Credit Suisse First Boston Asian Investment Conference Philip Chronican Chief Financial Officer 17 March 25 Westpac at a glance Established 1817 Top 1 bank globally 1 Core markets of Australia, New Zealand and near Pacific 8.2 million customers Leader in corporate sustainability 1 Euromoney June 24 (rank of 76 by shareholders equity) 3 Sept 24 Total assets A$245bn Cash return on equity 21% Cost to income ratio 49% Market cap A$34bn Cash earnings A$m 2,4 2, 1,6 1,2 8 4 2,559 2,271 2,244 1,95 1,77 1,548 1,354 1,314 1,127 914 CAGR 11% 1995 1996 1997 1998 1999 2 21 22 23 24 2
Key points of differentiation Strategy - Focused on core markets of Australia, New Zealand and near Pacific - Balanced wealth management position Customer franchise - Large customer base skewed towards higher value segments Leader in sustainability - Corporate governance and sustainability ethic embedded in the organisation Stable and proven management team Strong revenue growth and cost growth profile - Sustainable value gap between revenue growth and cost growth 3 Driving the gap between revenue and expenses Revenue and expense performance (A$m) 8,5 7,5 6,5 5,5 4,5 3,5 2,5 1,5 1999 2 21 22 23 24 5 Year CAGR 1 Revenue 7% 2 Expenses 3% Core earnings 12% Cash earnings Cash EPS ROE (5 year avg) 5 year CAGR 11% 11% 2% 1. Underlying basis (excl. significant items but not adjusted for acquisitions and disposals) 2. Excludes goodwill amortisation 4
Consistently delivering strong growth and returns Economic profit (A$m) 1,8 1,6 1,4 1,2 1, 8 6 4 2 13% 5 year CAGR* # * 1999 2 21 22 23 24 # Assumes 2H99 dividend was fully franked * Excludes significant items in 22 Total Shareholder Return (TSR) for period 1 Jan 22 31 December 24 Company Westpac ANZ Commonwealth NAB TSR (%) 51 49 43 22 Source: Mellon 5 Housing growth slowing, quality remains high Housing credit growth has fallen from peak of above 21% to 14% Higher growth segments have eased and prices are softer Competition has intensified as growth has slowed Housing credit growth Annual % Change 2 16 12 Signs of industry restructuring emerging, including brokers sharing in overall easing in sector profitability 8 4 Long term average 14.5% Forecasts (To Sep 25) Sep-9 Sep-92 Sep-94 Sep-96 Sep-98 Sep- Sep-2 Sep-4 6
Australian Business and Consumer Banking Business and Consumer Banking delivered 52% of the group s cash earnings in 24 Business and Consumer Banking Cash Earnings (A$m - year ended 3 September) Maintaining strong earnings momentum Competition noticeably increased over last 6 months When assessing competitive challenges Westpac focuses on maximising medium term shareholder value and we will not follow unsustainable or uneconomic pricing initiatives 1,6 1,4 1,2 1, 8 6 4 2 1,35 1,72 1,165 22 23 24 7 Westpac housing delivering profitable growth Consistently delivered profitable growth in housing lending with some loss of market share Housing lending growth Change in spreads Change in market share September 24 full year outcome 12% Down 3% Down 6bps December qtr 24 outcome 6% (Annualised) Up 1% Down 3bps Initiatives to enhance housing growth include: - Implementation of a new sales management program - Enhancing competitiveness in broker channel with improved relationships and supported by a reduction in commissions by some peers 8
Business lending continues to perform well Success of business markets strategy continues to deliver value - Increasing points of contact - Roll-out of CRM platform - Industry packages - Improved process technology Business lending (SME and Middle Market) up 15% in 24 against market growth of around 8% December quarter 24 annualised growth of 7% with spreads 1% higher Quality remains sound Australian business credit market share (%) 14% 12% 1% Source RBA, Westpac 8% 1994 1996 1998 2 22 24 Successful introduction of industry packages Industry Industry A (22) Industry B (22) Industry C (21) Industry D (23) Industry E (23) Avg rise in footings per connection 18% 14% 7% 7% 4% 9 Deposit market competition is more intense Proliferation of high yield at-call deposit accounts has increased deposit competition Competitive response seeks to protect relationships and achieve an appropriate balance between volume growth and spreads Launched new online product Max-i Direct Interest rates at 28 February 25 Official Cash Rate Competitor 1 BankWest Suncorp ING Direct Citibank 5.25% Online at-call rate with minimum balance of $1 6.