Fixed Income Investor Presentation Financial Year 2015

Transcription

1 Fixed Income Investor Presentation Financial Year 15 November 15 Data as at and for the year ending 3 September 15 unless otherwise stated

2 Disclaimer The material contained in this presentation is intended to be general background information on Westpac Banking Corporation ( Westpac ) and its activities. It does not constitute a prospectus, offering memorandum or offer of securities. It should not be reproduced, distributed or transmitted to any person without the consent of Westpac and is not intended for distribution in any jurisdiction in which such distribution would be contrary to local law or regulation. This presentation is directed only at persons who (i) have professional experience in matters relating to investments; or (ii) are persons falling within Article 9()(a) to (d) ( high net worth companies, unincorporated associations etc. ) of the Financial Services and Markets Act (Financial Promotion) Order 1 (as amended); or (iii) are outside the United Kingdom (all such persons together being referred to as relevant persons ). This document must not be acted on or relied on by persons who are not relevant persons. 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. All amounts are in Australian dollars unless otherwise indicated. Financial information in this presentation may be presented on a cash earnings basis. Cash earnings is a non-gaap measure. Refer to Westpac s 15 Full Year Financial Results (incorporating the requirements of Appendix E) for the year ended 3 September 15 available at for details of the basis of preparation of cash earnings. Refer to Appendix 1 for a reconciliation of reported net profit to cash earnings. Information contained in or otherwise accessible through the websites mentioned in this presentation does not form part of the presentation unless we specifically state that the information is incorporated by reference thereby forming part of the presentation. All references in this presentation to websites are inactive textual references and are for information only. Disclosure regarding forward-looking statements This presentation contains statements that constitute forward-looking statements within the meaning of Section 7A of the U.S. Securities Act of 133 and Section 1E of the US Securities Exchange Act of 193. Forward-looking statements are statements about matters that are not historical facts. Forward-looking statements appear in a number of places in this presentation and include statements regarding our intent, belief or current expectations with respect to our business and operations, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions, financial support to certain borrowers, indicative drivers, forecasted economic indicators and performance metric outcomes. We use words such as will, may, expect, 'indicative', intend, seek, would, should, could, continue, plan, probability, risk, forecast, likely, estimate, anticipate, believe, or other similar words to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond our control and have been made based upon management s expectations and beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will be in accordance with our expectations or that the effect of future developments on us will be those anticipated. Should one or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results could differ materially from the expectations described in this presentation. Factors that may impact the forward-looking statements made include, but are not limited to, those described in the section entitled Risk factors in Westpac s 15 Interim Financial Results available at When relying on forward-looking statements to make decisions with respect to us, investors and others should carefully consider such factors and other uncertainties and events. We are under no obligation, and do not intend, to update any forwardlooking statements contained in this presentation, whether as a result of new information, future events or otherwise, after the date of this presentation. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

3 Contents Highlights Highlights for Westpac and overview of recent changes to capital and home lending regulation Australian Home Lending 1 Westpac s Australian mortgage portfolio statistics and performance Economic data on the Australian home lending market Economics 9 Key forecasts and economic data on the Australian and New Zealand economies Additional Information 3 Includes additional information on Westpac s capital and asset quality Appendices 59 Earnings and capital reconciliations and relevant definitions 3 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

4 Full Year 15 Highlights All comparisons to Full Year 1 unless otherwise stated. Highlights Rated AA- / Aa / AA- with a Stable outlook $. billion in capital initiatives in calendar 15 Asset quality remains a highlight Strong financial performance from Australian retail banking divisions Financials Statutory net profit after tax $8.bn, up % Cash earnings 1 of $7.8bn, up 3% Return on average ordinary equity 1.%, down bps Balance sheet CET1 ratio 9.5% APRA Basel III basis; 13.% Basel III internationally comparable basis Will be further strengthened following completion of the A$3.5 billion Entitlement Offer Adds approximately 1bps to Westpac s CET1 capital ratio Internationally comparable pro forma CET1 capital ratio of approximately 1.% placing Westpac within the top quartile of international peers Stable funding ratio 3 8% LCR 11% Gross impaired loans $1.9bn, 19% lower Group mortgage +9 days delinquencies.%, down 3bps 1 Cash earnings is a non-gaap measure. Refer to Appendix 1 for a reconciliation of reported net profit to cash earnings. 3 The basis of the internationally comparable CET1 capital ratio aligns with the APRA study titled International capital comparison study", dated 13 July 15. For more details on adjustments made refer Appendix 3. 3 Stable Funding Ratio is calculated on the basis of customer deposits plus wholesale funding with residual maturity greater than 1 months plus equity plus securitisation, as a proportion of total funding. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

5 Full Year 15 net profit after tax up % FY15 Reported Results Financial results (A$m) FY15 % Change FY15 FY1 Net profit after tax 8,1 % Cash earnings 1 7,8 3% Reported NPAT ($m) Net interest margin (%) 8,1 7,51, ,93 Net operating income 1, 9% Expenses 9,73 11% Impairment charges 753 1% Financial metrics FY1 FY13 FY1 FY15 1H1 H1 1H13 H13 1H1 H1 1H15 H15 Return on average ordinary equity 1.% (bps) Earnings per share 5.3c 5% Net interest margin.9% - Expense to income ratio 3.8% 9bps Balance sheet and asset quality Impairment charges and stressed exposures (bps) 1 8 Impairment charge (lhs) Stressed exposures to TCE (rhs) 5 3 Net loans $3bn 7% Customer deposits $7bn % Total impaired loans to total loans 3bps (1bps) Net write-offs to average loans annualised 18bps (5bps) H11 H11 1H1 H1 1H13 H13 1H1 H1 1H H Cash earnings is a non-gaap measure. Refer to Appendix 1 for a reconciliation of reported net profit to cash earnings. Pre-8 does not include St.George. 8 and 9 are pro forma including St.George for the entire period with 1H9 ASX Profit Announcement providing details of pro forma adjustments. 5 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

6 Key balance sheet ratios improved All comparisons to Full Year 1 unless otherwise stated. Key balance sheet ratios Westpac key balance sheet ratios (%) 8% Stable Funding Ratio, up 8bps Well above 75% internal target 59% of total funding from customer deposits Equity 7% Securitisation and wholesale funding >1 year 17% Short term funding 1% - more than halved since 8 11% LCR, up from 13% 1 Comfortably above 1% regulatory minimum LCR introduced for Australian banks 1 January 15 8 Stable Funding Ratio >75 Target (internal) 11 LCR Regulatory minimum from 1 Jan 15 CET1 capital ratio (APRA Basel III) Regulatory minimum + buffers from 1 Jan CET1 (International comparison) 9.5% CET1 (APRA Basel III basis), up 53bps 13.% CET1 on an internationally comparable basis $3.5bn entitlement offer announced 1 October will add approx. 1bps to the 3 September 15 CET1 ratio Places Westpac CET1 capital ratio within the top quartile of banks globally 99bps Stressed exposures, down 5bps Down 5bps since 3 September 1 Strong provisions and coverage Australian mortgage +9 days delinquencies 5bps, down bps Stressed exposures as a % of TCE 3 (%) Impaired days past due and not impaired Watchlist & substandard FY7 FY8 FY9 FY1 FY11 1H1 H1 1H13 H13 1H1 H1 1H15 H15 1 Calculated on a pro forma basis. Analysis aligns with the APRA study entitled, International Capital Comparison Study released 13 July 15. For more information refer to Appendix 3. 3 TCE is Total Committed Exposure. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

7 Portfolio well diversified across industries Exposures at default 1 by sector ($bn) Mining portfolio 1H15 H15 Finance & insurance Property Wholesale & Retail Trade Manufacturing Government admin. & defence Property & business services Services Agriculture, forestry & fishing 3 Total committed exposures (TCE) $11.7bn $1.bn* Lending $7.bn $7.1bn Mining as a % of Group TCE 1.8% 1.5%* Average risk grade 1 BBB equivalent BB equivalent % of portfolio graded as stressed 1 3.7% 1.8% % of portfolio in impaired.97%.8% *Increase in exposure partly due to reclassification of certain conglomerate customers to mining in H15 Mining portfolio by sector at 3 September 15 (%) Transport & storage Utilities Construction Accommodation, cafes & restaurants Sep-1 Mar-15 Sep Oil and gas Iron ore Other metal ore Coal Mining Other 19 5 Mining services Other Includes impaired exposures. Exposures at default represents an estimate of the amount of committed exposure expected to be drawn by the customer at the time of default. Chart excludes consumer lending. Finance and insurance includes banks, non-banks, insurance companies and other firms providing services to the finance and insurance sectors. 3 Property includes both residential and non-residential property investors and developers, and excludes real estate agents. Construction includes building and non-building construction, and industries serving the construction sector. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

8 Portfolio stress remains at low levels Stressed exposures by industry ($bn) Stressed exposures by industry (%).5. Sep-1 Mar-15 Sep Property & business services Wholesale & Retail Trade Consumer lending Agriculture, forestry & fishing Manufacturing Transport & storage Accommodation, cafes Construction & restaurants Mining Finance & insurance Services Utilities Other 1. New and increased gross impaired assets ($m) Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-1 Sep-1 Mar-15 Sep ,18 1,798 1,78 1,519 1,33 1, ,19,19.5. Consumer lending Property & business services Manufacturing Wholesale & Retail Trade Agriculture, forestry & fishing Transport & storage Construction Accommodation, cafes & restaurants Services Mining Other Utilities Finance & insurance Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow 8

