Slide 1: ASX Release
ASX Release Level 18, 275 Kent Street Sydney, NSW, 2000 2 November 2020 Westpac FY20 Presentation and Investor Discussion Pack Westpac Banking Corporation (“Westpac”) today provides the attached Westpac FY20 Presentation and Investor Discussion Pack. For further information: David Lording Andrew Bow
Slide 2: Presentation and Investor Discussion Pack
Presentation and Investor Discussion Pack 2020 FULL YEAR FINANCIAL RESULTS FOR THE 12 MONTHS ENDED 30 SEPTEMBER 2020 WESTPAC BANKING CORPORATION ABN 33 007 457 141 Fix. Simplify. Perform. Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless o
Slide 3: Westpac 2020 Full Year Results Index
Westpac 2020 Full Year Results Presentation 3 Investor Discussion Pack of 2020 Full Year Results 26 2020 Full Year Overview 27 Results 29 Results Index Governance and risk management 33 Customer franchise 36 Digital transformation 37 Sustainability 40 Earnings drivers 43 Revenue 44 Expenses 47 Impai
Slide 4: Peter King
Peter King Chief Executive Officer Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 30 for definition. Results principally cover the 1H20, 2H19 and 1H19 periods. Comparison of 1H20 versus 2H19 (unless otherwis
Slide 5: FY20 Results – Overview
FY20 Results – Overview. Earnings • Cash earnings $2.6bn, disappointing result; environment and our own issues • $3.2bn impairment charge up 4x • Notable items1: ($2.6bn) after tax including $1.3bn provision for AUSTRAC penalty Capital • CET1 capital ratio at 11.1% • Pro forma CET1 after Zip sale 11
Slide 6: FY20 Earnings snapshot
FY20 Earnings snapshot. Change Change FY20 FY20 – FY19 2H20 – 1H20 Reported net profit $2,290m (66%) (8%) Cash earnings1 $2,608m (62%) 63% Impairment charge ($3,178m) 4.0x (58%) Impairment charge to average loans2 45bps 34bps (35bps) Cash EPS3 72.5c (63%) 61% Return on equity4,5 3.83% (Large) 178bps
Slide 7: FY20 divisional snapshot
FY20 divisional snapshot. FY20 Cash earnings ($m) FY20 – FY19 % Change Consumer $2,746m (12%) Business $734m (62%) Westpac Institutional Bank $332m (64%) New Zealand (NZ$) $649m (38%) Headline ($506m) Large Specialist Businesses Ex notable items1 $416m (45%) Headline ($1,310m) 57% Group Businesses E
Slide 8: Asset quality
Asset quality. Stressed exposures as a % of TCE1 Australian mortgage delinquencies (%) 3.20 3.0 90+ day past due 30+ day past due Watchlist & substandard 90+ day past due (dpd) and not impaired 2.14 2.0 Impaired 1.62 1.0 2.17 2.07 1.91 0.0 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 1.60 1.24 1
Slide 9: Deferrals lower – significant provision build
Deferrals lower – significant provision build. Deferral packages at 28 Oct 2020 ($bn)1 Impairment charges and provision cover ($m and bps) Mortgages Business Impairment charge ($m) 64.8 2 Total provisions to CRWA (%) 10.1 1.70% 1.71% 1.57% Mortgages: ~4% of book Business: ~2% of book3 54.7 1,983 17.
Slide 10: Capital and dividend
Capital and dividend. CET1 capital ratio (% and bps) 63 23 (58) (14) 37 (5) 11.13 11.21 10.67 10.81 Up 14 bps Up 32 bps Sep-19 Capital Cash 2H19 Other capital Mar-20 Cash Other capital Sep-20 Sep-20 raised earnings dividend movements earnings movements Pro-forma (net of DRP) Dividend considerations
Slide 11: Our strategy
Our strategy. Purpose Helping Australians and New Zealanders Succeed 50 customers products, Markets, Banking for consumer, business and institutional customers Fix Simplify Perform Address outstanding issues Streamline and focus the business Sustainable long-term returns Priorities • Risk management
Slide 12: Completed this year
Completed this year. Fix Simplify Perform • Settled AUSTRAC proceedings, and • Set up Specialist Businesses division, • Supported customers through 2 US class actions completed review of non-core COVID-19 with $64.8bn packages3 businesses • New function: Financial Crime, • Strong balance sheet; CET1
Slide 13: Priorities for FY21
Priorities for FY21. Fix Simplify Perform • Continue to strengthen risk • Portfolio simplification • Support customers through management ‒ Continue to exit non-core COVID-19 ‒ Financial Crime remediation businesses • Mortgage growth in line with ‒ Deliver CORE Program ‒ Close 5 international office
Slide 14: Michael Rowland
