WNZL Disclosure Statement for year ended 30 September 2018

Annual Report and
Disclosure Statement
For the year ended 30 September 2018
Westpac
New Zealand
Limited

Contents
Annual report for the year ended 30 September 2018
General information 1
Directors’ statement 6
Income statement 7
Statement of comprehensive income 7
Balance sheet 8
Statement of changes in equity 9
Statement of cash flows 10
Note 1 Financial statement preparation 11
Note 2 Net interest income 15
Note 3 Non-interest income 16
Note 4 Operating expenses 16
Note 5 Auditor’s remuneration 17
Note 6 Impairment charges/(benefits) 17
Note 7 Income tax expense 18
Note 8 Imputation credit account 19
Note 9 Receivables due from other
financial institutions 19
Note 10 Other assets 19
Note 11 Trading securities 19
Note 12 Available-for-sale securities 20
Note 13 Loans 20
Note 14 Asset quality 21
Note 15 Deferred tax assets 22
Note 16 Intangible assets 23
Note 17 Financial assets pledged as collateral 24
Note 18 Other liabilities 25
Note 19 Deposits and other borrowings 25
Note 20 Debt issues 25
Note 21 Provisions 26
Note 22 Loan capital 27
Note 23 Share capital 28
Note 24 Related entities 29
Note 25 Derivative financial instruments 32
Note 26 Fair value of financial assets and
financial liabilities 35
Note 27 Offsetting financial assets and
financial liabilities 38
Note 28 Operating lease commitments 40
Note 29 Credit related commitments, contingent assets
and contingent liabilities 40
Note 30 Segment reporting 41
Note 31 Securitisation, covered bonds and other
transferred assets 42
Note 32 Structured entities 43
Note 33 Insurance business 45
Note 34 Capital adequacy 45
Note 35 Risk management 48
Note 36 Concentration of funding 68
Note 37 Concentration of credit exposures 69
Note 38 Credit exposures to connected persons and non-
bank connected persons 71
Note 39 Notes to the statement of cash flows 72
Note 40 Subsequent events 73
Conditions of registration 74
Independent auditor’s report 79

Annual report for the year ended 30 September 2018
Pursuant to section 211(3) of the Companies Act 1993, the shareholder of Westpac New Zealand Limited has agreed that the Annual Report of Westpac
New Zealand Limited need not comply the requirements of paragraphs (a), and (e) to ( j) of subsection (1) and subsection (2) of section 211.
Accordingly, there is no information to be included in the Annual Report other than the financial statements for the year ended 30 September 2018 and
the independent auditor’s report on those financial statements.
For and on behalf of the Board of Directors:
JA Dawson
Chair
19 November 2018
DA McLean
Chief Executive
19 November 2018

1Westpac New Zealand Limited.
General information
Certain information contained in this Disclosure Statement is required by the Registered Bank Disclosure Statements (New Zealand Incorporated
Registered Banks) Order 2014 (as amended) (‘Order’).
In this Disclosure Statement, reference is made to:
–Westpac New Zealand Limited (otherwise referred to as the ‘Bank’);
–Westpac New Zealand Limited and its controlled entities (otherwise referred to as the ‘Banking Group’). Controlled entities of the Bank as at 30
September 2018 are set out in Note 24;
–Westpac Banking Corporation (otherwise referred to as the ‘Ultimate Parent Bank’); and
–Ultimate Parent Bank and its controlled entities (otherwise referred to as the ‘Ultimate Parent Bank Group’).
Words and phrases not defined in this Disclosure Statement, but defined by the Order, have the meaning given by the Order when used in this Disclosure
Statement.
Corporate information
The Bank was incorporated as Westpac New Zealand Limited under the Companies Act 1993 (Company Number 1763882) on 14 February 2006. The
head office of the Bank is situated at Westpac on Takutai Square, 16 Takutai Square, Auckland 1010, New Zealand and the address for service of process
on the Bank is Westpac on Takutai Square, 53 Galway Street, Auckland 1010, New Zealand.
The Bank is a locally incorporated subsidiary of the Ultimate Parent Bank undertaking the Ultimate Parent Bank’s New Zealand consumer and business
banking operations.
Ultimate Parent Bank
The Ultimate Parent Bank is incorporated in Australia under the Australian Corporations Act 2001 and its address for service of process is Level 18,
Westpac Place, 275 Kent Street, Sydney, New South Wales 2000, Australia.
Voting securities and power to appoint directors
The Bank is a subsidiary of Westpac New Zealand Group Limited (‘WNZGL’), a New Zealand company, which in turn is a wholly-owned subsidiary of
Westpac Overseas Holdings No. 2 Pty Limited (‘WOHL’), an Australian company. WOHL is, in turn, a wholly-owned subsidiary of the Ultimate Parent Bank.
At 30 September 2018, WNZGL has a direct qualifying interest in 100% of the voting securities of the Bank. The Ultimate Parent Bank has an indirect
qualifying interest in 100% of the voting securities of the Bank.
WNZGL has the ability to directly appoint up to 100% of the Board of Directors of the Bank (the ‘Board’) and, as indirect holding companies of the Bank,
both the Ultimate Parent Bank and WOHL have the ability to indirectly appoint up to 100% of the Board.
In addition, the Ultimate Parent Bank has the power under the Bank’s constitution to directly appoint up to 100% of the Board from time to time by giving
written notice to the Bank.
No director may be appointed unless the Reserve Bank of New Zealand (‘Reserve Bank’) has advised it has no objection to that appointment.
Limits on material financial support by the Ultimate Parent Bank
The Ultimate Parent Bank is an authorised deposit-taking institution (‘ADI’) under the Banking Act 1959 of Australia (‘Australian Banking Act’) and, as
such, is subject to prudential regulation and supervision by the Australian Prudential Regulation Authority (‘APRA’). APRA has the power to prescribe
prudential requirements which may affect the ability of the Ultimate Parent Bank to provide material financial support to the Bank. Pursuant to current
APRA requirements, and unless APRA provides otherwise, the Ultimate Parent Bank must comply with, among other prudential requirements, APRA’s
Prudential Standard APS 222 Associations with Related Entities (‘APS 222’). APS 222 includes the following prudential requirements:
–the Ultimate Parent Bank’s exposure to the Bank (being a related ADI as defined in APS 222) must not exceed 50% of the Ultimate Parent Bank’s Level
1 capital base (as defined in APS 222);
–the Ultimate Parent Bank’s aggregate exposure to all related ADI’s must not exceed 150% of the Ultimate Parent Bank’s Level 1 capital base (as defined
in APS 222);
–the Ultimate Parent Bank must not hold unlimited exposures to the Bank (such as a general guarantee covering any of the Bank’s obligations);
–the Ultimate Parent Bank must not enter into cross-default clauses whereby a default by the Bank on an obligation (whether financial or otherwise) is
deemed to trigger a default of the Ultimate Parent Bank in its obligations;
–when determining limits on acceptable levels of exposure to the Bank, the Board of Directors of the Ultimate Parent Bank must have regard to:
–the level of exposures that would be approved to third parties of broadly equivalent credit status; and
–the impact on the Ultimate Parent Bank’s stand-alone capital and liquidity positions, and its ability to continue operating, in the event of a failure
by the Bank or any other related entity to which it is exposed.
In January 2013, a provision in APS 222 took effect which allows APRA to set specific limits on the Ultimate Parent Bank’s exposures to related entities,
which include the Bank.
The Ultimate Parent Bank complies with the requirements set by APRA in respect of the extent of financial support that is provided to the Bank.
Section 13A(3) of the Australian Banking Act provides that, in the event that the Ultimate Parent Bank becomes unable to meet its obligations or suspends
payment, the assets of the Ultimate Parent Bank in Australia are to be available to satisfy the liabilities of the Ultimate Parent Bank in the following order:

2
Westpac New Zealand Limited.
–first, certain obligations of the Ultimate Parent Bank to APRA (if any) arising under Division 2AA of Part II of the Australian Banking Act in respect
of amounts payable by APRA to holders of ‘protected accounts’ (as defined in the Australian Banking Act) as part of the Financial Claims Scheme
(‘FCS’) for the Australian Government guarantee of ‘protected accounts’ (including most deposits) up to A$250,000 in the winding-up of the
Ultimate Parent Bank;
–second, APRA’s costs (if any) in exercising its powers and performing its functions relating to the Ultimate Parent Bank in connection with the FCS;
–third, the Ultimate Parent Bank’s liabilities (if any) in Australia in relation to ‘protected accounts’ that account-holders keep with the Ultimate
Parent Bank;
–fourth, the Ultimate Parent Bank’s debts (if any) to the Reserve Bank of Australia;
–fifth, the Ultimate Parent Bank’s liabilities (if any) under an ‘industry support contract’ that is certified by APRA in accordance with the Australian
Banking Act; and
–sixth, the Ultimate Parent Bank’s other liabilities (if any) in the order of their priority apart from the above.
Under section 16 of the Australian Banking Act, on the winding-up of an ADI, APRA’s cost of being in control of an ADI’s business, or having an administrator
in control of an ADI’s business, is a debt due to APRA. Debts due to APRA shall have, subject to section 13A(3) of the Australian Banking Act, priority over
all other unsecured debts of that ADI.
On 19 November 2015, APRA informed the Ultimate Parent Bank that its Extended Licensed Entity (‘ELE’) non-equity exposures to New Zealand banking
subsidiaries is to transition to be below a limit of 5% of the Ultimate Parent Bank’s Level 1 Tier 1 capital, as part of an initiative to reduce Australian bank
non-equity exposure to their respective New Zealand banking subsidiaries and branches.
The ELE consists of the Ultimate Parent Bank and its subsidiary entities that have been approved by APRA to be included in the ELE for the purposes of
measuring capital adequacy.
APRA has allowed a period of five years commencing on 1 January 2016 to transition to be less than the 5% limit. Exposures for the purposes of this
limit include all committed, non-intraday, non-equity exposures including derivatives and off-balance sheet exposures. For the purposes of assessing
this exposure, the 5% limit excludes equity investments and holdings of capital instruments in New Zealand banking subsidiaries. As at 30 September
2018, the ELE’s non-equity exposures to New Zealand banking subsidiaries affected by the limit were below 5% of Level 1 Tier 1 capital of the Ultimate
Parent Bank.
APRA has also confirmed the terms on which the Ultimate Parent Bank ‘may provide contingent funding support to a New Zealand banking subsidiary
during times of financial stress’. APRA has confirmed that, at this time, only covered bonds meet its criteria for contingent funding arrangements.
General information (continued)

3Westpac New Zealand Limited.
General information (continued)
Directorate
The Directors of the Bank at the time this Disclosure Statement was signed were:
Name: Janice Amelia Dawson, B.Com, FCA
Non-executive: Yes
Country of Residence: New Zealand
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes
Independent Director: Yes
External Directorships: Deputy Chair of Air New Zealand Limited. Director of each
of AIG Insurance New Zealand Limited, Beca Group Limited, Meridian Energy Limited,
Erua Limited, Fulbright New Zealand and Jan Dawson Limited. Member of each of
the Capital Investment Committee of the National Health Board, the Council of the
University of Auckland and World Sailing Council Vice President and Director.
Name: David Alexander McLean, LL.B (Hons)
Non-executive: No
Country of Residence: New Zealand
Primary Occupation: Chief Executive, Westpac New Zealand Limited
Secondary Occupations: None
Board Audit Committee Member: No
Independent Director: No
External Directorships: Member of Mastercard Asia/Pacific Advisory Board. Chair of
the New Zealand Bankers’ Association. Member of the New Zealand Prime Minister’s
Business Advisory Council. Co-Chair of Champions for Change.
Name: Malcolm Guy Bailey, B.Ag.Econ.
Non-executive: Yes
Country of Residence: New Zealand
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes
Independent Director: Yes
External Directorships: Chairman of each of the Dairy Companies Association of
New Zealand, Red Meat Profit Partnership General Partner Limited and New Zealand
International Business Forum and Central Economic Development Agency Limited.
Director of each of RMI NZ Limited, Bailey Agriculture Limited, Bailey Family Properties
Limited, BBD Industrial Properties Limited, Embryo Technologies Limied, Etech
Engineering Services Limited, Etech NZ Limited, Gleneig Holdings Limited, Tadpole NZ
Limited and Greentech NZ Limited.
Name: Peter Francis King, BEc, FCA
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Chief Financial Officer, Westpac Banking Corporation
(April 2014 to June 2018, and October 2018 to date) / Acting Chief Risk Officer,
Westpac Banking Corporation (June 2018 to September 2018)
Secondary Occupations: None
Board Audit Committee Member: Yes
Independent Director: No
External Directorships: None
Name: Jonathan Parker Mason, MBA, MA, BA
Non-executive: Yes
Country of Residence: New Zealand
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes, Chair
Independent Director: Yes
External Directorships: Director of each of Air New Zealand Limited, Advanced
Metering Assets Limited, Advanced Metering Services Limited, Arc Innovations
Limited, Allagash Limited, New Zealand Assets Management Limited, NGC Holdings
Limited, On Gas Limited, Vector Advanced Metering Assets (Australia) Limited, Vector
Communications Limited, Vector Gas Trading Limited, Vector Limited, Vector Metering
Data Services Limited, Zespri Group Limited, and Zespri International Limited. Board
Member of the American Chamber of Commerce in New Zealand and World Wildlife
Fund New Zealand.
Name: Christopher John David Moller, BCA, Dip Accounting, FCA
Non-executive: Yes
Country of Residence: New Zealand
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes
Independent Director: Yes
External Directorships: Chairman of Meridian Energy Limited. Director of Urenui
Consultants Limited.
Name: Mary Patricia Leonie Quin, PhD, MBA, BSc (Hons)
Non-executive: Yes
Country of Residence: New Zealand
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes
Independent Director: Yes
External Directorships: None
All communications may be sent to the Directors at the head office of the Bank at Westpac on Takutai Square, 16 Takutai Square, Auckland 1010,
New Zealand.
Changes to Directorate
There have been no changes in the composition of the Board of Directors of the Bank since 30 September 2017.
Conflicts of interest policy
The Board has a procedure to ensure that conflicts and potential conflicts of interest between the Directors’ duty to the Bank and their personal,
professional or business interests are avoided or dealt with.
Each Director must give notice to the Board of any direct or indirect interest in a matter relating to the affairs of the Bank as soon as practicable after the
relevant facts have come to that Director’s knowledge. Where a matter is to be considered at a Directors’ meeting in which one or more Directors have
an interest, the Board’s practice is to manage any conflict of interest on a case-by-case basis, depending on the circumstances.

4
Westpac New Zealand Limited.
General information (continued)
Interested transactions
There have been no transactions entered into by any Director, or any immediate relative or close business associate of any Director, with the Bank, or
any member of the Banking Group:
a. on terms other than on those which would, in the ordinary course of business of the Bank or any member of the Banking Group, be given to any other
person of like circumstances or means; or
b. which could otherwise be reasonably likely to influence materially the exercise of that Director’s duties.
Credit ratings
The Bank has the following credit ratings with respect to its long-term senior unsecured obligations, including obligations payable in New Zealand
in New Zealand dollars as at the date the Directors signed this Disclosure Statement:
Rating Agency Current Credit Rating Rating Outlook
Fitch Ratings AA- Stable
Moody’s Investors Service (‘Moody’s’) A1 Stable
S&P Global Ratings (‘S&P’) AA- Negative
On 19 June 2017, Moody’s downgraded the Bank’s credit rating to A1. The downgrade follows Moody’s revision of the Australian Macro Profile to “Strong
+” from “Very Strong -”, which resulted in a downgrade for the Ultimate Parent Bank to ‘Aa3’ from ‘Aa2’. At the same time, Moody’s revised the outlook
to ‘stable’ from ‘negative’.
Descriptions of credit rating scales
1
Fitch RatingsMoody’sS&P
The following grades display investment grade characteristics:
Capacity to meet financial commitments is extremely strong. This is the highest issuer credit rating.AAAAaaAAA
Very strong capacity to meet financial commitments.AAAaAA
Strong capacity to meet financial commitments although somewhat susceptible to adverse
changes in economic, business or financial conditions.
AAA
Adequate capacity to meet financial commitments, but adverse business or economic conditions
are more likely to impair this capacity.
BBBBaaBBB
The following grades have predominantly speculative characteristics:
Significant ongoing uncertainties exist which could affect the capacity to meet financial
commitments on a timely basis.
BBBaBB
Greater vulnerability and therefore greater likelihood of default.BBB
Likelihood of default now considered a real possibility. Capacity to meet financial commitments is
dependent on favourable business, economic and financial conditions.
CCCCaaCCC
Highest risk of default.CC to C CaCC
Obligations currently in default.RD to DCSD to D
1
This is a general description of the rating categories based on information published by Fitch Ratings, Moody’s and S&P.
Credit ratings by Fitch Ratings and S&P may be modified by a plus (higher end) or minus (lower end) sign to show relative standing within the major
categories. Moody’s apply numeric modifiers 1 (higher end), 2 or 3 (lower end) to ratings from Aa to Caa to show relative standing within the major
categories.
The Bank’s current position is indicated in bold.
Guarantee arrangements
No material obligations of the Bank are guaranteed as at the date the Directors signed this Disclosure Statement.
Auditor
PricewaterhouseCoopers
PricewaterhouseCoopers Tower
188 Quay Street
Auckland, New Zealand

5Westpac New Zealand Limited.
Other matters
In May 2018, the Financial Markets Authority (‘FMA’) and Reserve Bank commenced thematic reviews into the conduct and culture at New Zealand’s retail
banks and life insurers. These reviews were established to assess whether misconduct of the type highlighted by the Australian Royal Commission into
Misconduct in the Banking, Superannuation and Financial Services Industry may be taking place in New Zealand. The thematic review report concerning
the retail banks review was released on 5 November 2018. That report identifies no widespread instances of misconduct and notes that each bank will be
required to provide the regulators with a plan by March 2019 to address the issues identified in the report and in individualised letters due to be received
by the banks in late 2018. The thematic review report in respect of the life insurers is currently due to be released in late January 2019. In addition to these
broader conduct and culture thematic reviews, the FMA issued its industry findings from a separate, but related, thematic review concerning retail bank
incentives on 15 November 2018. Each of these reports may lead to further scrutiny of the financial services industry in New Zealand.
Historical summary of financial statements
THE BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Year Ended
30-Sep-16
Year Ended
30-Sep-15
Year Ended
30-Sep-14
Income statement
Interest income 3,989 3,917 4,113 4,397 3,979
Interest expense (2,145) (2,176) (2,369) (2,607) (2,339)
Net interest income 1,844 1,741 1,744 1,790 1,640
Non-interest income 373 405 400 399 481
Net operating income before operating expenses and
impairment charges
2,217 2 ,146 2 ,144 2,189 2 ,121
Operating expenses (915) (954) (907) (888) (817)
Impairment (charges)/benefits (3) 76 (59) (47) (26)
Profit before income tax 1,299 1,268 1,178 1,254 1,278
Income tax expense (363) (359) (327) (343) (337)
Net profit for the year 936 909 851 911 941
Net profit for the year attributable to:
Owners of the Banking Group 936 909 851 908 938
Non-controlling interests - - - 3 3
936 909 851 911 941
Dividends paid or provided (1,870) (640) (660) (608) (378)
Balance sheet
Total assets 89,871 88,627 86,307 79,925 74,449
Total individually impaired assets 145 173 222 282 346
Total liabilities 82,593 81,777 79,747 73,534 67,844
Total shareholder's equity 7,278 6,850 6,560 6,391 6,605
The amounts for the years ended 30 September have been extracted from the audited financial statements of the Banking Group.
General information (continued)

6
Westpac New Zealand Limited.
Directors’ statement
Each Director of the Bank believes, after due enquiry, that, as at the date on which this Disclosure Statement is signed, the Disclosure Statement:
a. contains all the information that is required by the Order; and
b. is not false or misleading.
Each Director of the Bank believes, after due enquiry, that, over the year ended 30 September 2018:
a. the Bank has complied with all conditions of registration imposed on it pursuant to section 74 of the Reserve Bank of New Zealand Act 1989 (‘Reserve
Bank Act’) except as noted on pages 77 and 78 and Note 34 to the financial statements;
b. credit exposures to connected persons were not contrary to the interests of the Banking Group; and
c. the Bank had systems in place to monitor and control adequately the Banking Group’s material risks, including credit risk, concentration of
credit risk, interest rate risk, currency risk, equity risk, liquidity risk, operational risk and other business risks, and that those systems were
being properly applied.
This Disclosure Statement has been signed by all the Directors:
Janice Amelia Dawson
David Alexander McLean
Malcolm Guy Bailey
Peter Francis King
Jonathan Parker Mason
Christopher John David Moller
Mary Patricia Leonie Quin
Dated this 19th day of November 2018

7Westpac New Zealand Limited.
Income statement for the years ended 30 September
THE BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Interest income2 3,989 3,917
Interest expense2 (2,145) (2,176)
Net interest income 1,844 1,741
Non-interest income3 373 405
Net operating income before operating expenses and impairment charges 2,217 2 ,146
Operating expenses4 (915) (954)
Impairment (charges)/benefits6 (3) 76
Profit before income tax 1,299 1,268
Income tax expense7 (363) (359)
Net profit attributable to the owners of the Banking Group 936 909
The above income statement should be read in conjunction with the accompanying notes.
Statement of comprehensive income for the years ended 30 September
THE BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Net profit attributable to the owners of the Banking Group 936 909
Other comprehensive income
Items that may be reclassified subsequently to profit and loss
Gains/(losses) on available-for-sale securities:
Recognised in equity - 11
Gains/(losses) on cash flow hedging instruments:
Recognised in equity (20) (76)
Transferred to income statement 39 79
Income tax on items taken to or transferred from equity:
Available-for-sale securities reserve - (3)
Cash flow hedge reserve (5) -
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit obligation recognised in equity (net of tax) (2) 10
Other comprehensive income for the year (net of tax) 12 21
Total comprehensive income attributable to the owners of the Banking Group 948 930
The above statement of comprehensive income should be read in conjunction with the accompanying notes.

