Westpac Banking Corporation · ASX:WBC
Westpac Banking — H1 2022 Earnings Presentation
133 slides from Westpac Banking's earnings presentation, May 9, 2022
Slide 1: ASX Release: Westpac 1H22 Presentation and Investor Discussion Pack
ASX Level 18, 275 Kent Street Sydney, NSW, 2000 Release 9 MAY 2022 Westpac 1H22 Presentation and Investor Discussion Pack Westpac Banking Corporation (“Westpac”) today provides the attached Westpac 1H22 Presentation and Investor Discussion Pack. For further information: Hayden Cooper Andrew Bowden G
Slide 2: Presentation and Investor Discussion Pack
Presentation and Investor Discussion Pack 2022 INTERIM FINANCIAL RESULTS For the six months ended 31 March 2022 Westpac Banking Corporation ABN 33 007 457 141 Cover image: Westpac employees at our portable 'Bank in a box' in Lismore, NSW, after the floods. Financial results throughout this presentat
Slide 3: Westpac 2022 Interim Results Index
Westpac 2022 Interim Results Presentation Investor Discussion Pack of 2022 Interim Results 3 35 2022 Interim Overview Results 36 38 Results Index Customer franchise Governance 42 48 Sustainability 50 Earnings drivers 56 Revenue 57 Expenses 60 Impairment charges 62 Credit quality and provisions 63 Au
Slide 4: Peter King
Peter King Chief Executive Officer
Slide 5: 1H22 Good progress on strategic priorities
1H22 Good progress on strategic priorities. Priorities Outcomes Fix • Lifting risk management - CORE program on track Address • Resolved significant regulatory investigations outstanding issues Simplify • Two more businesses sold, six sold in total Streamline and • Significant progress on digital fo
Slide 6: 1H22 Earnings snapshot
1H22 Earnings snapshot. Change Change 1H21 2H21 1H22 1H22–2H21 1H22–1H21 Reported net profit $3,443m $2,015m $3,280m 63% (5%) Cash earnings1 $3,537m $1,815m $3,095m 71% (12%) Cash earnings1 basis excluding notable items2 Core earnings $5,120m $4,338m $4,589m 6% (10%) Impairment (charge)/benefit $372
Slide 7: 1H22 Segment core earnings
1H22 Segment core earnings. Core earnings excl. Change 2H21 1H22 notable items ($m) 1H22–2H21 • Margins down, mortgage competition Consumer 2,495 2,332 (7%) • Costs down 5%1 • Improved loan growth, margins down Business 371 504 36% • Costs down 15%1 • Good loan growth, improved markets WIB 353 492 3
Slide 8: FIX – CORE program on track after first year
FIX – CORE program on track after first year. Progress on CORE activities by stage (% complete1) Sept 22 Sept 21 March 22 Expected Design Fifth Promontory report highlights our progress, and while it indicates the potential for 76% 99% disruption following our recent organisational changes, the repo
Slide 9: Consumer – franchise progress
Consumer – franchise progress. Mortgage time to right (days)1 3rd party Simplify Proprietary 20.6 • Reduced mortgage time to right 12.6 11.7 9.6 9.9 7.6 • New app rolled out to android users after iOS completed in 2021 1H21 2H21 1H22 • Tripled number of deposit accounts Australian mortgages ($bn) op
Slide 10: Business – returning to growth
Business – returning to growth. Net movements in business lending ($bn) Simplify • New digital lending application process 2.6 0.3 • Reduced products for sale by 17 • New SME risk grade model (2.1) (3.2) • Streamlined the annual review process 2H20 1H21 2H21 1H22 Perform Business lending settlements
Slide 11: WIB – improving returns
WIB – improving returns. Markets income ($m)1 Simplify 511 Non-customer income Customer income • New online FX pricing calculator 410 404 148 365 • 11,000 hours of manual work saved 75 34 25 from reengineering processes • Consolidating international – no direct 363 335 340 370 loan exposure in our C
Slide 12: NZ – steady progress
NZ – steady progress. Loans (NZ$m) Fix 88 91 93 94 • Significant risk and regulatory projects 32 32 31 31 underway – BS11, Liquidity, risk 1 1 Business 1 1 governance Personal Mortgage 58 61 62 Simplify 55 • Completed sale of Westpac Life NZ Sep-20 Mar-21 Sep-21 Mar-22 • Products for sale down 4% De
Slide 13: Fully franked interim dividend – 61 cps
Fully franked interim dividend – 61 cps. Dividend considerations • Medium term outlook for return and growth • Sustainable payout ratio ~60-75% (ex notable items) • Dividend yield 5%1, fully franked 7.2%1 • Seek to neutralise DRP with no discount on DRP market price Dividends per ordinary share (cen
Slide 14: Michael Rowland
Michael Rowland Chief Financial Officer Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 30 for definition. Results principally cover the 1H20, 2H19 and 1H19 periods. Comparison of 1H20 versus 2H19 (unless oth
Slide 15: 1H22 results summary
1H22 results summary. Core earnings ex • Reduced costs by 10%, good progress on simplification, notable items up headcount down over 4,000 6% on 2H21 • Revenue down 3%, lower margins, impact of businesses sold Balance sheet • Credit quality continues to improve, most metrics back strong around pre-C
Slide 16: Notable items and simplification impacts
Notable items and simplification impacts. Notable items Contribution of businesses sold1 ($m after tax) 2H21 1H22 ($m) 1H21 2H21 1H22 Core earnings 88 152 25 Remediation and litigation (172) (65) Cash earnings 72 115 23 Write-down of goodwill & (965) (154) other assets Included in businesses sold FY
