Westpac Banking Corporation · ASX:WBC
Westpac Banking — H1 2017 Earnings Presentation
134 slides from Westpac Banking's earnings presentation, May 8, 2017
Slide 1: 2017 Interim Financial Results
My ras ke @/y 1 ma eo} Sse i ie 2017 INTERIM FINANCIAL RESULTS 200 years proudly supporting Australia Westpac Banking Corporation ABN 33 007 457 141
Slide 2: Westpac 2017 Interim result index
Westpac 2017 Interim result index 3 Cover images, from left: For personal use only 2017 Interim Result Presentation Investor Discussion Pack of 2017 Interim Result 26 Bank of New South Wales employees with their families at the Officers’ Recreation Club annual staff picnic and Strategy 27 sports day
Slide 3: Basis of presentation
For personal use only Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 4: Another solid result
Another solid result 4 For personal use only • Cash earnings up 3% over the half and the prior corresponding period • Disciplined performance – Prioritised strength and return – CET1 10%, ROE 14% – Well-managed balance sheet – deposit to loan ratio 72% – Flat costs – expense to income ratio 41.7% •
Slide 5: Headline results
Headline results 5 Change Change For personal use only 1H17 1H17 – 2H16 1H17 – 1H16 Reported net profit after tax $3,907m 4% 6% Cash earnings $4,017m 3% 3% Cash EPS1 119.8c 2% 1% Common equity Tier 1 capital ratio2 10.0% 49bps (50bps) Return on equity (ROE)3 14.0% 11bps (20bps) Net tangible assets p
Slide 6: Prioritised strength and managing return
Prioritised strength and managing return 6 For personal use only • Capital above preferred range • Higher ROE • LCR1 & NSFR1 above minimums • Reduced low return assets; Property & WIB • Asset quality improved – stressed assets lower • Risk weighted assets down 1% • IAP2 coverage 52% • Margins lower
Slide 7: Portfolio of businesses delivering
Portfolio of businesses delivering 7 Cash earnings % 1H17 1H17 For personal use only Comments 1H17 – 2H16 change -2H16 -1H16 • Higher funding costs led to unchanged core earnings Consumer Bank (2) 5 • Flat expenses • Rise in impairments from higher delinquencies • Disciplined growth and expense mana
Slide 8: Strong balance sheet
Strong balance sheet 8 For personal use only Capital stronger High quality liquidity position (%) 10.5 CET1 capital ($bn) 10.0 50 LCR NSFR 127 134 CET1 capital ratio (%) 9.5 9.5 45 121 125 114 108 9.5 9.1 9.0 40 105 35 8.5 8.2 30 39 40 34 25 100% regulatory 30 7.5 25 28 20 minimum from LCR - Jan 201
Slide 9: Dividend maintained
Dividend maintained 9 For personal use only Dividends per ordinary share (cents) Dividend considerations Special dividends • Sustainability of the payout ratio over the long term – ratio lower 10 10 • CET1 capital ratio comfortably above preferred range • RWA lower • Surplus franking credits 92 93 9
Slide 10: Progress on our five strategic priorities
Progress on our five strategic priorities 10 For personal use only • Continued to balance capital, returns and funding Performance Discipline • Taken action on loan pricing to address margin pressure • Good progress on productivity: $118m in 1H17 savings • Restructured frontline incentives to emphas
Slide 11: Outlook
Outlook 11 For personal use only • Australian economy resilient, with good prospects • Increased global volatility remains a risk • House price growth expected to slow Prices high in Sydney and Melbourne Some weakness in other markets Mortgage serviceability remains strong with significant equ
Slide 12: Financial results basis
For personal use only Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 13: Results at a glance
Results at a glance 13 For personal use only Cash earnings movements ($m) Infrequent/volatile items ($m) $118m in productivity savings Cash earnings impact 1H16 2H16 1H17 161 (4) (36) Asset sales 0 (4) 4 (20) 4,017 3,918 (2) Markets income up 30.3% tax Performance fees 0 22 0 Wealth/insurance down r
Slide 14: Targeted balance sheet growth
Targeted balance sheet growth 14 Loan & deposit growth For personal use only Growth in key loan segments 1H17- 2H16 (%) 1H17- 2H16 (% and $bn) Customer deposit to loan 2.5 ratio 72% up from 70% 2.1 Includes decline in 1.9 commercial property 2.6% of $1.2bn (3%) (0.4) 0.8% $12bn $5bn (3.1) Total loan
Slide 15: Margins impacted by funding costs
Margins impacted by funding costs 15 For personal use only Net interest margin movement (% and bps) Treasury & Markets impact on NIM NIM excl. Treasury & Markets 2.11 (4bps) (1bps) (2bps) 4bps 0bps 2.07 0.07 (1bps) 0.07 2.04 2.00 2H16 Customer Term Capital Liquidity Loans Treasury & 1H17 deposits wh
Slide 16: Non-interest income
Non-interest income 16 For personal use only Non-interest income ($m) Markets income ($m) 1 DVA Trading Customer 748 467 609 19 580 2 546 500 10 247 147 131 142 3,050 72 89 450 473 462 465 447 482 2,966 (22) (153) (13) 2,889 2H14 1H15 2H15 1H16 2H16 1H17 Selected wealth related non-interest income (
Slide 17: Expenses tightly managed
Expenses tightly managed 17 For personal use only Movement in expenses ($m) Divisional expense growth 1H17 – 2H16 $m % Consumer Bank (4) 0 121 (118) 5 (4) Business Bank 11 1 4,479 4,483 BTFG (17) (3) WIB (21) (3) New Zealand (in NZ$) 6 1 Group Businesses 26 11 Sources of productivity savings Flat (u
Slide 18: Investment spend
Investment spend 18 For personal use only Total investment spend (expensed and capitalised) ($m) Amortisation of capitalised software Amortisation ($m) 310.00 6 Average amortisation period (years) 303 700 5.5 300.00 294 291 580 5 567 290.00 527 4.5 11% 280.00 4.1 458 271 4 270.00 24% 3.5 3.6 65% 260