8
Westpac New Zealand Limited.
Balance sheet as at 30 September
THE BANKING GROUP
$ millionsNote20182017
Assets
Cash and balances with central banks 39 1,353 1,659
Receivables due from other financial institutions 9 70 407
Other assets 10 276 264
Trading securities 11 1,151 1,797
Derivative financial instruments 25 585 220
Available-for-sale securities 12 3,810 4,087
Loans 13, 14 80,378 7 7, 2 6 1
Due from related entities 24 1,319 2,017
Property and equipment 144 146
Deferred tax assets 15 156 162
Intangible assets 16 629 607
Total assets 89,871 88,627
Liabilities
Payables due to other financial institutions 497 143
Other liabilities 18 621 502
Deposits and other borrowings 19 63,102 58,998
Other financial liabilities at fair value through income statement - 19
Derivative financial instruments 25 181 484
Debt issues 20 13,725 16,729
Current tax liabilities 96 75
Provisions 21 106 85
Total liabilities excluding related entities liabilities 78,328 7 7,0 3 5
Due to related entities 24 1,643 2 ,126
Loan capital 22 2,622 2,616
Total related entities liabilities 4,265 4,742
Total liabilities 82,593 81,777
Net assets 7,278 6,850
Shareholder's equity
Share capital 23 5,100 3,750
Reserves (51) (65)
Retained profits 2,229 3,165
Total shareholder's equity 7,278 6,850
Interest earning and discount bearing assets 87,810 8 7, 2 9 4
Interest and discount bearing liabilities 75,409 74,996
The above balance sheet should be read in conjunction with the accompanying notes.
Signed on behalf of the Board of Directors.
J.A. Dawson J.P. Mason
19 November 2018 19 November 2018

9Westpac New Zealand Limited.
Statement of changes in equity for the years ended 30 September
THE BANKING GROUP
Reserves
$ millions
Share
Capital
Available-
for-sale
Securities
Reserve
Cash Flow
Hedge
Reserve
Retained
Profits Total
As at 1 October 2016 3,750 1 (77) 2,886 6,560
Year ended 30 September 2017
Net profit attributable to the owners of the Banking Group - - - 909 909
Net gains/(losses) from changes in fair value - 11 (76) - (65)
Income tax effect - (3) 22 - 19
Transferred to income statement - - 79 - 79
Income tax effect - - (22) - (22)
Remeasurement of defined benefit obligations - - - 14 14
Income tax effect - - - (4) (4)
Total comprehensive income for the year ended 30 September 2017 - 8 3 919 930
Transactions with owners:
Dividends paid on ordinary shares (refer to Note 23) - - - (640) (640)
As at 30 September 2017 3,750 9 (74) 3,165 6,850
For the year ended 30 September 2018
Net profit attributable to the owners of the Banking Group - - - 936 936
Net gains/(losses) from changes in fair value - - (20) - (20)
Income tax effect - - 6 - 6
Transferred to income statement - - 39 - 39
Income tax effect - - (11) - (11)
Remeasurement of defined benefit obligations - - - (3) (3)
Income tax effect - - - 1 1
Total comprehensive income for the year ended 30 September 2018 - - 14 934 948
Transactions with owners:
Share capital issued (refer to Note 23) 1,350 1,350
Dividends paid on ordinary shares (refer to Note 23) - - - (1,870) (1,870)
As at 30 September 2018 5,100 9 (60) 2,229 7,278
The above statement of changes in equity should be read in conjunction with the accompanying notes.

10
Westpac New Zealand Limited.
Statement of cash flows for the years ended 30 September
THE BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Cash flows from operating activities
Interest received 3,985 3,902
Interest paid (2,161) (2,158)
Non-interest income received362 422
Operating expenses paid (820) (844)
Income tax paid (336) (334)
Cash flows from operating activities before changes in operating assets and liabilities 1,030 988
Net (increase)/decrease in:
Receivables due from other financial institutions 337 313
Other assets(9) (14)
Trading securities 666 312
Loans (3,121) (2,103)
Due from related entities 1,025 (281)
Net increase/(decrease) in:
Payables due to other financial institutions 354 128
Other liabilities 96 9
Deposits and other borrowings 4,104 207
Other financial liabilities at fair value through income statement (19) (381)
Due to related entities
1
(7) (197)
Net movement in external and related entity derivative financial instruments (63) (627)
Net cash provided by/(used in) operating activities39 4,393 (1,646)
Cash flows from investing activities
Purchase of available-for-sale securities (268) (533)
Proceeds from available-for-sale securities 499 162
Purchase of capitalised computer software (64) (61)
Purchase of property and equipment (44) (31)
Net cash provided by/(used in) investing activities 123 (463)
Cash flows from financing activities
Net movement in due to related entities
1
(388) (287)
Proceeds from debt issues20 550 7,490
Repayments of debt issues20 (4,464) (5,698)
Issue of loan capital (net of transaction fees)22 - 1,485
Issue of ordinary share capital 23 1,350 -
Dividends paid to ordinary shareholders23 (1,870) (640)
Net cash provided by/(used in) financing activities (4,822) 2,350
Net increase/(decrease) in cash and cash equivalents (306) 241
Cash and cash equivalents at beginning of the year 1,659 1,418
Cash and cash equivalents at end of the year39 1,353 1,659
1
Certain comparatives have been revised for consistency. The reclassification was made to better reflect the Banking Group’s cash flows from operating and financing
activities and has no effect on the balance sheet or income statement.
The above statement of cash flows should be read in conjunction with the accompanying notes. Details of the reconciliation of net cash provided by/
(used in) operating activities to net profit are provided in Note 39.

Westpac New Zealand Limited.11
Notes to the financial statements
Note 1 Financial statement preparation
In these financial statements, reference is made to:
–Westpac New Zealand Limited (otherwise referred to as the ‘Bank’);
–Westpac New Zealand Limited and its controlled entities (otherwise
referred to as the ‘Banking Group’);
–Westpac Banking Corporation (otherwise referred to as the ‘Ultimate
Parent Bank’); and
–Ultimate Parent Bank and its controlled entities (otherwise referred to
as the ‘Ultimate Parent Bank Group’).
The consolidated financial statements are for the Banking Group.
These financial statements were authorised for issue by the Board of
Directors of the Bank (the ‘Board’) on 19 November 2018. The Board has
the power to amend and reissue the financial statements.
The principal accounting policies are set out below and in the relevant
notes to the financial statements. These policies have been consistently
applied to all the years presented, unless otherwise stated.
a. Basis of preparation
i. Basis of accounting
These financial statements are general purpose financial statements
prepared in accordance with:
–the requirements of the Financial Markets Conduct Act 2013; and
–the Registered Bank Disclosure Statements (New Zealand Incorporated
Registered Banks) Order 2014 (as amended) (‘Order’).
These financial statements comply with Generally Accepted Accounting
Practice, applicable New Zealand equivalents to International
Financial Reporting Standards (‘NZ IFRS’) and other authoritative
pronouncements of the External Reporting Board, as appropriate for for-
profit entities. These financial statements also comply with International
Financial Reporting Standards, as issued by the International Accounting
Standards Board (‘IASB’).
All amounts in these financial statements have been rounded to the
nearest million dollars unless otherwise stated.
ii. Historical cost convention
These financial statements have been prepared under the historical cost
convention, as modified by applying fair value accounting to available-
for-sale securities and financial assets and liabilities (including derivative
instruments) measured at fair value through income statement or in other
comprehensive income. The going concern concept has been applied.
iii. Comparative revisions
Comparative information has been revised where appropriate
to conform to changes in presentation in the current year and to
enhance comparability. Where there has been a material restatement
of comparative information the nature of, and the reason for, the
restatement is disclosed in the relevant note.
iv. Changes in accounting standards
The Banking Group adopted the requirements of Disclosure Initiative:
Amendments to NZ IAS 7 Statement of Cash Flows which require additional
disclosures regarding both cash and non-cash changes in liabilities
arising from financing activities. These disclosures have been made in
Note 20 and Note 22. As permitted by the standard, comparatives are not
required on first application.
No other new accounting standards have been adopted for the year
ended 30 September 2018.
v. Business combinations
Business combinations are accounted for using the acquisition method
of accounting. Acquisition cost is measured as the aggregate of the fair
value at the date of acquisition of the assets given, equity instruments
issued or liabilities incurred or assumed. Acquisition-related costs are
expensed as incurred (except for those costs arising on the issue of equity
instruments which are recognised directly in equity).
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured at fair value on the
acquisition date. Goodwill is measured as the excess of the acquisition
cost, the amount of any non-controlling interest and the fair value of any
previous Banking Group’s equity interest in the acquiree, over the fair
value of the identifiable net assets acquired.
vi. Foreign currency translation
Functional and presentational currency
The consolidated financial statements are presented in New Zealand
dollars which is the Bank’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the date of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year end exchange rates
of monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement, except when deferred in other
comprehensive income for qualifying cash flow hedges.
vii. Reserves
Available-for-sale securities reserve
This comprises the changes in the fair value of available-for-sale financial
securities, net of tax. These changes are transferred to non-interest income
in the income statement when the asset is either disposed of or impaired.
Cash flow hedge reserve
This comprises the fair value gains and losses associated with the
effective portion of designated cash flow hedging instruments, net of tax.
b. Principles of consolidation
The Banking Group subsidiaries are entities which the Bank controls and
consolidates as it is exposed to, or has rights to, variable returns from the
entities, and can affect those returns through its power over the entities.
All transactions between entities within the Banking Group are eliminated.
Subsidiaries are fully consolidated from the date on which control
commences and are de-consolidated from the date that control ceases.
c. Financial assets and financial liabilities
i. Recognition
Purchases and sales of regular way financial assets, except for loans and
receivables, are recognised on trade-date; the date on which the Banking
Group commits to purchase or sell the asset. Loans and receivables are
recognised on settlement date, when cash is advanced to the borrowers.
Financial liabilities are recognised when an obligation arises.

12
Notes to the financial statements
Westpac New Zealand Limited.
ii. Classification and measurement
The Banking Group classifies its significant financial assets in the following
categories: cash and balances with central banks, receivables due
from other financial institutions, trading securities, derivative financial
instruments, available-for-sale securities, loans and due from related
entities. The Banking Group has not classified any of its financial assets as
held-to-maturity investments.
The Banking Group classifies its significant financial liabilities in the
following categories: payables due to other financial institutions, deposits
and other borrowings, other financial liabilities at fair value through
income statement, derivative financial instruments, debt issues, due to
related entities and loan capital.
Financial assets and financial liabilities measured at fair value through
income statement are recognised initially at fair value. All other financial
assets and financial liabilities are recognised initially at fair value plus
directly attributable transaction costs.
The accounting policy for each category of financial asset or financial
liability mentioned above is set out in the note for the relevant item.
The Banking Group’s policies for determining the fair value of financial
assets and financial liabilities are set out in Note 26.
iii. Derecognition
Financial assets are derecognised when the rights to receive cash flows
from the asset have expired, or when the Banking Group has either
transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full under a ‘pass through’
arrangement and transferred substantially all the risks and rewards of
ownership.
There may be situations where the Banking Group has partially transferred
the risks and rewards of ownership but has neither transferred nor
retained substantially all the risks and rewards of ownership. In such
situations, the asset continues to be recognised on the balance sheet to
the extent of the Banking Group’s continuing involvement in the asset.
Financial liabilities are derecognised when the obligation is discharged,
cancelled or expires. Where an existing financial liability is replaced by
another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, the exchange or
modification is treated as a derecognition of the original liability and the
recognition of a new liability, with the difference in the respective carrying
amounts recognised in the income statement.
d. Critical accounting assumptions and estimates
Applying the Banking Group’s accounting policies requires the use
of judgment, assumptions and estimates which impact the financial
information. The significant assumptions and estimates used are
discussed in the relevant notes below.
–Note 7 Income tax expense
–Note 14 Asset quality
–Note 15 Deferred tax assets
–Note 16 Intangible assets
–Note 26 Fair value of financial assets and financial liabilities
e. Future developments in accounting standards
The following new standards and interpretations which may have a
material impact on the Banking Group have been issued but are not yet
effective, and unless otherwise stated, have not been early adopted by
the Banking Group:
NZ IFRS 9 Financial Instruments (September 2014) (‘NZ IFRS 9’) will
replace NZ IAS 39 Financial Instruments: Recognition and Measurement
(‘NZ IAS 39’). It includes a forward looking ‘expected credit loss’
impairment model, revised classification and measurement model and
modifies the approach to hedge accounting. The standard is effective
from 1 October 2018.
The adoption of NZ IFRS 9 is expected to reduce retained profits at 1
October 2018 by approximately $27 million (net of tax) primarily due to the
increase in impairment provisions under the new standard. The Banking
Group continues to assess and refine certain aspects of our impairment
provisioning process and the opening adjustment may change. There
is no significant impact to our regulatory capital. These estimates are
based on accounting policies, assumptions, judgements and estimation
techniques that remain subject to change until the Banking Group
finalises its financial statements for the year ending 30 September 2019.
The major changes under the standard and details of the implementation
project are outlined below.
Impairment
NZ IFRS 9 introduces a revised impairment model which requires entities
to recognise expected credit losses based on unbiased forward looking
information, replacing the existing incurred loss model in NZ IAS 39 which
only recognises impairment if there is objective evidence that a loss has
been incurred. This will result in the earlier recognition of impairment
provisions. The revised impairment model applies to all financial assets at
amortised cost, lease receivables, debt securities measured at fair value
through other comprehensive income, loan commitments and financial
guarantee contracts.
Key elements of the new impairment model are:
–earlier recognition of expected credit losses using a three stage
approach. For financial assets where there has been no significant
increase in credit risk since origination, a provision for 12 months
expected credit losses is required (stage 1). For financial assets where
there has been a significant increase in credit risk or where the asset is
credit impaired, a provision for full lifetime expected losses is required
(stages 2 and 3 respectively);
–expected credit losses are probability-weighted amounts determined
by evaluating a range of possible outcomes and taking into account the
time value of money, past events, current conditions and forecasts of
future economic conditions. This will involve a greater use of judgment
than the existing impairment model; and
–interest is calculated on the gross carrying amount of a financial asset,
except where the asset is credit impaired (stage 3). This will result in
an increase in interest income and impairment charges as currently
interest is calculated on the net carrying value for all loans.
Implementation
Measurement
Models have been developed, tested and approved while certain aspects
of the impairment provisioning process continue to be assessed and
refined. These models use three main components (as well as the time
value of money) being:
–Probability of default (‘PD’): the probability that a counterparty will
default;
–Loss given default (‘LGD’): the loss that is expected to arise in the event
of a default; and
–Exposure at default (‘EAD’): the estimated outstanding amount of
credit exposure at the time of the default.
Note 1 Financial statement preparation (continued)

Westpac New Zealand Limited.13
Notes to the financial statements
The models use a 12 month timeframe for expected losses in stage 1 and
a lifetime timeframe for expected losses in stages 2 and 3. The models
incorporate past experience, current conditions and multiple probability-
weighted macroeconomic scenarios for reasonably supportable future
economic conditions. Where appropriate, adjustments will be made to
modelled outcomes to reflect reasonable and supportable information
not already incorporated in the models.
Significant increase in credit risk and movement between stages
An asset will move from stage 1 to stage 2 if there has been a significant
increase in credit risk.
The judgment to determine this will be primarily based on changes in
internal customer risk grades since origination of the facility. The Banking
Group does not intend to rebut the presumption that instruments that
are 30 days past due have experienced a significant increase in risk but
this will be used as a backstop rather than the primary indicator.
The Banking Group will not be applying the low credit risk exemption
which assumes investment grades facilities do not have a significant
increase in credit risk.
The movement between stages 2 and 3 will be based on whether financial
assets are credit-impaired at the reporting date which is expected to be
similar to the individual assessment of impairment for financial assets
under the current NZ IAS 39.
Assets may move in both directions through the stages of the impairment
model. Assets previously in stage 2 may move back to stage 1 if it is no
longer considered that there has been a significant deterioration of credit
risk. Similarly, assets in stage 3 may move back to stage 2 if they are no
longer assessed to be credit-impaired.
Forward looking information
The estimation of forward looking information is a key area requiring
judgement. The Banking Group intends to consider a minimum of three
future macroeconomic scenarios. These will include a base case scenario
along with upside and downside scenarios. The macroeconomic variables
used in these scenarios, based on current economic forecasts, include
(but are not limited to) unemployment rates, gross domestic product
growth rates and residential and commercial property price indices.
The macroeconomic variables and probability weightings of the three
scenarios will be subject to the approval of the Banking Group’s Chief
Financial Officer and the Chief Risk Officer with oversight from the Board
of Directors (and its Committees).
Governance
The Banking Group has established a governance framework and has
implemented controls to address disclosure of the impact of the new
requirements of NZ IFRS 9 including key areas of judgment such as
the determination of a significant increase in credit risk and the use of
forward looking information in future economic scenarios along with the
controls addressing credit data and systems and the expected credit
loss models.
The NZ IFRS 9 provision calculation models have been independently
reviewed in accordance with the Banking Group’s model risk policies and
approved by the Credit Risk Estimates Committee. The key judgments in
relation to the new provisioning methodology have been discussed and
agreed with the Board Risk and Compliance Committee (‘BRCC’) and the
Board Audit Committee (‘BAC’).
Models and credit risk processes have been tested in parallel run since
May 2018 to provide a better understanding of the implications of the
new impairment requirements. This included an evaluation of the effect
on the Banking Group’s results as well as ongoing validation of the
controls and effectiveness of the governance and operational processes.
The control environment will continue to evolve as the Banking Group
embeds processes and controls during the financial year ending 30
September 2019.
Classification and measurement
NZ IFRS 9 replaces the classification and measurement model in NZ IAS
39 with a new model that categorises financial assets based on a) the
business model within which the assets are managed, and b) whether
the contractual cash flows under the instrument solely represent the
payment of principal and interest. Financial assets will be measured at:
–amortised cost where the business model is to hold the financial
assets in order to collect contractual cash flows and those cash flows
represent solely payments of principal and interest;
–fair value through other comprehensive income where the business
model is to both collect contractual cash flows and sell financial assets
and the cash flows represent solely payments of principal and interest.
Non-traded equity instruments can also be measured at fair value
through other comprehensive income; or
–fair value through profit or loss if they are held for trading or if the cash
flows on the asset do not solely represent payments of principal and
interest. An entity can also elect to measure a financial asset at fair
value through profit or loss if it eliminates or reduces an accounting
mismatch.
The accounting for financial liabilities is largely unchanged.
Implementation
The Banking Group’s classification and measurement implementation
project has identified no material reclassifications of financial assets
required under NZ IFRS 9.
Hedging
NZ IFRS 9 will change hedge accounting by increasing the eligibility of
both hedged items and hedging instruments and introducing a more
principles-based approach to assessing hedge effectiveness. Adoption of
the new hedge accounting model is optional until the IASB completes its
accounting for dynamic risk management project. Until this time, current
hedge accounting under NZ IAS 39 can continue to be applied.
Implementation
The Banking Group will apply the option to continue hedge accounting
under NZ IAS 39, however will implement the amended NZ IFRS 7 hedge
accounting disclosures as required.
Transition
The impairment and classification and measurement requirements
of NZ IFRS 9 will be applied retrospectively by adjusting the opening
balance sheet at the date of initial application, 1 October 2018, with no
restatement of comparatives as permitted by the standard. However,
detailed transitional disclosures will be provided in accordance with the
amended requirements of NZ IFRS 7.
Note 1 Financial statement preparation (continued)

14
Notes to the financial statements
Westpac New Zealand Limited.
NZ IFRS 15 Revenue from Contracts with Customers (‘NZ IFRS 15’) was
issued on 3 July 2014 and will be effective from 1 October 2018. The
standard replaces NZ IAS 18 Revenue and related interpretations,
and applies to all contracts with customers, except leases, financial
instruments and insurance contracts. The standard provides a
systematic approach to revenue recognition by introducing a five-step
model governing revenue measurement and recognition. This includes
(1) identifying the contract with customer, (2) identifying each of the
performance obligations included in the contract, (3) determining the
amount of consideration in the contract, (4) allocating the consideration
to each of the identified performance obligations and (5) recognising
revenue as each performance obligation is satisfied.
The Banking Group will elect to apply NZ IFRS 15 retrospectively by
adjusting the opening balance of retained earnings at the date of initial
application, 1 October 2018, with no comparatives restatement.
The Banking Group has assessed the revenue streams existing at
transition. Based on this assessment, the primary impacts from the
adoption of NZ IFRS 15 are expected to be a grossing up of some income
and expenses which are currently reported on a net basis. In addition,
certain facility fees will be reclassified from non-interest income to
interest income. These presentation changes will not have a material
impact on the Group’s net profit, retained earnings or capital position.
NZ IFRS 16 Leases (‘NZ IFRS 16’) was issued on 11 February 2016 and will
be effective for the 30 September 2020 financial year. The standard will
not result in significant changes for lessor accounting. The main changes
under the standard are:
–all operating leases of greater than 12 months duration will be required
to be presented on balance sheet by the lessee as a right-of-use asset
and lease liability. The asset and liability will initially be measured at the
present value of non-cancellable lease payments and payments to be
made in optional periods where it is reasonably certain that the option
will be exercised. Details of the Banking Group’s lease obligations are
included in Note 28; and
–all leases on balance sheet will give rise to a combination of
interest expense on the lease liability and depreciation of the right-
of-use asset.
Alternative methods of calculating the right-of-use asset are allowed
under NZ IFRS 16 which impact the size of the transition adjustment. The
Banking Group is still evaluating which transition method to apply.
Current project implementation efforts are focused on the review and
evaluation of contracts within scope of the standard.
Note 1 Financial statement preparation (continued)

Westpac New Zealand Limited.15
Notes to the financial statements
Note 2 Net interest income
Accounting policy
Interest income and expense for all interest earning financial assets and interest bearing financial liabilities, detailed within the table below, are
recognised using the effective interest rate method. Net income from treasury’s interest rate and liquidity management activities is included in net
interest income.
The effective interest rate method calculates the amortised cost of a financial instrument by discounting the financial instrument’s estimated future
cash receipts or payments to their present value and allocates the interest income or interest expense, including any fees, costs, premiums or
discounts integral to the instrument, over its expected life.
THE BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Interest income
Cash and balances with central banks 28 30
Trading securities 46 57
Available-for-sale securities 148 157
Loans 3,751 3,656
Due from related entities 24 16 17
Total interest income 3,989 3,917
Interest expense
Deposits and other borrowings 1,303 1,250
Debt issues 317 314
Loan capital24 144 54
Due to related entities24 43 56
Other
1
338 502
Total interest expense 2,145 2,176
Net interest income 1,844 1,741
1
Includes the net impact of treasury’s interest rate and liquidity management activities.
Of the amounts noted in total interest income and total interest expense, the amounts related to financial instruments not measured at fair value
through income statement were as follows:
THE BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Interest income 3,938 3,854
Interest expense 2,119 2 ,122

16
Notes to the financial statements
Westpac New Zealand Limited.
Note 3 Non-interest income
Accounting policy
Fees and commissions
Fees and commission income are recognised as follows:
–Transaction fees are earned for facilitating transactions and are recognised once the transaction is executed;
–Lending fees are primarily earned for the provision of credit and other facilities to customers and are recognised as the services are provided;
–Other non-risk fee income includes advisory and underwriting fees which are recognised when the related service is completed.
Income which forms an integral part of the effective interest rate of a financial instrument is recognised using the effective interest method and
recorded in interest income (for example, loan origination fees).
THE BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Fees and commissions
Transaction fees and commissions
1
252 287
Lending fees 57 57
Management fees received from related entities24 7 10
Other non-risk fee income 43 46
Total fees and commissions 359 400
Net ineffectiveness on qualifying hedges 4 (12)
Other non-interest income
Share of associate’s net profit 5 5
Other 5 12
Total other non-interest income 10 17
Total non-interest income 373 405
1
Includes transaction fees and commissions due from related entities (refer to Note 24).
Note 4 Operating Expenses
THE BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Staff expenses 455 447
Operating lease rentals 62 67
Depreciation 44 46
Technology services and telecommunications 98 102
Purchased services 120 157
Software amortisation costs 42 44
Related entities - management fees24 4 3
Other 90 88
Total operating expenses 915 954

