Westpac Banking Corporation · ASX:WBC
Westpac Banking — Westpac New Zealand — Debt Investor Presentation (January 2014)
40 slides from Westpac Banking's debt investor presentation, January 2014
Slide 1: Westpac New Zealand Limited Investor Update, Year Ended 30 September 2013
: Westpac New Zealand Limited Year Ended 30 September 2013 Investor update January 2014
Slide 2: Disclaimer and forward-looking statements
: 2 The material contained in this presentation is intended to be general background information on Westpac Securities NZ Limited and Westpac New Zealand Limited and their activities. It should not be reproduced, distributed or transmitted to any person without consent of Westpac New Zealand Limited
Slide 3: Agenda
: 3 Franchise and Strategy Financial Results and Trends Capital Structure Wholesale Funding NZ Economic Outlook NZ Housing Portfolio
Slide 4: Franchise and Strategy
Franchise and Strategy
Slide 5: WNZL at a glance
: 5 Year ended Change WNZL at a glance Key Financial Data 30 Sept 2013 2013 - 2012 • One of new Zealand’s largest banking organisations Net profit after tax $714m 16% • Regulated by the Reserve Bank of New Zealand (RBNZ) Cost to income ratio 42.5% 100bps • A wholly owned subsidiary of Westpac Bankin
Slide 6: Westpac Group structure
: 6 Westpac Group New Zealand Australia Locally incorporated Bank, wholly owned but not guaranteed by Westpac Banking Westpac New Zealand Corporation Limited (WNZL) Comprises Westpac’s consumer, business and institutional banking operations in NZ Financial performance disclosed via quarterly W
Slide 7: Purpose, brand, ambition and priorities
> bo 2 3 fl B 2) re 3 je) Purpose ome much loved... helping you achieve your dreams Brand - Ambition Values Help is what we do ¢ Bethe most sustainably profitable ¢ One Team ¢ Making banking easier growth business in the Westpac * Courage ¢ Help when you need it most copes —_s a aeene peels ¢ Achiev
Slide 8: Growth, Return, Productivity, Strength
: 8 Higher growth in target segments, Maintain strong ROE with a focus including Agri, SME, MyBank on margin management Targeted growth to Efficient use of capital optimise the portfolio Growth Return Various Maintain drivers discipline Productivity Strength Disciplined cost Continued A st
Slide 9: FY13 performance highlights
: 9 R Improved core earnings and reduced impairment charges leading to improved cash earnings NIM broadly maintained during FY13 despite competitive pressures G Deposit growth funded loan growth as well as wholesale debt and intra-group debt reductions Targeted mortgage (below 80% LVR) growt
Slide 10: Financial Results and Trends
Financial Results and Trends
Slide 11: Income statement and key ratios
: 11 Variance Variance 1 2 (NZ$m) FY11 FY12 FY13 ($) (%) Net interest income 1,316 1,499 1,536 37 2% Non interest income 308 356 371 15 4% Net operating income 1,624 1,855 1,907 52 3% Operating expenses (771) (807) (810) (3) (0%) Underlying profit 853 1,048 1,097 49 5% / core earnings Impairment cha
Slide 12: Balance sheet
: 12 Variance Variance 1 2 (NZ$m) FY11 FY12 FY13 ($) (%) Assets Net loans 51,250 59,422 61,585 2,163 4% Funded Liquids 3 6,693 6,651 6,270 (381) (6%) Due from related entities 1,565 1,575 1,424 (151) (10%) Other assets 1,148 1,174 1,233 59 5% Total assets 60,656 68,822 70,512 1,690 2% Liabilities 4
Slide 13: Earnings, efficiency, margin and impairment trends
: 13 Historically… …And throughout FY13 Cash earnings ($m) Expense to income ratio (%) Cash earnings ($m) Expense to income ratio (%) Consistent performance uplift Improvements in efficiency Strong all round performance Improvements in efficiency 800 50.0% 50.0% 250 714 625 37.5% 37.5% 200 450 25.0%
Slide 14: Deposits and deposit to loan ratio
: 14 Deposits FY13 ($bn) Historical trend in deposits and mix ($bn) 48.0 50.0 $33.3bn $42.0bn $46.6bn 2.9 46.0 37.5 24.9 23.1 44.0 1.7 25.0 19.2 Call 47% Term 53% 46.6 Call 45% Term 55% 42.0 12.5 Call 42% Term 58% 42.0 18.9 21.8 14.1 10.95% growth - 40.0 FY11 FY12 FY13 4Q12 Term Call 4Q13 Term Call
