Download WESTPAC BANKING CORP (Form: 6-K, Received

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
May 4, 2015
Commission File Number 1-10167
WESTPAC BANKING CORPORATION
(Translation of registrant’s name into English)
275 KENT STREET, SYDNEY, NEW SOUTH WALES 2000, AUSTRALIA
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F
x
Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(7):
Indicate by check mark whether the registrant by furnishing the information contained in
this form is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Act of 1934.
Yes
No
x
If “Yes” is marked, indicate the file number assigned to the registrant in connection with
Rule 12g3-2(b):82-
Index to Exhibits
The information contained in Exhibit 1 to this Report on Form 6-K shall be incorporated by reference in the
prospectus relating to the Registrant’s debt securities contained in the Registrant’s Registration Statement on Form F-3
(File No. 333-185478), as such prospectus may be amended or supplemented from time to time.
Index to Exhibits
Exhibit
No.
Description
1
Westpac Group March 2015 Pillar 3 Report – Incorporating the requirements of APS 330
2
Westpac Group Half Year 2015 Presentation & Investor Discussion Pack
3
Appendix 3A.1 – Notification of dividend / distribution
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WESTPAC BANKING CORPORATION
(Registrant)
Date: May 4, 2015
By:
/s/ Sean Crellin
Sean Crellin
Director, Legal
Exhibit 1
Pillar 3 report
Table of contents
Executive summary
Introduction
Risk appetite and risk types
Controlling and managing risk
Group structure
Capital Overview
Credit risk management
Credit risk exposures
Credit risk mitigation
Counterparty credit risk
Securitisation
Market risk
Operational risk
Equity risk
Interest Rate Risk in the Banking Book
Liquidity risk
Appendices
Appendix I – Regulatory capital reconciliation
Appendix II – Regulatory consolidation
Appendix III – Level 3 entities’ asset and liabilities
Appendix IV – Regulatory expected loss
Appendix V – APS330 quantitative requirements
Glossary
Disclosure regarding forward-looking statements
3
5
6
7
12
14
18
25
51
54
56
67
71
73
75
77
78
84
88
90
91
94
99
In this report references to ‘Westpac’, ‘Westpac Group’, ‘the Group’, ‘we’, ‘us’ and ‘our’ are to Westpac Banking Corporation and its
controlled entities (unless the context indicates otherwise).
In this report, unless otherwise stated or the context otherwise requires, references to ‘$’, ‘AUD’ or ‘A$’ are to Australian dollars.
Any discrepancies between totals and sums of components in tables contained in this report are due to rounding.
In this report, unless otherwise stated, disclosures reflect APRA’s implementation of Basel III.
2 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Executive summary
Pillar 3 Executive Summary
Westpac’s common equity Tier 1 (CET1) capital ratio was 8.8% at 31 March 2015, 21 basis points lower than recorded at 30
September 2014. This half, 18 basis points of organic capital generation was more than offset by a 39 basis point reduction from other
items. Other items included implementing revised RWA models (19 basis point decrease), with residential mortgages model changes
having the largest impact, foreign currency translation impacts on RWA (14 basis point decrease) and the impact of lower interest rates
on the revaluation of the defined benefit accounting obligation (6 basis point decrease).
31 March 2015
The Westpac Group at Level 2
Common equity Tier 1 (CET1) capital after deductions $m
Risk weighted assets (RWA) $m
Common equity Tier 1 capital ratio %
Additional Tier 1 capital %
Tier 1 capital ratio %
Tier 2 capital %
Total regulatory capital ratio %
30,388
346,823
8.8
1.5
10.3
1.8
12.1
30 September 2014
29,724
331,387
9.0
1.6
10.6
1.7
12.3
31 March 2014
28,455
322,498
8.8
1.5
10.3
1.8
12.1
More specifically, the movement in the CET1 capital ratio over the half included:
Organic capital generation of 18 basis points from:

First Half 2015 cash earnings of $3.8 billion (109 basis point increase);

The 2014 final dividend payment net of Dividend Reinvestment Plan (DRP) share issuance (72 basis point decrease);

Increases in RWA excluding modelling changes and foreign currency translation impacts (7 basis point decrease); and

Other movements include higher capitalised expenditure (6 basis point decrease), higher deduction for regulatory expected loss (2
basis point decrease) and other items (4 basis point decrease).
Other items totalling a 39 basis point decrease:

Modelling changes for the determination of probability of default for residential mortgages increased RWA $8.5 billion (22 basis point
decrease). Other modelling changes for specialised lending and other retail products had a net impact of reducing RWA by $1.1
billion (3 basis point increase);

Currency movements increased credit RWA $5.4 billion (14 basis point decrease), mostly reflecting the value of New Zealand
exposures increasing from the depreciation of the A$ against the NZ$; and

An increase in the accounting obligation for the defined benefit plan reflecting the impact of lower interest rates (6 basis point
decrease).
Common Equity Tier 1 capital ratio movement for First Half 2015
Westpac Group March 2015 Pillar 3 report | 3
Pillar 3 report
Executive summary
This half, RWA increased $15.4 billion (or 4.7%) reflecting a rise in credit RWA of $21.6 billion, with non-credit RWA $6.1 billion lower.
The rise in credit RWA was principally due to:

Modelling changes which increased RWA $7.4 billion. These included changes to the determination of probability of default for
mortgages ($8.5 billion increase), changes to the approach to assigning exposures to regulatory slotting categories for specialised
lending exposures ($1.7 billion decrease) and changes to risk estimates for other retail exposures ($0.6 billion increase);

$5.4 billion from the depreciation in the A$ mostly related to our New Zealand operations ;

$1.9 billion from higher mark-to-market related credit risk related to derivative counterparty exposures ;

Improvements in asset quality which led to a reduction in RWA of $2.1 billion; and

Growth in the portfolio (excluding the above items) added $9.0 billion to credit RWA over the half.
The decline in non-credit RWA was predominately due to lower interest rate risk in the banking book (IRRBB) RWA. The reduction in
IRRBB RWA is due to a reduction in exposure to interest rate movements in the regulatory banking book and an increase in the
embedded gain from falling market interest rates.
Risk weighted assets
$m
Credit risk
Market risk
Operational risk
Interest rate risk in the banking book
Other
Total
31 March 2015
303,026
7,900
30,136
1,596
4,165
346,823
30 September 2014
281,459
8,975
29,340
7,316
4,297
331,387
31 March 2014
272,038
10,610
28,474
8,459
2,917
322,498
Over the half, exposure at default (EAD) increased $38.8 billion (up 4.5%). Most of the rise was due to the depreciation in the Australian
dollar and growth in residential mortgage and corporate lending.
Two classification changes have been introduced this half (prior periods have not been restated for the classification changes):

Business lending under $1 million secured by residential mortgages have been moved from the residential mortgage category to the
small business lending category ($2.0 billion of EAD and $0.6 billion of RWA at 31 March 2015) in line with APRA requirements;
and

In the exposure at default by industry classification table (page 28) all residential mortgage exposures are now reported under
the retail lending category. This change has been applied for consistency with industry practice and the treatment of other
consumer exposures such as credit cards and personal loans.
4 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Int roduc tion
Westpac Banking Corporation is an Authorised Deposit-taking Institution (ADI) subject to regulation by APRA. APRA has accredited
Westpac to apply advanced models permitted by the Basel III global capital adequacy regime to the measurement of its regulatory
capital requirements. Westpac uses the Advanced Internal Ratings-Based approach (Advanced IRB) for credit risk and the Advanced
Measurement Approach (AMA) for operational risk.
In accordance with APS330 Public Disclosure, financial institutions that have received this accreditation, such as Westpac, are required
to disclose prudential information about their risk management practices on a semi-annual basis. A subset of this information must be
disclosed quarterly.
The Structure of Westpac’s Pillar 3 Report as at 31 March 2015
This report describes Westpac’s risk management practices and presents the prudential assessment of Westpac’s 1 capital adequacy as
at 31 March 2015. The sections are arranged as follows:

‘Risk Appetite and Risk Types’ defines the risks that Westpac manages;

‘Controlling and Managing Risk’ outlines the responsibilities of the Board of Directors of Westpac and executive risk management
committees;

‘Group Structure’ defines the bases of measurement adopted by APRA and describes the principles of consolidation used for the
purposes of determining Westpac’s capital adequacy;

‘Capital Overview’ describes Westpac’s capital management strategy and presents the capital adequacy ratios for the Westpac
Group;




‘Credit Risk Management’ describes Westpac’s approach to managing credit risk;
‘Credit Risk Exposures’ tabulates Westpac’s credit risk exposures, including impaired and past due loans and loan impairment
provisions;
‘Credit Risk Mitigation’ describes how Westpac reduces its credit risk by using collateral, guarantees or credit derivatives;
‘Counterparty Credit Risk’ describes Westpac’s exposure to credit risk arising from its management of derivatives and securities
financing transactions;

‘Securitisation’ explains how Westpac participates in the securitisation market;

‘Market Risk’ describes Westpac’s approach to managing market risk;

‘Operational Risk’ describes Westpac’s operational risk management approach;

‘Equity Risk’ describes Westpac’s equity positions;






‘Interest Rate Risk in the Banking Book’ describes Westpac’s approach to managing the structural interest rate risk incurred in its
banking book;
‘Liquidity Risk’ describes Westpac’s approach to managing liquidity risk;
‘Appendix I – Regulatory capital reconciliation’ contains the reconciliation between Westpac’s statutory and regulatory balance
sheets and the common disclosure template as required by Attachment A of APS330;
‘Appendix II – Regulatory consolidation’ lists all the entities that form part of the Westpac Group.
‘Appendix III – Level 3 entities’ assets and liabilities’ contains the standalone assets and liability balances for all the legal entities
excluded from the regulatory scope of consolidation;
‘Appendix IV – Regulatory expected loss’ sets out how the capital deduction for regulatory expected loss is derived; and
A cross-reference between the quantitative disclosures in this report and the quantitative disclosures required by Attachments A, C, D
and E of APS330 is provided in Appendix V on page 91.
Capital instruments included in regulatory capital
The reporting requirements for capital instruments under Attachment B of APS330 can be found on the regulatory disclosures section of
the Westpac website 2 and are not included within this report. These disclosures are updated when the following occurs:

A new capital instrument is issued that will form part of regulatory capital; or

1
2
A capital instrument is redeemed, converted into CET1, written off, or its terms and conditions are changed.
Westpac also takes risk in subsidiaries that are outside the scope of the Level 2 regulatory consolidation of the Westpac Group and this risk is not described in this report.
http://www.westpac.com.au/about-westpac/investor-centre/financial-information/basel-iii-risk-reports/
Westpac Group March 2015 Pillar 3 report | 5
Pillar 3 report
Risk appetite and risk types
Westpac’s vision is to be one of the world’s great service companies, helping our customers, communities and people to prosper and
grow.
Westpac’s appetite for risk is influenced by a range of factors, including whether a risk is considered consistent with its strategy (core
risk) and whether an appropriate return can be achieved from taking that risk. Westpac has a lower appetite for risks that are not part of
its strategy. Westpac seeks to achieve an appropriate return on risk and prices its products accordingly.
Risk appetite cannot be defined by a single figure, having many dimensions and representing an amalgam of top-down requirements
(including Westpac’s target debt rating and regulatory requirements) and bottom-up aggregates (such as risk concentration limits).
Westpac uses a capital model as the basis of risk measurement, calibrated to its target debt rating.
Westpac distinguishes between different types of risk and takes an integrated approach toward managing them.
Overview of risk types
Key risks
Other risks

credit risk - the risk of financial loss where a customer or counterparty fails to meet their financial obligations
to Westpac;

liquidity risk - the risk that the Group will be unable to fund assets and meet obligations as they come due;

market risk - the risk of an adverse impact on earnings resulting from changes in market factors, such as
foreign exchange rates, interest rates, commodity prices and equity prices. This includes interest rate risk in
the banking book – the risk to interest income from a mismatch between the duration of assets and liabilities
that arises in the normal course of business activities;

operational risk - the risk of loss resulting from inadequate or failed internal processes, people and systems
or from external events. This definition is aligned to the regulatory (Basel II) definition, including legal and
regulatory risk but excluding strategic and reputation risk; and

compliance Risk - the risk of legal or regulatory sanction, financial or reputation loss, arising from our failure
to abide by the compliance obligations required of us.

business risk - the risk associated with the vulnerability of a line of business to changes in the business
environment;

environmental, social and governance risk – the risk that the Group damages its reputation or financial
performance due to failure to recognise or address material existing or emerging sustainability related
environmental, social or governance issues;

equity risk - the potential for financial loss arising from movements in equity values. Equity risk may be
direct, indirect or contingent;

insurance risk - the risk of mis-estimation of the expected cost of insured events, volatility in the number or
severity of insured events, and mis-estimation of the cost of incurred claims;

related entity (contagion) risk - the risk that problems arising in other Westpac Group members compromise
the financial and operational position of the authorised deposit-taking institution in the Westpac Group; and

reputation risk - the risk to earnings or capital from negative public opinion resulting from the loss of
reputation or public trust and standing.
6 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Controlling and managing risk
Westpac manages the risks that affect our business as they influence our performance, reputation and future success. Effective risk
management involves taking an integrated approach to risk and reward, and enables us to both increase financial growth opportunities
and mitigate potential loss or damage. We adopt a Three Lines of Defence approach to risk management (see page 11) which reflects
our culture of ‘risk is everyone’s business’ and that all employees are responsible for identifying and managing risk and operating within
the Group’s desired risk profile. Westpac’s Risk Management Strategy identifies risk culture as an essential element of risk management.
We embed risk culture and maintain an awareness of risk management responsibilities through regular communication, training and
other targeted approaches that support our risk management framework.
The Board is responsible for reviewing and approving our overall risk management strategy, including determining our appetite for risk.
The Board has delegated to the Board Risk & Compliance Committee responsibility for providing recommendations to the Board on the
Westpac Group’s risk-reward strategy, setting risk appetite, approving frameworks, policies and processes for managing risk, and
determining whether to accept risks beyond management’s approval discretion.
Risk management governance structure

Board

reviews and approves our overall Risk Management Strategy.

Board Risk & Compliance
Committee (BRCC)

provides recommendations to the Board on Westpac Group’s risk-reward strategy;

sets risk appetite;

reviews and approves the frameworks for managing risk, including capital, credit, liquidity,
market, operational, compliance and reputation risk;

reviews and approves the limits and conditions that apply to credit risk approval authority
delegated to the CEO, CFO and CRO and any other officers of the Westpac Group to whom
the Board has delegated credit approval authority;

monitors the risk profile, performance, capital levels, exposures against limits and the
management and control of our risks;

monitors changes anticipated in the economic and business environment and other factors
considered relevant to our risk profile and risk appetite;

oversees the development and ongoing review of key policies that support our frameworks
for managing risk; and

may approve accepting risks beyond management’s approval discretion.
From the perspective of specific types of risk, the Board Risk & Compliance Committee role
includes:

credit risk – approving key policies and limits supporting the Credit Risk Management
Framework, and monitoring the risk profile, performance and management of our credit
portfolio;

liquidity risk – approving key policies and limits supporting the Liquidity Risk Management
Framework, including our annual funding strategy and liquidity requirements, and recovery
and resolution plans and monitoring the liquidity risk profile;

market risk – approving key policies and limits supporting the Market Risk Management
Framework, including, but not limited to, the Value at Risk and Net Interest Income at Risk
limits, and monitoring the market risk profile;

operational risk – monitoring the operational risk profile, the performance of operational risk
management and controls, and the development and ongoing review of operational risk
policies supporting the Operational Risk Management Framework;

reputation risk – reviewing and approving the Reputation Risk Management Framework and
reviewing the monitoring of the performance of reputation risk management and controls: and

compliance risk – reviewing compliance risk processes and our compliance with applicable
laws, regulations and regulatory requirements, discussing with management and the external
auditor any material correspondence with regulators or government agencies and any
published reports that raise material issues, and reviewing complaints and whistleblower
concerns.
Westpac Group March 2015 Pillar 3 report | 7
Pillar 3 report
Controlling and managing risk
Risk management governance structure (continued)
The Board Risk & Compliance Committee also:
Board Committees with a Risk
Focus

approves the Internal Capital Adequacy Assessment Process and in doing so reviews the
outcomes of enterprise wide stress testing, sets the preferred capital ranges for regulatory
capital having regard to Westpac internal economic capital measures, and reviews and
monitors capital levels for consistency with the Westpac Group’s risk appetite;

provides relevant periodic assurances to the Board Audit Committee regarding the
operational integrity of the risk management framework; and

refers to other Board Committees any matters that come to the attention of the Board Risk &
Compliance Committee that are relevant for those respective Board Committees.
Board Audit Committee

oversees the integrity of financial statements and financial reporting systems, and matters
relating to taxation risks.
Board Remuneration Committee (BRC)

reviews any matters raised by the BRCC with respect to risk-adjusted remuneration.
Board Technology Committee

Executive Team
oversees the technology strategy, implementation, and risks associated with major
technology programs.
Westpac Executive Team (ET)

executes the Board-approved strategy;

assists with the development of the Board Statement of Risk Appetite;

delivers the Group’s various strategic and performance goals within the approved risk
appetite; and

monitors key risks within each business unit, capital adequacy and the Group’s reputation.
8 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Controlling and managing risk
Risk management governance structure (continued)
Executive risk committees
Westpac Group Executive Risk Committee (RISKCO)

leads the optimisation of credit, operational, compliance and market risk-reward
across the Group;

oversees the embedding of the Risk Management Strategy in the Group’s approach to
risk governance;

oversees risk-related management frameworks and key supporting policies;

oversees the Group’s credit, operational, compliance, and market risk profiles;

oversees reputation risk and Environmental, Social and Governance (ESG) risk
management frameworks and key supporting policies; and

identifies emerging credit, operational, compliance and market risks and allocates
responsibility for assessing impacts and implementing appropriate actions to address
these.
Westpac Group Asset & Liability Committee (ALCO)


leads the optimisation of funding and liquidity risk-reward across the Group;
reviews the level and quality of capital to ensure that it is commensurate with the
Group’s risk profile, business strategy and risk appetite;

oversees the Liquidity Risk Management Framework and key policies;

oversees the funding and liquidity risk profile and balance sheet risk profile; and

identifies emerging funding and liquidity risks and appropriate actions to address
these.
Westpac Group Remuneration Oversight Committee (ROC)

provides assurance that the remuneration arrangements across the Group have been
examined from a People, Risk and Finance perspective;

responsible for ensuring that risk is embedded in all key aspects of our remuneration
framework;

reviews and makes recommendations to the CEO for recommendation to the Board
Remuneration Committee on the Group Remuneration Policy and provides assurance
that remuneration arrangements across the Group encourage behaviour that supports
Westpac’s long-term financial soundness and the risk management framework;

reviews and monitors the remuneration arrangements (other than for Group
Executives) for Responsible Persons (as defined in the Group’s Statutory Officers Fit
and Proper Policy), risk and financial control personnel, and all other employees for
whom a significant portion of total remuneration is based on performance and whose
activities, either individually or collectively, may affect the financial soundness of
Westpac; and

reviews and recommends to the CEO for recommendation to the BRC the criteria and
rationale for determining the total quantum of the Group variable reward pool.
Westpac Group March 2015 Pillar 3 report | 9
Pillar 3 report
Controlling and managing risk
Risk management governance structure (continued)
Group and divisional risk
management
Enterprise Risk


develops the Group-level risk management frameworks for approval by the BRCC;
directs the review and development of key policies supporting the risk management
frameworks;

establishes risk concentration limits and monitors risk concentrations; and

monitors emerging risk issues.
Compliance Function

develops the Group-level compliance framework for approval by the BRCC;

directs the review and development of compliance policies, compliance plans, controls
and procedures;

monitors compliance
developments; and

and
regulatory
obligations
and
emerging
regulatory
reports on compliance standards.
Divisional Risk Management

Independent internal review
Group Assurance

Divisional business units
10 | Westpac Group March 2015 Pillar 3 report
develops division-specific policies, risk appetite statements, controls, procedures, and
monitoring and reporting capability that align to the frameworks approved by the BRCC.
reviews the adequacy and effectiveness of management controls for risk.
Business Units

responsible for identifying, evaluating and managing the risks that they originate within
approved risk appetite policies; and

establish and maintain appropriate risk management controls, resources and
self-assurance processes.
Pillar 3 report
Controlling and managing risk
Roles and responsibilities
Our approach to risk management is that ‘risk is everyone’s business’ and that responsibility and accountability for risk begins with the
business units that originate the risk.
The 1st Line of Defence – Risk identification, risk management and self-assurance
Divisional business units are responsible for identifying, evaluating and managing the risks that they originate within approved risk
appetite and policies. They are required to establish and maintain appropriate risk management controls, resources and self-assurance
processes.
The 2nd Line of Defence – Establishment of risk management frameworks and policies and risk management oversight
Our 2nd Line of Defence is a separate risk advisory, control and monitoring function which establishes frameworks, policies, limits and
processes for the management, monitoring and reporting of risk. It also evaluates and opines on the adequacy and effectiveness of 1st
Line controls and application of frameworks and policies and, where necessary, requires improvement and monitors the 1st Line’s
progress toward remediation of identified deficiencies.
Our 2nd Line of Defence has three layers:

our executive risk committees lead the optimisation of risk-reward by overseeing the development of risk appetite statements, risk
management frameworks, policies and risk concentration controls, and monitoring Westpac’s risk profile for alignment with approved
appetites and strategies;

our Enterprise Risk function is independent from the business divisions, reports to the Chief Risk Officer (CRO), and establishes
and maintains the Group-wide risk management frameworks, policies and concentration limits that are approved by the Board Risk &
Compliance Committee. It also reports on Westpac’s risk profile to executive risk committees and the Board Risk & Compliance
Committee; and

divisional risk areas are responsible for developing division-specific risk appetite statements, policies, controls, procedures,
monitoring and reporting capability, which align to the Board’s Statement of Risk Appetite and the risk management frameworks
approved by the Board Risk & Compliance Committee. These risk areas are independent of the Divisions’ 1st Line business areas,
with each divisional CRO having a direct reporting line to the CRO.
The 3rd Line of Defence – Independent assurance
Our Group Assurance function independently evaluates the adequacy and effectiveness of the Group’s overall risk management
framework and controls.
Our overall risk management approach is summarised in the following diagram:
Westpac Group March 2015 Pillar 3 report | 11
Pillar 3 report
Group structure
Westpac seeks to ensure that it is adequately capitalised at all times. APRA applies a tiered approach to measuring Westpac’s capital
adequacy 1 by assessing financial strength at three levels:

Level 1, comprising Westpac Banking Corporation and its subsidiary entities that have been approved by APRA as being part of a
single ‘Extended Licensed Entity’ (ELE) for the purposes of measuring capital adequacy;

Level 2, the consolidation of Westpac Banking Corporation and all its subsidiary entities except those entities specifically excluded
by APRA regulations. The head of the Level 2 group is Westpac Banking Corporation; and

Level 3, the consolidation of Westpac Banking Corporation and all its subsidiary entities.
Unless otherwise specified, all quantitative disclosures in this report refer to the prudential assessment of Westpac’s financial strength on
a Level 2 basis 2 .
The Westpac Group
The following diagram shows the Level 3 conglomerate group and illustrates the different tiers of regulatory consolidation.
Accounting consolidation 3
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries (including structured entities) controlled by
Westpac. Westpac and its subsidiaries are referred to collectively as the ‘Group’. The effects of all transactions between entities in the
Group are eliminated. Control exists when the parent entity is exposed to, or has rights to, variable returns from its involvement with an
entity, and has the ability to affect those returns through its power over that entity. Subsidiaries are fully consolidated from the date on
which control commences and they are no longer consolidated from the date that control ceases.
Group entities excluded from the regulatory consolidation at Level 2
Regulatory consolidation at Level 2 covers the global operations of Westpac and its subsidiary entities, including other controlled
banking, securities and financial entities, except for those entities involved in the following business activities:

insurance;

acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds management;

non-financial (commercial) operations; or

special purpose entities to which assets have been transferred in accordance with the requirements of APS120 Securitisation.
Retained earnings and equity investments in subsidiary entities excluded from the consolidation at Level 2 are deducted from capital,
with the exception of securitisation special purpose entities.
1
2
3
APS110 Capital Adequacy outlines the overall framework adopted by APRA for the purpose of assessing the capital adequacy of an ADI.
Impaired assets and provisions held in Level 3 entities are excluded from the tables in this report.
Refer to Note 1 of Westpac’s 2014 Annual Report for further details.
12 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Group structure
Westpac New Zealand Limited
Westpac New Zealand Limited (WNZL), a wholly owned subsidiary entity 1 , is a registered bank incorporated in New Zealand and
regulated by the Reserve Bank of New Zealand. WNZL uses the Advanced IRB approach for credit risk and the AMA for operational risk.
For the purposes of determining Westpac’s capital adequacy, Westpac New Zealand Limited is consolidated at Level 2.
Restrictions and major impediments on the transfer of funds or regulatory capital within the Group
Minimum capital (‘thin capitalisation’) rules
Tax legislation in most jurisdictions in which the Group operates (including Australia, New Zealand and the United Kingdom) prescribes
minimum levels of capital that must be retained in that jurisdiction to avoid a portion of the interest costs incurred in the jurisdiction
ceasing to be tax deductible. Capital for these purposes includes both contributed capital and non-distributed retained earnings. Westpac
seeks to maintain sufficient capital/retained earnings to comply with these rules.
Tax costs associated with repatriation
Repatriation of retained earnings (and capital) may result in tax being payable in either the jurisdiction from which the repatriation occurs
or Australia on receipt of the relevant amounts. This cost would reduce the amount actually repatriated.
Intra-group exposure limits
Exposures to related entities are managed within the prudential limits prescribed by APRA in APS222 Associations with Related Entities.
7 Westpac has an internal limit structure and approval process governing credit exposures to related entities. This structure and approval
process, combined with APRA’s prudential limits, is designed to reduce the potential for unacceptable contagion risk.
Prudential regulation of subsidiary entities
Certain subsidiary banking, insurance and trustee entities are subject to local prudential regulation in their own right, including capital
adequacy requirements and investment or intra-group exposure limits. Westpac seeks to ensure that its subsidiary entities are
adequately capitalised and adhere to regulatory requirements at all times. There are no capital deficiencies in subsidiary entities
excluded from the regulatory consolidation at Level 2.
1
2
Other subsidiary banking entities in the Group include Westpac Bank of Tonga, Westpac Bank-PNG-Limited, Westpac Bank Samoa Limited and Westpac Europe Limited. In
January 2015, Westpac announced that it had entered into an agreement to sell its banking operations in Samoa, Cook Islands, Solomon Islands, Vanuatu and Tonga to the Bank of
South Pacific Limited. Completion of the sale is expected to occur in Second Half 2015 and is subject to the parties obtaining necessary statutory, regulatory and third party approvals.
For the purposes of APS222, subsidiaries controlled by Westpac, other than subsidiaries that form part of the ELE, represent ‘related entities’. Prudential and internal limits apply to
intra-group exposures between the ELE and related entities, both on an individual and aggregate basis.
Westpac Group March 2015 Pillar 3 report | 13
Pillar 3 report
Capital overview
Capital Structure 1
This table shows Westpac’s capital resources under APS111 Capital Adequacy: Measurement of Capital.
$m
Tier 1 capital
Common equity Tier 1 capital
Paid up ordinary capital
Treasury shares
Equity based remuneration
Foreign currency translation reserve
Accumulated other comprehensive income
Non-controlling interests - other
Retained earnings
Less retained earnings in life and general insurance, funds management
and securitisation entities
Deferred fees
Total common equity Tier 1 capital
Deductions from common equity Tier 1 capital
Goodwill (excluding funds management entities)
Deferred tax assets
Goodwill in life and general insurance, funds management
and securitisation entities
Capitalised expenditure
Capitalised software
Investments in subsidiaries not consolidated for regulatory purposes
Regulatory expected loss in excess of eligible provisions 2
General reserve for credit losses adjustment
Securitisation
Equity Investments
Regulatory adjustments to fair value positions
Other Tier 1 deductions
Total deductions from common equity Tier 1 capital
Total common equity Tier 1 capital after deductions
Additional Tier 1 capital
Basel III complying instruments
Basel III non complying instruments
Total Additional Tier 1 capital
Net Tier 1 regulatory capital
Tier 2 capital
Basel III complying instruments
Basel III non complying instruments
Eligible general reserve for credit loss
Basel III transitional adjustment
Total Tier 2 capital
Deductions from Tier 2 capital
Investments in subsidiaries not consolidated for regulatory purposes
Holdings of own and other financial institutions Tier 2 capital instruments
Total deductions from Tier 2 capital
Net Tier 2 regulatory capital
Total regulatory capital
1
2
31 March
2015
30 September
2014
31 March
2014
27,237
(304 )
1,020
(203 )
137
63
21,275
26,943
(239 )
935
(240 )
125
60
20,641
26,954
(240 )
885
(303 )
90
48
19,556
(1,286 )
107
48,046
(1,223 )
135
47,137
(1,124 )
118
45,984
(9,019 )
(1,330 )
(9,076 )
(1,354 )
(9,196 )
(1,401 )
(1,255
(1,404
(1,932
(1,348
(734
(107
(7
(388
(127
(7
(17,658
30,388
)
)
)
)
)
)
)
)
)
)
)
2,694
2,660
5,354
35,742
(1,253
(1,212
(1,921
(1,327
(650
(133
(7
(341
(132
(7
(17,413
29,724
)
)
)
)
)
)
)
)
)
)
)
(1,264
(1,076
(1,903
(1,321
(694
(92
(8
(367
(203
(4
(17,529
28,455
)
)
)
)
)
)
)
)
)
)
)
2,694
2,579
5,273
34,997
1,383
3,466
4,849
33,304
2,538
4,045
59
(67 )
6,575
1,925
3,899
78
5,902
1,925
3,966
67
5,958
(140 )
(62 )
(202 )
6,373
42,115
(140 )
(58 )
(198 )
5,704
40,701
(140 )
(106 )
(246 )
5,712
39,016
The capital structure for 31 March 2014 has not been restated following the adoption of new or revised accounting standards this period (refer to Note 1 of Westpac’s 2014 Annual
Report for further details).
An explanation of the relationship between this deduction, regulatory expected loss and provisions for impairment charges is contained in Appendix II.
14 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Capital overview
Capital management strategy
Westpac’s approach seeks to balance the fact that capital is an expensive form of funding with the need to be adequately capitalised.
Westpac considers the need to balance efficiency, flexibility and adequacy when determining sufficiency of capital and when developing
capital management plans.
Westpac evaluates these considerations through an Internal Capital Adequacy Assessment Process (ICAAP), the key features of which
include:

the development of a capital management strategy, including preferred capital range, capital buffers and contingency plans;

consideration of both economic and regulatory capital requirements;


a process that challenges the capital measures, coverage and requirements which incorporates amongst other things, the impact
of adverse economic scenarios; and
consideration of the perspectives of external stakeholders including rating agencies, equity investors and debt investors.
Westpac’s preferred capital range
At 31 March 2015, Westpac’s preferred range for its CET1 capital ratio was 8.75%-9.25%. The CET1 preferred range takes into
consideration:

Current regulatory minimums, including capital conservation and D-SIB buffers;

Stress testing to calibrate an appropriate buffer against a downturn; and

Quarterly volatility of capital ratios under Basel III due to the half and yearly cycle of dividend payments.
Westpac’s capital adequacy ratios
%
The Westpac Group at Level 2
Common equity Tier 1 capital ratio
Additional Tier 1 capital
Tier 1 capital ratio
Tier 2 capital
Total regulatory capital ratio
The Westpac Group at Level 1
Common equity Tier 1 capital ratio
Additional Tier 1 capital
Tier 1 capital ratio
Tier 2 capital
Total regulatory capital ratio
31 March
2015
30 September
2014
31 March
2014
8.8
1.5
10.3
1.8
12.1
9.0
1.6
10.6
1.7
12.3
8.8
1.5
10.3
1.8
12.1
8.7
1.7
10.4
2.1
12.5
9.2
1.8
11.0
1.9
12.9
8.9
1.7
10.6
2.0
12.6
31 March
2015
30 September
2014
31 March
2014
11.6
11.6
11.6
11.9
11.9
11.9
12.2
12.2
12.2
W estpac New Zealand Limited’s capital adequacy ratios
%
Westpac New Zealand Limited
Common equity Tier 1 capital ratio
Additional Tier 1 capital
Tier 1 capital ratio
Tier 2 capital
Total regulatory capital ratio
Westpac Group March 2015 Pillar 3 report | 15
Pillar 3 report
Capital overview
Capital requirements
This table shows risk weighted assets and associated capital requirements9 for each risk type included in the regulatory
assessment of Westpac’s capital adequacy. The Westpac’s approach to managing these risks, and more detailed disclosures on
the prudential assessment of capital requirements, are presented in the following sections of this report.
31 March 2015
$m
Credit risk
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Mark-to-market related credit risk 3
Total
Market risk
Operational risk 4
Interest rate risk in the banking book
Other assets 5
Total
IRB
Approach
Standardised
Approach 2
Total Risk
Weighted Assets
Total Capital
Required 1
77,516
32,352
1,310
7,842
73,337
6,432
12,095
7,614
53,741
4,431
276,670
4,631
1,299
1,179
135
3,214
4,706
352
10,840
26,356
82,147
33,651
2,489
7,977
76,551
6,432
16,801
7,614
54,093
4,431
10,840
303,026
7,900
30,136
1,596
4,165
346,823
6,572
2,692
199
638
6,124
515
1,344
609
4,327
355
867
24,242
632
2,411
128
333
27,746
30 September 2014
$m
Credit risk
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Mark-to-market related credit risk 3
Total
Market risk
Operational risk 4
Interest rate risk in the banking book
Other assets 5
Total
IRB
Approach
Standardised
Approach 2
Total Risk
Weighted Assets
Total Capital
Required 1
70,199
33,125
1,627
8,745
63,071
6,069
10,653
6,311
53,162
4,845
257,807
4,679
1,213
851
121
2,830
4,735
318
8,905
23,652
74,878
34,338
2,478
8,866
65,901
6,069
15,388
6,311
53,480
4,845
8,905
281,459
8,975
29,340
7,316
4,297
331,387
5,990
2,747
198
709
5,272
486
1,231
505
4,279
388
712
22,517
718
2,347
585
344
26,511
1
2
3
4
5
Capital requirements are expressed as 8% of total risk weighted assets.
Westpac’s Standardised risk weighted assets are categorised based on their equivalent IRB categories.
Mark-to-market related credit risk is measured under the standardised approach. It is also known as Credit Valuation Adjustment (CVA) risk.
APRA approved the AMA approach for the calculation of Lloyds operational risk RWA from December 2014. For periods prior to December 2014 Westpac applied the partial use
approach, as approved by APRA, and the business acquired from Lloyds was measured under the Standardised approach as defined under APS114 Capital Adequacy: Standardised
Approach to Operational Risk.
Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets.
16 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Capital overview
31 March 2014
$m
Credit risk
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Mark-to-market related credit risk 3
Total
Market risk
Operational risk 4
Interest rate risk in the banking book
Other assets 5
Total
1
2
3
4
5
IRB
Approach
Standardised
Approach 2
Total Risk
Weighted Assets
Total Capital
Required 1
68,540
33,446
1,387
8,638
62,179
6,188
10,265
6,508
48,047
5,521
250,719
4,735
1,108
810
115
2,417
4,645
232
7,257
21,319
73,275
34,554
2,197
8,753
64,596
6,188
14,910
6,508
48,279
5,521
7,257
272,038
10,610
28,474
8,459
2,917
322,498
5,862
2,764
176
700
5,168
495
1,193
521
3,862
442
580
21,763
849
2,278
677
233
25,800
Capital requirements are expressed as 8% of total risk weighted assets.
Westpac’s Standardised risk weighted assets are categorised based on their equivalent IRB categories.
Mark-to-market related credit risk and is measured under the standardised approach. It is also known as Credit Valuation Adjustment (CVA) risk.
APRA approved the AMA approach for the calculation of Lloyds operational risk RWA from December 2014. For periods prior to December 2014 Westpac applied the partial use
approach, as approved by APRA, and the business acquired from Lloyds was measured under the Standardised approach as defined under APS114 Capital Adequacy: Standardised
Approach to Operational Risk.
Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets.
Westpac Group March 2015 Pillar 3 report | 17
Pillar 3 report
Credit risk management
Credit risk is the potential for financial loss where a customer or counterparty fails to meet their financial obligations to Westpac. Westpac
maintains a credit risk management framework and a number of supporting policies, processes and controls governing the assessment,
approval and management of customer and counterparty credit risk. These incorporate the assignment of risk grades, the quantification
of loss estimates in the event of default, and the segmentation of credit exposures.
Structure and organisation
The CRO is responsible for the effectiveness of overall risk management throughout Westpac, including credit risk. Authorised officers
have delegated authority to approve credit risk exposures, including customer risk grades, other credit parameters and their ongoing
review. A portion of consumer lending is subject to automated scorecard-based approval. Our largest exposures are approved by our
most experienced credit officers. Line business management is responsible for managing credit risks accepted in their business and for
maximising risk-adjusted returns from their business credit portfolios, within the approved risk appetite, risk management framework and
policies.
Credit risk management framework and policies
Westpac maintains a credit risk management framework and supporting policies that are designed to clearly define roles and
responsibilities, acceptable practices, limits and key controls.
The Credit Risk Management Framework describes the principles, methodologies, systems, roles and responsibilities, reports and
controls that exist for managing credit risk in Westpac. The Credit Risk Rating System policy describes the credit risk rating system
philosophy, design, key features and uses of rating outcomes.
Concentration risk policies cover individual counterparties, specific industries (e.g. property) and individual countries. In addition, there
are policies covering risk appetite statements, ESG credit risks and the delegation of credit approval authorities.
At the divisional level, credit manuals embed the Group’s framework requirements for application in line businesses. These manuals
include policies covering the origination, evaluation, approval, documentation, settlement and on-going management of credit risks, and
sector policies to guide the extension of credit where industry-specific guidelines are considered necessary.
Credit approval limits govern the extension of credit and represent the formal delegation of credit approval authority to responsible
individuals throughout the organisation.
18 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk management
Approach
Westpac adopts two approaches to managing credit risk depending upon the nature of the customer and the product.
Transaction-managed approach
For larger customers, Westpac evaluates credit requests by undertaking detailed individual customer and transaction risk analysis (the
‘transaction-managed’ approach). Such customers are assigned a customer risk grade (CRG) representing Westpac’s estimate of their
probability of default (PD). Each facility is assigned a loss given default (LGD). The Westpac credit risk rating system has 20 risk grades
for non-defaulted customers and 10 risk grades for defaulted customers. Non-defaulted CRGs down to the level of normally acceptable
risk (i.e. D grade – see table below) are mapped to Moody’s and Standard & Poor’s (S&P) external senior ranking unsecured ratings.
This mapping is reviewed annually and allows Westpac to integrate the rating agencies’ default history with internal historical data when
calculating PDs.
The final assignment of CRGs and LGDs is approved by authorised credit approvers with appropriate delegated approval authority. All
material credit exposures are approved by authorised Credit Officers who are part of the risk management stream and operate
independently of the areas originating the credit risk proposals. Credit Officer decisions are subject to reviews to ensure consistent
quality. Divisional operational units are responsible for maintaining accurate and timely recording of all credit risk approvals and changes
to customer and facility data. These units also operate independently of both the areas originating the credit risk proposals and the credit
risk approvers. Appropriate segregation of functions is one of the key requirements of our credit risk management framework.
Program-managed approach
High-volume retail customer credit portfolios with homogenous credit risk characteristics are managed on a statistical basis according to
pre-determined objective criteria (the ‘program-managed’ approach). Program-managed exposure to a consumer customer may exceed
$1 million. Business customer exposures are transaction managed when the exposure is in excess of $1 million, or when the exposure
includes complex products. Quantitative scorecards are used to assign application and behavioural scores to enable risk-based decision
making within these portfolios. The scorecard outcomes and decisions are regularly monitored and validated against subsequent
customer performance and scorecards are recalibrated or rebuilt when required. For capital estimation and other purposes, risk-based
customer segments are created based upon modelled expected PD, EAD and LGD. Accounts are then assigned to respective segments
based on customer and account characteristics. Each segment is assigned a quantified measure of its PD, LGD and EAD.
For both transaction-managed and program-managed approaches, CRGs, PDs and LGDs are reviewed at least annually.
Mapping of Westpac risk grades
The table below shows the current alignment between Westpac’s CRGs and the corresponding external rating. Note that only high-level
CRG groupings are shown.
Westpac customer
risk grade
Standard & Poor’s
rating
Moody’s
rating
A
B
C
D
AAA to AA–
A+ to A–
BBB+ to BBB–
BB+ to B+
Westpac Rating
Watchlist
Special mention
Substandard/default
Default
Aaa to Aa3
A1 to A3
Baa1 to Baa3
Ba1 to B1
E
F
G
H
For Specialised Lending Westpac maps exposures to the appropriate supervisory slot based on an assessment that takes into account
borrower strength and security quality, as required by APS 113.
Westpac Group March 2015 Pillar 3 report | 19
Pillar 3 report
Credit risk management
Mapping of Basel categories to Westpac portfolios
APS113 Capital Adequacy: Internal Ratings-Based Approach to Credit Risk, states that under the Advanced IRB approach to credit risk,
an ADI must categorise banking book exposures into six broad IRB asset classes and apply the prescribed treatment for those classes to
each credit exposure within them for the purposes of deriving its regulatory capital requirement. Standardised and Securitised portfolios
are subject to treatment under APS112 Capital Adequacy: Standardised Approach to Credit Risk and APS120 Securitisation
respectively.
1
APS Asset Class
Sub - asset class
Westpac category
Segmentation criteria
Corporate
Corporate
Corporate
All transaction - managed customers not elsewhere
classified where annual turnover exceeds $50m 1 .
SME Corporate
Business Lending
All transaction - managed customers not elsewhere
classified where annual turnover is $50m or less .
Project Finance
Specialised Lending Project Finance
Applied to transaction - managed customers where
the primary source of debt service , security and
repayment is derived from the revenue generated
by a completed project ( e . g . infrastructure such
as toll roads or railways ).
Income - producing
Real Estate
Specialised Lending Property Finance
Applied to transaction - managed customers where
the primary source of debt service , security and
repayment is derived from either the sale of a
property development or income produced by one
or more investment properties 2 .
Sovereign
Sovereign
Applied to transaction - managed exposures backed
by governments .
Bank
Bank
Applied to transaction - managed exposures to
deposit - taking institutions and foreign equivalents .
Residential Mortgage
Residential Mortgages
All program - managed exposures secured by
residential mortgages 3 .
Qualifying Revolving
Retail
Australian Credit Cards
Program - managed credit cards with low volatility in
loss rates . The New Zealand cards portfolio does
not currently meet the criteria for Qualifying
Revolving Retail and is classified in Other Retail .
Other Retail
Small Business
Program-managed
under $1 million 4 .
Other Retail
All other program - managed lending to retail
customers , including New Zealand credit cards .
Includes all NZ agribusiness loans, regardless of turnover.
business
lending
exposures
2
3
4
Excludes large diversified property groups and property trusts, which appear in the Corporate asset class.
Comparative period business lending under $1 million fully secured by residential property were included.
Comparative period business lending under $1 million fully secured by residential property were exluded.
20 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk management
Mapping of Credit risk approach to Basel categories and exposure types
Approach
Transaction-Managed
Portfolios
APS asset class
Corporate
Sovereign
Bank
Types of exposures
Direct lending
Contingent lending
Derivative counterparty
Asset warehousing
Underwriting
Secondary market trading
Foreign exchange settlement
Other intra-day settlement obligations
Residential mortgage
Mortgages
Equity access loans
Qualifying revolving retail
Australian credit cards
Other retail
Personal loans
Overdrafts
New Zealand credit cards
Auto and equipment finance
Business development loans
Business overdrafts
Other term products
Program-Managed
Portfolios
Internal ratings process for transaction-managed portfolios
The process for assigning and approving individual customer PDs and facility LGDs involves:

Business unit representatives recommend the CRG and facility LGDs under the guidance of criteria set out in established credit
policies. Each CRG is associated with an estimated PD;

Authorised officers evaluate the recommendations and approve the final CRG and facility LGDs. Credit officers may override line
business unit recommendations;

An expert judgement decisioning process is employed to evaluate CRG and the outputs of various risk grading models are used
as one of several inputs into that process; and

Authorised officers decisions are subject to reviews to ensure consistent quality.
For on-going exposures to transaction-managed customers, risk grades and facility LGDs are required to be reviewed at least annually,
but also whenever material changes occur.
No material deviations from the reference definition of default are permitted.
Internal ratings process for program-managed portfolios
The process for assigning PDs, LGDs and EADs to the program-managed portfolio involves dividing the portfolio into a number of pools
per product. These pools are created by analysing the homogeneity of risk characteristics that have historically proven predictive in
determining whether an account is likely to go into default.
No material deviations from the reference definition of default are permitted.
Internal credit risk ratings system
In addition to using the credit risk estimates as the basis for regulatory capital purposes, they are also used for the purposes described
below:
Economic capital - Westpac allocates economic capital to all exposures. Economic capital includes both credit and non-credit
components. Economic credit capital is allocated using a framework that considers estimates of PD, LGD, EAD, total committed
exposure and loan tenor, as well as measures of portfolio composition not reflected in regulatory capital formulae.
Provisioning - Impairment provisions are held by Westpac to cover credit losses that are incurred in the loan portfolio. Provisioning
includes both individual and collective components. Individual provisions are calculated on impaired loans taking into account
management’s best estimate of the present value of future cashflows.
Westpac Group March 2015 Pillar 3 report | 21
Pillar 3 report
Credit risk management
Collective provisions are established on a portfolio basis using a framework that considers PD, LGD, EAD, total committed exposure,
emergence periods, level of arrears and recent past experience.
Risk-adjusted performance measurement - Business performance is measured using allocated capital, which incorporates charges for
economic capital and regulatory capital, including credit capital and capital for other risk types.
Pricing - Westpac prices loans to produce an acceptable return on the capital allocated to the loan. Returns include interest income and
fees after expected credit losses and other costs.
Credit approval - For transaction-managed facilities, approval authorities are tiered based on the CRG, with lower limits applicable for
customers with a higher PD. Program-managed facilities are approved on the basis of application scorecard outcomes and product
based approval authorities.
Control mechanisms for the credit risk rating system include:


Westpac’s credit risk rating system is reviewed annually to confirm that the rating criteria and procedures are appropriate given the
current portfolio and external conditions;
All models materially impacting the risk rating process are periodically reviewed in accordance with Westpac’s model risk policy;

Specific credit risk estimates (including PD, LGD and EAD levels) are overseen, reviewed annually and approved by the Credit
Risk Estimates Committee (a sub-committee of RISKCO);

Credit Risk Assurance undertake an independent annual end-to-end technical and operational review of the overall process; and

RISKCO and BRCC monitor the risk profile, performance and management of Westpac’s credit portfolio and the development and
review of key credit risk policies.
Risk reporting
A comprehensive report on Westpac’s credit risk portfolio is provided to RISKCO and BRCC quarterly. It details the current level of
impairment losses, stressed exposures, delinquency trends, provisions, impaired assets and key performance metrics. It reports on
portfolio concentrations and large exposures.
Credit risk and asset quality are also reported to the Board each month, including details of impairment losses, stressed exposures,
delinquency trends and key performance metrics.
22 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk management
Summary credit risk disclosure
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised Lending
Securitisation
Standardised 2
Total
30 September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised Lending
Securitisation
Standardised 2
Total
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised Lending
Securitisation
Standardised 2
Total
1
2
Exposure
at Default
134,554
48,516
52,961
27,868
471,495
20,728
14,379
19,345
61,793
23,878
20,887
896,404
Exposure
at Default
120,132
48,476
51,746
32,565
455,481
20,383
12,418
16,689
59,188
22,109
18,430
857,617
Exposure
at Default
113,971
49,730
40,567
32,761
439,765
19,949
12,148
16,784
52,854
22,702
17,531
818,762
Risk
Weighted
Assets
77,516
32,352
1,310
7,842
73,337
6,432
12,095
7,614
53,741
4,431
26,356
303,026
Risk
Weighted
Assets
70,199
33,125
1,627
8,745
63,071
6,069
10,653
6,311
53,162
4,845
23,652
281,459
Risk
Weighted
Assets
68,540
33,446
1,387
8,638
62,179
6,188
10,265
6,508
48,047
5,521
21,319
272,038
Regulatory
Expected
Loss 1
801
745
2
14
916
336
497
223
1,054
4,588
Regulatory
Expected
Loss for
non-defaulted
exposures
504
424
2
9
770
263
403
128
618
3,121
Regulatory
Expected
Loss 1
827
768
3
22
811
304
456
213
1,232
4,636
Regulatory
Expected
Loss for
non-defaulted
exposures
475
470
3
17
680
246
380
108
681
3,060
Regulatory
Expected
Loss 1
897
875
3
15
837
323
452
219
1,343
4,964
Regulatory
Expected
Loss for
non-defaulted
exposures
507
456
3
10
687
258
369
114
653
3,057
Impaired
Loans
513
427
5
258
104
157
101
484
3
96
2,148
Specific
Provisions
for Impaired
Loans
214
231
7
93
71
101
45
209
56
1,027
Actual
Losses for
the 6 months
ended
35
53
45
129
95
31
49
34
471
Impaired
Loans
504
467
5
238
78
129
94
738
3
84
2,340
Specific
Provisions
for Impaired
Loans
251
215
5
94
58
83
42
255
44
1,047
Actual
Losses for
the 12 months
ended
171
234
121
288
190
72
174
52
1,302
Impaired
Loans
591
613
4
301
93
145
100
916
130
2,893
Specific
Provisions
for Impaired
Loans
294
330
4
116
64
91
46
335
63
1,343
Actual
Losses for
the 6 months
ended
111
119
58
136
87
14
60
12
597
Includes regulatory expected losses for defaulted and non-defaulted exposures.
Includes mark-to-market related credit risk.
Westpac Group March 2015 Pillar 3 report | 23
Pillar 3 report
Credit risk management
Loan impairment provisions
Provisions for loan impairment losses represent management’s best estimate of the losses incurred in the loan portfolios as at the
balance date. There are two components of Westpac’s loan impairment provisions: individually assessed provisions (IAPs) and
collectively assessed provisions (CAPs).
In determining IAPs, relevant considerations that have a bearing on the expected future cash flows are taken into account, for example:

the business prospects of the customer;

the realisable value of collateral;

