 Growth & productivity Regulatory change Expensed 261 236 243 Capitalised software Other
Slide 62: Productivity track record: $2.1bn in savings since 2009
Productivity track record: $2.1bn in savings since 2009 Expenses 62 For personal use only Efficiency initiatives $2.1bn saved from efficiency programs since FY09 ($m) • Business model changes across divisions 262 2,090 • Head office consolidation and migration to flexible 263 1,828 FY09 - FY17 annua
Slide 63: Lower 2H17 impairment charge reflects improving asset quality
Lower 2H17 impairment charge reflects improving asset quality Asset Quality 63 For personal use only Impairment charges ($m) Individually assessed Collectively assessed New IAPs Write-backs & recoveries Write-offs direct Other movements in CAP Total Lower due to absence of Higher due to unsecured Re
Slide 64: Asset Quality
For personal use only 200 years proudly supporting Australia Asset Quality
Slide 65: High quality portfolio with bias to secured consumer lending
High quality portfolio with bias to secured consumer lending Asset quality 65 For personal use only Asset composition as at 30 September 2017 (%) Loans (81%) Total assets ($852bn) Total loans ($685bn) Trading securities, financial assets at fair value and available-for-sale securities (10%) Derivati
Slide 66: A well diversified loan portfolio
A well diversified loan portfolio Asset quality 66 Top 10 exposures to corporations and NBFIs5 For personal use only Exposure at default1 by sector ($bn) as a % of TCE (%) Finance & insurance 2 Largest corporation/NBFI single name exposure 1.9 represents less than 0.2% of TCE Property 3 1.4 1.3 1.3
Slide 67: Well provisioned, asset quality improved
Well provisioned, asset quality improved Asset quality 67 For personal use only Provisions Total provisions ($m) Economic overlay Sep-16 Mar-17 Sep-17 Collectively assessed provisions Individually assessed provisions Total provisions to gross loans (bps) 54 52 45 5,061 Impaired asset provisions to i
Slide 68: Stressed exposures lower
Stressed exposures lower Asset quality 68 For personal use only Stressed exposures as a % of TCE Movement in stressed exposure categories (bps to TCE) 120 (2) 2 (2) (4) Watchlist & substandard 114 (5) (1) 0 (3) 105 90+ day past due (dpd) and not impaired 3.20 Impaired Mainly due to work-out of WIB e
Slide 69: Provision cover by portfolio category
Provision cover by portfolio category Asset quality 69 For personal use only Exposures as a % of TCE Provisioning to TCE (%) Mar-16 Sep-16 Mar-17 Sep-17 Fully performing portfolio • Small cover as low probability of default (PD) 0.22 0.22 0.21 0.20 • Includes economic overlay Fully performing 98.80
Slide 70: Stressed exposures lower across industries
Stressed exposures lower across industries Asset quality 70 For personal use only Corporate and business portfolio stressed exposures by industry ($bn) 2.5 Sep-16 Mar-17 Sep-17 2.0 Includes New Zealand dairy 1.5 2 larger names in watchlist 1.0 0.5 0.0 1 Wholesale & Construction Property Agriculture,
Slide 71: Areas of interest: Commercial property
Areas of interest: Commercial property Asset quality 71 For personal use only Commercial property portfolio Commercial property exposures % of TCE and % in stress Mar-17 Sep-17 10 Commercial property as % of TCE (lhs) 20 Total committed exposures (TCE) $65.5bn $65.2bn Commercial property % in stress
Slide 72: Areas of interest: Inner city apartments
Areas of interest: Inner city apartments Asset quality 72 For personal use only Commercial property portfolio TCE ($bn) Sep-16 Mar-17 Sep-17 TCE %1 Residential apartment development >$20m 5.1 4.1 4.2 6.4% • Progressively tightened risk appetite in areas of higher concern since 2012 • Actively monito
Slide 73: Asset quality areas of interest
Asset quality areas of interest Asset quality 73 For personal use only Mining (inc. oil and gas) portfolio New Zealand dairy portfolio Retail trade portfolio Mar-17 Sep-17 Mar-17 Sep-17 Mar-17 Sep-17 Total committed exposures (TCE) $10.4bn $9.7bn Total committed exposure (TCE) NZ$5.9bn NZ$6.0bn Tota
Slide 74: Changes in the treatment of hardship
Changes in the treatment of hardship now flowing through other consumer delinquencies Asset quality 74 For personal use only APRA is standardising the industry treatment of delinquency classification of facilities in hardship Hardship allows eligible customers to reduce or defer repayments in the sh
