Westpac Banking Corporation

Transcription

1 Westpac Banking Corporation Philip Chronican Group Executive Westpac Institutional Bank March 7 Westpac Banking Corporation at a glance Australia s first bank est. 87 Top bank globally Consistent earnings growth Strong franchise in core markets of Australia, New Zealand and near Pacific Global sustainability leader Sound asset quality Cash earnings Return on equity Tier ratio Long-term credit rating Total assets Market cap as at 8 Feb 7 Customers 3 September 6 A$3,79 million 3% 6.9% AA A$3 billion A$7 billion 7 million. FT Global 6 by sector, rank by market capitalisation. S&P Long-term issuer credit rating upgraded from AA- on Feb 7

2 Consistent solid growth over long term Cash earnings, revenue and expenses ($m) 3, 3,,,,, 7yr CAGR Cash Earnings (LHS) % Revenue (RHS) 7% Expenses (RHS) %,, 8, 6,,, to on AGAAP basis. and 6 adjusted for the impacts of A-IFRS, accounting reclassifications, NZ$ exchange rate impacts and one-off significant items. Source: Westpac Strong financial services franchise Composition of cash earnings Year ended 3 September 6 Other % Business and Consumer Banking Large, high quality retail franchise Fastest growing major bank New Zealand Retail % BTFG % Institutional Bank 6% Australian Consumer Financial Services 6% Australian Business Financial Services 9% BT Financial Group nd tier in size st tier in capability Fund Manager of the Year Institutional Bank Leading position in Australasia New Zealand Solid franchise, though consumer has under performed recently Business banking performing well. 6 AFR Smart Investor Blue Ribbon Awards

3 Areas of strategic focus Group Strategic Themes Feet on the street Investing in growth Productivity improvement Business Unit Strategic Themes Wealth Capitalise on new opportunities from superannuation reforms Australian retail banking Deliver profitable market share growth in housing, cards Expanding Business banking Leverage investment in new systems Reach and Pinnacle New Zealand retail Retain and grow customer numbers Improve market share Westpac Institutional Bank Leverage leading institutional and capital solutions positions Grow specialised capital income Australian Consumer Financial Services Strong momentum with leading bank sector growth in Q: - Housing 3.8% - Credit cards 6.% - Deposits.3% Growth achieved from enhanced sales process and leading CRM infrastructure Risk metrics stable over quarter Household credit volume Bank cum. YTD growth (%) 3 Household deposits volume Bank cum. YTD growth (%) 3 WBC Banking system Peer group Oct-6 Nov-6 Dec-6 Jan-7 WBC Banking system Peer group Oct-6 Nov-6 Dec-6 Jan-7 Charts source: Cumulative YTD growth; APRA, Westpac; Peer group is ANZ, CBA, NAB & SGB, which is subset of Banking system. 6

4 Australian Business Financial Services Business banking became a separate business unit in March 7 Growing business lending just above system Expanding Business Banking capability: - 7% additional bankers since - new business banking centres Westpac total Australian business credit market share (%) 3 9 Nov-99 May- Nov- May- Nov- May- Nov- May-3 Nov-3 May- Nov- May- Nov- May-6 Nov-6 Business Banking Centres Sep- Sep-6 Feb-7 7 Investing further in brand Customer satisfaction showing renewed signs of recovery in latest three-month data Consumer customer satisfaction 3 month rolling average very or fairly satisfied (%) Reinvigorated our brand in October 6 providing specific proof points on Westpac s customer focused strengths Higher levels of brand spend for 7 6 Westpac Peer Group Average 6 Sep-3 Mar- Sep- Mar- Sep- Mar-6 Sep-6 Source: Roy Morgan Research main financial institution + Peer group is average of 3 major banks plus SGB 8