% 5.4% 5.25% 5.4% 1. Various conditions apply to each account offered Total deposits Deposit spreads Change in market share September 24 full year outcome 7% Up 7% Up 2bps December qtr 24 outcome 11% (Annualised) Down 2% Down 1bps 1
New Zealand Retail maintaining momentum New Zealand delivered 16% of the group s cash earnings in 24 Benefits flowing from repositioning of business. In 24: - Employee satisfaction up 6% - Customer satisfaction up 13% Mortgage price war impacted industry margins Westpac NZ experienced some loss of share but minimised spread decline (approx 5bps) New Zealand Cash Earnings (A$m - year ended 3 September) 45 4 35 3 25 2 15 1 5 278 342 46 22 23 24 11 New Zealand status on current issues Incorporation Outsourcing Tax NZ Class Shares Agreed to incorporate key operations in NZ Incorporation model yet to be determined, although agreed that Westpac can operate both an incorporated entity and branch in NZ Cost impact not expected to be material Draft outsourcing policy issued for comment Industry submission lodged, further discussion expected A number of banks are in dispute over structured finance transactions conducted since 1999 Legislative change has removed attractiveness of current and future transactions In future will be subject to Australian franking Restructuring options under consideration, decision expected in May 25 12
BT ahead of expectations BT delivered 8% of the group s cash earnings in 24 Integration now behind us and on-track to deliver $116m in ongoing synergies from 25 Strong fund performance - top quartile over 1yr and 2yrs BT Cash Earnings (A$m - year ended 3 September) 25 2 15 128 169 196 Strong links into Westpac customer base - Corporate super and Wrap one of the fastest growing in the market Strong industry conditions 1 5 22 23 24 13 Growth in wealth products remains strong Current Australian market share Product Retail Corporate super Wrap and master trust Life and risk Margin lending Broking Institutional Market share (%) 8. 6.5 9.8 6.6 13.7 1.6 1.4 Rank 5 5 4 7 n/a 3 23 Share of new business Market share Rank (%) 1. 5 13.8 2. 8.4 16.3 1.4 n/a 2 3 5 n/a 3 n/a Sources: Retail& Wrap & M trust - ASSIRT Preliminary market share report Sept 24 Corporate super - Dexx&r Employer Super League Table Sept 24 Life and risk - Dexx&r Life analysis, Quarterly Statistics ending Sept 24 Margin lending - BT loan book verses RBA industry total Dec 24 Broking - ASX market analysis Dec 24 Institutional - Investor Supermarket Dec 24 14
Westpac Institutional bank (WIB) performing well WIB delivered 19% of the group s cash earnings in 24 Strategy to reclaim lead bank status is paying dividends - Customer related revenues up 12% in 24 Institutional Bank Cash Earnings (A$m - year ended 3 September) 6 5 4 384 489 Specialised Capital Group continuing to grow rapidly 3 2 1 275 22 23 24 15 Expenses continued tight management Strong revenue growth in 24 enabled an increase in investment spend leading cost growth towards top of medium range of 2 4% What we absorbed in 24: - Compliance spend $12m - Project costs expensed $214m - Restructuring charges $24m A$m Operating expenses Epic Unit Trusts 24 3,94 (22) (3) 23 3,763 % Change 4.7% Growth in 25 full year expenses will again be at the top end of range. First half may exceed due to: - Strength of NZ dollar - Impact of extra three months of EPIC expenses in 1H - Project spend timing Private equity performance fees Gross up 1 month BTFM $NZ impact Adjusted operating expenses (13) - 6 3,98 15 3,778 3.4% 16
