Westpac details 2H19 notable items and internet template

ASX
Release

23 October 2019

Westpac details 2H19 notable items and releases its 2019 Full Year Financial
Results Template
Customer remediation programs
The Westpac Group has today announced that its cash earnings
1
in Second Half 2019
will be reduced by an estimated $341 million due to its customer remediation programs.
2

Westpac CEO Mr Brian Hartzer said: “A key priority in 2019 has been to deal with
outstanding remediation issues and refund customers as quickly as possible. The
additional provisions announced today are part of that commitment.
“As part of our ‘get it right put it right’ initiative we are determined to fix these issues and
stop these errors occurring. We will continue to review our products and services to
ensure they deliver the right outcomes for customers, and if necessary, make further
provisions.”
Total 2019 notable items (after tax)
In aggregate customer remediation programs and costs related to the previously
announced wealth reset will reduce earnings by $377 million in Second Half 2019.
Together these items are called “notable items”. The table below summarises the
notable items by major items over FY19.
$ million 1H19 2H19 FY19
Customer remediation 617 341 958
Wealth reset 136 36 172
Total notable items 753 377 1,130

Line item impacts by division of 2H19 notable items are provided in Appendix 1.

1
Cash earnings is reported net profit adjusted for certain items to ensure they appropriately reflect profits available to
ordinary shareholders. For further details please see page 41 of Westpac’s 2019 Interim Presentation and Investor
Discussion Pack.

2
Customer remediation programs refers to provisions for estimated customer refunds and payments, associated costs,
and litigation. Each remediation program has its own methodology. These methodologies and estimates may change
over time as further facts emerge and may require additional provisions.

S
econd Half 2019 Customer Remediation Program estimates
Of the $341 million impact on cash earnings in Second Half 2019, approximately 72%
relates to customer payments (including interest) while the rest relates to costs
associated with running these remediation programs. The majority of amounts relate to
issues identified in prior periods. The larger items over the half related to:

•Provisions associated with financial advice. The majority of new provisions are
related to ongoing advic
e service fees and changes in how the time value of money
is calculated including extending the forecast timing over which payments are likely
to be made. The current estimated provision associated with authorised
representatives now represents 32%
3
of the ongoing advice service fees collected
over the period. For salaried planners the estimated percentage is 26%
3
, and
•In Business, provisions associated with interest only loans that did not automatically
switch, when required, to principal and interest loans.
T
he table below summarises the notable items related to customer remediation
programs in Second Half 2019 by division.
Division ($ million)
Customer
refunds
Program
costs
Total
Cash
earnings
impact
Group Businesses (Advice related) 191 48 239 168
Business 104 67 171 119
Consumer 40 6 46 31
New Zealand ($A) 17 15 32 23
Total 352 136 488 341
Fur
ther details on these notable items will be provided in Westpac’s 2019 Full Year
results announcement. Costs associated with the wealth reset are not in the above table
and are included within Group Businesses.
3
These calculations exclude interest costs and any project related costs.

Contingent liability update
As Westpac has not taken a provision for the IFTI matter, which was reported as a
significant development and contingent liability in the Group's 2018 Financial Statements
and its 2019 Interim Financial Results Announcement, the Group is providing a further
update on this matter.
The contingent liability disclosed last year relates to a failure to report a large number of
International Funds Transfer Instructions (IFTIs) (as required under Australia’s AML/CTF
Act), which Westpac self-reported to AUSTRAC. Under the Act, the 'sender' financial
institution of an IFTI transmitted out of Australia, or the 'recipient' financial institution of
an IFTI transmitted into Australia, is required to report the IFTI to AUSTRAC within 10
business days of the instruction being sent or received.
The majority of the IFTIs which are the subject of the Group’s engagement with
AUSTRAC, concern batch instructions received by Westpac through one institutional
bank product between 2009 and 2018 from a small number of correspondent banks for
payments made predominantly to beneficiaries living in Australia in Australian dollars, on
behalf of clients of those correspondent banks. The majority of the payments were low
value, recurring and made by foreign government pension funds and corporates.
AUSTRAC has issued a number of detailed statutory notices over the last year requiring
information relating to the Group’s processes, procedures and oversight. These notices
relate to a range of matters including these IFTI reporting failures and associated
potential failings related to record keeping and obligations to obtain and pass on certain
data in funds transfer instructions, as well as correspondent banking due diligence, risk
assessments and transaction monitoring. Westpac has not yet received an indication
from AUSTRAC about the nature of any enforcement action it may take. The Group is
continuing to work with AUSTRAC in relation to these matters.
Any enforcement action against Westpac may include civil penalty proceedings and
result in the payment of a significant financial penalty, which Westpac is currently unable
to reliably estimate. Previous enforcement action by AUSTRAC against other institutions
has resulted in a range of outcomes, depending on the nature and severity of the
relevant conduct and its consequences.
Updated significant developments, contingent liabilities and associated risk factors will
be included in Westpac’s 2019 Annual Report.

