WESTPAC RETAIL & BUSINESS BANKING Jason Yetton Group Executive
Westpac Banking Corporation ABN 33 007 457 141
Westpac RBB is well positioned for continued solid returns
Strong foundation
Westpac Local has created a strong relationship based franchise, supported by a step change in leadership and banker capability
Disciplined approach
Strong performance with a good balance across growth / return / risk while at the same time improving productivity
Positioned for continued success
Plans underway to generate additional value via deeper customer relationships, particularly through deposits, wealth and SME
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Westpac Local – a recap of last three years Westpac RBB strategy is focused on generating superior returns through more customers and deeper customer relationships - delivered via Westpac Local Increased skills & segment specific salespeople to deepen relationships
Building strong local distribution businesses 54 Regional General Managers and over 650 Bank Managers Branches operating as profit centres with P&L and balance sheet accountability Decentralised responsibility to meet local needs including opening hours, pricing, credit authority, recruitment, marketing etc.
More available with improved points of presence
More segment specific salespeople – 400 Local Business Bankers – 308 Personal Relationship Managers – Branch roles aligned to segments New training focussed on target segments Enhanced sales capability with updated sales disciplines/processes
31 new branches 172 new ATMs 50% of branches refurbished New branch format and ATM branding Highly rated online experience
1 Spider is the new teller platform based on the St.George system.
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Making it easier for customers Over 300 branch improvement processes Enhanced branch capability – Card servicing – Personal loan origination Increased branch authority – Advice and information needs in branch – Resolving issues on the spot Improved technology rollout of Spider1 completed
Westpac Local has delivered on key metrics WRBB Customer numbers (m)
WRBB Customers with 4+ products (%) 5.25
5.18
29.3
5.06
28.5 27.5
4.90
Sep-09
29.9
Sep-10
Key metrics (avg. per wk)
Teller referrals
Sep-11
Mar-12
Sep-09
Sep-10
Sep-11
Mar-12
WRBB Revenue per avg. FTE ( $’000)
Mar 09
Mar 12
Increase
3.3
9.8
197%
7.1 7.1
10.6 11.0
49% 55%
496
15.4 17.3
50% 63%
FY08
566
Needs profiles/banker Personal bankers Business bankers Sales per FTE Personal bankers Business bankers
530 515
(Sept 10) 10.3 10.6
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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FY09
FY10
FY11
Westpac Local has driven solid earnings growth, with balanced revenue and expense growth WRBB Net operating income ($m)
WRBB Expense to income ratio (%) 6,350
6,177
%
6,106
31.0 30.0 29.0 28.0 27.0 26.0 25.0 24.0
5,643
FY08
FY09
FY10
FY11
49.8
49.4
29.9 48.6 28.3
47.527.5 26.1
FY08 Sep-09
WRBB Core earnings ($m)
FY09 Sep-10
FY10 Sep-11
FY11 Mar-12
WRBB Cash earnings ($m) 1,915
1,878
3,263
3,231
1,752
3,064
1,729
2,856
FY08
FY09
FY10
FY11
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
FY08
5
FY09
FY10
FY11
Westpac Local has helped us establish a leadership position in banking and wealth cross sell BT Super for Life customer numbers3 (‘000)
Sector leading wealth penetration1 (%) WRBB
Peer 1
Peer 2
Peer 3
211
20.3%
172
18.4%
128
15.5% 13.6%
Mar-10
Sep-10
Mar-11
Sep-11
49
Sep-08
Mar-12
Market leading revenue per adviser2 ($’000) 500
232
Sep-09
Sep-10
Sep-11
Mar-12
Growing revenue sourced from wealth4 ($m) 314
Bank median WRBB Financial Planners
400
276
300
Up 14%
200
100 FY08
FY09
FY10
FY11
1H11
1H12
1H12
1 Refer slide 16 for definition of Wealth metrics. 2 Comparator December 2011. All data is for year ended 30 June except 1H12 which is for the 6 months to December 2011 annualised. 3 Customers from Westpac RBB only (excludes St.George customers). 4 Wealth revenue is 100% reported in BTFG.
