Continuing the performance momentum · * 31 March 2001, excluding banks. The cluster names are...

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Continuing theContinuing theperformance momentumperformance momentum

JBWere Financial ServicesConference, Singapore

6 June 2001

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DisclaimerDisclaimer

The Material contained in the following presentation isintended to be general background information on WestpacBanking Corporation and its activities as at 6 June 2001.

The information is supplied in summary form and is thereforenot necessarily complete. Also, it is not intended that it be reliedupon as advice to investors or potential investors, who shouldconsider seeking independent professional advice dependingupon their specific investment objectives, financial situation orparticular needs.

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• Performance overview

• Strategic focus

- Getting closer to customers- Finding new opportunities- Being more efficient- Backing our people- Understanding our strengths

• Outlook & summary

Continuing the performanceContinuing the performancemomentummomentum

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First half highlightsFirst half highlights

• Net profit up 13% to $924 million

• Continued revenue momentum

• Tight expense management

• Continued sound asset quality

• Strong performance across all businesses

• Improved return to shareholders

• Continues trend of previous three halves

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Strong earnings momentumStrong earnings momentum

653 666 676701

755

818

897924

500

600

700

800

900

1,000

2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H01

30

35

40

45

50

55

NPAT pre abn EPS pre abn

Net profit after tax +13%Earnings per Share +19% cents$m

NPATCAGR

4%

14%

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Increasing shareholder returnsIncreasing shareholder returns

362386

308

397

493

565 584

272

100

200

300

400

500

600

2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H0114.0

16.0

18.0

20.0

22.0

EP ROOE

Economic Profit: +18%ROE: +303bps to 20.9%

%$m

# Would have been $451m if dividend had been fully franked.

#

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Impaired assets and bad debtImpaired assets and bad debtexpense remain at acceptable levelsexpense remain at acceptable levels

5.0

2.8

1.41.0 0.8 0.6 0.5 0.6

0

1

2

3

4

5

6

Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Mar-01

Total impaired assets tototal loans & acceptances

%

Total bad debt expense toavg. total loans & acceptances

90

43

148

16 16 1727

0

20

40

60

80

100

Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Mar-01

Basispoints

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Westpac’s actual write-offsWestpac’s actual write-offsless than 50% of its peersless than 50% of its peers

0

50

100

150

200

250

300

350

400

Westpac CBA* NAB ANZ

$m

* CBA results for half-year to 31 December 2000.

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90 day delinquencies still90 day delinquencies stillnear historic lows.near historic lows.

Mass market/personal - Group *

%

1.10

0.33

0.34

0.44

0.65

0.45

0.0

0.3

0.6

0.9

1.2

1.5

Sep-96

Mar-97

Sep-97

Mar-98

Sep-98

Mar-99

Sep-99

Mar-00

Sep-0

0

Mar-01

* > 90 day delinquencies for all secured and unsecured personal products.

1.911.53 1.47 1.51

0.0

0.5

1.0

1.5

2.0

2.5

Sep-98

Mar-99

Sep-99

Mar-00

Sep-00

Mar-01

Business banking - Australia

%

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30%

2%

5%63%

AAA to A- BBB+ to BB- BB+ to BB- B+ to B <B

Business/Institutional

ConsumerMortgages

OtherConsumer

CreditCards

Spread of portfolio exposures Spread of portfolio exposures

31 March 2001

53%

2%

22%

1%

22%

Total committed exposure Business/Institutionalcredit grade mix

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Industry exposureIndustry exposure

0 1 2 3 4 5 6 7 8

Substantial non-bank financiersPropertyGovernmentDurable products manufactureElectricity, gas & waterOther agriculture & servicesPetroleum refining & chemicalsRetailingInsuranceGrain, sheep & poultryBusiness technical servicesMetal mining & servicesHotels & restaurantsNon-residential constructionFood manufactureTransport & storageWholesalingOther transport, equipment & servicesTelecommunicationsMotor vehicle tradeHospitals & health servicesRecreation servicesForestry, printing & paper productsIron & steel manufactureOther manufacturing

Credit exposures to governments, corporations and businesses*

* 31 March 2001, excluding banks. The cluster names are short titles for groups of similar industries.% Group Total Committed Exposure

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Sound capital position.Sound capital position.