Slide 75: Australian consumer unsecured lending
Australian consumer unsecured lending, 3% of Group loans Asset quality 75 For personal use only Australian consumer unsecured lending portfolio 90+ day delinquencies (%) - By State Sep-16 Mar-17 Sep-17 NSW/ACT VIC/TAS QLD WA SA/NT 3.00 30+ day delinquencies (%) 2.95 3.99 3.60 2.00 90+ day delinquenc
Slide 76: Australian mortgage portfolio continues to perform well
Australian mortgage portfolio continues to perform well, higher stress in regions impacted by mining slowdown Asset quality 76 Australian mortgage delinquencies and For personal use only properties in possession (PIPs) Sep-16 Mar-17 Sep-17 Australian mortgage portfolio delinquencies 90+ day past due
Slide 77: Australian mortgage portfolio well collateralised
Australian mortgage portfolio well collateralised Asset quality 77 Sep-16 Mar-17 Sep-17 2H17 For personal use only Australian mortgage portfolio balance balance balance flow1 Australian housing loan-to-value ratios (LVRs)5 (%) Total portfolio ($bn) 404.2 413.9 427.2 40.3 100 FY17 drawdowns LVR at or
Slide 78: Interest only now 46% of mortgage portfolio
Interest only now 46% of mortgage portfolio Asset quality 78 Flow of interest only1 (% of total limits) Switching from I/O to P&I2 ($m) Mortgage lending growth (%) For personal use only New interest only flows now <30% Customers switching to P&I Investor lending3 growth remaining <10% Applications S
Slide 79: Performance of interest only mortgages remains sound
Performance of interest only mortgages remains sound Asset quality 79 For personal use only Interest only lending Interest only lending by dynamic LVR2,5 and income band (%) • Interest only (I/O) loans assessed on a principal and Applicant gross income bands interest basis, from 2015 over the residu
Slide 80: Investor property lending portfolio: sound underwriting
Investor property lending (IPL) portfolio: sound underwriting Asset quality 80 For personal use only Applicants by gross income band (%) LVR at origination1 (%) 30 Owner occupied IPL 50 Owner occupied IPL 25 40 20 15 30 10 20 5 0 10 <=50 75<=100 500<=1m 1m+ 100<=125 125<=150 150<=200 200<=500 50<=75
Slide 81: Mortgage serviceability assessment settings
Mortgage serviceability assessment settings Asset quality 81 For personal use only Westpac’s key serviceability requirements and controls Mortgage interest rate buffers (%) • Income and employment is verified Westpac owner occupied SVR 2 inc package discount • Separate guidelines in place to assess
Slide 82: Australian mortgage deep dive
Australian mortgage deep dive Asset quality 82 For personal use only Australian mortgage lending1 by origination date, dynamic LVR2 and income (%) Gross income 2015+ 2011-14 <2011 bands 78 >$250k 69 7 $100k - $250k 12 46 33 <$100k 43 8 36 10 24 25 3 22 16 38 11 13 1 7 21 6 7 2 1 1 6 13 11 4 8 3 7 3
Slide 83: Lenders mortgage insurance arrangements
Lenders mortgage insurance arrangements Asset Quality 83 For personal use only Lenders mortgage insurance Lenders mortgage insurance arrangements • Where mortgage insurance is required, mortgages LVR Band Insurance are insured through Westpac’s captive mortgage insurer, Westpac Lenders Mortgage Insu
Slide 84: Mortgage portfolio stress testing outcomes
Mortgage portfolio stress testing outcomes Asset quality 84 • Westpac regularly conducts a range of portfolio stress tests as part of its Australian mortgage portfolio stress testing For personal use only regulatory and risk management activities as at 30 September 2017 • The Australian mortgage por
Slide 85: Capital, Funding and Liquidity
For personal use only 200 years proudly supporting Australia Capital, Funding and Liquidity
Slide 86: Well positioned for Unquestionably strong
Well positioned for “Unquestionably strong” Capital, Funding and Liquidity 86 CET1 capital ratio (%) and CET1 capital ($bn) For personal use only Highlights (APRA basis) Westpac CET1 capital (lhs, $bn) • 108bps increase over the year APRA industry 10.6% CET1 Westpac CET1 capital ratio (rhs, %) guide
Slide 87: CET1 ratio, top quartile globally
