Westpac 2020 Full Year Financial Results Announcement
ASX Release
2 November 2020
Westpac 2020 Full Year Financial Results Announcement (incorporating the
requirements of Appendix 4E)
Westpac Banking Corporation (“Westpac”) today provides the attached Westpac
2020 Full Year Financial Results Announcement (incorporating the requirements of
Appendix 4E).
For further information:
David Lording Andrew Bowden
Group Head of Media Relations Head of Investor Relations
0419 683 411 0438 284 863
This document has been authorised for release by Tim Hartin, General Manager & Company
Secretary.
Level 18, 275 Kent Street
Sydney, NSW, 2000
2020
INCORPORATING THE REQUIREMENTS OF APPENDIX 4E
WESTPAC BANKING CORPORATION
ABN 33 007 457 141
Full Year
Financial
Results
Fix Simplify Perform
iiWESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Results Announcement to the market
ASX Appendix 4E
Results for announcement to the market
1
Report for the full year ended 30 September 2020
2
Revenue from ordinary activities
3,4
($m)down2%to$20,183
Profit from ordinary activities after tax attributable to equity holders
4
($m)down66%to$2,290
Net profit for the year attributable to equity holders
4
($m)down66%to$2,290
Dividend Distributions (cents per ordinary share)
Amount per
security
Franked amount
per security
Final Dividend3131
Interim Dividend
5
NILn/a
Record date for determining entitlements to the dividends
12 November 2020 (Sydney)
10 November 2020 (New York)
1. This document comprises the Westpac Group 2020 Full Year Financial Results, and is provided to the Australian Securities Exchange
under Listing Rule 4.3A.
2. This report should be read in conjunction with the 2020 Westpac Group Annual Report and any public announcements made in the
period by the Westpac Group in accordance with the continuous disclosure requirements of the Corporations Act 2001 and ASX
Listing Rules.
3. Comprises reported interest income, interest expense and non-interest income.
4. All comparisons are with the reported results for the twelve months ended 30 September 2019.
5. The Board did not declare an interim dividend and no dividend was paid.
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iiiWESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Results Announcement to the market
Index
1.0Group results1
1.1 Reported results1
1.2 Key financial information2
1.3 Cash earnings results3
1.4 Market share and system multiple metrics9
2.0Review of Group operations10
2.1 Performance overview14
2.2 Review of earnings21
2.3 Credit quality33
2.4 Balance sheet and funding36
2.5 Capital and dividends41
2.6 Sustainability performance summary48
3.0Divisional results50
3.1 Consumer51
3.2 Business54
3.3 Westpac Institutional Bank57
3.4 Westpac New Zealand59
3.5 Specialist Businesses 63
3.6 Group Businesses67
4.02020 Full Year Financial Report69
4.1 Significant developments70
4.2 Consolidated income statement78
4.3 Consolidated statement of comprehensive income79
4.4 Consolidated balance sheet80
4.5 Consolidated statement of changes in equity81
4.6 Consolidated cash flow statement83
4.7 Notes to the consolidated financial statements84
4.8 Statement in relation to the audit of the financial statements115
5.0Cash earnings financial information116
6.0Other information129
6.1 Disclosure regarding forward-looking statements129
6.2 References to websites130
6.3 Credit ratings130
6.4 Dividend reinvestment plan130
6.5 Information on related entities130
6.6 Financial calendar and Share Registry details131
6.7 Exchange rates135
7.0Glossary136
ivWESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Results Announcement to the market
In this Full Year Financial Results Announcement (Results Announcement) references to ‘Westpac’, ‘WBC’,
‘Westpac Group’, ‘the Group’, ‘we’, ‘us’ and ‘our’ are to Westpac Banking Corporation and its controlled entities,
unless it clearly means just Westpac Banking Corporation.
All references to $ in this Results Announcement are to Australian dollars unless otherwise stated.
Financial calendar
Final Results Announcement released 2 November 2020
Ex-dividend date for final dividend 11 November 2020
Record date for final dividend (Sydney) 12 November 2020
Annual General Meeting 11 December 2020
Final dividend payable 18 December 2020
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1WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
1.0 Group results
1.1 Reported results
Reported net profit attributable to owners of Westpac Banking Corporation (WBC) is prepared in accordance with
the requirements of Australian Accounting Standards (AAS) and regulations applicable to Australian Authorised
Deposit-taking Institutions (ADIs). During the Full Year 2020, Westpac adopted AASB 16 Leases (AASB 16). As the
Group applied the standards prospectively, comparatives have not been restated.
Half YearHalf Year% Mov'tFull YearFull Year% Mov't
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 7,696 9,000 (14) 16,696 16,907 (1)
Net fee income 837 755 11 1,592 1,655 (4)
Net wealth management and insurance income 286 465 (38) 751 1,029 (27)
Trading income 435 460 (5) 895 929 (4)
Other income 325 (76)large 249 129 93
Net operating income before operating expenses and impairment
charges 9,579 10,604 (10) 20,183 20,649 (2)
Operating expenses(6,558)(6,181) 6 (12,739)(10,106) 26
Net profit before impairment charges and income tax expense 3,021 4,423 (32) 7,444 10,543 (29)
Impairment charges(940)(2,238)(58)(3,178)(794)large
Profit before income tax 2,081 2,185 (5) 4,266 9,749 (56)
Income tax expense(980)(994)(1)(1,974)(2,959)(33)
Net profit for the period 1,101 1,191 (8) 2,292 6,790 (66)
Profit attributable to non-controlling interests (NCI)(1)(1)- (2)(6)(67)
Net profit attributable to owners of WBC 1,100 1,190 (8) 2,290 6,784 (66)
Net profit attributable to owners of Westpac Banking Corporation for Full Year 2020 was $2,290 million, a
decrease of $4,494 million or 66% compared to Full Year 2019. Full Year 2020 net profit included a significant
increase in impairment charges due to the economic impact of the COVID-19 pandemic, costs associated with
the AUSTRAC proceedings, asset impairments and revaluations, and estimated customer refunds, payments,
associated costs and litigation. These items are further discussed in Section 1.3.2, Section 2.1, Section 2.2.9 and in
Note 10 and Note 14 of this Announcement.
Net interest income decreased $211 million compared to Full Year 2019 predominantly due to a decrease in net
interest margin of 9 basis points to 2.03%. The movement in net interest income is attributable to the impact of:
• lower rates on average interest earning assets exceeding benefits from the decrease in the Group’s funding
costs, which includes movements in economic hedges; and
• lower charges for estimated customer refunds and payments than in Full Year 2019.
Net interest income, loans, deposits and other borrowings, and net interest margin are discussed further in
Sections 2.2.1 to 2.2.4.
In aggregate, non-interest income decreased $255 million compared to Full Year 2019 mainly due to:
• a decrease in net wealth and insurance income due to lower rates, asset impairment, and severe weather events
resulting in higher claims; and
• a decrease in net fee income from lower customer activities and fee waivers; partially offset by
• a lower charge for estimated customer refunds and payments compared to Full Year 2019; and
• the realisation of a gain upon the derecognition of an associate.
Non-interest income is discussed further in Section 2.2.5.
Operating expenses increased $2,633 million or 26% compared to Full Year 2019. The rise was mainly due to:
• costs associated with AUSTRAC proceedings including a provision for penalty;
• customer service costs associated with responding to COVID-19,
• asset impairments, and an increase in amortisation and impairment of capitalised software; partially offset by
provisions for Wealth restructuring in Full Year 2019.
Operating expenses are discussed further in Section 2.2.8.
Impairment charges were $2,384 million higher compared to Full Year 2019 mostly reflecting the deterioration in
the economy as a result of the COVID-19 pandemic which has led to a significant increase in the expected credit
losses. Asset quality deteriorated, with stressed exposures as a percentage of total committed exposures at 1.91%,
up 71 basis points compared to Full Year 2019. Impairment charges are discussed further in Section 2.2.9 and Note
10 of this Announcement.
The effective tax rate of 46.3% was higher than the Full Year 2019 effective tax rate of 30.4% predominantly due to
both the provision for the AUSTRAC penalty and goodwill impairment being non deductible. Income tax expense is
discussed further in Section 2.2.10.
2WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
1.2 Key financial information
1
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
20202020Mar 2020202019Sept 19
Shareholder value
Earnings per ordinary share (cents) 30.5 33.2 (8) 63.7 196.5 (68)
Weighted average ordinary shares (millions)
2
3,606 3,574 1 3,590 3,450 4
Fully franked dividends per ordinary share (cents)
3
31 - - 31 174 (82)
Dividend payout ratio
3
101.65%- large 48.87% 88.83%large
Return on average ordinary equity 3.22% 3.52%(30 bps) 3.37% 10.65%large
Average ordinary equity ($m) 68,403 67,625 1 68,014 63,714 7
Average total equity ($m) 68,454 67,678 1 68,066 63,764 7
Net tangible asset per ordinary share ($) 15.67 15.43 2 15.67 15.36 2
Business performance
Interest spread 1.73% 2.08%(35 bps) 1.90% 1.94%(4 bps)
Benefit of net non-interest bearing assets, liabilities and
equity 0.12% 0.13%(1 bps) 0.13% 0.18%(5 bps)
Net interest margin 1.85% 2.21%(36 bps) 2.03% 2.12%(9 bps)
Average interest-earning assets ($m) 830,465 812,971 2 821,718 798,924 3
Expense to income ratio 68.46% 58.29%large 63.12% 48.94%large
Capital, funding and liquidity
Common equity Tier 1 capital ratio
- APRA Basel III 11.13% 10.81% 32 bps 11.13% 10.67% 46 bps
- Internationally comparable 16.50% 15.81% 69 bps 16.50% 15.85% 65 bps
Credit risk weighted assets (credit RWA) ($m) 359,389 369,142 (3) 359,389 367,864 (2)
Total risk weighted assets (RWA) ($m) 437,905 443,905 (1) 437,905 428,794 2
Liquidity coverage ratio (LCR) 150% 154%large 150% 127%large
Net stable funding ratio (NSFR) 122% 117%large 122% 112%large
Asset quality
Gross impaired exposures to gross loans 0.40% 0.30% 10 bps 0.40% 0.25% 15 bps
Gross impaired exposures to equity and total provisions 3.74% 2.93% 81 bps 3.74% 2.54% 120 bps
Gross impaired exposure provisions to gross impaired
exposures 41.45% 50.09%large 41.45% 44.92%(347 bps)
Total committed exposures (TCE) ($bn) 1,060 1,082 (2) 1,060 1,050 1
Total stressed exposures as a % of TCE
4
1.91% 1.32% 59 bps 1.91% 1.20% 71 bps
Total provisions to total gross loans 88 bps 80 bps 8 bps 88 bps 54 bps 34 bps
Mortgages 90+ day delinquencies 1.50% 0.87% 63 bps 1.50% 0.82% 68 bps
Other consumer loans 90+ day delinquencies 2.09% 1.94% 15 bps 2.09% 1.69% 40 bps
Collectively assessed provisions to credit RWA 154 bps 140 bps 14 bps 154 bps 95 bps 59 bps
Balance sheet ($m)
Loans 693,059 719,678 (4) 693,059 714,770 (3)
Total assets 911,946 967,662 (6) 911,946 906,626 1
Deposits and other borrowings 591,131 582,920 1 591,131 563,247 5
Total liabilities 843,872 900,016 (6) 843,872 841,119 -
Total equity 68,074 67,646 1 68,074 65,507 4
Wealth Management
Average Group Funds ($bn) 200.2 224.6 (11) 212.4 214.6 (1)
Life insurance in-force premiums (Australia) ($m) 953 1,208 (21) 953 1,212 (21)
General insurance gross written premiums (Australia) ($m) 282 273 3 555 538 3
1. Averages are based on six months for the halves and twelve months for the full year.
2. Weighted average number of fully paid ordinary shares listed on the ASX for the relevant period less average Westpac shares held by
the Group (“Treasury shares”).
3. The Board did not declare an interim dividend.
4. Stressed exposures include program managed loans 90 days plus and non-performing transaction managed loans.
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3WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
1.3 Cash earnings results
Throughout this Results Announcement, reporting and commentary of financial performance refers to ‘cash
earnings results’, unless otherwise stated. Section 4 is prepared on a reported basis. A reconciliation of cash
earnings to reported results is set out in Section 5, Note 8.
Certain commentary throughout this Results Announcement refers to performance excluding “notable items”.
Details on notable items are discussed in Section 1.3.2.
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 8,420 8,666 (3) 17,086 16,953 1
Non-interest income 1,865 1,675 11 3,540 3,702 (4)
Net operating income 10,285 10,341 (1) 20,626 20,655 -
Operating expenses(6,540)(6,160) 6 (12,700)(10,031) 27
Core earnings 3,745 4,181 (10) 7,926 10,624 (25)
Impairment charges(940)(2,238)(58)(3,178)(794)large
Operating profit before income tax 2,805 1,943 44 4,748 9,830 (52)
Income tax expense(1,189)(949) 25 (2,138)(2,975)(28)
Net profit for the period 1,616 994 63 2,610 6,855 (62)
Net profit attributable to non-controlling interests(1)(1)- (2)(6)(67)
Cash earnings 1,615 993 63 2,608 6,849 (62)
Add back notable items 1,220 1,399 (13) 2,619 1,047 150
Cash earnings excluding notable items 2,835 2,392 19 5,227 7,896 (34)
4WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
1.3.1 Key financial information – cash earnings basis
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
20202020Mar 2020202019Sept 19
Shareholder value
Cash earnings per ordinary share (cents) 44.7 27.7 61 72.5 198.2 (63)
Economic profit/(losses) ($m)
1
(1,433)(2,146)(33)(3,579) 1,619 large
Weighted average ordinary shares (millions)
2
3,612 3,579 1 3,595 3,456 4
Dividend payout ratio
3
69.33%- large 42.93% 88.09%large
Cash earnings return on average ordinary equity (ROE) 4.72% 2.94% 178 bps 3.83% 10.75%large
Cash earnings return on average tangible ordinary equity (ROTE) 5.49% 3.42% 207 bps 4.46% 12.66%large
Average ordinary equity ($m) 68,403 67,625 1 68,014 63,714 7
Average tangible ordinary equity ($m)
4
58,818 58,024 1 58,421 54,114 8
Business performance
Interest spread 1.92% 1.99%(7 bps) 1.96% 1.94% 2 bps
Benefit of net non-interest bearing assets, liabilities and equity 0.11% 0.14%(3 bps) 0.12% 0.18%(6 bps)
Net interest margin 2.03% 2.13%(10 bps) 2.08% 2.12%(4 bps)
Average interest earning assets ($m) 830,465 812,971 2 821,718 798,924 3
Expense to income ratio 63.59% 59.57%large 61.57% 48.56%large
Full time equivalent employees (FTE) 36,849 34,199 8 36,849 33,288 11
Revenue per FTE ($ ‘000’s) 285 309 (8) 593 608 (2)
Effective tax rate 42.39% 48.84%large 45.03% 30.26%large
Impairment charges
Impairment charges to average loans annualised 27 bps 62 bps(35 bps) 45 bps 11 bps 34 bps
Net write-offs to average loans annualised 15 bps 12 bps 3 bps 14 bps 14 bps-
1. Refer to Section 5, Note 9 for further details.
2. Weighted average ordinary shares – cash earnings: represents the weighted average number of fully paid ordinary shares listed on the
ASX for the relevant period.
3. The Board did not declare an interim dividend.
4. Average tangible ordinary equity is calculated as average ordinary equity less intangible assets (excluding capitalised software).
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5WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
1.3.2 Impact of notable items
In Full Year 2020 a number of large items have impacted results that do not reflect underlying performance. We
have called these items “notable items”. Notable items do not include COVID-19 impacts (apart from revaluations
partly due to weaker activity) despite the significant effect on our results this year. Notable items can be divided
into four categories:
Category
Cash earnings
impact FY20
$mDetail
1. AUSTRAC proceedings$1,442• Provision for $1.3 billion penalty.
• Legal costs, including AUSTRAC’s costs.
• Costs linked to Westpac’s response plan.
2. Refunds, payments, costs and litigation $440• Additional provisions for estimated refunds in FY20 including for :
–business customers provided with a business loan instead of a
consumer loan regulated by the National Consumer Credit Protection
Act and the National Credit Code;
–refunds to superannuation and investment customers not advised of
certain corporate actions;
–refunds to some BT customers where certain wealth fees were
inadequately disclosed; and.
–net increase in provisions for the refund of Advice fees.
• Costs associated with implementing the remediation programs.
• Cost of settling legal actions, including settlement of two US class actions.
3. Write-down of intangibles$614• Following a review, the valuation of our Life insurance business did not
support its goodwill so it has been written down.
• Lower returns in the Auto business has resulted in a write-down in its
goodwill.
• Write-down and impairment of capitalised software.
4. Asset sales and revaluations$123• Gain on revaluation of shareholding in Zip Co Limited
• Write-down of Life insurance deferred acquisition costs, along with a loss
on the liabilities associated with our disability insurance.
• Accounting loss on the sale of our Vendor Finance business, sold at a
discount to book value (recorded loss), with potential earn-out payments
on performance over next 3 years (to be recognised in future years).
6WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
Half Year Sept 2020
$m
AUSTRAC
proceedings
Refunds,
payments,
costs, and
litigation
Write-down
of intangibles
Asset
sales and
revaluationsTotal
Net interest income- (37)- - (37)
Non-interest income- (78)- 43 (35)
Net operating income- (115)- 43 (72)
Operating expenses(420)(142)(602)(119)(1,283)
Core earnings(420)(257)(602)(76)(1,355)
Impairment charges- - - - -
Operating profit before income tax(420)(257)(602)(76)(1,355)
Income tax benefit 5 75 34 21 135
Net profit attributable to non-controlling interests- - - - -
Cash earnings(415)(182)(568)(55)(1,220)
Half Year March 2020
$m
AUSTRAC
proceedings
Refunds,
payments,
costs, and
litigation
Write-down
of intangibles
Asset
sales and
revaluationsTotal
Net interest income- (106)- - (106)
Non-interest income- (131)- (97)(228)
Net operating income- (237)- (97)(334)
Operating expenses(1,058)(132)(66)- (1,256)
Core earnings(1,058)(369)(66)(97)(1,590)
Impairment charges- - - - -
Operating profit before income tax(1,058)(369)(66)(97)(1,590)
Income tax benefit 31 111 20 29 191
Net profit attributable to non-controlling interests- - - - -
Cash earnings(1,027)(258)(46)(68)(1,399)
Full Year Sept 2020
$m
AUSTRAC
proceedings
Refunds,
payments,
costs, and
litigation
Write-down
of intangibles
Asset
sales and
revaluationsTotal
Net interest income- (143)- - (143)
Non-interest income- (209)- (54)(263)
Net operating income- (352)- (54)(406)
Operating expenses(1,478)(274)(668)(119)(2,539)
Core earnings(1,478)(626)(668)(173)(2,945)
Impairment charges- - - - -
Operating profit before income tax(1,478)(626)(668)(173)(2,945)
Income tax benefit 36 186 54 50 326
Net profit attributable to non-controlling interests- - - - -
Cash earnings(1,442)(440)(614)(123)(2,619)
Full Year Sept 2019
$m
AUSTRAC
proceedings
Refunds,
payments,
costs, and
litigation
Write-down of
intangibles
Asset
sales and
revaluations
Wealth
ResetTotal
Net interest income- (344)- - - (344)
Non-interest income- (820)- 83 - (737)
Net operating income- (1,164)- 83 - (1,081)
Operating expenses- (220)- - (241)(461)
Core earnings- (1,384)- 83 (241)(1,542)
Impairment charges- - - - - -
Operating profit before income tax- (1,384)- 83 (241)(1,542)
Income tax benefit- 426 - - 69 495
Net profit attributable to non-controlling interests- - - - - -
Cash earnings- (958)- 83 (172)(1,047)
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7WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
1.3.3 Cash earnings policy
In assessing financial performance, including divisional results, Westpac Group uses a measure of performance
referred to as ‘cash earnings’. Cash earnings is viewed as a measure of the level of profit that is generated by
ongoing operations and is therefore typically considered in assessing distributions, including dividends. Cash
earnings is neither a measure of cash flow nor net profit determined on a cash accounting basis, as it includes both
cash and non-cash adjustments to statutory net profit.
Management believes this allows the Group to more effectively assess performance for the current period against
prior periods and to compare performance across business divisions and across peer companies.
To determine cash earnings, three categories of adjustments are made to reported results:
• Material items that key decision makers at the Westpac Group believe do not reflect the Group’s operating
performance;
• Some items that are not typically considered when dividends are recommended, such as the amortisation of
intangibles, impact of Treasury shares and economic hedging impacts; and
• Accounting reclassifications between individual line items that do not impact reported results.
A full reconciliation of reported results to cash earnings is set out in Section 5, Note 8.
Reconciliation of reported results to cash earnings and cash earnings excluding notable items
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net profit attributable to owners of WBC 1,100 1,190 (8) 2,290 6,784 (66)
Fair value (gain)/loss on economic hedges 581 (219)large 362 35 large
Ineffective hedges(37)(24) 54 (61)(20)large
Adjustments related to Pendal(32) 63 large 31 45 (31)
Treasury shares 3 (17)large(14) 5 large
Total cash earnings adjustment (post-tax) 515 (197)large 318 65 large
Cash earnings 1,615 993 63 2,608 6,849 (62)
Add back notable items 1,220 1,399 (13) 2,619 1,047 150
Cash earnings excluding notable items 2,835 2,392 19 5,227 7,896 (34)
Outlined below are the cash earnings adjustments to the reported result:
• Fair value (gain)/loss on economic hedges (which do not qualify for hedge accounting under AAS) comprise:
–The unrealised fair value (gain)/loss on hedges of accrual accounted term funding transactions are reversed
in deriving cash earnings as they may create a material timing difference on reported results but do not
affect the Group’s cash earnings over the life of the hedge; and
–The unrealised fair value (gain)/loss on foreign exchange hedges of future New Zealand earnings impacting
non-interest income is reversed in deriving cash earnings as they may create a material timing difference on
reported results but do not affect the Group’s cash earnings over the life of the hedge. Westpac has ceased
this activity, and as a result, at this stage, no further adjustments will be recognised in future periods.
• Ineffective hedges: The unrealised (gain)/loss on ineffective hedges is reversed in deriving cash earnings
because the gain or loss arising from the fair value movement in these hedges reverses over time and does not
affect the Group’s profits over time;
• Adjustments related to Pendal: Consistent with prior periods’ treatment, this item has been treated as a cash
earnings adjustment given its size and that it does not reflect ongoing operations. The adjustment relates to
the mark to market of the shares and separation costs related to the original sell down. Westpac disposed of its
holdings in Full Year 2020. As a result, no further adjustments will be recognised in future periods.
• Treasury shares: Under AAS, Westpac shares held by the Group in the managed funds and life businesses are
deemed to be Treasury shares and the results of holding these shares cannot be recognised in the reported
results. In deriving cash earnings, these results are included to ensure there is no asymmetrical impact on the
Group’s profits because the Treasury shares support policyholder liabilities and equity derivative transactions
which are re-valued in determining income. As at 30 September 2020, there are no Treasury shares; and
• Accounting reclassifications between individual line items that do not impact reported results comprise:
–Operating leases: Under AAS rental income on operating leases is presented gross of the depreciation of
the assets subject to the lease. These amounts are offset in deriving non-interest income and operating
expenses on a cash earnings basis; and
–Policyholder tax recoveries: Income and tax amounts that are grossed up to comply with the AAS covering
Life Insurance Business (policyholder tax recoveries) are reversed in deriving income and taxation expense
on a cash earnings basis.
8WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
Full Year 2020 Revisions
In 2020, Westpac implemented a change to the presentation of its divisional financial information. The change
related to:
• the creation of the Specialist Businesses division, which includes the following businesses: Auto and Vendor
Finance, Australian insurance businesses, Superannuation, Platforms and Investments, and Westpac Pacific; and
• the movement of certain small to medium size enterprise customer, and products between the Consumer and
Business division to better reflect our new line of business operating structure.
This change has no impact on the Group’s overall results or balance sheet but impacts divisional results and
balance sheets. Comparative divisional financial information has been restated for this change.
During the period Westpac has revised the classification of notable items. Some items that in prior periods were
not classified as notable items are now included in the revised classification.
This Results Announcement is unaudited
PricewaterhouseCoopers has audited the financial statements contained within the 2020 Westpac Group Annual
Report and has issued an unmodified audit report. This 2020 Full Year Results Announcement has not been
subject to audit by PricewaterhouseCoopers. The financial information contained in this Results Announcement
includes information extracted from the audited financial statements together with information that has not been
audited. The cash earnings disclosed as part of this Results Announcement has not been separately audited by
PricewaterhouseCoopers.
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9WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Group results
1.4 Market share and system multiple metrics
1.4.1 Market share
As atAs atAs atAs at
30 Sept31 March30 Sept31 March
2020202020192019
Australia
Banking system (Australian Prudential Regulation Authority (APRA))
1
Housing credit
2
23% 23% 24% 24%
Cards22% 23% 23% 23%
Household deposits21% 22% 22% 23%
Business deposits19% 20% 20% 20%
Financial system (Reserve Bank of Australia (RBA))
1
Housing credit
2
22% 22% 23% 23%
Business credit16% 16% 17% 18%
Retail deposits
3
21% 21% 22% 21%
New Zealand (Reserve Bank of New Zealand (RBNZ))
4
Consumer lending19% 18% 18% 18%
Deposits18% 19% 18% 19%
Business lending17% 17% 16% 17%
Australian Wealth Management
5
Platforms (includes Wrap and Corporate Super)18% 18% 18% 18%
Retail (excludes Cash)17% 18% 17% 17%
Corporate Super14% 15% 14% 13%
1.4.2 System multiples
Half YearHalf YearHalf YearHalf Year
SeptMarchSeptMarch
2020202020192019
Australia
Banking system (APRA)
1
Housing credit
2,6
n/a n/a 0.6 0.5
Cards
6
n/a n/a n/a n/a
Household deposits 0.6 0.3 0.6 0.1
Business deposits 0.7 0.6 2.6 0.1
Financial system (RBA)
1
Housing credit
2,6
n/a n/a 0.6 0.5
Business credit
6
n/a 0.2 n/a n/a
Retail deposits
3,6
0.4 0.3 0.7 n/a
New Zealand (RBNZ)
4
Consumer lending 1.3 1.0 1.1 0.4
Deposits 0.3 1.6 0.2 1.4
1. From March 2019 certain statistical data has been restated as a result of APRA’s implementation of the new Economic and Financial
Statistics (EFS) collection requirements. APRA’s EFS collection requirements have clarified and revised a number of key reporting
definitions including residency, industry sectors, and loan purpose. In addition, the EFS collection coverage has been expanded to
include credit unions and building societies. The restated balances are reported in APRA’s new Monthly Authorised Deposit-taking
Institutional Statistics (MADIS) publication, which replaces APRA’s Monthly Banking Statistics (MBS) publication. Westpac’s market
share and growth multiples from Second Half 2019 onwards have been calculated based on APRA’s MADIS publication, with prior
period comparative balances prepared on the previous MBS publication approach. As a result of this change, market share and system
multiples are not comparable to reporting periods prior to Second Half 2019.
2. Includes securitised loans.
3. Retail deposits as measured by the RBA, financial system includes financial corporations’ deposits.
4. New Zealand comprises New Zealand banking operations.
5. Market Share Australian Wealth Management based on market share statistics from Strategic Insight as at 30 June 2020 (for Second
Half 2020), as at 31 December 2019 (for First Half 2020), as at 30 June 2019 (for Second Half 2019) and as at 31 December 2018
(for First Half 2019).
6. n/a indicates that system growth or Westpac growth was negative.
10WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.0 Review of Group operations
Divisional cash earnings summary
Half Year Sept 2020Westpac Westpac New
Institutional Zealand
1
SpecialistGroup
$mConsumer BusinessBank(A$)BusinessesBusinessesGroup
Net interest income 4,313 2,019 506 892 247 443 8,420
Non-interest income 247 249 626 152 334 257 1,865
Net operating income 4,560 2,268 1,132 1,044 581 700 10,285
Operating expenses(2,141)(1,230)(697)(482)(1,128)(862)(6,540)
Core earnings 2,419 1,038 435 562 (547)(162) 3,745
Impairment (charges) / benefits(599)(674)(111)(102)(95) 641 (940)
Operating profit before income
tax 1,820 364 324 460 (642) 479 2,805
Income tax (expense) / benefit(546)(108)(139)(129) 44 (311)(1,189)
Net profit 1,274 256 185 331 (598) 168 1,616
Net profit attributable to NCI- - - - (1)- (1)
Cash earnings 1,274 256 185 331 (599) 168 1,615
Add back notable items 19 100 - 4 820 277 1,220
Cash earnings excluding notable
items 1,293 356 185 335 221 445 2,835
Half Year March 2020Westpac Westpac New
Institutional Zealand
1
SpecialistGroup
$mConsumer BusinessBank(A$)BusinessesBusinessesGroup
Net interest income 4,234 2,144 605 940 287 456 8,666
Non-interest income 326 311 556 167 428 (113) 1,675
Net operating income 4,560 2,455 1,161 1,107 715 343 10,341
Operating expenses(2,035)(1,068)(619)(516)(420)(1,502)(6,160)
Core earnings 2,525 1,387 542 591 295 (1,159) 4,181
Impairment (charges) / benefits(416)(697)(293)(200)(160)(472)(2,238)
Operating profit before income
tax 2,109 690 249 391 135 (1,631) 1,943
Income tax (expense) / benefit(637)(212)(102)(110)(41) 153 (949)
Net profit 1,472 478 147 281 94 (1,478) 994
Net profit attributable to NCI- - - - (1)- (1)
Cash earnings 1,472 478 147 281 93 (1,478) 993
Add back notable items 20 88 - 5 102 1,184 1,399
Cash earnings excluding notable
items 1,492 566 147 286 195 (294) 2,392
Mov’t Sept 20 - March 20Westpac Westpac New
Institutional Zealand
1
SpecialistGroup
%Consumer BusinessBank(A$)BusinessesBusinessesGroup
Net interest income 2 (6)(16)(5)(14)(3)(3)
Non-interest income(24)(20) 13 (9)(22)large 11
Net operating income - (8)(2)(6)(19) 104 (1)
Operating expenses 5 15 13 (7) 169 (43) 6
Core earnings(4)(25)(20)(5)large(86)(10)
Impairment (charges) / benefits 44 (3)(62)(49)(41)large(58)
Operating profit before income
tax(14)(47) 30 18 largelarge 44
Income tax (expense) / benefit(14)(49) 36 17 largelarge 25
Net profit(13)(46) 26 18 largelarge 63
Net profit attributable to NCI- - - - - - -
Cash earnings(13)(46) 26 18 largelarge 63
Add back notable items(5) 14 - (20)large(77)(13)
Cash earnings excluding notable
items(13)(37) 26 17 13 large 19
1. Refer to Section 3.4 for the Westpac New Zealand NZ$ divisional result.
1
2
3
4
5
6
7
11WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Movement in cash earnings ($m)
Second Half 2020 – First Half 2020
1H20 cash
earnings
Add back
1H20
notable
items
1H20
cash
earnings
ex notable
items
Net
interest
income
Non-
interest
income
Operating
expenses
Impairment
charges
Tax &
non-
controlling
interests
2H20 cash
earnings
ex notable
items
2H20
notable
items
2H20 cash
earnings
993
1,399
2,392
(315)
(3)
(353)
1,298
(184)
2,835
(1,220)
1,615
63%
19%
Movement in core earnings by division ($m)
Second Half 2020 – First Half 2020
Add back
1H20
notable
items
1H20 core
earnings
1H20
core
earnings
ex notable
items
ConsumerBusinessWIBWestpac
New
Zealand
(A$)
SBDGroup
Businesses
2H20 core
earnings
ex notable
items
2H20
notable
items
2H20 core
earnings
4,181
1,590
5,771
(107)
(332)
(107)
(29)
(66)
5,100
(1,355)
3,745
(10%)
(12%)
(30)
12WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Full Year Sept 2020Westpac Westpac New
Institutional Zealand
1
SpecialistGroup
$mConsumer BusinessBank(A$)BusinessesBusinessesGroup
Net interest income 8,547 4,163 1,111 1,832 534 899 17,086
Non-interest income 573 560 1,182 319 762 144 3,540
Net operating income 9,120 4,723 2,293 2,151 1,296 1,043 20,626
Operating expenses(4,176)(2,298)(1,316)(998)(1,548)(2,364)(12,700)
Core earnings 4,944 2,425 977 1,153 (252)(1,321) 7,926
Impairment (charges) / benefits(1,015)(1,371)(404)(302)(255) 169 (3,178)
Operating profit before income
tax 3,929 1,054 573 851 (507)(1,152) 4,748
Income tax (expense) / benefit(1,183)(320)(241)(239) 3 (158)(2,138)
Net profit 2,746 734 332 612 (504)(1,310) 2,610
Net profit attributable to NCI- - - - (2)- (2)
Cash earnings 2,746 734 332 612 (506)(1,310) 2,608
Add back notable items 39 188 - 9 922 1,461 2,619
Cash earnings excluding notable
items 2,785 922 332 621 416 151 5,227
Full Year Sept 2019Westpac Westpac New
Institutional Zealand
1
SpecialistGroup
$mConsumer BusinessBank(A$)BusinessesBusinessesGroup
Net interest income 8,130 4,456 1,337 1,860 555 615 16,953
Non-interest income 695 594 1,195 423 1,412 (617) 3,702
Net operating income 8,825 5,050 2,532 2,283 1,967 (2) 20,655
Operating expenses(3,794)(2,094)(1,220)(939)(847)(1,137)(10,031)
Core earnings 5,031 2,956 1,312 1,344 1,120 (1,139) 10,624
Impairment (charges) / benefits(582)(172)(31) 10 (111) 92 (794)
Operating profit before income
tax 4,449 2,784 1,281 1,354 1,009 (1,047) 9,830
Income tax (expense) / benefit(1,333)(838)(356)(369)(292) 213 (2,975)
Net profit 3,116 1,946 925 985 717 (834) 6,855
Net profit attributable to NCI- - - - (5)(1)(6)
Cash earnings 3,116 1,946 925 985 712 (835) 6,849
Add back notable items 33 220 - (15) 47 762 1,047
Cash earnings excluding notable
items 3,149 2,166 925 970 759 (73) 7,896
Mov’t Sept 20 - Sept 19Westpac Westpac New
Institutional Zealand
1
SpecialistGroup
%Consumer BusinessBank(A$)BusinessesBusinessesGroup
Net interest income 5 (7)(17)(2)(4) 46 1
Non-interest income(18)(6)(1)(25)(46)large(4)
Net operating income 3 (6)(9)(6)(34)large-
Operating expenses 10 10 8 6 83 108 27
Core earnings(2)(18)(26)(14)large 16 (25)
Impairment (charges) / benefits 74 largelargelarge 130 84 large
Operating profit before income
tax(12)(62)(55)(37)large 10 (52)
Income tax (expense) / benefit(11)(62)(32)(35)largelarge(28)
Net profit(12)(62)(64)(38)large 57 (62)
Net profit attributable to NCI- - - - (60)(100)(67)
Cash earnings(12)(62)(64)(38)large 57 (62)
Add back notable items 18 (15)- largelarge 92 150
Cash earnings excluding notable
items(12)(57)(64)(36)(45)large(34)
1. Refer to Section 3.4 for the Westpac New Zealand NZ$ divisional result.
1
2
3
4
5
6
7
13WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Movement in cash earnings ($m)
Full Year 2020 – Full Year 2019
FY19 cash
earnings
Add
back
FY19
notable
items
FY19
cash
earnings
ex notable
items
Net
interest
income
Non-
interest
income
Operating
expenses
Impairment
charges
Tax &
non-
controlling
interests
FY20 cash
earnings
ex
notable
items
FY20
notable
items
FY20 cash
earnings
6,849
1,0477,896
(68)
(636)
(591)
(2,384)
1,010
5,227
(2,619)
2,608
(62%)
(34%)
Movement in core earnings by division ($m)
Full Year 2020 – Full Year 2019
FY19 core
earnings
Add
back
FY19
notable
items
FY19
core
earnings
ex notable
items
ConsumerBusiness
WIB
Westpac
New
Zealand
(A$)
Group
Businesses
FY20 core
earnings
ex
notable
items
FY20
notable
items
FY20 core
earnings
10,624
1,54212,166
(94)
(577)
(335)
(172)
222
10,871
(2,945)
7,926
(25%)
(11%)
(339)
SBD
14WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
2.1 Performance overview
Overview
The 2020 financial year has been disappointing for Westpac. The combined effect of COVID-19 and Westpac’s own
issues has had a significant impact on the company, on earnings and on our stakeholders, particularly shareholders.