Westpac’s position relative to other claimants;

the reliability of customer information; and

the likely cost and duration of the work-out process.
These judgements and estimates can change with time as new information becomes available or as work-out strategies evolve, resulting
in revisions to the impairment provision as individual decisions are made.
CAPs are established on a portfolio basis taking into account:

the level of arrears;

collateral;

past loss experience;

expected defaults based on portfolio trends; and

the economic environment.
The most significant factors in establishing these provisions are estimated loss rates and the related emergence periods. The future
credit quality of these portfolios is subject to uncertainties that could cause actual credit losses to differ from reported loan impairment
provisions. These uncertainties include:

differences between the expected and actual economic environment;

interest rates and unemployment levels;

repayment behaviour; and

bankruptcy rates.
Regulatory classification of loan impairment provisions
APS220 Credit Quality requires that Westpac report specific provisions and a General Reserve for Credit Loss (GRCL). All IAPs raised
under AAS are classified as specific provisions. All CAPs raised under AAS are either classified into specific provisions or a GRCL.
A GRCL adjustment is made for the amount of GRCL that Westpac reports for regulatory purposes under APS220 in addition to
provisions reported by Westpac under AAS. For capital adequacy purposes the GRCL adjustment is deducted from CET1. Eligible GRCL
is included in Tier 2 capital.
24 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Loan impairment provisions
31 March 2015
$m
Specific Provisions
for impaired loans
for defaulted but not impaired loans
General Reserve for Credit Loss
Total provisions for impairment charges
30 September 2014
$m
Specific Provisions
for impaired loans
for defaulted but not impaired loans
General Reserve for Credit Loss
Total provisions for impairment charges
31 March 2014
$m
Specific Provisions
for impaired loans
for defaulted but not impaired loans
General Reserve for Credit Loss
Total provisions for impairment charges
IAPs
806
NA
NA
806
IAPs
867
NA
NA
867
IAPs
1,139
NA
NA
1,139
AAS Provisions
CAPs
221
130
2,348
2,699
AAS Provisions
CAPs
180
114
2,320
2,614
AAS Provisions
CAPs
204
127
2,321
2,652
GRCL
Adjustment
Total
1,027
130
2,348
3,505
NA
NA
107
107
Total
1,047
114
2,320
3,481
Total
1,343
127
2,321
3,791
GRCL
Adjustment
NA
NA
133
133
GRCL
Adjustment
NA
NA
92
92
Total Regulatory
Provisions
1,027
130
2,455
3,612
Total Regulatory
Provisions
1,047
114
2,453
3,614
Total Regulatory
Provisions
1,343
127
2,413
3,883
Westpac Group March 2015 Pillar 3 report | 25
Pillar 3 report
Credit risk exposures
The following tables segment the portfolio by characteristics that provide an insight into the assessment of credit risk
concentration.
Exposure at Default by major type
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation 2
Standardised
Total
On balance
sheet
59,160
36,688
48,182
14,967
396,973
10,228
11,324
14,809
48,456
16,061
17,990
674,838
Off-balance sheet
Non-market related
Market related
59,364
16,030
11,828
2,086
2,693
1,913
10,988
74,522
10,500
3,055
4,536
13,337
7,696
121
1,513
1,384
190,350
31,216
Total Exposure
at Default
134,554
48,516
52,961
27,868
471,495
20,728
14,379
19,345
61,793
23,878
20,887
896,404
Average
6 months ended 1
127,787
48,631
53,188
31,109
464,828
20,586
13,591
17,684
60,344
22,400
19,351
879,499
30 September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation 2
Standardised
Total
On balance
sheet
54,013
37,409
46,182
15,496
382,388
10,057
10,622
12,926
45,418
14,787
16,975
646,273
Off-balance sheet
Non-market related
Market related
51,121
14,998
11,067
3,272
2,292
1,806
15,263
73,093
10,326
1,796
3,763
13,770
7,243
79
1,455
178,712
32,632
Total Exposure
at Default
120,132
48,476
51,746
32,565
455,481
20,383
12,418
16,689
59,188
22,109
18,430
857,617
Average
12 months ended 3
115,250
49,739
43,660
32,862
439,987
19,918
12,053
16,753
54,629
22,546
16,229
823,626
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation 2
Standardised
Total
On balance
sheet
52,527
38,068
35,572
18,068
369,704
9,950
10,368
12,786
41,827
14,633
16,184
619,687
Off-balance sheet
Non-market related
Market related
51,131
10,313
11,662
3,441
1,554
1,739
12,954
70,061
9,999
1,780
3,998
11,027
7,902
167
1,347
174,087
24,988
Total Exposure
at Default
113,971
49,730
40,567
32,761
439,765
19,949
12,148
16,784
52,854
22,702
17,531
818,762
Average
6 months ended 4
113,322
50,146
38,953
32,803
432,153
19,645
11,818
16,711
51,763
22,772
14,889
804,975
1
2
3
4
Average is based on exposures as at 31 March 2015, 31 December 2014 and 30 September 2014.
EAD associated with securitisations is for the banking book only.
Average is based on exposures as at 30 September 2014, 30 June 2014, 31 March 2014, 31 December 2013 and 30 September 2013.
Average is based on exposures as at 31 March 2014, 31 December 2013 and 30 September 2013.
26 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Exposure at Default by measurement method
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Total
IRB
Approach
134,554
48,516
52,961
27,868
471,495
20,728
14,379
19,345
61,793
23,878
875,517
Standardised
Approach
6,056
1,295
1,179
135
5,651
6,223
348
20,887
Total Exposure
at Default
140,610
49,811
54,140
28,003
477,146
20,728
20,602
19,345
62,141
23,878
896,404
30 September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Total
IRB
Approach
120,132
48,476
51,746
32,565
455,481
20,383
12,418
16,689
59,188
22,109
839,187
Standardised
Approach
4,750
1,209
851
121
4,964
6,222
313
18,430
Total Exposure
at Default
124,882
49,685
52,597
32,686
460,445
20,383
18,640
16,689
59,501
22,109
857,617
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Total
IRB
Approach
113,971
49,730
40,567
32,761
439,765
19,949
12,148
16,784
52,854
22,702
801,231
Standardised
Approach
4,760
1,100
810
115
4,362
6,155
229
17,531
Total Exposure
at Default
118,731
50,830
41,377
32,876
444,127
19,949
18,303
16,784
53,083
22,702
818,762
Westpac Group March 2015 Pillar 3 report | 27
Pillar 3 report
Credit risk exposures
Exposure at Default by industry classification
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential
mortgages 4
Australian credit
cards
Other retail
Small business 4
Specialised
lending
Securitisation
Standardised
Total
1
2
3
4
Finance &
insurance
19,867
2,510
13,631
27,439
Government
administration
& defence
136
1
38,560
65
Manufacturing
23,825
4,341
54
72
Mining
9,701
740
124
-
Property
10,147
140
4
Property
services &
business
services
8,914
5,630
4
4
-
-
-
-
-
-
-
-
2,586
1,364
125
1,070
195
1,524
2,602
1,901
23
213
228
364
22,886
3,999
200
1,170
30
400
269
1,335
60
52,870
17
513
107
415
313
17,345
9,709
92,060
40,257
30,061
12,155
65,215
17,989
Accommodation,
cafes &
restaurants
2,066
5,911
-
Agriculture,
forestry &
fishing
8,654
6,802
2
-
Construction
3,144
3,479
59
-
-
601
1,864
235
154
8,967
Transport &
storage
10,325
2,621
51
2
Utilities 3
11,588
387
48
-
Retail
lending
-
Other
1,082
1,331
131
Total
Exposure
at Default
134,554
48,516
52,961
27,868
-
-
-
471,495
-
471,495
2,729
1,526
210
20,728
14,379
-
1,048
20,728
14,379
19,345
1,900
140
1,546
12
1,218
2,888
322
1,437
20
55
8,412
202
2,605
61,793
23,878
20,887
19,729
30,024
17,735
13,745
515,014
6,399
896,404
Services
1 Trade 2
8,364 16,741
5,351
9,272
449
38
78
14
Includes education, health & community services, cultural & recreational services and personal & other services.
Includes wholesale trade and retail trade.
Includes electricity, gas & water, and communication services.
All business lending under $1m secured by residential property has been moved to the small business category ($2.0 billion of EAD and $0.6 billion of RWA as at 31 March 2015).
For prior periods, business lending secured by residential property was recorded under residential mortgages. All residential mortgage exposures which are not business lending are
now reported under the retail lending industry classification to align with our treatment of other consumer exposures such as credit cards and personal loans.
28 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
30
September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential
mortgages
Australian credit
cards
Other retail
Small business
Specialised
lending
Securitisation
Standardised
Total
1
2
3
Accommodation,
cafes &
restaurants
2,320
5,676
-
Agriculture,
forestry &
fishing
7,480
6,790
3
-
Construction
2,879
3,513
6
992
1,266
491
1,729
183
179
9,841
17
17,285
Property
9,210
197
11
Property
services &
business
services
8,085
5,774
5
14
Services 1
7,303
5,372
613
74
Trade 2
15,736
9,469
73
11
Transport &
storage
8,047
2,537
91
3
Utilities 3
10,290
462
351
-
Retail
lending
-
Other
979
1,054
139
Exp
at D
12
4
5
3
140
11,347
6,015
4,870
3,780
653
214
418,605
-
45
187
1,234
2,239
1,674
2,210
1,417
180
20,383
12,418
-
932
2
1
1
1,326
168
9,416
50,451
16
469
72,935
112
410
875
23,529
1,071
140
1,699
22,816
29
1,534
32,842
3,122
564
16,434
1,389
72
12,958
8,274
459,680
162
647
3,913
5
2
1
85
Finance &
insurance
20,178
2,515
24,666
32,224
Government
administration
& defence
88
1
25,048
-
Manufacturing
20,840
4,350
813
34
Mining
6,697
766
83
49
2,751
3,480
45
1,323
2,216
1,144
132
904
628
579
12,572
444
20,933
1,939
107,523
242
881
26,437
29
610
533
29,436
Includes education, health & community services, cultural & recreational services and personal & other services.
Includes wholesale trade and retail trade.
Includes electricity, gas & water, and communication services.
Westpac Group March 2015 Pillar 3 report | 29
Pillar 3 report
Credit risk exposures
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential
mortgages
Australian credit
cards
Other retail
Small business
Specialised
lending
Securitisation
Standardised
Total
1
2
3
Accommodation,
cafes &
restaurants
1,977
5,846
-
Agriculture,
forestry &
fishing
7,690
6,613
2
-
Construction
2,868
3,491
10
1,003
1,298
496
1,768
241
178
9,741
Property
9,215
119
1
Property
services &
business
services
7,597
5,804
4
16
Services 1
7,189
5,601
703
64
Trade 2
14,178
10,201
76
15
Transport &
storage
8,697
2,720
95
6
Utilities 3
10,164
375
386
-
Retail
lending
-
Other
915
1,128
102
To
Expos
at Defa
113,9
49,7
40,5
32,7
141
11,152
6,052
4,897
3,847
666
228
402,714
-
439,7
187
1,181
2,187
1,649
2,239
1,445
174
19,949
12,148
-
1,177
19,9
12,1
16,7
32
605
596
1,169
189
45,987
16
362
118
386
850
1,039
140
1,123
32
1,934
1,270
513
1,639
69
8,122
157
527
52,8
22,7
17,5
28,853
9,714
68,033
23,014
22,405
32,522
15,412
13,035
442,933
4,006
818,7
Finance &
insurance
15,963
2,618
14,216
32,507
Government
administration
& defence
112
1
24,389
-
Manufacturing
20,197
4,448
642
40
Mining
7,209
765
54
-
2,802
3,542
47
1,376
2,170
1,065
129
917
59
624
521
546
21,555
1,644
844
17,430
12,486
93,656
25,522
Includes education, health & community services, cultural & recreational services and personal & other services.
Includes wholesale trade and retail trade.
Includes electricity, gas & water, and communication services.
30 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Exposure at Default by geography 1
1
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Australia
93,488
44,513
43,482
22,676
425,202
20,728
10,814
16,909
55,455
21,700
16,561
771,528
New Zealand
19,995
4,003
4,803
856
45,813
3,565
2,436
6,338
2,178
89,987
Americas
4,905
4,531
37
9,473
Asia
13,244
145
4,290
480
823
18,982
Europe
2,922
9
2,931
Pacific
3,503
3,503
Total Exposure
at Default
134,554
48,516
52,961
27,868
471,495
20,728
14,379
19,345
61,793
23,878
20,887
896,404
30 September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Australia
86,725
44,646
29,997
26,428
414,359
20,383
9,160
14,479
53,960
20,481
14,651
735,269
New Zealand
17,250
3,830
4,746
1,017
40,632
3,258
2,210
5,228
1,628
79,799
Americas
3,796
16,139
133
20,068
Asia
9,461
864
4,975
490
727
16,517
Europe
2,900
12
2,912
Pacific
3,052
3,052
Total Exposure
at Default
120,132
48,476
51,746
32,565
455,481
20,383
12,418
16,689
59,188
22,109
18,430
857,617
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Australia
80,053
45,728
28,354
29,431
397,830
19,949
8,862
14,468
47,950
21,253
14,120
707,998
New Zealand
18,151
4,002
4,982
1,829
41,426
3,286
2,316
4,880
1,449
82,321
Americas
3,716
6,009
102
9,827
Asia
9,366
1,222
1,356
509
711
13,164
Europe
2,685
43
24
2,752
Pacific
2,700
2,700
Total Exposure
at Default
113,971
49,730
40,567
32,761
439,765
19,949
12,148
16,784
52,854
22,702
17,531
818,762
Geographic segmentation of exposures is based on the location of the office in which these items were booked.
Westpac Group March 2015 Pillar 3 report | 31
Pillar 3 report
Credit risk exposures
Exposure at Default by residual contractual maturity
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
On demand
14,568
3,192
614
4,350
34,781
20,728
3,271
2,552
613
69
1,455
86,193
< 12 months
28,607
10,469
14,079
5,955
6,712
240
1,461
16,608
6,108
684
90,923
1 to < 3 years
53,475
23,231
13,802
10,628
31,022
5,130
5,735
28,506
4,916
8,563
185,008
3 to < 5 years
30,101
6,612
10,502
5,523
12,343
3,540
4,755
11,053
2,713
3,526
90,668
> 5 years
7,803
5,012
13,964
1,412
386,637
2,198
4,842
5,013
10,072
6,659
443,612
Total Exposure
at Default
134,554
48,516
52,961
27,868
471,495
20,728
14,379
19,345
61,793
23,878
20,887
896,404
30 September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
On demand
12,646
3,171
1,086
3,481
33,677
20,383
3,030
2,090
569
147
1,467
81,747
< 12 months
23,744
10,788
24,973
5,266
6,973
216
1,442
16,292
7,323
595
97,612
1 to < 3 years
53,081
22,760
6,870
19,007
32,844
3,699
5,360
27,408
4,251
6,332
181,612
3 to < 5 years
24,770
6,395
6,755
4,169
11,263
3,413
4,416
9,864
3,201
3,578
77,824
> 5 years
5,891
5,362
12,062
642
370,724
2,060
3,381
5,055
7,187
6,458
418,822
Total Exposure
at Default
120,132
48,476
51,746
32,565
455,481
20,383
12,418
16,689
59,188
22,109
18,430
857,617
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
On demand
8,210
3,346
934
1,547
32,118
19,949
3,046
2,155
551
157
1,509
73,522
< 12 months
26,935
11,323
14,533
7,478
7,265
198
1,447
15,505
8,196
610
93,490
1 to < 3 years
51,742
22,679
6,674
19,715
34,823
3,559
5,598
24,993
4,380
5,824
179,987
3 to < 5 years
21,557
6,584
5,324
3,912
10,421
3,375
4,276
7,283
2,727
3,437
68,896
> 5 years
5,527
5,798
13,102
109
355,138
1,970
3,308
4,522
7,242
6,151
402,867
Total Exposure
at Default
113,971
49,730
40,567
32,761
439,765
19,949
12,148
16,784
52,854
22,702
17,531
818,762
32 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Impaired and past due loans
The following tables disclose the crystallisation of credit risk as impairment and loss. Analysis of exposures 90 days past due not
impaired, impaired loans, related provisions and actual losses is broken down by concentrations reflecting Westpac’s asset
categories, industry and geography.
Impaired and past due loans by portfolio
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Items
past 90 days
not impaired
116
310
37
1,683
115
118
22
2,401
Impaired
Loans
513
427
5
258
104
157
101
484
3
96
2,148
Specific
Provisions for
Impaired Loans
214
231
7
93
71
101
45
209
56
1,027
Specific
Provisions to
Impaired Loans
42 %
54 %
140 %
36 %
68 %
64 %
45 %
43 %
58 %
48 %
Actual
Losses for the
6 months ended
35
53
45
129
95
31
49
34
471
30 September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Items
past 90 days
not impaired
81
249
1,607
2
87
181
34
2,241
Impaired
Loans
504
467
5
238
78
129
94
738
3
84
2,340
Specific
Provisions for
Impaired Loans
251
215
5
94
58
83
42
255
44
1,047
Specific
Provisions to
Impaired Loans
50 %
46 %
100 %
39 %
74 %
64 %
45 %
35 %
52 %
45 %
Actual
Losses for the
12 months ended
171
234
121
288
190
72
174
52
1,302
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Items
past 90 days
not impaired
86
395
1,615
1
85
213
17
2,412
Impaired
Loans
591
613
4
301
93
145
100
916
130
2,893
Specific
Provisions for
Impaired Loans
294
330
4
116
64
91
46
335
63
1,343
Specific
Provisions to
Impaired Loans
50 %
54 %
100 %
39 %
69 %
63 %
46 %
37 %
48 %
46 %
Actual
Losses for the
6 months ended
111
119
58
136
87
14
60
12
597
Westpac Group March 2015 Pillar 3 report | 33
Pillar 3 report
Credit risk exposures
Impaired and past due loans by industry classification
31 March 2015
$m
Accommodation, cafes & restaurants
Agriculture, forestry & fishing
Construction
Finance & insurance
Government administration & defence
Manufacturing
Mining
Property, Property services & business services
Services 1
Trade 2
Transport & storage
Utilities 3
Retail lending
Other
Total
Items
past 90 days
not impaired
28
117
100
74
43
15
238
41
102
56
7
1,570
10
2,401
Impaired
Loans
103
122
58
48
292
113
703
39
102
33
1
485
49
2,148
Specific
Provisions for
Impaired Loans
56
51
38
21
86
65
357
23
64
32
1
229
4
1,027
Specific
Provisions to
Impaired Loans
54%
42%
66%
44%
29%
58%
51%
59%
63%
97%
100%
47%
8%
48%
Actual
Losses for the
6 months ended
11
13
20
19
8
3
58
9
26
14
1
286
3
471
30 September 2014
$m
Accommodation, cafes & restaurants
Agriculture, forestry & fishing
Construction
Finance & insurance
Government administration & defence
Manufacturing
Mining
Property, Property services & business services
Services 1
Trade 2
Transport & storage
Utilities 3
Retail lending
Other
Total
Items
past 90 days
not impaired
43
65
54
31
39
10
274
46
117
22
8
1,521
11
2,241
Impaired
Loans
111
137
265
111
185
111
726
53
147
36
11
403
44
2,340
Specific
Provisions for
Impaired Loans
60
56
65
45
72
53
337
35
80
23
9
208
4
1,047
Specific
Provisions to
Impaired Loans
54%
41%
25%
41%
39%
48%
46%
66%
54%
64%
82%
52%
9%
45%
Actual
Losses for the
12 months ended
31
70
40
28
84
14
265
62
62
45
1
588
12
1,302
31 March 2014
$m
Accommodation, cafes & restaurants
Agriculture, forestry & fishing
Construction
Finance & insurance
Government administration & defence
Manufacturing
Mining
Property, Property services & business services
Services 1
Trade 2
Transport & storage
Utilities 3
Retail lending
Other
Total
Items
past 90 days
not impaired
48
125
64
24
38
22
317
50
140
36
4
1,519
25
2,412
Impaired
Loans
130
168
310
130
192
100
942
96
232
42
2
498
51
2,893
Specific
Provisions for
Impaired Loans
66
79
74
62
111
38
450
60
129
25
2
239
8
1,343
Specific
Provisions to
Impaired Loans
51%
47%
24%
48%
58%
38%
48%
63%
56%
60%
100%
48%
16%
46%
Actual
Losses for the
6 months ended
12
39
32
18
10
13
111
43
10
30
274
5
597
1
2
3
Includes education, health & community services, cultural & recreational services and personal & other services.
Includes wholesale trade and retail trade.
Includes electricity, gas & water, and communication services.
34 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Impaired and past due loans by geography 1
31 March 2015
$m
Australia
New Zealand
Americas
Asia
Europe
Pacific
Total
Items
past 90 days
not impaired
2,203
176
22
2,401
Impaired
Loans
1,579
518
3
48
2,148
Specific
Provisions for
Impaired Loans
825
171
31
1,027
Specific
Provisions to
Impaired Loans
52%
33%
65%
48%
Actual
Losses for the
6 months ended
433
24
2
11
1
471
30 September 2014
$m
Australia
New Zealand
Americas
Asia
Europe
Pacific
Total
Items
past 90 days
not impaired
2,134
85
2
20
2,241
Impaired
Loans
1,818
410
3
53
56
2,340
Specific
Provisions for
Impaired Loans
852
139
2
20
34
1,047
Specific
Provisions to
Impaired Loans
47%
34%
67%
38%
61%
45%
Actual
Losses for the
12 months ended
1,115
156
17
14
1,302
31 March 2014
$m
Australia
New Zealand
Americas
Asia
Europe
Pacific
Total
Items
past 90 days
not impaired
2,294
100
1
17
2,412
Impaired
Loans
2,330
393
6
79
85
2,893
Specific
Provisions for
Impaired Loans
1,117
141
2
30
53
1,343
Specific
Provisions to
Impaired Loans
48%
36%
33%
38%
62%
46%
Actual
Losses for the
6 months ended
478
101
15
3
597
1
Geographic segmentation of exposures is based on the location of the office in which these items were booked.
Westpac Group March 2015 Pillar 3 report | 35
Pillar 3 report
Credit risk exposures
Movement in provisions for impairment
$m
Collectively assessed provisions
Balance at beginning of the period
Provisions raised
Write-offs
Interest adjustment
Exchange rate and other adjustments
Closing balance
Individually assessed provisions
Balance at beginning of the period
Provisions raised
Write-backs
Write-offs
Interest adjustment
Exchange rate and other adjustments
Closing balance
Total provisions for impairment losses on loans and credit commitments
General reserve for credit losses adjustment
Total provisions plus general reserve for credit losses
36 | Westpac Group March 2015 Pillar 3 report
For the
6 months ended
31 March
2015
2,614
266
(330 )
98
51
2,699
867
293
(155 )
(204 )
(12 )
17
806
3,505
107
3,612
For the
6 months ended
30 September
2014
For the
6 months ended
31 March
2014
2,652
221
(371 )
98
14
2,614
2,585
284
(331 )
91
23
2,652
1,139
335
(189
(392
(11
(15
867
1,364
349
(244 )
(314 )
(23 )
7
1,139
3,481
133
3,614
)
)
)
)
3,791
92
3,883
Pillar 3 report
Credit risk exposures
Portfolios subject to the standardised approach
This table presents exposures subject to the standardised approach.
As at 31 March 2015, exposures subject to the standardised approach and categorised by risk weight are primarily Westpac Pacific, the
Lloyds asset finance portfolios, Asian retail exposures, the margin lending portfolio, self-managed superannuation fund and reverse
mortgages portfolios and some other small portfolios. Mark-to-market related credit risk and qualifying central clearing counterparties
exposure 1 is also included in the standardised approach.
31 March 2015
Risk Weight %
0%
2%
20%
35%
50%
75%
100%
150%
Default fund contributions 1
Mark-to-market related credit risk
Total
Total Exposure
at Default $m
279
1,692
1,548
1,102
2,536
1,810
11,844
19
57
20,887
Risk Weighted
Assets $m
34
310
386
1,268
1,358
11,844
28
288
10,840
26,356
30 September 2014
Risk Weight %
0%
2%
20%
35%
50%
75%
100%
150%
Mark-to-market related credit risk
Total
Total Exposure
at Default $m
245
72
1,554
1,008
2,266
1,385
11,880
20
18,430
Risk Weighted
Assets $m
1
311
353
1,133
1,040
11,880
29
8,905
23,652
31 March 2014
Risk Weight %
0%
2%
20%
35%
50%
75%
100%
150%
Mark-to-market related credit risk
Total
Total Exposure
at Default $m
235
27
1,595
953
2,009
1,282
11,403
27
17,531
Risk Weighted
Assets $m
1
319
334
1,004
961
11,403
40
7,257
21,319
1
Portfolios subject to the standardised approach now include exposures to qualifying central clearing counterparties used to clear derivative transactions. Derivative counterparty
exposure and initial margin are risk weighted at 2%. Default fund contributions to qualifying central clearing counterparties are shown separately and are subject to higher risk weights.
Westpac Group March 2015 Pillar 3 report | 37
Pillar 3 report
Credit risk exposures
Portfolios subject to supervisory risk-weights in the IRB approach
Exposures subject to supervisory risk-weights in the IRB approach include assets categorised as specialised lending, where a regulatory
capital ‘slotting’ approach applies.
Westpac currently has property finance and project finance credit risk exposures categorised as specialised lending. The ‘Credit Risk
Management’ section of this report describes the mapping of Westpac risk grades to both external rating equivalents and regulatory
capital ‘slots’.
Property finance
31 March 2015
$m
Strong
Good
Satisfactory
Weak
Default
Total
Risk Weight
70%
90%
115%
250%
NA
Exposure at
Default
16,086
27,970
8,148
437
792
53,433
Regulatory
Expected Loss
64
224
228
35
434
985
Risk Weighted
Assets
11,260
25,173
9,370
1,093
46,896
30 September 2014
$m
Strong
Good
Satisfactory
Weak
Default
Total
Risk Weight
70%
90%
115%
250%
NA
Exposure at
Default
10,852
28,048
10,719
649
905
51,173
Regulatory
Expected Loss
43
224
300
52
453
1,072
Risk Weighted
Assets
7,596
25,243
12,327
1,623
46,789
31 March 2014
$m
Strong
Good
Satisfactory
Weak
Default
Total
Risk Weight
70%
90%
115%
250%
NA
Exposure at
Default
8,881
25,036
11,123
711
1,156
46,907
Regulatory
Expected Loss
36
200
311
57
579
1,183
Risk Weighted
Assets
6,217
22,531
12,792
1,777
43,317
38 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Project finance
31 March 2015
$m
Strong
Good
Satisfactory
Weak
Default
Total
Risk Weight
70%
90%
115%
250%
NA
Exposure at
Default
5,402
2,396
361
197
4
8,360
Regulatory
Expected Loss
22
19
10
16
2
69
Risk Weighted
Assets
3,781
2,156
415
493
6,845
30 September 2014
$m
Strong
Good
Satisfactory
Weak
Default
Total
Risk Weight
70%
90%
115%
250%
NA
Exposure at
Default
5,266
2,121
223
208
197
8,015
Regulatory
Expected Loss
21
17
6
17
99
160
Risk Weighted
Assets
3,687
1,909
256
521
6,373
31 March 2014
$m
Strong
Good
Satisfactory
Weak
Default
Total
Risk Weight
70%
90%
115%
250%
NA
Exposure at
Default
4,120
1,135
264
208
220
5,947
Regulatory
Expected Loss
16
9
7
17
111
160
Risk Weighted
Assets
2,884
1,021
304
521
4,730
Westpac Group March 2015 Pillar 3 report | 39
Pillar 3 report
Credit risk exposures
Portfolios subject to IRB approaches
Westpac has classified its transaction-managed exposures by the external credit rating to which the internally assigned credit risk grade
aligns, as outlined in the ‘Credit Risk Management’ section of this report. Westpac’s internal rating system consists of more risk grades
than does the range of external grades, and as a result, PD will vary from portfolio to portfolio for the same external grade. Westpac’s
program-managed exposures are classified by PD band. The average PD within a band likewise varies from portfolio to portfolio.
For non-defaulted exposures, regulatory expected loss is defined as the product of PD, LGD and EAD. For defaulted exposures,
regulatory expected loss is based upon best estimates of loss. Expected loss is calculated at the facility level and then aggregated.
However, multiplying the aggregates of the PD, LGD and EAD, as reported in the tables below (e.g. $133,847m x 0.84% x 45%), does
not always equal the aggregate regulatory expected loss ($504m) because the product of two averages does not equal the average of a
product.
Corporate portfolio by external credit rating
31 March 2015
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
30 September 2014
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
31 March 2014
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
1
2
Outstandings 1
409
3,366
17,186
34,796
24,756
676
1,553
82,742
594
83,336
Committed
Undrawn 2
16
2,726
11,858
23,703
11,907
301
537
51,048
32
51,080
Exposure
at Default
426
6,137
29,143
58,495
36,582
976
2,088
133,847
707
134,554
Probability
of Default
0.01%
0.03%
0.07%
0.22%
1.29%
3.70%
22.45%
0.84%
NA
1.36%
Loss Given
Default
23%
37%
48%
48%
41%
40%
47%
45%
49%
45%
Regulatory
Expected Loss
1
11
62
187
15
228
504
297
801
Risk
Weighted
Assets
46
803
8,161
28,529
32,305
1,296
5,155
76,295
1,221
77,516
Average
Risk
Weight
11%
13%
28%
49%
88%
133%
247%
57%
173%
58%
Outstandings 1
353
3,126
16,718
29,833
23,060
804
1,705
75,599
556
76,155
Committed
Undrawn 2
1
1,652
11,215
19,672
10,543
135
605
43,823
36
43,859
Exposure
at Default
354
4,816
27,946
49,486
33,578
939
2,310
119,429
703
120,132
Probability
of Default
0.01%
0.03%
0.07%
0.22%
1.27%
3.70%
21.47%
0.91%
NA
1.49%
Loss Given
Default
23%
38%
49%
48%
41%
37%
43%
46%
53%
46%
Regulatory
Expected Loss
1
10
51
173
13
227
475
352
827
Risk
Weighted
Assets
34
720
8,059
24,177
29,970
1,066
5,248
69,274
925
70,199
Average
Risk
Weight
10%
15%
29%
49%
89%
114%
227%
58%
132%
58%
Outstandings 1
327
1,933
12,551
29,273
23,260
778
1,875
69,997
632
70,629
Committed
Undrawn 2
64
1,391
10,250
20,437
10,211
198
542
43,093
55
43,148
Exposure
at Default
391
3,324
22,800
49,717
33,554
977
2,419
113,182
789
113,971
Probability
of Default
0.01%
0.03%
0.07%
0.21%
1.32%
3.70%
22.87%
1.02%
NA
1.70%
Loss Given
Default
22%
44%
51%
47%
41%
41%
43%
46%
55%
46%
Regulatory
Expected Loss
9
51
180
15
252
507
390
897
Risk
Weighted
Assets
34
494
6,543
23,759
29,917
1,214
5,465
67,426
1,114
68,540
Average
Risk
Weight
9%
15%
29%
48%
89%
124%
226%
60%
141%
60%
Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items.
Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.
40 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Business lending portfolio by external credit rating
31 March 2015
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
30 September 2014
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
31 March 2014
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
1
2
Outstandings
1
1
216
1,644
31,740
1,999
1,900
37,500
725
38,225
Outstandings
1
1
203
1,740
32,017
1,963
2,295
38,219
688
38,907
Outstandings
1
1
211
1,868
32,502
1,926
2,121
38,629
971
39,600
Committed
Undrawn 2
54
88
724
9,035
266
201
10,368
24
10,392
Exposure
at Default
55
303
2,360
40,637
2,264
2,097
47,716
800
48,516
Probability
of Default
0.02%
0.09%
0.22%
1.62%
3.70%
23.71%
2.61%
NA
4.21%
Loss Given
Default
60%
49%
27%
31%
32%
37%
31%
44%
31%
Regulatory
Expected Loss
1
211
27
185
424
321
745
Risk
Weighted
Assets
6
77
591
25,071
1,786
3,469
31,000
1,352
32,352
Average
Risk
Weight
11%
25%
25%
62%
79%
165%
65%
169%
67%
Committed
Undrawn 2
49
61
694
8,333
249
203
9,589
31
9,620
Exposure
at Default
49
264
2,428
40,249
2,211
2,492
47,693
783
48,476
Probability
of Default
0.02%
0.09%
0.22%
1.62%
3.70%
24.11%
2.81%
NA
4.38%
Loss Given
Default
60%
47%
28%
31%
32%
37%
31%
44%
32%
Regulatory
Expected Loss
2
210
27
231
470
298
768
Risk
Weighted
Assets
5
74
636
25,007
1,777
4,185
31,684
1,441
33,125
Average
Risk
Weight
10%
28%
26%
62%
80%
168%
66%
184%
68%
Committed
Undrawn 2
51
63
821
8,829
233
209
10,206
39
10,245
Exposure
at Default
52
273
2,675
41,173
2,157
2,328
48,658
1,072
49,730
Probability
of Default
0.02%
0.09%
0.23%
1.60%
3.70%
23.83%
2.67%
NA
4.77%
Loss Given
Default
60%
46%
28%
31%
33%
37%
31%
43%
32%
Regulatory
Expected Loss
2
211
28
215
456
419
875
Risk
Weighted
Assets
5
75
710
25,199
1,794
3,904
31,687
1,759
33,446
Average
Risk
Weight
9%
28%
27%
61%
83%
168%
65%
164%
67%
Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items.
Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.
Westpac Group March 2015 Pillar 3 report | 41
Pillar 3 report
Credit risk exposures
Sovereign portfolio by external credit rating
31 March 2015
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
30 September 2014
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
31 March 2014
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
1
2
Outstandings 1
17,175
29,238
839
612
43
47,907
47,907
Committed
Undrawn 2
331
1,090
480
6
16
1,923
1,923
Exposure
at Default
18,632
32,294
1,358
618
59
52,961
52,961
Probability
of Default
0.01%
0.02%
0.05%
0.30%
1.89%
0.02%
NA
0.02%
Loss Given
Default
5%
8%
20%
30%
45%
8%
8%
Regulatory
Expected Loss
2
2
2
Risk
Weighted
Assets
214
676
138
210
72
1,310
1,310
Average
Risk
Weight
1%
2%
10%
34%
122%
2%
2%
Outstandings 1
13,177
31,609
830
878
13
46,507
46,507
Committed
Undrawn 2
293
1,703
514
500
17
3,027
3,027
Exposure
at Default
14,823
34,136
1,379
1,378
30
51,746
51,746
Probability
of Default
0.01%
0.02%
0.05%
0.31%
2.18%
0.03%
NA
0.03%
Loss Given
Default
5%
8%
19%
47%
33%
8%
8%
Regulatory
Expected Loss
3
3
3
Risk
Weighted
Assets
175
568
122
741
21
1,627
1,627
Average
Risk
Weight
1%
2%
9%
54%
70%
3%
3%
Outstandings 1
13,828
19,692
1,087
938
47
35,592
35,592
Committed
Undrawn 2
839
1,737
639
76
33
3,324
3,324
Exposure
at Default
15,359
22,388
1,726
1,014
80
40,567
40,567
Probability
of Default
0.01%
0.02%
0.06%
0.32%
1.50%
0.03%
NA
0.03%
Loss Given
Default
5%
7%
22%
49%
34%
8%
8%
Regulatory
Expected Loss
3
3
3
Risk
Weighted
Assets
171
431
169
566
50
1,387
1,387
Average
Risk
Weight
1%
2%
10%
56%
62%
3%
3%
Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items.
Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.
42 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Bank portfolio by external credit rating
31 March 2015
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
30 September 2014
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
31 March 2014
$m
AAA
AA
A
BBB
BB
B
Other
Subtotal
Default
Total
1
2
Outstandings 1
1,060
10,202
13,259
2,172
150
26,843
43
26,886
Committed
Undrawn 2
25
291
172
488
488
Exposure
at Default
1,060
10,525
13,746
2,344
150
27,825
43
27,868
Probability
of Default
0.01%
0.03%
0.07%
0.23%
0.58%
0.07%
NA
0.22%
Loss Given
Default
11%
56%
48%
39%
23%
49%
28%
49%
Regulatory
Expected Loss
2
5
2
9
5
14
Risk
Weighted
Assets
39
2,727
3,979
955
55
7,755
87
7,842
Average
Risk
Weight
4%
26%
29%
41%
37%
28%
202%
28%
Outstandings 1
627
12,859
16,128
1,725
267
33
31,639
5
31,644
Committed
Undrawn 2
26
212
141
379
379
Exposure
at Default
627
13,410
16,357
1,866
267
33
32,560
5
32,565
Probability
of Default
0.01%
0.03%
0.07%
0.22%
0.59%
40.01%
0.11%
NA
0.12%
Loss Given
Default
12%
52%
45%
41%
21%
60%
47%
100%
47%
Regulatory
Expected Loss
2
5
2
8
17
5
22
Risk
Weighted
Assets
26
3,340
4,424
750
91
114
8,745
8,745
Average
Risk
Weight
4%
25%
27%
40%
34%
345%
27%
27%
Outstandings 1
1,179
12,530
16,288
1,759
665
32,421
4
32,425
Committed
Undrawn 2
22
301
14
337
337
Exposure
at Default
1,179
12,551
16,588
1,773
665
1
32,757
4
32,761
Probability
of Default
0.01%
0.03%
0.07%
0.26%
0.64%
11.85%
0.07%
NA
0.09%
Loss Given
Default
10%
56%
49%
32%
21%
60%
49%
100%
49%
Regulatory
Expected Loss
2
6
1
1
10
5
15
Risk
Weighted
Assets
48
3,076
4,702
587
224
1
8,638
8,638
Average
Risk
Weight
4%
25%
28%
33%
34%
266%
26%
26%
Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items.
Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.
Westpac Group March 2015 Pillar 3 report | 43
Pillar 3 report
Credit risk exposures
Residential mortgages portfolio by PD band
31 March 2015
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
30 September 2014
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
31 March 2014
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
1
2
Outstandings 1
132,927
58,054
133,340
51,599
13,117
5,900
394,937
2,035
396,972
Committed
Undrawn 2
34,628
7,627
29,877
3,506
432
39
76,109
13
76,122
Exposure
at Default
167,613
65,369
162,371
54,642
13,513
5,947
469,455
2,040
471,495
Probability
of Default
0.04%
0.17%
0.48%
1.43%
5.35%
22.58%
0.81%
NA
1.24%
Loss Given
Default
20%
20%
20%
20%
20%
20%
20%
20%
20%
Regulatory
Expected Loss
13
22
159
160
148
268
770
146
916
Risk
Weighted
Assets
3,990
4,875
25,063
18,524
9,667
6,899
69,018
4,319
73,337
Average
Risk
Weight
2%
7%
15%
34%
72%
116%
15%
212%
16%
Outstandings 1
195,607
20,167
113,862
33,941
11,978
4,824
380,379
2,008
382,387
Committed
Undrawn 2
38,453
10,638
21,946
2,875
407
21
74,340
14
74,354
Exposure
at Default
234,197
30,506
135,138
36,410
12,364
4,851
453,466
2,015
455,481
Probability
of Default
0.07%
0.18%
0.46%
1.49%
4.78%
29.07%
0.75%
NA
1.19%
Loss Given
Default
20%
20%
20%
21%
20%
20%
20%
20%
20%
Regulatory
Expected Loss
33
11
126
112
121
277
680
131
811
Risk
Weighted
Assets
8,919
2,485
20,960
12,782
8,372
5,219
58,737
4,334
63,071
Average
Risk
Weight
4%
8%
16%
35%
68%
108%
13%
215%
14%
Outstandings 1
186,935
18,417
109,763
35,710
11,966
4,964
367,755
1,947
369,702
Committed
Undrawn 2
37,112
9,424
21,361
2,954
416
19
71,286
20
71,306
Exposure
at Default
224,191
27,533
130,463
38,272
12,357
4,990
437,806
1,959
439,765
Probability
of Default
0.07%
0.18%
0.45%
1.50%
4.70%
29.56%
0.78%
NA
1.22%
Loss Given
Default
20%
20%
20%
21%
21%
20%
20%
20%
20%
Regulatory
Expected Loss
31
10
121
118
119
288
687
150
837
Risk
Weighted
Assets
8,527
2,260
20,175
13,483
8,302
5,325
58,072
4,107
62,179
Average
Risk
Weight
4%
8%
15%
35%
67%
107%
13%
210%
14%
Outstandings are balances that were drawn down as at the reporting date.
Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.
44 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Australian credit cards portfolio by PD band
31 March 2015
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
30 September 2014
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
31 March 2014
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
1
2
Outstandings 1
2,222
847
2,656
2,297
1,397
690
10,109
118
10,227
Committed
Undrawn 2
11,500
2,763
2,573
2,852
708
83
20,479
15
20,494
Exposure
at Default
7,542
2,282
4,167
3,948
1,934
736
20,609
119
20,728
Probability
of Default
0.08%
0.19%
0.64%
1.55%
4.42%
22.60%
1.70%
NA
2.26%
Loss Given
Default
76%
75%
77%
76%
75%
75%
76%
76%
76%
Regulatory
Expected Loss
5
3
21
47
64
123
263
73
336
Risk
Weighted
Assets
318
183
910
1,689
1,697
1,389
6,186
246
6,432
Average
Risk
Weight
4%
8%
22%
43%
88%
189%
30%
207%
31%
Outstandings 1
2,158
846
2,751
2,256
1,330
628
9,969
90
10,059
Committed
Undrawn 2
11,296
2,792
2,741
2,624
630
77
20,160
10
20,170
Exposure
at Default
7,383
2,301
4,378
3,752
1,808
671
20,293
90
20,383
Probability
of Default
0.08%
0.19%
0.64%
1.54%
4.41%
22.33%
1.61%
NA
2.04%
Loss Given
Default
76%
75%
77%
77%
75%
75%
76%
77%
76%
Regulatory
Expected Loss
5
3
22
44
60
112
246
58
304
Risk
Weighted
Assets
313
185
964
1,607
1,586
1,271
5,926
143
6,069
Average
Risk
Weight
4%
8%
22%
43%
88%
189%
29%
159%
30%
Outstandings 1
2,098
811
2,766
2,069
1,403
695
9,842
108
9,950
Committed
Undrawn 2
11,166
2,650
2,687
2,230
687
86
19,506
12
19,518
Exposure
at Default
7,324
2,198
4,384
3,282
1,911
742
19,841
108
19,949
Probability
of Default
0.09%
0.19%
0.65%
1.53%
4.43%
22.72%
1.73%
NA
2.26%
Loss Given
Default
76%
75%
76%
77%
75%
75%
76%
77%
76%
Regulatory
Expected Loss
5
3
22
39
64
125
258
65
323
Risk
Weighted
Assets
311
176
964
1,401
1,686
1,413
5,951
237
6,188
Average
Risk
Weight
4%
8%
22%
43%
88%
190%
30%
219%
31%
Outstandings are balances that were drawn down as at the reporting date.
Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.
Westpac Group March 2015 Pillar 3 report | 45
Pillar 3 report
Credit risk exposures
Other retail portfolio by PD band
31 March 2015
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
30 September 2014
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
31 March 2014
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
1
2
Outstandings
1
3
198
2,663
5,162
2,254
879
11,159
164
11,323
Outstandings
1
1
156
1,583
4,645
2,768
1,334
10,487
134
10,621
Outstandings
1
2
187
1,615
4,609
2,534
1,273
10,220
147
10,367
Committed
Undrawn 2
2
700
1,807
803
733
395
4,440
8
4,448
Exposure
at Default
4
684
3,585
5,749
2,915
1,274
14,211
168
14,379
Probability
of Default
0.09%
0.15%
0.56%
1.67%
4.59%
24.02%
3.92%
NA
5.04%
Loss Given
Default
76%
44%
68%
60%
74%
68%
65%
68%
65%
Regulatory
Expected Loss
14
59
103
227
403
94
497
Risk
Weighted
Assets
1
111
1,916
4,461
3,335
1,949
11,773
322
12,095
Average
Risk
Weight
25%
16%
53%
78%
114%
153%
83%
192%
84%
Committed
Undrawn 2
1
582
1,531
913
721
331
4,079
7
4,086
Exposure
at Default
2
570
2,264
5,140
2,918
1,388
12,282
136
12,418
Probability
of Default
0.08%
0.15%
0.54%
1.66%
5.13%
22.80%
4.60%
NA
5.64%
Loss Given
Default
76%
44%
66%
59%
70%
67%
63%
68%
63%
Regulatory
Expected Loss
8
52
106
214
380
76
456
Risk
Weighted
Assets
92
1,153
3,885
3,220
2,070
10,420
233
10,653
Average
Risk
Weight
16%
51%
76%
110%
149%
85%
171%
86%
Committed
Undrawn 2
2
671
1,697
692
685
285
4,032
7
4,039
Exposure
at Default
3
656
2,402
4,926
2,688
1,324
11,999
149
12,148
Probability
of Default
0.08%
0.15%
0.54%
1.63%
5.18%
23.61%
4.55%
NA
5.72%
Loss Given
Default
76%
44%
65%
60%
70%
67%
63%
67%
63%
Regulatory
Expected Loss
9
50
98
212
369
83
452
Risk
Weighted
Assets
1
105
1,217
3,759
2,959
1,988
10,029
236
10,265
Average
Risk
Weight
17%
16%
51%
76%
110%
150%
84%
158%
85%
Outstandings are balances that were drawn down as at the reporting date.
Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.
46 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Small business portfolio by PD band
31 March 2015
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
30 September 2014
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
31 March 2014
$m
0.0 to 0.10
0.10 to 0.25
0.25 to 1.0
1.0 to 2.5
2.5 to 10.0
10.0 to 99.99
Subtotal
Default
Total
1
2
Outstandings 1
279
1,793
5,176
5,958
1,302
676
15,184
251
15,435
Committed
Undrawn 2
561
1,042
1,400
804
108
22
3,937
8
3,945
Exposure
at Default
787
2,845
6,633
6,678
1,411
701
19,055
290
19,345
Probability
of Default
0.07%
0.19%
0.57%
1.44%
5.34%
25.29%
2.06%
NA
3.53%
Loss Given
Default
37%
25%
41%
35%
27%
31%
35%
42%
35%
Regulatory
Expected
Loss
1
15
33
21
58
128
95
223
Risk
Weighted
Assets
50
298
2,164
2,925
818
705
6,960
654
7,614
Average
Risk
Weight
6%
10%
33%
44%
58%
101%
37%
226%
39%
Outstandings 1
544
818
5,394
4,921
1,214
430
13,321
213
13,534
Committed
Undrawn 2
654
493
1,301
591
96
8
3,143
7
3,150
Exposure
at Default
1,152
1,316
6,752
5,450
1,311
440
16,421
268
16,689
Probability
of Default
0.08%
0.20%
0.60%
1.45%
5.57%
27.06%
1.92%
NA
3.50%
Loss Given
Default
29%
26%
41%
37%
27%
34%
36%
45%
36%
Regulatory
Expected
Loss
1
16
29
20
42
108
105
213
Risk
Weighted
Assets
65
149
2,208
2,472
566
344
5,804
507
6,311
Average
Risk
Weight
6%
11%
33%
45%
43%
78%
35%
189%
38%
Outstandings 1
291
825
4,652
6,195
812
480
13,255
229
13,484
Committed
Undrawn 2
555
546
1,311
781
89
8
3,290
8
3,298
Exposure
at Default
796
1,376
6,025
6,911
902
491
16,501
283
16,784
Probability
of Default
0.07%
0.24%
0.60%
1.50%
5.58%
28.82%
2.03%
NA
3.69%
Loss Given
Default
33%
26%
44%
33%
30%
34%
36%
43%
36%
Regulatory
Expected
Loss
1
15
33
16
49
114
105
219
Risk
Weighted
Assets
47
171
2,130
2,817
433
389
5,987
521
6,508
Average
Risk
Weight
6%
12%
35%
41%
48%
79%
36%
184%
39%
Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items.
Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.
Westpac Group March 2015 Pillar 3 report | 47
Pillar 3 report
Credit risk exposures
Credit Quality
The improvement in quality of the portfolio seen over Full Year 2014 continued into First Half 2015, with a further reduction in stressed
assets, the emergence of new problem facilities remaining low, and the additional resolution and work-out of impaired facilities.
Impairment charges and actual losses are low, with provisioning levels being broadly maintained.
The institutional and commercial segments continue to perform well as customers remain cautious and protective of their balance sheets.
The consumer portfolios also remain sound, with low interest rates and the strong property market combining with continuing cautious
consumer behaviour to offset the modest pace of economic growth and rising unemployment, to contribute to the performance of the
portfolio.
Actual losses
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Write-offs
direct
1
25
12
137
119
20
2
316
Legal and
recovery costs
5
2
1
4
2
14
Write-offs from
provisions 1
38
30
34
3
10
50
39
204
Recoveries
(4)
(7)
(1)
(8)
(29)
(7)
(7)
(63)
Actual Losses for the
6 months ended
35
53
45
129
95
31
49
34
471
30 September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Write-offs
direct
2
64
26
303
226
50
4
4
679
Legal and
recovery costs
8
4
3
6
2
23
Write-offs from
provisions 1
184
176
96
30
164
56
706
Recoveries
(15)
(14)
(1)
(15)
(40)
(11)
(10)
(106)
Actual Losses for the
12 months ended
171
234
121
288
190
72
174
52
1,302
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Write-offs
direct
1
48
11
144
102
11
2
1
320
Legal and
recovery costs
4
1
1
4
1
11
Write-offs from
provisions 1
113
75
47
10
54
15
314
Recoveries
(3)
(8)
(8)
(16)
(8)
(5)
(48)
Actual Losses for the
6 months ended
111
119
58
136
87
14
60
12
597
1
Write-offs from individually assessed provisions.
48 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk exposures
Regulatory loss estimates and actual losses
The table below compares regulatory credit risk estimates used in the calculation of risk weighted assets to the average of actual
outcomes observed since the time of Advanced IRB accreditation for each portfolio.
Predicted parameters represent average internally predicted long-run probabilities of default for non-defaulted obligors at the start of
each year, as well as downturn estimates of loss (or the regulatory minimum where required). They are averaged using data from the
financial years beginning at the time of Advanced IRB accreditation (2008 for most portfolios) and compared to observed outcomes over
the same period. 1
Predicted parameters are updated annually and utilise observed outcomes from prior periods as a key input.
In order to appropriately include the most recent half-year period, its outcomes have been annualised.
Default rates
At the start of each year, a predicted default probability is assigned to all non-defaulted obligors. This is averaged over the portfolio and
reported as the predicted default rate. This is compared to the actual default rate for the year. Both predicted and observed annual
default rates are then averaged over the observation period.
Loss Given Default (LGD)
The LGD analysis excludes recent defaults in order to allow sufficient time for the full workout of the facility and hence an accurate LGD
to be determined. The workout period varies by portfolio: a two year workout period is assumed for transaction-managed and residential
mortgage lending; and a one year period for other program-managed portfolios.
Exposure at Default (EAD)
The EAD variance compares the observed EAD to the predicted EAD one year prior to default. For transaction-managed portfolios,
predicted EAD is currently mandated to be 100% of committed exposures. The observed EAD is averaged for all obligors that defaulted
over the observation period.
31 March 2015
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
1
2
3
Regulatory
Expected Loss 2
801
745
2
14
916
336
497
223
1,054
NA
NA
4,588
Default rate
Predicted
2.24%
2.25%
0.23%
0.60%
0.68%
1.51%
4.24%
2.52%
NA
NA
NA
Observed
1.09%
1.55%
0.24%
0.59%
1.50%
2.75%
1.68%
2.26%
NA
NA
Loss Given Default
Predicted
Observed
50%
39%
34%
19%
20%
6%
76%
60%
71%
56%
33%
22%
NA
23%
NA
NA
NA
NA
Observed EAD
variance to
Predicted 3
(27%)
(11%)
(3%)
(4%)
(9%)
(7%)
NA
NA
Predicted parameters are not available for specialised lending, securitisation or standardised exposures because risk weights for these portfolios do not rely on credit estimates
and are shown as NA in the tables above.
Includes regulatory expected losses for defaulted and non-defaulted exposures.
A negative outcome indicates observed EAD was lower than predicted EAD, which can happen because exposures were managed down prior to default or off-balance sheet
items or undrawn limits were not fully drawn prior to default.
Westpac Group March 2015 Pillar 3 report | 49
Pillar 3 report
Credit risk exposures
30 September 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Regulatory
Expected Loss 1
827
768
3
22
811
304
456
213
1,232
NA
NA
4,636
Default rate
Predicted
2.27%
2.25%
0.24%
0.51%
0.67%
1.51%
4.42%
2.53%
NA
NA
NA
NA
31 March 2014
$m
Corporate
Business lending
Sovereign
Bank
Residential mortgages
Australian credit cards
Other retail
Small business
Specialised lending
Securitisation
Standardised
Total
Regulatory
Expected Loss 1
897
875
3
15
837
323
452
219
1,343
NA
NA
4,964
Default rate
Predicted
2.27%
2.25%
0.24%
0.51%
0.67%
1.55%
4.74%
2.50%
NA
NA
NA
NA
1
2
Observed
1.19%
1.59%
0.59%
1.43%
2.86%
1.67%
2.51%
NA
NA
NA
Loss Given Default
Predicted
Observed
51%
39%
34%
21%
20%
6%
76%
57%
70%
53%
33%
21%
NA
27%
NA
NA
NA
NA
NA
NA
Observed EAD
variance to
Predicted 2
(28%)
(12%)
(4%)
(4%)
(9%)
(7%)
NA
NA
NA
Observed
1.17%
1.61%
0.62%
1.44%
2.88%
1.67%
2.57%
NA
NA
NA
Loss Given Default
Predicted
Observed
50%
46%
34%
20%
20%
6%
76%
58%
71%
54%
33%
21%
NA
29%
NA
NA
NA
NA
NA
NA
Observed EAD
variance to
Predicted 2
(28%)
(11%)
(3%)
(3%)
(8%)
(7%)
NA
NA
NA
Includes regulatory expected losses for defaulted and non-defaulted exposures
A negative outcome indicates observed EAD was lower than predicted EAD, which can happen because exposures were managed down prior to default or off-balance sheet
items or undrawn limits were not fully drawn prior to default.
50 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk mitigation
This section describes the way in which Westpac reduces its credit risk by using financial collateral, guarantees or credit derivatives for
Corporate, Sovereign and Bank asset classes.
Approach
Westpac recognises credit risk mitigation only when formal legal documentation is held that establishes Westpac’s direct, irrevocable and
unconditional recourse to the collateral or to an unrelated credit risk mitigation provider. The minimum standards to be met so that credit
risk mitigation can be recognised are embodied in Westpac’s credit rules and policies. All proposals for risk mitigation require a formal
submission confirming compliance with these standards, for approval by an authorised credit officer. Authorised credit officer approval is
also required for existing risk mitigation to be discontinued or withdrawn.
The amount of credit risk mitigation recognised is the face value of the mitigation instrument, which is adjusted by the application of
discounts for any maturity and/or currency mismatch with the underlying obligation, so that a discounted amount is recognised when
calculating the residual exposure after mitigation.
For regulatory capital purposes Westpac addresses credit risk mitigation as follows:

