Westpac Banking Corporation · ASX:WBC

Westpac Banking — Westpac New Zealand — Debt Investor Presentation (June 2015)

42 slides from Westpac Banking's debt investor presentation, June 2015

1. Slide 1: Westpac New Zealand Limited Investor Update

   Westpac New Zealand Limited June 2015 Investor update

2. Slide 2: Disclaimer

   :2 The material contained in this presentation is intended to be general background information on Westpac Securities NZ Limited, Westpac New Zealand Covered Bond Limited and Westpac New Zealand Limited and their activities. It should not be reproduced, distributed or transmitted to any person witho

3. Slide 3: Agenda

   :3 Overview of Westpac New Zealand Limited New Zealand Economic Outlook Strategy, Financial Results and Capital Wholesale Funding New Zealand Housing Portfolio Covered Bond Programme Appendix

4. Slide 4: Westpac Group

   : 4 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

5. Slide 5: New Zealand Economic Outlook

   New Zealand Economic Outlook

6. Slide 6: New Zealand's economic outlook has undergone significant change

   : 6  New Zealand’s economic outlook has undergone significant NZ export commodity prices (Index, July 1986 = 100) change in the last 12 months, with the growth outlook now 450 450 Westpac weaker than previously forecast. 400 Dairy forecast 400 350 Beef 350  A headwind for the economy is the weaker

7. Slide 7: Fonterra milk payout history

   Fonterra milk payout history Kg Ms $10 +9 KO Ms ¢49 $9 - _ $9 $8 | wDividend ~ $8 $7 | | $7 $6 - = Milk price L $6 $5 - _ $5 $4 - - $4 $3 - | $3 $2 - | $2 $1 - | $4 $0 - - $0 &* & PF FF EF FoF Fg gh VX Gg yw SFP EH SPS OSS PS Fonterra

8. Slide 8: Fonterra payout forecast

   :8 • Final 2015 payout forecast NZ$4.25-4.35/kg (Kilo Milk Solid) • Forecast Payout 2016 NZ$3.85/kg • Fonterra to provide interest free loan of further NZ$0.5/kg to be repaid when payouts return to above $6/kg • New Zealand remains one of the global lowest cost producers Production cost $/100kg

9. Slide 9: GDP growth and construction activity

   : 9  A key driver of the non-farm economy has been the post- Canterbury reconstruction activity (2012 dollars) earthquake rebuild in Canterbury, and renewed building 1.4 1.6 activity in Auckland. Westpac Residential 1.2 forecast Commercial 1.4 Other construction  Post-earthquake construction in Ca

10. Slide 10: House prices, building consents, migration, unemployment

    :10 House Price by region Monthly New Building Consents 170 170 Auckland 160 160 Wellington 150 150 Index = 100 at peak 140 ChCh 140 Index = 100 at peak 130 Other Nth Is. 130 120 Other Sth Is. 120 110 110 100 100 90 90 80 Source: REINZ, Westpac 80 2007 2008 2009 2010 2011 2012 2013 2014 2015 Net Mig

11. Slide 11: Dairy is significant but only 28% of NZ exports

    : 11 Statistics NZ at 31 March 2015 • Dairy is significant but represents only 28% of NZ exports • All sectors benefit from weakening currency particularly immediate improvement for Tourism and Education • NZ has strong trading relationships benefiting from continued urbanisation in broad Asia. • No

12. Slide 12: Low inflation expectations and RBNZ easing cycle

    :12 • Low inflation expectations, coupled with a slowdown in the Dairy sector, the RBNZ have embarked on an easing cycle. • The RBNZ continues to signal room for further falls in interest rates dependent on data over coming months . • Market pricing infers OCR at or below 2.5% by year end.

13. Slide 13: Strategy, Financial Results and Capital

    Strategy, Financial Results and Capital

14. Slide 14: Customer Experience, Revenue, Productivity

    : 14 Customer Experience Revenue #1 in NPS by FY20 Productivity Materially increasing Cost-to-Income of 37% by FY18 capability and cadence

15. Slide 15: Strategic Priorities

    : 15 ASPIRA- VISION TION To be one of the world’s great companies for our customers, To win in our chosen markets and deliver the leading customer ^ communities and people to prosper and grow experience, digitally enabled, anywhere, anytime. Five priority areas to deliver Westpac’s Service Revolutio

16. Slide 16: WNZL at a glance

    : 16 Nine months WNZL at a glance % Change Key Financial Data ended 30 vs. PCP* Jun 2015 • One of New Zealand’s largest banking organisations • Regulated by the Reserve Bank of New Zealand (RBNZ) Net profit after tax $689m 9% and Australian Prudential Regulations Authority (APRA) Cost to income rati