2019 Full Year Financial Results Template

Westpac Group has released the template for its 2019 Full Year Financial Results. The
Excel template outlines the changes that are expected to be made in the presentation of
Westpac’s 2019 Full Year Financial Results and details how key information will be
presented (including providing updated comparative data). The template is available on
Westpac’s website at www.westpac.com.au/investorcentre
.
The primary change relates to Westpac’s decision to reset its wealth business from 1
April 2019. Under this change, Westpac exited the provision of personal financial advice
by salaried financial advisers and authorised representatives and announced that BT
Financial Group will no longer operate as a separate division.
As a result, Westpac now has four primary operating divisions (down from five) while
businesses previously in BT Financial Group have been realigned as follows:
• Insurance operations, including Life, General and Lenders Mortgage Insurance have
been moved into an expanded Consumer division;
• Superannuation, Investments, Platforms and Private Wealth businesses have been
moved into an expanded Business division; and
• The Advice operations, which were wound down during the year, were moved to
Group Businesses.
These changes have no impact on the Group’s cash earnings, reported net profit or total
assets/liabilities in prior periods but do impact divisional earnings, balance sheets, and
performance and credit quality metrics.
In addition, in Westpac’s 2019 Interim Financial Result, various changes to financial
statements were introduced following the adoption of new accounting standards. At that
time proforma cash earnings for 1H18 and 2H18 were provided. This template provides
comparatives for FY18.
Appendix 2 provides tables showing selected updated disclosures.
The Westpac Group is scheduled to announce its 2019 Full Year Financial Results on
Monday, 4 November 2019. An Excel spreadsheet of the 2019 Full Year Financial
Results will also be published on the Westpac website on that date.

Ends.

For Further Information

David Lording
Head of Media Relations

M. 0419 683 411

Andrew Bowden
Head of Investor Relations
T. 02 8253 4008
M. 0438 284 863

Appendix 1

Summary of 2H19 notable items by line item by division


Group
Businesses
(advice and
wealth reset
related)
Business Consumer
New
Zealand
(in $A)
Total
Net interest income - 81 38 13 132
Net fee income 89 23 2 4 118
Net wealth
management &
insurance income
102 - - - 102
Non-interest income 191 23 2 4 220
Staff expenses 46 6 1 7 60
Occupancy expenses - - - - -
Technology expenses 15 - - - 15
Other expenses 38 61 5 8 112
Operating expenses 99 67 6 15 187
Core earnings 290 171 46 32 539
Income tax expense (86) (52) (15) (9) (162)
Cash earnings 204 119 31 23 377

Appendix 2
2019 Full Year Financial Results
Template

1.1 Reported results
% Mov't % Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$mSept 19March 19Mar 19Sept 19Sept 18Sept 18
Net interest income
8,26316,505
Net fee income
8262,424
Net wealth management and insurance income
3262,061
Trading income
437945
Other income
12772
Net operating income before operating expenses
and impairment charges
9,97922,007
Operating expenses
(5,091)(9,566)
Net profit before impairment charges
and income tax expense
4,88812,441
Impairment charges
(333)(710)
Profit before income tax
4,55511,731
Income tax expense
(1,379)(3,632)
Net profit for the period
3,1768,099
Net profit attributable to non-controlling interests
(3)(4)
Net profit attributable to owners of Westpac
Banking Corporation
3,1738,095

1.2 Key financial information
% Mov't% Mov't
Half YearHalf Year
Sept 19 -
Full YearFull Year
Sept 19 -
Sept 19
March 19
Mar 19
Sept 19Sept 18
Sept 18
Shareholder value
Earnings per ordinary share (cents)92.3237.5
Weighted average ordinary shares (millions)3,4363,406
Fully franked dividends per ordinary share (cents)94188
Return on average ordinary equity10.05%13.05%
Average ordinary equity ($m)63,34862,017
Average total equity ($m)63,40062,048
Net tangible asset per ordinary share ($)15.1215.39
Business performance
Interest spread1.89%1.95%
Benefit of net non-interest bearing assets,
liabilities and equity
0.20%0.18%
Net interest margin 2.09%2.13%
Average interest-earning assets ($m)794,660774,944
Expense to income ratio51.02%43.47%
Capital, funding and liquidity
Common equity Tier 1 capital ratio
- APRA Basel III 10.64%10.63%
- Internationally comparable16.17%16.14%
Credit risk weighted assets (credit RWA) ($m) 362,762362,749
Total risk weighted assets (RWA) ($m) 419,819425,384
Liquidity coverage ratio (LCR)138%133%
Net stable funding ratio (NSFR)113%114%
Asset quality
Gross impaired exposures to gross loans0.24%0.20%
Gross impaired exposures to equity and total provisions
2.57%2.09%
Gross impaired exposures provisions to
gross impaired assets
45.74%46.12%
Total committed exposures (TCE) ($bn)1,0471,038
Total stressed exposures as a % of TCE
1.10%1.08%
Total loan provisions to gross loans56bps43bps
Mortgage 90+ day delinquencies0.75%0.67%
Other consumer loans 90+ day delinquencies1.80%1.64%
Collectively assessed provisions to credit RWA98bps73bps
Balance sheet ($m)
Loans714,297709,690
Total assets
891,062879,592
Deposits and other borrowings555,007559,285
Total liabilities827,127815,019
Total equity63,93564,573
Wealth Management
Average Group Funds ($bn)207.3217.3
Life insurance in-force premiums (Australia) ($m)
1,2591,277
General insurance gross written premiums
(Australia) ($m)
259503

