2002 Interim Results. David Morgan, Chief Executive Officer Philip Chronican, Chief Financial Officer. 2 May 2002

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1 David Morgan, Chief Executive Officer Philip Chronican, Chief Financial Officer 2 May 2002

2 Another record result $m 1, Net Profit After Tax & EPS CAGR 755 1H99 1H02 EPS 14% NPAT 13% ,018 1H99 2H99 1H00 2H00 1H01 2H01 1H02 cents NPAT (LHS) EPS (RHS) 1

3 A strong and balanced result Double digit growth in key earnings measures Core earnings +14% Net profit +10% Economic profit +12% EPS +10% Dividends +13% Expense to income down from 52% to 49% Return on equity steady at 21% Credit quality sound, provisioning strengthened 2

4 Strategy delivering A revenue driven result Built on deeper customer relationships Enhanced by improved efficiency Balancing growth and returns Delivering for all stakeholders 3

5 Revenue growth the key driver $m 4,000 3,500 3,000 2,500 2,000 1,500 1, H99 2H99 1H00 2H00 1H01 2H01 1H02 CAGR Revenue 7% Expenses 1% (excl. goodwill) Core earnings 14% 4

6 Built on deeper customer relationships 1 Value Shift Percent in Segment % ve Economic Profit +ve Low Customer Value Segments Mar-99 Mar-02 High 1 Australian personal and business customers Australia 5

7 Growth in core products 1 % growth Mortgages Outstandings 12% 2 15% Credit cards (Bank issued) 4% Business lending 7% Deposits (excluding CDs) Housing - owner occupied Credit card outstandings Business lending Deposits (excluding CDs) Market share % Australia 2 Adjusted for securitisation 6

8 With strong focus on costs driving efficiency gains * % 60 Expense to Income % 1H99 2H99 1H00 2H00 1H01 2H01 1H02 * Excludes goodwill 7

9 And meeting performance targets Measure Target Result EPS Growth ROE Cost growth TSR (rolling 3yr) Capital Risk profile 10% 18-22% 2% Top quartile Tier 1, AA- rating 10% 21% 1% 77 th percentile 6.8% # Maintained # Approximately 6.5% post Rothschild 8

10 Balancing all stakeholder needs Staff Community/Environment Best listed company in SMH/Age Good Reputation Index Strong employee commitment Shareholders Customers Improved customer service & satisfaction +20% Return on Equity +10% EPS Growth 9

11 Delivering on social/ environmental responsibilities Community/ Environment Staff Shareholders Customers Contributing >$25 million per annum through community and social programs Maintaining rural and regional services Introduced social safety net accounts Launched Disability Discrimination Action Plan Producing first social impact report 10

12 Staff Clear leadership in corporate social responsibility Community/ Environment Shareholders Customers Top 3 bank worldwide on social and environmental performance (Dow Jones Sustainability Index) Only major Australian company with 5 star social and environmental rating (Corporate Monitor Sustainability Rating-Ethical Investor April 2002) No. 1 listed company on good reputation (SMH/AGE Good Reputation Index 2001) Best corporate governance disclosure (Annual Report Awards 2001) 11

13 Staff Strong staff satisfaction Community/ Environment Shareholders Customers Tracking above the industry norm and in 75 th percentile Staff commitment up 16% over year Agreement on Enterprise Development Agreement 12

14 Staff Helping customers achieve a better standard of living Community/ Environment Shareholders Customers Delivering on our 1998 commitment to maintain regional and rural services Refurbished over 400 branches with front of house services Expanding services via Saturday trading Accessible ATMs for the vision impaired Put in place a customer advocate and impartial complaints review committee 13

15 Adding up to improved shareholder value $m Economic Profit & Return on Ordinary Equity # 272 # H99 2H99 1H00 2H00 1H01 2H01 1H02 % Economic Profit (LHS) ROOE (RHS) # Would have been $451m if dividend had been fully franked. 14

16 Rothschild Springboard for growth Addressing key wealth management capability gaps Manufacturing capability Strong consultant ratings Combining best of breed to create a broad, high quality product suite Additional distribution grunt 1,000 independent premier planners Superior sales and service platform Accessing growth options without compromising returns 15

