Westpac Banking Corporation · ASX:WBC
Westpac Banking — H1 2023 Earnings Presentation
127 slides from Westpac Banking's earnings presentation, May 8, 2023
Slide 1: Westpac 1H23 Presentation and Investor Discussion Pack
ASX Level 18, 275 Kent Street Sydney, NSW, 2000 Release 8 May 2023 Westpac 1H23 Presentation and Investor Discussion Pack Westpac Banking Corporation (“Westpac”) today provides the attached Westpac 1H23 Presentation and Investor Discussion Pack. For further information: Hayden Cooper Justin McCarthy
Slide 2: Westpac Group 2023 Interim Financial Results
2023 = {2} = FINANCIAL «=f (4 Discussio For the six months ended 31 March 2023. t \)%estpac GRouP <i 7 7° & Westpac Banking Corporation ABN 33 007 457 141.
Slide 3: Results Index
Westpac 2023 Interim Results Presentation 3 2023 Interim Investor Discussion Pack of 2023 Interim Results 33 Results Index Earnings drivers 35 Credit quality and provisions 46 Non-credit risks 69 Capital, Funding and Liquidity 74 Customer franchise 88 Sustainability 92 Segment results 100 Economics
Slide 4: Peter King, Chief Executive Officer
Peter King Chief Executive Officer
Slide 5: 1H23 Highlights
1H23 Highlights Improved financial result Strengthened balance sheet Simpler, stronger bank Next strategic phase Supporting customers 4 Westpac Group 2023 Interim Results Presentation & Investor Discussion Pack
Slide 6: 1H23 Improved financial result
1H23 Improved financial result Change 1H22 1H23 1H23 – 1H22 Net profit1 $3,280m $4,001m 22% Notable Items $179m $178m (1%) Revenue $10,230m $11,003m 8% Expenses ($5,373m) ($4,988m) (7%) Impairment charges to average loans annualised 4 bps 10 bps 6 bps CET1 ratio 11.3% 12.3% 95 bps Return on equity 9
Slide 7: Increased shareholder returns
Increased shareholder returns Return on tangible equity (%) Dividend per share (cents) Interim Final 1H23 Interim 12.8 60 64 Up 361bps 9.2 58 61 70 8.8 31 Up 15%2 2020 1 2021 2022 2023 Earnings per share (cents)3 1H 2H 1H23 3.9 55 69 31 114 95 91 Up 26%2 33 FY20 FY21 FY22 1H23 2020 2021 2022 2023 1
Slide 8: Strengthened balance sheet
Strengthened balance sheet Capital above target range Well provisioned CET1 ratio $3.6bn above 12.3% top end of target range $4.9bn $1.5bn above 8.7% base case 7.4% $3.4bn 1 Mar-08 Mar-13 Mar-23 Total impairment provisions 100% base case ECL Significant increase in liquid assets Funding composition
Slide 9: Simpler, stronger bank
Simpler, stronger bank Simpler bank 9 Businesses 50 Co-located branches1 120 applications exited decommissioned 12% 1,700+ 47% Office space reduction ATMs – Armaguard reduction in major agreement2 technology incidents Stronger foundations • 87% of CORE program activities3 completed Design Implement
Slide 10: A strategy for growth and return
A strategy for growth and return PURPOSE Creating better futures together CUSTOMER EASY EXPERT ADVOCATE PILLARS care at the heart to do business with solutions and tools for positive change • Responsive & • Simple, safe, • Comprehensive • Financial inclusion & consistent service straightforward solu
Slide 11: Maintaining cost discipline
Maintaining cost discipline Expenses ($bn) • Looking to lift investment in growth and 1H23 1H 2H Notable items productivity over time 13.3 • Risk, regulatory and inflation costs persistent 12.7 2.3 • Moving away from FY24 absolute cost target 2.5 10.8 • Focus on improving cost to income ratio relati
Slide 12: Supporting customers – bank in your pocket
Supporting customers – bank in your pocket Carbon footprint tracker Open Banking1 Westpac Verify New Westpac Eftpos Air Android App New Westpac Personal Finance PayTo iOS App Management Strengthened Instant Digital Card Expense splitter and safeguards against New Business App and Dynamic CVC Voice s
Slide 13: Restoring mortgage market position
Restoring mortgage market position Established franchise Digitising to the Core One origination platform for Digital 1,350+ 20,000+ all consumer customers mortgage Bankers Active brokers • First party TTR2 down, • Decisioning from days simple deals at ~3 days3 to minutes Disciplined #2 • All brokers
Slide 14: Business Banking growth opportunity
Business Banking growth opportunity Disciplined growth Strong deposit base Deposits (%) Loans (%) Term deposits Property deposit to loan ratio 156% Agriculture Savings 16 29 27 Wholesale & retail trade Business lending growth 40 5 Transactions Professional services in targeted industries $133bn 7 $8
Slide 15: Reclaiming position as a leading institutional bank
Reclaiming position as a leading institutional bank Deeper relationships driving growth Financial performance Net loans ($bn) • Improved returns Revenue ($bn) Cost to income (%) 85 85 • More activity with existing customers 54.1 51.3 and products 43.6 • Markets sales and risk management income up 25
Slide 16: Michael Rowland, Chief Financial Officer
Michael Rowland Chief Financial Officer
