Fixed Income Investor Presentation

Fixed Income Investor Presentation

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. 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 16 Interim Financial Results (incorporating the requirements of Appendix D) for the six months ended 31 March 16 available at www.westpac.com.au for details of the basis of preparation of cash earnings. Refer to Appendix 1 and Appendix 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 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 or abbreviations thereof, likely, estimate, anticipate, believe, target, 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 Interim Financial Results for the six months ended 31 March 16. When relying on forwardlooking 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 forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise, after the date of this presentation. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Contents Westpac Overview Highlights for Westpac and summary of First Half 16 financial performance Economics 16 Key forecasts and economic data on the Australian and New Zealand economies Australian Home Lending 3 Westpac s Australian mortgage portfolio statistics and performance Economic data on the Australian home lending market Additional Information 39 Includes Appendices 3 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Westpac overview Financials at 31 March 16 Balance sheet at 31 March 16 First half cash earnings 1 of $3.9bn Net profit before impairment charges and income tax expense (pre-provision profit, cash basis) $6.bn Return on average ordinary equity (cash basis) 1.% Cost to income ratio (cash basis) 1.6% CET1 capital ratio 1.% APRA Basel III basis CET1 capital ratio 1.7% Basel III internationally comparable basis Stable funding ratio 3 83% LCR 17% Gross impaired assets to gross loans 39bps Australian mortgage +9 days delinquencies bps Franchise at 31 March 16 Australia s nd largest bank, and 13th largest bank in the world, ranked by market capitalisation Number 1 or Number market share in key customer segments in Australia and New Zealand 13.m customers Total assets $83bn Ratings at 1 July 16 AA- / Stable / F1+ (Fitch) Aa / Stable / P-1 (Moody s) AA- / Negative / A-1+ (Standard and Poor s) 1 Cash earnings is a non-gaap measure. Refer to Appendix 1 and Appendix for a reconciliation of reported net profit to cash earnings. The basis of the internationally comparable CET1 capital ratio aligns with the APRA study titled International capital comparison study", dated 13 July 1. For more details on adjustments made refer Appendix. 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. As at 31 March 16. Source: IRESS, CapitalIQ and www.xe.com based in US Dollars. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

A resilient balance sheet Westpac key balance sheet ratios at 31 March 16 (%) Capital resources at 31 March 16 83 3 other stable 6 cust. deposits Stable Funding Ratio >7 Target (internal) 17 LCR 1 1. Regulatory minimum CET1 capital ratio (APRA Basel III) 8. 3. CCB inc. D-SIB 1. Reg. minimum Regulatory minimum + capital buffers 1.7 CET1 (International comparison) Cash earnings pre-provisions (1H16 annualised) $1.bn CET1 $38.bn ~$6bn 83% Stable Funding Ratio Stable funding includes Customer deposits 6% Equity 8% Securitisation and wholesale funding >1 year 1% Short term funding 17% - more than halved since 8 17% LCR Comfortably above 1% regulatory minimum Fully compliant since 1 January 1 1.% CET1 capital ratio (APRA Basel III basis) Materially higher - $6. billion in CET1 capital raised in calendar 1 1.7% CET1 capital ratio Internationally comparable basis Places Westpac comfortably within the top quartile of banks globally Additional Tier 1 $6.bn 3 Tier $7.1bn Westpac 31 March 16 1 CCB is Capital Conservation buffer. D-SIB is Domestic systemically important bank. Analysis aligns with the APRA study entitled, International Capital Comparison Study released 13 July 1. 3 Additional Tier 1 includes $.bn of Basel III complying instruments. Tier includes $3.7bn of Basel III complying instruments. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

6 Basel III CET1 capital ratios global comparison 1 1.7% Nordea RBS UBS Westpac CBA Intesa Sanpaolo NAB Lloyds ANZ ING Group China Construct. Bank ICBC Standard Chartered HSBC Sumitomo Mitsui Rabobank Citigroup Commerzbank Natixis Barclays Credit Suisse Societe Generale BNP Paribas Mitsubishi UFJ Bank of Comm. Deutsche Bank Bank of China Unicredit Credit Agricole SA China Merchants Bank Wells Fargo BBVA Mizuho FG Agri Bank of China Santander Scotiabank Bank of Montreal Royal Bank of Canada Toronto Dominion 3 Bank of America 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 capital ratios as at 31 December 1 unless otherwise stated, assuming Basel III capital reforms fully implemented. Deduction for accrued expected future dividends added back for comparability. 3 As at 31 March 16. As at 3 September 1. As at 31 Jan 16. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

11. 1. 9. 8. 7. 6.. Capital ratios materially strengthened CET1 capital ratio (%) and CET1 capital ($bn) (APRA basis) Key capital ratios (%) Mar-1 Sep-1 Mar-16 Common equity Tier 1 (CET1) capital ratio 8.8 9. 1. Preferred CET1 capital ratio range 8.7% - 9.% 1. Additional Tier 1 capital 1. 1.9 1.6 CET1 capital ($bn) 1. CET1 capital ratio (%) Tier 1 capital ratio 1.3 11. 1.1 Tier capital 1.8 1.9 1.9 9. Total regulatory capital ratio 1.1 13.3 1. 8.7 9.1 8.8 9. 8.8 9. Internationally comparable CET1 capital ratio 1 1. 13. 1.7 Risk weighted assets (RWA) ($bn) 37 39 363 7.7 8. 8.3 8. 8.3 8.3 8. 3 Leverage ratio (APRA) n/a.8. Leverage ratio (internationally comparable) n/a..6 3 Changes to current regulatory capital ratios 7. 7. 3 7 6 8 7 8 7 3 9 3 3 3 37 38 The adjacent chart sets out Westpac s reported CET1 capital ratios (at Level ). Subsequent to 31 March 16 a number of factors will impact Westpac s reported capital ratios in future periods including: A change in the way APRA calculates risk weighted assets for Australian residential mortgages, including new models for assessing mortgages in hardship The payment of Westpac s 16 interim dividend (reducing the CET1 capital ratio by approximately.8%) 1 Westpac s earnings since 31 March 16 Dec-11 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-1 Jun-1 Sep-1 Dec-1 Mar-16 Various other impacts (e.g. IRRBB, movements in foreign exchange rates) 1 The internationally comparable CET1 capital ratio aligns with the APRA study titled International capital comparison study", of 13 July 1. For more details on adjustments refer to Appendix. Source: Citi Research 3 March 1. Based on Citi coverage stocks. Canadian bank IRB average includes guaranteed mortgages (largest portion of portfolio) at an estimated % risk weight. 7 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Additional Tier 1 and Tier capital Westpac Total Regulatory Capital (%) Westpac Additional Tier 1 issuance (issuance amount A$m) 1 October 11 to 3 June 16 CET1 Additional Tier 1 Tier 13.3 1.1 1.3 1.1 1.9 1.8 1.7 1.8 1. 1.6 1.9 1. 1. 1.9 1.6 Basel III transitional issuance 1,189 AUD Basel III compliant issuance 1,38 1,311 1,3 1,7 8.8 9. 8.8 9. 1. Mar-1 Sep-1 Mar-1 Sep-1 Mar-16 1H1 H1 1H13 H13 1H1 H1 1H1 H1 1H16 H16 YTD Westpac Additional Tier 1 and Tier as at 31 March 16 (A$m) Additional Tier 1 Tier Westpac Tier issuance 1 since 1 (issuance amount A$m) 1 October 11 to 3 June 16 Basel III transitional issuance Basel III compliant issuance 1,9,19 3,878 3,67,7 - AUD USD CNY SGD JPY 9 1, 8 67 31-681 Basel III Basel III Transitional Basel III Basel III Transitional 1H1 H1 1H13 H13 1H1 H1 1H1 H1 1H16 H16 YTD 1 Represents A$ equivalent notional amount using spot FX translation at time of issuance. 8 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Target a diversified funding base FY16 YTD new term issuance composition 1 as at 3 June 16 (%) 73 Senior Unsecured ABS Subordinated Debt By type 1 3 Covered Bonds Hybrid By tenor 3,3 Years 3 Years Years Years > years 1 By currency 6 AUD EUR GBP 8 33 USD JPY Other Wholesale funding composition 6 as at 31 March 16 (%) 11.3 1 3 3 3.1 1 13 1 CDs Commercial Paper Domestic MTN EMTN Covered Bonds Securitisation 1a SEC Registered Samurai Hybrids Subdebt Interbank Deposits Other Term debt issuance and maturity profile,, as at 3 June 16 ($bn) Covered Bond Hybrid Senior Sub Debt Issuance Maturities 33 33 3 31 9 6 1 Australian covered bond issuance ($bn) 7 8 3 7 8 3 8 11 9 1 6 9 1 1 Remaining capacity (8% cap & overcollateralisation) Outstanding (Other) Outstanding (EUR). Outstanding (USD) Outstanding (AUD) FY11 FY1 FY13 FY1 FY1 FY16 YTD FY16 YTD FY17 FY18 FY19 FY FY1 FY>1 Peer 1 Peer Peer 3 Westpac 1 Based on residual maturity and FX rates at time of transaction. 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. Based on residual maturity and FX spot currency translation. Perpetual sub-debt has been included in >FY1 maturity bucket. Maturities exclude securitisation amortisation. 6 Shown by product. At FX spot currency translation. 7 Sources: Westpac, APRA Banking Statistics May 16. 9 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Regulatory change agenda to continue Regulation 16 17 Post 17 Net Stable Funding ratio (NSFR) Ensures that banks hold a minimum amount of stable funding based, based on a one-year horizon APRA consultation APRA Consultation released Mar 16 Draft prudential standard expected H16 NSFR commences 1 Jan 18 Basel IV Advanced models for credit risk Revised standardised credit risk Advanced RWA floors based on standardised approach Review of sovereign, bank and large corporate exposures Fundamental review of trading book Counterparty credit risk changes Operational risk to standardised approach Basel consultation APRA consultation Basel consultation releases: - Credit risk, Standardised approach (Dec 1) - Operational risk (Mar 16) - Credit risk, Internal models (Mar 16) Basel finalised requirements: - Market risk (Jan 16) - IRRBB risk (Apr 16) APRA implementation from 18 Leverage ratio Non-risk based ratio to act as a backstop to risk based capital requirements. Basel consultation Basel consultation released Apr 16 Basel: Leverage commences 1 Jan 18 (Minimum 3% of Leverage) Total Loss Absorbing Capacity (TLAC) TLAC seeks to boost loss absorbing capital for systemically important banks TLAC ratios would be both risk-based (% of RWA) and non-risk based (leverage) APRA consultation (expected) FSB: 1 Jan 19 (6% leverage & 16% of RWA) 1 Jan (6.7% leverage & 18% of RWA) 1 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