CET1 ratio, top quartile globally Capital, Funding and Liquidity 87 For personal use only Capital ratios Key capital ratios (%) APRA basis Internationally comparable1 basis Sep-16 Mar-17 Sep-17 BIS 75th percentile2 21.1 CET1 capital ratio 9.5 10.0 10.6 18.6 14.8 16.2 12.7 Additional Tier 1 capital 1
Slide 88: Strong capital generation supported by disciplined loan growth
Strong capital generation supported by disciplined loan growth Capital, Funding and Liquidity 88 For personal use only CET1 capital ratio (% and bps) 1H17 DRP A reduction in credit risk has Capitalised expenses 16.20 participation rate been offset by movements in and other small equity 35.6% non-cre
Slide 89: Disciplined management and improved asset quality reduce RWA
Disciplined management and improved asset quality reduce RWA Capital, Funding and Liquidity 89 Movement in risk weighted assets ($bn) For personal use only 410.1 404.4 (3.4) 0.6 (0.4) 3.0 404.2 Higher interest Spread risk on the liquids portfolio See below rate exposure and repricing and yield curve
Slide 90: Well placed on internationally comparable CET1 and leverage ratios
Well placed on internationally comparable CET1 and leverage ratios Capital, Funding and Liquidity 90 Common equity Tier 1 ratio (%) For personal use only 25% 20% 16.20% 15% 10% 5% 0% Deutsche Bank Lloyds Credit Suisse Barclays Bank of America Scotiabank Westpac Credit Agricole SA Toronto Dominion Ba
Slide 91: Internationally comparable capital ratio reconciliation
Internationally comparable capital ratio reconciliation Capital, Funding and Liquidity 91 For personal use only 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. I
Slide 92: Optimising returns by actively managing capital
Optimising returns by actively managing capital Capital, Funding and Liquidity 92 For personal use only Ordinary equity (spot and includes reserves) ($bn) Actively managing returns • All divisions with a full year ROE > 13% 1.1 0.9 61.3 58.1 0.3 0.9 59.3 • Divisional capital allocation model to be r
Slide 93: New term issuance well diversified
New term issuance well diversified Capital, Funding and Liquidity 93 For personal use only FY17 new term issuance composition1 (%) By type By investor location2 By currency By tenor3,4 30 22 3 43 18 9 4 5 1 2 4 12 8 8 28 49 66 21 30 17 19 0.3 Senior Unsecured Covered Bonds Asia Australia & NZ AUD US
Slide 94: Well positioned for NSFR on January 2018
Well positioned for NSFR on 1 January 2018 Capital, Funding and Liquidity 94 For personal use only Liquidity coverage ratio ($bn and %) Liquidity coverage ratio (%) Unencumbered liquid assets ($bn) Committed Liquidity Facility ($bn) Self securitisation Sep-16 Mar-17 Sep-17 HQLA ($bn) Private securit
Slide 95: Divisional results
For personal use only 200 years proudly supporting Australia Divisional results
Slide 96: Consumer Bank – growing the franchise
Consumer Bank – growing the franchise Consumer 96 For personal use only Cash earnings ($m) Key financial metrics AIEA up 3%, margin up 7bps, repricing of Change on mortgages partly offset by some switching, 2H16 1H17 2H17 1H17 customer preference for fixed rate home loans and the impact of the Bank
Slide 97: A disciplined 2H17 performance
A disciplined 2H17 performance Consumer 97 For personal use only Revenue1 ($m) Core earnings1 ($m) Cash earnings1 ($m) 2,548 1,593 4,256 1,539 1,511 2,420 2,426 4,053 4,055 1,445 3,972 2,335 1,382 3,779 2,201 1,243 3,564 2,029 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H1
Slide 98: Improving the customer experience through digital and new products
Improving the customer experience through digital and new products Consumer 98 For personal use only SmartPlan Categorisation of spend Banker in Pocket – all brands • Launched in May 2017, • Enables St.George • Enables customers to ring the SmartPlan is a structured customers to obtain insight conta
Slide 99: Business Bank delivers another solid result
Business Bank delivers another solid result Business 99 For personal use only Cash earnings ($m) Key financial metrics Change on AIEA up 2%, margin up 4bps from asset Increased technology, 2H16 1H17 2H17 1H17 repricing, partially offset by increase in regulatory and funding costs and the Bank Levy i
Slide 100: A disciplined 2H17 performance