17 AGC Tighter focus on core businesses Consistent with customer centric strategy Stacks up against strict valuation criteria Business finance now being originated on Westpac s balance sheet Finalisation subject to ACCC Provides additional strategic flexibility 16

18 Strengthened the management team David Clarke Group Executive Business & Consumer Banking Michael Coomer Group Executive eit & Operations Mike Pratt Group Executive WestpacTrust & Pacific Bank David Morgan Chief Executive Officer Philip Chronican Chief Financial Officer Phil Coffey Group Executive Institutional Bank Ann Sherry Group Executive People & Performance 17

19 The details Philip Chronican Chief Financial Officer 2 May

20 Core earnings up 14% $m 1H01 1H02 % Change Net interest income 2,032 2,160 6 Non-interest income 1,249 1,362 9 Operating income 3,281 3,522 7 Expenses (1,714) (1,739) 1 Core earnings 1,567 1, Bad debts (176) (271) 54 Goodwill (49) (49) - NPBT 1,342 1,463 9 Tax and OEI (418) (445) 6 NPAT 924 1,

21 Revenue growth maintained $m 3, , ,522 3,400 3,200 3,000 1H 2001 Income 3,281 NII growth 128 Fees & comm. Financial markets Life & funds mgt Other income Operational Income Tax recovery mvt. Sale of 60 Martin Place Relinquishment of mgt. rights 1H 2002 Income 20

22 Operating income growth $m 1H01 1H02 % Change Operating income as reported 3,281 3,522 7 One off and non-cash items Embedded value uplift (36) (60) Policy holder tax recoveries 16 (14) Property management rights (28) Sale of 60 Martin Place (26) Net other (9) Normalised operating income 3,233 3,

23 Net interest income & margin trends $bn 2.2 Margin (%) H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01 1H Net interest income Interest margin 22

24 Wealth management business $m 1H01 1H02 % Change Reported after tax profit Embedded value uplift (post tax) (28) (46) Total Property mgt rights to property trust (28) - Core after tax performance Operating profit after tax by line of % 1H01 1H02 business Change Funds management Life insurance & risk Other (6) 23

25 Advisor/planner network 1 Number of advisers/planners 1,200 1, Advisor/planner numbers up 22% March 2001 to March 2002 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Mar-02 Sep-02 Sep-03 Business & regional advisers Priority advisers & financial planners Consumer advisers Direct business advisers Womens Advisory Westpac targets 1. Excludes impact of Rothschild acquisition 24

26 Expense growth within target range $m 1H01 1H02 % Change Salaries & other staff expenses (7) Equipment & occupancy (8) Other expenses Operating expenses (excl goodwill) 1,714 1,739 1 FTE 29,241 26,704 (9) Productivity ratio Net operating income/salaries and other staff expenses less restructuring expenses. 25

27 Tax breakdown $m 1H01 1H02 % Change Tax expense as reported Tax expense as a % NPBT 31.0% 30.3% One off adjustments Policy holder tax recoveries 16 (14) Offshore provision not tax effected (20) Normalised Tax expense (5) Normalised tax expense as a 31.8% 28.2% % of reported NPBT 1 1. Adjusted for policy holder tax recoveries 26

28 Business unit contributions $m 2,000 1,800 1,600 1,400 1,200 1, ,567 1H01 Core earnings 1,783 1H02 11% 12% 13% 10% 35% 2% 2% Large Wealth management Aust. Business Products Aust. Consumer Products Aust. Business & Regional Banking Distribution Aust. Consumer Distribution New Zealand Retail Institutional Bank Other 27

29 Credit environment Signs that the corporate downgrades and defaults are easing Business Banking credit remains sound Future bad debt expense linked to consumer debt and interest rates Westpac maintains leading coverage ratios and asset quality 28

30 Stressed loans reduced from September 2001 Stressed loans by category % of total commitments % H 02 Watchlist & substandard Impaired 90 days past due well secured 29

31 Controlled single name exposure concentrations Credit exposures* to Top 10 corporations and NBFIs S&P Rating or Equivalent AAA A+ BBB+ A A- A A+ A+ AA- BBB- Corporates & NBFIs * Customer exposure as a percentage of Total Committed Exposure - March