9 High levels of borrower equity support Westpac s Australian mortgage portfolio Australian housing portfolio H1 balance 1H15 balance H15 balance H15 flow 1 Total portfolio ($bn) Owner-occupied (%) Investment property loans (%) Portfolio loan/line of credit (%) Variable rate / Fixed rate (%) 78 / 78 / 8 / 9 / 1 Low Doc (%) Proprietary channel (%) Australian housing loan-to-value ratios (LVRs) 3, (%) H15 drawdowns LVR at origination Portfolio LVR at origination Portfolio dynamic LVR 9% of portfolio with dynamic LVR 8% First Home Buyer (%) Mortgage insured (%) <= <=7 7<=8 8<=9 9<= H1 1H15 H15 Average LVR at origination 3 (%) Australian mortgages delinquencies (%) Average dynamic 3, LVR (%) 3 3 Average LVR of new loans 3,5 (%) Average loan size ($ ) 9 35 Customers ahead on repayments, including offset accounts 3, (%) Actual mortgage losses (net of insurance) 7 ($m) Actual mortgage loss rate annualised (bps) Mar-9 Sep-9 9+ Past Due Total 9+ First Home Buyer 9+ Investor 3+ Past Due Mar-1 Sep-1 Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-1 Sep-1 Mar-15 Sep-15 1 Flow is all new mortgage originations settled during the month period ended 3 September 15 and includes RAMS. Proprietary channel restated to include referral business. 3 Excludes RAMS. Dynamic LVR represents the loanto-value ratio taking into account the current outstanding loan balance, changes in security value and other loan adjustments. Property valuation source Australian Property Monitors. 5 Average LVR of new loans is based on rolling month window. Customer loans ahead on payments exclude equity/line of credit products as there are no scheduled principal payments. Includes mortgage offset account balances. Behind is more than 3 days past due. On time includes up to 3 days past due. 7 Mortgage insurance claims H15 $3m (1H15 $1m, H1 $m, 1H1 $3m). 9 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

10 Further improving home lending standards Reinforcing sound lending standards Westpac has tightened some mortgage underwriting policies to further strengthen the quality of new lending and align with APRA s guidelines on sound lending practices Notable changes to Westpac mortgage originations in FY15 Minimum floor rate increased from.8% to 7.5% Buffer rate increased from 1.85% to at least.5% Westpac has also introduced differential pricing for owner occupied and investor loans. In response to pricing changes, there has been a significant level of switching between investment property loans (IPLs) and owner occupied loans as borrowers correctly classify the purpose of their loan. This trend is expected to continue Serviceability Tightened policy on assessment of living expenses and income verification for all applications Discounting of rental income, annuity and pension income increased for certain loans Investor / Owner Occupied portfolio mix changing Investment property lending Growth reduced below 1% p.a., in line with APRA industry benchmark Maximum LVR for stand alone investment property loans capped.5 Investor share of housing portfolio 1 (%) * 38* Pricing Variable interest rates on investment property loans increased by.7% (Westpac brand) and.5% (St.George, Bank of Melbourne, BankSA brands) Fixed rates on residential investment property loans increased by up to.3% Prerestatement Prerestatement Westpac Peer 1 Peer Peer 3 *% re-stated in H15 following reclassification of previously reported data for reporting purposes Mortgage insurance Mortgage insurance for new originations >9% LVR moved to Arch Capital from Genworth Australia and QBE LMI 1 Source: Westpac, APRA Monthly Banking Stats August Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

11 Increase to Australian mortgage risk weights Changes to RWA calculations for Australian residential mortgages Global mortgage risk weights 1 (%) On July 15 APRA announced a change to how risk weighted assets (RWA) for Australian residential mortgages would be determined for ADIs using the internal ratings based (IRB) approach to credit risk This change will mean that the average risk weight for Australian residential mortgages will increase from approximately 1% to at least 5% Change in the correlation factor will lead to an increase in risk weights for mortgages across all risk bands The change will be effective from 1 July 1 If applied at 3 September 15, this change would add approximately $bn to RWA and reduce the CET1 capital ratio by approximately 11bps Japan Australia (from 1 July 1) UK Australia (current) France Switzerland Singapore Nordics Canada 9 1 IRB (inc Insured Mortgages) IRB 1 Source: Citi Research 3 March 15. Based on Citi coverage stocks. Canadian bank IRB average includes guaranteed mortgages (largest portion of portfolio) at an estimated % risk weight 11 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

12 Capital materially strengthened $.bn in CET1 capital initiatives in calendar 15 $.bn from 1H15 DRP and partial DRP underwrite (complete) $.5bn from the partial sale of BTIM (complete) $3.5bn from Entitlement Offer CET1 capital ratio (%) (APRA basis) (1.1) 9. The $.bn of capital adds around 17bps to CET1 capital ratio On a pro forma basis, after allowing for the Entitlement Offer and the impact of changes to mortgage RWA (effective 1 July 1), Westpac s CET1 capital ratio as at 3 September 15 would be above the Group s preferred CET1 capital ratio range of 8.75% - 9.5% Pro forma internationally comparable 1 CET1 capital ratio of 1.% as at 3 September 15 Places Westpac within top quartile of international peers Mar-15 1H15 DRP + DRP partial underwrite Partial sale of BTIM Sep-15 Entitlement Offer Sep-15 with Entitlement Offer Impact of Mortgage RWA Pro forma CET1 capital ratio (%) (APRA basis) Mar-1 Jun-1 Sep-1 Dec-1 Mar-13 Jun-13 Sep-13 Dec-13 Mar-1 Jun-1 Sep-1 Dec-1 Mar Jun-15 Sep-15 Regulatory capital ratios (%) Jun-1 Mar-15 Sep-15 Pro forma CET1 capital ratio Additional Tier 1 capital Tier 1 capital ratio Tier capital Total regulatory capital ratio Internationally comparable 1 CET1 capital ratio The internationally comparable CET1 capital ratio aligns with the APRA study titled International capital comparison study", of 13 July 15. For more details on adjustments refer to Appendix 3. Pro forma reflects the impact of the Entitlement Offer and changes to the calculation of RWA for Australian residential mortgages, if they had been in force on 3 Sep Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

13 13 Basel III CET1 capital ratios global comparison 1 1.% 13.% APRA top quartile 1.% Nordea UBS CBA pro forma WBC pro forma Intesa Sanpaolo Lloyds NAB WBC ANZ ING Group RBS ICBC China Construct. Bank HSBC Sumitomo Mitsui Deutsche Bank Standard Chartered Citi Barclays JPMorgan Mitsubishi UFJ BNP Paribas Bank of Comm Societe Generale Bank of China Wells Fargo Commerzbank China Merchants Bank Unicredit Bank of America BBVA Scotiabank Credit Agricole SA Credit Suisse Royal Bank of Canada Toronto Dominion Santander Mizuho FG Agri. Bank of China Peer group comprises listed commercial banks with total assets in excess of A$7 billion and which have disclosed fully implemented Basel III ratios or provided sufficient disclosure for an estimate. Based on company reports and investor presentations. 1 Based on CET1 ratios as at 3 June 15 unless otherwise stated, assuming Basel III capital reforms fully implemented. Deduction for accrued expected future dividends added back for comparability. 3 As at 3 September 15. Interim profit not included in CET1 capital has been added back. 5 As at 31 July 15. Figure, APRA study titled, "International capital comparison study", dated 13 July 15. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

14 Wholesale term issuance well diversified Benefit from broad product capabilities FY15 new term issuance composition 1 (%) Australian covered bond issuance 5 By type By tenor 5,3 3 1 By currency Remaining capacity (8% cap & over-collateralisation) ($bn) Outstanding ($bn) 7 7 Senior Unsecured RMBS Hybrid Covered Bonds ABS Subordinated Debt 1 Year Years 3 Years Years 5 Years >5 years AUD EUR Other USD GBP 1 18 Peer 1 Peer Peer 3 Westpac Term debt issuance and maturity profile 1,, ($bn) Covered Bond Hybrid Senior Sub Debt Issuance 31 Maturities FY11 FY1 FY13 FY1 FY15 FY1 FY17 FY18 FY19 FY >FY 1 Based on residual maturity and FX spot currency translation. Includes all debt issuance with contractual maturity greater than 37 days excluding US Commercial Paper and Yankee Certificates of Deposit. Contractual maturity date for hybrids and callable subordinated instruments is the first scheduled conversion date or call date for the purposes of this disclosure. 3 Tenor excludes RMBS and ABS. Perpetual subdebt has been included in >FY maturity bucket. Maturities exclude securitisation amortisation. 5 Sources: Westpac, APRA Banking Statistics August Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

15 Australian economic snapshot A diverse and flexible economy Australian economy key statistics.% cash rate The RBA left the cash rate unchanged at its October meeting, but RBA s forecasts imply a slight easing bias.% GDP Australian economy continues to grow, albeit below longer-term averages, despite sharp fall in terms of trade 1.5% inflation Remains well below the RBA s target range of % to 3% US$.71 = AU$1 The lower Australian dollar is helping to cushion the fall in commodity prices. Westpac Economics forecasts a year end target for the AUD of USD 8c with downside risk.% unemployment Forecast to lift slightly to.3% by Q15 by Westpac Economics Australia s economy is diversified and flexible Sector contribution to GDP (%) 1 Mining 5 Manufacturing Construction 15 9 Transport, Utilities Wholesale, Retail 7 Household services Education & Health Government 8 Finance Property, Business services Rural Communications Sources: ABS, Westpac Economics. 1 Excludes ownership of dwellings and taxes less subsidies. Conditions diverge across the housing market Australia s housing markets are showing increasingly divergent performances Strong growth is confined to Sydney, with robust gains in Melbourne, subdued growth in Brisbane and slight declines in Perth Affordability measures based on a mortgage repayment basis are around long run levels nationally % Sources: ABS, CoreLogic RP Data, APM, Residex, Westpac Economics. 3 1 Australian employment by sector 1/15 (%) 9 1 Mining Manufacturing Construction Transport, Utilities Wholesale, Retail Household services Health, Social Assistance Education Public Administration Finance Business services Agriculture * mth annualised growth rates, all dwellings, composite of all measures, seasonally adjusted -1 Sydney Melbourne Brisbane Perth - Oct-9-3 Oct-1 Oct-11 Oct-1 Oct-13 Oct-1 Oct Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

