2004 Interim results presentation
David MorganChief Executive Officer
6 May 2004
Presentation Title & Date Interim Results 2004 2
Maintaining consistent growth and return
• Record result- Net profit of $1,225m up 17%- Cash earnings of $1,233m up 13%- Cash earnings per share of 66.7 cents up 11%
• High returns- Cash return on equity 20%- Interim dividend of 42 cents up 11%
• Robust growth - Revenue up 10%- Margins down 9 bps
• Quality of earnings maintained- Impaired assets to total loans & acceptances stable
Presentation Title & Date Interim Results 2004 3
Optimising value for shareholders
• Approximately $500m off-market buy-back:
- Bringing ACE ratio close to mid point of target range
- Reducing ordinary shares on issue by approximately 2%
- Effective utilisation of excess franking credits
• TPS II hybrid equity issued in April 04 enabling redemption of higher cost TOPrS hybrid equity in July 2004
Presentation Title & Date Interim Results 2004 4
Consistent dividend growth
• Dividend up 4 cents or 11% on prior corresponding periodDividends (cents per share)
26 28 30 32 34 36 38 40 42
0
5
1015
20
25
3035
40
45
1H00 2H00 1H01 2H01 1H02 2H02 1H03 2H03 1H04
Presentation Title & Date Interim Results 2004 5
Clear and simple strategy
Service – Profit Chain
Customer Focus
Internal Service Quality
Employee Commitment
Employee Retention
Employee Productivity
Superior Customer
Experience
Customer Satisfaction
Customer Loyalty
Revenue Growth
Profitability
Shareholder Value
Strategy Outcomes
Medium termObjectives
� Best practice employee commitment
� Service leadership in our industry
� Top quartile shareholder returns
� Leader in corporate responsibility
Employee Customer Shareholder
How?Differentiator:
Superior ExecutionOur high performanceculture:�Quality people�Effective people &
performance mgt processes
�Values
Vision
“To be a great Australian and NZ
Company”� A great place to work� A superior customer
experience� 1st quartile shareholder
returns� A good corporate citizen
Mission“To be at the forefront for service in our industry by
September 2005”
ValuesTeamwork
IntegrityPerformance
‘Ask Once’
Presentation Title & Date Interim Results 2004 6
Focused strategy and sound execution
• Australia and New Zealand remain highly attractive banking markets- Australian system credit growth 15% to March 2004- New Zealand private sector credit growth 11% to March
2004
• Balanced approach between disciplined pricing and growth
• Businesses focused – no diversion
• Wealth integration nearing completion, on-time, on-budget and ahead on synergies
Presentation Title & Date Interim Results 2004 7
Customer satisfaction improving
Source: Consumer - Roy Morgan Research. Data based on rolling four quarter average. Consumer satisfaction is up to February 2004and based on consumers aged 14+ who regard Westpac as their MFI.
Business - TNS Business Finance Monitor is since June 2002.
