Westpac Banking Corporation · ASX:WBC
Westpac Banking — H1 2012 Earnings Presentation
109 slides from Westpac Banking's earnings presentation, May 3, 2012
Slide 1: First Half Results 2012
For personal use only FIRST HALF RESULTS 2012 Westpac Banking Corporation ABN 33 007 457 141
Slide 2: Index
Index For personal use only Presentation of First Half 2012 Result 3 CEO summary 4 CFO details 12 CEO closing remarks 25 Investor Discussion Pack of First Half 2012 Result 28 Overview 29 Features 40 Net interest income 41 Non-interest income 45 Markets and Treasury income 46 Expenses 47 Investment s
Slide 3: First Half 2012 Financial Result - Gail Kelly
For personal use only FIRST HALF 2012 FINANCIAL RESULT Gail Kelly Chief Executive Officer Westpac Banking Corporation ABN 33 007 457 141
Slide 4: Sound financial result
Sound financial result For personal use only Change 1H12 1H12 – 2H11 Cash earnings $3,195m 2% Cash EPS 105c 1% Reported NPAT $2,967m (2%) Core earnings1 $5,231m 4% Impairment charges to average loans 24bps 2bps Tier 1 capital ratio 9.81% 13bps Return on equity (cash basis) 15.1% (50bps) Expense to i
Slide 5: Managing the growth/return mix
Managing the growth/return mix For personal use only • Deposits ahead of system, loan • Margins 6bps lower with growth sound disciplined approach • Bank of Melbourne on plan • Deeper relationships with • No.1 on all platforms customer return on credit (including corp. super)1 Growth Return RWA up 5b
Slide 6: WIB - excellent core earnings growth of 16% on 2H11
WIB - excellent core earnings growth of 16% on 2H11 For personal use only Earnings ($m) 1H12 versus 2H11 Cash earnings • Strong customer activity across Debt Core earnings Growth Markets, FX&CCE1 and Global 1,004 Transactional Services (including trade) 923 864 • Solid revenue growth with low Return
Slide 7: WRBB - strong growth with cash earnings up 6% on 2H11
WRBB - strong growth with cash earnings up 6% on 2H11 For personal use only Earnings ($m) 1H12 versus 2H11 Cash earnings • Ahead of system in deposits1, insurance Core earnings Growth and wealth 1,719 • Sound lending growth 1,669 1,594 • Strong return on Westpac Local investment with excellent reten
Slide 8: St.George - a softer half, foundation for growth in place
St.George - a softer half, foundation for growth in place For personal use only Earnings ($m) 1H12 versus 2H11 Cash earnings • Bank of Melbourne on plan Core earnings • Ahead of system in deposits1 and cards2 Growth • Strong proprietary mortgage lending, 1,091 broker originated lending declined 1,04
Slide 9: BT - good momentum offset by weaker markets
BT - good momentum offset by weaker markets For personal use only Cash earnings 1H11–1H12 ($m) 1H12 versus 1H11 • 60% share of annual new business on BT 61 (40) Wrap/Asgard platforms1 Growth • Growing share in superannuation, life and (22) general insurance 342 • Markets weaker 1 (58) • FUA margins
Slide 10: Westpac New Zealand - strong performance all round
New Zealand Westpac New Zealand - strong performance all round For personal use only Earnings ($m) 1H12 versus 2H11 Cash earnings • Good volume growth in a subdued Core earnings environment, particularly deposits Growth 559 529 • Solid progress on growing wealth 511 Return • Margins well managed, up
Slide 11: Balance sheet strength
Balance sheet strength For personal use only Tier 1 ratio (%) Liquid assets ($bn) Common Equity Basel 2 Basel 2.51 103 101 Residual Tier 1 9.7 9.8 85 9.5 82 9.1 74 8.6 1.5 1.6 1.8 1.6 1.5 45 7.5 8.0 8.1 8.0 7.1 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sept 08 Sept 09 Sept 10 Mar 11 Sept 11 Mar 12 Stressed
Slide 12: First Half 2012 Financial Result - Philip Coffey
For personal use only FIRST HALF 2012 FINANCIAL RESULT Philip Coffey Chief Financial Officer Westpac Banking Corporation ABN 33 007 457 141
Slide 13: Solid core earnings performance
Solid core earnings performance For personal use only Core earnings movement half on half ($m) 241 (120) 246 (50) 5,231 (104) 5,000 5,017 18 Flat Up 4% 1H11 Net interest Non-interest Expenses 2H11 Net interest Non-interest Expenses 1H12 income income income income Core earnings movement half on half
Slide 14: Sound balance sheet growth