Slide 15: Lending growth by housing, business and agri
: 15 Total net lending ($m) Gross Housing lending ($m) +$1,670m, 38,000 +$1,052m, 62,000 2.8% 2.9% 59,500 36,000 57,000 34,000 61,585 37,594 60,453 37,062 59,915 36,542 59,422 59,191 35,986 35,978 54,500 32,000 3.6% growth 4.5% growth 52,000 30,000 4Q12 1Q13 2Q13 3Q13 4Q13 4Q12 1Q13 2Q13 3Q13 4Q13 G
Slide 16: Operating income and fee income trends
: 16 Operating income trends ($m) Operating income ($m) $1,855m $1,907m 500 2,000 $1,624m 371 89 95 87 94 95 356 $1,455m 1,500 308 375 291 1,000 250 1,499 1,536 382 382 384 386 384 1,316 1,164 500 125 31% growth - 0 FY10 FY11 FY12 FY13 4Q12 1Q13 2Q13 3Q13 4Q13 Non II Net II Non II Net II Fee and com
Slide 17: Operating expenses and efficiency
: 17 Operating Expenses ($m) FY13 Expense to income ratio vs peers 840 46% 630 44% 420 807 810 42% 771 704 44.25% 43.86% 40% 42.48% 210 41.06% - 38% FY10 FY11 FY12 FY13 Peer Peer Peer Westpac FTE (000) Investment and compliance spend ($m) 5000 120 100 3750 80 Spend ($m) 60 2500 4698 4,660 4,691 4,48
Slide 18: Asset quality and housing book LVR
: 18 Stress assets to TCE (%) Impairment charges to gross loans (%) Continued improvement in the quality of assets Strengthening of lending book 8.0% -1bps +15bps -8bps +15bps FY13 6.0% 0.18% 0.17% 0.10% 0.07% 4.0% Peer Peer Peer Westpac 5.24% 2.0% 4.32% FY12 3.35% 2.30% 0.32% 0.22% 0.09% 0.10% 0.0%
Slide 19: Capital Structure
Capital Structure
Slide 20: Tier 1 capital, ROE and risk weighted assets
: 20 Tier 1 capital ratio (%) FY13 Total capital ratios (%) Continued re-investment in capital Capital levels well funded 11.90% 12.40% 12.61% 12.30% 14.0% Basel II Basel III 10.5% 7.0% 12.0% 12.3% 12.30% 9.9% 10.5% 10.40% 10.40% 9.5% 8.87% 3.5% 0.0% FY09 FY10 FY11 FY12 FY13 Peer Peer Peer Westpac C
Slide 21: Regulatory capital ratios and equity composition
: 21 WNZL regulatory capital ratios (%) FY13 capital ratios Basel III (%) 20 Basel II Basel III Capital adequacy ratios 15 14.1 11.9 12.1 12.3 Common Equity Tier One Capital ratio 12.3 13.0 13.1 11.9 13.0 12.1 12.1 12.3 12.3 12.0 11.7 10.5 Tier One Capital ratio 12.3 10 Total Capital ratio 12.3 5 Re
Slide 22: Wholesale Funding
Wholesale funding
Slide 23: Core funding and term maturities
: 23 Core Funding Term maturities WNZL Core Funding Ratio RBNZ Min Core Funding Ratio 100% 90% 80% 70% 60% 50% 2H10 1H11 2H11 1H12 2H12 1H13 2H13 Funding composition Commentary Core Funding comfortable above RBNZ minimum. Term maturities well spread for manageable annual refinancing task On go
Slide 24: Funding composition and wholesale funding
: 24 Total funding composition (%) Wholesale funding (%) Wholesale funding by currency (%) 1% 9 9 10 9 6% NZD 5 3 12% Domestic Medium Term Notes 34 34 23 20 28% USD Euro Medium Term Notes 23% 39% 16% US Commercial Paper EUR 63 68 57 57 Covered Bonds CHF 21% 23% Certificates of Deposit 31% Other FY10
Slide 25: Liquid assets
: 25 Liquid assets ($bn) Liquid assets as % short term funding 12.0 9.0 4.0 4.0 4.0 4.0 6.0 7.1 7.2 6.9 3.0 5.5 0.0 FY10 FY11 FY12 FY13 Funded Unfunded Liquid assets composition Commentary Cash Funded liquid assets have remained relatively 17% stable over last 3 years. Due from other financial ins
Slide 26: NZ Economic Outlook
NZ Economic Outlook
Slide 27: NZ regional population
: 27 Region Population Northland 158,400 Northern Auckland 1,507,600 (53% of population) Waikato 416,200 Bay of Plenty 277,300 Gisborne 46,800 Hawke's Bay 155,000 Central (24% of population) Taranaki 110,100 Manawatu-Wanganui 232,500 Wellington 490,100 Tasman 48,400 Nelson 46,600 Marlborough 45,700
Slide 28: NZ economic forecast commentary
: 28 Westpac forecast a strong NZ economy through 2014, following on from a robust Q3 in 2013, highlighted by a 1.4% rise in GDP. September’s GDP highlights the robust recovery to farm production following the drought earlier in the year, along with the continued positive impact of the Christchu