exposures secured by cash, eligible financial collateral or where protection is bought via credit linked notes, provided the
proceeds are invested in either cash or eligible financial collateral, are included at the gross value, with risk weighted assets for the
portion thus secured calculated by applying a 5% LGD 1 ;

exposures that are mitigated by way of eligible guarantees, standby letters of credit or similar instruments, where Westpac has
direct recourse to an unrelated third party on default or non-payment by the customer, or credit protection bought via credit default
swaps where Westpac is entitled to recover either full principal or credit losses on occurrence of defined credit events, are treated
under double default rules where the protection provider is a financial firm rated A/A2 or better; and

exposures that are mitigated by way of guarantees, letters of credit, credit default swaps or similar instruments, where the
eligibility criteria for double default treatment are not met, are treated under the substitution approach.
Structure and organisation
Westpac Institutional Bank is responsible for managing the overall risk in Westpac’s corporate, sovereign and bank credit portfolios, and
uses a variety of instruments, including securitisation and single name credit default swaps, to manage loan and counterparty risk.
Westpac Institutional Bank has a dedicated portfolio trading desk with the specific mandate of actively monitoring the underlying
exposure and the offsetting hedge book.
Risk reporting
Monthly reports are issued, which detail risk mitigated facilities where the mitigation instruments mature within 30 to 90 days. An
independent operational unit supervises this process to ensure that the relevant business and credit risk management units’ decisions
are taken and actions implemented in a timely fashion.
Specific reporting is maintained and monitored on the matching of hedges with underlying facilities, with any adjustments to hedges (e.g.
unwinds or extensions) managed dynamically.
Netting
Risk reduction by way of current account set-offs is recognised for exposures to creditworthy customers domiciled in Australia and New
Zealand only. Customers are required to enter into formal agreements giving Westpac the unfettered right to set-off gross credit and
debit balances in their nominated accounts to determine Westpac’s net exposure within each of these two jurisdictions. Cross-border
set-offs are not permitted.
Close-out netting is undertaken for off-balance sheet financial market transactions with counterparties with whom Westpac has entered
into master netting agreements which allow such netting in specified jurisdictions. Close-out netting effectively aggregates pre-settlement
risk exposure at time of default, thus reducing overall exposure.
Collateral valuation and management
Westpac revalues financial markets and associated collateral positions on a daily basis to monitor the net risk position, and has formal
processes in place so that calls for collateral top-up or exposure reduction are made promptly. An independent operational unit has
responsibility for monitoring these positions. The collateralisation arrangements are documented via the Credit Support Annex of the
International Swaps and Derivatives Association (ISDA) master agreement for derivatives transactions and Global Master Repurchase
Agreement (GMRA) for repurchase transactions.
1
Excludes collateralised derivative transactions.
Westpac Group March 2015 Pillar 3 report | 51
Pillar 3 report
Credit risk mitigation
Types of collateral taken
Westpac recognises the following as eligible collateral for credit risk mitigation by way of risk reduction:

cash (primarily in Australian dollars (AUD), New Zealand dollars (NZD), US dollars (USD), Canadian dollars (CAD), British
pounds (GBP), or Euro (EUR));

bonds issued by Australian Commonwealth, State and Territory governments or their Public Sector Enterprises, provided these
attract a zero risk-weighting under APS112;

securities issued by other specified AA-/Aa3 or better rated sovereign governments; and

credit-linked notes (provided the proceeds are invested in cash or other eligible collateral described above).
Guarantor/credit derivative counterparties
For mitigation by risk transfer, Westpac only recognises unconditional irrevocable guarantees or standby letters of credit issued by, or
eligible credit derivative protection bought from, the following entities provided they are not related to the underlying obligor:

sovereign entities;

public sector entities in Australia and New Zealand;

authorised deposit taking institutions and overseas banks; and

other entities with a minimum risk grade equivalent of A-/A3.
Market and/or credit risk concentrations
When Westpac uses credit risk mitigation techniques to reduce counterparty exposure, limits are applied to both gross (i.e.
pre-mitigation) and net exposure.
Furthermore, exposure is recorded against the provider of any credit risk mitigation and a limit framework prevents excessive
concentration to such counterparties.
All exposures to risk transfer counterparties are separately approved under Westpac’s usual credit approval process, with the amount
and tenor of mitigation recorded against the counterparty in Westpac’s exposure management systems. The credit quality of mitigation
providers is reviewed regularly in accordance with Westpac’s usual periodic review processes.
Market risks arising from credit risk mitigation activities are managed similarly to market risks arising from any other trading activities.
These risks are managed under either the market risk banking book or trading book frameworks as appropriate.
52 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Credit risk mitigation
Total exposure covered by collateral, credit derivatives and guarantees
31 March 2015
$m
Corporate
Sovereign
Bank
Total
Total before
mitigation
134,631
52,961
27,791
215,383
Impact
of credit
mitigation 1
(77)
77
-
Total after
mitigation
134,554
52,961
27,868
215,383
Total exposure for
which some credit
risk is mitigated
4,365
241
3,087
7,693
Eligible Financial
Collateral
1,892
96
1,115
3,103
Credit Risk Mitigants
Covered by
Guarantees
53
110
180
343
Covered by
Credit Derivatives
24
44
68
30 September 2014
$m
Corporate
Sovereign
Bank
Total
Total before
mitigation
120,235
51,746
32,462
204,443
Impact
of credit
mitigation 1
(103)
103
-
Total after
mitigation
120,132
51,746
32,565
204,443
Total exposure for
which some credit
risk is mitigated
4,671
254
7,740
12,665
Eligible Financial
Collateral
1,774
50
3,203
5,027
Credit Risk Mitigants
Covered by
Guarantees
46
175
149
370
Covered by
Credit Derivatives
57
150
207
31 March 2014
$m
Corporate
Sovereign
Bank
Total
Total before
mitigation
114,030
40,567
32,702
187,299
Impact
of credit
mitigation 1
(59)
59
-
Total after
mitigation
113,971
40,567
32,761
187,299
Total exposure for
which some credit
risk is mitigated
4,044
194
3,320
7,558
Eligible Financial
Collateral
1,829
25
1,000
2,854
Credit Risk Mitigants
Covered by
Guarantees
5
150
128
283
Covered by
Credit Derivatives
54
149
203
1
Impact of credit mitigation under the substitution approach.
Westpac Group March 2015 Pillar 3 report | 53
Pillar 3 report
Counterparty credit risk
This section describes Westpac’s exposure to credit risk arising from derivative and treasury products.
Approach
Westpac’s process for managing derivatives and counterparty credit risk is based on its assessment of the potential future credit risk
Westpac is exposed to when dealing in derivatives products and securities financing transactions. Westpac simulates future market rates
by imposing shocks on market prices and rates, and assessing the effect these shocks have on the mark-to-market value of Westpac’s
positions. These simulated exposure numbers are then checked against pre-settlement risk limits that are set at the counterparty level.
Structure and organisation
The Financial Markets and Treasury Risk management team is charged with managing the counterparty credit exposure arising from
derivatives and treasury products.
Risk reporting
Westpac actively reassesses and manages the counterparty credit exposure arising from derivatives business. A daily simulation of
potential future counterparty credit exposure taking into account movements in market rates is conducted. This simulation quantifies
credit exposure using the Derivative Risk Equivalent (DRE) methodology and exposure is loaded into a credit limit management system.
Limit excesses are reported to credit managers and actioned within strict timeframes.
Market related credit risk
There are two components to the regulatory capital requirements for credit risk arising from derivative products:

Capital to absorb losses arising from the default of derivative counterparties. This has been included as part of the “IRB
Approach” credit capital requirements since Westpac’s Basel II accreditation.

Capital to absorb losses arising from mark-to-market valuation movements resulting from changes in the credit quality of
derivative counterparties. These valuation movements are referred to as credit valuation adjustments and this risk is sometimes
labelled as credit valuation adjustment or CVA risk. Westpac refers to this requirement as mark-to-market related credit risk.
Risk mitigation
Mitigation is achieved in a number of ways:

the limit system monitors for excesses of the pre-determined limits, with any excesses being immediately notified to credit
officers;

Westpac has collateral agreements with its largest counterparties. The market value of the counterparty’s portfolio is used to
recalculate the credit position at each end of day, with collateral being called for when certain pre-set limits are met; and

credit derivatives are used to mitigate credit exposure against certain counterparties.
In addition, the following approaches are also used as appropriate to mitigate credit risk:

incorporating right-to-break in Westpac’s contracts, effectively reducing the tenor of the risk;

signing netting agreements, thus allowing the exposure across a portfolio of trades to be netted;

regular marking to market and settling of the foreign exchange components of foreign exchange reset contracts; and

downgrade triggers in documentation that, if breached, require the counterparty to provide collateral.
Counterparty derivative exposures and limits
The risk management methodology for counterparty derivatives exposures is similar to the credit methodology for transaction-managed
loans. The main difference is in the estimation of the exposure for derivatives which is based on the DRE methodology. DRE is a credit
exposure measure for derivative trades which is calibrated to a ‘loan-equivalent’ exposure.
Counterparty credit limits are approved on an uncommitted and unadvised basis by authorised credit officers. This follows an evaluation
of each counterparty’s credit worthiness and establishing an agreed credit risk appetite for the nature and extent of prospective business.
54 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Counterparty credit risk
Wrong-way risk exposures
Westpac defines wrong-way risk as exposure to a counterparty which is adversely correlated with the credit quality of that counterparty.
With respect to credit derivatives, wrong-way risk refers to credit protection purchased from a counterparty highly correlated to the
reference obligation.
Wrong-way risk exposures using credit derivatives are controlled by only buying protection from highly rated counterparties. These
transactions are assessed by an authorised credit officer who has the right to decline any transaction where they feel there is an
unacceptably high correlation between the ability to perform under the trade and the performance of the underlying counterparty.
Consequences of a downgrade in Westpac’s credit rating 1
Where an outright threshold and minimum transfer amount are agreed, there will not be any impact on the amount of collateral posted by
Westpac in the event of a credit rating downgrade. Where the threshold and minimum transfer amount are tiered according to credit
rating, the impact of Westpac being downgraded below its current credit rating would be: for a one notch downgrade, postings of $120
million; while for a two notch downgrade, postings would be $159 million.
1
Credit rating downgrade postings are cumulative.
Westpac Group March 2015 Pillar 3 report | 55
Pillar 3 report
Securitisation
A securitisation is a financial structure where the cash flow from a pool of assets is used to service obligations to at least two different
tranches or classes of creditors (typically holders of debt securities), with each class or tranche reflecting a different degree of credit risk
(i.e. one class of creditors is entitled to receive payments from the pool before another class of creditors).
Securitisation transactions are generally grouped into two broad categories:

traditional or true sale securitisations, which involve the transfer of ownership of the underlying asset pool to a third party; and

synthetic transactions, where the ownership of the pool remains with the originator and only the credit risk of the pool is
transferred to a third party, using credit derivatives or guarantees.
Covered bond transactions, in which bonds issued by Westpac are guaranteed by assets held in a special purpose vehicle, are not
considered to be securitisation transactions.
Approach
Westpac’s involvement in securitisation activities ranges from a seller of its own assets to an investor in third-party transactions and
includes transaction arrangement, the provision of securitisation services and funding for clients, including clients requiring access to
capital markets.
Securitisation of Westpac originated assets - Securitisation is a funding, liquidity and capital management tool. It allows Westpac the
ability to liquefy a pool of assets and increase Westpac’s wholesale funding capacity. Westpac may provide arm’s length facilities to the
securitisation vehicles. The facilities entered into typically include the provision of liquidity, funding, underwriting and derivative contracts.
Westpac has entered into on balance sheet securitisation transactions whereby loans originated by Westpac are transformed into stocks
of saleable mortgage backed securities and held in the originating bank’s liquid asset portfolio. These ‘self securitisations’ do not change
risk weighted assets 1 . No securitisation transactions for Westpac originated assets are classified as a resecuritisation.
Securitisation in the management of Westpac’s credit portfolio - Westpac uses securitisation, including portfolio credit default
swaps, to manage its corporate and institutional loan and counterparty credit risk portfolios. Single name credit default swaps are not
treated as securitisations but as credit risk mitigation facilities. Transactions are entered into to manage counterparty credit risk or
concentration risks.
Provision of securitisation services, including funding and management of conduit vehicles - Westpac provides services to clients
wishing to access asset-backed financing through securitisation. Those services include access to the Asset Backed Commercial Paper
Market through Waratah and Crusade conduits, the Westpac-sponsored securitisation conduits; the provision of warehouse and term
funding of securitised assets on Westpac’s balance sheet; and arranging Asset-Backed Bond issues. Westpac provides facilities to
Waratah and the Crusade securitisation conduit including liquidity, funding, underwriting, credit enhancement and derivative contracts.
Se curitisation facilities provided by Westpac include resecuritisation exposures which are securitisation exposures in which the risk
associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is itself a securitisation
exposure.
Westpac’s role in the securitisation process
Securitisation activity
Role played by Westpac
Securitisation of Westpac originated assets

Arranger

Note holder

Asset originator

Trust manager

Bond distributor

Swap provider

Facility provider

Servicer
Securitisation in the management of Westpac’s
credit portfolio
Provision of securitisation services including
funding and management of conduit vehicles

Hedger - protection purchaser

Investor - protection seller

Investor - purchaser of securitisation exposures

Arranger

Liquidity facility provider

Bond distributor

Swap counterparty

Credit enhancement provider

Servicer

Funder

1
The credit exposures of the underlying loans are measured in accordance with APS113.
56 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Securitisation
Key Objectives
Securitisation of Westpac originated assets - The securitisation of Westpac’s own assets provides funding diversity, and is a core tool
of liquidity management.
Securitisation in the management of Westpac’s credit portfolio - Westpac acts as principal in transactions and will buy and sell
protection in order to meet its portfolio management objectives. Westpac also purchases securitisation exposures in order to earn
income. All securitisation activity must follow Westpac’s credit approval processes.
Provision of securitisation services including funding and management of conduit vehicles - Westpac receives market-based
fees in return for its services as servicer, swap counterparty, arranger and facility provider and program fees, interest margins and bond
distribution fees on warehouse and term funding facilities.
Structure and organisation
Securitisation of Westpac originated assets - Westpac’s Treasury operations are responsible for all Westpac originated securitisation
activity including funding, liquidity and capital management.
Securitisation in the management of Westpac’s credit portfolio - Westpac’s exposure arising from securitisation, including portfolio
hedging, is managed by Westpac Institutional Bank (WIB) and integrated within Westpac’s standard risk reporting and management
systems.
Provision of securitisation services including funding and management of conduit vehicles - These services are provided by WIB
and include the provision of liquidity, credit enhancement, funding and derivative facilities and servicer and arranger services.
Risk reporting
Credit exposure - Funding, liquidity, credit enhancement and redraw facilities, swap arrangements and counterparty exposures are
captured and monitored in key source systems along with other facilities/derivatives entered into by Westpac.
Operational risk exposure - The operational risk review process for Westpac includes the identification of risks, controls and key
performance indicators in relation to all securitisation activity and services provided by Westpac or any of its subsidiaries.
Market risk exposure - Exposures arising from transactions with securitisation conduits and other counterparties are captured as part of
Westpac’s traded and non-traded market risk reporting and limit management framework.
Liquidity risk exposure - Exposure to, and the impact of, securitisation transactions are managed under the Liquidity Risk Management
Framework and are integrated into routine reporting for capital and liquidity positions, net interest margin analysis, balance sheet
forecasting and funding scenario testing. The annual funding plan incorporates consideration of overall liquidity risk limits and the
securitisation of Westpac originated assets.
Risk mitigation
Securitisation of Westpac originated assets - The interest rate and basis risks generated by Westpac’s hedging arrangements to each
securitisation trust are captured and managed within Westpac’s asset and liability management framework. The liquidity risk generated
by Westpac’s liquidity and redraw facilities to each securitisation trust is captured and managed in accordance with Westpac’s liquidity
management policies along with all other contingent liquidity facilities.
Securitisation in the management of Westpac’s credit portfolio - Transactions are approved in accordance with Westpac’s credit risk
mitigation policy (see pages 51 and 52).
Provision of securitisation services including funding and management of conduit vehicles - All securitisation transactions are
approved within the context of a securitisation credit policy that sets detailed transaction-specific guidelines that regulate servicer
counterparty risk appetite, transaction tenor, asset class, third party credit support and portfolio quality. This policy is applied in
conjunction with other credit and market risk policies that govern the provision of derivative and other services that support securitisation
transactions. In particular, credit hedging transactions are subject to credit risk mitigation policy (see pages 51 and 52). Any interest rate
or currency hedging is subject to counterparty credit risk management (see pages 54 and 55) and market risk management (see
pages 67 and 68) policies and processes.
Westpac Group March 2015 Pillar 3 report | 57
Pillar 3 report
Securitisation
Regulatory capital approaches
The regulatory capital treatment of all securitisation exposures is undertaken in accordance with APS120.
Consistent with APS120 the approaches employed include the Ratings-Based Approach (RBA), where APRA provides risk-weights that
are matched to external credit ratings, and the Internal Assessment Approach (IAA), which largely mirrors the RBA. The Supervisory
Formula (SF), which determines a capital charge based on the attributes of the securitisation structure through an industry standard
formula with pre-determined parameters, is employed under specific conditions where the RBA and IAA are deemed inappropriate.
Securitisation of Westpac originated assets - The assets sold by Westpac to a securitisation trust are excluded from Westpac’s
calculation of credit risk weighted assets if capital relief is sought and the requirements of APS120 are satisfied 1 . Westpac cannot rely
on external rating when risk weighting its exposure to these trusts and must use the Supervisory Formula approach instead.
In instances where insufficient risk transfer is achieved by the transaction for regulatory purposes, the capital calculation is performed on
the underlying asset pool while the facilities provided to such securitisation vehicles do not attract regulatory capital charges.
Securitisation in the management of Westpac’s credit portfolio - Unless Westpac makes an election under APS120, the underlying
assets subject to synthetic securitisation are excluded from Westpac’s calculation of credit risk weighted assets. They are replaced with
the credit risk weight of the applicable securitisation instrument, usually credit default swaps or underlying cash collateral. Westpac
applies the RBA and the SF when determining regulatory capital treatments for securitisation exposures arising from the management of
its credit portfolio.
Provision of securitisation services including funding and management of conduit services - Westpac uses the RBA and the IAA
methodology when determining regulatory capital requirements for the facilities associated with the provision of securitisation services to
the Waratah securitisation conduit and facilities for the provision of warehouse and term funding of securitised assets on Westpac’s
balance sheet. Regulatory capital for the Crusade securitisation conduit is determined in accordance with APS113.
The regulatory capital treatment of derivatives for securitisation exposures is currently undertaken in accordance with APS113.The
difference in regulatory capital calculations using APS120 and APS113 is immaterial.
The External Credit Assessment Institutions that can be used by Westpac for resecuritisations are Standard & Poor’s, Moody’s and Fitch.
Westpac’s accounting policies for securitisation activities
Securitisation of Westpac originated assets - The assets sold by Westpac to a securitisation trust remain on Westpac’s balance sheet
for accounting purposes.
Securitisation in the management of Westpac’s credit portfolio - For risk mitigation using synthetic securitisation, the underlying
assets remain on Westpac’s balance sheet for accounting purposes. The accounting treatment of the assets will depend on their nature.
They could include loans and receivables, available for sale securities or derivatives. The most common form of synthetic securitisation
is via a credit default swap, which is treated as a derivative and recognised in the profit and loss statement at fair value.
For investment in securitisation exposures, if the instrument includes a credit default swap, the exposure will be fair valued through the
profit and loss statement. Other securitisation exposures will be fair valued through the balance sheet unless Westpac makes an election
at the time of purchase to fair value through the profit and loss statement.
Provision of securitisation services including funding and management of conduit vehicles - Fee income from these services is
recognised on an accrual basis. Liquidity and funding facilities are treated as commitments to provide finance, with fee and margin
income recognised on an accrual basis. Warehouse and term funding facilities are treated as loans.
1
Including the requirements to achieve capital relief.
58 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Securitisation
Banking book summary of assets securitised by Westpac
This table shows outstanding Banking book securitisation assets and assets intended to be securitised 1 for Westpac originated assets
by underlying asset type. It includes the amount of impaired and past due assets, along with any losses recognised by Westpac during
the current period.
Securitised assets are held in securitisation trusts. Trusts which meet requirements to achieve capital relief do not form part of the Level
2 consolidated group. Self securitisation trusts remain consolidated at Level 2 and the assets transferred to these trusts are risk weighted
in accordance with APS113.
31 March 2015
$m
Residential mortgages
Credit cards
Auto and equipment finance
Business lending
Investments in ABS
Other
Total
Total outstanding securitised by ADI
Traditional
Synthetic
Securitisation 2
Securitisation
96,685
2,309
98,994
-
Assets
intended to be
securitised
-
Impaired
loans
9
10
19
Past due
assets
356
3
359
Westpac
recognised
losses
-
30 September 2014
$m
Residential mortgages
Credit cards
Auto and equipment finance
Business lending
Investments in ABS
Other
Total
Total outstanding securitised by ADI
Traditional
Synthetic
Securitisation 2
Securitisation
88,828
1,891
90,719
-
Assets
intended to be
securitised
-
Impaired
loans
12
11
23
Past due
assets
301
7
308
Westpac
recognised
losses
-
31 March 2014
$m
Residential mortgages
Credit cards
Auto and equipment finance
Business lending
Investments in ABS
Other
Total
Total outstanding securitised by ADI
Traditional
Synthetic
Securitisation 2
Securitisation
92,337
2,470
94,807
-
Assets
intended to be
securitised
-
Impaired
loans
12
13
25
Past due
assets
297
10
307
Westpac
recognised
losses
-
Banking book summary of total Westpac sponsored third party assets securitised
This table represents Banking book third party assets where Westpac acts a sponsor.
$m
Residential mortgages
Credit cards
Auto and equipment finance
Business lending
Investments in ABS
Other
Total
1
2
31 March
2015
674
145
182
1,001
30 September
2014
1,426
306
1,732
31 March
2014
1,495
332
1,827
Represents securitisation activity from the end of the reporting period to the disclosure date of this report.
Includes self securitisation assets of $84,966m ($78,064m at 30 September 2014 and $81,725m at 31 March 2014).
Westpac Group March 2015 Pillar 3 report | 59
Pillar 3 report
Securitisation
Banking book summary of securitisation activity by asset type
This table shows assets transferred into securitisation schemes by underlying asset type (ADI originated) for the relevant period.
For the 6 months ended
31 March 2015
$m
Residential mortgages
Credit cards
Auto and equipment finance
Business lending
Investments in ABS
Other
Total
Amount
securitised
18,511
1,091
19,602
Recognised gain or
loss on sale
-
For the 12 months ended
30 September 2014
$m
Residential mortgages
Credit cards
Auto and equipment finance
Business lending
Investments in ABS
Other
Total
Amount
securitised
33,116
1,302
34,418
Recognised gain or
loss on sale
-
For the 6 months ended
31 March 2014
$m
Residential mortgages
Credit cards
Auto and equipment finance
Business lending
Investments in ABS
Other
Total
Amount
securitised
25,135
1,130
26,265
Recognised gain or
loss on sale
-
60 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Securitisation
Banking book summary of on and off-balance sheet securitisation by exposure type
31 March 2015
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Lending facilities
Warehouse facilities
Total
On balance sheet
Securitisation retained
Securitisation purchased
8,213
7,836
12
7,848
8,213
Off-balance
sheet
1,854
5,773
69
121
7,817
Total Exposure
at Default
8,213
1,854
13,609
81
121
23,878
30 September 2014
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Lending facilities
Warehouse facilities
Total
On balance sheet
Securitisation retained
Securitisation purchased
7,036
1
7,737
13
7,751
7,036
Off-balance
sheet
3,010
4,086
147
79
7,322
Total Exposure
at Default
7,036
3,011
11,823
160
79
22,109
31 March 2014
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Lending facilities
Warehouse facilities
Total
On balance sheet
Securitisation retained
Securitisation purchased
6
6,804
1
7,817
15
7,839
6,804
Off-balance
sheet
3,984
3,752
157
166
8,059
Total Exposure
at Default
6,810
3,985
11,569
172
166
22,702
Westpac Group March 2015 Pillar 3 report | 61
Pillar 3 report
Securitisation
Banking book securitisation exposure at default by risk weight band
31 March 2015
Total
Exposure
Exposure
Risk Weighted Assets
$m
Less than or equal to 10%
Greater than 10 - 20%
Greater than 20 - 30%
Greater than 30 - 50%
Greater than 50 - 75%
Greater than 75 - 100%
Greater than 100 - 250%
Greater than 250 - 425%
Greater than 425 - 650%
Other
Deductions
Total
Securitisation
8,982
12,045
779
110
304
70
2
7
22,299
Resecuritisation
368
1,142
69
1,579
30 September 2014
at Default
8,982
12,045
1,147
1,252
373
70
2
7
23,878
Total
Exposure
Exposure
Securitisation
637
1,968
296
79
304
175
13
3,472
Resecuritisation
148
742
69
959
Risk Weighted Assets
$m
Less than or equal to 10%
Greater than 10 - 20%
Greater than 20 - 30%
Greater than 30 - 50%
Greater than 50 - 75%
Greater than 75 - 100%
Greater than 100 - 250%
Greater than 250 - 425%
Greater than 425 - 650%
Other
Deductions
Total
Securitisation
7,746
10,446
649
293
301
70
2
5
7
19,519
Resecuritisation
559
1,883
148
2,590
31 March 2014
at Default
7,746
10,446
1,208
2,176
449
70
2
5
7
22,109
Total
Exposure
Exposure
Securitisation
547
1,667
261
218
301
175
13
63
3,245
Resecuritisation
228
1,224
148
1,600
Risk Weighted Assets
$m
Less than or equal to 10%
Greater than 10 - 20%
Greater than 20 - 30%
Greater than 30 - 50%
Greater than 50 - 75%
Greater than 75 - 100%
Greater than 100 - 250%
Greater than 250 - 425%
Greater than 425 - 650%
Other
Deductions
Total
Securitisation
7,544
10,413
645
288
298
60
2
11
8
19,269
62 | Westpac Group March 2015 Pillar 3 report
Resecuritisation
676
2,208
549
3,433
at Default
7,544
10,413
1,321
2,496
847
60
2
11
8
22,702
Securitisation
534
1,662
256
215
298
150
13
138
3,266
Resecuritisation
271
1,435
549
2,255
Total Risk
Weighted
Assets
637
1,968
444
821
373
175
13
4,431
Total Risk
Weighted
Assets
547
1,667
489
1,442
449
175
13
63
4,845
Total Risk
Weighted
Assets
534
1,662
527
1,650
847
150
13
138
5,521
Pillar 3 report
Securitisation
Banking book securitisation exposure deducted from capital 1
31 March 2015
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Credit enhancements
Derivative transactions
Total
Exposures
deducted from
Common equity
Tier 1 capital
7
7
30 September 2014
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Credit enhancements
Derivative transactions
Total
Exposures
deducted from
Common equity
Tier 1 capital
7
7
31 March 2014
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Credit enhancements
Derivative transactions
Total
Exposures
deducted from
Common equity
Tier 1 capital
8
8
Banking book securitisation subject to early amortisation treatment
There is no securitisation exposure in the Banking book that is subject to early amortisation treatment for 31 March 2015.
Banking book resecuritisation exposure subject to credit risk mitigation (CRM)
As at 31 March 2015 resecuritisation exposures eligible for CRM was $1,579 million with nil CRM taken against these exposures ($2,590
million eligible for CRM and nil CRM taken as at 30 September 2014).
Banking book resecuritisation exposure to guarantors
Westpac has no third party guarantors providing guarantees for securitised assets, principal or interest repayments for 31 March 2015.
Trading book summary of assets securitised by Westpac
There are no outstanding securitisation exposures for Westpac originated assets held in the Trading book as at 31 March 2015.
1
Excludes securitisation start-up costs.
Westpac Group March 2015 Pillar 3 report | 63
Pillar 3 report
Securitisation
Trading book summary of total Westpac sponsored third party assets securitised
There are no third party assets held in the Trading book where Westpac is responsible for the establishment of the securitisation
program and subsequent management as at 31 March 2015.
Trading book summary of securitisation activity by asset type
There is no originated securitisation activity in the trading book for the 12 months to 31 March 2015.
Trading book aggregated amount of exposure securitised by Westpac and subject to APS116 Capital Adequacy: Market Risk
This table shows Westpac originated outstanding securitisation exposure held in the Trading book. These exposures are risk
weighted under APS116.
31 March 2015
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Credit enhancements
Derivative transactions
Total
Standard Method
Traditional
Synthetic
Securitisation
Securitisation
21
21
-
IMA Method
Traditional
Synthetic
Securitisation
Securitisation
-
30 September 2014
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Credit enhancements
Derivative transactions
Total
Standard Method
Traditional
Synthetic
Securitisation
Securitisation
21
21
-
IMA Method
Traditional
Synthetic
Securitisation
Securitisation
-
31 March 2014
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Credit enhancements
Derivative transactions
Total
Standard Method
Traditional
Synthetic
Securitisation
Securitisation
75
75
-
IMA Method
Traditional
Synthetic
Securitisation
Securitisation
-
64 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Securitisation
Trading book summary of on and off-balance sheet securitisation by exposure type 1
31 March 2015
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Lending facilities
Warehouse facilities
Credit enhancements
Basis swaps
Other derivatives
Total
On balance sheet
Securitisation retained
Securitisation purchased
21
200
21
200
Off-balance
sheet
42
110
152
Total Exposure
at Default
221
42
110
373
30 September 2014
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Lending facilities
Warehouse facilities
Credit enhancements
Basis swaps
Other derivatives
Total
On balance sheet
Securitisation retained
Securitisation purchased
22
726
22
726
Off-balance
sheet
32
137
169
Total Exposure
at Default
748
32
137
917
31 March 2014
$m
Securities
Liquidity facilities
Funding facilities
Underwriting facilities
Lending facilities
Warehouse facilities
Credit enhancements
Basis swaps
Other derivatives
Total
On balance sheet
Securitisation retained
Securitisation purchased
75
593
75
593
Off-balance
sheet
36
193
229
Total Exposure
at Default
668
36
193
897
Trading book securitisation exposure subject to specific risk
There is no Trading book securitisation exposure subject to specific risk for 31 March 2015.
Trading book securitisation exposure subject to APS120 Securitisation specific risk by risk weight band
There is no Trading book securitisation exposure subject to APS120 specific risk for 31 March 2015.
Trading book capital requirements for securitisation exposures subject to internal models approach (IMA) by risk classification
There is no Trading book capital requirement for securitisation subject to IMA for 31 March 2015.
1
EAD associated with Trading book securitisation is not included in the EAD by Major Type on page 26. Trading book securitisation exposure is captured and risk weighted under
APS116.
Westpac Group March 2015 Pillar 3 report | 65
Pillar 3 report
Securitisation
Trading book capital requirements for securitisation regulatory capital approaches by risk weight band
There is no Trading book capital requirement for securitisation subject to regulatory capital approaches for 31 March 2015.
Trading book securitisation exposure deducted from capital
There is no Trading book capital deduction for 31 March 2015.
Trading book securitisation subject to early amortisation treatment
There is no securitisation exposure in the Trading book that is subject to early amortisation treatment for 31 March 2015.
Trading book resecuritisation exposure subject to CRM
Westpac has no resecuritisation exposure subject to CRM at 31 March 2015.
Trading book resecuritisation by guarantor creditworthiness
Westpac has no third party guarantors providing guarantees for securitised assets, principal or interest repayments for 31 March 2015.
66 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Market risk
Westpac’s exposure to market risk arises out of its Financial Markets and Treasury trading activities. This is quantified for regulatory
capital purposes using both the standard method and the internal model approach, details of which are provided below.
Approach
Trading activities are controlled by a Board-approved market risk framework that incorporates a Board-approved value at risk (VaR) limit.
VaR is the primary mechanism for measuring and controlling market risk. Market risk is managed using VaR and structural risk limits
(including volume limits and basis point value limits) in conjunction with scenario analysis and stress testing. Market risk limits are
allocated to business management based upon business strategies and experience, in addition to the consideration of market liquidity
and concentration risk. All trades are fair valued daily, using independently sourced or reviewed rates. Rates that have limited
independent sources are reviewed at least on a monthly basis.
Financial Markets’ trading activity represents dealings that encompass book running and distribution activity. The types of market risk
arising from these activities include interest rate, foreign exchange, commodity, equity price, credit spread and volatility risk.
Treasury’s trading activity represents dealings that include the management of interest rate, foreign exchange and credit spread risks
associated with the wholesale funding book, liquid asset portfolios and foreign exchange repatriations. Treasury also manage banking
book risk which is discussed in the Interest Rate Risk in the Banking Book section.
VaR limits
Market risk arising from trading book activities is primarily measured using VaR based on an historical simulation methodology. Westpac
estimates VaR as the potential loss in earnings from adverse market movements and is calculated over a 1-day time horizon to a 99%
confidence level using 1 year of historical data. VaR takes account of all material market variables that may cause a change in the value
of the trading portfolio, including interest rates, foreign exchange rates, price changes, volatility, and the correlation between these
variables.
In addition to the Board approved market risk VaR limit for trading activities, RISKCO has approved separate VaR sub-limits for the
trading activities of Financial Markets and Treasury.
Backtesting
Daily backtesting of VaR results is performed to ensure that model integrity is maintained. A review of both the potential profit and loss
outcomes is also undertaken to monitor any skew created by the historical data.
Stress testing
Daily stress testing against pre-determined scenarios is carried out to analyse potential losses beyond the 99% confidence level. An
escalation framework around selective stress tests is approved by RISKCO.
Profit and loss notification framework
The BRCC has approved a profit and loss notification framework. Included in this framework are levels of escalation in accordance with
the size of the profit or loss. Triggers are applied to both a 1-day and a rolling 20-day cumulative total.
Risk reporting
Daily monitoring of current exposure and limit utilisation is conducted independently by risk managers in the Financial Markets &
Treasury Risk (FMTR) team, who monitor market risk exposures against VaR and structural limits. Daily VaR position reports are
produced by risk type, by product lines and by geographic region. These are supplemented by structural risk reporting, advice of profit
and loss trigger levels and stress test escalation trigger points. Model accreditation has been granted by APRA for the use of an internal
model for the determination of regulatory capital for the key classes of interest rate (general market), foreign exchange, commodity and
equity risks (including equity specific risk). Under the model, regulatory capital is derived from both the current VaR window (market data
is based upon the most recent 12 months of historical data) and a Stressed VaR window (12 months of market data that includes a
period of significant financial stress), where these VaR measures are calculated as a 10-day, 99th percentile, one-tailed confidence
interval. Specific risk refers to the variations in individual security prices that cannot be explained by general market movements, and
event and default risk. Interest rate specific risk capital (specific issuer risk) is calculated using the Standard method and is added to the
VaR regulatory capital measure.
Westpac Group March 2015 Pillar 3 report | 67
Pillar 3 report
Market risk
Risk mitigation
Market risk positions are managed by the trading desks consistent with delegated trading and product authorities. Risks are consolidated
into portfolios based on product and risk type. Risk management is carried out by qualified personnel with varying levels of seniority
commensurate with the nature and scale of market risks under management.
The following controls allow monitoring by management:

trading authorities and responsibilities are clearly delineated at all levels;

a structured system of limits and reporting of exposures;

all new products and significant product variations undergo a rigorous approval process to identify business risks prior to launch;

models that are used to determine risk or profit and loss for Westpac’s accounts are independently reviewed;


duties are segregated so that employees involved in the origination, processing and valuation of transactions operate under
separate reporting lines, minimising the opportunity for collusion; and
legal counsel approves documentation for compliance with relevant laws and regulations.
In addition, internal audit independently review compliance with policies, procedures and limits.
Market Risk regulatory capital and risk weighted assets
The Internal model approach uses VaR and Stressed VaR, while the Standard approach is used for interest rate specific risk.
$m
Internal model approach
Standard approach
Total capital required
Risk weighted assets
68 | Westpac Group March 2015 Pillar 3 report
31 March
2015
478
154
632
7,900
30 September
2014
541
177
718
8,975
31 March
2014
652
197
849
10,610
Pillar 3 report
Market risk
VaR by risk type
31 March 2015
$m
Interest rate risk
Foreign exchange risk
Equity risk
Commodity risk
Other market risks
Diversification benefit
Net market risk 1
High
18.1
6.4
0.5
5.7
6.7
NA
22.2
For the 6 months ended
Low
Average
7.0
10.7
0.5
2.8
0.1
0.2
1.7
3.1
4.0
5.8
NA
(7.4 )
9.7
15.2
Period end
8.6
1.7
0.3
3.2
4.0
(7.2 )
10.5
30 September 2014
$m
Interest rate risk
Foreign exchange risk
Equity risk
Commodity risk
Other market risks
Diversification benefit
Net market risk 1
High
30.7
5.8
0.6
2.9
11.1
NA
40.2
For the 6 months ended
Low
Average
6.3
16.9
1.3
3.1
0.1
0.3
1.3
1.9
5.4
8.5
NA
(7.8 )
9.5
22.9
Period end
6.7
3.2
0.2
2.2
5.7
(7.9 )
10.1
31 March 2014
$m
Interest rate risk
Foreign exchange risk
Equity risk
Commodity risk
Other market risks
Diversification benefit
Net market risk 1
High
24.6
7.6
0.7
2.9
11.3
NA
35.8
For the 6 months ended
Low
Average
9.1
14.4
1.2
2.9
0.2
0.4
1.7
2.1
7.7
9.9
NA
(8.7 )
12.8
21.0
Period end
16.7
3.2
0.3
1.7
10.4
(8.1 )
24.2
High
42.5
15.9
1.5
16.9
20.8
NA
55.2
For the 6 months ended
Low
Average
26.6
33.3
1.2
5.4
0.4
0.9
9.2
12.6
15.4
18.7
NA
(31.2 )
27.8
39.7
Period end
27.9
2.3
0.9
9.2
15.4
(26.5 )
29.2
For the 6 months ended
Average
45.8
4.9
0.5
11.4
26.8
(34.7 )
54.7
Period end
38.9
4.7
0.6
11.4
19.7
(29.6 )
45.7
Stressed VaR by risk type
31 March 2015
$m
Interest rate risk
Foreign exchange risk
Equity risk
Commodity risk
Other market risks
Diversification benefit
Net market risk 1
30 September 2014
$m
Interest rate risk
Foreign exchange risk
Equity risk
Commodity risk
Other market risks
Diversification benefit
Net market risk 1
1
High
61.2
12.5
1.0
14.2
30.7
NA
78.7
Low
33.6
1.7
0.2
8.9
19.0
NA
43.5
The Highs (Lows) by risk types will likely be determined by different days in the period. As such, the sum of these figures will not reflect the High (Low) net market risk, which reflects
the highest (lowest) aggregate risk position in the period.
Westpac Group March 2015 Pillar 3 report | 69
Pillar 3 report
Market risk
31 March 2014
$m
Interest rate risk
Foreign exchange risk
Equity risk
Commodity risk
Other market risks
Diversification benefit
Net market risk 1
High
53.2
17.1
2.3
11.2
33.4
NA
72.6
For the 6 months ended
Low
Average
30.5
41.1
1.1
4.5
0.3
0.9
5.4
8.3
26.3
30.8
NA
(34.3 )
39.2
51.2
Period end
42.5
4.9
0.3
9.5
31.0
(34.7 )
53.5
Back-testing results
The following graph gives a comparison of actual profit and loss to VaR over the 6 months ended 31 March 2015.
Each point on the graph represents 1 day’s trading profit or loss. This result is placed on the graph relative to the associated VaR
utilisation. The downward sloping line represents the point where a loss is equal to VaR utilisation. Any point below this line represents a
back-test exception (i.e. where the loss is greater than the VaR).
1
The Highs (Lows) by risk types will likely be determined by different days in the period. As such, the sum of these figures will not reflect the High (Low) net market risk, which reflects
the highest (lowest) aggregate risk position in the period.
70 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Operational risk
Operational risk is defined at Westpac as the risk of loss resulting from inadequate or failed internal processes, people and systems or
from external events. This definition includes legal and regulatory risk but excludes strategic and reputation risk. Westpac’s operational
risk definition is aligned to APS115 Capital Adequacy: Advanced Measurement Approaches to Operational Risk.
Approach
Westpac has been accredited to use the AMA in accordance with APS115. 1 Westpac’s operational risk is measured and managed in
accordance with the policies and processes defined in its Operational Risk Management Framework.
Westpac’s Operational Risk Management Framework
The Operational Risk Management Framework outlines a consistent approach to the:

identification, measurement and management of operational risks that may impede Westpac’s ability to achieve its strategic
objectives and vision;


identification and escalation of operational risk and compliance incidents in order to minimise potential financial losses, reputational
damage and shareholder, community, employee and regulatory impacts; and


calculation and allocation of operational risk capital.
The key components of Westpac’s operational risk management framework are listed below:
Governance - The governance structure provides clearly defined roles and responsibilities for overseeing and reviewing operational risk
exposure and management.
The Board and BRCC are supported by committees including RISKCO that monitor operational risk profiles and the effectiveness of
operational risk management practices, including operational risk capital and reporting.
Risk and Control Management (RCM) - RCM is a forward-looking tool used to manage Westpac’s operational risk profile by identifying
and assessing key operational risks and the adequacy of controls, with management action planning to reduce risks that are outside risk
appetite.
Key Indicators (KIs) - The framework defines requirements and processes for KIs, which are objective measures used by management
to monitor the operational risk and control environment.
Incident Management - Incident management involves identifying operational risk incidents, capturing them in the central operational
risk system and escalating them to appropriate levels of management. Early identification and ownership supports the ability to minimise
any immediate impacts of the incidents, address the root causes, and devise and monitor management actions required to strengthen
the control environment.
Data - The framework includes principles and processes to ensure the integrity of operational risk data used to support management
decision-making and calculate and allocate capital. The principles apply to the governance, input and capture, reconciliation and
validation, correction, reporting and storage of operational risk data. Operational risk data is subject to independent validation on a
regular basis.
Scenario Analysis - Scenario analysis is used to assess the impacts of extreme but plausible loss events on Westpac and is an input
to the calculation of operational risk capital.
Operational Risk of Change Programs - The framework defines requirements for understanding and managing the operational risk
implications of projects.
Reporting - Regular reporting of operational risk information to governance bodies and senior management is used to support timely and
proactive management of operational risk and enable transparent and formal oversight of the risk and control environment.
Control Assurance - The framework defines the process and requirements for providing assurance over the effectiveness of the
operational risk control environment, including the testing and assessment of the design and operating effectiveness of controls.
1
APRA approved the AMA approach for the calculation of Lloyds operational risk RWA from December 2014. For periods prior to December 2014 Westpac applied the partial use
approach, as approved by APRA, and the business acquired from Lloyds was measured under the Standardised approach as defined under APS114 Capital Adequacy: Standardised
Approach to Operational Risk.
Westpac Group March 2015 Pillar 3 report | 71
Pillar 3 report
Operational risk
AMA capital model overview
Operational risk regulatory capital is calculated on a quarterly basis. The capital model is reviewed annually to re-assess the
appropriateness of the model framework, methodology, assumptions and parameters in light of changes in the operational risk profile
and industry developments.
Westpac’s operational risk capital is based on three data sources:

Internal Loss Data – operational risk losses experienced by Westpac;

External Loss Data – operational risk losses experienced by other financial institutions; and

Scenario Data – potential losses from extreme but plausible events relevant to Westpac.
These data sources together represent the internal and external operational risk profile, across the spectrum of operational risk losses,
from both historical and forward-looking perspectives. The model combines these data sources to produce a loss distribution.
Expected loss offsets and risk mitigation
No adjustments or deductions are currently made to Westpac’s measurement of operational risk regulatory capital for the mitigating
impacts of insurance or expected operational risk losses.
Operational Risk regulatory capital and risk weighted assets
$m
Advanced measurement approach
Standardised approach
Total capital required
Risk weighted assets
72 | Westpac Group March 2015 Pillar 3 report
31 March
2015
2,411
2,411
30,136
30 September
2014
2,308
39
2,347
29,340
31 March
2014
2,239
39
2,278
28,474
Pillar 3 report
Equity risk
Equity risk is defined as the potential for financial loss arising from movements in equity values. The disclosures in this section exclude
investments in equities made by Westpac subsidiaries outside the regulatory Level 2 group.
Structure and organisation
Any changes to the portfolio and transactional limits for Westpac’s direct equity investments are approved under delegated authority from
the Westpac Board. The BRCC also approves the Equity Risk Management framework.
Approach
Westpac has established a comprehensive set of policies defining the management of equity risk. These policies are reviewed and
approved annually.
Risk mitigation
Westpac does not use financial instruments to mitigate its exposure to equities in the banking book.
Banking book positions
Equity underwriting and warehousing risk - As a financial intermediary Westpac underwrites listed and unlisted equities. Equity
warehousing activities require the acquisition of assets in anticipation of refinancing through a combination of senior, mezzanine and
capital market debt and listed, unlisted and privately placed equity.
Investment securities - Westpac undertakes, as part of the ordinary course of business, certain investments in strategic equity holdings
and over time the nature of underlying investments will vary.
Measurement of equity securities - Equity securities are generally carried at their fair value. Fair value for equities that have a quoted
market price (in an active market) is determined based upon current bid prices. If a market for a financial asset is not active, fair value is
determined based upon a valuation technique. This includes the use of recent arms-length transactions, discounted cash flow analysis,
option pricing models and other valuation techniques commonly used by market participants to price similar instruments. In the event that
the fair value of an unlisted security cannot be measured reliably, these investments are measured at cost.
Where the investment is held for long term strategic purposes, these investments are accounted for either as available for sale, with
changes in fair value being recognised in equity, or at fair value through profit and loss.
Other related matters

For the periods reported the book value of certain unlisted investments are measured at cost because the fair value cannot be
reliably measured. These investments represent minority interests in companies for which active markets do not exist and quote
prices are not available. For all other equity exposures book value equals fair value.

