Westpac Banking Corporation · ASX:WBC
Westpac Banking — H1 2013 Earnings Presentation
114 slides from Westpac Banking's earnings presentation, May 3, 2013
Slide 1: First Half 2013 Financial Result
For personal use only FIRST HALF 2013 FINANCIAL RESULT CASH EARNINGS BASIS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141.
Slide 2: Index
Index For personal use only Presentation of First Half 2013 Result 3 CEO summary 4 CFO details 14 Investor Discussion Pack of First Half 2013 Result 26 Overview 27 Features 39 Net interest income 40 Non-interest income 44 Markets and Treasury income 45 Expenses 46 Investment spend 48 Productivity 50
Slide 3: First Half 2013 Financial Result: Gail Kelly, CEO
For personal use only FIRST HALF 2013 FINANCIAL RESULT GAIL KELLY CHIEF EXECUTIVE OFFICER COMPARISON OF 1H13 VERSUS 2H12 CASH EARNINGS BASIS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141.
Slide 4: A strong 1H13 result
A strong 1H13 result For personal use only • A strong and balanced performance • All divisions performing well • Executing well against strategic priorities • Managing for the environment – Actively targeting areas where conditions more favourable – Disciplined where conditions more challenging – Co
Slide 5: A strong company
A strong company For personal use only Cash earnings ($m) Net interest margin (%) Customer deposit to loan ratio (%) 3,525 69.0 67.6 3,403 2.23 2.21 63.2 2.18 2.19 62.5 2.17 3,195 59.6 3,168 3,133 1H11 2H11 1H12 2H12 1H13 1H11 2H11 1H12 2H12 1H13 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Stressed assets to
Slide 6: A balanced performance
A balanced performance1 For personal use only • Customer deposit to loan ratio up • Cash ROE up 102bps to 16.1% 581bps to 69.0% • Common equity ratio 100bps • Customer return on credit higher. 10c special dividend RWA up 8bps to 4.0% • Asset quality improved, Strength Return • Margins up 2bps provis
Slide 7: Growth across all divisions
Growth across all divisions (core earnings1 $m) For personal use only Divisional contribution Westpac RBB St.George AFS 99 1,836 6 (37) 1,760 1,146 21 17 6 5,555 1,129 76 1,619 1,649 1,102 1,061 5,466 Up 2% 2H12 WRBB SGB BTFG WIB NZ Other 2 1H13 2H11 1H12 2H12 1H13 2H11 1H12 2H12 1H13 BT Financial G
Slide 8: Underlying customer momentum
Underlying customer momentum For personal use only Customers with 4+ products (%) Customer deposits ($bn) Loans ($bn) WRBB SGB 31.1 514 521 506 30.2 497 29.5 360 29.4 348 28.5 28.6 27.5 320 310 26.6 2H11 1H12 2H12 1H13 2H11 1H12 2H12 1H13 2H11 1H12 2H12 1H13 WIB trade volumes ($bn) FUM and FUA ($bn)
Slide 9: Improving returns remains a focus
Improving returns remains a focus For personal use only Net interest margin (%) Return on equity Average ordinary equity ($bn) 2.23 43.8 2.21 ROE (%) 2.18 2.19 2.17 42.9 42.3 1H11 2H11 1H12 2H12 1H13 40.1 16.50 Customer return on credit RWA1 (%) 16.13 15.85 38.6 15.60 4.0 15.11 3.9 3.9 1H12 2H12 1H1
Slide 10: Productivity funding investment
Productivity funding investment For personal use only $121m of efficiencies delivered in 1H13 Composition of investment spending (%) Structural change Infrastructure 12 12 10 • AFS/Group services $16m 14 22 26 • Supplier program $23m Regulatory change 19 46 32 $487m SIPs Continuous improvement $28m
Slide 11: Capital supports special dividend
Capital supports special dividend For personal use only • Strong capital ratio above Dividends (cents per share) preferred range Special dividend 10 • Fully franked ordinary dividend 86c 80 82 84 86 74 76 (up 2c) 65 60 • Neutralise DRP1 for 1H13 56 • Special, fully franked dividend of 1H09 2H09 1H10
Slide 12: Key result metrics
Key result metrics For personal use only Change Change 1H13 1H12 – 1H13 2H12 – 1H13 Reported NPAT $3,304m 11% 10% Cash earnings $3,525m 10% 4% Cash EPS 113.9c 8% 3% Core earnings1,2 $5,555m 6% 2% Impairment charges to average loans 17bps (7bps) (7bps) Common equity ratio APRA Basel III 8.7% 100bps3
Slide 13: Focused execution of clear strategic priorities
Focused execution of clear strategic priorities For personal use only 1 A strong company • Consistent increase in dividends 2 Reorient to higher growth/higher • Maintain ROE above 15% return sectors and segments 3 Continue building deeper • Grow customer return on credit customer relationships risk
Slide 14: First Half 2013 Financial Result: Philip Coffey, CFO
For personal use only FIRST HALF 2013 FINANCIAL RESULT PHILIP COFFEY CHIEF FINANCIAL OFFICER COMPARISON OF 1H13 VERSUS 2H12 CASH EARNINGS BASIS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141.