Westpac New Zealand Limited.17
Notes to the financial statements
Note 5 Auditor’s remuneration
THE BANKING GROUP
$’000s
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Audit and audit related services
Audit and review of financial statements
1
1,770 1,392
Other audit related services
2
49 47
Total remuneration for audit and other audit related services 1,819 1,439
Other services
3
126 125
Total remuneration for non-audit services 126 125
Total remuneration for audit, other audit related services and non-audit services 1,945 1,564
1
Fees for the annual audit of the financial statements including audit procedures in relation to the transition impact of new accounting standards, the review or other
procedures performed on the interim financial statements and Sarbanes-Oxley reporting undertaken in the role of auditor.
2
Primarily assurance provided on certain financial information performed in the role of auditor, including the issue of comfort letters in relation to debt issuance
programmes.
3
Assurance and agreed procedures relating to other regulatory and compliance matters.
It is the Banking Group’s policy to engage the external auditor on assignments additional to their statutory audit duties only if their independence is not
either impaired or seen to be impaired, and where their expertise and experience with the Banking Group is important.
Note 6 Impairment charges/(benefits)
Accounting policy
At each balance sheet date, the Banking Group assesses whether there is any objective evidence of impairment of its loan portfolio. An impairment
charge is recognised if there is objective evidence that principal or interest repayments may not be recoverable and when the financial impact of the
non-recoverable loan can be reliably measured.
Objective evidence of impairment could include a breach of contract with the Banking Group such as a default on interest or principal payments, a
borrower experiencing significant financial difficulties or observable economic conditions that correlate to defaults on a group of loans.
The impairment charge is measured as the difference between the loan’s current carrying amount and the present value of its estimated future cash
flows. The estimated future cash flows exclude any expected future credit losses which have not yet occurred and are discounted to their present
value using the loan’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment is the
current effective interest rate.
The impairment charge is recognised in the income statement with a corresponding reduction of the carrying value of the loan through an offsetting
provision account (refer to Note 14).
In subsequent periods, objective evidence may indicate that an impairment charge should be reversed. Objective evidence could include a
borrower’s credit rating or financial circumstances improving. The impairment charge is reversed in the income statement of that future period and
the related provision for impairment is reduced.
Uncollectable loans
A loan may become uncollectable in full or part if, after following the Banking Group’s loan recovery procedures, the Banking Group remains unable
to collect that loan’s contractual repayments. Uncollectable amounts are written off against their related provision for impairment, after all possible
repayments have been received.
The Banking Group may subsequently be able to recover cash flows from loans written off. In the period which these recoveries are made, they are
recognised in the income statement.
Critical accounting assumptions and estimates relating to impairment charges are included in Note 14.
THE BANKING GROUP
For the year ended 30 September 2018
$ millions
Residential
Mortgages
Other
Retail Corporate OtherTotal
Individually assessed provisions raised 9 2 17 - 28
Reversal of previously recognised impairment charges (3) (2) (13) - (18)
Collectively assessed provisions released (2) (10) (22) - (34)
Bad debts written-off/(recovered) directly to the income statement (2) 41 (12) - 27
Total impairment charges/(benefits) 2 31 (30) - 3

18
Notes to the financial statements
Westpac New Zealand Limited.
THE BANKING GROUP
For the year ended 30 September 2017
$ millions
Residential
Mortgages
Other
Retail Corporate OtherTot a l
Individually assessed provisions raised 8 4 6 - 18
Reversal of previously recognised impairment charges (4) (1) (62) - (67)
Collectively assessed provisions raised/(released) 5 (10) (51) - (56)
Bad debts written-off/(recovered) directly to the income statement - 31 (2) - 29
Total impairment charges/(benefits) 9 24 (109) - (76)
Refer to Note 14 for further details on provisions for impairment charges.
Note 7 Income tax expense
Accounting policy
The income tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it
relates to items recognised directly in other comprehensive income, in which case it is recognised in the statement of comprehensive income.
Current tax is the tax payable for the year using enacted or substantively enacted tax rates and laws. Current tax also includes adjustments to tax
payable for previous years.
Goods and services tax (‘GST’)
Revenue, expenses and assets are recognised net of GST except to the extent that GST is not recoverable from the Inland Revenue. In these
circumstances, GST is recognised as part of the expense or the cost of the asset.
Critical accounting assumptions and estimates
Significant judgment is required in determining the current tax liability. There may be transactions with uncertain tax outcomes and provisions are
held to reflect these tax uncertainties where appropriate.
THE BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Income tax expense
Current tax:
Current year 361 335
Prior year adjustments - (1)
Deferred tax (refer to Note 15):
Current year 2 20
Prior year adjustments - 5
Total income tax expense 363 359
Profit before income tax 1,299 1,268
Tax calculated at tax rate of 28% 364 355
Income not subject to tax (1) (1)
Expenses not deductible for tax purposes 2 1
Prior year adjustments - 4
Other items (2) -
Total income tax expense 363 359
The effective tax rate for the year ended 30 September 2018 was 27.9% (30 September 2017: 28.3%).
Note 6 Impairment charges/(benefits) (continued)

Westpac New Zealand Limited.19
Notes to the financial statements
Note 8 Imputation credit account
THE BANKING GROUP
$ millions20182017
Imputation credits available for use in subsequent reporting periods 775618
Note 9 Receivables due from other financial institutions
Accounting policy
Receivables due from other financial institutions are recognised initially at fair value and subsequently at amortised cost using the effective interest
rate method.
THE BANKING GROUP
$ millionsNote20182017
Cash collateral1770 407
Total receivables due from other financial institutions 70 407
Note 10 Other assets
THE BANKING GROUP
$ millions20182017
Accrued interest receivable 154 144
Trade debtors and prepayments 46 37
Other 76 83
Total other assets 276 264
Note 11 Trading securities
Accounting policy
Trading securities include actively traded debt (government, semi-government and other) and those acquired for sale in the near term and are held
at fair value.
Gains and losses on trading securities are recognised in the income statement. Interest received from government and other debt securities is
recognised in net interest income (refer to Note 2).
Securities purchased under agreements to resell (‘reverse repos’)
Reverse repos are not recognised on the balance sheet as the Banking Group has not obtained the risks and rewards of ownership. The cash
consideration paid is recognised as an asset. Reverse repos which are part of a trading portfolio are designated at fair value and recognised as part
of due from related entities (refer to Note 24). Gains and losses on these financial assets are recognised in non-interest income. Interest received
under these agreements is recognised in interest income.
THE BANKING GROUP
$ millions20182017
Government and semi-government securities 828 903
Other debt securities 323 894
Total trading securities 1,151 1,797

20
Notes to the financial statements
Westpac New Zealand Limited.
Note 12 Available-for-sale securities
Accounting policy
Available-for-sale debt (government, semi-government and other) securities are held at fair value with gains and losses recognised in other
comprehensive income except for the following amounts, which are recognised in the income statement:
–Interest on debt securities; and
–Impairment charges.
The cumulative gain or loss recognised in other comprehensive income is subsequently recognised in the income statement when the instrument
is disposed.
At each reporting date, the Banking Group assesses whether any available-for-sale securities are impaired. Impairment exists if one or more events
have occurred which have a negative impact on the security’s estimated cash flows.
Evidence of impairment includes significant financial difficulties or adverse changes in the payment status of an issuer. If impairment exists, the
cumulative loss is removed from other comprehensive income and recognised in the income statement. Any subsequent reversals of impairment
on debt securities are also recognised in the income statement.
THE BANKING GROUP
$ millions20182017
Government and semi-government securities 2,155 2,467
Other debt securities 1,655 1,620
Total available-for-sale securities 3,810 4,087
Note 13 Loans
Accounting policy
Loans are financial assets initially recognised at fair value plus directly attributable transaction costs. Loans are subsequently measured at amortised
cost using the effective interest rate method and are presented net of any provisions for impairment.
Loan products that have both mortgage and deposit facilities are presented gross on the balance sheet, segregating the asset and liability component,
because they do not meet the criteria to be offset. Interest earned on these products is presented on a net basis in the income statement as this
reflects how the customer is charged.
The following table shows loans disaggregated by type of product:
THE BANKING GROUP
$ millions20182017
Overdrafts 1,117 1,296
Credit card outstandings 1,499 1,518
Money market loans 1,361 1,250
Term loans:
Housing 48,893 46,947
Non-housing 27,031 25,778
Other 801 822
Total gross loans 80,702 7 7,6 1 1
Provisions for impairment charges on loans (324) (350)
Total net loans 80,378 7 7, 2 6 1
Movements in impaired assets and provisions for impairment charges on loans are outlined in Note 14.

Westpac New Zealand Limited.21
Notes to the financial statements
Note 14 Asset quality
Accounting policy
The Banking Group recognises two types of impairment provisions for its loans, being provisions for loans which are:
–individually assessed for impairment; and
–collectively assessed for impairment.
Note 6 explains how impairment charges are determined. The Banking Group assesses impairment as follows:
–individually for loans that exceed specified thresholds. Where there is objective evidence of impairment, individually assessed provisions will be
recognised; and
–collectively for loans below the specified thresholds noted above or if there is no objective evidence of impairment. These loans are included in
a group of loans with similar risk characteristics and collectively assessed for impairment. If there is objective evidence that the group of loans is
collectively impaired, collectively assessed provisions will be recognised.
Critical accounting assumptions and estimates
The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Banking Group to reduce differences between
impairment provisions and actual loss experience.
Individual component
Key judgments include the business prospects for the customer, the realisable value of collateral, the Banking Group’s position relative to other
claimants, the reliability of customer information and the likely cost and duration of recovering the loan.
Judgments can change with time as new information becomes available or as loan recovery strategies evolve, which may result in revisions to the
impairment provision.
Collective component
Collective provisions are established on a portfolio basis taking into account the level of arrears, collateral and security, past loss experience,
current economic conditions, expected default and timing of recovery based on portfolio trends.
Key judgments include estimated loss rates and their related emergence periods. The emergence period for each loan type is determined through
studies of loss emergence patterns. Loan files are reviewed to identify the average time period between observable loss indicator events and the
loss becoming identifiable.
Actual credit losses may differ materially from reported loan impairment provisions due to uncertainties including interest rates and their effect on
consumer spending, unemployment levels, payment behaviour and bankruptcy rates.

22
Notes to the financial statements
Westpac New Zealand Limited.
THE BANKING GROUP
2018
THE BANKING GROUP
2017
$ millions
Residential
Mortgages
Other
RetailCorporate OtherTotal
Residential
Mortgages
Other
RetailCorporate OtherTot a l
Neither past due nor impaired 47,974 3,726 27,293 278 79,271 46,023 3,767 26,189 225 76,204
Past due but not impaired assets
Less than 30 days past due 739 143 162 - 1,044 752 132 107 - 991
At least 30 days but less than 60 days
past due
80 25 6 - 111 67 22 10 - 99
At least 60 days but less than 90 days
past due
33 10 2 - 45 27 13 24 - 64
At least 90 days past due 43 18 25 - 86 46 19 15 - 80
Total past due assets not impaired 895 196 195 - 1,286 892 186 156 - 1,234
Individually impaired assets
1
Balance at beginning of the year 32 5 136 - 173 25 4 193 - 222
Additions 31 8 40 - 79 40 5 39 - 84
Amounts written off (6) (2) (14) - (22) (4) (1) (3) - (8)
Returned to performing or repaid (33) (5) (47) - (85) (29) (3) (93) - (125)
Balance at end of the year 24 6 115 - 145 32 5 136 - 173
Total gross loans
2
48,893 3,928 27,603 278 80,702 46,947 3,958 26,481 225 7 7,6 1 1
Individually assessed provisions
Balance at beginning of the year 7 5 36 - 48 7 3 95 - 105
Impairment charges/(benefits):
New provisions 9 2 17 - 28 8 4 6 - 18
Reversal of previously recognised
impairment charges
(3) (2) (13) - (18) (4) (1) (62) - (67)
Amounts written off (6) (2) (14) - (22) (4) (1) (3) - (8)
Balance at end of the year 7 3 26 - 36 7 5 36 - 48
Collectively assessed provisions
Balance at beginning of the year 54 97 181 - 332 46 95 220 - 361
Impairment charges/(benefits) (2) (10) (22) - (34) 5 (10) (51) - (56)
Interest adjustments 2 12 10 - 24 3 12 12 - 27
Balance at end of the year 54 99 169 - 322 54 97 181 - 332
Total provisions for impairment charges
on loans and credit commitments
61 102 195 - 358 61 102 217 - 380
Provision for credit commitments
(refer to Note 21)
- (4) (30) - (34) - (4) (26) - (30)
Total provisions for impairment
charges on loans
61 98 165 - 324 61 98 191 - 350
Total net loans
3
48,832 3,830 27,438 278 80,378 46,886 3,860 26,290 225 7 7, 2 6 1
1
The Banking Group had undrawn commitments of $4 million (30 September 2017: $4 million) to counterparties for whom drawn balances are classified as individually
impaired assets under corporate loans as at 30 September 2018.
2
The Banking Group does not have other assets under administration as at 30 September 2018.
3
Total net loans represent the estimated recoverable amounts which are net of provisions for impairment.
Note 15 Deferred tax assets
Accounting policy
Deferred tax accounts for temporary differences between the carrying amounts of assets and liabilities in the financial statements and their values
for taxation purposes.
Deferred tax is determined using the enacted or substantively enacted tax rates and laws which are expected to apply when the assets will be
realised or the liabilities settled.
Note 14 Asset quality (continued)

Westpac New Zealand Limited.23
Notes to the financial statements
Note 15 Deferred tax assets (continued)
Deferred tax assets and liabilities have been offset where they relate to the same taxable entity or group and where there is a legal right and intention
to settle on a net basis.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available to utilise the assets.
Deferred tax is not recognised for the following temporary differences:
–the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither the accounting nor taxable
profit or loss; and
–the initial recognition of goodwill in a business combination.
Critical accounting assumptions and estimates
On a similar basis to that described in Note 7, determining deferred tax assets and liabilities is considered one of the Banking Group’s critical
accounting assumptions and estimates.
THE BANKING GROUP
$ millions 2018 2017
Deferred tax assets/(liabilities) comprise the following temporary differences:
Provision for impairment charges on loans 94 101
Cash flow hedges 23 28
Provision for employee entitlements 14 12
Software, property and equipment 10 11
Other temporary differences 15 10
Net deferred tax assets 156 162
The deferred tax (charge)/credit in income tax expense comprises the following temporary differences:
Provision for impairment charges on loans (7) (24)
Provision for employee entitlements 1 (1)
Software, property and equipment (1) 2
Other temporary differences 5 (2)
Total deferred tax charge in income tax expense (2) (25)
The deferred tax (charge)/credit in other comprehensive income comprises the following temporary differences:
Provision for employee entitlements 1 (4)
Cash flow hedges (5) -
Total deferred tax charge in other comprehensive income (4) (4)
Note 16 Intangible assets
Accounting policy
Indefinite life intangible assets
Goodwill
Goodwill acquired in a business combination is initially measured at cost, generally being the excess of:
i. the consideration paid; over
ii. the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.
Subsequently, goodwill is not amortised but rather tested for impairment. Impairment is tested at least annually or whenever there is an indication of
impairment. An impairment charge is recognised when a cash generating unit’s (CGU) carrying value exceeds its recoverable amount. Recoverable
amount means the higher of the CGU’s fair value less costs to sell and its value-in-use.
Finite life intangible assets
Finite life intangibles include computer software which are recognised initially at cost and subsequently at amortised cost less any impairment.
IntangibleUseful lifeDepreciation method
GoodwillIndefiniteNot applicable
Computer software3 to 8 yearsStraight-line or diminishing balance method (using the Sum of the Years Digits)

24
Notes to the financial statements
Westpac New Zealand Limited.
Critical accounting assumptions and estimates
Judgment is required in determining the fair value of assets and liabilities acquired in a business combination. A different assessment of fair values
would have resulted in a different goodwill balance and different post-acquisition performance of the acquired entity.
When assessing impairment of intangible assets, significant judgment is needed to determine the appropriate cash flows and discount rates to be
applied to the calculations. The significant assumptions applied to the value-in-use calculations are outlined below.
THE BANKING GROUP
$ millions20182017
Goodwill 477 477
Computer software 152 130
Total intangible assets 629 607
Significant assumptions used in recoverable amount calculations
Goodwill has been allocated to the Consumer Banking and Wealth operating segment. Assumptions are used to determine the CGU’s recoverable
amount for goodwill, which is based on value-in-use calculations. Value-in-use refers to the present value of expected cash flows under its current use.
The Banking Group discounts the projected cash flows by its adjusted pre-tax equity rate.
–Banking Group’s equity rate was 11.0% (2017: 11.0%)
–Banking Group’s adjusted pre-tax equity rate was 15.3% (2017: 15.3%)
For the purpose of goodwill impairment testing, the assumptions in the following table are made for each significant CGU. The forecasts applied by
management are not reliant on any one particular assumption.
AssumptionBased on:
Cash flowsZero growth rate beyond 2 year forecast
Economic market conditionsCurrent market expectations
Business performanceObservable historical information and current market expectations of the future
There are no reasonably possible changes in assumptions for any significant CGU that would result in an indication of impairment or have a material
impact on the Banking Group’s reported results.
Note 17 Financial assets pledged as collateral
Accounting policy
Security repurchase agreements
Where securities are sold subject to an agreement to repurchase at a predetermined price, they remain recognised on the balance sheet in their
original category (i.e. trading securities or available-for-sale securities).
The cash consideration received is recognised as a liability (‘security repurchase agreements’). Security repurchase agreements are designated at
fair value and recognised as part of other financial liabilities at fair value through income statement or due to related entities (refer to Note 24) as
they are managed as part of a trading portfolio.
The Banking Group is required to provide collateral to other financial institutions, as part of standard terms, to secure liabilities. In addition to assets
supporting the Bank’s Global Covered Bond Programme (‘CB Programme’) disclosed in Note 31, the carrying value of these financial assets pledged
as collateral is:
THE BANKING GROUP
$ millions
20182017
Cash
1
70 407
Securities pledged under repurchase agreements:
Available-for-sale securities
2
15 41
Total amount pledged to secure liabilities (excluding CB Programme) 85 448
1
Comprises receivables due from other financial institutions.
2
As at 30 September 2018, $15 million of available-for-sale securities were pledged as collateral to the New Zealand Branch of the Ultimate Parent Bank (‘NZ Branch’) (30
September 2017: $22 million) which is recorded within due to related entities and nil available-for-sale securities were pledged to third parties (30 September 2017: $19
million) which is recorded within other financial liabilities at fair value through income statement.
Note 16 Intangible assets (continued)

Westpac New Zealand Limited.25
Notes to the financial statements
Note 18 Other liabilities
THE BANKING GROUP
$ millions20182017
Accrued interest payable 356 328
Retirement benefit obligations 18 14
Trade creditors and other accrued expenses 66 71
Other 181 89
Total other liabilities 621 502
Note 19 Deposits and other borrowings
Accounting policy
Deposits and other borrowings are initially recognised at fair value and subsequently either measured at amortised cost using the effective interest
rate method or at fair value.
Deposits and other borrowings are designated at fair value if they are managed on a fair value basis, reduce or eliminate an accounting mismatch,
or contain an embedded derivative.
Where they are measured at fair value, any changes in fair value (except those due to changes in credit risk) are recognised as non-interest income.
The change in the fair value that is due to changes in credit risk is recognised in other comprehensive income except where it would create an
accounting mismatch, in which case it is also recognised in the income statement.
Interest expense incurred is recognised in net interest income using the effective interest rate method.
THE BANKING GROUP
$ millions20182017
Certificates of deposit 1,218 593
Non-interest bearing, repayable at call 5,903 5,274
Other interest bearing:
At call 23,335 23,117
Term 32,646 30,014
Total deposits and other borrowings 63,102 58,998
Deposits at fair value 1,218 593
Deposits at amortised cost 61,884 58,405
Total deposits and other borrowings 63,102 58,998
Priority of financial liabilities in the event of liquidation
In the unlikely event that the Bank was put into liquidation or ceased to trade, claims of secured creditors and those classes of creditors set out in the
Seventh Schedule of the Companies Act 1993 would rank ahead of the claims of unsecured creditors in accordance with the priorities set out in that
Schedule. Deposits from customers are unsecured and rank equally with other unsecured liabilities of the Bank, and such liabilities will rank ahead of
any subordinated instruments issued by the Bank to the extent of any such subordination.
Note 20 Debt issues
Accounting policy
Debt issues are bonds, notes and commercial paper that have been issued by the Banking Group.
Debt issues are initially measured at fair value and subsequently either measured at amortised cost using the effective interest rate method or at fair value.
Debt issues are designated at fair value if they reduce or eliminate an accounting mismatch.
They are measured at fair value with changes in fair value (except those due to changes in credit risk) recognised as non-interest income.
The change in the fair value that is due to credit risk is recognised in other comprehensive income except where it would create an accounting
mismatch, in which case it is also recognised in the income statement.
Interest expense incurred is recognised within net interest income using the effective interest rate method.