The AUSTRAC proceedings (described further below) uncovered a number of shortcomings across the Group,
particularly in the management of financial crime, and has sparked major changes in our business and how we
operate.
This year we appointed a new Chairman, a new CEO and adopted a more focused strategy. Westpac is
concentrating on banking in our key markets of Australia and New Zealand and focused on supporting consumer,
business, commercial, and institutional customers.
In addition we have set up a Specialist Businesses division to better manage our non-core activities, reorganised
our operations around a Lines of Business operating model and commenced initiatives to materially enhance our
management of risk and improve our risk culture. Our plans for the Group are structured around three priorities:
• Fix: our issues. This includes improving risk management and our risk culture, completing customer remediation
and addressing IT complexity;
• Simplify: our businesses and the markets in which we operate, rationalise our products and transform using
digital; and
• Perform: by enhancing returns on capital, restoring growth in major markets, particularly mortgages, and
resetting the cost base. This priority is underpinned by delivering superior service by engaged employees.
Implementation of these priorities has impacted our results this year along with some other larger items. To help
explain performance we have combined the larger items that do not reflect underlying performance and called
them “notable items”. Notable items in this result include:
• Provisions and costs related to the AUSTRAC proceedings;
• Provisions for estimated customer refunds and repayments, associated costs and litigation costs;
• The writedown of intangible items, including goodwill; and
• The impact of asset sales and revaluations.
Further detail on notable items is provided in Section 1.3.2 and Section 3.0. In aggregate, they reduced cash
earnings in Full Year 2020 by $2.6 billion, compared to a $1.0 billion reduction in Full Year 2019.
At the same time, the impact of COVID-19 has been broad, affecting most line items in the financial statements. The
largest has been materially higher credit impairment charges as we provisioned for the likelihood of rising customer
loss. Interest margins have also declined, in a large part due to the fall in interest rates.
The combination of notable items and COVID-19 has led to Westpac’s Full Year 2020 financial results being
considerably lower. Cash earnings were $2,608 million in Full Year 2020, down $4,241 million or 62% over the year.
Excluding notable items, cash earnings for Full Year 2020 was $5,227 million, down $2,669 million or 34%. The
primary reason for the decline was the $2,384 million increase in impairment charges along with a decline in
non-interest income and higher expenses from spending more on risk management and responding to COVID-19
demands on the network and our employees.
While earnings were lower, our balance sheet remains strong, with our common equity tier 1 (CET1) capital
ratio rising more than 46 basis points to 11.13%. The mix of our funding also improved with more deposits and
less wholesale funding (particularly offshore wholesale funding) and our funding and liquidity metrics are all
comfortably above regulatory minimums.
Consistent with the weakening economy, asset quality deteriorated over the year with higher stressed exposures
(including impaired loans) and a large number of consumers and businesses remaining on repayment deferrals as
we support them manage the impact of COVID-19 restrictions. Nevertheless, our balance sheet provisions have
increased by more than 50% to $6,132 billion and our provision coverage ratios have significantly increased.
COVID-19
The global impact of the COVID-19 pandemic has had a significant impact on the economy, on the banking sector,
on Westpac and on customers. The restrictions associated with the pandemic, combined with actions from
governments and central banks, have broadly led to five impacts:
(1) The weaker economy has reduced loan demand and activity while very low interest rates has reduced margins.
This has principally contributed to lower net interest income;
(2) The need to provide additional support for the community and customers. Westpac has provided repayment
deferrals, special interest rates, fee waivers and special loans to support customers manage their cash flow.
These measures have had an impact on net interest and non-interest income;
(3) The deteriorating economy and higher unemployment have contributed to a rise in customer stress. This
increase, along with the likelihood that stress will increase in the future, has contributed to a material lift in
impairment charges and impairment provision balances;
(4) Costs increased as we employed more staff to respond to higher customer demand for support, responded to
restrictions at some of our offshore partners, and focused on protecting employees and customers; and
(5) A strengthening of the balance sheet with higher liquid assets and more customer deposits contributing to an
increase in the proportion of lending supported by customer deposits (to 80.1% from 73.4%).
Review of Group
operations
Review of Group operations
1
2
3
4
5
6
7
15WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
A significant focus over Second Half 2020 has been on customer loan deferrals. Around 175,000 mortgage
customers and over 36,000 small businesses were supported across Australia and New Zealand, with a loan
deferral. At the peak, around $60 billion in mortgages were in deferral, this has subsequently declined to $22 billion.
Total small business loan deferrals peaked at around $12 billion and are now around $1.5 billion.
We have been contacting customers who have been on deferral for six months and will continue to provide
support where needed. For those customers not in a position to return to their prior repayment schedule we can
provide further support including extensions to loan deferrals of up to four months, or loans may be restructured.
We are committed to working with these customers on an individual basis as their situations evolve.
Financial performance summary (Full Year 2020 compared to Full Year 2019)
Cash earnings for Full Year 2020 were $2,608 million, down 62% on Full Year 2019. The result was significantly
affected by higher impairment charges along with notable items. The notable items are explained in Section 1.3.2
and Section 3.0.
The cash earnings impact of notable items was $2,619 million in Full Year 2020 (compared to $1,047 million in
Full Year 2019). Excluding notable items, cash earnings were $5,227 million, down $2,669 million or 34% over
Full Year 2019.
Net interest income
Net interest income was 1% higher over the year with a 3% increase in average interest earning assets and a decline
in net interest margins. Excluding notable items, net interest income was relatively flat (down $68 million).
Most of the increase in average interest-earning assets was from liquid assets, which increased 23% while average
loans declined 1% over the year.
On a spot basis, lending declined $21.7 billion (down 3%). While lower demand was a feature across the portfolio,
the decline was due to lower Australian mortgage balances, a reduction in business and institutional lending
from reduced working capital and investment requirements, a 24% decline in Australian cards and personal loans
balances and a 47% reduction in our Asian exposure (mostly trade finance). Partially offsetting these declines was a
$3.4 billion rise in New Zealand lending (in $A terms).
In Australian mortgages, the decline was concentrated in investment lending (particularly interest only) with
owner occupied lending rising 2% over the year. In addition to increased run-off and our higher portfolio weighting
to investor lending, our below system growth in total mortgages was due to issues in mortgage processing,
implementing more detailed verification requirements and increased caution in response to COVID-19.
Customer deposits on the other hand increased 6%, lifting Westpac’s customer deposit to loan ratio by over
6 percentage points. The rise is consistent with the increase in overall market liquidity provided by monetary
stimulus. Most of the rise in deposits was in at call accounts, particularly transaction accounts, as customers chose
to keep their funds more liquid rather than in term deposits.
Margins were down 4 basis points over the year to 2.08%, while the margin excluding Treasury and Markets and
notable items was down 11 basis points to 1.97%. The decline was predominantly due to the reduction in interest rates
with the cash rate falling by 75 basis points over the year to 0.25%. Low rates contributed to reduced spreads across
our deposit portfolio and reduced returns on both capital and liquid assets. The mix impact of holding more liquid
assets also contributed to the decline. At the same time, lower demand for lending has seen competition remain
intense, contributing to lower rates on new lending and on existing lending as we repriced to retain customers.
Non-interest income
Non-interest income in Full Year 2020 declined $162 million, down 4%. Excluding notable items, non-interest
income was $636 million lower, down 14%. Notable items in non-interest income were $263 million in Full Year 2020
compared to $737 million in Full Year 2019. The decline (excluding notable items) was predominantly due to:
• A decline in banking fee income from lower activity across cards (particularly international transactions) and
institutional activity along with fee waivers (to support businesses affected by COVID-19);
• Lower insurance income from lower premiums and higher claims from severe storms and bushfires;
• Lower wealth income from declining platform fees (including from low interest rates) and lower superannuation
income from pricing changes and a decline in funds (markets and early superannuation withdrawals);
• A decline in fees from exiting the personal financial Advice business in 2019; and
• A 4% decline in markets related income mostly from lower customer activity.
Expenses
Expenses were higher, up 27% over the year, with much of the increase due to notable items. Excluding notable
items expenses were 6% higher from increased risk and compliance spending, costs of responding to COVID-19.
COVID-19 related costs included resources for higher call centre and processing centre volumes, increasing working
from home capacity, returning operations to Australia and more employee and customer safety measures. The
rise in expenses was also reflected in an 11% increase in FTE employees including in risk, complaints handling, call
centres and mortgage processing.
These increases were partially offset by a significant cut to short term employee incentives, lower restructuring costs
and reduced travel. We have also continued to pursue productivity and realised over $400 million in savings over the
year. Initiatives have included re-negotiating contracts, consolidating branches, and increasing the use of digital banking.
Review of Group operations
16WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Asset quality and impairment charges
Consistent with the weakening in economic activity, asset quality metrics deteriorated through the year.
Impaired assets to gross loans were 40 basis points at 30 September 2020 compared to 25 basis points at
30 September 2019. Stressed exposures to total committed exposures ended the year at 1.91% compared to 1.20%
at 30 September 2019. Delinquencies were also higher with mortgage 90+ day delinquencies up 68 basis points to
1.50%
1
.
The rise in stress and the weaker economic and industry outlook has led to a fourfold increase in impairment
charges in Full Year 2020, up $2,384 million to $3,178 million. Most of the increase was due to higher collectively
assessed provisions (up $2,020 million) as we increased expected credit losses for the likely impact of the
COVID-19 outbreak.
The increase in impairment charges led to higher provision balances and contributed to a rise in provision coverage
metrics. Our ratio of total provisions to credit risk weighted assets was 1.71% at 30 September 2020 up from 1.07%
at 30 September 2019.
Ta x
The Group booked a $2.1 billion tax expense in Full Year 2020 reflecting a significantly higher tax rate of 45.0%.
The higher tax rate reflects the non-deductibility of the AUSTRAC penalty and intangible/asset write-downs.
ROE and EPS
Lower cash earnings combined with a 4% increase in average shares on issue led to a decline in return and per
share metrics. The cash earnings return on equity was 3.83% in Full Year 2020 down from 10.75% for Full Year 2019.
Cash earnings per ordinary share were 72.5 cents in Full Year 2020, down 63% over the prior year. Excluding
notable items, cash earnings per share were 146 cents, down 36%.
Net tangible assets per share were $15.67 cents at 30 September 2020 up 2% relative to 30 September 2019, the
rise principally reflects capital raised over the year.
Capital
The Group’s capital position improved over the year with our CET1 ratio of 11.13% at 30 September 2020 up from
10.67% at 30 September 2019. The increase was due to the $2.8 billion capital raising early in the year, portfolio
optimisation actions and from retained earnings. This increase, along with a lower Second Half 2019 dividend (and
no First Half 2020 dividend), enabled us to absorb higher risk weighted assets, including from the deterioration in
asset quality.
The Group’s funding and liquidity also improved over the year with stimulatory monetary policy seeing more
liquidity available in the economy. This has contributed to an increase in deposits and lifted our customer
deposit to loan ratio to over 80%. As a result, funding and liquidity ratios remained comfortably above regulatory
minimums with the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) ending the year at
150% and 122% respectively.
Dividends
The Board determined a final ordinary dividend of 31 cents per share, fully franked. The lower dividend reflects the
decline in earnings and APRA guidance that dividend payments do not exceed 50% of statutory net profit. APRA
has also indicated that banks should consider dividend reinvestment plans (DRP).
Westpac’s payout ratio, based on Full Year 2020 reported profit, was 48.87%. The Group’s payout ratio on a cash
earnings basis was 42.93% and excluding notable items the payout ratio was 21.42%.
Using full year earnings for the pay out ratio is appropriate given we did not pay a First Half 2020 dividend. The
Board decided not to pay a First Half 2020 dividend given the significant uncertainty at the time. Since then,
while uncertainty remains, we have more confidence in the outlook given the decline in repayment deferrals from
their peak and better economic fundamentals relative to early expectations. The Board has also decided to fully
underwrite the DRP for the final 2020 dividend, neutralizing any impact on capital.
A 1.5 % discount will be applied to the market price used to determine the number of shares issued under the DRP
for those participating. The market price used to determine the number of shares issued under the DRP will be set
over the 15 trading days commencing 17 November 2020.
The final ordinary dividend is expected to be paid on 18 December 2020. After allowing for the final dividend, the
Group’s adjusted franking account balance was $3,448 million.
Bank Levy
Despite the lower earnings, Westpac paid the Government’s Bank Levy of $408 million in Full Year 2020, similar
to the $391 million in Full Year 2019. The Bank Levy in Full Year 2020 was equal to 11% of cash earnings and is
equivalent to 8 cents per share and is included in net interest income where it reduced net interest margin by
5 basis points. In aggregate, taxes paid along with the Bank Levy give Westpac an adjusted effective tax rate
of 53.6%.
1. Loans that have been granted a COVID-19 deferral package are not included in stress and delinquencies measures.
Review of Group operations
1
2
3
4
5
6
7
17WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
AUSTRAC Civil Proceedings
On 20 November 2019, AUSTRAC commenced civil proceedings against Westpac in relation to alleged
contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).
Westpac had previously disclosed that it had self-reported to AUSTRAC a failure to report a large number of
international funds transfer instructions (IFTIs) and that AUSTRAC was also investigating a number of other areas
relating to Westpac’s processes, procedures and monitoring.
Throughout 2020, we indicated a preference to settle the matter and on 24 September 2020 AUSTRAC and
Westpac reached an agreement to resolve the civil proceedings. Under this agreement Westpac and AUSTRAC
jointly filed with the Federal Court a Statement of Agreed Facts and Admissions. On 21 October 2020, the Court
approved the agreed penalty of $1.3 billion. The penalty has been fully provided for in our Full Year 2020 results
along with costs of both the legal proceedings and our response plan.
Commencement of the civil proceedings has significantly impacted Westpac and contributed to the stepping down
of the former CEO, the former Chair of the Board Risk Committee not seeking re-election and the early retirement
of the former Chairman.
Progress on our response plan over the year included:
• Closing the relevant products involved in international funds transfers, reporting outstanding IFTIs to AUSTRAC,
updating our transaction monitoring rules and enhancing oversight of the process;
• Putting in place new Board and management structures to elevate the management and oversight of financial
crime;
• Establishing an independent Advisory Panel to review Board governance of AML/CTF obligations. The Panel’s
report was released on 4 June 2020 and we are committed to implementing its recommendations;
• Commissioning Promontory to provide assurance over Westpac’s management accountability investigation, and
an external review of our financial crime program;
• Applying remuneration consequences of approximately $20 million to 38 individuals. This included cancelling all
short-term incentives for the CEO and Group Executives in Full Year 2020. Some individuals had already left the
company with no deferred remuneration outstanding and so additional consequences could not be applied;
• Investing to reduce the human impact of financial crime, including the establishment of partnerships with Save
the Children and The International Justice Mission, and the launch of a new grants program; and
• Established the Safer Children Safer Communities Roundtable of experts in human rights, child safety, online
safety and law enforcement. Together with the Roundtable and a wider Advisory Group, we co-designed the
Safer Children Safer Communities work program to help reduce the human impact of financial crime with a
particular focus on child safeguarding.
Our priorities
Given the significant change underway at Westpac we have organised our plans under three priorities, fix, simplify
and perform. Developments over the year under each priority have included:
Fix
This includes materially improving our risk management capability to rectify our shortcomings and seek to ensure
issues do not occur again. Central to this is improving our risk culture to respond quickly to emerging risks. We are
also focused on making it easier for customers to deal with us and completing customer remediation as quickly
as possible. In addition to the AUSTRAC response plan indicated above, we have made progress on this priority
through 2020 including:
• Commenced Customer Outcomes and Risk Excellence (CORE) program, to improve non-financial risk oversight,
lift risk culture, and strengthen our risk management framework. The program comprises 14 streams of work,
with a Group Executive responsible for each stream;
• Added over 400 people to our risk function, over 90% of the roles required are now filled;
• Processed $640million in refunds (to over 2.7 million customer accounts part of our remediation program);
• Changed our culture around complaint identification, capture and resolution. While more complaints are
now logged, we have reduced the time to close complaints by over 20%, reduced the number of long dated
(45+ days) complaints by almost 90% and we now solve over half our complaints on the same day;
• In addition to settling the AUSTRAC proceedings, we settled two class actions in the US related to our trading
in the bank bill swap rate (BBSW) and to the AUSTRAC matter. The court process initiated by ASIC in relation
to responsible lending was also concluded, finding in Westpac’s favour while a responsible lending class action
against Westpac has also been withdrawn. Additional legal actions were commenced over the year; and
• Developed a multi-year roadmap to fix Westpac’s IT complexity. As part of this roadmap, in 2020 we improved
IT stability and reliability while continuing the development and roll-out of the customer service hub that will
serve as a core layer of our IT systems.
Review of Group operations
18WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Simplify
This involves focusing on the businesses and markets we wish to operate in, streamlining our operating structure,
and reducing the number of our products. We are also seeking to modernise and simplify our technology, use
digital to streamline and automate processes and materially lift our data capabilities to support risk management
and a better customer experience. Progress over the year has included:
• Setting up end-to-end accountability for six Lines of Business in our Consumer and Business divisions,
• Establishing the Specialist Businesses division to manage the Group’s non-core assets and completed a
strategic review to determine the best option for each activity. As part of our plans we have already agreed to
sell our third party vendor finance business.
• Subsequent to 30 September 2020 we have sold our shareholding in Zip Co Limited.
• Announcing the consolidation of the Group’s international operations into New York, London and Singapore,
with plans to close our offices in Jakarta, Mumbai, Hong Kong, Beijing and Shanghai.
• Launching a new mobile banking app in Australia.
• Exiting 161 correspondent banking relationships.
Perform
This priority is focused on delivery, including improving accountability, speeding up decision making, enhancing
service and optimising how we manage our business to generate appropriate returns. In part, this will be supported
through our simplification initiatives but it also involves reviewing our distribution network, reassessing our
workplace strategy and corporate office space and reviewing efficiency through our cost reset program.
A hallmark of Westpac for many years has been a strong balance sheet across capital, funding, liquidity, and credit
quality – that will not change. Underpinning this priority is a highly motivated workforce who are capable, engaged
and driven by our purpose and clear values. Some developments over the year included:
• Completed the change in our Executive Team with 5 new appointments and realigned performance targets for
our updated priorities.
• Maintained position as the service leader on net promoter score in Business against the major banks, declined
to fourth position on service in the Consumer division. In New Zealand, we have not improved our fourth
ranking against our New Zealand peers but we have closed the gap.
• Significant support to consumers and businesses through bushfires, storms and COVID-19, including with
repayment deferrals and fee waivers.
• Completed an end-to-end analysis of the mortgage process to identify weaknesses and commenced a program
of over 30 enhancements.
• Employee engagement.
Review of Group operations
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7
19WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Financial performance Second Half 2020 – First Half 2020
Cash earnings of $1,615 million was up $622 million or 63% over First Half 2020. The increase was principally due
to lower impairment charges and lower notable items. Excluding notable items, cash earnings were $2,835 million
down $443 million, or 19%.
Notable items for the half reduced cash earnings by $1,220 million and included the increase in the AUSTRAC
penalty provision and associated costs ($413 million), additional provisions for refunds, litigation costs and
revaluations of the life business and Auto businesses and the write-down of some capitalised software. These costs
were partially offset by a $213 million revaluation gain (after tax) on the Group’s shareholding in Zip Co Limited.
Net interest income was 3% lower over the prior half, principally due to lower net interest margins which were
10 basis points lower. Average interest-earning assets were up 2% over the half with all of the increase due to an
increase liquid assets acquired at the end of First Half 2020. Total lending was 3.7% lower over the half (down
$26 billion) with the decline due to:
• Lower Australian lending split across mortgages (down $2.0 billion), business (down $2.2 billion) and other
personal lending (down $2.8 billion);
• Reduced institutional lending due to lower trade finance lending in Asia (down $3.7 billion) and an appreciation
in the $A relative to the $US; and
• Higher NZ lending, up $1 billion in $NZ terms but the appreciation of the $A saw its contribution decline
$3.4 billion.
Customer deposits increased $11.7 billion lifting the customer deposit to loan ratio to over 80%. Most of the deposit
increase was in at call Consumer and Business deposits which increased $10.9 billion and $9.7 billion respectively.
These increases were partially offset by lower offshore deposits in Institutional and a small reduction in the NZ
contribution (from a stronger $A).
Net interest margins were 10 basis points lower over the prior half with the margin, excluding Treasury and Markets
and notable items, down 13 basis points. The low interest rates, strong competition and higher liquid assets were
behind the decline.
Non-interest income was up 11% over the prior half and was little changed excluding notable items. The rise
excluding notable items was mainly due to lower insurance claims and higher trading income from a $109 million
movement in the derivative valuation adjustment.
Expenses were up 6% over the half predominantly from higher notable items. Excluding notable items, expenses
were up 7%. The increase (excluding notable items) was due to higher risk and compliance spending and an
increase in software amortisation. The increase was also due to putting on more temporary and permanent
employees responding to additional COVID-19 related demands, including support with repayment deferrals and
hardship assistance.
Asset quality deteriorated over the second half of the year from the easing in economic activity and rising
unemployment linked to COVID-19 restrictions.
After increasing materially in the first half of the year, impairment charges were lower in Second Half 2020 at
$940 million (but still more than double the prior corresponding period). Individually assessed provisions were
lower mostly as new individually assessed provisions were low. With material increases in provisions early in the
year, a large number of consumers retuning to repayment in the fourth quarter 2020 and an improving (albeit still
weak) economic outlook the need for further significant top-ups to provision levels diminished through the half.
Divisional performance summary
The performance of each division is based on Full Year 2020 compared to Full Year 2019 and is discussed below.
During the year the restructuring of the Group led to the creation of the Specialist Businesses division which has
combined certain businesses previously held in the Consumer, Business and Westpac Institutional Bank divisions.
For a description of each division see Section 3.
Consumer
Cash earnings of $2,746 million were $370 million (or 12%) lower than Full Year 2019, mostly from higher
impairment charges, increased expenses and lower non-interest income. Notable items had a small net impact on
the division’s earnings over the year. Net interest income was up 5% with a 15 basis point rise in margins more than
offsetting a 2% decline in lending. The increase in margins was mostly related to mortgage repricing, partially offset
by the impact of competition and low interest rates on deposit spreads. Mortgage lending declined, predominantly
in interest only investor lending. Owner occupied lending increased over the year. Non-interest income reflected
lower activity, impacting fees on cards, ATMs and international transactions. Costs were also higher as we hired
more staff to support customers through this challenging time. Impairment charges were higher with a rise in
customers requesting hardship assistance and customers remaining on repayment deferrals.
Review of Group operations
20WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Business
Cash earnings of $734 million were $1,212 million (or 62%) lower than Full Year 2019. Excluding notable items, cash
earnings were $922 million down $1,244 million (or 57%), mostly from higher impairment charges. Net interest
income was 7% lower, from a 4% decline in loans (across most forms of lending) and a 17 basis point decline in
margins. The decline in net interest margins was primarily due to reduced spreads on deposits from low interest
rates along with special interest rates on COVID-19 support packages. Non-interest income was also down,
(6% excluding notable items) reflecting fee waivers along with the effect of lower activity on lending fees and
markets related income. Expenses, excluding notable items, increased $131 million or 6% principally from applying
more resources to supporting customers, increased risk and compliance spending along with additional investment
in bankers. Annual salary increases were largely offset by productivity initiatives. Impairment charges were higher,
mostly reflecting the top-up in provisions for COVID-19 related impacts.
Westpac Institutional Bank
Cash earnings of $332 million were $593 million or 64% lower than Full Year 2019, primarily driven by higher
impairment charges (up $373 million) and a 26% decline in core earnings. Notable items did not impact WIB.
Income was 9% lower, mostly from a 24 basis points decrease in net interest margin combined with lower lending.
Most of the decline in lending was in trade finance in Asia. Non-interest income was a little lower (down $13 million)
with lower activity-based fees (syndications, customer markets income) partially offset by higher non-customer
markets income and a positive derivative valuation adjustment movement. Expenses were higher from a rise in risk
management and compliance spending including financial crime. Restructuring costs were also higher linked to the
consolidation of the division’s offshore offices. Impairment charges were up $373 million, reflecting a 44 basis point
increase in stressed exposures to 1.03% and higher COVID-19 related collective provisions.
Westpac New Zealand
Cash earnings of NZ$649 million were NZ$393 million (or 38%) lower than Full Year 2019. Notable items reduced
cash earnings by NZ$9 million in Full Year 2020, but increased cash earnings by NZ$16 million in Full Year 2019.
Net interest income was down 1% with a 5% increase in lending more than offset by a 19 basis point decline in net
interest margins. The decline in margins was primarily due to the impact of low interest rates on deposit spreads.
Non-interest income was also lower, down 24%, from continued fee simplification (reductions and elimination of
some fees), lower insurance and wealth income, lower activity fees and COVID related fee waivers. Costs were up
7%, from COVID-19 related spending and preparations for the RBNZ’s outsourcing restrictions. Impairment charges
were up $320 million (after recording an impairment benefit of $10 million in Full Year 2019) as stressed exposures
increased and we increased provisions for COVID-19 related impacts.
Specialist Businesses
The division recorded a cash earnings loss of $506 million compared to a profit of $712 million in Full Year 2019.
This year the division incurred $922 million (after tax) of notable items, compared to $47 million (after tax) in
Full Year 2019. Excluding notable items, cash earnings for Full Year 2020 were $416 million, $343 million lower than
Full Year 2019. Results of the major business lines within the division included:
• Superannuation platforms and investments cash earnings were $111 million, compared to $285 million in Full Year
2019. Excluding notable items, cash earnings were $167 million, down $165 million on last year. The decline was
predominantly due to lower margins and higher compliance costs.
• Insurance recorded a net loss of $480 million for Full Year 2020, excluding notable items cash earnings were
$181 million down $80 million on last year. The $80 million decline in cash earnings (excluding notable items)
was due to lower premiums, including from ceasing to provide group insurance and higher claims, mostly
related to bushfires and storms.
• Westpac Pacific’s cash earnings for Full Year 2020 was $11 million, a $58 million decline over the year. The fall
was mostly due to a decline in loans, lower margins and higher impairment charges.
• Auto and Vendor Finance recorded a loss of $148 million, compared to a profit of $97 million in Full Year 2019,
primarily due to $205 million of notable items. Excluding notable items, cash earnings were down $40 million
from a 13% decline in lending and a significant lift in impairment charges.
Group Businesses
Group Businesses recorded a loss of $1,310 million in Full Year 2020, $475 million higher than the $835 million loss
in Full Year 2019. Most of the loss in Full Year 2020 was due to notable items, including provisions for the AUSTRAC
proceedings, additional provisions for customer refunds and payments and litigation costs, partially offset by the
revaluation gains on our investment in Zip Co. Excluding notable items, cash earnings were $151 million which were
up $224 million over the year. The increase was due to an improved contribution from Treasury of $259 million, and
from the movement of centrally held impairment provision overlays to divisions. These gains were supported by
lower costs following the exit of the Advice business in 2019.
Review of Group operations
1
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7
21WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.2 Review of earnings
2.2.1 Net interest income
1
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest Income ($m)
Net interest income excluding Treasury & Markets 7,894 8,155 (3) 16,049 16,291 (1)
Treasury net interest income
2
459 444 3 903 513 76
Markets net interest income 67 67 - 134 149 (10)
Net interest income 8,420 8,666 (3) 17,086 16,953 1
Add back notable items 37 106 (65) 143 344 (58)
Net interest income excluding notable items 8,457 8,772 (4) 17,229 17,297 -
Average interest earning assets ($m)
Loans 664,871 675,273 (2) 670,072 674,960 (1)
Third party liquid assets
3
135,441 115,771 17 125,606 102,519 23
Other interest-earning assets 30,153 21,927 38 26,040 21,445 21
Average interest earning assets 830,465 812,971 2 821,718 798,924 3
Net interest margin (%)
Group net interest margin 2.03% 2.13%(10 bps) 2.08% 2.12%(4 bps)
Group net interest margin excluding Treasury &
Markets
4
1.90% 2.01%(11 bps) 1.95% 2.04%(9 bps)
Excluding notable items (%)
Group net interest margin 2.04% 2.16%(12 bps) 2.10% 2.16%(6 bps)
Group net interest margin excluding Treasury &
Markets
4
1.91% 2.04%(13 bps) 1.97% 2.08%(11 bps)
Second Half 2020 – First Half 2020
Net interest income decreased $246 million or 3% compared to First Half 2020. Key features include:
• Average interest earning assets were higher from increased holdings of third party liquid assets, from a higher
liquidity position driven by strong deposit inflow partly offset by Australian based lending;
• Other interest earning assets increased due to the deployment of excess liquidity to assets under reverse
repurchase agreements, and higher collateral balances;
• Net interest margin excluding Treasury and Markets decreased due to the low rate environment, competition for
lending and from higher liquid assets. Refer to Section 2.2.4 for further details on net interest margin; and
• Net interest income was impacted by provisions for estimated customer refunds and payments of $37 million in
Second Half 2020 versus $106 million in First Half 2020.
Full Year 2020 – Full Year 2019
Net interest income increased $133 million or 1% compared to Full Year 2019. Key features include:
• Average interest earning assets were higher from increased holdings of third party liquid assets, from a higher
liquidity position driven by strong deposit inflow partly offset by Australian based lending;
• Other interest earning assets increased due to the deployment of excess liquidity to assets under reverse
repurchase agreements, and higher collateral balances;
• Net interest margin excluding Treasury and Markets decreased due to the low rate environment, competition for
lending and from more liquid assets. Refer to Section 2.2.4 for further details on net interest margin;
• The contribution from Treasury increased primarily driven by interest rate risk management; and
• Net interest income was impacted by provisions for estimated customer refunds and payments of $143 million
in Full Year 2020 versus $344 million in Full Year 2019.
1. Refer to Section 4, Note 3 for reported results breakdown. Refer to Section 5, Note 3 for cash earnings results breakdown. As discussed
in Section 1.3, commentary is reflected on a cash earnings basis.
2. Treasury net interest income excludes capital benefit.
3. Refer to Glossary for definition.
4 Calculated by dividing net interest income excluding Treasury & Markets by total average interest earning assets.
Review of Group
operations
22WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.2.2 Loans
1
As atAs atAs at% Mov’t% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Australia 600,780 616,328 619,564 (3)(3)
Housing 440,933 445,663 449,201 (1)(2)
Personal 17,081 19,854 21,247 (14)(20)
Business 147,584 155,322 152,360 (5)(3)
Provisions(4,818)(4,511)(3,244) 7 49
New Zealand (A$) 81,788 85,176 78,428 (4) 4
New Zealand (NZ$) 88,353 87,425 84,626 1 4
Housing 55,231 53,411 51,504 3 7
Personal 1,469 1,652 1,844 (11)(20)
Business 32,261 32,867 31,599 (2) 2
Provisions(608)(505)(321) 20 89
Other overseas (A$) 10,491 18,174 16,778 (42)(37)
Total loans 693,059 719,678 714,770 (4)(3)
Second Half 2020 – First Half 2020
Total loans decreased $26.6 billion or 4% compared to First Half 2020. Excluding foreign currency translation
impacts, total loans decreased $20.2 billion or 3%.
Key features of total loan movements were:
• Australian housing loans declined mostly from accelerated payments. The decline was in investor property
lending, down $5.6 billion or 3% with owner occupied lending up $2.4 billion or 1%;
• Australian personal lending was lower across credit cards, personal loans and auto lending. This was consistent
with the overall market trends in unsecured lending and auto finance with customers reducing debt and
adopting other forms of finance;
• Australian business lending contracted as businesses reduced investment and working capital requirements.
Institutional customers repaid facilities drawn down in First Half 2020;
• New Zealand lending increased in $NZ terms with higher housing lending, supported by housing price
growth, partially offset by lower business and personal lending due to customer deleveraging and increasing
competition; and
• Overseas lending decreased mostly due to lower trade finance in Asia.
Full Year 2020 – Full Year 2019
Total loans decreased $21.7 billion or 3% compared to Full Year 2019. Excluding foreign currency translation
impacts, total loans decreased $20.8 billion or 3%.
Key features of total loan movements were:
• Australian housing loans declined mostly from accelerated payments. The decline was in investor property
lending, down $10.6 billion or 6% with owner occupied lending up $5.3 billion or 2%;
• Australian personal lending decreased across credit cards, personal loans and auto lending. This was consistent
with the overall market trends in unsecured lending and auto finance with customers reducing debt and
adopting other forms of finance;
• Australian business lending contracted from lower demand for investment and working capital requirements
along with higher institutional repayments;
• Most of the increase in New Zealand lending was in housing, with the property market continuing to grow with
business lending also a little higher. This was partly offset by lower personal loans due to customer deleveraging
and increased competition;
• Overseas lending decreased mostly due to lower trade finance in Asia; and
• Provision balances increased from changes in the economic scenarios and weightings used in AASB 9
provision models.