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Westpac RBB’s disciplined approach continues to deliver solid momentum in 1H121 Deposit growth (retail) 1.2x system2
Net operating income up 1%
Mortgage growth 0.7x system3 Wealth penetration sector leading at 20.3%4 Business lending up 1% with improving pipeline
Cash earnings up 6%
Growth
Return
Investment driven
Disciplined margin performance
Productivity Strength
AFS structure Continued implemented improvement Revenue per FTE up 3% Expenses down 1%, expense to income ratio down 90bps to 47.4%
Stronger balance sheet
Margins 4bps lower (approx. one third the decline of peers)
Deposits to loans ratio up 180bps to 53.5% Stressed exposures to TCE5 down 13bps
Impairment charges down 20%
1 All figures for 1H12 vs 2H11. 2 APRA Banking statistics, six months to 31 March 2012. 3 RBA Banking Statistics, six months to March 2012. 4 Refer slide 16 for definition of Wealth metrics. 5 TCE is Total committed exposure
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Westpac RBB is positioning for continued success
Digitalisation
Economic Transformation
Demographic Shift Basel III LCR Dodd-Frank
Regulatory Changes
1m+ mobile customers, up 90% in last 12 months New apps currently under development Online Transformation Program underway Simplifying sales and service online
Changing distribution footprint to align with customer preferences and geographic trends More industry specialisation, particularly in fastest growing segments Multiple brands provide increased flexibility Realigning network to be „all of relationship‟ driven rather than lending driven Continuing to build banking/wealth distribution alignment Stronger focus on deposit rich segments and affluent „Prime of Life‟ segment Sustainable balance sheet Drive harder on low capital intensive activities: wealth; transactional banking; FX; interest rate derivatives; and deposits Increased focus on higher return segments/sectors
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Re-orientating growth to higher market profit pools Australian financial service profit pools by segment & product1 ($) Increased focus on sources of highest deposit, super and life insurance growth and value
Lending General Insurance Life Insurance Super and Investment Deposits
Mass (all ages)
Affluent < 45 years
Affluent > 45 years
SME
1 Lending = Housing, business and personal loans along with credit cards; Super & Investment = Retail super and self managed super funds (excludes corporate and industry super), investments is retail investments; General insurance = Home and contents and Personal insurance; Life insurance = Retail life insurance and excludes group life insurance.
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Westpac RBB is well positioned for continued solid returns Strong relationship based franchise
Grow customer numbers Deepen products per customer Retain customers for all of life
Disciplined approach to growth, return, productivity and strength
Maintain margin management disciplines Focus on gathering deposits first, specifically from customers that see us as their MFI Best practice productivity
Positioned for continued success through deposits, wealth & SME
Grow AFS market share in chosen segments Leverage multi-brand differentiation Continue to increase revenue/FTE
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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WESTPAC RETAIL & BUSINESS BANKING APPENDIX Jason Yetton Group Executive
Westpac Banking Corporation ABN 33 007 457 141
Westpac RBB Cash earnings up 6% WRBB Movement 1H12 – 2H11
WRBB Cash earnings movement half on half ($m) 109
3
(37)
(1)
(1)
994
3
34
56
13
(51)
1,049
921
WRBB Core earnings continued momentum ($bn)
1H12
Tax & NCI
Impairment charges
Expenses
Non-II
Net II
2H11
Tax & NCI
4bps
2.15
6%
Cash earnings up 6% to $1,049m (represents 33% of Westpac Group)
Core earnings
3%
Core earnings up 3% to $1,719m
flat