16 Australian Home Lending November 15 Westpac Banking Corporation ABN Data as at and for the year ending 3 September 15 unless otherwise stated

17 Australian mortgage market Sound fundamentals underpin asset quality Australian mortgage market Full recourse Banks in Australia have full recourse to the borrower s mortgaged property, other assets and future earnings Banks can and do pursue defaulting borrowers for losses Reduces speculative buying behaviour Variable rate Majority of housing loans are variable rate Fixed rate loans for short periods of time in most cases, 3 to 5 years Fixed rate borrowers generally incur a break fee if they choose to refinance within the fixed period Interest rate buffers built into loan serviceability tests at application Interest-only loans assessed on a Principal & Interest basis Interest payments on primary residence are not tax deductible, provides incentive to pay off mortgage APRA, one national regulator Strict prudential supervision provided by one national regulator, APRA Sound underwriting and origination requirements National Consumer Protection Bill replaced the state-based Uniform Consumer Credit Code (UCCC) with an enhanced single Federal consumer credit regulation For mortgage insured loans, mortgage insurance covers the entire loan Low arrears Australian +9 days prime arrears 7bps at June 15 Low levels on an absolute basis and relative to other major economies Australian housing credit market share 1 (% of financial system) 78% share The Australian major banks have a 78% share of housing credit 1 Major banks have a lower share of low doc market, with low flow in this segment over recent years 9+ day prime arrears by country (%) Australia UK US Netherlands Jun-3 Dec-3 Jun- Dec- Jun-5 Dec-5 Jun- Dec- Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Jun-1 Dec-1 Jun-11 Dec-11 Jun-1 Dec-1 Jun-13 Dec-13 Jun-1 Dec-1 Jun Westpac NAB 1 Other banks 3 CBA ANZ 5 Non-banks 1 Source: APRA Banking Statistics June 15. Source: S&P and Bloomberg. 17 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

18 Westpac Australian mortgage delinquencies at low levels Australian mortgage portfolio Sep-1 Mar-15 Sep days delinquencies (bps) days delinquencies (bps) days delinquencies investment property loans (bps) Properties in possession (#) Properties in possession remain <bps of the portfolio. The increase over FY15 has been mainly in Qld and WA Review of treatment of hardship is expected to see a rise in reported delinquencies in future periods Westpac Australian housing portfolio and system by State (%) Australian mortgage loss rates (bps) Portfolio losses of $7m in FY15 represent a loss rate of bps (net of insurance claims 7 ) Loss rates remain very low by international standards due to supportive economic environment, sound underwriting standards, high levels of borrower equity, mortgage insurance and H15 total H15 IPL Australian active collections mortgages strategiesdelinquencies portfolio portfolio by state (%) H15 Owner Occ. portfolio Australian mortgage 9+ days delinquencies by state (%) total portfolio (last recession) Australian banking system Westpac Group portfolio H15 Westpac Group drawdowns ALL NSW/ACT VIC/TAS QLD WA SA/NT NSW & ACT VIC & TAS QLD WA SA & NT Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-1 Sep-1 Mar-15 Sep-15 1 Source ABA Cannex August Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

19 Westpac mortgage customers continuing to repay ahead of schedule Borrower repayments Australian mortgage customers continue to display a cautious approach to debt levels, taking advantage of historically low mortgage rates to pay down debt and build buffers Including mortgage offset account balances, 7% of customers are ahead of scheduled payments, with 5% of these being more than years ahead Mortgage offset account balances up $3.7bn or 1% (up % FY15/FY1) to $3.5bn Credit decisions across all brands are made by the Westpac Group, regardless of the origination channel Australian home loan customers ahead on repayments 1, (%) Sep-1 Mar-15 Sep % ahead on repayments Behind On Time < 1 Month < 1 Year < Years > Years Australian mortgage lending volumes ($bn) Australian mortgage offset account balances ($bn) ( 5.) (8.5) H1 New lending Run-off 1H15 New lending Run-off H15 FY9 FY1 FY11 1H1 H1 1H13 H13 1H1 H1 1H15 H15 1 Excludes RAMS. Customer loans ahead on payments exclude equity loans/line of credit products as there are no scheduled principal payments. Includes mortgage offset account balances. Behind is more than 3 days past due. On time includes up to 3 days past due. 19 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

20 Australian investment property portfolio Investment property loans (IPLs) are.5% of Westpac s Australian mortgage portfolio, down from.3% Compared to owner occupied applicants, IPL applicants are on average older (75% over 35 years), have higher incomes and higher credit scores 87% of IPLs originated at or below 8% LVR Majority of IPLs are interest only, however the repayment profile closely tracks the profile of the principal and interest portfolio 5% of IPL customers are ahead on repayments IPL +9 days delinquencies 31bps continue to outperform the total portfolio average (5bps) IPL portfolio losses represent an annualised loss rate of bps (net of insurance claims 1 ), in line with total portfolio losses of bps Self-managed Superannuation Fund balances are a very small part of the portfolio, at 1% of Australian mortgage balances Strong origination standards IPLs 1 are full recourse Loan serviceability assessments include an interest rate buffer, minimum assessment rate, adequate surplus test and discounts to certain forms of income (e.g. dividends, rental income) Maximum LVR for stand alone investment property loans capped at 8% Interest only loans are assessed on a principal & interest basis Specific credit policies apply to IPLs to assist risk mitigation, including Holiday apartments subject to tighter acceptance requirements Additional LVR restrictions apply to single industry towns Minimum property size and location restrictions apply Restrictions on non-resident lending include lower maximum LVR and discounts to foreign income recognition High levels of equity in IPL portfolio Loan-to-value ratio at origination (%) Applicants by gross income band (%) H15 Average LVR at origination (%) 7 Average dynamic,3, LVR (%) Owner Occupied IPL Owner Occupied IPL Average LVR of new loans,5 (%) 8 5 Average loan size ($ ) 97 Customers ahead on repayments, including offset accounts (%) <=5 5<=75 75<=1 1<=15 15<=15 15<= <=5 5<=1m 1m+ 1 Self Managed Super Fund (SMSF) IPLs are limited recourse but do require member guarantees. Excludes RAMS. 3 Dynamic LVR represents the loan-to-value ratio taking into account the current outstanding loan balance, changes in security value and other loan adjustments. Property valuation source Australian Property Monitors. 5 Average LVR of new loans is based on rolling month window. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

21 Lenders mortgage insurance Lenders mortgage insurance (LMI) provides benefits to the Westpac Group Risk transfer / loss mitigation Improvement in the quality of risk acceptance via the additional layer of independent review provided by the mortgage insurers Mortgages are insured through Westpac s captive mortgage insurer, Westpac Lenders Mortgage Insurance (WLMI), and through external LMI providers, based on risk profile WLMI provides the Westpac Group with an increased return on the mortgages it insures through the capture of underwriting profit WLMI is well capitalised (separate from bank capital) and subject to APRA regulation. Capitalised at 1.5x PCR 1 Scenarios indicate sufficient capital to fund claims arising from events of severe stress estimated losses for WLMI from a 1 in year event are $135m (net of re-insurance recoveries). This is $1m lower compared to 1H15 in line with reductions in WLMI s portfolio Lenders mortgage insurance LVR Band LVR 8% Low Doc LVR % Insurance Not required Australian mortgage portfolio (%) LVR >8% to 9% Low Doc LVR >% to 8% Generally insured through captive insurer, WLMI. LMI not required for certain approved borrower groups. LMI required for all Low Doc borrowers where LVR >% to 8% Reinsurance arrangements: % risk retained by WLMI % risk transferred through quota share arrangements with Arch Capital Group Limited, Tokio Millennium Re, Endurance Re, Everest Re, Trans Re and AWAC Not insured Insured by third parties Insured by WLMI 3 Insurance statistics Insurance claims ($m) WLMI loss ratio (%) Gross written premiums ($m) LVR >9% Insured externally through Arch Capital Group Limited for all new business effective from 18 May 15 Transitional arrangements are currently in place with LMI policies initially written by WLMI and then fully reinsured with Arch Capital Prior to 18 May 15, external insurance provided by QBE (Westpac brand) and Genworth (St George and RAMS brands). Existing LMI policies remain in force H1 1H15 H Prudential Capital Requirement (PCR) determined by APRA. For all new business effective from 1 October 1. 3 Insured coverage is net of quota share. Loss ratio is claims over the total of earned premium plus reinsurance plus exchange commission. 1 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

22 Mortgage portfolio stress testing outcomes Westpac regularly conducts a range of portfolio stress tests as part of its regulatory and risk management activities The Australian mortgage portfolio stress testing scenario presented represents a severe recession and assumes that significant reductions in consumer spending and business investment lead to six consecutive quarters of negative GDP growth. This results in a material increase in unemployment and nationwide falls in property and other asset prices Estimated Australian housing portfolio losses under these stressed conditions are manageable and within the Group s risk appetite and capital base Cumulative total losses of $.3bn over three years for the uninsured portfolio (1H15: $.3bn) Cumulative claims on LMI, both WLMI and external insurers, of $98m over the three years (1H15: $879m) Cumulative loss rates have decreased (bps compared to 5bps 1H15) mainly due to a decrease in dynamic LVRs and continued calibration of our stress testing methodology. Cumulative losses however are little changed as lower cumulative loss rates have been offset by the increase in the portfolio size WLMI separately conducts stress testing to test the sufficiency of its capital position to cover mortgage claims arising from a stressed mortgage environment Preferred capital ranges incorporate buffers at the Westpac Group level that also consider the combined impact on the mortgage portfolio and WLMI of severe stress scenarios Australian mortgage portfolio stress testing as at 3 September 15 Key assumptions Stressed scenario Current Year 1 Year Year 3 Portfolio size ($bn) Unemployment rate (%) Interest rates (cash rate, %) House prices (% change cumulative) (13.) (.) (.) Annual GDP growth (%). (3.9) (.) 1.7 Stressed loss outcomes (net of LMI recoveries) 1 $ million ,3 39 Basis points Assumes 3% of LMI claims will be rejected in a stressed scenario. Stressed loss rates are calculated as a percentage of mortgage exposure at default. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

