Westpac Banking Corporation · ASX:WBC
Westpac Banking — Debt Investor Presentation (February 2023)
38 slides from Westpac Banking's debt investor presentation, February 2023
Slide 1: Fixed Income Investor Presentation February 2023
FIXED INCOME INVESTOR PRESENTATION FEBRUARY 2023 WESTPAC BANKING CORPORATION ABN 33 007 457 141 Westpac Banking Corporation
Slide 2: Australian and New Zealand economic forecasts
Australian and New Zealand economic forecasts. Key economic indicators (%) 2021 2022 2023 Calendar years at February 2023 Q3 Q4 Q1 Q2 Q3F Q4F Q1F Q2F 2020 2021 2022F 2023F World GDP1 - - - - - - - - -3.0 6.0 3.3 2.9 Australia GDP2 4.1 4.6 2.9 3.2 5.9 2.6 2.7 2.0 -0.1 4.6 2.6 1.0 Unemployment – end p
Slide 3: Australian housing market
Australian housing market. In the midst of a significant correction; stabilisation expected late 2023 Australian dwelling prices (%, 3 month annualised) % 40 ‘Delta’ 35 2019 COVID-19 Macro-prudential election 30 measures 25 Macro- prudential 20 measures 15 10 5 0 -5 -10 rate cuts -15 rate hikes -20
Slide 4: Westpac overview – steady progress
Westpac overview – steady progress. Fix Well advanced on Fix • Major remediation programs in final stages and Simplify strategic • CORE program on track and delivering change priorities Simplify Financial performance • Announced sales of 9 businesses (out of 11). Exited 7 businesses. solid Perform D
Slide 5: Fix priority – reducing risk
Fix priority – reducing risk. Customer Outcomes and Risk Excellence (CORE) Program. CORE activities progress1 Sept 21 March 22 Sept 22 • CORE program in place to Design address enforceable undertaking with APRA signed 76% 99% 100% December 2020 Implement • Aims to strengthen risk governance, improve
Slide 6: Simplify priority – moving to further simplify banking
Simplify priority1 – moving to further simplify banking. Portfolio Geographic Banking simplification simplification simplification 3 businesses exited in FY22 2 Asian offices closed 27 Co-located branches 150 Products reduced by more than applications Digital 7 Total of business exits completed 3 As
Slide 7: Capital ratios
Capital ratios. Level 2 CET1 capital ratio movements (%) CET1 capital operating range CET1 capital ratio of 11.29% at Sep-22 10.5% Unquestionably 11.29 (0.43) (0.03) 11.13 0.10 ~0.45 ~11.68 strong benchmark Management Operating range 11.0% - 11.5% 0.30 buffer Buffer 0.75% Countercyclical capital Unq
Slide 8: Provisions for Expected Credit Loss
Provisions for Expected Credit Loss. Sound coverage. Total impairment provisions1 ($m) Provision coverage Sep-21 Dec-21 Sep-22 Dec-22 Overlay Stage 1 CAP Stage 2 CAP Provisions to credit RWA 140bps 132bps 128bps 132bps Stage 3 CAP Stage 3 IAP CAP to credit RWA 117bps 118bps 116bps 121bps 4,999 4,766
Slide 9: Stressed exposures and delinquencies
Stressed exposures and delinquencies. Stressed exposures as a % of TCE Australian mortgage delinquencies (%) 30+ day delinquencies 90+ day delinquencies Watchlist and substandard 4.0 90+ day past due and not impaired1 COVID-19 deferrals Small increase in 30+ day delinquencies mainly due to Impaired
Slide 10: Australian mortgage portfolio repayment buffers
Australian mortgage portfolio repayment buffers. Offset account balances1 ($bn) Australian housing loan-to-value ratios (LVRs) as at 31 Dec 22 (%) Linked to I/O mortgages Linked to P&I mortgages . 3 51 53 53 63 At origination Dynamic 46 48 40 41 42 37 39 39 36 44 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 S
Slide 11: Funding and liquidity
Funding and liquidity. Key funding and liquidity measures Liquidity coverage ratio (%) Net stable funding ratio (%) Customer deposits to net loans ratio (%) Quarterly average 83.6 82.9 84.0 142 132 139 Regulatory 127 121 122 133% ex-CLF requirement 100% Dec-21 Sep-22 Dec-22 Dec-21 Sep-22 Dec-22 Dec-
Slide 12: Tier 2 capital issuance and maturities
Tier 2 capital issuance and maturities. Westpac Tier 2 issuance and calls/maturities1,2,3 at 30 Sep 22 (notional amount, A$bn) 14.0 Issuance Maturities 12.0 10.0 FY23 issuance expected to be approx. $4-5 billion1 subject to 8.0 market conditions 6.0 12.8 4.0 6.2 5.2 2.0 4.2 2.3 3.2 3.1 2.2 1.4 1.2 0