1. Spot loan balances.
Review of Group operations
23WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
1
2
3
4
5
6
7
Review of Group operations
2.2.3 Deposits and other borrowings
1,2
As atAs atAs at% Mov’t% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Customer deposits
Australia 478,884 460,561 449,066 4 7
At call 304,761 274,071 247,161 11 23
Term 125,820 141,933 158,564 (11)(21)
Non-interest bearing 48,303 44,557 43,341 8 11
New Zealand (A$) 65,700 67,273 59,743 (2) 10
New Zealand (NZ$) 70,974 69,050 64,464 3 10
At call 28,411 26,504 24,053 7 18
Term 30,992 32,768 33,540 (5)(8)
Non-interest bearing 11,571 9,778 6,871 18 68
Other overseas (A$) 10,869 15,967 15,707 (32)(31)
Total customer deposits 555,453 543,801 524,516 2 6
Certificates of deposit 35,678 39,119 38,731 (9)(8)
Australia 25,647 21,029 26,259 22 (2)
New Zealand (A$) 2,773 3,452 1,058 (20) 162
Other overseas (A$) 7,258 14,638 11,414 (50)(36)
Total deposits and other borrowings 591,131 582,920 563,247 1 5
Second Half 2020 – First Half 2020
Total customer deposits increased $11.7 billion or 2% compared to First Half 2020. Excluding foreign currency
translation impacts, customer deposits increased $17.9 billion or 3%.
Key features of total customer deposits movements were:
• Australian customer deposits grew and the mix shifted from term deposits to at call products. Non-interest
bearing deposits grew mainly due to $3.7 billion of higher mortgage offset balances;
• New Zealand customer deposits increased in NZ$ terms across both households and businesses. The trends in
deposit growth were similar to Australia with term deposits declining and at call increasing; and
• Overseas deposits decreased as we continued to reduce our exposure to international regions.
Full Year 2020 – Full Year 2019
Total customer deposits increased $30.9 billion or 6% compared to Full Year 2019. Excluding foreign currency
translation impacts, customer deposits increased $32.0 billion or 6%.
Key features of total customer deposits growth were:
• Australian customer deposits grew and the mix shifted from term deposits to at call products. Non-interest
bearing deposits grew mainly due to $4.9 billion of higher mortgage offset balances;
• New Zealand customer deposits increased across both households and businesses. The trends in deposit
growth were similar to Australia with term deposits declining and at call increasing; and
• Overseas deposits decreased with all of the decline in the second half of the year as we continued to reduce
our exposure to international regions.
1. Spot deposit balances.
2. Non-interest bearing relates to instruments which do not carry a rate of interest.
24WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.2.4 Net interest margin
Group net interest margin movement (%)
Second Half 2020 – First Half 2020
1H20
Notable
Items
1H20 ex
Notable
Items
Short term
Wholesale
Funding
Loans
Customer
Deposits
Capital
&
Other
Liquidity
2H20 ex
Notable
Items
Treasury
&
Markets
2H20Notable
Items
2.13%
0.12%
2.01%
0.12%
2.04%
1.91%
3bps
(1bp)
2.16%
(1bp)
5bps
1bp
(7bps)
(3bps)
(7bps)
2.04%
1.90%
2.03%
Group margin down 10bps
Excluding Treasury & Markets and notable items down 13bps
Treasury & Markets
Group Margin ex Treasury & Markets
0.13%
0.13%
Second Half 2020 – First Half 2020
Group net interest margin of 2.03% decreased 10 basis points from First Half 2020, with lower notable items
relating to provisions for estimated customer refunds and payments improving margin by 2 basis points.
• Group net interest margin excluding Treasury and Markets, and notable items decreased 13 basis points to 1.91%
from:
–1 basis point decrease from loan spreads with pricing changes to Australian mortgages and business loans
offset by increased competition driving lower rates on new lending and retention pricing, the impact of
customers switching to lower spread fixed rate loans, and a change in portfolio mix with customers reducing
their unsecured personal debt given current market conditions;
–7 basis point decrease from lower deposit spreads and hedges due to the low interest rate environment.
This was partially offset by changes in the mix of the portfolio with customers moving to at call accounts
from term deposits;
–5 basis point increase from lower short term funding costs;
–3 basis point decrease from capital and other primarily due to lower income earned on hedged balances;
and
–7 basis point decrease from higher holdings of third party liquids assets due to the deployment of excess
liquidity generated by strong deposit inflows and lower lending.
Review of Group
operations
1
2
3
4
5
6
7
25WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Group net interest margin movement (%)
Full Year 2020 – Full Year 2019
FY19
Notable
Items
FY19 ex
Notables
Items
Short term
Wholesale
Funding
LoansCustomer
Deposits
Capital
&
Other
Liquidity
FY20 ex
Notable
Items
Treasury
&
Markets
FY20Notable
Items
2.12%
0.08%
2.04%
0.08%
0.13%
2.08%1.97%
4bps
(2bps)
2.16%
5bps
6bps
5bps
(11bps)
(4bps)
(7bps)
2.10%
0.13%
1.95%
2.08%
Group margin down 4bps
Excluding Treasury & Markets and notable items down 11bps
Treasury & Markets
Group Margin ex Treasury & Markets
0.13%
0.13%
Full Year 2020 – Full Year 2019
Group net interest margin of 2.08% decreased 4 basis points from Full Year 2019, with lower notable items relating
to provisions for estimated customer refunds and payments improving margin by 2 basis points.
• Group net interest margin excluding Treasury and Markets, and notable items decreased 11 basis points to 1.97%
from:
–5 basis point increase from loan spreads with pricing changes to Australian mortgages and business loans
partially offset by increased competition driving lower rates on new lending and retention pricing, and the
impact of customers switching to lower spread fixed rate loans;
–11 basis point decrease from lower deposit spreads and hedges due to the low interest rate environment.
This was partially offset by changes in the mix of the portfolio with customers moving to at call accounts
from term deposits;
–6 basis point increase from lower short term funding costs;
–4 basis point decrease from capital and other primarily due to lower income earned on hedged balances; and
–7 basis point decrease from higher holdings of third party liquid assets due to the deployment of excess
liquidity generated by strong deposit inflows and lower lending.
• Treasury and Markets contribution increased 5 basis points on Full Year 2019 driven by interest rate
risk management.
26WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.2.5 Non-interest income
1
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net fee income 837 755 11 1,592 1,655 (4)
Net wealth management and insurance income 278 481 (42) 759 1,023 (26)
Trading income 499 429 16 928 907 2
Other income 251 10 large 261 117 123
Total non-interest income 1,865 1,675 11 3,540 3,702 (4)
Add back notable items 35 228 (85) 263 737 (64)
Non-interest income excluding notable items 1,900 1,903 - 3,803 4,439 (14)
Second Half 2020 – First Half 2020
Non-interest income of $1,865 million increased $190 million or 11% compared to First Half 2020. Excluding notable
items, non-interest income was little changed compared to First Half 2020. Notable items were $35 million in
Second Half 2020 compared to $228 million in First Half 2020.
Net fee income
Net fee income increased $82 million or 11% due to:
• Notable items relating to provisions for estimated customer refunds and payments for financial planning
(down $161 million); partially offset by
• The impacts of COVID-19 including fee waivers for customer support packages, lower interchange fees, a
decline in international card volumes, and lower lending activity.
Net wealth management and insurance income
Net wealth management and insurance income decreased $203 million or 42% due to:
• Notable items (up $271 million) included $260 million life insurance asset impairment and $92 million relating to
estimated customer refunds and payments for authorised representatives;
• Lower platform income (down $40 million) as customers migrated to lower margin products, a decline of
funds under administration in line with lower markets and the impact of lower interest rates on managed cash
balances;
• Lower superannuation income (down $37 million) from pricing changes, customer migration to lower margin
products, the impact of Protecting Your Super legislation, and the early release of superannuation; partially
offset by
• Increased general insurance income (up $105 million) due to lower claims than First Half 2020.
Trading income
Trading income increased $70 million or 16% primarily due to a movement in derivative valuation adjustments in
Second Half 2020 compared to First Half 2020, partially offset by lower commodities income.
Other income
Other income increased $241 million due to a notable item relating to a gain on the revaluation of Zip Co Limited
($303 million) partially offset by the recognition of a foreign currency translation loss related to the closure of the
Mumbai branch ($55 million).
Full Year 2020 – Full Year 2019
Non-interest income of $3,540 million decreased $162 million or 4% compared to Full Year 2019. Excluding notable
items, non-interest income was $636 million lower compared to Full Year 2019. Notable items were $263 million in
Full Year 2020 compared to $737 million in Full Year 2019.
Net fee income
Net fee income decreased $63 million or 4% due to:
• The impacts of COVID-19 including fee waivers for customer support packages, lower interchange fees, and a
decline in international card volumes;
• A decline in institutional customer activity impacting syndication, arrangement, and structured finance fee
income (down $79 million); partially offset by
• Notable items relating to provisions for estimated customer refunds and payments for financial planning
(down $150 million).
Net wealth management and insurance income
1. Refer to Section 4, Note 4 for reported results breakdown. Refer to Section 5, Note 4 for cash earnings results breakdown. As discussed
in Section 1.3, commentary is on a cash earnings basis.
Review of Group
operations
1
2
3
4
5
6
7
27WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Net wealth management and insurance income decreased $264 million or 26% due to:
• Notable items (down $104 million) included $260 million asset impairment and $97 million write-off of deferred
acquisition costs related to life insurance and $76 million relating to estimated customer refunds and payments
for authorised representatives;
• Lower general insurance income (down $105 million) due to elevated claims for bushfires and severe
weather events;
• Lower platform income (down $93 million) as customers migrated to lower margin products, a decline of
funds under administration in line with lower markets and the impact of lower interest rates on managed
cash balances;
• Lower superannuation income (down $78 million) from pricing changes, customer migration to lower margin
products, the impact of Protecting Your Super legislation, and the early release of superannuation.
Trading income
Trading income increased $21 million or 2% primarily due to:
• Higher non-customer income across fixed income and foreign exchange products benefiting from volatile
markets; partially offset by
• Lower client demand impacting fixed income and foreign exchange sales.
Other income
Other income increased $144 million due to a notable item relating to a gain on the revaluation of Zip Co Limited
($303 million) partially offset by the recognition of a foreign currency translation loss related to the closure of
the Mumbai branch ($55 million) in Full Year 2020 and the non-repeat of prior year assets sales and revaluations
related to Paymark, Coinbase and 316 George Street.
2.2.6 Group funds
As atAs at% Mov’tAs at% Mov’t
30 SeptNetOther30 SeptSept 20 -31 MarchSept 20 -
$bn2020InflowsOutflowsflowsMov’t2019Sept 192020Mar 20
Superannuation 38.2 3.9 (5.7)(1.8)(0.6) 40.6 (6) 35.3 8
Platforms 117.8 27.8 (29.4)(1.6)(7.1) 126.5 (7) 109.0 8
Packaged Fund 41.0 9.5 (8.2) 1.3 (3.9) 43.6 (6) 38.8 6
Other
1
- - - - (4.7) 4.7 (100) 2.8 (100)
Total Australia 197.0 41.2 (43.3)(2.1)(16.3) 215.4 (9) 185.9 6
Total NZ funds (A$) 11.3 3.0 (2.7) 0.3 0.3 10.7 6 10.6 7
Total Group funds 208.3 44.2 (46.0)(1.8)(16.0) 226.1 (8) 196.5 6
Total NZ funds (NZ$) 12.2 3.1 (2.9) 0.2 0.5 11.5 6 10.9 12
2.2.7 Markets related income
2
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 67 67 - 134 149 (10)
Non-interest income 460 434 6 894 921 (3)
Total markets income 527 501 5 1,028 1,070 (4)
Customer income 363 420 (14) 783 893 (12)
Non-customer income 148 174 (15) 322 241 34
Derivatives valuation adjustment 16 (93)large(77)(64) 20
Total markets income 527 501 5 1,028 1,070 (4)
Markets income comprises sales and risk management revenue derived from the creation, pricing and distribution
of risk management products to the Group’s consumer, business, corporate and institutional customers. Dedicated
relationship specialists provide product solutions to these customers to help manage their interest rate, foreign
exchange, commodity, credit and structured products risk exposures.
1. Other included investable capital and other amounts related to subsidiaries, which are not related to funds and therefore have
been removed.
2. Markets income includes WIB Markets, Business division, Consumer division and Westpac New Zealand markets.
28WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Second Half 2020 – First Half 2020
Total markets income increased by $26 million or 5% compared to First Half 2020, with derivative valuation
adjustments increasing $109 million from a narrowing of credit spreads. This was partly offset by lower customer
and non-customer income.
Customer income reduced $57 million in the Second Half 2020 from lower foreign exchange sales, with fixed
income sales little changed.
Non-customer income decreased 15% due to lower foreign exchange and commodities trading income, partly
offset by higher fixed income trading.
Full Year 2020 – Full Year 2019
Total markets income decreased by $42 million or 4% compared to Full Year 2019, primarily due to lower
customer income and derivative valuation adjustments reducing $13 million. This was partly offset by higher
non-customer income.
Customer income decreased 12% driven by lower fixed income and foreign exchange sales.
Non-customer income was up 34% compared to Full Year 2019, reflecting an increase in fixed income and foreign
exchange trading result.
Markets Value at Risk (VaR)
1
$mAverageHigh Low
Half Year September 2020 15.5 22.1 9.5
Half Year March 2020 7.0 33.4 3.3
Half Year September 2019 9.0 43.0 3.3
The Components of Markets VaR are as follows:
AverageHalf YearHalf YearHalf Year
SeptMarchSept
$m202020202019
Interest rate risk 9.6 4.0 2.8
Foreign exchange risk 3.3 1.4 1.5
Equity risk 0.3 0.1 0.1
Commodity risk
2
1.6 2.2 8.2
Credit and other market risks
3
12.5 5.1 2.3
Diversification benefit(11.8)(5.8)(5.9)
Net market risk 15.5 7.0 9.0
Market Value at Risk (VaR) is calculated using a one year history of market price movements. The market disruption
caused by COVID-19 pandemic in March and April 2020 increased market volatility significantly, resulting in higher
average VaR measurements.
1. The daily VaR presented above reflects a WIB divisional view of VaR. It varies from presentations of VaR in the 2020 Westpac Group
Annual Report and Australian Prudential Standard (APS) 330 Prudential Disclosure under Basel III where market risk disclosures are
segregated into trading and banking book. VaR measures the potential for loss using a history of price volatility.
2. Includes electricity risk. The lower VaR measures in 2020 were due to reduced risk, revised modelling and closure of electricity trading
commenced in June 2020.
3. Includes pre-payment risk and credit spread risk (exposures to generic credit rating bonds).
1
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29WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.2.8 Operating expenses
1
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Staff expenses(2,571)(2,444) 5 (5,015)(5,017)-
Occupancy expenses(484)(493)(2)(977)(969) 1
Technology expenses(1,366)(1,277) 7 (2,643)(2,319) 14
Other expenses(2,119)(1,946) 9 (4,065)(1,726) 136
Total operating expenses(6,540)(6,160) 6 (12,700)(10,031) 27
Add back notable items 1,283 1,256 2 2,539 461 large
Total operating expenses excluding notable items(5,257)(4,904) 7 (10,161)(9,570) 6
Full Time Equivalent (FTE) employees
As atAs atAs at% Mov’t% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
Number of FTE202020202019Mar 20Sept 19
Permanent employees 32,367 30,913 30,326 5 7
Temporary employees 4,482 3,286 2,962 36 51
FTE 36,849 34,199 33,288 8 11
Average FTE
2
36,117 33,433 33,648 8 7
Second Half 2020 – First Half 2020
Operating expenses increased $380 million or 6% compared to First Half 2020. Notable items were $1,283 million in
Second Half 2020 compared to $1,256 million in First Half 2020. Excluding notable items, operating expenses were
$353 million or 7% higher.
Staff expenses increased $127 million or 5% from:
• Additional FTE (up 2,650) over the half as we responded to the operational requirements of higher volumes
associated with COVID-19 activities, and additional resources for risk and compliance (including financial crime);
• Salary costs were higher as staff took less leave over the half; and
• Lower short-term incentives and productivity benefits partly offset these increases.
Occupancy expenses were $9 million or 2% lower from:
• Savings from onshore retail branch closures.
Technology expenses were $89 million or 7% higher. Notable items were $31 million higher over the half, mostly
associated with write-downs of capitalised software. Excluding this impact, technology expenses were $58 million
or 5% higher mainly from:
• Higher telecommunication and software licensing costs mainly due to increased capacity and capability to
support our staff working from home.
Other expenses increased $173 million or 9%. Notable items in Second Half 2020 were $1,118 million, $8 million
lower than First Half 2020. Notable items included:
• A lower provision for a penalty from AUSTRAC ($400 million in Second Half 2020; $900 million in
First Half 2020);
• Lower AUSTRAC associated costs ($138 million);
• Partly offset by goodwill write-downs in Specialist Businesses ($490 million); and
• An accounting loss recognised on sale of Vendor Finance business ($112 million).
Excluding the impact of notable items, other expenses increased $181 million or 22% from:
• Increased spending on risk and compliance; and
• Costs associated with supporting COVID-19 activities, including the on-shoring of certain activities.
Full Year 2020 – Full Year 2019
Operating expenses increased $2,669 million or 27% compared to Full Year 2019. Notable items were $2,539 million
in Full Year 2020 compared to $461 million in Full Year 2019. Excluding notable items, operating expenses were
$591 million or 6% higher.
1. Refer to Section 4, Note 5 for reported results breakdown. Refer to Section 5, Note 5 for cash earnings breakdown. As discussed in
Section 1.3, commentary is on a cash earnings basis.
2. Average is based on a six month period.
Review of Group
operations
30WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Staff expenses decreased $2 million. Notable items were $142 million lower mainly due to the non-repeat
of provisions for the Group’s Wealth reset in Full Year 2019. Excluding this impact, staff expenses increased
$140 million or 3% from:
• Additional FTE (up 3,561) over the year as we responded to the operational requirements of higher volumes
associated with COVID-19 activities, and additional resources for risk and compliance (including financial crime);
• Salary costs were higher as staff took less leave over the year; and
• Lower short-term incentives and productivity benefits partly offset these increases.
Occupancy expenses were $8 million or 1% higher from:
• Exit costs associated with reducing our branch footprint;
• Partly offset by savings from onshore retail branch closures.
Technology expenses were $324 million or 14% higher. Notable items were $134 million higher over the year, mostly
associated with write-downs of capitalised software. Excluding this impact, technology expenses were $190 million
or 8% higher mainly from:
• Higher amortisation, including the full year impact of the Customer Service Hub; and
• Higher telecommunication and software licensing costs mainly due to increased capacity and capability to
support our staff working from home.
Other expenses increased $2,339 million or 136%. Notable items in Full Year 2020 were $2,244 million,
$2,086 million higher than Full Year 2019. Notable items included:
• A provision for a penalty from AUSTRAC ($1,300 million);
• AUSTRAC associated costs ($178 million);
• Goodwill write-downs in Specialist Businesses ($490 million); and
• An accounting loss recognised on sale of Vendor Finance business ($112 million).
Excluding the impact of notable items, other expenses increased $253 million or 16% from:
• Increased spending on risk and compliance; and
• Costs associated with supporting COVID-19 activities, including the on-shoring of certain activities.
Investment spend
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Expensed 384 296 30 680 608 12
Capitalised software and fixed assets 608 432 41 1,040 898 16
Total 992 728 36 1,720 1,506 14
Growth and productivity 368 296 24 664 784 (15)
Risk and compliance 470 336 40 806 503 60
Other technology 154 96 60 250 219 14
Total 992 728 36 1,720 1,506 14
In Full Year 2020, the Group invested $1,720 million, an increase of $214 million (or 14%) on the prior year. This was
due to a $303 million increase in risk and compliance projects and a $31 million increase in other technology, partly
offset by an $120 million decline in productivity and growth projects.
Risk and compliance projects accounted for 47% of investment spend, an increase from 33% in the prior year, as
we have continued to strengthen risk management across the group, and implement systems that improve our
response to regulatory obligations. Productivity and growth projects accounted for 39% of investment spend,
down from 52% in the prior year. Other technology projects accounted for 14% of investment spend, little changed
from the prior year.
Investment over the year was skewed to the second half (consistent with patterns over recent years), with Second
Half 2020 spending up 36% over First Half 2020. Across major investment categories the following progress was
achieved in Second Half 2020.
Growth and Productivity
Platform Modernisation
• Customer Service Hub (CSH) is a major program creating multi-brand operating system. The system will
ultimately provide a major improvement in functionality and productivity and create a better experience for
both customers and bankers. The system went live for mortgages in 2019 and the rollout to Westpac home
finance managers was completed in 2020. In Second Half 2020 we commenced the roll out to our regional
brands and continued work to enable broker home loan applications to be originated in 2021;
• Further development of Panorama (wealth administration platform) including simplifying our products and
processes to support the migration of BT Wrap to Panorama; and
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7
31WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
• Installed a new complaints management system, creating a common system across the Group and supporting
faster complaint resolution and improved consistency for customers. The system also provides better reporting
and analysis on the root causes of complaints.
Digitising and simplifying the company
• The Group has continued to improve its digital capability, support customers to bank online, and to simplify and
automate back office processes. Key initiatives delivered have included:
–Enhanced a number of customer features while improving security such as: expanding the details of
merchants details on transactions to improve transaction recognitions, enabling businesses to register for an
ABN PayID to receive payments faster, and launching ApplePay on iPad and Mac;
–Implemented enhanced scam-detection technology in branches, providing real-time analysis to flag high
risk transactions. Banker alerts then allows them to determine if a suspect transaction should be paused or
declined;
–Completed development of a new Westpac Mobile Banking App for consumers providing more intuitive
navigation, smarter searching and more streamlined payments. The app was launched to select customers in
September 2020 and will be progressively rolled out over 2021;
–Reducing complexity by simplifying fee structures on a range of products and migrating customers from
deposit products no longer for sale to similar products that are for sale; and
– Improving processes and controls, to accelerate customer remediation payments.
Risk and Compliance
• Enhancing financial crime risk management capability including updating our processes and systems and
improving data quality and controls;
• Upgraded our integrated risk and compliance management system to better capture and manage incidents and
strengthen controls.
• Updated a number of systems to meet new regulatory obligations including: The Banking Code of Practice,
open banking, protecting your super legislation, and putting members’ interest first legislation;
• Delivered a range of changes to support COVID-19 measures, including additional regulatory reporting,
facilitating the early release of superannuation, and managing deferral packages; and
• Delivered new and updated APRA requirements including APRA’s Residential Mortgage Review.
Other Technology
Major initiatives under this category included:
• Further investment in protecting customers against cyber risks, and data and privacy breaches;
• Strengthening system infrastructure to improve stability and speed. The number of major incidents halved
over the year with increased bandwidth throughout the network. Bandwidth increased tenfold over the last
12 months in around 90% of our branches;
• Completed the migration to the Windows 10 evergreen desktop to standardise the operating for all employees
and provide better support. At the same time we migrated shared mailboxes to Exchange Online; and
• Implemented a new service management platform to 6,000 users that will deliver improved efficiency to users.
Capitalised software
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Balance as at beginning of period 2,335 2,365 (1) 2,365 2,177 9
Total additions
1
605 430 41 1,035 906 14
Amortisation expense(406)(393) 3 (799)(694) 15
Impairment expense(96)(75) 28 (171)(25)large
Foreign exchange translation(8) 8 large- 1 (100)
Balance as at end of period 2,430 2,335 4 2,430 2,365 3
Capitalised software increased $65 million (or 3%) during the year. Additions increased by $129 million (or 14%)
over the year, due to higher investment spend, with the level of capitalisation broadly in line (~60%) with the
prior year.
Software amortisation expense increased $105 million (or 15%) compared to last year, as major investments became
operational. As part of the Group’s regular asset review, $171 million of capitalised software was impaired during the
year.
In aggregate, the average amortisation period for our capitalised software assets is 3 years.
1. Includes capitalised borrowing costs and card scheme.
32WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.2.9 Impairment charges
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Individually assessed provisions (IAPs)
New IAPs(283)(351)(19)(634)(343) 85
Write-backs 54 70 (23) 124 148 (16)
Recoveries 93 100 (7) 193 172 12
Total IAPs write-backs and recoveries(136)(181)(25)(317)(23)large
Collectively assessed provisions (CAPs)
Write-offs(438)(438)- (876)(953)(8)
Other changes in CAPs(366)(1,619)(77)(1,985) 182 large
Total new CAPs(804)(2,057)(61)(2,861)(771)large
Total impairment charges(940)(2,238)(58)(3,178)(794)large
Impairment charges significantly increased to $3,178 million in Full Year 2020, equivalent to 45 basis points of
gross loans. Almost three quarters of the impairment charge for Full Year 2020 was recorded in First Half 2020,
mostly related to the impacts of COVID-19 on expected credit losses. In First Half 2020 there was only a small
deterioration in asset quality with the high impairment charge due to weaker forward-looking economic inputs
used in our provision calculations, an increase in the weighting to our downside economic scenario, and increased
overlays as we sought to estimate the impact of COVID-19 on higher risk industries.
In Second Half 2020, impairment charges remained relatively high at 27 basis points to gross loans, but were
lower than First Half 2020 with the charge being predominantly due to a deterioration in the portfolio including
higher 90+ day delinquencies and from credit downgrades. These factors were partially offset by a small
improvement in our forward-looking economic inputs compared to First Half 2020.
The following table indicates the weightings applied by the Group to different economic scenarios:
Macroeconomic scenario weightings (%)
As at
30 Sept 2020
As at
31 March 2020
As at
30 Sept 2019
As at
31 March 2019
Upside
551010
Base
555562.565
Downside
404027. 525
The increase in weight to the downside scenario since 30 September 2019 reflects increased uncertainty around
the base case economic assumptions particularly given the impact of COVID-19 is highly unpredictable.
Second Half 2020 – First Half 2020
Impairment charges for Second Half 2020 were $940 million, down $1,298 million compared to First Half 2020.
Total new CAP charges were $1,253 million lower than First Half 2020.
The decline was predominately due to the material lift in provisions in First Half 2020 as we incorporated the
potential impact of COVID-19 in our provision for expected credit losses. The Second Half 2020 CAP charge was
due to:
• Higher CAP charges in the Business division as customers in particular segments (such as Accommodation,
Tourism and certain property sectors) were downgraded due to the impact of COVID-19;
• Australian mortgages 90+ day delinquencies increased 68 basis points to 1.62%, mostly from a rise in customers
in hardship, particularly those that did not take up a deferral package.
Total IAPs, write-backs and recoveries were $45 million lower than First Half 2020 principally due to:
• Lower new IAPs compared to First Half 2020 ($68 million); and
• Write-backs were $16 million lower compared to First Half 2020.
Full Year 2020 – Full Year 2019
Impairment charges of $3,178 million were up $2,384 million compared to Full Year 2019.
Total new CAP charges were $2,090 million higher due to a $2,167 million increase in CAPs partially offset by a
$77 million decrease in write-offs.
The increase in other changes in CAP was driven by the following:
• Changes in forward-looking economic inputs, increased weighting of a downside economic scenario and
increased overlay provisions from estimated impacts of COVID-19 pandemic, predominately within the
First Half 2020; and
• A rise in 90+ day delinquencies in the mortgage portfolio; and the downgrade of certain customers in the
Business division.
Review of Group
operations
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33WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Total new IAPs, write-backs and recoveries were $294 million higher than Full Year 2019. This was predominately
due to higher new IAPs for five large exposures (three WIB Asia, one Business and one New Zealand). The higher
IAPs were partially offset by higher recoveries in the unsecured portfolio.
2.2.10 Income tax expense
Second Half 2020 – First Half 2020
The effective tax rate of 42.4% in Second Half 2020 was lower than the First Half 2020 effective tax rate of 48.8%.
The effective tax rate is above the Australian corporate tax rate of 30%, with the key drivers being the non-
deductible provision for the penalty relating to AUSTRAC proceedings, and non-deductible goodwill impairments.
Full Year 2020 – Full Year 2019
The effective tax rate of 45.0% in Full Year 2020 was also significantly higher than the 30.3% in Full Year 2019 due
to the non-deductible provision for the penalty relating to AUSTRAC proceedings and the non-deductible goodwill
impairments.
2.2.11 Non-controlling interests
Non-controlling interests represent results of non-wholly owned subsidiaries attributable to shareholders other
than Westpac. These include profits attributable to the 10.1% shareholding in Westpac Bank-PNG-Limited and the
25% shareholding in St.George Motor Finance Limited that are not owned by Westpac.
2.3 Credit quality
The portfolio began the 2020 Financial Year performing well with stress in retail, business and Institutional
rising modestly from the low base experienced in recent years. At 30 September 2019 stressed exposures to
total committed exposures (TCE) were 1.20% rising to 1.32% by March 2020. Through Second Half 2020 stress
gradually increased given the deterioration in economic activity and the rise in unemployment. As a result, stressed
exposures to TCE increased to 1.91% with more businesses being downgraded and customers migrating through to
90+ day delinquencies.
The 71 basis point rise in stressed exposures to TCE comprised a 30 basis point rise in watchlist and substandard
exposures, a 32 basis point rise in 90 days past due and not impaired exposures and a 9 basis point increase in
impaired exposures.
The ratio of gross impaired exposures to gross loans increased 15 basis points to 0.40% compared to
30 September 2019.
The most impacted customers (across consumer, business and institutional) have been in industries impacted
by social distancing, travel, supply chain disruption, and industries adjacent to these. These include: Hospitality;
Travel related industries, Retail trade; Wholesale trade; Accommodation; Commercial property; Construction and
Manufacturing.
Provision levels increased $2,239 million over Full Year 2020, as we increased impairment charges for the potential
economic impact of COVID-19. Most of the increase was in collectively assessed provision with IAPs rising
$199 million over the year.
The increase in provisions has led to an increase in provision coverage both on a gross basis and on a risk adjusted
basis. Total loan provisions to gross loans increased to 88 basis points at September 2020, up from 54 basis
points at 30 September 2019. The ratio of collectively assessed provisions to credit risk weighted assets increased
59 basis points over the year to 154 basis point at 30 September 2020.
34WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Portfolio segments
The institutional segment has seen increases in stress with stressed exposures to TCE at 0.15% at
30 September 2020 up 12 basis points from September 2019. New stress has emerged in some of the high risk
categories mentioned earlier. Stress in the commercial property sector gradually increased through the year, up
122 basis points to 2.83% at September 2020.
The Business division saw an increase in stressed exposures to TCE to 4.70% (an increase of 182 basis points
compared to September 2019) as we completed our reviews of customers likely to be impacted by COVID-19.
Customers re-rated down were spread across several sectors particularly retail trade, motor vehicle retailers and
commercial property.
In New Zealand, stressed exposures to TCE was down 7 basis points over the year to 1.59% at 30 September 2020,
predominantly due to balance sheet growth partially offset by an impaired exposure increase related to one
name. During 2019, the methodology for reporting hardship was aligned to APRA’s definition which has impacted
delinquencies. These changes increased other consumer 90+ day delinquencies by 127 basis points and mortgage
90+ day delinquencies by 39 basis points. Excluding the impact of these changes, other consumer 90+ day
delinquencies increased 42 basis points and mortgage 90+ day delinquencies increased 2 basis points.
Australian mortgage 90+ day delinquencies increased 74 basis points to 1.62% over Full Year 2020. The increase
was more pronounced in Second Half 2020 due to customers placed in hardship in the early months of COVID-19
migrating through to 90+ day delinquent. Properties in possession decreased by 302 over the year to 256 at
30 September 2020. The fall was due to less properties moving into repossession.
Realised mortgage losses were $125 million for Full Year 2020, compared to $111 million in Full Year 2019.
Other consumer 90+ day delinquencies were 2.09% at September 2020, up 40 basis points over the year and
15 basis points higher than at March 2020. The contraction in the portfolio contributed around 42 basis points of
the rise, offset by 2 basis point improvement in the underlying portfolio.
New Zealand other consumer 90+ day delinquencies were 2.09% at September 2020 up 127 basis points
compared to September 2019 of which 42 basis points was due to balance sheet contraction and a change in the
measurement of delinquencies for customers granted hardship assistance.
Provisioning
Over the Full Year 2020 provisions increased $2,239 million to $6,163 million where:
• CAPs on loans and credit commitments were $6,132 million at September 2020, $2,220 million higher compared
to September 2019. The increase was mostly due to the use of deteriorating forward-looking economic inputs in
our provision calculations, increased weighting to the downside economic scenario, and an increase in overlay
provisions from estimated impacts of COVID-19 on high risk portfolios. In addition, CAP increased from rising
delinquencies in mortgages and the re-rating (and subsequent downgrades) in the Business division.
• IAPs were $199 million higher at $611 million. This was due to an increase in IAPs for three WIB Asia exposures,
one Business exposure and one New Zealand exposure,
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35WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.3.1 Credit quality key metrics
As atAs atAs atAs at
30 Sept31 March30 Sept31 March
2020202020192019
Stressed exposures by credit grade as a % of TCE:
Impaired 0.26% 0.20% 0.17% 0.17%
90 days past due and not impaired 0.80% 0.50% 0.48% 0.43%
Watchlist and substandard 0.85% 0.62% 0.55% 0.50%
Total stressed exposures 1.91% 1.32% 1.20% 1.10%
Gross impaired assets to TCE for business and institutional:
Business Australia 1.07% 0.71% 0.61% 0.59%
Business New Zealand 0.54% 0.59% 0.23% 0.41%
Institutional 0.15% 0.08% 0.03% 0.05%
Mortgage 90+ day delinquencies:
Group 1.50% 0.87% 0.82% 0.75%
Australia 1.62% 0.94% 0.88% 0.82%
New Zealand 0.52% 0.27% 0.13% 0.14%
Other consumer loans 90+ day delinquencies:
Group 2.09% 1.94% 1.69% 1.80%
Australia 2.09% 1.97% 1.77% 1.87%
New Zealand 2.09% 1.59% 0.82% 1.02%
Other
1
:
Gross impaired exposures to gross loans 0.40% 0.30% 0.25% 0.24%
Gross impaired exposure provisions to gross impaired exposures 41.45% 50.09% 44.92% 45.74%
Total loan provisions to gross loans 88 bps 80 bps 54 bps 56 bps
Collectively assessed provisions to credit risk weighted assets 154 bps 140 bps 95 bps 98 bps
Total provisions to credit risk weighted assets 171 bps 157 bps 107 bps 110 bps
Impairment charges to average gross loans annualised 27 bps 62 bps 13 bps 9 bps
Net write-offs to average loans annualised 15 bps 12 bps 15 bps 12 bps
2.3.2 Movement in gross impaired exposures
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Balance as at beginning of period 2,154 1,763 1,749 22 23
New and increased - individually managed 864 897 550 (4) 57
Write-offs(633)(537)(655) 18 (3)
Returned to performing or repaid(488)(516)(447)(5) 9
Portfolio managed - new/increased/returned/repaid 842 572 565 47 49
Exchange rate and other adjustments 40 (25) 1 largelarge
Balance as at end of period 2,779 2,154 1,763 29 58
1. Averages are based on a six month period.
36WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.4 Balance sheet and funding
2.4.1 Balance sheet
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Assets
Cash and balances with central banks 30,129 45,815 20,059 (34) 50
Collateral paid 4,778 5,339 5,930 (11)(19)
Trading securities and other financial assets measured at fair value
through income statement (FVIS) and investment securities 132,206 112,069 105,182 18 26
Derivative financial instruments 23,367 56,661 29,859 (59)(22)
Loans 693,059 719,678 714,770 (4)(3)
Life insurance assets 3,593 2,574 9,367 40 (62)
Other assets 24,814 25,526 21,459 (3) 16
Total assets 911,946 967,662 906,626 (6) 1
Liabilities
Collateral received 2,250 12,728 3,287 (82)(32)
Deposits and other borrowings 591,131 582,920 563,247 1 5
Other financial liabilities 40,925 33,996 29,215 20 40
Derivative financial instruments 23,054 48,089 29,096 (52)(21)
Debt issues 150,325 185,835 181,457 (19)(17)
Life insurance liabilities 1,396 604 7,377 131 (81)
Loan capital 23,949 25,807 21,826 (7) 10
Other liabilities 10,842 10,037 5,614 8 93
Total liabilities 843,872 900,016 841,119 (6)-
Equity
Total equity attributable to owners of WBC 68,023 67,590 65,454 1 4
NCI 51 56 53 (9)(4)
Total equity 68,074 67,646 65,507 1 4
Second Half 2020 – First Half 2020
During Second Half 2020, our balance sheet composition shifted, with higher levels of liquid assets from higher
inflows of deposits and utilisation of the Term Funding Facility (TFF) in place of debt issuance. Our lending
portfolio also experienced net outflows during the period. This shift impacted our margins and profitability.