Mortgages up 2%, with strong retention of customers and margin management Strengthening balance sheet with deposit growth of 5%, ahead of system1 Deposits to loans ratio improved to 53.5% (up 180bps)
4bps
Margins down 4bps to 2.13% Lending margins improved 5bps, aided by improved business spreads and repricing of mortgages Deposit spreads and mix declined 8bps with competition and higher growth in lower spread term deposits
6%
Rise in business lending fees Higher market sales income as customers increased their use of hedging to manage FX and rates Higher earnings from credit card loyalty points redemptions Partly offset by lower card transaction fees
1%
Lower expenses from FTE reductions, improved productivity and reduced discretionary spend Helped offset increased credit card loyalty costs, salary increases and rise in operating lease rentals
20%
Impairment charges down $56m to $218m Consumer impairment charges down $12m, improvement in 30+ days Credit Card delinquencies and flat Mortgages 90+ days delinquencies Business impairment charges down $44m due to an improvement in stressed exposures portfolio
Margins
WRBB Net interest margin (%)
1.72
Net interest income
Up 6%
Impairment charges
Expenses
Non-II
Net II
1H11
Up 8%
Cash earnings
Non-interest income
–
1bp (6bps)
2.17
(2bps)
1.59
(1bp) 2.13
1.53
Expenses
Impairment charges
1H12
Wholesale funding & other
Deposit mix
Deposit spread
Asset mix
1H12
Asset spread
1H11
2H11
1H10
1H11
Down 4bps
1 APRA banking statistics, March 2012.
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Westpac RBB delivering improved metrics WRBB Key features of 1H12
WRBB Key metrics
Westpac Local strategy continues to deliver relationship based growth, with a stronger balance sheet, tightly controlled expenses and a strong risk profile
1H11
2H11
1H12
11,192
10,958
10,632
Improved key metrics, include
Change on 2H11
–
Highest wealth penetration of major banks1 at 20.3% (up 50bps). BT Super for Life customers up 10%
Employees (# FTE)
–
Home & Contents insurance cross sell up 26 percentage points to 105%. On average, for every home loan we sell we write more than one risk product
Women in senior leadership (%)
42.7
43.8
44.5
–
Customers up 1% and Customers with 4+ products up 60bps to 29.9%. WRBB 2nd in market share for both online and mobile (active mobile customers 920K up 28%) 2
Revenue per avg. FTE („000)
274
292
302
–
WRBB ranks No.1 of major banks in SME and Agri NPS and No.2 in Commercial3
Expense to income ratio (%)
48.9
48.3
47.4
–
Leaner operating model with process efficiencies reducing FTE 3%, and improving banker productivity with revenue per average FTE up 3%. Women in senior leadership roles at 44.5% already above Group-wide 2014 target of 40%
Customers (#m)
5.13
5.18
5.25
NPS – Consumer affluent3 (rank)
2nd
3rd
4th
x
WRBB Strategy
NPS – Business SME3 (rank)
1st
1st
1st
Focused on providing financial knowledge through empowered local bankers
NPS – Business Agri3 (rank)
1st
1st
1st
Westpac Local strategy aims to assist our people build deeper relationships and become closer to customers and communities
Affluent customer retention (%)
99.0
98.9
98.7
–
Customers with 4+ products (%)
28.3
29.3
29.9
Customer deposits to loans ratio (%)
50.9
51.7
53.5
Wealth penetration (%)1
19.6
19.8
20.3
BT Super for Life customers („000)
189
211
232
Insurance – H&C cross sell4 (%)
76
79
105
It has delivered strong improvement in banker capability and productivity over the last three years. Further improvements to productivity and customer experience will be achieved with the roll out of the St.George teller system (Spider) to WRBB now completed Through the Westpac Local strategy we are growing customer numbers, maintaining high retention levels and deepening customers relationships
1 Refer to slide 106 of 1H12 Investor Discussion Pack for Wealth penetration metrics provider details. 2 Roy Morgan, March 12. 3 Refer slide 107 of 1H12 Investor Discussion Pack for NPS definition and source. 4 Insurance Home and Contents Cross sell rates are defined as the number of risk sales divided by the total home loan sales.