Slide 19: Australian mortgage trends
Australian mortgage trends 19 For personal use only Mortgage portfolio ($bn) 41.8 (28.4) 38.4 (28.7) 42.1 (27.1) 404.2 413.9 375.8 390.8 Slowdown in new lending • Reduced discounts • Higher proportion of proprietary flows • Fixed rate flow higher Sep-15 New Run-off Mar-16 New Run-off Sep-16 New Run-
Slide 20: Australian mortgages well secured
Australian mortgages well secured 20 For personal use only Interest-only lending by LVR1,2 and income band (%) Growth in mortgage Australian mortgageslending annual(%) growth (%) Applicant gross income bands 14 57% <$100k $100k - $250k >$250k Investor Owner occupied 12 13% 10 35% 8 29% 7% 6.4 6 6.3
Slide 21: Asset quality remains sound
Asset quality remains sound 21 For personal use only Stressed assets as a % of TCE1 Corporate/business stressed exposure by sector ($bn) Watchlist & substandard 90+ days past due and not impaired Mar-16 Sep-16 Mar-17 Impaired 3.20 2.5 3.09 2.0 2.48 2.17 1.5 1.60 1.0 1.30 1.24 1.20 1.14 0.5 0.99 0.0
Slide 22: Asset quality – topical areas
Asset quality – topical areas 22 For personal use only Commercial property Unsecured consumer % of TCE (lhs) % in stress (rhs) Australian unsecured lending 90+ day delinquencies (%) 8 20 3.0 Total unsecured consumer lending Credit cards 7 2.5 15 6 2.0 5 10 1.5 4 1.0 5 3 0.5 2 0 0.0 Mar-17 Sep-10 Sep
Slide 23: Impairment charge components
Impairment charge components ($m) 23 Individually assessed provisions Collectively assessed provisions Total For personal use only Other movement Write- backs Write-offs New IAPs in Collective & recoveries direct provisions 667 471 463 484 493 443 457 418 412 364 341 330 293 273 256 (64) (48) (114)
Slide 24: CET1 capital ratio well positioned
CET1 capital ratio well positioned 24 For personal use only • Total CET1 capital ratio increased 49 bps CET1 Capital ratio (% and bps) 15.34 • Organic capital generated (after dividends) 29bps with credit RWA declining • Capital initiatives includes management of unused limits and DTA in LMI 29 10 1
Slide 25: Considerations for FY17
Considerations for FY17 25 For personal use only • Continued discipline on growth/return • Margins – recent changes in pricing to flow into 2H17 • Expense growth likely below 2-3% range although subject to revenue outlook • Well positioned for unquestionably strong Westpac Group Interim 2017 Present
Slide 26: Investor Discussion Pack
For personal use only Investor Discussion Pack Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 27: Strategy
For personal use only Strategy Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 28: Westpac Group at a glance
WBC Westpac Group at a glance: Australia’s First Bank listed on ASX & NZX Strategy 28 • Australia’s first bank and first company, opened in 1817 Consumer Business BT Financial Institutional Westpac For personal use only Bank Bank Group Bank New Zealand • Australia’s 2nd largest bank; 15th largest ba
Slide 29: Progress on our five strategic priorities
Progress on our five strategic priorities Strategy 29 For personal use only Vision: To be one of the world’s great service companies, helping our customers, communities and people to prosper and grow The Service Revolution The Service Revolution Priorities Performance Service Digital Targeted Workfo
Slide 30: Sources of comparative advantage
Sources of comparative advantage Strategy 30 For personal use only Excellent strategic position Sector leading balance sheet • Seeking to differentiate on service • Asset quality • No. 1 or 2 position across key markets - all divisions well placed Sector leading through global financial crisis S
Slide 31: Consistent performer over the long term
Consistent performer over the long term Strategy 31 For personal use only Cash earnings ($bn) Cash earnings per share (cents) 245.4 248.2 235.5 227.8 7.8 7.8 209.3 214.8 7.6 189.4 198.3 197.8 167.2 163.7 7.1 6.6 119.8 6.3 5.9 5.0 4.7 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 1H17 4.0 Co
Slide 32: A conservative, high quality bank
A conservative, high quality bank Strategy 32 For personal use only Individually assessed provisions to Collectively assessed provisions to Impaired assets to gross loans1 (%) impaired assets1 (%) credit RWA1 (bps) 0.51 52.1 0.47 44.9 0.44 43.2 85 35.0 0.30 81 77 75 Peer 1 Peer 2 Peer 3 WBC Peer 1 P
Slide 33: Overview
For personal use only Overview Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 34: Cash earnings and reported net profit reconciliation
Cash earnings and reported net profit reconciliation Results 34 For personal use only Reported net profit and cash Cash earnings1 policy earnings adjustments ($m) • Westpac Group uses a measure of performance referred to as cash earnings to assess financial performance at both a Group and divisional
Slide 35: 1H17 financial snapshot
1H17 financial snapshot Results 35 For personal use only Change Change Change Change 1H17 1H17 – 1H16 1H17 – 2H16 1H17 1H17 – 1H16 1H17 – 2H16 Earnings1 Balance sheet Total assets ($bn) 840.0 1% flat Earnings per share (cents) 119.8 1% 2% Common equity Tier 1 9.97 (50bps) 49bps (CET1) capital ratio
Slide 36: Cash earnings up 3% over the year and prior half
Cash earnings up 3% over the year and prior half Performance discipline 36 For personal use only % chg % chg Cash earnings features of 1H17 – 2H16 ($m) 1H17 1H17- 1H17- ($m) 1H16 2H16 AIEA up 2%, margins down 4bps Net interest 161 (4) (36) (20) 4,017 7,693 1 - 3,918 (2) income Higher markets income
