Investor and Analyst Briefing - Westpac
Transcript of Investor and Analyst Briefing - Westpac
Investor and AnalystInvestor and AnalystBriefingBriefing
David WillisGroup Executive
8 September 2000
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Disclaimer
The material contained in the following presentation isintended to be general background information onWestpac Banking Corporation and its activities as at8 September 2000.
The information is supplied in summary form and istherefore not necessarily complete. Also, it is notintended that it be relied upon as advice to investorsor potential investors, who should consider seekingindependent professional advice depending upontheir specific investment objectives, financial situationor particular needs.
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WIB Management TeamWIB Management Team
u Jim Tate - Customer Origination
u Phil Coffey - Financial Markets
u Sean McElduff - Corporate Finance
u Simon Narroway - e-Business
u David Makinson - Financial Control
u Bob Tomlin - Risk
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AgendaAgenda
1.0 Introduction
2.0 Business Performance
3.0 Other
4.0 Conclusion
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AgendaAgenda
1.0 Introduction
1.1 Our Business Defined
1.2 Our Strategy
1.3 The Environment
1.4 Competitive Positioning
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We assist and advise in the management
of cash, funding, capital and market risk
for companies and institutions operating
or investing in Australia and New Zealand.
Our Business DefinedOur Business Defined
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Customers: 2,800Customers: 2,800Buying Behaviour: Three customer groups
RegionalCorporates and
Institutions586
Small toMedium Sized
Enterprises860
GlobalCorporates and
Institutions1358
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Customers: 2,800Customers: 2,800Industry Segments: 13 management teams
Asi
an B
usin
ess
Ban
ks
Con
sum
er
Ene
rgy
& U
tiliti
es
Gov
ernm
ent
Hea
lth
Indu
stria
ls
Med
ia
NB
FI’s
New
Eco
nom
y
Pro
pert
y
Res
ourc
es
Mid
Siz
ed C
orp
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GeographyGeography
New York31 Staff
London70 Staff
Asia80 Staff
Australia776 Staff
NewZealand246 Staff
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ProductsProducts
Advice Corporate, Resource, Property andRisk Advice
Loans, Bonds, Securitisation,Structured and Project Debt, Leasing,Loan Syndication, Equity
TransactionServices(Cash)
FinancialMarkets
Foreign Exchange (Options andDerivatives), Interest Rate DerivativeFixed Interest / Debt Securities,Commodities, Structured Hedging
Domestic and International ClearingInternational Payment & Trade Services
Needs Group Products
Capital(Debt and Equity)
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StaffStaff
u 1,203 Staff
u Average length of service is 8.6 years
u Many from global / investment banks
u Dynamic: average age is 35
u Diversity: 60% male, 40% female
u Morale: exceeds industry norms
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Staff: Morale ComponentsStaff: Morale Components
79
65
60
78
69
50 50
66
71
49 49
69
Wor
king
Rel
atio
nshi
ps
Com
mun
icat
ion
Per
form
ance
Wor
kP
roce
sses
WIB Global Norm Australian Norm
% fa
vour
able
res
pons
e
Annual Staff Survey
Source: International Survey Research
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AgendaAgenda
1.0 Introduction
1.1 Our Business Defined
1.2 Our Strategy
1.3 The Environment
1.4 Competitive Positioning
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Our Strategic DirectionOur Strategic DirectionTo be the pre-eminent wholesale bank inAustralasia by leveraging customerrelationships
u Customer relationship focus
u Full service provider to Regionals / SMEs
u ‘Top 3’ market share for core products
u Global business with regional focus
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Our Strategic ImperativesOur Strategic Imperatives
u e-Business investment
u Distribution of product
u Extend equity and advisory services
u Strengthen relationship model
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Global and Domestic TrendsGlobal and Domestic Trendsu Consolidation of full service global and
investment banks:• ABN Amro Lloyds (1996) & BZW (1997)• Citigroup SSB (1997) & Natwest (1998)• Merrill Lynch McIntosh (1996) & Centaurus (1997)• Macquarie Bank Bankers Trust (1999)• UBS Warburg SBC (1998)
u Levelling of the “e” playing field
u Renewed global focus on AUD
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u Growing liquidity in debt capital markets
u Retail structuring of wholesale products
u Emergence of different distribution models
Global and Domestic TrendsGlobal and Domestic Trends
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AgendaAgenda
1.0 Introduction
1.1 Our Business Defined
1.2 Our Strategy