Slide 13: Further information
Further information Westpac Group
Slide 14: FY22 Group Financial results
FY22 Group Financial results. FY22 vs FY21 Net profit after tax FY21 – FY22 ($m) Net profit after tax Average interest earning Mainly due to lower asset 5,694 + 4% (NPAT) ($m) assets up 8%, partly offset write-downs $1.0bn by 13bps reduction in net Return on average interest margin 8.10 + 40bps ordi
Slide 15: Our plan to become a net-zero, climate resilient bank
Our plan to become a net-zero, climate resilient bank. Progress • Joined NZBA in July 2022 01 Net-zero, climate resilient operations • Set interim 2030 financed emissions • Agreements in place to source the equivalent of 100% of our Australian targets for five sectors in our lending electricity cons
Slide 16: Targets set for five sectors in our lending portfolio
Targets set for five sectors in our lending portfolio. Sector targets in line with our NZBA commitment. For details on our targets and target-setting approach refer to our ‘Net-Zero 2030 Targets and Financed Emissions – our methodology and approach’. We continue to integrate and operationalise our t
Slide 17: Loan portfolio composition
Loan portfolio composition. As at 30 September 2022. Exposures at default1 by sector ($bn) Top 10 exposures to corporations and NBFIs5 (% of TCE) 2 Finance & insurance 1.2 1.2 1.1 1.1 1.1 1.0 1.0 Government admin. & defence 1.0 1.0 Property3 Wholesale & retail trade Agriculture, forestry & fishing S
Slide 18: Credit quality across sectors
Credit quality across sectors. As at 30 September 2022. Corporate and business stressed exposures by industry sector ($bn) Sep-21 Mar-22 Sep-22 2.0 Increase driven by 1.8 downgrade of one 1.6 exposure to watchlist 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Accommodation, cafes Services Property Utilities busin
Slide 19: Australian mortgage portfolio composition
Australian mortgage portfolio composition. Australian mortgage portfolio Sep-21 Sep-22 Dec-22 Fixed rate mortgage expiry schedule balance balance balance at 31 December 2022 ($bn) Total portfolio ($bn) 455.6 467.6 470.9 Expired 1Q23 Yet to expire 56 Owner occupied (OO) (%) 63.7 65.8 66.2 Investment
Slide 20: Australian mortgage portfolio analysis
Australian mortgage portfolio analysis. Australian mortgage book by Percentage increase in variable-rate repayment following interest rate origination period at changes (accounts at 31 Dec-22)3,4 31 Dec-22: $471 billion1 Originated before Aug-19 Originated between Aug-19 and Jun-22 Accounts >12 mont
Slide 21: New Zealand credit quality
New Zealand credit quality. Business stressed exposures as Mortgage 30+ and 90+ day delinquencies (%) a % of New Zealand business TCE 1.0 Increase in delinquencies 0.8 due to seasonality and Watchlist & substandard higher cost of living 90+ day past due and not impaired 0.6 0.54 Impaired 0.4 0.2 0.2
Slide 22: Economics
Economics Westpac Group
Slide 23: Global market backdrop
Global market backdrop. Central banks responding aggressively to inflation. Fed Funds and RBA Cash Rate (%) Global inflation (ann %) % Cash Rate Fed Funds (midpoint) % ann% ann% Australia G7 9 9 20 20 8 8 Westpac f’casts 7 to Dec-23 7 15 * CPI inflation; ‘G7’ is GDP- 15 6 6 weighted avg of US, EU, 1
Slide 24: RBA tightening cycle to continue
RBA tightening cycle to continue. Labour market remains key risk to policy. CPI inflation (%) Job vacancies (% of labour force) and Unemployment rate (%) % % Core CPI, %qtr Headline CPI %yr %^ 9 9 % Vacancies* (ABS survey), lhs Core CPI, avg RBA %yr 3.5 -3 8 Westpac f’casts to 8 Unemployment rate, r
Slide 25: Australian economy: slower growth expected in 2023
Australian economy: slower growth expected in 2023. Higher rates and high inflation to impact. Australia’s growth mix (ppts, annual) Australia’s GDP profile (index) ppts annual contributions to GDP growth, year end ppts annual Index pre COVID-19 forecast current forecast Index 6 6 112 112 5 4.5 5 De
Slide 26: Commodities: demand shifting, supply remains tight