26
Notes to the financial statements
Westpac New Zealand Limited.
In the following table, the distinction between short-term (12 months or less) and long-term (greater than 12 months) debt is based on the maturity of
the underlying security at origination.
THE BANKING GROUP
$ millions20182017
Short-term debt
Commercial paper - 1,642
Total short-term debt - 1,642
Long-term debt
Non-domestic medium-term notes 6,100 6,628
Covered bonds 5,640 5,236
Domestic medium-term notes 1,985 3,223
Total long-term debt 13,725 15,087
Total debt issues 13,725 16,729
Debt issues at fair value - 1,642
Debt issues at amortised cost 13,725 15,087
Total debt issues 13,725 16,729
THE BANKING GROUP
$ millions2018
Movement reconciliation
Balance as at 1 October 2017 16,729
Issuances 550
Maturities, repayments, buy backs and reductions (4,464)
Total cash movements (3,914)
Foreign exchange translation impact 933
Fair value adjustments (1)
Fair value hedge accounting adjustments (27)
Other
1
5
Total non-cash movements 910
Balance as at 30 September 2018 13,725
1
Includes items such as amortisation of issue costs.
Note 21 Provisions
Accounting policy
Provisions are recognised for present obligations arising from past events where a payment (or other economic transfer) is likely to be necessary to
settle the obligation and can be reliably estimated.
Employee benefits – annual leave and other employee benefits
The provision for annual leave and other employee benefits (including long service leave, wages and salaries, inclusive of non-monetary benefits,
and any associated on-costs (e.g. payroll tax)) is calculated based on expected payments.
Provision for impairment on credit commitments
The Banking Group is committed to provide facilities and guarantees as explained in Note 29. If it is probable that a facility will be drawn and the
resulting asset will be less than the drawn amount then a provision for impairment is recognised. The provision for impairment is calculated using
the same methodology as the provision for impairment charges on loans (refer to Note 6).
Note 20 Debt issues (continued)

Westpac New Zealand Limited.27
Notes to the financial statements
THE BANKING GROUP
$ millions20182017
Annual leave and other employee benefits 58 54
Provision for impairment on credit commitments 34 30
Other 14 1
Total provisions 106 85
Note 22 Loan Capital
Accounting policy
Loan capital are instruments which qualify for inclusion as regulatory capital under the Reserve Bank of New Zealand (‘Reserve Bank’) Capital
Adequacy Framework. Loan capital is initially measured at fair value and subsequently measured at amortised cost using the effective interest rate
method. Interest expense incurred is recognised in net interest income.
THE BANKING GROUP
$ millions
20182017
Additional Tier 1 loan capital - Convertible subordinated perpetual notes
1
1,487 1,485
Tier 2 loan capital - Convertible subordinated notes
1
1,135 1,131
Total loan capital 2,622 2,616
1
Net of capitalised transaction costs.
THE BANKING GROUP
$ millions
2018
Movement reconciliation
Balance as at 1 October 2017 2,616
Total cash movements -
Foreign exchange translation impact 4
Other
1
2
Total non-cash movements 6
Balance as at 30 September 2018 2,622
1
Includes items such as amortisation of issue costs.
Additional Tier 1 loan capital
A summary of the key terms and features of the Additional Tier 1 loan capital (‘AT 1 notes’) is provided below.
$Issue date Counterparty Interest rate Optional redemption date
NZ$1,500 million notes
1
22 September 2017 NZ Branch
NZ 90 day bank bill rate +
3.9594% p.a.
21 September 2027 and every
fifth anniversary thereafter
1
The AT1 notes rank equally amongst themselves and are subordinated to the claims of depositors and senior or less subordinated creditors of the Bank.
Interest payable
Quarterly interest payments on the AT1 notes are at the absolute discretion of the Bank and will only be paid if the payment conditions are satisfied,
including that the interest payment will not result in the Bank becoming insolvent immediately following the interest payment; not result in a breach of
the Reserve Bank Prudential Standards; and the payment date not falling on the date of a capital trigger event or non-viability trigger event. Interest
payments are non-cumulative. If interest is not paid in full, the Bank may not determine or pay any dividends on its ordinary shares or undertake a
discretionary buy back or capital reduction of the Bank’s ordinary shares (except in limited circumstances).
Redemption
The Bank may elect to redeem all or some of the AT1 notes for their face value on 21 September 2027 and every fifth anniversary thereafter, subject to the
Reserve Bank’s prior written approval. Early redemption of all of the AT1 notes for certain tax or regulatory reasons is permitted subject to the Reserve
Bank’s prior written approval.
Note 21 Provisions (continued)

28
Notes to the financial statements
Westpac New Zealand Limited.
Conversion
If a capital trigger event or non-viability trigger event occurs, the Bank must convert some or all of the AT1 notes into a variable number of ordinary
shares issued by the Bank (calculated with reference to the net assets of the Bank and the total number of ordinary shares on issue at the conversion
date) that is sufficient, in the case of a capital trigger event, to return the Bank’s Common Equity Tier 1 capital ratio to above 5.125% as determined by
the Bank in consultation with the Reserve Bank; or, in the case of a non-viability trigger event, to satisfy the direction of the Reserve Bank or the decision
of the statutory manager of the Bank. A capital trigger event occurs when the Bank determines, or the Reserve Bank notifies in writing that it believes,
the Bank’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%. A non-viability trigger event occurs when the Reserve Bank or the statutory
manager (appointed pursuant to section 117 of the Reserve Bank Act) directs the Bank to convert or write off all or some of its AT1 notes.
If conversion of the AT1 notes does not occur within five business days of a capital trigger event or a non-viability trigger event, holders’ rights in relation
to the AT1 notes will be immediately and irrevocably terminated.
The Bank is able to elect to convert all the AT1 notes for certain tax or regulatory reasons (or in certain other circumstances).
Tier 2 loan capital
A summary of the key terms and features of the Tier 2 loan capital (‘Tier 2 notes’) is provided below.
$Issue date Counterparty Interest rate Maturity date Optional redemption date
AU$1,040
million notes
1
8 September
2015
London Branch of the
Ultimate Parent Bank
Australian 90 day bank
bill rate + 2.87% p.a.
22 March 2026
22 March 2021 and every interest
payment date thereafter
1
The Tier 2 notes rank equally amongst themselves and are subordinated to the claims of depositors and senior or less subordinated creditors of the Bank.
Interest payable
Interest payments on the Tier 2 notes are subject to the Bank being solvent at the time of, and immediately following the interest payment.
Early redemption
The Bank may elect to redeem all or some of the Tier 2 notes for their face value together with accrued interest (if any) on 22 March 2021 or any interest
payment date thereafter, subject to the Reserve Bank’s prior written approval. Early redemption of all of the Tier 2 notes for certain tax or regulatory
reasons is permitted on an interest payment date subject to the Reserve Bank’s prior written approval.
Conversion
If a non-viability trigger event occurs, the Bank must convert such number of the Tier 2 notes into a variable number of ordinary shares issued by the
Bank (calculated with reference to the net assets of the Bank and the total number of ordinary shares on issue on the conversion date) that is sufficient
to satisfy the direction of the Reserve Bank or the decision of the statutory manager. A non-viability trigger event occurs when the Reserve Bank or
the statutory manager (appointed pursuant to section 117 of the Reserve Bank Act) directs the Bank to convert or write off all or some of its Tier 2
notes. If conversion of the Tier 2 notes fails to take effect within five business days, holders’ rights in relation to the Tier 2 notes will be immediately
and irrevocably terminated.
Note 23 Share capital
Accounting policy
Share capital
Ordinary shares are recognised at the amount paid up per ordinary share, net of directly attributable issue costs.
Ordinary shares fully paid
THE BANKING GROUP
2018
Number of SharesIssued and Authorised
2017
Number of Shares Issued and Authorised
Balance at beginning of the year 3,750,001,000 3,750,001,000
Share capital issued 1,350,000,000 -
Balance at end of the year 5,100,001,000 3,750,001,000
In accordance with the Reserve Bank document ‘Capital Adequacy Framework (Internal Models Based Approach) (BS2B)’ (‘BS2B’) ordinary share capital
is classified as Common Equity Tier 1 capital.
The ordinary shares have no par value. Subject to the constitution of the Bank, each ordinary share of the Bank carries the right to one vote on a poll
at meetings of shareholders, the right to an equal share in dividends authorised by the Board and the right to an equal share in the distribution of the
surplus assets of the Bank in the event of liquidation.
Note 22 Loan Capital (continued)

Westpac New Zealand Limited.29
Notes to the financial statements
The Directors of the Bank paid a dividend of $520 million on 16 August 2018, on the ordinary shares on issue to Westpac New Zealand Group Limited
(‘WNZGL’).
On 15 February 2018, the Directors of the Bank paid a dividend of $1,350 million on the ordinary shares on issue to WNZGL. Immediately after this
payment the Bank issued 1,350 million ordinary shares to WNZGL for $1 per share.
Note 24 Related entities
Related entities
The Banking Group’s related parties are those it controls or can exert significant influence over. Examples include subsidiaries, associates, joint ventures
and superannuation plans as well as key management personnel and their related parties.
Banking Group
The Bank is a controlled entity of WNZGL. The ultimate parent bank of the Bank is Westpac Banking Corporation.
The Banking Group consists of the Bank and all of its controlled entities. As at 30 September 2018, the Bank had the following controlled entities:
Name of EntityPrincipal ActivityNotes
Westpac NZ Operations Limited (‘WNZOL’)
1
Holding company
Aotearoa Financial Services LimitedNon-active company
Number 120 LimitedFinance company
The Home Mortgage Company LimitedResidential mortgage company
Westpac New Zealand Staff Superannuation Scheme
Trustee Limited (‘WNZSSSTL’)
Trustee company
Westpac (NZ) Investments Limited (‘WNZIL’)Property company
Westpac Securities NZ Limited (‘WSNZL’)Funding company
Westpac NZ Covered Bond Holdings Limited (‘WNZCBHL’)Holding company9.5% owned
2
Westpac NZ Covered Bond Limited (‘WNZCBL’)Guarantor9.5% owned
2
Westpac NZ Securitisation Holdings Limited (‘WNZSHL’)Holding company9.5% owned
3
Westpac NZ Securitisation Limited (‘WNZSL’)Funding company9.5% owned
3
Westpac NZ Securitisation No.2 Limited (‘WNZSL2’)Non-active company9.5% owned
3
Westpac Cash PIE FundPortfolio investment entityNot owned
4
Westpac Notice Saver PIE FundPortfolio investment entityNot owned
4
Westpac Term PIE FundPortfolio investment entityNot owned
4
1
As at 30 September 2018, WNZOL held 25% equity in Paymark Limited, an associate, which was not a controlled entity. See Note 40 Subsequent events.
2
The Banking Group, through its subsidiary, WNZOL, has a qualifying interest of 9.5% in WNZCBHL and its wholly-owned subsidiary company, WNZCBL. The Bank is
considered to control both WNZCBHL and WNZCBL based on contractual arrangements in place, and as such both WNZCBHL and WNZCBL are consolidated within the
financial statements of the Banking Group.
3
The Banking Group, through its subsidiary WNZOL, has a qualifying interest of 9.5% in WNZSHL and its wholly-owned subsidiary companies, WNZSL and WNZSL2. The
Bank is considered to control WNZSHL, WNZSL and WNZSL2 based on contractual arrangements in place, and as such WNZSHL, WNZSL and WNZSL2 are consolidated
within the financial statements of the Banking Group.
4
Westpac Term PIE Fund, Westpac Cash PIE Fund and Westpac Notice Saver PIE Fund (collectively referred to as the ‘PIE Funds’) were established as unit trusts. The
PIE Funds are Portfolio Investment Entities (‘PIE’), where BT Funds Management (NZ) Limited (‘BTNZ’) (an indirectly wholly-owned subsidiary of the Ultimate Parent
Bank) is the manager and issuer. The manager has appointed the Bank to perform all customer management and account administration for the PIE Funds. The Bank
is the PIE Funds’ registrar and administration manager. The Bank does not hold any units in the PIE Funds, however is considered to control them based on contractual
arrangements in place, and as such the PIE Funds are consolidated in the financial statements of the Banking Group.
There have been no changes in the ownership percentages since 30 September 2017.
All entities in the Banking Group are 100% owned unless otherwise stated. All the entities within the Banking Group have a balance date of 30 September
and are incorporated in New Zealand except the PIE Funds and WNZSSSTL which have a balance date of 31 March and 30 June respectively.
Note 23 Share capital (continued)

30
Notes to the financial statements
Westpac New Zealand Limited.
Nature of transactions
The Banking Group has transactions with members of the Ultimate Parent Bank Group on commercial terms, including the provision of management,
distribution and administrative services.
Loan finance and current account banking facilities are provided by the Ultimate Parent Bank to members of the Banking Group on normal commercial
terms. The interest earned on these loans and the interest paid on deposits are at market rates.
The NZ Branch provides financial market services, foreign currency, trade and interest rate risk products to the Banking Group and its customers, which
includes derivative transactions (refer to Note 25).
Effective 1 October 2014, the Bank and the NZ Branch entered into an agreement whereby the Bank will reimburse the NZ Branch for any credit losses
incurred by it due to certain customers of the Bank defaulting on certain financial market and international products. The Banking Group receives
commission from the sale of these products to customers for providing this guarantee.
This is treated as a financial guarantee for accounting purposes. Financial guarantee contracts are recognised as financial liabilities (recorded within
provisions) when a payment under a contract has become probable. The liability is initially measured at fair value and subsequently at the higher of
the amount determined in accordance with NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less
cumulative amortisation, where appropriate.
Refer to Note 22 for details of the loan capital transactions undertaken by the Banking Group with related entities.
Transactions with related entities
THE BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Ultimate Parent Bank
Interest income
1
2 16 17
Interest expense:
Loan capital2 144 54
Other
2
2 42 55
Non-interest income:
Commissions received 54 54
Management fees received3 3 3
Operating expenses - management fees4 4 3
Funding received22 - 1,485
Funding repaid 400 200
Immediate Parent Company
Dividends paid23 1,870 640
Other controlled entities of the Ultimate Parent Bank
Interest expense:
Interest expense - other2 1 1
Non-interest income:
Distribution fees received on managed fund products 14 13
Distribution fees received on life and general insurance products 36 40
Management fees received3 4 7
Associate
Dividends received 6 5
1
Includes interest income on reverse repos and cash held with the NZ Branch.
2
Includes interest expense on other funding provided by and repos with the NZ Branch.
Note 24 Related entities (continued)

Westpac New Zealand Limited.31
Notes to the financial statements
Due from and to related entities
THE BANKING GROUP
$ millions20182017
Due from related entities
Ultimate Parent Bank 1,309 2,006
Other controlled entities of the Ultimate Parent Bank 10 11
Total due from related entities 1,319 2,017
Due from related entities at fair value
1
558 587
Due from related entities at amortised cost 761 1,430
Total due from related entities 1,319 2,017
Due to related entities
Ultimate Parent Bank 1,588 2,089
Other controlled entities of the Ultimate Parent Bank 55 37
Total due to related entities 1,643 2 ,126
Due to related entities at fair value
2
251 355
Due to related entities at amortised cost 1,392 1,771
Total due to related entities 1,643 2 ,126
1
Includes reverse repos of $163 million (2017: $519 million).
2
Includes repos of $15 million (2017: $22 million).
Key management personnel compensation
Key management personnel are those who, directly or indirectly, have authority and responsibility for planning, directing and controlling the activities
of the Banking Group. This includes all Executive and Non-Executive Directors.
THE BANKING GROUP
$’000s
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Salaries and other short-term benefits 8,019 8,143
Post-employment benefits 613 455
Other termination benefits615-
Share-based payments 2,559 2,651
Total key management personnel compensation 11,806 11,249
Loans to key management personnel 22,349 22,769
Deposits from key management personnel 6,006 1,229
Interest income on amounts due from key management personnel 819 842
Interest expense on amounts due to key management personnel 107 19
The Directors have received remuneration from the Banking Group and these amounts are included in the table above.
Loans and deposits with key management personnel
All loans and deposits are made in the ordinary course of business of the Banking Group, on an arm’s length basis and on normal commercial
terms and conditions. Loans are on terms that range between variable, fixed rate up to five years and interest only loans, all of which are in
accordance with the Banking Group’s lending policies.
As at 30 September 2018, no individual provision has been recognised in respect of loans given to key management personnel and their related parties
(30 September 2017: nil). These individual loans have been included within the loan portfolio when determining collectively assessed provisions.
Other key management personnel transactions
All other transactions with key management personnel, their related entities and other related parties are conducted on an arm’s length basis
in the normal course of business and on commercial terms and conditions. These transactions principally involve the provision of financial and
investment services.
Note 24 Related entities (continued)

32
Notes to the financial statements
Westpac New Zealand Limited.
Note 25 Derivative financial instruments
Accounting policy
Derivative financial instruments are instruments whose values derive from the value of an underlying asset, reference rate or index and include
forwards, futures, swaps and options.
All derivatives are held at fair value. Changes in fair value are recognised in the income statement, unless designated in a cash flow hedge relationship.
Derivatives are presented as an asset where they have a positive fair value at balance date or as a liability where the fair value at balance date is
negative. Derivatives with related parties are included in due from/due to related entities.
The Banking Group uses derivative instruments as part of its asset and liability risk management activities, which are discussed in Note 35. Derivatives
used for risk management activities include designating derivatives into one of two types of hedge accounting relationships: fair value hedge or cash
flow hedge, where permitted under NZ IAS 39. These hedge designations and associated accounting treatment are as follows:
Fair value hedges
Fair value hedges hedge the exposure to changes in the fair value of an asset or liability.
–Changes in the fair value of derivatives and the changes in the fair value of the hedged asset or liability in fair value hedges attributable to the
hedged risk are recognised in non-interest income. The carrying value of the hedged asset or liability is adjusted for the changes in fair value
related to the hedged risk.
–If a hedge is discontinued, any fair value adjustments to the carrying value of the asset or liability are amortised to net interest income over the
period to maturity. If the asset or liability is sold, any unamortised adjustment is immediately recognised in the income statement.
Cash flow hedges
Cash flow hedges hedge the exposure to variability of cash flows attributable to an asset, liability or future forecast transaction.
–For effective hedges, changes in the fair value of derivatives are recognised in the cash flow hedge reserve through other comprehensive income
and subsequently recognised in net interest income when the asset or liability that was hedged impacts the income statement.
–For hedges with some ineffectiveness, the changes in the fair value of the derivatives relating to the ineffective portion are immediately recognised
in the income statement.
–If a hedge is discontinued, any cumulative gain or loss remains in other comprehensive income. It is amortised to net interest income over the
period which the asset or liability that was hedged also impacts the income statement.
–If a hedge of a forecast transaction is no longer expected to occur, any cumulative gain or loss in other comprehensive income is immediately
recognised in the income statement.
Fair value hedges
The Banking Group hedges a proportion of its interest rate risk and foreign exchange interest rate risk from debt issuances and fixed interest rate assets
with single currency and cross currency interest rate derivatives.
THE BANKING GROUP
$ millions20182017
Change in fair value of hedging instruments10 32
Change in fair value of hedged items attributed to hedged risk(10) (39)
Ineffectiveness in non-interest income - (7)
Cash flow hedges
Exposure to the volatility of interest cash flows from customer deposits and loans is hedged with interest rate derivatives. Exposure to foreign currency
principal and interest cash flows from floating rate debt issuances is hedged through the use of cross currency derivatives.
Gross cash inflows and outflows on derivatives designated in cash flow hedges are, as a proportion of total gross cash flows, expected to occur in the
following periods:
THE BANKING GROUP
2018
Less Than
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
2 Years
2 Years to
3 Years
3 Years to
4 Years
4 Years to
5 Years
Over
5 Years
Cash inflows0%0%19%18%24%23%3%13%
Cash outflows0%0%17%18%25%22%3%15%

Westpac New Zealand Limited.33
Notes to the financial statements
THE BANKING GROUP
2017
Less Than
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
2 Years
2 Years to
3 Years
3 Years to
4 Years
4 Years to
5 Years
Over
5 Years
Cash inflows
12%0%3%17%6%24%23%15%
Cash outflows12%0%4%17%6%25%21%15%
THE BANKING GROUP
$ millions20182017
Cash flow hedge ineffectiveness4 (5)
Dual fair value and cash flow hedges
Fixed rate foreign currency denominated debt is hedged using cross currency interest rate derivatives, designated as fair value hedges of foreign
interest rates and cash flow hedges of foreign exchange rates.
The notional amount and fair value of derivative instruments held for trading and designated in hedge relationships are set out in the following tables:
Derivatives held with external counterparties
THE BANKING GROUP
2018
$ millions
Notional
Amount
FAIR VALUE
Trading
Hedging
Total
Fair Value
Fair ValueCash Flow
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Swap agreements 4,232 - - 18 (119) - - 18 (119)
Total interest rate contracts 4,232 - - 18 (119) - - 18 (119)
Foreign exchange contracts
Cross currency swap agreements 7,314 - - 25 (7) 542 (55) 567 (62)
Total foreign exchange contracts 7,314 - - 25 (7) 542 (55) 567 (62)
Total of gross derivatives 11,546 - - 43 (126) 542 (55) 585 (181)
Impact of netting arrangements - - - - - - - - -
Total of net derivatives 11,546 - - 43 (126) 542 (55) 585 (181)
THE BANKING GROUP
2017
$ millions
Notional
Amount
FAIR VALUE
Trading
Hedging
Tot a l
Fair Value
Fair ValueCash Flow
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Swap agreements 4,488 - - 20 (164) - - 20 (164)
Total interest rate contracts 4,488 - - 20 (164) - - 20 (164)
Foreign exchange contracts
Cross currency swap agreements 7, 5 3 8 - - 30 (5) 170 (315) 200 (320)
Total foreign exchange contracts 7, 5 3 8 - - 30 (5) 170 (315) 200 (320)
Total of gross derivatives 12,026 - - 50 (169) 170 (315) 220 (484)
Impact of netting arrangements - - - - - - - - -
Total of net derivatives 12,026 - - 50 (169) 170 (315) 220 (484)
Note 25 Derivative financial instruments (continued)

34
Notes to the financial statements
Westpac New Zealand Limited.
Derivatives held with related parties
THE BANKING GROUP
2018
$ millions
Notional
Amount
FAIR VALUE
Trading
Hedging
Total
Fair ValueFair ValueCash Flow
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Swap agreements 50,500 - (1) - (84) 40 (110) 40 (195)
Total interest rate contracts 50,500 - (1) - (84) 40 (110) 40 (195)
Foreign exchange contracts
Cross currency swap agreements 6,490 - - - - 355 (41) 355 (41)
Total foreign exchange contracts 6,490 - - - - 355 (41) 355 (41)
Total of gross derivatives 56,990 - (1) - (84) 395 (151) 395 (236)
Impact of netting arrangements - - - - - - - - -
Total of net derivatives 56,990 - (1) - (84) 395 (151) 395 (236)
THE BANKING GROUP
2017
$ millions
Notional
Amount
FAIR VALUE
Trading
Hedging
Tot a l
Fair ValueFair ValueCash Flow
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Forward rate agreements 1,000 - - - - - - - -
Swap agreements 46,085 - - 1 (103) 51 (129) 52 (232)
Total interest rate contracts 47,085 - - 1 (103) 51 (129) 52 (232)
Foreign exchange contracts
Cross currency swap agreements 6,909 16 (26) - - - (75) 16 (101)
Total foreign exchange contracts 6,909 16 (26) - - - (75) 16 (101)
Total of gross derivatives 53,994 16 (26) 1 (103) 51 (204) 68 (333)
Impact of netting arrangements - - - - - - - - -
Total of net derivatives 53,994 16 (26) 1 (103) 51 (204) 68 (333)
Note 25 Derivative financial instruments (continued)