Sound balance sheet growth For personal use only Loan growth ($bn) 1.5 0.4 (0.2) (0.2) 506.1 0.5 0.6 1.4 1.4 4.1 496.6 Up 2 % Sep-11 Aust. Aust. Aust. Commercial Trade Other Aust. Other Other Other Mar-12 housing housing personal property finance Business/ New O'seas proprietary broker Institutional
Slide 15: Improved balance sheet mix
Improved balance sheet mix For personal use only Sources and uses of funds over 1H121 ($bn) • Major improvements to funding mix 17 (11) • Solid deposit growth; more term Sources of Uses of funding less short term funding funds funds • Covered bonds a new source of (12) funding - $30bn capacity • Liq
Slide 16: Softer margins from higher funding costs
Softer margins from higher funding costs For personal use only • Margins 6bps lower principally from Net interest margin movement (%) higher retail funding costs and Treasury & Markets impact on margin increased holdings of liquid assets Net interest margin excl. Treasury & Markets Income • Margin e
Slide 17: Customer activity supporting markets income
Customer activity supporting markets income For personal use only • Customer activity the major contributor to WIB Markets income and customer activity ($m) markets income Market trading activity Customer activity 331 304 359 – Customers managing FX volatility 79 44 66 – Increased interest rate risk
Slide 18: Expenses well managed; continued investment
Expenses well managed; continued investment For personal use only Expense movements ($m) 17 (26) 8 14 (102) 122 17 3,605 3,659 3,655 Up 1% Flat 3,501 1H11 2H11 Productivity Higher Normal Bank of 1H12 before Investment Software J O Hambro 1H12 restructuring expenses Melbourne investment spending amor
Slide 19: Significant productivity savings with more to come
Significant productivity savings with more to come For personal use only • Productivity savings of $102m in 1H12 FTE1 movements (#) – Prior period re-engineering accounted (543) (383) for around three quarters of savings (471) 143 (125) – Organisational restructure contributed 37,712 37,169 74 aroun
Slide 20: Impairment charges
Impairment charges For personal use only Impairment charge movement ($m) Impairment charge movement by Divisions ($m) 141 (9) (22) (12) (1) 39 608 (1) 608 221 530 (36) 530 (138) 17 (43) Note: divisional changes do not align with divisional P&L as model updates and economic overlay have been separate
Slide 21: Asset quality continues to improve
Asset quality continues to improve For personal use only Stressed exposures as a % of TCE1 Movement in stressed exposures ($m) 3.5 Impaired 18,437 (706) 90+ days past due well secured 68 (388) (85) 18 (171) (110) 43 (12) (257) Watchlist & substandard 16,837 3.0 Agri, forestry & Construction Consumer
Slide 22: Consumer caution contributing to improved asset quality
Consumer caution contributing to improved asset quality For personal use only • Consumer caution prevalent across Aust. credit cards average payments/balance ratio1 (%) the book 45.6 45.2 45.3 – Increasing card repayments 43.8 43.7 44.6 44.7 42.7 – Acceleration of housing loan 41.4 repayments 39.7 3
Slide 23: Strong capital supporting higher dividend
Strong capital supporting higher dividend For personal use only Capital ratios (%) Common equity ratio – Transitioning to Basel III (%) 255 10.29 Tier 1 up 13bps 107 (69) (28) 8.33 (37) 7.96 39 9 (8) 9.81 (89) 67 7.74 9.68 (37) 1.59 1.85 Waiting for capital data March 12 Basel 2.5 March 12 APRA Divi
Slide 24: Considerations for 2H12
Considerations for 2H12 For personal use only • Balance sheet growth likely to remain subdued, although better growth in target segments – deposit growth to continue to fund new lending • Margins will continue to be impacted by funding costs and asset re-pricing trade-off • Expect stronger result fr
Slide 25: First Half 2012 Financial Result - Gail Kelly
For personal use only FIRST HALF 2012 FINANCIAL RESULT Gail Kelly Chief Executive Officer Westpac Banking Corporation ABN 33 007 457 141
Slide 26: Operating environment undergoing structural change
Operating environment undergoing structural change For personal use only Global • Expect difficult and volatile conditions to continue Economy • Asia, increasingly important to global growth • Economic fundamentals sound – low unemployment, low Domestic government debt and controlled inflation Econo