17. Slide 17: Income statement summary

    :17 vs. PCP vs. PCP 1 2 (NZ$m) 3Q14YTD 3Q15YTD ($) (%) Net interest income 1,210 1,332 122 10% Non interest income 295 300 5 2% Net operating income 1,505 1,632 127 8% Operating expenses (614) (641) (27) 4% Underlying profit/ core earnings 891 991 100 11% Impairment charges (6) (45) (39) 650% Income

18. Slide 18: Balance sheet summary

    :18 YTD YTD vs PCP vs PCP 1 (NZ$m) 30-Jun-14 30-Sep-14 30-Jun-15 ($) (%) ($) (%) Assets Net loans 63,788 64,582 67,747 3,165 5% 3,959 6% Funded Liquids 6,757 6,682 7,773 1,091 16% 1,016 15% Due from related entities 1,918 1,900 2,814 914 48% 896 47% Other assets 1,398 1,285 1,565 280 22% 167 12% Tot

19. Slide 19: WNZL Lending Portfolio diversified

    WNZL Lending Portfolio diversified Credit Cards Other Retail 5.1% 0.8% Agriculture, 8.1% Property, 6.7% Finance, 7.1% Government, 3.6% Manufacturing, 4.0% Utilities, 2.1% Wholesale Trade, 2.1% Transport & Storage, 1.8% Others, 9.0% *Business Banking @ 21.5%; Corporate and Institutional @ 23.0%

20. Slide 20: Loan growth, deposits and capital ratios

    :20 Gross loans ($b) Customer deposits ($b) Steady loan growth Consistent strong deposit growth 70 55 Thousands Thousands 50 60 45 68.2 40 65.0 51.4 49.4 62.1 46.6 50 60.0 35 41.7 50.8 51.8 30 33.3 30.6 40 25 FY10 FY11 FY12 FY13 FY14 3Q15 FY10 FY11 FY12 FY13 FY14 3Q15 Deposit to loan ratio (%) Tier

21. Slide 21: Cash earnings, efficiency, margin and impairments

    : 21 Cash earnings ($m) Expense to income ratio (%) Consistent performance uplift Improvements in efficiency 1,000 50.0% 750 37.5% 500 853 921 25.0% 47.5% 714 43.5% 42.5% 40.2% 39.3% 613 250 433 12.5% 0 0.0% FY11 FY12 FY13 FY14* 3Q15** FY11 FY12 FY13 FY14* 3Q15** Net interest margin (%) Impairment c

22. Slide 22: Capital

    : 22  All capital is currently Common Equity Tier 1 Capital (CET1)  Focus on making the capital base more efficient WNZL Capital Capital Adequacy ratios As at 30 June 2015 Headroom Capital Adequacy RBNZ Jun-15 to RBNZ Ratios Minimum $6,750m Minimum $5,819m Other $4,642m Common Equity Tier 1 11.8%

23. Slide 23: Wholesale Funding

    Wholesale Funding

24. Slide 24: Funding composition and term maturities

    :24 Funding composition (%) Term maturities ($bn) 8 6 5 7 6 8 7 Wholesale Offshore <1Yr 8 4 3 2 2 4 4 3 3 4 3 3 Wholesale Offshore >1Yr 9 9 9 10 Wholesale Onshore <1Yr Wholesale Onshore >1Yr 67 69 68 Intercompany Debt 63 Equity Customer Deposits FY12 FY13 FY14 3Q15 Core Funding Ratio (%) Commentary

25. Slide 25: Wholesale funding mix and currency

    :25 Wholesale funding (%) @ 30 June 2015 Wholesale funding by currency (%) @ 30 June 2015 Funding mix Commentary • WNZL has a well balanced funding structure. 6% 14% • Ongoing reduction in US Commercial Paper. Customer Deposits • $7bn (FY11) down to $3bn (3Q15) Equity & Interco. 12% • Equity and Cus

26. Slide 26: Liquid assets

    :26 Liquid assets ($bn) Liquid assets as % maturing wholesale debt Liquid assets composition at 30 June 2015 Commentary Cash  Liquid asset holdings have remained robust over 15% the last 5 years. Short term inter-bank assets 31% 5%  Liquid asset portfolio diversified. Supranational securities 9% N

27. Slide 27: New Zealand Mortgage Portfolio

    New Zealand Mortgage Portfolio

28. Slide 28: Mortgage key statistics and products

    : 28 Key statistics – as at 30 June 2015 Mortgage Products Active mortgage customers 190k Fixed term and rate. Repayment Fixed Rate amount can be increased up to 20% but no lump-sum prepayments Total Mortgage Portfolio $41.0bn Floating - Variable rate. Primarily amortising Standard principal value M

29. Slide 29: Portfolio origination mix and interest type

    : 29 Portfolio origination mix (%) New Zealand mortgage portfolio (%) 1 Interest Interest type mix (%) type mix (%) New Zealand NZmortgage propertyportfolio LVR distribution (%) activity 100% 27% 30% 80% 39% 60% 40% 73% 70% 61% 20% 0% Fixed Floating Total P&I Interest Only 29 CoreLogic, Inc.