Compliance projects tracking to plan Major compliance projects Basel II IFRS Sarbanes Oxley Anti-money Laundering 25 expected spend (A$m) 1 11 5 5 Status Seeking accreditation by 26 and implementation in 28 Capital release on transition dependent on APRA although capital intensity of business written after 28 should be substantially reduced Project tracking to plan. First IFRS reporting date March 26 New APRA guidelines have no material impact Program requiring significant documentation and audit attestation of control procedures supporting financial accounts. Implementation deferred to 26. Preparation for new anti-money laundering legislation well underway Major systems and procedural changes required 17 Economic outlook remains supportive Australia and New Zealand economic fundamentals sound: - Solid domestic demand - Unemployment at 3 year lows Business and consumer surveys continue to portray a positive outlook Recent 25bps rise in interest rates supports continued sustainable economic growth Key economic indicators Financial year ended Australia GDP Unemployment New Zealand GDP Unemployment Sep 4 % 4. 5.7 4.6 4.2 Sep 5 % 2.2 5.3 2.9 3.5 Source: Westpac 18
Credit growth returning to long term trend Australian credit growth (%) 24 2 16 12 8 4-4 -8 Sep-9 Sep-92 Sep-94 Sep-96 Sep-98 Sep- Sep-2 Sep-4 Housing Business Total (Aust) Total credit average Total Housing average Forecasts (To Sep 25) 24 2 16 12 8 4-4 -8 Source: RBA, Westpac 19 Stressed exposures continue to decline Categories of stressed exposures as a percentage of total commitments (%) 1.6% 1.4% 1.2% 1.% 2,727* 3,61* 2,598* 2,623* Watchlist & substandard 9 days past due well secured Impaired 2,667*.8% 2,41* 2,18*.6%.4%.2%.% Sep 99 Sep Sep 1 Sep 2 Sep 3 Sep-4 1Q5 * Total A$m amount of watchlist, substandard, 9 Days past due but well secured and impaired loans 2
Forward credit indicators in good shape Housing Portfolio - 9 day delinquencies (%) 1.5 Aust. Business Banking - 9 day delinquencies (3 month moving average) (%) 2.5 1..5. 1.4.64.38.26.25.23.15.15.16.15 '96 '97 '98 '99 ' '1 '2 '3 '4 1Q5 2. 1.5 1..5. 1.4 1.47 1.27.9.75.5.65 1999 2 21 22 23 24 1Q5 Consumer Unsecured - 9 day delinquencies (%) 2.5 2. 1.98 1.5 1.14.9 1.7 1.2.96 1..5.96.82.95.63. '96 '97 '98 '99 ' '1 '2 '3 '4 1Q5 WIB - impaired assets to committed exposure (%).7.6.5.4.3.2.1..29.14.37.34.25.63.53.51.48.37 '96 '97 '98 '99 ' '1 '2 '3 '4 1Q5 21 Recent influences on capital and dividend policy At 3 September 24, ACE ratio was around the midpoint of the target range Recent developments improving capital flexibility: - Run-off of EPIC assets, A$297m - APRA clarification on treatment of pension fund surpluses/deficits and embedded value - Additional retained earnings Ongoing constraints on capital flexibility: - Remaining APRA issues on IFRS - Future Specialised Capital Group requirements Dividends per share (cents) 1 8 6 47 39 43 4 33 28 2 1995 Pay-out ratio (%) 7 65 63 62 6 6 57 57 57 56 57 54 55 53 5 45 1995 1996 1996 1997 1997 CAGR 13% 1998 1998 1999 2 62 54 21 22 86 78 7 1999 2 21 22 23 24 23 24 22
Outlook remains positive More competitive environment Actively managing the growth/margin trade-off Asset quality remaining first class Good earnings momentum across the group Continue to be comfortable with the outlook for the year 23 Credit Suisse First Boston Asian Investment Conference Philip Chronican Chief Financial Officer 17 March 25
Disclaimer The material contained in this presentation is intended to be general background information on Westpac Banking Corporation and its activities. 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 financial information contained in this presentation includes non-gaap financial measures. For a reconciliation of these measures to the most comparable GAAP measure, please refer to full year financial statements filed with the Securities Exchange Commission and Australian Stock Exchange. 25