Westpac Banking Corporation · ASX:WBC
Westpac Banking — Debt Investor Presentation (May 2016)
36 slides from Westpac Banking's debt investor presentation, May 2016
Slide 1: Westpac Capital Notes 4 Investor Presentation
WESTPAC CAPITAL NOTES 4 Investor Presentation
Slide 2: Disclaimer
Disclaimer THIS PRESENTATION IS NOT FOR DISTRIBUTION TO ANY US PERSON OR ADDRESS IN THE UNITED STATES. YOU SHOULD CONSIDER AND READ THE PROSPECTUS IN FULL BEFORE DECIDING WHETHER TO INVEST IN WESTPAC CAPITAL NOTES 4. This presentation has been prepared and authorised by Westpac Banking Corporation (
Slide 3: Westpac Capital Notes 4 Highlights
Westpac Capital Notes 4 Highlights Highlights for investors Highlights for Westpac • A new investment in Westpac Banking Corporation, including a • A new Basel III compliant security that will qualify as Additional priority reinvestment offer for Eligible Westpac TPS Holders Tier 1 Capital • Non-cum
Slide 4: A resilient balance sheet
A resilient balance sheet 10.5% Level 2 CET1 Westpac key balance sheet ratios as at 31 March 2016 (%) (APRA Basel III basis) • Materially higher - $6.0 billion in CET1 capital raised in calendar year 2015 Includes equity, securitisation and $27bn • 14.7% CET1 capital ratio on an internationally whol
Slide 5: Basel III CET1 capital ratios global comparison
Basel III CET1 capital ratios global comparison1 14.7% 2 2 2 2 3 2 2 2 3 2 2 2 2 3 2 2 4 4 2 4 4 2 2 Credit Suisse2 2 ING Group WBC Intesa Sanpaolo Barclays BNP Paribas Bank of Comm. BBVA Agri Bank of China Natixis Deutsche Bank Bank of China Bank of Montreal Toronto Dominion ANZ Lloyds China Constr
Slide 6: Westpac Capital Notes 4 Summary of terms
Westpac Capital Notes 4 Summary of terms Issuer • Westpac Banking Corporation (Westpac) Offer size • Approximately A$750 million with the ability to raise more or less Face Value • A$100 per Note Purpose • Notes will qualify as Additional Tier 1 Capital of the Westpac Group • The proceeds received u
Slide 7: Westpac Capital Notes 4 Trigger Events
Westpac Capital Notes 4 Trigger Events Capital Trigger • Westpac determines or APRA notifies Westpac in writing that it believes Westpac’s Common Equity Tier 1 Capital Ratio is Event equal to or less than 5.125% (on either a Level 1 or Level 2 basis) Non-Viability • APRA notifies Westpac in writing
Slide 8: Capital levels comfortably above regulatory requirements and Capital Trigger Event level
Capital levels comfortably above regulatory requirements and Capital Trigger Event level Common equity Tier 1 (CET1) capital on a Level 2 basis (%) Westpac’s CET1 capital ratio on a Level 2 basis (%) 10.54 Westpac’s preferred CET1 capital range 8.75% - 9.25% 10.2 4 9.5 10.5 9.1 9.5 9.0 8.7 9.1 8.8 9
Slide 9: Potential loss absorption
CET1 capital and significant earnings buffers to absorb loss ahead of Additional Tier 1 securities1 Capital and earnings buffers CET1 capital and earnings buffers above Capital Trigger level • Westpac’s capital position and earnings provide a significant buffer for Potential measures to Illustrative
Slide 10: Total regulatory capital and AT1 issuance profile
Total regulatory capital and AT1 issuance profile Total regulatory capital (%)1 CET1 Additional Tier 1 Tier 2 14.0 13.3 12.5 12.3 12.1 12.3 12.1 11.5 1.9 1.9 1.7 1.6 1.8 1.7 1.8 1.6 1.7 1.9 2.1 1.6 1.5 1.6 1.5 1.6 9.5 10.52 8.2 8.7 9.1 8.8 9.0 8.8 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar
Slide 11: Offer summary
Offer summary Offer • The Offer is for the issue of Westpac Capital Notes 4 by Westpac at an Issue Price of A$100 to raise approximately A$750 million, with the ability to raise more or less • The Offer includes a Reinvestment Offer, which is a priority offer to Eligible Westpac TPS Holders Who can
Slide 12: Priority Reinvestment Offer for Eligible Westpac TPS Holders