Slide 15: 1H13 built on a strong base
Quality & sustainability 1H13 built on a strong base For personal use only • 1H13 results built on a particularly Cash earnings ($m) good 2H12 3,525 • Result supported by 3,403 – Core earnings growth across 3,168 3,195 divisions 3,133 – Lower impairment charges 1H11 2H11 1H12 2H12 1H13 Composition o
Slide 16: A high quality performance
Quality & sustainability A high quality performance For personal use only • Straightforward result Markets related income ($m) – No material unusual items Markets Treasury 827 815 – No restatements to prior periods 656 648 563 376 – Reduced size and number of cash 305 415 334 earnings adjustments 28
Slide 17: Improved return with reduced leverage
Returns Improved return with reduced leverage For personal use only Return on average interest-earning 1H12 2H12 1H13 assets1 (AIEA) (%) Interest income (margin) 2.17 2.18 2.19 Non-interest income 0.93 0.98 0.99 Operating expenses (1.27) (1.28) (1.29) Impairment charges (0.21) (0.21) (0.15) Tax & no
Slide 18: Margins well managed
Returns Margins well managed For personal use only • Margins up 1bp to 2.19% Net interest margin1 (NIM) (%) • Margins excluding Treasury & Markets 2.7 NIM NIM excl. Treasury and Markets up 3bps to 2.06% 2.5 – Loan repricing offsetting higher deposit 2.3 costs 2.1 – Term wholesale funding impact neut
Slide 19: Expenses supporting investment
Investment / Productivity Expenses supporting investment For personal use only • Expenses up 2% Components of expense movements ($m) • Business as usual costs largely offset Up 2% Up 2% by productivity 29 (121) 129 19 3 3,800 • Most growth in expenses relates to (20) 3,741 10 27 3,724 higher investm
Slide 20: Asset quality continues to improve
Strength / Risk profile Asset quality continues to improve For personal use only Stressed exposures as a % of TCE1 Stressed exposures by sector ($bn) Watchlist & 6 substandard 1H12 2H12 1H13 90 days past due 1.94% well secured 5 Impaired 4 3 2007 2008 2009 2010 1H11 2H11 1H12 2H12 1H13 Mortgage 90+
Slide 21: Impairment charges
Strength / Risk profile Impairment charges For personal use only Impairment charge movements ($m) Economic overlay ($m) 33 (71) Balance at Sep-12 363 604 (105) Movement in property overlay (32) (18) 438 5 Movement in other overlays (3) Down $166m New sector overlays, mostly 63 manufacturing 2H12 WRB
Slide 22: Provision cover by portfolio category
Strength / Risk profile Provision cover by portfolio category For personal use only Exposuresasas Exposures a%a% 1 of TCE of TCE 1 Provisioning to TCE1 (%) 2H11 1H12 2H12 1H13 Performing portfolio Fully 98.06 • Small cover as low probability of 0.25 0.25 0.25 0.24 97.83 performing 97.52 97.74 defaul
Slide 23: Continued improvement in funding mix
Strength / Risk profile Continued improvement in funding mix For personal use only Sources and uses of funds over 1H131 ($bn) Stable funding ratio (SFR)3 (%) Sources of Uses of SFR 64 SFR 83 SFR 83 funds (10) funds 7 7 W'sale Onshore <1Yr 13 1 16 10 10 W'sale Offshore <1Yr 20 W'sale Onshore >1Yr 5 5
Slide 24: Capital above preferred range
Strength / Risk profile Capital above preferred range For personal use only • Common equity ratio up 58bps Common equity tier 1 ratio2 Basel III (%) – Good organic capital generation 114 (67) 11.40 1 8 2 8.74 – Benefits from capital allocation 7.74 8.16 efficiency – Improved asset quality harmonised
Slide 25: Considerations for 2H13
Considerations for 2H13 For personal use only • Lending growth likely to remain modest although some improvement off a low base • Deposit growth to remain faster than lending • Margin disciplines to remain; focus on balanced return/growth mix • Further productivity benefits funding investment • Cont
Slide 26: First Half 2013 Investor Discussion Pack
For personal use only FIRST HALF 2013 INVESTOR DISCUSSION PACK COMPARISON OF 1H13 VERSUS 2H12 CASH EARNINGS BASIS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141.
Slide 27: Overview
For personal use only FIRST HALF 2013 OVERVIEW COMPARISON OF 1H13 VERSUS 2H12 CASH EARNINGS BASIS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141.