23 Australian housing market Sound fundamentals Australian housing market continues to face a significant structural undersupply Population versus dwelling stock (annual average change ) Persistently low levels of new building over the last decade has combined with a strong migration-led burst in population growth over the last 15 years population dwelling stock* Australia s annual population increase lifted from around, a year in the 195s-199s to over 35, in the last years. Construction has been adding about 13, new dwellings net of demolitions over the same time * net of demolitions implied by Census data; Westpac estimates More recently, new construction has increased to a relatively high level with net additions expected to track around 17, dwellings a year. Population growth has also moderated although annual gains remain around 35, The mix will see pockets of excess dwelling stock, although pre-existing shortages remain significant, particularly in Sydney 3 35 Residential rental vacancy rates (%) % Sources: ABS, Westpac Economics. Australia Sydney Melbourne investor housing boom Sep-85 Sep-9 Sep-95 Sep- Sep-5 Sep-1 Sep Sources: REIA, Westpac Economics s 19s 197s 198s 199s s last years 13 3 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

24 House price growth and activity Some moderation, wide range of conditions Price growth has picked up in recent months, accelerating to 11.9%yr nationally in September. Activity remains mixed across geographies and market segments. Growth rates continue to vary widely between capital cities 1 Sydney up 1.7%yr; average since 7:.7% Melbourne up 1.%yr; average since 7: 5.% Brisbane up.5%yr, average since 7: 1.% Perth down.9%yr, average since 7:.8% Housing credit growth is currently holding steady at 7.5%yr, with net credit growth still being tempered by high levels of repayment. Net of funds accumulating in offset accounts, growth is closer to % (RBA estimate) Capital city dwelling prices % 3 1 * mth annualised growth rates, all dwellings, composite of all measures, seasonally adjusted -1 Sydney Melbourne Brisbane Perth - Oct-9 Oct-1 Oct-11 Oct-1 Oct-13 Oct-1 Oct-15 1 Sources: ABS, Westpac Economics. Sources: ABS, CoreLogic RP Data, APM, Residex, Westpac Economics. Sydney dwelling prices vs rest of Australia (ratio of weighted medians) % Sydney ratio to other major capital cities.8 Sep-8 Sep-85 Sep-9 Sep-95 Sep- Sep-5 Sep-1 Sep-15 Sources: ABS, CoreLogic RP Data, APM, Residex, Westpac Economics. Housing credit momentum mth %change, annualised Sources: RBA, Westpac Economics. Total Owner-occupier Investor Aug-1 Aug-3 Aug-5 Aug-7 Aug-9 Aug-11 Aug-13 Aug-15 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

25 Investment property lending remains buoyant Investor activity has been buoyant, responding to low vacancy rates, solid rental yields, and low interest rates, including low fixed rates offering attractive opportunities to hedge interest rate risk Gross rental yields are attractive compared to returns on other asset classes, many of which exhibit greater volatility New investor loans currently account for almost % of the value of total housing loan approvals while that is high, activity is coming from a relatively low starting point. Regulators have moved to contain growth in this sector and signs are that it has been effective Total market turnover remains below recent peaks and well below the levels seen in -3, when activity was clearly overheating (high levels of turnover are often associated with increased speculative activity) Dwelling turnover thousands 18 1 *quarterly Sep-95 Sep-99 Sep-3 Sep-7 Sep-11 Sep-15 Sources: CoreLogic RP Data, ABS, FIRB, Westpac Economics estimated investor purchases all dwellings units FIRB approvals Housing finance approvals: value of housing finance ($bn/mth) $bn/mth 'upgraders', ex-refinancing investor finance first home buyers Aug-95 Aug- Aug-5 Aug-1 Aug-15 Sources: ABS, Westpac Economics. Investor housing yields vs shares, deposits 1 8 %pa rental yield* ASX dividend yield 1yr term deposit *gross yield, median rent on bdrm unit as % of median unit price Sep-95 Sep-99 Sep-3 Sep-7 Sep-11 Sep-15 Sources: REIA, RBA, Westpac Economics. 5 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

26 Australian households A cautious approach to household finances Australian households: debt to income ratio (%) % * Westpac estimates prior to 1988 Dec-8 Dec-85 total (gross) debt total debt net of offset accounts total debt net of deposits* trend since Jun-7 Dec-9 Dec-95 Sources: ABS, RBA, Westpac Economics. Dec- Housing affordability: all dwellings Dec-5 Dec-1 Dec-15 includes funds held in mortgage offset accounts 5pts since peak Consumer survey: Wisest place for savings % shares real estate deposits pay down debt Sep-97 Sep- Sep-3 Sep- Sep-9 Sep-1 Sep-15 Sources: Melbourne Institute, Westpac Economics. Household savings rate (% income) % % % income required to service mortgage of 75% median dwelling, all regions long run avg 1yr avg deteriorate improve if mortgage rate was 1% higher % income estimates based on capital cities prior to Sep-8 Sep-85 Sep-9 Sep-95 Sep- Sep-5 Sep-1 Sep-15 Sources: CoreLogic RP Data, Residex, Westpac Economics. -3 Jun-91 Jun-95 Jun-99 Jun-3 Jun-7 Jun-11 Jun-15 Sources: ABS, Westpac Economics. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

27 Areas of interest The Sydney housing market % live in Sydney Australia s population of 3. million is concentrated in the capital cities. Approximately % or.8 million people live in Sydney. A further 19% live in Melbourne, with Brisbane, Perth and Adelaide accounting for 1%, 9% and % of Australia s population respectively 1. Compare that to the United States, where just 3% of the population live in the country s largest city, New York City. In the US, there are 95 cities with a population of over 1, people. With the NSW economy currently outperforming all other states, it s capital city, Sydney, is seeing strong housing demand. Geographic distribution of Australia s population by capital city 1 8k new Sydneysiders Sydney s population has grown strongly over the last 1 years, supported by natural increases and strong migration inflows. In 1, Sydney s population grew by almost %, or 8, people. This compares to the San Francisco area which added 11,331 people, New York, which added 5,57 people, and Los Angeles, which added 91,85 people. Note that the existing populations in these US cities are two to five times larger than Sydney. Further, greater Sydney's population is expected to grow from around.8 million today to approximately million by Sydney metropolitan area historical and projected population 1 new dwelling for every new people Sydney has faced a significant structural undersupply of dwellings as new building has failed to keep pace with the rising population. At its low in 8/9, Sydney was building only one new dwelling for every six extra people. Since that time, dwelling construction has picked up but is unlikely to meet new and backlogged demand for several years, although some pockets of oversupply are likely to emerge. Meanwhile, land constraints are becoming a limiting factor. Stocks of unsold vacant lots in Sydney suitable for development are low and greenfield land releases have not kept pace with recent demand. Sydney population growth vs dwelling approvals % 19% 1% 9% % 3% % % 1% 1% Sydney Melbourne Brisbane Perth Adelaide Gold Coast (Qld) Newcastle (NSW) Canberra Wollongong (NSW) Greater Hobart 9 millions millions 9 8 projection s population change dwelling approvals *financial years s Source: ABS, December 1. Source: United States Census Bureau 1. 3 Source: NSW Government Dept. of Planning & Environment. Sources: ABS, Westpac Economics. 7 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

28 Areas of interest The Sydney housing market.8% mortgage rate As the Australian economy transitions from mining to non-mining led growth, the RBA has moved policy from restraining to stimulating growth in interest-rate sensitive areas of the economy. Low interest rates have encouraged borrowers into the market and seen housing-related sectors, including construction, pick up. Interest rates are expected to remain around current lows throughout 15 and 1. The average interest rate over the next 1yrs is also expected to be lower than the last 1yrs as the buildup in debt globally has created substantial headwinds for growth and inflation. 1.7% investor lending growth In Australia, interest payments on investment properties are tax deductible, with any net loss on rental income able to be offset against other income ( negative gearing ). Investor housing activity is buoyant, responding to low vacancy rates, solid rental yields, and low interest rates, including low fixed rates that offer the opportunity to hedge interest rate risk. Gross rental yields are attractive compared to returns on other asset classes, many of which exhibit much greater volatility..% average price growth last 1 years Growth in Sydney house prices over the last decade has been more modest than recent periods suggest. This year Sydney house prices are up 1.7% (September), partly as the city catches up after not participating in the price increases in other states through the second half of the s. The average price increase in Sydney since 3 is.%. This is broadly in line with average growth in Sydney incomes over the period Oct-8 % Oct-85 Mortgage interest rates structurally lower 1 1.% Oct-9 centred rolling 1yr avg 8.7% Oct-95.8% Oct-.7% *assumes avg 5.% over 3-5 Oct-5.3% Oct-1 Oct-15 forecast 5.% Oct- %.9%* %pa Investor housing yields versus shares, deposits rental yield* ASX dividend yield 1yr term deposit *gross yield, median rent on bdrm unit as 1 % of median unit price 1 Sep-95 Sep-99 Sep-3 Sep-7 Sep-11 Sep % Sep-8 Sydney dwelling prices vs rest of Australia 3 Sep-85 Sep-9 ratio of weighted medians Sep-95 Sydney ratio to other major capital cities Sep- Sep-5 Sep-1 Sep-15 % Sources: RBA, Westpac Economics. Sources: REIA, RBA, Westpac Economics. 3 Sources: ABS, CoreLogic RP Data, APM, Residex, Westpac Economics. 8 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