Michael Rowland Chief Financial Officer Financial results throughout this presentation are in Australian dollars and are based on cash earnings unless otherwise stated. Refer page 30 for definition. Results principally cover the 1H20, 2H19 and 1H19 periods. Comparison of 1H20 versus 2H19 (unless oth
Slide 15: 2H20 earnings
2H20 earnings. Cash earnings ($m) 2H20 – 1H20 1,298 (184) 2,835 (1,220) 1,399 2,392 (315) (3) (353) 1,615 Up 19% 993 Core earnings down 12% Up 63% 1H20 1H20 1H20 excl. Net interest Non-interest Expenses Impairment Tax 2H20 excl. 2H20 2H20 notable items 1 notable items 1 income income charges & NCI 2
Slide 16: Notable items
Notable items. Notable items ($m after tax) Notable items detail 2H19 1H20 2H20 AUSTRAC proceedings - (1,027) (415) • Provisions for AUSTRAC penalty of $1.3bn • Includes provisions for estimated refunds, costs and litigation Remediation and litigation (341) (258) (182) • Remediation mostly top ups o
Slide 17: Balance sheet
Balance sheet. CET1 Capital ratio (%) LCR1 quarterly average (%) NSFR2 (%) 11.1 122 151 117 10.8 140 10.7 132 112 Sep-19 Mar-20 Sep-20 Sep-19 Mar-20 Sep-20 Sep-19 Mar-20 Sep-20 RBA Term Funding Facility Customer deposit to loan ratio (%) Wholesale funding outstanding ($bn) allowance ($bn) RBA Term F
Slide 18: Australian mortgages
Australian mortgages. Net mortgage movements ($bn) Annualised change (%) 1H19 2H19 1H20 2H20 Owner occupied 2 2 2 2 2.4 2.0 Investor - (1) (6) (7) (3.5) (4.7) Fixed rate (% of flow) 36 35 20 30 1H19 2H19 1H20 2H20 Mortgage flows ($bn) Portfolio mix (% of total) Mar-19 Sep-19 Mar-20 Sep-20 Principal
Slide 19: Margins
Margins. Net interest margin (% and bps) Includes 4bps of front book/back book pressure 3Q20 NIM: 2.05% 4Q20 NIM: 2.02% 2.13 3bps 2.16 (1bp) (7bps) 5bps (3bps) (7bps) 0.12 0.12 1bp 2.04 (1bp) 2.03 Treasury & Markets 0.13 impact on NIM 0.13 2.01 2.04 Down 12bps 1.91 NIM excl. Treasury 1.90 & Markets
Slide 20: Non-interest income
Non-interest income. Up 11% including notable items in 2H20, flat excluding notable items1 Net Fees1 9% Wealth and Insurance1 12% Trading and Other1 2% Down $79m Up $68m Up $8m • Lower cards from decline in activity, • Insurance up $105m from lower claims • $109m positive CVA movement particularly i
Slide 21: 2H20 expenses
2H20 expenses. Up 6%, 7% excluding notable items1 Expenses ($m) 2H20 – 1H20 1,283 6,540 6,160 (1,256) 137 5,257 226 113 (232) 4,904 109 Up 7% Up 6% 1 1 2 1 1 1H20 1H20 1H20 excl. BAU Structural Investment Risk & COVID-19 2H20 excl. 2H20 2H20 notable notable productivity Compliance notable notable it
Slide 22: Investment spend
Investment spend. Investment spend ($m) Risk and compliance Growth and productivity Other technology Amortisation 799 694 614 618 565 1,720 1,464 1,506 1,227 1,256 806 377 503 278 325 890 784 778 664 792 171 197 219 250 139 FY16 FY17 FY18 FY19 FY20 21 Westpac Group 2020 Full Year Results Presentatio
Slide 23: Credit impairment charge composition
Credit impairment charge composition. ($m) Individually assessed provisions Collectively assessed provisions Total Write-backs Write-offs Other movement New IAPs1 & recoveries direct in CAP2 2,238 1,619 One large name in WIB, several small names across 940 Business and WIB 535 438 438 461 351 366 28
Slide 24: Expected credit loss provisions
Expected credit loss provisions. Expected credit loss provisions on loans and credit commitments ($m) Forecasts for base case economic scenario3 Total ECL provisions $6,163m At March 2020 At September 2020 Includes $31m of provisions for debt securities 2020 2021 2020 2021 GDP growth (5.0%) 4.0% (3.
Slide 25: Capital drivers
Capital drivers. CET11 capital ratio (% and bps) Central economic estimate Downside V-shaped recession, W shaped recovery, mortgage delinquencies 1.5x mortgage CRWA2 sensitivity current levels, business delinquencies 2x downgrades across a range current levels, further 37 (11) of sectors downgrades
Slide 26: FY21 Considerations
FY21 Considerations. 1 • Economic forecasts for system business lending expected decline of ~3.5%2 Lending • Aiming for mortgage growth in line with major banks by 2H21, economic forecasts for system mortgage lending expected growth of ~3.2%2,3 Net • Low interest rates expected to impact deposit spr
Slide 27: Investor Discussion Pack
Investor Discussion Pack Fix. Simplify. Perform.