Slide 28: Westpac Group at a glance
Westpac Group at a glance For personal use only • Australia’s first bank and first company, opened in 1817 Australian Financial Services (AFS)8 WIB Westpac NZ • Australia’s 2nd largest bank, and 11th largest bank in the world, ranked by market capitalisation1 Westpac Retail St.George BT Westpac West
Slide 29: 1H13 Financial snapshot
1H13 Financial snapshot For personal use only change1 change1 change1 change1 1H13 1H13 1H12– 1H13 2H12 – 1H13 1H12 – 1H13 2H12 – 1H13 Earnings Balance sheet Cash earnings2 ($m) 3,525 10% 4% Total assets ($bn) 678 4% - EPS2,3 (cents) 113.9 8% 3% Common equity tier 1 ratio6 (%) 8.7 100bps 58bps Core
Slide 30: Reconciliation between Cash earnings and Reported profit
Reconciliation between Cash earnings and Reported profit For personal use only Cash earnings policy1 Reported profit and Cash earnings2 adjustments ($m) • Westpac Group uses a measure of performance referred to as Cash earnings to assess financial performance 2H12 1H13 • This measure has been used i
Slide 31: Our strategic priorities
Our strategic priorities For personal use only Strategic priorities Priorities 1H13 versus 2H12 outcomes • Common equity ratio up 58bps to 8.72%, special dividend 10c 1 A strong company • Customer deposit to loan ratio up 14bps to 69.0% • Stressed assets to TCE down 23bps to 1.94% Strong • Collectiv
Slide 32: Delivering against key strategic priorities
Delivering against key strategic priorities For personal use only Consistent increase in ordinary Customer deposit to loan ratio Maintain strong ROE (%) dividends (cps) improving (%) 86.0 69.0 16.5 67.6 84.0 15.6 15.9 16.1 62.5 63.2 15.1 59.6 82.0 80.0 76.0 1H11 2H11 1H12 2H12 1H13 Mar-11 Sep-11 Mar
Slide 33: Improving franchise quality
Improving franchise quality For personal use only Wealth penetration1 leads sector (%) Customer numbers up across brands (#m) Customers with 4+ products rising (%) Peer 1 Peer 2 Peer 3 WRBB SGB WRBB SGB SGB WRBB WBC Group 31.1 20.9% 6.01 6.08 6.13 30.2 18.6% 29.5 29.4 18.3% 28.6 15.2% 3.09 3.16 3.22
Slide 34: Westpac sustainability agenda 2013-2017
Westpac sustainability agenda 2013-2017 For personal use only • Sustainability is an integral part of the Westpac Shaping the future landscape – 10 initial objectives Group agenda since being the first bank in Australia to publish an environmental policy in Objectives 5 year aspirations 1992 Anticip
Slide 35: 1H13 Cash earnings growth built on strong FY12 performance
1H13 Cash earnings growth built on strong FY12 performance For personal use only Cash earnings 1H13 % change1 % change1 Cash earnings 1H12 – 1H13 ($m) Cash earnings 2H12 – 1H13 ($m) ($m) 1H12-1H13 2H12-1H13 247 (145) 170 (164) 166 (133) Net interest income 6,445 4 2 60 (76) 3,525 3,525 105 Non-inter
Slide 36: Growth driven by all customer facing business divisions
Growth driven by all customer facing business divisions For personal use only 1H13 divisional contribution to Cash earnings growth ($m)1,2 1H13 divisional contribution to core earnings growth ($m)1,2 AFS division 54 AFS division 99 17 (23) 74 3,525 21 6 (37) 17 6 5,555 58 (7) 76 3,403 3 5,466 Up 2%
Slide 37: 1H13 highlights quality franchise
1H13 highlights quality franchise For personal use only Cash earnings Core Business % of Group earnings Earnings summary Performance highlights unit Cash earnings1 $m % chg % change • Deposits up 3%, deposit to loan up 108bps • Deposits grew above system3 • Lending up 1%, with mortgage and consumer
Slide 38: Continued strong dividend growth path with a special dividend
Continued strong dividend growth path with a special dividend For personal use only • 1H13 record dividend of 86 cents, up 2% Dividends per share (cents) – Dividend yield1 5.6% – Equivalent to a fully franked dividend yield 1 of 7.3% Special dividend of 10c • Special dividend of 10 cents, fully fran
Slide 39: Features
For personal use only FIRST HALF 2013 FEATURES COMPARISON OF 1H13 VERSUS 2H12 CASH EARNINGS BASIS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141.