5 New Zealand - consumer banking slow turnaround Initiatives are having some impact, in what is expected to be an ongoing restoration process - Improving customer growth and retention - Increased share in Auckland - Improving sales force effectiveness Performance improving gradually NZ customer numbers 8 Total Net Gain/Loss Auckland Net Gain/Loss Dec Qtr Mar Qtr 6 Jun Qtr 6 Sep Qtr 6 Dec Qtr 6 Source: Westpac NZ Housing multiple of system growth (%). mth multiple System Oct- Nov- Dec- Jan-6 Feb-6 Mar-6 Apr-6 May-6 Jun-6 Jul-6 Aug-6 Sep-6 Oct-6 Nov-6 Dec-6 Jan-7 Source: Westpac 9 New Zealand business banking solid growth Business banking revenues up 8% in 6 Solid performance driven by: - Number position in key segments - Improved customer and balance share - Market leading advice in middle markets and corporate - Agri-lending.x system in 6 - Leverage of Institutional Bank products Middle Business Lending Share ($m - $m t/o) (%) th Qtr st Qtr nd Qtr 3rd Qtr Other Banks th Qtr st Qtr 6 nd Qtr 6 Source: TNS Business Finance Monitor September 6 Lending volumes (NZ$) and Credit Quality (%) Total Credit Exposure (LHS NZ$), E & Below/Total Risk Graded (RHS %),,, Westpac 3rd Qtr 6 Sep- Dec- Mar-3 Jun-3 Sep-3 Dec-3 Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar-6 Jun-6 Sep-6 th Qtr Source: Westpac

6 BT - delivering Wrap and Corporate Super growth Wrap Funds Under Administration (FUA) up % in Q to $3bn BT s platforms No. for new business in December Qtr* Corporate Super FUA grew 6% in Q to $.bn Tax changes provide additional incentives for superannuation savings Wrap FUA ($bn) 3 Sep-3 Sep- Sep- Sep-6 Dec-6 Source: BT Corporate Super FUA ($bn) 6 3 Source: * S&P Market Share Report for December 6 Source: BT Sep-3 Sep- Sep- Sep-6 Dec-6 BT - strong momentum in Margin Lending and Investment Management Margin Lending - $bn in balances reached in early 7 Enhanced link to WRAP platform in Sep 6 Well placed for high demand months of April, May and June Institutional sales: Aussie Equities Institutional sales over $. billion in Q Solid pipeline also developing with alliance partner products especially AEW (Global Property) and AQR (International Equities) * Margin Lending sales represents net flows Margin Lending ($m), 3, 3,,,,, Sep-3 Sep- Sep- Sep-6 Q '7 Source: RBA Institutional sales ($m) 3,,,,, Sep-3 Sep- Sep- Sep-6 Q '7 Source: BT

7 Asia executing on growth opportunities Revenues Footprint Capabilities Key Transactions Locally booked revenues up 38% in 6 Repositioned geographic footprint and seeking to expand activities into India and China. Applications submitted in late 6 to open branch in Shanghai and representative office in Mumbai Growing success in corporate banking and financial markets Focus on working capital and trade, introducing business banking Continuing to utilise third party relationships to support our efforts Supporting Australian and New Zealand small to medium enterprises interested in entering the China market Collaboration with Standard Chartered on promoting India- Australia/NZ banking capabilities for Australia/NZ firms interested in India and vice versa Singtel Group Treasury Pte Ltd Asian Development Bank Hongkong Electric Company Limited World Bank American Express Credit Corporation 3 Specialised Capital Group Provides alternative asset and structured products, and institutional funds management Solid position in a competitive market - Funds under management up % over prior year - Successful fund performance Launching new funds: - Westpac Essential Services Trust - Westpac Residential Property Trust - Westpac Diversified Property Fund Hastings accessing new markets through offices in UK and USA Strong pipeline of deals for 7 Funds Under Management ($bn) 7 Westpac Private Equity Limited Westpac Funds Management Limited Hastings Funds Management

8 Private Equity Core customers increasingly involved in private equity transactions. We underwrite debt for investee companies of private equity funds Westpac supports private equity transactions that are appropriately structured and bear acceptable risk Builds on our leading capital markets position Current residual holdings around $.7bn (representing <.% of Group total committed exposures). Average deal size $m. Westpac is alert to aggregate changes in leverage across private equity transactions but also levels of gearing generally Westpac monitoring risks as: - Recent higher debt multiples not yet fully tested; and - Trend toward lite covenants Forward credit indicators modest upward trend Asset quality environment remains sound: - Consistent economic growth - Low unemployment Household delinquencies trending back to long-term norms No systemic portfolio issues Household - 9 day delinquencies (%) Consumer unsecured Housing Dec- 6 WIB - impaired assets to committed exposure (%) Aust. Business Banking - 9 day delinquencies (3 month moving average) (%) Dec Aust. Business Banking 9 year average Dec- 6 6 Source: Westpac