Key movements during the half included:
Assets
• Cash and balances with central banks decreased $15.7 billion or 34% reflecting lower liquid assets held in this
form;
• Trading securities and financial assets measured at FVIS and investment securities increased $20.1 billion or
18% reflecting higher balances held in this form;
• Derivative assets decreased $33.3 billion or 59% mainly driven by movements in cross currency swaps and
foreign currency forward contracts;
• Loans decreased $26.6 billion or 4%. Refer to Section 2.2.2 Loans for further information;
• Life insurance assets increased $1.0 billion or 40% mainly due to consolidation of new funds, partly offset by the
transfer of assets to non-consolidated funds; and
• Other assets decreased $0.7 billion or 3% mainly due to impairment of intangible assets.
Review of Group
operations
1
2
3
4
5
6
7
37WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Liabilities
• Collateral received decreased $10.5 billion or 82% primarily due to the decrease in net collateralised derivative
assets;
• Deposits and other borrowings increased $8.2 billion or 1%. Refer to Section 2.2.3 Deposits and other
borrowings for further information;
• Other financial liabilities increased $6.9 billion or 20% mainly driven by higher securities sold under agreements
to repurchase as the Group accessed the TFF, partly offset by lower securities purchased not delivered and
interbank deposits;
• Derivative liabilities decreased $25.0 billion or 52% driven by movements in cross currency swaps and foreign
currency forward contracts;
• Debt issues decreased $35.5 billion or 19% ($21.1 billion or 11% decrease excluding foreign currency impacts).
Refer to Section 2.4.2 Funding and liquidity risk management for further information;
• Life insurance liabilities increased $0.8 billion or 131% mainly due to consolidation of new funds, partly offset by
transfer of liabilities to non-consolidated funds;
• Loan capital decreased $1.9 billion or 7% mainly due to foreign currency translation and fair value hedging
impacts; and
• Other liabilities increased $0.8 billion or 8% mainly due to higher provisions.
Equity attributable to owners of Westpac Banking Corporation increased $0.4 billion or 1% reflecting retained
profits during the period.
Full Year 2020 – Full Year 2019
During Full Year 2020, our balance sheet composition shifted, with higher levels of liquid assets from higher inflows
of deposits and utilisation of the Term Funding Facility (TFF) in place of debt issuance. Our lending portfolio also
experienced net outflows during the period. This shift impacted our margins and profitability.
Key movements included:
Assets
• Cash and balances with central banks increased $10.1 billion or 50% reflecting higher liquid assets held in this
form;
• Trading securities and financial assets measured at FVIS and investment securities increased $27.0 billion or
26% reflecting higher balances held in this form;
• Derivative assets decreased $6.5 billion or 22% mainly driven by movements in cross currency swaps and
foreign currency forward contracts;
• Loans decreased $21.7 billion or 3%. Refer to Section 2.2.2 Loans for further information;
• Life insurance assets decreased $5.8 billion or 62% mainly due to transfer of assets to non-consolidated funds,
partly offset by consolidation of new funds; and
• Other assets increased $3.3 billion or 16% mainly due to the adoption of AASB 16, higher deferred tax assets
from the impact of provision for ECL, partly offset by impairment of intangible assets.
Liabilities
• Deposits and other borrowings increased $27.9 billion or 5%. Refer to Section 2.2.3 Deposits and other
borrowings for further information;
• Other financial liabilities increased $11.7 billion or 40% mainly driven by higher securities sold under agreements
to repurchase as the Group accessed the TFF and securities purchased not delivered, partly offset by lower
accrued interest payable and interbank deposits;
• Derivative liabilities decreased $6.0 billion or 21% driven by movements in cross currency swaps and foreign
currency forward contracts;
• Debt issues decreased $31.1 billion or 17% ($29.2 billion or 16% decrease excluding foreign currency impacts).
Refer to Section 2.4.2 Funding and liquidity risk management for further information;
• Life insurance liabilities decreased $6.0 billion or 81% mainly due to transfer of liabilities to non-consolidated
funds, partly offset by consolidation of new funds;
• Loan capital increased $2.1 billion or 10% mainly due to the issuance of US$1.5 billion Tier 2 capital instruments;
and
• Other liabilities increased $5.2 billion or 93% mainly due to the adoption of AASB 16 and higher provisions.
Equity attributable to owners of Westpac Banking Corporation increased $2.6 billion or 4% reflecting $2.8 billion
of new shares issuances, 2019 final dividend reinvestment plan and retained profits, partly offset by 2019 final
dividends paid in First Half 2020.
38WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.4.2 Funding and liquidity risk management
Liquidity risk is the risk that the Group will be unable to fund assets and meet obligations as they become
due. This type of risk is inherent for all banks as intermediaries between depositors and borrowers. The Group
has a liquidity risk management framework which seeks to meet cash flow obligations under a wide range of
market conditions, including name specific and market-wide stress scenarios, as well as meeting the regulatory
requirements of the LCR and NSFR.
The challenges presented by COVID-19 to the global economy have highlighted the speed and extent to which
financial markets can become dislocated and the critical importance of banks maintaining sufficient liquidity at all
times.
We believe the Group is well positioned for these challenges, having maintained funding and liquidity metrics
comfortably above regulatory minimums. At 30 September 2020, the Group’s LCR was 150% and its NSFR was
122% compared to regulatory minimums of 100% for both.
During 2020, the Reserve Bank introduced extensive measures to support the economy, including lowering the
cash rate, injecting extra liquidity into the financial system through daily market operations, the purchasing of
Australian Government bonds in the secondary market, increasing the interest rate on Exchange Settlement
Balances, and the introduction of the Term Funding Facility (TFF). Through the TFF, funding is provided to eligible
ADIs at a fixed interest rate of 25 basis points, for a maximum of three years.
Westpac’s total TFF allowance as at 30 September 2020 was $19.7 billion and Westpac had drawn down
$17.9 billion from its total TFF allowance. Westpac has included the full amount of its TFF Allowance in the LCR and
NSFR calculations for 30 September 2020.
A Supplementary Allowance of $11.9 billion will be available to Westpac from 1 October 2020.
Liquidity
The Group has a number of sources of liquidity that provide a buffer against periods of liquidity stress. These
include High Quality Liquid Assets (HQLA) and the Committed Liquidity Facility (CLF), both of which are used to
meet the Group’s LCR requirements. The Group also has access to non-HQLA and other assets that are eligible for
re-purchase with a central bank under certain conditions.
• At 30 September 2020, Westpac held $131.7 billion in HQLA (31 March 2020: $121.0 billion). HQLA includes cash,
deposits with central banks, government securities and other high quality securities that are repo-eligible with
the RBA. The HQLA portfolio is managed within the Group’s risk appetite and within regulatory requirements.
• Westpac’s CLF allocation for the 2020 calendar year, as approved by APRA, is $52 billion (2019 calendar
year: $54 billion). The fee to access the CLF was increased by the RBA on 1 January 2020 to 17 basis points
(from 15 basis points) and will increase to 20 basis points on 1 January 2021.
• The Group also holds a portfolio of non-HQLA liquid assets that are repo-eligible with the Reserve Bank of
Australia. These include private securities and self-originated AAA-rated mortgage backed securities.
The Group’s total unencumbered liquid assets were $221.2 billion as at 30 September 2020
(31 March 2020: $199.9 billion).
LCR
The LCR enhances banks’ short-term resilience, requiring them to hold sufficient HQLA, as defined, to withstand
30 days under a regulator-defined acute stress scenario. In addition to HQLA, Australian ADIs including Westpac
also have access to the CLF, as set out above, to meet the requirements of the LCR.
Westpac’s LCR for 30 September 2020 calculated on a spot basis was 150% (31 March 2020: 154%). Movements in
the Group’s LCR reflect the drawdown of the TFF allowance during the half, an increase in HQLA by $10.6 billion
over the half, while net cash outflows (NCOs) remained relatively flat (decreased by $0.3 billion).
NSFR
The NSFR is designed to encourage banks’ longer-term funding resilience. To comply, banks are required
to maintain an NSFR of at least 100% at all times. Westpac had an NSFR of 122% at 30 September 2020
(31 March 2020: 117%). Movements in the Group’s NSFR over the half reflect the inclusion of the TFF of $19.7 billion,
a $3.6 billion decrease in available stable funding, due to wholesale funding (down $19billion) offset by deposits
(up $14 billion) and equity (up $1 billion). Required stable funding decreased by $23.9 billion.
Funding
The Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk
appetite. This includes compliance with both the LCR and NSFR.
Customer deposits
Customer deposits increased by 232 basis points to 65.0% of the Group’s total funding at 30 September 2020.
Customer deposits increased by $11.7 billion over the half reflecting Government stimulus payments, a reduction in
consumer spending and a higher household savings ratio, the early release of superannuation and an increase in
Government and corporate cash balances.
Review of Group
operations
1
2
3
4
5
6
7
39WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Long term wholesale funding
Long term funding with a residual maturity greater than 12 months decreased 60 basis points or $7.2 billion to
15.7%. The reduction in long term funding reflects strong growth in customer deposits and a contraction in lending
which have reduced the bank’s wholesale funding needs. The Group did not access term wholesale funding
markets in the Second Half following the introduction of the TFF. Funding from securitisation decreased by 16 basis
points to 0.9% of total funding.
Short term wholesale funding
Wholesale funding with a residual maturity less than 12 months decreased by 174 basis points to 10.4%. High levels
of liquidity from customer deposits and access to the TFF enabled the bank to reduce its outstanding short-term
funding. The Group’s short-term funding portfolio (including long term to short term scroll) of $88.5 billion
had a weighted average maturity of 127 days and is more than covered by the $221.2 billion of unencumbered
repo-eligible liquid assets and cash held by the Group.
Equity
Funding from equity increased by 18 basis points to 8.0% of total funding.
Liquidity coverage ratio
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
High Quality Liquid Assets (HQLA)
1
131,664 121,017 89,883 9 46
Committed Liquidity Facility (CLF)
1
52,000 52,000 54,000 - (4)
Term Funding Facility (TFF)
1
1,764 17,897 - (90)-
Total LCR liquid assets 185,428 190,914 143,883 (3) 29
Cash outflows in a modelled 30-day APRA defined stressed scenario
Customer deposits 86,283 85,922 74,860 - 15
Wholesale funding 13,494 12,639 14,544 7 (7)
Other flows
2
23,569 25,036 23,986 (6)(2)
Total 123,346 123,597 113,390 - 9
LCR
3
150% 154% 127%largelarge
Net stable funding ratio
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Available stable funding 624,097 627,676 606,774 (1) 3
Required stable funding 512,656 536,601 543,958 (4)(6)
Net stable funding ratio 122% 117% 112%largelarge
1. Refer to Glossary for definition.
2. Other flows include credit and liquidity facilities, collateral outflows and inflows from customers.
3. Calculated on a spot basis.
40WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Funding by residual maturity
As at 30 SeptAs at 31 MarchAs at 30 Sept
202020202019
$mRatio %$mRatio %$mRatio %
Wholesale funding
Less than 6 months 43,543 5.1 49,097 5.7 45,334 5.4
6 to 12 months 5,445 0.7 17,301 2.0 25,566 3.1
Long term to short term scroll
1
39,489 4.6 38,539 4.4 30,255 3.6
Wholesale funding - residual maturity less than 12 months 88,477 10.4 104,937 12.1 101,155 12.1
Securitisation 8,000 0.9 9,523 1.1 8,190 1.0
Greater than 12 months 133,732 15.7 140,974 16.3 139,328 16.6
Wholesale funding - residual maturity greater than 12 months 141,732 16.6 150,497 17.4 147,518 17.6
Customer deposits 555,453 65.0 543,801 62.7 524,516 62.5
Equity
2
68,199 8.0 67,604 7.8 65,785 7.8
Total funding 853,861 100.0 866,839 100.0 838,974 100.0
Deposits to net loans ratio
As at 30 SeptAs at 31 MarchAs at 30 Sept
202020202019
$mRatio %$mRatio %$mRatio %
Customer deposits 555,453 543,801 524,516
Net customer loans 693,059 80.1 719,678 75.6 714,770 73.4
Funding view of the balance sheet
Total liquidCustomerWholesaleCustomerMarket
$massetsdepositsfundingfranchiseInventoryTotal
As at 30 September 2020
Total assets 221,176 - - 637,880 52,890 911,946
Total liabilities- (555,453)(230,210)- (58,209)(843,872)
Total equity- - - (68,199) 125 (68,074)
Total 221,176 (555,453)(230,210) 569,681 (5,194)-
Net loans
3
71,616 - - 621,443 - 693,059
As at 31 March 2020
Total assets 199,949 - - 673,994 93,719 967,662
Total liabilities- (543,801)(255,434)- (100,781)(900,016)
Total equity- - - (67,604)(42)(67,646)
Total 199,949 (543,801)(255,434) 606,390 (7,104)-
Net loans
3
63,189 - - 656,489 - 719,678
As at 30 September 2019
Total assets 169,871 - - 670,261 66,494 906,626
Total liabilities- (524,516)(248,673)- (67,930)(841,119)
Total equity- - - (65,785) 278 (65,507)
Total 169,871 (524,516)(248,673) 604,476 (1,158)-
Net loans
3
59,278 - - 655,492 - 714,770
1. Scroll represents wholesale funding with an original maturity greater than 12 months that now has a residual maturity less than 12 months.
2. Includes total share capital, share based payments reserves and retained profits.
3. Liquid assets in net loans include internally securitised assets that are eligible for repurchase agreements with the RBA/RBNZ.
1
2
3
4
5
6
7
41WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
2.5 Capital and dividends
As AtAs AtAs At% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
202020202019Mar 20Sept 19
Level 2 Regulatory capital structure
Common equity Tier 1 capital (CET1) after deductions ($m) 48,733 47,982 45,752 2 7
Risk weighted assets (RWA) ($m) 437,905 443,905 428,794 (1) 2
CET 1 capital ratio 11.13% 10.81% 10.67% 32 bps 46 bps
Additional Tier 1 capital ratio 2.10% 2.13% 2.17%(3 bps)(7 bps)
Tier 1 capital ratio 13.23% 12.94% 12.84% 29 bps 39 bps
Tier 2 capital ratio 3.15% 3.35% 2.79%(20 bps) 36 bps
Total regulatory capital ratio 16.38% 16.29% 15.63% 9 bps 75 bps
APRA leverage ratio
1
5.78% 5.66% 5.68% 12 bps 10 bps
Level 1 Regulatory capital structure
CET 1 capital after deductions ($m) 49,453 48,482 46,380 2 7
Risk weighted assets ($m) 433,727 437,137 422,475 (1) 3
Level 1 CET1 capital ratio 11.40% 11.09% 10.98% 31 bps 42 bps
APRA announcements on capital
On 29 July 2020, APRA released further capital management guidance for ADIs
2
. This guidance included APRA’s
expectation that for 2020, ADIs will retain at least half of their earnings, actively use dividend reinvestment plans
(DRPs) and/or other capital management initiatives to at least partially offset the diminution in capital from
distributions and conduct regular stress testing to inform decision-making and demonstrate ongoing lending
capacity. APRA also committed to ensuring that any rebuild of capital buffers, if required, will be conducted in
a gradual manner. APRA noted that the implementation of the Basel III capital reforms, which will embed the
‘unquestionably strong’ level of capital in the framework, has been postponed to 1 January 2023.
Further details of APRA’s regulatory changes are set out in the Significant Developments section of the 2020 Full Year
Financial Results.
Capital management strategy
Westpac’s approach to capital management seeks to ensure that it is adequately capitalised as an ADI. Westpac
evaluates its approach to capital management through an Internal Capital Adequacy Assessment Process (ICAAP),
the key features of which include:
• The development of a capital management strategy, including consideration of regulatory minimums, capital
buffers and contingency plans;
• Consideration of both regulatory and economic capital requirements;
• A stress testing framework that challenges the capital measures, coverage and requirements including the
impact of adverse economic scenarios; and
• Consideration of the perspectives of external stakeholders including rating agencies as well as equity and debt
investors.
During the period of disruption caused by COVID-19, Westpac is operating with the following principles in relation to
capital:
• Prioritise maintaining capital strength;
• Retain capital to absorb further downside on credit quality and acknowledge a high degree of uncertainty
regarding the length and depth of this stress;
• Allow for capital flexibility to support lending to customers; and
• In line with APRA guidance, Westpac will seek to maintain a buffer above the regulatory minimum (currently
at least 8% for D-SIBs including Westpac) and may utilise some of the “unquestionably strong” buffer.
3
At 30 September 2020 the CET1 buffer above the regulatory minimum of 8% is $13.7 billion.
These principles take into consideration:
• Current regulatory capital minimums and the capital conservation buffer (CCB), which together are the Total
CET1 Requirement. In line with the above, the Total CET1 Requirement for Westpac is at least 8.0%, based upon
an industry minimum CET1 requirement of 4.5% plus a capital buffer of at least 3.5% applicable to D-SIBs
4,5
;
• Stress testing to calibrate an appropriate buffer against a downturn; and
• Quarterly volatility of capital ratios due to the half yearly cycle of ordinary dividend payments.
Westpac will revise its target capital levels once the medium to longer term impacts of COVID-19 are clearer and
APRA’s review of the capital adequacy framework is finalised.
Review of Group
operations
1. Refer to Glossary for definition.
2. Letter to Authorised Deposit Taking Institutions – Capital Management, 29 July 2020.
3. APRA has set an “unquestionably strong” benchmark of a CET1 capital ratio of 10.5%.
4. Noting that APRA may apply higher CET1 requirements for an individual ADI.
5. If an ADI’s CET1 ratio falls below the Total CET1 Requirement (at least 8%), they face restrictions on the distribution of earnings, such as
dividends, distribution payments on AT1 capital instruments and discretionary staff bonuses.
42WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
CET1 capital ratio movement for Second Half 2020
Mar-20
Cash earnings
ex notable
items
Notable
items
Capital
deductions
and other capital
movements
RWA movement
Sep-20
10.81%
65
(28)
5
(11)
11.13%
1
FX
translation
impact
Cash earnings +37bps
Westpac’s CET1 capital ratio was 11.13% at 30 September 2020, 32 basis points higher than 31 March 2020. This
reflects cash earnings for the half taking into account notable items, a slight decline in RWAs and higher capital
deductions.
Key movements in the CET1 capital ratio over the half were:
• Second Half 2020 cash earnings (37 basis point increase), which includes the impact of notable items;
• Capital deductions and other capital movements (11 basis point decrease). This mainly reflects movements
in fair value on economic hedges recognised in net profit (13 basis point decrease), a higher deduction for
deferred tax assets (8 basis point decrease) and a net increase in capital held in non-consolidated subsidiaries
(3 basis point decrease). These were largely offset by a lower deduction for goodwill (12 basis point increase)
and other movements (1 basis point increase);
• A decline in RWA (1 basis point increase), mainly driven by decreases in credit risk RWA which were partially
offset by an increase in non-credit risk RWA; and
• Foreign currency impacts from the appreciation of the A$ against the NZ$ and US$ (5 basis point increase)
1
.
1. Reflecting the net impact of movements in the foreign currency translation reserve and RWA.
1
2
3
4
5
6
7
43WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
CET1 capital ratio movement for Full Year 2020
Sep-19
Cash earnings
ex notable
items
Notable
items
2H19
dividend
(net of DRP)
Capital
deductions
and other capital
movements
Ordinary
RWA
growth
Sep-20
10.67%
63
120
(60)
(26)
(58)
5
2
Capital
raised
FX
translation
impact
11.13%
Cash earnings +60bps
Westpac’s CET1 capital ratio was 11.13% at 30 September 2020, up 46 basis points from 30 September 2019.
This reflects the institutional placement and share purchase plan (which together raised $2.8 billion of capital) and
earnings for the Full Year, partially offset by payment of the final 2019 dividend and notable items.
Leverage ratio
The leverage ratio represents the amount of Tier 1 capital relative to exposure
1
. At 30 September 2020, Westpac’s
leverage ratio was 5.78%, up 12 basis points since 31 March 2020.
Internationally comparable capital ratios
The APRA Basel III capital adequacy requirements are more conservative than those of the Basel Committee on
Banking Supervision (BCBS), leading to lower reported capital ratios when compared to international peers. APRA
conducted a study in July 2015 outlining its methodology for measuring international comparable capital ratios.
For details on the adjustments refer to Westpac’s 2020 Full Year Investor Discussion Pack.
The table below calculates the Group’s reported capital ratios consistent with this methodology.
As AtAs AtAs At% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
%202020202019Mar 20Sept 19
Internationally comparable capital ratios
CET1 capital ratio 16.50% 15.81% 15.85% 69 bps 65 bps
Tier 1 capital ratio 19.25% 18.55% 18.64% 70 bps 61 bps
Total regulatory capital ratio 23.19% 22.69% 22.08% 50 bps 111 bps
Leverage ratio 6.46% 6.28% 6.36% 18 bps 10 bps
1. As defined under Attachment D of APS110: Capital Adequacy.
44WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Risk Weighted Assets (RWA)
As AtAs AtAs At% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Credit risk:
Corporate
1
73,666 78,288 74,807 (6)(2)
Business lending
2
36,777 34,493 35,470 7 4
Sovereign
3
2,376 2,192 2,068 8 15
Bank
4
5,640 6,956 8,339 (19)(32)
Residential mortgages 130,787 131,424 131,629 - (1)
Australian credit cards 4,405 4,837 5,089 (9)(13)
Other retail 10,174 11,594 12,395 (12)(18)
Small business
5
16,977 16,812 16,090 1 6
Specialised lending: Property and project finance
6
57,019 56,004 55,262 2 3
Securitisation
7
5,413 5,747 5,749 (6)(6)
Standardised 8,853 9,506 9,653 (7)(8)
Mark-to-market related credit risk 7,302 11,289 11,313 (35)(35)
Total Credit risk 359,389 369,142 367,864 (3)(2)
Market risk 8,761 8,396 9,350 4 (6)
Operational risk
8
54,090 54,093 47,680 - 13
Interest rate in the banking book (IRRBB) 9,124 5,305 530 72 large
Other 6,541 6,969 3,370 (6) 94
Total risk weighted assets
437,905 443,905 428,794 (1) 2
Second Half 2020 - First Half 2020
Total RWA decreased $6.0 billion or 1.4% this half mainly driven by a reduction in credit risk RWA.
The $9.8 billion decline in credit risk RWA included:
• $3.1 billion from lower lending in corporate from reduced Trade Finance activity in Asia and a decrease in
personal lending across credit cards and other retail;
• Foreign currency translation impacts which decreased RWA by $5.6 billion from the appreciation of the
A$ against the NZ$ and US$;
• Modelling and methodology changes, which reduced RWA by $2.6 billion; and
• A decrease in credit RWA associated with derivative exposures (counterparty credit risk and mark-to-market
related credit risk) of $3.9 billion mainly relating to currency and interest rate movements.
Partially offset by:
• A $5.4 billion increase from credit quality deterioration comprising:
–Downgrades mainly across corporate, business and specialised lending which increased RWA by $3.4 billion;
and
–An overlay to the probability of default for corporate, business lending and specialised lending which led
to a $2.0 billion increase in RWA and an associated increase in regulatory expected loss of $89 million.
This overlay will be reviewed regularly as individual customers continue to be assessed and re-gradings are
finalised.
Non-credit risk RWA increased by $3.8 billion from higher IRRBB (up $3.8 billion), an increase in market risk RWA
(up $0.4 billion), partially offset by Other RWA down $0.4 billion.
During the half, APRA approved a new IRRBB model and the revised model has been implemented as at
30 September 2020. Westpac had included an IRRBB capital overlay of $500 million which has now been released
with minimal net overall impact. The key driver for the increase this half is primarily credit spread risk from the
higher liquids portfolio.
1. Corporate – typically includes exposure where the borrower has annual turnover greater than $50 million, and other business exposures
not captured under the definitions of either Business lending or Small business.
2. Business lending – includes exposures not captured elsewhere where the borrower has annual turnover less than or equal to $50 million.
3. Sovereign – includes exposures to governments themselves and other non-commercial enterprises that are owned or controlled by
them.
4. Bank – includes exposures to licensed banks and their owned or controlled subsidiaries, and overseas central banks.
5. Small business – program managed business lending exposures.
6. Specialised lending – property and project finance – includes exposures to entities created to finance and/or operates specific assets
where, apart from the income received from the assets being financed, the borrower has little or no independent capacity to repay from
other activities or assets.
7. Securitisation – exposures reflect Westpac’s involvement in activities ranging from originator to investor and include the provision of
securitisation services for clients wishing to access capital markets.
8. Operational risk – the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events,
including legal risk but excluding strategic or reputational risk.
1
2
3
4
5
6
7
45WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Full Year 2020 - Full year 2019
Total RWA increased $9.1 billion or 2.1% this year mainly driven by an increase in non-credit risk RWA of
($17.6 billion), partially offset by a decrease in credit risk RWA of $8.5 billion.
Non-credit risk over the year primarily related to Operational Risk capital overlay of $500 million imposed by APRA
following AUSTRAC’s Statement of Claim ($6.3 billion increase in RWA), an increase in IRRBB ($8.6 billion increase
in RWA) and adoption of AASB 16 Leases methodology from 1 October 2019 in other assets risk calculation
($3.3 billion increase in RWA).
This increase was partially offset by a decline in credit RWA of $8.5 billion, which included:
• Lower lending primarily to corporates, which decreased RWA by $4.8 billion;
• Model and methodology changes which reduced RWA by $6.1 billion;
• Foreign currency translation impacts which decreased RWA by $1.5 billion from the appreciation of the
A$ against the US$ and NZ$;
• A decrease in mark-to-market related credit risk and counterparty credit risk RWA of $2.9 billion; and
• Partially offset by a $6.8 billion increase in RWA from credit quality deterioration.
46WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Capital adequacy
As AtAs AtAs At
30 Sept31 March30 Sept
$m202020202019
Tier 1 capital
CET1 capital
Paid up ordinary capital 40,509 40,503 37,508
Treasury shares(620)(619)(575)
Equity based remuneration 1,661 1,645 1,548
Foreign currency translation reserve(309) 59 (199)
Accumulated other comprehensive income 126 (190)(68)
Non-controlling interests - other 57 61 58
Retained earnings 26,533 25,985 27,188
Less retained earnings in life and general insurance, funds management and securitisation
entities(1,132)(1,326)(1,407)
Deferred fees 214 229 267
Total CET1 capital 67,0 3 9 66,347 64,320
Deductions from CET1 capital
Goodwill (excluding funds management entities)(8,532)(8,673)(8,648)
Deferred tax assets(2,963)(2,610)(2,034)
Goodwill in life and general insurance, funds management and securitisation entities(535)(935)(940)
Capitalised expenditure(1,576)(1,656)(1,719)
Capitalised software(2,137)(2,029)(2,019)
Investments in subsidiaries not consolidated for regulatory purposes(1,941)(1,633)(1,540)
Regulatory expected loss in excess of eligible provisions(40)- (1,106)
Defined benefit superannuation fund surplus(71)(80)(73)
Equity investments(492)(327)(425)
Regulatory adjustments to fair value positions(18)(407)(63)
Other Tier 1 deductions(1)(15)(1)
Total deductions from CET1 capital(18,306)(18,365)(18,568)
Total CET1 capital after deductions 48,733 47,982 45,752
Additional Tier 1 capital
Basel III complying instruments 9,206 9,473 9,299
Total Additional Tier 1 capital 9,206 9,473 9,299
Net Tier 1 regulatory capital 57,939 57,455 55,051
Tier 2 capital
Basel III complying instruments 13,161 14,455 11,645
Basel III transitional instruments 494 567 519
Eligible general reserve for credit loss 397 79 62
Total Tier 2 capital 14,052 15,101 12,226
Deductions from Tier 2 capital
Investments in subsidiaries not consolidated for regulatory purposes(140)(140)(140)
Holdings of own and other financial institutions Tier 2 capital instruments(121)(102)(115)
Total deductions from Tier 2 capital(261)(242)(255)
Net Tier 2 regulatory capital 13,791 14,859 11,971
Total regulatory capital 71,730 72,314 67,022
Risk weighted assets 437,905 443,905 428,794
CET1 capital ratio 11.13% 10.81% 10.67%
Additional Tier 1 capital 2.10% 2.13% 2.17%
Tier 1 capital ratio 13.23% 12.94% 12.84%
Tier 2 capital 3.15% 3.35% 2.79%
Total regulatory capital ratio 16.38% 16.29% 15.63%
1
2
3
4
5
6
7
47WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Dividends
Half Year Half Year % Mov’t Full YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
Ordinary dividend (cents per share)20202020Mar 2020202019Sept 19
Interim (fully franked)- - - - 94 (100)
Final (fully franked) 31 - - 31 80 (61)
Total ordinary dividend 31 - - 31 174 (82)
Payout ratio (reported)101.65% - large48.87% 88.83%large
Payout ratio (cash earnings)69.33% - large42.93% 88.09%large
Adjusted franking credit balance ($m) 3,448 2,881 20 3,448 1,558 121
Imputation credit (cents per share - NZ) 7 - - 7.0 14.0 (50)
The Board has determined a final fully franked dividend of 31 cents per share, to be paid on 18 December 2020 to
shareholders on the register at the record date of 12 November 2020
1
. The 2020 final dividend represents a Full
Year payout ratio on a cash earnings basis of 42.93%. In addition to being fully franked, the dividend will also carry
NZ$0.07 in New Zealand imputation credits that may be used by New Zealand tax residents.
The Board has determined to issue shares to satisfy the DRP for the 2020 final dividend and to apply a 1.5%
discount to the market price used to determine the number of shares issued under the DRP. The market price
used to determine the number of shares issued under the DRP will be set over the 15 trading days commencing
17 November 2020.
Westpac has also entered into an agreement to underwrite the DRP up to the full amount of the 2020 final
dividend.
Capital deduction for regulatory expected credit loss
For capital adequacy purposes APRA requires the amount of regulatory expected credit losses in excess of eligible
provisions to be deducted from CET1 capital. The table below shows the calculation of this capital deduction.
As atAs atAs at
30 Sept31 March30 Sept
$m202020202019
Provisions associated with eligible portfolios
Total provisions for expected credit losses (Section 4, Note 10) 6,163 5,791 3,924
plus provisions associated with partial write-offs 26 41 41
less ineligible provisions
2
(118)(129)(89)
Total eligible provisions 6,071 5,703 3,876
Regulatory expected downturn loss 5,801 5,540 4,982
(Excess)/shortfall in eligible provisions compared to regulatory expected downturn loss(270)(163) 1,106
CET1 capital deduction for regulatory expected downturn loss in excess of eligible provisions
3
(40)- (1,106)
1. Record date in New York is 10 November 2020.
2. Provisions associated with portfolios subject to the Basel standardised approach to credit risk are not eligible.
3 Regulatory expected loss is calculated for portfolios subject to the Basel advanced capital IRB approach to credit risk. The comparison
between regulatory expected loss and eligible provisions is performed separately for defaulted and non-defaulted exposures.
48WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Review of Group
operations
2.6 Sustainability performance summary
Westpac’s approach to sustainability
The Group’s approach to operating sustainably is outlined in its Sustainability Strategy and is designed to
anticipate, respond to and shape the most pressing emerging issues and opportunities that have the potential to
materially impact customers, employees, suppliers, shareholders and communities.
As one of Australia’s largest financial institutions, we recognise our role in helping to create positive social,
economic and environmental impact.
Westpac is:
• a founding signatory to the United Nations Environment Programme Finance Initiative’s Principles for
Responsible Banking;
• a signatory to the Business Coalition Statement on Climate which highlights support for the Paris Agreement;
• a supporter of the United Nations Sustainable Development Goals (SDGs) and its agenda for action on
improving the wellbeing of present and future generations; and
• guided by the United Nations Guiding Principles on Business and Human Rights.
Key developments against our 2020 Sustainability Strategy
Helping people make better financial decisions:
• Delivered a range of financial literacy programs reaching an estimated 1 million individuals, as well as businesses,
not for-profit organisations and community groups through Westpac’s Davidson Institute in Australia and the
Managing Your Money program in New Zealand.
Helping people by being there when it matters most to them:
• Provided 176,000 consumer and 36,000 business relief packages in response to COVID-19;
• Helped customers experiencing financial hardship, issuing over 75,000 financial assistance packages;
• Donated over $1.4 million to community groups and charities, including Financial Counselling Australia,
state-based volunteer fire services, Foundation for Rural and Regional Renewal (FRRR), The Salvation Army and
Victorian Bushfire Appeal, as part of our Bushfire support; and
• Assisted over 24,000 customers, including those experiencing vulnerable circumstances such as domestic or
family violence and financial abuse.