Slide 40: Sound operating income
Sound operating income For personal use only • Net operating income up 2% Net operating income movement half on half ($m) • Net interest income up 2% – Average interest-earnings asset growth of 2% 64 (64) 9 (74) 9,355 – Modest loan growth, strong customer deposit growth 105 79 46 207 35 (67) 9,190 –
Slide 41: Loan growth predominantly in Australian housing
Loan growth predominantly in Australian housing For personal use only • Westpac Group loans up 1% Net loans Sep12 – Mar13 ($bn) • Australian housing loans up 2% – Growth in new lending partly offset by high run-off as customers use lower rates to repay faster 5.5 (1.0) 0.4 0.7 0.8 0.3 521.1 514.4 •
Slide 42: Customer deposit growth funding loan growth
Customer deposit growth funding loan growth For personal use only • Customer deposits up $11.9bn or 3% Customer deposit composition3 ($bn and %) • Customer deposit growth well in excess of loan growth of $6.7bn • Growth was higher in at-call savings, as consumers sought increased Term deposits Savin
Slide 43: Underlying margin modestly higher
Underlying margin modestly higher For personal use only • Net interest margin (NIM) up 1bp to 2.19% Net interest margin1 (%) • NIM excluding Treasury and Markets 3bps higher as asset re-pricing offset higher deposit costs NIM NIM excl. Treasury and Markets – 7bps increase primarily from re-pricing o
Slide 44: Non-interest income solid performance
Non-interest income solid performance For personal use only • Non-interest income up 2% Non-interest income ($m) – Fees and commissions up 1% to $1,330m, with higher business facility fees Fees and Commissions – Wealth and insurance down 7% to $934m, with higher wealth performance fees offset by a s
Slide 45: WIB Markets and Treasury income
WIB Markets and Treasury income – strong result driven by customer flows For personal use only • Strong WIB Markets income of $444m, up 12% (up 31% on 1H12) on the WIB Markets income and customer activity ($m) back of good customer flows – Customer activity $307m, up 11% (up 12% on 1H12), supported
Slide 46: Expenses up 2% with continued investment
Expenses up 2% with continued investment For personal use only • Expenses up 2% contributing to a 10bps increase in expense to income Expense growth (%) ratio to 40.6% (down 51bps on 1H12) • Well controlled business as usual costs (up 0.4%), with $121m worth of Expense growth Expense to income ratio
Slide 47: Efficiency leader of peers and all banks in developed markets
Efficiency leader of peers and all banks in developed markets For personal use only Global peer comparison of expense to income ratios1 (%) 76.5 72.0 70.0 68.0 63.5 63.1 62.8 62.0 60.5 57.7 57.3 56.7 55.7 54.2 53.9 52.8 52.7 51.7 49.0 48.1 47.6 45.6 45.5 45.4 45.1 44.4 42.5 41.3 40.6 35.3 32.6 Wells
Slide 48: Investment spend well managed
Investment spend well managed For personal use only • Total cash spend on investments increased to $487m Capitalised software & deferred – 1H12 2H12 1H13 SIPs cash spend eased to $91m as a number of projects were expenses ($m) completed. Total cash spent on SIPs to date is $1,468m and remains on tra
Slide 49: Investment program focused on delivering returns
Investment program focused on delivering returns For personal use only • Investment spend in 1H13 of $487m in line with 2H12 Investment • Investment spend composition weighted heavily towards growth and productivity (45%) and regulatory change (26%) Years Major programs • SIPs was 19% of investment
Slide 50: Continuous productivity focus and improvement
Continuous productivity focus and improvement For personal use only • Westpac Group has implemented a variety of programs over recent years Over $1bn saved from efficiency programs over last 3.5 years ($m) to maintain a strong efficiency advantage relative to peers that has delivered over $1bn in sa
Slide 51: Investment programs modernising technology and capability
Investment programs are progressively modernising our technology and capability For personal use only 2009 2011 2013 2015 2017 Key SIPs outcomes Ongoing focus areas Key Digital signatures – online Enhanced digital enablement – including mobile signatures/account authorities Channels Cards consolidat
Slide 52: Improvements in asset quality leading to lower impairment charges
Improvements in asset quality leading to lower impairment charges in 1H13 For personal use only New IAPs, write-backs and recoveries ($m) Impairment charge movements ($m) Includes 23% reduction in new IAPs, with fewer companies downgraded to impaired and 33 (71) 976 983 604 top-ups to existing IAPs
Slide 53: Capital, Funding & Liquidity
For personal use only FIRST HALF 2013 CAPITAL, FUNDING & LIQUIDITY COMPARISON OF 1H13 VERSUS 2H12 CASH EARNINGS BASIS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141.