Slide 28: Overview
Overview WIfestpac croup
Slide 29: Westpac Group at a glance
Westpac Group at a glance. WBC Strategy Australia’s First Bank. listed on ASX & NZX Five operating divisions • In its 204th year, Australia’s first • Unique portfolio of brands Specialist Businesses bank and first company, opened providing a range of financial 1817 services across consumer, Consumer
Slide 30: Cash earnings and reported net profit reconciliation
Cash earnings and reported net profit reconciliation. Results Cash earnings1 policy • Westpac Group uses a measure of performance referred to as cash earnings to assess financial FY20 FY20-FY19 2H20-1H20 performance at both a Group and divisional level ($m) % chg % chg • This measure has been used i
Slide 31: FY20 cash earnings
FY20 cash earnings. Results Lower from higher impairment charges and notable items. Change Change Cash earnings FY20 – FY19 ($m) FY20- 2H20- Higher insurance claims, lower wealth Higher risk and compliance spend Higher charge to increase FY20 FY19 1H20 income and lower fees from fee waivers and cost
Slide 32: Notable items in FY20 and FY19
Notable items in FY20 and FY19. Results In FY20 and FY19, the Group raised certain provisions known throughout this document as “notable items” which relate to the following: Specialist Group AUSTRAC proceedings1 ($1,442m FY20, nil FY19) FY20 notable items ($m) Consumer Business NZ2 Businesses Busin
Slide 33: FY20 financial snapshot
FY20 financial snapshot. Results Change Change Change Change FY20 FY20 - FY19 2H20 - 1H20 FY20 FY20 - FY19 2H20 - 1H20 Earnings1 Balance sheet Earnings per share (cents) 72.5 (63%) 61% Total assets ($bn) 911.9 1% (6%) Common equity Tier 1 (CET1) capital Core earnings ($m) 7,926 (25%) (10%) 11.1 46bp
Slide 34: Improving risk management through the CORE program
Improving risk management through the CORE program. Governance and risk management Responding to the findings of our CGA assessments. Background: • Westpac completed a Culture, Governance and Accountability (CGA) self-assessment in 2018 • Implementation of 30 of the recommendations commenced in Febr
Slide 35: AUSTRAC proceedings settled
AUSTRAC proceedings settled. Governance and risk management Overview Our Response to date • In 2018 Westpac self-reported to AUSTRAC a failure to report certain international 1. Immediate changes funds transfer instructions (IFTIs). AUSTRAC subsequently began investigating this and a number of other
Slide 36: Customer remediation
Customer remediation. Governance and risk management. Progressing customer refunds: Provisions for customer refunds, payments and associated costs: • Extensive product, process and policy reviews • Provisioned $384 million (after tax) in FY20 for estimated customer refunds, payments and associated c
Slide 37: Customer franchise
Customer franchise. Customer franchise MFI Share1,2 Net Promoter Score (NPS)2 Westpac St.George brands Peers Westpac St.George brands Peers 3.4 Consumer 29.6% 0.1 -1.2 -5.5 -6.9 14.6% 15.9% 11.6% Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Aug-20 Westpac St.George brands Peers Peer 1 Peer 2 Peer 3 Wes
Slide 38: Continued migration to digital
Continued migration to digital. Digital transformation Putting customers in control and reducing cost to serve. Digitally active customers (#m) Accounts with eStatements Sales via digital (%) Digital transactions1 (#m) Number (#m) eStatements (%) 277 60 257 267 55 57 42 242 5.09 52 234 4.99 5.04 49
Slide 39: Customer Service Hub
Customer Service Hub. Digital transformation Westpac 1st Party roll-out complete with significant improvements to the customer and banker experience. Capabilities delivered Customer digital upload and Customer access via any channel Banker dashboard application tracker Customer applications availabl
Slide 40: Panorama
Panorama. Digital transformation Supporting advisers and investors. FUA on Panorama ($m) Investors on Panorama (#) • Best Mobile Platform1 31,240 67,109 • Highest Planner Satisfaction with Mobile 23,387 24,700 54,781 Access & App2 44,314 17,041 • Fastest growing 32,444 12,402 23,462 platform3 9,363
Slide 41: Continued sustainability commitment
Continued sustainability commitment. Sustainability Westpac’s sustainability FY20 outcomes (unless otherwise stated) strategy priority areas Helping people • Delivered a range of financial literacy programs reaching around 1 million individuals, as well as businesses, not for-profit organisations an
Slide 42: Climate-related metrics
Climate-related metrics. Sustainability Climate change solutions1 exposure Electricity generation exposure Our lending to electricity generation (% of TCE) at 30 September 2020 (% of TCE)2 at 30 September 2020 in Australia and New Zealand (%) 80% 3.6 1.9 1.6 Green buildings 2.8 0.6 70% 4.4 Renewable
Slide 43: Climate-related disclosures – scenario analysis