A disciplined 2H17 performance Business 100 For personal use only Revenue1 ($m) Core earnings1 ($m) Cash earnings1 ($m) 2,651 1,723 1,091 2,557 2,534 1,646 1,634 1,006 1,008 2,495 999 1,599 976 2,427 951 1,547 2,376 1,525 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H1
Slide 101: Transforming Business Bank
Transforming Business Bank Business 101 For personal use only Digital for bankers Digital for customers LOLA, the division’s simplified loan origination platform continues to deliver reduced processing times and faster • Providing more digital self service options, including credit decisions to cust
Slide 102: BT continued business growth offset by industry headwinds
BT continued business growth offset by industry headwinds BT Financial Group 102 For personal use only Cash earnings ($m) Key financial metrics Change Loans up 8%; deposits up Infrequent items includes FY15 FY16 FY17 on FY16 16%, total FUM/FUA up Higher insurance $83m ($58m after tax) for 7%. Partly
Slide 103: Funds management: Growth in Private Wealth and Platforms
Funds management: Growth in Private Wealth and Platforms offset by margin compression and lower Advice income BT Financial Group 103 For personal use only Cash earnings movement ($m) FUA ($bn) 35 (30) BT Wrap/Asgard/Panorama Corporate super Other 58 (33) 520 (10) 510 (15) (8) 517 (82) Up 6% 435 136.
Slide 104: Sound insurance fundamentals
Sound insurance fundamentals BT Financial Group 104 For personal use only Insurance premiums ($m) Insurance claims rates (%) General Insurance gross written premiums Life in-force premiums General Insurance Life Insurance 1,068 71 1,030 927 973 892 Up 4% 51 50 49 38 38 35 35 33 34 246 245 258 250 25
Slide 105: Panorama: a market leading wealth management system
Panorama: a market leading wealth management system for customers and advisors BT Financial Group 105 FUA on Panorama ($m) Investors on Panorama (#) For personal use only One core One of the first platforms to operating support complex account types system online, such as SMSFs 11,778 6,713 One Buil
Slide 106: WIB 2H17 result reflects lower markets income
WIB 2H17 result reflects lower markets income after a strong 1H17 and significantly lower impairment charges Westpac Institutional Bank 106 For personal use only Cash earnings ($m) Key financial metrics Higher margins, Lower customer and risk Change on balance sheet management income after a 2H16 1H
Slide 107: Disciplined performance, focus on returns
Disciplined performance, focus on returns Westpac Institutional Bank 107 For personal use only Disciplined balance sheet management Expense control WIB deposits ($bn) Deposits • Expense growth 1% WIB expenses ($m) supported by productivity • Deposits 5% lower reflecting initiatives, including 93.8 t
Slide 108: Delivering for customers with leading industry expertise
Delivering for customers with leading industry expertise and capabilities Westpac Institutional Bank 108 • 864 transactional banking relationships For personal use only Strong and • 99% transactional banking retention rate1 enduring customer • 94% of the ASX100 bank with Westpac Institutional Bank f
Slide 109: NZ delivered improved 2H17 from margin management
NZ delivered improved 2H17 from margin management New Zealand 109 For personal use only Cash earnings (NZ$m) Key financial metrics Change on Disciplined growth and repricing of Improved asset 2H16 1H17 2H17 1H17 mortgages and business lending, quality particularly in partly offset by lower deposit s
Slide 110: New Zealand key metrics
New Zealand key metrics1 New Zealand 110 For personal use only Revenue2,3 ($m) Core earnings2 ($m) Cash earnings2 ($m) 675 674 508 1,141 1,150 651 653 1,132 635 480 1,095 1,110 1,097 610 462 449 452 434 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H16 1H17 2H17 Expense
Slide 111: Improving the digital customer experience
Improving the digital customer experience New Zealand 111 For personal use only Westpac One CashNav Transforming the network • Market leading online platform. Canstar Best Online • Integrated app to track finances and deliver • Further enhancing 24/7 capability Bank in New Zealand 2017, 2016, 2015 s
Slide 112: Stressed exposures lower as dairy portfolio improves