Slide 17: 1H22 Cash earnings 1H22 – 2H21
1H22 Cash earnings ($m) 1H22 – 2H21. $131m reduction from sold businesses 565 1,319 3,134 73 3,101 3,095 (357) (6) (168) (146) 1,815 Core earnings up 6% Down 1% Up 71% 2H21 2H21 2H21 excl. Net interest Non-interest Expenses Impairment Tax & NCI1 1H22 excl. 1H22 1H22 notable notable income income cha
Slide 18: Lending composition
Lending composition ($bn). Up $1.3bn in NZ$ 6.0 0.1 0.1 719.6 (1.0) 5.2 2.6 (1.7) 710.8 (2.5) • Sale of wholesale dealer loan book ($1.0bn) • Auto run-off ($0.7bn) 690.0 Up $8.8bn or 1% Mar-21 Sep-21 Mortgages Mortgages Business Institutional New Personal Other2 Auto Mar-22 - Owner - Investor1 Zeala
Slide 19: Australian mortgages
Australian mortgages. Mortgage balances ($bn) Owner occupied Investor1 Investor contraction reflects: 275.1 290.1 295.3 • Continued high run-off in interest only 266.3 • Reduction in non-standard products i.e 174.6 168.5 165.5 163.0 SMSF, reverse mortgage and foreign • Current policies and processes
Slide 20: Margins down from low rates & intense competition
Margins down from low rates & intense competition. Net interest margin (% and bps) Treasury & Markets impact on NIM NIM excl. Treasury & Markets 1.99 1.98 1bp - 4bps 0.11 (1bp) 0.11 4bps 1.85 (15bps) (7bps) 0.15 1.88 1.87 1.70 Exit margin 1.68%1 2H21 Notable items 2H21 excl. Loans Customer Funding C
Slide 21: Margin drivers – ex Treasury & Markets
Margin drivers – ex Treasury & Markets.1 1H22 movement detail 2H22 considerations Interest • Cash rate 10bps • Rising rate environment, Westpac Economics’ rates • 3yr swap rates increased ~200bps to 2.57% forecast cash rate of 1.75% by end of CY22 Lending • (4bps) fixed rate mortgages (rate and mix)
Slide 22: Non-interest income excluding notable items
Non-interest income excluding notable items.1 Net fees1 up $30m 4% Wealth & insurance1 down $185m 29% Trading and other1 up $9m 2% • Increased card spend $19m • Insurance business exits ($125m) • Increased customer demand in fixed • Funds income down from lower fees income and FX following Panorama
Slide 23: Markets & Treasury income
Markets & Treasury income.1 Up 28% in 1H22 from stronger Treasury contribution. Markets non-customer and Treasury income ($m) Markets customer income ($m) 618 607 602 Markets non-customer 557 34 Treasury 148 174 75 421 396 25 362 114 127 568 459 482 444 438 455 396 420 363 370 335 340 282 235 1H19 2
Slide 24: 1H22 – 2H21 expenses
1H22 – 2H21 expenses ($m). • Lower amortisation 7,302 following WIB write-off • Completion of key • Investment typically mortgage platform projects higher in 2H of year 5,700 (1,602) 231 5,366 (170) 5,135 (142) (188) (65) • Reduction in 3rd party spend ($78m) • Higher annual leave utilisation ($80m)
Slide 25: Progress on $8bn cost target
Progress on $8bn cost target.1 Expenses ($bn) Notable items Specialist businesses Fix - one-off 2H22 costs expected to be 0 - 2% WBC ongoing 7.3 lower than 1H22 ex-notable items 1.6 Full period impact of reduced 6.0 headcount and office space 0.7 5.4 0.4 0.2 0.4 0.6 0.4 0.5 Seasonality in investment
Slide 26: Select cost reset targets
Select cost reset targets.1 FY20 Metric Baseline 1H22 FY24 1 under sale Portfolio • Sale of non-core businesses 1 under sale agreement 9 transactions simplification • Completion of sales agreement 6 completed completed Business • Mortgages processed on digital 32%2 82% 100% simplification originatio
Slide 27: Credit quality metrics improved
Credit quality metrics improved. Stressed exposures as a % of TCE1 Australian mortgage delinquencies (%) Watchlist & substandard 1.91 4.0 90+ day delinquencies 30+ day delinquencies 90+ day past due and not impaired 1.60 3.0 Impaired 0.85 2.0 1.36 1.32 1.47 1.0 0.88 1.14 0.75 1.09 1.10 1.10 0.49 0.0
Slide 28: Impairment provisions
Impairment provisions. Total impairment provisions1 ($m) Provision coverage Overlay2 Stage 2 CAP3 Stage 3 IAP4 Sep-20 Mar-21 Sep-21 Mar-22 Stage 1 CAP3 Stage 3 CAP3 Provisions to Credit 5,508 171bps 159bps 140bps 130bps RWA 5,007 Provisions to TCE 58bps 51bps 44bps 40bps 958 4,682 647 IAP to impaire
Slide 29: Credit impairment charge / (benefit) composition
Credit impairment charge / (benefit) composition. ($m). Individually assessed provisions Collectively assessed provisions Total Write-backs Other movement New IAPs & recoveries Write-offs direct in CAP 940 466 438 318 296 366 283 218 144 97 139 (147) (194) (203) (166) (10) (218) (372) (640) (777) 2H
Slide 30: Capital – returned $5.5bn to shareholders
Capital – returned $5.5bn to shareholders. CET1 Capital (%, bps) New CET1 operating range 11.0% - 11.5% (From 1 Jan 2023) 67bps • Minimal RWA impact expected from updated Basel III standards 12.32 (48bps) 11.5% Westpac operating range 11.0% 11.49% pro forma 0.75% after sale of Life Management buffer
Slide 31: 2H22 Considerations
2H22 Considerations.1 Net interest • Owner occupied mortgage growth to continue; improve income investor lending performance • Exit margin2 excl. Tsy & Markets for March 2022 ~1.68% Non-interest • Increased economic activity to benefit income • Life divestment releases 16bps of capital but sees a $1
Slide 32: Peter King