Slide 27: Leveraging strengths and positioning to grow franchise value
Leveraging strengths and positioning to grow franchise value For personal use only Westpac’s distinct Positioning for success strengths Positioned for success • Retail deposits Further • SME lending and deposits invest in • Agri. and natural resources sectors Lead institutional bank higher • Trade f
Slide 28: First Half Investor Discussion Pack
For personal use only FIRST HALF INVESTOR DISCUSSION PACK 2012 Westpac Banking Corporation ABN 33 007 457 141
Slide 29: Overview
For personal use only FIRST HALF OVERVIEW 2012 COMPARISON OF 1H12 VERSUS 2H11 CASH EARNINGS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141
Slide 30: Westpac Group at a glance
Westpac Group at a glance For personal use only • Australia‟s first bank and first company, opened in 1817 Cash earnings8,9 ($bn) • Australia‟s 2nd largest bank, and within the top 20 largest banks in the world, ranked by market capitalisation1 3.2 3.1 3.2 • Strategy focused on supporting customers
Slide 31: 1H12 Financial snapshot
1H12 Financial snapshot For personal use only change1 change1 change1 change1 1H12 1H12 2H11 – 1H12 1H11– 1H12 2H11 – 1H12 1H11 – 1H12 Earnings Balance sheet Cash earnings ($m) 3,195 2% 1% Total assets ($bn) 654 (2%) 5% EPS2, cash basis (cents) 105 1% (1%) Tier 1 ratio4 (Basel 2.5) (%) 9.81 13bps 28
Slide 32: Reconciliation between Cash earnings and Reported profit
Reconciliation between Cash earnings and Reported profit For personal use only Cash earnings policy Cash earnings and Reported profit1,2 ($bn) • In assessing financial performance, including divisional results, Westpac Group uses a measure of performance referred to as Cash earnings Cash Earnings Re
Slide 33: Sound Cash earnings growth
Sound Cash earnings growth For personal use only Cash earnings 1H12 ($m) % change1 % change1 Cash earnings 2H11 – 1H12 ($m) Cash earnings 1H11 – 1H12 ($m) 2H11-1H12 1H11-1H12 126 (154) Net interest income 6,223 - 4 246 (50) (78) 259 (145) (74) Non–interest income 2,663 10 5 3,195 3,133 18 (59) 3,168
Slide 34: Major strategic progress
Major strategic progress For personal use only Objective Detail Outcomes • Above system growth in deposits1 and wealth2 Deliver benefits from • Build on investments to date to drive higher cross sell, • Higher insurance and wealth penetration3, up 70bps to 17.7%, and increased deeper customer especi
Slide 35: Delivering against target metrics
Delivering against target metrics For personal use only Customer return1 improving (%) Customer numbers grew across brands (#m) Customers with 4+ Products improving (%) WRBB St.George WRBB St.George 29.9 4.07 4.12 29.3 4.00 7.80 7.88 7.99 28.3 27.5 2.67 2.70 2.74 26.6 25.3 5.13 5.18 5.25 1H11 2H11 1
Slide 36: Delivering against target metrics (cont.)
Delivering against target metrics (cont.) For personal use only Common Equity ratio at high end of sector Customer deposits to loans ratio Women in senior leadership positions average1 (%) improving (%) improving (%) Basel 2.5 8.0 8.1 8.0 63.2 62.5 38.4 7.5 37.5 7.1 59.6 36.5 58.7 35.4 57.2 Mar-10 S
Slide 37: Growth driven by WRBB, WIB and New Zealand
Growth driven by WRBB, WIB and New Zealand For personal use only Cash earnings movement half on half by business unit ($m)1 Core earnings movement half on half by business unit ($m)1 129 5,231 55 (46) 85 3,195 50 (36) 140 26 (69) 5,017 (95) 3,133 35 2 Up 2% Up 4% 2 2H11 WRBB SGB BTFG WIB NZ Other 1H
Slide 38: 1H12 Highlights quality franchise
1H12 Highlights quality franchise For personal use only Cash earnings Core % of Group earnings Division % chg % change Earnings summary Performance summary Cash earnings $m on 2H11 on 2H11 • Deposits up 5% (term deposits up 14%) • Deposits grew above system2 and business lending growth positive WRBB
Slide 39: Continued strong dividend growth path
Continued strong dividend growth path For personal use only • 1H12 dividend 82 cents, up 3% over 2H11 Dividends per share (cents) • Highest half year dividend ever paid • Payout ratio at 78.4% in 1H12 consistent with strong capital position. Effective payout ratio lower at 65% given approximately 80