First Half 16 Financial results 1H16 Cash Earnings 1 Results Financial results (A$m) 1H16 % Change 1H16 1H1 Net operating income 1,619 6 Expenses (,19) Core earnings ($m) Net interest margin (%) (Net profit before impairment charges and income tax expense),766 6,139 6,.19.1.11.6..11.1 Core earnings 6, 8 Impairment charges (667) 96 Cash earnings 1 3,9 3 Reported net profit after tax 3,71 3 Financial metrics 1H1 H1 1H16 1H13 H13 1H1 H1 1H1 H1 1H16 Return on average ordinary equity 1.% (166bps) Earnings per share 118.c () Net interest margin.1% 9bps Expense to income ratio 1.6% (8bps) Movement in impairment charges ($m) 198 36 1 667 Impairment charges to avg. loans ann. 1bps 1bps Balance sheet and asset quality Net loans $61bn 6 Total committed exposure (TCE) $96bn Customer deposits $bn Impaired loans to total gross loans 39bps bps 31 () 8 83 1 Increased provisions primarily for names in Institutional Bank Writebacks and backs and 1H1 IAPs CAPs H1 IAPs Write- CAPs 1H16 recoveries recoveries 1 Cash earnings is a non-gaap measure. Refer to Appendix 1 and Appendix for a reconciliation of reported net profit to cash earnings. Prior periods have not been restated for accounting changes. 11 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Asset quality remains sound Stressed exposures as a % of TCE (%). Watchlist & substandard 3.9 3. 9+ days past due and not impaired Impaired %.8.17.7.3 1. 1.6 1.3 1. 1.37 1. 1.1.8.99 1.3.88.7.91.6.1.71.9.3.6..9.6.31.8.1.7.67.6.6.8.6..8.13..13..3.7...6 Sep-7 Sep-8 Sep-9 Sep-1 Sep-11 Sep-1 Sep-13 Mar-1 Sep-1 Mar-1 Sep-1 Mar-16 Areas of interest Mining (inc. Oil and Gas) portfolio Sep-1 Mar-16 TCE $1.bn $11.8bn % of Group TCE 1.% 1.3% % of portfolio graded as stressed 1 1.86% 3.3% % of portfolio in impaired.8% 1.6% Commercial property portfolio Sep-1 Mar-16 TCE $6.6bn $67.bn % of Group TCE 7.% 7.6% % of portfolio graded as stressed 1 1.8% 1.3% % of portfolio in impaired.6%.% Provisions Mar-1 Sep-1 Mar-16 Total provisions to gross loans (bps) 8 3 7 Impaired asset provisions to impaired assets (%) 8 6 8 Collectively assessed provisions to credit RWA (bps) 89 86 87 Economic overlay ($m) 387 388 393 NZ agribusiness portfolio Sep-1 Mar-16 TCE NZ$7.8bn NZ$8.1bn Agriculture as a % of NZ TCE 7.9% 7.9% % of portfolio graded as stressed 1 3.9% 7.81% % of portfolio in impaired.3%.3% 1 Includes impaired exposures. 1 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Australian mortgage delinquencies remain low Australian mortgage portfolio 1H1 H1 1H16 Australian mortgages delinquencies (%) +3 days delinquencies (bps) 1 1 13 +9 days delinquencies (bps) (includes impaired mortgages) estimated impact of changes to hardship reporting (bps) +9 days delinquencies investment property loans (bps) 7-36 31 38 Properties in possession (#) 63 3.. 1. 1.. - Mar-11 +9 days past due total +9 days past due investor +3 days past due total Loss rates Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-1 Sep-1 Mar-1 Sep-1 Mar-16 Westpac Australian housing portfolio and system share by State (%) 3 7 6 3 Australian banking system Westpac Group portfolio 18 17 13 1 7 7 7 6 NSW & ACT VIC & TAS QLD WA SA & NT 1 1 1H16 Westpac Group drawdowns Australian mortgages +9 days delinquencies by state (%). NSW/ACT VIC/TAS QLD 1. WA SA/NT ALL 1... Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-1 Sep-1 Mar-1 Sep-1 Mar-16 1 Source ABA Cannex February 16. 13 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Australian mortgage lending standards on a tightening bias Notable changes to Westpac mortgage lending (1 months to 3 April 16) Serviceability Investment property lending Pricing Mortgage insurance Non-resident lending Minimum floor rate 7.% Buffer rate at least.% Tightened policy on assessment of living expenses and income verification Discounting of rental income, annuity and pension income increased for certain loans Growth below 1% p.a., in line with APRA industry benchmark Maximum LVR for stand alone residential investment property loans Variable interest rates on residential investment property loans increased by.7% (Westpac brand) and.% (St.George, Bank of Melbourne, BankSA brands) Fixed rates on residential investment property loans increased by up to.3% Mortgage insurance for new originations >9% LVR moved to Arch Capital from Genworth Australia and QBE LMI Non-resident customers no longer qualify for mortgage loans (limited exceptions for Premium and Private Bank customers) For Australian and NZ citizens and permanent visa holders using foreign income, tightened verification processes and LVR restricted to 7% maximum 9 7 Increase in mortgage interest rate buffers (%) Westpac owner-occupied SVR inc package discount (%) Westpac minimum assessment ('floor') rate (%) Investor / Owner Occupied portfolio mix changing Investor share of housing portfolio 1 (%) Prerestatement Prerestatement *Increase reflects reclassification of previously reported data for reporting purposes 7..68 3 Mar-1 Jun-1 Sep-1 Dec-1 Mar-1 Jun-1 Sep-1 Dec-1 Mar-16 Oct-1 Jul-1 Oct-1 Feb-16 6 * 3 3 39* 37 39 36 38 3 3 3 3 9 8 Peer 1 Peer Peer 3 Westpac.7% 1 Source: Westpac, APRA Monthly Banking Statistics. Definition of investor lending per Monthly Banking Statistics excludes non-resident and SMSF. 1 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

