Westpac Banking Corporation · ASX:WBC
Westpac Banking — Debt Investor Presentation (September 2021)
43 slides from Westpac Banking's debt investor presentation, September 2021
Slide 1: Westpac Banking Corporation
Westpac Banking Corporation The Euromoney/ECBC Covered Bond Congress September 2021 Investor Presentation WESTPAC BANKING CORPORATION ABN 33 007 457 141 Fix. Simplify. Perform.
Slide 2: The Australian economy
The Australian economy Recovery facing a significant near-term setback from virus outbreaks Key economic indicators (%) Australia’s GDP profile (index) 2020 2021F 2022F at 30 August 2021 Index Index pre covid forecast current forecast 112 112 Dec 2019 = 100 Westpac Australia GDP1 -1.0 2.4 5.0 108 f’
Slide 3: Westpac overview
Westpac overview Earnings • Cash earnings $3.5bn, up $1.9bn on 2H20 as at • Cash ROE 10% 31 March 2021 • Net interest margin 2.09%, up 6bps on 2H20 Balance sheet • CET1 capital ratio of 12.0% APRA-basis, 17.7% internationally comparable basis strength • Announced divestments expected to add ~50bps t
Slide 4: Key capital ratios
Key capital ratios Key capital ratios (%) Sep-20 Mar-21 Jun-21 CET1 capital ratio (%) APRA basis Internationally comparable basis Internationally comparable ratios1 18.1 17.7 CET1 capital ratio (internationally 16.5 16.5 18.1 17.7 comparable) 12.3 12.0 0.5 12.5 11.1 Leverage ratio 6.5 6.9 6.5 (inter
Slide 5: Credit quality
Credit quality Stressed exposures down 9bps in 3Q21. Stressed exposures as a % of TCE 3.20 Impaired 90+ days past due and not impaired1 Watchlist & substandard 3.0 Increase in impaired Reduction in watchlist and Increase in 90+ days past due and not mainly driven by one impaired driven by migration
Slide 6: Provisions
Provisions Prudence maintained. Total impairment provisions1 ($m) Provision coverage Sep-20 Mar-21 Jun-21 Overlay Stage 1 CAP Stage 2 CAP Stage 3 CAP Provisions to Credit RWA 171bps 159bps 155bps IAP (Stage 3) Provisions to TCE 58bps 51bps 50bps 6,159 708 5,508 5,540 Impaired provisions to impaired
Slide 7: Australian housing market
Australian housing market Temporary loss of momentum, but correction looks unlikely Australian housing market metrics ann% ppts Dwelling prices (lhs)* Dwelling approvals (lhs) Turnover (rhs) 60 3.5 50 * 6mth annualised %ch; ^ annual change as % dwelling stock 2.5 40 30 1.5 20 10 0.5 0 -0.5 -10 -20 -
Slide 8: Australian housing market
Australian housing market Key measures of activity show impact of recent COVID-19 outbreaks. Residential property: sales vs listings Housing finance approvals by segment ($bn) ‘000s new listings (lhs) sales (lhs) ‘000s $bn value of housing finance $bn 33 40 18 18 31 16 FHBs 16 29 35 14 'upgraders' 1
Slide 9: Australian housing market
Australian housing market Affordability issues emerging in Sydney and Melbourne. Affordability: Australia (%) Westpac Mortgage interest rates (%) f’casts to % Sydney Melbourne Dec-22 % % % 35 35 Variable* 3 year fixed 2017 peaks 10 10 30 30 8 8 25 25 6 6 20 20 4 4 Share of average income required to
Slide 10: Australian mortgage delinquencies
Australian mortgage delinquencies Australian mortgages Sep-20 Mar-21 Jun-21 Australian mortgage delinquencies (%) Total portfolio 30+ day delinquencies (bps) 214 179 176 4.0 90+ day delinquencies 30+ day delinquencies Total portfolio 90+ day delinquencies (bps) 162 120 111 3.0 (incl. impaired mortga
Slide 11: Australian mortgage portfolio composition
Australian mortgage portfolio composition Owner-occupiers driving new flows; more customers choosing fixed rates. Mar-20 Sep-20 Mar-21 1H21 Australian mortgage portfolio by interest rate type Australian mortgage portfolio balance balance balance Flow1 (% by balances) Total portfolio ($bn) 445.7 440.