9 Westpac is well positioned for growth Consumer distribution Business distribution Customer solutions (Wealth products) Investment management Payments Specialised capital group Life insurance Advice Equity (derivatives, broking) Asia Increases in sales force leveraging enhanced infrastructure Increasing footprint in selected geographic locations Pinnacle loan origination system providing a comparative advantage Increasing footprint and refurbishing and expanding existing centres Growing market share in key product areas Double digit market growth in funds under management and administration Leveraging off market leading Wrap and Corporate Super platforms and new superannuation changes Strong market growth supported by top quartile fund performance over 3 years Sector leading institutional transaction banking platform Additional investment underway to capture further growth in business banking Unique capability for alternative asset and structured products among major banks, with significant experience base including with Hastings Strong product set but low cross sell relative to global best practice New advice (financial planning solutions) model beginning to deliver benefits Under represented across the broader Westpac customer base Established business with solid earnings stream Options to build distribution through financial planners is underway Small business leveraging off Asian/Australasian capital/financial flows Increasing footprint and personnel to stimulate growth 7 Source: BU BSR submissions Leadership transition Board - Chairman Leon Davis retiring March 7 - Chairman elect Ted Evans, Board member since Chief Executive Officer, David Morgan, confirmed in 6 his intention to retire as scheduled in December 7. Succession process continuing. Divisional Heads - Brad Cooper CEO NZ elect, to commence in April 7 - Business and Consumer Banking Australia split: - Mike Pratt, Group Executive, Consumer Financial Services - Peter Hanlon, Group Executive, Business Financial Services 8

10 Financial sector short-term outlook Expect credit growth to moderate to more sustainable levels Ongoing competitive intensity, with rising demands around customer experience Bad debt environment trending modestly higher, but no signs of systemic stress Wealth management represents major growth opportunity Overall sector dynamics remain favourable 9 Supplementary slides

11 Economic environment sound Expansion continues in Australia, although drought a negative By contrast, a period of consolidation in New Zealand Global growth above par for last four years, likely to be solid for 7 Inflation relatively high, but risks receding as energy costs fall and wages remain contained Unemployment at 3 year low Annual GDP (Year average, Calendar years %) GDP (Aust) GDP (NZ) (e) 7(f) Annual CPI (Year end, Calendar years %) CPI (NZ) CPI (Aust) (f) Source: Westpac Economics Australian and New Zealand economic outlook Calendar year Key economic indicators 6f World GDP.9%.% Australia Private consumption 3.%.9% Business investment.9% 8.% GDP.8%.3% Unemployment end period.%.6% CPI headline - yr end.8% 3.3% Interest rates cash rate.% (Dec ) 6.% (Dec 6) New Zealand GDP.%.6% Unemployment end period 3.6% 3.7% Consumer prices 3.%.6% Interest rates overnight cash rate 7.% (Dec ) 7.% (Dec 6) 7f.6% 3.%.%.7%.8%.9% 6.% (Dec 7).% 3.%.% 7.% (Dec 7) Business investment adjusted to exclude the effect of private sector purchases of public assets. Source: Westpac Economics

12 Credit growth expected to edge lower Australian and New Zealand credit growth (%) 6 8 Forecasts (To Sept 7) Jun-99 Dec- Jun- Dec-3 Jun- Dec-6 Aust. housing Aust. business Total credit (Aust) Total credit avg (Aust) Total housing avg (Aust) Total credit (NZ) - 3 Source: RBA, RBNZ, Westpac Improved momentum across the business Westpac total Australian credit growth* as a multiple of system growth Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar-6 Jun-6 Sep-6 Dec-6 * Rolling three month average. Source: RBA

13 Strong dividend growth higher sustainable payout Dividends per share (cents) Dividend considerations dividend up 6% Supported by 3% ROE, significant franking surplus ($7m) and strong capital position Payout ratio (%) Dividend path Franking New share issues Pay-out ratio Capital 9 9 Deliver dividend increase each half Only pay fully franked dividends General principle is to neutralise new share issuance although some dilution tolerated to utilise franking credits Absorb some movement in payout ratio given earnings volatility and A-IFRS Seek to hold capital ratios within target ranges AGAAP A-IFRS H H H H H3 H3 H H H H H6 H6 H H H H H3 H3 H H H H H6 H6 Source: Westpac Starting point for 7 margins One-off impacts on margins in 6 provides a different starting point for 7 Starting point should be around.7% being the H6 margin (.9%) adjusted for: - Cards impact bps - More normal Treasury performance (after soft H6) adding bps Group Margins.6..%..3.. H.% H6.9% H6 bps Cards reversal bps Treasury impact ~.7%.3% Starting point for H7 Source: Westpac 6