7.1

6.3

5.7

7.26.6

6.1

4.0

5.0

6.0

7.0

8.0

TOE / RAA Tier 1 ratio

1H00 2H00 1H01

%

* Target range

6.5 - 6.0% *

5.8% -5.6% *

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• Performance overview• Strategic focus




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000’s

Nu

mb

er o

f C

ust

om

ers

300400500600700800900

100011001200

Sep-97

Mar-98

Sep-98

Mar-99

Sep-99

Mar-00

Sep-00

Mar-01

* Priority customers are those with whom we have significant,typically multi-product, relationships.

28% growth betweenMar 2000 & Mar 2001

Priority Customers *

Deepening customer relationshipsDeepening customer relationships

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5

10

15

20

25

Customer Value Segments

% in segment July 1999 % in segment March 2001

Positive shift in customer valuePositive shift in customer value

Low High

%

Per

cen

tag

e in

Seg

men

t

Value Shift

Value diluting Value creating

Australian personal and business customers

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Mortgage Lending

25

30

35

40

Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-010

5

10

15

20

25

Outstandings (LHS) Market share (RHS)

Credit Card Outstandings

0

1

2

3

4

5

Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-0110

12

14

16

18

20

22


$b %$b %

Business Lending

25

30

35

40

Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Feb-015

10

15

20

25


$b %

Solid market share trends in coreSolid market share trends in coreproductsproducts

Principal Corporate Bank Share

22.6 23.124.5

15.0

20.0

25.0

30.0

Sep-99 Apr-00 Dec-00

East & Partners Surveys

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CRM is a key enablerCRM is a key enabler

• Focus on high value segments completed:

- Private banking- Priority banking, and

- Business direct

• Next stages include:

- Priority business banking, and

- Financial planners & advisers

• Results include improved customer retention and

increased cross selling opportunities

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Wealth management value chainWealth management value chain

AdministrationInvestment

ManagementDistribution/

Retail Service Advice

Proportionof Profit *

17% 29% 34% 20%

ExpectedMarginTrend

Stable Stable

OrganicGrowthInitiatives

• Maintain superior fund performance

• Source best of breed products

• Grow sales force

• Create alternative distribution models

• Grow sales force & upgrade skills

• Upgrade software tools

* Westpac estimates based upon external data

• Upgrade Master Trust platform

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Growing our adviser network is keyGrowing our adviser network is keyto our wealth creation strategyto our wealth creation strategy

0

200

400

600

800

1000

1200

Sep-95

Sep-96

Sep-97

Sep-98

Sep-99

Sep-00

Mar-01

Sep-01

Sep-02

Sep-03

Consumer advisers

Priority advisers & financial planners

Business advisers

Plan

-100

0

100

200

300

400

Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-010

3

6

9

12

15

Net inflows (excluding annuities) Annuity net inflows Market share (RHS)

Rank: 3rd 5th 13th 13th 6th 9th 8th 8th

Source: Assirt Market Share Report & Westpac accounts* Excludes Cash Management Account balances

$m %

Net Monthly RetailFunds Inflow*

Planner/Adviser Numbers

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On-line banking & brokingOn-line banking & brokingexpanding rapidly...expanding rapidly...

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Oct-99

Dec-99

Feb-00

Apr-00

Jun-00

Aug-00

Oct-00

Dec-00

Feb-01

Apr-01

Australia New Zealand

On-line Banking

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Oct-99

Dec-99

Feb-00

Apr-00

Jun-00

Aug-00

Oct-00

Dec-00

Feb-01

Apr-01

On-line Broking - Australia

837,000 74,000

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Share of Australian On-line Banking market

• Registered on-line banking customers

– Overall 24%

– Consumer 23%

– Business 29%

• Logons to on-line banking sites 26%

• On-line Funds transfers 28%

• On-line Bill Payments 29%

• On-line account history retrievals 39%

Source: Market Intelligence Strategy Centre Pty. Ltd. (MISC) Internet Banking Data Pooling Facility Report December Quarter 2000

…with above off-line market share...…with above off-line market share...

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0.5

1

1.5

2

2.5

3

3.5

4

FundsTransfer

BillPayments

WBCIndustry AverageOther 3 MajorsOther

0

2

4

6

8

10

12

14

16

AccountHistories

Transactions per Registered On-line Customer

Source: Market Intelligence Strategy Centre Pty. Ltd. (MISC) Internet Banking Data Pooling Facility Report December Quarter 2000.

…and strong on-line activity levels.…and strong on-line activity levels.