Slide 37: WIB up strongly, demonstrating value of portfolio diversification
WIB up strongly, demonstrating value of portfolio diversification Performance discipline 37 For personal use only 1H17 divisional1 cash earnings movements ($m) 1H17 divisional1 core earnings movements ($m) 216 (40) (10) 6,260 6,105 6 12 (29) 115 26 0 4,017 3,918 (28) 9 (23) Up 3% Up 3% 2 3 3 2 2H16
Slide 38: Dividends
Dividends Performance discipline 38 For personal use only Key dividend considerations for 1H17 Dividends (cents per share) • Sustainability of payout ratios over medium term Special dividend • Strong capital comfortably above preferred range 10 10 • Modest RWA growth • Final regulatory capital requi
Slide 39: Building long term franchise value
Building long term franchise value Service leadership 39 For personal use only Australian banking customer numbers (#m) Australian customers with a wealth product2 (%) Consumer Bank Business Bank Westpac St.George brands Peers 10.26 10.44 10.62 9.94 10.09 1.48 1.65 1.69 1.71 20.7 1.45 19.5 15.4 8.49
Slide 40: Building long term franchise value
Building long term franchise value Service leadership 40 Customer satisfaction1 For personal use only Customer complaints (#) Consumer and New Zealand (%), Business (mean) Australian retail (CB, BB and BT) Westpac St.George brands Peers Consumer 84.7% 82.7% 82.7% 81.9% Down 26% 79.9% Down 56% Mar-15
Slide 41: Customers continue to move to digital channels
Customers continue to move to digital channels Digital transformation 41 For personal use only Digitally active customers1 (#m) Digital sales1 (#000) Impacted by lower credit card balance transfers Up 4% Down 2% 4.33 4.18 433 425 4.05 3.96 367 3.84 347 Up 7% Up 16% 273 Mar-15 Sep-15 Mar-16 Sep-16 Ma
Slide 42: New digital services launched over the last six months
New digital services launched over the last six months Digital transformation 42 For personal use only Helping customers get more from digital Making digital services easier to find Easy set up of Quick key digital Balance and features: An enhanced menu Quick giving customers Transfer help • Simple
Slide 43: Uptake of recently launched capabilities
Uptake of recently launched capabilities Digital transformation 43 For personal use only Taking out paper Transition to digital Customer self-serve Proof of balance statements (# and % of total) On line password change/reset Total accounts on eStatements (#m) (#’000 events) 2 36% Proportion of accou
Slide 44: Digital used to transform customer service
Digital used to transform customer service: new capabilities Digital transformation 44 For personal use only Westpac Keyboard1 Expense splitter1 Quick transfers1 Samsung Pay1 • An Asia-Pacific first • Manage what you’re owed, • Allows customers to transfer • First major Australian bank to and who ha
Slide 45: Deep dive: Digitisation of personal loans
Deep dive: Digitisation of personal loans1 Digital transformation 45 For personal use only Simple form From up to with instant 1-2 days decision to 10-15 minutes 75% conditionally 25% unconditionally approved approved Applicants approved (predominantly existing customers)/or Simpler From 4 days decl
Slide 46: Actively responding to new digital opportunities
Actively responding to new digital opportunities Digital transformation 46 For personal use only Investing and partnering to build new businesses and help Accelerating innovation solve customer problems “The Hothouse” provides innovation services supported by Entrepreneurs-In- Invested in Quintessen
Slide 47: Reinventure – Investing in new technology businesses
Reinventure – Investing in new technology businesses1 Digital transformation 47 For personal use only Westpac has committed $100m to Reinventure, an independently run venture capital fund. The operation allows Westpac to gain insights into emerging fintech business models, adjacent business opportun
Slide 48: Significant momentum in our technology transformation
Significant momentum in our technology transformation Digital transformation 48 2015 Underway (degree of shading represents completion) For personal use only Assisted Unassisted Channel Channels (customer 5 interface) Starting with home ownership in Phase One Customer Service Hub Brand Brand agnosti
Slide 49: Workforce revolution delivering
Workforce revolution delivering Workforce revolution 49 For personal use only Lost time injury frequency rate Agile work space providing benefits Women in leadership positions2 (%) (rolling 12 months) (#) • Around 10,300 employees now in agile workplaces 49 • Commenced work on transforming Westpac H
Slide 50: Continued sustainability leadership
Continued sustainability leadership Sustainable futures 50 For personal use only Strategic priorities and 1H17 progress highlights Leading track record • Most sustainable bank globally in the 2016 1 Embracing societal change Dow Jones Sustainability Index for the third • Leadership roles held by wom
Slide 51: Continued support through sustainable investing
Continued support for customers through sustainable investing Sustainable futures 51 For personal use only Industry first sustainability scoring on ASX200 and managed funds Making sustainable investing easier • BT launched sustainability scoring, providing financial advisers and customers visibility
Slide 52: Support for environmental, energy and mining transition
