Westpac Banking Corporation · ASX:WBC
Westpac Banking — Investor Presentation (July 2006)
46 slides from Westpac Banking's investor presentation, Jul 31, 2006
Slide 1: Market Update
Wlfestpac Australia’s First Bank Market Update 31 July 2006
Slide 2: Westpac overview
Wlfestpac Australia’s First Bank Westpac overview David Morgan - Chief Executive Officer 31 July 2006 Delivering on our promises 2005 Market Update Day Priorities : 2006 Progress Restore momentum in the. Australian retail franchise VV Enhance business unit cooperation and cross sell Vv 4 2006 Market
Slide 3: Consistently implementing against our strategy
Consistently implementing against our strategy Delivering on service / value Financial discipline chain Focus on core Operational markets excellence Customer Focus ® Deeply understands needs * Provide value-adding solutions * Build long-term relationships Employees = = Senne r Tr Tr A company where
Slide 4: We are actively addressing / Plans for growth
We are actively addressing « Accelerating the revenue momentum in BCB « Restoring growth in our New Zealand consumer business * Continuing to grow strongly in our core markets ~ BTFG - Increasing market share across the board ~ WIB — #1 Lead Bank, specialised funds management (Hastings/SCG) 7 2006 M
Slide 5: Strong confidence in the future
Strong confidence in the future « Strong track record of delivering on promises * Sector leading platforms now in place * Momentum restored in core business * Significant productivity improvements still available « Investments committed to growth 9 2006 Market Update Wfestpac 13:30 Session 1 * Panel
Slide 6: Profitable growth momentum in BCB
Wlfestpac Australia’s First Bank Profitable growth momentum in BCB Mike Pratt - Group Executive BCB 31 July 2006 Our report card - delivering on our commitments Investing in Business Banking M Recruit additional relationship managers M Address Pinnacle issues for SME &! Roll out Pinnacle to Middle M
Slide 7: Key messages
13 Key messages * Volume momentum is strong * Revenue momentum being driven both by volumes and 1HO6 pricing changes * Spread compression in both asset and liability books is being actively managed * Investment spend moving forward will reflect a different mix of capital expense and operating expens
Slide 8: ... and Pinnacle delivering for SME ...
... and Pinnacle delivering for SME ... M Significant reduction in processing time from origination to documentation M1 Imaging of all collateral documentation Reduced manual processing through concurrent deal capability M4 Reduced re-work through more structured and validated data capture M4 Much e
Slide 9: Consumer profitable volume momentum ...
Consumer profitable volume momentum ... Mortgage growth achieved through: - First party productivity improvements ~ Third party service and quality focus Deposits challenging - not competing at top of market Portfolio management and acquisition driving credit cards growth Mortgage growth as a multip
Slide 10: Deposit growth achieved with active spread management ...
Deposit growth achieved with active spread management ... * Shift to high yield accounts Savings Balances (%) 186 Be * Actively managing spreads 50 * Launched Westpac One Saver with 20 other high spread product initiatives a . . 11405. tHOS in train Maxi ~' Wterm Deposits @Savings Mouser . ceo. Sour
Slide 11: ... however, consumer customer satisfaction stalled ...
24 ... however, consumer customer satisfaction stalled ... * Since January 2006 customer satisfaction has declined: - Fee increases first half 2006 - Contact centre impacts - Low ‘share of voice’ * Customer satisfaction is driven by customer experience, product and brand perception 2006 Market Updat
Slide 12: Across Business & Consumer Banking, Reach is driving sales
23 Across Business & Consumer Banking, Reach is driving sales by meeting customer needs ... « Our Quality Needs Based Conversation program is linked to Reach across the branch network. _Westpac Wa ee Sales & Service Profiles / Disciplines Customer Plans fe ‘ customers’ needs 8,000 future needs captu
Slide 13: Westpac Way is now in embedding stage
25 Westpac Way is now in embedding stage March June September January Now 2005 2005 2005 2006 Discovery >|! Design Customise Roll Out Embed » Diagnose Integrate tools and || Test and validate Deliver to front line |; Inspection business state practices program design sales outines Uncover tools and
Slide 14: Volume momentum is strong
« Volume momentum is strong «+ Revenue momentum being driven by volumes and 1HO06 pricing changes * Spread compression in both asset and liability books is being actively managed * Investment spend moving forward will reflect lower capital expenditure and higher operating expenses principally in the
Slide 15: Maintaining a flat expense base
® & = _ Oo Maintaining a flat expense base e Redirection of investment to the front line — allowing for compositional change in expense base Leveraging a sector leading suite of platforms Sourcing — natural evolution of our strategy / greater depth and breadth of experience 2006 Market Update 29 All
Slide 16: Manages 41% of Westpac's expense base
34 Manages 41% of Westpac’s expense base Westpac expense base BTSS expense base ae — a BTSS managed oe expense oe oe ae we! ae a ao - Retained expense base Proces¢ & Channel Pa Transformation - Mortgage processing Property Let Risk a Sourcing us Information Property Pa ‘Technology’ Program Office &