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Selective investment in growthSelective investment in growthinitiativesinitiatives

• Westpac B2Buy pilot commenced end April2001, to run for 2 months

• Involving 500 buyers and 20 suppliers

• Powered by Metiom Australasia software

eProcurement

FXall• Global electronic currency trading & research

platformMcGrath Limited• Premier real estate group

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Productivity & efficiency initiativesProductivity & efficiency initiatives

Productsolutions

Servicing &processing

• Branch network redesign

• Business Banking process re-engineering

• CRM - including training, simplified sales processes, improvedsales management

• Migration to lower cost channels & extend capability - egbroker channel / Internet

• Product & process simplification

• Innovative products - eg RapidRepayPac, Investor Options A/c

• Insourcing / aggregating products & services

• Outsourcing, eg. IT & Telecommunications, printing &distribution

• E-enabling & straight through processing

• Shared services, Trans Tasman initiatives

Sales &marketing

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%

* Excludes goodwill

50

52

54

56

58

60

62

1H98 2H98 1H99 2H99 1H00 2H00 1H0128,000

30,000

32,000

34,000

36,000

Expense/income Staff numbers (FTE - implied)

FTECost to income ratio* and

Staff numbers

Delivering on expenses objectiveDelivering on expenses objective

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Outsourcing initiativesOutsourcing initiatives

• Outsourcing partnerships• IBM GSA - core IT operations• Telstra - telecommunications services• Investa - property services• Unisys - voucher processing• Palms Consortium - printing & logistics

• Recruitment resourcing• TMP Worldwide and seven specialist providers

• Investigating mortgage processing outsourcing• Due diligence with EDS & Unisys

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eTransforming internal processeseTransforming internal processes

• Substantially eEnabled• eProcurement• Web enabled accounts payable• Oracle based intranet general ledger• eBusiness Resource Centre• Comprehensive intranet communications

• Transformational projects under way• HR/Self serve & leave management• Standardised 32-bit platform• Full web enablement

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Branch network redevelopment inBranch network redevelopment inAustralia.Australia.

0

250

500

750

1000

Mar-99 Sep-99 Mar-00 'Sep-00 Mar-01

Branches In-store Other

• Opened 182 in-storebranches

• Opened 10 new siteswhere not previouslyrepresented

• Amalgamated 167locations

• Relocated 20branches

• Refurbished 228branches

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Staff performance & productivityStaff performance & productivity

• Performance culture• Alignment around vision, values & strategy• Reorganising and reshaping• Up-skilling & accreditation• Linking economic performance & reward

• Productivity• 15% staff productivity improvement• Streamlined senior & middle management

structure

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Focusing on our strengths andFocusing on our strengths andlooking beyondlooking beyond

• Organised around where & how we create value

• Geographic focus remains Australia, NewZealand & near Pacific

• Strategic growth opportunities, subject to strictcriteria:

- Australasian consolidation- Australasian convergence- Selective Pacific Island growth

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Best practice on socialBest practice on socialresponsibilityresponsibility

• Image & reputation fundamentally linked tosustainable shareholder value creation

• Multi-tiered strategy

• Sustainable & socially responsiblebusiness practices

• Social safety net and access initiatives

• Widespread community involvement

• Managing the risk of social regulation

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Our aspirations: 2001-2003Our aspirations: 2001-2003

ü Leverage revenue growth into higher earningsper share (EPS) growth - in excess of nominalgrowth in the economy - through:

ü tight rein on expenses

ücontinued capital management

ü Expense/ Income - at least at peer average

ü ROE - in the region of 20%

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Full year outlookFull year outlook

• Outlook remains positive for continued earnings growth

• Reflecting economic conditions, credit growth may slow tohigh single digits

• Expect GDP recovery in 2001/02 to around 3.5%, upfrom 2.0% in 2000/01

• Interest rates are close to bottom

• Inflation should stay in the 2.5% to 3.5% range• Expect to deliver broadly flat expenses this year

• Some rise in consumer credit charges, but well withinacceptable levels

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In summary, our organic growthIn summary, our organic growthstrategy is delivering.strategy is delivering.

Financial HighlightsFinancial Highlights

• Economic profit up 18% to$584m

• EPS up 19%

• ROE 21%

• Improved shareholder returns

• Market share growth in keyproducts

• Disciplined expense control

• Sound asset qualitymaintained

Non-Financial HighlightsNon-Financial Highlights

• Realising opportunities inexisting customer base

– CRM delivering saleseffectiveness

– Positive shift in customer valueprofile

• Enhancing productivity

– Resource optimisation

– Channel redesign & migration

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Continuing the performance momentum · * 31 March 2001, excluding banks. The cluster names are...

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