Slide 40: Features
For personal use only FIRST HALF FEATURES 2012 COMPARISON OF 1H12 VERSUS 2H11 CASH EARNINGS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141
Slide 41: Sound operating income
Sound operating income For personal use only • Net Operating income up 3% Operating income movement half on half ($m) • Net interest income flat – Modest loan growth and lower margins 81 8,886 • Non-interest income up 10% 206 (138) 152 – Fees and commissions up slightly with higher business fees and
Slide 42: Asset growth predominantly in housing
Asset growth predominantly in housing For personal use only • Australian housing up 2% Net lending Sep11 – Mar12 ($bn) – Growth continues to be driven by proprietary 506.1 channel 2.2 0.4 0.6 0.7 5.6 • Australian business lending up 2%, including small 496.6 growth in commercial property • New Zeala
Slide 43: Customer deposits funding loan growth
Customer deposits funding loan growth For personal use only • Customer deposits up $9.8bn (up 3%) Customer deposit composition1 ($bn) • Customer deposits growth more than fully funded lending Term deposits Transaction Online Savings growth for 1H12 320 – Most of growth in term deposits, up $15bn (11
Slide 44: Margins modestly lower over half
Margins modestly lower over half For personal use only • Net interest margin down 6bps to 2.17% Net interest margin1 (NIM) (%) • 8bps increase primarily from re-pricing of loan facilities, mostly mortgages 2.6 NIM NIM excl. Treasury and Markets • 9bps decline from deposit impacts – More costly term
Slide 45: Non-interest income a key driver of 1H12 result
Non-interest income a key driver of 1H12 result For personal use only • Non-interest income up 10% driven by strong markets result, asset sales and Non-interest income ($m) a small increase in fees and commissions – Fees & commissions up 2% with higher business facility fees. Higher commissions from
Slide 46: WIB Markets and Treasury income - strong result
WIB Markets and Treasury income - strong result For personal use only • WIB Markets income is predominantly sourced through providing WIB Markets income and customer activity ($m) risk management and markets based products to customers Market trading activity Customer activity • Conditions during 1Q
Slide 47: Expenses well managed, continued investment
Expenses well managed, continued investment For personal use only • Expenses up 1% in 1H12 contributing to a reduction in the Expense growth1 (%) expense to income ratio to 41.1% • Productivity initiatives delivered $102m in savings, largely 7 offsetting normal business expenses 6 • Expenses associa
Slide 48: Investment spend
Investment spend For personal use only • Total cash spending on investments eased in 1H12 to $450m from $668m Capitalised software & deferred expenses 1H11 2H11 1H12 with both the amount capitalised and the amount expensed reducing ($m) – SIPs spending eased to $187m, from $279m as a number of proje
Slide 49: New supplier plans well advanced
New supplier plans well advanced For personal use only • Westpac is implementing changes to its back office and technology Benefits from the supplier program supplier arrangements to ensure the Group is well positioned for the changing operating environment • Direct cost savings from using specialis
Slide 50: SIPs 60% complete
SIPs 60% complete For personal use only Number of SIPs FY11 FY12 FY13 FY14+ programs Credit Card Consolidation Single, integrated credit card processing platform SIPs (Strategic Investment Collections System New collections case handling platform that enables Priorities) is a program of consolidatio
Slide 51: Impairment charges up off a low base
Impairment charges up off a low base For personal use only • Impairment charges have risen 15% to $608m, representing 24bps Provisioning coverage ratios 1H11 2H11 1H12 of average gross loans – Much of the increase was due to lower benefits from stressed Collectively assessed provisions to business r
Slide 52: Business Unit Performance
For personal use only FIRST HALF BUSINESS UNIT PERFORMANCE 2012 COMPARISON OF 1H12 VERSUS 2H11 CASH EARNINGS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141
Slide 53: Westpac RBB Cash earnings up 6%