Fair value should not differ to the listed stock price. Should a listed stock price not be available, it is estimated using the
techniques referred to above.
Risk reporting
Westpac manages equity risk in two ways, VaR limits and investment limits:


A VaR limit (in conjunction with structural limits) is used to manage equity risk in the equity trading business in Financial Markets.
This limit is a sub-limit of the BRCC approved VaR limit for Financial Markets trading activities; and
Investment exposures are reported quarterly.
Westpac Group March 2015 Pillar 3 report | 73
Pillar 3 report
Equity risk
Book value of listed equity exposures by industry classification
$m
Business services
Property
Finance and insurance
Construction
Mining
Total
31 March
2015
41
41
30 September
2014
37
37
31 March
2014
51
51
31 March
2015
221
14
235
30 September
2014
7
174
16
197
31 March
2014
12
175
31
218
31 March
2015
13
30 September
2014
13
31 March
2014
13
(11)
(2)
(13)
(5)
(2)
(7)
14
32
46
Book value of unlisted equity exposures by industry classification
$m
Business services
Property
Finance and insurance
Construction
Mining
Total
Gains/losses
$m
Cumulative realised gains (losses)
Total unrealised gains (losses) through profit & loss
Total unrealised gains (losses) through equity
Total latent revaluation gains (losses)
Amounts included in Tier 1 / Tier 2 capital
74 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Interest rate risk in the banking book (IRRBB)
Interest Rate Risk in the Banking Book (IRRBB) is the risk to interest income arising from a mismatch between the duration of assets and
liabilities that arises in the normal course of banking activities.
Approach
The banking book activities that give rise to market risk include lending activities, balance sheet funding and capital management.
Interest rate risk, currency risk and funding and liquidity risk are inherent in these activities. Treasury’s Asset & Liability Management
(ALM) unit is responsible for managing market risk arising from Westpac’s banking book activity.
All material regions, business lines and legal entities are included in Westpac’s IRRBB framework.
Asset and liability management
ALM manages the structural interest rate mismatch associated with the transfer priced balance sheet, including the investment of
Westpac’s capital to its agreed benchmark duration. A key risk management objective is to achieve reasonable stability of Net Interest
Income (NII) over time. These activities are performed under the oversight of RISKCO and the FMTR unit.
Net Interest Income sensitivity
NII sensitivity is managed in terms of the net interest income-at-risk (NaR) modelled over a three year time horizon to a 99% confidence
interval for movements in wholesale market interest rates. A simulation model is used to calculate Westpac’s potential NaR. The NII
simulation framework combines the underlying statement of financial position data with assumptions about runoff and new business,
expected repricing behaviour and changes in wholesale market interest rates. Simulations using a range of interest rate scenarios are
used to provide a series of potential future NII outcomes. The interest rate scenarios modelled include those projected using historical
market interest rate volatility as well as 100 and 200 basis point shifts up and down from current market yield curves. Additional stressed
interest rate scenarios are also considered and modelled.
A comparison between the NII outcomes from these modelled scenarios indicates the sensitivity to interest rate changes. On and
off-balance sheet instruments are then used to manage this interest rate risk.
NaR limit
The BRCC has approved a NaR limit. This limit is managed by the Treasurer and is expressed as a deviation from benchmark hedge
levels over a one-year rolling time frame, to a 99% level of confidence. This limit is monitored by FMTR.
VaR limit
The BRCC has also approved a VaR limit for ALM activities. This limit is managed by the Treasurer and monitored by FMTR.
Additionally, FMTR sets structural risk limits to prevent undue concentration of risk.
Structural foreign exchange rate risk
Structural foreign exchange rate risk results from the generation of foreign currency denominated earnings and from Westpac’s capital
deployed in offshore branches and subsidiaries, where it is denominated in currencies other than Australian dollars. The Australian dollar
equivalent of offshore earnings and capital is subject to change as exchange rates fluctuate, which could introduce significant variability
to Westpac’s reported financial results. ALCO provides oversight of the appropriateness of foreign exchange hedges on earnings.
Risk reporting
Interest rate risk in the banking book risk measurement systems and personnel are located in Sydney, Auckland, Singapore and
Shanghai. These include front office product systems, which capture all treasury funding and derivative transactions; the transfer pricing
system, which captures all retail and other business transactions; non-traded Interest Rate Risk systems, which calculate amongst other
things, ALM VaR and NaR.
Daily monitoring of current exposure and limit utilisation is conducted independently by FMTR, which monitors market risk exposures
against VaR, NaR and structural risk limits. Management reports detailing structural positions and VaR are produced and distributed
daily for use by dealers and management across all stakeholder groups. Monthly and quarterly reports are produced for the senior
management market risk forums of RISKCO and BRCC respectively to provide transparency of material market risks and issues.
Westpac Group March 2015 Pillar 3 report | 75
Pillar 3 report
Interest rate risk in the banking book (IRRBB)
Risk mitigation
Market risk arising in the banking book stems from the ordinary course of banking activities, including structural interest rate risk (the
mismatch between the duration of assets and liabilities) and capital management. Hedging Westpac’s exposure to interest rate risk is
undertaken using derivatives. The hedge accounting strategy adopted utilises a combination of the cash flow, fair value and net
investment hedge approaches. Some derivatives held for economic hedging purposes do not meet the criteria for hedge accounting as
defined under AASB 139 Financial Instruments: Recognition and Measurement and therefore are accounted for in the same way as
derivatives held for trading.
The same controls used to monitor traded market risk allow for continuous monitoring by management.
Change in economic value of a sudden upward and downward movement in interest rates
31 March 2015
$m
AUD
NZD
USD
Total
200bp parallel
increase
174.7
23.3
198.0
200bp parallel
decrease
(183.6 )
(24.4 )
(207.9 )
30 September 2014
$m
AUD
NZD
USD
Total
200bp parallel
increase
202.2
21.8
224.0
200bp parallel
decrease
(203.8 )
(23.4 )
(227.2 )
31 March 2014
$m
AUD
NZD
USD
Total
200bp parallel
increase
206.8
6.3
213.1
200bp parallel
decrease
(207.9 )
(7.4 )
(215.3 )
VaR results for non-traded interest rate risk
$m
High
Low
Average
Period end
For the
6 months ended
31 March
2015
5.9
0.8
2.7
3.8
For the
6 months ended
30 September
2014
7.2
1.2
3.8
3.1
For the
6 months ended
31 March
2014
10.7
3.4
5.6
3.7
Interest rate risk in the banking book regulatory capital and risk weighted assets
$m
Total capital required
Risk weighted assets
76 | Westpac Group March 2015 Pillar 3 report
31 March
2015
128
1,596
30 September
2014
585
7,316
31 March
2014
677
8,459
Pillar 3 report
Liquidity risk
Liquidity risk is the risk that Westpac will be unable to fund assets and meet obligations as they come due. This type of risk is inherent in
all banks through their role as intermediaries between depositors and borrowers.
Approach
Liquidity risk is measured and managed in accordance with the policies and processes defined in the BRCC approved Liquidity Risk
Management Framework.
Liquidity management is primarily the responsibility of the Treasurer under the oversight of the BRCC and ALCO.
Liquidity Risk Management Framework
Westpac’s Liquidity Risk Management Framework sets out the liquidity risk appetite, roles and responsibilities, tools for measuring and
managing liquidity risk, reporting procedures and supporting policies. The key components of the Liquidity Risk Management Framework
are listed below.
Funding strategy
Treasury undertakes an annual review of the funding profile consistent with expected market conditions and the balance sheet growth of
customer deposits and loans. The funding strategy is reviewed by ALCO and approved by the BRCC annually.
To further strengthen the management of Westpac’s funding, the Stable Funding Ratio (SFR) is used to focus on the composition and
stability of the overall funding base. Stable funding consists of customer deposits, equity and wholesale term funding with residual
maturity greater than twelve months (including securitisation). As at 31 March 2015 the SFR was 83%. See also section 2.4.2 ‘Funding
and Liquidity Risk Management’ in the Westpac Group 2015 Interim Financial Results Announcement for further detail.
Minimum liquid asset holdings
Westpac holds a portfolio of liquid assets that are eligible to be used as collateral for repurchase agreements with the Reserve Bank of
Australia. The BRCC approves minimum holdings of liquid assets annually.
Liquidity Coverage Ratio (LCR)
The LCR requires banks to hold sufficient high-quality liquid assets, as defined, to withstand 30 days under a regulator-defined acute
stress scenario. The LCR came into effect from 1 January 2015. Given the limited amount of qualifying High Quality Liquid Assets
available in Australia (due to relatively low levels of government debt outstanding), the Reserve Bank of Australia makes available to
Australian institutions a Committed Liquidity Facility (CLF) that, subject to the satisfaction of qualifying conditions, can be accessed to
help meet the LCR requirement.
Stress testing
Stress testing is carried out to assess Westpac’s ability to meet cash flow obligations under a range of market conditions, including name
specific and market wide stress scenarios. These scenarios inform liquidity limits and strategic planning.
Liquidity transfer pricing
Westpac has a liquidity transfer pricing process which measures and allocates liquidity risk across the Group.
Contingency planning
Treasury maintains a contingency funding plan that outlines the steps that should be taken by Westpac in the event of an emerging
‘funding crisis’. The plan is reviewed and approved by ALCO and is aligned with the Westpac’s broader Liquidity Crisis Management
Framework which is approved annually by the BRCC.
Liquidity reporting
Daily monitoring of the liquidity risk position is conducted by the Liquidity Risk team in Enterprise Risk, which monitors compliance with
liquidity limits. The daily liquidity risk reports are circulated to, and reviewed by, local and senior staff in Treasury and the independent
Liquidity Risk team. Summary liquidity reports are submitted to senior staff weekly, ALCO monthly, and to BRCC quarterly.
Westpac Group March 2015 Pillar 3 report
| 77
Pillar 3 report
Appendix I | Regulatory capital reconciliation
Balance Sheet Reconciliation
31 March 2015
$m
Assets
Cash and balances with central banks
Receivables due from other financial institutions
Due from subsidiaries
Derivative financial instruments
Trading securities
Other financial assets designated at fair value
Available-for-sale securities
Loans
Life insurance assets
Regulatory deposits with central banks overseas
Deferred tax assets
Goodwill and other intangible assets
Property, plant and equipment
Investments in life & general insurance, funds management &
securitisation entities
Other assets
Total assets
Liabilities
Payables due to other financial institutions
Due to subsidiaries
Deposits and other borrowings
Other Financial Liabilities at fair value through
income statement
Derivative financial instruments
Debt issues and acceptances
Current tax liabilities
Deferred tax liabilities
Life insurance liabilities
Provisions
Loan Capital
Other liabilities
Total liabilities
Equity
Ordinary share capital
Treasury shares and RSP treasury shares
Reserves
Retained Profit
Non-controlling interest
Total equity
78 | Westpac Group March 2015 Pillar 3 report
Group Balance
Sheet
Adjustment
Level 2 Regulatory
Balance Sheet
14,738
13,637
45,702
35,041
3,288
44,296
605,064
12,348
1,306
1,368
12,592
1,539
-
(230)
(666)
245
95
(280)
(102)
(12,348)
(38)
(386)
(3)
1,348
14,508
12,971
245
45,797
35,041
3,008
44,194
605,064
1,306
1,330
12,206
1,536
1,348
5,042
795,961
(1,076)
(13,441)
3,966
782,520
15,421
466,743
(31)
2,934
(68)
15,390
2,934
466,675
12,133
50,510
168,151
347
52
10,945
1,320
11,905
8,117
745,644
(2,593)
(38)
(52)
(10,945)
(75)
(1,024)
(11,892)
12,133
50,510
165,558
309
1,245
11,905
7,093
733,752
27,237
(390)
1,283
21,275
912
50,317
(169)
(1,286)
(94)
(1,549)
27,237
(390)
1,114
19,989
818
48,768
Reconciliation Table
Common Disclosure
Template
Table a
Table b
Table c
Table a
Table d and e
Row 1
Table f
Table g
Row 2
Table h
Pillar 3 report
Appendix I | Regulatory capital reconciliation
$m
Table a
Deferred Tax Assets
Total Deferred Tax Assets per level 2 Regulatory Balance Sheet
Deferred tax asset adjustment before applying prescribed thresholds
Less: Amounts below prescribed threshold - risk weighted
Total per Common Disclosure Template - Deferred Tax Asset
$m
Table b
Goodwill and other intangible assets
Total Goodwill and Intangibles Assets per level 2 Regulatory Balance Sheet
Less: Capitalised Software Disclosed Under Intangibles
Total per Common Disclosure Template - Goodwill
$m
Table c
Equity Investments
Investment in significant financial entities
Equity Investments in non-consolidated subsidiaries
Total Investment in significant financial entities
Investment in non-significant financial entities
Total Investments in financial institutions
Investment in commercial entities
Total Equity Investments before applying prescribed threshold
Less: Amounts below prescribed threshold
Total per Common Disclosure Template - Equity Investments
$m
Table d
Additional Tier 1 Capital
Total Loan Capital per Level 2 Regulatory Balance Sheet
Total Non-Controlling Interest per Level 2 Regulatory Balance Sheet
Total Loan Capital per Level 2 Regulatory Balance Sheet
Less: Non-Controlling Interest not included in Additional Tier 1 Capital
Less: Tier 2 Capital Instruments Reported Below
Add: Capitalised Issue Costs for Additional Tier 1 Capital Instruments 1
Total per Common Disclosure Template - Tier 1 Capital
Additional Tier 1 Capital included in Regulatory Capital
Westpac Capital Notes
Westpac Capital Notes 2
Total Basel III complying instruments
Convertible preference shares (CPS)
Trust Preferred Securities 2004 (TPS 2004)
Trust Preferred Securities 2006 (TPS 2006)
Total Basel III non complying instruments
Total per Common Disclosure Template - Additional Tier 1 Capital Instruments
31 March 2015
Common
Disclosure
Template
Reference
1,330
1,330
(1,330)
-
Row 26e
Row 75
Row 21 / 25
31 March 2015
Common
Disclosure
Template
Reference
12,206
(1,932)
10,274
Row 9
Row 8
31 March 2015
Common
Disclosure
Template
Reference
161
1,348
1,509
116
1,625
111
1,736
(1,736)
-
Row 18/ 19/ 23
31 March 2015
Common
Disclosure
Template
Reference
11,905
818
12,723
(63)
(7,340)
34
5,354
Row 36
1,383
1,311
2,694
1,190
715
755
2,660
5,354
Row 73
Row 72
Row 26d
Row 26g
Row 30
Row 33
Row 36
Westpac Group March 2015 Pillar 3 report | 79
Pillar 3 report
Appendix I | Regulatory capital reconciliation
31 March 2015
Common
Disclosure
Template
Reference
7,340
17
(56)
(718)
(67)
59
6,575
Row 56c
Row 50 / 76
Row 51
Tier 2 Capital included in Regulatory Capital
AUD1,000 million Westpac Subordinated Notes
AUD925 million Westpac Subordinated Notes II
CNY1,250 million Westpac Subordinated Notes
AUD350 million Westpac Subordinated Notes
Total Basel III complying instruments
1,000
925
264
349
2,538
Row 46
USD352 million Perpetual Floating Rate Notes
USD350 million SEC registered Subordinated Notes
USD400 million 144A Subordinated Notes
USD75 million Subordinated Notes
AUD500 million Subordinated Notes
AUD1,676 million Westpac Subordinated Notes
USD800 million Subordinated Notes
Total Basel III non complying instruments
Less: Basel III transitional adjustment
Total Basel III non complying instruments after transitional adjustment
Provisions
Total per Common Disclosure Template - Tier 2 Capital Instruments
461
290
57
14
500
1,676
1,047
4,045
(67)
3,978
59
6,575
Row 85
Row 47
Row 50 / 76
Row 51
31 March 2015
Common
Disclosure
Template
Reference
(390)
86
(304)
Row 26a
31 March 2015
Common
Disclosure
Template
Reference
1,114
(39)
1,075
Row 3
31 March 2015
Common
Disclosure
Template
Reference
818
(755)
63
Row 5
$m
Table e
Tier 2 Capital
Total Tier 2 Capital per Level 2 Regulatory Balance Sheet
Add: Capitalised Issue Costs for Tier 2 Capital Instruments 1
Less: Fair Value Adjustment 2
Less: Cumulative amortisation of Tier 2 Capital Instruments
Less: Basel III transitional adjustment
Provisions
Total per Common Disclosure Template - Tier 2
$m
Table f
Treasury Shares and RSP Teasury Shares
Total treasury shares per Level 2 Regulatory Balance Sheet
Less: Treasury Shares not included for Level 2 Regulatory Capital
Total per Common Disclosure Template - Treasury Shares
$m
Table g
Accumulated Other Comprehensive Income
Total reserves per Level 2 Regulatory Balance Sheet
Less: Share Based Payment Reserve not included within capital
Total per Common Disclosure Template - Accumulated Other Comprehensive Income
$m
Table h
Non Controlling Interests
Total non controlling interests per Level 2 Regulatory Balance Sheet
Less: TPS included in Additional Tier 1 Capital (Refer to Table d)
Total per Common Disclosure Template - Non Controlling Interests
1
2
Unamortised issue costs relating to capital instruments are netted off against each instrument in the Balance Sheet. For regulatory capital purposes, these capital instruments
are shown gross of unamortised issue costs. The unamortised issue costs are deducted from CET1 as part of capitalised expenses in Row 26f in the common disclosure template.
For regulatory capital purposes, APRA requires these instruments to be included as if they were unhedged.
80 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Appendix I | Regulatory capital reconciliation
The common disclosure template below represents the post 1 January 2018 Basel III requirements. The Group is applying the Basel III
regulatory adjustments in full as implemented by APRA.
$m
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
26a
26b
26c
26d
26e
26f
26g
26h
26i
26j
27
28
29
31 March 2015
Common Equity Tier 1 capital: instruments and reserves
Directly issued qualifying ordinary shares (and equivalent for mutually-owned entities) capital
Retained earnings
Accumulated other comprehensive income (and other reserves)
Directly issued capital subject to phase out from CET1 (only applicable to mutually-owned companies)
Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)
Common Equity Tier 1 capital before regulatory adjustments
Common Equity Tier 1 capital : regulatory adjustments
Prudential valuation adjustments
Goodwill (net of related tax liability)
Other intangibles other than mortgage servicing rights (net of related tax liability)
Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of
related tax liability)
Cash-flow hedge reserve
Shortfall of provisions to expected losses
Securitisation gain on sale (as set out in paragraph 562 of Basel II framework)
Gains and losses due to changes in own credit risk on fair valued liabilities
Defined benefit superannuation fund net assets
Investments in own shares (if not already netted off paid-in capital on reported balance sheet)
Reciprocal cross-holdings in common equity
Investments in the capital of banking, financial and insurance entities that are outside the scope of
regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the
issued share capital (amount above 10% threshold)
Significant investments in the ordinary shares of banking, financial and insurance entities that are outside
the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold)
Mortgage service rights (amount above 10% threshold)
Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax
liability)
Amount exceeding the 15% threshold
of which: significant investments in the ordinary shares of financial entities
of which: mortgage servicing rights
of which: deferred tax assets arising from temporary differences
National specific regulatory adjustments (sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j)
of which: treasury shares
of which: offset to dividends declared under a dividend reinvestment plan (DRP), to the extent that the
dividends are used to purchase new ordinary shares issued by the ADI
of which: deferred fee income
of which: equity investments in financial institutions not reported in rows 18, 19 and 23
of which: deferred tax assets not reported in rows 10, 21 and 25
of which: capitalised expenses
of which: investments in commercial (non-financial) entities that are deducted under APRA prudential
requirements
of which: covered bonds in excess of asset cover in pools
of which: undercapitalisation of a non-consolidated subsidiary
of which: other national specific regulatory adjustments not reported in rows 26a to 26i
Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to
cover deductions
Total regulatory adjustments to Common Equity Tier 1
Common Equity Tier 1 Capital (CET1)
27,237
19,989
1,075
63
48,364
(10,274)
(1,932)
-
Table
Reference
Table g
Table h
Table b
Table b
(120)
(734)
(127)
-
Table c
-
Table c
-
Table a
(4,789)
(304)
107
(1,625)
(1,330)
(1,404)
(111)
Table c
Table a
Table f
Table c
Table a
Table c
(122)
-
(17,976)
30,388
Westpac Group March 2015 Pillar 3 report | 81
Pillar 3 report
Appendix I | Regulatory capital reconciliation
$m
30
31
32
33
34
35
31 March 2015
Additional Tier 1 Capital: instruments
Directly issued qualifying Additional Tier 1 instruments
of which: classified as equity under applicable accounting standards
of which: classified as liabilities under applicable accounting standards
Directly issued capital instruments subject to phase out from Additional Tier 1
Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held
by third parties (amount allowed in group AT1)
of which: instruments issued by subsidiaries subject to phase out
41c
Additional Tier 1 Capital before regulatory adjustments
Additional Tier 1 Capital: regulatory adjustments
Investments in own Additional Tier 1 instruments
Reciprocal cross-holdings in Additional Tier 1 instruments
Investments in the capital of banking, financial and insurance entities that are outside the scope of
regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the
issued share capital (amount above 10% threshold)
Significant investments in the capital of banking, financial and insurance entities that are outside the scope
of regulatory consolidation (net of eligible short positions)
National specific regulatory adjustments (sum of rows 41a, 41b and 41c)
of which: holdings of capital instruments in group members by other group members on behalf of third
parties
of which: investments in the capital of financial institutions that are outside the scope of regulatory
consolidations not reported in rows 39 and 40
of which: other national specific regulatory adjustments not reported in rows 41a and 41b
42
Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions
43
44
45
Total regulatory adjustments to Additional Tier 1 capital
Additional Tier 1 capital (AT1)
Tier 1 Capital (T1=CET1+AT1)
Tier 2 Capital: instruments and provisions
Directly issued qualifying Tier 2 instruments
Directly issued capital instruments subject to phase out from Tier 2
Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and
held by third parties (amount allowed in group T2)
of which: instruments issued by subsidiaries subject to phase out
Provisions
Tier 2 Capital before regulatory adjustments
Tier 2 Capital: regulatory adjustments
Investments in own Tier 2 instruments
Reciprocal cross-holdings in Tier 2 instruments
Investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of
regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the
issued share capital (amount above 10% threshold)
36
37
38
39
40
41
41a
41b
46
47
48
49
50
51
52
53
54
55
56c
Significant investments in the Tier 2 capital of banking, financial and insurance entities that are outside the
scope of regulatory consolidation, net of eligible short positions
National specific regulatory adjustments (sum of rows 56a, 56b and 56c)
of which: holdings of capital instruments in group members by other group members on behalf of third
parties
of which: investments in the capital of financial institutions that are outside the scope of regulatory
consolidation not reported in rows 54 and 55
of which: other national specific regulatory adjustments not reported in rows 56a and 56b
57
58
59
60
Total regulatory adjustments to Tier 2 capital
Tier 2 capital (T2)
Total capital (TC=T1+T2)
Total risk-weighted assets based on APRA standards
56
56a
56b
82 | Westpac Group March 2015 Pillar 3 report
2,694
2,694
2,660
-
Table
Reference
Table d
Table d
Table d
5,354
Table d
-
5,354
35,742
2,538
3,978
59
6,575
(50)
-
(140)
(12)
(12)
(202)
6,373
42,115
346,823
Table d
Table e
Table e
Table e
Table e
Pillar 3 report
Appendix I | Regulatory capital reconciliation
$m
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
31 March 2015
Capital ratios and buffers
Common Equity Tier 1 (as a percentage of risk-weighted assets)
Tier 1 (as a percentage of risk-weighted assets)
Total capital (as a percentage of risk-weighted assets)
Buffer requirement (minimum CET1 requirement of 4.5% plus capital conservation buffer of 2.5% plus any
countercyclical buffer requirements expressed as a percentage of risk-weighted assets)
of which: capital conservation buffer requirement
of which: ADI-specific countercyclical buffer requirements
of which: G-SIB buffer requirement (not applicable)
Common Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets)
National minima (if different from Basel III)
National Common Equity Tier 1 minimum ratio (if different from Basel III minimum)
National Tier 1 minimum ratio (if different from Basel III minimum)
National total capital minimum ratio (if different from Basel III minimum)
Amount below thresholds for deductions (not risk-weighted)
Non-significant investments in the capital of other financial entities
Significant investments in the ordinary shares of financial entities
Mortgage servicing rights (net of related tax liability)
Deferred tax assets arising from temporary differences (net of related tax liability)
Applicable caps on the inclusion of provisions in Tier 2
Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to
application of cap)
Cap on inclusion of provisions in Tier 2 under standardised approach
Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach
(prior to application of cap)
Cap for inclusion of provisions in Tier 2 under internal ratings-based approach
Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1
Jan 2022)
Current cap on CET1 instruments subject to phase out arrangements
Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities
Current cap on AT1 instruments subject to phase out arrangements
Amount excluded from AT1 instruments due to cap (excess over cap after redemptions and maturities)
Current cap on T2 instruments subject to phase out arrangements
Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)
Table
Reference
8.76%
10.31%
12.14%
N/A
N/A
N/A
N/A
N/A
4.50%
6.00%
8.00%
116
1,509
1,330
Table c
Table c
Table a
59
Table e
329
1,660
N/A
N/A
3,901
3,980
67
Table e
Westpac Group March 2015 Pillar 3 report | 83
Pillar 3 report
Appendix II | Regulatory consolidation
This appendix lists all subsidiaries controlled by Westpac according to their level of regulatory consolidation.
Level 1 Entities
The following controlled entities have been approved by APRA for inclusion in the Westpac ADI’s ‘Extended Licensed Entity’ (ELE) for
the purposes of measuring capital adequacy at Level 1:
Westpac Banking Corporation
1925 (Commercial) Pty Limited
1925 (Industrial) Pty Limited
Belliston Pty Limited
Bill Acceptance Corporation Pty Limited
CBA Limited
Challenge Limited
Mortgage Management Pty Limited
Nationwide Management Pty Limited
Partnership Pacific Pty Limited
Partnership Pacific Securities Pty Limited
Pashley Investments Pty Limited
Sallmoor Pty Limited
Sixty Martin Place (Holdings) Pty Limited
St.George Business Finance Pty Limited
St.George Custodial Pty Limited
St.George Equity Finance Limited
St.George Finance Holdings Limited
St.George Security Holdings Pty Limited
Tavarua Funding Trust IV
Teuton Pty Limited
The Mortgage Company Pty Limited
Value Nominees Pty Limited
Westpac Administration Pty Limited
Westpac Administration 2 Limited
Westpac Americas Inc.
Westpac Capital Holdings Inc.
84 | Westpac Group March 2015 Pillar 3 report
Westpac Capital Trust IV
Westpac Capital-NZ-Limited
Westpac Debt Securities Pty Limited
Westpac Delta LLC
Westpac Direct Equity Investments Pty Limited
Westpac Equipment Finance (No.1) Pty Limited
Westpac Equipment Finance Limited
Westpac Equity Investments NZ Limited
Westpac Finance (HK) Limited
Westpac Financial Holdings Pty Limited
Westpac Group Investment-NZ-Limited
Westpac Group Investments Australia Pty Limited
Westpac Holdings-NZ-Limited
Westpac Investment Capital Corporation
Westpac Investment Vehicle No.2 Pty Limited
Westpac Investment Vehicle Pty Limited
Westpac Leasing Nominees-Vic.-Pty Limited
Westpac New Zealand Group Limited
Westpac Overseas Holdings No. 2 Pty Limited
Westpac Overseas Holdings Pty Limited
Westpac Properties Limited
Westpac Securitisation Holdings Pty Limited
Westpac Structured Products Limited
Westpac TPS Trust
Westpac Unit Trust
Westpac USA Inc.
Pillar 3 report
Appendix II | Regulatory consolidation
Level 2 Entities
The following controlled entities are included in the Level 2 consolidation (along with the ELE entities) for the purposes of measuring
capital adequacy:
1925 Advances Pty Limited
A.G.C. (Pacific) Limited
Altitude Administration Pty Limited
Altitude Rewards Pty Limited
Aotearoa Financial Services Limited
Ascalon Funds Seed Pool Trust
Australian Loan Processing Security Company Pty Limited
Australian Loan Processing Security Trust
Bella Trust No.2
Bella Trust
BT (Queensland) Pty Limited
BT Australia Pty Limited
BT Financial Group (NZ) Limited
BT Financial Group Pty Limited
BT Securities Limited
BT Short Term Income Fund
Capital Corporate Finance Limited
Capital Finance (NZ) Limited
Capital Finance Australia Limited
Capital Finance New Zealand Limited
Capital Fleetlease Limited
Capital Motor Finance Limited
Capital Rent Group Limited
Castlereagh Trust
Crusade ABS Series 2012-1 Trust
Crusade ABS Series 2013-1 Trust
Crusade ABS Series 2015-1 Trust
Crusade CP No.1 Pty Limited
Crusade CP Trust No. 52
Crusade CP Trust No. 53
Crusade CP Trust No. 55
Crusade CP Trust No. 56
Crusade CP Trust No. 57
Crusade CP Trust No. 58
Crusade Management Limited
Crusade Trust No.2P of 2008
Danaby Pty Limited
G.C.L. Investments Pty Limited
General Credits Holdings Pty Limited
General Credits Pty Limited
Halcyon Securities Pty Limited
Hastings Management Pty Limited
Hickory Trust
Hitton Pty Limited
Net Nominees Limited
North Ryde Office Trust
Number 120 Limited
Oniston Pty Limited
Qvalent Pty Limited
RAMS Financial Group Pty Limited
RMS Warehouse Trust 2007-1
Seed Pool Trust No. 2
Series 2008-1M WST Trust
Series 2009-1 WST Trust
Series 2011-1 WST Trust
Series 2011-2 WST Trust
Series 2011-3 WST Trust
Series 2012-1 WST Trust
Series 2013-1 WST Trust
Series 2013-2 WST Trust
Series 2014-1 WST Trust
Series 2014-2 WST Trust
SIE-LEASE (Australia) Limited
SIE-LEASE (New Zealand) Pty Limited
St.George Finance Limited
St.George Motor Finance Limited
The Home Mortgage Company Limited
The Warehouse Financial Services Limited
W2 Investments Pty Limited
Westpac (NZ) Investments Limited
Westpac Administration 3 Limited
Westpac Administration 4 Pty Limited
Westpac Altitude Rewards Trust
Westpac Asian Lending Pty Limited
Westpac Bank of Tonga
Westpac Bank Samoa Limited
Westpac Group March 2015 Pillar 3 report | 85
Pillar 3 report
Appendix II | Regulatory consolidation
Level 2 Entities (Continued)
Westpac Bank-PNG-Limited
Westpac Capital Markets Holding Corp.
Westpac Capital Markets LLC
Westpac Cash PIE Fund
Westpac Covered Bond Trust
Westpac Equity Holdings Pty Limited
Westpac Europe Limited
Westpac Financial Consultants Limited
Westpac Financial Services Group Limited
Westpac Financial Services Group-NZ-Limited
Westpac Global Capital Markets Pty Limited
Westpac Investment Vehicle No.3 Pty Limited
Westpac New Zealand Limited
Westpac Notice Saver PIE Fund
Westpac NZ Covered Bond Holdings Limited
Westpac NZ Covered Bond Limited
Westpac NZ Operations Limited
Westpac NZ Securitisation Holdings Limited
Westpac NZ Securitisation Limited
Westpac NZ Securitisation No.2 Limited
Westpac Pacific Limited Partnership
Westpac Securities Limited
Westpac Securities NZ Limited
Westpac Securitisation Management Pty Limited
Westpac Singapore Limited
Westpac Syndications Management Pty Limited
Westpac Term PIE Fund
Level 3 Entities
The following controlled entities are excluded from the Level 2 consolidation but form part of the conglomerate group at Level 3:
Advance Asset Management Limited
Ascalon Capital Managers (Asia) Limited
Ascalon Capital Managers Limited
Asgard Capital Management Limited
Asgard Wealth Solutions Limited
BT Funds Management (NZ) Limited
BT Funds Management Limited
BT Funds Management No. 2 Limited
BT Investment Management (Fund Services) Limited
BT Investment Management (Institutional) Limited
BT Investment Management Limited
BT Long Term Income Fund
BT Portfolio Services Limited
BT Private Nominees Pty Limited
BTIM UK Limited
Canning Park Pte. Ltd
Core Infrastructure Income Feeder 1 L.P.
Core Infrastructure Income Feeder 2 L.P.
Core Infrastructure Income Master L.P.
Crusade CP Management Pty Limited
Crusade Euro Trust 1E of 2006
Crusade Euro Trust 1E of 2007
Crusade Global Trust 1 of 2006
86 | Westpac Group March 2015 Pillar 3 report
Crusade Global Trust 1 of 2007
Crusade Global Trust 2 of 2005
Crusade Global Trust 2 of 2006
Crusade Trust 1A of 2005
Data Republic Pty Limited
eQR Securities Pty. Limited
Europe Infrastructure Debt LP
Hastings Advisers LLC
Hastings Forestry Investments Limited
Hastings Forests Australia Pty Limited
Hastings Funds Management (UK) Limited
Hastings Funds Management (USA) Inc.
Hastings Funds Management Asia Pte Limited
Hastings Funds Management Limited
Hastings Infrastructure 1 Limited
Hastings Infrastructure 2 Limited
Hastings Investment Capital LP
Hastings Investment Management (Europe) Limited
Hastings Investment Management Pty Ltd
Hastings Investments GP LLC
Hastings Korea Company Limited
Hastings Private Equity Fund IIA Pty Limited
HLT Custodian Trust
Pillar 3 report
Appendix II | Regulatory consolidation
Level 3 Entities (Continued)
Infrastructure GP LLP
Infrastructure GP 2 LLP
Infrastructure Research and Advisory Services Private Limited
J O Hambro Capital Management Holdings Limited
J O Hambro Capital Management Limited
JOHCM (Singapore) Pte Limited
JOHCM (USA) Inc
Magnitude Group Pty Limited
MIF Custodian Trust
Reinventure Fund, I.L.P.
Securitor Financial Group Limited
Series 2007-1G WST Trust
St.George Life Limited
Sydney Capital Corporation Inc.
Waratah Receivables Corporation Pty Limited
Waratah Securities Australia Limited
Westpac Cook Cove Trust I
Westpac Cook Cove Trust II
Westpac Custodian Nominees Pty Limited
Westpac Equity Pty Limited
Westpac Financial Services Limited
Westpac Funds Financing Holdco Pty Limited
Westpac Funds Financing Pty Limited
Westpac General Insurance Limited
Westpac General Insurance Services Limited
Westpac Lenders Mortgage Insurance Limited
Westpac Life Insurance Services Limited
Westpac Life-NZ-Limited
Westpac Nominees-NZ-Limited
Westpac RE Limited
Westpac Securities Administration Limited
Westpac Superannuation Nominees-NZ-Limited
Westpac Group March 2015 Pillar 3 report | 87
Pillar 3 report
Appendix III | Level 3 entities’ assets and liabilities
The following legal entities excluded from the regulatory scope of consolidation.
The total assets and liabilities should not be aggregated because some of the entities are holding companies for other entities in the
table shown below.
31 March 2015
$m
a) Securitisation
Crusade CP Management Pty Limited
Crusade Euro Trust 1E of 2006
Crusade Euro Trust 1E of 2007
Crusade Global Trust 1 of 2006
Crusade Global Trust 1 of 2007
Crusade Global Trust 2 of 2005
Crusade Global Trust 2 of 2006
Crusade Trust 1A of 2005
HLT Custodian Trust
MIF Custodian Trust
Series 2007-1G WST Trust
Sydney Capital Corporation Inc.
Waratah Receivables Corporation Pty Limited
Waratah Securities Australia Limited
b) Insurance and Funds Management
Advance Asset Management Limited
Ascalon Capital Managers (Asia) Limited
Ascalon Capital Managers Limited
Asgard Capital Management Limited
Asgard Wealth Solutions Limited
BT Funds Management (NZ) Limited
BT Funds Management Limited
BT Funds Management No.2 Limited
BT Investment Management (Fund Services) Limited
BT Investment Management (Institutional) Limited
BT Investment Management Limited
BT Long Term Income Fund
BT Portfolio Services Limited
BT Private Nominees Pty Limited
BTIM UK Limited
Canning Park Pte. Ltd
Core Infrastructure Income Feeder 1 L.P.
Core Infrastructure Income Feeder 2 L.P.
Core Infrastructure Income Master L.P.
Data Republic Pty Ltd
eQR Securities Pty. Limited
Europe Infrastructure Debt LP
Hastings Advisers LLC
Hastings Forestry Investments Limited
Hastings Forests Australia Pty Limited
Hastings Funds Management (UK) Limited
Hastings Funds Management (USA) Inc.
Hastings Funds Management Asia Pte Limited
Hastings Funds Management Limited
Hastings Infrastructure 1 Limited
Hastings Infrastructure 2 Limited
Hastings Investment Capital LP
Hastings Investment Management (Europe) Limited
Hastings Investment Management Pty Ltd
88 | Westpac Group March 2015 Pillar 3 report
Total Assets
Liabilities (excluding
equity)
1
259
376
359
607
472
671
668
259
376
359
607
472
671
668
63
42
72
99
69
62
183
24
14
4
652
303
120
11
300
1
1
18
41
1
22
7
3
28
4
53
8
15
129
3
8
3
35
303
42
36
8
14
7
2
1
Pillar 3 report
Appendix III | Level 3 entities’ assets and liabilities
31 March 2015
$m
Hastings Investments GP LLC
Hastings Korea Company Limited
Hastings Private Equity Fund IIA Pty Limited
Infrastructure GP 2 LLP
Infrastructure GP LLP
Infrastructure Research and Advisory Services Private Limited
J O Hambro Capital Management Holdings Limited
J O Hambro Capital Management Limited
JOHCM (Singapore) Pte Limited
JOHCM (USA) Inc
Magnitude Group Pty Limited
Reinventure Fund, I.L.P.
Securitor Financial Group Limited
St.George Life Limited
Westpac Cook Cove Trust I
Westpac Cook Cove Trust II
Westpac Custodian Nominees Pty Limited
Westpac Equity Pty Limited
Westpac Financial Services Limited
Westpac Funds Financing Holdco Pty Limited
Westpac Funds Financing Pty Limited
Westpac General Insurance Limited
Westpac General Insurance Services Limited
Westpac Lenders Mortgage Insurance Limited
Westpac Life Insurance Services Limited
Westpac Life-NZ-Limited
Westpac Nominees-NZ-Limited
Westpac RE Limited
Westpac Securities Administration Limited
Westpac Superannuation Nominees-NZ-Limited
Total Assets
1
1
339
193
10
2
33
9
34
83
9
24
636
49
343
8,795
187
4
13
11
-
Liabilities (excluding
equity)
80
7
2
10
11
3
5
501
5
197
7,522
2
2
3
-
Westpac Group March 2015 Pillar 3 report | 89
Pillar 3 report
Appendix IV | Regulatory expected loss
Capital deduction for regulatory expected loss 2
For capital adequacy purposes APRA requires the amount of regulatory expected credit losses in excess of eligible provisions to be
deducted from capital. The following table shows how the deduction is calculated.
$m
Provisions associated with eligible portfolios
Total provisions for impairment charges
plus general reserve for credit losses adjustment
plus provisions associated with partial write-offs
less ineligible provisions 1
Total eligible provisions
Regulatory expected downturn loss
Shortffall in eligible provisions compared to regulatory expected downturn loss
Common equity Tier 1 capital deduction for regulatory expected downturn loss in
excess of eligible provisions 2
1
2
31 March
2015
30 September
2014
31 March
2014
3,505
107
406
(131)
3,887
4,588
(701)
3,481
133
504
(132)
3,986
4,636
(650)
3,791
92
528
(141)
4,270
4,964
(694)
(734)
(650)
(694)
Provisions associated with portfolios subject to the Basel standardised approach to credit risk are not eligible.
Regulatory expected loss is calculated for portfolios subject to the Basel advanced capital IRB approach to credit risk. The comparison between regulatory expected loss and
eligible provisions is performed separately for defaulted and non-defaulted exposures. As at 31 March 2015, there was an excess of eligible provisions compared to regulatory
expected loss for defaulted exposures of $33m. This excess is not available to reduce the shortfall for non-defaulted exposures in the calculation of the common equity Tier 1 capital
deduction.
90 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Appendix V | APS330 quantitative requirements
The following table cross-references the quantitative disclosure requirements given by Attachments A, C, D and E of APS330 to the
quantitative disclosures made in this report. The continuous reporting requirements for capital instruments under Attachment B are
satisfied separately and can be found on the regulatory disclosures section on the Westpac website. 1
APS330 reference
Attachment A:
Table 1: Common disclosure template
Attachment C:
Table 3: Capital adequacy
Westpac disclosure
(a) to (e)
(f)
Page
Common disclosure template
81
Capital requirements
Westpac’s capital adequacy ratios
Capital adequacy ratios of major subsidiary banks
16
15
15
Table 4: Credit risk
(a)
(b)
(c)
Exposure at Default by major type
Impaired and past due loans by portfolio
General reserve for credit losses
26
33
25
Table 5: Securitisation exposures
(a)
Banking book summary of securitisation activity by asset
type
Banking book summary of on and off-balance sheet
securitisation by exposure type
Trading book summary of on and off-balance sheet
securitisation by exposure type
60
Capital requirements
Westpac’s capital adequacy ratios
Capital adequacy ratios of major subsidiary banks
16
15
15
(b)
Attachment D:
Table 6: Capital adequacy
(b) to (f)
(g)
61
65
Table 7: Credit risk - general disclosures
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(h)
(i)
(j)
Exposure at Default by major type
Exposure at Default by geography
Exposure at Default by industry classification
Exposure at Default by residual contractual maturity
Impaired and past due loans by industry classification
Impaired and past due loans by geography
Movement in provisions for impairment charges
Loan impairment provisions
Exposure at Default by measurement method
General reserve for credit losses
26
31
28
32
34
35
36
25
27
25
Table 8: Credit risk - disclosures for
portfolios subject to the standardised
approach and supervisory risk-weights in
the IRB approaches (formerly Table 5)
(b)
Portfolios subject to the standardised approach
37
Property finance
Project finance
38
39
1
http://www.westpac.com.au/about-westpac/investor-centre/financial-information/basel-iii-risk-reports/
Westpac Group March 2015 Pillar 3 report | 91
Pillar 3 report
Appendix V | APS330 quantitative requirements
APS330 reference
Table 9: Credit risk - disclosures for
portfolios subject to IRB approaches
Table 10: Credit risk mitigation disclosures
(d)
Westpac disclosure
Corporate portfolio by external credit rating
(e)
(f)
Business lending portfolio by external credit rating
Sovereign portfolio by external credit rating
Bank portfolio by external credit rating
Residential mortgages portfolio by PD band
Australian credit cards portfolio by PD band
Other retail portfolio by PD band
Small business portfolio by PD band
Actual losses
Comparison of regulatory expected and actual loss rates
41
42
43
44
45
46
47
48
49
Total exposure covered by collateral, credit derivatives and
guarantees
53
(b) to (c)
Table 12: Securitisation exposures
(g) part i and
(h) to (i)
(g) part ii
(j)
(k)
(l) part i
(l) part ii
(m)
(n) part i
(n) part ii
(o) part i and
(p)
(o) part ii
(q)
(r)
(s)
(t) part i
(t) part ii
(u) part i
(u) part ii
(u) part iii
(v)
(w) part i
(w) part ii
92 | Westpac Group March 2015 Pillar 3 report
Banking Book
Summary of assets securitised by Westpac
Page
40
59
Summary of total Westpac sponsored third party assets
securitised
Summary of securitisation activity by asset type
Summary of on and off-balance sheet securitisation by
exposure type
Securitisation exposure by risk weight band
Securitisation exposures deducted from capital
Securitisation subject to early amortisation treatment
Resecuritisation exposure subject to credit risk mitigation
Resecuritisation exposure to guarantors
Trading Book
Summary of assets securitised by Westpac
59
Summary of total Westpac sponsored third party assets
securitised
Summary of securitisation activity by asset type
Aggregate amount of exposures securitised by Westpac
and subject to APS116
Summary of on and off-balance sheet securitisation by
exposure type
Securitisation exposure retained or purchase subject to
specific risk
Securitisation exposure subject to APS120 for Specific risk
by risk weight band
Capital requirements for securitisation exposure subject to
internal models approach (IMA) by risk classification
Capital requirements for securitisation regulatory capital
approaches by risk weight band
Securitisation exposures deducted from capital
Securitisation subject to early amortisation treatment
Aggregate resecuritisation exposures retain or purchased
subject to credit risk mitigation
Resecuritisation exposure to guarantors credit worthiness
64
60
61
62
63
63
63
63
63
64
64
65
65
65
65
66
66
66
66
66
Pillar 3 report
Appendix V | APS330 quantitative requirements
APS330 reference
Table 13: Market risk - disclosures for ADIs
using the standard method
(b)
Westpac disclosure
Market Risk regulatory capital and risk weighted assets
Table 14: Market risk - disclosures for ADIs
using the IMA for trading portfolios
(d)
VaR and Stressed VaR by risk type
69
Table 16: Equities - disclosures for banking
book positions
(b) to (c)
Book value of listed equity exposures by industry
classification / Book value of unlisted equity exposures by
industry classification
Gains/losses
Capital requirement 1
74
(d) to (e)
(f)
Table 17: Interest rate risk in the banking
book
Attachment E 2
Table 18: Remuneration disclosure
requirements
1
2
(b)
Page
68
74
NA
76
(b)
Change in economic value of sudden upward and
downward movement in interest rates
Capital requirement
(g)
Governance structure
NA
(h)
(i)
(j)
(k)
Senior manager and material risk taker payments
Deferred remuneration
Total value of remuneration awards
Implicit and explicit adjustments
NA
NA
NA
NA
76
No Equity risk exposures.
Remuneration disclosure is an annual reporting requirement under APS330.
Westpac Group March 2015 Pillar 3 report | 93
Pillar 3 report
Glossary
Term
Description
Actual losses
Represent direct write-offs and write-offs from provisions after adjusting for recoveries.
Additional Tier 1 capital
Comprises high quality components of capital that provide a permanent and unrestricted
commitment of funds that are freely available to absorb losses but rank behind claims of
depositors and other more senior creditors. They also provide for fully discretionary
capital distributions.
Advanced measurement approach
(AMA)
The capital requirement using the AMA is based on a bank’s internal operational risk
systems, which must both measure and manage operational risk.
Assets intended to be securitised
Represents securitisation activity from the end of the reporting period to the disclosure
date of this report.
Australian Accounting Standards (AAS)
A set of Australian reporting standards and interpretations issued by the Australian
Accounting Standards Board.
Australian and New Zealand Standard
Industrial Classification (ANZSIC)
A code used by the Australian Bureau of Statistics and Statistics New Zealand for
classifying businesses.
Authorised deposit-taking institution
(ADI)
ADIs are corporations that are authorised under the Banking Act 1959 to carry on
banking business in Australia.
Banking book
The banking book includes all securities that are not actively traded by Westpac.
Cash EPS Compound Annual Growth
Rate (CAGR)
An internal measure used to assess performance by measuring growth in cash earnings
per share over a three year performance period.
Common Equity Tier 1 (CET1) capital
The highest form of capital. The key components of common equity are shares, retained
earnings and undistributed current year earnings.
Credit Valuation Adjustment (CVA) risk
Refer to mark-to-market related credit risk.
Default
A customer default is deemed to have occurred when Westpac considers that either or
both of the following events have taken place:

the customer is unlikely to pay its credit obligations to its financiers in full, without
recourse by any of them to actions such as realising security (where held); and

the customer is past due 90 or more calendar days on any material credit obligation
to its financiers. Overdrafts will be considered past due once the customer has
breached an advised limit, or been advised of a limit smaller than the current
outstandings.
Double default rules
Double default applies to exposures where a particular obligor’s exposure has been
hedged by the purchase of credit protection from a counterparty and loss will only occur
if both obligor and counterparty default. In this instance, capital can be reduced.
Exposure at default (EAD)
EAD represents an estimate of the amount of committed exposure expected to be drawn
by the customer at the time of default.
Extended licensed entity (ELE)
An Extended Licensed Entity (ELE) comprises an ADI and any subsidiaries of the ADI
that have been approved by APRA as being part of a single ‘stand-alone’ entity.
External Credit Assessment Institution
(ECAI)
ECAI is an external institution recognised by APRA (directly or indirectly) to provide
credit assessment in determining the risk-weights on financial institutions’ rated credit
exposures (including securitisation exposures).
94 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Glossary
Facilities 90 days or more past due date
not impaired
Includes facilities where:

contractual payments of interest and/or principal are 90 or more calendar days
overdue, including overdrafts or other revolving facilities that remain continuously
outside approved limits by material amounts for 90 or more calendar days; or

an order has been sought for the customer’s bankruptcy or similar legal action has
been instituted, which may avoid or delay repayment of its credit obligations; and

the estimated net realisable value of assets/security to which Westpac has recourse
is sufficient to cover repayment of all principal and interest, or where there are
otherwise reasonable grounds to expect payment in full and interest is being taken to
profit on an accrual basis.
These facilities, while in default, are not treated as impaired for accounting purposes.
Geography
Geographic segmentation of exposures is based on the location of the office in which
these items were booked.
Impaired assets
Includes exposures that have deteriorated to the point where full collection of interest
and principal is in doubt, based on an assessment of the customer’s outlook, cashflow,
and the net realisation of value of assets to which recourse is held:

facilities 90 days or more past due, and full recovery is in doubt: exposures where
contractual payments are 90 or more days in arrears and the net realisable value of
assets to which recourse is held may not be sufficient to allow full collection of interest
and principal, including overdrafts or other revolving facilities that remain continuously
outside approved limits by material amounts for 90 or more calendar days;

non-accrual assets: exposures with individually assessed impairment provisions held
against them, excluding restructured loans;

restructured assets: exposures where the original contractual terms have been
formally modified to provide for concessions of interest or principal for reasons related
to the financial difficulties of the customer;

other assets acquired through security enforcement (includes other real estate
owned): includes the value of any other assets acquired as full or partial settlement of
outstanding obligations through the enforcement of security arrangements; and