Westpac New Zealand Limited.35
Notes to the financial statements
Note 26 Fair value of financial assets and financial liabilities
Accounting policy
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
On initial recognition, the transaction price generally represents the fair value of the financial instrument unless there is observable information from
an active market to the contrary. Where unobservable information is used, the difference between the transaction price and the fair value (day one
profit or loss) is recognised in the income statement over the life of the instrument when the inputs become observable.
Critical accounting assumptions and estimates
The majority of valuation models used by the Banking Group employ only observable market data as inputs. However, for certain financial
instruments, data may be employed which is not readily observable in current markets.
The availability of observable inputs is influenced by factors such as:
–product type;
–depth of market activity;
–maturity of market models; and
–complexity of the transaction.
Where unobservable market data is used, more judgment is required to determine fair value. The significance of these judgments depends on the
significance of the unobservable input to the overall valuation. Unobservable inputs are generally derived from other relevant market data and
adjusted against:
–standard industry practice;
–economic models; and
–observed transaction prices.
In order to determine a reliable fair value for a financial instrument, management may apply adjustments to the techniques previously described.
These adjustments reflect the Banking Group’s assessment of factors that market participants would consider in setting the fair value.
These adjustments incorporate bid/offer spreads, credit valuation adjustments and funding valuation adjustments.
Fair Valuation Control Framework
The Banking Group uses a Fair Valuation Control Framework where the fair value is either determined or validated by a function independent of the
transaction. This framework formalises the policies and procedures used to achieve compliance with relevant accounting, industry and regulatory
standards. The framework includes specific controls relating to:
–the revaluation of financial instruments;
–independent price verification;
–fair value adjustments; and
–financial reporting.
A key element of the Framework is the Revaluation Committee, comprising senior valuation specialists from within the Ultimate Parent Bank Group. The
Revaluation Committee reviews the application of the agreed policies and procedures to assess that a fair value measurement basis has been applied.
The method of determining fair value differs depending on the information available.
Fair value hierarchy
A financial instrument’s categorisation within the valuation hierarchy is based on the lowest level input that is significant to the fair value measurement.
The Banking Group categorises all fair value instruments according to the hierarchy described below.
Valuation techniques
The Banking Group applies market accepted valuation techniques in determining the fair valuation of Over the Counter derivatives. This includes
credit valuation adjustments and funding valuation adjustments, which incorporates credit risk and funding costs and benefits that arise in relation to
uncollateralised derivative positions, respectively.
The specific valuation techniques, the observability of the inputs used in valuation models and the subsequent classification for each significant product
category are outlined below:

36
Notes to the financial statements
Westpac New Zealand Limited.
Financial instruments measured at fair value
Level 1 instruments
The fair value of financial instruments traded in active markets based on recent unadjusted quoted prices. These prices are based on actual arm’s
length basis transactions.
The valuations of Level 1 instruments require little or no management judgment.
InstrumentBalance sheet categoryIncludes:Valuation technique
Non-asset backed
debt instruments
Trading securities
New Zealand
Government bonds
These instruments are traded in liquid, active markets
where prices are readily observable. No modelling or
assumptions are used in the valuation.
Available-for-sale securities
Level 2 instruments
The fair value for financial instruments that are not actively traded are determined using valuation techniques which maximise the use of observable
market prices. Valuation techniques include:
–the use of market standard discounting methodologies;
–option pricing models; and
–other valuation techniques widely used and accepted by market participants.
InstrumentBalance sheet categoryIncludes:Valuation technique
Interest rate
products
Derivative financial
instruments
Interest rate swaps, forwards
and options – derivative
financial instruments
Industry standard valuation models are used to
calculate the expected future value of payments
by product, which is discounted back to a
present value. The model’s interest rate inputs
are benchmark interest rates and active broker
quoted interest rates in the swap, bond and futures
markets. Interest rate volatilities are sourced from
brokers and consensus data providers.
Due from related entities
Due to related entities
Foreign exchange
products
Derivative financial
instruments
FX swaps – derivative financial
instruments
Derived from market observable inputs or
consensus pricing providers using industry
standard models.
Due from related entities
Due to related entities
Non-asset backed
debt instruments
Trading securities
Local authority and NZ
public securities, other bank
issued certificates of deposit,
commercial paper, other
government securities and
corporate bonds
Valued using observable market prices which are
sourced from consensus pricing services, broker
quotes or inter-dealer prices.
Available-for-sale securities
Due from related entities
Other financial liabilities at
fair value through income
statement
Security repurchase
agreements and reverse
repurchase agreements
over non-asset backed debt
securities
Due to related entities
Deposits and
other borrowings
at fair value
Deposits and other
borrowings
Certificates of deposit
Discounted cash flow using market rates offered
for deposits of similar remaining maturities.
Debt issues at fair
value
Debt issuesCommercial paper
Discounted cash flows, using a discount rate
which reflects the terms of the instrument and
the timing of cash flows adjusted for market
observable changes in the Bank’s implied credit
worthiness.
Level 3 instruments
Financial instruments valued where at least one input that could have a significant effect on the instrument’s valuation is not based on observable
market data due to illiquidity or complexity of the product. These inputs are generally derived and extrapolated from other relevant market data and
calibrated against current market trends and historical transactions.
These valuations are calculated using a high degree of management judgment.
Note 26 Fair value of financial assets and financial liabilities (continued)

Westpac New Zealand Limited.37
Notes to the financial statements
The table below summarises the attribution of financial instruments carried at fair value to the fair value hierarchy:
THE BANKING GROUP
20182017
$ millionsLevel 1Level 2Level 3 Total Level 1Level 2Level 3 Tot a l
Financial assets measured at fair value
Trading securities 6 1,145 - 1,151 20 1,777 - 1,797
Derivative financial instruments - 585 - 585 - 220 - 220
Available-for-sale securities 1,167 2,643 - 3,810 1,556 2,531 - 4,087
Due from related entities - 558 - 558 - 587 - 587
Total financial assets measured at fair value 1,173 4,931 - 6,104 1,576 5,115 - 6,691
Financial liabilities measured at fair value
Deposits and other borrowings at fair value - 1,218 - 1,218 - 593 - 593
Other financial liabilities at fair value through income statement - - - - - 19 - 19
Derivative financial instruments - 181 - 181 - 484 - 484
Debt issues at fair value - - - - - 1,642 - 1,642
Due to related entities - 251 - 251 - 355 - 355
Total financial liabilities measured at fair value - 1,650 - 1,650 - 3,093 - 3,093
Analysis of movements between Fair Value Hierarchy Levels
During the year there were no material transfers between levels of the fair value hierarchy (30 September 2017: nil).
Financial instruments not measured at fair value
For financial instruments not measured at fair value on a recurring basis, fair value has been derived as follows:
InstrumentValuation technique
Loans
Where available, the fair value of loans is based on observable market transactions; otherwise fair value is estimated
using discounted cash flow models. For variable rate loans, the discount rate used is the current effective interest
rate. The discount rate applied for fixed rate loans reflects the market rate for the maturity of the loan and the credit
worthiness of the borrower.
Deposits and other
borrowings
Fair values of deposit liabilities payable on demand (interest free, interest bearing and savings deposits) approximate
their carrying value. Fair values for term deposits are estimated using discounted cash flows, applying market rates
offered for deposits of similar remaining maturities.
Debt issues and loan
capital
Fair values are calculated using a discounted cash flow model. The discount rates applied reflect the terms of the
instruments, the timing of the estimated cash flows and are adjusted for any changes in the applicable credit spreads.
Due to related
entities
The fair value of the loan due to related entities is estimated using a discounted cash flow model. The discount rate
applied reflects the terms of the loan and the timing of the estimated cash flows. The carrying value of all other balances
due to related entities approximates the fair value. These items are either short-term in nature or re-price frequently.
All other financial
assets and financial
liabilities
For all other financial assets and financial liabilities, the carrying value approximates the fair value. These items are
either short-term in nature or re-price frequently, and are of a high credit rating.
Note 26 Fair value of financial assets and financial liabilities (continued)

38
Notes to the financial statements
Westpac New Zealand Limited.
The following tables summarise the estimated fair value and fair value hierarchy of financial instruments not measured at fair value:
THE BANKING GROUP
2018
$ millions
Carrying
Amount
Fair Value
Level 1Level 2Level 3 Total
Financial assets not measured at fair value
Cash and balances with central banks 1,353 1,353 - - 1,353
Receivables due from other financial institutions 70 70 - - 70
Other assets 225 - - 225 225
Loans 80,378 - - 80,503 80,503
Due from related entities 761 - 751 10 761
Total financial assets not measured at fair value 82,787 1,423 751 80,738 82,912
Financial liabilities not measured at fair value
Payables due to other financial institutions 497 476 21 - 497
Other liabilities 539 - 539 - 539
Deposits and other borrowings 61,884 - 61,276 647 61,923
Debt issues 13,725 - 13,845 - 13,845
Due to related entities 1,392 - 1,399 - 1,399
Loan capital 2,622 - - 2,645 2,645
Total financial liabilities not measured at fair value 80,659 476 77,080 3,292 80,848
THE BANKING GROUP
2017
$ millions
Carrying
Amount
Fair Value
Level 1Level 2Level 3 Tot a l
Financial assets not measured at fair value
Cash and balances with central banks 1,659 1,659 - - 1,659
Receivables due from other financial institutions 407 407 - - 407
Other assets 221 - - 221 221
Loans 7 7, 2 6 1 - - 7 7, 2 9 2 7 7, 2 9 2
Due from related entities 1,430 - 1,419 11 1,430
Total financial assets not measured at fair value 80,978 2,066 1,419 7 7, 5 24 81,009
Financial liabilities not measured at fair value
Payables due to other financial institutions 143 143 - - 143
Other liabilities 423 - 423 - 423
Deposits and other borrowings 58,405 - 57,849 601 58,450
Debt issues 15,087 - 15,259 - 15,259
Due to related entities 1,771 - 1,786 - 1,786
Loan capital 2,616 - 1,500 1,188 2,688
Total financial liabilities not measured at fair value 78,445 143 76,817 1,789 78,749
Note 27 Offsetting financial assets and financial liabilities
Accounting policy
Financial assets and liabilities are presented net on the balance sheet when the Banking Group has a legally enforceable right to offset them in all
circumstances and there is an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
The gross assets and liabilities behind the net amounts reported on the balance sheet are disclosed in the table below.
Some of the Banking Group’s offsetting arrangements are not enforceable in all circumstances. The assets and liabilities under such agreements are
also disclosed in the table below, to illustrate the net balance sheet amount if these future events should occur. The amounts in the tables below may
not tie back to the balance sheet if there are balances which are not subject to offsetting arrangements. The amounts presented in this note do not
represent the credit risk exposure of the Banking Group. Refer to Note 35.2 for information on credit risk management. The offsetting and collateral
arrangements and other credit risk mitigation strategies used by the Banking Group are further explained in the ‘Management of risk mitigation’ section
under Note 35.2.
Note 26 Fair value of financial assets and financial liabilities (continued)

Westpac New Zealand Limited.39
Notes to the financial statements
THE BANKING GROUP
2018
Effects of Offsetting on Balance Sheet
Amounts Subject to Enforceable
Netting Arrangements But Not Offset
$ millions
Gross
Amounts
Amounts
Offset
Net Amounts
Reported on
the Balance
Sheet
Other
Recognised
Financial
Instruments
Cash
Collateral
Financial
Instrument
Collateral Net amount
Assets
Derivative financial instruments 585 - 585 (109) (471) - 5
Due from related entities - securities
purchased under agreement to resell
1
163 - 163 - - (163) -
Due from related entities - derivative
financial instruments
1
395 - 395 (236) - - 159
Total assets 1,143 - 1,143 (345) (471) (163) 164
Liabilities
Derivative financial instruments 181 - 181 (109) (70) - 2
Due to related entities - security
repurchase agreements
3
15 - 15 - - (15) -
Due to related entities - derivative
financial instruments
3
236 - 236 (236) - - -
Total liabilities 432 - 432 (345) (70) (15) 2
THE BANKING GROUP
2017
Effects of Offsetting on Balance Sheet
Amounts Subject to Enforceable
Netting Arrangements But Not Offset
$ millions
Gross
Amounts
Amounts
Offset
Net Amounts
Reported on the
Balance Sheet
Other
Recognised
Financial
Instruments
Cash
Collateral
Financial
Instrument
Collateral Net amount
Assets
Derivative financial instruments 220 - 220 (168) (52) - -
Due from related entities - securities
purchased under agreement to resell
1
519 - 519 - - (519) -
Due from related entities - derivative
financial instruments
1
68 - 68 (68) - - -
Total assets 807 - 807 (236) (52) (519) -
Liabilities
Security repurchase agreements
2
19 - 19 - - (19) -
Derivative financial instruments 484 - 484 (168) (314) - 2
Due to related entities - security
repurchase agreements
3
22 - 22 - - (22) -
Due to related entities - derivative
financial instruments
3
333 - 333 (68) - - 265
Total liabilities 858 - 858 (236) (314) (41) 267
1
Forms part of due from related entities on the balance sheet (refer to Note 24).
2
Forms part of other financial liabilities at fair value through income statement on the balance sheet.
3
Forms part of due to related entities on the balance sheet (refer to Note 24).
Other recognised financial instruments
These financial assets and liabilities are subject to master netting agreements which are not enforceable in all circumstances, so they are recognised
gross on the balance sheet. The offsetting rights of the master netting arrangements can only be enforced if a predetermined event occurs in the future,
such as a counterparty defaulting.
Note 27 Offsetting financial assets and financial liabilities (continued)

40
Notes to the financial statements
Westpac New Zealand Limited.
Cash collateral and financial instrument collateral
These amounts are received or pledged under master netting arrangements against the gross amounts of assets and liabilities. Financial instrument
collateral typically comprises securities which can be readily liquidated in the event of counterparty default. The offsetting rights of the master netting
arrangement can only be enforced if a predetermined event occurs in the future, such as a counterparty defaulting.
Note 28 Operating lease commitments
The Banking Group leases various commercial and retail premises and related plant and equipment. The lease commitments at 30 September are as
follows:
THE BANKING GROUP
$ millions20182017
Due within one year 55 55
Due after one year but not later than five years 147 141
Due after five years 197 159
Total lease commitments 399 355
Operating leases are entered into to meet the business needs of entities in the Banking Group. Lease rentals are determined in accordance with market
conditions when leases are entered into or on rental review dates.
Note 29 Credit related commitments, contingent assets and contingent liabilities
Accounting policy
Undrawn credit commitments
The Banking Group enters into various arrangements with customers which are only recognised in the balance sheet when called upon.
These arrangements include commitments to extend credit, bill endorsements, financial guarantees, standby letters of credit and underwriting
facilities.
Contingent assets
Contingent assets are possible assets whose existence will be confirmed only by uncertain future events. Contingent assets are not recognised on
the balance sheet but are disclosed if an inflow of economic benefits is probable.
Contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events, and present obligations where the
transfer of economic resources is not probable or cannot be reliably measured. Contingent liabilities are not recognised on the balance sheet but
are disclosed unless the outflow of economic resources is remote.
Undrawn credit commitments
The Banking Group enters into various arrangements with customers which are only recognised on the balance sheet when called upon. These
arrangements include commitments to extend credit, bill endorsements, financial guarantees, standby letters of credit and underwriting facilities.
They expose the Banking Group to liquidity risk when called upon and also to credit risk if the customer fails to repay the amounts owed at the due
date. The maximum exposure to credit loss is the contractual or notional amount of the instruments disclosed below. Some of the arrangements can be
cancelled by the Banking Group at any time and a significant portion is expected to expire without being drawn. The actual required liquidity and credit
risk exposure is therefore less than the amounts disclosed. The Banking Group uses the same credit policies when entering into these arrangements as
it does for on-balance sheet instruments. Refer to Note 35 for further details on liquidity risk and credit risk management.
The Banking Group is obliged to repurchase any loan sold to and held by:
a. WNZSL (pursuant to its securitisation programme) where the loan does not meet certain terms and conditions of the WNZSL securitisation
programme;
b. WNZCBL (pursuant to the CB Programme) where:
i. it is discovered that there has been a material breach of a sale warranty (or any such sale warranty is materially untrue);
ii. the loan becomes materially impaired or is enforced prior to the second monthly covered bond payment date falling after the assignment of the
loan; or
iii. at the cut-off date relating to the loan, there were arrears of interest and that loan subsequently becomes a delinquent loan prior to the second
monthly covered bond payment date falling after the assignment of the loan.
It is not envisaged that any liability resulting in material loss to the Banking Group will arise from these obligations.
Note 27 Offsetting financial assets and financial liabilities (continued)

Westpac New Zealand Limited.41
Notes to the financial statements
THE BANKING GROUP
$ millions20182017
Letters of credit and guarantees
1
863 772
Commitments to extend credit
2
24,650 25,081
Other60 10
Total undrawn credit commitments 25,573 25,863
1
Letters of credit and guarantees are undertakings to pay, against presentation documents, an obligation in the event of a default by a customer. Guarantees are
unconditional undertakings given to support the obligations of a customer to third parties. The Banking Group may hold cash as collateral for certain guarantees issued.
2
Commitments to extend credit include all obligations on the part of the Banking Group to provide credit facilities. As facilities may expire without being drawn upon, the
notional amounts do not necessarily reflect future cash requirements.
Contingent assets
The credit commitments shown in the table above also constitute contingent assets. These commitments would be classified as loans on the balance
sheet on the contingent event occurring.
Contingent liabilities
The Banking Group has contingent liabilities in respect of actual and potential claims and proceedings. An assessment of the Banking Group’s likely loss in
respect of these matters has been made on a case-by-case basis and provision has been made in these financial statements where appropriate.
Additional information relating to any provision or contingent liability has not been provided where disclosure of such information might be expected to
seriously prejudice the position of the Banking Group.
WNZIL, a subsidiary of the Bank, leases the majority of the properties occupied by the Bank. The Bank guarantees a significant portion of lease obligations.
As is normal practice, the lease agreements contain ‘make good’ provisions which require WNZIL, upon termination of the lease, to return the premises
to the lessor in the original condition. The maximum amount payable by WNZIL upon vacation of all leased premises subject to these provisions as at 30
September 2018 was estimated to be $30 million (30 September 2017: $30 million).
No amount has been recognised for the $30 million in estimated maximum vacation payments as the Banking Group believes it is highly unlikely that
WNZIL would incur a material operating loss as a result of such ‘make good’ provisions in the normal course of its business operations.
Guarantees
As disclosed in Note 24, the Bank has an agreement with the NZ Branch whereby the Bank will reimburse the NZ Branch for any credit losses incurred by
it due to certain customers of the Bank defaulting on certain financial market and international products.
Note 30 Segment reporting
Accounting policy
Operating segments are presented on a basis that is consistent with information provided internally to the Banking Group’s chief operating decision-
maker and reflects the management of the business, rather than the legal structure of the Banking Group. The chief operating decision-maker
is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The Banking Group has
determined that the Bank’s executive team is its chief operating decision-maker.
All transactions between business segments are conducted on an arm’s length basis, with inter-segment revenue and costs being eliminated at
head office. Income and expenses directly associated with each segment are included in determining business segment performance.
The Banking Group operates predominantly in the consumer banking and wealth, commercial corporate and institutional banking, and investments and
insurance sectors within New Zealand. On this basis, no geographical segment reporting is provided.
The operating segment results have been presented on a management reporting basis and consequently internal charges and transfer pricing
adjustments have been reflected in the performance of each operating segment. Intersegment pricing is determined on a cost recovery basis.
The Banking Group does not rely on any single major customer for its revenue base.
Comparative information for the year ended 30 September 2017 has been restated following changes to the allocation of costs and the Ultimate
Parent Bank updating its capital allocation framework. Comparative information has been restated to ensure consistent presentation with the current
reporting period. The revised presentation has no impact on total profit before income tax expense for the year ended 30 September 2017.
The Banking Group’s operating segments are defined by the customers they serve and the services they provide. The Banking Group has identified the
following main operating segments:
–Consumer Banking and Wealth provides financial services predominantly for individuals;
–Commercial, Corporate and Institutional Banking provides a broad range of financial services for commercial, corporate, property finance,
agricultural, institutional and government customers; and
–Investments and Insurance provides funds management and insurance services.
Note 29 Credit related commitments, contingent assets and contingent liabilities (continued)

42
Notes to the financial statements
Westpac New Zealand Limited.
Reconciling items primarily represent:
–business units that do not meet the definition of operating segments under NZ IFRS 8 Operating Segments;
–elimination entries on consolidation of the results, assets and liabilities of the Banking Group’s controlled entities in the preparation of the consolidated
financial statements of the Banking Group;
–results of certain entities included for management reporting purposes, but excluded from the consolidated financial statements of the Banking Group
for statutory financial reporting purposes; and
–results of certain business units excluded for management reporting purposes, but included within the consolidated financial statements of the
Banking Group for statutory financial reporting purposes.
THE BANKING GROUP
$ millions
Consumer
Banking and
Wealth
Commercial,
Corporate and
Institutional
Investments
and
Insurance
Reconciling
ItemsTotal
Year ended 30 September 2018
Net interest income1,145 705 1 (7) 1,844
Non-interest income177 153 138 (95) 373
Net operating income before operating expenses and
impairment charges
1,322 858 139 (102) 2,217
Operating expenses(679)(221)(32)17 (915)
Impairment (charges)/benefits(33)9 - 21 (3)
Profit before income tax610 646 107 (64) 1,299
Total gross loans46,605 34,068 - 29 80,702
Total deposits and other borrowings36,147 25,737 - 1,218 63,102
Year ended 30 September 2017 (restated)
Net interest income1,053 683 1 4 1,741
Non-interest income219 153 131 (98) 405
Net operating income before operating expenses and
impairment charges
1,272 836 132 (94) 2 ,146
Operating expenses(708)(221)(29)4 (954)
Impairment (charges)/benefits(34)97 - 13 76
Profit before income tax530 712 103 (77) 1,268
Total gross loans44,707 32,870 - 34 7 7,6 1 1
Total deposits and other borrowings34,044 24,361 - 593 58,998
Note 31 Securitisation, covered bonds and other transferred assets
The Banking Group enters into transactions in the normal course of business by which financial assets are transferred to counterparties or structured
entities. Depending on the circumstances, these transfers may result in derecognition of the assets in their entirety, partial derecognition or no
derecognition of the assets subject to the transfer. For the Banking Group’s accounting policy on derecognition of financial assets, refer to Note 1.
Securitisation
Securitisation is the transferring of assets (or an interest in either the assets or the cash flows arising from the assets) to a structured entity which then
issues interest bearing debt securities to third party investors.
Own assets securitised
Securitisation of its own assets is used by the Banking Group as a funding and liquidity tool.
For securitisation structured entities which the Banking Group controls, as defined in Note 32, the structured entities are classified as subsidiaries and
consolidated. When assessing whether the Banking Group controls a structured entity, it considers its exposure to and ability to affect variable returns.
The Banking Group may have variable returns from a structured entity through ongoing exposures to the risks and rewards associated with the assets,
the provision of derivatives, liquidity facilities, trust management and operational services.
In October 2008, WNZSL was set up as part of the Bank’s internal residential mortgage-backed securitisation programme. Under this programme
the Bank sold the rights (but not the obligations) of a pool of housing loans to WNZSL. The purchase was funded by WNZSL’s issuance of residential
mortgage-backed securities (‘RMBS’). The RMBS and an equivalent liability in the form of a deemed loan from the Bank to WNZSL are fully eliminated
in the Banking Group’s financial statements. Refer to Note 29 for a description of the Banking Group’s obligation to repurchase certain housing loans
sold to WNZSL.
Note 30 Segment reporting (continued)