Continued support for the environmental, energy and mining transition Sustainable futures 52 For personal use only • Supporting CleanTech and environmental CleanTech and environmental Group mining portfolio to total services, with over $6.7bn TCE in Australia services exposure (%)2 lending TCE (%) a
Slide 53: Actively supporting Australia
Actively supporting Australia Sustainable futures 53 For personal use only Supporting communities1 Income tax expense on a cash earnings basis ($m) 1H16 2H16 1H17 $49.3bn • Provide loans to help Australians own Backing new lending2 Notional income tax based on the their home or grow their business $
Slide 54: Earnings Drivers
For personal use only Earnings Drivers Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 55: Net operating income up 2% over the half
Net operating income up 2% over the half Revenue 55 For personal use only Net operating income movement ($m) 150 (108) 29 (96) 168 (170) 199 18 10,743 10,619 5 (15) 28 (84) 10,584 Net interest up 1% Non-interest down 3% Net interest flat Non-interest up 6% 1 1 1H16 AIEA Margins Fees & Wealth Trading
Slide 56: Composition of lending
Composition of lending Revenue 56 For personal use only Composition of lending (% of total) Net loans ($bn) 2.0 661.9 7.4 0.9 (2.3) (1.7) 0.7 666.9 640.7 Aust. mortgages 10.5 New Zealand lending up 3.5 Aust. business NZ$1.4bn 8.8 Aust. institutional Aust. other consumer Up 1% 13.2 62.0 New Zealand l
Slide 57: Customer deposits
Customer deposits Revenue 57 For personal use only Customer deposit mix ($bn) and % of total Customer deposit composition ($bn) Term deposits Savings Online Transaction CB BB WIB BTFG, NZ & Other 467 479 467 479 442 Up 6% Up 3% 442 136 87 87 130 79 123 83 88 94 84 92 28% 80 106 111 112 40% 68 64 60
Slide 58: Net interest margin down 4bps
Net interest margin down 4bps, primarily due to higher funding costs and lower interest rates Revenue 58 For personal use only Net interest margin movement (%) Net interest margin (NIM) (%) NIM excl. Treasury & Markets Treasury & Markets impact on NIM NIM NIM excl. Treasury & Markets Lower CLF fee o
Slide 59: Non-interest income up 6%
Non-interest income up 6%, primarily from higher markets income Revenue 59 For personal use only Non-interest income contributors ($m) Fees and commissions income ($m) Higher institutional and business fee income partly offset by lower card income 199 18 3,050 1,478 2,966 28 (84) 1,464 2,889 1,375 1
Slide 60: Wealth and insurance and markets and Treasury income
Wealth and insurance and markets and Treasury income Revenue 60 For personal use only Funds management income ($m) Insurance income ($m) Margin compression from 665 Mostly higher claims, 327 614 622 305 product mix including including Cyclone Debbie Hastings performance fees 264 migration to MySuper
Slide 61: Expense to income ratio 41.7%
Expense to income ratio 41.7% Expenses 61 For personal use only Expense movements ($m) FTE run versus change (#) 4,479 121 (118) (4) 5 4,483 454 35,580 (296) 162 6 35,290 34,964 Run: for ongoing operations Change: project Flat based 2H16 Ongoing Productivity Investment Regulatory/ 1H17 1H16 Run Chan
Slide 62: Investment spend focused on growth and productivity
Investment spend focused on growth and productivity Expenses 62 For personal use only Total investment spend mix (% of total) Investment spend ($m) Investment spend capitalised1 ($m) Growth & productivity Regulatory change 1H16 2H16 1H17 1H16 2H16 1H17 Expensed 256 261 236 Capitalised software Other
Slide 63: Productivity track record: $1.9bn in savings since 2009
Productivity track record: $1.9bn in savings since 2009 Expenses 63 Efficiency initiatives: For personal use only • Business Connect and Connect Now video $1.9bn saved from efficiency programs since FY09 ($m) conferencing now in 91% of sites1 1,828 118 1,946 Targeting FY16-1H17 annual 263 • Improved
Slide 64: 1H17 impairment charge lift mainly due to higher IAPs
1H17 impairment charge lift mainly due to higher IAPs Impairment charges 64 For personal use only Impairment charges ($m) Individually assessed Collectively assessed New IAPs Write-backs & recoveries Write-offs direct Other movements in CAP Total Rise reflects new impairments in Institutional Bank 6
Slide 65: Asset quality
For personal use only Asset quality Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 66: High quality portfolio with bias to secured consumer lending
High quality portfolio with bias to secured consumer lending Asset Quality 66 For personal use only Asset composition as at 31 March 2017 (%) Loans Total assets ($840bn) Total loans ($667bn) Trading securities, financial assets at fair value and available-for-sale securities 1 Derivative financial i
Slide 67: A well diversified portfolio
A well diversified portfolio Asset Quality 67 For personal use only Top 10 exposures to corporations and NBFIs5 Exposures at default1 by sector ($bn) as a % of TCE (%) 2 Finance & insurance Largest corporation/NBFI single name 1.9 exposure represents less than 0.2% of TCE 3 Property 1.4 1.3 1.3 Gove
Slide 68: Strong provisioning maintained
Strong provisioning maintained Asset Quality 68 For personal use only Asset quality Total provisions ($m) Individually assessed provisions 1H16 2H16 1H17 Collectively assessed provisions Economic overlay Impairment charges to average loans annualised (bps) 21 14 15 5,061 4,734 Lower total provisions
Slide 69: Stressed exposures lower