Peter King Chief Executive Officer Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 30 for definition. Results principally cover the 1H20, 2H19 and 1H19 periods. Comparison of 1H20 versus 2H19 (unless otherwis
Slide 33: Supporting the transition to a net zero economy
Supporting the transition to a net zero economy. Improving our direct Helping customers Collaborating climate performance transition to net zero for impact • On track to reduce scope 1 and 2 • 39 new sustainable finance transactions • Reporting in line with TCFD and SASB6 emissions by 65% by the end
Slide 34: FY22 – Solid outlook, some economic uncertainty
FY22 – Solid outlook, some economic uncertainty. • GDP growth above average in 2022, slowing in 2023 • Unemployment to hit historic lows • Credit growth to remain sound but moderating • Housing prices likely to moderate Australian economic forecasts1 Dec-22 Dec-23 Cash rate 1.75% 2.25% GDP 4.5% 2.5%
Slide 35: 2H22 Areas of focus
2H22 Areas of focus. Fix • Complete CORE program ‘implement’ activities Simplify • Announce transactions for Super and Platforms • Continue digital transformation Perform • Build on loan momentum − Continue progress in Business/Institutional − Improve performance in investor mortgages • Deliver on c
Slide 36: Investor Discussion Pack
Investor Discussion Pack Fix. Simplify. Perform.
Slide 37: Overview
Overview AIfestpac Group
Slide 38: Westpac Group at a glance
Westpac Group at a glance. Overview Our Purpose: Helping Australians and New Zealanders succeed. Westpac Group • Australia’s first bank and oldest company founded in 1817 • Australia’s 3rd largest bank and 31st largest bank in the world, ranked by market capitalisation1 • Strong market share in key
Slide 39: 1H22 cash earnings (vs 2H21)
1H22 cash earnings. Results Change Cash earnings 1H22 – 2H21 ($m) 1H22- 2H21 1H22 2H21 Lower income following the sale ($m) ($m) (%) 6% AIEA growth mostly from Lower expenses from of liquid assets. NIM down 13bps simplification initiatives, Net interest businesses, lower wealth and life of which 7bp
Slide 40: 1H22 cash earnings (vs 1H21)
1H22 cash earnings. Results Change Cash earnings 1H22 – 1H21 ($m) 1H22- 1H21 1H22 1H21 ($m) ($m) (%) 7% AIEA growth mostly from liquid assets. Lower income following the Lower expenses from NIM down 22bps of which 8bps due to sale of businesses, lower simplification initiatives, lower Net interest i
Slide 41: 1H22 financial snapshot
1H22 financial snapshot. Results Change Change Change Change 1H22 1H22 – 2H21 1H22 – 1H21 1H22 1H22 – 2H21 1H22 – 1H21 Earnings1 Balance sheet Earnings per share (cents) 85.4 73% (12%) Total assets ($bn) 964.7 3% 8% Common equity Tier 1 (CET1) Core earnings ($m) 4,593 56% (5%) 11.33 (99bps) (101bps)
Slide 42: Cash earnings and reported net profit reconciliation
Cash earnings and reported net profit reconciliation. Results Cash earnings1 policy Change Change 1H22 1H22 - 2H21 1H22 - 1H21 • Westpac uses a measure of performance referred to as cash earnings to assess financial ($m) (%) (%) performance at both a Group and segment level • This measure has been u
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 6.2 6.1 Consumer 15.8% 15.6% 15.7% 16.4% 5.0 7.7 3.0 5.4% 5.4% 5.2% 5.3% 7.6 0.7 11.0% 7.5 10.4% 10.2% 10
Slide 44: Supporting customers
Supporting customers. Customer franchise Customers at the centre of what we do. Helping customers Migrating to digital Insight / expertise / security • Supported around 24,000 customers1 • Acquisition of MoneyBrilliant with • Over 25,000 payments with abusive through hardship capability available in
Slide 45: Investing in the Westpac digital experience
Investing in the Westpac digital experience. Customer franchise The Westpac app. New app experience enabled for Android and iOS Protect me • 200+ features and capabilities • Introduced behavioural pattern scam and fraud prevention capabilities1 • 2.5m customers using the app • Dynamic CVC capability
Slide 46: Investing in the Westpac digital experience
Investing in the Westpac digital experience. Customer franchise The Westpac app. More functionalities through the app Developments in 2H22 and beyond • More self-service opportunities for customers with capability to • New app experience to Westpac business customers by end- better manage daily paym
Slide 47: Investing in the Westpac digital experience
Investing in the Westpac digital experience. Customer franchise Other improvements and developments. Merchant support Mortgages Better support customers Next generation smart terminals • Continued roll-out of our mortgage • Digital Banker provides a holistic view of • Improved experience for merchan
Slide 48: Continued migration to digital
Continued migration to digital. Customer franchise Less physical More digital Australian ATMs (#) Australian branches (#)1 Digitally active customers (#m) Accounts with eStatements5 eStatements (%) Number (#m) At 31 March 2022 we had 10 co-located branches2 62 60 58 2,133 933 931 5.31 55 891 851 5.2
Slide 49: Customer Outcomes and Risk Excellence (CORE) program
Customer Outcomes and Risk Excellence (CORE) program. Governance • CORE is a three-year program of work to strengthen risk governance, improve Classification of activities and % progress 1 accountability and enhance our risk culture • CEO and Group Executive accountability for program delivery − per