1.3 Cash earnings results
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Net interest income
8,38917,187
Non-interest income
1,7144,978
Net operating income
10,10322,165
Operating expenses
(5,041)(9,698)
Core earnings
5,06212,467
Impairment charges
(333)(812)
Operating profit before income tax
4,72911,655
Income tax expense
(1,430)(3,586)
Net profit
3,2998,069
Net profit attributable to non-controlling interests
(3)(4)
Cash earnings
3,2968,065
Add back notable items
753281
Cash earnings excluding notable items
4,0498,346
1.3.1 Key financial information - cash earnings basis
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19
Sept 18Sept 18
Shareholder value
Cash earnings per ordinary share (cents)
95.8236.2
Economic profit ($m)
6603,444
Weighted average ordinary shares (millions)
3,4423,414
Dividend payout ratio
98.33%79.94%
Cash earnings on average ordinary equity (ROE)
10.43%13.00%
Cash earnings on average tangible
ordinary equity (ROTE)
12.30%15.41%
Average ordinary equity ($m)
63,34862,017
Average tangible ordinary equity ($m)
53,74852,338
Business performance
Interest spread
1.92%2.04%
Benefit of net non-interest bearing assets, liabilities and equity
0.20%0.18%
Net interest margin
2.12%2.22%
Average interest-earning assets ($m)
794,660774,944
Expense to income ratio
49.90%43.75%
Full time equivalent employees (FTE)
34,24135,029
Revenue per FTE ($ '000's)
294626
Effective tax rate
30.24%30.77%
Impairment charges
Impairment charges to average loans annualised
9bps12bps
Net write-offs to average loans annualised
12bps14bps

1.3.2 Impact of notable Items
Half YearHalf Year
Sept 19March 19
EstimatedEstimated
customercustomer
refunds,refunds,
associatedassociated
costs, andWealthcosts, andWealth
$mlitigationrestructuring
TotallitigationrestructuringTotal
Net interest income
(212)-(212)
Net fee income
(165)-(165)
Net wealth management and insurance income
(435)-(435)
Non-interest income
(600)-(600)
Net operating income
(812)-(812)
Staff expenses
(66)(142)(208)
Technology expenses
(9)(11)(20)
Other expenses
(9)(37)(46)
Operating expenses
(84)(190)(274)
Operating profit before tax
(896)(190)(1,086)
Income tax expense
27954333
Cash earnings
(617)(136)(753)
Full YearFull Year
Sept 19Sept 18
EstimatedEstimated
customercustomer
refunds,refunds,
associatedassociated
costs, andWealthcosts, and
Wealth
$mlitigationrestructuringTotallitigationrestructuringTotal
Net interest income
(105)-(105)
Net fee income
(157)-(157)
Net wealth management and insurance income
(6)-(6)
Non-interest income
(163)-(163)
Net operating income
(268)-(268)
Staff expenses
(37)-(37)
Technology expenses
---
Other expenses
(75)-(75)
Operating expenses
(112)-(112)
Operating profit before tax
(380)-(380)
Income tax expense
99-99
Cash earnings
(281)-(281)

2.0 Divisional Cash Earnings Summary
Half Year Sept 19

WestpacWestpac

Institutional
New Zealand
Group
$mConsumer
BusinessBank(A$)BusinessesGroup
Net interest income
Non-interest income
Net operating income
Operating expenses
Core earnings
Impairment (charges) / benefits
Operating profit before income tax
Income tax expense
Net profit
Non-controlling interests
Cash earnings
Add back notable items
Cash earnings excluding notable items
Half Year March 19WestpacWestpac
Institutional
New Zealand
Group
$mConsumerBusiness Bank(A$) BusinessesGroup
Net interest income3,8832,5197439452998,389
Non-interest income556744682234(502)1,714
Net operating income
4,4393,2631,425
1,179(203)10,103
Operating expenses(1,886)(1,375)(653)(453)(674)(5,041)
Core earnings2,5531,888772726(877)5,062
Impairment (charges) / benefits(268)(74)(15)(14)38(333)
Operating profit before income tax2,2851,814757712(839)4,729
Income tax expense(678)(547)(210)(188)193(1,430)
Net profit1,6071,267547524(646)3,299
Non-controlling interests
--(3)--(3)
Cash earnings1,6071,267544524(646)3,296
Add back notable items2151--600753
Cash earnings excluding notable items1,6091,418544524(46)4,049
Mov't Sept 19 - Mar 19WestpacWestpac
Institutional New Zealand
Group
%ConsumerBusiness Bank(A$) BusinessesGroup
Net interest income
Non-interest income
Net operating income
Operating expenses
Core earnings
Impairment (charges) / benefits
Operating profit before income tax
Income tax expense
Net profit
Non-controlling interests
Cash earnings
Add back notable items
Cash earnings excluding notable items

2.0 Divisional Cash Earnings Summary
Full Year Sept 19WestpacWestpac
Institutional
New Zealand
Group
$mConsumer
Business Bank(A$) BusinessesGroup
Net interest income
Non-interest income
Net operating income
Operating expenses
Core earnings
Impairment (charges) / benefits
Operating profit before income tax
Income tax expense
Net profit
Non-controlling interests
Cash earnings
Add back notable items
Cash earnings excluding notable items
Full Year Sept 18WestpacWestpac
Institutional
New Zealand
Group
$mConsumerBusiness Bank(A$) BusinessesGroup
Net interest income7,8505,2841,4421,79981217,187
Non-interest income1,3111,6401,565373894,978
Net operating income
9,1616,9243,007
2,17290122,165
Operating expenses(3,774)(2,651)(1,449)(855)(969)(9,698)
Core earnings5,3874,2731,5581,317(68)12,467
Impairment (charges) / benefits(486)(321)16(22)1(812)
Operating profit before income tax4,9013,9521,5741,295(67)11,655
Income tax expense(1,478)(1,196)(476)(361)(75)(3,586)
Net profit3,4232,7561,098934(142)8,069
Non-controlling interests
--(5)-1(4)
Cash earnings3,4232,7561,093934(141)8,065
Add back notable items1145-12150281
Cash earnings excluding notable items3,5372,7611,09394698,346
Mov't Sept 19 - Sept 18WestpacWestpac
Institutional New Zealand
Group
%ConsumerBusiness Bank(A$) BusinessesGroup
Net interest income
Non-interest income
Net operating income
Operating expenses
Core earnings
Impairment (charges) / benefits
Operating profit before income tax
Income tax expense
Net profit
Non-controlling interests
Cash earnings
Add back notable items
Cash earnings excluding notable items