Helping people create a prosperous nation:
• Westpac Scholars Trust
1
awarded $3.9 million in educational scholarships to the next 64 Westpac Scholars,
bringing the total cohort to 474;
• Westpac Foundation
2
job creation grants to social enterprises helped to create over 700 jobs
3
for vulnerable
Australians;
• Increased lending to climate change solutions, taking total committed exposure to $10.1 billion, exceeding our
2020 target of $10 billion;
• Facilitated $4.8 billion in climate change solutions, exceeding our 2020 target of $3 billion;
• Maintained our share of renewable energy at 75% of our lending to the electricity sector;
• Remained the largest financier of greenfield renewable energy projects in Australia over the past three years
4
;
• Updated our Position Statements and Action Plans on climate change and human rights; and
• Established the Safer Children, Safer Communities Roundtable of experts in human rights, child safety, online
safety, and law enforcement, and developed a work program that focuses on our ambitions for impact and
target areas, with associated funding principles which aims to support long lasting change for children and their
communities, as one of the commitments in our Response Plan to the AUSTRAC proceedings.
A culture that is caring, inclusive and innovative:
• Reduced average time to resolution for complaints
5
to 6.5 days in Full Year 2020, from 9 days in Full Year 2019;
• Resolved 74% Australian Banking
6
complaints within five days in Full Year 2020, compared to 68% in Full Year
2019; and
• Hired 115 new Aboriginal or Torres Strait Islander employees and increased the regional footprint of our
Aboriginal and Torres Strait Islander traineeship program.
1. Westpac Scholars Trust (ABN 35 600 251 071) is administered by Westpac Scholars Limited (ABN 72 168 847 041) as trustee for the
Westpac Scholars Trust. Westpac Scholars Trust is a private charitable trust and neither the Trust nor the Trustee are part of Westpac
Group. Westpac provides administrative support, skilled volunteering, and funding for operational costs of the Westpac Scholars Trust.
2. Westpac Foundation is administered by Westpac Community Limited (ABN 34 086 862 795) as trustee for Westpac Community Trust
(ABN 53 265 036 982). The Westpac Community Trust is a Public Ancillary Fund, endorsed by the ATO as a Deductible Gift Recipient.
None of Westpac Foundation, Westpac Community Trust Limited nor the Westpac Community Trust are part of Westpac Group.
Westpac provides administrative support, skilled volunteering, donations and funding for operational costs of the Westpac Foundation.
3. Jobs created through the Westpac Foundation job creation grants to social enterprises are for the year ended 30 June 2020.
4. IJGlobal, September 2020.
5. Group Internal Dispute Resolution complaints excluding WIB.
6. Australian Banking includes Consumer Bank and Business Bank products, except wealth management and insurance.
1
2
3
4
5
6
7
49WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Review of Group operations
Sustainability fundamentals:
• Maintained A+ rating for BT’s sustainable investment strategy and governance through the UN Principles for
Responsible Investment (PRI);
• Remained on track to achieve 100% of electricity supply from renewables by 2025;
• Sourced $19.1 million from diverse suppliers, including $5.9 million from Indigenous suppliers; and
• Contributed over $150 million to community investment excluding commercial sponsorships across the Group.
Further information
A summary of this information is available in Section 1 of Westpac’s Annual Report and Continued sustainability
commitment section of its Investor Discussion Pack.
Detailed disclosures can be found in the Group’s 2020 Sustainability Performance Report.
50WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
3.0 Divisional results
Comparative divisional results have been restated. These changes have no impact on the overall Group’s results or
balance sheet. Refer Section 4, Note 2 for further detail.
Notable items
The table below shows the impact of notable items on the divisions by the relevant period. Notable items are
discussed in Section 2.1.
WestpacWestpac New
InstitutionalZealandSpecialistGroup
$mConsumerBusinessBank(A$)BusinessesBusinessesGroup
Half Year Sept 2020
Net interest income- (34)- (3)- - (37)
Non-interest income 4 (3)- (4)(305) 273 (35)
Operating expenses(31)(106)- 1 (653)(494)(1,283)
Core earnings(27)(143)- (6)(958)(221)(1,355)
Tax and NCI 8 43 - 2 138 (56) 135
Cash earnings(19)(100)- (4)(820)(277)(1,220)
Half Year March 2020
Net interest income 5 (107)- (4)- - (106)
Non-interest income- 5 - (3)(104)(126)(228)
Operating expenses(33)(24)- - (41)(1,158)(1,256)
Core earnings(28)(126)- (7)(145)(1,284)(1,590)
Tax and NCI 8 38 - 2 43 100 191
Cash earnings(20)(88)- (5)(102)(1,184)(1,399)
Full Year 2020
Net interest income 5 (141)- (7)- - (143)
Non-interest income 4 2 - (7)(409) 147 (263)
Operating expenses(64)(130)- 1 (694)(1,652)(2,539)
Core earnings(55)(269)- (13)(1,103)(1,505)(2,945)
Tax and NCI 16 81 - 4 181 44 326
Cash earnings(39)(188)- (9)(922)(1,461)(2,619)
Full Year 2019
Net interest income(85)(246)- (13)- - (344)
Non-interest income(2)(12)- 34 (40)(717)(737)
Operating expenses 25 (57)- (15)(30)(384)(461)
Core earnings(62)(315)- 6 (70)(1,101)(1,542)
Tax and NCI 29 95 - 9 23 339 495
Cash earnings(33)(220)- 15 (47)(762)(1,047)
Divisional results
1
2
3
4
5
6
7
51WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
3.1 Consumer
Consumer is responsible for sales and service of banking products, including mortgages, credit cards, personal
loans, and savings and deposit products to consumer customers in Australia. Banking products are provided under
the Westpac, St.George, BankSA, Bank of Melbourne, and RAMS brands. Consumer works with Business, WIB, and
Specialist Businesses in the sales, service, and referral of certain financial services and products including general
and life insurance, superannuation, platforms, auto lending and foreign exchange.
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 4,313 4,234 2 8,547 8,130 5
Non-interest income 247 326 (24) 573 695 (18)
Net operating income 4,560 4,560 - 9,120 8,825 3
Operating expenses(2,141)(2,035) 5 (4,176)(3,794) 10
Core earnings 2,419 2,525 (4) 4,944 5,031 (2)
Impairment charges(599)(416) 44 (1,015)(582) 74
Profit before income tax 1,820 2,109 (14) 3,929 4,449 (12)
Income tax expense and NCI(546)(637)(14)(1,183)(1,333)(11)
Cash earnings 1,274 1,472 (13) 2,746 3,116 (12)
Add back notable items 19 20 (5) 39 33 18
Cash earnings excluding notable items 1,293 1,492 (13) 2,785 3,149 (12)
Expense to income ratio 46.95% 44.63% 232 bps 45.79% 42.99% 280 bps
Net interest margin 2.41% 2.33% 8 bps 2.37% 2.22% 15 bps
As atAs at% Mov’tAs atAs at% Mov’t
30 Sept31 MarchSept 20 -30 Sept30 SeptSept 20 -
$bn20202020Mar 2020202019Sept 19
Customer deposits
Term deposits 47.5 50.0 (5) 47.5 55.9 (15)
Other 171.8 158.4 8 171.8 151.7 13
Total customer deposits 219.3 208.4 5 219.3 207.6 6
Net loans
Mortgages 382.4 385.8 (1) 382.4 388.6 (2)
Other 9.3 11.4 (18) 9.3 12.1 (23)
Provisions(1.9)(1.6) 19 (1.9)(1.4) 36
Total net loans 389.8 395.6 (1) 389.8 399.3 (2)
Deposit to loan ratio 56.26% 52.68% 358 bps 56.26% 51.99%large
Total assets 398.3 404.3 (1) 398.3 407.0 (2)
TCE 460.4 464.2 (1) 460.4 469.3 (2)
Average interest earning assets
1
358.2 363.6 (1) 360.9 365.9 (1)
Credit quality
As atAs atAs atAs at
30 Sept31 March30 Sept31 March
%2020202020192019
Impairment charges to average loans annualised
2
0.30% 0.21% 0.16% 0.14%
Mortgage 90+ day delinquencies 1.60% 0.94% 0.90% 0.84%
Other consumer loans 90+ day delinquencies 1.69% 1.96% 1.75% 1.67%
Total stressed exposures to TCE 1.38% 0.83% 0.79% 0.73%
1. Averages are based on a six month period for the halves and a twelve month period for the full year.
2. The presented ratios are based on a six month period.
52WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Financial performance
Second Half 2020 – First Half 2020
Cash earnings of $1,274 million were $198 million or 13% lower than First Half 2020 from higher impairment charges,
higher expenses and lower non-interest income. This was partly offset by an 8 basis point increase in net interest
margin.
Net interest
income
up $79m, 2%
• Net loans decreased 1% (or $5.8 billion) over the half. Mortgage lending was $3.4 billion
lower mostly from accelerated pay down. Other personal lending declined $2.1 billion
(or 18%) from customers paying down this form of debt and lower spending;
• Deposits increased 5% (or $10.9 billion), with growth in mortgage offset and at call balances
partly offset by a decline in term deposits. The increase, along with a shift to at call funds,
reflects consumer preference, lower spending and early releases of superannuation; and
• Net interest margin was 8 basis points higher from mortgage repricing and lower funding
costs (this benefit was partly offset by elevated retention pricing and lower spreads on new
mortgages). Deposit spreads declined due to low interest rates.
Non-interest
income
down $79m,
24%
• Non-interest income was lower from the impact of COVID-19 restrictions on activity which
has resulted in lower debit and credit card revenue including lower international travel
spending.
Expenses
up $106m, 5%
• Excluding the impact of notable items, expenses were up $108 million, or 5% from:
–Costs associated with our COVID-19 response;
–Increased restructuring costs;
–Higher spend on risk and compliance programs; and
–Increased costs associated with mortgage processing and bringing jobs onshore.
• Cost increases from annual salary reviews and inflation were offset by productivity benefits
from organisational redesign, the full period benefit from the 24 branches consolidated in
First Half 2020, and further use of digital channels.
Impairment
charges
up $183m, 44%
• Mortgage 90+ day delinquencies of 1.60% were up 66 basis points since March 2020
(0.94%), mostly from an increase in hardship particularly for customers who were not
eligible for the COVID-19 deferral package; and
• Impairment charges were higher, driven by higher collectively assessed provisions related to
increased mortgage delinquencies. The rise also included additional overlays and a transfer
of existing overlays previously held centrally.
1
2
3
4
5
6
7
53WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Financial performance
Full Year 2020 – Full Year 2019
Cash earnings of $2,746 million were $370 million or 12% lower than Full Year 2019 from higher impairment charges,
higher expenses and lower non-interest income. This was partly offset by a 15 basis point increase in net interest
margin.
Net interest
income
up $417m, 5%
• Net loans were 2% lower (or $9.5 billion) over the year. Mortgages decreased $6.2 billion
(or 2%) with the decline mostly from accelerated pay down. Other personal lending was
$2.8 billion (or 23%) lower as customers paid down debt and reduced spending;
• Deposits increased 6% (or $11.7 billion), with most of the growth in the second half of the
year from higher mortgage offset balances and increased at call deposits partly offset by a
reduction in term deposits; and
• Net interest margin was 15 basis points higher from mortgage repricing and lower funding
costs (this benefit was partly offset by elevated retention pricing and lower spreads on new
mortgages). Deposit spreads declined due to low interest rates.
Non-interest
income down
$122m, 18%
• Non-interest income was lower mostly from COVID-19 restrictions leading to reduced
activity, lower credit and debit card revenue, while lower international travel contributed to
reduced foreign currency conversion and foreign ATM fees.
Expenses up
$382m, 10%
• Notable items increased expenses $89 million, excluding the impact of these items,
expenses were $293 million higher, up 8% from:
–Costs associated with our COVID-19 and bushfire response;
–Increased restructuring costs;
–Higher spend on risk and compliance programs; and
–Increased costs associated with mortgage processing and bringing jobs onshore;
• Increases from annual salary reviews, inflation, and the roll-out of the customer service
hub, were offset by productivity benefits from organisational redesign, rationalisation of
a further 24 branches in 2020 (on top of 57 branches closed in 2019), and further use of
digital channels.
Impairment
charges up
$433m, 74%
• Mortgage 90+ day delinquencies of 1.60% were up 70 basis points since September 2019
(0.90%) predominately due to an increase in hardship, particularly for those customers who
were not eligible for the COVID-19 deferral package. Other consumer 90+ day delinquencies
of 1.69% were down 6 bps over the year; and
• Impairment charges were higher, with collectively assessed provisions increasing
significantly reflecting the rise in delinquencies and changes to the economic forecasts.
Increased overlay provisions also contributed to the rise.
54WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
3.2 Business
Business provides business banking products and services for Australian SME and Commercial customers
(including Agribusiness) generally up to $200 million in exposure. The division also serves Private Wealth. SME
includes relationship managed and non-relationship managed SME customers. The division offers a wide range of
banking products and services to support their borrowing, payments and transaction needs. In addition, specialist
services are provided for cash flow finance, trade finance, equipment finance and property finance. Business
operates under the Westpac, St.George, BankSA, and Bank of Melbourne brands. Business works with Consumer,
WIB, and Specialist Businesses in the sale, referral and service of select financial services and risk management
products (including corporate superannuation, foreign exchange and interest rate hedging).
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 2,019 2,144 (6) 4,163 4,456 (7)
Non-interest income 249 311 (20) 560 594 (6)
Net operating income 2,268 2,455 (8) 4,723 5,050 (6)
Operating expenses(1,230)(1,068) 15 (2,298)(2,094) 10
Core earnings 1,038 1,387 (25) 2,425 2,956 (18)
Impairment charges(674)(697)(3)(1,371)(172)large
Profit before income tax 364 690 (47) 1,054 2,784 (62)
Income tax expense and NCI(108)(212)(49)(320)(838)(62)
Cash earnings 256 478 (46) 734 1,946 (62)
Add back notable items 100 88 14 188 220 (15)
Cash earnings excluding notable items 356 566 (37) 922 2,166 (57)
Expense to income ratio 54.23% 43.50%large 48.66% 41.47%large
Net interest margin 2.93% 3.05%(12 bps) 2.99% 3.16%(17 bps)
As atAs at% Mov’tAs atAs at% Mov’t
30 Sept31 MarchSept 20 -30 Sept30 SeptSept 20 -
$bn20202020Mar 2020202019Sept 19
Customer deposits
Term deposits 51.7 57.3 (10) 51.7 63.4 (18)
Other 100.2 84.9 18 100.2 79.2 27
Total customer deposits 151.9 142.2 7 151.9 142.6 7
Net loans
Mortgages 58.5 59.9 (2) 58.5 60.8 (4)
Business 83.9 86.1 (3) 83.9 86.6 (3)
Other 0.5 0.7 (29) 0.5 0.7 (29)
Provisions(2.2)(1.7) 29 (2.2)(1.2) 83
Total net loans 140.7 145.0 (3) 140.7 146.9 (4)
Deposit to loan ratio 107.96% 98.07%large 107.96% 9 7.07 %large
Total assets 145.8 150.1 (3) 145.8 151.6 (4)
TCE 182.6 184.0 (1) 182.6 184.3 (1)
Average interest earning assets
1
137.6 140.5 (2) 139.1 140.8 (1)
Credit quality
As atAs atAs atAs at
30 Sept31 March30 Sept31 March
%2020202020192019
Impairment charges to average loans annualised
2
0.93% 0.95% 0.20% 0.04%
Mortgage 90+ day delinquencies 1.72% 0.93% 0.84% 0.72%
Other consumer loans 90+ day delinquencies 1.46% 1.29% 1.38% 1.03%
Business: impaired exposures to TCE 1.08% 0.71% 0.63% 0.60%
Total stressed exposures to TCE 4.70% 3.07% 2.88% 2.49%
1. Averages are based on a six month period for the halves and a twelve month period for the full year.
2. The presented ratios are based on a six month period.
1
2
3
4
5
6
7
55WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Financial performance
Second Half 2020 - First Half 2020
Cash earnings of $256 million were $222 million (or 46%) lower than First Half 2020. Notable items reduced cash
earnings by $100 million in Second Half 2020 compared to $88 million in First Half 2020. A 12 basis point reduction
in net interest margin and lower non-interest income also contributed to the decline in cash earnings.
Net interest
income down
$125m, 6%
• Net loans were 3% (or $4.3 billion) lower over the half, driven by a 2% (or $1.4 billion)
reduction in mortgages (mostly investment) and a 3% (or $2.2 billion) reduction in business
lending, with growth in agriculture and property exposures more than offset by declines
across other industries;
• Deposits were 7% (or $9.7 billion) higher with a 22% increase in transaction balances and a
14% increase in savings and online balances supported by government stimulus measures.
This was partly offset by a 10% decline in term deposits as customers preferred to hold
funds in at call accounts; and
• Net interest margin was 12 basis points lower over the half (down 22 basis points excluding
notable items). The lower margin was mostly from reduced deposit spreads due to low
interest rates, along with interest rate reductions on certain business lending products
as part of COVID-19 customer support measures. These impacts were partly offset by
repricing of mortgages and the changing mix of deposits.
Non-interest
income down
$62m, 20%
• Notable items in Second Half 2020 of $3 million were $8 million higher than First Half 2020.
Excluding this, non-interest income was down $54 million (or 18%), mostly due to lower
markets related income and COVID-19 fee waivers (predominantly merchant service fees).
Overdraft fees were also lower from lower utilisation.
Expenses
up $162m, 15%
• Notable items in Second Half 2020 were $106 million up $82 million from First Half 2020,
excluding these, expenses were $80 million (or 8%) higher; and
• Most of the increase related to supporting COVID-19 activities, further spend on risk and
compliance, and more bankers. This contributed to an 8% increase in FTE over the half.
Impairment
charges down
$23m, 3%
• The level of stressed exposures to TCE increased 163 basis points to 4.70%, mostly from an
increase in watchlist and substandard in the Commercial portfolio;
• We continued to increase collectively assessed provisions for higher expected credit loss,
most of the increase was in the first half of the year and as a result the Second Half 2020
charge was significantly lower; and
• The second half charge also included higher collectively assessed provisions from the
re-rating and downgrade of customers, and from the transfer of overlay provisions which
were previously held centrally.
56WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Full Year 2020 – Full Year 2019
Cash earnings of $734 million were $1,212 million (or 62%) lower than Full Year 2019. Excluding notable items, cash
earnings were $1,244 million (or 57%) lower mostly from an increase in impairment charges and a decline in net
interest margin.
Net interest
income down
$293m, 7%
• Net loans were 4% (or $6.2 billion) lower over the year, driven by a 4% (or $2.3 billion)
reduction in mortgages and a 3% (or $2.7 billion) reduction in business lending, with growth
in agriculture more than offset by declines across other industries;
• Deposits were 7% (or $9.3 billion) higher over the year with a 33% rise in transaction
balances and 20% increase in savings and online balances supported by government
stimulus packages. This was partially offset by an 18% decline in term deposits given a
customer preference to retain funds in at call accounts; and
• Net interest margin was 17 basis points lower than Full Year 2019 (down 25 basis points
excluding notable items). The lower margin was mostly from reduced deposit spreads
from low interest rates and interest rate reductions on business lending products as part of
COVID-19 support measures. These reductions were partly offset by repricing and changes
in deposit mix.
Non-interest
income down
$34m, 6%
• Notable items in Full Year 2020 were $14 million lower than Full Year 2019. Excluding this,
non-interest income was down $48 million (or 8%) mostly due to lower markets income,
lower business lending fees, and the impact of COVID-19 fee waivers. These impacts were
partly offset by higher merchant fee income.
Expenses
up $204m, 10%
• Notable items were $73 million higher than Full Year 2019. Excluding these items, expenses
were up $131 million, (or 6%) due to higher spend relating to COVID-19 activities, increased
spending on risk and compliance programs, and investment in bankers.
Impairment
charges up
$1,199m, large
• The level of stressed exposures increased 182 basis points to 4.70% mostly from an increase
in watchlist and substandard within the Commercial portfolio;
• Impairment charges were higher mostly from an increase in collectively assessed provisions
due to COVID-19 impacts reflecting
–Changes to the base case economics forecasts and increasing the weight applied to the
downside economic scenario;
–an increased overlay provision; and
–an increase in stressed exposures;
• Individually assessed provisions also increased $58 million, from a small number of large
exposures.
1
2
3
4
5
6
7
57WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
3.3 Westpac Institutional Bank
Westpac Institutional Bank (WIB) delivers a broad range of financial products and services to corporate,
institutional and government customers operating in, or with connections to, Australia and New Zealand. WIB
operates through dedicated industry relationship and specialist product teams, with expert knowledge in financing,
transactional banking, and financial and debt capital markets. Customers are supported throughout Australia
and via branches and subsidiaries located in New Zealand, the US, UK and Asia. WIB works with all the Group’s
divisions in the provision of markets’ related financial needs including foreign exchange and fixed interest solutions.
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 506 605 (16) 1,111 1,337 (17)
Non-interest income 626 556 13 1,182 1,195 (1)
Net operating income 1,132 1,161 (2) 2,293 2,532 (9)
Operating expenses(697)(619) 13 (1,316)(1,220) 8
Core earnings 435 542 (20) 977 1,312 (26)
Impairment charges(111)(293)(62)(404)(31)large
Profit before income tax 324 249 30 573 1,281 (55)
Income tax expense and NCI(139)(102) 36 (241)(356)(32)
Cash earnings 185 147 26 332 925 (64)
Expense to income ratio 61.57% 53.32%large 57.39% 48.18%large
Net interest margin 1.23% 1.46%(23 bps) 1.35% 1.59%(24 bps)
As atAs at% Mov’tAs atAs at% Mov’t
30 Sept31 MarchSept 20 -30 Sept30 SeptSept 20 -
$bn20202020Mar 2020202019Sept 19
Customer deposits 102.9 110.0(6) 102.9 99.0 4
Net loans
Loans 66.6 79.0 (16) 66.6 73.8 (10)
Provisions(0.4)(0.4)- (0.4)(0.2) 100
Total net loans 66.2 78.6 (16) 66.2 73.6 (10)
Deposit to loan ratio 155.44% 139.95%large 155.44% 134.51%large
Total assets 75.5 109.4 (31) 75.5 95.0 (21)
TCE 168.7 172.7 (2) 168.7 172.6 (2)
Average interest earning assets
1
82.1 82.9 (1) 82.5 84.2 (2)
Impairment charges to average loans annualised 0.31% 0.80%(49 bps) 0.56% 0.04% 52 bps
Impaired exposures to TCE 0.27% 0.15% 12 bps 0.27% 0.06% 21 bps
Total stressed exposures to TCE 1.03% 1.09%(6 bps) 1.03% 0.59% 44 bps
Revenue contribution
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Lending and deposit revenue 644 707 (9) 1,351 1,522 (11)
Markets, sales and fee income 356 389 (8) 745 817 (9)
Total customer revenue 1,000 1,096 (9) 2,096 2,339 (10)
Derivative valuation adjustments 16 (93)large(77)(64) 20
Trading revenue 148 174 (15) 322 241 34
Other
2
(32)(16) 100 (48) 16 large
Total WIB revenue 1,132 1,161 (2) 2,293 2,532 (9)
1. Averages are based on a six month period for the halves and a twelve month period for the full year.
2. Includes capital benefit and the Bank Levy.
58WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Financial performance
Second Half 2020 – First Half 2020
Cash earnings of $185 million were $38 million or 26% higher than First Half 2020 due to lower impairment
charges and a higher contribution from derivative valuation adjustments. This was partly offset by a 23 basis point
reduction to net interest margin from the impact of lower interest rates, and higher risk and compliance costs.
Net interest
income down
$99m, 16%
• Net loans decreased 16%, or $12.4 billion, (14%, or $11.1 billion excluding FX movements).
Lower lending in Asia, in particular trade finance, was a key driver of the decrease, as we
sought to preserve capital and reduced lower returning assets. Lending was also lower
from a decline in utilisation following a short term increase late in the first half as customers
sought to strengthen their working capital in response to COVID-19;
• Deposits reduced 6%, or $7.1 billion, (5%, or $6.0 billion excluding the impact of FX
movements), mostly from lower term deposits, both in Australia and offshore. This was
partly offset by an increase in at call balances mostly from governments; and
• Net interest margin was down 23 basis points, with the low interest rate environment
reducing at call deposit spreads and earnings on capital. This was partly offset by improved
lending and term deposit spreads from disciplined pricing.
Non-interest
income up
$70m, 13%
• $109 million movement in derivative valuation adjustments ($16 million benefit in
Second Half 2020 compared to a $93 million charge in First Half 2020); and
• Partly offset by lower non-customer Markets income across FX and commodities and a
reduction in customer Markets income from lower FX sales.
Expenses up
$78m, 13%
• Increase in costs related to financial crime, risk and compliance. FTE increased 9% during
the half primarily to support these activities;
• Increase in restructuring costs; and
• Partly offset by productivity benefits and lower variable remuneration.
Impairment
charges down
$182m, 62%
• Over the half, impaired exposures to TCE increased 12 basis points to 0.27% whilst stressed
exposures to TCE reduced 6 basis points to 1.03%; and
• Impairment charges were lower in the half, from a reduction in collectively assessed
provisions as First Half 2020 included a significant rise in collectively assessed provisions.
Full Year 2020 – Full Year 2019
Cash earnings of $332 million were $593 million or 64% lower than Full Year 2019, primarily driven by higher
impairment charges (up $373 million) and a 26% decline in core earnings. Income was 9% lower mostly from the
24 basis points decrease in net interest margin. Expenses were higher from a rise in risk and compliance costs.
Net interest
income down
$226m, 17%
• Net loans decreased 10% (or $7.4 billion) primarily from a reduction in offshore lending,
including lower trade finance in Asia;
• Deposits increased 4% (or $3.9 billion) reflecting higher at call balances as customers
increased liquidity in response to COVID-19 and from higher government balances. This was
partly offset by lower term deposits and offshore deposits; and
• Net interest margin was down 24 basis points, with lower interest rates reducing deposit
spreads and earnings on capital. This was partly offset by more disciplined loan pricing and
benefits from the change in deposit mix.
Non-interest
income down
$13m, 1%
• Higher charge on derivative valuation adjustments ($77 million charge in Full Year 2020
compared to $64 million charge in Full Year 2019);
• Reduced syndication fees with Full Year 2019 including several large transactions;
• A reduction in customer Markets income from lower fixed income and FX sales; partly offset by
• Higher non-customer Markets income across fixed income and FX.
Expenses up
$96m, 8%
• Higher risk and compliance related costs, including financial crime;
• Increase in restructuring costs; and
• Productivity savings of $36 million and lower variable remuneration more than offset
increases from annual salary reviews and higher technology costs.
Impairment
charges up
$373m, large
• Stressed exposures to TCE of 1.03%, up 44 basis points compared to 30 September 2019
due to the downgrade of a number of facilities to stressed or impaired; and
• Impairment charges were higher, reflecting COVID-19 impacts. These resulted from changes
to the base case economics forecasts and increasing the weight applied to the downside
economic scenario. Individually assessed provisions were also higher following the
downgrade of a small number of facilities to impaired.
1
2
3
4
5
6
7
59WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
3.4 Westpac New Zealand
Westpac New Zealand provides banking, wealth and insurance products and services for consumer, business
and institutional customers in New Zealand. Westpac conducts its New Zealand banking business through two
banks: Westpac New Zealand Limited, which is incorporated in New Zealand, and Westpac Banking Corporation
(New Zealand Branch), which is incorporated in Australia. Westpac New Zealand operates through a network of
branches and ATMs in both the North and South Islands. Business and institutional customers are also served
through relationship and specialist product teams. Banking products and services are provided under the
Westpac brand while insurance and wealth products are provided under Westpac Life and BT brands, respectively.
New Zealand maintains its own infrastructure, including technology, operations and treasury in accordance with
regulatory requirements.
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
NZ$m20202020Mar 2020202019Sept 19
Net interest income 956 987 (3) 1,943 1,967 (1)
Non-interest income 164 175 (6) 339 448 (24)
Net operating income 1,120 1,162 (4) 2,282 2,415 (6)
Operating expenses(518)(541)(4)(1,059)(993) 7
Core earnings 602 621 (3) 1,223 1,422 (14)
Impairment (charges)/benefits(109)(211)(48)(320) 10 large
Profit before income tax 493 410 20 903 1,432 (37)
Income tax expense and NCI(139)(115) 21 (254)(390)(35)
Cash earnings 354 295 20 649 1,042 (38)
Add back notable items 4 5 (20) 9 (16)large
Cash earnings excluding notable items 358 300 19 658 1,026 (36)
Expense to income ratio 46.25% 46.56%(31 bps) 46.41% 41.12%large
Net interest margin 1.89% 2.06%(17 bps) 1.97% 2.16%(19 bps)
As atAs at% Mov’tAs atAs at% Mov’t
30 Sept31 MarchSept 20 -30 Sept30 SeptSept 20 -
NZ$bn20202020Mar 2020202019Sept 19
Customer deposits
Term deposits 31.0 32.8 (5) 31.0 33.5 (7)
Other 40.0 36.3 10 40.0 31.0 29
Total customer deposits 71.0 69.1 3 71.0 64.5 10
Net loans
Mortgages 55.2 53.3 4 55.2 51.5 7
Business 31.9 32.5 (2) 31.9 31.1 3
Other 1.5 1.7 (12) 1.5 1.9 (21)
Provisions(0.6)(0.5) 20 (0.6)(0.3) 100
Total net loans 88.0 8 7.0 1 88.0 84.2 5
Deposit to loan ratio 80.68% 79.43% 125 bps 80.68% 76.60%large
Total assets 104.2 105.0 (1) 104.2 97.1 7
TCE 127.6 125.1 2 127.6 117.3 9
Third party liquid assets 12.8 14.4 (11) 12.8 10.3 24
Average interest earning assets
1
101.2 95.8 6 98.5 91.1 8
Total funds 12.2 10.9 12 12.2 11.5 6
Credit quality
As atAs atAs atAs at
30 Sept31 March30 Sept31 March
%2020202020192019
Impairment charges/(benefits) to average loans annualised
2
0.25% 0.49%(0.06%) 0.03%
Mortgage 90+ day delinquencies 0.52% 0.27% 0.13% 0.14%
Other consumer loans 90+ day delinquencies 2.09% 1.59% 0.82% 1.02%
Impaired exposures to TCE 0.16% 0.17% 0.08% 0.13%
Total stressed exposures to TCE 1.59% 1.64% 1.66% 1.57%
1. Averages are based on a six month period for the halves and a twelve month period for the full year.
2. The presented ratios are based on a six month period.
60WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Financial performance (NZ$)
Second Half 2020 – First Half 2020
Cash earnings of $354 million were $59 million or 20% higher than First Half 2020 due to lower impairment
charges and a 4% reduction in operating expenses. This was partly offset by a 17 basis point reduction in net
interest margin from the impact of lower interest rates.
Net interest
income down
$31m, 3%
• Net loans increased 1%, or $1.0 billion, with growth in mortgages up $1.9 billion, partly
offset by lower business lending (down $0.6 billion, or 2%), as Corporate and Institutional
customers reduced their gearing to strengthen their balance sheets;
• Deposits were up $1.9 billion with growth primarily from consumers. Term deposits were
lower from a customer preference to retain funds in at call accounts; and
• Net interest margin was down 17 basis points, with the low interest rate environment
reducing deposit spreads. (The RBNZ reduced the official cash rate 75 basis points to
0.25% in March 2020). This was partly offset by improved lending spreads from repricing.
Non-interest
income down
$11m, 6%
• Non-interest income was lower mostly from the impact of COVID-19 restrictions on
activity which reduced volume based fees. Fee waivers as part of COVID-19 customer
support measures also contributed to the decline.
Expenses
down $23m, 4%
• Most of the decline related to higher restructuring costs in First Half 2020; and
• Timing of investment spend and productivity benefits were partly offset by costs related
to supporting COVID-19 activities.
Impairment
charges down
$102m, 48%
• Stressed exposures to TCE decreased 5 basis points to 1.59% compared to March 2020;
• Mortgage 90+ day delinquencies increased 25 basis points to 0.52% and other consumer
90+ day delinquencies increased 50 basis points to 2.09%, mostly from an increase in
hardship; and
• Impairment charges were lower, mostly from changes to the base case economics
forecasts and increasing the weight applied to the downside economic scenario used in
provision models. Individually assessed provisions were also lower due to a single large
provision in First Half 2020.
1
2
3
4
5
6
7
61WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Full Year 2020 – Full Year 2019
Cash earnings of $649 million were $393 million or 38% lower than Full Year 2019, primarily driven by higher
impairment charges (up $330 million). Core earnings were 14% lower mostly from a 24% decline in non-interest
income and a 7% increase in expenses.
Net interest
income down
$24m, 1%
• Net loans increased 5%, or $3.8 billion, primarily from mortgages which increased
$3.7 billion, mostly in fixed rate loans. Business lending increased $0.8 billion, (up 3%).
These gains were partly offset by a $0.4 billion decline in other personal lending, and
higher impairment provision balance (up $0.3 billion);
• Deposits were up $6.5 billion with growth across both consumer and business deposits.
Term deposits were lower from customer preference to retain funds in at call accounts;
and
• Net interest margin was down 19 basis points, with the low interest rate environment
reducing deposit spreads. This was partly offset by improved lending spreads from
repricing and some mix impacts.
Non-interest
income down
$109m, 24%
• Non-interest income declined from:
–Notable items, mostly from the gain on sale of PayMark in Full Year 2019:
–Full period impact of fee simplification initiatives implemented in 2019, and lower
income from card products;
–COVID-19 restrictions which contributed to lower activity based fees, and fee waivers
from customer support measures; and
–Lower insurance income.
Expenses up
$66m, 7%
• Excluding the impact of notable items ($17 million lower in 2020), expenses increased
$83 million (or 8%). Mostly from:
–Increased spending on risk and compliance programs (including BS11 outsourcing) and
increased restructuring expenses; and
–Costs to support COVID-19 activities, salary increases and other inflationary rises were
offset by productivity benefits.
Impairment
charge of $320m
compared to
an impairment
benefit of $10m
• Stressed exposures to TCE decreased 7 basis points to 1.59% compared to September
2019;
• During 2019, the methodology for reporting hardship was aligned to APRA’s definition
which has impacted delinquencies. These changes increased other consumer 90+ day
delinquencies by 127 basis points and mortgage 90+ day delinquencies by 39 basis
points. Excluding the impact of these changes, other consumer 90+ day delinquencies
increased 42 basis points and mortgage 90+ day delinquencies increased 2 basis points;
and
• Impairment charges were higher, reflecting expected COVID-19 impacts. These included
changes to the base case economics forecasts and increasing the weight applied to
the downside economic scenario used in provision models. New individually assessed
provisions for two large exposures also contributed to the increase.
62WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
3.4.1 Westpac New Zealand division performance (A$ Equivalent)
Results have been translated into Australian dollars (A$) at the average exchange rates for each reporting
period, Second Half 2020: $1.0721 (First Half 2020: $1.0493, Full Year 2020: $1.0607, Full Year 2019: $1.0574).