Stressed exposures lower Asset Quality 69 For personal use only Stressed exposures as a % of TCE Movement in stress categories (bps) Impaired (2) 2 (2) 10 120 (4) 90+ day past due and not impaired 6 114 103 (4) 5 Watchlist & substandard 3.20 . 3.09 Mainly NZ dairy and Mainly due to work- exposures i
Slide 70: Stressed exposures lower across industries
Stressed exposures lower across industries reflecting both work-out and return to health of facilities Asset Quality 70 Corporate and business portfolio stressed exposures by industry ($bn) For personal use only 2.5 Mar-16 Sep-16 Mar-17 2.0 1.5 1.0 0.5 0.0 Property Property services & Finance & insu
Slide 71: Areas of interest: Commercial property
Areas of interest: Commercial property Asset Quality 71 For personal use only Commercial property portfolio Commercial property exposures % of TCE and % in stress Sep-16 Mar-17 10 Commercial property as % of TCE (lhs) 20 Total committed exposures (TCE) $67.1bn $65.5bn Commercial property % in stress
Slide 72: Areas of interest: Inner city apartments
Areas of interest: Inner city apartments Asset Quality 72 For personal use only Commercial property portfolio TCE ($bn) Sep-16 Mar-17 TCE %1 Residential apartment development >$20m 5.1 4.1 6.3% • Progressively tightened risk appetite in areas of higher concern since 2012 • Actively monitoring settle
Slide 73: Asset quality areas of interest
Asset quality areas of interest Asset Quality 73 For personal use only Mining (inc. oil and gas) portfolio New Zealand dairy portfolio Retail trade portfolio Sep-16 Mar-17 Sep-16 Mar-17 Sep-16 Mar-17 Total committed exposure Total committed exposures (TCE) $11.3bn $10.4bn NZ$5.9bn NZ$5.9bn Total com
Slide 74: Provision cover by portfolio category
Provision cover by portfolio category Asset Quality 74 For personal use only Exposures as a % of TCE PROVISIONING TO TCE (%) Sep-15 Mar-16 Sep-16 Mar-17 Fully performing portfolio • Small cover as low probability of default (PD) 0.21 0.22 0.22 0.21 • Includes economic overlay Fully performing 98.80
Slide 75: Changes in the treatment of hardship
Changes in the treatment of hardship now flowing through other consumer delinquencies Asset Quality 75 For personal use only APRA is standardising the delinquency treatment of facilities in hardship Hardship allows eligible customers to reduce or defer repayments in the short term to manage through
Slide 76: Australian consumer unsecured lending
Australian consumer unsecured lending Asset Quality 76 For personal use only Australian unsecured consumer portfolio Australian unsecured lending 90+ day delinquencies (%) Mar-16 Sep-16 Mar-17 Total unsecured consumer lending 3.00 Credit cards 30+ day delinquencies (%) 3.88 2.95 3.99 2.50 Total ex-h
Slide 77: High levels of borrower equity create buffers
High levels of borrower equity create buffers in the Australian mortgage portfolio Asset Quality 77 For personal use only Australian housing portfolio Australian housing loan-to-value ratios (LVRs)2,3 (%) Mar-16 Sep-16 Mar-17 1H17 balance balance balance flow1 100 1H17 drawdowns LVR at origination T
Slide 78: Australian mortgage serviceability supporting payments ahead
Australian mortgage serviceability supporting payments ahead Asset Quality 78 For personal use only Mortgage interest rate buffers (%) Australian home loan customers ahead on repayments2(%) 9 Westpac owner occupied SVR inc package discount Mar-16 Sep-16 Mar-17 30 Westpac minimum assessment ('floor')
Slide 79: Australian mortgage delinquencies remain low
Australian mortgage delinquencies remain low Asset Quality 79 For personal use only Australian mortgage portfolio Australian mortgages delinquencies (%) Mar-16 Sep-16 Mar-17 90+ day past due total 90+ day past due investor 3.0 30+ day past due total Loss rates 30+ day delinquencies (bps) 134 130 139
Slide 80: Sound underwriting supports quality across the mortgage book
Sound underwriting supports quality across the mortgage book Asset Quality 80 For personal use only Investment property portfolio Interest-only portfolio Mar-16 Sep-16 Mar-17 • Interest-only (IO) loans assessed on a principal and interest basis, now over the Average LVR of new IPL loans in the perio
Slide 81: Lenders mortgage insurance
Lenders mortgage insurance Asset Quality 81 For personal use only Lenders mortgage insurance Lenders mortgage insurance arrangements • Where mortgage insurance is required, mortgages are insured through Westpac’s captive mortgage LVR Band Insurance insurer, Westpac Lenders Mortgage Insurance (WLMI),
Slide 82: Mortgage portfolio stress testing outcomes
Mortgage portfolio stress testing outcomes Asset Quality 82 For personal use only • Westpac regularly conducts a range of portfolio stress tests as part Australian mortgage portfolio stress testing of its regulatory and risk management activities as at 31 March 2017 • The Australian mortgage portfol
Slide 83: Capital, Funding and Liquidity
For personal use only Capital, Funding and Liquidity Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 84: CET1 capital ratio above preferred range
CET1 capital ratio above preferred range Capital, Funding and Liquidity 84 For personal use only Common equity Tier 1 (CET1) capital ratio (%) Key capital ratios (%) % Mar-16 Sep-16 Mar-17 11.0 Preferred CET1 capital 10.5 ratio range 8.75% - 9.25% CET1 capital ratio 10.5 9.5 10.0 10.0 10.0 10.2 9.5
Slide 85: Capital a strength