Westpac New Zealand Limited.43
Notes to the financial statements
Covered bonds
The Banking Group has a covered bond programme whereby selected pools of housing loans it originates are assigned to a bankruptcy remote
structured entity. WNZCBL is a special purpose entity established to purchase from time to time, and hold the rights, but not the obligations, of a pool
of housing loans (‘cover pool’) and to provide a financial guarantee (in addition to that of the Bank) in respect of obligations under the covered bonds
issued from time to time by WSNZL under the CB Programme. That financial guarantee is supported by WNZCBL granting security in favour of the
covered bondholders over the cover pool.
The intercompany loan made by the Bank to WNZCBL to fund the initial purchase (and subsequent further purchases which increased the cover pool)
and the liability representing the deemed loan from WNZCBL to the Bank are fully eliminated in the Banking Group’s financial statements. Refer to Note
29 for a description of the Banking Group’s obligation to repurchase certain housing loans sold to WNZCBL.
Security repurchase agreements
Where securities are sold subject to an agreement to repurchase at a predetermined price, they remain recognised on the balance sheet in their original
category (i.e. trading securities or available-for-sale securities).
The cash consideration received is recognised as a liability (security repurchase agreements). Refer to Note 17 for further details.
The following table presents the Banking Group’s assets transferred and their associated liabilities:
THE BANKING GROUP
For those liabilities that only have recourse
to the transferred assets:
$ millions
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
Fair value of
transferred
assets
Fair value of
associated
liabilities
Net fair value
position
2018
Securitisation - own assets
1
5,033 5,015 5,021 5,015 6
Covered bonds
2
7,533 5,656 n/a n/a n/a
Security repurchase agreements 15 15 n/a n/a n/a
Total 12,581 10,686 5,021 5,015 6
2017
Securitisation - own assets
1
5,034 5,013 5,018 5,013 5
Covered bonds
2
7,535 5,246 n/a n/a n/a
Security repurchase agreements 41 41 n/a n/a n/a
Total 12,610 10,300 5,018 5,013 5
1
The most senior rated securities at 30 September 2018 of $4,700 million (30 September 2017: $4,700 million) qualify as eligible collateral for repurchase agreements with
the Reserve Bank. The Bank takes advantage of the Reserve Bank’s guidelines for its overnight reverse repo facility and open market operations, which allows banks in
New Zealand to offer RMBS as collateral for the Reserve Bank’s repurchase agreements.
2
The difference between the carrying values of the covered bonds and the assets pledged allows for the immediate issuance of additional covered bonds if required.
These additional assets can be repurchased by the Bank at its discretion, subject to the conditions set out in the transaction documents. The cover pool is comprised of
housing loans up to a value of $7,500 million as at 30 September 2018 (30 September 2017: $7,500 million). Over time, the composition of the cover pool will include, in
addition to housing loans, accrued interest (representing accrued and unpaid interest on the outstanding housing loans) and cash (representing collections of principal
and interest from the underlying housing loans).
Note 32 Structured entities
Accounting policy
Structured entities are generally created to achieve a specific, defined objective and their operations are restricted such as only purchasing specific
assets. Structured entities are commonly financed by debt or equity securities that are collateralised by and/or indexed to their underlying assets.
The debt and equity securities issued by structured entities may include tranches with varying levels of subordination.
Structured entities are classified as subsidiaries and consolidated if they meet the definition in Note 1. If the Banking Group does not control a
structured entity then it will not be consolidated.
The Banking Group engages in various transactions with both consolidated and unconsolidated structured entities that are mainly involved in
securitisations.
Consolidated structured entities
Securitisation and covered bonds
The Banking Group uses structured entities to securitise its financial assets through the CB Programme and the Bank’s internal residential mortgage-
backed securitisation programme. Refer to Note 31 for further details.
Note 31 Securitisation, covered bonds and other transferred assets (continued)

44
Notes to the financial statements
Westpac New Zealand Limited.
Funds managed by a member of the Ultimate Parent Bank Group
As disclosed in Note 24 and the ‘Funds management and other fiduciary activities’ section below, the PIE Funds are consolidated within the financial
statements of the Banking Group.
Non-contractual financial support
The Banking Group does not provide non-contractual financial support to these consolidated structured entities.
Unconsolidated structured entities
The Banking Group has interests in various unconsolidated structured entities including debt instruments, liquidity arrangements, lending, loan
commitments and certain derivatives.
Interests exclude non-complex derivatives (e.g. interest rate swap agreements) and lending to a structured entity with recourse to a wider operating
entity, not just the structured entity.
The Banking Group’s main interests in unconsolidated structured entities, which arise in the normal course of business, are loans and other credit
commitments. The Banking Group lends to unconsolidated structured entities, subject to the Banking Group’s collateral and credit approval processes,
in order to earn interest and fee income. The structured entities are mainly securitisation entities.
The following table shows the Banking Group’s interests in unconsolidated structured entities and its maximum exposure to loss in relation to those
interests. The maximum exposure does not take into account any collateral or hedges that will reduce the risk of loss.
–For on-balance sheet instruments, including debt instruments in and loans to unconsolidated structured entities, the maximum exposure to loss is
the carrying value; and
–For off-balance sheet instruments, including liquidity facilities and loan and other credit commitments, the maximum exposure to loss is the
notional amounts.
THE BANKING GROUP
20182017
$ millions Financing to Securitisation Vehicles Financing to Securitisation Vehicles
Assets
Loans 2,632 2,297
Total on-balance sheet exposures 2,632 2,297
Total notional amounts of off-balance sheet exposures 765 1,052
Maximum exposure to loss 3,397 3,349
Size of structured entities
1
3,397 3,349
1
Represented by the total assets or market capitalisation of the entity, or if not available, the Banking Group’s total committed exposure (for lending arrangements and
external debt holdings).
Non-contractual financial support
The Banking Group does not provide non-contractual financial support to these unconsolidated structured entities.
Funds management and other fiduciary activities
The Bank markets the products of BTNZ, a member of the Ultimate Parent Bank Group, through its branches, advisory network and private bank. The
Bank derives distribution fees from the sale of managed fund products, superannuation and unit trusts marketed on behalf of BTNZ. The Bank also
provides investment advice to a number of clients, which includes the provision of other fiduciary activities.
The PIE Funds are administered by the Banking Group (refer to Note 24 for further details) and invest in deposits with the Bank. The Bank is considered to
control the PIE Funds, and as such they are consolidated within the financial statements of the Banking Group. As at 30 September 2018, $3,249 million
(30 September 2017: $2,870 million) of funds under management were invested by the PIE Funds in the Bank’s deposits.
Marketing and distribution of insurance products
The Bank markets and distributes both life and general insurance products. The life insurance products are underwritten by Westpac Life-NZ- Limited,
a member of the Ultimate Parent Bank Group, and by external third party insurance companies. The general insurance products are fully underwritten
by external third party insurance companies. Disclosures are made in marketing material that the products are underwritten by those companies and
that the Bank does not guarantee the obligations of, or any products issued by, those companies.
Note 32 Structured entities (continued)

Westpac New Zealand Limited.45
Notes to the financial statements
Risk management
The Banking Group’s risk management strategy (refer to Note 35) will help minimise the possibility that any difficulties arising from the above activities
would adversely impact the Banking Group.
Furthermore, during the year ended 30 September 2018:
–financial services provided by any member of the Banking Group to entities which conduct the trust, custodial, securitisation, funds management and
other fiduciary activities described above, or on whose behalf insurance products are marketed or distributed, have been provided at arm’s length
terms and conditions and at fair value; and
–assets purchased by any member of the Banking Group from entities which conduct the trust, custodial, securitisation, funds management and other
fiduciary activities specified above, or on whose behalf insurance products are marketed or distributed, have been purchased on arm’s length terms
and conditions and at fair value.
Peak aggregate funding provided to entities
During the year ended 30 September 2018, the Banking Group did not provide any funding to entities conducting funds management and other fiduciary
activities, securitisation activities or insurance product marketing and distribution activities described in this note (30 September 2017: nil).
Note 33 Insurance business
The Banking Group does not conduct any insurance business (as that term is defined in the Order).
Note 34 Capital adequacy
The information contained in this note has been derived in accordance with the Banking Group’s conditions of registration which relate to capital
adequacy and BS2B issued by the Reserve Bank, except for the matters of non-compliance with condition of registration 1B disclosed on pages 77 and
78. The Bank considers its internal credit model methodologies result in the retention of an appropriate amount of capital to reflect its credit risk and
any effect of the non-compliance with its conditions of registration 1B on the information relating to capital adequacy is not considered by the Bank to
be material.
The Banking Group maintains an actively managed capital base to cover risks inherent in the business. The adequacy of the Banking Group’s capital is
monitored using, among other measures, the rules and ratios established by the Basel Committee on Banking Supervision (‘BCBS’) and adopted by the
Reserve Bank in supervising the Banking Group.
Capital management
The primary objectives of the Banking Group’s capital management are to ensure that the Banking Group complies with the regulatory capital
requirements prescribed by the Reserve Bank, maintains strong credit ratings and holds a strong capital position in order to support its business
objectives and maximise shareholders’ value.
The Banking Group manages its capital structure and makes adjustments to this in light of changing economic conditions and the risk characteristics
of its activities. In order to maintain or adjust the capital structure, the Banking Group may adjust the amount of dividend payments to shareholders,
reduce discretionary expenditure, return/issue capital to shareholders or issue capital securities.
Three independent processes, undertaken by Directors and senior management of the Bank, are designed to manage the Banking Group’s capital
adequacy to support its current and future activities:
1. The Banking Group actively monitors its capital adequacy as part of the annual Banking Group internal capital adequacy assessment process
(‘ICAAP’) and reports this to senior management and the Bank’s BRCC. This process supports the Board approved risk appetite statement. This
statement outlines the target debt rating, target capital ratios and the degree of earnings volatility that is acceptable. Capital ratios are set at a higher
level than required by the regulator, which both reduces the risk of breaching the conditions of registration and provides investor confidence.
2. The Banking Group calculates the capital required to be held for its current risk profile and forecasts the estimated capital position based on expected
future activities. The forecast capital required is assessed against the target ranges that have been approved by the Board in regard to capital ratios.
The Banking Group also reviews its positions in this process against other stakeholder requirements to ensure capital efficiency.
3. The Ultimate Parent Bank Group takes capital considerations into account during its Board Strategy Review (‘BSR’). The BSR is an annual process
where the current strategic direction of the Ultimate Parent Bank Group is reviewed and refinements are made.
Note 32 Structured entities (continued)

46
Notes to the financial statements
Westpac New Zealand Limited.
The Banking Group’s capital summary (unaudited)
THE BANKING GROUP
$ millionsNote2018
Tier 1 capital
Common Equity Tier 1 capital
Paid-up ordinary shares issued by the Bank plus related share premium 23 5,100
Retained earnings (net of appropriations) 2,229
Accumulated other comprehensive income and other disclosed reserves
1
(51)
Less deductions from Common Equity Tier 1 capital
Goodwill (477)
Other intangible assets
2
(168)
Cash flow hedging reserve 60
Deferred tax asset deduction (156)
Expected loss excess over eligible allowance (247)
Total Common Equity Tier 1 capital 6,290
Additional Tier 1 capital
Additional Tier 1 capital instruments
3
22 1,500
Total additional Tier 1 capital 1,500
Total Tier 1 capital 7,790
Tier 2 capital
Tier 2 capital instruments
3
22 1,135
Revaluation reserves -
Eligible impairment allowance in excess of expected loss -
Total Tier 2 capital 1,135
Total capital 8,925
1
Accumulated other comprehensive income and other disclosed reserves consist of available-for-sale securities reserve and cash flow hedge reserve as disclosed on the
balance sheet.
2
Includes capitalised transaction costs on loan capital and debt issues.
3
Excludes capitalised transaction costs.
Capital ratios (unaudited)
The Basel banking accords (the ‘Accords’) have been developed and strengthened over time by the BCBS to enhance the banking regulatory framework.
The Accords are made up of the different Basel frameworks with the latest being Basel III. Basel III builds on the Basel I and Basel II frameworks, and
seeks to improve the banking sector’s ability to deal with financial and economic stress, improve risk management and strengthen banks’ transparency.
The Basel III framework is built on three mutually reinforcing pillars. Pillar 1 sets out the mechanics for minimum capital adequacy requirements for
credit, market and operational risks. Pillar 2 relates to the internal assessment of capital adequacy and the supervisory review process. Pillar 3 deals
with market disclosure and market discipline.
For the purposes of calculating the capital adequacy ratios for the Bank on a solo basis, wholly-owned and wholly-funded subsidiaries of the Banking
Group are consolidated with the Bank. In this context, wholly-funded by the Bank means there are no liabilities (including off-balance sheet obligations)
to anyone other than the Bank, the Inland Revenue or trade creditors, where aggregate exposure to trade creditors does not exceed 5% of the
subsidiary’s shareholder’s equity. Wholly-owned by the Bank means that all equity issued by the subsidiary is held by the Bank or is ultimately owned by
the Bank through a chain of ownership where each entity is 100% owned by its parent.
Note 34 Capital adequacy (continued)

Westpac New Zealand Limited.47
Notes to the financial statements
The table below is disclosed under the Reserve Bank’s Basel III framework in accordance with Clause 15 of Schedule 11 to the Order and represents the
capital adequacy calculation based on BS2B.
THE BANKING GROUPThe Bank
2
%
Reserve Bank
Minimum Ratios
1
2018 2017 2018 2017
Common Equity Tier 1 capital ratio 6.5 11.7 11.1 11.0 8.8
Tier 1 capital ratio 8.0 14.5 14.0 13.6 11.1
Total capital ratio 10.0 16.6 16.1 15.6 12.8
Buffer ratio 2.5 5.2 6.6 N/A N/A
1
Changes to the Bank’s conditions of registration, effective from 31 December 2017, have increased the Common Equity Tier 1 capital ratio, the Tier 1 capital ratio and Total
capital ratio (‘minimum capital ratios’) by 2% compared to the minimum capital ratios as at 30 September 2017. The increased minimum capital ratios will remain in
place until the Bank has satisfied the Reserve Bank that all existing issues in relation to the matters of non-compliance on pages 77 and 78 have been resolved.
2
On 26 September 2018 the Reserve Bank confirmed it has no objection to the Bank using the Internal Ratings Based (‘IRB’) approach to assess the risk weighting of two
solo-deconsolidated entities for the purposes of calculating the Bank’s solo capital ratios. On a comparable basis, the Bank’s solo capital ratios as at 30 September 2017
would be Common Equity Tier 1 of 10.5%, Tier 1 capital of 13.1% and Total capital of 15.1%.
Banking Group Pillar 1 total capital requirement (unaudited)
THE BANKING GROUP
2018
$ millions
Total Exposure After
Credit Risk Mitigation
Risk-weighted Exposure
or Implied Risk-weighted
Exposure
Total Capital
Requirement
Credit risk
Exposures subject to the internal ratings based approach 100,688 39,9313,195
Equity exposures - - -
Specialised lending subject to the slotting approach 8,040 7,292 583
Exposures subject to the standardised approach 2,516 1,027 82
Total credit risk (scaled)
1
111,244 48,2503,860
Operational risk N/A 4,532 363
Market risk N/A 1,038 83
Total 111,244 53,8204,306
1
The value of the scalar used in determining the credit risk weighted exposure is 1.06 as required by the conditions of registration.
Capital for other material risk
Summary of ICAAP (unaudited)
The Banking Group’s ICAAP outlines the Banking Group’s approach to meeting minimum capital requirements and confirming that capital held by
the Bank is commensurate with its risk profile. The Banking Group’s ICAAP complies with the requirements set out in the Reserve Bank document
‘Guidelines on a Bank’s Internal Capital Adequacy Assessment Process (ICAAP)’ (BS12) in accordance with the Bank’s Conditions of Registration.
The Banking Group’s ICAAP is founded on the principle that its target level of capital is directly related to its risk appetite and corresponding risk profile.
The ICAAP supplements the minimum regulatory capital requirements in respect of credit, market and operational risk through the consideration
of a broader range of risk types and the Banking Group’s risk and capital management capabilities. The ICAAP also takes account of future strategic
objectives, stress testing, regulatory developments and peer group comparatives.
The Banking Group’s ICAAP identifies, reviews and measures additional material risks that must be captured within the Banking Group’s capital
adequacy assessment process. The additional material risks considered are those not captured by Pillar 1 regulatory capital requirements and include
compliance risk, conduct risk, liquidity risk, reputational risk, environmental, social and governance risk, business/strategic risk, other assets risk,
model risk, deferred acquisition cost risk and subsidiary risk.
The Banking Group’s internal capital allocation for ‘other material risks’ is $245 million as at 30 September 2018 (30 September 2017: $256 million).
Note 34 Capital adequacy (continued)

48
Notes to the financial statements
Westpac New Zealand Limited.
Ultimate Parent Bank Group Basel III capital adequacy ratios (unaudited)
The table below represents the capital adequacy calculation for the Ultimate Parent Bank and the Ultimate Parent Bank Group as at 30 September 2018
based on Australian Prudential Regulation Authority’s (‘APRA’) application of the Basel III capital adequacy framework.
THE BANKING GROUP
%20182017
Ultimate Parent Bank Group (excluding entities specifically excluded by APRA regulations)
1, 2
Common Equity Tier 1 capital ratio 10.6 10.6
Additional Tier 1 capital ratio 2.2 2 .1
Tier 1 capital ratio 12.8 12.7
Tier 2 capital ratio 1.9 2 .1
Total regulatory capital ratio 14.7 14.8
Ultimate Parent Bank (Extended Licensed Entity)
1, 3
Common Equity Tier 1 capital ratio 10.5 10.4
Additional Tier 1 capital ratio 2.3 2.2
Tier 1 capital ratio 12.8 12.6
Tier 2 capital ratio 2.0 2.4
Total regulatory capital ratio 14.8 15.0
1
The capital ratios represent information mandated by APRA. The capital ratios of the Ultimate Parent Bank Group are publicly available in the Ultimate Parent Bank Group’s
Pillar 3 report. This information is made available to users via the Ultimate Parent Bank’s website (www.westpac.com.au).
2
Ultimate Parent Bank Group (excluding entities specifically excluded by APRA regulations) comprises the consolidation of the Ultimate Parent Bank and its subsidiary
entities except those entities specifically excluded by APRA regulations for the purposes of measuring capital adequacy (Level 2). The head of the Level 2 group is the
Ultimate Parent Bank.
3
Ultimate Parent Bank (Extended Licensed Entity) comprises the Ultimate Parent Bank and its subsidiary entities that have been approved by APRA as being part of a single
Extended Licensed Entity for the purpose of measuring capital adequacy (Level 1).
Under APRA’s Prudential Standards, Australian authorised deposit-taking institutions (‘ADI’), including the Ultimate Parent Bank Group are required
to maintain minimum ratios of capital to risk weighted assets (‘RWA’), as determined by APRA. For the calculation of RWAs, the Ultimate Parent Bank
Group is accredited by APRA to apply advanced models permitted by the Basel III global capital adequacy regime. The Ultimate Parent Bank Group
uses the Advanced Internal Ratings Based (‘Advanced IRB’) approach for credit risk, the Advanced Measurement Approach (‘AMA’) for operational risk
and the internal model approach for interest rate risk in the banking book for calculating regulatory capital. APRA’s prudential standards are generally
consistent with the International Regulatory Framework for Banks, also known as Basel III, issued by the Basel Committee on Banking Supervision
(‘BCBS’), except where APRA has exercised certain discretions.
The Ultimate Parent Bank Group is required to disclose additional detailed information on its risk management practices and capital adequacy on a
quarterly basis. This information is made available to users via the Ultimate Parent Bank’s website (www.westpac.com.au).
The Ultimate Parent Bank Group (excluding entities specifically excluded by APRA regulations), and the Ultimate Parent Bank (Extended Licensed Entity
as defined by APRA), exceeded the minimum capital adequacy requirements as specified by APRA as at 30 September 2018.
Note 35 Risk management
The Banking Group regards the management of risk to be a fundamental management activity performed at all levels of its business. The Banking Group’s
risk management strategy includes a sound risk culture and sets out minimum standards for risk management across all risk types (‘Risk Management
Strategy’). The Banking Group adopts a ‘Three Lines of Defence’ approach to risk management which reflects our culture of ‘risk is everyone’s business
in which all employees are responsible for identifying and managing risk and operating within the Banking Group’s desired risk profile.
The 1st Line of Defence – Risk identification, risk management and self-assurance
Divisional business units and corporate core functions are responsible for identifying, evaluating and managing the risks that 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
The 2nd Line of Defence comprises separate risk and compliance advisory, control, assurance and monitoring functions which establish frameworks,
policies, limits and processes for the management, monitoring and reporting of risk. The 2nd Line of Defence may approve risks outside the authorities
granted to the 1st Line and also evaluate and provide assurance over the adequacy and effectiveness of 1st Line controls and application of frameworks
and policies and, where necessary, require improvement and monitor the 1st Line’s progress toward remediation of identified deficiencies.
The 3rd Line of Defence – Independent assurance
The audit function independently evaluates, and opines on, the adequacy and effectiveness of the overall risk management framework and controls to
the Board and senior executives.
Note 34 Capital adequacy (continued)