Industry
Interest rate risk in the banking book
(IRRBB)
any other assets where the full collection of interest and principal is in doubt.
Exposures to businesses, government and other financial institutions are classified into
industry clusters based upon groups of related ANZSIC codes. Companies that operate
in multiple industries are classified according to their primary industry. Consumer
customers as classified as “retail” and not further broken down.
The risk to current and future year interest income arising from a mismatch between the
duration of assets and liabilities that arises in the normal course of banking activities.
Westpac Group March 2015 Pillar 3 report | 95
Pillar 3 report
Glossary
Internal assessment approach (IAA)
Basel III provides three approaches to determine the risk-weight for a securitisation
transaction, where the term securitisation includes any complex credit derivative. The
internal assessment approach, a more complex approach, and subject to approval from
APRA for use, may be used when there is an inability to use either the Ratings-Based
Approach (no external rating available) or the supervisory formula approach. The internal
assessment approach may be used to risk-weight exposures relating to residential
mortgages (excluding reverse mortgages), trade receivables, equipment receivables and
auto loans.
Internal Ratings-Based Approach (IRB &
Advanced IRB)
These approaches allow banks to use internal estimates of the risks of their loans as
inputs into the determination of the amount of credit risk capital needed to support the
organisation. In the Advanced IRB approach, banks must supply their own estimates for
all three credit parameters – Probability of Default, Loss Given Default and Exposure at
Default.
Liquidity Coverage Ratio (LCR)
An APRA requirement to maintain an adequate level of unencumbered high quality liquid
assets, to meet liquidity needs for a 30 calendar day period under an APRA-defined
severe stress scenario. Absent a situation of financial stress, the value of the LCR must
not be less than 100%, effective 1 January 2015. LCR is calculated as the percentage
ratio of stock of HQLA and CLF over the total net cash out flows in a modelled 30 day
defined stressed scenario.
Loss given default (LGD)
The LGD represents an estimate of the expected severity of a loss to Westpac should a
customer default occur during a severe economic downturn. Westpac assigns LGD to
each credit facility, assuming an event of default has occurred and taking into account a
conservative estimate of the net realisable value of assets to which Westpac has
recourse and over which it has security. LGDs also reflect the seniority of exposure in the
customer’s capital and debt structure.
Maturity
The maturity date used is drawn from the contractual maturity date of the customer
loans.
Mark-to-market related credit risk
The risk of mark-to-market losses related to deterioration in the credit quality of a
derivative counterparty also referred to as credit valuation adjustment (CVA) risk.
A method of random sampling to achieve numerical solutions to mathematical problems.
Monte Carlo simulation
Net interest income at risk (NaR)
BRCC-approved limit expressed as a deviation from the benchmark hedge level over a
1-year time frame, at a 99% confidence level.
Off-balance sheet exposure
Credit exposures arising from facilities that are not recorded on Westpac’s balance sheet
(under accounting methodology). Undrawn commitments and the expected future
exposure calculated for Westpac’s derivative products are included in off-balance sheet
exposure.
On balance sheet exposure
Credit exposures arising from facilities that are recorded on Westpac’s balance sheet
(under accounting methodology).
Probability of default (PD)
Probability of default is a through-the-cycle assessment of the likelihood of a customer
defaulting on its financial obligations within one year.
Ratings-Based Approach (RBA)
Basel III provides three approaches to determine the risk-weight for a securitisation
transaction, where the term securitisation includes any complex credit derivative. The
Ratings-Based Approach relies on the number of assets in the transaction and the
external credit rating of the tranche to determining a regulatory risk-weight.
96 | Westpac Group March 2015 Pillar 3 report
Pillar 3 report
Glossary
Regulatory expected loss (EL)
For regulatory purposes EL is defined as:


for non-defaulted exposures, the product of PD, LGD and EAD; and
for defaulted exposures, the best estimate of expected loss for that exposure. It is
equivalent to provisions for impaired assets and represents charges already realised
through Westpac’s earnings.
Regulatory EL is not calculated for standardised portfolios and is based on mandated
risk-weights for specialised lending portfolios. Regulatory EL should not be interpreted as
an estimate of long-run expected loss because the LGDs used in all regulatory
calculations are calibrated to reflect stressed economic conditions rather than long run
averages.
Resecuritisation
A resecuritisation exposure is a securitisation exposure in which the risk associated with
an underlying pool of exposures is tranched and at least one of the underlying exposures
is a securitisation exposure. In addition, an exposure to one or more resecuritisation
exposures is a resecuritisation exposure;
Risk weighted assets (RWA)
Assets (both on and off-balance sheet) are risk weighted according to each asset’s
inherent potential for default and what the likely losses would be in case of default. In the
case of non asset based risks (ie market and operational risk), RWA is determined by
multiplying the capital requirements for those risks by 12.5.
Securitisation Purchased
The purchase of third party securitisation exposure, for example residential mortgage
backed securities.
Securitisation Retained
Securitisation exposures arising through Westpac originated assets or generated by
Westpac third party securitisation activity.
Sponsor
An ADI would generally be considered a sponsor if it, in fact or substance, manages or
advises the securitisation program, places securities into the market, or provide liquidity
and/or credit enhancements.
Standard model
The standard model for Market risk applies supervisory risk weights to trading positions.
Stressed VaR
Stress VaR uses a bank’s approved VaR model but applies it to a time period of
significant financial stress. Market risk capital is estimated by adding Stress VaR to
actual VaR.
Substitution Approach
Substitutions refers to the rules governing the circumstances when capital can be
reduced because an obligor’s exposure has been hedged by the purchase of credit
protection from a counterparty and the counterparty’s PD is used in place of the obligors’
PD.
Supervisory formula (SF)
Basel III provides three approaches to determine the risk-weight for a securitisation
transaction, where the term securitisation includes any complex credit derivative. The
supervisory formula is used when the Ratings-Based Approach is unable to be used.
Tier 2 capital
Includes other capital elements, which, to varying degrees, fall short of the quality of Tier
1 capital but still contribute to the overall strength of an entity as a going concern.
Westpac Group March 2015 Pillar 3 report | 97
Pillar 3 report
Glossary
Trading book
Trading book activity represents dealings that encompass book running and distribution
activity. The types of market risk arising from trading activity include interest rate risk,
foreign exchange risk, commodity risk, equity price risk, credit spread risk and volatility
risk. Financial Markets and Treasury are responsible for managing market risk arising
from Westpac’s trading activity.
Value at risk (VaR)
VaR is the potential loss in earnings from adverse market movements and is calculated
over a one-day time horizon at a 99% confidence level using a minimum of one year of
historical rate data. VaR takes account of all material market variables that may cause a
change in the value of the trading portfolio and the banking book including interest rates,
foreign exchange rates, price changes, volatility, and the correlation among these
variables.
Exchange rates
The following exchange rates were used in the Westpac Pillar 3 report, and reflect spot rates for the period end.
$
USD
GBP
NZD
EUR
31 March 2015
0.7635
0.5167
1.0202
0.7078
98 | Westpac Group March 2015 Pillar 3 report
30 September 2014
0.8768
0.5384
1.1195
0.6904
31 March 2014
0.9230
0.5549
1.0665
0.6711
Pillar 3 report
Disclosures regarding forward-looking statements
This Report contains statements that constitute ‘forward-looking statements’ within the meaning of Section 21E of the US Securities
Exchange Act of 1934.
Forward-looking statements are statements about matters that are not historical facts. Forward-looking statements appear in a number of
places in this Report and include statements regarding Wespac’s intent, belief or current expectations with respect to its business and
operations, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions and
financial support to certain borrowers. Words such as ‘will’, ‘may’, ‘expect’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’,
‘estimate’, ‘anticipate’, ‘believe’, ‘probability’, ‘risk’ or other similar words are used to identify forward-looking statements. These
forward-looking statements reflect Westpac’s current views with respect to future events and are subject to change, certain risks,
uncertainties and assumptions which are, in many instances, beyond Westpac’s control, and have been made based upon
management’s expectations and beliefs concerning future developments and their potential effect upon Westpac. There can be no
assurance that future developments will be in accordance with Westpac’s expectations or that the effect of future developments on
Westpac will be those anticipated. Actual results could differ materially from those expected, depending on the outcome of various
factors, including, but not limited to:

the effect of, and changes in, laws, regulations, taxation or accounting standards or practices and government policy, particularly
changes to liquidity, leverage and capital requirements;

the stability of Australian and international financial systems and disruptions to financial markets and any losses or business
impacts Westpac or its customers or counterparties may experience as a result;

market volatility, including uncertain conditions in funding, equity and asset markets;

adverse asset, credit or capital market conditions;

changes to Westpac’s credit ratings;

levels of inflation, interest rates, exchange rates and market and monetary fluctuations;

market liquidity and investor confidence;

changes in economic conditions, consumer spending, saving and borrowing habits in Australia, New Zealand and in other
countries in which Westpac or its customers or counterparties conduct their operations and Westpac’s ability to maintain or to
increase market share and control expenses;

the effects of competition in the geographic and business areas in which Westpac conducts its operations;

information security breaches, including cyberattacks;

reliability and security of Westpac’s technology and risks associated with changes to technology systems;

the timely development and acceptance of new products and services and the perceived overall value of these products and
services by customers;

the effectiveness of Westpac’s risk management policies, including internal processes, systems and employees;

the incidence or severity of Westpac insured events;

the occurrence of environmental change or external events in countries in which Westpac or its customers or counterparties
conduct their operations;

internal and external events which may adversely impact Westpac’s reputation;

changes to the value of Westpac’s intangible assets;

changes in political, social or economic conditions in any of the major markets in which Westpac or its customers or counterparties
operate;

the success of strategic decisions involving diversification or innovation, in addition to business expansion and integration of new
businesses; and