2.2.6 Group funds
As atAs at% Mov'tAs at% Mov't
30 Sept
NetOther30 SeptSept 19 -31 MarchSept 19 -
$bn2019InflowsOutflowsflowsMov't2018Sept 182019
Mar 19
Superannuation39.338.9
Platforms122.9120.8
Packaged Funds39.639.8
Other3.83.6
Total Australia funds205.6203.1
Total NZ funds (A$)9.810.4
Total funds215.4213.5
Total NZ funds (NZ$)10.710.9
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull Year
Sept 19 -
Sept 19Mar 19Mar 19Sept 19Sept 18Sept 18
Average funds for the Group (excluding Westpac
Institutional Bank)207.3214.9
Westpac Institutional Bank-2.4
Average funds for the Group207.3217.3

2.4.1 Balance Sheet

As atAs atAs at% Mov't% Mov't
30 Sept31 March30 SeptSept 19 -Sept 19 -
$m201920192018Mar-19Sep-18
Assets
Cash and balances with central banks19,48626,788
Collateral paid6,1034,787
Trading securities and financial assets measured at fair value through
income statement (FVIS), available-for-sale securities and
investment securities97,84384,251
Derivative financial instruments21,76524,101
Loans714,297709,690
Life insurance assets9,3749,450
Other assets22,19420,525
Total assets891,062879,592
Liabilities
Collateral received1,8892,184

Deposits and other borrowings555,007559,285
Other financial liabilities29,01328,105
Derivative financial instruments23,38424,407
Debt issues188,759172,596
Life insurance liabilities7,5037,597
Loan capital16,73617,265
Other liabilities4,8363,580
Total liabilities827,127815,019
Equity
Total equity attributable to owners of Westpac Banking Corporation63,88464,521
Non-controlling interests5152
Total equity63,93564,573

3.0 Notable items
Half Year Sept 19Westpac
Westpac
Institutional
New Zealand
Group
$mConsumerBusinessBank
(A$)
BusinessesGroup
Net interest income
Non-interest income
Operating expenses
Core earnings
Tax and non-controlling interests
Cash earnings
Half Year March 19
WestpacWestpac
Institutional
New Zealand
Group
$mConsumerBusiness
Bank(A$)
BusinessesGroup
Net interest income(47)(165)---(212)
Non-interest income-(32)--(568)(600)
Operating expenses31(20)--(285)(274)
Core earnings(16)(217)--(853)(1,086)
Tax and non-controlling interests1466--253333
Cash earnings(2)(151)--(600)(753)
Full Year 2019Westpac
Westpac
Institutional
New Zealand
Group
$mConsumerBusinessBank
(A$)
BusinessesGroup
Net interest income
Non-interest income
Operating expenses
Core earnings
Tax and non-controlling interests
Cash earnings
Full Year 2018Westpac
Westpac
Institutional
New Zealand
Group
$mConsumerBusinessBank
(A$)
BusinessesGroup
Net interest income(99)--(2)(4)(105)
Non-interest income(12)--(11)(140)(163)
Operating expenses(39)(5)-(3)(65)(112)
Core earnings(150)(5)-(16)(209)(380)
Tax and non-controlling interests36--45999
Cash earnings(114)(5)-(12)(150)(281)

3.1 Consumer
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sep-19March 19Mar 19Sept 19Sept 18Sept 18
Net interest income3,8837,850
Non-interest income5561,311
Net operating income4,4399,161
Operating expenses(1,886)(3,774)
Core earnings2,5535,387
Impairment charges(268)(486)
Operating profit before income tax2,2854,901
Tax and non-controlling interests(678)(1,478)
Cash earnings1,6073,423
Add back notable items2114
Cash earnings excluding notable items
1,609
3,537
Economic profit9532,248
Expense to income ratio42.49%41.20%
Net interest margin
2.20%2.27%
As atAs at% Mov'tAs atAs at% Mov't
30 Sept
31 MarchSept 19 -
30 Sept
30 SeptSept 19 -
$bn
20192019Mar-1920192018Sep-18
Deposits
Term deposits65.363.9
Other140.5142.3
Total customer deposits205.8206.2
Net loans
Mortgages375.4373.0
Other13.213.3
Provisions(1.5)(0.9)
Total net loans387.1385.4
Deposit to loan ratio53.16%53.50%
Total assets397.7395.6
TCE454.3452.7
Average interest-earning assets
353.2346.4
As atAs atAs atAs at
30 Sept31 March
30 Sept31 March
2019201920182018
Credit quality
Loan impairment charges to average loans annualised0.14%0.12%0.13%
Mortgage 90+ day delinquencies0.84%0.74%0.72%
Other consumer loans 90+ day delinquencies1.66%1.50%1.61%
Total stressed assets to TCE
0.74%0.65%0.64%
Cash earnings (ex notable items)