Unless otherwise stated, assets and liabilities have been translated at spot rates as at the end of the period,
30 September 2020: $1.0803 (31 March 2020: $1.0264; 30 September 2019: $1.0790).
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 892 940 (5) 1,832 1,860 (2)
Non-interest income 152 167 (9) 319 423 (25)
Net operating income 1,044 1,107 (6) 2,151 2,283 (6)
Operating expenses(482)(516)(7)(998)(939) 6
Core earnings 562 591 (5) 1,153 1,344 (14)
Impairment (charges)/benefits(102)(200)(49)(302) 10 large
Profit before income tax 460 391 18 851 1,354 (37)
Income tax expense and NCI(129)(110) 17 (239)(369)(35)
Cash earnings 331 281 18 612 985 (38)
Add back notable items 4 5 (20) 9 (15)large
Cash earnings excluding notable items 335 286 17 621 970 (36)
Expense to income ratio
1
46.25% 46.56%(31 bps) 46.41% 41.12%large
Net interest margin
1
1.89% 2.06%(17 bps) 1.97% 2.16%(19 bps)
As atAs at% Mov’tAs atAs at% Mov’t
30 Sept31 MarchSept 20 -30 Sept30 SeptSept 20 -
$bn20202020Mar 2020202019Sept 19
Customer deposits 65.7 67.3 (2) 65.7 59.7 10
Net loans 81.4 84.8 (4) 81.4 78.0 4
Deposit to loan ratio
1
80.68% 79.43% 125 bps 80.68% 76.60%large
Total assets 96.4 102.3 (6) 96.4 90.0 7
TCE 118.1 121.9 (3) 118.1 108.7 9
Third party liquid assets 11.9 14.0 (15) 11.9 9.6 24
Average interest earning assets
2
94.5 91.3 4 92.9 86.2 8
Total funds 11.3 10.6 7 11.3 10.7 6
1. Ratios calculated using NZ$.
2. Averages are based on a six month period for the halves and a twelve month period for the full year, and are converted at applicable
average rates.
1
2
3
4
5
6
7
63WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
3.5 Specialist Businesses
Specialist Businesses provides automobile finance, Australian life, general and lenders mortgage insurance,
investment products and services (including margin lending and equities broking), superannuation and retirement
products as well as wealth administration platforms. It also manages Westpac Pacific which provides a full range
of banking services in Fiji and Papua New Guinea. The division operates under the Westpac, St.George, BankSA,
Bank of Melbourne, and BT brands. Specialist Businesses works with Consumer, Business and WIB in the provision
of select financial services and products.
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 247 287 (14) 534 555 (4)
Non-interest income 334 428 (22) 762 1,412 (46)
Net operating income 581 715 (19) 1,296 1,967 (34)
Operating expenses(1,128)(420) 169 (1,548)(847) 83
Core earnings(547) 295 large(252) 1,120 large
Impairment charges(95)(160)(41)(255)(111) 130
Profit before income tax(642) 135 large(507) 1,009 large
Income tax expense and NCI 43 (42)large 1 (297)large
Cash earnings(599) 93 large(506) 712 large
Add back notable items 820 102 large 922 47 large
Cash earnings excluding notable items 221 195 13 416 759 (45)
Expense to income ratio 194.15% 58.74%large 119.44% 43.06%large
As atAs at% Mov’tAs atAs at% Mov’t
30 Sept31 MarchSept 20 -30 Sept30 SeptSept 20 -
$bn20202020Mar 2020202019Sept 19
Deposits 9.3 9.6 (3) 9.3 9.3 -
Net loans
Loans 15.4 16.7 (8) 15.4 17.5 (12)
Provisions(0.5)(0.4) 25 (0.5)(0.3) 67
Total net loans 14.9 16.3 (9) 14.9 17.2 (13)
Deposit to loan ratio 62.42% 58.90% 352 bps 62.42% 54.07%large
Total funds 193.0 179.1 8 193.0 207.2 (7)
TCE 19.9 20.6 (3) 19.9 21.9 (9)
Average funds
1
191.1 203.8 (6) 197.5 196.3 1
Cash earnings excluding notable items
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Banking 34 34 - 68 166 (59)
Insurance 149 32 large 181 261 (31)
Superannuation, platforms and investments 38 129 (71) 167 332 (50)
Total cash earnings (ex notable items) 221 195 13 416 759 (45)
1. Averages are based on a six month period for the halves and a twelve month period for the full year
64WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Financial performance
Second Half 2020 - First Half 2020
Cash earnings were a loss of $599 million compared to a profit of $93 million in First Half 2020. During
Second Half 2020 the business incurred $820 million (after tax) of notable items, compared to $102 million
(after tax) in First Half 2020. Excluding notable items, cash earnings for Second Half 2020 was $221 million,
$26 million higher than First Half 2020.
Net interest
income down
$40m, 14%
• Net loans decreased 9% (or $1.4 billion) on First Half 2020, mostly in Auto Loans,
reflecting subdued activity and lower new car sales. Margin lending and lending in
Westpac Pacific were also lower;
• Deposits decreased 3% (or $0.3 billion); and
• Net interest margin was down 25 basis points from reduced deposit spreads and lower
earnings on capital from low interest rates, and interest rate reductions on certain
products as part of COVID-19 customer support measures.
Non-interest
income down
$94m, 22%
• Notable items were $201 million higher in Second Half 2020. Excluding this, non-interest
income increased $107 million (or 20%);
• Superannuation, Platforms and Insurance (SPI) contribution was down $19 million from:
–Margin compression from platform and superannuation pricing changes, product
migrations to lower margin super products and impacts of regulation (including
Protecting Your Super);
–Lower revenue from lower interest rates on managed cash balances; and
–Lower average fund balances from market volatility over the half, and early release of
superannuation.
• Insurance income was $135 million higher over the half given materially lower general
insurance claims mostly from a $116 million reduction in claims for bushfires and severe
weather events; and
• Lower banking fees also contributed to the decline.
Expenses
up $708m, 169%
• Notable items increased $612 million in the half. Excluding these, expenses were
$96 million (or 25%) higher. Most of the increase in costs related to supporting COVID-19
activities and continued spend on risk and compliance.
Impairment
charges down
$65m, 41%
• The level of stressed exposures to TCE increased 438 basis points to 8.56%, mostly from
an increase in watchlist exposures in Westpac Pacific; and
• We continued to increase collectively assessed provisions to reflect higher expected
credit losses from AASB 9 provision models, however, the provisions required to be raised
in Second Half 2020 were lower than First Half 2020.
1
2
3
4
5
6
7
65WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Full Year 2020 – Full Year 2019
Cash earnings were a loss of $506 million compared to a profit of $712 million in Full Year 2019. During
Full Year 2020 the business incurred $922 million (after tax) of notable items, compared to $47 million (after
tax) in Full Year 2019. Excluding the impact of notable items, cash earnings for Full Year 2020 were $416 million,
$343 million lower than Full Year 2019.
Net interest
income down
$21m, 4%
• Net loans decreased 13% (or $2.3 billion), mostly in Auto Loans, reflecting subdued
activity and lower new car sales;
• Deposits were unchanged with the decline in term deposits offset by an increase in at call
accounts; and
• Net interest margin was up 11 basis points with the benefit of lower funding costs partly
offset by reduced deposit spreads and lower earnings on capital from low interest rates,
and interest rate reductions from customer support measures.
Non-interest
income down
$650m, 46%
• The increase in notable items reduced non-interest income $369 million during the year.
Excluding these, non-interest income decreased $281 million (or 19%);
• SPI contribution was down $143 million from:
–Margin compression from platform and superannuation pricing changes, product
migrations to lower margin super products and impacts of regulation (including
Protecting Your Super); and
–Lower platform revenue from lower interest rates on managed cash balances.
• Insurance contribution was down $140 million mostly from:
–General insurance claims increased $108 million primarily from bushfires and major
weather events (including NSW/QLD storms and floods). Partly offset by an increase
in premiums;
–Life insurance income was $10 million lower mostly from COVID-19 customer policy
support measures. Lower premiums were largely offset by a lower claims; and
–LMI income was also lower, mostly from higher claims.
Expenses up
$701m, 83%
• Notable items in Full Year 2020 were $664 million higher than Full Year 2019. Excluding
these items, expenses were $37 million higher. Most of the increase related to supporting
COVID-19 activities, continued spend on risk and compliance, and CPI increases.
Impairment
charges up
$144m, 130%
• The level of stressed exposures to TCE increased 508 bps to 8.56%, mostly from an
increase in watchlist exposures in Westpac Pacific; and
• Impairment charges were higher, mostly reflecting COVID-19 impacts. These were from
changes to the base case economics forecasts and increasing the weight applied to
the downside economic scenario. Higher stress and delinquencies also led to increased
overlay provisions. Lower recoveries in Full Year 2020 also contributed to the increase.
66WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Insurance key metrics
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
20202020Mar 2020202019Sept 19
Life Insurance in-force premiums ($m)
Balance as at beginning of period 1,208 1,212 - 1,212 1,277 (5)
Sales / New Business 67 67 - 134 88 52
Lapses(322)(71)large(393)(153) 157
Balance as at end of period
1
953 1,208 (21) 953 1,212 (21)
Claims ratios
2
for Insurance Business (%)
Life insurance 48 54 large 51 51 (76 bps)
General insurance 58 107 large 82 62 large
Lenders mortgage insurance 67 15 large 40 20 large
Gross written premiums ($m)
General insurance gross written premium ($m) 282 273 3 555 538 3
Lenders mortgage insurance gross written premium
3
91 89 2 180 160 13
Superannuation, Platforms & Investments
As atAs at% Mov’tAs at% Mov’t
30 SeptNetOther30 SeptSept 20 -31 MarchSept 20 -
$bn2020InflowsOutflowsFlowsMov’t
1
2019Sept 192020Mar 20
Superannuation 38.2 3.9 (5.7)(1.8)(0.6) 40.6 (6) 35.3 8
Platforms 113.8 26.5 (28.3)(1.8)(7.4) 123.0 (7) 105.0 8
Packaged funds 41.0 9.5 (8.2) 1.3 (3.9) 43.6 (6) 38.8 6
Total funds 193.0 39.9 (42.2)(2.3)(11.9) 207.2 (7) 179.1 8
Market share in key Australian wealth products are displayed below.
Current Australian Market ShareMarket
ShareRank
Platforms (includes Wrap and Corporate Super)18%1
Retail (excludes Cash)17%1
Corporate Super14%3
1. The life insurance in-force premium is comprised of:
Retail as at 30 September 2020 of $942 million (as at 31 March 2020: $949 million, as at 30 September 2019: $960 million); and Group
Life Insurance as at 30 September 2020 of $11 million (as at 31 March 2020: $259 million, as at 30 September 2019: $252 million).
2. Claims ratios are claims over earned premium plus reinsurance rebate. The lenders mortgage insurance claims ratios have been
calculated to include exchange commission.
3. LMI gross written premium includes loans >90% LVR reinsured with Arch Reinsurance Limited. Second Half 2020 gross written
premiums include $61 million (First Half 2020: $63 million, Full Year 2020: $124 million, Full Year 2019: $108 million).
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67WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
3.6 Group Businesses
Group Businesses include:
• Treasury, which is responsible for the management of the Group’s balance sheet including wholesale funding,
capital and the management of liquidity. Treasury also manages the interest rate risk and foreign exchange risks
inherent in the balance sheet, including managing the mismatch between Group assets and liabilities. Treasury’s
earnings are primarily sourced from managing the Group’s balance sheet and interest rate risk, (excluding
Westpac New Zealand) within set risk limits;
• Group Technology
1
, which is responsible for technology strategy and architecture, infrastructure and operations,
applications development and business integration in Australia; and
• Core Support
2
, which comprises Group support functions, including Australian banking operations, property
services, strategy, finance, risk, financial crime, compliance and conduct, compliance, legal, human resources,
and customer and corporate relations.
Group Businesses also includes earnings on capital not allocated to divisions, certain intra-group transactions that
facilitate the presentation of the performance of the Group’s divisions, gains/losses from most asset sales, earnings
and costs associated with the Group’s Fintech investments, costs associated with customer remediation for the
Advice business
3
, and certain other head office items such as centrally raised provisions.
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 443 456 (3) 899 615 46
Non-interest income 257 (113)large 144 (617)large
Net operating income 700 343 104 1,043 (2)large
Operating expenses(862)(1,502)(43)(2,364)(1,137) 108
Core earnings(162)(1,159)(86)(1,321)(1,139) 16
Impairment (charges)/benefits 641 (472)large 169 92 84
Profit/(loss) before income tax 479 (1,631)large(1,152)(1,047) 10
Income tax (expense)/benefit and NCI(311) 153 large(158) 212 large
Cash earnings 168 (1,478)large(1,310)(835) 57
Add back notable items
Costs associated with AUSTRAC proceedings including
a provision for a penalty 415 1,027 (60) 1,442 - -
Estimated customer refunds, payments, associated
costs and litigation(138) 157 large 19 590 (97)
Wealth restructuring- - - - 172 (100)
Cash earnings excluding notable items 445 (294)large 151 (73)large
Treasury
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net interest income 458 429 7 887 512 73
Non-interest income 15 (1)large 14 5 180
Net operating income 473 428 11 901 517 74
Cash earnings 301 273 10 574 315 82
Treasury Value at Risk (VaR)
4
$mAverageHighLow
Half Year September 2020 219.4 231.1 173.1
Half Year March 2020 46.3 176.7 33.7
Half Year September 2019 35.1 41.1 28.6
1. Group Technology costs are fully allocated to other divisions in the Group.
2. Core Support costs are partially allocated to other divisions, while Group Head Office costs are retained in Group Businesses.
3. In March 2019, Westpac announced that it was exiting the provision of personal financial advice.
4. VaR includes trading book and banking book exposures. The banking book component includes interest rate risk, credit spread risk in
liquid assets and other basis risks as used for internal management purposes.
Divisional results
68WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Divisional results
Financial performance
Second Half 2020 – First Half 2020
Group Businesses cash earnings were $168 million, $1,646 million higher than First Half 2020. Excluding notable
items, cash earnings were $445 million, an increase of $739 million.
Net operating
income up $357m,
104%
• Revaluation gains from our investment in Zip Co Limited ($303 million); and
• Provisions for estimated customer refunds and payments which were $30 million in
Second Half 2020, compared to $126 million in First Half 2020.
Expenses down
$640m, 43%
• Provision for a penalty from AUSTRAC and the associated costs of $420 million ($638
million lower than First Half 2020); and
• Provisions for estimated customer refunds and payments, associated costs and
litigation which were $68 million in Second Half 2020 compared to $100 million in
First Half 2020.
Impairments charges
down $1,113m, large
• The movement of $1,113 million was mainly due to the reallocation of overlays held
centrally in First Half 2020 to the operating divisions and centrally held overlays
relating to drought and bushfires no longer required.
Full Year 2020 – Full Year 2019
Group Businesses Full Year 2020 cash earnings loss of $1,310 million was $475 million worse than Full Year 2019.
Excluding notable items, cash earnings were $151 million, an increase of $224 million.
Net operating
income up $1,045m,
large
• Provisions for estimated customer refunds and payments which were $156 million in
Full Year 2020, compared to $759 million in Full Year 2019;
• Revaluation gains from our investment in Zip Co Limited ($303 million); and
• Higher Treasury revenue due to management of interest rate risk ($384 million).
Expenses up
$1,227m, 108%
• Higher costs due to a provision for a penalty from AUSTRAC and the associated costs
($1,478 million), partly offset by;
• Lower costs from the exit of the Advice business ($241 million).
Impairments charges
down $77m, 84%
• The movement of $77 million was mainly due to centrally held overlays relating to
drought and bushfires no longer required.
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69WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Table of contents
4.02020 Full Year Financial Report
4.1Significant developments70
4.2Consolidated income statement78
4.3Consolidated statement of comprehensive income79
4.4Consolidated balance sheet80
4.5Consolidated statement of changes in equity81
4.6Consolidated cash flow statement83
4.7Notes to the consolidated financial statements84
Note 1Financial statements preparation84
Note 2Segment reporting84
Note 3Net interest income88
Note 4Non-interest income89
Note 5Operating expenses90
Note 6Income tax91
Note 7Earnings per share91
Note 8Average balance sheet and interest rates92
Note 9Loans93
Note 10Provisions for expected credit losses93
Note 11Credit quality98
Note 12Deposits and other borrowings100
Note 13Fair values of financial assets and liabilities101
Note 14Provisions, contingent liabilities, contingent assets and credit commitments106
Note 15Shareholders’ equity111
Note 16Notes to the consolidated cash flow statement113
Note 17Subsequent events114
4.8Statement in relation to the audit of the financial statements115
Table of contents
70WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Significant developments
4.1 Significant developments
COVID-19 impacts on Westpac
COVID-19 has had, and continues to have, a significant and adverse impact on the Australian economy, the banking
sector, our customers, counterparties and third party suppliers, as well as our operations.
In response to the COVID-19 pandemic, the Australian government has taken a number of actions to help reduce
and mitigate the economic impact of the pandemic, including in relation to JobKeeper and JobSeeker payments.
The Australian, State and Territory governments have also implemented a range of material restrictions on
businesses, venues, travel, movement and gatherings of people. There have also been similar restrictions put in
place in other jurisdictions in which the Group operates. Many of these new measures have adversely impacted
Westpac.
Westpac’s business activities and operations have been, and will likely in the future be, disrupted by the COVID-19
pandemic. For example, the COVID-19 pandemic has resulted in Westpac closing workplaces and suspending the
provision of services through certain channels. The COVID-19 pandemic has also disrupted, and will continue to
disrupt, numerous industries and global supply chains.
Banks continue to play an important role in supporting customers, continuing to lend to keep credit flowing
and supporting the circulation of funds in the economy. Westpac has provided support to certain customers
impacted by the COVID-19 pandemic by implementing a range of initiatives, such as lowering interest rates on
certain products, waiving certain fees, providing special loans to support customers to manage their cash flow and
granting deferrals of mortgage and business loan repayments. These initiatives, and any support that governments
or regulators may in the future require banks to provide to customers impacted by the COVID-19 pandemic, may
have a negative impact on the Group’s financial performance and may see the Group assume greater risk than it
would have under ordinary circumstances.
Both APRA and ASIC have supported the provision of credit to customers in these circumstances and remain
closely engaged to understand the impact of these measures on our customers, capital, credit risk profile and
liquidity. On 1 September 2020, Westpac submitted a comprehensive plan to APRA and ASIC detailing the
existing and planned processes in place to ensure appropriate ongoing borrower review, customer engagement,
capabilities, resourcing and oversight across the borrower assessment process for COVID-19 impacted customers.
Westpac is expected to identify, address and report to ASIC and APRA any material issues that arise in the
implementation of these plans.
The COVID-19 pandemic has also led to increased regulatory focus in certain areas, including operational resilience,
technology, cyber security, capital management and stress testing. Westpac continues to manage these risks.
In March 2020, the RBA established a Term Funding Facility (TFF) to lower funding costs for the entire banking
system so that the cost of credit to households and businesses is low, and to provide an incentive for lenders to
support credit to businesses. The TFF provides Westpac access to at least $29.8 billion of funds through three year
repurchase transactions at a fixed interest rate of 25 basis points. For further information on the TFF see ‘Funding
and liquidity risk management’ in the Review of Group Operations section.
Further information on the actual and potential impacts of COVID-19 and the Group’s response are set out in the
’Strategic Report’ and ‘Risk Factors’ sections in the 2020 Westpac Group Annual Report.
Westpac significant developments
Leadership changes, reset of strategy and launch of Lines of Business operating model
Since November 2019, there have been significant changes to the Westpac Board and Group Executives. Further
information is set out in Section 10 of the Directors’ Report in the 2020 Westpac Group Annual Report.
In addition, Westpac has adopted a new purpose, helping Australians and New Zealanders succeed, and reset
its strategy, which is focused on concentrating on banking in our core markets of Australia and New Zealand to
support consumer, business, commercial and institutional customers. Further information is set out in the Strategic
Report section in the 2020 Westpac Group Annual Report.
Westpac has also launched its Lines of Business operating model to clarify responsibility and accountability for
end-to-end performance. Further information is set out in the Strategic Report section in the 2020 Westpac Group
Annual Report.
AUSTRAC civil proceedings
On 20 November 2019, AUSTRAC commenced civil proceedings in the Federal Court of Australia against Westpac
in relation to alleged contraventions of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006
(Cth) (AML/CTF Act). These proceedings related to non-reporting of a large number of International Funds
Transfer Instructions (IFTIs) and a failure to include in a number of IFTIs required information about the payer,
failings in relation to record keeping and the passing on of certain data required in IFTIs, failure to comply with
correspondent banking obligations, AML/CTF Program failures and contraventions of ongoing customer due
diligence obligations. AUSTRAC alleged over 23 million contraventions of the AML/CTF Act.
On 24 September 2020, Westpac announced that it had reached an agreement with AUSTRAC to resolve the
proceedings, subject to Court approval. Under the agreement, the parties agreed to file with the Court a Statement
of Agreed Facts and Admissions (SAFA), and to recommend to the Court that Westpac pay a civil penalty of
$1.3 billion in relation to in excess of 23 million admitted contraventions of the AML/CTF Act. Westpac also agreed
to pay AUSTRAC’s legal costs of $3.75 million. In light of the above developments, Westpac has increased the
Significant developments
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71WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Significant developments
provision in respect of the penalty from $900 million to $1.3 billion. The settlement was approved by the Court on
21 October 2020. Further information on the provision is set out in Note 14.
As part of the SAFA, Westpac admitted to additional contraventions of the AML/CTF Act to those in its Defence
of May 2020 and to the new allegations in the Amended Statement of Claim that AUSTRAC filed with the Court on
24 September 2020. Those additional admitted contraventions relate to the reporting of 76,144 IFTIs that did not
contain the required information about the payer, two additional failures to comply with correspondent banking
due diligence obligations, a failure to conduct appropriate ongoing customer due diligence in relation to a number
of additional customers, and aspects of Part A of Westpac’s AML/CTF Program not fully complying with the
requirements under the AML/CTF Act and the AML/CTF Rules.
AUSTRAC response plan and external reviews
Since the commencement of the AUSTRAC proceedings, Westpac has made significant progress in its AUSTRAC
response plan. Further information on the AUSTRAC response plan is set out in the Strategic Report section in the
2020 Westpac Group Annual Report.
Westpac commissioned a number of external reviews in order to identify the causes of the compliance failings
related to the AUSTRAC proceedings, determine appropriate consequences, and to identify key lessons learned.
These reviews include a review by an Advisory Panel into Westpac’s Board governance of AML/CTF obligations,
an assurance review by Promontory of Westpac’s management accountability investigation, and a review, also by
Promontory, of Westpac’s financial crime program. On 4 June 2020 Westpac released a copy of the Advisory Panel
Report and a summary of the reviews’ findings and recommendations.
Financial Crime
Following the AUSTRAC proceedings, Westpac has been progressing actions to improve its financial crime
program. This includes a significant multi-year program of work to improve its management of financial crime risks
(including AML/CTF, sanctions, Anti-Bribery and Corruption, Foreign Account Tax Compliance Act (FATCA) and
Common Reporting Standards (CRS)). Through this work, Westpac has identified further weaknesses and areas
for improvement, which it is addressing. Specific focus areas include uplifting its AML/CTF policies, reviewing the
completeness of data feeding into its AML/CTF systems and considering the adequacy and appropriateness of its
AML/CTF processes and controls. The work also involves addressing matters identified in AUSTRAC’s Statement of
Claim and outlined in the SAFA.
Westpac is also undertaking remediation work in multiple areas, including applicable customer identification
procedures, ongoing and enhanced customer due diligence, customer and payment screening, risk assessments,
transaction monitoring and regulatory reporting including in relation to IFTIs, Threshold Transaction Reports (TTRs)
and Suspicious Matter Reports (including “tipping off” controls).
With increased focus on financial crime, further issues requiring attention have been identified and may continue
to be identified. As part of these efforts, Westpac identified deficiencies in certain systems and controls relevant
to its obligation to file TTRs. This has resulted in instances where the Group has failed to report TTRs, as well as
instances where the Group filed TTRs with incomplete or inaccurate information. The Group self-reported these
TTR deficiencies to AUSTRAC, providing a series of updates since 2019, and is keeping AUSTRAC apprised of the
status of its remediation.
As part of the remediation work the Group is also working to remediate gaps and enhance controls to support
compliance with its FATCA and CRS obligations.
Details about the consequences of failing to comply with financial crime obligations are set out in the Risk Factors
section in the 2020 Westpac Group Annual Report.
Australian Prudential Regulation Authority (APRA) and Australian Securities and Investments Commission (ASIC)
investigations
On 17 December 2019, APRA commenced an investigation examining potential contraventions by Westpac, its
directors and/or senior managers of the Banking Act 1959 (Cth) (including the Banking Executive Accountability
Regime) (Banking Act) and/or APRA’s Prudential Standards by engaging in, and the way it responded to, the
conduct which is the subject of the AUSTRAC proceedings.
On 17 June 2020, APRA delegated certain of its enforcement powers under the Banking Act to ASIC. Following
that delegation, ASIC will examine potential contraventions under the Banking Act by Westpac, its directors and/or
senior managers. APRA has retained its power to administratively disqualify certain individuals under the Banking
Act.
ASIC has commenced an extensive investigation into matters related to the AUSTRAC allegations in the AUSTRAC
proceedings. Westpac remains committed to cooperating and working constructively with ASIC during its
investigation which is ongoing. Westpac has not received an indication from ASIC about the nature of any
enforcement action it may take. Details about the consequences of failing to comply with legal obligations are set
out in the Risk Factors section in the 2020 Westpac Group Annual Report.
72WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Significant developments
Australian and US class actions
Westpac is defending a class action proceeding which was commenced in December 2019 in the Federal Court
of Australia by law firm Phi Finney McDonald, on behalf of certain investors in Westpac securities between 16
December 2013 and 19 November 2019. The proceeding involves allegations relating to market disclosure issues
connected to Westpac’s monitoring of financial crime over the relevant period and matters which are the subject
of the AUSTRAC proceedings. The claims do not identify the amount of any damages sought. However, given
the time period in question and the nature of the claims it is likely that the damages which will be alleged will be
significant. No provision has been taken in relation to the potential exposure.
A second class action in relation to similar issues was commenced by law firm Johnson Winter & Slattery in
March 2020. The Phi Finney McDonald claim was subsequently amended to include the group members from the
Johnson Winter & Slattery proceeding. The Johnson Winter & Slattery proceeding was discontinued in May 2020
by agreement between Westpac, the applicant in that proceeding and the applicant in the Phi Finney McDonald
proceeding.
In January 2020, a US class action was commenced by the Rosen Law Firm, naming Westpac, our current CEO
and our former CEO as defendants. It was brought on behalf of certain investors in Westpac securities between
11 November 2015 and 19 November 2019. That claim related to market disclosure issues connected to Westpac’s
monitoring of financial crime over the relevant period and matters which are the subject of the AUSTRAC
proceedings. The parties have agreed to settle this proceeding on a wholly without admissions basis and on the
basis that in return for full releases from the class members in the proceeding, Westpac will pay an amount of
US$3.1 million. The settlement remains subject to approval by the District Court of Oregon and a process to give
class members an option to opt out. In light of the above developments, Westpac has taken a provision in respect
of the settlement. Further information on the provision is set out in Note 14.
APRA review into risk governance
On 17 December 2019, following the commencement of the AUSTRAC proceedings and other significant prudential
reviews, APRA announced that in addition to investigating possible breaches of the Banking Act by Westpac, it
would conduct an extensive supervision program focused on Westpac’s risk governance, accountability and risk
culture. This program will assess Westpac’s remediation actions, the effectiveness of Westpac’s execution and
the steps Westpac has been taking to strengthen risk governance, including through its self-assessment, which
is referred to below. APRA’s review will consider several governance focus areas in non-financial and financial risk
management and case studies. This review is expected to take approximately 18 months and result in a report of
APRA’s observations and findings.
Operational risk capital overlays
The following additional capital overlays are currently applied by APRA to Westpac’s operational risk capital
requirement:
• $500 million in response to Westpac’s Culture, Governance and Accountability (CGA) self-assessment. The
overlay applied from 30 September 2019 and will remain in place until APRA is satisfied that Westpac has
completed its action plan.
• $500 million in response to the magnitude and nature of issues alleged by AUSTRAC in its Statement of Claim.
The additional overlay applied from 31 December 2019.
Both of the overlays have been applied through an increase in risk weighted assets (RWA). The impact on
Westpac’s Level 2 common equity tier 1 (CET1) capital ratio at 30 September 2020 was 31 basis points.
Outcome of Specialist Businesses strategic review
On 4 May 2020, Westpac announced the creation of a new Specialist Businesses division consisting of the
following businesses:
• Superannuation, Investments and Platforms;
• Insurance;
• Auto and vendor finance; and
• Westpac Pacific.
These businesses have since undergone a strategic review process which has now been completed. The outcome is
that Westpac does not view itself as the long-term owner of these businesses and will seek to exit them over time
as market conditions permit.
On 21 August 2020, Westpac announced that it had entered into an agreement for the sale of its Vendor Finance
business to Angle Finance, a portfolio company of Cerberus Capital Management, L.P. Vendor Finance supports
third parties to fund small ticket equipment finance loans to around 42,000 Australian businesses. Given the
relatively modest size of the portfolio, the sale is expected to have an immaterial impact on Westpac’s balance
sheet and capital ratios. Completion is expected to occur at the end of April 2021.
Consolidation of Westpac’s international operations
Following a comprehensive review of its Asia, Europe and US businesses, Westpac has decided to consolidate its
international operations into three branches; Singapore, London and New York. This decision means the Group
will exit operations in Beijing, Shanghai, Hong Kong, Mumbai and Jakarta. The changes are not expected to have a
significant impact on cash earnings and, over time, are planned to improve the Group’s capital efficiency, including
by reducing RWA.
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Significant developments
Sale of shares in Pendal Group Limited
On 17 June 2020, Westpac announced the sale of approximately 31 million Pendal Group Limited (ASX:PDL)
(Pendal) shares at a price of $5.98 per share, pursuant to a fully underwritten institutional offer. This sale completed
the divestment of Westpac’s proprietary shareholding in Pendal, following earlier share sales in 2007, 2015 and
2017.
Sale of shares in Zip Co Limited
On 21 October 2020, Westpac announced the sale of its 10.7% stake in Zip Co Limited (ASX:Z1P) by way of a fully
underwritten institutional offer. The decision reflects Westpac’s approach to simplifying its business and ensuring
the efficient use of capital. The sale added approximately 8 basis points to Westpac’s common equity tier 1 capital
ratio in the first half of FY21. Settlement of the transaction occurred on 26 October 2020.
Westpac reviews
Culture, Governance and Accountability reassessment
Following a reassessment of its existing CGA Remediation Plan (as defined below), which was undertaken in
response to a request from APRA, Westpac has launched a Group-wide program to strengthen its management of
non-financial risks.
Westpac first conducted a self-assessment into culture, governance and accountability in November 2018 and
developed a remediation plan in response (CGA Remediation Plan). Following AUSTRAC’s Statement of Claim in
November 2019, Westpac reassessed its remediation plan at the request of APRA. A central conclusion from the
reassessment was that Westpac’s non-financial risk culture remains immature and reactive.
As a result, Westpac is embarking on a Group-wide program, CORE – Customer Outcomes and Risk Excellence –
with a focus on Board and Executive oversight of non-financial risk, and strengthening risk culture, risk frameworks
and risk management capability. Promontory will provide ongoing assurance over the CORE program.
Further information about CORE is set out in the ‘Strategic Report’ and ‘Group Performance’ sections in the
2020 Westpac Group Annual Report.
Risk management
Westpac is upgrading its end to end risk management. Recent reviews have identified a wide range of
shortcomings and areas for improvement in Westpac’s policies, systems and data, as well as its risk capabilities and
risk management framework. The Group has a number of risks which sit outside of our risk appetite or do not meet
the expectations of regulators. The CORE program is addressing some of these improvements. Key components
of the CORE program include embedding a more proactive risk culture, refining a three lines of defence model to
define clearer risk management accountabilities and improving risk awareness, capability and capacity through
organisational-wide training and additional risk resources in the business. Other areas of improvement are
being addressed through significant investment in risk management expertise in areas such as operational risk,
compliance, financial crime, stress testing, modelling and data management.
Further information about risk management is set out in the Risk and Risk Management section in the 2020
Westpac Group Annual Report.
Regulatory and Government focus
Royal Commission into the banking, superannuation and financial services industry
Implementation of the 76 express recommendations in the Final Report of the Royal Commission into Misconduct
in the Banking, Superannuation and Financial Services Industry continues to have a significant impact on Australia’s
banking and financial services entities and their regulators. Depending on how and when the government legislates
or regulates for the recommendations there may also be adverse impacts on our business.
To allow the industry to focus on its response to COVID-19 and support for customers on 8 May 2020 the
government announced a six month deferral in its Implementation Roadmap. A number of the legislative drafts
are proposed to come into effect in early 2021 but the final form of these drafts have not yet been released by the
government posing a challenge to implementation.
Presently, 50 recommendations apply to Westpac. The Group has commenced programs of work in relation to all
of the applicable recommendations that have been the subject of legislative activity and/or regulatory activity and,
to date, has implemented 14 recommendations.
In anticipation of the removal of grandfathering of conflicted remuneration payable to financial advisers effective
from 1 January 2021, we are also currently reviewing third party remuneration arrangements.
Other impacts arising from the Royal Commission include a number of claims being brought against financial
institutions in relation to certain matters considered during the Royal Commission, and the referral of several cases
of misconduct to the financial regulators by Commissioner Hayne. The Royal Commission has also led to increased
political and regulatory scrutiny of the financial industry in New Zealand and may continue to do so.
74WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Significant developments
Changes to responsible lending laws
On 25 September 2020, the government announced a proposed simplification of Australia’s consumer credit
regulatory regime. The government’s intended commencement date (subject to the passage of law) is 1 March 2021.
We are closely monitoring this and will make any changes to our systems and processes as appropriate.
In addition to the responsible lending obligations, consumer credit is subject to regulatory oversight through a
range of mechanisms, including APRA standards and guidance in relation to credit assessments by authorised
deposit-taking institutions (ADIs), the ABA’s Banking Code of Practice and the general conduct obligations under
section 47 of the National Consumer Credit Protection Act 2009 (Cth), including the obligation to do all things to
ensure that credit activities are engaged in efficiently, honestly and fairly. Accordingly, without analogous changes
to these regulatory requirements, removal of the responsible lending obligations may not necessarily have a
significant impact on our overall consumer credit processes.
Focus on superannuation
On 6 October 2020, the government released a paper entitled ‘Your Future, Your Super’, setting out ‘reforms to
make your super work harder for you’.