Stressed exposures lower as dairy portfolio improves New Zealand 112 For personal use only Business stressed exposures as a % of New Zealand business TCE 15.6 Impaired 90+ day past due not impaired Watchlist & substandard Property 13.2 Manufacturing 12 14 4 12.8 3 Agriculture, 9.6 8 6.8 forestry & f
Slide 113: Consumer asset quality in good shape
Consumer asset quality in good shape New Zealand 113 For personal use only Mortgage 90+ day delinquencies (%) Unsecured consumer 90+ day delinquencies (%) 1.0 1.5 1.0 0.5 0.57 0.5 0.12 0.0 0.0 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Ma
Slide 114: Economics
For personal use only 200 years proudly supporting Australia Economics
Slide 115: Australian economic snapshot
Australian economic snapshot Economics 115 Australian economy key statistics Continued strength in commodity For personal use only Global conditions have improved (latest available as at October 2017) prices Index USD/t Iron ore (TSI 62% fines benchmark) GDP 1.8% 60 340 Coking coal (Qld HCC spot) 55
Slide 116: Australian economic outlook
Australian economic outlook Economics 116 For personal use only Australian growth mix points to moderation in 2018 Positive business conditions Contributions to GDP growth (ppts) Net bal. Australian business conditions (net balance) ppts ppts 2014 2015 2016 2017f 2018f 30 Goods related 3 3 Consumer
Slide 117: Conditions continue to diverge across States
Conditions continue to diverge across States Economics 117 For personal use only NSW and Victoria 57% of population, 58% of employment Relative size of States (Share of Australia, 2015/16, %) 1 GSP Population Employment Exports 38 32 32 32 25 26 21 22 19 20 20 20 15 12 11 11 6 7 7 5 2 2 2 1 NSW Vic
Slide 118: Jobs are being created, although wage growth remains low
Jobs are being created, although wage growth remains low Economics 118 For personal use only Services employ a large part of the Australian workforce Jobs growth across all states Sector contribution to GDP (%)1 State jobs market (Index: Dec 2011 = 100. % is share of total employment) Index Index Se
Slide 119: A closer look: State employment by sector
A closer look: State employment by sector Economics 119 For personal use only NSW backdrop of robust economic activity supportive Victorian job gains widespread across industries NSW: Employment by sector (annual change in employment, ‘000) Victoria: Employment by sector (annual change in employment
Slide 120: Housing market fundamentals
Housing market fundamentals Economics 120 For personal use only Dwelling prices cooling Aggregate supply/demand fundamentals remain positive Change in Australian dwelling prices (annual %) Population versus dwelling stock (annual average change ‘000) Rate cuts Macro-prudential tightening Population
Slide 121: Impact of macro-prudential measures across Australian industry
Impact of macro-prudential measures across Australian industry Economics 121 For personal use only Change in composition of housing credit Introduction of differentiated mortgage pricing Australian housing credit growth (6mth % change annualised) % Mortgage interest rates (major bank average) % 7.5
Slide 122: Australian household balance sheets
Australian household balance sheets Economics 122 For personal use only Affordability on repayment basis below 10 year average Australian households debt to income ratio (%) Housing affordability: all dwellings Total (gross) debt 200 (% income required to service mortgage of 75% median dwelling, all
Slide 123: A closer look: Debt servicing and arrears by State
A closer look: Debt servicing and arrears by State Economics 123 For personal use only NSW: Arrears near 13 year lows1 Victoria: Arrears low, debt burden around post GFC avg1 % Debt servicing ratio (rhs) Arrears rate (lhs) % % % 3.0 24 2.0 Debt servicing ratio (rhs) Arrears rate (lhs) 22 WBC f/c WBC
Slide 124: Australia's high rise apartment market
Australia’s high rise apartment market Economics 124 Population versus new dwelling stock For personal use only Projected dwelling completions, major metro areas (annual average change ‘000) Dwelling completions by capital city (‘000s, rolling 6mth totals) Population New 'high rise' apartments^ Tota
Slide 125: Investor property lending