Capital a strength Capital, Funding and Liquidity 85 For personal use only Highlights Regulatory capital ratios (%) APRA basis Internationally comparable2 basis • CET1 capital ratio above preferred BIS 75th percentile3 range CET1 19.4 • Well placed to respond to future APRA 17.2 announcements 15.3 1
Slide 86: Strong capital generation supported by disciplined loan growth
Strong capital generation supported by disciplined loan growth Capital, Funding and Liquidity 86 For personal use only CET1 capital ratio (% and bps) 15.3 APRA changes Disciplined growth and Mostly FX translation impacts to mortgage improved asset quality on NZ$ loans RWA 10.47 (110) 99 (70) 2 (2) 4
Slide 87: Disciplined management and improved asset quality reduce RWA
Disciplined management and improved asset quality reduce RWA Capital, Funding and Liquidity 87 For personal use only Movement in risk weighted assets ($bn) 410.1 (6.1) (0.4) (1.7) 2.8 (0.3) 404.4 Reduced embedded 363.2 Updated loss gain as the yield scenarios curve steepened Down $5.7bn or 1% Mar-16
Slide 88: Well placed on internationally comparable CET1 and leverage ratios
Well placed on internationally comparable CET1 and leverage ratios Capital, Funding and Liquidity 88 For personal use only Common equity Tier 1 ratio (%) 20% 15.3% 15% 10% 5% 0% ICBC Credit Agricole SA Wells Fargo JPMorgan Chase Nordea Norinchukin Bank ING BPCE Societe Generale BBVA China Constructi
Slide 89: Internationally comparable capital ratio reconciliation
Internationally comparable capital ratio reconciliation Capital, Funding and Liquidity 89 For personal use only APRA’s Basel III capital requirements are more conservative than those of the Basel Committee on Banking Supervision (BCBS), leading to lower reported capital ratios by Australian banks. I
Slide 90: Optimising returns by actively managing capital
Optimising returns by actively managing capital Capital, Funding and Liquidity 90 For personal use only Ordinary equity (spot and includes reserves) ($bn) Actively managing returns • 1H17 ROE increased as cash earnings growth (3%) was higher 0.9 59.3 than the increase in average ordinary equity (AOE
Slide 91: Maintained strong funding and liquidity profile
Maintained strong funding and liquidity profile Capital, Funding and Liquidity 91 For personal use only Liquidity Coverage Ratio ($bn and %) Funding composition by residual Net Stable Funding Ratio (NSFR) maturity (%) Sep-16 Mar-17 Wholesale Onshore <1yr Wholesale Offshore <1yr Sep-16 Mar-17 HQLA1 6
Slide 92: New term issuance reflects investor preferences
New term issuance reflects investor preferences Capital, Funding and Liquidity 92 For personal use only 1H17 new term issuance composition1 (%) By type By investor location By currency By tenor2,3 38 32 11 0.5 8 2 8 2 1 3.4 82 65 27 9 10 21 14 25 18 0.3 23 Senior Unsecured ABS Asia Australia & NZ AU
Slide 93: Divisional Results
For personal use only Divisional Results Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 94: Consumer Bank disciplined 1H17 result
Consumer Bank disciplined 1H17 result in a competitive environment Consumer 94 For personal use only Cash earnings ($m) Volume growth and higher mortgage Lower operating expenses with margins offset by increased funding productivity offsetting run, regulatory Key financial metrics and deposit costs
Slide 95: Consumer: A disciplined 1H17 performance
A disciplined 1H17 performance Consumer 95 For personal use only Revenue1 ($m) Core earnings1 ($m) Cash earnings1 ($m) 4,053 4,055 2,420 2,426 1,539 3,972 1,511 2,335 1,445 3,776 1,380 2,198 3,560 1,240 2,025 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 Loans ($bn) and
Slide 96: Improving the digital customer experience: Consumer Bank & Business Bank
Improving the digital customer experience: Consumer Bank & Business Bank Consumer 96 Consumer For personal use only Proof of balance Quick transfer Digitisation of personal loans • Following the successful launch of proof of balance • Enables customers to transfer between three • During 1H17 complet
Slide 97: Business Bank delivers a solid 1H17 result
Business Bank delivers a solid 1H17 result Business 97 For personal use only Cash earnings ($m) Key financial metrics Change on AIEA up 2%, margin down 2bps Increased technology 1H16 2H16 1H17 2H16 from deposit competition and higher and investment costs wholesale funding costs, partially Revenue ($
Slide 98: Business: A disciplined 1H17 performance
A disciplined 1H17 performance Business 98 For personal use only Revenue1 ($m) Core earnings1 ($m) Cash earnings1 ($m) 2,557 1,646 2,534 1,634 1,017 999 1,008 2,495 976 2,443 1,599 962 2,392 1,563 1,541 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 Loans ($bn) and custom
Slide 99: BT franchise impacted by challenging environment
BT franchise impacted by challenging environment BT Financial Group 99 For personal use only Cash earnings movement 2H16 – 1H17 ($m) Key financial metrics Growth in premium income and lapse Change on Reduced advice activity levels and improvement more than offset by higher 1H16 2H16 1H17 2H16 margin
Slide 100: Funds management business
Funds management business: Positive flows offset by margin compression from product mix changes BT Financial Group 100 For personal use only Earning drivers 1H17 v 2H16 FUA ($bn) • Continued growth in Private Wealth BT Wrap/Asgard/Panorama Corporate super Other • Advice income lower from reduced act
Slide 101: Sound insurance fundamentals