% Mov't % Mov't
Half Year
Half YearSept 19 -Full Year
Full YearSept 19 -
$m
Sept 19
March 19Mar 19Sept 19Sept 18Sept 18
Banking1,5123,230
Insurance - Life Insurance77146
Insurance - General Insurance-109
Insurance - Lenders Mortgage Insurance1027
Capital and Other1025
Total Insurance (including Capital and Other)97307
Total cash earnings (ex notable items)1,6093,537
Insurance key metrics
% Mov't % Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Life Insurance in-force premiums ($m)
Life Insurance in-force premiums at start of period1,2771,068
Sales / New Business55363
Lapses(73)(154)
Life Insurance in-force premiums at end of period1,2591,277
Claims ratios for Insurance Business (%)
Life Insurance4843
General Insurance8146
Lenders Mortgage Insurance2516
Gross written premiums ($m)
General Insurance gross written premium259503
Lenders Mortgage Insurance gross written premium76180

3.2 Business
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Net interest income2,5195,284
Non-interest income7441,640
Net operating income3,2636,924
Operating expenses(1,375)(2,651)
Core earnings1,8884,273
Impairment charges(74)(321)
Operating profit before tax1,8143,952
Tax and non-controlling interests(547)(1,196)
Cash earnings1,2672,756
Add back notable items1515
Cash earnings excluding notable items
1,4182,761
Economic profit8922,038
Expense to income ratio42.14%38.29%
Net interest margin
3.04%3.18%
Cash earnings excluding notable items
% Mov't
% Mov't
Half YearHalf YearSept 19 -Full Year
Full Year
Sept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Banking
1,1352,162
Super, Investments, Platforms and Private Wealth
283599
Total cash earnings excluding notable items
1,418 2,761
As atAs at% Mov'tAs atAs at
% Mov't
201931 MarchSept 19 -30 Sept30 SeptSept 19 -
$bn
Sept 19
2019Mar-1920192018Sep-18
Deposits
Term deposits64.264.6
Other78.479.2
Total deposits142.6143.8
Net loans
Mortgages72.172.1
Business91.792.4
Other9.910.3
Provisions(1.4)(1.2)
Total net loans172.3173.6
Deposit to loan ratio82.76%82.83%
Total assets186.6188.2
TCE218.4219.9
Average interest-earning assets
166.4165.9
Total funds
203.1205.6
Average funds
197.3201.7
As at
As atAs atAs at
30 Sept31 March30 Sept31 March
2019201920182018
Credit quality
Loan impairment charges to average loans annualised0.09%0.19%0.18%
Mortgage 90+ day delinquencies0.73%0.64%0.58%
Other consumer loans 90+ day delinquencies2.18%2.09%1.87%
Business: impaired assets to TCE0.59%0.57%0.54%
Total stressed assets to TCE
2.43%2.48%2.31%

3.3 Westpac Institutional Bank
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Net interest income7431,442
Non-interest income6821,565
Net operating income1,4253,007
Operating expenses(653)(1,449)
Core earnings7721,558
Impairment (charges) / benefits(15)16
Operating profit before tax7571,574
Tax and non-controlling interests(213)(481)
Cash earnings5441,093
Economic profit254487
Expense to income ratio45.82%48.19%
Net interest margin
1.67%1.67%
As atAs at% Mov'tAs atAs at% Mov't
30 Sept31 MarchSept 19 -30 Sept30 SeptSept 19 -
$bn
20192019Mar-1920192018Sep-18
Deposits95.7104.9
Net loans
Loans76.777.7
Provisions(0.2)(0.3)
Total net loans76.577.4
Deposit to loan ratio125.10%135.53%
Total assets99.8102.5
TCE176.4173.2
Average interest-earning assets89.186.3
Loan impairment charges / (benefits) to average
loans annualised0.04%(0.02%)
Impaired assets to TCE0.08%0.03%
Total stressed assets to TCE0.63%0.66%
Revenue contribution
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Lending and deposit revenue8481,669
Markets, sales and fee income458890
Total customer revenue1,3062,559
Derivative valuation adjustments(11)14
Trading revenue126221
Hastings-203
Other410
Total WIB revenue
1,4253,007

3.4 Westpac New Zealand
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
NZ$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Net interest income1,0001,958
Non-interest income248406
Net operating revenue1,2482,364
Operating expenses(480)(930)
Core earnings7681,434
Impairment (charges) / benefits(14)(25)
Operating profit before tax7541,409
Tax and non-controlling interests(199)(393)
Cash earnings5551,016
Add back notable items-13
Cash earnings excluding notable items
5551,029
Economic profit249459
Expense to income ratio38.46%39.34%
Net interest margin
2.23%2.24%
As atAs at% Mov'tAs atAs at% Mov't
30 Sept31 MarchSept 19 -30 Sept30 SeptSept 19 -
NZ$bn
20192019Mar-1920192018Sep-18
Deposits
Term deposits33.332.6
Other30.929.3
Total customer deposits64.261.9
Net loans
Mortgages49.648.9
Business30.929.8
Other2.02.0
Provisions(0.4)(0.3)
Total net loans82.180.4
Deposit to loan ratio78.20%76.99%
Total assets93.490.0
TCE113.9112.0
Third party liquid assets9.17.5
Average interest earning assets89.987.2
Total funds
10.910.7
As atAs atAs atAs at
30 Sept31 March30 Sept31 March
2019201920182018
Credit quality
Loan impairment charges/(benefits) to average loans annualised0.03%(0.03%)0.10%
Mortgage 90+ day delinquncies0.14%0.11%0.16%
Other consumer loans 90+ day delinquncies 1.02%0.62%0.86%
Impaired assets to TCE0.13%0.15%0.21%
Total stressed assets to TCE
1.57%1.57%1.86%