Slide 54: Strong capital position, up across all measures
Strong capital position, up across all measures For personal use only • Westpac’s capital ratios are now fully reported on an APRA Basel III Key capital ratios2 (%) 1H12 2H12 1H13 basis with prior periods reported under Basel 2.5 Common equity tier 1 ratio 8.0 8.4 8.7 • Transitioning to Basel III le
Slide 55: Clear direction on preferred capital range
Clear direction on Westpac’s preferred capital range For personal use only Board approved Basel III preferred capital range APRA Basel III Common equity ratio - preferred range (%) • Preferred range common equity tier 1 ratio of 8.0% to 8.5%, comfortably above APRA minimums and capital conservation
Slide 56: APRA to BCBS Basel III reconciliation
APRA to BCBS Basel III reconciliation For personal use only • The Australian Prudential Regulation Authority (APRA) has maintained the conservative stance adopted under its Basel II capital standards, resulting in a significant variance between capital measured under APRA and fully harmonised Basel
Slide 57: Fully harmonised common equity tier 1 ratio above local peers
Fully harmonised common equity tier 1 ratio above local peers and at the upper end of global peers For personal use only Global peer comparison of Basel III pro-forma Common equity tier 1 ratios (%)1 15.0 14.4 14.0 13.5 13.0 12.0 11.8 11.6 11.4 11.0 10.8 10.6 10.5 10.3 10.1 10.0 9.6 9.4 9.3 9.3 9.3
Slide 58: Risk weighted assets relatively flat over half
Risk weighted assets relatively flat over half For personal use only • Basel III pro forma adjustments added $10.7bn to reported RWA at RWA movements ($bn) 30 September 2012 – $12.0bn increase in credit RWA 11 309 (3) 3 1 308 (2) 0 298 – Removal of $1.3bn RWA for equity risk as equity investments ar
Slide 59: Strong funding profile supported by customer deposit growth
Strong funding profile supported by customer deposit growth For personal use only • Stable funding ratio 83%, up 30bps Funding composition by residual maturity (%) – Increase in customer deposit funding of $11.9bn to 59% of total funding – Small decrease in short term funding of $0.5bn SFR4 64% SFR4
Slide 60: Customer deposits continue to fund loan growth
Customer deposits continue to fund loan growth For personal use only • Customer deposit growth continuing to fund Westpac deposit growth funding loan growth loan growth – 142bps improvement in deposit to loan Customer deposit growth ($bn) Net loan growth ($bn) Customer deposit to loan ratio (%) rati
Slide 61: Term issuance focused on flexibility and diversity
Term issuance focused on flexibility and diversity For personal use only New term issuance by type1 (%) New term issuance by original tenor1,2 (%) FY12 2013 year to date 1H13 FY12 FY12 20131H13 year to date 3 0 9 15 27 10 9 8 15 47 21 46 40 24 12 33 23 45 12 1 Senior unsecured Covered bonds RMBS & A
Slide 62: Asset Quality
For personal use only FIRST HALF 2013 ASSET QUALITY COMPARISON OF 1H13 VERSUS 2H12 CASH EARNINGS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141
Slide 63: High quality portfolio with bias to secured consumer lending
High quality portfolio with bias to secured consumer lending For personal use only Asset composition as at 31 March 2013 (%) Cash and balances with central banks Total assets On balance sheet lending Receivables due from other financial institutions 18 Trading securities, financial assets at fair va
Slide 64: Diversification across industries and large exposures
Diversification across industries and large exposures For personal use only Exposures at default1 by sector ($m) Top 10 exposures to corporations and NBFIs as a % of TCE5 (%) • Top 10 single name exposures to corporations and non-bank financial Finance & insurance2 institutions (NBFIs) continue to b
Slide 65: Commercial property portfolio comfortably within appetite
Commercial property portfolio comfortably within appetite For personal use only Commercial property exposures size ($bn) and % of TCE1 Commercial property portfolio by sector and region (%) Commercial property exposure ($bn) 9 18 9.6 70 9.1 Commercial Property as % of TCE 10.00 9 17 17 8.0 7.7 40 7.
Slide 66: Asset quality improvement and strong provisioning
Asset quality improvement and strong provisioning For personal use only Stressed exposures as a % of TCE1 (%) and provisions ($m) Provisioning coverage ratios 1H12 2H12 1H13 Watchlist & substandard (lhs) 90+ days past due well secured (lhs) Collectively assessed provisions to 116bps2 108bps2 106bps
Slide 67: Downward trend in stressed exposures
Downward trend in stressed exposures For personal use only Stressed exposures by industry ($bn) New and increased gross impaired assets ($m) 6 1H12 2H12 1H13 2,149 1,798 1,748 1,519 5 1,343 1,218 1,194 1,060 997 4 3 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2 Movement in stressed exposures ($bn)
Slide 68: High quality mortgage portfolio, with strong collateralisation
High quality mortgage portfolio, with strong collateralisation For personal use only Westpac Australian housing 2H12 1H13 1H13 Australian housing portfolio3,4,5 (%) portfolio1 Balance Balance Flow2 Total portfolio ($bn) 316.3 321.9 25.3 LVR at origination Dynamic LVR 70 Owner-occupied (%) 48.2 48.1
Slide 69: Australian housing portfolio delinquencies remain low
Australian housing portfolio delinquencies remain low For personal use only Delinquencies Australian mortgages delinquencies and loss rates (%) • 90+ days delinquencies remain at low levels at 58bps, up 6bps (up 4bps on 90+ Past Due Total 90+ First Home Buyer 1H12) with some impact from seasonal tre
Slide 70: Prepayment levels and serviceability remain strong
Prepayment levels and serviceability remain strong For personal use only • Australian mortgage customers continue to display a cautious approach to Australian home loan customers ahead on repayments1,2 (%) debt levels, taking advantage of lower rates to pay down debt Sep-12 Mar-13 Mar-13 including m
Slide 71: Australian investment property portfolio sound
Australian investment property portfolio sound For personal use only • Investment property loans (IPLs) make up Australian mortgage1 loan-to-value ratio Australian mortgage1 applicants by gross 42.2% of Westpac’s Australian mortgage at origination (%) income band (%) portfolio Owner Occupied IPL Own
Slide 72: Mortgage portfolio stress testing outcomes
Mortgage portfolio stress testing outcomes For personal use only • Westpac regularly conducts a range of portfolio stress tests as part of its Australian mortgage portfolio stress testing as at 31 March 2013 regulatory and risk management activities • The Australian mortgage portfolio stress testing
Slide 73: 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 LMI coverage (%) Mortgage Insurance (WLMI), which insures mortgages originated through as at 31 March 2013 all brands and channels 1
Slide 74: Australian credit card portfolio continues sound performance
Australian credit card portfolio continues sound performance For personal use only • Credit card payment rates continue to reflect ongoing consumer Australian credit card average payments to balance ratio1 (%) deleveraging • The average payments to balance ratio for the Australian portfolio was 46.6
Slide 75: Business Units
For personal use only FIRST HALF 2013 BUSINESS UNITS COMPARISON OF 1H13 VERSUS 2H12 CASH EARNINGS BASIS (UNLESS OTHERWISE STATED) Westpac Banking Corporation ABN 33 007 457 141.