Slide 17: 1H23 results summary compared to 2H22
1H23 results summary compared to 2H22 • Pre-provision profit1 $5,883m, up 15% • Revenue1 $10,871m, up 7% – higher Core NIM and non-interest income • Expenses1 $4,988m, down 1% – cost discipline Financial performance • Impairment charges 10 bps2, up 5 bps mainly from updated economics improved foreca
Slide 18: Notable Items and discontinuation of cash earnings
Notable Items and discontinuation of cash earnings • Statutory net profit after tax primary measure • Part of simplification agenda: − ASX and US results closely aligned − Full year results and annual report combined • Notable Items continued to be reported Notable Items1 ($m after tax) 1H22 2H22 1H
Slide 19: 1H23 Net profit
1H23 Net profit ($m) 1,231 4,001 80 51 (194) 617 (198) 2,414 1H23: AAML1 sale $256m gain 2H22: Life insurance sale $1,112m loss Pre-provision profit up 15% 2 2H22 Net interest Non-interest Expenses Impairment Tax & NCI Notable Items 1H23 income income charges 1 Advance Asset Management Limited. 2 No
Slide 20: Core NIM ex liquids up 12 bps
Core NIM1 ex liquids up 12 bps Net interest margin (%) Core NIM Notable Items, Treasury & Markets Impact on Group NIM (%) 2H22 1H23 Treasury & Markets 0.10 0.08 Notable Items: Economic 0.06 (0.02) Savings accounts ~11bps hedges and ineffectiveness Hedged deposits 2bps Competition, switching and mix
Slide 21: Disciplined lending growth
Disciplined lending growth ($bn) 6.6 0.1 (1.8) 749.9 5.2 0.7 (0.5) 739.6 Up $1.4bn in NZ$ 719.6 Up 1% Mar-22 Sep-22 Mortgages Business Institutional New Personal Auto Mar-23 (ex auto) Zealand (ex auto) (in A$) 20 Westpac Group 2023 Interim Results Presentation & Investor Discussion Pack
Slide 22: Non-interest income up 5%
Non-interest income up 5%1 ($m) Net fees1 Flat Wealth1 16% Markets and other1 43% • NZ: Lower interchange fees • Lower contribution from • Tightening credit spreads • Consumer: Lower payments businesses sold • Higher sales volumes remediation • One-off in 2H22 - Australian life • WIB: lower undrawn
Slide 23: 1H23 expenses down 1%
1H23 expenses down 1%1 ($m) Salary & wage increases and inflation 5,429 (390) 5,373 249 (194) (93) 5,039 20 (33) 4,988 Down 1% 1H22 2H22 Notable 2H22 ex Ongoing Cost Investment Risk Specialist 1H23 Items Notable expenses reset ex risk & reg Businesses Items benefits & reg 1 Excluding the impact of N
Slide 24: Investment
Investment ($m) Growth & productivity Risk & regulatory Growth and productivity investment increased • Mortgage origination platform 947 • Digital capability 868 • Corporate cash management platform • Business process simplification 294 Regulatory compliance remains a priority Up 13% 332 • CORE prog
Slide 25: Credit impairment charge / (benefit) composition
Credit impairment charge / (benefit) composition ($m) Individually assessed provisions (IAP) Collectively assessed provisions (CAP) Total Write-backs Write-offs Other movement New IAP & recoveries direct in CAP 390 310 218 228 218 196 123 139 97 76 (10) (17) (138) (166) (214) 1H22 2H22 1H23 1H22 2H2
Slide 26: Impairment provisions $1.5bn above base case
Impairment provisions $1.5bn above base case Total impairment provisions ($m) CAP to credit RWA of 1.33%, up 17bps Overlays Stage 1 CAP Stage 2 CAP Overlays higher Stage 3 CAP Stage 3 IAP • New NZ weather-related events overlay 4,923 4,682 • Construction reduced, reflected in modelled scenarios 4,63
Slide 27: Slight increase in early cycle delinquencies
Slight increase in early cycle delinquencies Stressed exposures as a % of TCE1 Australian mortgage delinquencies (%) Watchlist & Non-performing, 4.00 30+ day delinquencies 90+ day delinquencies Impaired substandard not impaired2 3.00 1.91 2.00 1.39 1.00 0.73 0.85 1.36 0.00 Mar-20 Sep-20 Mar-21 Sep-2
Slide 28: Capital above top end of target operating range
Capital above top end of target operating range CET1 Capital (%) 7bps (15bps) 62bps 8bps 12.28 82bps (45bps) 11.29 Target operating range: 11 – 11.5% Reduced RWA: • Property finance • Mortgages • Off-balance sheet Sep-22 Net profit ex Dividend 1 Basel III2 RWA Other 3 Divestments Mar-23 Notable Item
Slide 29: Dividend 70 cps, up 15%
Dividend 70 cps, up 15%1 Considers medium Sustainable Final dividend yield Neutralise term outlook for payout ratio 6.5%2, fully DRP return and growth range 65 – 75% franked 9.3%2 Dividends per ordinary share (cents) Dividend payout ratio (%) 1H22 2H22 1H23 Net profit 65 93 61 64 70 61 Net profit 69
Slide 30: 2H23 Margin outlook
2H23 Margin outlook1 • Core NIM peaked in Oct-22 Core NIM • Exit NIM2 1.88%, 2 bps below 1H23 average of 1.90% • Expecting mortgages to remain very competitive Lending • Deposit mix impact & deposits • Higher earnings on hedged deposits Capital • Higher earnings on capital • Small drag from roll-off
Slide 31: 2H23 Considerations