Priority Reinvestment Offer for Eligible Westpac TPS Holders Reinvestment • The Reinvestment Offer is an opportunity for Eligible Westpac TPS Holders to apply to have the redemption proceeds of some or all of Offer their Westpac TPS (A$100 per Westpac TPS) automatically reinvested in Notes (includin
Slide 13: Comparison to other Westpac Group Additional Tier 1 Securities
Comparison to other Westpac Group Additional Tier 1 Securities1 Westpac Capital Notes 4 Westpac Capital Notes 3 Westpac TPS ASX code WBCPG2 WBCPF WCTPA • Preferred unit in the Westpac TPS Legal form • Note issued by Westpac • Note issued by Westpac Trust issued by WREL Term • Perpetual with the firs
Slide 14: Key dates
Key dates Key dates for the Offer Key dates for Reinvestment Offer and holders of Westpac TPS Record date for determining Eligible Reinvestment Offer Record Date for determining 10 May 2016 Securityholders (7.00pm Sydney time) Eligible Westpac TPS Holders (7.00pm Sydney 10 May 2016 time) Announcemen
Slide 15: Additional Information
WESTPAC CAPITAL NOTES 4 Additional Information
Slide 16: Westpac Capital Notes 4 Distributions
Westpac Capital Notes 4 Distributions Distributions • Non-cumulative, floating rate Distributions paid quarterly in arrear • Expected to be fully franked (if not fully franked the cash amount of the Distribution will be increased to compensate for the unfranked portion) • Distributions are payable o
Slide 17: Optional Conversion, Redemption or Transfer and mandatory Conversion upon an Acquisition Event
Optional Conversion, Redemption or Transfer and mandatory Conversion upon an Acquisition Event Optional Conversion, • Westpac may elect to Convert into Ordinary Shares (subject to certain conditions), Redeem1 or Transfer Notes: Redemption or – on 20 December 2021 (in respect of all or some of the No
Slide 18: Westpac Capital Notes 4 Scheduled Conversion
Westpac Capital Notes 4 Scheduled Conversion Scheduled • On 20 December 2023 (“Scheduled Conversion Date”), subject to the Scheduled Conversion Conditions being satisfied, Conversion the Notes will mandatorily Convert into Ordinary Shares • Holders will receive for each Note they hold a variable num
Slide 19: Summary of certain events that may occur during the term of Westpac Capital Notes 4
Summary of certain events that may occur during the term of Westpac Capital Notes 4 The table below is a summary of certain events that may occur during the term of Westpac Capital Notes 4, and summarises what Holders may receive upon the occurrence of such events. The events may not occur as their
Slide 20: Westpac Capital Notes 4 Key risks
Westpac Capital Notes 4 Key risks Key risks Key risks • The Notes are not deposit liabilities or protected accounts of • If a Distribution is not paid in full because the Distribution Payment Westpac for the purposes of the Banking Act or Financial Claims Conditions are not satisfied, unpaid Distrib
Slide 21: Westpac Capital Notes 4 Key risks (continued)
Westpac Capital Notes 4 Key risks (continued) Key risks Key risks • In the event of a Winding Up, if the Notes are still on issue and • The Ordinary Share price used to calculate the number of Ordinary have not been Redeemed or Converted, they will rank ahead of Shares to be issued on Conversion may
Slide 22: Information on Westpac Banking Corporation
WESTPAC CAPITAL NOTES 4 Information on Westpac Banking Corporation
Slide 23: First Half 2016 Financial results
First Half 2016 Financial results % Change Core earnings ($m) Net interest margin3 (%) 1H16 Cash Earnings1 Results 1H16 1H16 – 2H15 (Profit before impairment charges) Financial results (A$m) 6,139 6,200 Net operating income 10,619 1 5,766 2.14 Expenses (4,419) 1 2.16 2.17 2.13 2.14 2.09 2.09 2.05 2.