Slide 17: Sector leading platforms / Sourcing
Sector leading platforms Reach Corporate Online Corporate Super £— 33 2006 Market Update Wfestpac Sourcing — a natural evolution + Builds on Westpac’s extensive onshore outsourcing experience and involvement in industry utilities « A-key platform to underpin Westpac’s strategy to deliver sustainable
Slide 18: Maintain costs flat through prudent platform investments
« Maintain costs flat through prudent platform investments « Re-direct investment to front line « Pursue other productivity opportunities 35 2006 Market Update Wfestpac Westpac Australia’s First Bank New Zealand banking Ann Sherry — CEO New Zealand and Pacific Banking 31 July 2006
Slide 19: New Zealand is an important contributor to Westpac
New Zealand is an important contributor to Westpac * New Zealand accounts for 17% of Westpac New Group cash earnings, of which: Zealand Banking Amount ($A) AH06 : Group % of ~ 14% is New Zealand Business and Consumer Banking Cash Earnings $210m 14% ~ 3% is WIB New Zealand Loans $29bn 14% Deposits $1
Slide 20: We continue to have a strong and valuable franchise
We continue to have a strong and valuable franchise External Consumer Metrics 807 MWEC MANZ. IDNBNZ DBNZ ASB * Largest customer numbers for any brand in the market 70 + * Balanced business mix 604 ~ 60% Consumer ~ 40% Business a * Balance sheet growth at system levels “| + Asset quality strong al *
Slide 21: We have a clear plan to restore growth
We have a clear plan to restore growth 44 « Absolute focus on attrition hot spots * Frontline empowerment and accountability * More systematic customer contact strategy * Clearer pricing strategy * Product pricing to meet transition points « Improve after sales service * Cross sell leads via leads a
Slide 22: We have targeted and delivered growth in key segments
We have targeted and delivered growth in key segments 43 * Success in growing: ~ Private Bank lending portfolio ~ Migrant lending portfolio ~ Personal lending book doubled * Success driven by: ~ More feet on street ~ Strength of our relationship management ~ Targeted advertising campaigns 2006 Marke
Slide 23: Key growth segments
45 Key growth segments Middle Markets * 16% lending growth in middle business‘ + #1 Middle business. market share* by balances * #1.Middle business nominated main bank? Property » Leading Property team * Market has slowed but we continue to hold market share SME * SME lending growth has increased 21
Slide 24: The market is challenging but there is upside
* The market is challenging but there is upside * We have a strong brand position * We understand the retention problems in our Consumer business and have implemented a plan to address them * Our Business Banking portfolio is outperforming the market and has further opportunity * Invested but held c
Slide 25: BT continues to be a wealth growth story
49 » BT continues to be a wealth growth story * Growth in core capability * Capturing flows and market share * Growth underpinned by Advice business * Continued excellent investment performance * Brand investment pays off * Significant upside remains 2006 Market Update Wifestpac 650 * Underlying cas
Slide 26: Growth in Wrap FUA ...
$1 Growth in Wrap FUA ... * Wrap FUA $25bn (at June 2006), peice bechai sana up 39% from June 2005 Wf oe oe ms 48 cane . at * Wrap sales up 45% June 2005 to 104 vol a L me June 2006 5 | Z | | . sees JuaD4 dtun-05- Jun-06 .-. and advisors like BT product as weli ° June BT Wrap platform inflows inflow
Slide 27: March qtr 2006 market share
§3 March gtr 2006 Category _ Market Share of New | Share _ Business _(FUMIEUA) © (Net Flows) Retail Retirement Income —-- -41,6% Total Platforms* » ” 14.4% Share of Annual Flows vs Share of FUM/FUA, % Share of Flows 35.9 % Flows 30.. © CBAICoft 25 | JE 29) Macquarie wl oy 10 {stGeorg? Javiva “g, OB
Slide 28: One of the best risk adjusted returns in the market - Mercer
$5 One of the best risk adjusted returns in the market - Mercer Source: BT internal data Source: BT internal data Currant S&P small caps fund of the year BT institutional Core Australian Share BT Institutional Smaller Companies 8% . 8% 12% . 18% ‘GEG? Month Active Return . Ea t Month Active Retum o
Slide 29: Comparing our cross sell performance
* Comparing our cross sell performance Clonal Be || WeelpaceT against global best practice reveals Curent Aspiration significant opportunit 5 60-90% © g PP y Goree European © 38% | 60% + Institutional sales in Investment oS g___banks Management - strong pipeline oe 8% European | 3% 50% - * Ratings c
Slide 30: Leading wholesale bank in Australia / New Zealand
Wlfestpac Australia’s First Bank Growth opportunities across Westpac Philip Chronican - Group Executive WIB 31 July 2006 Leading wholesale bank in Australia / New Zealand area | |{ll/3 Market Position Customer #4 Lead bank’, Australia ~ Peter Lee Associates 2005 Transactional ©. #1 Lead domestic tra
Slide 31: Leading wholesale bank in Australia / New Zealand
61 Leading wholesale bank in Australia / New Zealand WIB revenue & cash earnings excluding Structured Finance {$m) Diversified revenues 1H06 ($m) Average VaR usage ‘700 between 1 April 05 - 34 Revenue Cash earnings March 06 was $6.8m — Spec. Capital 99% confidence level / 883 552 Group 16 1 day hold