Investor property lending Economics 125 Housing finance approvals: value of housing finance For personal use only Few signs of speculative behaviour in housing markets ($bn/mth) • Investor activity has been a key driver of Australia’s housing markets in recent $bn/mth years 16 'Upgraders', ex-refina
Slide 126: New Zealand economic snapshot
New Zealand economic snapshot Economics 126 For personal use only Key economic statistics FY17 FY18f Change Firm growth in recent years, pace to slow going forward GDP (%) % % GDP annual average growth1 2.5% 2.8% 30bps 6 Qtr % chg Annual average % change 6 Forecast Inflation rate 1.9% 1.4% (50 bps)
Slide 127: New Zealand economy: growth to slow
New Zealand economy: growth to slow Economics 127 For personal use only Drivers of GDP growth in recent years are dissipating Large pipeline of construction work, increases to be gradual • After expanding at a firm pace in recent years, New Zealand GDP growth is $bn Construction spending (annual $bn
Slide 128: New Zealand economic indicators
New Zealand economic indicators Economics 128 For personal use only Inflation off its lows, sustained return to target elusive Commodity prices remain firm Inflation (%) NZ export commodity price index (world prices) % % Index 6 CPI inflation 6 500 Meat skins & wool Forestry Dairy 5 Forecast 5 450 F
Slide 129: New Zealand housing market momentum has faded
New Zealand housing market momentum has faded Economics 129 For personal use only Housing price inflation has flattened off Sales volumes low New Zealand house prices by region (index) Sales New Zealand house sales (monthly sales) Sales 220 220 9,000 9,000 Canterbury 200 Wellington 200 8,000 8,000 I
Slide 130: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts Economics 130 Calendar year For personal use only Key economic indicators (%) as at October 2017 2016 2017F 2018F World GDP1 3.2 3.6 3.6 Australia GDP2 2.4 3.0 2.5 Private consumption2 2.6 2.5 2.5 Business investment2,3 -6.2 3.0 2.0 Unemployment – end pe
Slide 131: Appendix and disclaimer
For personal use only 200 years proudly supporting Australia Appendix and disclaimer
Slide 132: Appendix 1: Cash earnings adjustments
Appendix 1: Cash earnings adjustments Appendix and Disclaimer 132 Cash earnings 2H16 1H17 2H17 For personal use only Description adjustment $m $m $m Reported net profit 3,744 3,907 4,083 Net profit attributable to owners of Westpac Banking Corporation The merger with St.George and acquisition of sel
Slide 133: Appendix 2: Definitions
Appendix 2: Definitions Appendix and Disclaimer 133 Consumer Bank (CB) is responsible for sales and service to consumer For personal use only customers in Australia under the Westpac, St.George, BankSA, Bank of BTFG is the Australian wealth management and insurance arm of the Melbourne and RAMS bran
Slide 134: Appendix 2: Definitions
Appendix 2: Definitions Appendix and Disclaimer 134 Capital ratios As defined by APRA (unless stated otherwise) For personal use only The NSFR is defined as the ratio of the amount of available stable funding (ASF) to the amount of required stable funding (RSF) defined by APRA. The Assets (both on a
Slide 135: Appendix 2: Definitions
Appendix 2: Definitions Appendix and Disclaimer 135 For personal use only Includes exposures that have deteriorated to the point where full collection Represents the sum of the committed portion of direct lending (including of interest and principal is in doubt, based on an assessment of the Total c
Slide 136: Appendix 2: Definitions
Appendix 2: Definitions Appendix and Disclaimer 136 For personal use only Women in Leadership refers to the proportion of women (permanent and Source: Roy Morgan Research, September 2015 – September 2017, maximum term) in leadership roles across the Group. It includes CEO, 6MMA. Main Financial Insti
Slide 137: Investor Relations Team
Investor Relations Team Contact us 137 Equity Investor Relations For personal use only www.westpac.com.au/investorcentre Andrew Bowden Nicole Mehalski Annual reports Presentations and webcasts Head of Investor Relations Director +61 2 8253 4008 +61 2 8253 1667 5 year financial summary andrewbowden@w
Slide 138: Disclaimer
Disclaimer 138 The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (Westpac) and its activities. For personal use only The information is supplied in summary form and is therefore not necessarily complete. It is not intended tha