2H23 Considerations1 • Headwinds on margin • System credit growth easing • Focus on increasing business lending Revenue • Full period impact of business exits • Cost discipline maintained • Risk and regulatory costs, wages and inflation to remain elevated Expenses • Start 2H23 with sound credit qual
Slide 32: Peter King, Chief Executive Officer
Peter King Chief Executive Officer
Slide 33: Priorities and outlook
Priorities and outlook Slowing Credit portfolio Supporting economic growth resilient to date customers Strong financial position Disciplined growth Focus on cost reset provides flexibility Australian economic forecasts1 Dec-22 Dec-23 Dec-24 Cash rate 3.10% 3.85% 2.85% GDP 2.7% 1.0% 1.5% Unemployment
Slide 34: Investor Discussion Pack
Investor Discussion Pack
Slide 35: Why Westpac
Why Westpac Overview Australia’s first bank Improved total shareholder Second largest market share and oldest company return, dividend 70 cents per in Australian mortgages and founded in 1817 share up 15% in 1H231 household deposits3 Member of Net-Zero Banking Strong balance sheet with Alliance, sup
Slide 36: Earnings drivers
Earnings drivers AIfestpac Group
Slide 37: 1H23 Net profit
1H23 Net profit Earnings Net profit 1H22 – 1H23 ($m) Businesses sold, simplification benefits and Lower income from completion of some regulatory programs, businesses sold AIEA1 up 7%, core NIM2 up 20bps. average FTE3 down 4% Higher charge for collectively Impact of Treasury & Markets and assessed p
Slide 38: 1H23 Net profit
1H23 Net profit Earnings Net profit 2H22 – 1H23 ($m) AIEA up 4% due to loan growth and Reduction in third-party providers, property Changes in macro economic factors, New higher liquid assets. Core NIM up Stronger Markets costs, and other simplification benefits partly Zealand weather overlays and s
Slide 39: Single measure of performance – net profit
Single measure of performance – net profit Earnings • Westpac uses net profit to assess financial performance at both a Group and segment level • Notable Items broadly fall into the following categories: − Large items that are not reflective of the Group’s ordinary operations which may include: o Pr
Slide 40: Composition and movement in lending
Composition and movement in lending Revenue Composition of loans1,2 (% of total) Movement in gross loans ($bn) 4 <1 8 Australian mortgages 5 1 7 (2) 754 2 Australian business 744 (0) 724 10 Institutional $754bn Australian other consumer New Zealand mortgages Up 1% 12 63 New Zealand business/others U
Slide 41: Composition and movement in deposits
Composition and movement in deposits Revenue Customer deposits by type ($bn) Composition of deposits (% of total) Term deposits Savings Transaction Mortgage offset 613 628 18 581 601 53 54 54 52 Households 198 183 188 193 $628bn Businesses 56 199 211 Institutional 207 217 26 134 137 162 179 Sep-21 M
Slide 42: Net interest margin
Net interest margin Revenue Net interest margin (% and bps) Notable Items,T&M Core NIM 20bps 4bps (1bp) (2bps) (2bps) (8bps) 1.96 (11bps) 1.96 0.16 0.06 Core NIM 1.80 Exit 1.88% 1.90 1H23 1.90% 2H22 Loans Deposits Earnings on Wholesale Liquid assets Treasury Notable Items 1H23 capital funding & Mark
Slide 43: Non-interest income
Non-interest income1 Revenue Non-interest income by type ($m) Net fee income ($m) Fees Wealth management Markets Other WIB Consumer Business Other 845 827 827 1,529 1,485 116 111 102 1,422 61 82 162 165 163 66 265 248 266 409 339 281 302 303 296 219 248 232 1H22 2H22 1H23 Markets and other ($m) Mark
Slide 44: Expenses
Expenses Expenses Operating expenses declined 3% despite inflationary pressures1 697 (562) 5,373 (231) (95) (101) 5,142 (93) 4,988 Includes SFT2 expense Wage increases and inflation reimbursement Down 3% 1H22 Notable Items 1H22 ex Notable Ongoing Cost reset Investment Risk & reg Specialist 1H23 Item
Slide 45: Selected cost reset initiatives
Selected cost reset initiatives Expenses Metric FY20 baseline FY22 1H23 Portfolio 1 under sale • Sale of non-core businesses 7 completed 9 completed7 simplification agreement • Mortgages processed on digital 32% 82% 92%8 origination platform1 Business • Consumer sales via digital2 42% 43% 43% simpli
Slide 46: 1H23 impairment charge of $390m
1H23 impairment charge of $390m Impairment charges Impairment charges ($m) Individually assessed Collectively assessed Total New Write-backs & Write-offs Other mvmts 390 IAPs recoveries direct in CAP 310 218 228 218 196 123 139 97 76 (10) (17) (138) (166) (214) 1H22 2H22 1H23 1H22 2H22 1H23 1H22 2H2
Slide 47: Credit quality and provisions
Credit quality and provisions
Slide 48: Provisions for expected credit loss
Provisions for expected credit loss Credit quality Total provisions for expected credit losses1 ($m) Expected credit loss1 (ECL) ($m) Stage 3 IAP Stage 3 CAP Stage 1 CAP Overlay Total provisions $1.5bn in provisions above the base case economic scenario 6,836 COVID-19 6,163 4,923 708 3,391 5,007 4,9
Slide 49: Provision cover