Slide 12: Australian mortgage portfolio
Australian mortgage portfolio Majority of borrowers have significant equity. Australian housing loan-to-value ratios (LVRs) (%) Serviceability assessment rate (%) 100 1H21 drawdowns LVR at origination Portfolio LVR at origination Portfolio dynamic LVR 1 90 2.50% buffer applied Serviceability in serv
Slide 13: Funding and liquidity
Funding and liquidity Shift in balance sheet: higher customer deposits, lower offshore wholesale funding Funding composition (%) Significant balance sheet Key funding and liquidity measures By residual maturity changes in the last 18 months Net stable funding ratio (%) Liquidity coverage ratio (%) 5
Slide 14: Long term wholesale funding
Long term wholesale funding Expect to return to more normal funding activities in FY22 Term debt issuance and maturity profile at 30 June 20211 ($bn) 42 Funding for Lending Programme (NZ) Issuance Maturities 37 38 37 32 34 Term Funding Facility (Aus) 31 27 26 Subordinated debt 18 13 Senior/Securitis
Slide 15: Westpac Australian Covered Bonds
Westpac Australian Covered Bonds
Slide 16: Westpac covered bonds highlights
Westpac covered bonds highlights Key features Westpac issuance profile • Covered Bonds are AAA/Aaa rated1 • Well managed maturity profile • Highly rated issuer Westpac A+ / Aa3 / AA-2 • Covered bond issuance capped at 8% of Australian assets • Issuer can go to BBB+/A3(cr) (Fitch/Moody’s) and covered
Slide 17: Australian covered bonds
Australian covered bonds Australian covered bonds legislation Westpac’s Australian covered bond program • Legislation was passed in October 2011 to amend Banking Issuer Westpac Banking Corporation Act and enable Australian banks to issue covered bonds Timing • Covered bond issuances previously prohi
Slide 18: Westpac's Australian covered bond program
Westpac’s Australian covered bond program Key features Covered Bonds are issued by Westpac, backed by an unconditional and irrevocable guarantee by the Covered Bond Structure Guarantor (the “CBT Guarantor”), which is limited in recourse to the assets in the Westpac Covered Bond Trust. Security compr
Slide 19: Covered bond structure
Covered bond structure Westpac Banking Corporation Covered Bond Swap Provider Covered bond swap Sale of Mortgage Loans and Related Security Interest Rate Swap Westpac Banking Westpac Banking Corporation Trustee of the Westpac Corporation Seller Covered Bond Trust Interest Rate Swap Provider Consider
Slide 20: Structural enhancements
Structural enhancements • The Interest Rate Swap provides a minimum yield on the Cover Pool by swapping: - The amount of interest received from the residential mortgage loans and other assets of the CBT Guarantor, in exchange for - An amount sufficient to pay expenses and the interest on the Interco
Slide 21: Asset Coverage Test
Asset Coverage Test • Tested prior to the service of a Notice to Pay as of every Calculation Date (monthly) • The Asset Coverage Test is designed to protect Covered Bondholders by ensuring that the value of mortgages, cash and substitution assets are greater than the outstanding principal of the Cov
Slide 22: Amortisation Test
Amortisation Test • Tested as of every Calculation Date (monthly) after the service of a Notice to Pay • The Amortisation Test is designed to ensure the CBT Guarantor has sufficient assets to meet its obligations under the Covered Bond Guarantee • A failure of the Amortisation Test will constitute a
Slide 23: Pre-Acceleration Priority of Payments
Pre-Acceleration Priority of Payments Principal priority of payments Revenue priority of payments Revenue priority of payments Principal priority of payments Accrued interest adjustment If the Pre Maturity Test has been breached: Taxes (CBT Guarantor only) to Pre Maturity Liquidity Ledger Amounts du
Slide 24: Guarantee Priority of Payments
Guarantee Priority of Payments Guarantee priority of payments – following service of a Notice to Pay Accrued Interest Adjustment to Seller / Repurchase Price Adjustment to Seller CBT Guarantor Fees and Amounts due to Bond Trustee / Security Trustee / Agents / Trust Expenses Amounts due to Servicer (
Slide 25: Issuer Events of Default
Issuer Events of Default • Issuer fails to pay when due - Any amount of Covered Bond principal within seven days of the due date - Any amount of Covered Bond interest within 14 days of the due date • Issuer defaults in performance or obligations under the Transaction Documents and such default remai
Slide 26: CBT Guarantor Events of Default
CBT Guarantor Events of Default • CBT Guarantor fails to pay when due - Any amount of Covered Bond principal within seven days of the due date Events of - Any amount of Covered Bond interest within 14 days of the due date Default • CBT Guarantor defaults in performance of obligations under the Trans
Slide 27: International comparisons
International comparisons Terms Westpac UK Sweden Canada UK Regulated Covered Bonds Lag om Utgivning av Säkerställda Legislation Amendment to the Banking Act 1959 National Housing Act Regulations Obligationer All assets transferred to SPV All assets transferred to SPV Asset allocation All assets tra