various other factors beyond Westpac’s control.
The above list is not exhaustive. For certain other factors that may impact on forward-looking statements made by Westpac, refer to the
section ‘Risk factors’ in Westpac’s 2015 Interim Financial Results Announcement. When relying on forward-looking statements to make
decisions with respect to Westpac, investors and others should carefully consider the foregoing factors and other uncertainties and
events.
Westpac is under no obligation to update any forward-looking statements contained in this Report, whether as a result of new
information, future events or otherwise, after the date of this Report.
Westpac Group March 2015 Pillar 3 report | 99
Exhibit 2
Westpac Banking
Corporation ABN
33 007 457 141.
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Westpac First
Half 2015 result index
2 Presentation of First
Half 2015 Result 3
Investor Discussion
Pack of First Half
2015 Result 33
Strategy 34 Overview
Performance
discipline Service
revolution Digital
transformation
Targeted growth
Workforce revolution
Sustainable futures 37
38 45 47 50 51 52
Earnings drivers Net
interest income
Non-interest income
Markets and Treasury
income Expenses
Impairment charges
54 55 63 64 65 68
Asset quality Funding
and Liquidity Capital
69 84 88 Divisional
summary Westpac
RBB St.George BT
Financial Group
Westpac Institutional
Bank Westpac New
Zealand Westpac
Pacific 95 97 101 105
111 117 123
Economics 124
Appendix and
Disclaimer 141
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Brian Hartzer Chief
Executive Officer
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group Half
Year 2015
Presentation &
Investor Discussion
Pack Operating
divisions delivering,
bottom line lower 4 •
Solid operating
performance,
especially retail and
business banking •
Cash earnings affected
by . Derivative
adjustments1 . Lower
Treasury earnings •
Strength a hallmark of
the Group • Positive
economic outlook but
some near-term
challenges •
Delivering on strategy
with increased focus
on service 1 In 1H15
changes were made to
derivative valuation
methodologies, which
include the first time
adoption of a FVA for
derivatives. The
impact of these
changes resulted in a
$122m (pre-tax) or
$85m (post tax)
charge which reduced
non-interest income.
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Headline
results 5 1H15
Change
1H15-1H14
Change
1H15-2H14 Cash
earnings $3,778m
0% (2%) Cash
EPS1 121.3c 0%
(2%) Reported
NPAT $3,609m 0%
(8%) NIM (excl.
Treasury and
Markets) 2.01%
0bps 0bps
Impairment charge
to avg. gross loans
11bps (1bp) 0bps
Return on equity2
15.8% (67bps)
(54bps) Common
equity Tier 1
capital ratio3 8.8%
(6bps) (21bps)
Fully franked
interim dividend
93c 3% 1% 1 EPS
is cash earnings per
weighted average
ordinary share. 2
Return on equity is
cash earnings
divided by average
ordinary equity. 3
Common equity
Tier 1 capital ratio
on an APRA Basel
III basis.
| Westpac Group Half
Year 2015
Presentation &
Investor Discussion
Pack Solid
performance across
operating divisions 6
Cash earnings ($m)
1H14 2H14 1H15
Operating divisions1
3,671 3,766 3,819
Cash earnings growth
4.0% 2.6% 1.4% Core
earnings growth2
1.7% 3.2% 2.2%
Group businesses3
101 90 44 Derivative
adjustments4 0 0 (85)
Total Group 3,772
3,856 3,778 1
Operating divisions
(includes all divisions
except Group
Businesses) before
derivative
adjustments. 2 Core
earnings is net
operating income less
operating expenses. 3
Group Businesses
provide centralised
functions, including
Treasury. 4 In 1H15
changes were made to
derivative valuation
methodologies, which
include the first time
adoption of a FVA for
derivatives. The
impact of these
changes resulted in a
$122m (pre-tax) or
$85m (post tax)
charge which reduced
non-interest income.
| Westpac Group Half
Year 2015 Presentation
& Investor Discussion
Pack Strength a
hallmark 7 Common
equity Tier 1 capital
ratio (%) Stressed
assets to TCE2 (%)
Stable funding ratio1
(%) Total liquid assets3
($bn) 2.5 1.4 1.2 1.1
FY11 1H14 2H14 1H15
. 103 127 134 137
FY11 1H14 2H14 1H15
77.0 83.4 83.2 83.2
FY11 1H14 2H14 1H15
7.4 8.8 9.0 8.8 FY11
1H14 2H14 1H15 1
Stable funding ratio is
calculated as customer
deposits and wholesale
funding with residual
maturity greater than 12
months and equity and
securitisation, as a
proportion of total
funding. 2 TCE is total
committed exposures. 3
Total liquid assets
represent cash,
interbank deposit and
assets eligible for
existing repurchase
agreements with a
central bank.
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Prudent capital
management 8
Dividends (cps) 1
$2bn is an estimate
and relates to both
DRP and DRP
underwrite. 2 cps is
cents per share. 3
Based on 1 May
2015 price of $36.73
with 1H15 dividend
annualised. Common
equity Tier 1 capital
ratio (%) 7.4 7.7 8.2
8.7 9.1 8.8 9.0 8.8
9.3 Sep-11 Mar-12
Sep-12 Mar-13
Sep-13 Mar-14
Sep-14 Mar-15
Mar-15 Pro forma
after DRP Preferred
range 8.75% –
9.25% 80 82 84 86
88 90 92 93 10 10
2H11 1H12 2H12
1H13 2H13 1H14
2H14 1H15 •
Strongly capitalised
and moving to upper
end of preferred
range . 1.5%
discount applied to
DRP market price .
Partially
underwriting DRP .
Adds approximately
$2bn1 to capital •
1cps2 rise in
dividends .
Supported by solid
operating
performance .
Pay-out ratio 75%
(ex derivative
adjustment) .
Considers regulatory
uncertainty •
Dividend yield3
5.1% Special
dividends
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Balancing
growth,
productivity and
return 9 1 RBA
financial
aggregates, six
months to March
2015. 2 APRA
Banking Statistics,
six months to
March 2015. NIM
(excl. Treasury and
Markets) (%)
Mortgages1 and
household
deposits2 system
multiple (x) ROE
(%) Expense
growth (%) 2.01
2.01 2.01 1H14
2H14 1H15 1.0 1.3
1.0 0.9 1.0 0.9
1H14 2H14 1H15
Household deposits
Mortgages 16.5
16.4 15.8 1H14
2H14 1H15 3.3 2.9
1.7 1H14 2H14
1H15
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Consistent
growth in retail and
business banking
cash earnings 10
432 432 441 1H14
2H14 1H15 1,253
1,330 1,350 1H14
2H14 1H15 769
806 837 1H14
2H14 1H15 1 In
A$ 1H15 cash
earnings $413m (up
4% on 2H14 and
5% on 1H14).
Westpac RBB ($m)
St.George ($m)
Westpac NZ1
($NZm)
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Steadily
building customer
franchise 11 1 Refer
slide 145 for
customer satisfaction
details. 2 Refer slide
145 for wealth
metrics provider.
Total consumer
satisfaction1 (%)
Customer numbers
(#m) Customers with
a wealth product2
(%) 83.7 86.6 81.7
83.7 83.0 Mar-13
Mar-14 Mar-15
WRBB SGB Peers
6.1 6.2 6.4 3.2 3.6
3.7 1H13 1H14
1H15 WRBB SGB
9.3 9.8 10.1 21.8
17.1 14.6 19.5 12.3
Mar-13 Mar-14
Mar-15 WRBB SGB
Peers
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack 227 235 246
734 792 827 1H14
2H14 1H15
General insurance
gross written
premiums Life
in-force premiums
BT growing
franchise, although
earnings down
from insurance
claims 12 Insurance
premiums ($m) BT
cash earnings ($m)
Down 2% Up 2%
82 89 103 107 113
125 1H14 2H14
1H15 FUM FUA
Up 17% Up 26%
Up 8% Up 13%
265 274 291 150
174 131 26 11 29
441 459 451 1H14
2H14 1H15 Funds
Management
Insurance Capital
& other FUM and
FUA ($bn)
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Core earnings
up 4% Lower WIB
earnings impacted
by derivative
adjustments 13
Cash earnings
components ($m)
717 (2) 67 (25) (23)
(25) 709 (85) 624
2H14 Net II Non-II
Expenses
Impairments Tax &
NCI 1H15 before
derivative
adjustments
Derivative
adjustments 1H15
Lower impairment
benefit Down 13%
Down 1%
Westpac Banking
Corporation ABN 33 007
457 141.
Strategy/Outlook Brian
Hartzer Chief Executive
Officer
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Westpac
vision 15 To be one
of the world’s great
service companies,
helping our
customers,
communities and
people to prosper
and grow
| Westpac Group Half
Year 2015
Presentation &
Investor Discussion
Pack Our strategic
priorities will deliver
for all stakeholders 16
Service Revolution
Digital
Transformation
Performance
Discipline Targeted
Growth Workforce
Revolution One of the
World’s Great Service
Companies 21st
Century Bank
Region’s Best
Performing Bank
Building new Growth
Highways Talent
Factory Strategic
Priorities Indicators
ROE above 15%
Customer franchise
growth Lower expense
to income ratio
Targeted growth in
Asia, wealth and SME
Leading employee
engagement
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Expectations
for operating
environment 17
Outlook for
Australia remains
positive Global
economic
conditions are
mixed In Australian
banking - Credit
growth modest,
housing growing
faster than business
- Asset quality
expected to remain
strong Competition
remaining intense,
particularly given
low interest rates Considerable
regulatory
uncertainty Continuing growth
in wealth and
insurance markets
Economy currently
in transition, expect
2015 GDP growth
around 2.2% Expect uneven
growth across
industry sectors and
geographies - Lift
in consumer and
business confidence
will be important
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Well
positioned for our
third century 18
Drivers of value in
good shape, each
division has a clear
strategy and is
performing well
Strong balance
sheet, actively
responding to
regulatory
uncertainty Service
Revolution
program well
underway,
delivering a better
experience for
customers High
quality
management team
continuing to
manage the
business in a
balanced way
Westpac is well
positioned to
continue building
value
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Peter King Chief
Financial Officer
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group Half
Year 2015 Presentation
& Investor Discussion
Pack Solid performance
before Treasury and
derivative adjustments
20 Cash earnings ($m)
Income/Expenses ($m)
3,856 59 (73) (32) (32)
3,778 2H14 Operating
income Expenses
Impairment charges
Tax & NCI 1H15 1H14
2H14 1H15 1H151H14 (%) 1H15- 2H14
(%) Total operating
income 9,859 9,961
10,020 1.6 0.6 Treasury
income 303 170 123
(59.4) (27.6) Derivative
adjustments 0 0 (122)
n/a n/a All other income
9,556 9,791 10,019 4.8
2.3 Expenses (4,065)
(4,181) (4,254) 4.6 1.7
Down 2%
| Westpac Group Half Year
2015 Presentation & Investor
Discussion Pack $159m drag
from infrequent and volatile
items 21 2H13 1H14 2H14
1H15 Asset sales
(Hastings/Visa shares) 21 30
29 6 Performance fees 43 29
17 25 Group CVA 47 2 (19)
(22) Tax matters resolved 0 0
56 0 Derivative adjust. (85)
Total cash earnings impact
111 61 83 (76) Cash earnings
impact of infrequent/volatile
items ($m) Reported profit
versus cash earnings ($bn)
$159m lower (4.2% cash
earnings impact) 3.46 3.62
3.94 3.61 3.56 3.77 3.86 3.78
2H13 1H14 2H14 1H15
Reported profit Cash
earnings
| Westpac Group Half
Year 2015
Presentation &
Investor Discussion
Pack Capital
considerations Asset
quality a highlight and
sector deep dives
Expenses tightly
managed Disciplined
growth/margin
outcomes Investor
property regulation
Areas of interest in
result 22 Features of
Markets and Treasury
income
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Markets
customer income
higher offset by
derivative valuation
adjustments1 23
380 389 420 455 84
140 72 147 67 (1)
(22) (153) 531 528
470 449 2H13
1H14 2H14 1H15
2H13 1H14 2H14
1H15 2H13 1H14
2H14 1H15 2H13
1H14 2H14 1H15
Customer income
Derivative
valuation
adjustments1 Total
1 Includes charge
for methodology
changes to
derivative
adjustments of
$122m (pre tax)
and CVA of $31m
(pre tax) in 1H15.
Markets income by
component ($m)
Market risk related
income
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Treasury
income lower,
substantial rebasing
from GFC highs 24
1 FY08 and FY09
based on pro forma
cash earnings.
Treasury income
($m) 226 306 970
756 618 720 577
473 2.2 2.1 5.8 4.5
3.6 4.0 3.1 2.4
0.0% 2.0% 4.0%
6.0% 8.0% 10.0%
12.0% 14.0%
16.0% 18.0%
20.0% 0 100 200
300 400 500 600
700 800 900 1000
FY07 FY08 FY09
FY10 FY11 FY12
FY13 FY14
Treasury income
($m) % of Group
income 376 201
303 170 123 1H13
2H13 1H14 2H14
1H15 Historical
view Last five
halves 1 1
| Westpac Group Half
Year 2015
Presentation &
Investor Discussion
Pack Sound new
lending growth offset
by higher run-off 25 1
Includes Private Bank
business within BT. 2
Gross loans. 3
Includes WRBB, SGB
and BT. 4 Prior period
balances have been
restated for Working
Capital adjustments. 5
Over last 12 months. 6
Includes Australian
and offshore balances.
Australian mortgage
lending1,2 ($bn)
Managing investment
property lending
growth • APRA
indicated potential
capital requirements if
investor property
lending growth above
10% benchmark •
Based on APRA’s
definition, WBC
investor property
lending currently
growing at ~11.5%5 •
Adjusting lending
criteria to actively
manage investor
property growth to
10% WIB lending4,6
($bn) 64.0 66.2 3.4 0.3
0.1 0.1 70.1 1H14
2H14 Corporate &
Institutional lending
Securitisation & asset
finance Trade finance
Other 1H15 Up 6%
338.0 351.0 362.8
(23.9) (25.2) 36.9 37.0
1H14 New lending
Run-off 2H14 New
lending Run-off 1H15
Australian retail
business lending2,3,4
($bn) 80.7 81.9 82.4
9.1 9.1 (7.9) (8.6)
1H14 New lending
Run-off 2H14 New
lending Run-off 1H15
Up 1% Up 1% Up 3%
Up 4%
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack NIM
excluding Treasury
and Markets well
managed 26 Net
interest margin
(NIM) movement
(%) NIM (%) NIM
by division (%)
2.01 2.01 2.01 0.10
0.05 0.04 2.11 2.06
(6bps) 5bps 3bps
(1bp) (1bp) (1bp)
2.05 1H14 2H14
Assets Customer
deposits Term
wholesale funding
Liquidity costs
Capital & other
Treasury &
Markets 1H15 NIM
excl. Treasury &
Markets Treasury
& Markets impact
on NIM 2.17 2.18
2.19 2.12 2.11 2.06
2.05 2.07 2.03 2.06
2.06 2.01 2.01 2.01
1H12 2H12 1H13
2H13 1H14 2H14
1H15 NIM NIM
excl. Treasury and
Markets 2.33 2.28
2.06 2.36 2.27 2.00
2.36 2.29 1.89
WRBB/SGB NZ
WIB 1H14 2H14
1H15 NIM down
1bp NIM excl.
Treasury &
Markets flat
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Well
controlled expenses
in 1H15 27
Expense
movements ($m)
Composition of
expense growth per
half (%) 1.7 1.5 1.0
1.1 0.6 0.1 1.2 0.6
0.8 0.6 0.9 0.7 2.9
3.3 2.9 1.7 2H13
1H14 2H14 1H15
Operating expenses
Amortisation FX
Lloyds 4,254 4,065
4,181 144 4,212 19
4,231 23 (113)
1H14 2H14
Operating expenses
Productivity
benefits 1H15 pre
investment
Investments 1H15
pre FX FX 1H15
Up 0.6% Up 0.4%
Up 0.7%
| Westpac Group Half
Year 2015
Presentation &
Investor Discussion
Pack Asset quality a
highlight 28 0.88 1.30
3.09 3.20 2.48 2.17
1.60 1.37 1.24 1.12
2007 2008 2009 2010
2011 2012 2013 1H14
2H14 1H15 Watchlist
& substandard 90 days
past due and not
impaired Impaired
Stressed exposures as
a % of TCE Stressed
exposure by industry
over last 3 halves
($bn) 0.0 0.5 1.0 1.5
2.0 2.5 3.0 3.5
Property & business
services Retail lending
Wholesale & retail
trade Agriculture,
forestry & fishing
Manufacturing
Transport & storage
Accommodation,
cafes & restaurants
Construction Mining
Finance & insurance
Services Utilities
Other 1H15 lower
stressed exposure
1H15 higher stressed
exposure
| Westpac Group
Half Year 2015
Presentation &
Investor Discussion
Pack Sector deep
dives 29 1 Includes
impaired
exposures. 2 % of
portfolio is to TCE.
Mining portfolio
Commercial
property portfolio
Commercial
property (TCE) by
borrower (%) TCE
$11.7bn Lending
$7.0bn % of Group
TCE 1.28% % of
portfolio graded as
stressed1,2 3.67%
% of portfolio in
impaired2 0.97%
44 5 15 12 17 7 Oil
and gas Iron ore
Other metal ore
Coal Mining
services Other
Mining portfolio
(TCE) by sector
(%) TCE $64.8bn
Lending $50.5bn %
of Group TCE
7.11% % of
portfolio graded as
stressed1,2 1.75%
% of portfolio in
impaired2 0.80%
43 10 25 22
Exposures <$10m
Developers >$10m
Investors >$10m
Diversified
property groups
and property trusts
>$10m
| Westpac Group Half
Year 2015 Presentation
& Investor Discussion
Pack Impairments up
off a low base, strong
provisioning cover 30
Mar-14 Sep-14 Mar-15
Impaired asset
provisions to impaired
assets (%) 46 45 48
Collectively assessed
provisions to credit
RWA1 (bps) 97 93 89
Economic overlay ($m)
398 389 387 1 RWA is
risk weighted assets.
Impairment charge
movements ($m) 555
349 335 293 (289)
(292)(247)(218) 382
331 371 330 (239) (47)
(150) (64) 409 341 309
341 2H13 1H14 2H14
1H15 2H13 1H14 2H14
1H15 2H13 1H14 2H14
1H15 2H13 1H14 2H14
1H15 2H13 1H14 2H14
1H15 New IAPs
Write-backs &
recoveries Write-offs
direct Other movements
in collective provisions
Total Individually
assessed Provisioning
cover Collectively
assessed Impairment
charges to average
gross loans (bps)
Mar-14 Sep-14 Mar-15
Impairment charges 12
11 11 Impairment
charges including
interest adjustment 16
15 15
| Westpac Group Half
Year 2015 Presentation
& Investor Discussion
Pack Organic Other
items Capital drivers
and considerations 31 1
Other includes capital
deductions. 2 Includes
impact of mortgage
RWA changes of 22bps
and other smaller model
changes. 3
Internationally
comparable ratio - see
slide 92 of 2015 Half
Year Presentation and
Investor Discussion
Pack for reconciliation
and explanation. 4
APRA have clarified
that holding companies
are to be part of the
Level 2 Group for
regulatory purposes.
Transitional
arrangements are in
place for major banks. 5
BCBS is Basel
Committee on Banking
Supervision. Common
equity Tier 1 ratio (%
and bps) Other capital
reviews with uncertain
impact and timing 8.97
109 8.76 12.73 (72) (7)
(12) (19) (14) (6)
Sep-14 Cash earnings
2014 final dividend (net
DRP) RWA movement
Other Model changes
FX translation Defined
benefit pension fund
Mar-15 Mar-15
Internat. Comp. •
RBNZ changes to
investment property
loans • Changes in
IRRBB calculations •
Adjustment for wealth
leverage4 (Westpac
Group not affected) •
Westpac potential sale
of certain Pacific Island
operations Known
capital impacts •
Government and APRA
response to FSI report •
BCBS2,5 proposals
(Basel IV) announced
Dec 2014. Proposed
changes to standardised
approach for
determining Credit
RWA and consults on
RWA capital floors for
advanced banks •
BCBS review of
calculation of RWA for
traded risk and
operational risk 1 2 3
| Westpac Group Half
Year 2015
Presentation &
Investor Discussion
Pack Considerations
for 2H15 Disciplined
growth in housing,
business lending,
household deposits
and wealth to continue
Asset competition
expected to continue
with lower funding
and deposit costs
helping to offset.
Aiming for flat
margins excluding
Treasury and Markets
Productivity benefits
expected to continue,
largely offsetting
business as usual
expenses. Higher
amortisation in 2H15
Strong balance sheet
with leading asset
quality. Impairment
charges expected to
remain low although
write-backs likely to
reduce All divisions
continuing to show
good momentum 32
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Investor Discussion
Pack Comparison
of 1H15 versus
2H14 cash earnings
basis (unless
otherwise stated)
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Strategy
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Our strategic
priorities will deliver
for all stakeholders 35
Service Revolution
Digital
Transformation
Performance
Discipline Targeted
Growth Workforce
Revolution One of the
World’s Great Service
Companies 21st
Century Bank
Region’s Best
Performing Bank
Building new Growth
Highways Talent
Factory Strategic
Priorities Indicators
ROE above 15%
Customer franchise
growth Lower expense
to income ratio
Targeted growth in
Asia, wealth and SME
Leading employee
engagement
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Westpac stands
for 36 • ‘One team’
culture managing the
business in a
disciplined way to
build long term value
• CET1 capital ratio at
higher end compared
to international and
Australian peers1 •
Sector leading asset
quality through last
significant stress test
(global financial
crisis) • High quality
portfolio, biased to
secured consumer
lending • Provisioning
cover at upper end of
peers • Maintained
stable funding ratio
with high liquidity
levels • Expense to
income ratio at lower
end of global peers
and below average of
Australian major
banking peers3 •
Productivity culture
has delivered $1.4bn
of savings since FY09
• Significant further
opportunities with
digital transformation
Service focussed
Strategically well
placed Focussed on
core markets Leader
in strength Global
efficiency leader
Sustainability leader •
Our vision is to be one
of the world’s great
service companies,
helping our customers,
communities and
people to prosper and
grow • Customers at
centre of everything
we do • Our people
are empowered at
every level to deliver a
better experience for
our customers • No 1
or 2 position across
key markets with all
divisions well placed •
Diverse portfolio of
distinct brands across
key markets appealing
to a broader customer
set • Enhanced
strategic options
through portfolio of
brands across
distribution, marketing
and pricing • Leading
Institutional
franchise2 •
Comparative
advantages in wealth
across systems and
products, providing
wealth/ insurance to
the Group’s customers
• New online and
mobile platforms
rolled out to
customers in 2015 •
Major Australian bank
most focussed on
Australia and New
Zealand where we
have proven ability to
add value • 95% of
exposures in
Australia/NZ •
Expanding in Asia,
connecting customers
to the region •
Australia’s first bank
and company, in
operation for 198
years • Ranked in
Global 100 list of
worlds most
sustainable
corporations for 10 of
the last 11 years,
including being
ranked number 1 in
2014 • Global banking
leader in Dow Jones
Sustainability Index
since 2002. Westpac
achieved sector
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Overview
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
WIB Westpac NZ
WRBB Westpac Group
at a glance, Australia’s
First Bank 38 1 As at 31
March 2015. Source:
IRESS, CapitalIQ and
www.xe.com based in
US Dollars. 2 Data
sourced from Credit
Suisse analysis of
expense to income ratio
of world’s largest banks
March 2015. 3 Source:
Standard and Poor’s,
Moody’s Investors
Service, Fitch Ratings. 4
Westpac Group included
in 2015 Global 100 most
sustainable companies,
announced at World
Economic Forum in
January 2015. 5 APRA
Banking Statistics,
March 2015. 6 RBA
Financial Aggregates,
March 2015. 7 RBNZ,
March 2015. 8 Plan for
Life, December 2014,
All Master Funds Admin.
9 Cash earnings basis. 10
Share price as at 31
March 2015, $39.38.
Customers 13m
Australian household
deposit market share5
23% Australian mortgage
market share6 23%
Australian business
market share6 19% New
Zealand deposit market
share7 21% New
Zealand consumer
lending market share7
20% Australian wealth
platforms market share8
20% • Australia’s first
bank and first company,
opened in 1817 •
Australia’s 2nd largest
bank, and 12th largest
bank in the world, ranked
by market capitalisation1
• Strategy focused on
customers, differentiated
through service
outcomes. Value created
by growth in customer
numbers and depth of
relationships •
Supporting customers in
Australia, New Zealand
and the near Pacific and
customers with ties to
these markets • Portfolio
of brands providing
consumer, business and
institutional banking,
wealth management and
insurance services, with
excellent positioning in
key markets • One of the
most efficient banks
globally2 • Rated AA- /
Aa2 / AA-, with stable
outlook3 • Strong capital,
funding, liquidity and
credit quality •
Consistent earnings
profile over time •
Leader in sustainability4
Reported net profit
$3,609m Cash earnings
$3,778m Expense to
income ratio9 42.5%
Common equity Tier 1
capital ratio (APRA
basis) 8.8% Return on
equity9 15.8% Total
assets $796bn Market
capitalisation10 $123bn
Key statistics for 1H15
Key financial data for
1H15 (31 March 2015)
Westpac Retail &
Business Banking
Westpac Institutional
Bank Westpac New
Zealand St.George
Banking Group BT
Financial Group SGB BT
PERFORMANCE
DISCIPLINE
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack 1H15 financial
snapshot 39 1 For
profitability metrics the
change represents
results for 1H15 versus
1H14 and 1H15 versus
2H14, the actual results
for 2H14 and 1H14 are
not represented here. 2
All measures on a cash
earnings basis. 3 EPS is
earnings per share. 4
NTA is net tangible
assets. 5 2H14 liquidity
coverage ratio was pro
forma. 6 Total liquid
assets represent cash,
interbank deposits and
assets eligible for
existing repurchase
agreements with a
central bank. 1H15
Change1 1H15 – 1H14
Change1 1H15 – 2H14
Earnings2 EPS3 (cents)
121.3 0% (2%) Core
earnings ($m) 5,766 0%
0% Cash earnings ($m)
3,778 0% (2%) Return
on equity (%) 15.8
(67bps) (54bps)
Dividend per share
(cents) 93 3% 1%
Expense to income ratio
(%) 42.5 123bps 49bps
Net interest margin (%)
2.05 (6bps) (1bp) Asset
quality Impairment
charges to average
gross loans (bps) 11
(1bp) 0bps Impaired
assets to gross loans
(bps) 35 (16bps) (5bps)
Impaired provisions to
impaired assets (%) 48
2ppt 3ppt 1H15
Change1 1H15 – 1H14
Change1 1H15 – 2H14
Balance sheet Total
assets ($bn) 796 9% 3%
Common equity Tier 1
capital ratio (APRA
basis) (%) 8.8 (6bps)
(21bps) CET1 capital
ratio internationally
comparable (%) 12.73
(34bps) (36bps) Risk
weighted assets ($bn)
346.8 8% 5% Loans
($bn) 605 7% 4%
Customer deposits
($bn) 420 8% 3%
NTA4 per share ($)
11.84 6% 2% Funding
and Liquidity Customer
deposit to loan ratio (%)
69.5 58bps (106bps)
Stable funding ratio (%)
83 (22bps) 6bps
Liquidity coverage ratio
(%) 114 n/a 11ppts5
Total liquid assets6
($bn) 137 10bn 2bn
PERFORMANCE
DISCIPLINE
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
1H15 cash earnings
summary 40 1H15 ($m)
% chg1 1H15-1H14 %
chg1 1H15-2H14 Net
interest income 6,934 4 2
Non-interest income
3,086 (3) (2) Expenses
4,254 5 2 Core earnings
5,766 0 0 Impairment
charges 341 0 10 Cash
earnings 3,778 0 (2)
Reported net profit 3,609
0 (8) (32) 3,856 115
3,778 (56) (73) (32)
2H14 Net interest
income Non-interest
income Expenses
Impairment charges Tax
& NCI 1H15 3,772 257
34 3,778 (96) (189)
1H14 Net interest
income Non-interest
income Expenses
Impairment charges Tax
& NCI 1H15 1 For
profitability metrics the
change represents results
for 1H15 versus 2H14
and 1H15 versus 1H14,
the actual results for
2H14 and 1H14 are not
represented here. • Cash
earnings down 2% with:
WRBB up 2%; SGB up
4%; BTFG down 2%
(impacted by higher
insurance claims); WIB
down 13% (impacted by
derivative adjustments)
and Westpac NZ up 4%
(up 2% in NZ$) • Cash
earnings absorbed $85m
change related to
derivative adjustments,
and lower Treasury
income (in Group
Businesses) • Net interest
income rose 2%, with a
3% rise in average
interest-earning assets
partially offset by a 1bp
decline in net interest
margin. Lower NIM due
to Treasury, with margin
excluding Treasury and
Markets flat •
Non-interest income
down 2% impacted by
derivative adjustments.
Excluding this,
non-interest income up
2% with an increase in
markets income,
following the increased
volatility in FX markets •
Expenses up 2% or 1%
excluding FX translation
impacts. $113m of
productivity savings
delivered this half •
Impairment charges up
10%, with fewer WIB
write-backs in the period
• Cash earnings flat with:
WRBB up 8%; SGB up
9%; BTFG up 2%; WIB
down 17% (impacted by
derivative adjustments
and lower impairment
benefit) and Westpac NZ
up 5% (up 2% in NZ$) •
Net interest income up
4%, driven by a 7% rise
in average
interest-earning assets.
Net interest margin down
6bps due to Treasury and
Markets. Margin
excluding Treasury and
Markets was flat •
Non-interest income
down 3% impacted by
derivative adjustments.
This decline more than
offset growth in wealth
management income and
higher fees and
commissions • Expense
growth 5%. Expense
growth of 3% excluding
Lloyds acquisition and
FX translation impacts.
Productivity savings of
$230m over last 12
months, mostly offset
operating cost increases,
with expense growth due
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Actively managing
returns 41 1 1H15 ex
derivative adjustment. 2
Return on average
interest-earning assets. 3
Average ordinary equity.
Return on average
interest-earning assets
(AIEA) (%) 2H13 1H14
2H14 1H15 Actual 1H15
ex deriv. adjust.1 Net
interest income (margin)
2.12 2.11 2.06 2.05 2.05
Derivative adjustments - - (0.04) - Non-interest
income 0.99 1.00 0.95
0.95 0.95 Operating
expenses (1.29) (1.28)
(1.26) (1.26) (1.26) Core
earnings 1.82 1.83 1.75
1.70 1.74 Impairment
charges (0.13) (0.11)
(0.09) (0.10) (0.10) Tax
& non-controlling
interests (0.52) (0.53)
(0.49) (0.48) (0.50) Cash
Earnings (ROA2) 1.17
1.19 1.17 1.12 1.14
Leverage (AIEA/AOE3)
13.55 13.85 14.01 14.16
14.16 Return on average
ordinary equity (ROE)
15.80 16.48 16.35 15.81
16.17 PERFORMANCE
DISCIPLINE
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack Retail and
business banking
engine room of growth
42 1 Refer to division
definitions, slide 143. 2
Derivative adjustment.
3 Other includes Group
Businesses (including
Treasury) and Westpac
Pacific. 4 In A$. (85)
3,856 20 31 16 3,778
(8) (8) (44) 2H14
WRBB SGB BTFG
Deriv. adjust. WIB NZ
Other 1H15 1H15
divisional contribution
to cash earnings1 ($m)
5,780 37 34 40 29
5,766 (13) (122) (19)
2H14 WRBB SGB
BTFG Deriv. adjust.
WIB NZ Other 1H15
1H15 divisional
contribution to core
earnings1 ($m) 1H15
($m) WRBB SGB
BTFG WIB NZ4
Other3 Group
Operating income 3,835
2,113 1,340 1,506
1,008 218 10,020
Expenses (1,685) (801)
(668) (624) (408) (68)
(4,254) Core earnings
2,150 1,312 672 882
600 150 5,766
Impairment (charges) /
benefits (221) (116) 4
22 (30) 0 (341) Tax &
non-controlling
interests (579) (359)
(225) (280) (157) (47)
(1,647) Cash earnings
1,350 837 451 624 413
103 3,778 % of Group
cash earnings 36 22 12
17 11 2 100 Flat Down
2% 3 3 2 WIB total (93)
WIB total (82) 2
PERFORMANCE
DISCIPLINE
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Continued to
grow dividend 43 •
Seek to consistently
lift ordinary dividend
cents per share each
half while maintaining
a strong capital
position to support
growth • Pay fully
franked dividends,
utilising franking
surplus to distribute
value to shareholders •
Maintain payout ratio
that is sustainable in
the long term 6.3 6.0
5.2 5.7 5.1 8.9 8.5 7.5
8.2 7.3 1H13 2H13
1H14 2H14 1H15
WBC yield WBC
fully franked yield 78
76 76 77 74 74 77
1H12 2H12 1H13
2H13 1H14 2H14
1H15 1 $2bn is an
estimate and relates to
both DRP and DRP
underwrite. 2 1H15
ordinary dividend
(annualised) using 1
May 2015 Westpac
closing share price of
$36.73. 3 Data using
past half year
dividends and share
price as at 31 March
and 30 September in
each of the years.
Includes special
dividends in 1H13 and
2H13. • 1H15
ordinary dividends of
93 cents, up 1% (up
3% on 1H14) • Payout
ratio of 77% (ex
derivative adjustments
payout ratio 75%) –
Acting to increase
capital ratios by
issuing shares to
satisfy the DRP with
1.5% discount –
Partially underwriting
DRP to $2bn1 • 1H15
dividend yield2 5.1%
– Equivalent to a fully
franked dividend
yield2 of 7.3% •
Franking balance of
$471m after allowing
for interim dividend
payment 76 80 82 84
86 88 90 92 93 10 10
1H11 2H11 1H12
2H12 1H13 2H13
1H14 2H14 1H15
Dividends per share
(cents) Key dividend
considerations
Westpac dividend
yield2,3 (%) Ordinary
dividend payout ratio
(%) Special dividends
PERFORMANCE
DISCIPLINE Payout
ratio 75% ex
derivative adjustments
| Westpac Group First Half
2015 Presentation &
Investor Discussion Pack
Cash earnings and
reported net profit
reconciliation 44 1H15
($m) % change 1H151H14 % change 1H152H14 Cash earnings 3,778
0 (2) Cash EPS (cents)
121.3 0 (2) Reported net
profit 3,609 0 (8) 2H14
1H15 Reported net profit
3,939 3,609 Treasury
shares (6) 37 Ineffective
hedges 29 (1) Fair value
(gain/loss) on economic
hedges (151) 26 Buyback
of government guaranteed
debt (12) (1) Amortisation
of intangible assets 77 73
Acquisition transaction
and integration expenses
26 35 Fair value
amortisation of financial
instruments 8 0 Bell
litigation provision (54) 0
Westpac Bicentennial
Foundation grant 70 0
Prior period tax provisions
(70) 0 Cash earnings 3,856
3,778 • 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 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 slide 142.
Cash earnings policy1
Reported net profit and
cash earnings1
adjustments ($m)
Reported profit and cash
earnings ($bn)
PERFORMANCE
DISCIPLINE 3.5 3.6 3.9
3.6 3.6 3.8 3.9 3.8 2H13
1H14 2H14 1H15
Reported profit Cash
earnings
| Westpac Group First Half
2015 Presentation &
Investor Discussion Pack
Delivering digital
innovation for customers
45 Lost your wallet? •
Emergency cash solution
supporting 272,000
cardless cash transactions
Need a loan quickly? •
St.George Bank online
applications for cards and
loans Expanded help for
small businesses? • Access
to online tools and
resources to help small
businesses grow,
complementing our
expanded
videoconferencing
facilities In a rush? •
Mobile ‘Tap and Pay’ now
for American Express
cards Open a new account
anytime • 5-minute
account opening through
online electronic data
validation Make logging
on safer and easier? •
Fingerprint and PIN logon
for mobile customers Need
enhanced online help? •
Improved customer
support through online
‘Click to chat’ Leading
mobile and digital
capabilities Fewer
complaints! • 35%
reduction in complaints1
compared to 1H14
Westpac Live won Best
Innovative Online
Banking Service in Money
Magazine’s 2015 Best of
the Best Innovation
awards St.George won the
Best New Innovative
Product for its
MoneyMeter Smartwatch
app (Android) ‘St.George
Fingerprint logon’ won the
Security & Fraud
Management Category of
the Financial Insights
Innovation Awards (FIIA)
2015 SERVICE
REVOLUTION 1 Total
complaints for
WRBB/SGB/BT.
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Steadily
building customer
franchise 46 1 Refer
slide 145 for wealth
metrics provider. 2
Refer slide 145 for
customer satisfaction
details. Customer
numbers and depth
of relationship
Customer
satisfaction
Initiatives to drive
customer growth and
satisfaction 6.1 6.2
6.4 3.2 3.6 3.7 1H13
1H14 1H15 WRBB
SGB 9.3 9.8 10.1
21.8 17.1 14.6 19.5
12.3 Mar-13 Mar-14
Mar-15 WRBB SGB
Peers 1 16 23 21 27
39 1H13 1H14 1H15
WRBB SGB
Customer numbers
(#m) Customers with
a wealth product1
(%) Total consumer
satisfaction2 (%)
Total business
satisfaction2 (mean)
Smart ATMs as a %
of ATM network
Total customer
complaints across
WRBB, SGB and
BT (#) 1H13 1H14
1H15 Down 35%
SERVICE
REVOLUTION 83.7
86.6 81.7 83.0
Mar-13 Mar-14
Mar-15 WRBB SGB
Peers 7.5 7.5 7.1
Mar-13 Mar-14
Mar-15 WRBB SGB
Peers
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Digital
transformation is
reshaping the
company 47 62.0 60.7
60.4 59.8 56.9 53.8
45.5 44.7 44.0 42.5
42.2 US regional bank
average Canadian
bank average
European banks UK
bank average Korean
bank average NAB
Hong Kong bank
average ANZ
Singapore bank
average WBC CBA
Migration to digital is
removing complexity
in processes and is
reducing manual
activity • Continuing
shift from manual
transactions (branches,
cheques, telephone
service) to digital
transactions (online,
smart ATM, direct
entry) • Greater focus
on mobile capability •
Increased straight
through processes •
Material upgrade in
technology
infrastructure has
improved system
stability and enhanced
customerfacing
systems • Next stage
is a customer service
hub that will improve
efficiency and support
the service focused
strategy 1 Company
data, Credit Suisse.
Expense to income
ratio average for all
banks (excluding
WBC/CBA) are based
on their FY14 results.
WBC and CBA based
on 1H15 results. 43.1
42.6 52.7 33.1 42.2
41.3 50.6 36.7 41.8
40.6 49.9 41.4
WRBB/SGB NZ
BTFG WIB 1H13
1H14 1H15 Global
peer comparison of
expense to income
ratios1 (%) Divisional
expense to income
ratios (%) Supporting
the service revolution
Digital transformation
Building technology
architecture for the
future Delivering
digital solutions that
improve the customer
experience and help
customers to bank
when and where they
want • New online
platform in WRBB
and New Zealand •
New services to
improve convenience
(i.e. get cash, online
applications) •
Increased ability for
customers to
self-serve DIGITAL
TRANSFORMATIO
N
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Digital
transformation
continues 48 >200%
increase in digital
gross productivity
save1 95% increase in
mobile sales2 2.5%
increase in active
digital customers in
1H15 >13% digital
sales as a % of retail
sales 2.6m active
mobile customers
3.1m consumers
migrated to Westpac
Live 300K business
customers migrated to
Westpac Live $84m
new sales revenue
from digital in 1H15
35% reduction in
complaints2 >58% of
customers bank with
us on a mobile device
1 Productivity benefits
associated with
shifting service
activity out of
high-cost channels
such as branches and
contact centres to
lower-cost channels
such as digital. 2 Total
for WRBB/SGB/BT
and 1H15 compared to
1H14. DIGITAL
TRANSFORMATIO
N 1H13 2H13 1H14
2H14 1H15 Active
digital customers (m)
3.52 3.65 3.77 3.97
4.07 % of digital
sessions via mobile
43.5 46.1 51.3 53.8
59.6 Australian digital
banking logins (m)
288 320 338 359 389
Digital sales as a % of
total retail sales 10.2
9.1 10.6 10.5 13.3
Increasing use of
digital by customers
52.8 44.0 35.3 -1.6
-15.0 -26.4 -34.6
Digital EFTPOS
Direct Entry Branch
ATM Cheques
Telephone Shift in
payment transactions
FY11 – 1H15 (%)
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack Our customer
focused technology
strategy continues to
deliver 49 Channel
Systems • 502k
additional accounts
have switched to
e-statements in 1H15
Customer Service Hub •
Progressing the next
step in our
transformation to put
the customer at the
centre of our
technology systems
Product Systems •
Second release of
Panorama Wealth
platform introducing
‘BT Managed
Portfolios’ for sale
through financial
advisors • Work
underway to upgrade
Hogan in St.George
Analytics Systems •
Systems in place to
deliver information on
next best offer and
notifications to help
customers manage their
finances (i.e. due
payments) • Further
development underway
to deliver improved
customer insights and
more personalised
offers Infrastructure
Platforms • Upgrade to
data centres has enabled
the further closure of 2
data centres (East
Chatswood and Kent
Street) • Upgrades have
materially enhanced
stability – Severity 1
incidents down 50% in
1H15 Customer Service
Hub Channel Systems
Analytics Systems
Customer Data Product
System A Product
System B Product
System C Product
System D Infrastructure
Platforms We are
building a world-class
technology leadership
team focused on
developing our target
architecture and
transforming our
infrastructure. The team
continues to drive
efficiencies to create
the headroom for
additional investment in
strategic programs
DIGITAL
TRANSFORMATION
| Westpac Group First Half
2015 Presentation &
Investor Discussion Pack
Building new growth
highways 50 Targeted
Growth Building new
Growth Highways Wealth
Asia SME • Helping to
deepen customer
relationships while
providing high quality
earnings and low capital
intensive growth • Proven
track record of delivering
wealth/insurance products
to customers1 •
Technology providing
better customer access and
a comparative advantage
for Westpac – Panorama2
(integrated wealth system
to transform how
customers manage, build
and protect their wealth)
progressively being rolled
out – In FY14 the BT
Cash Hub was launched
(balances now over $1bn)
– 1H15 BT Managed
Portfolio released and
continuing to attract more
advisers onto platform
(over 1,300 advisors
currently registered) •
New technology and
simplification of
systems/processes is
allowing Westpac to
deliver a high quality, low
cost to serve model to
better support SME
customers – 49% of
WRBB/SGB sites3 have
business connect which
gives customers
immediate face-to-face
access to over 120 experts
via videoconference –
Driving product simplicity
including SGB Digital
BizPack (5 essential
products, 15 minute
sign-up). WRBB
equivalent My Business
Solutions launched in
April 2015 – New online
lending application tool
(LOLA) for local business
bankers providing them
with more customer
information, conditionally
approved limits and
maturing facility
information • Building
capabilities and capacity in
Asia to seamlessly connect
our customers to the
increasing flows of global
trade, capital and people
between Australia/NZ and
Asia. Increased our team
in Asia by 17% to 506
FTE • Completed
technology foundations
including global trade
platform and core banking
systems. Now offering
faster end-to-end
processing • Sub-branch in
the Shanghai Free Trade
Zone is now operational •
Became a foundational
bank for the Sydney RMB
Hub announced in
November and continue to
be a lead market maker in
AUD/CNY and
NZD/CNY • 1H15
welcomed our 500th new
corporate customer 1
Refer slide 145 for wealth
metrics provider details. 2
Refer slide 109 for more
information on Panorama.
3 Sites is branches and
standalone business
banking centres excluding
instores. TARGETED
GROWTH
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Workforce
revolution 51 •
‘Building a high
performance culture
through improved
management and
performance systems,
and by enhancing the
Group’s leadership
capabilities, through
training and education
• Developing a
workforce that better
meets the company’s
needs with a mix that
is more reflective of
society, including
increased flexibility;
gender equality in
leadership roles; and
delivering on our
reconciliation action
plan • Creating
physical workspaces
that deliver more for
our teams. New sites
are already operational
including the new
Melbourne head
office. Future sites
including a new
corporate office at
Barangaroo are in
development •
Simplifying employee
arrangements and
processes including
the development of a
new enterprise
agreement to increase
workforce flexibility
and simplify our
industrial terms • Key
indicators of success
include employee
engagement (biannual
survey) and employee
metrics shown LTI2
frequency rate (rolling
12 months) (#)
Women in leadership
positions1 (%) New
starter retention
(rolling 12 months)
(%) High performer
retention (rolling 12
months) (%) 1 Spot
number as at balance
date. 2 LTI is lost time
injury. 41 43 44
Mar-13 Mar-14
Mar-15 1.8 1.4 0.9
Mar-13 Mar-14
Mar-15 96.0 95.6 95.7
Mar-13 Mar-14
Mar-15 85.7 86.7 87.6
Mar-13 Mar-14
Mar-15
WORKFORCE
REVOLUTION
‘Workforce
revolution’ is a
program to further
transform Westpac’s
workforce to
encourage and retain
the best talent
| Westpac Group First Half
2015 Presentation &
Investor Discussion Pack
Continued sustainability
leadership 52 1H15
progress Priority
Objectives 1H15 progress
• Ensure our workforce is
representative of
community • Women in
leadership steady at 44%,
and up from 43% one year
ago • Recruited an
additional 67 Indigenous
Australians • Participation
of mature aged workers
(50+) has remained steady
at 20.9% • Extend length
and quality of working
lives • Mean employee
retirement age 61.5 years,
down from 61.6 (but up
from 61.4 one year ago) •
Anticipate the future
product and service needs
of aging and culturally
diverse customers •
Launched BTFG changing
the face of financial
planning. Five initiatives
now launched since 2013 •
Provide products/services
to help customers adapt to
environmental challenges •
Work continues to build
on the four products
already launched, ahead of
target • Increase lending
and investment in
CleanTech and
environmental services •
Group exposures (TCE) to
the CleanTech and
environmental services
sector have grown by
$50m, taking total
exposures to over $8.0bn •
Continue to reduce our
environmental footprint •
On track to maintain
carbon neutrality for FY15
and achieve electricity and
paper reduction targets •
Ensure customers have
access to the right advice
to achieve a secure
retirement • The
proportion of customer
facing employees with
wealth accreditation
remains steady at 12% •
Help customers meet their
financial goals in
retirement • Commenced a
new retention program
with a range of activities
planned to meet the 2017
target • Increase access to
financial services in
Pacific Island nations •
Provided over 32,000 new
basic banking accounts •
More than doubled
number of mobile
activations to over 40,000
• Help people gain access
to social and affordable
housing • $1bn lent to the
social and affordable
housing sector as at 31
March 2015, up from
$0.82bn Sustainability
strategic priorities • Global
banking leader in the Dow
Jones Sustainability Index
since 2002. Westpac was
the sector leader from
2002-2007, in 2011 and in
2014 • Ranked as one of
the Global 100 Most
Sustainable Corporations
in the World by Corporate
Knights for 10 of the last
11 years, including being
ranked number 1 in 2014
Leading track record •
Westpac supported the
Westpac Bicentennial
Foundation which
awarded the first 22
scholarships from the
Westpac Bicentennial
Foundation, Australia’s
largest ever private
education scholarship fund
• Launched a Social
Impact Framework to
ensure our activities
deliver the greatest social
and business benefit •
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack Helping
communities prosper
and grow 53 1 All
figures for the six
months to 31 March
2015 unless otherwise
stated. 2 New mortgage
and new business
lending in Australian
retail and business
banking operations. 3
Includes NZ and
Pacific. 4 Is a FY14
number. Supporting
communities1 One of
Australia’s largest
taxpayers, with an
effective tax rate 29.7%
Employ approximately
36,500 fulltime
equivalent employees
$46bn new lending2 of
$524bn total Aust.
loans Provide loans to
help millions of
Australians own their
home or grow their
business Funding
economic activity
$2.9bn in dividends
Supporting working or
retired Australians
either individually
(595K shareholders) or
via their super funds
Wealth of many
Australians >$1.6bn in
tax expense The bottom
line $2.4bn in employee
expenses The
workforce 2%4
community
contributions to pre-tax
profit Invested
$217m3,4 via
community
contributions The
nation Income tax
expense on a cash
earnings basis ($m)
1H14 2H14 1H15
Notional income tax
based on the Australian
company tax rate of
30% 1,636 1,641 1,628
Net amounts not
deductible/(not
assessable) 7 (54) (15)
Total income tax
expense in the income
statement 1,643 1,587
1,613 Effective tax rate
(%) 30.1 29.0 29.7
Other tax/government
payments ($m) 1H14
2H14 1H15 Net GST,
Payroll tax, FBT 218
208 228 Westpac also
makes a number of
other government and
regulatory payments
including fees for
Government
guarantees, APRA fees
and stamp duties which
are not included in the
above. Similarly,
Westpac also collects
tax on behalf of others,
such as withholding tax,
PAYG and GST. These
have been excluded
from this analysis
SUSTAINABLE
FUTURES
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Earnings Drivers
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Net operating income up
1% 55 1 AIEA is average
interest-earning assets. 2
Other includes Group
Businesses and Westpac
Pacific. 3 DA is
derivative adjustments. •
Net operating income up
1% • Net interest income
up 2% – AIEA1 growth
of 3% mostly from rise
in Australian mortgages
– Customer deposit
growth of 3%, with focus
on growing LCR
efficient deposits – Net
interest margin down 1bp
due to lower Treasury
revenue. Margins
excluding Treasury and
Markets flat •
Non-interest income
down 2% – Fees and
commissions up 1% to
$1,478m – Wealth and
insurance down 1% to
$1,134m – Trading
income, down 10% to
$425m (up 16%
excluding derivative
adjustments) – Other
income down 17% to
$49m 9,859 9,961 10,020
(86) 245 10 34 201 10
(103) (77) (7) (11) (45)
(10) 1H14 AIEA growth
Margins Fees &
commissions Wealth
Trading Other 2H14
AIEA growth Margins
Fees & commissions
Wealth Trading Other
1H15 9,859 9,961 10,020
1H14 2H14 1H15 Net
operating income
movement half on half
($m) Operating income
($m) and divisional %
contribution to 1H15
9,859 144 134 13 31
9,961 66 23 2 65 46
10,020 (2) (218) (122)
(21) 1H14 WRBB SGB
BTFG WIB NZ Other
2H14 WRBB SGB
BTFG DA WIB NZ
Other 1H15 Divisional
contribution to net
operating income ($m)
38% 21% 13% 15% 10%
3% WRBB SGB BTFG
WIB NZ Other Up 1%
Up 1% Net interest up
2% Non-interest down
1% Net interest up 2%
Non-interest down 2% 2
2 2 3 WIB total (57)
REVENUE
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Loan growth
predominantly from
Australian mortgages
and institutional 56
338.0 351.0 362.8
20.6 21.4 22.1 133.2
136.9 139.7 2.0 2.0
1.9 Mar-14 Sep-14
Mar-15 Margin
lending Business
Personal (loans +
cards) and other
Housing 338.0 351.0
20.5 16.5 362.8
(25.2) Mar-14
Sep-14 WRBB new
lending SGB new
lending Net run-off
Mar-15 Up 3% 133.2
136.9 0.4 0 2.2 0.2
139.7 Mar-14 Sep-14
WRBB SGB WIB
Other Mar-15 Up 2%
1 Other includes
other offshore
lending. 2 Includes
Private Bank within
BT. • Westpac
Group loans up 4%
(up 3% excluding
foreign exchange
translation impacts) •
Australian mortgage
lending up 3% –
Small rise in new
lending although
run-off increased 6%
reflecting accelerated
customer repayments
and lower interest
rates • Australian
business lending up
2% – Growth
weighted towards
corporate in property
and natural resources
– Continued run-off
in stressed assets,
though at a slower
rate • Australian
personal lending up
3% – Growth in auto
finance portfolio and
credit card balances •
New Zealand
lending up 3% (in
NZ$ terms) with
similar growth
across mortgages
and business.
Lending up 13% in
A$ terms due to
exchange rate
movements • Other
overseas lending up
13% with majority of
growth due to
foreign exchange
impacts of $1.8bn.
Trade finance
volumes impacted by
lower commodity
prices 564.6 580.3
605.1 11.8 2.8 0.6
7.7 1.9 Mar-14
Sep-14 Australian
housing Australian
business Australian
other New Zealand
Other Mar-15 Net
loans ($bn)
Australian gross
loans ($bn)
Australian mortgage
flow (gross loans)
($bn) Australian
business (gross
loans) ($bn) 1
REVENUE 2 2 Up
4%
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Australian
mortgages driver of
lending growth 57
0.9 1.0 0.9 1H14
2H14 1H15 18.4
19.7 19.8 14.7 17.2
17.2 1H14 2H14
1H15 Proprietary 3rd
party 1 RBA
Financial
Aggregates, March
2015. 2 Includes
Private Bank
business within BT.
3 Gross loans. 4
Westpac data, APRA
ADI property
exposure statistics,
December 2014. 5
Other ADIs consist
of authorised deposit
taking institutions
that are not banks,
building societies or
credit unions. •
Australian mortgage
market share1 of
23.1% – Grew at
0.9x system1 • 3%
lift in balances –
Higher new lending
volumes – Partly
offset by run-off of
$25.2bn, up 6% •
Average dynamic
LVRs slightly lower
• % of loans written
over 80% largely
steady and
significantly lower
than industry •
Mortgage complaints
down 6% Australian
mortgage lending
volumes2,3 ($bn)
Mortgage growth
multiple of system1
(x) Australian new
mortgage lending2
($bn) Loans
approved above 80%
LVR4 (%) 5 338.0
351.0 362.8 ( 23.9) (
25.2) 36.9 37.0 1H14
New lending Run-off
2H14 New lending
Run-off 1H15 0 10
20 30 40 WBC ADIs
(excluding other
non-bank ADIs)
REVENUE Up 4%
Up 3%
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Business remains
subdued, with high
repayment levels
continuing 58 1 Sites
is branches and stand
alone business
banking centres
excluding instores. 2
Includes WRBB, SGB
and BT. 3 Prior period
balances have been
restated for Working
Capital adjustments. 4
Gross loans. 5
Business banking
customers of WRBB
and St.George. 6 Net
loans. 7 Includes
Australian and
offshore balances. •
Westpac Group
business lending up
4%, primarily driven
by institutional
customers • WIB
business balances up
6% – Majority of
growth in corporate
and institutional
lending (up 7%),
predominantly
commercial property
and natural resources •
WRBB/SGB business
balances up 1% –
Business customers up
4% – Conditions
remain subdued with
customers choosing to
use surplus cash flow
to pay down existing
debt – New lending of
$9.1bn was largely
offset by higher
run-off ($8.6bn) –
WRBB Connect Now
in 46% of sites1 and
SGB Business
Connect in 55% of
sites1 delivering low
cost-to-serve model to
more customers –
Business and
merchant complaints
down 13% Australian
business banking
customers5 (#000)
WIB lending6,7 ($bn)
Australian retail
business lending2,3,4
($bn) 949 969 985
1,007 1,038 1,132
1,174 1H12 2H12
1H13 2H13 1H14
2H14 1H15 Lloyds 70
77.4 80.7 81.9 82.4
8.1 3.7 9.1 9.1 (8.5)
(7.9) (8.6) 2H13 New
lending Run-off
Lloyds 1H14 New
lending Run-off 2H14
New lending Run-off
1H15 Up 4% Up 1%
Up 1% 64.0 66.2 3.4
0.3 0.1 0.1 70.1 1H14
2H14 Corporate &
Institutional lending
Securitisation & Asset
Finance Trade Finance
Other 1H15 Up 6%
REVENUE 1,108
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Consumer
finance supported by
growth in auto finance
59 1 APRA monthly
banking statistics,
March, 2015. 2 Rfi
data, March 2015,
excludes auto finance.
3 NPS among credit
card customers refer
slide 144 for metric
provider details. 4
Includes Private Bank
within BT. 5 Net
loans. • Total
Australian consumer
finance up 3% to
$21.1bn • Growth
across both personal
lending and credit
cards modest –
Applications for credit
cards down 4% –
Credit card growth of
1.6% below system1
growth of 3.2% –
Personal lending
growth at 2.6% in line
with system2 • Auto
finance up 6% with
new business volumes
and margins
improving. Growth
supported by 2014
Lloyds acquisition •
Simplification and
service enhancements
improving customer
experience – 33%
reduction in credit
card complaints –
27% reduction in
personal loan
complaints – SGB
continued to lead
majors in NPS among
credit card customers
and WBC rated 2nd of
the majors3 Australian
credit card and
personal loan
applications4 (#’000)
Australian consumer
finance lending4,5
($bn) Australian credit
cards growth relative
to system1 Australian
personal lending
growth relative to
system2 21.1 0.4 0.2
19.9 0.2 0.4 20.5
1H14 Auto finance
Other consumer
finance 2H14 Auto
finance Other
consumer finance
1H15 Up 3% Up 3%
204 179 257 240 230
145 148 160 149 150
1H13 2H13 1H14
2H14 1H15 Credit
cards Personal lending
REVENUE 1H13
2H13 1H14 2H14
1H15 Westpac Group
(%) 1.1 (2.4) 4.3 1.2
1.6 Market (%) 1.8
(1.8) 2.2 (0.8) 3.2
Growth multiple
against market (x) 0.6
n/a 1.9 n/a 0.5 1H13
2H13 1H14 2H14
1H15 Westpac Group
(%) 6.5 2.9 6.7 2.8 2.6
Market (%) 6.2 3.0 4.5
1.6 2.6 Growth
multiple against
market (x) 1.0 1.0 1.5
1.8 1.0
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
High quality deposit
focus, liquidity coverage
ratio higher at 114% 60
169 180 188 92 97 95 73
78 75 55 54 62 1H14
2H14 1H15 Other WIB
Australian retail business
Australian retail
household 162 171 166
60 65 68 69 69 74 98 104
112 389 409 420 1H14
2H14 1H15 Term
deposits Savings Online
Transaction 1 Refer slide
145 for liquidity
coverage ratio definition.
2 APRA Banking
Statistics, March 2015. 3
Australian retail includes
Private Bank within BT.
4 Other is predominately
comprised of NZ and
Westpac Pacific. 5 Pro
forma. 6 Refer slide 145
for HQLA definition. 7
Refer slide 145 for CLF
definition. 8 Other flows
includes credit and
liquidity facilities,
collateral outflows and
inflows from customers.
9 Calculated on a spot
basis. 10 Mortgage offset
accounts are included in
transaction accounts. •
Liquidity coverage ratio1
higher at 114% •
Customer deposit LCR
outflow favourable
movements reflects
quality improvements
within the deposit book
including – Shift in mix
of deposits away from
lower quality to higher
quality retail and
non-financial institution
deposits – Customers
migrating to new term
deposit structures •
Customer deposits up
$11bn or 3% – Excluding
FX translation, customer
deposits increased
$5.2bn – Focus on
growing LCR efficient
deposits (strong
relationship
characteristics) and with
LCR costs now
incorporated in pricing –
Household deposit
growth at 1.0x system2 •
Growth across all
categories except term
deposits – Transactional
deposits up 8%,
including good growth in
mortgage offset accounts
– Term deposits down
3% due to lower
financial institution
deposits (have low LCR
value) as the Group
priced to improve
portfolio quality
Liquidity coverage ratio
Australian household
deposits2 market share
(%), system multiple (x)
Customer deposit
composition3 ($bn)
Customer deposit
composition3 ($bn) 40%
27% 17% 16% 10
Sep-145 Mar-15 High
Quality Liquid Assets6
(HQLA) 59 57
Committed Liquidity
Facility7 (CLF) 66 66
Total LCR liquid assets
125 123 Cash outflows in
a modelled 30 day
defined stress scenario
Customer deposits 75 66
Wholesale funding 20 17
Other flows8 26 25 Total
cash outflows 121 108
Liquidity coverage ratio9
103% 114% 1.1 1.1 1.2
1.3 1.0 1.3 1.0 22.3 22.5
22.7 22.9 23.0 23.3 23.3
20.00 20.20 20.40 20.60
20.80 21.00 21.20 21.40
21.60 21.80 22.00 22.20
22.40 22.60 22.80 23.00
23.20 23.40 23.60 23.80
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Delivered good
growth across the
New Zealand
portfolio 61 24.3
24.9 24.5 25.2 25.1
20.7 21.7 23.9 24.2
26.4 45.0 46.6 48.4
49.4 51.5 1H13
2H13 1H14 2H14
1H15 Term deposits
Other deposits •
Mortgage growth of
3% – Good growth
in a competitive
market – Proportion
of fixed rate
mortgages now 73%
of the portfolio –
83% of the portfolio
in <80% LVR
lending • Business
lending up 4% –
Good growth in food
processing and
agriculture lending •
Deposit growth of
4% – Deposit growth
fully funded loan
growth in 1H15 –
Growth driven by at
call and transaction
accounts, primarily
in online deposits –
Customer deposit to
loan ratio now
77.3% 1H14 2H14
1H15 Change
1H15-2H14 (%) Net
loans 63.2 64.6 66.6
. 3 Mortgage 38.6
39.6 40.7 . 3
Business &
institutional 22.8
23.1 24.0 . 4 Other
1.8 1.9 1.9 - 0 Total
deposits 48.4 49.4
51.5 . 4 Term
deposits 24.5 25.2
25.1 - 0 Other 23.9
24.2 26.4 . 9 TCE
90.1 92.7 94.9 . 2
Balance sheet
(NZ$bn) Customer
deposits (NZ$bn)
>80% LVR
mortgages as a % of
the portfolio Balance
sheet growth
compared to system1
growth (%)
Mortgages System
5.7 5.2 Business
Westpac NZ
Deposits 10.8 11.9
21.3 20.5 18.4 17.5
16.6 1H13 2H13
1H14 2H14 1H15
REVENUE 1 RBNZ
March 2015. 7.5 6.7
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Flat net interest
margin (NIM)
excluding Treasury
and Markets 62 •
NIM down 1bp to
2.05% due to lower
Treasury income •
NIM up across
WRBB (1bp), New
Zealand (2bps), and
slightly down in
St.George (2bps).
Most margin
pressure in WIB
(down 11bps) • NIM
excluding Treasury
and Markets flat at
2.01% – 6bps
decrease in asset
spreads primarily
from impact of
competitive pricing
in mortgages.
Business and
institutional spreads
also lower – 5bps
increase from
improved customer
deposit spreads on
term deposits, online
accounts and savings
deposits, partially
offset by 1bps
impact of lower
hedging benefit on
low-rate deposits –
3bps benefit from
term wholesale
funding as pricing
for new term senior
issuances was lower
than maturing deals
– 1bp decrease from
increased holdings of
high quality liquid
assets and cost of
CLF – 1bp decline in
capital and other due
to lower hedging
rates • Treasury and
Markets down 1bp,
reflecting lower
Treasury earnings
2.26 2.05 2.09 2.01
1H10 2H10 1H11
2H11 1H12 2H12
1H13 2H13 1H14
2H14 1H15 NIM
NIM excl. Treasury
and Markets Net
interest margin (%)
Net interest margin
by division (%) 2.01
2.01 2.01 0.10 0.05
0.04 2.11 2.06 (6bps)
5bps 3bps (1bp)
(1bp) (1bp) 2.05
1H14 2H14 Assets
Customer deposits
Term wholesale
funding Liquidity
costs Capital &
Other Treasury &
Markets 1H15 NIM
excl. Treasury &
Markets flat NIM
down 1bp Net
interest margin
movement (%) 2.37
2.27 2.06 2.28 2.40
2.30 2.00 2.27 2.41
2.28 1.89 2.29
WRBB SGB WIB
NZ 1H14 2H14
1H15 REVENUE
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Non-interest
income impacted
by derivative
adjustments 63
Non-interest
income ($m)
Non-interest
income contributors
(% of total) Fees
and commissions
Wealth and
insurance Trading
income •
Non-interest
income down 2% –
Fees and
commissions up
1% to $1,478m,
mostly from
seasonally higher
points redemption
income associated
with credit cards –
Wealth and
insurance down 1%
to $1,134m with
business growth
(9% increase in
FUM revenue; 4%
increase in FUA;
BTIM performance
fees up $31m;
general insurance
net earned
premiums up 6%;
life net earned
premiums up 1%)
being offset by an
increase in
insurance claims
(severe weather
events resulted in
insurance claims
costs of $51m, and
higher life
insurance claims
reflecting growth in
book and rise in
loss ratios to 34%
from 30%) –
Trading income
down $45m to
$425m. $122m
derivative
adjustment more
than offset
increased markets
income – Other
income down $10m
to $49m with lower
gains from asset
sales compared to
2H14, partly offset
by lower cost of
hedging New
Zealand earnings
46 46 47 48 34 35
36 37 18 17 15 14 2
2 2 1 2H13 1H14
2H14 1H15 Fees
and commissions
Wealth and
insurance Trading
income Other 1,393
1,458 1,468 1,478
2H13 1H14 2H14
1H15 1,024 1,111
1,145 1,134 2H13
1H14 2H14 1H15
550 547 470 425
2H13 1H14 2H14
1H15 REVENUE
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Markets and
Treasury income: lift
in customer business,
treasury and derivative
valuation adjustments
lower1 64 • Markets
income down 4%
(down 15%
1H15/1H14) . Market
volatility saw a lift in
customer flow, with
customer income up
8%, while derivative
valuation
adjustments1 of
$153m offset an
increase in market risk
related income •
Customer income up
8% (up 17%
1H15/1H14) . Fixed
income and FX sales
both increased,
maintaining the strong
performance delivered
in the last three halves
. Fixed income sales,
mainly interest rate
hedging products,
benefited from
improved deal flow
through the year,
including WIB’s
involvement in a
number of
infrastructure deals.
FX saw increased
demand to manage
currency risk from
corporate and
institutional customers
. The successful
partnership between
WIB and the
Australian retail and
business banking
divisions has also
supported growth in
Fixed Income and FX
sales Group risk
related income ($m)
Markets income by
activity ($m) • Group
risk related income,
down $103m (down
$325m 1H15/1H14) .
Derivative valuation
adjustments1 in 1H15
reduced Group risk
related income by
$153m . Market risk
related income was up
$75m from improved
trading performance in
Fixed Income and FX
– Treasury income
$47m lower ($180m
lower compared to
1H14) . Returns on the
liquids portfolio have
been impacted by the
introduction of the
LCR, which requires a
significant portion of
the Group’s liquid
assets to be held in
low-yielding, High
Quality Liquid Assets,
which are largely
long-term holdings
and not actively traded
. Returns from balance
sheet risk management
activities also lower •
WIB 1H15 average
daily VaR $7.9m
($8.5m 2H14; $10.0m
1H14) • Treasury
1H15 average daily
VaR $10.4m ($17.6m
2H14; $15.5m 1H14)
1 Includes charge for
methodology changes
to derivative
adjustments of $122m
(pre-tax) and CVA of
$31m (pre-tax) in
1H15. 380389 420
455 84 140 72 147 67
(1) (22) (153) 531 528
470 449 2H13 1H14
2H14 1H15 2H13
1H14 2H14 1H15
2H13 1H14 2H14
1H15 2H13 1H14
2H14 1H15 Customer
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Expense
growth well
controlled, expense
to income ratio at
lower end of global
peers 65 1
Company data,
Credit Suisse.
Expense to income
ratio average for all
banks (excluding
WBC/CBA) are
based on their
FY14 results. WBC
and CBA based on
1H15 results.
Components of
expense growth
(%) Expense
movement ($m)
Divisional expense
to income (%)
Global peer
comparison of
expense to income
ratios1 (%) 1.4 1.3
2.1 1.7 1.5 1.0 1.1
0.7 0.1 0.6 0.1 1.2
(0.1) (0.2) 0.6 0.8
0.9 0.7 0.6 1.4 1.9
2.0 2.9 3.3 2.9 1.7
1H12 2H12 1H13
2H13 1H14 2H14
1H15 Operating
expenses
Amortisation FX
translation Lloyds
4,254 23 4,065
4,181 144 4,212 63
4,231 (113) (13)
(31) 1H14 2H14
Operating expenses
Productivity
benefits 1H15 pre
investment Growth
and productivity
Regulatory change
Other technology
1H15 pre FX
translation FX
translation 1H15
Up 0.4% Up 0.7%
43.1 42.6 52.7 33.1
42.2 41.3 50.6 36.7
41.8 40.6 49.9 41.4
WRBB/SGB NZ
BTFG WIB 1H13
1H14 1H15 62.0
60.7 60.4 59.8 56.9
53.8 45.5 44.7 44.0
42.5 42.2 US
regional bank
average Canadian
bank average
European banks
UK bank average
Korean bank
average NAB Hong
Kong bank average
ANZ Singapore
bank average WBC
CBA Up 0.6% Ex
deriv. adjust. 38.3%
EXPENSES
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Disciplined
investment spend,
focused on growth
and productivity 66
1 Investment spend
capitalised also
includes technology
hardware
equipment. 2
Includes positive
FX revaluation of
$15m and
write-offs of $3m
in 1H15. 3 Data for
Westpac and Peer 2
from 1H15 results,
and data for Peer 1
and Peer 3 from
2H14 results.
Investment spend
capitalised ($m)
1H14 2H14 1H15
Growth and
productivity 169
166 148 Regulatory
change and
compliance 81 103
57 Other
technology 95 97
86 Total1 345 366
291 Investment
spend expensed
($m) 1H14 2H14
1H15 Growth and
productivity 80 55
85 Regulatory
change and
compliance 74 82
51 Other
technology 32 34
31 Total 186 171
167 Investment
spend capitalised
($m) 1H14 2H14
1H15 Capitalised
software Opening
balance 1,897
2,023 2,070
Additions 332 332
274 Amortisation