Westpac RBB Cash earnings up 6% For personal use only Cash earnings movement half on half ($m) Movement 1H12 – 2H11 56 (51) Cash earnings 6% • Cash earnings up 6% to $1,049m 109 3 (37) 34 13 1,049 (1) (1) 994 3 Core earnings 3% • Core earnings up 3% to $1,719m 921 • Mortgages up 2%, with strong
Slide 54: Continuing to deepen relationships
Continuing to deepen relationships For personal use only Key features of 1H12 Key metrics • Westpac Local strategy continues to deliver relationship based growth, with a stronger Change on balance sheet, tightly controlled expenses and a strong risk profile 1H11 2H11 1H12 2H11 • Improved key metrics
Slide 55: Westpac Local strategy has driven consistent uplift
Westpac Local strategy has driven consistent uplift across all key metrics For personal use only Core earnings ($m) Revenue per average FTE ($’000) Employee engagement (%) 87 1,719 302 1,669 292 82 1,594 274 81 1,530 258 257 1,534 76 1H10 2H10 1H11 2H11 1H12 1H10 2H10 1H11 2H11 1H12 Jul-08 Jul-09 Ju
Slide 56: Strengthened balance sheet in lower growth environment
Strengthened balance sheet in lower growth environment For personal use only • Strong deposit growth exceeded loan growth, improving the deposits to loans ratio Balance sheet ($bn) 180bps to 53.5% • Deposits up 5% with the majority of growth in term deposits (up 14%) 1H11 2H11 1H12 % Chg on 2H11 – T
Slide 57: Maintaining strong risk profile
Maintaining strong risk profile, business and consumer impairment charges lower For personal use only Strong risk profile1 Movement in impairment charges ($m) • Stressed exposures as a % of TCE2 at 137bps, down 13bps – Impaired assets up 5bps to 29bps – 90+ days past due and well secured down 3bps t
Slide 58: St.George Core earnings steady since merger
St.George Core earnings steady since merger, absorbing business repositioning For personal use only Cash earnings movement half on half ($m) Movement 1H12 – 2H11 17 Cash earnings 7% • Cash earnings down 7% to $569m 52 (19) (33) 615 (41) Core earnings 3% • Core earnings down 3% to $1,055m 602 (4)
Slide 59: Solid improvement in key operating metrics
Solid improvement in key operating metrics with wealth cross sell up significantly For personal use only Key features of 1H12 Key metrics • St.George has continued to deepen customer relationships and has had good Change on early success with the launch of Bank of Melbourne and growth of the RAMS 1H
Slide 60: St.George multi-brands firm footing to grow
St.George multi-brands firm footing to grow For personal use only Multi-brand approach Core earnings by brand ($m) • St.George is home to three regional brands and a specialist national brand. 1,091 (37) Brands are locally managed with differentiated strategies – St.George in NSW/ACT aims to grow sh
Slide 61: Bank of Melbourne capitalising on gap in Victorian market
Bank of Melbourne capitalising on gap in Victorian market for a strong local player For personal use only • In Australia, around 50% of the population prefer to bank with a local Local Bank footings by State1 (%) bank, with local banks typically holding around 20% market share in each State 30 Local
Slide 62: Strong deposit and proprietary lending growth
Strong deposit and proprietary lending growth For personal use only • Strong deposit growth exceeded loan growth • Improving the deposits to loans ratio 180bps to 51.7% Balance sheet ($bn) • Deposit growth of 5% driven by term deposits up 13% (now represent 52% of total deposits) 1H11 2H11 1H12 Chg
Slide 63: Solid risk profile
Solid risk profile For personal use only Improving risk profile1 Movement in impairment charges ($m) • Asset quality has continued to improve with stressed exposures to TCE 2 185 240 down 18bps to 329bps. Impaired assets declined the most, down 15bps 213 (132) • Mortgage 90+ days delinquencies were
Slide 64: Solid underlying business momentum offset by irregular items
Solid underlying business momentum offset by irregular items and market movements For personal use only Cash earnings 1H11 – 1H12 ($m) 1H12 Cash earnings impacted by a number of factors 61 • In BTFG there is some seasonality in flows and costs such that a comparison with the prior (40) corresponding
Slide 65: Solid underlying business momentum (cont.)