High levels of borrower equity support Australian mortgage portfolio Australian housing portfolio 1H1 balance H1 balance 1H16 balance 1H16 flow 1 Total portfolio ($bn) 36.8 37.8 39.8.1 Owner occupied (%) 6.6 8.9.3 6.9 Investment property loans (%) 6.3. 39. 3.6 Portfolio loan/line of credit (%) 7.1 6.6 6.. Variable rate / Fixed rate (%) 78 / 8 / 83 / 17 87 / 13 Low Doc (%) 3. 3..7. Proprietary channel (%) 9.8 9.1 8..8 8 6 Australian housing loan-to-value ratios (LVRs),3 (%) 1H16 drawdowns LVR at origination Portfolio LVR at origination Portfolio dynamic LVR 9% of portfolio with dynamic LVR 8% First Home Buyer (%) 9.7 9. 8.9 7.6 Mortgage insured (%).3 19. 18.8 13.7 <=6 6<=7 7<=8 8<=9 9<=9 9+ 1H1 H1 1H16 Average LVR at origination (%) 7 7 7 Australian home loan customers ahead on repayments, (%) Average dynamic,3 LVR (%) 3 3 3 Average LVR of new loans, (%) 71 71 7 Average loan size ($ ) 3 9 Customers ahead on repayments, including offset accounts, (%) Actual mortgage losses (net of insurance) 6 ($m) Actual mortgage loss rate annualised (bps) 73 7 7 38 3 3 3 1 1 Mar-1 Sep-1 Mar-16 7% ahead on repayments Behind On Time < 1 Month < 1 Year < Years > Years 1 Flow is all new mortgage originations settled during the 6 month period ended 31 March 16 and includes RAMS. 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. Average LVR of new loans is based on rolling 6 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. 6 Mortgage insurance claims 1H16 $m (H1 $3, 1H1 $1m). 1 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Westpac Banking Corporation ABN 33 7 7 11. Economics

Snapshot More than mining, the Australian economy is diverse and flexible Australian economy key statistics (latest available) 3.1% GDP Australian economy has surprised to the upside, with growth near trend, benefitting from low rates and a low dollar.8% unemployment Employment grew by a solid 1.9% over the past year, supported by demand for labour in the services sector 1.3% inflation Below the RBA s % to 3% target range Australia s economy is diversified and flexible Sector contribution to GDP (%) 1 Australian employment by sector 1 (%) Mining Mining Manufacturing Manufacturing 11 3 8 1 Construction Construction 16 9 9 Transport, Utilities Transport, Utilities 9 Wholesale, Retail 6 Wholesale, Retail 7 Household services 6 Household services Education & Health 1 Health, Social Assistance 1 8 3 Government Education 8 Finance 13 13 13 Public Administration Property, Business services Finance Rural Business services Communications Agriculture Sources: ABS, Westpac Economics. 1 Excludes ownership of dwellings and taxes less subsidies. 1.7% cash rate The RBA lowered the cash rate by bps in May. Risks to current forecasts remain to the downside given the importance of the inflation outlook to future moves US$.76 = AU$1 The Australian dollar is now back to average levels. Despite rebounding recently, the lower AUD is supporting services sectors and helping to cushion the fall in commodity prices. Westpac Economics expect the AUD to move lower in 16, to USD 71 Australian housing sector beginning to cool % 3 1 House price growth rates (%) 6mth annualised growth rates, all dwellings, composite of all measures, seasonally adjusted -1 Sydney Melbourne Brisbane Perth - Jul-1 Jul-11 Jul-1 Jul-13 Jul-1 Jul-1 Jul-16 Sources: ABS, CoreLogic RP Data, APM, Residex, Westpac Economics. House price growth in Sydney and Melbourne has cooled as regulatory constraints on investor lending, tighter lending standards and mortgage rate increases in 1 impact the market 17 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Australian and New Zealand economic forecasts Calendar year Key economic indicators 1 (%) as at July 16 1 1 16f 17f World GDP 3. 3.1 3. 3. Australia GDP.7. 3. 3. Private consumption.8.8 3. 3. Business investment,3 -. -9.3-11. -. Unemployment end period 6..8.6. CPI headline year end 1.7 1.7. 1. Interest rates cash rate.. 1. 1. Credit growth, Total year end.8 6.6.8. Credit growth, Housing year end 7. 7. 6..6 Credit growth, Business year end.7 6. 6. 6. New Zealand GDP 3.7..9.7 Unemployment end period.8..7. Consumer prices.8.1 1.3.1 Interest rates official cash rate 3.... Credit growth Total.6 6. 7. 7. Credit growth Housing.1 6. 8. 8.8 Credit growth Business 3.7 6.7 6.6.9 1 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. 18 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Australian economy adjusting well Australian economy adjusting well to significant changes The terms of trade peaked in September 11 and has since fallen by 36% Commodity prices, in USD terms, have fallen around 6% over this period Chinese demand has slowed Australian economy has continued to grow Lower AUD and low interest rates key to rebalancing Service sectors creating the bulk of new jobs Unemployment trending lower 6 % Australian unemployment rate (%) Jun-8 Jun-1 Jun-1 Jun-1 Jun-16 Sources: OECD, Westpac Economics. Economy continues to grow 3 1 Real GDP growth (%) % growth, year-ended Mar-8 Mar-1 Mar-1 Mar-1 Mar-16 Sources: OECD, Westpac Economics. Lower AUD boosting service sectors Employment (# ) Household services 7 Business services 6 Mining Construction Goods distribution Manufacturing 3 1-1 - Jun-9 Jun-11 Jun-13 Jun-1 Source: ABS, Westpac Economics AUD close to post float average 1. 1.1 1..9.8.7.6.. Jun-8 Jun-1 Jun-1 Jun-1 Jun-16 Sources: RBA, Westpac Economics. Business conditions strengthened net bal. 1-1 AUD/USD actual & forecast AUD/USD average post float =.76 Business conditions (%) - Jun- Jun-6 Jun-1 Jun-1 Sources: NAB, RBA, Westpac Economics F casts 19 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Lower AUD sees non-mining sectors pick up Education Australia s th largest export Tourism Australia s th largest export Business services Approx. 1/3 rd of Australia s service exports Agriculture 1.% of Australia s merchandise exports $119bn education sector, of which 6.1% are international students 1 International student enrolments up.% in 1 on 1 International students brought $19bn to Australia in the year to September 1 3 Lower AUD, more accommodative visa policies and continuing positive performance on university league tables Inbound arrivals up 17% over the last years Outbound growth has slowed to 3% from 9% average over previous years Added, jobs over the last 3 years (+7.7%) after holding flat for the previous years Increased competitiveness sees Australian expertise in demand offshore, with business services exports legal, financial, communications and other professionals up 3% in the last 3 years Improved export competitiveness and more attractive to foreign investment Outlook for beef, lamb, wheat and dairy positive Wine, an important sector for smaller states and regional areas, has exports worth $.1billion 1 countries import Australian wines and value of exports grew in 1 markets in 1 International arrivals in Australia (millions) mn.. 1. 1.... 1991 199 1999 3 7 11 1 19 Sources: ABS, Westpac Economics Service exports ($bn) $bn 18 16 1 1 1 8 6 Service exports, total: +11%, 16 Q1 vs 1 Q1 Annual arrivals, financial years 1: +17% vs years ago Rolling annual, nominal Education Business services* Leisure travel Transportation Business travel mn Asia,. ex-china Europe Mar-9 Mar-96 Mar- Mar- Mar-8 Mar-1 Mar-16 Mar- NZ China Other US. 1. 1.. Sources: ABS, Westpac Economics 1. Source IBIS World. Source Australian Government Department of Education and Training. 3 Source ABS. Source Wine Australia Export Report. * Total: $17.9bn, including: legal & prof services $.1bn, financial services $3.9bn, IT & Telecomm $.9bn, Intellectual property rights $1.bn and other, $.9bn Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Australian labour market Conditions improving, although wage growth subdued Employment and hours worked (index) State unemployment rates (% trend) index 11 8 average = 1 11 18 16 Employment Total hours worked Avg hours worked 1 1 1 98 96 9 Jun-8 Jun-11 Jun-1 9 8 7 6 3 % Tas Vic NSW Jun- Jun-9 Jun-13 SA Qld WA Jun- Jun-9 Jun-13 % 9 8 7 6 3 Sources: ABS, Westpac Economics Sources: ABS, Westpac Economics Job ads and job vacancies (%) Wage Price Index growth (%) %.. % of labour force Advertisements (ANZ survey) Vacancies* (ABS survey) % Private Public % 1. 3 3 1. %qtr Yr end %qtr Yr end. 1 1. Jun-1 Jun- Jun-7 Jun-1 Jun-13 Jun-16 Sources: ABS, ANZ, Westpac Economics *ABS survey suspended between May 8 and November 9. Mar-98 Mar-8 Sources: ABS, Westpac Economics Mar-98 Mar-8 1 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Australian labour market Services sectors creating the vast bulk of new jobs Australia: more than just mining Australia: employment by sector (annual change, ) 3 9 1 8 13 Sector contribution to GDP (%) 1 11 9 1 7 Mining Manufacturing Construction Transport, Utilities Wholesale, Retail Household services Education & Health Government Finance Property, Business services Rural Communications Health & education Retail Construction Finance & real estate Agriculture Government Australian employment by sector 1 (%) Business services 6 8 16 13 3 8 13 9 1 6 Mining Manufacturing Construction Transport, Utilities Wholesale, Retail Household services Health, Social Assistance Education Public Administration Finance Business services Agriculture Wholesale & transp. Mining Utilities Leisure & hospitality Manufacturing - - 7 1 change in employment* Q 1 Q 16 *6mth avg level compared to 6mth avg level a year ago Sources: ABS, Westpac Economics. 1 Excludes ownership of dwellings and taxes less subsidies. Sources: ABS, Westpac Economics. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Australia s population and State breakdown Australian population by State (million) mn 8 7 6 3 1 7.7 6..8.6 NSW Vic (%) Qld (%)WA (11%) SA (7%) Tas ACT NT (3%) Sources: ABS, Westpac Economics 1.7 Population growth (average -1) (%) Total population: 3.9 million (Dec 1) 7% of the population live in states NSW and Victoria... Domestic final demand (% ann) % ann 6 Mar-1 yr Mar-16 yr.7 3.9.1. 3. 3..7.9.. - - -1.8 -. -6 -. -.7 WA Qld Aus SA Tas NSW Vic Sources: ABS, Westpac Economics State jobs markets (index, share of total employment). 1. 1. world.. -. Germany Hungary Poland Greece Japan Netherlands China France Italy UK Sweden US Canada New Zealand Spain India Indonesia Australia Sources: UN, Westpac. 1. 1... -. 116 11 18 1 1 index Dec 9 = 1 Vic (%) NSW (3%) Tas (%) 96 96 Jun-1 Jun-1 Jun-1 Jun-16 Jun-1 Jun-1 Jun-1 Jun-16 Sources: ABS, Westpac Economics WA (11%) Qld (%) SA (7%) index 116 11 18 1 1 3 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