The first key reform involves linking a person to their superannuation fund throughout their working life (although
a person can choose to change their super fund at any time). Rather than contributing to the employer’s default
fund for its employees who do not choose their own superannuation fund, employers will be required to contribute
to their employees’ existing superannuation funds. This reform is intended to reduce the number of people with
multiple superannuation accounts. This means employees do not have to select a superannuation fund each time
they change jobs, and should therefore reduce individuals having unintended multiple superannuation accounts.
The second key reform relates to annual performance tests. An online ATO ‘YourSuper’ comparison tool that
compares funds by fees and performance will be introduced to assist people in selecting a superannuation
fund. The tool will also expressly list under performing funds, based on the annual performance tests. These
annual performance tests will apply by July 2021 for MySuper (default) products. If a MySuper product fails the
performance ‘test’, the trustee will be required to notify members of the under performance by October 2021 and
provide information about the YourSuper comparison tool. If a fund fails two consecutive performance ‘tests’,
it will not be permitted to accept new members. Annual performance tests will also apply to certain types of
superannuation choice options by July 2022.
Westpac is supportive of the changes given they are expected to drive increased competitiveness across the
industry.
In addition, APRA is increasing its supervisory focus on superannuation providers, including Westpac, with an
emphasis on member outcomes and governance. Westpac’s superannuation entities are underway with an ongoing
program of work to strengthen their management of risk under the risk management framework and address
feedback from APRA.
Regulatory reviews and inquiries
Provision of credit - reviews by APRA
Following APRA reviews assessing the adequacy of our credit risk management framework including our controls,
end-to-end processes, policies and operating systems, long standing weaknesses have been identified that require
significant uplift. The Group is making changes to systems and controls to improve its end-to-end approach for
its mortgage, business and institutional lending portfolios, as well as other key processes. This includes enhancing
portfolio management practices, data governance, systems upgrades (including data collection and rationalisation),
strengthening collateral management processes and improving assurance and oversight over our credit
management frameworks. This program of work will also address issues identified by Westpac’s internal assurance
and audit teams.
General regulatory changes affecting our business
Open banking regime
The Competition and Consumer Act 2010 (Cth), as amended by the Treasury Laws Amendment (Consumer Data
Right) Act 2019 (Cth), contains a regime for a consumer data right that gives customers in Australia a right to
direct that their data (starting with banking data) be shared with accredited third parties. Data sharing facilitates
competition through easier product comparison and switching. This is expected to have significant implications for
consumers and banks, including Westpac.
The Competition and Consumer (Consumer Data Right) Rules 2020 (the CDR Rules) commenced on 6 February
2020. The CDR Rules set out how the CDR regime will operate. Open Banking commenced on 1 July 2020 with
the four major banks required to share consumer data for credit and debit card, deposit account and transaction
account data with accredited service providers. Future phases will introduce additional products, joint accounts
and, business and corporate consumers. Other brands in the Westpac Group will be required to commence data
sharing on 1 July 2021.
Comprehensive Credit Reporting (CCR)
The National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019
(Cth) is currently before the Senate. The Bill requires the four major Australian banks to supply CCR data to credit
reporting bodies and outlines how financial hardship cases should be reported.
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75WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Significant developments
The Bill has not yet passed and there have been disruptions to the parliamentary schedule as a result of COVID-19.
Nevertheless, Westpac is already participating in CCR on a voluntary basis.
Other litigation
ASIC’s outbound scaled advice division proceedings
On 22 December 2016, ASIC commenced Federal Court proceedings against BT Funds Management Limited
(BTFM) and Westpac Securities Administration Limited (WSAL) in relation to a number of superannuation account
consolidation campaigns conducted between 2013 and 2016. ASIC has alleged that in the course of some of these
campaigns, customers were provided with personal advice in contravention of a number of Corporations Act 2001
(Cth) (Corporations Act) provisions, and selected 15 specific customers as the focus of their claim. Following an
appeal by ASIC in the proceedings, on 28 October 2019 the Full Federal Court handed down its decision in ASIC’s
favour and made findings that BTFM and WSAL each provided personal advice on relevant calls made to 14 of the
15 customers and made declarations of consequential contraventions of the Corporations Act (including section
912A(1)(a)). BTFM and WSAL were granted special leave to appeal by the High Court of Australia, which heard the
appeal to the Full Federal Court’s decision on 7 and 8 October 2020. The High Court’s judgment in the matter is
reserved. If this appeal is unsuccessful, the matter will be remitted to the Federal Court for a hearing on penalties
and any other orders sought by ASIC.
ASIC’s proceedings against BT Funds Management and Asgard Capital Management
On 20 August 2020, ASIC commenced proceedings in the Federal Court against BT Funds Management Limited
and Asgard Capital Management Limited, in relation to an issue that was a case study in the Royal Commission. The
allegations concern the inadvertent charging of financial adviser fees to 404 customers totalling $130,006 after a
request had been made to remove the financial adviser from the customers’ accounts. The issue was self-reported
to ASIC in 2017 and customers have been contacted and remediated. BTFM and ACML accept the allegations
made by ASIC and do not intend to defend the proceedings. Westpac is now working through the relevant Court
procedural steps to try and bring the matter to a resolution.
Class action against Westpac Banking Corporation and Westpac Life Insurance Services Limited
On 12 October 2017, a class action was filed in the Federal Court of Australia on behalf of customers who,
since February 2011, obtained insurance issued by Westpac Life Insurance Services Limited (WLIS) on the
recommendation of financial advisers employed within the Westpac Group. The plaintiffs have alleged that aspects
of the financial advice provided by those advisers breached fiduciary and statutory duties owed to the advisers’
clients, including the duty to act in the best interests of the client, and that WLIS was knowingly involved in those
alleged breaches. Westpac and WLIS are defending the proceedings. The matter has been set down for an initial
trial in May 2021.
Class action in the US relating to bank bill swap rate (BBSW)
In August 2016, a class action was filed in the United States District Court for the Southern District of New York
against Westpac and a number of other Australian and international banks and brokers alleging misconduct in
relation to the bank bill swap reference rate. Westpac has reached agreement with the Plaintiffs to settle this
class action. The terms of the settlement are currently confidential and subject to negotiation and execution of
settlement papers and Court approval. Westpac holds a provision in relation to this matter.
Class action relating to cash in super
On 5 September 2019, a class action against BTFM and WLIS was commenced in the Federal Court of Australia
in relation to aspects of BTFM’s BT Super for Life cash investment option. The claim follows other industry class
actions.
It is alleged that BTFM failed to adhere to a number of obligations under the general law, the relevant trust deed
and the Superannuation Industry (Supervision) Act 1993 (Cth), and that WLIS was knowingly concerned with
BTFM’s alleged contraventions. The damages sought by the claim are unspecified. BTFM and WLIS are defending
the proceedings.
Class action relating to consumer credit insurance
On 28 February 2020, a class action was commenced against Westpac Banking Corporation, Westpac General
Insurance Limited and Westpac Life Insurance Services Limited in the Federal Court of Australia in relation to
Westpac’s sale of consumer credit insurance (CCI). The claim follows other industry class actions.
It is alleged that the three entities failed to adhere to a number of obligations in selling CCI in conjunction with
credit cards, personal loans and flexi loans. The damages sought by the claim are unspecified. The three entities are
defending the proceedings. Westpac no longer sells CCI products.
Class action relating to payment of flex commissions to auto dealers
On 16 July 2020, a class action was commenced against Westpac Banking Corporation and St George Finance
Limited (SGF) in the Supreme Court of Victoria in relation to flex commissions paid to auto dealers from
1 March 2013 to 31 October 2018. This proceeding is one of two class actions brought by Maurice Blackburn against
a number of lenders in the auto finance industry.
It is alleged that Westpac and SGF are liable for the unfair conduct of dealers acting as credit representatives
and engaged in misleading or deceptive conduct. The damages sought are unspecified. Westpac and SGF are
defending the proceedings. Another law firm publicly announced in July 2020 that it is preparing to commence
76WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Significant developments
a class action against Westpac entities in relation to flex commissions paid to auto dealers. Westpac has not
been served with a claim from that law firm on flex commissions. Westpac has not paid flex commissions since
1 November 2018 following an industry-wide ban issued by ASIC.
Potential class actions
Westpac is aware from media reports and other publicly available material that other class actions against Westpac
entities are being investigated. In July 2020, one law firm publicly stated that it intends to commence a class action
against BTFM alleging that since 2014, BTFM did not act in the best interests of members of certain superannuation
funds when obtaining group insurance policies. In August 2020, another law firm announced that it is investigating
claims on behalf of persons who in the past 6 years acquired, renewed or continued to hold a financial product
(including life insurance) on the advice or recommendation of a financial adviser from Magnitude Group, Securitor
Financial Group or Westpac Banking Corporation. Westpac has not been served with a claim in relation to either of
these matters and has no information about the proposed claims beyond the public statements issued by the law
firms involved.
APRA regulatory changes and other changes affecting capital
APRA announcements on capital
As part of its response to the current economic environment following the COVID-19 pandemic, APRA has made
the following announcements on capital:
• Updated guidance on capital management and dividends: For 2020, APRA expects ADIs to retain at least
half of their earnings, actively use the dividend reinvestment plan (DRP) and/or other capital management
initiatives to at least partially offset the reduction in capital from distributions. Westpac took this guidance into
consideration when determining the final dividend, which is discussed further in Section 3 of the Directors’
Report in the 2020 Westpac Group Annual Report;
• Adjustment to expectations for bank capital: As announced in March 2020, APRA does not expect ADIs to
meet the ‘unquestionably strong’ capital benchmarks in the period ahead (so long as they remain above the
current regulatory requirement). Westpac’s capital management strategy is set out further in the Review of
Group Operations section in the 2020 Westpac Group Annual Report;
• Temporary amendments to the calculation of RWA for COVID-19 support packages: Where a support package
provides an option to defer repayments for a period of time, for RWA calculation purposes, a bank need not
treat the period of the repayment holiday as a period of arrears (provided the borrower had previously been
meeting their repayment obligations). In addition, the government’s ‘Coronavirus SME Guarantee Scheme’
is to be regarded as an eligible guarantee by the government for RWA calculation purposes. The temporary
capital treatment is available until the earlier of either a maximum period of ten months from when the initial
repayment deferral was granted, or 31 March 2021;
• Deferral of APRA’s implementation of the Basel III capital reforms by a year to January 2023; and
• Deferral of changes to APS 222 Associations with Related Entities standard by a year to 1 January 2022.
APRA’s proposed revisions to subsidiary capital investment treatment
APRA has proposed changes to APS 111 Capital Adequacy Measurement of Capital including changes to the
existing approach for equity exposures in banking and insurance subsidiaries (Level 1). There is no impact to
Westpac’s reported capital ratios on a Level 2 basis. APRA has indicated that they intend to recommence
consultation and a revised standard will come into effect from 1 January 2022 following the COVID-19 pandemic.
Additional loss absorbing capacity
On 9 July 2019, APRA announced a requirement for the Australian major banks (including Westpac) to increase
their total capital requirements by three percentage points of RWA as measured under the current capital
adequacy framework. This increase in total capital will take full effect from 1 January 2024.
The additional capital is expected to be raised through Tier 2 Capital and is likely to be offset by a decrease
in other forms of long term wholesale funding. Westpac is continuing to make progress towards the new
requirements. As at 30 September 2020, the Tier 2 ratio was 3.15%.
APRA is still targeting an additional four to five percentage points of loss-absorbing capacity. Over the next four
years, APRA has stated that it will consider feasible alternative methods for raising the remaining 1-2 percentage
points.
APRA Prudential Standard CPS 511: Remuneration
On 23 July 2019, APRA released for consultation a new draft prudential standard and supporting discussion paper
on remuneration. It is aimed at clarifying and strengthening remuneration arrangements in APRA-regulated entities.
The new standard will replace existing remuneration requirements under CPS/SPS 510 Governance. In August 2020,
APRA released its 2020-2024 Corporate Plan noting the revised APRA Prudential Standard CPS 511 is expected to
be released from January to July 2021.
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77WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Significant developments
New Zealand
COVID-19 impacts
In response to COVID-19, a number of laws have been enacted by the New Zealand government to help reduce
the economic impact and it has implemented a range of material restrictions on businesses, venues, travel and
movement. Many of these new measures have impacted WNZL’s operations.
Also in response to COVID-19, there have been a number of new guidance updates published and regulatory delays
announced by New Zealand regulators, including the Reserve Bank of New Zealand (RBNZ), the Financial Markets
Authority and the Commerce Commission.
On 2 April 2020, a decision was made by the RBNZ to freeze the distribution of dividends on ordinary shares by all
banks in New Zealand during the period of economic uncertainty caused by COVID-19. Non-payment of dividends
from WNZL only affects Westpac’s Level 1 CET1 capital ratio.
Westpac is well capitalised and at 30 September 2020 had a Level 1 CET1 capital ratio of 11.40%.
RBNZ Capital Review
On 5 December 2019, the RBNZ announced changes to the capital adequacy framework in New Zealand. The new
framework includes the following key components:
• Setting a Tier 1 capital requirement of 16% of RWA for systemically important banks (including WNZL) and
14% for all other banks;
• Additional Tier 1 capital (‘AT1’) can comprise no more than 2.5% of the 16% Tier 1 capital requirement;
• Eligible Tier 1 capital will comprise common equity and redeemable perpetual preference shares. Existing AT1
instruments will be phased out over a seven year period;
• Maintaining the existing Tier 2 capital requirement of 2% of RWA; and
• Recalibrating RWA for internal rating based banks, such as WNZL, such that aggregate RWA will increase to
90% of standardised RWA.
Westpac believes WNZL is already strongly capitalised with a Tier 1 capital ratio of 15% at 30 September 2020
based on the current RBNZ rules. On a pro forma basis (including the new RWA and capital requirements), at
30 September 2020 and assuming a Tier 1 capital ratio of 16-17%, WNZL would require a further NZ$1.6-$2.2 billion
of Tier 1 capital to meet the new requirements that are fully effective in 2028.
In response to the impacts of COVID-19, and to support credit availability, the RBNZ has delayed the start date of
the new capital regime by 12 months to 1 July 2021 and the RBNZ will consider further delays in 2021 if it considers
that market conditions warrant it. Banks will be given up to seven years to comply.
RBNZ - Review under section 95 of the Reserve Bank of New Zealand Act 1989
In June 2019, in response to a review under section 95 of the Reserve Bank of New Zealand Act 1989 of WNZL’s
compliance with advanced internal rating based aspects of the RBNZ’s ‘Capital Adequacy Framework (Internal
Models Based Approach)’ (BS2B), WNZL presented the RBNZ with a submission providing an overview of its credit
risk rating system and activities undertaken to address compliance issues and enhance risk management practices.
On 30 October 2019, the RBNZ informed WNZL that it had accepted the submission and measures undertaken by
WNZL to achieve satisfactory compliance with BS2B, and that WNZL would retain its accreditation to use internal
models for credit risk in the calculation of its regulatory capital requirements. With effect from 31 December 2019,
the RBNZ removed the requirement imposed on WNZL since 31 December 2017 to maintain minimum regulatory
capital ratios that were two percentage points higher than the ratios applying to other locally incorporated banks.
78WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Consolidated financial statements
4.2 Consolidated income statement
Westpac Banking Corporation and its controlled entities
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$mNote20202020Mar 2020202019Sept 19
Interest income:
Calculated using the effective interest
rate method3 12,184 14,412 (15) 26,596 32,518 (18)
Other3 179 272 (34) 451 704 (36)
Total interest income 12,363 14,684 (16) 27,047 33,222 (19)
Interest expense 3(4,667)(5,684)(18)(10,351)(16,315)(37)
Net interest income 7,696 9,000 (14) 16,696 16,907 (1)
Net fee income4 837 755 11 1,592 1,655 (4)
Net wealth management and insurance
income4 286 465 (38) 751 1,029 (27)
Trading income4 435 460 (5) 895 929 (4)
Other income4 325 (76)large 249 129 93
Net operating income before operating
expenses and impairment charges 9,579 10,604 (10) 20,183 20,649 (2)
Operating expenses5(6,558)(6,181) 6 (12,739)(10,106) 26
Impairment charges10(940)(2,238)(58)(3,178)(794)large
Profit before income tax 2,081 2,185 (5) 4,266 9,749 (56)
Income tax expense6(980)(994)(1)(1,974)(2,959)(33)
Net profit for the period 1,101 1,191 (8) 2,292 6,790 (66)
Net profit attributable to non-controlling
interests (NCI)(1)(1)- (2)(6)(67)
Net profit attributable to owners of Westpac
Banking Corporation (WBC) 1,100 1,190 (8) 2,290 6,784 (66)
Earnings per share (cents)
Basic7 30.5 33.2 (8) 63.7 196.5 (68)
Diluted7 29.9 33.2 (10) 63.7 189.5 (66)
The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated financial statements
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79WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Consolidated financial statements
4.3 Consolidated statement of comprehensive income
Westpac Banking Corporation and its controlled entities
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net profit for the period 1,101 1,191 (8) 2,292 6,790 (66)
Other comprehensive income
Items that may be reclassified subsequently to profit or
loss
Gains/(losses) recognised in equity on:
Debt securities measured at fair value through other
comprehensive income (FVOCI) 500 (143)large 357 (46)large
Cash flow hedging instruments(240) 145 large(95)(203)(53)
Transferred to income statement:
Debt securities measured at FVOCI(51)(28) 82 (79)(29) 172
Cash flow hedging instruments 90 128 (30) 218 197 11
Foreign currency translation reserve 55 - - 55 (10)large
Loss allowance on debt securities measured at FVOCI 1 1 - 2 - -
Exchange differences on translation of foreign operations
(net of associated hedges)(433) 265 large(168) 182 large
Income tax on items taken to or transferred from equity:
Debt securities measured at FVOCI(131) 50 large(81) 20 large
Cash flow hedging instruments 44 (80)large(36) 2 large
Items that will not be reclassified subsequently to profit
or loss
Gains/(losses) on equity securities measured at FVOCI
(net of tax)(3)(18)(83)(21) 11 large
Own credit adjustment on financial liabilities
designated at fair value (net of tax)(383) 344 large(39)(10)large
Remeasurement of defined benefit obligation
recognised in equity (net of tax)(169) 54 large(115)(276)(58)
Other comprehensive income for the period (net of tax)(720) 718 large(2)(162)(99)
Total comprehensive income for the period 381 1,909 (80) 2,290 6,628 (65)
Attributable to:
Owners of WBC 386 1,905 (80) 2,291 6,620 (65)
NCI(5) 4 large(1) 8 large
Total comprehensive income for the period 381 1,909 (80) 2,290 6,628 (65)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes.
80WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Consolidated financial statements
4.4 Consolidated balance sheet
Westpac Banking Corporation and its controlled entities
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$mNote202020202019Mar 20Sept 19
Assets
Cash and balances with central banks 30,129 45,815 20,059 (34) 50
Collateral paid 4,778 5,339 5,930 (11)(19)
Trading securities and financial assets measured at fair
value through income statement (FVIS) 40,667 26,280 31,781 55 28
Derivative financial instruments 23,367 56,661 29,859 (59)(22)
Investments securities 91,539 85,789 73,401 7 25
Loans9 693,059 719,678 714,770 (4)(3)
Other financial assets 5,474 5,849 5,367 (6) 2
Life insurance assets 3,593 2,574 9,367 40 (62)
Investment in associates 61 101 129 (40)(53)
Property and equipment 3,910 4,170 1,155 (6)large
Deferred tax assets 3,064 2,623 2,048 17 50
Intangible assets 11,497 11,943 11,953 (4)(4)
Other assets 808 840 807 (4)-
Total assets 911,946 967,662 906,626 (6) 1
Liabilities
Collateral received 2,250 12,728 3,287 (82)(32)
Deposits and other borrowings12 591,131 582,920 563,247 1 5
Other financial liabilities 40,925 33,996 29,215 20 40
Derivative financial instruments 23,054 48,089 29,096 (52)(21)
Debt issues 150,325 185,835 181,457 (19)(17)
Current tax liabilities 70 31 163 126 (57)
Life insurance liabilities 1,396 604 7,377 131 (81)
Provisions14 5,287 4,669 3,169 13 67
Deferred tax liabilities 126 45 44 180 186
Other liabilities 5,359 5,292 2,238 1 139
Total liabilities excluding loan capital 819,923 874,209 819,293 (6)-
Loan capital 23,949 25,807 21,826 (7) 10
Total liabilities 843,872 900,016 841,119 (6)-
Net assets 68,074 67,646 65,507 1 4
Shareholders’ equity
Share capital:
Ordinary share capital15 40,509 40,503 37,508 - 8
Treasury shares and Restricted Share Plan (RSP)
treasury shares15(563)(586)(553)(4) 2
Reserves15 1,544 1,688 1,311 (9) 18
Retained profits 26,533 25,985 27,188 2 (2)
Total equity attributable to owners of WBC 68,023 67,590 65,454 1 4
NCI 51 56 53 (9)(4)
Total shareholders’ equity and NCI 68,074 67,646 65,507 1 4
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
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81WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Consolidated financial statements
4.5 Consolidated statement of changes in equity
Westpac Banking Corporation and its controlled entities
Total equity
ShareattributableTotal
CapitalReservesRetainedto owners of shareholders’
$m(Note 15)(Note 15)profitsWBCNCIequity and NCI
Balance as at 30 September 2018 35,561 1,077 27,883 64,521 52 64,573
Impact on adoption of new accounting standards- 2 (727)(725)- (725)
Restated opening balance 35,561 1,079 27,156 63,796 52 63,848
Net profit for the year- - 6,784 6,784 6 6,790
Net other comprehensive income for the year- 122 (286)(164) 2 (162)
Total comprehensive income for the year- 122 6,498 6,620 8 6,628
Transactions in capacity as equity holders
Dividends on ordinary shares
1
- - (6,466)(6,466)- (6,466)
Dividend reinvestment plan 1,489 - - 1,489 - 1,489
Other equity movements
Share-based payment arrangements- 108 - 108 - 108
Purchase of shares (net of issue costs)(33)- - (33)- (33)
Net (acquisition)/disposal of treasury shares(62)- - (62)- (62)
Other- 2 - 2 (7)(5)
Total contributions and distributions 1,394 110 (6,466)(4,962)(7)(4,969)
Balance as at 30 September 2019 36,955 1,311 27,188 65,454 53 65,507
Net profit for the year- - 2,290 2,290 2 2,292
Net other comprehensive income for the year- 155 (154) 1 (3)(2)
Total comprehensive income for the year- 155 2,136 2,291 (1) 2,290
Transactions in capacity as equity holders
Share issuances 2,751 - - 2,751 - 2,751
Dividends on ordinary shares
1
- - (2,791)(2,791)- (2,791)
Dividend reinvestment plan 273 - - 273 - 273
Other equity movements
Share-based payment arrangements- 78 - 78 - 78
Purchase of shares (net of issue costs)(29)- - (29)- (29)
Net (acquisition)/disposal of treasury shares(10)- - (10)- (10)
Other 6 - - 6 (1) 5
Total contributions and distributions 2,991 78 (2,791) 278 (1) 277
Balance as at 30 September 2020 39,946 1,544 26,533 68,023 51 68,074
1. 2020 relates to 2019 final dividend of 80 cents per share ($2,791 million) (2019: 2019 interim dividend of 94 cents per share ($3,239
million) and 2018 final dividend of 94 cents per share ($3,227 million)), all fully franked at 30%.
82WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Consolidated financial statements
Total equity
ShareattributableTotal
CapitalReservesRetainedto owners of shareholders’
$m(Note 15)(Note 15)profitsWBCNCIequity and NCI
Balance as at 30 September 2019 36,955 1,311 27,188 65,454 53 65,507
Net profit for the period- - 1,190 1,190 1 1,191
Net other comprehensive income for the period- 317 398 715 3 718
Total comprehensive income for the period- 317 1,588 1,905 4 1,909
Transactions in capacity as equity holders
Share issuances 2,751 - - 2,751 - 2,751
Dividends on ordinary shares
1
- - (2,791)(2,791)- (2,791)
Dividend reinvestment plan 273 - - 273 - 273
Other equity movements
Share-based payment arrangements- 60 - 60 - 60
Purchase of shares (net of issue costs)(29)- - (29)- (29)
Net (acquisition)/disposal of treasury shares(33)- - (33)- (33)
Other- - - - (1)(1)
Total contributions and distributions 2,962 60 (2,791) 231 (1) 230
Balance as at 31 March 2020 39,917 1,688 25,985 67,590 56 67,646
Net profit for the period- - 1,100 1,100 1 1,101
Net other comprehensive income for the period- (162)(552)(714)(6)(720)
Total comprehensive income for the period- (162) 548 386 (5) 381
Other equity movements
Share-based payment arrangements- 18 - 18 - 18
Net (acquisition)/disposal of treasury shares 23 - - 23 - 23
Other 6 - - 6 - 6
Total contributions and distributions 29 18 - 47 - 47
Balance as at 30 September 2020 39,946 1,544 26,533 68,023 51 68,074
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
1. First Half 2020 reflects the 2019 final dividend of 80 cents per share ($2,791 million), all fully franked at 30%.
4.5 Consolidated statement of changes in equity (continued)
Westpac Banking Corporation and its controlled entities
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83WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Consolidated financial statements
4.6 Consolidated cash flow statement
Westpac Banking Corporation and its controlled entities
The above consolidated cash flow statement should be read in conjunction with the accompanying notes.
Half
Year
Half
Year% Mov’t
Full
Year
Full
Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$mNote20202020Mar 2020202019Sept 19
Cash flows from operating activities
Interest received 12,578 14,637 (14) 27,215 33,093 (18)
Interest paid(5,283)(6,183)(15)(11,466)(16,486)(30)
Dividends received excluding life business 15 1 large 16 6 167
Other non-interest income received 947 1,947 (51) 2,894 3,865 (25)
Operating expenses paid(4,348)(4,250) 2 (8,598)(9,080)(5)
Income tax paid excluding life business(1,318)(1,762)(25)(3,080)(3,406)(10)
Life business:
Receipts from policyholders and customers 1,102 1,133 (3) 2,235 2,189 2
Interest and other items of similar nature 10 11 (9) 21 6 large
Dividends received 124 182 (32) 306 553 (45)
Payments to policyholders and suppliers(1,113)(1,189)(6)(2,302)(2,250) 2
Income tax paid(5)(1)large(6)(94)(94)
Cash flows from operating activities before changes in
operating assets and liabilities 2,709 4,526 (40) 7,235 8,396 (14)
Net (increase)/decrease in:
Collateral paid(529) 877 large 348 (847)large
Trading securities and financial assets measured at FVIS(16,870) 8,114 large(8,756)(7,629) 15
Derivative financial instruments(3,115) 4,966 large 1,851 7,605 (76)
Loans 18,966 (694)large 18,272 (4,188)large
Other financial assets 272 1 large 273 336 (19)
Life insurance assets and liabilities(134)(143)(6)(277)(134) 107
Other assets 1 69 (99) 70 (13)large
Net increase/(decrease) in:
Collateral received
(9,996) 8,900 large(1,096) 1,007 large
Deposits and other borrowings
16,002 12,908 24 28,910 1,113 large
Other financial liabilities
9,190 2,627 large 11,817 1,463 large
Other liabilities(4) 8 large 4 (5)large
Net cash provided by/(used in) operating activities16 16,492 42,159 (61) 58,651 7,104 large
Cash flows from investing activities
Proceeds from investment securities 18,096 14,984 21 33,080 19,768 67
Purchase of investment securities(25,764)(25,568) 1 (51,332)(29,527) 74
Proceeds/(payments) from disposal of controlled entities, net of
cash disposed- - - - (1)(100)
Proceeds from disposal of associates- - - - 45 (100)
Purchase of associates(6)(2) 200 (8)(25)(68)
Proceeds from disposal of property and equipment 35 23 52 58 157 (63)
Purchase of property and equipment(183)(57)large(240)(280)(14)
Purchase of intangible assets(608)(427) 42 (1,035)(906) 14
Net cash provided by/(used in) investing activities(8,430)(11,047)(24)(19,477)(10,769) 81
Cash flows from financing activities
Proceeds from debt issues (net of issue costs) 7,703 27,063 (72) 34,766 61,484 (43)
Redemption of debt issues(28,936)(36,224)(20)(65,160)(63,313) 3
Payments for the principal portion of lease liabilities(259)(284)(9)(543)- -
Issue of loan capital (net of issue costs)- 2,225 (100) 2,225 4,935 (55)
Redemption of loan capital(11)(251)(96)(262)(1,662)(84)
Proceeds from issuances of shares- 2,751 (100) 2,751 - -
Purchase of shares on exercise of employee options and rights- (4)(100)(4)(6)(33)
Shares purchased for delivery of employee share plan- (25)(100)(25)(27)(7)
Purchase of RSP treasury shares(2)(44)(95)(46)(69)(33)
Net sale/(purchase) of other treasury shares 3 11 (73) 14 7 100
Payment of dividends- (2,518)(100)(2,518)(4,977)(49)
Dividends paid to NCI- (1)(100)(1)(5)(80)
Net cash provided by/(used in) financing activities(21,502)(7,301) 195 (28,803)(3,633)large
Net increase/(decrease) in cash and balances with central
banks
(13,440) 23,811 large 10,371 (7,298)large
Effect of exchange rate changes on cash and balances with
central banks(2,246) 1,945 large(301) 569 large
Cash and balances with central banks as at beginning of the
period 45,815 20,059 128 20,059 26,788
(25)
Cash and balances with central banks as at end of the period 30,129 45,815 (34) 30,129 20,059 50
84WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
4.7 Notes to the consolidated financial statements
Note 1. Financial statements preparation
The accounting policies and methods of computation adopted in the financial year were in accordance with the
requirements for an authorised deposit-taking institution under the Banking Act 1959 (as amended), Australian
Accounting Standards (AAS) and Interpretations as issued by the Australian Accounting Standards Board and
the Corporations Act 2001. Westpac’s financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
All amounts have been rounded in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, to the nearest million dollars, unless otherwise stated.
For further information, refer to Westpac’s 2020 Annual Report.
Comparative revisions
Comparative information has been revised where appropriate to conform with changes in presentation in the
current period and to enhance comparability.
Note 2. Segment reporting
Operating segments are presented on a basis consistent with information provided internally to Westpac’s key
decision makers and reflects the management of the business, rather than the legal structure of the Group.
Internally, Westpac uses ‘cash earnings’ in assessing the financial performance of its divisions. Management believes
this allows the Group to:
• more effectively assess current year performance against prior years;
• compare performance across business divisions; and
• compare performance across peer companies.
Cash earnings is viewed as a measure of the level of profit that is generated by ongoing operations and is therefore
typically considered in assessing distributions, including dividends. Cash earnings is neither a measure of cash
flow nor net profit determined on a cash accounting basis, as it includes both cash and non-cash adjustments to
statutory net profit.
To determine cash earnings, three categories of adjustments are made to statutory results:
• material items that key decision makers at Westpac believe do not reflect ongoing operations;
• items that are not typically considered when dividends are recommended, such as the amortisation of
intangibles, impact of Treasury shares and economic hedging impacts; and
• accounting reclassifications between individual line items that do not impact statutory results.
Reportable operating segments
The operating segments are defined by the customers they serve and the services they provide:
• Consumer:
–is responsible for sales and service of banking and financial products and services to consumer customers in
Australia; and
–operates under the Westpac, St.George, BankSA, Bank of Melbourne, and RAMS brands.
• Business:
–is responsible for banking products and services for Small to Medium size Enterprises (SME) and commercial
customers in Australia. SME and commercial customers typically have facilities up to approximately
$200 million;
–is responsible for Private Wealth, serving the banking needs of high net worth customers across the banking
brands; and
–operates under the Westpac, St.George, BankSA, and Bank of Melbourne brands.
• Westpac Institutional Bank (WIB):
–is responsible for delivering a broad range of financial products and services to commercial, corporate,
institutional and government customers with connections to Australia and New Zealand;
–services include financing, transactional banking, financial and debt capital markets; and
–customers are supported throughout Australia, as well as via branches and subsidiaries located in New
Zealand, US, UK and Asia.
• Westpac New Zealand:
–is responsible for banking, wealth and insurance products and services to customers in New Zealand;
–customer base includes consumers, business and institutional customers; and
–operates under the Westpac brand for banking products, the Westpac Life brand for life insurance products
and the BT brand for wealth products.
Notes to the consolidated financial statements
1
2
3
4
5
6
7
85WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
• Specialist Businesses:
–is responsible for sales and service of Auto and Vendor Finance, Australian insurance products,
Superannuation, Platforms and Investments;
–it is also responsible for Westpac Pacific which provides a full range of banking services in Fiji and
Papua New Guinea; and
–operates under the Westpac, St.George, BankSA, Bank of Melbourne and BT brands.
• Group Businesses include:
–Treasury, which is responsible for the management of the Group’s balance sheet including wholesale
funding, capital and management of liquidity. Treasury also manages the interest rate risk and foreign
exchange risks inherent in the balance sheet, including managing the mismatch between Group assets and
liabilities. Treasury’s earnings are primarily sourced from managing the Group’s balance sheet and interest
rate risk, (excluding Westpac New Zealand) within set risk limits;
–Group Technology
1
, which comprises functions for the Australian businesses, is responsible for technology
strategy and architecture, infrastructure and operations, applications development and business integration;
–Core Support
2
, which comprises Group support functions, including Australian banking operations, property
services, strategy, finance, risk, financial crime, compliance and conduct, compliance, legal, human resources,
and customer and corporate relations; and
–Group Businesses also includes earnings on capital not allocated to divisions, certain intra-group
transactions that facilitate presentation of performance of the Group’s operating segments, earnings from
non-core asset sales, earnings and costs associated with the Group’s fintech investments, costs associated
with customer remediation for the Advice business
3
,
and certain other head office items such as centrally
held provisions.
Revisions to segment results
In 2020, Westpac implemented a change to the presentation of its divisional financial information. The change
related to:
• the creation of the Specialist Businesses division, which includes the following businesses: Auto and Vendor
Finance, Australian insurance businesses, Superannuation, Platforms and Investments, and Westpac Pacific; and
• the movement of certain small to medium size enterprise customer, and products between the Consumer and
Business division to better reflect our new line of business operating structure.
This change has no impact on the Group’s overall results or balance sheet but impacts divisional results and
balance sheets. Comparative divisional financial information has been restated for this change.
The tables present the segment results on a cash earnings basis for the Group:
Note 2. Segment reporting (continued)
1. Costs are fully allocated to other divisions in the Group.
2. Costs are partially allocated to other divisions in the Group, with costs attributed to enterprise activity retained in Group Businesses.