3.5 Group Businesses
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Net interest income299812
Non-interest income(502)89
Net operating income(203)901
Operating expenses(674)(969)
Core earnings(877)(68)
Impairment (charges) / benefits381
Operating profit before tax(839)(67)
Tax and non-controlling interests193(74)
Cash earnings(646)(141)
Add back notable items
Wealth restructuring
136-
Provisions for customer refunds, payments, associated costs,
and litigation464150
Cash earnings excluding notable items
(46)9
Treasury% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Net interest income239737
Non-interest income(4)10
Net operating income235747
Cash earnings
143480
Treasury Value at Risk (VaR)
$mAverageHighLow
Six months ended 30 September 2019
Six months ended 31 March 201926.833.620.9
Six months ended 30 September 2018
29.332.625.6
Advice business that has been exited
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19
Sept 18Sept 18
Net operating income
51185
Operating expenses
(93)(260)
Cash earnings excluding notable items
(29)(53)

Note 1. Interest spread and margin analysis (cash earnings basis)
Half Year
Half YearFull YearFull Year
Sept 19March 19Sept 19Sept 18
Group
Average interest-earning assets ($m)794,660774,944
Net interest income ($m)8,38917,187
Interest spread 1.92%2.04%
Benefit of net non-interest bearing assets, liabilities and equity0.20%0.18%
Net interest margin2.12%2.22%

Analysis by division

Average interest-earning assets ($m)
Consumer353,246346,358
Business166,435165,920
Westpac Institutional Bank89,11686,315
Westpac New Zealand (A$)85,03880,159
Group Businesses100,82596,192
Group total794,660774,944
Westpac New Zealand (NZ$)89,94687,223

Net interest income ($m)
Consumer3,8837,850
Business2,5195,284
Westpac Institutional Bank7431,442
Westpac New Zealand (A$)9451,799
Group Businesses299812
Group total8,38917,187
Westpac New Zealand (NZ$)1,0001,958

Interest margin
Consumer2.20%2.27%
Business3.04%3.18%
Westpac Institutional Bank1.67%1.67%
Westpac New Zealand (NZ$)2.23%2.24%
Group Businesses0.59%0.84%
Group total2.12%2.22%

Note 2. Average balance sheet and interest rates (cash earnings basis)
AverageInterestAverageAverageInterestAverage
balanceRatebalanceRate
$m$m%$m$m%
Assets
Interest earning assets
Collateral paid10,2751022.0
Trading securities and other financial assets designated at fair value27,9683342.4
Available-for-sale securities---
Investment securities60,3059583.2
Loans and other receivables696,11215,5674.5
Total interest earning assets and interest income 794,66016,9614.3
Non-interest earning assets
Derivative financial instruments24,090
Life insurance assets9,192
All other assets59,212
Total non-interest earning assets92,494
Total assets887,154
Liabilities
Interest bearing liabilities
Collateral received2,378201.7
Deposits and other borrowings505,4594,6751.9
Loan capital17,9423864.3
Other interest bearing liabilities203,6003,4913.4
Total interest bearing liabilities and interest expense729,3798,5722.4
Non-interest bearing liabilities
Deposits and other borrowings48,772
Derivative financial instruments25,556
Life insurance policy liabilities7,286
All other liabilities12,761
Total non-interest bearing liabilities94,375
Total liabilities823,754
Shareholders' equity63,348
Non-controlling interests52
Total equity63,400
Total liabilities and equity887,154
Loans and other receivables
Australia589,84913,2674.5
New Zealand78,4321,8514.7
Other overseas27,8314493.2
Deposits and other borrowings
Australia424,7153,6981.7
New Zealand54,4006342.3
Other overseas26,3443432.6
Half YearHalf Year
30 September 201931 March 2019

Note 2. Average balance sheet and interest rates (cash earnings basis)
AverageInterestAverageAverageInterestAverage
balanceRatebalanceRate
$m$m%$m$m%
Assets
Interest earning assets
Collateral paid8,0851291.6
Trading securities and other financial assets designated at fair value
24,118564
2.3
Available-for-sale securities61,5401,9143.1
Investment securities---
Loans and other receivables681,20130,8304.5
Total interest earning assets and interest income774,94433,4374.3
Non-interest earning assets
Derivative financial instruments26,443--
Life insurance assets10,664--
All other assets61,259--
Total non-interest earning assets98,366--
Total assets873,310--
Liabilities
Interest bearing liabilities
Collateral received2,909451.5
Deposits and other borrowings499,9739,0211.8
Loan capital17,9977744.3
Other interest bearing liabilities194,6306,4103.3
Total interest bearing liabilities and interest expense715,50916,2502.3
Non-interest bearing liabilities
Deposits and other borrowings47,177--
Derivative financial instruments26,218--
Life insurance policy liabilities8,874--
All other liabilities13,484--
Total non-interest bearing liabilities95,753--
Total liabilities811,262--
Shareholders' equity62,017--
Non-controlling interests31--
Total equity62,048--
Total liabilities and equity873,310--
Loans and other receivables
Australia578,67926,4884.6
New Zealand73,9023,5914.9
Other overseas28,6207512.6
Deposits and other borrowings
Australia422,0067,3081.7
New Zealand51,3681,1962.3
Other overseas26,5995171.9
30 September 201830 September 2019
Full YearFull Year

