Credit Suisse Asian Investment Conference Gail Kelly Chief - PDF document

Credit Suisse Asian Investment Conference Gail Kelly Chief Executive Officer March 2010 Westpac Banking Corporation ABN 33 007 457 141 Well positioned to sustain shareholder returns � Operating environment improving with healthy Australian economy � Westpac’s strong portfolio of businesses is delivering � Transformational merger with St.George � Low risk profile, and strong balance sheet � Well positioned for the changing operating environment � Consistent performance and solid dividend pay-out 2 The Westpac Group – Credit Suisse AIC 2010

Australia avoided a recession and is positioned for growth � 2009 GDP 2.7% GDP growth: international comparison (%) Australia* year to * yr to Dec '09 US * � Unemployment of 5.3% is Sep 2009 NZ down from a peak of 5.8% Canada UK * euro zone � Economy supported by: Germany Japan − Responsive monetary policy Ireland -8 -6 -4 -2 0 2 4 − Timely fiscal stimulus Sources: Treasury budget papers Unemployment rate (%) − Strong banking sector 12 12 Euro Area 10 10 � Mining infrastructure and 8 8 Australia proximity to Asia will help US 6 6 sustain growth 4 4 2 2 Japan 0 0 Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10 Sources: Facset, Westpac Economics The Westpac Group – Credit Suisse AIC 2010 3 Westpac Banking Corporation – at a glance � Australia’s first bank Pro-forma 2 30 September 2009 A$4,627m � One of the four major Australian Cash earnings US$3,390m 5 banks Return on equity 13.8% � One of only 10 banks globally A$590bn Total assets rated ‘AA’ or higher 1 , US$519bn 5 � Focused on Australia & New Zealand Australian market share Dec 09 Housing 3 24% � 10 million customers Business 3 18% � Leader in sustainability Household deposits 3 24% Wealth platforms 4 20% 1 Rated AA and higher by Standard & Poor’s. As at 30 Sept 2009. Excludes government-owned banks. 2. Reported results adjusted to include the addition of the cash earnings of St.George for the full period (pro forma adjustments) and for material items to ensure they appropriately reflect profits normally available to ordinary shareholders (cash earnings adjustments). Refer to Westpac’s 2009 FY Results for details on the basis of preparation. 3. Source APRA share of banking system 4. Source: QDS Plan for Life All Master Funds, September 2009 share of annual net flows. 5. $A/US$ Average FY09 exchange rate 0.7327 (for cash earnings) $A/US$ spot September 09 exchange rate 0.8800 (for assets) 4 The Westpac Group – Credit Suisse AIC 2010

Strong portfolio of businesses and brands % of FY09 Business Brand Segment earnings Westpac Retail & Consumer & SME banking Business Banking 41% RAMS Mortgage specialist Consumer, SME and St.George corporate 23% Bank SA Consumer & SME New Zealand consumer 4% Westpac New Zealand and SME 11% BT Financial Group Wealth management Corporate & institutional 8%* Westpac Institutional Bank banking * 2009 Performance was impacted by high impairment charges, the proportion of earnings is typically much larger The Westpac Group – Credit Suisse AIC 2010 5 Customer focused strategy is delivering Westpac RBB growth versus banking system 1 (times) St.George growth versus banking system 1 (times) 2.2 2.2 Mortgages Mortgages 1.9 1.9 Deposits Deposits 1.6 1.6 1.3 1.3 1.0 1.0 0.7 0.7 0.4 0.4 2H08 1H09 2H09 1Q10 2H08 1H09 2H09 1Q10 Westpac Institutional Bank – Relationship Strength 2 Share of new Wealth Market share 3 business 4 95 WBC Nearest Peer 85 share share Product Rank Rank (%) (%) 75 Wealth 65 20 1 33 1 Platforms 55 Corporate Super 10 5 18 4 2007 2008 2009 1. APRA Monthly Banking Statistics 2. The Relationship Strength Index is a single measure combining a range of service quality factors, including Relationship Manager capability, visibility, knowledge of client’s business and industry, and understanding and advice. The number is a statistical combination of evaluations. Peter Lee (July/August 2009). Peer group includes ANZ, CBA and NAB 3. Source: QDS Plan for Life All Master Funds, 4. September quarter 2009 share of annual net flows 6 The Westpac Group – Credit Suisse AIC 2010