Slide 50: 1H22 CORE progress
1H22 CORE progress. Governance EMBEDDING THREE STRONGER CULTURE AND CLEAR END-TO-END RISK DATA QUALITY AND LINES OF DEFENCE OVERSIGHT AND ACCOUNTABILITIES MANAGEMENT MANAGEMENT (3LOD) IMPROVING EXECUTION Employees have a Proactive risk management. 100% of Second Improving data through the 98% of tec
Slide 51: Our commitment to sustainability
Our commitment to sustainability. Sustainability Helping Australians and New Zealanders succeed. Helping when Backing a stronger Collaborating it matters most Australia and NZ for impact • Supported 1,500+ customers with a • $2.8 billion in new lending to climate • Sustainability disclosures in line
Slide 52: Taking action on climate change
Taking action on climate change. Sustainability Progressing our Climate Change Position Statement and 2023 Action Plan. Our principles A transition to a net Economic growth and Addressing climate Climate-related risk Collective action, zero emissions economy emissions reductions are change creates i
Slide 53: Climate-related metrics
Climate-related metrics. Sustainability Lending to climate change solutions Electricity generation exposure Lending to electricity generation ($bn, TCE)1,2 (% of TCE)3 in Australia and New Zealand (% of total) 10.8 10.7 10.1 2.8 79% 0.7 9.1 9.3 4.3 Renewable energy 52% 13.2 Gas TCE Black coal 48% $4
Slide 54: Sustainable financing solutions
Sustainable financing solutions. Sustainability Helping customers transition to a low carbon future. Supporting our customers’ transition to net zero Sustainable finance highlights • 39 sustainable finance transactions Group-wide with a total market • Joint Green Bond Coordinator and Joint Lead Mana
Slide 55: Strengthening diversity and inclusion
Strengthening diversity and inclusion. Sustainability Building a workforce that reflects the customers we serve through three areas of focus. GENDER CULTURAL INDIGENOUS EQUALITY DIVERSITY REPRESENTATION Targets Group-wide survey to understand Targeted development programs cultural diversity of workf
Slide 56: Comprehensive sustainability reporting
Comprehensive sustainability reporting. Sustainability A suite of disclosures for more information and depth. 2021 Annual Report 2021 Sustainability Supplement FY21 Disclosure Standards FY21 Modern Slavery Statement 2021 Annual Report Climate Change Position Statement and Action Plan Human Rights Po
Slide 57: Earnings drivers
Earnings drivers AIfestpac Group
Slide 58: Composition of lending and deposits
Composition of lending and deposits. Revenue Lending up 1% and deposits grew 4% over the half. Composition of loans1 (% of total) Gross loans ($bn) +NZ$1.3bn Australian mortgage lending1 ($bn) 6.0 725.5 723.8 51 2.6 715.4 2.9 (1.1) (0.3) (1.7) 1 12 458 Aust. mortgages 456 2 695.0 444 Aust. business
Slide 59: Net interest margin
Net interest margin. Revenue Net interest margin (NIM) movement (%, bps) Net interest margin (%) NIM excl. Treasury & Markets Treasury & Markets impact on NIM NIM NIM excl. Treasury & Markets 2.09 2.17 2.06 1.85 0.13 1.99 1.98 (1bp) 0.11 1.70 0.11 1bp 0bp 4bps 4bps 1.85 (15bps) 1H17 2H17 1H18 2H18 1
Slide 60: Non-interest income
Non-interest income. Revenue Non-interest income contributors excluding notable items and businesses sold.1 Non-interest income contributors ($m) Net fee income ($m) Fees Wealth and insurance Trading Other Other non-risk fee income Net transaction fees Facility fees 1,867 815 845 18 1,690 804 1,675
Slide 61: Expenses
Expenses. Expenses Expense movements 1H22 – 2H21 ($m) FY24 $8bn cost target supporting assumptions Ongoing expenses down from Fix down from the completion of a simplification benefits1, lower leave number of initiatives including the In setting an FY24 $8bn cost target we made provisions, lower thir
Slide 62: Expenses: Total investment spending
Expenses. Expenses Total investment spending. Investment spend mix ($m) Fix • Continued investment in our CORE program1 1,163 • Updated our AML/CTF systems Fix Simplify Perform • Rectification of our electronic security register for business customers • Expanded open banking capability to all brands
Slide 63: 1H22 impairment charge of $139m
1H22 impairment charge of $139m. Impairment charges Charge driven by higher overlays and increased weight to downside scenario. Impairment charges ($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
Slide 64: Credit quality and provisions
Credit quality and provisions
Slide 65: Provisions
Provisions. Credit quality Sound coverage; increase in overlays for uncertainties and floods. Provisions for impairments Total impairment provisions2 ($m) Overlay 3 Stage 1 CAP Stage 2 CAP Mar-21 Sep-21 Mar-22 Stage 3 CAP Stage 3 IAP Provisions to gross loans (bps) 79 70 65 6,159 Impaired asset prov
Slide 66: Provision cover by portfolio category
Provision cover by portfolio category. Credit quality Increase in portfolio overlays reflected in higher Stage 2 exposures. Exposures as a % of TCE Provisioning to TCE (%) Sep-20 Mar-21 Sep-21 Mar-22 Stage 1 reduction due to larger TCE transfer Stage 1 provisions Fully to Stage 2 from performing 92.