Slide 32: Asian strategy
Asian strategy Our goal * Capture value from Asian growth by building on our strengths and developing the, capability to better capture business flows Customers + Australia/New Zealand clients operating in Asia + Asian corporates/individuals with interests in Australia/NZ Businesses / Products + Tra
Slide 33: Assisting business at inflection point
Assisting business at inflection point « Our advantage is the ability to assist companies as they migrate from middle markets to corporate - the growth inflection point for their business * Typically where the customer moves from vanilla loan structures to: Senior/subordinated debt issuance Structur
Slide 34: Opportunities with BT Financial Group
Opportunities with BT Financial Group Securities Specialised Capital Group (SCG) working with Industry Teams to Distribution identify origination opportunities with existing WIB clients Introducing clients into BT Financial Group corporate super and margin lending Other 67 2006 Market Update Wfestpa
Slide 35: Opportunities — Corporate Super/Margin Lending
Opportunities — Corporate Super/Margin Lending « During 2006 WIB has successfully introduced 5 of its clients to the BT Corporate Super package ¢ Introductions represent FUM of over $110m * Margin lending has also been an area where opportunities are only beginning to be leveraged 69 2006 Market Upd
Slide 36: Recruiting and retaining a productive workforce
Wlfestpac Australia’s First Bank Recruiting and retaining a productive workforce lana Atlas - Group Executive, People & Performance 31 July 2006 Recruiting and retaining a productive workforce Achieve business targets for hiring sales professionals Leverage our strong employment brand Build internal
Slide 37: Re-directing personnel resources to the front line
Re-directing personnel resources to the front line «+ We have rationalised support functions + Around 500 roles have been removed to date by not filling vacant support positions, reducing the use of contractors and redeploying people where possible « Freed up resources are being reinvested in the fr
Slide 38: Competitive resignation rates in a very tight labour market
Competitive resignation rates in a very tight labour market Overall resignation rate {%) Most recent (December 2005) 20% 5 external benchmark for matched finance companies 15.6% ee 18% 3 ~~ 10% 3 8% 4 O% 4 Sep-02 Dec-02 Mar-03 Jun03 Sep-0d Dec-03 Mar-04 Jun-04 Sep-04 Dec-O4 Mar05 Jun05 Sap-05 Deo05
Slide 39: The touch and feel of a great place to work
The touch and feel of a great place to work rad 2006 Market Update Wfestpac Key messages * We have the capability and brand to ensure a quality supply of skilled people « Leadership is the key driver of employee commitment and retention *« We will continue to restructure our workforce in line with g
Slide 40: Summary
Wlfestpac Australia’s First Bank Summary David Morgan- Chief Executive Officer 31 July 2006 Strong confidence in the future * Strong track record of delivering on promises + Substantial platform investment Improved front ine Presence and complete and now delivering capability * We are addressing our
Slide 41: Supplementary Slides
Wlfestpac Australia’s First Bank Supplementary Slides Quality and composition of Westpac’s balance sheet is sound 82 implied overall change in capital requirements -~ percent of Basel | capital requirements § --2----------- === === =e ee % Change in Minimum Required Capital Westpac Other non- .G10 G
Slide 42: Well provisioned given quality / composition of our balance sheet
Well provisioned given quality / composition of our balance sheet Provisions for impairment losses on loans ($m) 2,000 5 4,800 | 4,600 5 @ Individually Assessed Provisions 1,400 | {AGAAP Specific Provisions) & it Lit Provist 4,200 4 Credit Litigation Provision 1,000 4 & Collectively Assessed Provisi
Slide 43: Economic environment sound
85 Economic environment sound * Expansion continues in Australia — growth rebounding to 3.5% in 2006 * By contrast, a period of consolidation in New Zealand ¢ Global growth above par for fourth consecutive year — a positive for exporters ¢« Unemployment at 30 year low * However, higher inflation a c
Slide 44: Credit growth expectations
Credit growth expectations Australian and New Zealand credit growth (%) Forecasts (To Dec 2007} 245 24 2045 r 26 16 paws. ef 8 124 at 44 L 4 9 a AH wd dunos Bec-00 Jun-02 Dec-03 Jun-08 Dec-06 = Aust. Housing woauucs Aust Business. ‘Total credit (Aust} «=== Total credit avg (Aust} — - —Total housing
Slide 45: Strong growth continues
Strong growth continues Accelerated growth (CAGR 42% Wrap funds under adminiateation (tb) ae : « Gaining market share in retail - platform FUA « High penetration of dealer and planner population « Increasing share of super assets Source: BT 89 BT Meeting the needs of the wealth industry Benefits of
Slide 46: Building on our lead / Disclaimer
Building on our lead Competitive advantage Strategy Solutions Wrap - the engine that powers successful advice businesses a1 BT Disclaimer The material contained in this presentation is intended to be general background information on Westpac Banking Corporation and its activities. The information is