Slide 28: Westpac's high quality cover pool
Westpac’s high quality cover pool Covered bond pool eligibility criteria Covered bond pool eligibility criteria Covered pool loan statistics as at 31 July 2021 • At the time of sale, each loan: Total pool loan balance1 A$22,551,207,423 − Is denominated and payable only in A$ in Australia − Is secure
Slide 29: Cover pool statistics
Cover pool statistics As at 31 July 2021 Loan to value ratio by balance (%) Geographic distribution by state Current LVR (unindexed) Current LVR (indexed) 50 40 30 Northern Territory 20 $123.4m, 0.6% 10 Queensland Western $3,694.9m, 0 Australia South 16.4% 0-50% 80-100% > 100% 50-55% 55-60% 60-65% 6
Slide 30: Cover pool statistics
Cover pool statistics As at 31 July 2021 Current loan balance Interest rate split (%) % of pool (lhs) Number of loans (rhs) 30 35,000 25 30,000 20 25,000 41% 20,000 15 15,000 10 10,000 59% 5 5,000 - - 750k -1m 100-200k 200-300k 300-400k 400-500k 500-750k 0-100K 1m - 1.5m > 1.5m Fixed Variable Remain
Slide 31: Additional Information
Additional Information Westpac Group
Slide 32: Supporting customers, communities and our people
Supporting customers, communities and our people We have continued to operate effectively through the latest lockdown. New and ongoing support to customers Supporting our people • New support for eligible customers announced in July 2021 including1: • Supporting vaccine rollout – Short term deferral
Slide 33: Our sustainability strategy
Our sustainability strategy Sustainability Priorities What How UN Sustainable Development Goals1 Help individuals and businesses • Supporting customers build strong financial futures and and businesses through navigate times of change, times of change and End poverty in all its Decent work and Reduc
Slide 34: Our climate change strategy
Our climate change strategy OUR PRINCIPLES A transition to a net Economic growth Addressing climate Climate-related risk Collective action, zero emissions and emissions change creates is a financial risk. transparency and economy is required reductions are opportunities. disclosure matter. by 2050.
Slide 35: Climate-related metrics
Climate-related metrics Lending to climate change solutions Electricity generation exposure Lending to electricity generation ($bn, Total Committed Exposures (TCE)) (% of TCE)1 at 30 September 2020 in Australia and New Zealand (% of total) 80% 10.1 10.0 9.1 9.3 2.8 0.6 70% 6.4 Renewable energy 60% 7
Slide 36: Portfolio simplification progress
Portfolio simplification progress Expected divestment Businesses sold Announced Completed CET1 benefit (bps) Zip Co Ltd. Oct 2020 Oct 2020 Realised Coinbase Inc. May 2021 May 2021 Realised General Insurance Dec 2020 Jul 2021 12 Vendor Finance Aug 2020 Aug 2021 - Announced sale Announced Completion e
Slide 37: Stressed exposures
Stressed exposures Corporate and business stressed exposures by industry sector ($bn) Sep-20 Mar-21 Jun-21 2.0 1.8 Small number of names in 1.6 WIB and Business divisions Mostly one institutional 1.4 exposure 1.2 1.0 0.8 0.6 Mostly one institutional exposure 0.4 0.2 0.0 Accommodation, cafes Property
Slide 38: New Zealand credit quality
New Zealand credit quality Mortgage 90+ day delinquencies1 (%) Unsecured consumer 90+ day delinquencies1 (%) 0.6 3.0 Ex-hardship Reported Ex-hardship Reported 0.5 0.4 Introduction of changes to 2.0 Introduction of changes to 0.37 the reporting of hardship the reporting of hardship 1.66 0.3 0.2 1.0 0
Slide 39: Australian consumer portfolio
Australian consumer portfolio Australian consumer finance portfolio1 Australian consumer finance 90+ day delinquencies (%) Sep-20 Mar-21 Jun-21 Lending $15.7bn $15.0bn $14.5bn 2.50 30+ day delinquencies (%) 3.62 3.58 3.25 1.82 1.50 90+ day delinquencies (%) 2.09 1.92 1.82 90+ day delinquencies impro
Slide 40: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting Australian mortgage portfolio by Credit policy as at April 2021 year of origination (% of total book) • Income verified via payslips or tax returns with other supporting documentation such as PAYG income statements and salary credits to accounts where requi
Slide 41: Australian mortgages
Australian mortgages Interest-only and Investment property lending. I/O lending by dynamic LVR1 and income band (%) Investment property portfolio by number of properties per customer (%) Applicant gross income bands <$100k $100k - $250k >$250k 1 55 2 1 7 1 17 2 33 3 10 25 27 12 4 17 3 64 5 11 6 6 2
Slide 42: Tier 2 issuance
Tier 2 issuance Westpac Total Regulatory Capital Westpac Tier 2 issuance and calls/maturities4 as at 31 March 2021 (notional amount, A$m) CET1 Additional Tier 1 Tier 2 FY21 Tier 2 issuance 6.0 expected to be approx. $5-7billion (including buffer) 5.5 5.0 Issuance Maturities 5.0% 3.9% ($17bn) (approx
Slide 43: Disclaimer
Disclaimer The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (“Westpac”) (ABN 33 007 457 141) and its activities. It should not be reproduced, distributed or transmitted to any person without the consent of Westpac and is not
Westpac Banking — Debt Investor Presentation (September 2021) on 6ix