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 Victoria 1 in 3 Australians live in NSW, with a similar number spread across WA and Qld, some % 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 is growing weakly The NSW economy, held back by the high interest rates prevailing during the mining boom, has responded strongly to low rates and to the lower dollar. Home building is in a catch-up phase and consumer spending growth is around trend, supported by gains in population, house prices and wage incomes In Victoria, conditions are also being supported by low interest rates and a sharply lower dollar. Home building activity has increased strongly and the service sectors (education and tourism) are expanding 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.6 million SIZE OF ECONOMY 17% of Australian GDP GROWTH 1.% forecast for 1/16 1.% forecast for 16/17 HOUSE PRICES Perth house prices down.7%yr to Jun-16 SA POPULATION 1.7 million SIZE OF ECONOMY 6% of Australian GDP GROWTH 1.% forecast for 1/16 1.7% forecast for 16/17 HOUSE PRICES Adelaide house prices up.1%yr to Jun-16 Sources: ABS, CoreLogic RP Data, Westpac Economics VIC POPULATION 6. million SIZE OF ECONOMY % of Australian GDP GROWTH 3.% forecast for 1/16 3.% forecast for 16/17 HOUSE PRICES Melbourne house prices up 11.%yr to Jun-16 QLD POPULATION.8 million SIZE OF ECONOMY 19% of Australian GDP GROWTH 3.% forecast for 1/16.% forecast for 16/17 HOUSE PRICES Brisbane house prices up.7%yr to Jun-16 NSW POPULATION 7.7 million SIZE OF ECONOMY 31% of Australian GDP GROWTH.7% forecast for 1/16 3.% forecast for 16/17 HOUSE PRICES Sydney house prices up 11.3%yr to Jun-16 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Credit growth expanding 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 Forecasts end 17 11 1 1 1 1 1 1 9-1 8-7 * rebased to avg -3 () - 6 - Jul- Jul-8 Jul-1 Jul-16 Sources: Westpac MI, NAB, Westpac Economics. Consumer sentiment generally improved in 1, responding positively to the RBA s February and May rate cuts but with choppy results month to month. Sentiment, having softened in early 16, again responded to the RBA s May rate cut, only to slip ahead of the Federal election result. Heightened job loss fears have been a recurring consumer theme in recent years but have shown some signs of easing in 16. Business confidence is at around historic averages, supported by improved business conditions Actual business conditions have lifted to above average readings as the non-mining economy strengthens, responding to lower rates and a lower dollar. (1) May-91 May-9 May-99 May-3 May-7 May-11 May-1 Sources: RBA, Westpac Economics. Credit grew by 6.% in the year to May 16, well up from.7% two years earlier, as housing and businesses responded to low interest rates Credit growth is expected to slow to.8% in December 16, with housing credit growth moderating further from 7% o 6.% as regulatory constraints limit investor credit growth, but cushioned by lower mortgage rates. Business credit growth is forecast to remain robust at 6.%, in line with the 6.% outcome for 1-1 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

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 6 - - -6 Mar- Mar- Mar-8 Mar-1 Mar-16 Sources: OECD, Westpac Economics. Fiscal position remains sound Net public debt levels as a % of GDP 1 8.6 8.7 89.1 6. 8.8 6.7 17.9 7. Aus NZ Canada Germany Spain US UK France Sources: IMF, Westpac Economics. Australia UK Canada US Euro 111. Italy 6 3 1 Sources: RBA, OECD, Westpac Economics. Sources: OECD, Westpac Economics. Major countries policy rates (%) -1 Jun-9 Jun-1 Jun-11 Jun-1 Jun-13 Jun-1 Jun-1 Jun-16 Australian unemployment rate is expected to remain little changed % 1 1 8 6 Australia UK Canada US Euro Major countries unemployment rate (%) Australia Canada UK US Euro Jun- Jun- Jun-8 Jun-1 Jun-16 6 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