SME satisfaction - total satisfied
Middle Market Satisfaction - total satisfied
Consumer Satisfaction - % of main financial institution customers very or fairly satisfied
40%45%50%55%60%65%70%75%
Sep 02
Oct 02
Nov 02
Dec 02
Jan 0
3Fe
b 03
Mar 03
Apr 03
May 03
Jun 0
3Ju
l 03
Aug 03
Sep 03
Oct 03
Nov 03
Dec 03
Jan 0
4Feb
04Mar
04
Bank X WBC Bank Z Bank Y
40%
45%
50%
55%
60%
65%
Sep 02
Oct 02
Nov 02
Dec 02
Jan 0
3Fe
b 03
Mar 03
Apr 03
May 03
Jun 0
3Ju
l 03
Aug 03
Sep 03
Oct 03
Nov 03
Dec 03
Jan 0
4Fe
b 04
Mar 04
Bank X WBC Bank Z Bank Y
55%
60%
65%
70%
Sep 02
Oct 02
Nov 02
Dec 02
Jan 0
3Feb
03Mar
03Apr
03May
03Ju
n 03
Jul 0
3Aug
03Sep
03Oct
03Nov
03Dec
03Ja
n 04
Feb 04
Peer average Westpac
Presentation Title & Date Interim Results 2004 8
Market share enhanced
• Westpac has consistently increased market share of financial system credit over the last 3 years (year to 30 September): - 2001 - 50 basis point increase- 2002 - 40 basis point increase - 2003 - 90 basis point increase
+20 bps13.914.1Retail deposits
Credit-60 bps17.516.9Household (housing & other
personal)
15.012.3
Mar 04%
+10 bps14.9Total credit+80 bps11.5Other (mainly business)
Change(bps)
– half year
Mar 03%
Australian market share – RBA financial system aggregates
Presentation Title & Date Interim Results 2004 9
Growth in most wealth products remains strong
7
n/a7.2122.6Institutional310.4310.4Broking
7.759.2Retail
n/a9.3214.4Margin lending310.676.7Life and risk315.1311.1Wrap and master trust214.356.2Corporate super
RankMarket share(%)Rank
Market share (%)Product
Share of new businessCurrent Australian market share
Sources: Retail& Wrap & M’trust - ASSIRT February 2004 (as at Dec 2003)
- New Business – September 2003 – ASSIRT Market share report September 2003Corporate super - Dexx&r Employer Super League Table December 2003Life and risk - Dexx&r Life analysis, Quarterly Statistics ending 30 September 2003Margin lending - BT loan book verses RBA industry total – 31 December 2003Broking - ASX market analysis March 2004Institutional - Institutional Rainmaker Mandate Analysis 2003 – 04 (does not include externally managed FUM)
Presentation Title & Date Interim Results 2004 10
Sound contribution across all businesses
0 100 200 300 400 500 600 700
NZ
InstitutionalBank
BT
Business &ConsumerBanking
H1 2003H2 2003H1 2004
Cash earnings
$m
Growth1
1H03 - 1H04
58%
9%
20%
17%
Proportion of Group
Contribution
11%
11%
25%
19%
1 NZ % growth in AUD terms
Presentation Title & Date Interim Results 2004 11
Business unit performance: BCB1
• Balance right with 27% growth in economic profit
• Profitable growth delivered, strong increase in loan and deposits, partially offset by softer margins
• Continued success in business sector strategy - lending growth 18% higher
• Expenses supported significant compliance spend
52.3%
652
(280)
932
(171)
1,103
(1,210)
2,313
1H04
(16)(147)Bad debts
290bps55.2%Expense to income
19546Cash earnings
(19)(236)Tax & OEI
19782Operating profit
19929Core earnings
(6)(1,143)Operating exp
122,072Operating income
% Change
1H03$m
1 BCB – Business and Consumer Banking, Australia
Presentation Title & Date Interim Results 2004 12
Business unit performance: WIB1
• Core performance flat -improved revenues across most divisions offset by weaker financial markets performance
• Improved results from Financing and Specialised Capital Group
• Financial Markets impacted by softer trading income and stronger AUD. Programs are underway to improve performance
• Bad debts sharply lower
1 WIB – Westpac Institutional Bank, including corporate and institutional business in New Zealand
42.4
225
(100)
325
2
323
(238)
561
1H04
Large(43)Bad debts
-60bps41.8Expense to income
11203Cash earnings
(25)(80)Tax & OEI
15283Operating profit
(1)326Core earnings
(2)(234)Operating exp
0560Operating income
% Change
1H03$m
Presentation Title & Date Interim Results 2004 13
Business unit performance: BT Financial Group
• Integration on track, on time and 04 synergies expected to be higher than planned based on current run-rate
• Investment performance turnaround now achieved, assisting improved future fund flows
• Insurance continues to perform well
60.4
96
(26)
122
-
122
(186)
308
1H04
--Bad debts
220bps62.6Expense to income
2577Cash earnings
(8)(24)Tax & OEI
21101Operating profit
21101Core earnings
(10)(169)Operating exp
14270Operating income
% Change
1H031$m
1. Period 1H03 included only five months of BTFM contribution
Presentation Title & Date Interim Results 2004 14
Business unit performance: New Zealand