St.George merger enhances Westpac’s growth profile � 40% uplift in distribution, 3 million more Expanded customers distribution � Maintaining distinct brands, enables the Multi-brand Group to support more customers flexibility � $400m in merger synergies Improved efficiency profile � Heading to a sub 40% cost to income ratio � Increases product sales in insurance, Enhanced wealth and superannuation cross sell The Westpac Group – Credit Suisse AIC 2010 7 Low risk portfolio � Exposures predominantly in Exposure by region (%) at 30 Sep 2009 Australia/New Zealand – markets we know well NZ/Pacific 10% Australia � Portfolio biased to retail 89% customers and mortgages Other 1% � No sub-prime or problem conduit exposures Proportion of lending (%) at 30 Sep 2009 Business 23% Mortgages Corporate 61% 11% Other consumer 5% 8 The Westpac Group – Credit Suisse AIC 2010

Strong balance sheet � High provision coverage: Collectively assessed provisions/credit risk weighted assets (bps) − Leads the sector 142 143 125 105 2H08 1H09 2H09 1Q10 � Strong Tier 1 ratio at 8.5%: Tier 1 Ratio (%) − Healthy organic capital generation 8.5 8.4 8.1 7.8 � Improved funding profile: 2H08 1H09 2H09 1Q10 Stable funding ratio 1 (%) − Customer deposits represent over 60% of funding 84 87 81 70 − More term wholesale funding 2H08 1H09 2H09 1Q10 1. Stable funding ratio includes, customer deposits plus term funding with a residual maturity greater than one year and securitisation. Ratio for 1H08 and 2H08 are on a Westpac standalone basis (not including the merger with St.George) The Westpac Group – Credit Suisse AIC 2010 9 Stressed exposures stabilising in 1Q10 � Focused on working through Stressed exposures as a % of total committed exposures (TCE) existing stressed facilities 3.0% rather than new problems Watchlist & substandard � New stressed assets smaller 2.5% 90 days past due well and fewer secured 2.0% Impaired � Commercial property outlook 1.5% improving 1.0% � Consumer performing well 0.5% 0.0% 1Q09 1Q09 3Q09 4Q09 1Q10 2001 2002 2003 2004 2005 2006 2007 2008 1H09 Includes St.George 10 The Westpac Group – Credit Suisse AIC 2010

Strong capital position Westpac’s capital ratios FY09 1Q10 Tier 1 ratio (%) 8.1 8.5 Tier 1 ratio (FSA basis) (%) 10.7 10.9 Total capital ratio (%) 10.8 11.1 Fundamental capital ratio (%) 6.6 7.0 Fundamental capital ratios 1 international comparison (%) Australia (APRA) 2 United Kingdom (FSA) 3 Canada (OSFI) 4 11.0 9.9 9.4 8.3 10.0 7.1 9.0 8.2 9.2 7.0 9.0 6.8 7.5 7.2 Westpac Peer 2 Peer 4 Westpac Peer 1 Peer 2 Peer 3 Westpac Peer 1 Peer 2 Peer 3 Peer 1 Peer 3 Peer 5 1. Westpac estimates based on publically available information, 2. At December 2009, APRA = Australian Prudential Regulation Authority, 3. UK Peers include Barclays, HSBC, and RBS. FSA = Financial Services Authority (UK), 4. Canada Peers include Bank of Montreal, CIBC, RBC, Scotia Bank and TD. OFSI = Office of the Superintendent of Financial Institutions (OSFI) The Westpac Group – Credit Suisse AIC 2010 11 Key changes from the new operating environment � Average wholesale funding costs Higher funding continuing to rise costs � Deposits more valuable and higher priced � A more conservative assessment of capital A large regulatory � Stricter liquidity requirements in terms of reform agenda both size and liquid asset mix Changes in � Customers placing more value on bank customer relationships relationships 12 The Westpac Group – Credit Suisse AIC 2010

Strong performance over the long run Cash earnings, revenue and expenses ($m) Cash earnings, revenue and expense ($m) Includes St.George 5,400 18,000 10yr CAGR 4,800 16,000 11% Cash Earnings (LHS) 4,200 14,000 7% Revenue (RHS) 3,600 4% 12,000 Expenses (RHS) 3,000 10,000 2,400 8,000 1,800 6,000 1,200 4,000 600 2,000 0 0 1998 1999 AGAAP 2000 A-IFRS 2001 2002 2003 2004 2005 2006 2007 2008 2009 The Westpac Group – Credit Suisse AIC 2010 13 Dividends – solid pay-out ratio � Westpac has consistently Dividends per share (cents) 72 70 68 maintained a pay-out ratio above 63 60 60 56 56 51 49 60% (average pay-out closer to 44 42 70%) over recent years: − Organic growth strategy − High return on equity leads to 1H04 2H04 1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 strong cash flow generation − High proportion of retail Payout ratio (cash basis) (%) 76 investors, 47% 71 72 71 70 69 69 69 67 65 63 � Dividend yield 1 of 4.5% 61 1H04 2H04 1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1. Based on 2H09 dividend and share price at 18 March 2010 14 The Westpac Group – Credit Suisse AIC 2010