Climate-related disclosures – scenario analysis. Sustainability Alignment with the TCFD Transition risk – key points • Westpac continues to integrate the consideration of climate-related • Westpac assessed potential transition risks (policy, legal, technology and risks and opportunities into its ope
Slide 44: Earnings drivers
Earnings drivers WIfestpac croup
Slide 45: Composition of lending and deposits
Composition of lending and deposits. Revenue Lending 3% lower and deposits up 6% over the year. Composition of lending (% of total) Gross loans ($bn) Australian mortgage lending3 ($bn) +1% in NZ$ 33 (38) 2 718.4 724.9 (5.5) (3.8) (12.4) 449 446 441 Aust. mortgages (3.3) (1.2) 698.7 12 Aust. business
Slide 46: Net interest margin
Net interest margin. Revenue Down 13bps excluding Treasury & Markets and notable items. Net interest margin (NIM) movement (%) Net interest margin (%) Treasury & Markets impact on NIM NIM excl. Treasury & Markets NIM NIM excl. Treasury & Markets Restated for adoption of AASB 9 and 15 5bps (1bps) (7b
Slide 47: Non-interest income
Non-interest income. Revenue Non-interest income contributors ($m) Net fee income (ex notable items) ($m) Fees Wealth and insurance Trading Other Facility fees Net transaction fees Other non-risk fee income 1,988 Down 16% Up 11% 1,865 Down 5% Down 9% 1,714 16 991 1,675 947 443 10 251 902 101 106 101
Slide 48: Expenses
Expenses. Expenses Expense movements FY20 – FY19 ($m) FTE (#) 2,539 12,700 772 512 471 189 36,849 10,031 (461) 9,570 159 454 147 10,161 33,288 1,617 (169) Up 6% Up 11% Notable Investments ex Notable items expenses compliance (RC) FY19 reported FY19 ex-notable COVID-19 FY20 ex-notable FY20 reported I
Slide 49: Impairment charges lower over the half
Impairment charges lower over the half. Impairment charges Impairment charges ($m) Impairment 1H20 ($m) 2H20 ($m) Drivers of 2H20 charge charge ($m) Individually assessed Collectively assessed Total New Write-backs & Write-offs Other mvmts Individually assessed IAPs recoveries direct in CAP 2,238 In
Slide 50: COVID-19 deferral packages
COVID-19 deferral packages WIfestpac croup
Slide 51: Australian mortgage support for customers
Australian mortgage support for customers1. COVID-19 Deferral packages reducing as customers return to repayments. Mortgage deferral packages1 ($bn and % by balances ) Mortgage deferral package new requests2 (%) 7.0% 54.6 100% 6.0% Melbourne 5.0% Returned to lockdown repayment 4.0% Stage 3 66 Melbou
Slide 52: Australian mortgage support for customers: borrower characteristics
Australian mortgage support for customers. COVID-19 Borrower characteristics. Mortgages in deferral1 by dynamic LVR6 and paid ahead7 Total mortgage Mortgage deferral (% by balance) packages portfolio at outstanding1 at <3 months ahead >3 months and <1 year ahead >1 year ahead 30 September 20201 19 O
Slide 53: Australian mortgage support: borrower repayment buffers
Australian mortgage support for customers. COVID-19 Borrower repayment buffers. Australian housing dynamic loan-to-value ratios2 Mortgage deferral Total mortgage packages (LVRs) (%) portfolio at outstanding1 at 30 September 2020 1 Mortgages in deferral dynamic LVR Total portfolio dynamic LVR 19 Octo
Slide 54: Support for Australian small businesses
Support for Australian small businesses1. COVID-19 Support provided to Australian business customers Australian business portfolio by State (% of total) Westpac Group Business Lending Portfolio Business portfolio in deferral1 Repayment relief packages • Over 32,9002 small business customers approved
Slide 55: Support for Australian small businesses: borrower characteristics
Support for Australian small businesses1,2 COVID-19 Borrower characteristics. Total business Repayment relief approvals by industry1,2 (%) Total business1 deferral packages portfolio Property and property services provided at 18 6 2 at 30 Sep 2020 Retail and wholesale trade October 20201,2 5 26 Agri
Slide 56: New Zealand mortgage support for customers
New Zealand mortgage support for customers. COVID-19 Total Total mortgage Mortgage Mortgage deferral packages1 (NZ$bn and % by balance) mortgage deferral deferral portfolio packages packages 100% 6.5 at 30 Sep provided outstanding 5.9 2020 at 19 Oct 2020 at 19 Oct 2020 Returned to Number of accounts
Slide 57: Support for New Zealand businesses
Support for New Zealand businesses1. COVID-19 Total business Business Business customer support by industry3 (%) Total business deferral deferral Agriculture, Forestry and Fishing New Zealand Business Loans portfolio packages packages 4 10 Transport, Postal and Warehousing 4 17 at 30 Sep 2020 provid
Slide 58: Credit quality and provisions
Credit quality and provisions
Slide 59: Significant provision build over the year
Significant provision build over the year. Provisions Provisions for impairments Total impairment provisions ($m) Sept-19 Mar-20 Sep-20 Overlay 2 Loan provisions to gross loans (bps) 54 80 88 Stage 1 CAP Impaired asset provisions to impaired assets (%) 45 50 41 Stage 2 CAP Collectively assessed prov