Sound insurance fundamentals BT Financial Group 101 For personal use only Insurance premiums ($m) Insurance claims rates (%) General Insurance gross written premiums Life in-force premiums General Insurance claims rate Life Insurance claims rate 71 Up 6% 1,030 927 973 62 892 827 51 50 49 38 38 34 33
Slide 102: Improving the digital customer experience: BTFG
Improving the digital customer experience: BTFG BT Financial Group 102 Superannuation & Insurance For personal use only Super profile SuperCheck Digital in insurance • Innovative solution enabling customers to find their lost • Launched BT Super Profile • Policy display – customers can see their hom
Slide 103: WIB 1H17 result driven by customer activity and markets
WIB 1H17 result driven by lift in customer activity and markets Westpac Institutional Bank 103 For personal use only Cash earnings ($m) Financial metrics Flow through of Change on 2016 productivity 1H16 2H16 1H17 2H16 Lift in FX, fixed income and program commodities trading with positive Revenue ($m
Slide 104: Disciplined performance maintained
Disciplined performance maintained Westpac Institutional Bank 104 For personal use only Disciplined balance sheet management Expense control Deposits ($bn) WIB expenses ($m) • Business as usual costs lower from Net loans ($bn) 93.8 678 (6) full period benefit of productivity 88.4 669 0 (5) (10) init
Slide 105: Australasia's leading Institutional Bank
Australasia’s leading Institutional Bank Westpac Institutional Bank 105 For personal use only • 170 Leading years longest customer relationship Enduring Innovative Institutional Franchise Customer Relationships Products and solutions Public sector WIB / Business, wealth and consumer • Enduring Insti
Slide 106: New Zealand result reflects competitive market
New Zealand result reflects highly competitive market, and improving credit quality New Zealand 106 For personal use only Cash earnings (NZ$m) Key financial metrics AIEA up 4% offset by margin, down 17bps Increased dairy provisions in Change on driven by competitive deposit market and the 2H16 not r
Slide 107: New Zealand key metrics
New Zealand key metrics New Zealand 107 For personal use only Revenue1 (NZ$m) Core earnings1 (NZ$m) Cash earnings1 (NZ$m) 658 653 468 1,115 634 635 462 1,106 452 1,092 1,078 610 437 434 1,058 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 Loans (NZ$bn) and customer Expens
Slide 108: Improving the digital customer experience: New Zealand
Improving the digital customer experience New Zealand 108 Westpac One CashNav Transforming the network For personal use only • Market leading platform. Canstar Best Online Bank • Integrated app to track finances and deliver • Further enhancing 24/7 capability in New Zealand 2016, 2015 spending insig
Slide 109: Improvements in stressed exposures as dairy portfolio stabilises
Improvements in stressed exposures as dairy portfolio stabilises New Zealand 109 For personal use only Business stressed exposures as a % of New Zealand business TCE 16.2 15.6 Impaired 90+ day past due not impaired Watchlist & substandard Property 13.2 Manufacturing 17 8 7 14.4 12.8 3 Agriculture, 7
Slide 110: Asset quality in good shape
Asset quality in good shape New Zealand 110 For personal use only Unsecured consumer 90+ day Movement in impairment charges (NZ$m) delinquencies (%) 1.5 50 (5) (49) 1.0 9 Down $86m 0.58 0.5 0.0 (31) (1) (36) Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 M
Slide 111: Economics
For personal use only Economics Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)
Slide 112: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts Economics 112 CALENDAR YEAR For personal use only KEY ECONOMIC INDICATORS1 (%) AS AT MAY 2017 2015 2016 2017F World GDP 3.1 3.3 3.5 Australia GDP2 2.4 2.5 2.6 Private consumption 2.7 2.7 2.7 Business investment2,3 -8.6 -8.8 -1.7 Unemployment – end period
Slide 113: A positive start to 2017 for the Australian economy
A positive start to 2017 for the Australian economy Economics 113 For personal use only Australian economy key statistics Business conditions trending higher Global lead indicators have turned (latest available as at May 2017) index 30 net bal. goods related 60 consumer sectors GDP 2.4% 20 business
Slide 114: Emerging growth drivers for Australia
Emerging growth drivers for Australia Economics 114 For personal use only Services Infrastructure Service exports ($bn) • While mining investment remains the Australia’s project pipeline: transport $bn Rolling annual, nominal dominant driver of Australia’s investment Under construction (Inv. Monitor
Slide 115: Jobs are being created, although wage growth is low
Jobs are being created, although wage growth is low Economics 115 For personal use only Services employ a large part of the Australian workforce Australian employment by sector (annual change, ‘000) Government Sector contribution to GDP (%)1 Manufacturing Services Mining 52% Construction 4 Manufactu
Slide 116: State differences across Australia
State differences across Australia are key to understanding trends Economics 116 For personal use only NSW and Victoria 57% of population, 58% of employment Relative size of States (Share of Australia, 2015/16, %) GSP Population Employment Exports 38 32 32 32 25 26 21 22 19 20 20 20 15 12 11 11 6 7
Slide 117: Credit growth remaining modest
Credit growth remaining modest Economics 117 For personal use only Australian private sector credit growth (% ann) Australian housing credit growth (% ann) Housing Total credit Business 36 25 Total Investor Owner-occupier Forecasts 32 20 end 2018 28 15 24 10 20 16 5 12 8.6 0 8 6.7 -5 4 5.8 -10 0 Mar