• Strong business momentum since September 2003
• Lending up 16% (in $NZ)
• Mortgage market share improving - captured 23% of growth in period
• Business transformation continues to be successful
48.9
192
(90)
282
(20)
302
(289)
591
1H04
9(22)Bad debts
-150bps47.4Expense to income
11173Cash earnings
(13)(80)Tax & OEI
11253Operating profit
10275Core earnings
(17)(248)Operating exp
13523Operating income
% Change
1H03$m
Presentation Title & Date Interim Results 2004 15
Sustaining core earnings growth
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1H99
2H99
1H00
2H00
1H01
2H01
1H02
2H02
1H03
2H03
1H04
Revenue 7%
Expenses 3%
Core earnings 12%
$m
1. Underlying basis (excl. significant items but not adjusted for acquisitions and disposals)
2. Excluding goodwill amortisation
5 Year CAGR 1
2
Presentation Title & Date Interim Results 2004 16
Consistency over the medium term
• Achieved total shareholder return of 80% over the last 5 years
• Shareholder performance hall of fame ranks those companies with a market cap greater than $US10 billion who have most frequently been placed in the top third in the annual Shareholder Performance Index (SPI)2
Global Shareholder Performance Hall of Fame
Mercer Oliver Wyman1
Westpac6
Danske Bank Group5
Citigroup4
Royal Bank of Scotland3
Royal Bank of Canada2
UnitedHealth Group
Name
1
Rank
1. Mercer Oliver Wyman State of the Financial Services Industry 2004. Companies are ranked by their 2003 SPI
2. SPI – Measures risk adjusted performance over the medium term. The calculation is based on a five year moving window of performance. The SPI is calculated by dividing the average monthly total shareholder return by the standard deviation of the monthly shareholder return.
The Details
Philip ChronicanChief Financial Officer
6 May 2004
Presentation Title & Date Interim Results 2004 18
Cash earnings – maintaining the growth
71,4391,539Non-interest income
1,233
1,225
1,662
(207)(84)
(1,925)
2,339
1H04
112,098Net interest income
131,095Cash earnings
171,051Net profit after tax
201,388Net profit before tax
3(214)Bad debts(8)(78)Goodwill(4)(1,857)Operating expenses
% Change1H03 –
1H041H03$m
Presentation Title & Date Interim Results 2004 19
Cash earnings – half on half patterns
• Movement in 2H03 to 1H04 is more subdued than annual growth
• This pattern of growth has been consistent given:
– Dec/Jan are more subdued months
– June business refinancing cycle
• In 1H04 this pattern has been exacerbated by credit card interchange changes reducing the delta between 2H03 and 1H04 by $33m
4.8
2.6
1.5
2.6
%2H-1H
7.11,0679962002
1,233
1,095
920
1H
na-2004
7.41,1762003
6.69812001
%1H-2H2H$m
Net impact of recent credit card changes on operating income relative to 1H03
(9)+24Net impact
1H042H03$m
Presentation Title & Date Interim Results 2004 20
Net interest income analysis
• Net interest income up 11%
• Behind these movements has been
– Average interest earning assets up 15%
– Rising interest rates supporting deposit margins and earnings on free funds
– Additional hybrid capital contributing to reported spreads
– Business mix changes contributing to a decline in overall margins
• Removing the impact of new hybrid issuance would see net interest income rise by 10%
2,0982,339
106
98
7331
(182)
327
1,600
1,800
2,000
2,200
2,400
2,600
2,800
Mar
-03
Ave
Earn
ing A
sset
Gro
wth
Spre
adHy
brids
Free
Fun
dsM
ar-0
4
$m
Tax equivalent gross-up
Movement in net interest income
Presentation Title & Date Interim Results 2004 21
Loan growth remaining robust
190.5148.9174.9
1.726.722.633.3
6.985.292.1
1H04
86.46.6Personal (loans & cards)1872.179.3Housing11778.585.9Consumer (Australia)
% Change
158
14
1316
118
1H04 - 1H03
1.51.6BT Financial Group
Business Unit
28.331.2Business (incl. equip. finance)22.422.2Westpac Institutional Bank23.124.5New Zealand ($NZ)
Group
179.3142.9164.3
2H03
166.2Avg int. earning assets137.8Risk weighted assets153.8Net loans and acceptances
1H03$bn
1 Securitised loans have been deducted from the total
Presentation Title & Date Interim Results 2004 22
Business lending continues to improve
• Business lending (SME and Middle Market) up 18% against market growth of around 6%
• Key drivers of improvement:– Leading business customer
satisfaction
– Roll-out of CRM technology in business direct
– Selective return of business banking managers to branch network
– Industry packages supported by specialist teams
– Continued success in growing equipment finance. Increased to $5.8bn from $3.6bn over year.