Slide 76: AFS Cash earnings up 3% in 1H13
AFS AFS Cash earnings up 3% in 1H13 For personal use only Cash earnings movement ($m) Key features of AFS in 1H13 141 24 (66) 33 (78) • Cash earnings up 3%. Core earnings up 3% 65 (59) 2,176 • Driven by strong growth across retail bank divisions. Wealth result affected 125 (39) 2,122 by usual season
Slide 77: AFS: Delivering performance at upper end of sector
AFS Delivering performance at upper end of sector For personal use only Wealth penetration1 (%) Net interest margins(%) Return on tangible equity (%) Peer 1 Peer 2 Peer 3 1H12 2H12 1H13 SGB WRBB WBC Group 2.97 3.08 2.98 24.9 24.7 20.9 2.21 2.25 2.31 22.7 18.6 2.08 2.16 2.20 18.3 15.2 14.0 13.8 Sep-0
Slide 78: AFS strong position, subdued growth environment
AFS strong position, subdued growth AFS environment in 1H13 For personal use only • Solid deposit growth exceeded loan growth, improving the deposit to loan ratio 130bps to 59.4% Westpac Group market share1 (%) • Deposits up $7.6bn or 3% Housing – Strong growth with customer preferences moving to sa
Slide 79: AFS high quality portfolio; strong risk profile
AFS high quality portfolio; AFS significant improvement in business For personal use only Strong risk profile1 Movement in impairment charges ($m) • AFS portfolio quality remains high, with stressed exposures as a % of TCE reducing 14bps to 1.84% (down 20bps on 1H12) 464 76 (43) 38 (109) • Impaired
Slide 80: WRBB: Strong franchise delivering a disciplined performance
WRBB Strong franchise delivering a disciplined performance For personal use only Cash earnings movement ($m) Movement 1H13 – 2H12 96 15 (35) (33) Cash 19 7 (6) 1,113 (40) 1,116 - - • Largely flat at $1,116m 70 22 earnings 1,001 Core 4% • Up 4% to $1,836m earnings • Deposits up 3% and deposit to lo
Slide 81: Deepening customer relationships through mobile innovation
Deepening customer relationships and leading WRBB customer experience through mobile innovation For personal use only Key features of 1H13 Key customer / employee metrics • Westpac Local strategy meeting more customer needs, combined with disciplined Change pricing, expenses and risk management deli
Slide 82: WRBB strategy driving uplift across key metrics
Strategy driving uplift across key metrics, WRBB delivering a stronger and more sustainable franchise1 For personal use only Core earnings ($m) Revenue per FTE2 ($’000) Employee engagement (%) 338 89 1,836 320 1,760 298 85 1,649 293 1,619 278 1,551 1,490 255 81 81 2H10 1H11 2H11 1H12 2H12 1H13 2H10
Slide 83: St.George delivering strong growth in 1H13
St.George delivering strong growth in 1H13 For personal use only Cash earnings movement ($m) Movement 1H13 – 2H12 71 (30) • Up 9% to $715m, with a positive contribution from all 55 (17) 715 Cash earnings 9% 47 (32) (21) brands 78 5 (15) 657 574 Core earnings 2% • Up 2% to $1,146m • Deposits up 4
Slide 84: Strong momentum in key operating metrics
Strong momentum in key operating metrics with reinvigorated strategy For personal use only Key features of 1H13 Key customer / employee metrics • St.George has continued strong momentum in 1H13 with a reinvigorated strategy, resulting in sustainably improved share in mortgages, deposits, and wealth
Slide 85: Local brands delivering sustainable growth
Local brands delivering sustainable growth and increasing the Group’s flexibility For personal use only Cash earnings by brand ($m) St.George in 1H13 BankSA in 1H13 • St.George (NSW/QLD/ACT/WA) Cash • BankSA Cash earnings higher due to a good 49 4 2 3 715 earnings higher supported by balance sheet m
Slide 86: Strategic priorities to drive growth/return
Strategic priorities to drive growth/return For personal use only Best Bankers, driving strong employee Revenue per FTE1 ($’000) Customers with 4+ products engagement (%) 83 363 29.4 354 81 341 28.6 80 338 78 326 27.5 Jul-09 Jul-10 Jul-11 Jul-12 1H11 2H11 1H12 2H12 1H13 1H12 2H12 1H13 Continue to dr
Slide 87: BTFG: Strong underlying growth across business
Strong underlying growth across business For personal use only Cash earnings movement1 ($m) Cash earnings ($m) Movement 1H13 – 1H123 Revenue upup$135 Revenue (14%) 120 (12%) Expenses up 53 (10%) Cash earnings up 44 (15%) • Flows revenue up $81m (8%) 27 (22) • All Platforms (including Corporate Super