Provision cover Credit quality Key ratios Mar-22 Sep-22 Mar-23 Provisions to gross loans (bps) 65 62 65 Impaired asset provisions to impaired assets (%) 48 48 43 Collectively assessed provisions to credit RWA (bps)1 116 116 133 Exposures as a % of TCE Provisioning to TCE (%) Mar-22 Sep-22 Mar-23 Sta
Slide 50: Credit quality metrics stable
Credit quality metrics stable Credit quality Stressed exposures as a % of TCE Movement in stress categories (bps) 4 1 (1) 110 Watchlist & substandard Non-performing, not impaired Impaired 107 (1) 1.91 Increase driven by change in methodology following 0.85 regulatory change1 Sep-22 Impaired Non- Sub
Slide 51: Portfolio composition
Portfolio composition Credit quality Total committed exposure (TCE) by risk grade at 31 March 2023 ($m) Standard and Poor’s risk grade1 Australia NZ / Pacific Other overseas Group % of total AAA to AA- 221,184 25,119 19,502 265,805 22% A+ to A- 39,054 5,618 9,539 54,211 4% BBB+ to BBB- 71,205 12,087
Slide 52: Credit quality across sectors
Credit quality across sectors Credit quality Corporate and business stressed exposures by industry sector (%) Mar-22 Sep-22 Mar-23 8.0 Upgrade of a Increased stress Mostly downgrades to small number 7.0 mostly in New of exposures watchlist (loans are 6.0 Zealand dairy Decrease driven by still perfor
Slide 53: Sectors in focus: Commercial property
Sectors in focus: Commercial property Credit quality • Single Group-wide credit policy, Commercial property exposures Commercial property portfolio supported by industry concentration (% of TCE) composition (TCE) (%) limits and sub limits Sector5 • Managed by specialist relationship 6.5 6.5 6.4 6.4
Slide 54: Sectors in focus: Accommodation, cafes and restaurants; construction
Sectors in focus: Credit quality Accommodation, cafes and restaurants; construction Accommodation, cafes and restaurants Mar-22 Sep-22 Mar-23 Portfolio security composition3 (TCE) (%) Portfolio by sub-sector (TCE) (%) Total committed 9.9 10.2 10.2 4 4 Accommodation exposure (TCE) ($bn) 22 Fully secu
Slide 55: Sectors in focus: Australian agriculture; mining
Sectors in focus: Credit quality Australian agriculture; mining Australian agriculture Mining (incl. oil and gas) Mar-22 Sep-22 Mar-23 Mar-22 Sep-22 Mar-23 TCE ($bn) 13.4 13.7 14.3 TCE ($bn) 8.4 7.9 8.7 Lending ($bn) 10.6 11.3 11.3 Lending ($bn) 3.4 3.1 2.8 As a % of Group TCE 1.16 1.16 1.17 As a %
Slide 56: Sectors in focus: Retail trade; aged care and retirement
Sectors in focus: Credit quality Retail trade; residential aged care and retirement Retail trade Residential aged care and retirement Mar-22 Sep-22 Mar-23 Mar-22 Sep-22 Mar-23 TCE ($bn) 12.5 11.9 12.4 TCE ($bn) 3.7 3.1 2.9 Lending ($bn) 8.3 8.6 7.8 Lending ($bn) 1.6 1.7 1.6 As a % of Group TCE 1.08
Slide 57: New Zealand business exposures
New Zealand business exposures Credit quality Business TCE by industry sector % Business stressed exposures as a % of business TCE Impaired 90+ day past due and not impaired Watchlist & substandard 3 2 11 3 4 3.3 Increase in stress from agriculture1, 3.1 commercial property and trade 5 reflecting hi
Slide 58: New Zealand business exposures
New Zealand business exposures Credit quality Sectors in focus Agriculture1 Dairy4 Mar-22 Sep-22 Mar-23 Mar-22 Sep-22 Mar-23 TCE (NZ$bn) 10.6 10.5 10.3 TCE (NZ$bn) 6.3 6.3 6.3 Agriculture as a % of total TCE 7.4 7.2 7.0 Dairy as a % of total TCE 4.4 4.3 4.2 % of portfolio graded as ‘stressed’2,3 6.1
Slide 59: Australian consumer finance
Australian consumer finance Credit quality Australian consumer finance portfolio1 Australian consumer finance 90+ delinquencies (%) 6.0 Credit cards Personal loans Auto loans Mar-22 Sep-22 Mar-23 (consumer - in run off) Lending ($bn) 12.8 11.7 11.0 5.0 4.0 As a % of Group loans 1.8 1.6 1.5 2.85 3.0
Slide 60: Australian mortgage delinquencies
Australian mortgage delinquencies Mortgage credit quality Australian mortgage portfolio Mar-19 Mar-22 Sep-22 Mar-23 Australian mortgage delinquencies (%) Pre COVID-19 30+ day delinquencies 4.0 90+ day delinquencies 90+ day delinquencies (bps): 90+ dpd excl. 6 months serviceability hold-out period To
Slide 61: Australian mortgage portfolio composition
Australian mortgage portfolio composition Mortgage credit quality Mar-22 Sep-22 Mar-23 1H23 Owner occupied / Investment property loans as a % Australian mortgage portfolio balance balance balance flow1 of the Australian mortgage portfolio Total portfolio ($bn) 458.3 467.6 472.7 49.7 OO IPL 64 66 66
Slide 62: Australian mortgage portfolio
Australian mortgage portfolio Mortgage credit quality Sound fundamentals maintained By product and repayment type (%) By State (%) Mar-22 (Portfolio) Sep-22 (Portfolio) Mar-23 (Portfolio) 1H23 Flows Mar-22 (Portfolio) Sep-22 (Portfolio) Mar-23 (Portfolio) 1H23 Flows 62 63 64 66 41 41 41 39 31 29 29
Slide 63: Australian mortgage portfolio – LVRs remain low