Slide 24: Small rise in portfolio stress from low base
Small rise in portfolio stress from low base Provision cover remains sound Stressed exposures as a % of TCE (%) Stressed exposures by industry ($bn) 2.5 Property stress Mar-15 Sep-15 Mar-16 lower; Business Services higher Watchlist & substandard 2.0 3.20 90+ days past due and not impaired Mainly NZ
Slide 25: Areas of interest: Mining, agriculture and commercial property portfolios
Areas of interest Mining, agriculture and commercial property portfolios Mining (incl. Oil and Gas) portfolio Agriculture portfolio Commercial property portfolio Sep-15 Mar-16 Sep-15 Mar-16 Sep-15 Mar-16 TCE $14.4bn $11.8bn TCE $18.1bn $17.1bn TCE $65.6bn $67.5bn Lending $7.1bn $5.9bn Lending $15.1b
Slide 26: Australian mortgage lending standards tightened
Australian mortgage lending standards tightened Notable changes to Westpac mortgage lending Increase in mortgage interest rate buffers (%) (last 12 months) • Minimum floor rate 7.25% Westpac owner-occupied SVR inc package discount (%) • Buffer rate at least 2.25% 9 Westpac minimum assessment ('floor
Slide 27: High levels of borrower equity supporting Australian mortgage portfolio
High levels of borrower equity supporting Australian mortgage portfolio 1H15 2H15 1H16 1H16 Australian housing portfolio Australian housing loan-to-value ratios (LVRs)2,3 (%) balance balance balance flow1 Total portfolio ($bn) 362.8 375.8 390.8 42.1 1H16 drawdowns LVR at origination Portfolio LVR at
Slide 28: Australian mortgage delinquencies remain low
Australian mortgage delinquencies remain low Australian mortgage portfolio 1H15 2H15 1H16 Australian mortgages delinquencies (%) 30+ days delinquencies (bps) 124 102 134 2.5 +90 days past due total +90 days past due investor +30 days past due total Loss rates 90+ days delinquencies (bps) 2.0 47 45 5
Slide 29: Stable sources provide 83% of all funding
Stable sources provide 83% of all funding % Mov’t Stable funding ratio (%) Liquidity Coverage Ratio ($bn) Sep-15 Mar-16 Mar 16 – Sep 15 High Quality Liquid Assets1 (HQLA) 61 66 9 66 59 (11) 83.2% 83.8% 83.3% Committed Liquidity Facility2 (CLF) 5 127 125 (2) 6.2 6.2 7.4 Wholesale Onshore <1yr Total L
Slide 30: Targeting a diversified funding base
Targeting a diversified funding base 1H16 new term issuance composition1 (%) Wholesale funding composition5 (%) 0.1 CDs By type By tenor 2,3 By currency 2 3 Commercial Paper 33 Domestic MTN 7 22 5 EMTN 16 6 4 11 19 53 0.4 0.3 Covered Bonds 49 4 Securitisation 77 10 144a 28 29 14 SEC Registered 4 3 1
Slide 31: Regulatory change agenda to continue
Regulatory change agenda to continue Regulation 2016 2017 Post 2017 Net Stable • Ensures that banks hold a APRA consultation NSFR proposed to commence 1 Funding minimum amount of stable Jan 2018 ratio funding based on a one-year APRA discussion paper released Mar 2016 (NSFR) horizon Draft prudential
Slide 32: Appendix 1: Cash earnings adjustments
Appendix 1: Cash earnings adjustments Cash earnings 2H15 ($m) 1H16 ($m) Description adjustment Reported net profit 4,403 3,701 Partial sale of BTIM (665) 0 During Second Half 2015 the Group recognised a significant gain following the partial sale and deconsolidation of the Group’s shareholding in BT
Slide 33: Appendix 2: Definitions
Appendix 2: Definitions Financial performance and capital Asset quality Is a measure of the level of profit that is generated by ongoing operation and is therefore available for distribution to shareholders. Three categories of TCE Total committed exposures adjustments are made to reported results t
Slide 34: Appendix 3: Internationally comparable capital ratio reconciliation
Appendix 3: Internationally comparable capital ratio reconciliation The APRA Basel III capital requirements are more conservative than those of the Basel Committee on Banking Supervision (BCBS), leading to lower reported capital ratios. In July 2015, APRA published a study that compared the major ba
Slide 35: Appendix 4: Joint Lead Managers
Appendix 4: Joint Lead Managers Arranger • Allan O’Sullivan (02) 8254 1425 Westpac Institutional Bank • Ryan Evans (02) 8254 4694 Joint Lead Managers ANZ Securities Limited • Tariq Holdich (02) 8037 0622 • Truong Le (02) 9118 1205 Commonwealth Bank of Australia • Sally Choi (02) 9117 1214 Morgan Sta
Slide 36: Information for investors
Information for investors Westpac contacts Information for Westpac Capital Notes 4 investors Curt Zuber Andrew Bowden Westpac Copies of the Prospectus are available at Group Treasurer Head of Investor Relations Capital Notes 4 www.westpac.com.au/westpaccapnotes4 Westpac Banking Corporation 02 8253 4
Westpac Banking — Debt Investor Presentation (May 2016) on 6ix