Slide 60: Provision cover by portfolio category
Provision cover by portfolio category. Credit quality Exposures as a % of TCE Provisioning to TCE (%) Stage 1 lower as Mar-19 Sep-19 Mar-20 Sep-20 more customers migrated to Stage 2 Stage 1 provisions 92.10 Fully performing portfolio 95.77 95.72 95.66 Small cover as low probability of default Fully
Slide 61: Portfolio composition
Portfolio composition. Credit quality Asset composition (%) Loan composition at 30 September 2020 (% of total) Total assets ($912bn) Sep-18 Sep-19 Sep-20 Loans 81 79 76 Investment securities 7 8 10 Housing Trading securities and financial assets at fair value 17 3 4 4 Business through income stateme
Slide 62: Loan portfolio composition
Loan portfolio composition. Credit quality Exposures at default1 by sector ($bn) Top 10 exposures to corporations and NBFIs5 (% of TCE) 2 Finance & insurance The single largest corporation/NBFI 3 Government admin. & defence exposure is 0.3% of TCE Property 1.3 1.1 1.2 1.2 1.1 1.1 1.0 1.0 1.1 1.0 1.0
Slide 63: Some stress emerging in 2H20
Some stress emerging in 2H20. Credit quality Stressed exposures as a % of TCE Movement in stress categories (bps) 3.20 191 22 Watchlist and • Downgrades following review of Business 30 1 substandard Lending customers deemed to be at high risk 6 132 6 90+ days past due 120 3 2 1 • Rise in mortgage 90
Slide 64: Corporate and business stressed exposures
Corporate and business stressed exposures. Credit quality Corporate and business stressed exposures by industry sector ($bn) 2.0 Sep-19 Mar-20 Sep-20 Accommodation 5 1.8 11 1.6 Pubs, taverns & bars 13 1.4 Cafes & restaurants 71 1.2 Clubs 1.0 0.8 0.6 0.4 0.2 0.0 Services1 Property Accommodation, cafe
Slide 65: Sectors in focus: Accommodation and Construction
Sectors in focus. Credit quality Accommodation, cafes & restaurants and Construction. Accommodation, cafes and restaurants 3 Portfolio security composition (TCE) (%) Portfolio by sub-sector (TCE) (%) Sep-19 Mar-20 Sep-20 Total committed exposures 7 $9.6bn $9.7bn $9.8bn 8 Accommodation (TCE) Fully Se
Slide 66: Sectors in focus: Commercial property
Sectors in focus. Credit quality Commercial property. Commercial property Commercial property exposures % of TCE and % in stress Sep-19 Mar-20 Sep-20 Commercial property as % of TCE (lhs) Total committed exposures (TCE) $66.9bn $67.6bn $65.9bn Commercial property % in stress (rhs) 8 20 Lending $51.7
Slide 67: Sectors in focus: Mining and Manufacturing
Sectors in focus. Credit quality Mining and Manufacturing. Mining (inc. oil and gas) Portfolio by sub-sector (TCE) (%) Sep-19 Mar-20 Sep-20 6 Total committed exposure (TCE) $10.5bn $10.3bn $9.0bn 5 Oil and gas 9 32 Lending $5.5bn $5.8bn $5.1bn Other metal ore Mining services As a % of Group TCE 1.00
Slide 68: Sectors in focus: Retail trade
Sectors in focus. Credit quality Retail trade. Retail trade Retail trade exposure by sub-sector (TCE) ($bn) Sep-19 Mar-20 Sep-20 Sep-19 Mar-20 Sep-20 Total committed exposures (TCE) $16.0bn $15.5bn $15.0bn 7.0 7.0 7.0 Lending $11.6bn $11.1bn $9.5bn 4.8 4.6 4.4 4.2 As a % of Group TCE 1.52 1.43 1.41
Slide 69: Services and Transport & Storage
Sectors in focus. Credit quality Services and Transport & Storage. Services Portfolio security composition (TCE) (%) 3 Portfolio by sub-sector (TCE) (%) Sep-19 Mar-20 Sep-20 Total committed Education $22.4bn $23.2bn $23.6bn exposures (TCE) 23 20 18 Lending $15.3n $15.8bn $14.9bn Fully Secured Health
Slide 70: Australian consumer unsecured lending
Australian consumer unsecured lending. Credit quality Australian consumer unsecured lending portfolio1 Australian consumer unsecured 90+ day delinquencies (%) Sep-19 Mar-20 Sep-20 Lending $19.5bn $18.4bn $15.7bn 2.50 30+ day delinquencies (%) 3.68 4.22 3.62 2.09 1.50 1.77 90+ day delinquencies (%) 1
Slide 71: Australian mortgage delinquencies: impacted by hardship
Australian mortgage delinquencies: impacted by hardship1. Mortgage asset quality • Australian mortgages 90+ day delinquencies up 68bps Australian mortgages Sep-19 Mar-20 Sep-20 − 56bps from hardship • Our approach to applying COVID-19 relief meant an increased number of 30+ day delinquencies (bps) 1
Slide 72: Australian mortgage portfolio composition
Australian mortgage portfolio composition. Mortgage asset quality Australian mortgage portfolio by product and Sep-19 Mar-20 Sep-20 2H20 Australian mortgage portfolio balance balance balance Flow1 repayment type (%) Total portfolio ($bn) 449.2 445.7 440.9 33.5 Sep-19 Sep-20 2H20 Westpac Group drawdo
Slide 73: Australian mortgage portfolio
Australian mortgage portfolio. Mortgage asset quality Majority of borrowers have significant equity. Australian housing loan-to-value ratios (LVRs) (%) Australian housing loan-to-value ratios (LVRs) (%) 100 % of total portfolio 2H20 drawdowns LVR at origination 90 Portfolio LVR at origination 41 % o