Slide 67: Credit quality metrics improved
Credit quality metrics improved. Credit quality Stressed exposures down 26bps. Stressed exposures as a % of TCE Movement in stress categories (bps) Watchlist and • Improvement from customer rating upgrades and substandard repayments, mostly institutional 160 (0) 0 2 (8) (18) 90+ day past due • Reduc
Slide 68: Portfolio composition
Portfolio composition. Credit quality Total committed exposure (TCE) by risk grade at 31 March 2022 ($m) Standard and Poor’s Risk Grade1 Australia NZ / Pacific Asia Americas Europe Group % of Total AAA to AA- 194,296 22,152 570 11,787 842 229,647 18% A+ to A- 38,430 5,802 1,246 3,188 4,155 52,821 5%
Slide 69: Loan portfolio composition
Loan portfolio composition. Credit quality Exposures at default1 by sector ($bn) Top 10 exposures to corporations and NBFIs5 (% of TCE) Finance & insurance 2 Government admin. & defence 1.2 1.1 1.1 1.0 Property 3 1.0 1.0 1.0 Includes increased Wholesale & retail trade liquid assets Agriculture, fore
Slide 70: Credit quality improved across most sectors
Credit quality improved across most sectors. Credit quality Corporate and business stressed exposures by industry sector ($bn) Mar-21 Sep-21 Mar-22 2.0 Reduction mainly due to refinance of one exposure Decrease driven by 1.8 in accommodation sector partial write-off of 1.6 Forum exposure 1.4 1.2 1.0
Slide 71: Sectors in focus: Accommodation and Construction
Sectors in focus. Credit quality Accommodation, cafes & restaurants and Construction. Accommodation, cafes and restaurants Portfolio security composition3 (TCE) (%) Portfolio by sub-sector (TCE) (%) Mar-21 Sep-21 Mar-22 Total committed exposure 9.7 9.6 9.9 5 6 (TCE) ($bn) Accommodation Lending ($bn)
Slide 72: Sectors in focus: Commercial property
Sectors in focus. Credit quality Commercial property. Commercial property Commercial property exposures % of TCE and % in stress Mar-21 Sep-21 Mar-22 Commercial property as % of TCE (lhs) 8 Commercial property % in stress (rhs) 20 TCE ($bn) 67.4 70.0 74.3 18 16 6 Lending ($bn) 52.2 51.7 56.5 14 12 A
Slide 73: Australian Agriculture; Mining; Retail trade
Sectors in focus. Credit quality Australian Agriculture; Mining incl. oil and gas; Retail trade. Australian Agriculture Mining (incl. oil and gas) Retail trade Mar-21 Sep-21 Mar-22 Mar-21 Sep-21 Mar-22 Mar-21 Sep-21 Mar-22 TCE ($bn) 12.6 13.0 13.4 TCE ($bn) 8.0 8.4 8.4 TCE ($bn) 13.9 14.0 12.5 Lendi
Slide 74: Australian consumer finance
Australian consumer finance. Credit quality Higher credit card balances from spending lift; consumer auto loans in run-off. Australian consumer finance portfolio1 Australian consumer finance 90+ day delinquencies (%) Mar-21 Sep-21 Mar-22 Lending ($bn) 15.0 13.2 12.8 2.50 As a % of Group loans 2.0 1.
Slide 75: Australian mortgage delinquencies
Australian mortgage delinquencies. Mortgage credit quality Improvement in delinquencies across the portfolio. Australian mortgage portfolio Mar-21 Sep-21 Mar-22 Australian mortgage delinquencies (%) Total portfolio 30+ day delinquencies (bps) 179 220 147 90+ day delinquencies 30+ day delinquencies 4
Slide 76: Australian mortgage portfolio composition
Australian mortgage portfolio composition. Mortgage credit quality Mar-21 Sep-21 Mar-22 1H22 Australian mortgage portfolio and 1H22 flow by Australian mortgage portfolio balance balance balance Flow1 product and repayment type (%) Total portfolio ($bn) 443.6 455.6 458.3 50.8 Mar-21 (Portfolio) Sep-2
Slide 77: Australian mortgage portfolio
Australian mortgage portfolio. Mortgage credit quality Equity increased for existing loans. Australian housing loan-to-value ratios (LVRs) (%) Serviceability assessment creates a buffer for borrowers 100 • Loans are assessed at the higher of 1H22 drawdowns LVR at origination 90 Portfolio LVR at orig
Slide 78: Australian mortgage portfolio repayment buffers
Australian mortgage portfolio repayment buffers. Mortgage credit quality Offset account balances continue to increase. Offset account balances1 ($bn) Australian home loan customers ahead on repayments2 (% by accounts) Linked to P&I mortgages Linked to I/O mortgages 51 53 Mar-21 Sep-21 Mar-22 46 48 3
Slide 79: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting. Mortgage credit quality Credit policy at April 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 or
Slide 80: Australian mortgages: interest only and investment lending
Australian mortgages. Mortgage credit quality Interest only and Investment property lending. I/O lending by dynamic LVR1 and income band Investment property portfolio by number of properties (% of total I/O lending) per customer (%) Applicant gross income bands 66 11 <$100k $100k - $250k >$250k 6 2
Slide 81: Capital, funding and liquidity
Capital, funding and liquidity
Slide 82: CET1 capital ratio 11.33%
CET1 capital ratio 11.33%. Capital, funding and liquidity Level 2 CET1 capital ratio movements (%, bps) Key capital ratios (%) Mar-21 Sep-21 Mar-22 Capital deductions and other Divestments includes sale of Level 2 CET1 capital ratio 12.3 12.3 11.3 From RWA movements capital movements mostly Westpac
Slide 83: Risk weighted assets