14 Cards portfolio continues to grow strongly Credit card portfolio up 7% in Q, grown 8% in months to Dec 6 Above system growth driven by: - Launch of new products, complementing existing suite - Superior branch origination processes delivered by Reach via online applications - Improved analytics, enabling better leverage of existing customer base - Risk positioning remains sound Enhanced processes and increased capability in collections area Credit cards balance quarterly growth (%) 8 6 Mar Qtr Source: APRA WBC Jun Qtr Sep Qtr Banking System Dec Qtr Mar Qtr 6 Jun Qtr 6 Sep Qtr 6 Dec Qtr 6 7 Geographically well diversified portfolio Household lending book is broadly in line with the market in NSW BCB s business lending in NSW/ACT is closer to market, at approximately 36% At a Group level, business credit is above market in NSW/ACT, given WIB exposures Importantly, at an aggregate level we are not underweight in WA and QLD Household lending book by state as at June 6 (%) Westpac Australia Banks 3 NSW/ACT Vic/Tas Qld SA/NT WA Source: ABA/Cannex data Business lending book by state as at June 6 (%) Westpac Australia Banks 3 NSW/ACT Vic/Tas Qld SA/NT WA Source: ABA/Cannex data 8

15 Well provisioned under A-IFRS Provisions for impairment losses on loans ($m), General Reserve for Credit Losses adjustment Individually Assessed Provisions, Collectively Assessed Provisions On transition to A-IFRS Westpac and all Australian banks reduced their collective provision levels Westpac remains well provisioned on both an absolute basis and relative to peers, AGAAP 3 Sep A-IFRS Oct A-IFRS 3 Mar 6 A-IFRS 3 Sep 6 Source: Westpac A-IFRS FY6 Total provisions¹ to RWA (%) Collective provisions for drawn and undrawn exposures¹ to RWA (%) Total provisions¹ to GLAA (%) Collective provisions¹ to GLAA (%) Collective provisions¹ to non-housing GLAA (%) Total provision coverage of impairment losses on loans written off (annualised, 3 year average) Includes General Reserve for Credit Losses (GRCL) adjustment (pre-tax) above A-IFRS provisioning levels ($7m) Credit quality Categories of stressed exposures as a % of total commitments (%).6%.%.%.%.8%.6%.%.%.% Watchlist & substandard 9 days past due well secured Impaired¹ 3 6 Total impairment provisions / Total impaired assets (%)¹ AGAAP A-IFRS 6 3 FY99 FY FY FY FY3 FY FY FY6 WBC ANZ CBA NAB H 6 coverage ratio is.x. Collectively assessed provisions² / Non-housing performing loans & acceptances (%)³ AGAAP A-IFRS FY99 FY FY FY FY3 FY FY FY6 WBC ANZ CBA NAB 3. Westpac s impaired assets for Sep have been restated to reflect APRA's prudential approach to the adoption of A-IFRS by ADI's, which came into effect July 6. Total impaired assets for Sep includes $7m of consumer accounts > 9 days past due but not well secured. Prior to 6, impaired provisions equals specific provisions.. Includes General Reserve for Credit Losses (GRCL) adjustment (pre-tax) above A-IFRS provisioning levels. WBC $7m, CBA $m, ANZ nil and NAB $93m. 3. Prior to 6 : General provisions / Non-housing performing loans & acceptances