29 Economics November 15 Westpac Banking Corporation ABN

30 Australian and New Zealand Economic forecasts Calendar year Key economic indicators 1 (%) as at October f 1f World GDP Australia GDP Private consumption Business investment, Unemployment end period CPI headline year end Interest rates cash rate Credit growth, Total year end Credit growth, Housing year end Credit growth, Business year end New Zealand GDP Unemployment end period Consumer prices Interest rates official cash rate Credit growth Total Credit growth Housing Credit growth Business Source: Westpac Economics. GDP and component forecasts updated following the release of quarterly national accounts. 3 Business investment adjusted to exclude the effect of private sector purchases of public assets. 3 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

31 Australia economy Fiscal and monetary flexibility remain GDP well placed relative to other developed economies RBA still has capacity to reduce rates further Real GDP growth (%) % growth, year-ended Jun-99 Jun-3 Jun-7 Jun-11 Jun-15 Sources: OECD, Westpac Economics. Fiscal position remains sound Net public debt levels as a % of GDP Aus NZ Canada Germany Spain US UK France Sources: IMF, Westpac Economics. Australia UK Canada US Euro 11.7 Italy 8 Sources: OECD, Westpac Economics. Major countries policy rates (%) Australia UK Canada US Euro Sep-8 Sep-9 Sep-1 Sep-11 Sep-1 Sep-13 Sep-1 Sep-15 Sources: RBA, OECD, Westpac Economics. Australian unemployment rate is expected to remain little changed % Major countries unemployment rate (%) Australia Canada UK US Euro Jun-99 Jun-3 Jun-7 Jun-11 Jun Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

32 Australian economy adjusting well to lower commodity prices and mining investment Terms of trade returning to a sustainable level 1 1 Sources: ABS, Westpac Economics Non-resource exports approaching 5% share 1 Jun-51 Jun-1 Jun-71 Jun-81 Jun-91 Jun-1 Jun index % ann Non-resources Resources Sources: ABS, Westpac Economics Terms of trade, goods & services +8.5%yr Historic average Non-resources Resources index $bn/mth Non-resource exports - 1 approaches 5% share 7.%yr - 8 Aug-9 Aug-11 Aug-13 Aug-15 Aug-9 Aug-11 Aug-13 Aug Lower AUD is providing some cushion latest: Sep-9 Sep-9 Sep- Sep- Sep-8 Sep-1 Sep-1 Sources: RBA, Westpac Economics. Fair value band AUD/USD actual & forecast F casts Lower rates support housing activity and flow on effects Dwelling approvals ( month sum, annualised) Vic NSW SA WA Qld Aug-1 Aug-3 Aug-5 Aug-7 Aug-9 Aug-11 Aug-13 Aug-15 Sources: ABS, Westpac Economics 3 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

33 Lower Australian dollar supporting rebalancing of the economy Positives A critical buffer to external shocks Australia s commodity prices.3%yr in USD terms but only 5.3%yr in AUD terms Assists economy s transition from mining to nonmining driven growth Lifts AUD prices for non-mining commodity exporters (e.g. rural +8.%yr) Improves competitiveness of export and importcompeting sectors, including services Clear lift to inbound and domestic tourism and education sectors an important driver of service sector jobs growth Investment in these sectors also starting to turn Negatives Impact on sentiment both within and towards Australia Is a reduction in the purchasing power of Australian incomes Pushes up the cost of imports including capital equipment Generates short term inflationary pulse, though this is often absorbed by importers Can cause funding issues but Australia s external debt risk is mostly hedged Australian dollar lower against major currencies Australian dollar, change last 18mths (%) NZD EUR CAD JPY SGD CHF GBP KRW CNY USD Source: RBA, Westpac Economics International services turn on lower AUD Consumer related industries on the up $bn travel* non-travel $bn ann% Consumer spending vs industry activity (ann %) ann% 1 8 * includes education exports exports imports +%yr 9%yr exports imports 5%yr %yr consumer spending - industry output consumer-related sectors* - *retail, hospitality, household services - - Jun-85 Jun-93 Jun-1 Jun-9 Jun-85 Jun-93 Jun-1 Jun-9 Jun-91 Jun-95 Jun-99 Jun-3 Jun-7 Jun-11 Jun-15 Source: ABS, Westpac Economics Source: ABS, Westpac Economics * Includes Financial services $3.bn, IT & Telecomm $.bn, Intel. property rights $1.1bn and Other $9.7bn. 33 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

34 Case study Tourism benefiting from lower Australian dollar Australia s 3rd largest export Tourism is Australia's third largest export, and its largest service export. The lower Australian dollar has Improved Australia s attractiveness as a holiday destination for both foreigners and locals. Inbound arrivals are up 15% over last yrs; outbound growth has slowed to 3% from 9% avg over previous 5yrs Supported a pick-up in jobs growth, with tourism directly adding an estimated, jobs over the last 3yrs (+7.7%) after holding flat over the previous 5yrs Starting to drive a lift in investment in the hotel sector Sector is also capitalising on strong Chinese demand. Short term arrivals from China up % in the year to August 15 to 953, Many overseas visitors now have spending power -3% greater than two years ago. In the last financial year, international investors spent a record $33. billion, up 1% 1 Hotel occupancy rates are 8% in Sydney and Melbourne, comfortably above average. Rates in holiday areas such as Cairns and Port Douglas are rising significantly. Room rates are also up The lift is starting to drive a pick-up in investment in the tourism industry. In Queensland, the possible pipeline is almost $17bn. A pick-up is long overdue the average age of the capital stock in the sector is 17.5 years, the first time in 38 years has been older than the capital stock of the rest of the economy International arrivals in Australia (millions) mn Jun 91 Jun 95 Jun 99 Jun 3 Jun 7 Jun 11 Jun 15 Sources: ABS, Westpac Economics Annual arrivals, financial years 1/15: +1% vs 3 yrs ago Accommodation / resort projects (June 15) mn Asia,.5 ex-china. Europe NZ China Other US State Project Comment $bn Qld Aquis project, casino & resort Possible 8. Airlie beach resort, inc. gaming Possible 5. Great Keppel Island resort, redevelopment Under consideration. Jewel development Under construction 1. Capricorn Integrated resort Under consideration. NSW Crown, casino & hotel, Barangaroo Approval granted. Darling Harbour, hotel, Lend Lease Possible.5 WA Crown Towers Perth, gaming & hotel Under construction Source: Tourism Research Australia. Source: Australian Bureau of Statistics. 3 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

35 Australian labour market Services sectors creating the vast bulk of new jobs Around 8% of Australian jobs are in the services industries Australia is a world-class provider of a range of services, such as telecommunications, travel, banking and insurance The services sector represents about 7% of Australia's GDP and employs four out of five Australians Health is the biggest employer with over 1% of the country s 11.8 million jobs In September 15, the Performance of Services Index 1 came in at 5.3. While down on the previous month's seven month high of 55., a reading over 5 means the biggest employment sector in the country is expanding Growth in employment in the non-mining sectors is more than offsetting the contraction in mining employment, with the gains focused in consumer-related or business services sectors In the year to August,, jobs were created in Australia, or.% p.a. growth across the economy More than 18, new jobs in health care and education The next best performer was professional and technical services, which added 1, jobs over the year Mining, agriculture and utilities shed 3,7 jobs in the year Australian employment by sector (1/15, %) 11.8 million employed Mining Manufacturing Construction Transport, Utilities Wholesale, Retail Household services Health, Social Assistance Education Public Administration Finance Business services Agriculture Source: ABS 35 1 The Australian Industry Group Australian Performance of Services Index is a leading indicator of services activity in the Australian economy. The Australian PSI is a seasonally adjusted national composite index based on the diffusion indices for sales, orders/new business, deliveries, inventories and employment with varying weights. An Australian PSI reading above 5 points indicates that services activity is generally expanding; below 5, that it is declining. The distance from 5 is indicative of the strength of the expansion or decline. Results are based on a sample of around companies each month. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

36 Australian labour market Services sectors creating the vast bulk of new jobs Cumulative change in industry employment ( ) In 15: jobs outstrips population growth (% ann) - household services mining construction goods distribution - - Jun-9 Aug-11 Oct-13 Dec-15Jun-9 Aug-11 Oct-13 Dec-15 Source: ABS, Westpac Economics % ann employment % ann population, working age Jobs:.%yr Population: 1.5%yr - Sep-87 Sep-91 Sep-95 Sep-99 Sep-3 Sep-7 Sep-11 Sep-15 Sources: ABS, Westpac Economics. public admin business services manufacturing other Australia: employment by sector (annual change, ) Health & education Business services Leisure & hospitality Wholesale & transp. Construction Government Q, Q3 1 Utilities Q, Q3 15 Mining Retail Agriculture Manufacturing Finance & real estate change in employment Sources: ABS, Westpac Economics. 3 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