1.3 The Environment
1.4 Competitive Positioning
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Market Share: CustomerMarket Share: Customer
Source: East and Partners CorporateBanking Report, April 2000
23.1
13.7
10.1 9.8 9.8
4.6 4.2 4.2 4.4
0
5
10
15
20
25
Wes
tpac
NA
B
CB
A
AN
Z
Deu
tsch
e
Cit
iban
k
Mac
qu
arie
CS
FB
Mer
rill
Lyn
ch
% R
espo
nden
ts
20Source: East and Partners CorporateBanking Report, April 2000, Top 500
Market Share: Debt ProductMarket Share: Debt Product
Off Balance Sheet On Balance Sheet
NAB15.0%
ANZ16.2%
CBA15.6%
Citibank5.2%
Westpac19.8%
Others28.2%
NAB20.7%Deutsche
10.5%
Others29.5%
ANZ16.6%
Westpac22.6%
Off Balance Sheet
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Financial MarketsTransaction Services
Source: East and Partners CorporateBanking Report, April 2000, Top 500
Market Share: ProductMarket Share: Product
CBA13.5%
NAB18.1%
Others25.4%
Westpac19.1%
DMG7.3%
ANZ16.6%
CBA13.1%
ANZ11.6%
NAB14.1%
Others23.6%
DMG10.4%
Westpac27.2%
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Customer SatisfactionCustomer Satisfaction
4.54.3 4.2 4.2
4.1 4.0 4.0 4.0 4.0
3
4
5JP
Mo
rgan
Sal
om
on
Sm
ithB
arn
ey
Mer
rill
Lyn
ch
Cit
iban
k
Wes
tpac
AN
Z
Deu
tsch
e
CS
FB
War
bu
rgD
illo
nR
ead
(1 = very dissatisfied / 5 = very satisfied)
Source: East and Partners CorporateBanking Report, April 2000
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AgendaAgenda
2.0 Business Performance
2.1 How are we Performing
2.2 Risk Management
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54.7%
46.3% 43.8%
59.9%
51.5%
0%
30%
60%
1997 1998 1999
WIB Peer Average
Key Financial MeasuresKey Financial MeasuresExpense / Income Ratio
Excludes Goodwill, Westpac Estimates
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269
374395
0
100
200
300
400
500
FY 97 FY 98 FY 99
14.8%
10.5%
19.5%21.5%
0%
5%
10%
15%
20%
25%
FY 97 FY 98 FY 99 HY 00
Core Earnings ROAE
Key Financial MeasuresKey Financial Measures
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AgendaAgenda
2.0 Business Performance
2.1 How are we Performing
2.2 Risk Management
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Managing Our RiskManaging Our Risk
u Core to sustainability and ROAE
u Three areas: Market, Operational, Credit
u Tied to capital allocation
u Market risk - Phil Coffey
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Credit RiskCredit Risk
35
40
36
43
20
30
40
FY 97 FY 98 FY 99 HY 00
$BN
Asset Levels
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Credit RiskCredit Risk
0%
20%
40%
60%
80%
100%
AAA, AA A BBB BB & Below
Sep 97 Sep 98 Sep 99 Mar 00
Total Committed Exposure
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Credit RiskCredit Risk
402
314268
0
100
200
300
400
Total Westpac Institutional Bank Only
31 Mar 99 30 Sept 99 31 Mar 00
$M
Net Impaired Assets
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Credit RiskCredit Risk
40
14
26
14
10
10
20
30
40
50
Australia NorthAmerica
Asia NewZealand
Europe Japan
$A B
N
By Country of Ultimate Risk - March 2000
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Operational RiskOperational Risk
u Managed at the business unit level
u Quarterly Review
u Annual certification by APRA
u Independent appraisal by Group Audit
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Operational Risk MapOperational Risk Map
1 5 20
Annual Events Frequency
High
Low
Effective Controls
Qualified Controls
Net
Sev
erit
y
Requires Improvement
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Financial MarketsFinancial Markets
Phil Coffey
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AgendaAgenda
3.0 Other
3.1 Financial Markets
3.2 Relationship with Westpac
3.3 e-Business
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Overview of BusinessOverview of Businessu Successful customer focused business
concentrating on AUD & NZD Excellence
• customer survey places us number 1 in market share amongstTop 500 (Greenwich Associates Treasury Survey Report) andnumber 1 in AUD & NZD in London / New York
u Return on Equity has average 25% over thelast three years
u Offices in Aust / NZ, New York, London, Asia
u Total of 375 front office staff
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Our CustomersOur Customers
Business Bank35%
Corporate28%
Institutional37%
Our delivery model is tailored to meet theneeds of our customers
% Revenue by Key Segment
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Financial Markets ProductFinancial Markets Product
Growth Products12%
Long Term Interest Rates
21%
Foreign Exchange
37%
Short Term Interest Rates
30%
Our products span the full spectrum ofAUD & NZD markets
% Revenue by Product Group
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Asia & Northern HemisphereCost Base
Straight Through Processing
Processing Asian andNorthern Hemisphereoperations in Australia hassignificantly reduced ouroffshore cost base.