16 Composition of portfolio On balance sheet lending - September 6 Business % Corporate % Other consumer % Margin Lending Cards Total Committed^ Business / Corporate exposure 7% 6% 6% business / corporate exposure exceed investment grade Total Committed Exposure^ by customer segment % 8% 6% % % % M ortgages 7% 8% 38% 8% 36% 9% % % 3% 3% 8% 3% 8% 9% 3% Personal Loans Mortgages represent 3% of total commitments and 7% of funded lending 8% 9% 3% 9% 9% 9% Sep- Sep-3 Sep- Sep- Sep-6 Corporate Business Consumer Mortgages Other Consumer* % % 3% % % % 8% 3% % 3% % 9% 7% 7% 6% 6% % % % % % % 6% 7% 8% 7%.9%.9%.6%.6%.7% Sep- Sep-3 Sep- Sep- Sep-6 <B+ BB+ to B+ BBB+ to BBB- A+ to A- AAA to AA- 3 ^Total committed exposures include outstanding facilities and un-drawn commitments that may give rise to lending risk or pre-settlement risk *Other consumer includes credit cards, personal lending and margin lending Australian mortgage portfolio Australian Mortgage Portfolio ($bn) % H Owner occupied Investment Equity Access H H3 H3 H H 3 H 36 H 39 H6 Proportion of total 3% 38% H6 Total Portfolio as at 3 September 6 Average LVR of portfolio Average LVR of new loans Low Doc Portfolio as at 3 September 6 Total portfolio Avg new lending per month Low Doc Lending $m $,83 $8 Maximum loan-to-value ratio of 8%, mortgage insurance required where LVR >6% Security restrictions on property size, type and location (e.g. CBD postcodes not acceptable) All loans require an internal inspection 68% 7% % of portfolio <3% <9% Primary applicant must have been self employed for minimum of years All standard credit policies (credit score, bureau, credit history, serviceability etc) are applied. 3. Based on valuation at drawdown

17 WIB portfolio ROE vs allocated equity ROE Structured Finance Foreign Exchange Structured Equities Indicative Key Points Financing acts as a drag on ROE Growth in Financial Markets (FX, FM Capital Markets, Debt Capital Markets), Equities and Transactional has high returns SCG still in early growth phase Transactional FM Capital Markets Debt Capital Markets Financing Specialised Capital Group Allocated Equity 33 BT key performance indicators Key performance indicators Total FUM Dec 6 $bn % Change Q 6 to Q 7 6 Total FUA $bn 9 Margin lending LUM $bn Life in-force premiums $8m GI gross premium revenue $69m 3* Note: * % increase on same period last year 3

18 BT - researcher support for performance Continued researcher upgrades and new ratings for Aussie Equities since Oct 6 Strong researcher support for international equities post AQR appointment International Equities Rater Rating van Eyk S&P Zenith A Stars Highly Recommended Change Previously not rated Upgraded from Hold New Rating Date Apr 6 Jun 6 Jun 6 Aussie Equities upgrades and new ratings since Oct 6 Fund Core Imputation Focus Ethical Rating Stars Stars BUY A Stars BUY Stars BUY Change Upgrade Upgrade New Rating Upgrade New Rating New Rating Upgrade New Rating Rater S&P S&P IWL van Eyk S&P IWL S&P IWL S&P s most recent sector review saw BT awarded the only Star rating in its Enhanced Cash categories (Feb 7) 3 BT - sustained investment performance over three years Performance and Quartile Ranking as at Dec 6 yr (%) Quartile yrs (% pa) Quartile 3 yrs (% pa) Quartile Core Australian Share Fund 6 7 Ethical Share Fund Imputation Fund* Smaller Companies Fund Balanced Domestic Fixed Interest 3 International Equities 6 Australian Property 3 3 Global Property 3 N/A 3 N/A 3 N/A Source: Intech, *Mercer 36

19 BT - insurance businesses - great potential Continued momentum in insurance business Benefiting from cross-sell initiatives across the group Life sales up 3% on same period last year Life Direct accounts for approximately /3 of Life Insurance Sales Sales General Insurance sales (volume) Life insurance (dollars) Q 6/7 6,86 $.8m % change on same period last year 7% 3% In Q, Life Direct increased new premiums by 73% and new policy numbers by 6% on same period in the previous year 37 BT - advice business showing improving results Improving turnover. Planner numbers increased 8% year on year Well placed to take advantage of superannuation opportunity Magnitude wealth advice channel: 9 new representatives and 3 new practices on board since October 6 3 more practices to transition in Q 7 Advice sales ($m) 3,,,,, H H H6 H6 Q Source: BT Magnitude FUA ($m) 8 6 May 6 Jun-6 Jul-6 Aug-6 Sep-6 Dec-6 Source: BT 38

20 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. The material contained in this presentation may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. The financial information contained in this presentation includes non-gaap financial measures. For a reconciliation of these measures to the most comparable GAAP measure, please refer to our 6 Reg G (US) financial statements filed with the Securities Exchange Commission and Australian Stock Exchange. 39