Slide 88: BTFG: Underlying business momentum continues
Underlying business momentum continues For personal use only Cash earnings movement1 ($m) Cash earnings ($m) Movement 1H13 – 2H122 Revenue 16 (1%) Expenses up $31up(3%) Revenue Expensesup up$26 (4%) 10 (2%) Cash earnings down 7 (2%) • Flows revenue up $14m (1%) • Life Insurance in-force premium and
Slide 89: Ongoing improvement across many key metrics
Ongoing improvement across many key metrics For personal use only Key features of 1H13 Key customer / employee metrics • Cross sell continues to improve wealth penetration1 with Westpac Group Change on leading the sector at 18.6% (WRBB at 20.9% maintaining #1 and St.George #3 1H12 2H12 1H13 2H12 at
Slide 90: Increased planner numbers, productivity and cross-sell
Increased planner numbers, productivity, good cross-sell and improved markets contribute to FUA growth For personal use only Market leading revenue per salaried Aligned and salaried planner numbers up (#) Leading on wealth penetration3 (%) planner1,2 ($000) Bank median WBC Group 20.9 536 Salaried pl
Slide 91: Steady increase in FUM
Steady increase in FUM For personal use only Increased flows and markets contribute to FUM growth ($bn) BT Investment Management Retail Super/Other BTIM is ASX listed and a separately managed global asset manager (63% Advance1 share consolidated into BTFG) JOHCM • Spot FUM up 5% on Sep-12 to $35.9bn
Slide 92: Strong growth in Life and General Insurance
Strong growth in Life and General Insurance For personal use only Insurance Cash earnings contribution Life Insurance in-force premiums ($m) General Insurance gross written ($m) premiums ($m) Life LMI General 137 Up 16% 124 Up 18% 198 115 635 22 41 186 75 83 25 601 Up 6% Up 6% 36 22 24 17 37 170 540
Slide 93: WIB: Strong uplift in Cash earnings
Strong uplift in Cash earnings For personal use only Cash earnings movement ($m) Movement 1H13 – 2H12 105 (52) Cash earnings 10% • Cash earnings up 10% to $813m 813 45 (20) Core earnings 2% • Core earnings up 2% to $1,120m 78 (27) 3 734 (56) 7 739 (4) • Lending up $2.1bn or 4%, with good growth
Slide 94: Deep customer relationships core to WIB's strategy
Deep customer relationships core to WIB’s strategy For personal use only Extending WIB franchise Have the best PEOPLE who understand our customers’ needs • Focus on extending capabilities Invest in TECHNOLOGY and innovation where it matters most into fast growing Asian region, Asia connecting trade,
Slide 95: Australasia's number one institutional bank
Australasia’s number one institutional bank For personal use only Global Transactional Foreign Debt Relationship. Insight. Services. Exchange. Markets. No.1 Lead Relationship No.1 Most Useful No.1 Supply Chain No.1 Australian No.1 Australian Bank in Australia1 Analysis of the Finance – Product3 Bank
Slide 96: Maintaining customer focus
Maintaining customer focus For personal use only WIB customer revenue up 5% WIB revenue by business division • WIB’s strategic focus on deep and WIB 1H13 revenue composition enduring customer relationships % WIB Business Performance has supported growth in customer 1 revenue Customer Market risk Oth
Slide 97: Solid balance sheet growth
Solid balance sheet growth For personal use only Balance sheet Net interest margin • WIB balance sheet growth solid • Lending margins reflect – Deposits up $1.8bn, or 3%, building on WIB’s strong deposit – Asset prices coming off highs seen during the financial crisis growth in FY12 and benefiting f
Slide 98: Portfolio quality remains strong
Portfolio quality remains strong For personal use only Asset quality remains strong Movement in impairment charges/(benefits) ($m) • Significant reduction in the level of stressed assets leading to a benefit from 65 62 (37) impairments of $43m. Positive outcome reflects – New IAPs $28m lower, driven
Slide 99: New Zealand: Strong franchise and risk profile
New Strong franchise and risk profile in a low growth, Zealand competitive environment For personal use only Cash earnings movement ($m)1 Movement 1H13 – 2H121 26 (5) Cash earnings 2% • Cash earnings up 2% to $370m 5 (7) 370 5 (7) 19 Core earnings 2% • Core earnings down 2% to $582m 361 (8) 3 (7
Slide 100: Strong focus on investment and improving balance sheet strength