Solid underlying business momentum offset by irregular items and market movements (cont.) For personal use only Cash earnings movement half on half ($m) Movement 1H12 – 2H11 49 (20) • Cash earnings down $69m (19%) to 363 (49) 342 (8) $294m (41) Cash earnings 19% • Cash earnings impacted by irregul
Slide 66: Solid underlying performance, Cash earnings lower
Solid underlying performance, Cash earnings lower For personal use only Key features of 1H12 underlying performance Key metrics • Platforms saw increased market share in BT Wrap / Asgard Platforms (including Change on corporate super) up 1% to 21% and #1 in net flows at 60% share of annual new 1H11
Slide 67: Sector leading platforms, growing above peers
Sector leading platforms, growing above peers For personal use only • Ranked #1 on all Platforms (including corporate super) with 1% increase in FUA share (to 21%) and annual net flows of 60% YTD1 BT FUA market share growing strongly (all platforms)2,5 • Corporate Super market share up 3% to 13.4% a
Slide 68: Enhancing distribution and cross sell
Enhancing distribution and cross sell For personal use only Life insurance sales by retail advisers ($m) Market leading revenue per adviser2 ($’000) Expanded distribution to Independent Financial Advisers with launch of Bank median “BT Protection Plan” through the IFA network in February 2011. Produ
Slide 69: Well represented across asset management styles
Well represented across asset management styles with sound FUM growth For personal use only Ascalon - Boutique managers BTIM - Global asset manager • Continued strong FUM growth (up 12%)1 FUM (by asset class) • Ascalon boutiques have maintained positive net flows half on half for the last four halve
Slide 70: Life and General Insurance continues to improve
Life and General Insurance continues to improve, LMI lower from de-risking For personal use only Life Insurance General Insurance Lenders Mortgage Insurance (LMI) Contribution to Individual New Cash earnings contribution ($m) Premium Market Share Growth Home & Contents Market Share (%) Retained Busi
Slide 71: Strong Core earnings growth underpinned by customer activity
Strong Core earnings growth underpinned by increased customer activity For personal use only Cash earnings movement half on half ($m) Movement 1H12 – 2H11 Cash earnings – flat • Cash earnings flat at $663m 151 (10) (143) Core earnings 16% • Core earnings up 16% to $1,004m 655 21 (78) 66 (1) 661 (1
Slide 72: Building on our strong customer footprint
Building on our strong customer footprint to adapt and extend our strategic focus For personal use only Strategy Australasian footprint • Deliver superior returns by providing market-leading solutions, service and insight to earn all our customers‟ business • Deepen customer relationships through a
Slide 73: Lead Australasian Institutional Bank
Lead Australasian Institutional Bank For personal use only Large & diversified customer footprint with market leading scale, diversification and leadership in key segments Scale Diversity Leadership How we operate Well diversified portfolio Leading Institutional Bank • Relationships extend to over 5
Slide 74: High quality customer earnings and solid balance sheet growth
High quality customer earnings and solid balance sheet growth For personal use only • WIB‟s customer centric strategy delivers strong underlying customer Revenue mix (%) revenue through co-ordinated and seamless customer relationships across all divisions Customer (includes customer market activity)
Slide 75: Strong asset quality
Strong asset quality For personal use only Asset quality remains strong Movement in impairment charges/(benefits) ($m) • Asset quality further strengthened with stressed exposures continuing to decline although the rate of improvement has slowed moderately 69 65 • Impairment charges of $65m in 1H12
Slide 76: Solid performance and continued margin uplift
New Zealand Solid performance and continued margin uplift For personal use only Cash earnings movement half on half (NZ$m) Movement 1H12 – 2H11 (NZ$) 10 2 333 Cash earnings 14% • Cash earnings up 14% to $333m 25 (21) 14 0 30 3 (15) 16 Core earnings 6% • Core earnings up 6% to $559m 291 269 • Goo
Slide 77: Continued momentum across key metrics
New Zealand Continued momentum across key metrics For personal use only Key features of 1H12 Key metrics • Solid performance has resulted from a strong distribution focus, continued front line investment, combined with localised marketing and decision making Change 1H11 2H11 1H12 • Ongoing investmen
Slide 78: Good balance sheet growth in subdued environment
New Zealand Good balance sheet growth in subdued environment For personal use only • The transfer of business from WIB to Westpac New Zealand on 1 November Balance sheet (NZ$bn) 2011 has diversified the lending book. It has increased total deposits by $5.1bn and lending by $6.3bn1 1H11 2H11 1H12 Chg
Slide 79: New Zealand mortgage portfolio