37 Australia s population growth Australia s population is just over 3 million and growing at a comparatively rapid pace Population growth was 1.% in 1, at the lower end of growth over the last decade which has ranged from 1.3% to.%, but in line with Australia s long run average pace of 1.% and above world population growth of 1.% Australia s population growth has been much stronger than that seen in most advanced economies, many of which are seeing static or even declining populations Also strong compared to population growth in many emerging economies The growth of Australia's population has two main components natural increase (the number of births minus the number of deaths) and net overseas migration Natural increase and net overseas migration contributed 5% and 55% respectively to total population growth in the 1 months to March 15 Australia is very much a migrant country Approximately one-third of the population was born overseas Overall, the proportion of overseas-born residents from European countries of birth is declining, while the proportion of migrants coming from Asia is increasing Population growth (average 5-1) (%) % %. 1.5 world Germany Hungary Poland Greece Japan Netherlands China France Italy UK Sweden US Canada New Zealand Spain India Indonesia Australia Sources: UN, Westpac 37 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

38 Australian state economies Shift in growth with NSW the pace setter Domestic demand growth is shifting from the mining states of WA and Qld, to NSW and, to a lesser extent, Victoria 1 in 3 Australians live in NSW, with a similar number spread across WA and Qld, some 5% are in Victoria, and 1% reside in the smaller states and territories The downturn in mining investment and in global commodity prices is being particularly hard felt in WA and Qld, with per capita consumer spending growth now quite weak In Victoria, structural change associated with the recent high level of the Australian dollar has been a significant headwind, with a number of large manufacturers announcing their intended exit from Australia In contrast, the NSW economy, held back by the high interest rates prevailing during the mining boom, has responded strongly to low rates. Home building is in a catch-up phase and consumer spending growth is above trend, supported by gains in population, house prices and wage incomes The exchange rate plays a key role in adjusting to swings in global commodity prices and in facilitating a rebalancing of growth between the mining and non-mining sectors of the economy WA POPULATION. million SIZE OF ECONOMY 1% of Australian GDP GROWTH 3.% estimate for 1/15 1.5% forecast for 15/1 HOUSE PRICES Perth house prices down.9%yr to Sep-15 SA POPULATION 1.7 million SIZE OF ECONOMY % of Australian GDP GROWTH 1.% estimate for 1/15 1.5% forecast for 15/1 HOUSE PRICES Adelaide house prices down.3%yr to Sep-15 Sources: ABS, CoreLogic RP Data, Westpac Economics VIC POPULATION 5.9 million SIZE OF ECONOMY % of Australian GDP GROWTH.% estimate for 1/15.% forecast for 15/1 HOUSE PRICES Melbourne house prices up 1.%yr to Sep-15 QLD POPULATION.8 million SIZE OF ECONOMY 19% of Australian GDP GROWTH.% estimate for 1/15 3.8% forecast for 15/1 HOUSE PRICES Brisbane house prices up.5%yr to Sep-15 NSW POPULATION 7. million SIZE OF ECONOMY 31% of Australian GDP GROWTH.5% estimate for 1/15.7% forecast for 15/1 HOUSE PRICES Sydney house prices up 1.7%yr to Sep Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

39 Credit growth picking up at a modest pace Business confidence and consumer confidence (net balance) Australian private sector credit growth (% ann) 13 1 monthly Consumer (lhs) Business * (rhs) 3 % annual % annual Housing Total credit Business 5 Forecasts 5 end * rebased to avg -3 (5) -5 - Sep-3 Sep-7 Sep-11 Sep-15 Sources: Westpac MI, NAB, Westpac Economics. After a weak 1, consumer sentiment initially responded positively to the RBA s February rate cut but has since shown renewed fragility Change in Federal Government leadership provided a modest lift and job loss fears have started to abate but consumer views on housing have weakened notably Business confidence has been more resilient in 15, although financial market volatility and China growth concerns have had an impact. Surveys of business conditions however, have solidly improved, pointing to an improving non-mining economy although outcomes vary across industries (1) Sep-95 Sep-99 Sep-3 Sep-7 Sep-11 Sep-15 Sources: RBA, Westpac Economics. Credit growth lifted to over just over % in the year to August 15 with both housing and business responding to lower interest rates Credit growth is expected to slow somewhat from.1% in 15 to 5.% in 1 as business credit growth holds up at around 5.% (albeit with a modest rebalancing away from property) and housing credit growth slows from 7.3% to.% as regulatory constraints on investor housing continue to have an impact Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

40 New Zealand economy Growth to soften, inflation remains subdued A slowdown in GDP growth remains on the cards for 1, despite an improvement in recent economic indicators The New Zealand economy is facing headwinds from sluggish global trade, the levelling off of the Canterbury rebuild, and sharp declines in consumer and business confidence The NZD, however, remains well down on its levels from the start of this year. This is boosting export earnings, and will provide a buffer from slowing global growth Softening GDP growth and low inflation saw the RBNZ cut the Official Cash Rate to.75%. With recent economic indicators picking up, Westpac Economics expects the next RBNZ move will be a cut in December 15, followed by cuts in March and June 1, taking the OCR to a low of % The New Zealand housing market has experienced strong gains in house prices and sales. Strength has been centred on Auckland, supported by strong population growth, and low building in recent years. There is also strong demand from developers and investors The Auckland housing market is however expected to slow over the coming year as macro-prudential measures from the RBNZ and changes to taxation come into effect from late 15 Housing sales in Auckland have already moderated, though house price growth remains firm. Strength in the housing market has been spreading beyond Auckland, with sales and prices rising strongly in the Waikato and Bay of Plenty regions GDP growth (%) 8 - Qtr % chg Source: Statistics NZ, Westpac Economics Index = 1 in 7 Annual average % change New Zealand house prices by region (index) Wellington Christchurch Other Nth Island Other Sth Island Auckland Westpac forecast Index = 1 in Jan-7 Jan-9 Jan-11 Jan-13 Jan-15 8 Source: REINZ, Westpac Economics Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

41 New Zealand economy Low inflation outlook 1 New Zealand Official Cash Rate (%) CPI inflation (annual, % year) % Westpac forecast Mar- Mar- Mar-8 Mar-1 Mar %yr Westpac forecast %yr Source: RBNZ, Westpac Economics Source: Statistics NZ, Westpac Economics NZD/USD Net immigration (annual, s) Westpac forecast s 75 5 Westpac forecast s Source: RBNZ, Westpac Economics Source: Statistics NZ, Westpac Economics -5 1 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

42 New Zealand economy Export markets Sharp rebound in dairy prices, following weakness earlier in the year Sparked in large part by Fonterra s predictions that milk collection this season will be down by more than originally expected However the outlook for milk production remains uncertain Based on current prices, Westpac Economics expect that the payout for the current season will be $5.3/kg (higher than Fonterra s current forecast of $./kg) As well as boosting export earnings, this will mean less need for additional borrowing and cost-cutting measures than previously thought El Niño conditions have increased the risk of drought in New Zealand over coming months Previous El Niño events have led to a sharp drop in agricultural output and weak economic conditions. However since the last El Niño event in 1997/98, the structure of the agriculture sector has seen some significant changes that may mitigate the impact Activity has shifted away from sheep and beef, towards dairy, particularly in the South Island. A drought can have a neutral or even positive impact on dairy sector income, as higher milk prices offset lower volumes; in contrast, drought tends to depress both prices and volumes for meat Increased use of irrigation in areas vulnerable to El Niño Global Dairy Trade price index Jul 8 index Jul 1 Source: GlobalDairyTrade $1 Aug 11 1 Aug 1 Dairy payout inflation adjusted $9 $8 $7 $ $5 per kg Ms Aug 13 5 Aug 1 index Aug 15 $ Westpac $3 forecast $ 1981/8 1989/9 1997/98 5/ 13/1 Source: Fonterra, LIC, Statistics NZ, Westpac per kg Ms $1 $9 $8 $7 $ $5 $ $3 $ Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

43 Additional Information November 15 Westpac Banking Corporation ABN Data as at and for the year ending 3 September 15 unless otherwise stated

44 Westpac is a high quality credit with a clear domestic focus and a strong market position Unique portfolio of national and regional brands Large domestic presence Westpac Institutional Bank Australian retail banking and wealth Westpac New Zealand Top 1 banks in Australia by total resident assets (A$bn) Westpac CBA NAB ANZ Macquarie Bank Bendigo and Adelaide Bank Suncorp-Metway ING Bank (Australia) Bank of Queensland Citibank, N.A.,,, 8, Clear focus on Australia and New Zealand Total income by geography 1 (%) Australia New Zealand Asia, Pacific, Europe & Americas Strong market share positions Customers 13m Australian household deposit market share 3 3% Australian housing market share 3% Australian business market share 19% Australian wealth platforms market share 5 % New Zealand deposit market share 1% Westpac ANZ CBA NAB New Zealand consumer lending market share % 1 Source: Company Annual Reports. Westpac, ANZ and NAB as at 3 September 1. CBA as at 3 June 15. APRA Banking Statistics August 15. Total resident assets refers to all assets on the banks' domestic books that are due from residents. 3 APRA Banking Statistics September 15. RBA Financial Aggregates, September Plan for Life, June 15, All Master Funds Admin. RBNZ, September 15. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

45 Westpac business divisions A unique portfolio of brands Westpac Retail & Business Banking Australian national brand for consumer and business banking, SMEs and commercial customers under the Westpac brand Division Cash earnings FY15 ($m) Cash earnings FY15-FY1 % change Core earnings FY15-FY1 % change Westpac RBB,788 8% 8% St.George Banking Group Australian local brand for consumer, business and commercial banking customers under the St.George, BankSA, Bank of Melbourne and RAMS brands BT Financial Group Australian Wealth and Insurance division with $bn funds under management and $1bn funds under administration at 3 September 15 St.George 1,88 7% 8% BT Financial Group 9 flat flat Westpac Institutional Bank 1,8 (1%) (7%) Westpac NZ (in A$) Other 1 33 flat 3 Contribution to FY15 cash earnings by division (%) Westpac Institutional Bank Leading Australasian institutional bank, with branches and representative offices in Australia, NZ, US, UK and Asia Westpac Retail & Business Banking St.George Banking Group BT Financial Group Westpac Institutional Bank Westpac New Zealand Banking and wealth services to consumers, businesses and institutions in New Zealand 1 Westpac New Zealand Westpac Pacific and Group Businesses inc. Treasury 1 Other includes Westpac Pacific and Group Businesses, including Treasury. 5 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