Westpac New Zealand Limited.49
Notes to the financial statements
Financial instruments are fundamental to the Banking Group’s business of providing banking and financial services. The associated financial risks
(including credit risk, funding and liquidity risk and market risk) are a significant proportion of the total risks faced by the Banking Group.
This note details the risk management policies, practices and quantitative information of the Banking Group’s principal risk exposures.
Principal risksNote name
Note
number
OverviewRisk management frameworks
Independent New Zealand Audit unit
Reviews in respect of risk management systems
3 5.1.1
3 5.1.2
3 5.1.3
Credit risk
The risk of financial loss where a customer or counterparty fails to
meet their financial obligations to the Banking Group.
Credit risk ratings system
Credit risk mitigation, collateral and other credit enhancements
Credit risk concentrations
Regulatory capital
Residential mortgages by loan-to-value ratio (‘LVR’)
Credit quality of financial assets
Collateral held
3 5.2.1
35.2.2
35.2.3
35.2.4
35.2.5
35.2.6
3 5.2.7
Operational risk and compliance risk
Operational risk is the risk of loss resulting from inadequate or failed
internal processes, people and systems, or from external events.
The definition is aligned to the regulatory (Basel II) definition, including
legal and regulatory risk but excluding strategic and reputation risk.
Compliance risk is the risk of legal or regulatory sanction, financial
loss or reputation loss arising from the Banking Group’s failure to
abide by the compliance obligations required of the Banking Group.
Operational risk and compliance risk35.3
Funding and liquidity risk
The risk that the Banking Group will be unable to fund assets and
meet obligations as they become due.
Liquidity modelling
Sources of liquidity
Regulatory liquidity ratios
Contractual maturity of financial instruments
Expected maturity
3 5.4.1
35.4.2
35.4.3
35.4.4
35.4.5
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.
Value-at-Risk (‘VaR’)
Non-traded market risk
Market risk notional capital charges
Interest rate sensitivity
35.5.1
35.5.2
35.5.3
35.5.4
35.1 Over view
35.1.1 Risk management frameworks
The Board is responsible for approving the Banking Group’s Risk Management Strategy and Risk Appetite Statement and monitoring the effectiveness
of risk management by the Banking Group. The Bank is wholly owned by the Ultimate Parent Bank and, therefore, a member of the group of companies
comprising the Ultimate Parent Bank Group. Accordingly, the Banking Group’s Risk Management Strategy is closely aligned with the Ultimate Parent
Bank’s Risk Management Strategy.
The Board has delegated authority to the BRCC to:
–review and recommend the Banking Group’s Risk Management Strategy and Risk Appetite Statement to the Board for approval;
–set risk appetite consistent with the Risk Appetite Statement;
–approve frameworks, policies and processes for managing risk (consistent with the Banking Group’s Risk Management Strategy and Risk Appetite
Statement); and
–review and, where appropriate, approve risks beyond the approval discretion provided to management.
The Board is also supported by the Bank’s BAC which assists the Board in fulfilling its responsibilities in relation to:
–external reporting of financial information, internal control of operational risk, the efficiency and effectiveness of audit and compliance with regulatory
and statutory reporting requirements; and
–the review of the interim and annual financial statements, the activities of the Banking Group’s internal auditors and monitoring of the relationship
between management and the external auditors.
Note 35 Risk management (continued)

50
Notes to the financial statements
Westpac New Zealand Limited.
For each of its primary risks, the Banking Group maintains risk management frameworks and a number of supporting policies that define roles and
responsibilities, acceptable practices, limits and key controls:
RiskRisk management framework and controls
Credit risk
–The Banking Group’s Credit Risk Management Framework
describes the principles, methodologies, systems, roles and
responsibilities, reports and key controls for managing credit
risk. Within the Credit Risk Management Framework, the Banking
Group has its own credit approval limits approved by the Banking
Group’s Board as delegated by the Ultimate Parent Bank Group
Chief Risk Officer.
–The BRCC, Executive Risk Committee (‘RISKCO’) and Credit Risk
Committee (‘CREDCO’) monitor the risk profile, performance
and management of the Banking Group’s credit portfolio and the
development and review of key credit risk policies.
–The Banking Group’s Credit Risk Rating System Policy describes
the credit risk rating system philosophy, design, key features and
uses of rating outcomes.
–All models materially impacting the risk rating process are
periodically reviewed in accordance with the Banking Group’s
model risk policies.
–An annual review is performed of the Credit Risk Rating System for
approval by the BRCC.
–Specific credit risk estimates (including PD, LGD and EAD) are
reviewed by CREDCO, overseen, reviewed annually and approved
by the Chief Risk Officer and by the Ultimate Parent Bank’s Credit
Risk Estimates Committee (a subcommittee of the Ultimate Parent
Bank ’s BRCC).
–Policies for delegating credit approval authorities and formal limits
for the extension of credit are established throughout the Banking
Group. These include those for the approval and management of all
credit risk arising from other banks and related entities.
–Credit manuals are established throughout the Banking Group.
They include policies governing the origination, evaluation,
approval, documentation, settlement and ongoing management
of credit risks.
–Sector policies guide credit extension where industry-specific
guidelines are considered necessary (e.g. acceptable financial ratios
or permitted collateral).
–The Ultimate Parent Bank’s Related Entity Risk Management
Framework and supporting policies govern credit exposures to
related entities to minimise the spread of credit risk between the
Ultimate Parent Bank Group.
Operational
risk and
compliance
risk
–The Banking Group has an Operational Risk Management
Framework, which is aligned to the Ultimate Parent Bank’s
Operational Risk Framework and outlines the business requirements
for managing operational risk with respect to governance, risk and
control assessments, incident management, and reporting and
monitoring. This Framework is approved by the BRCC.
–The Advanced Measurement Approach (‘AMA’) methodology for
calculating operational risk capital has been implemented which
takes into account both internal and external factors. An allocation
methodology is in place for the economic capital calculated.
–The Bank has a Compliance Risk Management Framework and a
dedicated compliance function to assist the business in managing its
compliance risks.
–The Bank’s RISKCO, chaired by the Bank’s Chief Risk Officer, is
responsible for overseeing the effectiveness and implementation of
the Operational Risk and Compliance Frameworks. RISKCO monitors
the operational risk profiles and the action plans, and has the
discretion to escalate material matters to the Bank’s BRCC and/or the
relevant Ultimate Parent Bank Group Risk Committee.
Funding
and liquidity
risk
–The 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. It also documents the limits and targets for minimum
liquid asset holdings, cash flow mismatch levels and wholesale
funding and balance sheet ratios. It is reviewed by the Banking
Group’s Asset and Liability Committee (‘ALCO’) prior to approval
by the BRCC.
–The Banking Group’s Treasury function is responsible for managing
funding and liquidity including managing the balance sheet
against approved limits and targets and managing the Banking
Group’s funding base so that it is appropriately maintained, stable
and diversified.
–Daily liquidity risk reports are reviewed by Treasury and the Liquidity
risk teams. Liquidity reports are presented to ALCO monthly and to
the BRCC quarterly.
–An annual funding strategy is established by Treasury which includes
consideration of trends in global markets, peer analysis, wholesale
funding capacity, expected funding requirements and funding risk
analysis. The strategy is regularly reviewed to take into account
current market conditions.
–A contingency funding plan is also maintained, which details actions
to be taken in response to severe disruptions in the Banking Group’s
ability to conduct its activities in a timely manner and at a reasonable
cost. The plan identifies the committee of senior executives to
manage any crisis and their responsibilities. The plan is aligned with
the Banking Group’s broader Liquidity Crisis Management Policy.
Market risk
–The Market Risk Framework describes the Banking Group’s
approach to managing non-traded market risk.
–As the Ultimate Parent Bank’s financial markets business in New
Zealand is conducted by the NZ Branch, the market risks faced by
the Banking Group are only of a non-traded nature. Non-traded
market risk includes interest rate and foreign exchange risks. The
Banking Group does not carry material foreign currency or equity
price risk due to the risks being hedged.
–Market risk is managed using VaR limits, Net interest income at
risk (‘NaR’) and structural risk limits (including credit spread and
interest rate basis point value limits) as well as scenario analysis
and stress testing.
–The BRCC approves the VaR and NaR limits for non-traded risk.
–Market risk limits are assigned to business managers based upon
business strategies, experience, and the consideration of market
liquidity and the concentration of risks.
–Market risk positions are managed by the trading desks and
Asset and Liability Management (‘ALM’) unit consistent with
their delegated authorities and the nature and scale of the
market risks involved.
–Daily monitoring of current exposure and limit utilisation is conducted
independently by the Banking Group’s Market Risk Management unit,
which monitors market risk exposures against VaR and structural risk
limits. Daily VaR position reports are produced by risk type, by product
lines and by geographic region. Monthly and quarterly reports are
produced for both the Banking Group’s and Ultimate Parent Bank’s
risk forums and Ultimate Parent Bank’s BRCC, respectively, to ensure
transparency of material market risks and issues.
–Daily stress testing and backtesting of VaR results is performed to
support model integrity and to analyse extreme or unexpected
movements. A review of both the potential profit and loss outcomes
is also undertaken to monitor any skew created by the historical data.
RISKCO has ratified an approved escalation framework.
–The BRCC has approved a framework for profit or loss escalation
which considers both single day and 20 day cumulative results.
–Treasury’s ALM unit is responsible for managing the non-traded
interest rate risk including risk mitigation through hedging using
derivatives. This is overseen by the market risk unit and reviewed
by the Ultimate Parent Bank’s Market Risk Committee, RISKCO
and BRCC.
Note 35 Risk management (continued)

Westpac New Zealand Limited.51
Notes to the financial statements
Other risk classes include:
–Conduct risk: the risk that the Banking Group’s provision of services and products results in unsuitable or unfair outcomes for the Banking Group’s
customers or undermines market integrity;
–Business risk: the risk associated with the vulnerability of a line of business to changes in the business environment;
–Equity risk: the potential for financial loss arising from movements in equity values. Equity risk may be direct, indirect or contingent;
–Reputation risk: the risk of loss of reputation, stakeholder confidence, or public trust and standing; and
–Sustainability risk: the risk of reputation or financial loss due to failure to recognise or address material existing or emerging sustainability related
environmental, social or governance issues.
35.1.2 Independent New Zealand Audit unit
The Banking Group has an independent assurance unit (‘New Zealand Audit’) comprised of a New Zealand based audit team, supported by the
Ultimate Parent Bank Credit Portfolio Review (including Model Risk) functions, which report to the Bank’s BAC, as well as to the Ultimate Parent Bank.
New Zealand Audit, as an independent function, has no direct authority over the activities of management. It has unlimited access to all of the Banking
Group’s activities, records, property and employees. The scope of responsibility of New Zealand Audit covers systems of management control across
all business activities and support functions at all levels of management within the Banking Group. The level of risk across all material risk classes
determines the scope and frequency of individual audits. The Head of New Zealand Audit reports on a quarterly basis, or more often as deemed
appropriate, to the Bank’s BAC, to agree the budget and the annual audit plan and to report its findings. In addition, the Bank’s BAC has private sessions
with the Head of New Zealand Audit. Furthermore, the Head of New Zealand Audit reports to the Chair of the Bank’s BAC, and for administrative
purposes to the Bank’s Chief Financial Officer (‘CFO’) and the Ultimate Parent Bank’s General Manager Group Audit.
35.1.3 Reviews in respect of risk management systems
The Ultimate Parent Bank Group Audit’s Credit Portfolio Review function has a rolling programme of credit and model risk reviews throughout the
financial year. New Zealand Audit, with support from the Ultimate Parent Bank’s Group Audit unit, also periodically reviews the Bank’s Operational,
Compliance, Market, Funding and Liquidity Risk Frameworks.
The reviews discussed above in this section are not conducted by a party which is external to the Banking Group or the Ultimate Parent Bank, though
they are independent and have no direct authority over the activities of management.
Various external reviews of the Bank’s risk management system have been conducted during the year ended 30 September 2018 as part of ongoing
compliance with regulatory requirements.
35.2 Credit risk
35.2.1 Credit risk ratings system
The principal objective of the credit risk rating system is to reliably assess the credit risk to which the Banking Group is exposed. The Banking Group has
two main approaches to this assessment.
Transaction-managed customers
The Banking Group assigns a Customer Risk Grade (‘CRG’) to each customer, corresponding to their expected PD. Each facility is assigned an LGD. The
Banking Group’s risk rating system has a tiered scale of risk grades for both non-defaulted customers and defaulted customers. Non-defaulted CRGs
are mapped to Moody’s Investor Service (‘Moody’s’) and S&P Global Ratings (‘S&P’) external senior ranking unsecured ratings.
Program-managed portfolio
Customers that are not transaction-managed are grouped into pools of similar risk. Pools are created by analysing characteristics that have historically
predicted that an account is likely to go into default. Customers grouped according to these predictive characteristics are assigned a PD and LGD
relative to their pool.
Note 35 Risk management (continued)

52
Notes to the financial statements
Westpac New Zealand Limited.
Customer risk grades
The table below maps the Banking Group’s high level CRGs to their corresponding external rating.
Financial Statement DisclosureThe Banking Group’s CRGMoody’s RatingS&P Rating
StrongA
B
C
Aaa – Aa3
A1 – A3
Baa1 – Baa3
AAA – AA-
A+ – A-
BBB+ – BBB-
Good/satisfactoryDBa1 – B1BB+ – B+
WeakE
F
Banking Group Rating
Watchlist
Special Mention
Weak/defaultG
H
Substandard/Default
Default
35.2.2 Credit risk mitigation, collateral and other credit enhancements
The Banking Group uses a variety of techniques to reduce the credit risk arising from its lending activities.
This includes the Banking Group establishing that it has direct, irrevocable and unconditional recourse to collateral and other credit enhancements
through obtaining legally enforceable documentation.
The Banking Group includes the effect of credit risk mitigation through eligible guarantees within the calculation applied to LGD. The value of the
guarantee is not always separately recorded, and therefore, not available for disclosure, under Clause 7 of Schedule 11 to the Order.
Collateral
The table below describes the nature of collateral or security held for each relevant class of financial asset:
Financial assetsNature of collateral
Loans – housing and
personal
1
Housing loans are secured by a mortgage over property and additional security may take the form of guarantees and
deposits.
Personal lending (including credit cards and overdrafts) is predominantly unsecured. Where security is taken, it is
restricted to eligible motor vehicles, caravans, campers, motor homes and boats.
Loans – business
1
Business loans may be secured, partially secured or unsecured. Security is typically taken by way of a mortgage over
property and/or a general security agreement over business assets or other assets.
Other security such as guarantees or standby letters of credit may also be taken as collateral, if appropriate.
Financial assets
designated at fair
value within due from
related entities and
derivative financial
instruments
These exposures are carried at fair value which reflects the credit risk.
Master netting agreements are typically used to enable the effects of derivative assets and derivative liabilities with the
same counterparty to be offset when measuring these exposures. Additionally, collateralisation agreements are also
typically entered into with major institutional counterparties to avoid the potential build-up of excessive mark-to-market
positions. Derivative transactions are increasingly being cleared through central clearers.
1
This includes collateral held in relation to associated credit commitments.
Note 35 Risk management (continued)

Westpac New Zealand Limited.53
Notes to the financial statements
Management of risk mitigation
The Banking Group mitigates credit risk through controls covering:
Collateral and
valuation management
The Ultimate Parent Bank manages collateral under collateralisation agreements centrally for all branches of the Ultimate
Parent Bank and the Bank.
The estimated realisable value of collateral held in support of loans is based on a combination of:
–formal valuations currently held for such collateral; and
–management’s assessment of the estimated realisable value of all collateral held.
This analysis also takes into consideration any other relevant knowledge available to management at the time. Updated
valuations are obtained when appropriate.
The Banking Group revalues collateral related to financial markets positions on a daily basis and has formal processes
in place to promptly call for collateral top-ups, if required. These processes include margining for non-centrally cleared
customer derivatives where required under APRA’s Prudential Standard CPS226. The collateralisation arrangements are
documented via the Credit Support Annex of the International Swaps and Derivatives Association dealing agreements.
Other credit
enhancements
The Banking Group only recognises guarantees, standby letters of credit, or credit derivative protection from the following
entities (provided they are not related to the entity with which the Banking Group has a credit exposure):
–Sovereign;
–Australia and New Zealand public sector;
–Authorised deposit-taking institutions and overseas banks with a minimum risk grade equivalent of A3 / A-; and
–Other entities with a minimum risk grade equivalent of A3 / A-.
OffsettingCreditworthy customers domiciled in New Zealand may enter into formal agreements with the Banking Group,
permitting the Banking Group to set-off gross credit and debit balances in their nominated accounts. Cross-border
set-offs are not permitted.
Close-out netting is undertaken with counterparties with whom the Banking Group has entered into a legally enforceable
master netting agreement for their off-balance sheet financial market transactions in the event of default.
Further details of offsetting are provided in Note 27.
Central clearing
(ASX/LCH)
The Banking Group increasingly executes derivative transactions through central clearing counterparties. Central clearing
counterparties mitigate risk through stringent membership requirements, the collection of margin against all trades
placed, the default fund, and an explicitly defined order of priority of payments in the event of default.
35.2.3 Credit risk concentrations
Credit risk is concentrated when a number of counterparties are engaged in similar activities, have similar economic characteristics and thus may be
similarly affected by changes in economic or other conditions.
The Banking Group monitors its credit portfolio to manage risk concentrations and rebalance the portfolio.
Individual customers or groups of related customers
The Banking Group has large exposure limits governing the aggregate size of credit exposure normally acceptable to individual customers and groups
of related customers. These limits are tiered by customer risk grade.
Specific industries
Exposures to businesses, governments and other financial institutions are classified into a number of industry clusters based on related Australian and
New Zealand Standard Industrial Classification (‘ANZSIC’) codes and are monitored against the Banking Group’s industry risk appetite limits.
Individual countries
The Banking Group has limits governing risks related to individual countries, such as political situations, government policies and economic conditions
that may adversely affect either a customer’s ability to meet its obligations to the Banking Group, or the Banking Group’s ability to realise its assets in a
particular country.
Note 35 Risk management (continued)

54
Notes to the financial statements
Westpac New Zealand Limited.
Maximum exposure to credit risk
The carrying amount of on-balance sheet financial assets and undrawn credit commitments, represents the maximum exposure to credit risk (excluding
any collateral received) as set out in the following table.
THE BANKING GROUP
$ millions20182017
Financial assests
Cash and balances with central banks 1,353 1,659
Receivables due from other financial institutions 70 407
Other assets 225 221
Trading securities 1,151 1,797
Derivative financial instruments 585 220
Available-for-sale securities 3,810 4,087
Loans 80,378 7 7, 2 6 1
Due from related entities 1,319 2,017
Total financial assets 88,891 87,669
Undrawn credit commitments
Letters of credit and guarantees 863 772
Commitments to extend credit24,650 25,081
Other commitments60 10
Total undrawn credit commitments 25,573 25,863
Total maximum credit risk exposure 114,464 113,532
35.2.4 Regulatory capital
The credit risk rating system is a key input to evaluate the level of capital to be held against loans for regulatory capital purposes.
Overview of the internal credit risk ratings process by portfolio
(a) Transaction-managed approach (including business lending, corporate, sovereign and bank)
The process for assignment and approval of individual PDs and LGDs involves business unit representatives recommending the CRGs and LGDs under
criteria guidelines. Credit Officers then independently evaluate the recommendations and approve the final outcomes. An expert judgment decision-
making process is employed to evaluate the CRG. The following represent the types of business lending, corporate, sovereign and banking exposures
included within the transaction-managed portfolio approach:
–direct lending exposures;
–contingent lending exposures;
–pre-settlement exposures;
–foreign exchange settlement exposures; and
–transaction exposures.
All of the above exposure categories also apply to Specialised Lending, which is a sub-asset class of Corporate and in the Banking Group comprises
Property Finance and Project Finance. Regulatory risk-weights are also applied to Specialised Lending.
Definitions, methods and data for estimation and validation of PD, LGD and EAD
PD
The PD is a through-the-cycle assessment of the likelihood of a customer defaulting on its financial obligations within one year. The Banking Group
reflects its PD estimate in a CRG.
Note 35 Risk management (continued)

Westpac New Zealand Limited.55
Notes to the financial statements
LGD
The LGD represents an estimate of the expected severity of a loss to the Banking Group should a customer default occur during an economic downturn.
The Banking Group assigns an 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 the Banking Group has recourse and over which it has security. LGDs also reflect the seniority of exposures
in the customer’s capital and debt structure.
LGD estimates are benchmarked against observed historical LGDs from internal and external data and are calibrated to reflect losses expected in an
economic downturn. The calculation of historical LGDs is based on an economic loss and includes allowances for workout costs and the discounting of
future cash flows to the date of default.
LGD values range from 5% to 100%. The range of LGD values ensures that the risk of loss is differentiated across many credit facilities extended
to customers.
EAD and Credit Conversion Factor (‘CCF’)
EAD represents an estimate of the amount of committed exposure expected to be drawn by the customer at the time of default. To calculate EAD,
historical data is analysed to determine what proportion of undrawn commitments are ultimately utilised by customers who end up in default. The
proportion of undrawn commitments ultimately utilised by customers is termed the CCF. EAD therefore consists of the initial outstanding balances plus
the CCF multiplied by undrawn commitments. For transaction-managed exposures CCF’s are all 100%.
(b) Retail (program-managed) asset class approach (including residential mortgages, small business and other retail)
Each customer is rated using details of their account performance or application details and segmented into pools of similar risk. These segments are
created by analysing characteristics that have historically proven predictive in determining if an account is likely to go into default. Customers are then
grouped according to these predictive characteristics of default. The retail (program-managed) portfolio is divided into a number of segments per
product with each segment assigned a quantified measurement of its PD, LGD and EAD.
Retail asset class exposures included in the retail (program-managed) portfolio approach are split into the following categories of products:
Asset sub-classesProduct categories
Residential mortgages –Mortgages
Small business –Equipment finance
–Business overdrafts
–Business term loans
–Business credit cards
Other retail –Credit cards
–Personal loans
–Overdrafts
PD
PDs are assigned at the retail segment level and reflect the likelihood of accounts within that segment to default. A long-run average is used to assign a
PD to each account in a segment based on the segment’s characteristics. The PD estimate for each segment is based on internal data.
Models are used to help determine or establish the appropriate internal rating for program-managed portfolios.
LGD
LGD measures the proportion of the exposure that will be lost if default occurs. LGD is measured as a percentage of EAD. The approach to LGD varies
depending on whether the retail product is secured or unsecured. A downturn period is used to reflect the effect on the collateral for secured products.
For unsecured products, a long-run estimate is used for LGD.
EAD
EAD represents an estimate of the amount of committed exposure expected to be drawn by the customer at the time of default. To calculate EAD,
historical data is analysed to determine what proportion of undrawn commitments are ultimately utilised by customers who end up in default.
Classification of Banking Group exposures according to rating approach
The Banking Group reports capital adequacy under BS2B. Under the IRB approach for the measurement of credit risk, banks use their own tools to
calculate both expected and unexpected loss probabilities for their customers and exposures. For exposures classified under specialised lending,
the Banking Group uses slotting tables supplied by the Reserve Bank rather than internal estimates. The Banking Group has some minor portfolios
that, due to system or other constraints, are not assessed under an IRB approach. Risk weights for these exposures are assessed for capital
adequacy under the standardised approach as set out in the Reserve Bank document Capital Adequacy Framework (Standardised Approach)
(‘BS2A’).
Note 35 Risk management (continued)