Australian mortgage portfolio Mortgage credit quality LVRs remain low Australian housing loan-to-value ratios (LVRs) (%) Serviceability assessment creates a buffer for borrowers 100 • Loans are assessed at the higher of 1H23 drawdowns LVR at origination Portfolio LVR at origination − The customer ra
Slide 64: Mortgage buffers largely unchanged in 1H23
Australian mortgage portfolio Mortgage credit quality Mortgage buffers largely unchanged in 1H23 Australian home loan customers ahead on repayments1 Australian home loan customers ahead on repayments1 (% by accounts) (% by balances) Mar-22 Sep-22 Mar-23 1 >2yrs 31 30 30 25 >6mths <2yrs 32 23 22 <6 m
Slide 65: Fixed rate mortgage roll-off closely managed
Australian mortgage portfolio Mortgage credit quality Fixed rate mortgage roll-off closely managed • Most fixed rate borrowers are well placed Australian fixed rate mortgage expiry Australian mortgage portfolio by to manage higher repayments schedule ($bn, every 6 months to) income band (%) − Borrow
Slide 66: Identifying and supporting customers at risk
Australian mortgage portfolio Mortgage credit quality Identifying and supporting customers at risk • Increase in repayments greatest for those loans originated Mortgages originated between between August 2019 and June 2022, during historically low Aug-19 and Jun-223 Dynamic LVR with no LMI (42% of t
Slide 67: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting Mortgage credit quality Credit policy at March 2023 Australian mortgage portfolio by • Verified via payslips, tax returns or salary credits, with other supporting documentation such as year of origination (% of total book) Income PAYG payment summaries or A
Slide 68: Interest only and investment property lending
Australian mortgage portfolio Mortgage credit quality Interest only and investment property lending Interest only (I/O) lending by dynamic LVR1 and income Investment property portfolio by number of properties band (% of total I/O lending) per customer (%) Applicant gross income bands 1 55 <$100k $10
Slide 69: New Zealand consumer portfolio
New Zealand consumer portfolio New Zealand credit quality Mortgage 90+ day delinquencies1 (%) Unsecured consumer 90+ day Mortgage portfolio Sep-22 Mar-23 delinquencies1 (%) 0.6 3.0 Total portfolio (NZ$bn) 63.8 65.2 0.5 Owner occupied (%) 73.3 73.7 0.4 2.0 0.29 Investment property loans 0.3 26.7 26.3
Slide 70: Non-financial risks
Non-financial risks AIfestpac Group
Slide 71: CORE program
CORE program Non-credit risks 87% of activities complete1 • Customer Outcome Risk Excellence CORE activities progress1 program (CORE) activities progressing Sep-21 Sep-22 Mar-23 and targeted to be complete by end of 20232 Design 76% • Addresses issues raised by enforceable undertaking with APRA sign
Slide 72: CORE program
CORE program Strengthening risk governance, accountability and risk culture Non-credit risks Target states Measures of progress We are a well-run 1 “People constructively “Jobs…are designed to have “Clear in how expected to High-rated issues2 business where challenge…”1 clear objectives and manage r
Slide 73: Our cyber security protection
Our cyber security protection Non-credit risks Continued investment in cyber security Customers Significant sources of threat from Core Security Targeted ransomware Espionage & critical System Security infrastructure attacks Data Monitoring, intelligence and networks Our cybersecurity controls Emplo
Slide 74: Digital banking security initiatives
Digital banking security initiatives Non-credit risks Helping protect customers and reducing fraud and scams Real-time blocking of potentially Biometric fraud detection Westpac Verify alerting customers questionable online merchants Better customer experience, to potential scams including account Sa
Slide 75: Capital, funding and liquidity
Capital, funding and liquidity
Slide 76: CET1 capital ratio 12.3%
CET1 capital ratio 12.3% Capital, funding and liquidity Above target operating range of 11.0% – 11.5% Level 2 CET1 capital ratio movements (%, bps) Key capital ratios (%) Mar-22 Sep-22 Mar-23 Level 2 CET1 capital ratio 11.3 11.3 12.3 Additional Tier 1 capital ratio 2.1 2.1 2.2 7 (18) 3 62 8 12.28 82
Slide 77: Risk weighted assets
Risk weighted assets Capital, funding and liquidity Risk weighted assets1 (RWA) ($bn) Exposure changes and Annual update based on higher market volatility APRA’s Standardised Measurement Approach 477.6 (23.7) 5.9 (8.0) 460.0 3.6 (2.4) 2.0 (1.0) (2.2) 1.1 452.9 Credit risk down $21.5bn1 or 6% See bel
Slide 78: APRA’s revised capital framework
APRA’s revised capital framework Capital, funding and liquidity Credit RWA reduced by $23.7 billion Impact on Westpac Changes in credit RWA include • APRA’s revised capital framework effective on 1 January 2023 • Property: Closer alignment to international standards. Greater use of internal modellin
Slide 79: Additional Tier 1 (AT1) and Tier 2 capital