3432
2927
23 22*
0
5
10
15
20
25
30
35
40
45
2H01 1H02 2H02 1H03 2H03 1H04
Business loans and acceptances ($bn)
* Decline due predominantly to sale of AGC
Presentation Title & Date Interim Results 2004 23
Housing market – beginning to slow
• Overall housing lending up 18% against system growth of 24% leading to market share easing by 110 basis points over past year
• Strategy has been to focus on profitable growth:
- Proportion of third party originated loans constant at 30%
- Investor housing growing 22% against market growth closer to 30%
- Cautious approach to ‘low-doc’ loans
Australian housing finance
3
8
13
18
23
28
33
38
Feb-92 Feb-94 Feb-96 Feb-98 Feb-00 Feb-02 Feb-04
no.'000
0123456789
1st homebuyers2nd homebuyersInvestors - ex constr'n(rhs)
Source: ABS
$bn
Westpac housing loan drawdowns ($m)
1,2001,4001,6001,8002,0002,2002,4002,600
OctNovDec Ja
nFeb Mar AprMay Ju
n Jul
AugSep
2002/20032003/2004
Presentation Title & Date Interim Results 2004 24
New Zealand – good growth across the business
2725232221 22
0
10
20
30
40
2H01 1H02 2H02 1H03 2H03 1H04
Net loans and acceptances (NZ$bn)• Total lending up 16% (in $NZ) against private sector credit growth of 11%
• Business lending has been robust up 23%
• In housing, first time since 1998 that Westpac NZ has consistently increased market share (5 out of the last 7 months)
• Improvement due to:- Increased focus on Auckland- Greater specialisation of
workforce- Successful focused marketing
spend-15%-10%
-5%0%5%
10%15%20%25%30%
98 99 00 00 01 01 02 02 03 04
Market share Share of new growth
Housing market share monthly
Presentation Title & Date Interim Results 2004 25
Deposit growth
511.710.912.3Westpac Institutional Bank
1321.122.723.8Business (Australia)1144.146.849.0Consumer
% Change
111811
70
17
8
Mar 03 –Mar 04
545Non-interest bearing
Business Unit
16.617.318.0New Zealand ($NZ)
29.933.635.0Other 1
Group
273029Certificates of deposit
1223456
1H03
1364062
1H04
129Total deposits34Other interest bearing – Term61Other interest bearing – At call
2H03$bn
1 Other include Treasury and Pacific Banking
Presentation Title & Date Interim Results 2004 26
Group margin dynamics
% (6bps)
2.57
Spreads Free fundsbenefit
2.652.59
2.2
2.3
2.4
2.5
2.6
2.7
2.8
Mar-03
2H03
Sep-03
Austra
lian S
pread
s
NZ Spread
sOthe
r Spre
ads
Free fun
ds
Hybrid
s
Mar-04
(9bps)
0 0
2.5bps3.5bps
2.56
Presentation Title & Date Interim Results 2004 27
Australian margins
(13)bpsChange in Australian spread
4bpsLiabilities
(6)bpsAssets mix
(5)bpsFunding & portfolio
(6)bpsCash /30 Day bills spread
2H03 to 1H04
Product
dicative
In
• The decline in Australian margins has been due to a variety of factors
• Transitory change in the cash/bills spread has impacted spread by around 6 basis points in 1H04
• Funding portfolio composition impacted by strong lending growth not fully matched by deposit growth
• Reduced asset margins almost fully offset by improved liability margins
• Australian spread impact on group spreads is 9 basis points
Presentation Title & Date Interim Results 2004 28
Non-interest income analysis
1,439
82
(9)(23)
34 18
1,200
1,300
1,400
1,500
1,600
Mar-03 P'holder Rec. FinancialMarkets
Net card impact BT Adjustment Core Non-interest income
Mar-04
$m
Presentation Title & Date Interim Results 2004 29
Credit cards – fee impact of recent changes
• Net impact of interchange reforms and our strategic response will be broadly earnings neutral by 2005 and beyond.