New Zealand New Zealand mortgage portfolio For personal use only • Mortgage portfolio of $35.4bn, up 1% New Zealand mortgage portfolio by region (%) • The distribution of the mortgage portfolio across regions is consistent with population concentrations of New Zealand Auckland Wellington Christchurc
Slide 80: Improving asset quality across portfolios
New Zealand Improving asset quality across portfolios For personal use only Asset quality continues to improve1 Movement in impairment charges (NZ$m) • Impairment charges down 9% (down 26% on 1H11) 133 • Business stressed exposures as proportion of TCE 2 reduced significantly principally due to the
Slide 81: Strong business performance as Pacific region improves
Strong business performance as Pacific region operating environment improves For personal use only Pacific Banking Cash earnings movement half on half ($m) Movement 1H12 – 2H11 Reported Ex-FX 9 (10) Cash 9 (7) 4 55 49% 38% • Cash earnings up 49% to $55m 12 (0) 51 earnings (10) 6 40 (3) 3 Core 35 2
Slide 82: Capital, Funding and Liquidity
For personal use only FIRST HALF CAPITAL, FUNDING AND LIQUIDITY 2012 COMPARISON OF 1H12 VERSUS 2H11 CASH EARNINGS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141
Slide 83: Strong capital position driven by organic growth
Strong capital position driven by organic growth For personal use only • Westpac‟s Tier 1 ratio increased 13bps to 9.81% measured under Basel 2.5 • Basel 2.5 implementation on 1 January 2012 reduced capital by 37bps, Key capital ratios (%) 1H11 2H11 1H12 impacting the risk weighted assets for market
Slide 84: Solid foundation for Basel III transition
Solid foundation for Basel III transition For personal use only • On 30 March 2012, APRA released a response paper and a set of five Common equity ratio – estimated APRA Basel III at Mar 121 (%) draft prudential standards that give effect to the Basel III capital reforms in Australia. The draft stan
Slide 85: Capital movements in greater detail
Capital movements in greater detail For personal use only • RWA movements include RWA movements ($bn) – Market risk increased $10.8bn to $19.3bn, primarily driven by the implementation of Basel 2.5 on 1 January 2012 – Operational risk increased $4.0bn (21%) to $23.6bn, largely due 300 4.0 1.4 to the
Slide 86: Higher savings rates further strengthen funding
Higher savings rates further strengthen funding For personal use only • The composition and stability of the Group‟s funding has strengthened since the Funding composition by residual maturity (%) global financial crisis • While significant changes have already been made, the Group continues to focu
Slide 87: Diverse funding platform supported by strong liquidity position
Diverse funding platform supported by strong liquidity position For personal use only • Liquid assets portfolio provides a source of Liquid assets ($bn) Term debt maturity profile3 ($bn) reserve liquidity as eligible collateral under the Central Bank (RBA) repurchase facility Cash, goverment and sem
Slide 88: Asset Quality
For personal use only FIRST HALF ASSET QUALITY 2012 COMPARISON OF 1H12 VERSUS 2H11 (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141
Slide 89: High quality portfolio with bias to secured consumer lending
High quality portfolio with bias to secured consumer lending For personal use only Asset composition as at 31 March 2012 (%) Cash and balances with central banks Housing Business lending Corporate Other consumer Receivables due from other financial institutions 5 Trading securities, financial assets
Slide 90: Assets diversified across industries
Assets diversified across industries For personal use only Exposures at default1 by sector ($m) 1H12 2H11 2 Finance & insurance Property3 Wholesale & Retail Trade Manufacturing Government administration & defense Exposures at default1 by sector (%) as at 31 March 2012 Services Finance & insurance 2
Slide 91: Large exposures and commercial property portfolio
Large exposures and commercial property portfolio For personal use only • Top 10 single name exposures to Top 10 exposures to corporations and NBFIs Top 10 exposures to corporations and NBFIs as a % of TCE1,2 (%) ($m) corporations and non-bank financial institutions (NBFIs) continue to be well below
Slide 92: Stressed exposures continue to decline
Stressed exposures continue to decline For personal use only • Stressed exposures to TCE1 down 22bps (down 59bps from Stressed exposures as a % of TCE1,3(%) 1H11) to 2.26%, due to 4.0 – Upgrades out of stress and into performing Impaired 90+ days past due well secured Watchlist & substandard – Rate
Slide 93: Stressed exposures reducing across most sectors
Stressed exposures reducing across most sectors For personal use only • Stressed exposures continue to trend down. – Significant decline in stress in the commercial property segment although it Stressed exposures by industry ($bn) continues to demonstrate the most stress 8 9 6 • Institutional and co