56
Notes to the financial statements
Westpac New Zealand Limited.
Asset
Class
Banking Group
CategorySegmentation Criteria
Rating
Approach
CorporateCorporateAll transaction-managed customers not elsewhere classified where annual turnover exceeds $50 million.IRB
Business lendingAll transaction-managed customers not elsewhere classified where annual turnover is $50 million or less.IRB
Specialised lending -
property
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.
IRB - Slotting
Specialised lending -
project finance
Applied to transaction-managed customers where the primary source of debt service, repayment and
security is revenues generated by a project.
IRB - Slotting
SovereignSovereignApplied to transaction-managed customers identified by ANZSIC code.IRB
BankBankApplied to transaction-managed customers identified by ANZSIC code and public sector entities.IRB
Residential
mortgages
Residential
mortgages
All program-managed exposures secured by residential mortgages defined as housing lending.IRB
Other retailSmall businessProgram-managed business lending.IRB
Other retailAll other program-managed lending to retail customers, including New Zealand credit cards, personal loans
and presonal overdrafts.
IRB
EquityEquityAll equity items that have not been deducted from capital and meet the definition of equity exposures in
paragraph 4.8 of BS2B.
IRB
Other assetsOther assetsAll other assets not falling within the above classes.Standardised
Credit risk exposures by asset class
The Banking Group’s credit risk exposures by asset class as at 30 September 2018 (Unaudited)
Exposure-weighted PD Grade (%)
Weighted
Average
PD
%
EAD
$ millions
Exposure-
weighted
LGD
%
Exposure-
weighted
Risk
Weight
%
Risk-
weighted
Assets
1
$ millions
Minimum
Pillar 1
Capital
Requirement
$ millions
Residential mortgages
0.00 to 0.10 - - - - - -
0.10 to 0.25 0.18 2,811 19.10 7.28 217 17
0.25 to 1.0 0.49 27,557 20.59 16.86 4,926 395
1.0 to 2.5 1.42 21,681 19.94 33.78 7,763 621
2.5 to 10.0 4.42 3,892 22.17 73.45 3,030 242
10.0 to 99.99 - - - - - -
Default 100.00 278 21.57 212.43 626 50
Total 1.60 56,219 20.38 27.79 16,562 1,325
Other retail
0.00 to 0.10 - - - - - -
0.10 to 0.25 0.14 565 40.57 12.86 77 6
0.25 to 1.0 0.36 1,534 62.87 37.45 609 49
1.0 to 2.5 2.22 1,311 68.57 89.88 1,249 100
2.5 to 10.0 5.54 308 84.72 126.81 414 33
10.0 to 99.99 20.74 220 72.12 150.94 352 28
Default 100.00 16 73.40 94.34 16 1
Total 2.89 3,954 63.83 64.83 2,717 217
Small business
0.00 to 0.10 0.03 162 73.76 7.57 13 1
0.10 to 0.25 - - - - - -
0.25 to 1.0 0.31 637 20.93 17.33 117 9
1.0 to 2.5 1.84 1,501 20.72 26.21 417 34
2.5 to 10.0 4.83 291 19.59 28.85 89 7
10.0 to 99.99 16.12 30 22.47 44.03 14 1
Default 100.00 40 21.29 238.21 101 8
Total 3.33 2,661 23.91 26.62 751 60
1
The value of the scalar used in determining the risk weighted assets is 1.06 as required by the conditions of registration.
Note 35 Risk management (continued)

Westpac New Zealand Limited.57
Notes to the financial statements
Exposure-weighted PD Grade (%)
Weighted
Average
PD
%
EAD
$ millions
Exposure-
weighted
LGD
%
Exposure-
weighted
Risk
Weight
%
Risk-
weighted
Assets
1
$ millions
Minimum
Pillar 1
Capital
Requirement
$ millions
Corporate/Business lending
0.00 to 0.02 - - - - - -
0.02 to 0.04 0.03 2,671 38.95 17.20 487 39
0.04 to 0.10 0.08 3,920 52.29 30.90 1,284 103
0.10 to 0.50 0.21 8,163 43.69 39.87 3,450 276
0.50 to 3.0 1.52 13,872 34.72 72.20 10,616850
3.0 to 10.0 3.70 923 35.86 103.23 1,010 81
10.0 to 99.0 29.48 1,169 39.42 198.12 2,455 196
Default 100.00 73 40.09 223.57 173 14
Total 2.22 30,791 39.93 59.67 19,4751,559
Sovereign
0.00 to 0.02 0.01 1,481 16.04 1.91 30 2
0.02 to 0.04 0.02 2,557 8.86 1.59 43 4
0.04 to 0.10 0.06 1 60.00 - - -
0.10 to 0.50 0.30 4 59.94 0.47 2 -
0.50 to 3.0 1.82 19 38.80 0.79 16 1
3.0 to 10.0 - - - - - -
10.0 to 99.0 ------
Default - - - - - -
Total 0.02 4,062 11.68 2.11 91 7
Bank
0.00 to 0.02 - - - - - -
0.02 to 0.04 0.03 2,047 15.28 3.78 82 7
0.04 to 0.10 0.05 915 49.02 24.44 237 19
0.10 to 0.50 0.13 34 60.00 27.75 10 1
0.50 to 3.0 1.29 5 55.71 113.21 6 -
3.0 to 10.0 - - - - - -
10.0 to 99.0 - - - - - -
Default - - - - - -
Total 0.04 3,001 26.14 10.53 335 27
Total credit risk exposures subject to
the internal ratings based approach
100,688 39,9313,195
1
The value of the scalar used in determining the risk weighted assets is 1.06 as required by the conditions of registration.
The following table summarises the Banking Group’s credit risk exposures by asset class arising from undrawn commitments and other off-balance
sheet exposures. These unaudited amounts are included in the previous tables.
Undrawn Commitments and
Other Off-balance Sheet Amounts
Market Related
Contracts
$ millions Value EAD Value EAD
Residential mortgages 9,983 7,438 - -
Other retail 3,213 1,865 - -
Small business 866 769 - -
Corporate/Business lending 9,299 9,211 - -
Sovereign 179 179 - -
Bank 792 826 - -
Total 24,332 20,288 - -
Note 35 Risk management (continued)

58
Notes to the financial statements
Westpac New Zealand Limited.
Equity
Total
Exposure
$ millions
Risk
Weight
%
Risk-
weighted
Exposure
1
$ millions
Minimum
Pillar 1
Capital
Requirement
$ millions
Equity holdings (not deducted from capital) that are not publicly traded - 300 - -
All other holdings (not deducted from capital) - 400 - -
1
The value of the scalar used in determining the risk weighted assets is 1.06 as required by the conditions of registration.
The Banking Group’s specialised lending: Project and property finance credit risk exposures as at 30 September 2018
(Unaudited)
Supervisory slotting grade
Total
Exposures
After Credit
Risk Mitigation
$ millions
Risk
Weight
%
Risk-
weighted
Assets
1
$ millions
Minimum
Pillar 1
Capital
Requirement
$ millions
Strong 3,336 70.00 2,475 198
Good 3,823 90.00 3,648 292
Satisfactory 650 115.00 792 63
Weak 142 250.00 377 30
Default 89-- -
Total 8,040 85.56 7,292 583
1
The value of the scalar used in determining the risk weighted assets is 1.06 as required by the conditions of registration.
The following table summarises the Banking Group’s specialised lending: Project and property finance credit risk exposures arising from undrawn
commitments and other off-balance sheet exposures. These amounts are included in the above table.
EAD
$ millions
Average
Risk
Weight
%
Risk-
weighted
Assets
1
$ millions
Minimum
Pillar 1
Capital
Requirement
$ millions
Undrawn commitments and other off-balance sheet exposures 1,247 86.32 1,141 91
1
The value of the scalar used in determining the risk weighted assets is 1.06 as required by the conditions of registration.
The Banking Group’s credit risk exposures subject to the standardised approach as at 30 September 2018 (Unaudited)
Calculation of on-balance sheet exposures
Total
Exposure
After Credit
Risk Mitigation
$ millions
Average Risk
Weight
%
Risk-
weighted
Exposure
1
$ millions
Minimum
Pillar 1
Capital
Requirement
$ millions
Other assets
2
1,192 40.44 511 41
Total on-balance sheet exposures 1,192 511 41
1
The value of the scalar used in determining the risk weighted assets is 1.06 as required by the conditions of registration.
2
Other assets relate to property and equipment, other assets and related parties.
Note 35 Risk management (continued)

Westpac New Zealand Limited.59
Notes to the financial statements
Calculation of off-balance sheet exposures
Total
Exposure or
Principal
Amount
$ millions
Average
Credit
Conversion
Factor
%
Credit
Equivalent
Amount
$ millions
Average Risk
Weight
%
Risk-
weighted
Exposure
1
$ millions
Minimum
Pillar 1
Capital
Requirement
$ millions
Market related contracts subject to the
standardised approach
Foreign exchange contracts 15,016 N/A 1,215 20.00 257 20
Interest rate contracts 54,732 N/A 109 20.00 23 2
Credit value adjustment - N/A - - 236 19
Total market related contracts subject to the
standardised approach
69,748 1,324 516 41
Standardised subtotal (on and off-balance sheet) 2,516 1,027 82
1
The value of the scalar used in determining the risk weighted assets is 1.06 as required by the conditions of registration.
35.2.5 Residential mortgages by LVR as at 30 September 2018 (Unaudited)
LVRs are calculated as the current exposure divided by the Banking Group’s valuation of the residential security at origination.
For loans originated from 1 January 2008, the Banking Group utilises data from its loan system. For loans originated prior to 1 January 2008, the
origination valuation is not separately recorded and is therefore not available for disclosure. For these loans, the Banking Group utilises its dynamic LVR
process to estimate an origination valuation.
Exposures for which no LVR is available have been included in the ‘Exceeds 90%’ category in accordance with the requirements of the Order.
LVR range ($ millions)
Does not
exceed 60%
Exceeds 60%
and not 70%
Exceeds 70%
and not 80%
Exceeds 80%
and not 90% Exceeds 90% Total
On-balance sheet exposures 20,561 11,727 12,092 2,717 1,601 48,698
Undrawn commitments and other off-balance
sheet exposures
5,161 1,168 821 110 178 7,438
Value of exposures 25,722 12,895 12,913 2,827 1,779 56,136
Reconciliation of residential mortgage-related amounts
The table below provides the Banking Group’s reconciliation between any amounts disclosed in this Disclosure Statement that relate to mortgages on
residential property.
THE BANKING GROUP
$ millions 30-Sep-18
Term loans - Housing (as disclosed in Note 13) and Residential mortgages - total gross loans (as disclosed in Note 14) 48,893
Reconciling items:
Unamortised deferred fees and expenses (166)
Fair value hedge adjustments (29)
Value of undrawn commitments and other off-balance sheet amounts relating to residential mortgages 9,983
Undrawn at default
1
(2,545)
Residential mortgages by LVR 56,136
Accrued interest receivable 78
Partial write-offs 5
Residential mortgages - EAD (as disclosed in Credit risk exposures by asset class) 56,219
1
Estimate of the amount of committed exposure not expected to be drawn by the customer at the time of default.
35.2.6 Credit quality of financial assets
An asset is considered to be past due when any payment under the contractual terms has been missed. The entire contractual balance is considered
to be past due, rather than only the overdue portion. Assets may be overdue for a number of reasons, including late payments or incomplete
documentation. Late payment may be influenced by the timing of weekends and holidays. This does not always align with the underlying basis by which
credit risk is managed.
All the financial assets of the Banking Group as at 30 September 2018 and 2017, other than loans (as disclosed in Note 14), are neither past due nor
impaired.
Note 35 Risk management (continued)

60
Notes to the financial statements
Westpac New Zealand Limited.
The credit quality of financial assets of the Banking Group that are neither past due nor impaired is determined by reference to the credit risk ratings
system (refer to Note 35.2.1). All the financial assets of the Banking Group that are neither past due nor impaired fall into the ‘Strong’ category in their
entirety except those financial assets disclosed below:
THE BANKING GROUP
20182017
$ millions Strong
Good/
Satisfactory Weak Total Strong
Good/
Satisfactory Weak Tot a l
Accrued intered receivable (refer to Note 10) 68 83 3 154 61 80 3 144
Trading securities (refer to Note 11) 1,151 - - 1,151 1,779 18 - 1,797
Loans (refer to Note 14) 35,027 42,860 1,384 79,271 32,073 42,303 1,828 76,204
35.2.7 Collateral held
Loans
The Banking Group analyses the coverage of the loan portfolio which is secured by the collateral that it holds. Coverage is measured as follows:
CoverageSecured loan to collateral value ratio
Fully securedLess than or equal to 100%
Partially securedGreater than 100% but not more than 150%
UnsecuredGreater than 150%, or no security held (e.g. can include credit cards, personal loans, and exposure to highly rated corporate
entities)
The Banking Group’s loan portfolio has the following coverage from collateral held:
THE BANKING GROUP
%20182017
Fully secured 78 77
Partially secured 12 13
Unsecured 10 10
Total net loans 100 100
Collateral held against financial assets other than loans
THE BANKING GROUP
$ millions20182017
Cash, primarily for derivatives 476 136
Securities under reverse repurchase agreements
1
163 519
Total other collateral held 639 655
1
Securities received as collateral are not recognised on the Banking Group’s balance sheet.
35.3 Operational risk and compliance risk
Operational risk
Operational risk has the potential, as a result of the way business objectives are pursued, to negatively impact the Banking Group’s financial performance,
customer service and/or reputation in the community or cause other damage to the business.
Calculating operational risk capital (Unaudited)
Operational risk regulatory capital is calculated on a quarterly basis. The Operational Risk Capital Model (‘ORCM’) is reviewed annually to reassess the
appropriateness of the model framework, methodology, assumptions and parameters in light of changes in the operational risk profile and industry
developments.
Note 35 Risk management (continued)

Westpac New Zealand Limited.61
Notes to the financial statements
The Banking Group operational risk capital is based on three data sources:
–Internal Loss Data – operational risk losses experienced by the Banking Group;
–External Loss Data – operational risk losses experienced by other financial institutions; and
–Scenario Data – potential losses from extreme but plausible events relevant to the Banking Group.
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.
No adjustments or deductions are currently made to the Banking Group’s measurement of operational risk regulatory capital for the mitigating impacts
of insurance or expected operational risk losses.
The following table sets out the Banking Group’s unaudited implied risk-weighted exposures under the AMA methodology and the operational risk
capital requirement.
THE BANKING GROUP
2018
$ millions
Implied Risk-weighted
Exposure
Total Operational Risk
Capital Requirement
Methodology implemented
Advanced Measurement Approach
Operational risk 4,532 363
Compliance risk
The Bank is subject to regulation and regulatory oversight. Any significant regulatory developments could have an adverse effect on how business is
conducted and on the results of operations. Business and earnings are also affected by the fiscal or other policies that are adopted by various regulatory
authorities of the New Zealand Government, foreign governments and international agencies. The nature and impact of future changes in such policies
are not predictable and are beyond the Bank’s control.
Effective compliance risk management enables the Bank to identify emerging issues and, where necessary, put in place preventative measures.
35.4 Funding and liquidity risk
The Bank aims to maintain a mix of retail and wholesale funding, with emphasis on the value of core funding consistent with the principles inherent in
the Reserve Bank’s document entitled ‘Liquidity Policy’ (BS13) (‘BS13’).
35.4.1 Liquidity modelling
The Bank is subject to the conditions of BS13. The following metrics are calculated and reported on a daily basis in accordance with BS13:
–the level of liquid assets held;
–the one-week mismatch ratio;
–the one-month mismatch ratio; and
–the one-year core funding ratio.
In addition, the Bank calculates the following liquidity ratios in accordance with the Ultimate Parent Bank’s liquidity risk framework under APRA
Prudential Standard APS 210 Liquidity:
–liquidity coverage ratio; and
–net stable funding ratio.
35.4.2 Sources of liquidity
Sources of liquidity are regularly reviewed to maintain a wide diversification by currency, geography, product and term. Sources include, but are not
limited to:
–deposits;
–debt issues;
–proceeds from sale of marketable securities;
–repurchase agreements with central banks;
–principal repayments on loans;
–interest income; and
–fee income.
Note 35 Risk management (continued)

62
Notes to the financial statements
Westpac New Zealand Limited.
Wholesale funding
The wholesale funding base is diversified with respect to term, investor base, currency and funding instruments. The Bank and its subsidiary, WSNZL,
maintain funding programmes for both short and long-term debt in several jurisdictions including New Zealand, Europe and the United States.
THE BANKING GROUP
20182017
Markets Issuer Programme Type Programme Limit Issuer Programme Type Programme Limit
Euro market
Ultimate Parent
Bank / WSNZL
1
Euro Commercial Paper
and Certificate of
Deposit Programme
US$20 billion
Ultimate Parent
Bank / WSNZL
1
Euro Commercial
Paper and Certificate of
Deposit Programme
US$20 billion
Euro market WSNZL
1
Programme for Issuance
of Debt Instruments
US$10 billionWSNZL
1
Programme for Issuance
of Debt Instruments
US$10 billion
Euro market WSNZL
1
Global Covered Bond
Programme
€5.0 billionWSNZL
1
Global Covered Bond
Programme
€5.0 billion
United States WSNZL
1
US Commercial Paper
Programme
US$10 billionWSNZL
1
US Commercial Paper
Programme
US$10 billion
New Zealand The Bank
Medium-term Note
Programme and
Registered Certificate
of Deposit Programme
No limitThe Bank
Medium-term Note
Programme and
Registered Certificate of
Deposit Programme
No limit
1
Notes issued by WSNZL are guaranteed by the Bank.
Liquid assets
The Banking Group holds a portfolio of high-quality liquid assets as a buffer against unforeseen funding requirements. These assets are eligible for
repurchase agreements with the Reserve Bank and are held in cash, government, local government and highly rated investment grade securities. The
level of liquid asset holdings is reviewed frequently and is consistent with both the requirements of the balance sheet and market conditions.
The table below shows the Banking Group’s holding of liquid assets and represents the key liquidity information provided to management. Liquid
assets include high quality assets readily convertible to cash to meet the Banking Group’s liquidity requirements. In management’s opinion, liquidity is
sufficient to meet the Banking Group’s present requirements.
THE BANKING GROUP
$ millions20182017
Cash and balances with central banks 1,353 1,659
Receivables due from Ultimate Parent Bank 134 799
Supranational securities 1,502 1,484
NZ Government securities 1,322 2,240
NZ public securities 1,809 1,609
NZ corporate securities 476 1,029
Residential mortgage-backed securities 3,950 3,950
Total liquid assets 10,546 12,770
35.4.3 Regulatory Liquidity Ratios (unaudited)
The Bank calculates liquidity ratios in accordance with BS13 issued by the Reserve Bank. Ratios are calculated daily and are part of the Bank’s
management of liquidity risk. Quarterly, average ratios are produced in line with the Reserve Bank rules and guidance.
THE BANKING GROUP
$ millions 30-Sep-18 30-Jun-18
Average for the three months ended
One-week mismatch ratio 6.01 4.87
One-month mismatch ratio 9.21 9.75
Core funding ratio 83.79 84.73
Note 35 Risk management (continued)

Westpac New Zealand Limited.63
Notes to the financial statements
35.4.4 Contractual maturity of financial liabilities
The table below presents cash flows associated with financial liabilities, payable at the balance sheet date, by remaining contractual maturity. The
amounts disclosed in the table are the future contractual undiscounted cash flows, whereas the Banking Group manages inherent liquidity risk based
on expected cash flows.
Cash flows associated with these financial liabilities include both principal payments as well as fixed or variable interest payments incorporated into
the relevant coupon period. Principal payments reflect the earliest contractual maturity date. Derivative liabilities designated for hedging purposes are
expected to be held for their remaining contractual lives, and reflect gross cash flows over the remaining contractual term.
Derivatives held for trading and certain liabilities classified in “Other financial liabilities at fair value through income statement” are not managed for
liquidity purposes on the basis of their contractual maturity, and accordingly these liabilities are presented in either the on demand or up to 1 month
columns. Only the liabilities that the Banking Group manages based on their contractual maturity are presented on a contractual undiscounted basis
in the tables below.
THE BANKING GROUP
2018
$ millions
On
Demand
Up to
1 Month
Over
1 Month
and Up to
3 Months
Over
3 Months
and Up to
1 Year
Over
1 Year
and Up to
5 Years
Over
5 Years Total
Financial liabilities
Payables due to other financial institutions 20 477 - - - - 497
Other liabilities - 183 - - - - 183
Deposits and other borrowings 28,083 6,488 12,166 14,759 2,363 - 63,859
Other financial liabilities at fair value through income statement - - - - - - -
Derivative financial instruments:
Held for hedging purposes (net settled) - 6 4 51 60 - 121
Held for hedging purposes (gross settled):
Cash outflow - 5 5 32 682 581 1,305
Cash inflow - - - (15) (529) (584) (1,128)
Debt issues - 10 52 1,772 11,595 1,017 14,446
Due to related entities:
Non-derivative balances 609 15 60 720 11 - 1,415
Derivative financial instruments:
Held for trading 2 - - - - - 2
Held for hedging purposes (net settled) - 9 42 63 84 - 198
Held for hedging purposes (gross settled):
Cash outflow - - 14 44 1,264 - 1,322
Cash inflow - - (14) (41) (1,221) - (1,276)
Loan capital - - 14 41 232 2,782 3,069
Total undiscounted financial liabilities 28,714 7,193 12,343 17,426 14,541 3,796 84,013
Total contingent liabilities and commitments
Letters of credit and guarantees 863 - - - - - 863
Commitments to extend credit 24,650 - - - - - 24,650
Other commitments 60 - - - - - 60
Total undiscounted contingent liabilities and commitments 25,573 - - - - - 25,573
Note 35 Risk management (continued)

64
Notes to the financial statements
Westpac New Zealand Limited.
THE BANKING GROUP
2017
$ millions
On
Demand
Up to
1 Month
Over
1 Month
and Up to
3 Months
Over
3 Months
and Up to
1 Year
Over
1 Year
and Up to
5 Years
Over
5 Years Tot a l
Financial liabilities
Payables due to other financial institutions 5 138 - - - - 143
Other liabilities - 95 - - - - 95
Deposits and other borrowings 28,454 4,455 12,404 12,205 2 ,158 - 59,676
Other financial liabilities at fair value through income statement - 19 - - - - 19
Derivative financial instruments:
Held for hedging purposes (net settled) - 4 15 65 82 3 169
Held for hedging purposes (gross settled):
Cash outflow - 929 23 238 3,065 830 5,085
Cash inflow - (800) - (153) (2,453) (753) (4,159)
Debt issues - 910 692 3,090 11,640 1,189 1 7, 5 2 1
Due to related entities:
Non-derivative balances 611 22 245 222 732 - 1,832
Derivative financial instruments:
Held for trading 26 - - - - - 26
Held for hedging purposes (net settled) - 17 54 91 78 - 240
Held for hedging purposes (gross settled):
Cash outflow - - 42 2,606 7,4 2 8 62 10,138
Cash inflow - - (31) (2,556) (7,216) (57) (9,860)
Loan capital - - 13 40 244 2,851 3,148
Total undiscounted financial liabilities 29,096 5,789 13,457 15,848 15,758 4,125 84,073
Total contingent liabilities and commitments
Letters of credit and guarantees 772 - - - - - 772
Commitments to extend credit 25,081 - - - - - 25,081
Other commitments 10 - - - - - 10
Total undiscounted contingent liabilities and commitments 25,863 - - - - - 25,863
Note 35 Risk management (continued)