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Strong risk culture with clear market differentiation on credit quality and impairments WRBB Strong risk profile
WRBB Movement in impairment charges ($m)
Credit Risk (1H12 compared to 2H11) Stressed exposures as a % of TCE1 at 137bps, down 13bps Mortgage 90+ day delinquencies stable at 52bps Credit Cards 90+ day delinquencies at 106bps, up 8bps Impairment charges down 20% to $218m Better than target on 15 of 18 key risk indicators
274
273
(17)
(12)
(27)
218
2H11
New IAPs
Writebacks
Recoveries Write-offs Changes in CAPs
1H12
WRBB Stressed exposures as % of TCE 1(%)
WRBB 90+ days delinquencies (%) Credit Cards
11
Down 20%
1H11
2.0
(11)
Mortgages
Impaired
90+ days past due well secured
Watchlist & substandard
2
1.5
1.0
1
0.5
0.0 Sep-08
0 Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
1H09
1 TCE is Total Committed Exposure.
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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2H09
1H10
2H10
1H11
2H11
1H12
Ongoing changes in the operating environment will significantly impact financial services Digitalisation
Digitalisation of the economy is transforming how customers interact with businesses and is placing customers more in control
Economic Transformation
The commodities super cycle and demand from Asia has created a resources boom and a higher Australian dollar, leading to different growth rates across sectors and geographies. Trends have been exacerbated by a preference for lower gearing by business and consumers
Demographic Shift
The Australian population is aging and bringing a shift in the type of products demanded, particularly in superannuation
Basel III LCR Dodd-Frank
Regulatory Changes
New rules for capital and liquidity are changing the profitability of products. Other changes are presenting opportunities such as in superannuation
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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Definitions and Disclaimer DEFINITIONS: Wealth and Home and Content Penetration Metrics: Data based on Roy Morgan Research, Respondents aged 14+. Wealth penetration is defined as the number of Australians who have Managed Investments, Superannuation or Insurance with each financial services group (“group”) and who also have a Deposit or Transaction Account, Mortgage, Personal Lending or Major Card with that group as a proportion of the total number of Australians who have a Deposit or Transaction Account, Mortgage, Personal Lending or Major Card with that group. Home and Contents penetration is defined as the number of Australians who have Household Insurance (Building, contents and valuable items) within the group and who also have a Deposit or Transaction Account, Mortgage, Personal Lending or Major Card with that group as a proportion of the total number of Australians who have a Deposit or Transaction Account, Mortgage, Personal Lending or Major Card with that group. 12 month rolling average to March 2012. WRBB includes Bank of Melbourne (until Jul-11), BT, Challenge Bank, RAMS (until December 2011), Rothschild, and Westpac. St.George includes Advance Bank, Asgard, BankSA, Bank of Melbourne (from Aug-11), Barclays, Dragondirect, Sealcorp, St. George and RAMS (from January 2012). Westpac Group includes Bank of Melbourne, BT, Challenge Bank, RAMS, Rothschild, Westpac, Advance Bank, Asgard, BankSA, Barclays, Dragondirect, Sealcorp and St.George.
DISCLAIMER: 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. Refer to Westpac First Half 2012 Results (incorporating the requirements of Appendix 4D) for the half year ended 31 March 2012 available at www.westpac.com.au for details of the basis of preparation of Cash earnings. This presentation contains statements that constitute “forward-looking statements” including within the meaning of Section 21E of the US Securities Exchange Act of 1934. The forwardlooking statements 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 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. Should one or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from the expectations described in this presentation. Factors that may impact on the forward-looking statements made include those described in the section entitled „Risk factors' in Westpac‟s Interim Financial Report for the half year ended 31 March 2012 available at www.westpac.com.au. When relying on forward-looking statements to make decisions with respect to us, investors and others should carefully consider such factors and other uncertainties and events. We are under no obligation, and do not intend, to update any forward-looking statements contained in this presentation.
UBS Australian Financial Services Conference – Westpac RBB Presentation | June 2012
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