7 New Zealand economy Key economic statistics FY1 FY16f Change NZD/USD, NZD/AUD and TWI GDP annual average growth 3.%.8% ( ppts) Inflation rate.%.7% 3 ppts Official cash rate (OCR).%.% ( bps) Unemployment rate 6.%.7% (3 ppts) Dairy payout (ex dividend) 1, $. $3.9 ($.) Source: RBNZ, Westpac Economics 1..9.8.7.6. Westpac NZD/USD forecast. NZD/AUD TWI (right axis).3 3 6 9 1 1 18 Source: RBNZ, Westpac Economics 8 8 7 7 6 6 GDP growth (%) New Zealand unemployment rate (%) 8 6 Qtr % chg Annual average % change Westpac forecast 8 6 1 11 1 9 % % Westpac Forecast 1 11 1 9 8 7 6 8 7 6 - - 6 8 1 1 1 16 Source: Statistics NZ, Westpac Economics - - 3 199 1993 1996 1999 8 11 1 17 Source: Statistics NZ, Westpac Economics 3 1 Westpac NZ Economics forecast (ex dividend), Fonterra forecast is $3.9/kg. Seasons ended May. 7 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

New Zealand economy Conditions remain challenging for dairy sector 8 Global dairy prices have lifted, but remain at low levels Prices continue to be dampened by lacklustre demand from China and strong growth in global supply, especially out of Europe Dairy payout and dividend 1 $1 $/Kg Ms $/Kg Ms $1 Westpac Economics expect the sustained period of lower prices will eventually lead to slower growth in global milk supply. However, this is taking some time. Westpac Economics payout forecasts assume dairy prices remain around current levels until late 16 before gradually starting to improve $8 $6 $ Dividend Milk price Westpac forecast $8 $6 $ While dairy prices remain in the doldrums, prices for some of New Zealand s other agricultural commodity exports have been holding up better. In addition, strong growth in tourism exports has provided an offset $ $ /3 / 6/7 8/9 1/11 1/13 1/1 16/17 $ $ Source: Westpac Economics NZ export commodity price index (NZD) Break-even dairy payout Indexed to 1 Jan Indexed to 1 Jan 3 3 3 3 1 1 1 1 Meat, Skins and Wool Dairy Products Horticultural Products Seafood Jan- Jan- Jan- Jan-6 Jan-8 Jan-1 Jan-1 Jan-1 Jan-16 Source: ANZ, Westpac 1 Westpac NZ Economics forecast (ex dividend), Fonterra forecast is $3.9/kg. Seasons ended May. $/KgMs $9 $8 $7 $6 $ $ $3 $ $1 $ 1-3- -6 7-8 9-1 11-1 13-1 1-16 Source: RBNZ, DairyNZ, Westpac, Fonterra Average Break-even effective payout Fonterra Payout (including (inlcuding dividends) Westpac forecast $/KgMs $9 $8 $7 $6 $ $ $3 $ $1 $ 8 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

New Zealand economy Housing market trends prompt policy response 9 House prices have been rising at a rapid pace, including strong growth in many regions outside of Auckland. This has been encouraged by record low interest rates. In addition, in parts of the country, such as Auckland, housing supply has not kept up with population growth. Increases in house prices and housing demand have seen credit growth accelerating In response, the RBNZ introduced new restrictions on mortgage lending on 18 July 16 (effective from 1 September) For investors Banks will require a % deposit - up from 3% - for at least 9% of investor loans. Restrictions for investor lending extended nationwide (previously Auckland only) For owner occupiers Required deposit level remains at % for at least 9% of owneroccupied lending. Restrictions for owner-occupier lending also extended nationwide (previously Auckland only) Household debt, share of disposable income (%) Index = 1 in 7 New Zealand house prices by region (index) 18 16 1 1 1 8 Jan-7 Jan-9 Jan-11 Jan-13 Jan-1 Source: REINZ, Westpac Economics Housing turnover Wellington Christchurch Other Nth Island Other Sth Island Auckland 18 16 1 1 1 8 Index = 1 in 7 % 17 % 17 1 1 7, 6,, NZ$m Mortgage approvals, value (left axis) House sales, number (right axis) sales 1, 9, 8, 7, 1 1, 3, 6,,, 1 1999 8 11 1 Source: RBNZ 1, 8 9 1 11 1 13 1 1 16 Source: RBNZ, REINZ 3, 9 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Westpac Banking Corporation ABN 33 7 7 11. Australian Home Lending

Australian housing market has sound fundamentals, Sector moderating Population versus dwelling stock (annual average change ) population dwelling stock* * net of demolitions implied by Census data; Westpac estimates 1 77 6 98 187 Sources: REIA, Westpac Economics. 36 196 3 11 1 136 1 19s 196s 197s 198s 199s s last years New dwelling completions v population growth - NSW (#) 3 139 Residential rental vacancy rates (%) 7 6 3 1 % Australia Sydney Melbourne investor housing boom Jun-86 Jun-91 Jun-96 Jun-1 Jun-6 Jun-11 Jun-16 Sources: ABS, Westpac Economics. Dwelling approvals: 3% off their peak ( mth, annualised) 3..8 1.9 1, 1, Population Completions trend sa Private approvals 1, 8, 6, 16,, Dec-81 Dec-8 Dec-89 Dec-93 Dec-97 Dec-1 Dec- Dec-9 Dec-13 Sources: ABS, Westpac Economics. 1 long run avg: 16k 8 RBA easing cycles May-96 May- May- May-8 May-1 May-16 Sources: RBA, Westpac Economics 31 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