• Repricing implemented in 1H03
• Interchange reforms Oct 03
• Reward point changes to impact in 2H04 and beyond
(81)(82)(76)Rewards costs
62
35
103
1H03
5386Cards non-interest income
2832Other fee income
3030Fee repricing
76
1H04
106Interchange income
2H03$m
Presentation Title & Date Interim Results 2004 30
Institutional Bank financial markets income
• Financial markets income 20% lower than prior corresponding period and 6% below previous half.
• Result consistent with expected volatility, although recent performance has been below average
• Recent period was accompanied by a small rise in the average value at risk (VaR). VaR is well within approved limits
• Measures to improve performance have been implemented- Ceasing coverage of interbank
markets where we no longer have a competitive advantage - including some currency options
- A number of operational changes
Financial markets income ($m)
050
100150200250300
1H02 2H02 1H03 2H03 1H04FX Interest Rate Product FM Other
Monthly average VaR ($m)
0369
121518
Apr-0
3M
ay-0
3Ju
n-03
Jul-0
3Au
g-03
Sep-
03Oct-
03No
v-03
Dec-
03Ja
n-04
Feb-
04M
ar-0
4
Monthly average VaR
Board Limit
Presentation Title & Date Interim Results 2004 31
Expenses – tightly managed
• On target for 2 - 4% annual expense growth for year
4%1,8571,9061,925Operating expenses
15--Gross up – 5 months of BT
1,872
663
296
898
1H03
1%668672Other expenses
3%1,9061,925Adjusted operating expenses
6%938948Salaries & other staff expenses
3%300305Equipment & occupancy
% Change2H031H04$m
Presentation Title & Date Interim Results 2004 32
2004 expenses – what we have said
Additional costs of $10m in 1H04Increase in superannuation costs
Significant compliance spend in 1H04 compared to 1H03 (FSR, IFRS, Sarbanes Oxley, Basel II)
Absorb major compliance spending
Up to $57 in 1H04 from $40 in 2H02 and $49m in 1H02.
Higher capitalised software amortisation expense
Temporary staff reduced by 327Decrease in temporary staff expected as project work eases
Net impact of AUD/NZD exchange rate reduced costs by $10m
No further pressure from NZD/AUD exchange rate
Outcome in 1H04Comment
Presentation Title & Date Interim Results 2004 33
Expense to income – now under 50%
49505253
30354045505560
1H02 2H02 1H03 2H03 1H04
Banking – expense to income%
48.7%
5053
515051
5254
5657
30
35
40
45
50
55
60
2H99
1H00
2H00
1H01
2H01
1H02
2H02
1H03
2H03
1H04
Group - expense to income%
49.6%
5961
46
6263
3035404550556065
1H02 2H02 1H03 2H03 1H04
Wealth – expense to income%
Presentation Title & Date Interim Results 2004 34
BT Integration – on track
51
8885
116
54
0
20
40
60
80
100
120
140
2002/03 2003/04 2004/05
Expected synergies2003 actual achieved
$m
2004 locked-in run rate
SynergiesIntegration progress
Jul-0
2
Oct
-02
Jan-
03
May
-03
Aug-
03
Nov
-03
Mar
-04
Jun-
04
Sep-
04
Dec
-04
People & Location
Systems
Customer Contact
Investment Management
Registry consolidation
Selected back-office insourcing and Customer MIS
Complete
In progress
Presentation Title & Date Interim Results 2004 35
Net retail FUM against acquisition model - BT
0
2
4
6
8
10
12
Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Dec-04 Dec-05
$bn Acquisition modelActual
Presentation Title & Date Interim Results 2004 36
Performance turnaround: Australian equities
-2.0%-1.6%-1.2%-0.8%-0.4%0.0%0.4%0.8%1.2%
May-02
Jun-0
2Ju
l-02
Aug-02
Sep-02
Oct-02
Nov-02
Dec-02
Jan-0
3Feb
-03Mar-
03Apr-
03May
-03Ju
n-03
Jul-0
3Aug
-03Sep
-03Oct-
03Nov
-03Dec
-03Ja
n-04
Feb-04
Mar-04
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Monthly portfolio excess return (LHS) One-Year Excess Return (RHS)
BT Core Fund1 vs S&P/ASX300 Accumulation Index
1. BT Institutional Core Australian Share Sector Trust. Benchmark: ASX300, Pre Fee / Pre Tax
Presentation Title & Date Interim Results 2004 37
Improved researcher ratings
Large Cap Australian Equities – Flagship Retail Fund Ratings*
Rating
Upgraded from Investment Grade to Buy in Nov 03
BuySellInvestorweb
Qualitative component upgraded Jan 04, no impact on star rating.