Additional Tier 1 (AT1) and Tier 2 capital Capital, funding and liquidity AT1 and Tier 2 capital ($bn) Westpac AT1 profile1,4 (notional amount, A$bn) AT1 Tier 2 AUD USD 3.6 USD 2 AT1 24 24 20 1.7 1.9 1.8 1.4 1.5 WCN6 WCN5 WCN7 WCN9 WCN8 1.7 10 10 10 Mar-22 Sep-22 Mar-23 FY23 FY24 FY25 FY26 FY27 FY28
Slide 80: Loss-absorbing capacity and capital securities
Loss-absorbing capacity and capital securities Capital, funding and liquidity Loss-absorbing capacity (LAC) AT1 and Tier 2 securities • Australian D-SIBs are required to increase • Primary method of loss absorption is contractual conversion into ordinary Total Capital to meet APRA’s LAC shares requi
Slide 81: Regulatory capital changes
Regulatory capital changes Capital, funding and liquidity Expected impact on the Group’s Implementation Change Details capital ratios CPS 190 Financial APRA has released two draft prudential standards for consultation for banks to: Contingency Planning • Develop plans to respond to financial stress
Slide 82: Internationally comparable capital ratio reconciliation
Internationally comparable capital ratio reconciliation1 Capital, funding and liquidity APRA’s capital requirements are more conservative than those of the Basel Committee on Banking Supervision (BCBS), leading to lower reported capital ratios by Australian banks. The following details the adjustmen
Slide 83: Well placed on internationally comparable capital
Well placed on internationally comparable Capital, funding and liquidity Common equity Tier 1 ratio (%)1 20% 15% 10% Agricultural Bank of China China Construction Bank Toronto Dominion Bank China Merchants Bank Royal Bank of Canada Standard Chartered Credit Agricole SA Norinchukin Bank JPMorgan Chas
Slide 84: Liquidity risk management
Liquidity risk management Capital, funding and liquidity Key metrics Details Westpac 1H23 • LCR requires banks to hold a sufficient reserve of HQLA to allow them to survive a period 135% Liquidity Coverage of significant liquidity stress lasting 30 calendar days (March 2023 Ratio (LCR) • Westpac is
Slide 85: Liquidity Coverage Ratio
Liquidity Coverage Ratio Capital, funding and liquidity LCR (March 2023 quarterly average, $bn) Movement in LCR (quarterly average, %) LCR 135% 186 7 5 Net cash outflows (NCOs) 2 138 0 135 Other flows1 132 (11) 26 Wholesale funding 15 Customer deposits 186 97 Liquid assets High Quality Liquid Assets
Slide 86: Funding
Funding Capital, funding and liquidity Focus on stable funding sources Funding composition (%) Net stable funding ratio (%) • Customer deposits provide 65% of total funding 701 Wholesale • Additional 22% from stable sources of long-term wholesale and equity funding and 590 other liabilities NSFR Cor
Slide 87: Long term wholesale funding
Long term wholesale funding Capital, funding and liquidity Well managed long term wholesale funding profile • Well diversified issuance across Term debt issuance and maturity profile1 ($bn) currencies, programs and tenors Issuance Maturities • SEC registration a key advantage 43 40 in USD market acc
Slide 88: Long term wholesale funding
Long term wholesale funding Capital, funding and liquidity Long term wholesale funding well diversified 1H23 term debt issuance1 (%) By program (%) By currency (%) By tenor (%) 7 1 7 10 20 AUD 2 years USD 38 25 3 years Senior bonds EUR 25 Covered bonds GBP 5 years 58 81 Other >5 years 29 Charts may
Slide 89: Customer franchise
Customer franchise AIfestpac Group
Slide 90: 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 12 18% 7.8 7.8 16% 7.6 7.6 7.6 9 Consumer 6% 7.5 7.5 7.5 7 5% 7.4 7.4 6 5 11% 12% 1 1 2 Sep-22 Mar-23 -1 0
Slide 91: Australian banking digital metrics
Australian banking digital metrics Customers continue to migrate to digital Digitally active customers1 (#m) Digital transactions1,2 (#m) Mobile wallet payments1 (#m) 5.64 320 5.48 372 356 5.31 334 273 5.24 316 5.15 298 213 158 Up 4% 124 Up 17% Up 3% Up 6% Up 11% Up 50% Mar-21 Sep-21 Mar-22 Sep-22 M
Slide 92: Digital initiatives in 1H23
Digital initiatives in 1H23 Customer franchise Improving the digital banking experience for our customers Accessibility & Ecosystems Business Payments & Money Fraud & Scams Servicing Rewards & offers Offering Transactions Management Actionable push Voice search, Open new Expense splitter cashback –
Slide 93: Sustainability
Sustainability AIfestpac Group
Slide 94: Our commitment to sustainability
Our commitment to sustainability Sustainability Creating better futures together Helping when Backing a stronger Collaborating it matters most Australia and New Zealand for impact • Supported 14,200+ Australian customers • Implementing our Climate Action Plan – • FY22 Modern Slavery Statement with h
Slide 95: Climate action plan
Climate action plan Sustainability Becoming a net-zero, climate resilient bank Progress Climate Action Plan priority areas • New Climate Change Position Statement 1. Net-zero, climate resilient operations and Action Plan, published • On track to reduce our FY23 Scope 1 and 2 direct operational emiss