House price growth and activity Some moderation, geographic differences After a surge in the first half of calendar 1 house price growth has moderated from 1% in June 1 to 6.6% in March 16. Price growth has lifted again in recent months but remains patchy and uneven across geographies and market segments. Growth rates continue to vary between capital cities 1 Sydney up 11.3%yr; average since 7: 7.% Melbourne up 11.%yr; average since 7:.8% Brisbane up.7%yr, average since 7: 1.% Perth down.9%yr, average since 7:.% Housing credit slowed ahead of RBA s May rate cut, to 6.%yr. Net credit growth is being tempered by high levels of repayment. Net of funds accumulating in offset accounts. Capital city dwelling prices growth rates (%) % 3 1 * 6mth annualised growth rates, all dwellings, composite of all measures, seasonally adjusted -1 Sydney Melbourne Brisbane Perth - Jul-1 Jul-11 Jul-1 Jul-13 Jul-1 Jul-1 Jul-16 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 other major capital cities). 1.8 1.6 1. 1. 1. %.8 Jun-81 Jun-86 Jun-91 Jun-96 Jun-1 Jun-6 Jun-11 Jun-16 Sources: ABS, CoreLogic RP Data, APM, Residex, Westpac Economics. Housing credit (6mnth % change annualised) 36 Total 3 Owner-occupier 8 Investor 16 1 7. 8 6..8 May- May- May-6 May-8 May-1 May-1 May-1 May-16 Sources: RBA, Westpac Economics. 3 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Investment property lending off highs Investor activity responded in 1 and into 1 to low vacancy rates, solid rental yields, and low interest rates, including low fixed rates offering attractive opportunities to hedge interest rate risk Regulators moved in 1 to contain growth in this sector and signs are that these measures are having an effect, with investor credit growth slowing from 11.9% in November 1 to.3% in November 1 on a three month annualised basis 1 Total market turnover remains below recent peaks and well below the levels seen in -3, when activity was strong (high turnover is often associated with greater speculative activity) Housing finance approvals: value of housing finance ($bn/mth) $bn/mth 1 1 'upgraders', ex-refinancing investor finance first home buyers 1 Source: RBA Dwelling turnover (quarterly # ) 18 16 1 1 1 8 6 Jun-96 Jun- Jun- Jun-8 Jun-1 Jun-16 Sources: CoreLogic RP Data, ABS, FIRB, Westpac Economics estimated investor purchases all dwellings units FIRB approvals May-96 May-1 May-6 May-11 May-16 Sources: ABS, Westpac Economics. Investor housing yields vs shares, deposits (% p.a.) 1 8 6 rental yield* ASX dividend yield 1yr term deposit *gross yield, median rent on bdrm unit as % of median unit price Mar-96 Mar- Mar- Mar-8 Mar-1 Mar-16 Sources: REIA, RBA, Westpac Economics. 33 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Australian households A cautious approach to household finances Australian households: debt to income ratio (%) % 18 13 8 3 * Westpac estimates prior to 1988 total (gross) debt total debt net of offset accounts total debt net of all deposits* trend since Jun-7 - Jun-8 Jun-87 Jun-9 Jun-97 Jun- Jun-7 Jun-1 Jun-17 Sources: ABS, RBA, Westpac Economics. Housing affordability: all dwellings includes funds held in mortgage offset accounts 6pts since peak Consumer survey: Wisest place for savings 7 6 3 1 % shares real estate deposits pay down debt Jun-98 Jun-1 Jun- Jun-7 Jun-1 Jun-13 Jun-16 Sources: Melbourne Institute, Westpac Economics. Household savings rate (% income) % 7 6 3 1 % 3 3 % income required to service mortgage of 7% median dwelling, all regions long run avg 1yr avg deteriorate improve if mortgage rate was 1% higher % income 1 1 9 6 8.1 3 1 estimates based on capital cities prior to 1993 1 Jun-81 Jun-86 Jun-91 Jun-96 Jun-1 Jun-6 Jun-11 Jun-16 Sources: CoreLogic RP Data, Residex, Westpac Economics. -3 Mar-9 Mar-96 Mar- Mar- Mar-8 Mar-1 Mar-16 Sources: ABS, Westpac Economics. 3 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Changes in the reporting of hardship Following guidance from APRA the industry is aligning treatment of hardship in delinquencies Westpac changed measurement and reporting of new hardship accounts in 1H16 and impacts will continue in H16 No impact on the risk profile of the Group or asset classes At the same time, hardship policies have tightened What is changing? Previous approach When an account enters hardship their position in the delinquency flow (3, 6, or 9 days etc) is frozen until they return to performing (or not) Changes made in 1H16 An account in hardship is no longer frozen and continues to migrate through delinquency buckets until +9days Accounts continue to be reported as delinquent until the customer has maintained repayments for 6 months called the serviceability period Average hardship period granted 3-months Hardship + serviceability period = 1 months average What is hardship? Accounts in hardship ($m) 1H16 9+ days mortgage delinquencies (bps) Allows customers the opportunity to reduce or defer current debt obligations in the short term so they can manage through a period of financial hardship (e.g. injury, illness, separation, natural disasters etc) May take the form of extending loan duration or restructuring Hardship solutions will differ based on customer circumstance, payment serviceability and recoverable position 1,17 88 99 Mar-16 Accounts in serviceability period Accounts in hardship exserviceability.6...3. Accounts in serviceability period 9+ days inc. hardship (ex-serviceability) Sep-1 Oct-1 Nov-1 Dec-1 Jan-16 Feb-16 Mar-16 3 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Westpac s Australian investment property portfolio Investment property lending IPL portfolio statistics 1H1 H1 1H16 Investment property loans (IPLs) 1 are full recourse Maximum LVR for stand alone investment property loans capped at 8% Majority of IPLs interest only, however repayment profile closely tracks the profile of the principal and interest portfolio Discounts to certain forms of income. For example dividends / rental income / bonus / overtime discounted by % Loan serviceability assessments include an interest rate buffer (at least.%), minimum assessment rate (7.%) and adequate surplus test Interest only loans are assessed on a principal and interest basis Specific credit policies apply to assist risk mitigation, including Average LVR at origination (%) 7 7 7 % IPL loans originated at or below 8% LVR 87 87 87 Average dynamic,3, LVR (%) 8 8 8 Average LVR of new loans, (%) 7 68 67 Average loan size ($ ) 9 97 99 Customers ahead on repayments including offset accounts (%) 6 6 6 +9 days delinquencies (bps) 36 31 38 Annualised loss rate (net of insurance claims) (bps) Holiday apartments may be subject to tighter acceptance requirements (e.g. holiday resort style developments require approval prior to individual loans being considered) LVR at origination (%) Applicants by gross income band (%) Additional LVR restrictions and additional income discounting apply to single industry towns and higher risk postcodes Owner Occupied IPL Owner Occupied IPL Minimum property size and location restrictions apply 1 Loans to Australian citizens and permanent visa holders using foreignsourced income restricted to maximum 7% LVR and discounts apply to foreign income recognition (up to %) From April ceased providing IPLs to non-residents 3 1-6 6-7 7-7 7-8 8-8 8-9 9-9 9-97 97+ 1 <= <=7 7<=1 1<=1 1<=1 1<= <= <=1m 1m+ 1 Self-Managed Super Fund (SMSF) IPLs are limited recourse however 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. Average LVR of new loans is based on rolling 6 month window. 36 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

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 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 Westpac 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.x 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 $13m net of re-insurance recoveries (H1: $13m) Lenders mortgage insurance LVR Band LVR 8% Low Doc LVR 6% Insurance Not required Australian mortgage portfolio (%) 8 LVR >8% to 9% Low Doc LVR >6% to 8% Generally insured through captive insurer, WLMI. LMI not required for certain borrower groups. Reinsurance arrangements: % risk retained by WLMI 6% risk transferred through quota share arrangements with Arch Capital Group Limited, Tokio Millennium Re, Endurance Re, Everest Re, Trans Re and AWAC Not insured LVR >9% Insured externally through Arch Capital Group Limited for all new business effective from 18 May 1 Transitional arrangements are currently in place with LMI policies initially written by WLMI and then fully reinsured with Arch Capital Prior to 18 May 1, external insurance provided by QBE and Genworth. Existing LMI policies remain in force Insurance statistics 1H1 H1 1H16 Insurance claims ($m) 1 3 Insured by third parties Insured by WLMI 3 WLMI loss ratio (%) 1 1 8 1 Gross written premiums ($m) 68 133 37 1 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. LMI gross written premium includes loans >9% LVR reinsured with Arch Capital. First Half 16 gross written premium includes $1m from transitional arrangements. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Mortgage portfolio stress testing outcomes Westpac regularly conducts a range of portfolio stress tests as part of its regulatory and risk management activities Australian mortgage portfolio stress testing as at 31 March 16 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 Key assumptions Stressed scenario Current Year 1 Year Year 3 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 $.6bn over three years for the uninsured portfolio (FY1: $.3bn) Cumulative claims on LMI, both WLMI and external insurers, of $87m over the three years (FY1: $968m) Stress loss basis point outcomes have decreased (Years 1 and ) mainly due to a decrease in dynamic LVRs. Cumulative losses however have increased compared to FY1 predominantly driven by increase in portfolio size WLMI separately conducts stress testing to test the sufficiency of its capital position to cover mortgage claims arising from a stressed mortgage environment Preferred capital ranges incorporate buffers at the Westpac Group level that also consider the combined impact on the mortgage portfolio and WLMI of severe stress scenarios Portfolio size ($bn) 391 377 369 367 Unemployment rate (%).8 11.6 1.6 9. Interest rates (cash rate, %) House prices (% change cumulative)..... (13.) (.) (6.) Annual GDP growth (%).8 (3.9) (.) 1.7 Stressed loss outcomes (net of LMI recoveries) 1 $ million 7 1,3 1,37 19 Basis points 3 1 9 9 1 Assumes 3% of LMI claims will be rejected in a stressed scenario. Represents 1H16 actual losses of $3m annualised. 3 Stressed loss rates are calculated as a percentage of mortgage exposure at default. 38 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Westpac Banking Corporation ABN 33 7 7 11. Additional Information