1 Star1 StarMorningstar
Investment Grade
3 star
AApril 04
Upgraded in April 04.1 starASSIRTSell and
then Hold
BLast year
CommentsResearcher
Hold rating in place since Oct 03, moved to Inv Grade in Apr 04.
Lonsec
Upgraded Feb 04. Van Eyk
*Retail flagship fund is the BT Australian Share fund
Presentation Title & Date Interim Results 2004 38
Continued focus on risk management
• Detailed systems in place
• More recently the emphasis has focused on documented control regime prompted by:
- APRA / NAB report- Sarbanes Oxley 404 requirements- Basel II
• Re-assessed position following NAB report
• Confident that same issues could not have emerged
• Increased awareness of areas we can strengthen some tools and processes
• Rigorously managed with the most advanced tools of our risk monitoring systems
• Further enhancements in pipeline with Basel II implementation
Market Risk
Operational Risk
Credit Risk
Presentation Title & Date Interim Results 2004 39
Financial Markets risk control environment
• Distribution of earnings consistent with risk expectations
• Control environment overall sound
– Independent monitoring and reporting
– Limit adherence– Constructive culture
• Areas for strengthening processes identified include:
– Enhanced risk diagnostics
– System upgrades
Distribution of Financial markets daily P&L 1H 2004
0
2
4
6
8
10
12
14
16
-6 to
-5.5
-5 to
-4.5
-4 to
-3.5
-3 to
-2.5
-2 to
-1.5
-1 to
-0.5
0 to
0.5
1 to
1.5
2 to
2.5
3 to
3.5
4 to
4.5
5 to
5.5
6 to
6.5
7 to
7.5 >8
Num
ber o
f tra
ding
day
s
$m
Presentation Title & Date Interim Results 2004 40
Forward credit indicators in good shape
Housing Portfolio - 90 day delinquencies
1.04
0.64
0.180.150.38
0.150.230.250.26
0.0
0.5
1.0
1.5
1996 1997 1998 1999 2000 2001 2002 2003 1H04
%
1.40
0.900.50
1.271.47
0.57
0.0
0.5
1.0
1.5
2.0
2.5
1999 2000 2001 2002 2003 1H04
Aust. Business Banking - 90 day delinquencies (3 month moving average)%
WIB - impaired assets to committed exposure%
0.430.51
0.14
0.530.63
0.290.37
0.25
0.34
0.00.10.20.30.40.50.60.7
1996 1997 1998 1999 2000 2001 2002 2003 1H04
0.820.63
0.901.140.96
1.98
1.021.07 1.11
0.0
0.5
1.0
1.5
2.0
2.5
1996 1997 1998 1999 2000 2001 2002 2003 1H04
Consumer Unsecured - 90 day delinquencies %
Presentation Title & Date Interim Results 2004 41
Bad debt analysis
1.7%
1,432
(207)
(41)
(166)
35
(73)
(128)
1H04
1.7%
1,393
(271)
(95)
(176)
27
(70)
(133)
2H03
(214)Net bad debt expense
1,309General provision balance
47Recovery of debts previously written off
1.7%General provision to non-housing loans & acceptances
(136)Increase in dynamic provision
(78)Bad debt charge-off
(142)Write-offs
17Net transfer (to)/from specific provisions
1H03$m
Presentation Title & Date Interim Results 2004 42
Stressed exposures further reduced
Categories of stressed exposures as a % of total commitments
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
Sep 99 Sep 00 Sep 01 Sep 02 Sep 03 1H04
Watchlist & substandard
90 days past due well secured
Impaired
Presentation Title & Date Interim Results 2004 43
Provisioning cover
Specific provisions / impaired assets
%
0
10
20
30
40
50
60
FY98 FY99 FY00 FY01 FY02 FY 03 1H04
WBC ANZ CBA NAB
General provisions / non-housing performing loans & acceptances
%
0.5
1.0
1.5
2.0
FY98 FY99 FY00 FY01 FY02 FY 03 1H04WBC ANZ CBA NAB
• Specific provision for impaired assets increased to 36%, from 26% at 2H03
• Increase due to top-up of specific provisions for two existing impaired assets