Slide 74: Australian mortgage portfolio underwriting
Australian mortgage portfolio underwriting. Mortgage asset quality Australian mortgage portfolio by Credit policy as at 16 October 2020 year of origination (% of total book) Calendar year • Income verified via payslips or tax returns with other supporting documentation such as PAYG income statements
Slide 75: Interest only mortgages
Interest only mortgages. Mortgage asset quality 21% of the total Australian mortgage portfolio. Australian mortgage Scheduled I/O term expiry4 • 72% weighted average LVR at origination1 delinquencies (%) (% of total I/O loans) • 63% of customers ahead of repayments I/O P&I (including offset accounts
Slide 76: Australian investment property portfolio
Australian investment property portfolio. Mortgage asset quality Portfolio reducing. Investment property lending (IPL) portfolio Sep-19 Mar-20 Sep-20 Investment property portfolio by number of properties Investment property loans ($bn) 172 167 161 per customer (%) LVR of IPL loans at origination (%)
Slide 77: Lenders mortgage insurance arrangements
Lenders mortgage insurance arrangements. Mortgage asset quality Separately capitalised to the bank. Lenders mortgage insurance (LMI) Lenders mortgage insurance arrangements • Where mortgage insurance is required, mortgages LVR Band insurance are insured through Westpac’s captive mortgage insurer, We
Slide 78: Capital, funding and liquidity
Capital, funding and liquidity
Slide 79: CET1 capital ratio of 11.1%
CET1 capital ratio of 11.1%. Capital, Funding and Liquidity Key capital ratios (%) Sep-19 Mar-20 Sep-20 • CET1 capital ratio of 11.13%, up 32bps from 31 March 2020 • RWA declined 1bp mostly from: CET1 capital ratio 10.7 10.8 11.1 - Lower credit RWA due to portfolio management and lower counterparty
Slide 80: Risk weighted assets
Risk weighted assets. Capital, Funding and Liquidity Decrease from lower credit risk RWA. Risk weighted assets ($bn) Commentary 443.9 (9.8) 3.8 0.0 437.9 • RWA decreased by $6.0bn over 2H20, mostly from lower credit RWA 0.4 (0.4) 428.8 (CRWA), partially offset by non-credit risk • CRWA reduced $9.8b
Slide 81: Internationally comparable capital ratio reconciliation
Internationally comparable capital ratio reconciliation. Capital, Funding and Liquidity 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. In July 2015, APRA publis
Slide 82: Well placed on internationally comparable CET1 and leverage ratios
Well placed on internationally comparable. Capital, Funding and Liquidity CET1 and leverage ratios. Common equity Tier 1 ratio (%)1 20% 15% China Construction Bank Toronto Dominion Bank Royal Bank of Canada China Merchants Bank 10% Standard Chartered Credit Agricole SA Norinchukin Bank Societe Gener
Slide 83: Liquidity coverage ratio
Liquidity coverage ratio. Capital, Funding and Liquidity Liquidity remains high reflecting deposit growth and QE measures. Liquidity coverage ratio (LCR)1 (spot basis, $bn and %) Liquidity coverage ratio1 (quarterly average, %) 31 March 2020 30 September 2020 LCR 154% LCR 150% 151 200.0 190.9 140 18
Slide 84: Balance sheet funding
Balance sheet funding. Capital, Funding and Liquidity Funding composition shift towards customer deposits. Funding composition (%) Net stable funding ratio (NSFR) ($bn) By residual maturity NSFR at 30 September 2020: 122% 5 5 4 624.1 Wholesale Onshore <1yr1 7 7 6 Wholesale funding 1 and 512.7 Wholes
Slide 85: Balance sheet funding: reduced need for long term funding
Balance sheet funding. Capital, Funding and Liquidity Reduced need to access long term funding markets. Deposits to net loans ratio (%) Term Funding Facility (TFF) ($bn) As at 30 Sep 2020 Customer deposits Net customer loans Deposits to net loans ratio 32 Additional Adjusts monthly 80.1 allowance 2
Slide 86: Tier 2 capital profile
Tier 2 capital profile. Capital, Funding and Liquidity Westpac Tier 2 issuance and calls/maturities1,2 (notional amount, A$m) 5,000 Issuance Maturities 4,000 FY21 Tier 2 issuance expected to be approx. 3,000 $5-7billion (including buffer) 2,000 4,209 1,000 2,241 2,110 2,110 2,358 1,759 1,070 1,240 1
Slide 87: Divisional results
Divisional results WIfestpac croup
Slide 88: Divisional contributions
Divisional1 contributions. Divisional results Specialist Group FY20 ($m) Consumer Business WIB NZ Businesses Businesses Group Operating income 9,120 4,723 2,293 2,151 1,296 1,043 20,626 Expenses (4,176) (2,298) (1,316) (998) (1,548) (2,364) (12,700) Core earnings 4,944 2,425 977 1,153 (252) (1,321)
Slide 89: Consumer 2H20 performance
Consumer 2H20 performance. Consumer Change Cash earnings ($m) Key financial metrics 2H19 1H20 2H20 on 1H20 NIM up due to Lower activity Revenue1 ($m) 4,494 4,560 4,560 – repricing and lower including Costs associated with funding costs, partly international and COVID-19 activity and higher Net inter
Slide 90: Business 2H20 performance