Slide 96: Net-zero 2030 targets
Net-zero 2030 targets Sustainability Targets set for five sectors in our lending portfolio For details on our targets and target-setting approach refer to our ‘Net-Zero 2030 Targets and Financed Emissions – our methodology and approach’. We continue to integrate and operationalise our targets into o
Slide 97: Climate-related metrics
Climate-related metrics Sustainability Exposure to climate change solutions Breakdown of exposure to climate Mining exposure ($bn, TCE)1 change solutions ($bn, TCE)2 12.0 (% of TCE)1 8.7 10.8 10.8 8.4 10.1 2.4 7.9 2.2 0.7 Mar-22 Sep-22 Mar-23 9.3 2.9 8.9 5.4 5.4 5.0 TCE 46.2 $12.0bn 2.8 2.4 2.6 36.9
Slide 98: Sustainable finance
Sustainable finance Sustainability Helping customers transition to a low carbon future Mirvac QTC – green bond Atmos Renewable – green loan Mirvac – green loan Lightsource bp – green loan Supported the Queensland Treasury Acted as Joint Sustainability Supported Mirvac as Sustainability Supported Lig
Slide 99: Comprehensive sustainability reporting
Comprehensive sustainability reporting Sustainability A suite of disclosures for more information and depth Net-Zero 2030 Targets and Financed 2022 2022 Sustainability Climate Change Position Emissions – Our methodology and Annual Report Supplement Statement and Action Plan approach 2021 Annual Repo
Slide 100: Our people
Our people Sustainability Building capability, strengthening inclusion and diversity Strengthening gender diversity Measuring organisational health Building skills and capability Organisational Health Index score5 • Risk management – ~12,000 employees Females % Mar-23 Target Progress completed found
Slide 101: Segment results
Segment results AIfestpac Group
Slide 102: Consumer 1H23 performance
Consumer 1H23 performance Consumer Net profit ($m) Simplification benefits partly offset by higher Lower CAP from improvement in 90+ day AIEA up 2%, NIM up 2bps mortgage delinquencies. 2H22 charge staff expenses to enhance service levels was higher from an update to modelled economic scenarios 85 9
Slide 103: Business 1H23 performance
Business 1H23 performance Business Net profit ($m) Simplification benefits partly offset by increased Higher CAP reflecting changed economic AIEA up 3%, NIM increased 71bps investment to enhance service levels forecast partly offset by an overlay release 339 (2) 1 (93) (73) 851 679 Up $172m or 25% 2
Slide 104: WIB 1H23 performance
WIB 1H23 performance Westpac Institutional Bank Net profit ($m) Higher write-backs and recoveries more than Strong Markets performance offset the increase in CAP and low new IAP AIEA up 5%, NIM increased 12bps 150 (10) 31 (61) 574 83 381 306 Up $193m or 51% 1H22 2H22 Net interest Non-interest Operat
Slide 105: New Zealand 1H23 performance
New Zealand 1H23 performance1 New Zealand AIEA up 3%, Increase in CAP due to deterioration in Net profit ($m) Lower interchange fees Increase in risk and economic outlook, higher early cycle NIM up 6bps due to regulatory change regulatory spend delinquencies and weather related overlay 640 61 (19) (
Slide 106: New Zealand balance sheet
New Zealand balance sheet New Zealand Net loans (NZ$bn) Deposits (NZ$bn) 1.4 79.8 1.4 0.0 98.2 96.8 78.4 0.5 77.9 94.0 Up 1% Up 2% Mar-22 Sep-22 Consumer Business Mar-23 Mar-22 Sep-22 Consumer Business Mar-23 Loans (NZ$bn, % of total ) Customer deposits (NZ$bn, % of total) Mortgage Personal Business
Slide 107: Specialist Businesses 1H23 performance
Specialist Businesses 1H23 performance Specialist Businesses Net profit ($m) 256 493 Primarily loss on sale of Loss of income from Net gain Australian life insurance Simplification benefits on sale of Advanced Asset businesses sold Management Limited 1,112 257 33 19 237 (16) (25) (31) Businesses 126
Slide 108: Specialist Businesses portfolio
Specialist Businesses portfolio Specialist Businesses Businesses remaining Platforms Financials excluding Notable Items Change and businesses sold ($m) 1H22 2H22 1H23 on 2H22 • Average FUA1 balance of $130.8bn up 3% on 2H22 supported by higher equity markets, partly offset by net fund outflows Opera
Slide 109: BT Panorama
BT Panorama Specialist Businesses Panorama Platform FUA on BT Panorama4 ($m) Investors on BT Panorama4 (#) • Awarded Best Mobile Platform and Best Client Portal for the fifth 104,779 105,012 250,809 250,393 102,068 234,948 236,741 consecutive year1 95,891 • Awarded Highest Quality Platform rating2 4
Slide 110: Economics
Economics AIfestpac Group
Slide 111: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts Economics Key economic indicators (%) 2022 2023 Calendar years at 3 May 2023 Q2 Q3 Q4 Q1E Q2F Q3F Q4F 2021 2022 2023F 2024F World GDP1 - - - - - - - 6.0 3.3 3.0 3.1 Australia GDP2 3.1 5.9 2.7 2.5 1.8 1.2 1.0 4.6 2.7 1.0 1.5 Unemployment – end period 3.8
Slide 112: Australian housing market
