Westpac Institutional Bank Philip Coffey - Group Executive 31 July 2003
Agenda Business overview Transformation Expanded capabilities and growth path 2
Investors Business overview: why WIB is different Specialised Capital Group Banking Customers Corporate and Institutional Banking - Originations - Advisory - Transactional Sales Debt Capital Markets Financial Markets Investor Sales Structured Finance Risk Finance P&P 3
Business overview: solid platform Revenue key driver of growth Revenue by product category - 1H03 600 500 400 Corporate Advisory and Custody 2% Derivative Sales 8% Trade & International 8% Financing 16% 300 200 SCG 3% FM Trading 16% 100 Transactional 8% 0 $m 1H01 2H01 1H02 2H02 1H03 Revenue Expenses NPAT Structured Finance 15% Capital Markets 8% FX Sales 16% 4
Business overview: a question of balance WIB On Balance Sheet Lending WIB Impaired Assets Impaired Assets 20.0 Australia & New Zealand Offshore 700 600 Ratio Imp. Assets / Loans & Acceptances. 3.5% 3.0% A$ bn 15.0 10.0 500 400 300 564 583 466 2.5% 2.0% 1.5% 5.0 200 363 1.0% - Sep 1999 Sep 2000 Sep 2001 Mar 2002 Sep 2002 Mar 2003 100 245 214 0.5% 0 0.0% FY 99 FY 00 FY 01 1H 02 FY 02 1H 03 $m % 5
Business overview: good, but not good enough Australian Lead Bank Bonds/Semi's/Credit Securities* 1 ANZ 1 WBC 1 CBA 2 WBC =1 UBS 2 WBC FX* New Zealand Lead Bank Syndicated Loans Trade and International 1 BNZ 1 ANZ 1 ANZ 2 WBC 2 WBC 2 WBC Debt Capital Markets Transactional Interest Rate Derivatives * 1 WBC 1 ANZ 1 Deutsche 2 NAB 2 WBC 2 WBC Note * Volume based share Source: Greenwich Surveys, Australia/New Zealand 6
Does being number 1 matter? Lead Bank status critical to maximise value Corporate & Institutional clients nominate the 1-2 banks they consider their lead bank Why is it important? Accounts for over 55% (and up to 70%) of market share across core product offerings Access to high value transaction deals Cross sell opportunities (average product cross sell is 4.5 for Lead Bank versus 2.9 for Non Lead Bank) What drives Lead Bank status? Relationships Broad range of quality products Customer knowledge Solutions and service 7
Transformation: we have thoroughly reviewed our business Review undertaken to help us achieve our vision of being the No.1 wholesale bank in Australasia Looked at how we operate, our processes, and how we can drive profitability through enhanced customer satisfaction and product excellence Utilised own high potential team, supported by global consultants Found we have the critical capabilities required to deliver but there is opportunity to tighten execution in several areas and identified some key growth opportunities 8
Transformation: our way forward Completed Initiatives underway Goal Organisational alignment Customer segmentation Core product development Risk optimisation Credit Portfolio Management No. 1 Australasian Wholesale Bank Process mapping and alignment Expense efficiencies New capability focus 9
Transformation: our way forward Completed Initiatives underway Goal Organisational alignment Customer segmentation Core product development Single product coverage InstoFX IT enhancements Risk optimisation Credit Portfolio Management No. 1 Australasian Wholesale Bank Process mapping and alignment Sustainable earnings & Growth Expense efficiencies Operating disciplines & value for money New capability focus Structured investments Specialised funds Energy Equity derivatives 10
Pinpointing growth opportunities 40% WIB Product Positioning vs Market Size and Growth 35% Capital Markets WIB Market Share (Revenue) 30% 25% 20% 15% 10% Transaction Banking Foreign Exchange Project & Syndications Debt Financing Structured Securities Corporate Securities Custody Interest Rates Above Natural Market Share Core Product Natural Market Share Below Natural Market Share 5% 0% Advisory (addressable market) Energy Structured Investments (Institutional) Structured Investments (Retail) Specialist Asset Management -5% 0% 5% 10% 15% 25% 30% Market Profit Pool Growth Rate Notes: Source: Size of bubble represent market profit pool size WIB analysis 11
Building new capabilities Building structure and capabilities in alternative assets Acquired specialist asset management capability through Hastings Funds Management Organised to facilitate acquisition, structuring and distribution whilst: Separation of responsibility to achieve corporate governance Product Manufacturing Capability Distribution Capability Hastings Funds Management Quadrant WBC Specialised Funds Property Public Private Partnerships Retail and Institutional investors looking for wealth creation opportunities in alternative asset classes WIB Pipeline Coordinated deal team across WIB, creating innovative product Institutions BT - IFA s High Net Worth desk Private & Priority Bank Business Bank WBC Planners 12
Getting results: Moorebank Property Trust Department of Defence site at Moorebank, valued at around $200m Sale and leaseback transaction with over 40 bidders WIB arranged debt and equity, Stockland Property Group was cornerstone investor $70m of securities distributed to retail investors Largest single site industrial property trust 13
Getting results: Westpac Office Trust New Westpac headquarters WIB structured investment including Initial capital guarantee Instalment, leveraged investments Yield based on WBC rental stream Offer closed - $ 183m in first instalments received Largest single site office property trust 14
Getting results: specialised funds Hastings connection and processes agreed First asset acquired - Electranet at circa $120 million Leveraged: - WIB balance sheet and customer knowledge and - Hastings asset management and investor base Attracting institutional and retail investors 15
Getting results: specialised funds pipeline Global Renewables Limited Hastings Retail Infrastructure Trust Short listed for the Lane Cove Tunnel Consortium member Mitcham - Frankston Freeway Various others 16
Distribution: what did we say last year? Tapping our large retail customer base Leverage: wholesale product expertise; retail investor relationships; and external planners Expanding range of investments: capital guaranteed offerings warrants property trusts hybrid equity / mezzanine debt Expand investment range for retail investors 8 A$m $1,500 $1,000 $500 $0 Westpac Investor Update 2002 Phil Coffey Distributing to retail investors growth opportunity Retail distribution volume of products sold 1999 2000 2001 2002 FY Forecast Leverage our wholesale product expertise 7 Products across a variety of asset classes 2002 FY Forecast Property 4% Fixed interest 66% Equity 11% Cash 19% Westpac Investor Update 2002 Phil Coffey 17
Distribution: how did we go? $1.7bn products sold over the last ten months The number of structured products offered to retail customers increased from 14 in 2001 to 24 in 2003 $500m worth of cross sell into other Westpac retail products Retail distribution volume of products sold $2,000 $1,500 $1,000 $500 $0 Property 14% 1999 2000 2001 2002 To July 2003 Products across a variety of asset classes From 1999 to June 2003 Equity 11% Cash 6% Hybrid Equity 15% Other Fixed Interest Products 54% 18
In summary Solid platform and a diverse portfolio of businesses Critical capabilities and initiatives to achieve lead bank status Pinpointed opportunities for growth and delivering with new capabilities 19
Disclaimer The material contained in this presentation is intended to be general background information on Westpac Banking Corporation and its activities as at 31 July 2003. 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. 20