New Strong focus on investment and improving Zealand balance sheet strength For personal use only Key features of 1H13 Key customer / employee metrics • Sound performance which strengthened the franchise with a higher deposit Change 1H12 2H12 1H13 to loan ratio and improved asset quality on 2H12 • C
Slide 101: New Zealand strategy to drive sustainable returns
New Zealand Strategy to drive sustainable returns For personal use only Five strategic imperatives Next generation distribution • Transition to next generation distribution Changing customer preferences and improved technology is leading to material • Build a faster moving, more responsive and flexi
Slide 102: Strong deposit growth driving sustainable lending
New Strong deposit growth driving sustainable lending Zealand and reduced reliance on wholesale funding For personal use only • Strong deposit growth up 7% resulted in an improvement in the deposit to loan ratio to 75.1%, up 442bps in 1H13 Balance sheet2 ($bn) • Increase in total lending driven by h
Slide 103: New Zealand mortgage portfolio
New Zealand New Zealand mortgage portfolio For personal use only • Mortgage portfolio of $36.4bn, up 1% New Zealand mortgage portfolio by region (%) • The distribution of the mortgage portfolio across regions is consistent with population concentrations of New Zealand Auckland Wellington Christchurc
Slide 104: Improving asset quality across portfolios
New Zealand Improving asset quality across portfolios For personal use only Asset quality continues to improve1 Movement in impairment charges (NZ$m) • Impairment charges down 28% – Asset quality has continued to improve, driven primarily by lower 85 (2) (1) (108) incidence of business IAPs – Partia
Slide 105: Westpac Pacific: Strong business performance across the region
Westpac Pacific Strong business performance across the region For personal use only Cash earnings movement ($m) Movement 1H13 – 2H12 Down 5% Up 23% • Up 23% to $64m 64 Cash earnings 23% • Movements in exchange rates across the 19 1 region had little impact on Cash earnings 4 (3) 3 (11) or the comp
Slide 106: Economics
For personal use only FIRST HALF 2013 ECONOMICS Westpac Banking Corporation ABN 33 007 457 141.
Slide 107: Credit growth expected to modestly improve
Credit growth expected to modestly improve For personal use only Credit growth1 (% annual) Aust. housing Total credit (Aust.) Aust. business Housing - avg (Aust. 20yr) Total credit - avg (Aust. 20yr) Total credit (NZ) 30 30 Forecasts to end 2014 25 25 20 20 15 15 10 10 5 5 0 0 -5 -5 -10 -10 Dec-00 D
Slide 108: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts For personal use only Calendar year Key economic indicators as at 30 April 20131 (%) 2011 2012 2013f 2014f World GDP 4.0 3.2 3.4 3.1 Australia GDP 2.4 3.6 2.5 2.3 Private consumption 3.3 3.2 2.4 3.0 Business investment2,3 17.0 16.7 5.0 –1.0 Unemployment
Slide 109: Appendix and Disclaimer
For personal use only FIRST HALF 2013 APPENDIX AND DISCLAIMER Westpac Banking Corporation ABN 33 007 457 141.
Slide 110: Appendix 1: Cash earnings adjustments
Appendix 1: Cash earnings adjustments For personal use only Cash earnings 1H12 2H12 1H13 Description adjustment Reported NPAT 2,967 3,003 3,304 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 111: Appendix 2: Definitions
Appendix 2: Definitions For personal use only Westpac’s business units Financial performance Australian Financial Services is responsible for the Westpac Group’s Australian Australian Net profit attributable to equity holders adjusted for the impact of the economic retail banking, business banking a
Slide 112: Appendix 2: Definitions (continued)
Appendix 2: Definitions (continued) For personal use only Financial performance (cont.) Asset quality Net Net Promoter ScoreSM and NPSSM is a service mark of Bain & Company, Inc., Satmetrix Promoter TCE Total committed exposures Systems, Inc. and Mr Frederick Reichheld. Score (NPS) Stressed loans ar
Slide 113: Investor Relations Team
Investor Relations Team For personal use only Equity Investor Relations For further information on Westpac Please visit our dedicated website Andrew Bowden Leigh Short www.westpac.com.au/investorcentre click on ‘Analysts’ Centre’ Head of Investor Relations Senior Manager +61 2 8253 4008 +61 2 8253 1
Slide 114: 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