46 Delivering on our strategic priorities The Service Revolution Performance Discipline Service Leadership Digital Transformation Targeted Growth Workforce Revolution Strategic Priorities Region s Best Performing Bank One of the World s Great Service Companies 1 st Century Bank Building new Growth Highways Talent Factory Measures 1 ROE 15.8% All divisions above their cost of capital +1K customers (up %) Products per customer.98 (up 1%) Expense to income ratio.% Targeting below % in next 3 years FUA 3 up 1% Life in-force premiums up 13% SME revenue up 8% Women in leadership % Retention of high performers 95% 1 FY15 numbers and growth rates on FY1. Australian retail and business banking customers. 3 Average BTFG FUA. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

47 Full Year 15 Balance sheet metrics and credit ratings Balance sheet metrics FY15 FY1 Change FY15-FY1 Westpac credit ratings Total assets $81.bn $77.8bn 5% Short term Long term Outlook Loans $3.3bn $58.3bn 7% Fitch Ratings F1+ AA- Stable Housing loans (Australia) $375.8bn $351.bn 7% Moody s Investor Services P-1 Aa Stable Customer deposits $7.1bn $9.bn % Standard and Poor s A-1+ AA- Stable Customer deposit to loan ratio 8.5% 7.5% (199bps) Risk management a competitive advantage Stable funding ratio % 83.% 8bps Total impaired loans to total loans (%).7. Total committed exposures $937.1bn $88.bn %.3.35 Total stressed exposures as a % of TCE.99% 1.% (5bps) Total impaired loans to total loans.3%.% (1bps) Westpac ANZ CBA NAB 1 Stable funding ratio is total stable funding divided by total funding. Stable funding includes customer deposits, wholesale term funding with a residual maturity greater than 1 months, securitisation and equity. Total funding includes customer deposits, total wholesale funding (short and long term) and equity. Source: Company Reports. Westpac, ANZ and NAB as at 3 September 15. CBA as at 3 June Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

48 High quality portfolio with bias to secured consumer lending Asset composition as at 3 September 15 (%) Cash and balances with central banks Total assets On balance sheet lending Receivables due from other financial institutions Trading securities, financial assets at fair value and available-for-sale securities Derivative financial instruments Loans Life insurance assets Goodwill Other assets Housing Business Institutional Other consumer Exposure by risk grade as at 3 September 15 ($m) Standard and Poor s risk grade 1 Australia NZ / Pacific Asia Americas Europe Group % of Total AAA to AA- 91,19 7,8,1 7,15 1,311 19,15 11% A+ to A- 3, 5,319 8,8,181 3, 51,9 5% BBB+ to BBB- 58,173 8,59 1,77 1,813,553 83,75 9% BB+ to BB 9,38 1,39 1, ,9 9% BB- to B+,13 1, ,318 8% <B+ 5,5 1, ,15 1% Secured consumer 33,358, ,37 51% Unsecured consumer 7,31 5, ,87 % Total committed exposures 795,99 9,537,38 13,397, ,5 Exposure by region (%) 85% 1% 3% 1% 1% 1% 1 Risk grade equivalent. Exposure by booking office. 8 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

49 Areas of interest Commercial property; Agriculture Commercial property portfolio Agriculture portfolio Total committed exposure (TCE) $5.bn Total committed exposure (TCE) $18.1bn Lending $51.3bn Lending $15.1bn Commercial property as a % of Group TCE 7.% Agriculture as a % of Group TCE 1.9% Average risk grade 1 BB- equivalent Average risk grade 1 B+ equivalent % of portfolio graded as stressed 1 1.8% % of portfolio in impaired.% % of portfolio graded as stressed 1.8% % of portfolio in impaired.3% Commercial property (TCE) by region (%) Agriculture (TCE) by region (%) 1 NSW & ACT VIC Australia QLD SA & NT WA NZ & Pacific Institutional (diversified) 1 5 New Zealand Other Commercial property (TCE) by borrower type (%) 5 11 Exposures <$1m Developers >$1m Investors >$1m Diversified Property Groups and Property Trusts >$1m Agriculture (TCE) by sector (%) Grain, Sheep and Beef Cattle Farming 3 Dairy Cattle Farming Horticulture and Fruit Growing Services to Agriculture Other Livestock Farming 31 Fishing Other 1 Includes impaired exposures. 9 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

50 Australian unsecured lending portfolio Total Australian consumer unsecured 9+ days delinquencies decreased 9bps to 111bps (up bps FY15/FY1) consistent with seasonal trends Australian credit card 9+ days delinquencies were down 7bps to 81bps (down 1bp FY15/FY1) The average credit card payments to balance ratio remained high, at 5.7%, with customers remaining disciplined Australian personal loan portfolio 9+ days delinquencies were down 1bps to 17bps (up 5bps FY15/FY1) Australian unsecured lending 9+ days delinquencies (%) Sep-1 Dec-1 Mar-11 Credit cards Total unsecured lending Jun-11 Sep-11 Dec-11 Mar-1 Jun-1 Sep-1 Dec-1 Mar-13 Jun-13 Sep-13 Dec-13 Personal loans (excl Auto loans) Auto loans Mar-1 Jun-1 Sep-1 Dec-1 Mar-15 Jun-15 Sep Levels in line with average of last five years. Increase over the year reflects general weaker employment conditions. Australian auto loan 9+ days delinquencies were up 18bps to 1bps (up 18bps FY15/FY1), mainly reflecting changes to collections management that have now been addressed Review of treatment of hardship will likely see a rise in reported delinquencies in future periods across all lending categories Australian unsecured lending portfolio as at 3 September 15 ($bn and %) Credit cards Personal loans Auto loans 3.1 % Australian credit card average payments to balance ratio 1 (%) H9 H9 1H1 H1 1H11 H11 1H1 H1 1H13 H13 1H1 H1 1H15 H15 1 Cards average payments to balance ratio is calculated using the average payment received compared to the average statement balance at the end of the reporting month. 5 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

51 Leverage ratio disclosure Leverage ratio APRA requires the disclosure of the leverage ratio from the first reporting period after 1 July 15. The leverage ratio is not a Pillar 1 requirement at the moment The leverage ratio measures Tier 1 capital as a percentage of an exposure measure (the sum of on and off balance sheet exposures) unadjusted for risk and is intended to set a floor on the capital banks hold 1 Given the conservative nature of APRA s determination of Tier 1 capital, the leverage ratio has also been calculated under an internationally comparable basis On a pro forma basis (including capital raised in the Entitlement Offer) APRA leverage ratio would be 5.% Internationally comparable leverage would be 5.9% Leverage ratio (APRA basis) $bn Leverage ratio internationally comparable (%) Sep-15 Level On balance sheet exposures ex derivatives and SFT Derivative exposures 5. SFT exposures 7.1 Other off-balance sheet exposures 7.1 Less Tier 1 capital deductions (17.9) Total leverage ratio exposure measure 85. Tier 1 capital.8 Leverage ratio (APRA).8% Pro forma leverage ratio (APRA) 5.% APRA Sep-15 Equity investments Deferred tax assets 3 Other Intl. Comp. Sep-15 Entitlement Offer Pro forma 51 1 SFT is securities financing transactions. The internationally comparable leverage ratio utilises Tier 1 capital as measured for the internationally comparable capital ratios, and includes Additional Tier 1 instruments subject to Basel III transitional relief. Tier 1 capital aligns with the APRA study titled International capital comparison study", of 13 July 15. For more details on adjustments refer slide [xx]. 3 Other includes capitalised expenditure and Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

52 Additional Tier 1 and Tier capital Westpac Additional Tier 1 and Tier Westpac targets 3.5% of supplementary capital, being Additional Tier 1 and Tier capital - assists Westpac to meet minimum regulatory requirements at Total Tier 1 and Total Regulatory Capital levels Approximately $1bn in aggregate on issue as at 3 September 15 Includes $.8bn of Basel III transitional capital instruments Will be replaced with Basel III compliant instruments as debt matures, which will count towards the internationally comparable capital calculation Westpac Additional Tier 1 and Tier as at 3 September 15 (A$m),71 Basel III Transitional,19 Basel III,99 Additional Tier 1 Tier,88 Westpac Additional Tier 1 and Tier issuance since 1 (Issuance amount, A$m) Total Regulatory Capital (%) Basel III transitional issuance,7 Basel III compliant issuance Additional Tier 1 Tier CET1 Additional Tier 1 Tier ,189 1,38 1,311 1,3 95 1, H1 H1 1H13 H13 1H1 H1 1H15 H H1 1H13 H13 1H1 H1 1H15 H15* *Does not include impact of $3.5bn Entitlement Offer announced 1 October 15 5 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