Note 3. Net interest income (cash earnings basis)
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Interest income
Cash and balances with central banks193326
Collateral paid102129
Net ineffectiveness of qualifying hedges--
Trading securities and financial assets measured at FVIS334564
Available-for-sale securities-1,914
Investment securities958-
Loans15,35930,469
Other interest income1535
Total interest income16,96133,437
Interest expense
Collateral received(20)(45)
Deposits and other borrowings(4,675)(9,021)
Trading liabilities(755)(1,143)
Debt issues(2,352)(4,480)
Loan capital(386)(774)
Bank Levy(193)(378)
Other interest expense(191)(409)
Total interest expense(8,572)(16,250)
Total net interest income8,38917,187

Note 4. Non-interest income (cash earnings basis)
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Net fee income
Facility fees375792
Transaction fees6241,268
Other non-risk fee income(59)71
Fee income9402,131
Credit card loyalty programs(63)(126)
Transaction fees related expenses(51)(95)
Fee expenses(114)(221)
Net fee income8261,910
Net wealth management and insurance income
Wealth management income(32)1,145
Life insurance premium income7071,410
General insurance and LMI net premium earned240472
Life insurance investment and other income23622
General insurance and LMI investment and other income2550
Total insurance premium, investment and other income9952,554
Life insurance claims and changes in insurance liabilities(414)(1,396)
General insurance and LMI claims and other expenses(226)(286)
Total insurance claims, changes in liabilities
and other expenses(640)(1,682)
Net wealth management and insurance income3232,017
Trading income464926
Other operating income
Dividends received from other entities43
Net gain on sale of associates38-
Net gain on disposal of assets224
Net gain/(loss) on derivatives held for risk
management purposes(11)32
Net gain/(loss) on financial instruments measured at FVIS3038
Gain/(loss) on disposal of controlled entities3(9)
Rental income on operating leases826
Share of associates net profit/(loss)(10)(10)
Other3721
Total other operating income101125
Total non-interest income1,7144,978

Note 5. Operating expenses (cash earnings basis)
% Mov't% Mov't
Half YearHalf YearSept 19 -Full YearFull YearSept 19 -
$m
Sept 19March 19Mar 19Sept 19Sept 18Sept 18
Staff expenses
Employee remuneration, entitlements and on-costs2,2184,342
Superannuation expense194386
Share-based payments5795
Restructuring costs155114
Total staff expenses2,6244,937
Occupancy expenses
Operating lease rentals343632
Depreciation of property and equipment80164
Other74156
Total occupancy expenses497952
Technology expenses
Amortisation and impairment of software assets334620
Depreciation and impairment of IT equipment68141
Technology services405729
Software maintenance and licences185362
Telecommunications109215
Data processing3877
Total technology expenses1,1392,144
Other expenses
Professional and processing services453902
Amortisation and impairment of intangible assets5113
Postage and stationery87182
Advertising129203
Non-lending losses(9)133
Other expenses116132
Total other expenses7811,665
Operating expenses5,0419,698

Note 8. Group earnings reconciliation
Six months to 31 March 2019

Fair value
Amortisation
(gain)/lossAdjustment
Reportedof intangible
economicIneffectiverelated toTreasuryPresentationCash
$mresultsassets
on hedgeshedgesPendalshareschangesearnings
Net interest income8,263-133(7)---8,389
Net fee income826------826
Net wealth management and insurance income326----(2)(1)323
Trading income437-27----464
Other Income127-17-(14)-(29)101
Non-interest income1,716-44-(14)(2)(30)1,714
Net operating income9,979-177(7)(14)(2)(30)10,103
Staff expenses(2,645)---21--(2,624)
Occupancy expenses(526)-----29(497)
Technology expenses(1,139)------(1,139)
Other expenses(781)------(781)
Operating expenses(5,091)---21-29(5,041)
Core earnings4,888-177(7)7(2)(1)5,062
Impairment charges(333)------(333)
Operating profit before tax4,555-177(7)7(2)(1)
4,729
Income tax expense(1,379)-(52)2(2)-1(1,430)
Net profit3,176-125(5)5(2)-3,299
Net profit attributable to non-controlling interests(3)------(3)
NET PROFIT ATTRIBUTABLE TO OWNERS OF WBC3,173-125(5)5(2)-3,296
WBC Cash earnings adjustments:
Amortisation of intangible assets-------
-
Fair value (gain)/loss on economic hedges 125-(125)----
-
Ineffective hedges(5)--5----
Adjustment related to Pendal5---(5)---
Treasury shares(2)----2--
Cash earnings3,296------3,296
Six months to 31 March 2019PolicyholderMerchantOtherInterest
Operatingtaxand cardfees andcarrying
Presentation
$m
leasesrecoveriesLine feesschemesexpenses
adjustmentchanges
Net interest income-------
Net fee income-------
Net wealth management and insurance income-(1)----(1)
Trading income-------
Other Income(29)-----(29)
Non-interest income(29)(1)----(30)
Net operating income(29)(1)----(30)
Staff expenses-------
Occupancy expenses29-----29
Technology expenses-------
Other expenses-------
Operating expenses29-----29
Core earnings-(1)----(1)
Impairment benefits / (charges)-------
Operating profit before tax-(1)----(1)
Income tax expense-1----1
Net profit-----
--
Net profit attributable to non-controlling interests-------
NET PROFIT ATTRIBUTABLE TO OWNERS OF WBC-------
Cash earnings adjustments