Slide 29: GDP, commodity prices, unemployment, immigration
: 29 GDP Growth – Annual change World Prices for NZ commodities 8 % % 8 350 Index Index 350 6 Forecast 6 300 300 4 4 250 Forecast 250 2 2 200 200 0 0 150 150 -2 -2 100 100 -4 Source: -4 50 50 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Une
Slide 30: Christchurch rebuild and house prices
: 30 Christchurch rebuild House prices inflation $bn $bn % % 1.6 1.6 30 30 Estimate Forecast 25 Forecast 25 1.4 1.4 1.2 Residential 1.2 20 20 Commercial 15 15 1.0 1.0 Infrastructure 10 10 0.8 0.8 5 5 0.6 0.6 0 0 0.4 0.4 -5 -5 0.2 0.2 -10 -10 0.0 0.0 -15 -15 2011 2013 2015 2017 2019 2021 2000 2002 20
Slide 31: Leverage, servicing and house affordability
: 31 Leverage and Servicing House affordability 180 % % 16 Ratio Ratio 6 25 160 14 5 20 140 12 120 4 10 15 100 8 3 80 6 10 60 Household debt as % nominal disposable 2 House price-to-income ratio (left axis) 40 income 4 1 5 Servicing as % nominal disposable income 2 Lower quartile house price-to-medi
Slide 32: Interest rates and projections
: 32 90 day interest rates 90 day rate projections % % 16 16 5.5 % RBNZ projection (Sep % 5.5 MPS) 14 14 5.0 5.0 Swap market pricing Forecast 12 12 4.5 4.5 Westpac Economics 10 10 forecast 4.0 4.0 8 8 3.5 3.5 6 6 3.0 3.0 4 4 2 2 2.5 2.5 0 0 2.0 2.0 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 N
Slide 33: NZ Housing Portfolio
NZ Housing Portfolio
Slide 34: Home loan portfolio regional and LVR profile
: 34 Home loan Portfolio - Regional Profile • Mortgage portfolio of $37.5bn. • Geographic profile consistent with 40% 42% population concentrations of New Zealand. • Well secured book with low LVR profile. 8% 10% • Growth in above 80% LVR lower than peers. Auckland Wellington Christchurch Rest Home
Slide 35: Home loan size and maturation profile
: 35 Home Loan Portfolio - Original Loan Amount 40% • Majority of lending concentrated in lower 35% loan amounts (less than $500k). 30% 25% 20% • Less than 3% of the portfolio are large loan 15% sizes above $1m. Limits exposure to higher 10% value market segments that are typically 5% 0% more volati
Slide 36: Mortgage delinquency and loss rates
: 36 • Delinquency rates continue to improve for Mortgage Portfolio - Delinquency Rates both 30+ and 90+ day arrears. 1.40% 1.20% • Driven by improved underwriting standards 1.00% 0.80% and strengthening New Zealand housing 0.60% market and economy. 0.40% 0.20% • Loss rates stable and continue to ru
Slide 37: Housing loans payments in advance
: 37 • Advance payments driven by customers maintaining scheduled payments at historical levels after rate falls. Housing Loans - Payments In Advance % of Total Outstandings 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Aug-12 Aug-13 Jun-12 Jul-12 Nov-12 Apr-13 Jun-13 Jul-13 Dec-12 Oct-12 Jan-13 Mar-13 Feb-13 M
Slide 38: Home loan origination process
Originator Application Home Loan Origination Process Private, Mobile, Branch, Business = 3 = 2 = Broker Operations aA é . 3 ~*~ Co 3 Lend. 4 5 ers Recommendatioi g = ca a4 s £6 3 2s S Credit Authority Conditional 3° (Credit Manager a a og = E s t o 5 Tend Exception Request 3 5 3 = S = io] = g = = é
Slide 39: Arrears and collections process
: 39 1 - 10 days Payment retry 1 - 21 days Branch/Relationship contact 21 - 30 days Phone Call - Dialler 32 days Letter – penalty interest 39 - 45 days Phone Call - Dialler 46 days Letter – intention to list default 46 - 80 days Phone Call – Dialler and Manual 80 days Issue Demand 90 days Demand exp
Slide 40: For further information contact
: 40 For further information contact: For further information on WNZL and WSNZL: Funding and Securitisation Jim Reardon Programmes Treasurer Westpac New Zealand Limited WNZL Disclosure Statement +64 9 367 3539 WSNZL Financial Statements [email protected] Please visit our investor websi
Westpac New Zealand — Debt Investor Presentation (January 2014) on 6ix