Business 2H20 performance. Business Change Cash earnings ($m) Key financial metrics 2H19 1H20 2H20 on 1H20 Lower deposit spreads Lower markets and Revenue1 ($m) 2,554 2,455 2,268 (8%) impacted by low interest payments related 944 rates. Margins also lower income, and fee from COVID-19 customer waive
Slide 91: WIB 2H20 performance
WIB 2H20 performance. Westpac Institutional Bank Cash earnings ($m) Change Restructuring costs Key financial metrics 2H19 1H20 2H20 on 1H20 and higher risk Movement in management and Revenue ($m) 1,210 1,161 1,132 (2%) 430 derivative compliance spend valuation Net interest margin (%) 1.58 1.46 1.23
Slide 92: NZ 2H20 performance
NZ 2H20 performance1. New Zealand Cash earnings (NZ$m) Restructuring costs in 1H20 and timing of Change investment spend partly Key financial metrics 2H19 1H20 2H20 on 1H20 Decline in NIM Lower fee income offset by costs to support from lower due to reduced COVID-19 activities Revenue (NZ$m) 1,167 1
Slide 93: NZ balance sheet
NZ balance sheet. New Zealand New Zealand net loans (NZ$bn) New Zealand deposits (NZ$bn) 87.0 1.6 (0.6) 88.0 84.2 69.1 2.2 (0.3) 71.0 64.5 Up 1% Up 3% Sep-19 Mar-20 Consumer Business Sep-20 Sep-19 Mar-20 Consumer Business Sep-20 New Zealand customer loans (NZ$bn) and % of total New Zealand customer
Slide 94: NZ stressed exposures
NZ stressed exposures. New Zealand Business stressed exposures as a % of New Zealand business TCE Property Watchlist & substandard 90+ day past due and not impaired Impaired Manufacturing 19 15 Agriculture, forestry 5.5 4 10 & fishing 4.9 4 Wholesale trade 4.4 3.3 3.4 3.3 3.1 2.9 Construction 3.2 2.
Slide 95: NZ consumer portfolio
NZ consumer portfolio. New Zealand Mortgage 90+ day delinquencies1 (%) Unsecured consumer 90+ day delinquencies1 (%) 0.6 90+ day past due (ex-hardship) 3.0 90+ day past due (ex hardship) 90+ day past due 0.52 90+ day past due 0.5 0.4 Introduction of changes to 2.0 Introduction of changes to 2.09 the
Slide 96: Specialist Businesses 2H20 performance
Specialist Businesses 2H20 performance. Specialist Businesses Change Cash earnings ($m) Key financial metrics 2H19 1H20 2H20 on 1H20 Increase in risk Higher Increase mostly and compliance collectively Funds ($bn) 207 179 193 8% from lower and costs related assessed weather and to increased provision
Slide 97: Economics
Economics WIfestpac croup
Slide 98: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts. Economics Key economic indicators (%) at October 2020 2019 2020F 2021F World GDP1 2.8 -4.0 6.0 Australia GDP2 2.3 -3.5 2.8 Private consumption2 1.3 -4.8 4.2 Business investment2,3 -0.3 -11.3 2.2 Unemployment – end period 5.2 7.5 7.5 CPI headline – year
Slide 99: The Australian economy
The Australian economy. Economics Population 25.7 million. Australian population Australian GDP and employment composition Population 245k Output 2019 - sector contribution to GDP (%)1 Mining Northern 10 Manufacturing Territory 19 Population 5.2m 6 Construction Queensland Transport, Utilities Wester
Slide 100: The Australian economy: a recession like no other
The Australian economy. Economics A recession like no other. Australia’s GDP profile (index) Unemployment rate1 (%) 112 index pre covid forecast current forecast index 112 % % 12 ’80s ’90s 12 108 Dec 2019 = 100 Westpac 108 recession recession Westpac f’casts f’casts 10 10 104 104 100 100 8 COVID-19
Slide 101: The Australian economy: impact of COVID-19 on segments
The Australian economy. Economics Detailed impact of COVID-19 on segments. GDP growth year end contributions (ppts) Consumer spending by category (ppts) 1.6 ppts* GDP -6.3 -4 -3 -2 -1 0 1 Consumption 0.8 HH Goods -7.1 -0.5 Housing -0.6 Alcohol Mar-20 Jun-20 Jun-19 -0.1 Investment -0.7 Jun-20 Utiliti
Slide 102: Significant variances across States
The Australian economy. Economics Significant variances across States. COVID-19 current infections Activity outlook: State view (index) Population (New cases minus deaths, rolling 14day avg) % ann NSW (1.1%yr) index index % ann ‘000s ‘000s 7 110 NSW 110 3.0 Vic (1.8%yr) 3.0 7 NSW Victoria 6 6 105 10
Slide 103: Significant Government support measures
Significant Government support measures. Economics Sharp lift in public debt but servicing costs remain stable. Federal Government support measures ($bn) Australia: public net debt (% of GDP) % of GDP Net debt (lhs) Interest payments (rhs) % of GDP Direct payments JobKeeper 50 Federal Government 5 J
Slide 104: Australian housing market
Australian housing market. Economics Mild dwelling price correction underway prior to strong price recovery in 2022-23. Australian dwelling prices (index) Mortgage interest rates (%) index All dwellings (index, Jan 2004 = 100) % % Variable* 3 year fixed 230 230 10 10 Rest of Australia 210 210 Other
Slide 105: Australian housing market: showing resilience