Risk weighted assets. Capital, funding and liquidity Increase mostly from higher non-credit risk RWA. Risk weighted assets (RWA) ($bn) Commentary 2.0 460.0 • RWA increased $23.3bn over 1H22, mostly from higher IRRBB RWA 16.3 (0.3) • Interest rate risk in the banking book (IRRBB) RWA increased $16.3b
Slide 84: Update on capital management
Update on capital management. Capital, funding and liquidity APRA’s revisions to capital framework and our new operating range. Effective 1 January 2023 10.5% Unquestionably Operating range CET1 capital operating range strong benchmark 11.0% - 11.5% • We will seek to operate with a CET1 10.25% APRA
Slide 85: Regulatory capital changes
Regulatory capital changes. Capital, funding and liquidity Key regulatory changes and timeline. Implementation Change Details Current and RBNZ Capital Review • Implementation from 1 January 2022 with a transitional period of ~6 years finalised by • RWA of IRB banks including WNZL increased to 90% of
Slide 86: Internationally comparable capital ratio reconciliation
Internationally comparable capital ratio reconciliation. Capital, funding and liquidity APRA’s Basel III capital requirements are more conservative than those of the Basel Committee on Banking Supervision (BCBS), leading to lower reported capital ratios by Australian banks. In July 2015, APRA publis
Slide 87: Well placed on internationally comparable CET1 and leverage ratios
Well placed on internationally comparable. Capital, funding and liquidity CET1 and leverage ratios. Common equity Tier 1 ratio (%)1 20% 15% China Construction Bank Toronto Dominion Bank 10% Royal Bank of Canada China Merchants Bank Agricultural Bank of China Standard Chartered Westpac (17.4%) Credit
Slide 88: Balance sheet funding and liquidity
Balance sheet funding and liquidity. Capital, funding and liquidity Customer deposits provide 66% of the Group’s funding. Funding composition (%) Customer deposits and net loans ($bn) By residual maturity Wholesale onshore <1yr1 Customer deposits Net loans Customer deposits to net loans ratio (%) 5
Slide 89: Funding and liquidity ratios
Funding and liquidity ratios. Capital, funding and liquidity Increase in LCR reflects higher liquid assets; NSFR unchanged. Liquidity coverage ratio1 (LCR) (quarterly average, $bn) Liquidity coverage ratio1 (quarterly average, %) Sep qtr 2021: Mar qtr 2022: LCR 129% LCR 137% Net cash outflows (NCOs)
Slide 90: Long term wholesale funding
Long term wholesale funding. Capital, funding and liquidity Return to normal funding activities post TFF conclusion. Term debt issuance and maturity profile1 ($bn) Issuance Maturities Funding for Lending Programme (NZ) 42 37 39 Term Funding Facility (Aus) 37 34 35 31 32 31 Subordinated debt 27 Senio
Slide 91: Tier 2 capital issuance
Tier 2 capital issuance. Capital, funding and liquidity Well positioned to meet increased TLAC requirements. Westpac Tier 2 issuance and calls/maturities1,2 (notional amount, A$bn) Issuance Maturities 9.8 Remaining Tier 2 issuance expected for FY22 approx. $2 billion 6.2 (including buffer above regu
Slide 92: Segment results
Segment results AIfestpac Group
Slide 93: Segment contributions
Segment1 contributions. Segments Cash earnings and notable items. Specialist Group 1H22 cash earnings ($m) Consumer Business WIB NZ2 Businesses Businesses Group Net interest income 4,377 1,323 481 1,041 242 564 8,028 Non-interest income 324 163 588 270 550 36 1,931 Expenses (2,369) (982) (577) (534)
Slide 94: Segment reporting change from 1H22
Segment reporting change from 1H22. Segments Segment Lines of Business (LOB) Major changes • Mortgages • All Australian mortgages (both business and consumer) now Consumer • Consumer finance included in Mortgage LOB Consumer & • Consumer deposits • Ceased revenue sharing from sale of certain institu
Slide 95: Consumer 1H22 performance
Consumer 1H22 performance. Consumer Cash earnings ($m) Change One-off payment for new insurance distribution Key financial metrics 1H21 2H21 1H22 on 2H21 agreement and higher card income Revenue ($m) 5,019 4,985 4,701 (6%) NIM 18bps down from lower Simplification benefits and lower loan spreads, par
Slide 96: Business 1H22 performance
Business 1H22 performance. Business Cash earnings ($m) Change Key financial metrics 1H21 2H21 1H22 on 2H21 NIM excluding notable items Simplification Impairment charge 10bps lower benefits and lower compared to impairment Revenue ($m) 1,711 1,625 1,486 (9%) from lower asset spreads risk and complian
Slide 97: WIB 1H22 performance
WIB 1H22 performance. Westpac Institutional Bank Cash earnings ($m) Change Key financial metrics 1H21 2H21 1H22 on 2H21 AIEA growth Negative DVA Simplification Improved credit contribution partly quality metrics, one Revenue ($m) 1,154 1,084 1,069 (1%) of 12% partly initiatives, lower offset by 7bps
Slide 98: New Zealand 1H22 performance
New Zealand 1H22 performance.1 New Zealand Cash earnings (NZ$m) Change Key financial metrics 1H21 2H21 1H22 on 2H21 Lower income from Mainly due to timing of risk and Revenue (NZ$m) 1,245 1,218 1,389 14% KiwiSaver and banking fees compliance spending Net interest margin (%) 2.06 1.94 1.98 4 bps AIEA
Slide 99: New Zealand balance sheet