(209) (256) (254)
Write-offs,
impairments and
other2 3 (29) 12
Closing balance
2,023 2,070 2,102
Other deferred
expenses Deferred
acquisition costs
118 129 126 Other
deferred expenses
28 11 14 2.5 2.0 2.1
2.1 Peer 1 Peer 2
Peer 3 WBC
Average
amortisation period
(excluding
write-offs)3 (years)
Capitalised
software balance3
($bn) 5.1 6.5 6.7
4.1 Peer 1 Peer 2
Peer 3 WBC
Investment spend
($m) and mix (%)
29 35 24 47 41 51
24 24 25 1H14
2H14 1H15 Other
technology Growth
& productivity
Regulatory change
458 537 531
Investment spend
($m) EXPENSES
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Productivity
savings of $113m 67 •
Bank Now/FreshStart
branches now 30% of
Australian branches1 •
Smart ATMs process
23% of deposits in
WRBB and 33% of
deposits in Westpac
NZ • Complaints for
retailing and business
banking and wealth
down 21% on 2H14
and 35% on 1H14 •
WIB implemented
new automated
payment system
across Asia reducing
inward FX payments
from numerous
manual steps to 1
automatic step •
WRBB 5 minute
account opening
through online
electronic validation •
WRBB 60 minute
mortgage approval
introduced in 2H14
represented 18% of
total applications •
SGB online
applications
introduced for card
and loan applications •
New business loan
origination platform
reduced settlement of
funds time from 19
days to 3 days $1.4bn
saved from efficiency
programs since FY09
($m) 1H15 metrics 1
Branches excluding
instores. 2 Cumulative
numbers. 3 Total
branch sales FTE
including business
FTE / Total FTE. 4
Percentage change is
based on prior
corresponding period.
1,439 143 212 289
238 225 102 117 113
FY09 FY10 FY11
FY12 FY13 1H14
2H14 1H15
FY09-1H15
cumulative Initiative
1H13 1H14 1H15 %
of Bank Now /
FreshStart Australian
branches1,2 7% 16%
30% Australian % of
smart ATMs of ATM
network2 8% 20%
29% WRBB branch
sales FTE/branch
FTE2,3 51% 55%
59% WRBB/SGB
active digital
customers2 (m) 3.5
3.8 4.1 % sales growth
per average customer
contact centre FTE4
n/a 14% 8% Retail
and business banking
and wealth complaint
reduction4 11% 35%
Number of IT
applications closed2 8
35 96 EXPENSES
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Improvements
in asset quality
leading to low
impairment charges
68 1 Pre-2008 does
not include
St.George. 2008 and
2009 are pro forma
including St.George
for the entire period
with 1H09 ASX
Profit
Announcement
providing details of
pro forma
adjustments. 2 Does
not include interest
carrying adjustment.
3 Other includes
Westpac Pacific, BT
and centrally held
provisions in Group
Businesses.
Impairment charges
to average gross
loans1 (bps)
Impairment charge
movements ($m)
New IAPs,
write-backs and
recoveries ($m) Net
change in CAPs
($m) 976 983 480
613 506 511 412 458
291 266 57 88 75
1H09 2H09 1H10
2H10 1H11 2H11
1H12 2H12 1H13
2H13 1H14 2H14
1H15 635 698 399
(36) (43) 19 196 146
147 143 284 221 266
1H09 2H09 1H10
2H10 1H11 2H11
1H12 2H12 1H13
2H13 1H14 2H14
1H15 221 266 88 11
(12) 23 9 1 75 2H14
WRBB SGB WIB
NZ Other 1H15 New
IAP’s $42m lower
(13%) as fewer
stressed assets
deteriorated.
Write-backs $34m
lower, recoveries
$5m higher New
CAPs raised in 1H15
were $45m higher.
Other changes in
CAPs were positive
however the benefit
was less than that
recorded in 2H14.
Write-offs were little
changed Up 10%
309 341 Net change
in CAPs2 New IAPs,
write-backs and
recoveries Net
change in CAPs2
New IAPs,
write-backs and
recoveries 3 11 15 0
20 40 60 80 100
2005 2006 2007
2008 2009 2010
1H11 2H11 1H12
2H12 1H13 2H13
1H14 2H14 1H15
Impairment charge
Impairment charge
inc. interest
adjustment
IMPAIRMENT
CHARGES
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Asset Quality
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group First Half
2015 Presentation &
Investor Discussion Pack
High quality portfolio with
bias to secured consumer
lending 70 1 Exposure by
booking office. Asset
composition as at 31 March
2015 (%) Standard and
Poor’s risk grade Australia
NZ / Pacific Asia Americas
Europe Group % of Total
AAA to AA- 88,897 7,684
1,099 5,744 1,314 104,738
12% A+ to A- 32,259 5,271
6,350 3,539 3,071 50,490
5% BBB+ to BBB- 59,200
8,713 8,679 1,437 2,153
80,182 9% BB+ to BB
66,095 11,029 1,743 225 7
79,099 9% BB- to B+
59,480 9,876 - 15 31 69,402
8% <B+ 6,025 1,786 - 105
3 7,919 1% Secured
consumer 418,134 48,121
532 - - 466,787 51%
Unsecured consumer 46,586
5,069 279 - - 51,934 5%
Total committed exposures
776,676 97,549 18,682
11,065 6,579 910,551
Exposure by region1 (%)
85% 11% 2% 1% <1%
100% 2 2 10 6 76 1 2 1
Cash and balances with
central banks Receivables
due from other financial
institutions Trading
securities, financial assets at
fair value and
available-for-sale securities
Derivative financial
instruments Loans Life
insurance assets Goodwill
Other assets On balance
sheet lending Total assets
67 18 11 4 Housing
Business Institutional Other
consumer Exposure by risk
grade as at 31 March 2015
($m) ASSET QUALITY
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
A well diversified
portfolio across
industries and large
exposures 71 2.0 1.9 1.4
1.3 1.1 1.2 1.3 1.1 1.1
FY07 FY08 FY09 FY10
FY11 FY12 FY13 FY14
1H15 Largest
corporation/NBFI single
name exposure
represents less than 0.2%
of TCE Top 10
exposures to corporations
& NBFIs6 as at 31
March 2015 ($m) 0 300
600 900 1,200 1,500
AAAABBBA A A
ABBB AA+ S&P rating
or equivalent Top 10
exposures to corporations
and NBFIs6 as a % of
total committed
exposures7 (%)
Exposures at default1 by
sector2 ($m) 0 20 40 60
80 100 120 Other Mining
Accommodation, cafes &
restaurants Construction
Utilities Transport &
storage Agriculture,
forestry & fishing
Services Property &
business services
Government admin. &
defence Manufacturing
Wholesale & Retail
Trade Property Finance
& insurance 1H14 2H14
1H15 ASSET QUALITY
3 4 5 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 retail lending. 2
All residential mortgage
exposures are now
reported under the retail
lending classification to
align with our treatment
of other consumer
portfolios. Comparatives
have been restated to
reflect this change. 3
Finance and insurance
includes banks,
non-banks, insurance
companies and other
firms providing services
to the finance and
insurance sectors. 4
Property includes both
residential and
non-residential property
investors and developers,
and excludes real estate
agents. 5 Construction
includes building and
nonbuilding construction,
and industries serving the
construction sector. 6
Non-Bank Financial
Institutions. 7 Includes
St.George from 2009
onwards.
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Commercial
property portfolio
well diversified 72 1
Includes impaired
exposures. ASSET
QUALITY 54 19 18
9 Commercial
offices & diversified
groups Residential
Retail Industrial
Commercial property
by borrower type
(%) Commercial
property by sector
(%) Commercial
property by region
(%) 16 11 8 6 5 9 45
NSW & ACT VIC
QLD SA & NT WA
NZ & Pacific
Institutional
(diversified) 43 10
25 22 Exposures
<$10m Developers
>$10m Investors
>$10m Diversified
Property Groups and
Property Trusts
>$10m Total
committed exposure
(TCE) $64.8bn
Lending $50.5bn
Commercial property
as a % of Group
TCE 7.11% Average
risk grade1 BBequivalent % of
portfolio graded as
‘stressed’1 1.75% %
of portfolio in
impaired 0.80%
Commercial property
portfolio
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Mining portfolio
relatively underweight
73 1 Includes
impaired exposures.
TCE $11.7bn Lending
$7.0bn Mining as a %
of Group TCE 1.28%
Average risk grade1
BBB equivalent % of
portfolio graded as
‘stressed’1 3.67% %
of portfolio in
impaired 0.97% 44 5
15 12 17 7 Oil and gas
Iron ore Other metal
ore Coal Mining
services Other •
Westpac’s direct
exposure to mining
(category includes
energy and resources
sector) 1.3% of Group
TCE at 31 March
2015 • A high quality
portfolio . Diversified
by commodity,
customers and region .
Focused on quality
operators with
efficient, lower cost
operating models .
Well rated, with <1%
of exposures in
impaired •
Underwriting includes
customer sensitivity to
movements in
commodity prices •
Provisioning levels
remain sound, with
specific provisions to
impaired assets at
58%. Additional
management overlay
provision exists
(within economic
overlays) given
potential for volatility
in energy and resource
prices • Trade finance
portfolio supports
customers primarily
through export letters
of credit . High quality
counterparties and
short tenors . Less
than 20% of the trade
portfolio has iron ore
as the underlying
commodity and less
than 5% for coal
Mining portfolio
Mining portfolio (total
committed exposure)
by sector (%) ASSET
QUALITY Mining
portfolio
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Stressed
exposures as a % of
TCE and
provisions1 ($bn)
Portfolio stress
continues to reduce
74 0.13 0.24 0.57
0.67 0.62 0.60 0.58
0.56 0.44 0.34 0.27
0.24 0.13 0.15 0.29
0.46 0.41 0.40 0.35
0.35 0.31 0.28 0.26
0.26 0.62 0.91 2.23
2.07 1.45 1.26 1.24
1.03 0.85 0.75 0.71
0.62 0.88 1.30 3.09
3.20 2.48 2.26 2.17
1.94 1.60 1.37 1.24
1.12 0.0 0.5 1.0 1.5
2.0 2.5 3.0 3.5 4.0
4.5 5.0 5.5 0.0 1.0
2.0 3.0 4.0 FY07
FY08 FY09 FY10
FY11 1H12 2H12
1H13 2H13 1H14
2H14 1H15
Impaired (lhs) 90+
days past due and
not impaired (lhs)
Watchlist &
substandard (lhs)
IAP (rhs) 1H14
2H14 1H15
Collectively
assessed provisions
to credit RWA
97bps 93bps 89bps
Collectively
assessed provisions
to performing
nonhousing loans
134bps 129bps
128bps Impairment
provisions to
impaired assets
46% 45% 48%
Total provisions to
gross loans 67bps
60bps 58bps 10.9
(0.06) (0.39) (0.04)
(0.34) 0.16 (0.02)
10.2 2H14 WRBB
SGB BT WIB NZ
Pacific & other
1H15 1 FY07 and
FY08 do not
include St.George.
Provisioning
coverage ratios
Movement in
stressed exposures
($bn) % $bn
ASSET QUALITY
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Improvement in
portfolio quality
across most sectors 75
1,798 2,149 1,218
1,748 1,519 1,343
1,060 1,194 997 958
708 609 607 1H09
2H09 1H10 2H10
1H11 2H11 1H12
2H12 1H13 2H13
1H14 2H14 1H15 162
531 568 872 925 745
792 738 886 1,232
1,179 731 736 1H09
2H09 1H10 2H10
1H11 2H11 1H12
2H12 1H13 2H13
1H14 2H14 1H15
New and increased
gross impaired assets
($m) Gross impaired
assets returned to
performing or repaid
($m) Stressed
exposures by industry
($bn) 0.0 0.5 1.0 1.5
2.0 2.5 3.0 3.5
Property & business
services Retail lending
Wholesale & Retail
Trade Agriculture,
forestry & fishing
Manufacturing
Transport & storage
Accommodation,
cafes & restaurants
Construction Mining
Finance & insurance
Services Utilities
Other 1H14 2H14
1H15 ASSET
QUALITY
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Provision
cover by portfolio
category 76
Exposures as a %
of TCE 0.44 0.34
0.27 0.24 0.31 0.28
0.26 0.26 0.85 0.75
0.71 0.62 98.76
2H13 1H14 2H14
1H15 Fully
performing
portfolio Watchlist
& substandard 90+
days past due and
not impaired
Impaired 98.40
98.63 98.88 Fully
performing
portfolio • Small
cover as low
probability of
default (PD) •
Includes economic
overlay 0.23 0.23
0.22 0.22
Provisioning to
TCE (%) 2H13
1H14 2H14 1H15
Watchlist &
substandard • Still
performing but
higher cover
reflects elevated
PD 6.36 6.73 6.76
6.55 90+ days past
due and not
impaired • In
default but strong
security 5.36 5.23
5.06 5.36 Impaired
assets • In default.
High provision
cover reflects
expected recovery
43.16 46.43 44.77
47.82 Collective
provisions Impaired
asset provisions
ASSET QUALITY
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Australian
unsecured lending
portfolio continues to
perform well 77 •
Total Australian
consumer unsecured
90+ day delinquencies
increased 18bps to
120bps (up 5bps
1H14/1H15) •
Changes in
delinquencies reflect
some seasonality, with
the Christmas and
holiday season
typically seeing higher
delinquencies, as well
as weakening
employment
conditions in some
areas • Australian
credit card 90+ days
delinquencies were up
26bps to 108bps (up
9bps 1H14/1H15)
although part of the
rise in March was due
to timing differences
associated with debt
sales • The average
credit card payments
to balance ratio
remained high,
increasing to 49.3%,
with customers
remaining disciplined
• Australian personal
loan portfolio 90+ day
delinquencies were up
26bps to 168bps (up
13bps 1H14/1H15) •
Australian auto loan
90+ day delinquencies
were flat at 82bps
(down 11bps
1H14/1H15) • Review
of treatment of
hardship will likely
see a rise in reported
delinquencies in future
periods 1 Cards
average payments to
balance ratio is
calculated using the
average payment
received compared to
the average statement
balance at the end of
the reporting month.
Australian credit card
average payments to
balance ratio1 (%)
Australian unsecured
lending portfolio as at
31 March 2015 ($bn
and %) Australian
unsecured lending 90+
days delinquencies
(%) 1.08 1.68 1.20
0.82 - 0.50 1.00 1.50
2.00 2.50 Sep-10
Dec-10 Mar-11 Jun-11
Sep-11 Dec-11
Mar-12 Jun-12 Sep-12
Dec-12 Mar-13 Jun-13
Sep-13 Dec-13
Mar-14 Jun-14 Sep-14
Dec-14 Mar-15 Credit
cards Personal loans
(excl Auto loans)
Total unsecured
lending Auto loans 44
22 34 Credit cards
Personal loans Auto
loans 10.0 5.0 7.9
1H15 39.7 39.8 41.4
45.6 45.2 42.7 43.8
43.7 44.6 44.7 45.3
45.4 46.6 47.7 48.7
48.4 49.3 1H07 2H07
1H08 2H08 1H09
2H09 1H10 2H10
1H11 2H11 1H12
2H12 1H13 2H13
1H14 2H14 1H15 22.9
% ASSET QUALITY
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Australian
housing loan-to-value
ratios (LVRs) 2 (%)
High levels of
borrower equity
support Australian
mortgage portfolio 78
1 Flow is all new
mortgage originations
settled during the 6
month period ended
31 March 2015 and
includes RAMS. 2
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. 4
Property valuation
source Australian
Property Monitors. 5
Average LVR of new
loans is based on
rolling 6 month
window. 6 Customer
loans ahead on
payments exclude
equity/line of credit
products as there are
no scheduled
payments. 7 Mortgage
insurance claims 1H15
$1m (2H14 $6m,
1H14 $3m). 0 20 40
60 80 0<=60 60<=70
70<=80 80<=90
90<=95 95+ 1H15
drawdowns LVR at
origination Portfolio
LVR at origination
Portfolio dynamic
LVR Australian
mortgage portfolio
1H14 balance 2H14
balance 1H15 balance
1H15 flow1 Total
portfolio ($bn) 338.0
351.0 362.8 37.0
Owner-occupied (%)
47.6 47.1 46.6 46.3
Investment property
loans (%) 44.0 45.2
46.3 51.6 Portfolio
loan/line of credit (%)
8.4 7.7 7.1 2.1
Variable rate / Fixed
rate (%) 81 / 19 78 /
22 78 / 22 82 / 18 Low
Doc (%) 4.2 3.8 3.4
1.1 Proprietary
channel (%) 57.5 56.6
55.8 53.2 First Home
Buyer (%) 10.9 10.3
9.7 6.0 Mortgage
insured (%) 22.2 21.3
20.3 11.6 1H14 2H14
1H15 Average LVR at
origination2 (%) 69 70
70 Average
dynamic2,3,4 LVR
(%) 47 44 43 Average
LVR of new loans2,5
(%) 72 71 71 Average
loan size ($’000) 223
229 235 Customers
ahead on repayments,
including offset
accounts2,6 (%) 73 73
73 Actual mortgage
losses (net of
insurance)7 ($m) 45
55 38 Actual
mortgage loss rate
annualised (bps) 2 3 2
94% of portfolio with
dynamic LVR <80% 2
2 1 11 1H15 total
portfolio 1H15 IPL
portfolio 1H15 Owner
Occ. portfolio 1992
total portfolio (last
recession) • Portfolio
losses of $38m in
1H15 represent an
annualised loss rate of
2bps (net of insurance
claims7) • Loss rates
remain very low by
international standards
due to supportive
economic
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack 0 5 10 15 20 25
30 Behind On Time <
1 Month < 1 Year < 2
Years > 2 Years
Mar-14 Sep-14
Mar-15 Mortgage
customers continuing
to repay ahead of
schedule 79 Borrower
repayments •
Australian mortgage
customers continue to
display a cautious
approach to debt
levels, taking
advantage of
historically low
mortgage rates to pay
down debt and build
buffers – Including
mortgage offset
account balances, 73%
of customers are
ahead of scheduled
payments, with 23%
of these being more
than 2 years ahead –
Mortgage offset
account balances up
$3.3bn or 14% (up
29% 1H15/1H14) to
$27bn • Credit
decisions across all
brands are made by
the Westpac Group,
regardless of the
origination channel
Serviceability
assessment • Loan
serviceability
assessments include
an interest rate buffer,
adequate surplus test
and discounts to
certain forms of
income (e.g.
dividends, rental
income) • Westpac has
a minimum
assessment rate, often
referred to as a floor
rate, now set at 7.10%
p.a. • The minimum
assessment rate is at
least 210bps higher
than the lending rate
and is applied to all
mortgage debt, not
just the loan being
applied for • The
minimum assessment
rate and buffer has
increased from 6.80%
p.a. and 180bps
respectively 1
Excludes RAMS. 2
Customer loans ahead
on payments exclude
equity loans/line of
credit products as
there are no scheduled
principal payments.
Includes mortgage
offset account
balances. ‘Behind’ is
more than 30 days
past due. ‘On time’
includes up to 30 days
past due. Australian
home loan customers
ahead on
repayments1,2 (%)
Australian mortgage
offset account
balances ($bn) 73%
ahead on repayments
8.0 10.1 11.9 13.0
14.6 16.2 18.4 20.8
23.5 26.8 FY09 FY10
FY11 1H12 2H12
1H13 2H13 1H14
2H14 1H15 ASSET
QUALITY
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Australian
investment property
portfolio sound
origination profile 80
1 Excludes RAMS. 2
Dynamic LVR
represents the
loan-to-value ratio
taking into account the
current outstanding
loan balance, changes
in security value and
other loan
adjustments. 3
Property valuation
source Australian
Property Monitors. 4
Average LVR of new
loans is based on
rolling 6 month
window. 5
Self-managed Super
Fund (SMSF) IPLs are
limited recourse
however do require
member guarantees.
Strong origination
standards High levels
of equity in the
portfolio
Loan-to-value ratio at
origination1 (%)
Applicants by gross
income band1(%) 0 5
10 15 20 25 <=50
50<=75 75<=100
100<=125 125<=150
150<=200 200<=500
500<=1m 1m+ Owner
Occupied IPL 0 10 20
30 40 50 0-60 60-70
70-75 75-80 80-85
85-90 90-95 95-97
97+ Owner Occupied
IPL • Investment
property loans (IPLs)
are 46.3% of
Westpac’s Australian
mortgage portfolio •
Compared to
owner-occupied
applicants, IPL
applicants are on
average older (75%
over 35 years), have
higher incomes and
higher credit scores •
87% of IPLs
originated at or below
80% LVR • Majority
of IPLs are
interest-only, however
the repayment profile
closely tracks the
profile of the principal
and interest portfolio .
62% of interest-only
IPL customers are
ahead on repayments •
IPL 90+ days
delinquencies 36bps
continue to
outperform the total
portfolio average •
IPL portfolio losses
represent an
annualised loss rate of
2bps (net of insurance
claims) – in line with
total portfolio losses
of 2bps •
Self-managed
Superannuation Fund
balances are a very
small part of the
portfolio, at 1% of
Australian mortgage
balances • All IPLs5
are full recourse •
Loan serviceability
assessments include
an interest rate buffer,
minimum assessment
rate, adequate surplus
test and discounts to
certain forms of
income (e.g.
dividends, rental
income) • All IPLs,
including interest-only
loans, are assessed on
a principal & interest
basis • Specific credit
policies apply to IPLs
to assist risk
mitigation, including .
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Australian
mortgage
delinquencies at low
levels 81 1 Source
ABA Cannex
February 2015. - 0.5
1.0 1.5 2.0 Mar-09
Sep-09 Mar-10 Sep-10
Mar-11 Sep-11
Mar-12 Sep-12
Mar-13 Sep-13
Mar-14 Sep-14
Mar-15 90+ Past Due
Total 90+ First Home
Buyer 90+ Investor
30+ Past Due
Australian mortgage
portfolio 1H14 2H14
1H15 30+ days
delinquencies (bps)
128 108 124 90+ days
delinquencies (bps) 50
47 47 90+ days
delinquencies –
investment property
loans (bps) 39 37 36
Properties in
possession (#) 189
194 263 • Australian
mortgage
delinquencies have
declined given
improved
serviceability in low
interest rate
environment •
Properties in
possession remain
<2bps of the portfolio,
however have
increased, mainly in
Qld, where natural
disasters and a decline
in mining investment
have seen weaker
conditions • Review of
treatment of hardship
will likely see a rise in
reported delinquencies
in future periods
Australian mortgages
delinquencies (%) 0.0
0.2 0.4 0.6 0.8 1.0 1.2
1.4 Mar-09 Sep-09
Mar-10 Sep-10
Mar-11 Sep-11
Mar-12 Sep-12
Mar-13 Sep-13
Mar-14 Sep-14
Mar-15 ALL
NSW/ACT VIC/TAS
QLD WA SA/NT
Australian mortgages
delinquencies by state
(%) Westpac
Australian mortgage
portfolio and system
by State (%) 34 27 19
13 7 40 26 17 10 7 44
28 14 9 6 NSW &
ACT VIC & TAS
QLD WA SA & NT
Australian banking
system Total Westpac
portfolio (all brands)
1H15 Westpac
drawdowns (all
brands) 1 ASSET
QUALITY
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Lenders
mortgage insurance
82 Insurance
statistics 1H14 2H14
1H15 Insurance
claims ($m) 3 6 1
WLMI loss ratio4
(%) 10 27 5 Gross
written premiums
($m) 24 28 24 LVR
Band • LVR =80% •
Low Doc LVR
=60% • LVR >80%
to = 90% • Low Doc
LVR >60% to = 80%
• LVR >90%
Insurance Not
required Generally
insured through
captive insurer,
WLMI. LMI not
required for certain
approved borrower
groups. LMI
required for all Low
Doc borrowers
where LVR >60% to
= 80% Reinsurance
arrangements: • 40%
risk retained by
WLMI • 60% risk
transferred through
quota share
arrangements2 with
Arch Capital Group
Limited, Tokio
Millennium Re,
Everest Re,
Endurance Re, Trans
Re and AWAC
Insured externally
through Arch Capital
Group Limited for
all new business
effective from 18
May 2015 Prior to
18 May 2015,
external insurance
provided by QBE
(Westpac brand) and
Genworth (St
George and RAMS
brands). Existing
LMI policies remain
in force 1 Prudential
Capital Requirement
(PCR) determined by
APRA. 2 For all new
business effective
from 1 October
2014. 3 Insured
coverage is net of
quota share. 4 Loss
ratio is claims over
the total of earned
premium plus
reinsurance plus
exchange
commission. 79.8
10.2 10.0 Not
insured Insured by
third parties Insured
by WLMI • 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
provided by the
mortgage insurers •
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 the
Westpac Group with
an increased return
on the mortgages it
insures through the
capture of
underwriting profit •
WLMI is strongly
capitalised (separate
from bank capital)
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Mortgage
portfolio stress
testing outcomes 83
• Westpac regularly
conducts a range of
portfolio stress tests
as part of its
regulatory and risk
management
activities • 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 •
Estimated
Australian
mortgage portfolio
losses under these
stressed conditions
are manageable and
within the Group’s
risk appetite and
capital base –
Cumulative total
losses of $2.3bn
over three years for
the uninsured
portfolio (2H14:
$2.2bn) –
Cumulative claims
on LMI, both
WLMI and external
insurers, of $879m
over the three years
(2H14: $793m) •
WLMI separately
conducts stress
testing so that it is
sufficiently
capitalised 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 1
Assumes 30% of
LMI claims will be
rejected in a
stressed scenario. 2
Represents 1H15
actual losses of
$38m annualised. 3
Stressed loss rates
are calculated as a
percentage of
mortgage exposure
at default. Key
assumptions
Stressed scenario
Current Year 1
Year 2 Year 3
Portfolio size ($bn)
363 350 343 341
Unemployment rate
(%) 6.1 11.6 10.6
9.4 Interest rates
(cash rate, %) 2.25
0.50 0.50 0.50
House prices (%
change cumulative)
0.0 (13.0) (22.4)
(26.2) Annual GDP
growth (%) 2.5
(3.9) (0.2) 1.7
Stressed loss
outcomes (net of
LMI recoveries)1
$m 762 1,065 1,272
273 bps3 2 26 32 7
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Funding and
Liquidity
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Strong liquidity position
85 • Westpac’s Liquidity
Coverage Ratio (LCR)
114% • The LCR
requires banks to hold
100% of their net cash
outflows over a modelled
30-day stressed scenario
in qualifying liquid
assets – Westpac held
$57bn of eligible High
Quality Liquid Assets
(HQLA) at 31 March
2015 – In addition,
APRA has approved
access to the Committed
Liquidity Facility (CLF)
for $66bn for calendar
year 2015 • $136.7bn in
unencumbered liquid
assets held at 31 March
2015 – Securities are
eligible for repo with a
central bank – Sufficient
to cover all short term
debt outstanding
(including long term debt
with a residual maturity
less than or equal to one
year) – Sufficient to
cover all outstanding
debt for 19 months –
Differs from LCR
qualifying liquid assets
due to applicable haircuts
and eligibility criteria
Liquidity Coverage Ratio
($m) Pro forma as at
2H14 as at 1H15 %
Mov’t 1H15 – pro forma
2H14 High Quality
Liquid Assets1 (HQLA)
59 57 (3) Committed
Liquidity Facility2 (CLF)
66 66 - Total LCR liquid
assets 125 123 (1)
Customer deposits 75 66
(11) Wholesale funding
20 17 (15) Other flows3
26 25 (7) Total cash
outflows 121 108 (11)
LCR4 103% 114% 11 1
Includes HQLA as
defined in APS 210,
BS-13 qualifying liquids,
less RBA open repos
funding end of day ESA
balances with the RBA. 2
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
APS210 – Liquidity. 3
Other flows include
credit and liquidity
facilities, collateral
outflows and inflows
from customers. 4 LCR
is calculated as the
percentage ratio of stock
of HQLA and CLF over
the total net cash
outflows in a modelled
30 day defined stressed
scenario. Calculated on a
spot basis. September
2014 LCR is on a pro
forma basis. 5 Private
securities include Bank
paper, RMBS, and
Supra-nationals. 6
Includes long term
wholesale funding with a
residual maturity less
than or equal to 1 year.
Unencumbered liquid
assets ($bn) 43.0 54.6
57.0 118.2 26.0 21.7 19.2
58.0 58.1 60.5 1H14
2H14 1H15 Total short
term debt outstanding at
1H15 Self securitisation
Private securities Cash,
government and
semi-government bonds
6 126.5 134.4 136.7 5
FUNDING &
LIQUIDITY
| Westpac Group First Half
2015 Presentation &
Investor Discussion Pack
Sound funding profile,
stable sources providing
83% of all funding 86 1
Source APRA Banking
Statistics March 2015. 2
Excluding securitisation. 3
FY08 does not include
St.George. 4 Equity
excludes FX translation,
Available-for-Sale
Securities and Cash Flow
Hedging Reserves. • Stable
Funding Ratio maintained at
83.2% as the Group
continues to focus on
funding growth through
stable funding sources •
Focus on deposit quality –
household deposits grew at
system in 1H151 • $15.9bn
of term wholesale funding
raised in 1H15, with a
weighted average term to
maturity of 4.6 years2,
providing a stable source of
funds for the Group • Short
term funding maintained at
16.8% of total funding .
Weighted average maturity
of short term funding
portfolio 130 days 43.8 57.7
60.6 60.2 59.7 4.7 7.3 7.4
7.1 7.0 1.3 1.7 1.6 1.7 1.8
10.2 10.7 9.3 9.3 9.7 3.8 5.4
5.0 4.9 5.0 19.7 9.8 9.3 9.7
10.6 16.5 7.4 6.8 7.1 6.2
FY08 FY12 FY13 FY14
1H15 Wholesale Onshore
<1yr Wholesale Offshore
<1yr Wholesale Onshore
>1yr Wholesale Offshore
>1yr Securitisation Equity
Customer deposits Funding
composition by residual
maturity (%) Stable
Funding Ratio 3 4 63.8%
83.9% 83.2% 82.8% 83.2%
Maintaining a stable
funding profile FUNDING
& LIQUIDITY
| Westpac Group First Half 2015
Presentation & Investor Discussion
Pack Wholesale term issuance well
diversified, benefit from broad
product capabilities 87 53 23 16 4
4 By type Senior Unsecured
Covered Bonds RMBS ABS
Subordinated Debt 1 Based on
residual maturity and FX spot
currency translation. Includes all
debt issuance with contractual
maturity greater than 370 days
excluding US Commercial Paper
and Yankee Certificates of
Deposit. 2 Contractual maturity
date for hybrids and callable
subordinated instruments is the
first scheduled conversion date or
call date for the purposes of this
disclosure. 3 Tenor excludes
RMBS and ABS. 4 Perpetual
subdebt has been included in
>FY20 maturity bucket. Maturities
exclude securitisation amortisation.
5 Sources: Westpac, APRA
Banking Statistics March 2015.
1H15 new term issuance
composition1 (%) Australian
covered bond issuance5 Term debt
issuance and maturity profile1,2,4
($bn) 2 1 35 1 41 20 By tenor 1
Year 2 Years 3 Years 4 Years 5
Years >5 years 41 30 11 10 8 By
currency AUD USD EUR GBP
Other 45 43 25 33 22 33 16 15 24
28 22 17 13 9 FY09 FY10 FY11
FY12 FY13 FY14 1H15 2H15
FY16 FY17 FY18 FY19 FY20
>FY20 Covered Bond Hybrid
Senior Govt Guaranteed Sub Debt
Issuance Maturities 2,3 16 23 18
25 19 27 24 27 Peer 1 Peer 2 Peer
3 Westpac Remaining capacity
(8% cap & over-collateralisation)
($bn) Issued ($bn) FUNDING &
LIQUIDITY
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Capital
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack Current capital
considerations 89 1
Domestic systemically
important banks. 2
Basel Committee on
Banking Supervision. 3
FSB is Financial
Stability Board. 4 QIS
is quantitative impact
study. 5 TLAC is total
loss absorbing capital. 6
GSIB is globally
systemically important
banks. Common equity
Tier 1 capital ratio (%)
Regulatory
considerations •
Westpac’s preferred
common equity Tier 1
(CET1) capital range is
8.75% - 9.25%. The
management buffer
above regulatory
minimums takes into
consideration – The
capital conservation
buffer (CCB)
requirement from
January 2016 – Stress
testing to maintain an
appropriate buffer in a
downturn – Quarterly
volatility of capital
ratios associated with
dividend payments •
Given current
regulatory uncertainties
the Group has decided
it is appropriate to
move capital ratios to
the upper end of the
preferred range Issuing shares to satisfy
the DRP at a 1.5%
discount - Partial
underwrite of the DRP
Westpac preferred
capital range 8.8 8.8
Revised APRA
minimum (from 2016)
Westpac Mar 15 CET1
Westpac Mar 15
Pro-forma CET1
Reported CET1 capital
ratio DRP and DRP
underwrite D-SIB1 +
capital conservation
buffer 3.5 Regulatory
minimum 4.5 8.0
Quartile 1 Quartile 2
Quartile 3 Quartile 4
Westpac’s preferred
CET1 capital ratio
range 9.3 • RBNZ
changes to risk
weighting of investor
property loans • BCBS2
initial consultation on
standardised approach
for determining Credit
RWA and consults on
RWA capital floors for
advanced banks.
Proposals announced
December 2014 with
first consultation due
mid- 2015. BCBS work
plan target date for
completion end 2015.
Implementation date
and transition
arrangements to be
advised • Awaiting
Government and APRA
response to provide
more information on
implementation of FSI
recommendations •
Leverage ratio
disclosure expected
during 2015 and
applicable (Pillar 1)
from 2018 • FSB3
undertaking a QIS4 on
TLAC5 during 2015
with rules for G-SIBs6
expected to be finalised
at G20 summit in 2015.
D-SIB impacts
unknown • Risk model
enhancements and
recalibrations – IRRBB
CAPITAL
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack Capital strength
maintained while
supporting growth 90 1
Based on PwC report,
refer slide 92 for
definition of
internationally
comparable. 2 Reflects
APRA clarification that
holding companies are
now part of the Level 2
Group for regulatory
purposes. Transitional
arrangements are in
place. 3 Includes the
impact of change to
mortgage PDs of 22bps
and other smaller model
changes. 4 Peer 1,2 and
3 are as at 31 December
2014. Common equity
Tier 1 (CET1) capital
ratio (% and bps) WBC
CET1 capital ratio not
impacted by wealth
leverage2,3 (%) 1H14
2H14 1H15 Common
equity Tier 1 capital
ratio 8.8 9.0 8.8
Additional Tier 1
capital 1.5 1.6 1.5 Tier
1 capital ratio 10.3 10.6
10.3 Tier 2 capital 1.8
1.7 1.8 Total regulatory
capital ratio 12.1 12.3
12.1 Risk weighted
assets (RWA) ($bn)
322 331 347
Internationally
comparable1 common
equity Tier 1 ratio 13.1
13.1 12.7 • Organic
movements were –
Cash earnings net of
ordinary dividends paid
(+109bps) – 2014 final
dividend (-72bps) –
Higher RWA from
supporting growth in
the business (-7bps) –
Other including higher
capitalised expenditure
(-6bps), higher
regulatory expected loss
(-2bps) and other items
(-4bps) • Other items
impacting capital in
1H15 included – Risk
model changes
including mortgage risk
weights (-19bps) – FX
translation impact
(-14bps) – Defined
benefit plan revaluation
(-6bps) • 17bps increase
in Tier 2 from issue of
CNY1.25bn and
AUD0.35bn •
Internationally
comparable CET1
capital ratio 12.7%. On
a total regulatory
capital basis the ratio is
16.9% 8.82 8.97 109
8.76 12.73 (72) (7) (12)
(19) (14) (6) 31 Mar 14
Basel III 30 Sep 14
Basel III Cash Earnings
Final ordinary dividend
RWA movement Other
Model changes FX
translation DB plan
changes 31 Mar 15
Basel III 31 Mar 15 Int'l
Comp1 Organic
(+18bps) Other items
(-39bps) 3 Key
movements in capital
Key capital ratios (%)
8.76 8.14 8.60 8.28 0.2
0.6 0.5 Westpac Peer 1
Peer 2 Peer 3
CAPITAL
| Westpac Group Half
Year 2015 Presentation
& Investor Discussion
Pack Internationally
comparable CET1
capital ratio in top
quartile of global peers
91 Source: Company
reports and investor
presentations. 1 Based
on internationally
comparable, refer slide
92 for definition. 2 As
at 31 March 2015. 3 As
at 31 October 2014. 4
As at 31 December
2014. 5 As at 30
September 2014.
Global peer comparison
of Basel III pro forma
CET1 capital ratios1
(%) 12.7
Handelsbanken SEB
Nordea Danske Bank
DnB UBS CBA Intesa
Sanpaolo Lloyds WBC
ANZ United Overseas
Bank Deutsche Bank
DBS Rabobank Natixis
NAB HSBC RBS
Sumitomo Mitsui
Goldman Sachs
Standard Chartered
Scotiabank Macquarie
Mitsubishi UFG
Morgan Stanley
Barclays BNP Paribas
OCBC Credit Agricole
SA Citigroup Wells
Fargo Societe Generale
BBVA Banco Popular
CIBC Bank of Montreal
JPMorgan Chase
Unicredit Royal Bank
of Canada Santander
Bank of America TD
Bank Commerzbank
Miziho FG 3 4 5 5 4 3 4
4444444344344
4444444444444
444534444244
CAPITAL
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack Internationally
comparable capital ratio
92 • APRA has a
conservative stance in
setting capital
standards, resulting in a
significant variance
between capital
measured under APRA
and the Basel III
Framework • In August
2014 the ABA1
released a report
prepared by PwC titled
“International
comparability of capital
ratios of Australia’s
major banks”. This
report sets out the basis
for an internationally
comparable CET1
capital ratio for the
major Australian banks,
using the findings from
the BCBS March 2014
report on its assessment
of Basel III regulations
in Australia, and other
items identified by PwC
as areas where APRA’s
implementation is
different to other
jurisdictions • This
table reconciles
Westpac’s APRA CET1
capital ratio with the
internationally
comparable CET1
capital ratio 2H14 1H15
Westpac’s CET1 capital
ratio (APRA basis)
8.97% 8.76% Capital
deductions APRA
requires 100%
deductions from capital
for DTA, intangibles
relating to capitalised
expenses and all
investments (e.g.
financial institutions,
funds management and
insurance subsidiaries).
The Basel Framework
allows a concessional
threshold before these
deductions apply.
Assets below the
threshold can be risk
weighted 112bps
115bps Mortgage loss
given default (LGD)
20% floor The Basel
Framework imposes a
10% floor in downturn
loss given default
(LGD) models used for
residential mortgages,
whereas APRA imposes
a 20% floor. A 15% flat
LGD is has been
assumed as a
reasonable proxy 47bps
52bps Specialised
lending APRA rules for
“specialised lending”
(corporate lending to
project finance, certain
real estate exposures,
commodity finance,
etc) are more
conservative than those
contained in the Basel
Framework and / or
which are applied by
most other prominent
jurisdictions 64bps
61bps Interest rate risk
in the banking book
(IRRBB) APRA’s rules
require the inclusion of
IRRBB within Pillar 1
RWA for banks using
Advanced Internal
Ratings Based (AIRB)
approaches. IRRBB is
not required to be
assessed under Pillar 1
in the Basel
Framework. It is
highlighted as a risk
that may be taken into
account in assessing
Pillar 2 capital ratios
20bps 4bps Undrawn
corporate lending
EAD2 APRA’s rules
typically require AIRB
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack RWA
movements 93 1
Credit RWA
movements impacted
by rounding. RWA
movements RWA
movements ($bn)
Credit RWA
movements ($bn)1
Credit RWA
movements ($bn)1
272.0 281.5 303.0 7.4
5.4 9.0 1.9 (2.2) 1H14
2H14 Methodology
changes Translation
impacts Net growth
Credit quality
Mark-to-market
related credit risk
1H15 Up 7.7% 272.0
281.5 303.0 7.3 10.3
1.3 1.4 0.8 1.9 (0.8)
(0.7) 1H14 2H14
Corporate Business
lending Residential
mortgages Small
business Other retail
Standardised
Mark-to-market Other
1H15 Up 7.7% 322.5
331.4 346.8 21.6 0.8
(1.1) (5.7) (0.2) 1H14
2H14 Credit risk
Market risk
Operational risk
IRRBB Other 1H15
Up 4.7% • Total RWA
increased 4.7% •
Credit RWA increased
7.7% or $21.6bn $7.4bn from
methodology changes
including $8.5bn from
changes in probability
of default (PD)
estimates for
mortgages - $5.4bn
from translation
impacts of the lower
A$ - $9.0bn
supporting business
growth • Lower
interest rate risk in the
banking book
(IRRBB) due to a
reduction in exposure
to interest rate
movements and a
higher embedded gain
from lower market
interest rates • Market
risk RWA down
$1.1bn primarily due
to lower market
volatility •
Operational risk RWA
up $0.8bn (3%)
CAPITAL
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Actively managing
capital across Group and
business units to
optimise returns 94 8.7
9.1 8.8 9.0 8.8 16.1 15.8
16.5 16.4 15.8 1H13
2H13 1H14 2H14 1H15
CET1 ROE 1 1H15
adjusted for the impact of
methodology changes to
derivative adjustments. 2.
ROA is return on average
interest-earning assets. 3
AOE is average ordinary
equity. 4 Capital for the
Group is average
ordinary tangible equity.
5 Other includes Group
Businesses including
Treasury and Westpac
Pacific. 6 Operational
risk financial
requirements (ORFR)
imposed by APRA on
funds management
businesses. Actively
managing returns ROE
and CET1 capital ratios
(%) Return on average
interest-earning assets
(AIEA) (%) Allocated
capital and ROTE 1H14
2H14 1H15 1H151 Net
interest margin 2.11 2.06
2.05 2.05 Non-interest
income 1.00 0.95 0.91
0.95 Operating income
3.11 3.01 2.96 3.00
Operating expenses
(1.28) (1.26) (1.26)
(1.26) Cash earnings
(ROA2) 1.19 1.17 1.12
1.14 Leverage
(AIEA/AOE3) 13.85
14.01 14.16 14.16 ROE
16.5 16.4 15.8 16.2 •
Returns impacted by
methodology change for
derivative adjustments in
1H15. Before derivative
adjustments ROE 16.2%
• Continue to refine
capital allocation model
with more capital
allocated to divisions in
1H15 • Capital held
centrally includes:
surplus capital, capital
for Treasury, and capital
for next dividend
payment • ROTE
declined as cash earnings
was lower and there was
a 3% increase in the
value of average tangible
equity Division 2H14
1H15 Capital ($m)
ROTE (%) Capital ($m)
ROTE (%) Comments on
movements in allocated
capital Group4 36,441
21.1 37,399 20.3
Westpac RBB 9,905 26.8
10,983 24.7 Increased
mortgage from model
review and business
lending growth
St.George 7,630 21.1
7,973 21.1 Increase in
mortgage, offset by
reduction in business
stressed exposures BTFG
2,850 32.1 3,090 29.3
Increased capital in funds
management (ORFR6)
and growth WIB 8,119
17.6 8,367 15.0 Uplift in
lending Westpac NZ
($A) 3,778 21.0 3,619
22.9 Lower capital due to
review of regulatory
capital loadings Other5
4,159 7.0 3,367 6.1
Capital for dividend &
Treasury. More allocated
to divisions in 1H15
CAPITAL
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
DIVISIONAL
SUMMARY
Comparison of
1H15 versus 2H14
cash earnings basis
(unless otherwise
stated)
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Differentiated by
our strong portfolio of
brands Westpac Group
96 1 Other includes
Group Businesses
(including Treasury)
and Westpac Pacific.
Key statistics for
1H15 Contribution to
1H15 cash earnings
(%) WIB Westpac NZ
Westpac New Zealand
Banking and wealth
services to consumers,
businesses and
institutions in New
Zealand Westpac
Institutional Bank
Leading Australasian
institutional bank,
with branches and
representative offices
in Australia, US, UK
and Asia 36 22 12 17
11 2 Westpac RBB
St.George Banking
Group BT Financial
Group Westpac
Institutional Bank
Westpac NZ Other1
WRBB BTFG SGB
Division Cash
earnings 1H15 ($m)
Cash earnings
1H15-2H14 % change
Core earnings
1H15-2H14 % change
Westpac RBB 1,350
2% 2% St.George 837
4% 3% BT Financial
Group 451 (2%) (2%)
Westpac Institutional
Bank 624 (13%) (9%)
Westpac NZ (in A$)
413 4 5 Other1 103
(30) (11) Westpac
Retail & Business
Banking Australian
national brand for
consumer and
business banking,
SMEs and commercial
customers under the
Westpac brand
St.George Banking
Group Australian local
brand for consumer,
business and
commercial banking
customers under the
St.George, BankSA,
Bank of Melbourne
and RAMS brands BT
Financial Group
Australian Wealth and
Insurance division
with $103bn funds
under management
and $118bn funds
under administration
at 31 March 2015
DIVISIONAL
SUMMARY
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack WRBB delivers
another disciplined
1H15 result 97 1 ROTE
down in 1H15 with
more capital allocated
to the division,
including more capital
being applied to
mortgages. 2 APRA
Banking Statistics,
March 2015. Key
financial metrics 1H15
- 2H14 Key financial
metrics 1H14 2H14
1H15 Change on 2H14
Revenue ($m) 3,625
3,769 3,835 . 2% Net
interest margin (%)
2.37 2.40 2.41 . 1bp
Expense to income (%)
44.4 43.9 43.9 - 0bp
Customer deposit to
loan ratio (%) 58.4 60.0
60.5 . 49bps ROTE (%)
26.6 26.8 24.7 .
(213bps)1 Cash
earnings . 2% • Up
$20m to $1,350m Core
earnings . 2% • Up
$37m to $2,150m with
2% revenue growth Net
interest income . 2% •
Up $61m to $3,100m •
3% asset growth:
mortgages up 3% and
business lending up 1%
• 3% deposits growth
with system growth in
household deposits2,
delivering a 49bps
uplift in deposit to loan
ratio to 60.5% Net
interest margin . 1bp •
Asset spread
compression of 7bps
due to competitive
pricing for new
business • Deposit
spreads up 6bps due to
market pricing of at call
and term deposits •
Lower wholesale
funding costs of 2bps
Noninterest income .
1% • 7% growth in FX
revenue through
leveraging WIB
partnership • Uplift in
merchant and trade
activity revenue
Expenses . 2% • Salary,
lease and investment
cost increases • Partly
offset by productivity
benefits from improved
processes, Bank Now
and Connect Now
transformation, and
more customers using
self-service through
Westpac Live and
Smart ATMs
Impairment charges .
5% • Up $11m to
$221m • Higher
consumer impairments
in line with seasonal
trends, offset by
improved quality in
business lending
portfolio Cash earnings
movement 1H15 1H14 ($m) 1,253 1,330
1,350 125 19 16 61 5
(46) (37) (29) (11) (6)
1H14 Net II Non-II
Expenses Impairment
charges Tax & NCI
2H14 Net II Non-II
Expenses Impairment
charges Tax & NCI
1H15 Up 6% Up 2%
WRBB
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack WRBB
consistently
delivering high
quality results 98
45.5 44.5 44.4 43.9
43.9 1H13 2H13
1H14 2H14 1H15
341 359 361 369
379 1H13 2H13
1H14 2H14 1H15
252 256 262 271
278 56.3 58.2 58.4
60.0 60.5 1H13
2H13 1H14 2H14
1H15 1,143 1,217
1,253 1,330 1,350
1H13 2H13 1H14
2H14 1H15 1,873
1,982 2,015 2,113
2,150 1H13 2H13
1H14 2H14 1H15
3,438 3,570 3,625
3,769 3,835 1H13
2H13 1H14 2H14
1H15 Revenue
($m) Expense to
income ratio (%)
Revenue per FTE
($’000) Core
earnings ($m) Cash
earnings ($m)
Loans ($bn) and
customer deposit to
loan ratio (%)
WRBB
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack A leading
customer franchise
driving growth 99 1
Refer slide 145 for
customer satisfaction
details. 2 Refer slide
145 for wealth
metrics provider
details. 3 Branches
excluding instores. 4
Refer slide 145 for
business satisfaction
details. 5 Refer slide
144 for business
NPS. 6 Sites
includes branches
and standalone
business banking
centres and excludes
instores. 7 Refer
slide 145 for average
products per
customer metrics. 8
Refer slide 144 for
consumer NPS. 9
Complaints
1H14/2H14 restated
with BT complaints
historically captured
and reported within
WRBB channel now
reported in BT
channel. 10 Spot
number as at balance
date. Key
performance metrics
Business banking
highlights • Equal #1
in business customer
satisfaction of the
majors4, #1 NPS
overall business and
SME5 • Continuing
to enhance our
business bank
offering with 0.3m
customers migrated
to Westpac Live
platform; Connect
Now our video
conferencing facility
is in 332 sites (up
240) representing
46% of sites6
(enhancing the
Westpac Local
model, with more
access to business
banking specialists
via video
conference) • Small
Business Banking
unit delivered 17%
of WRBB’s total
revenue in 1H15,
with revenue growth
of 3% • Successful
partnership model
with WIB providing
increased access to
FX, foreign accounts
and debt markets
products. FX
revenue up 20% •
Winner: Business
banking excellence
recognised through
awards - AB+F Best
Business Bank;
AB+F Best Service
Business Bank;
AB+F Best Business
Banking at Branch;
Roy Morgan Major
Business Bank of the
Year (2014 calendar
year) for fourth year
in a row • Leading
customer franchise
maintained with
equal #1 in customer
satisfaction1 of the
majors, record
customer growth,
maintained market
leading wealth
penetration2
position, and
delivered a 34%
reduction in
customer complaints
• Continuing to meet
customer needs 24/7
and enabling: more
self-service with 80
Bank Now branches
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Transformation
of network delivering
gains 100 1 Size
calculations and rent
savings excludes new
branches, kiosks and
instore conversions. 2
Transaction
redirection to
self-service device –
Before (3months
average pre opening),
After (all months
average post opening,
excludes month in
which it opens). 3
Percentage of deposits
at branches with
Smart ATMs. Bank
Now improvements
delivered Active
digital customers (#m)
Sales FTE / Total FTE
(%) Digital sales
(#’000) Deposits
through Smart ATMs3
(%) Branch
transactions (#m)
WRBB % change post
opening Branch size
reduction1 (m2) . 27
Rent savings1 . 12
Counter deposit
transactions (#) . 29
Counter withdrawal
transactions (#) . 19
Transactions
redirected to Smart
ATM’s2 (#) . 519 21.5
20.4 19.9 18.4 2H13
1H14 2H14 1H15 2.45
2.53 2.63 2.70 2H13
1H14 2H14 1H15 107
135 145 152 2H13
1H14 2H14 1H15 10
16 23 1H14 2H14
1H15 52 55 57 59
2H13 1H14 2H14
1H15
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack 1H15 delivered
4% cash earnings
growth 101 1 RBA
Financial
Aggregates, March
2015. Key financial
metrics 1H15 –
2H14 Key financial
metrics 1H14 2H14
1H15 Change on
2H14 Revenue ($m)
1,956 2,090 2,113 .
1% Net interest
margin (%) 2.27 2.30
2.28 . 2bps Expense
to income (%) 38.2
38.9 37.9 . 94bps
Customer deposit to
loan ratio (%) 54.7
55.6 54.4 . 116bps
ROTE (%) 22.0 21.1
21.1 . (2bps) Cash
earnings . 4% • Up
$31m to $837m Core
earnings . 3% • Up
$34m to $1,312m
with 1% revenue
growth Net interest
income . 1% • Up
$14m to $1,840m •
Lending up 3%
primarily mortgages
(above system1) and
auto finance growth.
Business lending flat
with 7% increase in
new lending offset
by portfolio run-off •
Deposits up 1%,
with most of the rise
in consumer savings
and transaction
accounts Net interest
margin . 2bps •
Margins down 2bps
to 2.28% • Asset
spreads declined by
5bps from strong
competition for new
lending • Cost of
liquidity and capital
higher by 3bps •
Partly offset by 6bps
deposit spread
improvement
Non-interest income
. 3% • Repricing
business line fees
including for
undrawn
commitments. Auto
finance fees also
higher Expenses .
1% • Expenses down
1% • Productivity
initiatives including
benefits from branch
optimisation and
Lloyds synergies •
Offset increases
from FreshStart
branch rollout •
Some benefit from
timing of investment
spend Impairment
charges . 9% •
Impairment charges
down $12m to
$116m • Business
impairment charges
were $41m lower •
Offset slightly higher
consumer
impairments
reflecting seasonality
in unsecured
delinquencies Cash
earnings movement
1H15 – 1H14 ($m)
769 121 13 806 14 9
11 12 837 (65) (20)
(12) (15) 1H14 Net
II Non-II Expenses
Impairment charges
Tax & NCI 2H14
Net II Non-II
Expenses
Impairment charges
Tax & NCI 1H15 Up
5% Up 4%
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack St.George
building strong
track record for
delivering 102
Cash earnings
contribution (%)
Cash earnings ($m)
Core earnings ($m)
Expense to income
ratio (%) Revenue
per FTE ($’000)
Loans ($bn) and
customer deposit to
loan ratio (%) 688
699 769 806 837
1H13 2H13 1H14
2H14 1H15 38.5
37.8 38.2 38.9 37.9
1H13 2H13 1H14
2H14 1H15 149
153 162 168 174
56.4 58.1 54.7 55.6
54.4 1H13 2H13
1H14 2H14 1H15
358 370 367 377
378 1H13 2H13
1H14 2H14 1H15
1,108 1,167 1,209
1,278 1,312 1H13
2H13 1H14 2H14
1H15 67 8 14 5 6
STG BoM BankSA
RAMS Lloyds
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack St.George
delivering across key
metrics 103 1 Refer
slide 145 for
consumer satisfaction
details. 2 Refer slide
144 for consumer NPS
details. 3 Branches
excludes instores 4
Sites includes
branches and
standalone business
banking centres but
excludes instores.
BoM included in
analysis for the first
time. 5 Includes
Lloyds customers. 6
Refer to slide 145 for
average products per
customer metrics
details. 7 Refer to
slide 145 for wealth
metrics provider
details. 8 Refer to
slide 144 for business
NPS details. 9 Spot
number as at balance
date. Key performance
metrics • Customer
service revolution and
continued innovation
is delivering a better
customer experience.
Customer
satisfaction1 and
NPS2 equal to or
ahead of all the
majors, delivered
strong customer
growth, and reduced
complaints by 6% •
Continuing to meet
customer needs with
30 more FreshStart
branches3 (60% of
branches) and
enabling more
self-service. Smart
ATMs now represent
39% of ATM network
• Continued to focus
on simplification of
processes including
‘Time to First Yes’
(65% now approved in
branch within one
hour); and deliver
innovative digital
mobility solutions that
support customer
needs including:
biometric
authentication on
mobiles, Smartwatch
capability and piloting
iBeacon technology •
Winner: Asian Banker
best mobile Phone
banking initiative for
2015; AIMIA best
smartphone or table
application in
financial services
2015; Money
Magazine best app
2015 Consumer
banking highlights
1H14 2H14 1H15
Change on 2H14 Total
customers (#m) 3.55
3.61 3.71 . 3%
Business customers5
(#’000) 366 381 398 .
4% Active digital
customers (#m) 1.28
1.33 1.37 . 2% Total
branches (#) 446 452
431 (5%) FreshStart
% of branches3 33 51
60 . 9ppts Smart
ATMs % of ATM
network 27 33 39 .
6ppts Business
Connect % of sites4
44 52 55 . 3ppts Avg.
products per
customer6 (#) 2.61
2.64 2.63 x (0.3%)
Customers with a
wealth product7 (%)
16.1 17.1 17.1 - 0bps
Overall consumer
NPS2 1st 1st =1st .
Steady Overall
business NPS8 1st 1st
| Westpac Group First Half
2015 Presentation & Investor
Discussion Pack Investment,
innovation and customer
focus delivering sustainable
growth across brands 104 •
Development of ‘Our Service
Promise’ program which
included – Establishment of
key service behaviours and
staff empowerment model –
Successful national roll-out
with all staff attending
immersion sessions around
Australia • Reinvigoration of
branch network model
through FreshStart now
rolled out to 253 branches3
(60% of branches) • Business
Connect, providing SME
customers access to expert
bankers now rolled out to 243
sites4 (55% of sites) 1 First
in Australia. 2 First bank in
the world. 3 Branches
excludes instores. 4 Sites is
branches and business
banking centres and excludes
instores. We have included
BoM sites in analysis for first
time. Strong customer growth
(#m) Bank of Melbourne
continuing to grow market
share Lloyds acquisition a
solid performer Stressed
assets as % of TCE (%)
Maintaining an innovation
edge Customer-faced
transformational agenda
continuing • Leverage strong
heritage of digital capability
– First internet banking1
(1995) – Real time banking1
(1996) – First to send SMS
alerts1 (2003) – First
savings/transaction accounts
opened via mobile devices1
(2010) – First to deliver
biometric authentication via
mobile devices2 (2014) •
Providing innovative
customer solutions – Credit
and debit card application
and activation via mobile
(2012) – Personal loans on
mobile (2013) – Ability to
view e-statements via mobile
(2013) – Piloting iBeacon
identification of customers in
branches (2015) • Positive
cash earnings growth
supporting expansion •
Branches/instores (up 7) •
Strong household deposits up
12% to $6.2bn, mortgages up
10% to $19.7bn and total
lending up 8% to $25.8bn •
7% lift in customer numbers
• Strong engagement with the
Victorian community
including: a partnership with
Melbourne City Mission;
Bank of Melbourne
Neighbourhood Fund and
Local Project; presenting
partner of Melbourne Food
and Wine Festival • Acquired
capital finance business from
Lloyds in FY14 • Integration
program is progressing well –
Auto finance dealers now
migrated to single St.George
origination platform –
Integrated collections,
customer service and risk
functions • Customer growth
of 2.4% with new business
volumes and margins
remaining strong • Product
innovation to enhance
customer experience – iPad
app that allows dealers to
navigate quickly through
settlement processes –
Customers can self-serve
payout details 3.22 3.26 3.55
3.61 3.71 1H13 2H13 1H14
2H14 1H15 Includes Lloyds
2.8 2.3 1.8 1.6 1.3 1H13
2H13 1H14 2H14 1H15
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Consistent
wealth results up 2%
(up 7% before
performance fees)
105 1 Plan for Life
as at 31 December
2014. Movement
1H15 - 1H14 Key
financial metrics
Cash earnings
movement ($m) 86
27 28 2 441 451 (77)
(49) (7) 1H14 Funds
income Performance
fees Insurance
income GI claims
Capital & other
income Expenses
Impairment charges
Tax and NCI 1H15
Revenue up $15
(1%) 0 Up 2% 1H13
1H14 1H15 Change
on 1H14 Revenue
($m) 1,133 1,325
1,340 . 1% Expense
to income (%) 52.7
50.6 49.9 . (72bps)
ROTE (%) 25.4 31.2
29.3 . (194bps) FUM
($bn) 65.7 82.1
103.3 . 26% FUA
($bn) 95.5 106.8
125.0 . 17% BTFG
cash earnings tend to
be seasonal, given
insurance claims and
fund activity, and are
best compared to
prior corresponding
period (1H14) Funds
management income
. 1% • Funds
management income
up 1%, and up 9%
when adjusted for
BTIM performance
fees • Maintained
lead FUA position
with all platforms
market share1
ranked #1 at 19.9% •
Strong FUM/FUA
supported by
positive net flows,
impact of FX and a
rise in asset markets
• Private wealth up
13% driven by
growth in mortgage
lending • Partly
offset by significant
BTIM performance
fee income from
JOHCM in 1H14 not
matched in 1H15
Insurance income .
9% • Insurance
income down $22m •
Higher claims
mostly from
Brisbane hail storm
and Cyclone Marcia
($51m) • Life
in-force premium
and General
Insurance gross
written premiums up
13% and 8%
respectively Capital
& other income .
90% • Higher
income driven by
returns on invested
capital and a rise in
retained earnings
Expenses - 0% •
Investment costs up
$3m driven by
investment in
Panorama and
increase in planner
numbers • Other
expenses down $5m,
driven by a reduction
in performance fees,
partly offset by
higher volumes
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack 106 Movement
1H15 - 2H14 Key
financial metrics Cash
earnings movement
($m) 9 31 5 24 6 459
451 (67) (15) (1)
2H14 Funds income
Performance fees
Insurance income GI
claims Capital & other
income Expenses
Impairment charges
Tax and NCI 1H15
Revenue up $2 (flat)
Down 2% 1H14 2H14
1H15 Change on
2H14 Revenue ($m)
1,325 1,338 1,340 0% Expense to
income (%) 50.6 48.8
49.9 . 105bps ROTE
(%) 31.2 32.1 29.3 .
(285bps) FUM ($bn)
82.1 89.0 103.3 . 16%
FUA ($bn) 106.8
112.7 125.0 . 11%
Funds management
income . 4% • Funds
management income
up 4%, up 1% when
adjusted for BTIM
performance fees •
Asset markets stronger
positively impacting
FUM/FUA related
income across
platforms,
superannuation and
asset management •
Private wealth up 5%
driven by 5% growth
in mortgage lending •
In BTIM, 100% of
JOHCM funds
returning above
benchmark in 3 and 5
year periods resulting
in higher performance
fee income Insurance
income . 21% •
Insurance income
down $62m • Higher
seasonal claims
experience including
Brisbane hail storms
and Cyclone Marcia •
Life in-force
premiums and General
Insurance gross
written premiums up
4% and 5%
respectively Capital &
other income . 69% •
Higher income driven
by higher returns on
invested capital and a
rise in retained
earnings Expenses .
2% • Expenses up
$15m reflecting higher
volumes and BTIM
performance fees
partly offset by
productivity benefits
Franchise growth
continues
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Growth across
funds management
business 107 FUM
and FUA drivers
FUA ($bn) FUM
($bn) FUA by asset
class (%) 77.0 82.8
86.6 91.7 101.5
14.7 15.9 17.2 18.1
20.1 3.8 4.0 3.0 2.9
3.4 1H13 2H13
1H14 2H14 1H15
BT Wrap/Asgard
Corporate Super
Other Up 17% 95.5
125 • FUM related
revenue increased
9% on 2H14
supported by –
Positive foreign
exchange
translation impacts
for funds held
outside Australia
by JOHCM and
revaluation of
Ascalon seed pool
– Above
benchmark for 5
year performance:
90% Advance, 97%
BTIM and 100%
JOHCM – BT
Super for Life retail
FUM up 16% to
$5.7bn • FUA
related revenue
increased 4% on
2H14 – Asgard
Infinity up 22% to
$8.7bn supported
by positive flows –
BT Wrap/Asgard
platforms FUA
increased 11% –
Improved markets
contributed $10bn
to FUA balances –
Asset class
investment
allocation held
consistent 17.1 17.4
17.0 18.1 19.9 14.4
20.5 24.1 27.7 35.1
18.3 20.8 23.0 25.2
28.8 15.9 17.5 18.0
18.0 19.5 65.7 76.2
82.1 89.0 103.3
1H13 2H13 1H14
2H14 1H15 BTIM
(exc. JOHCM)
JOHCM Advance
Retail super/other
Up 26% 38 40 40
39 39 17 18 18 19
19 5 5 5 5 4 19 19
19 19 18 13 13 12
12 12 8 5 6 6 8
1H13 2H13 1H14
2H14 1H15
Equities Aust
Equities Intl.
Property Cash
Fixed interest Other
inc. diversified
102.7 106.8 112.7
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Insurance
portfolio continues
to expand 108 1
Plan for Life
December 2014.
Premiums ($m)
Insurance loss rates
(%) Life insurance
individual new
sales market share1
(%) Life insurance
lapse rates1 (%)
218 227 235 246
685 734 792 827
2H13 1H14 2H14
1H15 General
insurance gross
written premiums
Life in-force
premiums 31 45 32
62 32 29 30 34
2H13 1H14 2H14
1H15 General
insurance loss rate
Life insurance loss
rates 5% 10% 15%
20% Dec-10
Dec-11 Dec-12
Dec-13 Dec-14
WBC Peer 1 Peer 2
Avg of next Top 4
10% 15% 20%
Dec-10 Dec-11
Dec-12 Dec-13
Dec-14 WBC Peer
1 Peer 2 Peer 3 Up
13% Up 8%
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Strategy driving long
term growth 109
Panorama – a 360 degree
view Advice – lifting
professional standards •
Helping customers across
the banking network •
Strong focus on
innovation, enhancing
customer experience and
increasing digital – SMS
alert to customers before
a major storm reminding
them of what to do if
they need us • Expanding
General Insurance reach
and consolidating Motor,
Travel and Business
Insurance products
through new Allianz
partnership – Offering
customers wider product
range and greater digital
access – Westpac
General Insurance will
continue to offer its own
Home & Contents cover
• Restructured Lenders
Mortgage Insurance
arrangements to improve
customer service with no
change to risk appetite
Insurance – continued
targeted growth •
Delivering new
initiatives to improve the
client experience, adviser
professionalism and
transparency – Launched
Adviser View, an online
adviser register giving
customers the power to
search, share and
compare financial
advisers, provide
comments and rate their
financial adviser.
Average rating for
advisers is 4.86 out of 5,
over 1,000 pieces of
customer feedback to
date – Rolled out Advice
Commitment (customer
charter) providing an
upfront overview on
what clients can expect
from us – Raising the bar
on minimum education
and professional
standards. By the end of
2019 all advisers will be
required to hold a
Certified Financial
Planner, Fellow
Chartered Financial
Planner Practitioners or
Masters of Financial
Planning – Continued
focus on strengthening
our risk and control
framework • Panorama,
BT's new investment
platform, will provide
advisers and clients with
a 360-degree view of
their wealth across
investments,
superannuation,
insurance and banking,
allowing them to actively
manage, access and
report their wealth • Cash
Hub launched a year ago.
FUM now exceeds $1
billion and 1,363
advisers registered to
date • Supports SMSF
investors by connecting
accountants and other
SMSF professionals and
facilitating compliance,
tax and consolidated
reporting • Ongoing
investment in Panorama
will provide sustainable
productivity in future
years • The latest
addition to Panorama,
BT Managed Portfolios,
offers a simple way to
access shares, managed
funds and cash
investments through a
range of professionally
managed portfolios, and
removes the need to
individually research,
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Solid
performance across
key metrics 110 1
Refer slide 145 for
wealth metrics
provider. 2 Plan for
Life, All Master Funds
Admin as at
December 2014 (for
1H15), as at June
2014 (for 2H14) and
as at December 2013
(for 1H14) and
represents the BT
Wealth business
market share at these
times. 3 Plan for Life
(Individual Risk)
rolling 12 month
average. New sales
includes sales,
premium re-rates, age
and CPI indexation
December 2014. 4
Internally calculated
from APRA quarterly
general insurance
performance statistics,
February 2015. 5 Spot
number as at balance
date. Key performance
metrics FUM / FUA •
Life Insurance claims
team consistently
rated Claims
Management Analysis
Programme A+ since
2011. CMAP is an
independently
conducted assessment
of our claims
department providing
transparent analysis of
operations and
measuring the client
claims ‘experience’ •
Home & Contents
Fast Track Program
expanded to include
additional products
reducing average
claims processing time
from 64 to 30 days •
Online Investing One
Click launched,
delivering
pre-population of data,
signature free account
applications and
straight through
processing •
Continued roll out of
digital video
statements for BT
Super for Life
providing members
with a personalised
video, addressing the
member by name and
confirming their
superannuation
balance. Initiative won
Money Magazine’s
Best Innovative
Investing Product
Delivering on the
service revolution
1H14 2H14 1H15
Change on 2H14
Wealth penetration1
(WBC Group) 19.7
20.0 20.0 - 0%
Planners (salaried &
aligned) (# spot) 1,195
1,220 1,222 . 0% BT
Super for Life (retail)
customers (#’000) 432
466 478 . 3% Platform
market share2
(including Corporate
Super) (%) 19.7 19.7
19.9 . 1% Retail
market share2 (exc.
cash) (%) 18.4 18.4
18.8 . 2% Life
Insurance market
share3 (%) 10.8 11.4
11.6 . 19bps Home &
contents market
share4 (%) 5.2 5.5 5.6
. 10bps Women in
leadership5 (%) 41 44
43 × (1ppt) Average
Period end $bn 1H15
– 2H14 % mov't $bn
1H15 – 1H14 % mov't
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Lower WIB earnings
impacted by derivative
adjustments 111
Movement 1H15 – 2H14
Cash earnings . 13% •
Lower cash earnings
mainly due to the impact
of methodology changes
to derivative adjustments
that reduced cash
earnings by $85m •
Excluding this impact,
WIB’s cash earnings
were down 1% Core
earnings . 9% •
Excluding the impact of
derivative adjustments,
core earnings were up
4% Net interest income flat • Average
interest-earning assets up
6%. Growth was
supported by a lift in
lending, with net loans
up 6% • Deposits down
4%, as the business did
not pursue lower LCR
value deposits • Growth
was offset by margin
compression as
competitive industry
pressures remain Net
interest margin . 11bps •
Lower net interest
margin reflects continued
competition, in particular
for lending assets
Non-interest income . 8%
• Excluding the impact of
derivative adjustments,
non-interest income was
up 9%, supported by a
lift in WIB markets
income from a strong
performance in fixed
income and FX sales
Expenses . 4% •
Increased expenses
reflects investments in
the business, including
the continued build of
capabilities in Asia and
meeting regulatory
requirements Impairment
benefit . 51% •
Impairment benefit $22m
(2H14: $45m) as
writebacks continued to
exceed new IAPs Cash
earnings movement ($m)
717 (2) 67 (25) (23) (25)
709 (85) 624 2H14 Net II
Non-II Expenses
Impairments Tax & NCI
1H15 (adjusted) 1H15
Down 1% Down 13%
Derivative adjustments
Core earnings movement
($m) 964 882 (2) 67 (25)
1,004 (122) 2H14 Net II
Non-II Expenses 1H15
(adjusted) 1H15 Up 4%
Down 9% Derivative
adjustments
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Customer
revenue supported by
lift in customer
activity across the
business 112 1,227
1,296 1 (7) 16 1,306
1H14 2H14 Lending
Deposits Sales and
fees 1H15 • Customer
revenue1 up 1%
supported by . Strong
customer flow in FX
and Fixed Income
businesses . Increased
market volatility in
core currencies
contributed to a rise in
customer hedging
activity . Maintained
No. 1 position in core
AUD and NZD FX