32 Diversified industry exposure Credit exposure to governments, corporations and businesses as a percent of total committed exposure* Substantial non-bank financiers Property Government Durable products manufacture Other agriculture & services Business technical services Retailing Electricity, gas & water Grain, sheep & poultry Petroleum refining & chemicals Hotels & restaurants Non-residential construction Transport & storage Metal mining & services Transport & equipment services Hospitals & health services Insurance Motor vehicle trade Recreation services Wholesaling Forestry, printing & paper products Food manufacture Telecommunications Residential construction Other manufacturing * 31 March 2002, excluding banks. 31

33 Improving business banking portfolio * Impaired assets ratio at historical low Delinquencies relatively stable No signs of any systemic credit problems % % Impaired assets to total committed exposure H day delinquencies H 02 * Australian business banking portfolio. 32

34 Mortgage and other consumer loan portfolios * Mortgages of represent more than 51% of total loans & acceptances Other consumer loans represent less than 8% of total loans & acceptances % % Other Consumer Loans - 90 day delinquencies 1.68 Mortgage Loans - 90 day delinquencies H H 02 * Australia 33

35 Impaired loans continue to rank well against our peers 3.0 Impaired assets to loans & acceptances % Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 WBC ANZ CBA NAB 34

36 Provisioning coverage relative to peers % Specific provisions to impaired assets % General provisions to nonhousing performing loans Sep- 95 Sep- 96 Sep- 97 Sep- 98 Sep- 99 Sep- 00 Sep Sep- 95 Sep- 96 Sep- 97 Sep- 98 Sep- 99 Sep- 00 Sep- 01 WBC ANZ CBA NAB WBC ANZ CBA NAB 35

37 Active capital management Target ranges re-affirmed No specific announcement on capital management activities until AGC sale is confirmed Intention to access additional hybrid capital in time Small increase in dividend payout ratio consistent with franking capacity Intend to hold capital at upper levels of target ranges at this point in cycle 36

38 % Well capitalised TOE / RAA % - 5.6% H01 2H01 1H Tier 1 ratio % - 6.0% 1 1. Target range Estimated impact of Rothschild acquisition. 37

39 AGC background Net profit after tax Loans and Advances Loan loss provisions Net assets AGC New Zealand Book value of Receivables A$m 143 9, NZ$837 38

40 Outlook David Morgan Chief Executive Officer 2 May

41 Strategy is delivering Disciplined and consistent execution Customer centric strategy deepening relationships Benefits of efficiency programs continuing to flow Balancing all stakeholder needs is enhancing sustainability of returns 40

42 Outlook Australian economy remains robust GDP growth to June 2003 ~4% Housing to slow; business investment & exports up Unemployment down from 7% peak, to 6% in 2002 Credit growth slowing to 6% - 8% range Inflation back in 2% - 3% range Expected rise in official rates No signs of portfolio stress across segments or industries Scenario consistent with maintaining earnings momentum, a high ROE and double-digit EPS growth 41

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44 Supplementary Information 2 May 2002

45 Successfully deepening customer relationships 000 s Priority Customers * Number of Customers % growth between March 2001 March H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01 1H02 * Priority customers are those with whom we have significant, typically multi-product, relationships. 44

46 Online growth On-line Banking On-line Broking - Australia 1,400,000 1,200,000 1,000, , , , ,000 0 Mar-00 Jun ,000 1,400,000* 105,000* Mar-02 Dec-01 Sep-01 Jun-01 Mar-01 Dec-00 Sep-00 90,000 70,000 50,000 30,000 10,000-10,000 Sep-01 Jun-01 Mar-01 Dec-00 Sep-00 Jun-00 Mar-00 Dec-01 Mar-02 Australia New Zealand * 31 March

47 Breakdown of portfolio by customer segment* 100% 4% 5% 5% 80% 60% 40% 20% 0% 30% 32% 34% 66% 63% 61% 1H 01 FY 01 1H 02 Refer to next slide for further detail. Business / Institutional Consumer Mortgages Other Consumer * % of Total Exposure - 31 March

48 Business / Corporate risk grade profile * 80% 66% 63% 61% 60% 40% 20% 0% 1.2% 1.5% 1.3% 17% 18% 19% 14% 13% 13% 14% 12% 9% 19% 18% 19% 1H 01 FY 01 1H 02 AAA to AA- A+ to A- BBB+ to BBB- BB+ to B+ <B+ * % of Total Exposure - 31 March

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