New Zealand balance sheet. New Zealand Net loans (NZ$bn) Deposits (NZ$bn) 1.5 94.0 2.3 0.2 78.4 92.6 (0.1) 90.6 75.9 74.1 Up 2% Up 3% Mar-21 Sep-21 Consumer Business Mar-22 Mar-21 Sep-21 Consumer Business Mar-22 Loans (NZ$bn) and % of total Customer deposits (NZ$bn) and % of total Business Transacti
Slide 100: New Zealand business exposures
New Zealand business exposures. New Zealand Business stressed exposures as a % of business TCE Business TCE by industry sector % Watchlist & substandard 90+ day past due and not impaired Impaired Finance & insurance 5 21 Agriculture, Forestry and Fishing 3 5.5 3 Property 4 28 4.9 Government administ
Slide 101: New Zealand consumer portfolio
New Zealand consumer portfolio. New Zealand Mortgage 90+ day delinquencies1 (%) Unsecured consumer 90+ day delinquencies1 (%) 0.6 3.0 0.5 0.4 2.0 0.3 0.30 1.42 0.2 1.0 0.1 0.0 0.0 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 S
Slide 102: Specialist Businesses 1H22 performance
Specialist Businesses 1H22 performance. Specialist Businesses Cash earnings ($m) Businesses sold ($128m), lower life insurance income from revaluation of life policy liabilities, partly offset by transitional service payments Change Key financial metrics 1H21 2H21 1H22 on 2H21 Benefits from simplifi
Slide 103: BT Panorama
BT Panorama. Specialist Businesses Supporting advisers and investors. Panorama Platform FUA on BT Panorama1 ($m) Investors on BT Panorama1 (#) • Increased Panorama capabilities 104,779 105,012 234,948 236,741 - Improved mobile app functionality, FUA Investors with BT Panorama winning Best BT Wrap mi
Slide 104: Developing next generation banking technology
Developing next generation banking technology. Specialist Businesses Banking as a Service reaching new customers via strategic distribution partners. New core banking platform live in <18 months, Reaching new customers in strategic with broader potential segments and creating value • Built and opera
Slide 105: Economics
Economics AIfestpac Group
Slide 106: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts. Economics Key economic indicators (%) 2021 2022 Calendar years at April 2022 Q2 Q3 Q4 Q1F Q2F Q3F Q4F 2020 2021 2022F 2023F World GDP1 - - - - - - - -3.3 5.5 3.7 3.5 Australia GDP2 9.6 4.0 4.2 2.5 3.7 7.2 4.5 -0.8 4.2 4.5 2.5 Unemployment – end period 5
Slide 107: Global market backdrop changing
Global market backdrop changing. Economics Central banks moving from emergency settings; responding to inflation pressures. Fed Funds and RBA Cash Rate (%) Global inflation (ann %) % Cash Rate Fed Funds (midpoint) % ann% ann% Australia G7 9 9 20 20 8 8 7 7 15 * CPI inflation; ‘G7’ is GDP- 15 Westpac
Slide 108: Australian economy: considerable momentum into 2022
Australian economy: considerable momentum into 2022. Economics Economic expansion led by the consumer; household balance sheets a key positive. Australia’s GDP profile (index) Australia’s growth mix (ppts, annual) ppts annual contributions to GDP growth, year end ppts annual Index pre COVID-19 forec
Slide 109: RBA tightening cycle commenced
RBA tightening cycle commenced. Economics Responding to inflation and tight labour market. RBA cash rate and 3 year bonds (%) CPI inflation (%) Westpac f’casts to Westpac f’casts Dec -22 % % % % to Jun-23 Core CPI, %qtr Headline CPI %yr Core CPI, avg RBA %yr 3.5 3.0 6 6 3 year bonds 3.0 2.5 5 5 RBA
Slide 110: Commodity prices holding higher for longer
Commodity prices holding higher for longer. Economics Down from peaks but fundamentals continue to firm. Australian commodity prices (index) Terms of Trade (index) 2012=100 2012=100 index index Westpac f’casts Wespac estimate 320 420 140 2022Q1, 73% 140 Iron ore Met coal to Dec-23 370 Wool boom abov
Slide 111: Australian housing market
Australian housing market. Economics Correction expected as interest rates rise. Australian dwelling prices (%, 3 month annualised) % 40 ‘Delta’ 35 2019 COVID-19 Macro-prudential election 30 measures 25 Macro- 20 prudential measures 15 10 5 0 -5 rate cuts -10 -15 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 A
Slide 112: Australian housing market
Australian housing market. Economics Activity levels easing in response to higher rates expectations. Mortgage interest rates (%) Housing finance approvals by segment ($bn) % % $bn Value of housing finance $bn Variable* 3 year fixed 10 10 18 First home buyers 18 16 16 Upgraders 8 8 14 14 Investors 1
Slide 113: Australian housing market
Australian housing market. Economics Affordability challenges emerging in Sydney and Melbourne. Affordability: Australia (%) Westpac Rental vacancy rates (% quarterly, annual average) f’casts to % % Sydney Melbourne Dec-22 % 8 Sydney Melbourne Perth Brisbane latest month % 8 35 2017 peaks 35 (where
Slide 114: The Australian economy
The Australian economy. Economics Population 25.8 million. Australian population Australian GDP and employment composition Output by sector 2020-21 (% contribution to GDP)1 NT Mining 246k 11 Manufacturing 18 QLD 6 Construction WA 5.2m Transport, Utilities 2.7m SA 8 Wholesale, Retail 10 1.8m Agricult
Slide 115: New Zealand economic overview
New Zealand economic overview. Economics Interest rates rising in response to firming economy activity and increasing inflation. New Zealand GDP ($bn) Consumer prices (% year) %yr %yr $bn $bn 80 80 8 Westpac 8 Westpac forecasts 75 forecasts 75 6 6 70 70 Initial Covid 4 4 lockdown 65 ‘Red Traffic lig