Slide 118: Housing market supported by population growth
Housing market supported by population growth and dwelling supply/demand balance Economics 118 For personal use only Population versus dwelling stock Residential rental vacancy rates (%) (annual average change ‘000) Population Dwelling stock* % Australia Sydney Melbourne 7 * net of demolitions – imp
Slide 119: Housing market responds to macro prudential measures and rates
Housing market responds to both macro prudential measures and rates Economics 119 For personal use only Australian housing market indicators Change in Australian dwelling prices by capital city (annual %) % Sydney Melbourne Brisbane Perth ann% Dwelling prices ann% 30 30 20 20 15 20 10 10 0 macro- 5
Slide 120: Drivers of investor property lending
Drivers of investor property lending Economics 120 For personal use only • Investor activity has been a key driver of Australian housing in recent years Housing finance approvals: value of housing finance • Demand from investors tends to be less sensitive to affordability considerations ($bn/mth) wi
Slide 121: Australian household sector
Australian household sector Economics 121 For personal use only • Conditions remain mixed across Australia’s household sector • After a period of balance sheet consolidation, debt is now rising again. With income growth subdued, aggregate measures of leverage are at or slightly above previous peaks.
Slide 122: Australia's high rise apartment market
Australia’s high rise apartment market Economics 122 Population versus dwelling stock For personal use only • Construction in Australia has responded to low rates and the end of the mining boom (annual average change ‘000) • A surge in apartment construction in recent years saw a rise in the number
Slide 123: New Zealand economy
New Zealand economy Economics 123 For personal use only Key economic statistics • Inflation rebounded to 2.2% in early 2017, boosted by fuel and food prices Core inflation, while still below 2%, has also lifted FY16 FY17f Change Annual inflation is expected to remain around 2% through 2017 – hig
Slide 124: New Zealand economy: solid growth outlook
New Zealand economy Solid growth outlook, low interest rates a key support Economics 124 For personal use only • The New Zealand economy is expected to continue growing at around 3% per GDP growth (%) annum over the next few years 8 8 • Growth is being supported by strong population of around 2% per
Slide 125: New Zealand - conditions improving for the dairy sector
New Zealand - conditions improving for the dairy sector Economics 125 For personal use only • The outlook for the dairy sector has improved significantly over the year. Despite Dairy payout and dividend some recent pull-back, global dairy prices are nearly 50% higher than mid-2016 Kg Ms Kg Ms • A co
Slide 126: New Zealand housing market conditions evolving
New Zealand economy Housing market conditions evolving, stability concerns persist Economics 126 For personal use only • House price inflation has cooled substantially in recent months New Zealand house prices by region (index) • In Auckland prices have been effectively flat since last August (thoug
Slide 127: Appendix and disclaimer
For personal use only Appendix and disclaimer
Slide 128: Appendix 1: Cash earnings adjustments
Appendix 1: Cash earnings adjustments Appendix and Disclaimer 128 Cash earnings 1H16 2H16 1H17 For personal use only Description adjustment $m $m $m Reported net profit 3,701 3,744 3,907 Net profit attributable to owners of Westpac Banking Corporation The merger with St.George and acquisition of Llo
Slide 129: Appendix 2: Definitions
Appendix 2: Definitions Appendix and Disclaimer 129 BT Financial Group (Australia) (BTFG) is the wealth management and For personal use only Consumer Bank (CB) is responsible for sales and service to consumer customers in Australia under the Westpac, St.George, BankSA, Bank of insurance arm of Westp
Slide 130: Appendix 2: Definitions (continued)
Appendix 2: Definitions (continued) Appendix and Disclaimer 130 Capital ratios As defined by APRA (unless stated otherwise) For personal use only The NSFR is defined as the ratio of the amount of available stable funding Assets (both on and off-balance sheet) are risk weighted according to each (ASF
Slide 131: Appendix 2: Definitions (continued)
Appendix 2: Definitions (continued) Appendix and Disclaimer 131 Average interest-earning assets and is the average balance of assets For personal use only Includes exposures that have deteriorated to the point where full collection of interest and principal is in doubt, based on an assessment of the
Slide 132: Appendix 2: Definitions (continued)
Appendix 2: Definitions (continued) Appendix and Disclaimer 132 For personal use only Data based on Roy Morgan Research, Respondents aged 14+ and 12 month rolling. Wealth penetration is defined as the proportion of Australians who have a Deposit or Transaction Account, Mortgage, Personal Lending or
Slide 133: Investor Relations Team
Investor Relations Team Contact us 133 For personal use only Equity Investor Relations www.westpac.com.au/investorcentre Andrew Bowden Nicole Mehalski Annual reports Head of Investor Relations Director Presentations and webcasts +61 2 8253 4008 +61 2 8253 1667 5 year financial summary andrewbowden@w
Slide 134: Disclaimer
Disclaimer Appendix and Disclaimer 134 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