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 HSBC Bank Australia, 8, Clear focus on Australia and New Zealand Total income by geography 1 (%) Australia New Zealand Asia, Pacific, Europe & Americas 1 19 11 1 18 11 Strong market share positions Customers 13m Australian household deposit market share 3 3% Australian housing market share 3% Australian business market share 19% 86 63 83 7 Australian wealth platforms market share % New Zealand deposit market share 6 1% Westpac ANZ CBA NAB New Zealand consumer lending market share 6 % 1 Source: Company Annual Reports. Westpac, ANZ and NAB as at 3 September 1. CBA as at 3 June 1. APRA Banking Statistics February 16. Total resident assets refers to all assets on the banks' domestic books that are due from residents. 3 APRA Banking Statistics September 1. RBA Financial Aggregates, September 1. Plan for Life, June 1, All Master Funds Admin. 6 RBNZ, September 1. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Westpac business divisions A unique portfolio of brands Consumer Bank Sales and service, including residential mortgages, credit cards and personal loans, to consumer customers in Australia under the Westpac, St.George, BankSA, Bank of Melbourne and RAMS brands Business Bank Sales and service to micro, SMR and commercial business customers in Australia under the Westpac, St.George, BankSA and Bank of Melbourne brands BT Financial Group Australian Wealth and Insurance division with $6bn funds under management and $13bn funds under administration at 31 March 16 Division Cash earnings 1H16 ($m) Cash earnings 1H16-H1 % change Core earnings 1H16-H1 % change Consumer Bank 1, 6 Business Bank 988 3 3 BT Financial Group () () Westpac Institutional Bank 17 () () Westpac NZ (in NZ$) () () Other 1 93 () (19) Contribution to 1H16 cash earnings by division (%) Westpac Institutional Bank Leading Australasian institutional bank, with branches and representative offices in Australia, NZ, US, UK and Asia 13 11 37 Consumer Bank Business Bank 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 Other divisions 1 Other is Group Businesses, including Treasury. 1 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