Presentation Title & Date Interim Results 2004 44
Adjusted common equity movement
• Surplus capital1 grew $429m over the year but only $80m over the last half
4.8%
5.1%
(18bps)(20bps)(52bps)
83bps
(52bps) (17bps) (7bps)
5.0%
83bps
19bps10bps
4.00%
4.50%
5.00%
5.50%
6.00%
31-M
ar-0
3
Cas
h Ea
rnin
gs
Div
iden
ds
DR
P/O
ptio
ns
RW
A
Oth
er*
30-S
ep-0
3
Cas
h Ea
rnin
gs
Div
iden
ds
DR
P/O
ptio
ns
RW
A
Oth
er*
31-M
ar-0
4
1 ACE capital in excess of 4.75% (mid point of our target range)* “Other” includes capital employed by non-banking subsidiaries, Specialised capital group investments and movements in the FCTR and deferred tax balances.
Presentation Title & Date Interim Results 2004 45
Tier 1 and ACE ratios now above target levels
• Tier 1 and ACE ratios above target levels
Capital ratios
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
Mar-00
Sep-0
0Mar
-01Sep
-01
Mar-02
Sep-0
2Mar
-03Sep
-03
Mar-04
ACE Tier 1
ACE
Tier 1
Ratio
4.5% – 5.0%5.1%
6.0% – 6.75%7.2%
Target rangeCurrent level
Presentation Title & Date Interim Results 2004 46
2004 hybrid issue complicates reporting
Post IFRS implementation instrument will be debt and swap will be effective hedge
Hedge achieved through offsetting USD capital invested in UK/US
Swap put in place for risk management but not given hedge treatment
Typically swapped into NZD
Mark to market of swap will impact NPAT until 1 Oct 2005 (IFRS transition date) but we will isolate from cash earnings
Issued in USD (525m) and funds used in NZ (NZD)
2004 Trust Preferred Securities
USD issues accounted for as equity, no hedge accounting available
Sufficient capital deployed to offshore branches for commercial and regulatory purposes providing natural hedge
Historical practice
1,233Cash earnings0MTM TPS Hedge
(76)Preference Dividends84Goodwill amortisation
1,225Net profit after tax
Presentation Title & Date Interim Results 2004 47
Buy-back overview
• Target buy-back size approximately $500m (approximately 2% of ordinary shares)
• Also conducting on-market buy-back of an equivalent proportion of our NZ Class Shares (approximately 1m)
• Off-market tender buy-back structure
• Buy-back price includes a $4.00 capital component, with balance treated as a fully franked dividend for tax purposes
• The tender range is $14.00 to $18.00 with 9 specific prices at 50c intervals. Tenders can be lodged at any of the specified prices, or as a Final Price Tender
• Shareholders will be entitled to receive the interim dividend even if they tender into the buy-back
6 May 1Announcement
26 MayDispatch of booklets
30 JuneCredit buy-back proceeds
21 JuneBuy back price announced
18 JuneTender period closes
31 MayTender period opens
18 MayBuy-Back record date
12 MayEx-date for Buy-Back
2004Key Dates
1. Shares acquired on or after 7 May will not qualify for franking entitlements under 45 day rule
Presentation Title & Date Interim Results 2004 48
Capital position remains sound
-29bps+3bpsJuly 2004 – TOPrS called (US$ 322.5m)
4.8%
-34bps
-
5.1%
ACE
-34bpsMay/June 2004 structured off-market buyback (~$500m)
+46bps12004 TPS raising in April 04 (US$ 525m)
6.8%
7.2%
Tier 1
Ratios as at 31 March 2004
Pro-forma ratios 31 March 20042
1. Impact (46bps) – a portion of this is exceeds the APRA 25% hybrid limit 2. Does not include the impact of capitalised expenses which based on balances at 31 March 2004 would be a
deduction of $291m or 20 basis points on both ACE and Tier 1. This will not be applied until 1 July 04.