Slide 116: New Zealand economic activity
New Zealand economic activity. Economics Demand has remained firm despite COVID headwinds. Manufacturing conditions (index) and Residential dwelling consents (annual, total) Service sector conditions (index) Index Annual total Annual total Index 70 Delta 70 lockdown 30000 Auckland 30000 Initial Covi
Slide 117: New Zealand inflation and interest rates
New Zealand inflation and interest rates. Economics Demand and supply pressures widespread, interest rates to rise into tight territory. Inflation (% yr) Strong demand and shortage of supplies %yr %yr % of business highlighting % of business highlighting a 8 8 100 a lack of demand as a lack of suppl
Slide 118: New Zealand housing market
New Zealand housing market. Economics The housing market is cooling as interest rates rise. Monthly house sales and prices (% yr) New Zealand dwelling prices (index) Sales %yr Index Index 14,000 40 Auckland Sales (left axis) 2750 2750 12,000 30 Canterbury 10,000 House prices (right axis) 20 2250 Wel
Slide 119: New Zealand exports
New Zealand exports. Economics Commodity price strength expected to be sustained, services exports to recover. NZ export commodity prices (index) Farmgate milk price ($/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 8 250 250 6 6
Slide 120: The New Zealand economy
The New Zealand economy. Economics Population 5.1 million. Regional GDP Economy Output 2021 - sector shares of GDP (%) Total nominal GDP 2021: $350bn Primary industries 11 6 Construction 7 Total nominal GDP 2019: $303bn 3 Electricity, gas, and water 10 Manufacturing Northland, $8bn 9 4% of populatio
Slide 121: Appendix and Disclaimer
Appendix and Disclaimer AIfestpac Group
Slide 122: Appendix 1: Cash earnings adjustments and notable items
Appendix 1: Appendix Cash earnings adjustments and notable items. Cash earnings adjustment ($m) 1H21 2H21 1H22 Description Reported net profit 3,443 2,015 3,280 Net profit attributable to owners of Westpac Banking Corporation Fair value on economic hedges (which do not qualify for hedge accounting u
Slide 123: Appendix 1: Cash earnings ex-notable items
Appendix 1: Appendix Cash earnings ex-notable items.1 Change Change 1H21 ($m) 2H21 ($m) 1H22 ($m) 1H22-2H21 (%) 1H22-1H21 (%) Net interest income 8,398 8,189 8,021 (2) (4) Non-interest income 1,958 1,849 1,703 (8) (13) Net operating income 10,356 10,038 9,724 (3) (6) Expenses (5,236) (5,700) (5,135)
Slide 124: Appendix 1: Customer remediation notable items
Appendix 1: Appendix Customer remediation notable items. Milestones Provisions for customer compensation and associated costs • In 1H22, we paid or offered $378m to Net provisions raised in 1H22 for: approximately 475,000 customers • Refunds associated with certain ongoing advice fees charged by the
Slide 125: Appendix 2: Portfolio simplification progress
Appendix 2: Appendix Portfolio simplification progress. 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 126: Appendix 3: Reinventure: Investing in fintech businesses
Appendix 3. Appendix Reinventure: Investing in fintech businesses. 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 127: Appendix 4: Sustainability
Appendix 4: Appendix Sustainability. Industry recognition Sustainability indexes Inclusion and diversity recognition Received “B” rating in the 2021 CDP for Member of the DJSI Indices since Recognised by the Bloomberg Gender our response to Climate Change, 2002 Equality Index for the 6th consecutive
Slide 128: Appendix 4: Sustainability
Appendix 4: Appendix Sustainability. 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 129: Appendix 5: Definitions – Credit quality
Appendix 5: Appendix Definitions – Credit quality. For financial assets where there has been a significant increase in credit risk Includes facilities where: Stage 2: Lifetime ECL since origination but where the asset is still performing a provision for lifetime • contractual payments of interest an
Slide 130: Appendix 5: Definitions – Segments, earnings drivers, capital and liquidity
Appendix 5: Appendix Definitions – Segments, earnings drivers, capital and liquidity. Segments Capital and liquidity Consumer provides banking products and services, including mortgages, credit cards, Capital ratios As defined by APRA (unless stated otherwise) Consumer personal loans, and savings an
Slide 131: Appendix 5: Definitions – Other
Appendix 5: Appendix Definitions – Other. Branch Net Promoter Score measures the net likelihood of recommendation to others of the Branch transactions are typically withdrawals, deposits, transfers and payments transactions customer’s main financial institution for retail or business banking. Net Pr
Slide 132: Investor Relations Team
Investor Relations Team. Contact us Contact us. Andrew Bowden Jacqueline Boddy Group Head of Investor Relations Head of Debt Investor Relations Louise Coughlan Andrea Jaehne Head of Ratings Agencies and Analysis Director, Ratings Agencies and Analysis Rebecca Plackett Arthur Petratos Director, Corpo
Slide 133: 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