Credit Quality and Dynamic Provisioning Jim Coleman Chief Credit Officer 13 August 2001

Transcription

1 Credit Quality and Dynamic Provisioning Jim Coleman Chief Credit Officer 13 August

2 Disclaimer The material contained in the following presentation is intended to be general background information on Westpac Banking Corporation and its activities as at 13 August 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. 1

3 High quality loan book Total Westpac Group * Business / Institutional 45% Mortgages 48% Other consumer 7% * On balance sheet funded lending March

4 Mortgage delinquencies within expectations days Past Due Mortgage Loans % Sep 96 Sep 97 Sep 98 Sep 99 Sep 00 Jun 01 Sep-96 Dec-96 Mar-97 Jun-97 Sep-97 Dec-97 Mar-98 Jun-98 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 3

5 as well as other consumer delinquencies 90 days Past Due Other Consumer Loans % Sep 96 Sep 97 Sep 98 Sep 99 Sep 00 June 01 Sep-96 Dec-96 Mar-97 Jun-97 Sep-97 Dec-97 Mar-98 Jun-98 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 4

6 Other consumer portfolio Business / Institutional 45% Mortgages 48% Total Westpac Group * Other consumer 7% CreditLine 1.5% Motor Retail 1.0% Personal Loans 1.5% Cards 3.2% * On balance sheet funded lending March

7 Mostly investment grade portfolio exposures * Consumer Mortgages 30% 5% Other Consumer Total Westpac Group BB+ to B+ Business/ 15 % Institutional 65% BBB+ to BBB- 14 % Business/Institutional credit grade mix <B+ 1.3 % AAA to AA- 20 % A+ to A- 15 % * Total Committed Exposure - 31 March

8 Business banking - stressed loans trending down 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Watchlist & below Sep-97 Sep-98 Sep-99 Sep-00 1H % 1.6% 1.2% 0.8% 0.4% 0.0% Impaired Assets Sep-97 Sep-98 Sep-99 Sep-00 1H 01 % of total business banking commitments 7

9 Concentration risk 8

10 Limited single name exposure concentrations Credit exposures* to Top 10 corporations and NBFIs Rating (S&P 30 June) AAA A- A+ A+ A+ AA A AAA A A+ Corporates & NBFIs * Group Total Committed Exposure as a percentage of equity plus general provision - June

11 Stressed loans remain near historic lows % Exposure by credit grade - stressed loans* % of total commitments FY 96 FY 97 FY 98 FY 99 FY 00 1H 01 Watchlist Special mention Substandard 90 days past due well secured Impaired * Includes retail stressed loans 10

12 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Comparatively low level of impaired assets... CBA WBC Westpac BK WB Impaired Assets / Loans (International Peer Comparison *) NAB PNC ANZ TD WFC Australian Peers US Peers Canadian Peers FBF JPM/Chase RBC BMO CIBC BAC ONE BNS *Based on most recent published results 11

13 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% and comparatively low bad debt charges CBA Annualised Bad Debt Charge / Average Loans (International Peer Comparison *) Westpac WBC BK ANZ Australian Peers US Peers Canadian Peers NAB BMO PNC RBC CIBC BAC JPM/Chase * Based on most recent published results BNS WFC WB 12 ONE

14 Dynamic provisioning reviewed $m General Provision Actual APRA (minimum) 13

15 Dynamic provisioning impact of migration on a loan of $1m Credit Debit $ 120, ,000 80,000 60,000 40,000 20,000 0 (20,000) (40,000) (60,000) (80,000) BBB Impact of downgrades on P&L BBB to BB- BB- to B B to CCC CCC to BB 120, ,000 80,000 60,000 40,000 20,000 Two Year Loan at 40%* Loss Given Default 0 Cumulative impact on DP Pool BBB BB- B CCC BB * Illustrative only 14

16 Provisioning surplus 15

17 Prudent provisioning buffer maintained $m Actual provisions - March ,565 Total dynamic provision required 1,374 Buffer for model risk and judgement

18 Westpac is well provisioned 17

19 Comparatively well provisioned 300% 250% 200% 150% 100% 50% 0% BNS BMO RBC Total Provisions / Impaired Assets (International Peer Comparison *) CIBC BAC TD ONE JPM/Chase ANZ NAB PNC Westpac WBC CBA FBF WB WFC BK Australian Peers US Peers Canadian Peers * Based on most recent published results 18

20 Asset quality summary Low risk asset profile Generates a relatively low level of problem loans Strong risk management controls, and Low net bad debt expense compared to its peers. 19

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