Australian housing market. Economics Showing resilience, although some uncertainty ahead. Housing finance ($bn) Aust. population growth: medium term prospects (% ann) $bn $bn ann% Population ann% 'Upgraders' Investor FHBs 16 16 Contribution from net migration Value of housing finance 2.5 2.5 14 14 G
Slide 106: The New Zealand economy
The New Zealand economy. Economics Population 5.1 million. Regional GDP Economy Total nominal GDP 2019: $303 bn Output 2019 - sector shares of GDP (%) Primary industries Northland, $8bn 3 7 Construction 4% of population 10 7 Electricity, gas, and water 5 3 Food manufacturing Auckland, $114bn 3 35% o
Slide 107: New Zealand recovery underway
New Zealand recovery underway. Economics Headwinds in some services sectors, but domestic activity lifting faster than expected. Dec 2020 Economic indicators Current forecast New Zealand GDP Business activity surveys $bn $bn Index Index 0.25% 75 75 70 70 Cash rate 0.25% Westpac (21 Oct) forecasts 65
Slide 108: New Zealand housing market
New Zealand housing market. Economics Policy supporting a strong lift in momentum. New Zealand dwelling prices by region Annual house price growth Index Index 20 % % 20 2500 2300 Forecast 2300 Auckland 15 15 2100 2100 1900 Canterbury 10 10 1900 1700 1700 Wellington 5 5 1500 1500 0 0 Other regions 13
Slide 109: The RBNZ’s COVID-19 response
The RBNZ’s COVID-19 response. Economics RBNZ supporting market liquidity Mortgage rates The RBNZ has introduced a significant amount of support for the economy. % % Major policy initiatives include: 12 12 Floating rate • Cash rate cut to 25bps 10 10 2 year fixed • Large scale asset purchases (LSAP)
Slide 110: Appendix and disclaimer
Appendix and disclaimer WIfestpac croup
Slide 111: Appendix 1: Cash earnings adjustments
Appendix 1: Appendix Cash earnings 2H19 1H20 2H20 adjustment $m $m $m Description Reported net profit 3,611 1,190 1,100 Net profit attributable to owners of Westpac Banking Corporation Fair value on economic hedges (which do not qualify for hedge accounting under AAS) comprise: • The unrealised fair
Slide 112: Appendix 2: Reinventure – Investing in fintech businesses
Appendix 2: Appendix Reinventure – Investing in fintech businesses1. Westpac has invested $150m in fintech venture capital fund, Reinventure. Reinventure enables Westpac to access insights and adjacent business opportunities, both in Australia and offshore. The model also helps Westpac to source com
Slide 113: Appendix 3: Sustainability
Appendix 3: Appendix Sustainability. Industry awards1 Sustainability indexes1 Inclusion and diversity recognition1 Received “B” rating in the 2019 Recognised by the Bloomberg Member of the DJSI Gender Equality Index for the CDP for our response to climate Indexes since 2002 4th consecutive year chan
Slide 114: Appendix 3: Sustainability commitments and partnerships
Appendix 3: Appendix Sustainability. Key commitments and partnerships1 Principles for Responsible Banking Principles for Responsible Investment UN Sustainable Development Goals Paris Climate Agreement Signatory 2019 Signatory (2007) CEO Statement of Commitment (2015) Supporter (2015) The Equator Pri
Slide 115: Appendix 4: Definitions – Divisions
Appendix 4: Appendix Definitions – Divisions. Westpac New Zealand provides banking, wealth and insurance products and Consumer is responsible for sales and service of banking products, including services for consumer, business and institutional customers in New Zealand. mortgages, credit cards, pers
Slide 116: Appendix 4: Definitions – Credit quality
Appendix 4: Appendix Definitions – Credit quality. Includes facilities where: For financial assets where there has been a significant increase in credit risk • contractual payments of interest and / or principal are 90 or more calendar Stage 2: Lifetime ECL since origination but where the asset is s
Slide 117: Appendix 4: Definitions – Earnings, capital and liquidity
Appendix 4: Appendix Definitions – Earnings, capital and liquidity. Earnings Drivers As defined by APRA (unless stated otherwise). Tier 1 capital divided by ‘exposure measure’ and expressed as a percentage. ‘Exposure measure’ is the sum of on- Leverage ratio Average interest- The average balance of
Slide 118: Appendix 4: Definitions – Other
Appendix 4: Appendix Definitions – Other. Net Promoter Score measures the net likelihood of recommendation to others of the Branch Branch transactions are typically withdrawals, deposits, transfers and payments customer’s main financial institution for retail or business banking. Net Promoter transa
Slide 119: Investor Relations Team
Investor Relations Team. Contact us Contact Us. Andrew Bowden Nicole Mehalski www.westpac.com.au/investorcentre Head of Investor Relations Head of Institutional • Annual reports +61 2 8253 4008 +61 2 8253 1667 andrewbowden@westpac.com.au • Presentations and webcasts nicole.mehalski@westpac.com.au •
Slide 120: Disclaimer
Disclaimer Disclaimer 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 be relied