Note 8. Group Earnings Reconciliations
Twelve months to 30 September 2018

Fair value
Amortisation
(gain)/lossAdjustment
Reportedof intangible
economicIneffectiverelated toTreasuryPresentationCash
$mresultsassets
on hedgeshedgesPendalshareschangesearnings
Net interest income16,505-(184)18--84817,187
Net fee income2,424-----(514)1,910
Net wealth management and insurance income2,061----(9)(35)2,017
Trading income945-(19)----926
Other Income72-24-104-(75)125
Non-interest income5,502-5-104(9)(624)4,978
Net operating income22,007-(179)18104(9)22422,165
Staff expenses(4,887)-----(50)(4,937)
Occupancy expenses(1,033)-----81(952)
Technology expenses(2,110)-----(34)(2,144)
Other expenses(1,536)25----(154)(1,665)
Operating expenses(9,566)25----(157)(9,698)
Core earnings12,44125(179)18104(9)6712,467
Impairment charges(710)-----(102)(812)
Operating profit before tax11,73125(179)18104(9)(35)
11,655
Income tax expense(3,632)(8)53(5)(31)235(3,586)
Net profit8,09917(126)1373(7)-8,069
Net profit attributable to non-controlling interests(4)------(4)
NET PROFIT ATTRIBUTABLE TO OWNERS OF WBC8,09517(126)1373(7)-8,065
WBC Cash earnings adjustments:
Amortisation of intangible assets17(17)-----
-
Fair value (gain)/loss on economic hedges (126)-126----
-
Ineffective hedges13--(13)----
Adjustment related to Pendal73---(73)---
Treasury shares(7)----7--
Cash earnings8,065------8,065
Twelve months to 30 September 2018PolicyholderMerchantOtherInterest
Operatingtaxand cardfees andcarrying
Presentation
$m
leasesrecoveriesLine feesschemesexpenses
adjustmentchanges
Net interest income--667-66115848
Net fee income--(667)203(50)-(514)
Net wealth management and insurance income-(35)----(35)
Trading income-------
Other Income(81)---6-(75)
Non-interest income(81)(35)(667)203(44)-(624)
Net operating income(81)(35)-20322115224
Staff expenses---(50)--(50)
Occupancy expenses81-----81
Technology expenses---(31)(3)-(34)
Other expenses---(122)(32)-(154)
Operating expenses81--(203)(35)-(157)
Core earnings-(35)--(13)11567
Impairment benefits / (charges)----13(115)(102)
Operating profit before tax-(35)----(35)
Income tax expense-35----35
Net profit-----
--
Net profit attributable to non-controlling interests-------
NET PROFIT ATTRIBUTABLE TO OWNERS OF WBC-------
Cash earnings adjustments

Note 9. Divisional result and economic profit
Six months to 30 September 2019
Westpac
InstitutionalWestpac New
$mGroup
ConsumerBusinessBank
Zealand
Reported results
Cash earnings adjustments
Cash earnings
Franking Benefit
Adjusted cash earnings
Average equity
Capital charge
Economic profit
Return on average equity (including intangibles)
Six months to 31 March 2019
$m
Reported results3,1731,6071,262544519
Cash earnings adjustments123-5-5
Cash earnings3,2961,6071,267544524
Franking Benefit839475383124-
Adjusted cash earnings4,1352,0821,650668524
Average equity63,34820,59113,8247,5475,272
Capital charge(3,475)(1,129)(758)(414)(289)
Economic profit660953892254235
Return on average equity (including intangibles)10.4%12.9%14.1%13.6%18.2%
Twelve months to 30 September 2019
$m
Reported results
Cash earnings adjustments
Cash earnings
Franking Benefit
Adjusted cash earnings
Average equity
Capital charge
Economic profit
Return on average equity (including intangibles)
Twelve months to 30 September 2018
$m
Reported results8,0953,4082,6801,093947
Cash earnings adjustments(30)1576-(13)
Cash earnings8,0653,4232,7561,093934
Franking Benefit2,2011,035837279-
Adjusted cash earnings10,2664,4583,5931,372934
Average equity62,01720,08914,1358,0454,661
Capital charge(6,822)(2,210)(1,555)(885)(513)
Economic profit3,4442,2482,038487421
Return on average equity (including intangibles)13.0%13.9%15.1%12.7%18.2%

6.7.2 Westpac New Zealand division performance (A$ Equivalent to Section 3.5)
% Mov't % Mov't
Half YearHalf Year
Sept 19 -
Full YearFull Year
Sept 19 -
$mSept 19March 19
Mar 19
Sept 19Sept 18
Sept 18
Net interest income9451,799
Non-interest income234373
Net operating income1,1792,172
Operating expenses(453)(855)
Core earnings7261,317
Impairment (charges)/benefits(14)(22)
Operating profit before tax7121,295
Tax and non-controlling interests(188)(361)
Cash earnings524 934
Add back notable items-12
Cash earnings excluding notable items524946
Economic profit235421
Expense to income ratio38.46%39.34%
Net interest margin2.23%2.24%
As atAs at
% Mov't
As atAs at
% Mov't
30 Sept30 March
Sept 19 -
30 Sept30 Sept
Sept 19 -
$bn20192019
Mar 19
20192018
Sept 18
Customer deposits61.5 56.7
Net loans78.6 73.6
Deposit to loan ratio78.20%76.99%
Total assets89.5 82.4
TCE109.1 102.5
Third party liquid assets8.7 6.9
Average interest-earning assets85.0 80.2
Total funds10.4 9.8