markets2 . Fixed
income sales, mainly
interest rate hedging
products, benefited
from a number of
large transactions,
including
infrastructure deals .
Lower fixed rates also
supported a lift in
customer interest rate
hedging . Lending
revenue in line with
2H14 . Net loans up
6%, mainly in
infrastructure and
natural resources .
Successful integration
of Lloyds business,
with asset finance
revenue up 10% .
Lower trade finance
revenue as contract
values declined in line
with the fall in
commodity prices .
Net interest margin
pressure offsetting
growth as competition
for assets remains
strong . Deposit
revenue lower
reflecting lower
deposit balances and
margin pressure 176
95 184 104 203 114
FX Fixed Income
1H14 2H14 1H15 Lift
in customer revenue
Lift in Financial
Markets customer
sales Up 1% Up 6%
Financial Markets
customer sales
revenue ($m) 1 WIB
customer revenue is
lending revenue,
deposit revenue, sales
and fee income.
Excludes trading,
derivative adjustments
and Hastings. 2
Source: Euromoney
FX Poll 2014, Number
1 Australian Bank for
FX, Globally.
Measure of market
share from 14,050 FX
industry votes. 3 Other
includes overdrafts
and provisions.
Customer revenue1
($m) 66 80 131 1H14
2H14 1H15 Operating
lease avg balances
($m) 2.8 2.9 3.3 1H14
2H14 1H15 Financing
lease avg balances
($bn) Leveraging new
capabilities in asset
finance Lift in
customer lending 64.0
66.2 3.4 0.3 0.1 0.1
70.1 1H14 2H14
Corporate &
Institutional lending
Securitisation & Asset
Finance Trade Finance
Other 1H15 WIB net
loans ($bn) 3 Up 6%
Up 10% Up 10%
| Westpac Group First Half 2015
Presentation & Investor
Discussion Pack Infrastructure •
Revenue up 40% • 3 major
transactions successfully closed
in 1H15, with a total enterprise
value of approximately $7.7bn
and a strong pipeline of
opportunity • Hastings continues
to deliver positive results with
revenue up 20%. Hastings is one
of the longest running dedicated
infrastructure specialists globally,
with a strong track record
Delivering for customers in key
growth sectors 113
Superannuation • Revenue in line
with 2H14 • More than 41,000
employers in Australia now using
Westpac’s clearing house and
gateway – up 39% in 1H15 •
More than 50% of
prudentially-regulated funds use
Westpac’s solution, including key
industry funds WIB/Australian
retail and business banking
partnership • Partnership revenue
up 2% • WIB’s financial market
activity with retail and business
banking customers has continued
to grow . Active customers up
27% . Revenue up 9% for FX
products to retail and business
banking customers • Lift in
customer activity due to market
volatility, resulting in hedging of
the lower Australian dollar and
customers locking in fixed
interest rates at current lows •
Investment in digital capability
delivering . Over 80% of
financial markets transactions
with retail and business banking
customers executed online •
Revenue from global currency
card more than doubled on 1H14
• Westpac customers can now
apply for a global currency card
online in just 30 seconds China
and broader Asian Region •
Increasing levels of customer
activity . Welcomed 500th new
corporate & institutional
customer in February 2015 .
Connecting Asian Corporates into
Australia across multiple
products – Financing, Bond
Issuance, Remittance, FX &
Interest Rate Swaps . Continued
focus on Greater China with 57%
of new financing drawdowns
originating from China • Revenue
lower, mainly due to lower trade
finance revenue as contract
values decline in line with
commodity prices • Building
capabilities . Opened Shanghai
Free Trade Zone Sub-Branch –
completed first customer
transaction on the day of opening
. Implemented newly automated
payment system across
Singapore, Hong Kong and India
offering significantly faster
end-to-end processing for
customers
| Westpac Group First Half
2015 Presentation & Investor
Discussion Pack Innovative
solutions and new capabilities
to support WIB customers 114
1 WIB customer revenue is
lending revenue, deposit
revenue, sales and fee income.
Excludes trading, derivative
adjustments and Hastings. 2
Peter Lee Associates Large
Corporate and Institutional
Transactional Banking Survey
Australia. Quantitative
measure from 576 votes in
2014. Westpac ranks No.1 for
citations as a ‘lead’ domestic
transactional bank 2004-2014.
3 Excludes a charge for $122m
from methodology changes to
derivative valuations.
Reinventing the customer
experience Solutions and
capabilities for customers –
1H15 highlights 80 7 3 10
Customer Market risk Hastings
Other 1H15 revenue
composition3 (%) Maintained
focus on delivering for
customers • 80% of WIB
revenue from customer
business1 • Supported by 11
years as No.1 lead domestic
transactional bank2 and
strength of customer
relationships • Continue to
focus on partnering with
customers and delivering
innovative solutions Corporate
Mobile & Corporate Online •
Customers are accessing
Corporate Online features
from their smart devices. To
date, 13,500 customers have
downloaded the Corporate
Mobile app, an increase of
35% • Delivered single sign-on
for Quickservice Foundation
bank for Sydney RMB Hub •
A foundation bank for
Australasia’s first RMB Hub
in Sydney supporting the
internationalisation of the
Chinese currency Launched
QuickRec to key customers •
Provides additional payables
and receivables information to
enhance customer bank
statements, including
aggregating data from multiple
accounts into a single report •
Information provided via a
secure online portal or direct
customer connection, and
tailored to customer needs
Mobile PayWay • Growing
between 30-50 new customers
per month • Rolled out to over
150 public schools in S.A. •
Improvements to customer
onboarding – up to 80%
reduction in time to onboard
new customers in key sectors •
Customer collaboration and
co-design to develop big data
solutions • Implemented bulk
customer onboarding for
merchant acquiring
significantly reducing time to
establish new multiple
merchant terminals for
customers • Tailoring solutions
to automate end-of-day
reconciliations for merchants
for key multinational customer
• Improving customer
experience by delivering
automated solution for
exception and escalation
processes • Introduced
paperless statements providing
customers with greater
flexibility and increasing
efficiency
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Risk
management
continues to be a
competitive
advantage 115 • WIB
continues to benefit
from its strong risk
management
disciplines,
recording
impairment benefits
in the last five halves
• Impairment benefit
of $22m was lower
compared to 2H14
($45m). Writebacks
and recoveries have
reduced as the
volume of stressed
assets has declined,
however they
continue to offset
new IAPs • The level
of stress in the
portfolio remains
very low, down a
further 21bps to
68bps • The current
level of stress
remains well below
the long term
average of
approximately 2% •
Impaired assets to
TCE down 11bps to
12bps Stressed
exposures as a % of
TCE Impairments:
(charges) / benefits
($m) (186) (100)
(69) (15) (37) 104 98
93 58 54 125 48 66 2
5 43 46 90 45 22
1H13 2H13 1H14
2H14 1H15 1H13
2H13 1H14 2H14
1H15 1H13 2H13
1H14 2H14 1H15
1H13 2H13 1H14
2H14 1H15 0.1 0.2
0.7 0.9 0.7 0.7 0.6
0.6 0.4 0.3 0.2 0.1
0.7 0.8 3.6 3.5 1.8
1.5 1.4 1.0 0.7 0.7
0.7 0.6 0.8 1.0 4.3
4.6 2.6 2.3 2.1 1.6
1.2 1.0 0.9 0.7 FY07
FY08 FY09 FY10
FY11 1H12 2H12
1H13 2H13 1H14
2H14 1H15 Impaired
90+ days past due
not impaired
Watchlist &
substandard New
IAPs Write-backs
and recoveries
Change in CAP
Total impairment
benefit
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Institutional market
leadership 11 years as
Number 1 Lead
Domestic Transactional
Bank1 116 No.1
Relationship Strength
Index (All domestic
relationships)2 1 Peter
Lee Associates Large
Corporate and
Institutional
Transactional Banking
Survey Australia.
Quantitative measure
from 576 votes in 2014.
Westpac ranks No.1 for
citations as a ‘lead’
domestic transactional
bank 2004-2014. 2 Peter
Lee Associates Large
Corporate and
Institutional
Transactional Banking
Survey Australia. Rank
vs. Top 4. Quantitative
measure from 576 votes
in 2014. 3 Euromoney
FX Poll 2014. Measure
of market share from
14,050 FX industry
votes. 4 Euromoney FX
Poll 2014. Quantitative
measure of market share
vs. global competitors
from 308 FX industry
votes. 5 Euromoney FX
Poll 2014, Asian
Timezone. Measure of
client service from 5,405
FX service user votes. 6
Peter Lee Associates
Foreign Exchange
Survey Australia 2014.
Quantitative measure
from 307 corporate and
financial institution
respondents. Rank vs.
Top 4. 7 Euromoney
Awards for Excellence
2014. 8 Peter Lee
Associates Debt
Securities Investors
Australia Survey 2014.
Rank vs. top 4 major
domestic banks. Based
upon the most active
investors in each type of
security. Based upon
Westpac achieving a no.1
ranking amongst the four
major domestic banks for
estimated market share
across Corporate Bonds,
Asset Backed Securities,
CPI Linked Securities
and CPI Linked
Derivatives, a No.1
ranking for Relationship
Strength amongst the
four major domestic
banks across
Commonwealth Treasury
and Semi Government
Bonds and Asset Backed
Securities. 9 KangaNews
fixed income research
poll 2014. Votes by more
than 60 Australian-based
institutional fixed income
investors only. 10 Peter
Lee Associates Large
Corporate and
Institutional Banking
Survey Australia 2014.
Rank vs Top 4 from 570
respondents. 11 Peter
Lee Associates Interest
Rate Derivatives Survey,
Australia 2014.
Quantitative measure
from 188 corporate
respondents. Rank vs.
Top 4. Global
Transactional Services.
No.1 Overall Satisfaction
(All domestic
relationships)2 No.1
Lead Transactional Bank
in Australia 20142
Financial Markets. No.1
Australian Bank for FX,
Globally3 No.1
Australian Bank for FX
Quantitative Research in
Australasia4 No.1
Australian FX Bank for
Client Service in the
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack NZ delivers a
solid performance
across return,
growth, productivity
and strength 117 1
RBNZ March 2015.
Cash earnings
movement (NZ$m)
Flat Up 2% Key
financial metrics
1H15 - 2H14
(NZ$m) Cash
earnings . 2% • Cash
earnings of $441m
up $9m Core
earnings . 3% • Up
$18m to $640m
driven by 3%
increase in revenue
Net interest income .
3% • Up $23m to
$832m • Lending up
3% with mortgages
up 3% and business
lending up 4%,
including agriculture
lending above
system1 • Deposits
up 4% fully funding
lending growth Net
interest margin .
2bps • Deposit
spreads improved
driven by active rate
management and
portfolio
optimisation • A
reduction in
wholesale funding
costs • Asset spreads
declined mainly
reflecting continued
intense competition,
particularly in fixed
housing Non-interest
income . 2% •
Increased revenue
driven by wealth
income and higher
institutional income •
Insurance
performance
maintained with
premium growth
offset by higher
claims coming off a
low level of claims
in 2H14 Expenses .
2% • Increase driven
by annual salary
increases • Partially
offset by investment
in strategic
initiatives delivering
productivity savings
Impairment charges .
41% • Impairments
up $9m to $31m
with a rise in
stressed assets off a
low base • Asset
quality maintained
with 90+ days
mortgage
delinquencies a low
25bps Key financial
metrics 1H14 2H14
1H15 Change on
2H14 Revenue
(NZ$m) 1,022 1,049
1,077 . 3% Margins
(%) 2.28 2.27 2.29 .
2bps Expense to
income (%) 41.3
40.7 40.6 . 13bps
Customer deposit to
loan ratio (%) 76.6
76.5 77.3 . 86bps
ROTE (%) 21.2 20.9
22.8 . 190bps 432 26
1 432 23 5 441 (5)
(18) (4) (10) (9)
1H14 Net II Non-II
Expenses
Impairment charges
Tax & NCI 2H14
Net II Non-II
Expenses
Impairment charges
Tax & NCI 1H15 0
New Zealand
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Investment
delivering
improvement in
key operating
metrics and
enhancing the
customer
experience 118 1
Refer slide 144 for
NPS definition. 2
Refer slide 145 for
metric definition.
Key performance
metrics Everyday
banking, changing
how customers
bank New Zealand
1H14 2H14 1H15
Change on 2H14
Customers (#m)
1.32 1.31 1.32 . 1%
Active digital
customers (#’000)
647 661 679 . 3%
Digital applications
($m) 282 284 297 .
5% Digital log-ins
(#m) 53 59 64 . 8%
Total branches 197
193 190 (2%)
Smart ATMs % of
ATM network 19
21 23 . 2ppts
Deposits through
Smart ATMs
(#’000) 880 946
1,066 . 13%
Customers with a
wealth product2
(%) 26.4 27.3 28.0 .
69bps FUM
(NZ$bn) 4.9 5.5 6.0
. 9% FUA (NZ$bn)
1.5 1.7 1.9 . 12%
Women in
leadership (%) 43
44 45 . 1ppt 880
946 1,066 1H14
2H14 1H15 Up
13% Number of
deposits via Smart
ATM’s • Providing
enhanced flexibility
with 24/7 capability
for customers’
everyday banking
needs • Further
expanded the fleet
of Smart ATM’s
(up 8%) to 143 •
Deposits via Smart
ATM’s up 13% 33% of all physical
deposits now
processed via this
channel - Over 1 in
3 Smart ATM
deposits are
conducted outside
normal business
hours • Branch
deposits have fallen
11% Digital
capability
enhancing customer
experience 2,646
2,402 2,135 1H14
2H14 1H15 Down
11% Number of
deposits via
branches 284 280
297 1H14 2H14
1H15 Up 5%
Digital applications
($m) • Enhanced
digital application
capabilities is
supporting an
improved customer
experience with
online banking
NPS1 up 5ppt to
46% • Number of
digital applications
rose 19%. Value
now $297m (up
5%) • Broker
originated
applications have
been streamlined
with a new app that
digitally captures
customer
information and
completes the
application 38%
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Delivering on digital
leadership and leveraging
partnerships 119 1
Global Finance World's
Best Banks in Developed
Markets Award 2015
March 2015. 2 The Asian
Banker Excellence in
Retail Financial Services
Awards 2015 March
2015. 3 Canstar Online
Banking NZ Awards
April 2015. • Continuing
to deliver digital
innovation in partnership
with Mastercard with the
launch of Pay Tag (a
mobile sticker).
Converting a phone into
a contactless payment
device enabling
customers to make fast,
secure payments of up to
$80 by holding their
device up to contactless
terminals New internet
banking platform
Partnerships providing
value for customers
Recognition for digital
leadership continues
Innovation via
partnerships • Launched
Westpac One, a new
internet and mobile
banking platform
providing customers
more functionality and a
consistent experience
across all devices • Over
500,000 customers
migrated to date. As a
result of the new
platform digital
applications are - Up
52% on average across
cards, personal loans and
home lending - 40% of
total applications are
now made online - 88%
are being conditionally
approved instantly online
• 11.8 million log-ins per
month, up 17% in the
first month after launch •
Best Bank in New
Zealand (Global
Finance)1 • Best Retail
Bank of the Year (New
Zealand) (Asian Banker
awards)2 • Best Online
Bank in New Zealand
(Canstar)3 • Announced
a partnership with Air
New Zealand to offer
Airpoints rewards, New
Zealand’s most popular
loyalty rewards
programme with over
1.4m New Zealanders
participating. Will
provide customers
greater choice and more
value on their credit card
and mortgage products •
Over 25,000 applications
received to date via an
online portal which has
delivered
straight-through approval
of over 70% of all
applications • New
Airpoints cards sent to
customers from 1 May
2015. Capability to select
PIN numbers online has
been launched New
Zealand
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Delivering
returns through
growth and
productivity whilst
optimising the
balance sheet 120
42.6 40.7 41.3 40.7
40.6 1H13 2H13
1H14 2H14 1H15
2.34 2.32 2.28 2.27
2.29 1H13 2H13
1H14 2H14 1H15
75.2 75.7 76.6 76.5
77.3 1H13 2H13
1H14 2H14 1H15
368 400 432 432
441 1H13 2H13
1H14 2H14 1H15
580 602 600 622
640 1H13 2H13
1H14 2H14 1H15
1.3 1.4 1.5 1.7 1.9
4.1 4.4 4.9 5.5 6.0
1H13 2H13 1H14
2H14 1H15 FUA
FUM Cash
earnings (NZ$m)
Core earnings
(NZ$m) Net
interest margin (%)
Expense to Income
ratio (%) FUM and
FUA (NZ$bn)
Deposit to loan
ratio (%) New
Zealand
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Mortgage
portfolio quality
remains strong 121
43% 17% 23% 12%
3% 2% 0<=60
60<=70 70<=80
80<=90 90<=95 95+
83% of mortgage
portfolio less than
80% LVR 0.25 0.0
0.5 1.0 1H09 2H09
1H10 2H10 1H11
2H11 1H12 2H12
1H13 2H13 1H14
2H14 1H15 •
Mortgage portfolio
NZ$40.7bn, up 3% •
The proportion of
fixed rate mortgages
remains at 73%, as
the outlook for cash
rate rises has been
delayed to late 2016
• Loan origination
through proprietary
channels remained
steady at 74% • Well
secured portfolio,
with 83% of the
portfolio having
LVR of 80% or less •
Mortgage 90+ days
delinquencies
remains low at 25bps
up 4bps from low 21
bps in 2H14,
reflecting seasonal
increases • Westpac
New Zealand uses a
servicing assessment
approach to assess
capacity to repay
mortgages. This
includes an adequate
surplus test and
discounts to certain
forms of non-salary
income. Also
included is an
interest rate buffer
which in the current
interest rate
environment is in the
range of 2% higher
than the standard
lending rate 0.05
0.00 0.05 0.10 0.15
0.20 0.25 1H09
2H09 1H10 2H10
1H11 2H11 1H12
2H12 1H13 2H13
1H14 2H14 1H15 1
LVR based on
current loan balance
and current
assessment of
property value.
Portfolio highlights
New Zealand
mortgage portfolio
by region (%) New
Zealand mortgage
portfolio LVR1 (%)
of portfolio
Mortgage 90+ days
delinquencies (%)
Mortgage loss rates
each half (%) New
Zealand 43 9 8 40
Auckland
Wellington
Christchurch Rest of
New Zealand
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack 24.2 23.1 16.2
11.2 6.8 18.4
Property
Manufacturing
Agriculture, forestry
& fishing Wholesale
trade Mining Other
Stable asset quality
with a small increase
in business stressed
assets 122 0.3 0.5 1.4
2.6 3.4 2.2 1.9 1.5
0.8 0.9 1.1 0.0 0.1
0.4 0.2 0.3 0.2 0.1
0.2 0.1 0.0 0.2 4.7
7.1 14.4 12.8 9.6 4.4
4.1 3.2 2.9 2.3 2.3
5.0 7.7 16.2 15.6
13.2 6.8 6.1 4.9 3.8
3.3 3.6 FY07 FY08
FY09 FY10 FY11
FY12 1H13 2H13
1H14 2H14 1H15
Impaired 90+ days
past due not
impaired Watchlist
& substandard 1
Large reduction in
stressed exposures
from FY11 to FY12
due primarily to
transfer of WIB
assets during 1H12.
Business stressed
exposures as a % of
New Zealand
business TCE
Movement in
impairment charges
(NZ$m) • Total
business stressed
exposures as a % of
business TCE is at
3.56%, up 30bps
(down 20bps on
1H14) • Business
impaired exposures
increased to 1.07%
of business TCE, up
14bps mostly due to
the movement of one
single name
exposure • Watchlist
and substandard
exposures were
relatively stable at
2.32%, up 2bps •
Impairment charges
increased NZ$9m.
The higher CAP
charge reflects
seasonal delinquency
patterns, and is offset
by lower IAP
charges • Overall,
asset quality remains
stable with credit
quality metrics
remaining relatively
low New Zealand 1
4 22 33 15 31 (37)
(2) 1H14 2H14 CAP
changes & other
Writeback +
recoveries New
IAPS Write- Offs
1H15 Up $9m
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Westpac Pacific
solid earnings
contribution, up 4%
123 Cash earnings
movement ($m)
Movement 1H15 –
2H14 Cash earnings .
4% • Strong net
interest income
performance, partly
offset by the impact of
FX controls
introduced in PNG in
July 2014 •
Translation impacts
from movements
between the A$ and
local currencies
increased cash
earnings by $4m Net
interest income . 19%
• Good growth in both
assets and liabilities,
in particular in Fiji.
Higher yields on
government securities
portfolio. Benefit of
currency translation.
Net interest margin up
18bps Non-interest
income . 14% •
Mainly due to lower
FX sales income from
the impact of foreign
exchange controls in
PNG Expenses . 11%
• Increase reflects
annual salary reviews
and government
mandated
superannuation
increases in Fiji
Impairment charges .
$4m • Impairments
provided a $1m
benefit 65 5 3 6 57 13
4 59 (22) (9) (5) (1)
1H14 Net II Non-II
Expenses Impairment
charges Tax & NCI
2H14 Net II Non-II
Expenses Impairment
charges Tax & NCI
1H15 Down 12% Up
4% 1. Full year impact
in FY14 flat Sale of
operations in five
Pacific Island Nations
• In January 2015,
Westpac entered into
an agreement to sell
its banking operations
in Samoa, Cook
Islands, Solomon
Islands, Vanuatu and
Tonga to the Bank of
South Pacific Limited
(BSP) for A$125m •
Westpac will retain its
operations in Fiji and
PNG • Completion of
the sale is expected to
occur in Second Half
2015 and is subject to
the parties obtaining
necessary statutory,
regulatory and third
party approvals •
Decision reflects
desire to increase
focus on growth plans
in the larger markets
of PNG and Fiji.
These markets are
closely tied to Asia,
Australia and New
Zealand with strong
flows of capital, trade,
and migration between
these regions
Contribution of
Pacific businesses to
be sold Cash
earnings1 A$8m
Assets A$0.7b
Liabilities A$0.6b
Pacific Highlights •
Papua New Guinea
(PNG) and Fiji grew
their customer base by
71,000 (18%) on prior
year through
expansion of the
‘Everywhere Banking’
program. The program
saw over 7,100 people
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Economics
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Australian and
New Zealand
economic forecasts
125 Key economic
indicators1 (%) as at
April 2015 Calendar
year 2013 2014f
2015f 2016f World
GDP 3.3 3.2 3.5 4.1
Australia GDP 2.1
2.7 2.2 3.0 Private
consumption 2.0 2.8
2.4 3.2 Business
investment2,3 -8.0
-4.3 -7.4 -1.2
Unemployment –
end period 5.8 6.2
6.7 6.3 CPI headline
– year end 2.7 1.7
2.3 2.5 Interest rates
– cash rate 2.5 2.5
2.0 2.0 Credit
growth, Total – year
end 3.8 5.9 5.3 6.0
Credit growth,
Housing – year end
5.4 7.1 7.4 6.6 Credit
growth, Business –
year end 1.6 4.8 2.3
5.6 New Zealand
GDP 2.3 3.3 3.0 3.4
Unemployment –
end period 6.1 5.7
5.2 4.9 Consumer
prices 1.6 0.8 0.3 1.7
Interest rates –
official cash rate 2.5
3.5 3.5 4.0 Credit
growth – Total 4.2
4.5 5.1 5.5 Credit
growth – Housing
5.2 5.1 5.2 5.9 Credit
growth – Business
2.2 3.8 4.3 4.4 1
Source: Westpac
Economics. 2 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.
ECONOMICS
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Australia
remains well-placed
relative to developed
economies 126
Australia’s economy:
diversified and
flexible Real GDP
growth (%) 8.4 8.6
11.5 2.6 8.4 10.3 12.7
11.1 3.2 5.6 11.9 5.7
Manufacturing
Construction Mining
Rural Utilities &
transport Wholesale &
retail Property,
business services
Finance
Communications
Household services
Education & health
Government -8 -6 -4
-2 0 2 4 6 8 Dec-98
Dec-02 Dec-06
Dec-10 Dec-14
Australia UK Canada
US Euro Net public
debt levels as a % of
GDP 2013 Sources:
OECD, Westpac
Economics. Sources:
IMF, Westpac
Economics. Sources:
ABS, Westpac
Economics. 1
Excludes ownership of
dwellings and taxes
less subsidies. Sector
contribution to GDP
(%)1 % growth,
year-ended Australian
economic growth and
external shocks -2 0 2
4 6 8 -2 0 2 4 6 8
Dec-86 Dec-90
Dec-94 Dec-98
Dec-02 Dec-06
Dec-10 Dec-14 GDP
%yr GDP %yr Global
recession, but home
grown property bust
Asian Crisis, ~ 60% of
export markets in
recession Tech Wreck,
~ 90% of export
markets in recession
GFC, ~ 70% of export
markets in recession €
shock Sources: ABS,
Westpac Economics.
13.5 26.0 38.5 55.7
60.4 81.3 83.1 87.6
110.7 Aus NZ Canada
Germany Spain US
UK France Italy
ECONOMICS
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Australia’s
economic transition
from mining to
non-mining Sources:
ABS, Westpac
Economics.
Investment: share of
Australian economy
(% of GDP) Iron ore
cash cost curve (total
supply free-on-board)
0 5 10 15 Dec-90
Dec-94 Dec-98
Dec-02 Dec-06
Dec-10 Dec-14
mining, CAPEX
housing investment
business investment
(ex mining) Sources:
AME, Westpac
Economics F’casts
end 2015 Sources:
ABS, Westpac
Economics. % of GDP
Australian growth
mix: contributions to
GDP growth (%) -2 -1
0 1 2 3 4 -2 -1 0 1 2 3
4 consumer housing
inv. mining inv.
business inv. govt
demand net exports
GDP ppts 2012 2013
2014e 2015f 2016f
ann% avg 10yrs to
2007 0 50 100 0 50
100 0 450 900 1350
1800 USD/t USD/t
Brazil Australia China
others current MB
$48/t cfr Cumulative
export supply, mt
ECONOMICS 127
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Australian state
economies shift in
growth with NSW
the pace setter 128
Business investment
by state ($bn)
Domestic demand
(% ann) Gross State
Product 2013/14 (%)
Population (# m) •
Domestic demand
growth is shifting
from the mining
states of WA and
Qld, to NSW and, to
a lesser extent,
Victoria – 1 in 3
Australians live in
NSW, with a similar
number spread
across WA and Qld,
some 25% are in
Victoria, and 12%
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
growth now quite
weak • In Victoria,
structural change
associated with the
recent high level of
the Australian dollar
has been a
significant
headwind, with a
number of large
manufacturers
announcing their
intended exit from
the Australian
market • In contrast,
the NSW economy,
held back by the
high interest rates
prevailing during the
mining boom, has
responded strongly
to record low rates.
Home building is in
a catch-up phase and
consumer spending
growth is above
trend, supported by
strong gains in
population, house
prices and wage
incomes • 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 0.9
-3.7 0.7 0.3 0.5 1.4
1.8 -3.4 -1.7 1.2 1.5
1.7 2.8 3.8 Qld WA
Aus Tas SA Vic
NSW Dec-13 yr
Dec-14 yr Sources:
ABS, Westpac
Economics 0 5 10 15
20 25 Dec-00
Dec-08 NSW + Vic
WA + Qld
Construction 0 5 10
15 20 25 Dec-00
Dec-08 NSW + Vic
WA + Qld
Equipment ’03/04 to
’07/08 Sources:
ABS, Westpac
Economics 7.5 5.8
4.7 2.6 1.7 0.5 0.4
0.2 NSW Vic Qld
WA SA Tas ACT
NT Australia: 23.5
million Jun 2014 31
22 19 16 6 2 0 10 20
30 40 NSW Vic Qld
WA SA Tas % of
Australian GDP
Sources: ABS,
Westpac Economics
Sources: ABS,
Westpac Economics
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Australian labour
market 129 Australia:
employment by sector
(annual change, ’000)
Sources: ABS,
Westpac Economics. 1
The group of
industries collectively
called the household
services sector
includes those
industries that provide
services primarily to
households, including
health, education,
hospitality,
accommodation, food
services and art and
recreation. Sources:
OECD, Westpac
Economics. 0 2 4 6 8
10 12 14 Feb-99
Feb-03 Feb-07 Feb-11
Feb-15 Australia
Canada UK US Euro
% Personal
bankruptcies vs
company insolvencies
(%) Unemployment
rates (%) Sources:
ASIC, ITSA, ABS,
Westpac Economics.
0.0 1.0 2.0 3.0 4.0
Feb-01 Feb-02 Feb-03
Feb-04 Feb-05 Feb-06
Feb-07 Feb-08 Feb-09
Feb-10 Feb-11 Feb-12
Feb-13 Feb-14 Feb-15
0.0 0.4 0.8 1.2 1.6 %
% Company
insolvencies (rhs)
Personal bankruptcies
(lhs) *seasonally
adjusted by Westpac;
bankruptcies shown as
per 1000 people,
insolvencies shown as
per employing
businesses -120 -80
-40 0 40 80 120 160
200 Mining
Manufacturing
Utilities Government
Health & education
Agriculture Wholesale
& transp. Retail
Finance & real estate
Construction Leisure
& hospitality Business
services change in
employment 4Q13 1Q14 4Q14 - 1Q15
ECONOMICS
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Australia’s
population growth
130 Population
growth (%) -0.5 0.0
0.5 1.0 1.5 2.0 -0.5
0.0 0.5 1.0 1.5 2.0
Germany Hungary
Poland Greece Japan
Netherlands China
France Italy UK
Sweden US Canada
New Zealand Spain
India Indonesia
Australia % %
*average 2005-10
world • Australia’s
population is just
over 23 million and
growing at a
comparatively rapid
pace . Population
growth was 1.8% in
2013, a touch above
Australia’s long run
average pace of
1.4% and well above
world population
growth of 1.2% .
Much stronger than
that seen in most
advanced economies,
many of which are
seeing static or even
declining
populations . Also
strong compared to
population growth
seen in many
emerging economies
• The growth of
Australia's
population has two
main components –
natural increase (the
number of births
minus the number of
deaths) and net
overseas migration .
Natural increase and
net overseas
migration
contributed 40% and
60% respectively to
total population
growth in the 12
months to March
2013 • Australia is
very much a migrant
country .
Approximately
one-third of the
population born
overseas . Overall,
the proportion of
overseas-born
residents from
European countries
of birth is declining,
while the proportion
of migrants coming
from Asia is
increasing Sources:
UN, Westpac
ECONOMICS
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Interest rates
to remain low AUD
high relative to
fundamentals 131
Sources: RBA,
OECD, Westpac
Economics. 0 1 2 3
4 5 6 7 8 Mar-08
Mar-09 Mar-10
Mar-11 Mar-12
Mar-13 Mar-14
Mar-15 Australia
UK Canada US
Euro Major
countries’ policy
rates (%) 0.40 0.50
0.60 0.70 0.80 0.90
1.00 1.10 1.20 0.40
0.50 0.60 0.70 0.80
0.90 1.00 1.10 1.20
Mar-92 Mar-96
Mar-00 Mar-04
Mar-08 Mar-12
Mar-16 Fair value
band AUD/USD
actual & forecast
Australian dollar
(AUD/USD) • We
see scope for the
Reserve Bank to
lower interest rates
further, expecting
rates to decline
from 2.25% to
2.00% in 2Q15 •
The economy has
been hit by a
negative income
shock since mid
2014, with
commodity prices
falling sharply,
particularly iron ore
as global supply
expands and China
navigates a soft
spot • Price
pressures are
expected to remain
benign with core
CPI inflation
forecast to be 2.3%
in 2015 and wages
growth subdued.
Labour markets are
only expected to
improve slowly •
The Australian
dollar has not fully
adjusted to the
sharp fall in
commodity prices
since mid 2014.
The currency
remains above ‘fair
value’ based on
long run
fundamentals •
Commodity prices
have fallen by
around 32% since
mid 2014, while the
AUD has
depreciated by 18%
against the USD
and by only 12%
on a TWI basis
over the same
period • The AUD
is expected to
decline further to
US72¢ by the end
of 2015, holding
around that level
through much of
2016 Sources:
RBA, Westpac
Economics. latest:
78 F’casts USD
USD Includes
WCFI+BI
commodities index,
2 year swap spread,
and NFD to GDP.
% ECONOMICS
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Credit growth
picking up at a
modest pace 132
Sources: Westpac
MI, NAB, Westpac
Economics. -40 -30
-20 -10 0 10 20 30
60 70 80 90 100 110
120 130 Mar-03
Mar-07 Mar-11
Mar-15 Consumer
(lhs) Business * (rhs)
monthly * rebased to
avg 0 Business
confidence and
consumer confidence
(net balance) -10 -5
0 5 10 15 20 25 (10)
(5) 5 10 15 20 25
Mar-95 Mar-99
Mar-03 Mar-07
Mar-11 Mar-15
Housing Total credit
Business Forecasts
end 2015 Australian
private sector credit
growth (% ann) •
Confidence remains
relatively subdued •
After a weak 2014,
consumer sentiment
responded positively
to the RBA’s
February rate cut but
has since drifted
lower again and
remains in
pessimistic territory •
Job loss fears and
concerns around a
Budget tightening by
the Federal
Government have
been the main factors
weighing on
sentiment • Business
confidence was more
resilient for a time
but has slipped back
in recent months •
Credit growth
increased to over
5.5% during 2014, as
both housing and
business responded
to declining interest
rates • A potential
loss of momentum in
business credit,
following the recent
dip in confidence,
could see the 2015
year be one of
consolidation ahead
of an improvement
in 2016, supported
by record low
interest rates,
investors continuing
to move in to the
housing market, and
an improved
international
environment
Sources: RBA,
Westpac Economics.
% annual % annual
ECONOMICS
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Australian
commercial
property market
133 0 5 10 15 20 25
30 35 Jan-90
Jan-95 Jan-00
Jan-05 Jan-10
Jan-15 Brisbane
CBD Perth CBD
Sydney CBD
Melbourne CBD
Source: PCA OMR
1/2015 Total
vacancy rates in
capital cities (%)
Australian
commercial
investment sales
over $5 million
($’000) 0 5 10 15
20 25 30 2000 2001
2002 2003 2004
2005 2006 2007
2008 2009 2010
2011 2012 2013
2014 NSW Vic Qld
SA WA ACT
Recent sector
activity largely in
NSW and Vic
Source: CBRE
research Source:
CBRE, RBA,
Westpac
Economics -4.0%
-2.0% 0.0% 2.0%
4.0% 6.0% 8.0%
Dec-94 Dec-95
Dec-96 Dec-97
Dec-98 Dec-99
Dec-00 Dec-01
Dec-02 Dec-03
Dec-04 Dec-05
Dec-06 Dec-07
Dec-08 Dec-09
Dec-10 Dec-11
Dec-12 Dec-13
Dec-14 Prime
Office Prime
Industrial Prime
Retail Average
premium since
2000 Prime Office
= 2.52%; Prime
Industrial = 3.31%;
Prime Retail =
2.01% Premium
property prime
yields over 10 year
bond rate (%)
-2.5% -1.5% -0.5%
0.5% 1.5% 2.5%
Sydney CBD
Melbourne CBD
Canberra Adelaide
CBD Brisbane
CBD Gold Coast
Sunshine Coast
Perth CBD West
Perth Change in
occupied space Net
supply Net changes
over second half
2014 Factors
driving vacancy
change (%) Source:
PCA OMR 2/2015
ECONOMICS
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack China growth
remains a positive for
Australia 134 • As a
$US7 trillion economy,
China grew at 10%. As
a $US10 trillion
economy, Westpac
expects China to grow
at 7.1% • Represents an
equivalent incremental
contribution to global
growth, at higher levels
of energy, protein,
metal and consumer
goods demand per head
• Were China to slow
immediately to a 5%
pace (a big downside
shock that we do not
envisage), it would still
double its 2012 size by
2025 • Chinese
authorities have shown
a clear commitment to
maintaining growth
above 7% but will be
less tolerant of strong
credit driven
expansions – the double
digit growth rates that
have featured regularly
over the past 20 years
are now unlikely to
occur • Australia will
continue to benefit as
Chinese households
progressively expand
their living standards
and their consumption
basket Source: Westpac
Economics. Real GDP
% ann 2012 2013 2014f
2015f 2016f China 7.7
7.7 7.4 7.1 7.3 Chinese
real GDP increments: 4
scenarios (% of 2012
GDP) 0 5 10 15 20 25
30 35 0 5 10 15 20 25
30 35 1993 1998 2003
2008 2013 2018 2023
2028 % of 2012 GDP
% of 2012 GDP 8%
CAGR History & 7%
CAGR 6% CAGR 5%
CAGR 0 50 100 150
200 250 300 350 400
450 1 6 11 16 21 26 31
36 41 46 51 index years
Korea China Japan
Taiwan Malaysia Hong
Kong Thailand Sources:
GGDC, Westpac
Economics. Middle
income is defined as
20% of
contemporaneous US
per capita GDP in PPP
terms Per capita growth
from middle income
stage ECONOMICS
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack Australian
housing market
sound fundamentals
135 Sources: REIA,
Westpac Economics.
210 226 187 236 196
300 365 77 98 114
125 136 125 125
1950s 1960s 1970s
1980s 1990s 2000s
last 4 years
population dwelling
stock* * net of
demolitions –
implied by Census
data; Westpac
estimates 2.6 1.7 2.9
01234567
Dec-84 Dec-89
Dec-94 Dec-99
Dec-04 Dec-09
Dec-14 Australia
Sydney Melbourne
investor housing
boom • Australian
housing market
continues to face a
significant structural
undersupply •
Persistently low
level of new building
over the last decade
has combined with a
strong migration-led
burst in population
growth over the last
15yrs • Australia’s
annual population
increase has lifted
from around 200,000
a year in recent
decades to over
350,000 in the last 4
years. Construction
has been adding
about 125,000 new
dwellings net of
demolitions over the
same time • More
recently, new
construction has
increased to a
relatively high level
and is expected to
remain elevated in
2015 with net
additions tracking
around 160,000
dwellings a year •
While this may result
in pockets of excess
dwelling stock, it
will only begin to
address shortages
across the broader
market Population
versus dwelling
stock (annual
average change
‘000) Australia’s
housing stock
deficiency
Residential rental
vacancy rates (%)
Sources: ABS,
Westpac Economics.
0 50 100 150 200
250 300 0 50 100
150 200 250 300
Feb-93 Feb-95
Feb-97 Feb-99
Feb-01 Feb-03
Feb-05 Feb-07
Feb-09 Feb-11
Feb-13 Feb-15 '000
'000 indicative
accumulated
deficiency Aus
dwelling approvals
(SA annualised)
underlying f'casts
Sources: ABS,
Westpac Economics.
% ECONOMICS
| Westpac Group First
Half 2015 Presentation
& Investor Discussion
Pack Price growth and
activity some
moderation, wide range
of conditions 136
Sources: RP
Data-Rismark, ABS,
Westpac Economics.
Australia: dwelling
prices vs labour
incomes Sources: ABS,
RP Data-Rismark,
APM, Residex,
Westpac Economics.
Sources: ABS, Westpac
Economics. • Price
growth and activity
have moderated
somewhat since the
start of 2015 but
remains robust at
around 8% yr nationally
• Growth rates continue
to vary significantly
between capital cities –
Sydney up 13.9%yr;
average since 2007:
6.0% – Melbourne up
5.6%yr; average since
2007: 4.6% – Brisbane
up 3.0%yr, average
since 2007: 0.2% –
Perth flat over the year,
average since 2007:
0.9% • Housing credit
growth is currently
tracking at 7.4%yr,
however new growth is
stronger with total
credit tempered by high
levels of repayment •
Repayment-based
measures of
affordability remain
around their long run
average levels only
partly reflecting low
interest rates -20 -10 0
10 20 30 Dec-08
Dec-09 Dec-10 Dec-11
Dec-12 Dec-13 Dec-14
% Sydney Melbourne
Brisbane Perth * 6mth
annualised growth
rates, all dwellings,
composite of all
measures, seasonally
adjusted index 40 70
100 130 160 190 220
250 Dec-95 Dec-98
Dec-01 Dec-04 Dec-07
Dec-10 Dec-13
dwelling prices labour
income per household
labour income per
capita Capital city
dwelling prices
Sources: RBA, Westpac
Economics. Housing
credit momentum 7.5
6.0 10.3 0 4 8 12 16 20
24 28 32 36 Feb-01
Feb-03 Feb-05 Feb-07
Feb-09 Feb-11 Feb-13
Feb-15 Total
Owner-occupier
Investor 6mth
%change, annualised
ECONOMICS
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Investment
property lending
remains buoyant 137
Sources: ABS,
Westpac Economics. 0
2 4 6 8 10 12 14
Feb-95 Feb-00 Feb-05
Feb-10 Feb-15
'upgraders',
ex-refinancing
investor finance first
home buyers Investor
housing yields vs
shares, deposits
Housing finance
approvals: value of
housing finance
($bn/mth) Dwelling
turnover Sources: RP
Data-Rismark, ABS,
FIRB, Westpac
Economics Sources:
REIA, RBA, Westpac
Economics. Sources:
ABS, Westpac
Economics. 0 20 40
60 80 100 120 140
160 180 200 Dec-94
Dec-98 Dec-02
Dec-06 Dec-10
Dec-14 thousands
estimated investor
purchases all
dwellings units FIRB
approvals *quarterly
$bn/mth 0 1 2 3 4 5 6
7 8 9 10 Mar-95
Mar-99 Mar-03
Mar-07 Mar-11
Mar-15 %pa rental
yield* ASX 200
dividend yield 1yr
term deposit *gross
yield, median rent on
2bdrm unit as % of
median unit price
investor boom
improved access to
finance and CGT
changes • Investor
housing activity is
buoyant, responding
to low vacancy rates,
solid rental yields, and
low interest rates,
including low fixed
rates that also offer the
opportunity to hedge
interest rate risk •
Gross rental yields are
attractive compared to
returns on other asset
classes, many of
which exhibit much
greater volatility •
New investor loans
currently account for
almost 40% of the
value of total housing
loan approvals – while
that is high, activity is
coming from a
relatively low starting
point and evidence
suggests borrowing
and lending decisions
are conservative •
Total market turnover
remains below recent
peaks and well below
the levels seen in
2002-03, when
activity was clearly
overheating (high
levels of turnover are
often associated with
increased speculative
activity)
ECONOMICS
| Westpac Group First
Half 2015
Presentation &
Investor Discussion
Pack Australian
households a cautious
approach to household
finances 138 Sources:
ABS, RBA, Westpac
Economics. Australian
households: debt to
income ratio (%)
Household savings
rate (% income) -20
30 80 130 180 Dec-77
Dec-82 Dec-87
Dec-92 Dec-97
Dec-02 Dec-07
Dec-12 total (gross)
debt total debt net of
offset accounts total
debt net of deposits*
trend since Jun-07 *
Westpac estimates
prior to 1988
Consumer survey:
‘Wisest place for
savings’ Sources:
ABS, Westpac
Economics. Sources:
Melbourne Institute,
Westpac Economics. 0
10 20 30 40 50 60 70
0 10 20 30 40 50 60
70 Mar-97 Mar-00
Mar-03 Mar-06
Mar-09 Mar-12
Mar-15 % % shares
real estate deposits
pay down debt 9.0 -3
0 3 6 9 12 15 Dec-90
Dec-94 Dec-98
Dec-02 Dec-06
Dec-10 Dec-14 %
income includes funds
held in mortgage
offset accounts –24pts
since peak % Sources:
RP Data-Rismark,
Residex, Westpac
Economics. Housing
affordability: all
dwellings 10 15 20 25
30 35 40 Mar-79
Mar-84 Mar-89
Mar-94 Mar-99
Mar-04 Mar-09
Mar-14 estimates
based on capital cities
prior to 1993 %
income required to
service mortgage of
75% median dwelling,
all regions long run
avg deteriorate
improve 10yr avg if
mortgage rate was 1%
higher %
ECONOMICS
| Westpac Group First Half
2015 Presentation &
Investor Discussion Pack -3
-2 -1 0 1 2 3 4 5 6 7 1999
2001 2003 2005 2007 2009
2011 2013 2015 2017 2019
New Zealand domestic
demand to underpin growth
139 New Zealand GDP
growth and forecast (%)
Earthquake-related
construction activity in
Christchurch ($bn) Source:
Westpac Economics.
Source: Statistics NZ,
Westpac Economics. 0.0 0.2
0.4 0.6 0.8 1.0 1.2 1.4 2011
2013 2015 2017 2019 2021
2023 Residential
Commercial Infrastructure
Estimate Forecasts • The
economy grew by 3.3%
over 2014 - its fastest pace
in seven years. Growth is
expected to remain strong
over 2015 and 2016 •
Growth is being support by
robust domestic demand.
Construction activity is
ramping up in Canterbury
(associated with the
Christchurch earthquake)
and more generally. At the
same time, household and
business spending has been
increasing supported by
gains in employment, strong
population growth, and low
borrowing costs • Strength
in domestic demand is
helping to offset the effects
of softness in the prices for
some exports and the high
exchange rate • Inflation
will fall close to zero over
2015 as a result of earlier
oil price declines and
lingering strength in the
NZD • With domestic
demand looking robust, the
RBNZ is not expected to cut
rates, however, weak
inflation means the OCR is
likely to remain on hold for
an extended period • OCR
increases are not expected
until September 2016 at the
earliest Source: ANZ,
Westpac Economics.
Selected NZ export
commodity prices 0 50 100
150 200 250 300 350 400
450 0 50 100 150 200 250
300 350 400 450 1995 1997
1999 2001 2003 2005 2007
2009 2011 2013 2015 2017
index index Meat and wool
Dairy Forestry F’cast $bn %
Forecasts ECONOMICS
| Westpac Group
First Half 2015
Presentation &
Investor Discussion
Pack -10 0 10 20 30
1999 2001 2003
2005 2007 2009
2011 2013 2015
2017 Annual % New
Zealand housing
market remains firm
140 New Zealand
house price inflation
(annual %) New
Zealand Official
Cash Rate (%)
Source: RBNZ,
Westpac Economics.
Source: QV,
Westpac Economics.
Westpac forecast 0 1
2 3 4 5 6 7 8 9 1999
2001 2003 2005
2007 2009 2011
2013 2015 2017 •
Housing market
activity slowed in
2014 following the
introduction of
restrictions on high
loan-to-value
lending. It picked up
again in late 2014 as
the impact of lending
restrictions waned,
and volatility
associated with the
general election
passed • Housing
demand is being
supported by the low
fixed mortgage rates
• Strong population
growth is also
boosting housing
demand • We expect
a 7.5% increase in
nationwide house
prices this year, up
from 4.9% in 2014.
Auckland will
probably exceed that
figure, while the rest
of New Zealand
(including
Christchurch) will be
a little more subdued
• The RBNZ has
been consulting on
requirements for
banks to set aside
more capital if they
lend to property
investors • This may
have only a modest
impact on interest
rates for investor
property, however, it
could open the door
to further policy
changes in the future
0 2 4 6 8 10 12 14 16
18 20 Sep-00 Sep-02
Sep-04 Sep-06
Sep-08 Sep-10
Sep-12 Sep-14
Sep-16 Ann %
change Westpac
forecast Westpac
forecast Source:
RBNZ, Westpac
Economics. Annual
growth in system
housing lending (%
annual change) %
ECONOMICS
Westpac Banking
Corporation ABN
33 007 457 141.
2015 Interim
Financial Results
Appendix &
Disclaimer
| Westpac Group First Half
2015 Presentation & Investor
Discussion Pack Appendix 1:
Cash earnings adjustments 142
Cash earnings adjustment
1H14 2H14 1H15 Description
Reported net profit 3,622
3,939 3,609 Reported net
profit after tax attributable to
owners of Westpac Group
Treasury shares 13 (6) 37
Earnings on certain Westpac
Banking Corporation shares
held by Westpac in the wealth
business are not recognised
under AAS. These are added
back as these shares support
policyholder liabilities and
equity derivative transactions,
which are re-valued in
deriving income Ineffective
hedges 17 29 (1) The
gain/(loss) on qualified hedge
ineffectiveness is reversed as
the gain/(loss) from fair value
movements reverses over time
Fair value gain/(loss) on
economic hedges 46 (151) 26
Unrealised profit/losses on
economic hedges: FX hedges
on future NZ earnings, FX
hedges on fees payable on
Governmentguaranteed debt,
accrual accounted term
funding transactions and credit
spread movements on certain
long term debt issuances 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 Buyback of
government guaranteed debt
(30) (12) (1) The Group has
bought back portions of its
government guaranteed debt,
which reduced the government
fees on that debt, currently
70bps. The charge is being
amortised over the original
term of the debt that was
bought back. This has been
treated as a cash earnings
adjustment as the economic
benefit of ceasing to pay the
government guarantee fee
cannot be recognised
Amortisation of intangible
assets 70 77 73 The merger
with St.George and the
acquisitions of J O Hambro
Capital Management and
Lloyds resulted in the
recognition of identifiable
intangible assets. These assets
include intangibles related to
core deposits, customer
relationships, management
contracts and distribution
relationships. These intangible
items are amortised over their
useful lives, ranging between 4
and 20 years. The amortisation
of intangible assets (excluding
capitalised software) is a cash
earnings adjustment because it
is a noncash flow item and
does not reflect cash
distribution available to
shareholders Acquisition
transaction and integration
expenses 25 26 35 Transaction
and integration costs
associated with the acquisition
of Capital Finance Australia
Ltd and BOS International
Australia Ltd incurred have
been treated as a cash earnings
adjustment as they do not
impact the earnings expected
from the acquired businesses
following the integration
period Fair value amortisation
of financial instruments 9 8 0
The unwind of the merger
accounting adjustments
associated with the fair valuing
of St.George retail bank loans,
deposits, wholesale funding
and associated hedges. Given
these are not considered in
determining dividends they are
treated as cash earnings
adjustments Bell litigation
provision 0 (54) 0 During
2012, the Group recognised
additional provisions in respect
of the long running Bell
litigation. This was treated as a
| Westpac Group First Half 2015 Presentation & Investor Discussion
Pack Appendix 2: Definitions 143 Westpac RBB or WRBB Westpac
Retail & Business Banking is responsible for sales and service to
consumer, SME, commercial and agribusiness customers (with turnover
of up to $100 million) in Australia under the Westpac brand St.George
Banking Group or St.George or SGB St.George Banking Group
provides sales and service to consumer, SME and corporate customers
(businesses with facilities typically up to $150 million) in Australia
under the St.George, BankSA, Bank of Melbourne and RAMS brands
BTFG BT Financial Group (Australia) is the Group’s wealth
management business, including operations under the Advance Asset
Management, Ascalon, Asgard, BT Investment Management, Licensee
Select, and Securitor brands. Also included are the advice, private
banking, and insurance operations of Bank of Melbourne, BankSA,
St.George and Westpac. BTFG designs, manufactures and distributes
financial products that are designed to help customers achieve their
financial goals by administering, managing and protecting their assets
WIB Westpac Institutional Bank provides a broad range of financial
services to commercial, corporate, institutional and government
customers with connections to Australia and New Zealand. Operates in
Australia, New Zealand, UK, US and Asia Westpac NZ Westpac New
Zealand provides a full range of retail and commercial banking and
wealth management and insurance products and services to consumer,
business, and institutional customers throughout New Zealand. New
Zealand operates under the Westpac New Zealand, Westpac
Institutional Bank, Westpac Life and BT brands in NZ Westpac Pacific
Westpac Pacific provides banking services for retail and business in
Fiji, Papua New Guinea, Vanuatu, Cook Islands, Tonga, Solomon
Islands and Samoa Group Businesses or GBU Group Businesses
provides centralised Group functions, including Treasury and Finance
Westpac’s divisions Cash earnings Is a measure of the level of profit
that is generated by ongoing operation and is therefore available for
distribution to shareholders. Three categories of adjustments are made
to reported results to determine cash earnings: material items that key
decision makers at Westpac believe do not reflect ongoing operations;
items that are not considered when dividends are recommended; and
accounting reclassifications that do not impact reported results. For
details of these adjustments refer to slide 142 Core earnings Net
operating income less operating expenses AIEA Average
interest-earning assets Net interest margin Net interest income divided
by average interest-earning assets ROTE Return on average tangible
equity and is cash earnings divided by average ordinary equity less
average goodwill and other intangible assets (excluding capitalised
software) Full-time equivalent employees (FTE) A calculation based on
the number of hours worked by full and part-time employees as part of
their normal duties. For example, the full-time equivalent of one FTE is
76 hours paid work per fortnight Risk Weighted Assets or RWA Assets
(both on and off-balance sheet) are risk weighted according to each
asset's inherent potential for default and what the likely losses would be
in case of default. In the case of non asset based risks (ie market and
operational risk), RWA is determined by multiplying the capital
requirements for those risks by 12.5 NCI Non-controlling interests
Capital ratios As defined by APRA (unless stated otherwise)
Internationally comparable Internationally comparable regulatory
capital ratios are Westpac’s estimated ratios after adjusting the capital
ratios determined under APRA Basel III regulations for various items
as identified in the August 2014 Australian Bankers Association’s
report titled “International comparability of capital ratios of Australia’s
major banks” prepared by Pricewaterhouse Coopers. This report is
available at “bankers.asn.au/FSI/Papers-and-Reports/PapersandReports” Financial performance Capital
| Westpac Group First
Half 2015 Presentation &
Investor Discussion Pack
Appendix 2: Definitions
(continued) 144 TCE
Total committed
exposures Stressed loans
Stressed loans are the
total of watchlist and
substandard, 90 days past
due and not impaired and
impaired assets Impaired
assets Impaired assets
can be classified as 1.
Non-accrual assets:
Exposures with
individually assessed
impairment provisions
held against them,
excluding restructured
loans 2. Restructured
assets: exposures where
the original contractual
terms have been formally
modified to provide
concessions of interest or
principal for reasons
related to the financial
difficulties of the
customer 3. 90 days past
due and not impaired:
exposures where
contractual payments are
90 days or more in
arrears and not well
secured 4. other assets
acquired through security
enforcement 5. any other
assets where the full
collection of interest and
principal is in doubt 90
days past due and not
impaired A loan facility
where payments of
interest and/or principal
are 90 or more calendar
days past due and the
value of the security is
sufficient to cover the
repayment of all
principal and interest
amounts due, and interest
is being taken to profit
on an accrual basis
Watchlist and
substandard Loan
facilities where
customers are
experiencing operating
weakness and financial
difficulty but are not
expected to incur loss of
interest or principal
Individually assessed
provisions or IAPs
Provisions raised for
losses that have already
been incurred on loans
that are known to be
impaired and are
individually significant.
The estimated losses on
these impaired loans is
based on expected future
cash flows discounted to
their present value and as
this discount unwinds,
interest will be
recognised in the
statement of financial
performance Collectively
assessed provisions or
CAPs Loans not found to
be individually impaired
or significant will be
collectively assessed in
pools of similar assets
with similar risk
characteristics. The size
of the provision is an
estimate of the losses
already incurred and will
be estimated on the basis
of historical loss
experience of assets with
credit characteristics
similar to those in the
collective pool. The
historical loss experience
will be adjusted based on
current observable data
Key metrics Asset
quality Net Promoter
Score or NPS Net
Promoter Score measures
the net likelihood of
recommendation to
others of the customer’s
main financial institution
for retail or business
| Westpac Group First Half
2015 Presentation & Investor
Discussion Pack Appendix 2:
Definitions (continued) 145
Key metrics (continued)
Leading employer in
workplace diversity We were
recognised as the leading
bank in the 2014 Australian
Workforce Equality Index for
creating an inclusive
workplace culture for lesbian,
gay, bisexual, transsexual and
intersex employees; as a
leading employer of people
with disability in the
Australian Government’s
National Disability Awards;
as a leading employer of
mature employees by
US-based AARP; and we
retained our status as an
Employer of Choice for
Women by the Workplace
Gender Equality Agency
Liquidity coverage ratio
(LCR) LCR is calculated as
the percentage ratio of stock
of HLQA and CLF over the
total net cash outflows in a
modelled 30 day defined
stressed scenario High
quality liquid assets (HQLA)
As defined by APRA in
Australian Prudential
Standard APS210: Liquidity,
including RBNZ BS-13
qualifying liquid assets, less
RBA open repos funding and
end of day exchange
settlement accounts
Committed liquidity facility
(CLF) 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 APS210 – Liquidity
Credit value adjustment
(CVA) CVA adjusts the fair
value of over-the-counter
derivatives and credit risk.
CVA is employed on the
majority of derivative
positions and reflects the
market view of the
counterparty credit risk. A
debit valuation adjustment
(DVA) is employed to adjust
for our own credit risk
Funding valuation adjustment
(FVA) FVA reflects the
estimated present value of the
future market funding cost or
benefit associated with
funding uncollateralised
derivatives Derivative
adjustments In First Half
2015 changes were made to
derivative valuation
methodologies, which
include the first time
adoption of the FVA for
uncollateralised derivatives.
The impact of these changes
resulted in a $122 million
(pre-tax) charge which
reduced non-interest income
Key metrics (continued)
Customer satisfaction –
overall business Source:
DBM Consultants Business
Financial Services Monitor,
March 2013- 2015, 6MMA.
MFI customers, all
businesses. The Customer
Satisfaction score is an
average of customer
satisfaction ratings of the
customer’s main financial
institution for business
banking on a scale of 0 to 10
(0 means ‘extremely
dissatisfied’ and 10 means
‘extremely satisfied’)
Customer satisfaction –
overall consumer Source:
Roy Morgan Research,
March 2013-2015, 6MMA.
Main Financial Institution (as
defined by the customer).
Satisfaction ratings are based
on the relationship with the
financial institution.
Customers must have at least
a Deposit/Transaction
account relationship with the
institution and are aged 14 or
| Westpac Group First Half 2015 Presentation &
Investor Discussion Pack Investor Relations
Team 146 Andrew Bowden Head of Investor
Relations +61 2 8253 4008
[email protected] Leigh Short
Senior Manager +61 2 8253 1667
[email protected] Equity Investor
Relations www.westpac.com.au/investorcentre
click on ‘Analysts’ Centre’ • Annual reports •
Presentations and webcasts • 5 year financial
summary • Prior financial results For further
information on Westpac Jacqueline Boddy
Director +61 2 8253 3133
[email protected] Louise Coughlan
Director (Rating Agencies) +61 2 8254 0549
[email protected] Debt Investor
Relations Retail Shareholder Investor Relations
Rebecca Plackett Manager +61 2 8253 6556
[email protected] or email:
[email protected]
| Westpac Group First Half
2015 Presentation & Investor
Discussion Pack Disclaimer
147 The material contained
in this presentation is
intended to be general
background information on
Westpac Banking
Corporation (Westpac) and
its activities. The information
is supplied in summary form
and is therefore not
necessarily complete. 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.
Unless otherwise noted,
financial information in this
presentation is presented on a
cash earnings basis. Cash
earnings is a non-GAAP
measure. Refer to Westpac’s
2015 Interim Financial
Results (incorporating the
requirements of Appendix
4D) for the half year ended
31 March 2015 available at
www.westpac.com.au for
details of the basis of
preparation of cash earnings.
Refer to slides 44 for an
explanation of cash earnings
and Appendix 1 slide 142 for
a reconciliation of reported
net profit to cash earnings.
This presentation contains
statements that constitute
“forward-looking statements”
within the meaning of
Section 21E of the US
Securities Exchange Act of
1934. 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’, ‘likely’,
‘estimate’, ‘anticipate’,
‘believe’, or 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.
Actual results could differ
Exhibit 3
Appendix 3A.1 - Notification of dividend /
distribution Appendix 3A.1 - Notification of
dividend / distribution 1 / 4 Important
Information Information and documents
given to ASX become ASX's property and
may be made public. Please note that two
corporate actions on the same security may
not run with different record dates if the
timetables result in overlapping (but not
identical) ex-periods. It is permissible to run
different corporate actions with the same
record date except in the case of
reorganisations - consolidations/splits which
cannot run at the same time as any other
corporate action for that entity Denotes
minimum information required for first
lodgement of this form. * Denotes
information that must be provided before or
on +business day 0 of the relevant **
Appendix 6A or Appendix 7A timetable.
The balance of the information, where
applicable, must be provided as soon as
reasonably practicable by the entity. Part 1 Entity and announcement details 1.1 Name
of +Entity WESTPAC BANKING
CORPORATION 1.2 Registered Number
Type ABN Registration Number
33007457141 1.3 ASX issuer code WBC
1.4 The announcement is New
announcement 1.5 Date of this
announcement Monday May 4, 2015 1.6
ASX +Security Code WBC ASX +Security
Description ORDINARY FULLY PAID
Part 2A - All dividends/distributions basic
details Each form (announcement) can only
relate to one +record date and payment date
but may have multiple types of
dividend/distributions applicable for those
dates, for example an ordinary and a special
dividend/distribution. If more than one type
is applicable tick each relevant box in
Q2A.1. Further Parts to the form will be
presented for each type of
dividend/distribution selected. All other
questions in Part 2A are to be answered on
the basis of the total of all the
dividend/distribution types indicated in
Q2A.1 (i.e. gross) as well as any
supplementary dividend/distribution if
applicable. Appendix 3A.1 - Notification of
dividend / distribution
Appendix 3A.1 - Notification of
dividend / distribution Appendix
3A.1 - Notification of dividend /
distribution 2 / 4 2A.1 Type of
dividend/distribution Ordinary
2A.2 Dividend/distribution period
(frequency) Six Monthly 2A.3
Dividend/distribution relates to
period ending Tuesday March 31,
2015 2A.4 +Record Date Friday
May 15, 2015 2A.5 Ex Date
Wednesday May 13, 2015 2A.6
Payment Date Thursday July 2,
2015 2A.7 Is the payment of
dividend/distribution conditional?
No 2A.8 Currency in which the
dividend/distribution is made
("primary currency") AUD Australian Dollar 2A.9 Total
dividend/distribution amount per
+security (in primary currency)
AUD 0.93000000 2A.10 Whether
mandatory or via an optional plan
or facility, will or can the
dividend/distribution be paid in a
currency other than the primary
currency? Yes 2A.11 Does the
+entity have a
Dividend/Distribution
Reinvestment Plan (DRP) 2A.11a
If the +entity has a DRP, is the
DRP applicable to this
dividend/distribution? Yes
2A.11a(i) DRP Status in respect
of this dividend/distribution Full
DRP 2A.12 Does the +entity
have tax component information
apart from franking? Yes Part 2B
- Currency Information 2B.1
Does the +entity pay in certain
currencies dependent upon the
registered address of the
+security holder (for example
NZD to residents of New Zealand
and/or USD to residents of the
U.S.A.)? No
Appendix 3A.1 - Notification of dividend /
distribution Appendix 3A.1 - Notification of
dividend / distribution 3 / 4 2B.2 Does the entity
offer all +security holders a documented plan
under which they may apply to receive their
payment in a foreign currency? Yes 2B.2a Please
provide or indicate where +security holders may
obtain the foreign currency plan documentation
inclusive of the application form and further
information about the foreign currency plan.
Details of dividend payment options for Westpac
Ordinary Fully Paid Shares are available in
Westpac's Investor Centre at .
www.westpac.com.au/investorcentre 2B.2b Date
and time by which share registry must receive
application documentation Friday May 15, 2015
17:00:00 Part 3A - Ordinary
dividend/distribution 3A.1 Is the ordinary
dividend/distribution estimated at this time? No
3A.1a Ordinary dividend/distribution estimated
amount per +security AUD 3A.1b Ordinary
Dividend/distribution amount per security AUD
0.93000000 3A.2 Is the ordinary
dividend/distribution franked? Yes 3A.2a Is the
ordinary dividend/distribution fully franked? Yes
3A.3 Percentage of ordinary
dividend/distribution that is franked 100.0000 %
3A.3a Applicable corporate tax rate for franking
credit (%) 30.0000 % 3A.4 Ordinary
dividend/distribution franked amount per
security AUD 0.93000000 3A.5 Percentage
amount of dividend which is unfranked 0.0000 %
3A.6 Ordinary dividend unfranked amount per
security AUD 0.00000000 3A.7 Ordinary
dividend/distribution conduit foreign income
amount per security AUD 0.00000000 Part 3E Other - distribution components / tax 3E.1 Please
indicate where and when information about tax
components can be obtained (you may enter a
url). A New Zealand imputation credit of NZD
0.06 per Westpac Ordinary Fully Paid Share will
attach to the dividend. Further details are
available in Westpac's investor centre at .
www.westpac.com.au/investorcentre
Appendix 3A.1 - Notification of dividend / distribution Appendix 3A.1 - Notification of dividend / distribution 4 / 4 Part 4A +Dividend reinvestment plan (DRP) 4A.1 What is the default option if +security holders do not indicate whether they want to
participate in the DRP? Do not participate in DRP (i.e. cash payment) 4A.2 Last date and time for lodgement of election notices to
share registry under DRP Monday May 18, 2015 17:00:00 4A.3 DRP discount rate 1.5000 % 4A.4 Period of calculation of
reinvestment price Start Date Wednesday May 20, 2015 End Date Thursday June 18, 2015 4A.5 DRP price calculation methodology
The average of the daily volume weighted average market price per Westpac Ordinary Fully Paid Share sold on the ASX and Chi-X
during the 21 trading days commencing Wednesday May 20, 2015, less a 1.50 percent discount. 4A.6 DRP Price (including any
discount): AUD 4A.7 DRP +securities +issue date Thursday July 2, 2015 4A.8 Will DRP +securities be a new issue? Yes 4A.8a Do
DRP +securities rank pari passu from +issue date? Yes 4A.9 Is there a minimum dollar amount or number of +securities required for
DRP participation? No 4A.10 Is there a maximum dollar amount or number of +securities required for DRP participation? No 4A.11
Are there any other conditions applying to DRP participation? Yes 4A.11a Conditions for DRP participation Participation in the DRP
is restricted to shareholders who are resident in, and whose address on the register of shareholders is in, Australia or New Zealand.
4A.12 Link to a copy of the DRP plan rules
http://www.westpac.com.au/about-westpac/investor-centre/shareholder-information/dividend-rein vestment-plan/ Part 5 - Further
information 5.1 Please provide any further information applicable to this dividend/distribution