Australian housing market Economics Prices stabilise, ahead of 2024 lift Australian dwelling prices (%, 3 month annualised) % 40 ‘Delta’ 35 2019 COVID-19 Macro-prudential election 30 measures 25 Macro- prudential 20 measures 15 10 5 0 -5 -10 rate cuts -15 rate hikes -20 Apr-15 Apr-16 Apr-17 Apr-18 A
Slide 113: New Zealand housing market
New Zealand housing market Economics Sharp downturn as interest rates have increased Monthly house sales and prices (% yr) New Zealand dwelling prices (index) Sales %yr Index Index 14,000 Sales (lhs) 40 Auckland House prices (rhs) 2750 2750 12,000 30 Canterbury 10,000 2250 2250 20 Wellington 8,000 1
Slide 114: Appendix
Appendix AIfestpac Group
Slide 115: Appendix 1: Net profit ex Notable Items
Appendix 1: Net profit ex Notable Items1 Appendix Change Change 1H23 – 1H22 1H23 – 2H22 $m 1H22 2H22 1H23 (%) (%) Net interest income 8,021 8,585 9,202 15 7 Non-interest income 1,710 1,589 1,669 (2) 5 Net operating income 9,731 10,174 10,871 12 7 Expenses (5,142) (5,039) (4,988) (3) (1) Pre-provisio
Slide 116: Appendix 2: 1H23 Notable Items and impact of businesses sold
Appendix 2: 1H23 Notable Items and impact of businesses sold1 Appendix Net Profit 2H22 Net Less Profit Less Net Profit Asset sales Notable Notable Less and Net Profit Items & Items Hedging hedging revaluations Less Impact of impact of & impact Notable Notable Notable Notable businesses business of b
Slide 117: Appendix 3: Notable customer remediation
Appendix 3: Notable customer remediation Appendix Milestones in 1H23 Provisions for customer compensation and associated costs • Paid $103 million to more than • There were no notable customer remediation provisions raised in 1H23 500,000 customers in 1H23 • Small customer remediations treated in re
Slide 118: Appendix 4: Businesses exited
Appendix 4: Businesses exited Appendix Divestment CET1 benefit Transactions completed Completed (bps, $m1) Westpac NZ Wealth Advisory Dec 2020 – Westpac General Insurance Jul 2021 12bps, ~$500m Vendor Finance Jul 2021 1bp, ~40m Westpac LMI Aug 2021 7bps, ~$300m Westpac Life-NZ- Limited Feb 2022 7bps
Slide 119: Appendix 5: Reinventure – investing in fintech businesses
Appendix 5: Reinventure – investing in fintech businesses Appendix Westpac has committed $150m in fintech venture capital funds, managed by Reinventure Reinventure enables Westpac to access insights and adjacent business opportunities, both in Australia and offshore The model also helps Westpac to s
Slide 120: Appendix 6: Sustainability – footnotes
Appendix 6: Sustainability – footnotes Appendix Our commitment to sustainability. 1. Spend with diverse and Indigenous suppliers are defined in the Glossary section in our 2022 Sustainability Index and Datasheet. 2. Westpac Scholars Trust (ABN 35 600 251 071) is administered by Westpac Scholars Limi
Slide 121: Appendix 6: Sustainability
Appendix 6: Sustainability Appendix Industry recognition Sustainability indexes Inclusion and diversity recognition Achieved highest ISS QualityScore Recognised in the Bloomberg Gender for Social dimension Member of the DJSI Indices Equality Index for the 7th consecutive year since 2002 Accredited a
Slide 122: Appendix 6: Sustainability
Appendix 6: Sustainability Appendix Key commitments and partnerships Toitū net carbonzero Principles for Responsible Banking certified (New Zealand) UN Sustainable Development Goals Paris Climate Agreement The Valuable 500 Signatory (2019) Since 2019 CEO Statement of Commitment (2016) Supporter (201
Slide 123: Appendix 7: Definitions – credit quality
Appendix 7: Definitions – credit quality Appendix Includes those credit exposures that are in default, but where it is expected that Non-performing not the full value of principal and accrued interest can be collected, generally by Includes exposures that have deteriorated to the point where full co
Slide 124: Appendix 7: Definitions – segments, earnings drivers, capital and liquidity
Appendix 7: Definitions – segments, earnings drivers, capital and Appendix liquidity Segments Capital and liquidity Consumer provides banking products and services, including mortgages, credit Capital ratios As defined by APRA (unless stated otherwise) Consumer cards, personal loans, and savings and
Slide 125: Appendix 7: Definitions – other
Appendix 7: Definitions – other Appendix Branch Consumer MFI Source: Fifth Dimension (5D) for March 2023 (1H23); DBM Consultants Consumer Branch transactions are typically withdrawals, deposits, transfers and payments transactions share Atlas for September 2022 (2H22), 6MR. MFI customers Net Promote
Slide 126: Investor Relations Team
Investor Relations Team Contact us Justin McCarthy Jacqueline Boddy General Manager, Investor Relations Head of Debt Investor Relations Andrea Jaehne Catherine Garcia Head of Investor Relations, Head of Investor Relations, Ratings Agencies and Analysis Institutional Rebecca Plackett James Wibberley
Slide 127: 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