Presentation Title & Date Interim Results 2004 49
A strong, broad based, high quality result
• Strong performance from all businesses
• Continued tight expense management while growing investment in key capabilities, and absorbing compliance spend
• Profitable growth with robust loan growth and modest margin deterioration
• Credit quality high and provisioning coverage strong
• Actively managing capital base with strong franking position
Outlook and summary
David MorganChief Executive Officer
6 May 2004
Presentation Title & Date Interim Results 2004 51
Australian and New Zealand economic outlook
• Australia and New Zealand economic fundamentals sound due to:
- Solid domestic demand- Low unemployment
• Export recovery to boost economy in 2004, driven by stronger global economy and the recent rebound in farm output
• Further slight rise in interest rates expected later in 2004
Key economic indicators
2.33.1GDP
4.84.6Unemployment
Australia
3.34.3GDP
5.75.7Unemployment
New Zealand
World (Calendar year)
4.04.4GDP
Jun 05%Financial year ended Jun 04
%
Source: Westpac
Presentation Title & Date Interim Results 2004 52
Economy operating with a more sustainable mix
-4
-2
0
2
4
6
8
Domestic demand Net exports GDP
Perc
enta
ge p
oint
con
tribu
tion
-4
-2
0
2
4
6
8
2000/01
2001/02
2002/03
2003/04f
2004/05f
Source: ABS, Westpac
Key contributors to GDP
Presentation Title & Date Interim Results 2004 53
Credit growth returning to longer term average
-8
-4
0
4
8
12
16
20
24
Sep-90 Sep-92 Sep-94 Sep-96 Sep-98 Sep-00 Sep-02 Sep-04-8
-4
0
4
8
12
16
20
24
Housing Business Total Housing averageTotal (Aust) Total credit average
Forecasts ( To Sep 2005)Australian credit growth
Sep-05
Source: RBA
Presentation Title & Date Interim Results 2004 54
Financial sector short-term outlook
• Credit growth moderating to more sustainable levels
• Ongoing competitive intensity
• Bad debt environment benign
• Wealth management environment remaining favourable
• Rising demands around customer experience
• Overall sector dynamics are favourable
Presentation Title & Date Interim Results 2004 55
Well positioned to maintain momentum
• Established track record in delivering growth and executing well- Consistent growth / return mix - Disciplined management
• Improved sustainability of earnings- Market share improvements- Increased customer satisfaction
• Low risk profile, with high credit quality and sound provisioning
• Focused strategy and a quality management team
Presentation Title & Date Interim Results 2004 56
Outlook
• Operating environment remains accommodating:- Credit growth lower but still above the 15 year
average- No immediate signs of asset quality deterioration
• Good momentum with first half earnings growth above medium-term guidance
• Positive full year outlook for solid earnings growth in 2004
2004 Interim results presentation
6 May 2004
Presentation Title & Date Interim Results 2004 58
Disclaimer
The material contained in this presentation is intended to be general background information on Westpac Banking Corporation and its activities.
The information is supplied in summary form and is therefore not necessarily complete. Also, it is not intended that it be relied upon as advice to investors or potential investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial situation or particular needs.
Top Related