30. Slide 30: Mortgage portfolio LVR, loan amount, region, maturity

    :30 Mortgage Portfolio – LVR (Historical Value) Mortgage Portfolio – Original Loan Amount Average LVR 67% Average Loan $217k Mortgage Portfolio – Regional Profile Mortgage Portfolio – Maturation Profile

31. Slide 31: Mortgage delinquency and loss rates

    :31 Mortgage Portfolio – Delinquency Rates Mortgage Portfolio – Loss Rates Each Half (%) Mortgages % 30 dpd and written off – Yearly Averages Commentary • Asset quality of the mortgage portfolio continues to improve. • Post 2008 mortgage vintages continue to perform well. • Mortgage 90+ day delinque

32. Slide 32: Covered Bond Programme

    Covered Bond Programme

33. Slide 33: Covered bond programme summary

    :33 Issuer Westpac Securities NZ Limited, London Branch Group Guarantor Westpac New Zealand Limited Group Guarantor Rating AA-/Aa3/AA- by S&P / Moody’s / Fitch Format Legislative Covered Bond Covered Bond Rating Aaa / AAA by Moody’s / Fitch Programme Size €5 billion Maturity Options Soft and Hard Bu

34. Slide 34: Cover pool loan statistics

    :34 Cover Pool Loan Statistics as at 30 June 2015 • Covered Bond Pool eligibility criteria: – First ranking mortgage registered under the New Total Pool Loan Balance1 NZ$5,124,400,611 Zealand Real Property Legislation – All loans are secured by a mortgage over land and a Number of Loans 39,747 compl

35. Slide 35: Covered bond programme structure

    :35 Westpac Westpac NZ Westpac Banking 1 Corporation (WBC) New Zealand Covered Bond 8 Limited (WNZL) Limited (CBG) Covered Bond Swap Seller, Group Guarantor, & 2 Covered Bond Provider Interest Rate Swap Provider Guarantor 7 8 Key Westpac Securities 1. Loans sold by WNZL to CBG 3 NZ Limited (WSNZL) 4

36. Slide 36: Structure, security and overcollateralisation

    : 36 Structure Covered Bonds are issued by Westpac Securities NZ Limited, and guaranteed by WNZL (AA-/Aa3/AA-) , backed by an unconditional and irrevocable guarantee by the Covered Bond Guarantor (Westpac NZ Covered Bond Limited), which is limited in recourse to its assets Security Security comprise

37. Slide 37: Appendix

    APPENDIX

38. Slide 38: New Zealand population by region

    :38 Region Population Northland 151,689 Northern Auckland 1,415,689 (53% of Waikato 403,639 population) Bay of Plenty 267,741 Gisborne 46,653 Hawke's Bay 151,179 Central Taranaki 109,608 (24% of population) Manawatu-Wanganui 222,689 Wellington 471,315 Tasman 47,157 Nelson 46,437 Marlborough 43,416 S

39. Slide 39: Immigration by country

    : 39 Country 2010 2011 2012 2013 2014 Total United Kingdom 6,800 5,400 5,500 6,400 5,500 29,600 India 5,600 5,800 5,100 5,200 7,700 29,400 China 3,500 4,500 5,100 5,400 6,600 25,100 Philippines 1,500 1,800 2,000 2,100 3,100 10,500 Germany 1,400 1,400 1,600 1,900 2,300 8,600 Total 18,800 18,900 19,30

40. Slide 40: Regulatory changes: LVR restrictions and APRA LCR

    :40 • RBNZ (Covered Bonds) Amendment Act 2013 • RBNZ LVR restrictions • October 2013 – Limit 10% >80% LVR • June 2015 – Outside Auckland – Limit 15% >80% LVR • RBNZ Investor Housing Loans • Limit 5% >70% LVR on Investor Housing Loans in Auckland • Higher RWA for Capital purposes on non-Owner Occupie

41. Slide 41: Covered bond legislation

    :41 • Legislation passed December 2013 ⁻ RBNZ1 (Covered Bonds) Amendment Act 2013 • Programme must be registered with RBNZ ⁻ WNZL first New Zealand bank registered - April 2014 • Non compliance, RBNZ can compel issuer to take immediate corrective action • Cover Pool (SPV) is not an associated, relat

42. Slide 42: Further information and contacts

    : 42 For further information on WNZL and WSNZL: • Funding and Securitisation Programmes For further information contact: • WNZL Disclosure Statement • WSNZL Financial Statements Jim Reardon Treasurer Please visit our investor website: Westpac New Zealand Limited http://www.westpac.com.au/about-westp

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