Our goal is STP forourselves and ourcustomers
Operating EfficiencyOperating Efficiency
102
45
0
50
100
150
93/94 98/99
$M
Manual 57%
STP 43%
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Market Risk ManagementMarket Risk Management
u We aim for best practice in marketrisk management
u Board delegated limitu Independent risk calculation and
monitoringu EAR risk framework using full
portfolio historical simulationu Daily stress testing
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Market Risk ManagementMarket Risk Management
Daily Earnings at Risk
0
2
4
6
8
10
12
14
16
Apr 1999 May 1999 Jun 1999 Jul 1999 Aug 1999 Sep 1999 Oct 1999 Nov 1999 Dec 1999 Jan 2000 Feb 2000 Mar 2000
Daily Earnings at Risk Quarterly Average Daily EAR
A$m
Board Limit
12 month view ofaggregated dailyearnings at risk
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e-Business Developmente-Business Development
u Global portals
u Regional portals
u Proprietary applications
Customer buying behaviour determinesour investment approach
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AgendaAgenda
3.0 Other
3.1 Financial Markets
3.2 Relationship with Westpac
3.3 e-Business
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Westpac StructureWestpac Structure
Processing and IT
Pro
du
ct Other Bank Products
Corporateand
Institutional
Cu
sto
mer
BusinessCustomers
ConsumerCustomers
WIB Product
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A Competitive AdvantageA Competitive Advantage
u Bank product to WIB customers• Transaction Services: $82M
• Funds Management / Custody / Insurance:$10M revenue
u WIB product to bank customers• Financial Markets: $73M revenue
• Corporate Finance: $250M mezzanine debt
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AgendaAgenda
3.0 Business Performance
3.1 Financial Markets
3.2 Relationship with Westpac
3.3 e-Business
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IT E
nab
led
Tra
nsf
orm
atio
n
• e-enable core systems & processes• web site & Intranet.• Supply chain
• Increase business scope• Reconfigure business networks
§ New value networks§ New value propositions§ New business models
Low
High
Potential for new customersand Likelihood of alliances
Create a NewBusiness
Extend theEnterprise
EnhanceBusinessExecution
Low High
Investment StrategyInvestment Strategy
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u Contact Management: CONNECT
u Human Resources (SAP)
u Credit Origination & Approval Process
u Intranet Upgrade
u Electronic Document Management
u Straight through processing/workflow automation
u Video mail, Team Rooms, Instant Messaging
Internal
Enhance / Extend ExamplesEnhance / Extend Examples
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Customer
FX portals
u StateStreetu yieldbroker.comu FXallu e-Bondsu Online FXu Online Researchu Vostro Onlineu ImpExu New look internet site
Enhance / Extend ExamplesEnhance / Extend Examples
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AgendaAgenda
4.0 Conclusion
4.1 Future Growth
4.2 How We Are Different
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u Increased ‘share of wallet’ from existingcustomers
• Customer focused model• Full range of services• Leveraging franchise knowledge
u Acquisitions
• By product• By customer• By geography
GrowthGrowth
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AgendaAgenda
4.0 Conclusion
4.1 Future Growth
4.2 How We Are Different
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DifferencesDifferences
Superior financial performance from:
u Strength of our customer franchise
u Depth of people
u Product strength
u e-Business: strong market position
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QuestionsQuestions