Slide 94: Provisioning movements and impairment charges
Provisioning movements and impairment charges For personal use only • Total provisions were relatively stable at $4,391m Provisioning ($m) 1H12 economic overlay changes ($m) • Economic overlay little changed (down $1m) IAP CAP (ex. Econ overlay) • NZ earthquake (net of FX) -3 – Greater certainty aro
Slide 95: Impairment charges
Impairment charges For personal use only • Impairment charges up $78m to $608m Impairment charge movement by division ($m) – Economic overlay little changed (down $1m) – Institutional had lower benefits from write-backs and repayments offset by 143 (8) (28) 608 top up of provisions on existing stres
Slide 96: High quality Australian housing portfolio
High quality Australian housing portfolio For personal use only • Australian housing portfolio up $5.6bn (up 2%) Australian housing portfolio2 • Investment loans represent 40.5% of portfolio and are all first lien 2H11 1H12 1H12 – Investment lending generally has lower delinquency performance Balanc
Slide 97: Australian housing portfolio well collateralised
Australian housing portfolio well collateralised For personal use only • Australian housing portfolio remains well collateralised and high quality Australian housing portfolio 1H11 2H11 1H12 – 60% of mortgages are ahead of scheduled payments (offset Average LVR at origination1 (%) 69 68 69 balances
Slide 98: Australian housing portfolio delinquencies little changed
Australian housing portfolio delinquencies little changed For personal use only • Australian mortgages 90+ days delinquencies 54bps up 1bp (down Australian mortgages delinquencies and loss rates (%) 2bps 1H11) and remain below industry benchmarks 90+ Past Due Total 90+ First Home Buyer • Modest incr
Slide 99: Stable performance in Australian credit card portfolio
Stable performance in Australian credit card portfolio For personal use only • Australian credit card portfolio has continued to perform well, largely Australian credit card average payments to balance ratio1 (%) driven by cautious consumer behaviour resulting in increased payment levels • The avera
Slide 100: Lenders mortgage insurance managing risk transfer
Lenders mortgage insurance managing risk transfer For personal use only • Westpac Group has one captive mortgage insurer, Westpac Lenders Australian mortgage portfolio lenders mortgage insurance (LMI) Mortgage Insurance (WLMI)1, which insures mortgages originated coverage (%) at 31 March 2012 throug
Slide 101: Economics
For personal use only FIRST HALF ECONOMICS 2012 Westpac Banking Corporation ABN 33 007 457 141
Slide 102: Australian and New Zealand economic outlook
Australian and New Zealand economic outlook For personal use only Calendar year Key economic indicators as at April 2012 (%) 2010 2011 2012f 2013f World GDP 5.1 3.9 2.8 4.0 Australia GDP 2.5 2.0 3.0 3.8 Private consumption 2.9 3.4 3.0 3.3 Business investment1, 2 (1.8) 15.9 16.0 16.0 Unemployment – e
Slide 103: Credit growth expected to modestly improve
Credit growth expected to modestly improve For personal use only Credit growth (% annual) Aust. housing Total credit (Aust.) Aust. business 30 Housing - avg (Aust.) Total credit - avg (Aust.) Total credit (NZ) 30 25 forecasts 25 to end 2013 20 20 15 15 10 10 5 5 0 0 -5 -5 -10 -10 Sep-00 Sep-02 Sep-0
Slide 104: Appendix and Disclaimer
For personal use only FIRST HALF APPENDIX AND DISCLAIMER 2012 Westpac Banking Corporation ABN 33 007 457 141
Slide 105: Appendix 1: Cash earnings adjustments
Appendix 1: Cash earnings adjustments For personal use only Cash earnings adjustment 1H11 2H11 1H12 Description Reported NPAT 3,961 3,030 2,967 Reported net profit after tax attributable to equity holders of Westpac Group The TPS hybrid instrument is not fair valued however the economic hedge is fai
Slide 106: Appendix 2: Definitions
Appendix 2: Definitions For personal use only Westpac’s business units Financial performance Westpac Retail and Business Banking is part of Australian Financial Services Net profit attributable to equity holders adjusted for the impact of the economic Westpac RBB or division hedges related to TPS, e
Slide 107: Appendix 2: Definitions (continued)
Appendix 2: Definitions (continued) For personal use only Financial performance (cont.) Asset quality Refers to an external measure of customer advocacy which looks at how willing our customers are to recommend Westpac to their family and friends. TCE Total committed exposure Net Promoter To calcula
Slide 108: Investor Relations Team
Investor Relations Team For personal use only Equity Investor Relations For further information on Westpac Andrew Bowden Leigh Short Please visit our dedicated website Head of Investor Relations Senior Manager www.westpac.com.au/investorcentre click on ‘Analysts’ Centre’ +61 2 8253 4008 +61 2 8253 1
Slide 109: Disclaimer
Disclaimer For personal use only 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