Commodities: demand shifting, supply remains tight. Terms of Trade at record high in 2Q22. Australian commodity prices (index) Terms of Trade (index) 2012=100 2012=100 index index Westpac f’casts Westpac estimate 4Q22 320 to Dec-23 520 140 140 Iron ore Met coal 470 67% above long run avg Wool boom 2
Slide 27: Australian housing market
Australian housing market. Slowdown in activity in response to higher rates. Mortgage interest rates (%) Housing finance approvals by segment ($bn) % % $bn Value of housing finance $bn Variable* 3 year fixed 8 9 18 First home buyers 18 8 16 16 7 Upgraders 7 14 14 6 Investors 6 12 12 5 5 10 10 4 4 8
Slide 28: Australian housing market
Australian housing market. Rental market continues to tighten. Affordability: Australia (%) Westpac Rental vacancy rates (% quarterly, annual average) f’casts to % % Sydney Melbourne Dec-23 % 8 Sydney Melbourne Perth Brisbane latest month % 8 40 40 (where 7 available) 7 35 35 6 6 10yr avgs 30 30 5 5
Slide 29: The Australian economy
The Australian economy. Population 26 million1. Australian population Australian GDP and employment composition Output by sector 2021-22 (% contribution to GDP)2 NT Mining 250k 11 Manufacturing 19 QLD 7 Construction WA 5.3m Transport, Utilities 2.8m SA 8 Wholesale, Retail 9 1.8m Agriculture NSW Hous
Slide 30: New Zealand economic overview
New Zealand economic overview. Economic activity softening, expected to weaken further due to interest rate hikes. New Zealand GDP ($bn) Consumer prices (% year) $bn $bn %yr %yr 75 75 9 Forecast 9 8 8 70 70 7 7 6 6 5 5 65 65 Forecast 4 4 3 3 60 60 RBNZ target band 2 2 1 1 55 55 0 0 Jun-18 Jun-19 Jun
Slide 31: New Zealand housing market
New Zealand housing market. The housing market downturn is deepening following the sharp rise in interest rates. Monthly house sales and prices (% yr) New Zealand dwelling prices (index) 3500 3500 Sales %yr 14,000 40 OCR increases begin 3000 Auckland 3000 Sales (left axis) 12,000 30 Canterbury House
Slide 32: New Zealand economic activity
New Zealand economic activity. Following strong growth over the past year, demand has started to soften. Manufacturing conditions (index) and Residential dwelling consents (annual, total) Service sector conditions (index) Index Annual total Annual total Index 70 Delta 70 30000 30000 Auckland Initial
Slide 33: New Zealand exports
New Zealand exports. Commodity prices near cyclical low, services exports recovery in train. NZ export commodity prices (index) Farmgate milk price ($/kg Ms) Index = 100 in 1986 Index = 100 in 1986 $/kg Ms $/kg Ms 450 450 12 12 400 400 Forecast 10 10 350 350 300 300 8 8 250 250 6 6 200 200 150 150 4
Slide 34: New Zealand inflation and interest rates
New Zealand inflation and interest rates. Demand and supply pressures widespread, interest rates to continue pushing higher. Inflation (% yr) Strong demand and shortage of supplies %yr %yr % of business highlighting a % of business highlighting a 9 9 100 lack of demand as a constraint lack of labour
Slide 35: The New Zealand economy
The New Zealand economy. Population 5 million1. Regional GDP2 Economy Output 2022 - sector shares of GDP (%) Nationwide GDP: NZ$373bn Other 11% Primary industries 6% Northland, $9bn Construction 7% Social services (incl. 4% of population Bay of Plenty, $19bn health and education) 10% Utilities 3% 6%
Slide 36: Sustainability – footnotes
Sustainability – footnotes. Our plan to become a net-zero, climate resilient bank. 1. Predominantly through a virtual power purchase agreement with Bomen Solar Farm in NSW and through other sources including Westpac rooftop solar and Large-Scale Generation Certificates sourced and retired on behalf
Slide 37: Disclaimer
Disclaimer. The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (“Westpac”) (ABN 33 007 457 141) and its activities. It should not be reproduced, distributed or transmitted to any person without the consent of Westpac and is not
Slide 38: Disclaimer continued
Disclaimer continued. Further important information regarding climate change and sustainability-related statements This presentation contains forward-looking statements and other representations relating to environment, social and governance (ESG) topics, including but not limited to climate change,
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