53 Tier capital comparison Characteristic Basel III compliant Tier Old-style Tier (specifically Lower Tier ) Absorb losses on a "gone concern" basis Gone concern capital Gone concern capital Non-discretionary, cumulative payments Must pay securities subject to solvency tests; deferred payments accumulate with or without compounding Must pay securities subject to solvency tests; deferred payments accumulate with or without compounding Minimum Term Minimum term of at least 5 years; straight line amortisation over final four years Can call after a minimum of five years with APRA's approval Minimum term of at least 5 years; straight line amortisation over final four years Call Right Can call after a minimum of five years with APRA's approval Incentive to redeem No step-ups or other incentives to redeem early Step-up in margin permitted Ranking in a Winding Up Rank ahead of claims of ordinary shareholders and Additional Tier 1 Capital holders 1 Rank ahead of claims of ordinary shareholders and hybrid Tier 1 Capital holders Conversion or Write-off at Point of Non-Viability (PONV) Conversion (full or partial as necessary) or permanent Write-off in contractual terms Conversion or Write-off only after Additional Tier 1 (some or all as necessary to return to viability) If Conversion is not possible, rights of Holders will be terminated Not applicable. However APRA has powers under the Banking Act to direct banks not to make payment on Lower Tier instruments PONV Trigger Event APRA notifies Westpac that it believes conversion or write-off or a public sector injection of capital (or equivalent support), is necessary because, without it, Westpac would become non-viable No explicit APRA guidance regarding likely triggers. Non-viability could be expected to include serious impairment of financial position, concerns about its capital, funding or liquidity levels and/or insolvency N/a 53 1 APRA requires that new Basel III compliant Tier instruments must be the most subordinated claim in a winding-up after Common Equity Tier 1 and Additional Tier 1 instruments. As Westpac has old-style perpetual "Upper Tier " instruments on issue that rank behind "old style" Lower Tier instruments, any new Basel III Tier instruments must rank equally with "old-style" Upper Tier instruments. Once all "old style" Lower Tier instruments have been redeemed all Tier instruments will rank equally. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

54 Tier capital comparison across jurisdictions 1 US Canada UK / EU / Scandinavia Singapore Australia Ranking Senior to Tier 1 Capital Senior to Additional Tier 1 Capital Senior to Additional Tier 1 Capital Senior to Additional Tier 1 Capital Senior to Additional Tier 1 Capital Step-ups Not permitted Not permitted Not permitted Not permitted Not permitted Capital amortisation % p.a. beginning 5 years prior to maturity (no credit in final year) % p.a. beginning 5 years prior to maturity (no credit in final year) 5 years prior to maturity on a straight-line amortised basis years prior to maturity on a straight-line amortised basis years prior to maturity on a straight-line amortised basis Early redemption Tax Event / Regulatory Event Tax Event / Regulatory Event Tax Event / Regulatory Event Tax Event / Regulatory Event Tax Event / Regulatory Event Point of Non-Viability Definition n.a. Regulatory Discretion Regulatory Discretion Regulatory Discretion Regulatory Discretion Approach n.a Contractual Statutory Contractual Contractual Disclosure n.a Terms & Conditions Risk factor Terms & Conditions Terms & Conditions Primary loss absorption mechanism n.a Conversion into ordinary shares Conversion into ordinary shares or Write-down Write-down Conversion into ordinary shares 1 Source: HSBC, as at August 15. The Terms and Conditions of the Subordinated Instruments include a provision that enables the sale of shares, on Conversion, for cash, subject to possible Write-off. 5 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

55 Funding and liquidity profile Liquidity Coverage Ratio ($bn) Mar-15 Sep-15 %Mov t Mar15 Sep15 High Quality Liquid Assets 1 (HQLA) 57 1 Committed Liquidity Facility (CLF) - Total LCR liquid assets Customer deposits 5 () Wholesale funding (13) Other flows Total cash outflows (3) LCR 11% 11% large Focus on stable funding sources Stable funding ratio (%) 83.% 83.% 83.8% Wholesale Onshore <1yr Wholesale Offshore <1yr Wholesale Onshore >1yr Wholesale Offshore >1yr Securitisation Equity Unencumbered liquid assets ($bn) Customer deposits Self securitisation Private securities Cash, government and semi-government bonds Sep-1 Mar-15 Sep-15 Total short term wholesale debt outstanding at Sep-15 Sep-1 Mar-15 Sep-15 H15 total customer deposits $7bn Term deposits Savings Online Transaction Customer deposit composition H15 (%) 8% 19% 1% 37% 1 Includes HQLA as defined in APS 1, BS-13 qualifying liquids, less RBA open repos funding end of day ESA balances with the RBA. The RBA makes available to Australian Authorised Deposit-taking Institutions a CLF that, subject to qualifying conditions, can be accessed to meet LCR requirements under APS1 Liquidity. 3 Other flows include credit and liquidity facilities, collateral outflows and inflows from customers. LCR is calculated as the percentage ratio of stock of HQLA and CLF over the total net cash outflows in a modelled 3 day defined stressed scenario. Calculated on a spot basis. 5 Private securities include Bank paper, RMBS, and Supra-nationals. Includes long term wholesale funding with a residual maturity of less than or equal to 1 year. 55 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

56 Broad funding capabilities Ability to meet investor preferences Diverse and flexible funding capabilities Wholesale funding capabilities USCP/USCD USMTN SEC Shelf Covered Bonds Short Term Debt ECP/ECD EMTN Long Term Debt Samurai/ Uridashi NCD TCD/MTN RCD MTN Short term markets Term markets Issuance currencies Include Prime floaters, Federal Funds, Extendibles, Stepups, Range accruals, CDs, CP and Flippers Issuance in senior unsecured, securitisation and covered bond format, as well as subordinated debt Only major Australian bank to be SEC registered. SEC registered deals are included in the index, deliver greater liquidity for investors and have higher disclosure requirements Westpac also maintains its ability to issue in US 1A format Include AUD, CAD, CHF, CNH, EUR, GBP, HKD, JPY, NOK, NZD, SGD, TRY and USD Wholesale funding composition 1 as at 3 September 15 (%) 3. Domestic Certificates of Deposit.3 13 Commercial Paper 3 11 Medium term notes Covered bonds 5 Securitisation Hybrids 15 1A SEC Registered 1 15 Samurai Interbank deposits Other Selected debt programs Issuer Program Limit WBC Domestic CD ECP/CD Yankee CD USCP 1A US SEC registered shelf Global Covered Bond No limit US$bn No limit US$5bn US$35bn No limit US$bn WNZL Domestic CD No limit WSNZL ECP/CD USCP Global Covered Bond US$bn US$1bn EUR5bn 1 At FX spot currency translation. WSNZL London Branch. 5 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

57 Westpac s covered bond program Providing valuable diversity Westpac covered bonds Covered bonds issued through Westpac s US$bn covered bond program Westpac also maintains RCB/N-bond capability Westpac Securities New Zealand EUR5bn covered bond program is separate, and guaranteed by Westpac New Zealand Limited as well as the covered bond guarantor At 3 September 15, A$.bn of covered bonds issued since November 11, with benchmark transactions in USD, EUR and AUD In Australia, covered bond issuance is capped at 8% of Australian assets Limits balance sheet encumbrance 9% of Westpac s covered bond capacity utilised (including overcollateralisation) at 3 September 15 Weighted average remaining tenor is 3.7 years for issuance to 3 September 15 for the Australian covered bond program Westpac Australian covered bond maturity profile as at 3 September 15 (A$bn) Westpac covered bond issuance as at 3 September 15 (%) Total pool loan balance A$3,73,39,85 Average loan size A$1,811 Weighted average current LVR (unindexed/indexed).17% / 5.9% Weighted average seasoning months Owner occupied security 7.3% Moody s collateral score 1.3% Moody s market risk / collateral risk 1 1.1% /.5% Min. overcollateralisation required (Fitch/Moody s) 11.7% /.% Min. WBC rating to maintain AAA (Fitch/Moody s) A / A3 (cr) Moody s collateral score 1 Maturity profile well managed, with view to maintaining capacity % 5.9%.3% 7.7% 8.%.%.3%.% 7.5% 8.%. 3. < 1 yr 1yr - yrs yr - 3yrs 3yr - yrs yr - 5yrs 5yr - 1yrs > 1 yrs. Westpac CBA NAB ANZ RBC TD BMO CIBC DBS Bank Kookmin 57 1 The collateral score is Moody s opinion of how much credit enhancement is needed to protect investors from the credit deterioration of assets in a cover pool in order to reach a theoretical Aaa expected loss, assuming those assets are otherwise unsupported. The higher the credit quality of the cover pool, the lower the collateral score. Source: Moody s. Last Updated September 15. Moody s takes into account the minimum contractual over-collateralisation percentage of 5.% in its qualitative assessment. Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow

58 Securitisation an important part of the Westpac Group s funding Outstanding securitisation A$1.bn, represents 1.7% of the Group s total funding, mostly RMBS issuance Securitisation provides additional diversity to Westpac s funding and investor base Only Australian major bank to have an active Auto ABS capability Westpac s RMBS and Auto ABS transactions have been well supported by the Australian domestic market, as well as offshore investors All A$ Class A Notes from RMBS and ABS transactions are repo eligible securities with the Reserve Bank of Australia Westpac has outstanding securitisation transactions under both the WST and Crusade programs Westpac Securitisation Trust (WST) Program is Westpac s program for securitising Westpac-originated residential mortgages Crusade Program is Westpac s vehicle for securitising St.George originated residential mortgages and auto loans Bella securitisation program acquired 31 December 13 Westpac is a consistent issuer of RMBS and ABS Original RMBS and ABS issuance by calendar year (A$bn) (excludes Bella) WST. Crusade Issuance highlights 1997 Westpac Securitisation Trust program established 7 Westpac issues its largest RMBS transaction A$7.bn (equiv.) WST Trust Series 7-1G 9 Westpac issues first major bank RMBS since 7 and first non AOFM 1 supported RMBS trade since 7 A$bn WST Trust Series Issued first Auto ABS for an Australian major bank A$1.bn Crusade ABS Series 1-1 Trust FY15 transactions to date Dec 1 A$.7bn WST Trust Series 1- Mar 15 A$8m Crusade ABS Series 15-1 Trust Jun 15 A$.1bn WST Trust Series AOFM is The Australian Office of Financial Management. 58 Westpac Group Fixed Income Presentation I Full Year 15 I US Roadshow