High quality portfolio with bias to secured consumer lending Asset composition as at 31 March 16 (%) 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 availablefor-sale securities Derivative financial instruments Loans Life insurance assets Goodwill Other assets 1 1 1 77 67 17 1 Housing Business Institutional Other consumer Exposure by risk grade as at 31 March 16 ($m) Updated Standard and Poor s risk grade 1 Australia NZ / Pacific Asia Americas Europe Group % of Total AAA to AA- 9,33 6,997 1,339 9,369 1,7 19,6 11% A+ to A- 8,6,3 6,89, 3, 8,188 % BBB+ to BBB- 6,6 1,36 1,67 1,96 1,697 8, 9% BB+ to BB 7,113 1,6,189 87,6 9% BB- to B+ 6,96 9,78 18 17 31 66,88 7% <B+,6 1,63-6 - 7,19 1% Secured consumer,31 6,987 - - 1,8 3% Unsecured consumer,87,1 7 - - 1,87 % Total committed exposures (TCE) 81,99 96,611 1,9 1,9 6,3 96,31 Exposure by region (%) 8% 1% % % 1% 1% 1 Risk grade equivalent. Exposure by booking office. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Portfolio diversified across industries; Small rise in portfolio stress from low base Exposures at default 1 by sector ($bn) Stressed exposures by industry ($bn) Finance & insurance. Mar-1 Sep-1 Mar-16 Property Government admin. & defence 3. Property stress lower; Business Services higher Wholesale & Retail Trade Manufacturing Services 1. Mainly NZ dairy Property & business services 1. Transport & storage Agriculture, forestry & fishing Utilities Mining Mar-1 Sep-1 Mar-16.. Construction Accommodation, cafes & restaurants Other 6 8 1 Property & business services Agriculture, forestry & fishing Wholesale & Retail Trade Manufacturing Transport & storage Mining Construction Accommodation, cafes & restaurants Services Other Finance & insurance 1 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 nonbuilding construction, and industries serving the construction sector. 3 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Areas of interest: Commercial property Commercial property portfolio H1 1H16 Commercial property exposures % of TCE and % in stress Total committed exposures (TCE) $6.6bn $67.bn Lending $1.3bn $.1bn 1 8 Commercial property as % of TCE (lhs) Commercial property % in stress (rhs) 1 Commercial property as a % of Group TCE 7.% 7.6% Median risk grade 1 BB equivalent BB equivalent 6 1 % of portfolio graded as stressed 1 1.8% 1.3% - - % of portfolio in impaired.6%.% 1H9 H9 1H1 H1 1H11 H11 1H1 H1 1H13 H13 1H1 H1 1H1 H1 1H16 Commercial property lending Growth has moderated to 3% annualised Dedicated property risk managers provide additional risk assessment for all loans >$1m Sound underwriting standards with a maximum LVR 6%. Lower LVRs applied to areas of higher concerns e.g. low to mid % LVRs for Melbourne and Brisbane CBD and parts of Sydney Strong pre-sales are required typically 1% of the loan and pre-sales to non-residents limited Focus on lending to customers with strong track records of delivering projects on time and on budget Commercial property portfolio composition (%) 8 16 NSW & ACT QLD WA Institutional (diversified) Region (%) Borrower type (%) Sector (%) 11 9 6 VIC SA & NT NZ & Pacific 8 19 1 Exposures <$1m Developers >$1m Investors >$1m 1 Diversified Property Groups and Property Trusts >$1m 8 Commercial offices & diversified groups Residential Retail Industrial 1 Includes impaired exposures. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Areas of interest: Mining (including Oil and Gas) Mining portfolio (total committed exposure) by sector (%) Mining portfolio H1 1H16 9 Oil and gas Total committed exposures (TCE) $1.bn $11.8bn 1 Iron ore Lending $7.1bn $.9bn 8 6 Other metal ore Mining as a % of Group TCE 1.% 1.3% 1 Coal Mining services Median risk grade 1 BBB equivalent BBB- equivalent 13 Other % of portfolio graded as stressed 1 1.86% 3.3% % of portfolio in impaired.8% 1.6% Diversified by commodity, customers and region Focused on operators with efficient, lower cost operating models Approx. 6% of the portfolio is investment grade Increase in stress and impaired in 1H16 driven by a small number of downgrades and reduction in the portfolio Specific provisions to impaired assets at 6%. Approx. % of the economic overlay allocated to the mining sector Oil and Gas exposure $.bn Around half to LNG projects, generally large investment grade counterparties No exposure to high cost shale oil Australian and Canadian major bank mining exposures (including oil and gas) (A$bn) 3 1 Westpac AU Peer 1 17 AU Peer 1 AU Peer 3 CAD Peer 1 1 CAD Peer 1 CAD Peer 3 3 CAD Peer 7 CAD Peer 1 Includes impaired exposures. Changes in sectors partly relate to reclassification of certain conglomerate customers within the mining portfolio in 1H16. 3 Westpac is exposure at default (EAD) at 31 March 16. Australian peers 1 and 3 are EAD at 3 September 1. Australian peer is EAD at 31 December 1. All Canadian peers EAD at 31 January 16, except peers and 3, where mining exposure (excluding oil and gas) includes drawn commitments only. Conversion rate AUD/CAD.99. Source Company reports and presentations. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Areas of interest: Agriculture Agriculture portfolio Agriculture lending comprises 1.79% of Group TCE Australian agri portfolio improving. NZ dairy portfolio has been the sector under more stress from declines in milk prices The New Zealand dairy portfolio: Focused on quality operators with efficient, lower cost models Within the main regions farms can operate on a low cost farming model due to climate / soil types Majority of dairy security held in prime geographic farming areas New Zealand s cost structure at the lower end of global competitors Group agriculture portfolio Sep-1 Mar-16 Total committed exposures (TCE) $18.1bn $17.1bn Lending $1.1bn $1.bn Agriculture as a % of Group TCE 1.9% 1.79% Median risk grade 1 BB Equivalent BB Equivalent % of portfolio graded as stressed 1.8%.8% % of portfolio in impaired.3%.8% New Zealand agriculture portfolio Sep-1 Mar-16 Group agriculture portfolio by sector (%) Total committed exposure (TCE) NZ$7.8bn NZ$8.1bn Agriculture as a % of TCE 7.9% 7.9% % of portfolio graded as stressed 1 3.9% 7.81% 9 9 3 3 38 Grain, sheep & beef Dairy cattle Horticulture and fruit Services to agriculture % of portfolio in impaired.3%.3% 3 Other livestock farming Fishing The increase in stress is driven by the downgrade of a number of customers, including one large customer Other 1. Includes impaired exposures. 6 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Stable sources provide 83% of all funding Liquidity Coverage Ratio ($bn) Sep-1 Mar-16 %Mov t Mar 16 Sep 1 High Quality Liquid Assets 1 (HQLA) 61 66 9 Committed Liquidity Facility (CLF) 66 9 (11) Total LCR liquid assets 17 1 () Customer deposits 6 63 (3) Wholesale funding 1 13 (1) Other flows3 (1) Total cash outflows 1 98 (6) LCR 11% 17% Customer deposit average run off rate 1.% 1.3% Unencumbered liquid assets ($bn) Self securitisation Private securities 7 136.7 13.6 138. 6. 7. 7.8 19. 18.6 13.8 1.9 Stable funding ratio (%) 83.% 83.8% 83.3% 6. 6. 7. 1.6 1. 9.3..9.1 9.7 1. 1. 1.8 1.7 1. 7. 7. 7.8 9.7 9.3 6. Wholesale Onshore <1yr Wholesale Offshore <1yr Wholesale Onshore >1yr Wholesale Offshore >1yr Securitisation Equity 6 Customer deposits Cash, government and semigovernment bonds 7. 6. 66.9 Mar-1 Sep-1 Mar-16 Total short term wholesale debt outstanding at 31 Mar 16 Mar-1 Sep-1 Mar-16 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. Includes long term wholesale funding with a residual maturity less than or equal to 1 year. 6 Equity excludes FX translation, Available-for-Sale securities and Cash Flow Hedging Reserves. 7 Private securities include Bank paper, RMBS, and Supra-nationals. 7 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Appendix 1: Cash earnings adjustments Cash earnings adjustment 1H1 $m H1 $m 1H16 $m Description Reported net profit 3,69,3 3,71 Partial sale of BTIM (66) Capitalised technology cost balances Amortisation of intangible assets Acquisition transaction and integration expenses 3 73 76 79 3 31 7 Lloyds tax adjustments (6) Fair value (gain)/loss on economic hedges 6 (9) 83 Ineffective hedges (1) 6 Treasury shares 37 (36) 8 Buyback of government guaranteed debt (1) Cash earnings 3,778, 3,9 During Second Half 1 the Group recognised a significant gain following the partial sale of the Group s shareholding in BT Investment Management (BTIM). This gain has been treated as a cash earnings adjustment given its size and that it does not reflect ongoing operations Following changes to the Group s technology and digital strategy, rapid changes in technology and evolving regulatory requirements a number of accounting changes were introduced in Second Half 1, including moving to an accelerated amortisation methodology for most existing assets with a useful life of greater than three years, writing off the capitalised cost of regulatory program assets where the regulatory requirements have changed and directly expensing more project costs. The expense recognised in Second Half 1 to reduce the carrying value of impacted assets has been treated as a cash earnings adjustment given its size and that it does not reflect ongoing operations The merger with St. George, the acquisition of J O Hambro Capital Management and the acquisition of select Australian businesses of Lloyds Banking Group (Lloyds) resulted in the recognition of identifiable intangible assets. The commencement of equity accounting for BTIM also resulted in the recognition of notional identifiable intangible assets within the investments in associate s carrying value. The intangible assets recognised relate to core deposits, customer relationships, management contracts and distribution relationships. These intangible items are amortised over their useful lives, ranging between four and twenty years. The amortisation of these intangible assets (excluding capitalised software) is a cash earnings adjustment because it is a non-cash flow item and does not affect cash distributions available to shareholders Costs associated with the acquisition of Lloyds have been treated as a cash earnings adjustment as they do not reflect the earnings expected from the acquired businesses following the integration period Tax adjustments arising from the acquisition of Lloyds have been treated as a cash earnings adjustment in line with our treatment of Lloyds acquisition and integration costs Unrealised fair value (gain)/loss on economic hedges: FX hedges on future NZ earnings and accrual accounted term funding transactions are reversed as they may create a material timing difference on reported earnings in the current period, which does not affect cash earnings over the life of the hedge The (gain)/loss on ineffective hedges is reversed in deriving cash earnings for the period because the gain or loss arising from the fair value movement in these hedges reverses over time and does not affect the Group s profits over time Under AAS, Westpac shares held by the Group in the managed funds and life businesses are deemed to be Treasury shares and the results of holding these shares are not permitted to be recognised as income in the reported results. In deriving cash earnings, these results are included to ensure there is no asymmetrical impact on the Group s profits because the Treasury shares support policyholder liabilities and equity derivative transactions which are re-valued in determining income The Group previously bought back certain Government guaranteed debt issues which reduced Government guarantee fees (7bps) paid. In undertaking the buybacks, a cost was incurred reflecting the difference between current interest rates and the rate at which the debt was initially issued. In the reported result, the cost incurred was recognised at the time of the buyback. In cash earnings, the cost incurred was being amortised over the original term of the debt that was bought back, consistent with a 7bp saving being effectively spread over the remaining life of the issue. The cash earnings adjustment gives effect to the timing difference between reported results and cash earnings 8 Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow

Appendix : Cash earnings and reported net profit reconciliation Cash earnings policy Westpac Group uses a measure of performance referred to as cash earnings to assess financial performance at both a Group and divisional level This measure has been used in the Australian banking market for over a decade and management believes it is the most effective way to assess performance for the current period against prior periods and to compare performance across divisions and across peer companies To calculate cash earnings, reported net profit is adjusted for Material items that key decision makers at the Westpac Group believe do not reflect ongoing operations (both positive and negative) Items that are not considered when dividends are recommended, such as the amortisation of intangibles, impact of Treasury shares and economic hedging impacts Accounting reclassifications between individual line items that do not impact reported results Reported net profit and cash earnings 1 adjustments ($m) H1 1H16 Reported net profit,3 3,71 Partial sale of BTIM (66) - Capitalised technology cost balances 3 - Amortisation of intangible assets 76 79 Reported profit and cash earnings ($bn) Acquisition transaction and integration expenses 31 7 Reported profit Cash earnings Lloyds tax adjustments (6) - 3.3 3. 3.6 3. 3.6 3.8 3.9 3.9 3.6 3.8.. 3.7 3.9 Fair value (gain)/loss on economic hedges (9) 83 Treasury shares (36) 8 Ineffective hedges 6 1H13 H13 1H1 H1 1H1 H1 1H16 Cash earnings, 3,9 9 1 Cash earnings is not a measure of cash flow or net profit determined on a cash accounting basis, as it includes non-cash items reflected in net profit determined in accordance with AAS (Australian Accounting Standards). The specific adjustments outlined include both cash and non-cash items. Cash earnings is reported net profit adjusted for material items to ensure they appropriately reflect profits available to ordinary shareholders. All adjustments shown are after tax. For further details refer to Appendix 1. Westpac Group First Half 16 Fixed Income Presentation I July 16 I Asia Roadshow