3. In March 2019, Westpac announced that it was exiting the provision of personal financial advice.
86WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Half Year Sept 2020
WestpacWestpac New
InstitutionalZealandSpecialistGroup
$mConsumerBusinessBank(A$)BusinessesBusinessesGroup
Net interest income 4,313 2,019 506 892 247 443 8,420
Net fee income 196 191 280 56 48 66 837
Net wealth management and insurance
income- 10 - 80 266 (78) 278
Trading income 42 47 364 9 17 20 499
Other income 9 1 (18) 7 3 249 251
Net operating income before operating
expenses and impairment charges 4,560 2,268 1,132 1,044 581 700 10,285
Operating expenses
1
(2,141)(1,230)(697)(482)(1,128)(862)(6,540)
Impairment (charges) / benefits(599)(674)(111)(102)(95) 641 (940)
Profit before income tax 1,820 364 324 460 (642) 479 2,805
Income tax (expense)/benefit(546)(108)(139)(129) 44 (311)(1,189)
Net profit attributable to NCI- - - - (1)- (1)
Cash earnings for the period 1,274 256 185 331 (599) 168 1,615
Net cash earnings adjustments- - - (4) 32 (543)(515)
Net profit for the period attributable to
owners of WBC 1,274 256 185 327 (567)(375) 1,100
Balance sheet
Loans 389,793 140,698 66,192 81,434 14,942 - 693,059
Deposits and other borrowings 219,259 151,939 102,851 68,473 9,260 39,349 591,131
Half Year March 2020
WestpacWestpac New
InstitutionalZealandSpecialistGroup
$mConsumerBusinessBank(A$)BusinessesBusinessesGroup
Net interest income 4,234 2,144 605 940 287 456 8,666
Net fee income 275 247 264 67 41 (139) 755
Net wealth management and insurance
income- 12 - 78 358 33 481
Trading income 48 50 273 18 40 - 429
Other income 3 2 19 4 (11)(7) 10
Net operating income before operating
expenses and impairment charges 4,560 2,455 1,161 1,107 715 343 10,341
Operating expenses
1
(2,035)(1,068)(619)(516)(420)(1,502)(6,160)
Impairment (charges) / benefits(416)(697)(293)(200)(160)(472)(2,238)
Profit before income tax 2,109 690 249 391 135 (1,631) 1,943
Income tax (expense)/benefit(637)(212)(102)(110)(41) 153 (949)
Net profit attributable to NCI- - - - (1)- (1)
Cash earnings for the period 1,472 478 147 281 93 (1,478) 993
Net cash earnings adjustments- - - 11 (63) 249 197
Net profit for the period attributable to
owners of WBC 1,472 478 147 292 30 (1,229) 1,190
Balance sheet
Loans 395,625 144,959 78,595 84,778 16,269 (548) 719,678
Deposits and other borrowings 208,427 142,175 109,977 70,725 9,625 41,991 582,920
Note 2. Segment reporting (continued)
1. Included in the Specialist Businesses division in operating expenses is $538 million relating to impairment of goodwill and other
intangible assets for Second Half 2020 (First Half 2020: $33 million). For other divisions, there was no impairment of goodwill and
impairment of other intangibles assets was not material.
1
2
3
4
5
6
7
87WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Full Year Sept 2020
WestpacWestpac New
InstitutionalZealandSpecialistGroup
$mConsumerBusinessBank(A$)BusinessesBusinessesGroup
Net interest income 8,547 4,163 1,111 1,832 534 899 17,086
Net fee income 471 438 544 123 89 (73) 1,592
Net wealth management and insurance
income- 22 - 158 624 (45) 759
Trading income 90 97 637 27 57 20 928
Other income 12 3 1 11 (8) 242 261
Net operating income before operating
expenses and impairment charges 9,120 4,723 2,293 2,151 1,296 1,043 20,626
Operating expenses
1
(4,176)(2,298)(1,316)(998)(1,548)(2,364)(12,700)
Impairment (charges) / benefits(1,015)(1,371)(404)(302)(255) 169 (3,178)
Profit before income tax 3,929 1,054 573 851
(507)(1,152) 4,748
Income tax (expense)/benefit(1,183)(320)(241)(239) 3 (158)(2,138)
Net profit attributable to NCI- - - - (2)- (2)
Cash earnings for the year 2,746 734 332 612 (506)(1,310) 2,608
Net cash earnings adjustments- - - 7 (31)(294)(318)
Net profit for the period attributable to
owners of WBC 2,746 734 332 619 (537)(1,604) 2,290
Balance sheet
Loans 389,793 140,698 66,192 81,434 14,942 - 693,059
Deposits and other borrowings 219,259 151,939 102,851 68,473 9,260 39,349 591,131
Full Year Sept 2019
WestpacWestpac New
InstitutionalZealandSpecialistGroup
$mConsumerBusinessBank(A$)BusinessesBusinessesGroup
Net interest income 8,130 4,456 1,337 1,860 555 615 16,953
Net fee income 594 463 570 163 44 (179) 1,655
Net wealth management and insurance
income- 16 - 177 1,319 (489) 1,023
Trading income 94 109 636 37 54 (23) 907
Other income 7 6 (11) 46 (5) 74 117
Net operating income before operating
expenses and impairment charges 8,825 5,050 2,532 2,283 1,967 (2) 20,655
Operating expenses(3,794)(2,094)(1,220)(939)(847)(1,137)(10,031)
Impairment (charges) / benefits(582)(172)(31) 10 (111) 92 (794)
Profit before income tax 4,449 2,784 1,281 1,354 1,009 (1,047) 9,830
Income tax (expense)/benefit(1,333)(838)(356)(369)(292) 213 (2,975)
Net profit attributable to NCI- - - - (5)(1)(6)
Cash earnings for the year 3,116 1,946 925 985 712 (835) 6,849
Net cash earnings adjustments- - - (1)(45)(19)(65)
Net profit for the period attributable to
owners of WBC 3,116 1,946 925 984 667 (854) 6,784
Balance sheet
Loans 399,279 146,867 73,572 78,005 17,216 (169) 714,770
Deposits and other borrowings 207,578 142,558 99,005 60,801 9,277 44,028 563,247
Note 2. Segment reporting (continued)
1. Included in the Specialist Businesses division in operating expenses is $571 million relating to impairment of goodwill and other
intangible assets for Full Year 2020. For other divisions, there was no impairment of goodwill and impairment of other intangibles assets
was not material.
88WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 2. Segment reporting (continued)
Reconciliation of cash earnings to reported results
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Cash earnings for the period 1,615 993 63 2,608 6,849 (62)
Cash earnings adjustments
Fair value gain/(loss) on economic hedges(581) 219 large(362)(35)large
Ineffective hedges 37 24 54 61 20 large
Adjustments related to Pendal 32 (63)large(31)(45)(31)
Treasury shares(3) 17 large 14 (5)large
Total cash earnings adjustment (post-tax)(515) 197 large(318)(65)large
Net profit attributable to owners of WBC 1,100 1,190 (8) 2,290 6,784 (66)
Note 3. Net interest income
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Interest income
1
Calculated using the effective interest rate method
Cash and balances with central banks 21 114 (82) 135 334 (60)
Collateral paid 6 69 (91) 75 201 (63)
Investment securities 640 881 (27) 1,521 1,919 (21)
Loans 11,512 13,336 (14) 24,848 30,029 (17)
Other financial assets 5 12 (58) 17 35 (51)
Total interest income calculated using the effective
interest rate method 12,184 14,412 (15) 26,596 32,518 (18)
Other
Net ineffectiveness on qualifying hedges 52 35 49 87 28 large
Trading securities and financial assets measured at
FVIS 125 234 (47) 359 662 (46)
Loans 2 3 (33) 5 14 (64)
Total other 179 272 (34) 451 704 (36)
Total interest income 12,363 14,684 (16) 27,047 33,222 (19)
Interest expense
Calculated using the effective interest rate method
Collateral received(7)(19)(63)(26)(57)(54)
Deposits and other borrowings(1,792)(2,860)(37)(4,652)(7,967)(42)
Debt issues(1,078)(1,829)(41)(2,907)(4,706)(38)
Loan capital(370)(430)(14)(800)(776) 3
Other financial liabilities(11)(87)(87)(98)(274)(64)
Total interest expense calculated using the effective
interest rate method(3,258)(5,225)(38)(8,483)(13,780)(38)
Other
Deposits and other borrowings(107)(295)(64)(402)(978)(59)
Trading liabilities
2
(964) 177 large(787)(915)(14)
Debt issues(39)(68)(43)(107)(163)(34)
Bank Levy(212)(196) 8 (408)(391) 4
Other interest expense
3
(87)(77) 13 (164)(88) 86
Total other(1,409)(459)large(1,868)(2,535)(26)
Total interest expense(4,667)(5,684)(18)(10,351)(16,315)(37)
Total net interest income 7,696 9,000 (14) 16,696 16,907 (1)
1. Interest income includes items relating to estimated customer refunds, payments, associated costs and litigation recognised as a
reduction in interest income of $38 million for Second Half 2020 (First Half 2020: $132 million, Full Year 2020: $170 million; Full Year
2019: $372 million).
2. Includes net impact of Treasury balance sheet management activities.
3. Included in other interest expense for Second Half 2020 is $32 million (First Half 2020: $32 million, Full Year 2020: $64 million) relating
to interest expense on lease liabilities due to the adoption of AASB 16 from 1 October 2019. Comparatives have not been restated. Refer
to Notes 1 and 26 in the 2020 Annual Report for further details.
1
2
3
4
5
6
7
89WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 4. Non-interest income
1
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net fee income
Facility fees 359 372 (3) 731 730 -
Transaction fees 439 582 (25) 1,021 1,225 (17)
Other non-risk fee income 134 (86)large 48 (76)large
Fee income 932 868 7 1,800 1,879 (4)
Credit card loyalty programs(40)(62)(35)(102)(121)(16)
Transaction fee related expenses(55)(51) 8 (106)(103) 3
Fee expenses(95)(113)(16)(208)(224)(7)
Net fee income 837 755 11 1,592 1,655 (4)
Net wealth management and insurance income
Wealth management income 247 384 (36) 631 276 129
Life insurance premium income 609 688 (11) 1,297 1,443 (10)
General insurance and lenders mortgage insurance
(LMI) net premiums earned 252 247 2 499 482 4
Life insurance investment and other income
2
68 (4)large 64 409 (84)
General insurance and LMI investment and other
income 18 24 (25) 42 52 (19)
Total insurance premium, investment and other
income 947 955 (1) 1,902 2,386 (20)
Life insurance claims and changes in life insurance
liabilities(710)(574) 24 (1,284)(1,266) 1
General insurance and LMI claims and other expenses(198)(300)(34)(498)(367) 36
Total insurance claims, changes in life insurance
liabilities and other expenses(908)(874) 4 (1,782)(1,633) 9
Net wealth management and insurance income 286 465 (38) 751 1,029 (27)
Trading income 435 460 (5) 895 929 (4)
Other income
Dividends received from other entities- 1 (100) 1 6 (83)
Net gain/(loss) on derecognition/sale of associates 316 - - 316 38 large
Net gain/(loss) on disposal of assets 9 2 large 11 61 (82)
Net gain/(loss) on derivatives held for risk
management purposes
3
27 (23)large 4 (11)large
Net gain/(loss) on financial instruments measured at
fair value 14 (92)large(78)(39) 100
Net gain/(loss) on disposal of controlled entities- - - - 3 (100)
Rental income on operating leases 25 29 (14) 54 72 (25)
Share of associates’ net profit/(loss)(9)(14)(36)(23)(23)-
Other(57) 21 large(36) 22 large
Total other income 325 (76)large 249 129 93
Total non-interest income 1,883 1,604 17 3,487 3,742 (7)
1. Non-interest income includes items relating to estimated customer refunds, payments, associated costs and litigation recognised as a
reduction in non-risk fee income, wealth management income and other income of $96 million in Second Half 2020 (First Half 2020:
$129 million, Full Year 2020: $225 million, Full Year 2019: $860 million). Refer to Note 14 for further details.
2. Includes policyholder tax recoveries.
3. Income from derivatives held for risk management purposes reflects the impact of economic hedges of earnings.
90WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 5. Operating expenses
1
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Staff expenses
Employee remuneration, entitlements and on-costs 2,273 2,155 5 4,428 4,320 3
Superannuation expense 206 207 - 413 378 9
Share-based payments 33 47 (30) 80 108 (26)
Restructuring costs 59 35 69 94 232 (59)
Total staff expenses 2,571 2,444 5 5,015 5,038 -
Occupancy expenses
Operating lease rentals 84 64 31 148 658 (78)
Depreciation and impairment of property and
equipment
2
320 388 (18) 708 222 large
Other 98 62 58 160 143 12
Total occupancy expenses 502 514 (2) 1,016 1,023 (1)
Technology expenses
Amortisation and impairment of software assets 502 468 7 970 719 35
Depreciation and impairment of IT equipment
2
147 125 18 272 129 111
Technology services 350 348 1 698 810 (14)
Software maintenance and licences 205 193 6 398 371 7
Telecommunications 117 99 18 216 207 4
Data processing 45 44 2 89 83 7
Total technology expenses 1,366 1,277 7 2,643 2,319 14
Other expenses
Professional and processing services 774 600 29 1,374 1,060 30
Amortisation and impairment of intangible assets and
deferred expenditure 520 3 large 523 9 large
Postage and stationery 81 83 (2) 164 179 (8)
Advertising 95 122 (22) 217 245 (11)
Non-lending losses 474 969 (51) 1,443 58 large
Other expenses 175 169 4 344 175 97
Total other expenses 2,119 1,946 9 4,065 1,726 136
Total operating expenses 6,558 6,181 6 12,739 10,106 26
1. In Second Half 2020, operating expenses include estimated costs associated with AUSTRAC proceedings of $420 million, (First Half
2020: $1,058 million, Full Year 2020: $1,478 million, Full Year 2019: nil) which includes a provision for a penalty of $400 million (First
Half 2020: $900 million, Full Year 2020: $1,300 million, Full Year 2019: nil) and estimated customer refunds, payments, associated costs
and litigation of $173 million (First Half 2020: $144 million, Full Year 2020: $317 million; Full Year 2019: $196 million). Refer to Note 14 for
further details.
2. These balances include depreciation of right-of-use assets for Second Half 2020 of $313 million (First Half 2020: $317 million, Full Year
2020: $630 million) due to the adoption of AASB 16 from 1 October 2019. Comparatives have not been restated. Refer to Notes 1 and 26
in the 2020 Annual Report for further details.
1
2
3
4
5
6
7
91WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 6. Income tax
The income tax expense is reconciled to the profit before income tax as follows:
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Profit before income tax 2,081 2,185 (5) 4,266 9,749 (56)
Tax at the Australian company tax rate of 30% 624 656 (5) 1,280 2,925 (56)
The effect of amounts which are not deductible/
(assessable) in calculating taxable income:
Hybrid capital distributions 26 30 (13) 56 72 (22)
Life insurance:
Tax adjustment on policyholder earnings 7 (24)large(17) 8 large
Adjustment for life business tax rates- 1 (100) 1 (1)large
Dividend adjustments- - - - (1)(100)
Other non-assessable items(2)(1) 100 (3)(14)(79)
Other non-deductible items 290 295 (2) 585 12 large
Adjustment for overseas tax rates 6 10 (40) 16 (32)large
Income tax (over)/under provided in prior periods 1 - - 1 (10)large
Other items 28 27 4 55 - -
Total income tax expense 980 994 (1) 1,974 2,959 (33)
Effective income tax rate 47.09% 45.49% 160 bps 46.27% 30.35%large
Note 7. Earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted
average number of ordinary shares on issue during the period, adjusted for treasury shares. Diluted EPS is
calculated by adjusting the basic EPS by assuming all dilutive potential ordinary shares are converted.
Half Year Sept 2020Half Year March 2020Full Year Sept 2020Full Year Sept 2019
$mBasicDilutedBasicDilutedBasicDilutedBasicDiluted
Net profit attributable to shareholders 1,100 1,100 1,190 1,190 2,290 2,290 6,784 6,784
Adjustment for RSP dividends
1
- - (2)(2)(2)(2)(6)(6)
Adjustment for potential dilution:
Distributions to convertible loan capital
holders
2
- 75 - - - - - 290
Adjusted net profit attributable to
shareholders 1,100 1,175 1,188 1,188 2,288 2,288 6,778 7,068
Weighted average number of ordinary
shares (millions)
Weighted average number of ordinary shares
on issue 3,612 3,612 3,579 3,579 3,595 3,595 3,456 3,456
Treasury shares (including RSP share rights)
1
(6)(6)(5)(5)(5)(5)(6)(6)
Adjustment for potential dilution:
Share-based payments- 3 - 1 - 1 - 1
Convertible loan capital
2
- 325 - - - - - 278
Adjusted weighted average number of
ordinary shares 3,606 3,934 3,574 3,575 3,590 3,591 3,450 3,729
Earnings per ordinary share (cents) 30.5 29.9 33.2 33.2 63.7 63.7 196.5 189.5
1. Some shares under the RSP have not vested and are not outstanding ordinary shares but do receive dividends. These RSP dividends
are deducted to show the profit attributable to ordinary shareholders. Shares under the RSP were dilutive in Second Half 2020 and
antidilutive in all other periods presented.
2. The Group has issued convertible loan capital which may convert into ordinary shares in the future. These convertible loan capital
instruments are potentially dilutive instruments, and diluted EPS is therefore calculated as if the instruments had been converted at the
beginning of the respective period or, if later, the instruments’ issue date. In Second Half 2020, all convertible loan capital instruments,
except for Westpac capital note 4, were dilutive (First Half 2020 and Full Year 2020: all convertible loan capital instruments were
antidilutive, Full Year 2019: all convertible loan capital instruments were dilutive).
92WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 8. Average balance sheet and interest rates
Full Year Sept 2020Full Year Sept 2019
AverageAverageAverageAverage
balanceInterestratebalanceInterestrate
$m$m%$m$m%
Assets
Interest earnings assets
Collateral paid 15,732 75 0.5 10,823 201 1.9
Trading securities and financial assets measured at FVIS 29,629 359 1.2 29,074 662 2.3
Investment securities 78,181 1,521 1.9 63,787 1,919 3.0
Loans and other receivables
1
698,176 25,092 3.6 695,240 30,440 4.4
Total interest earning assets and interest income 821,718 27,047 3.3 798,924 33,222 4.2
Non-interest earning assets
Derivative financial instruments 31,334 25,959
Life insurance assets 4,614 9,610
All other assets
2
62,414 60,231
Total non-interest earning assets 98,362 95,800
Total assets 920,080 894,724
Liabilities
Interest bearing liabilities
Collateral received 7,581 26 0.3 3,617 57 1.6
Deposits and other borrowings 518,633 5,054 1.0 506,789 8,945 1.8
Loan capital 22,711 800 3.5 18,181 776 4.3
Other interest bearing liabilities
3
196,716 4,471 2.3 205,695 6,537 3.2
Total interest bearing liabilities and interest expense 745,641 10,351 1.4 734,282 16,315 2.2
Non-interest bearing liabilities
Deposits and other borrowings 54,892 49,270
Derivative financial instruments 33,249 26,568
Life insurance liabilities 2,999 7,653
All other liabilities
4
15,233 13,187
Total non-interest bearing liabilities 106,373 96,678
Total liabilities 852,014 830,960
Shareholders’ equity 68,014 63,714
NCI 52 50
Total equity 68,066 63,764
Total liabilities and equity 920,080 894,724
Loans and other receivables
1
Australia 585,643 21,315 3.6 589,427 25,931 4.4
New Zealand 85,184 3,237 3.8 79,255 3,650 4.6
Other overseas 27,349 540 2.0 26,558 859 3.2
Deposits and other borrowings
Australia 435,877 3,745 0.9 425,799 7,023 1.6
New Zealand 57,096 882 1.5 54,720 1,235 2.3
Other overseas 25,660 427 1.7 26,270 687 2.6
1. Loans and other receivables are net of Stage 3 provision for ECL, where interest income is determined based on their carrying value.
Stages 1 and 2 provisions for ECL are not included in the average interest earning assets balance, as interest income is determined
based on the gross value of loans and other receivables.
2. Includes property and equipment, intangible assets, deferred tax assets, non-interest bearing loans relating to mortgage offset accounts
and all other non-interest earning assets.
3. Includes net impact of Treasury balance sheet management activities and the Bank Levy.
4. Includes other financial liabilities, provisions, current and deferred tax liabilities and other non-interest bearing liabilities.
1
2
3
4
5
6
7
93WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 9. Loans
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Australia
Housing 440,933 445,663 449,201 (1)(2)
Personal 17,081 19,854 21,247 (14)(20)
Business 147,584 155,322 152,360 (5)(3)
Total Australia 605,598 620,839 622,808 (2)(3)
New Zealand
Housing 51,126 52,037 47,731 (2) 7
Personal 1,360 1,610 1,709 (16)(20)
Business 29,864 32,021 29,285 (7) 2
Total New Zealand 82,350 85,668 78,725 (4) 5
Total other overseas 10,713 18,361 16,845 (42)(36)
Total loans 698,661 724,868 718,378 (4)(3)
Provision for expected credit losses (ECL) on loans (Note 10)(5,602)(5,190)(3,608) 8 55
Total net loans
1,2
693,059 719,678 714,770 (4)(3)
Note 10. Provisions for expected credit losses
Loans and credit commitments
The following table shows the provision for ECL on loans and credit commitments by stage:
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Performing - Stage 1 1,084 1,181 884 (8) 23
Performing - Stage 2 2,875 2,878 1,674 - 72
Non-performing - Stage 3 2,173 1,707 1,355 27 60
Total provisions for ECL on loans and credit commitments 6,132 5,766 3,913 6 57
Presented as:
Provision for ECL on loans (Note 9) 5,602 5,190 3,608 8 55
Provision for ECL on credit commitments (Note 14) 530 576 305 (8) 74
Total provisions for ECL on loans and credit commitments 6,132 5,766 3,913 6 57
Of which:
Individually assessed provisions 611 606 412 1 48
Collectively assessed provisions 5,521 5,160 3,501 7 58
Total provisions for ECL on loans and credit commitments 6,132 5,766 3,913 6 57
1. Total net loans include securitised loans of $7,367 million (31 March 2020: $9,029 million, 30 September 2019: $7,737 million). The level
of securitised loans excludes loans where Westpac is the holder of related debt securities.
2. Total net loans include assets pledged for the covered bond programs of $37,222 million (31 March 2020: $39,348 million, 30 September
2019: $38,832 million).
Notes to the consolidated financial statements
94WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Movement in provision for ECL on loans and credit commitments
Non-
Performingperforming
$mStage 1Stage 2Stage 3Total
Balance as at 30 September 2019 884 1,674 1,355 3,913
Transfers to Stage 1 600 (583)(17)-
Transfers to Stage 2(131) 466 (335)-
Transfers to Stage 3(2)(334) 336 -
Business activity during the period 120 114 (50) 184
Net remeasurement of provision for ECL(297) 1,526 911 2,140
Write-offs- - (537)(537)
Exchange rate and other adjustments 7 15 44 66
Balance as at 31 March 2020 1,181 2,878 1,707 5,766
Transfers to Stage 1 978 (945)(33)-
Transfers to Stage 2(214) 695 (481)-
Transfers to Stage 3(5)(621) 626 -
Business activity during the period 92 (54)(27) 11
Net remeasurement of provision for ECL(936) 948 1,004 1,016
Write-offs- - (633)(633)
Exchange rate and other adjustments(12)(26) 10 (28)
Balance as at 30 September 2020 1,084 2,875 2,173 6,132
The following table provides further details of the provision for ECL by class and stage:
Non-
Performingperforming
$mStage 1Stage 2Stage 3Total
Housing 163 354 591 1,108
Personal 268 459 248 975
Business 453 861 516 1,830
Balance as at 30 September 2019 884 1,674 1,355 3,913
Housing 195 544 583 1,322
Personal 267 562 319 1,148
Business 719 1,772 805 3,296
Balance as at 31 March 2020 1,181 2,878 1,707 5,766
Housing 192 747 977 1,916
Personal 216 408 232 856
Business 676 1,720 964 3,360
Balance as at 30 September 2020 1,084 2,875 2,173 6,132
Note 10. Provisions for expected credit losses (continued)
1
2
3
4
5
6
7
95WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Impact of Overlays on the provision for ECL for the year ending 30 September 2020
The following table attributes the breakup between modelled ECL and other economic overlays.
Where there is increased uncertainty regarding the required forward-looking economic conditions under
AASB 9, or limitations of the historical data used to calibrate the models to current stressed environments,
overlays are typically used to address areas of potential risk not captured in the underlying modelled ECL.
As atAs atAs at
30 Sept31 March30 Sept
$m202020202019
Modelled provision for ECL 5,480 5,147 3,801
Overlays
1
652 619 112
Total provision for ECL 6,132 5,766 3,913
Details of these changes, which are based on reasonable and supportable information up to the date of this report
are provided below.
Modelled provision for ECL
The modelled provision for ECL is a probability weighted estimate based on three scenarios which together are
representative of the Group’s view of the forward-looking distribution of potential loss outcomes. The increase in
provisions as a result of changes in modelled ECL are reflected through the “net remeasurement of provision for
ECL” line.
The base case scenario uses current Westpac Economics forecasts and reflects the latest available macroeconomic
view which shows a deterioration in the short term, with a subsequent recovery. The latest view considers both
the economic and societal impacts of COVID-19, the Australian Government stimulus measures implemented to
cushion the impacts, including the JobKeeper package and the New Zealand Government stimulus package. The
Westpac Australian economics forecast assumes the following:
• forecast growth of 2.5% for GDP in calendar year 2021;
• forecast a contraction of 19.3% for commercial property prices in calendar year 2021;
• forecast a marginal dip in residential property prices in calendar year 2021; and
• unemployment rate forecast to peak at 7.9% in February 2021 and then fall to 7.5% at December 2021.
The downside scenario is a more severe scenario with expected credit losses higher than the base case
scenario. The more severe loss outcome for the downside is generated under a recession scenario in which the
combination of negative GDP growth, declines in commercial and residential property prices and an increase in
the unemployment rate simultaneously impact expected credit losses across all portfolios from the reporting
date. The assumptions in this scenario and relativities to the base case scenario will be monitored having regard
to the emerging economic conditions and updated where necessary. The upside scenario represents a modest
improvement to the base case.
The following sensitivity table shows the reported provision for ECL based on the probability weighted scenarios
and what the provisions for ECL would be assuming a 100% weighting is applied to the base case scenario and to
the downside scenario (with all other assumptions, including customer risk grades, held constant).
As atAs atAs at
30 Sept31 March30 Sept
$m202020202019
Reported probability-weighted ECL 6,132 5,766 3,913
100% base case ECL 4,750 4,476 2,748
100% downside ECL 8,315 7,902 7,065
If 1% of the stage 1 gross exposure from loans and credit commitments (calculated on a 12 month ECL) was
reflected in Stage 2 (calculated on a lifetime ECL) the provision for ECL would increase by $296 million
(2019:$236 million) for the Group based on applying the average provision coverage ratios by stage to the
movement in the gross exposure by stage.
Note 10. Provisions for expected credit losses (continued)
1. Included in 2020 is $577 million related to COVID-19.
96WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
The following table indicates the weightings applied by the Group:
Macroeconomic scenario weightings (%)30 Sept 202031 March 202030 Sept 2019
Upside5.05.010.0
Base55.055.062.5
Downside40.040.027. 5
The increase in weighting to the downside scenario since 30 September 2019 reflects the continuing uncertainty
around the economic assumptions used in the base case and the asymmetric impact of downside tail risk on ECL.
In particular, the current base case economic forecast indicates a relatively short and sharp economic impact
followed by a subsequent recovery. There is a risk that the economic impacts of COVID-19 could be deeper or more
prolonged which would result in higher credit losses than those modelled under the base case.
The COVID-19 pandemic is leading to material structural shifts in the behaviour of the economy and customers, and
unprecedented actions by banks, governments and regulators in response. ECL models are expected to be subject
to a higher than usual level of uncertainty during this period. In this environment there is a heightened need for the
application of judgement in order to reflect these evolving relationships and risks.
This judgement has been applied in the form of the revision to scenario weightings and a COVID-19 overlay.
COVID-19 overlay
Where there is increased uncertainty regarding the required forward-looking economic conditions under AASB
9, or limitations of the historical data used to calibrate the models to current stressed environments, overlays are
typically used to address areas of potential risk not captured in the underlying modelled ECL.
The COVID-19 pandemic has had, and continues to have, an impact on businesses around the world and the
economic environments in which they operate. There also exists significant uncertainty regarding the duration and
severity of COVID-19 impacts and the associated disruption to the economy and our customers. While the impacts
on the broader economy are included in the assumptions used in the economic scenarios and the weightings
applied to these scenarios, these general economy wide impacts may not fully reflect the specific impact on
individual customers, and therefore the potential risk is not captured in the underlying modelled ECL. As overlays
require the application of expert judgment, they are documented and subject to comprehensive internal
governance and oversight.
The Group’s COVID-19 overlay as of September 2020 is $577 million, of which, $404 million relates to COVID-19
deferral packages.
The deferral of payments by customers in hardship arrangements is generally treated as an indication of a
significant increase in credit risk (SICR) but the deferral of payments under the current COVID-19 support
packages for mortgages, personal and business loans has not, in isolation, been treated as an indication of SICR.
As highlighted by the IASB in its guidance document ‘IFRS 9 and COVID-19’ issued on 27 March 2020, in these
changed circumstances it is not appropriate to apply previously established approaches to assessing significant
increase in credit risk (‘SICR’) for payment holidays in a mechanistic manner.
These relief packages are available to customers who require assistance because of COVID-19 and who otherwise
had up to date payment status prior to the onset of COVID-19. The relief packages allow for a deferral of payments
for up to 6 months. During this period, the deferred interest will be capitalised and the deferred principal along
with the capitalised interest, will be repaid over the remaining term of the loan. These packages have been
designed to provide short-term cash flow support while the most significant COVID-19 restrictions are in place.
A further extension allowing for up to an additional 4 month deferral up to 31 March 2021 has been announced.
The extension will not be automatic and will require up-to-date financial information on each borrower to confirm
that there is a reasonable prospect to repay the loan.
As the situation has evolved since March 2020, the Group has classified the deferral packages into different
categories of risk. Each of these categories are assigned a corresponding AASB 9 staging level based on whether
SICR is deemed to have occurred because of the increased likelihood of a risk of default. The group has identified
a proportion of deferral packages as higher credit risk and has identified a SICR event to have occurred on these
customers. An overlay estimation has been done on this base of customers.
We continue to monitor our lending portfolios closely and reassess our provisioning levels as the situation around
COVID-19 evolves. At the cessation of the COVID-19 support packages, , it is likely that some customers will move
into general hardship arrangements (Stage 2). Exposures allocated to Stage 3 relies only observable evidence of
default.
Note 10. Provisions for expected credit losses (continued)
1
2
3
4
5
6
7
97WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Business lending (including institutional)
The business lending overlay relates to the increased credit risk relating to a portion of small business and
transaction managed (<$10 million TCE) customers currently on COVID-19 relief packages or still to be reviewed.
Based on this judgement we have identified $2.4 billion of business portfolio exposures on which a lifetime ECL
overlay has been determined. This has resulted in a $223m million overlay for business lending exposures which is
included in Stage 2 provision.
Retail lending
The retail lending overlay relates to the increased credit risk relating to a portion of housing and personal
customers currently on COVID-19 relief packages. Customers with packages have been segmented into different
categories of risk based on how these customers are expected to perform following the expiry of the package.
Customers assessed to be high risk have been considered for an overlay estimation and a lifetime ECL overlay has
been determined for these customers.
We have identified $7.5 billion of retail exposures on which a lifetime ECL overlay has been determined. This has
resulted in a $354 million overlay which is included in Stage 2 provision.
The judgements and assumptions used in estimating the above overlays will be reviewed and refined as both the
COVID-19 pandemic and portfolio evolves.
Impact of changes in credit exposures on the provision for ECL
• Stage 1 exposures had a net decrease of $52.9 billion (2019: $7.6 billion) primarily driven by decreases in
housing and business segments. The decrease is impacted by underlying balance reduction as well as an
additional $31.3 billion transferred to Stage 2 to account for staging methodology changes and TCE associated
with overlays.
• Stage 2 credit exposures increased by $34.3 billion (2019: $2.1 billion) mainly driven by increases from the
business segment and the impact of the additional $31.3 billion transferred to Stage 2 to account for staging
methodology changes and TCE associated with overlays . The Stage 2 underlying exposure increase has been
driven by the business segment resulting from credit reviews in the portfolio. Stage 2 ECL has increased driven
by the COVID-19 overlay, impacts from revised macro-economic forecasts/weightings and underlying increase
in Stage 2 exposures.
• Stage 3 credit exposures had a net increase of $4.5 billion (2019: $0.9 billion) driven by net transfers to Stage 3
from Stage 1 and Stage 2 with the increase driven by the housing portfolio. The increase in Stage 3 exposures is
in line with increase in 90 days past due for the home loans portfolio. Stage 3 ECL has increased in line with the
increase in Stage 3 exposures.
Note 10. Provisions for expected credit losses (continued)
98WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 10. Provisions for expected credit losses (continued)
Investment Securities – debt securities
The following tables reconcile the provision for ECL on debt securities.
Total
DebtInvestment
Debtsecurities atsecurities -
securities atamortiseddebt
$mFVOCI
1
costsecurities
Balance as at 30 September 2019 2 9 11
Stage 1 - change in the provision during the period 1 10 11
Stage 2 - change in the provision during the period- 3 3
Balance as at 31 March 2020 3 22 25
Stage 1 - change in the provision during the period 1 (19)(18)
Stage 2 - change in the provision during the period- 24 24
Balance as at 30 September 2020 4 27 31
Reconciliation of impairment charges
Half YearHalf YearFull YearFull Year
SeptMarchSeptSept
$m2020202020202019
Loans and credit commitments:
Business activity during the period 11 184 195 (170)
Net remeasurement of the provision for ECL 1,016 2,140 3,156 1,136
Impairment charges for debt securities at amortised cost 5 13 18 -
Impairment charges for debt securities at FVOCI
1
1 1 2 -
Recoveries(93)(100)(193)(172)
Total impairment charges 940 2,238 3,178 794
Note 11. Credit Quality
The loans and credit commitments balance in stage 3 (non-performing) is represented by those loans and credit
commitments which are in default. A default occurs when Westpac considered that the customer is unlikely to
repay its credit obligations in full, irrespective of recourse by the Group to actions such as realising security, or the
customer is more than 90 days past due on any material credit obligation. This definition of default is aligned to
the APRA regulatory definition of default. These can be disaggregated into impaired loans and credit commitments
(which is where the customer is unlikely to pay its credit obligations in full including restructured loans) and items
90 days past due, or otherwise in default but not impaired.
Impaired loans and credit commitments include:
• housing and business loans with insufficient security to cover the principal and interest payments owing
(aligned to an impaired internal credit risk grade);
• personal loans which are greater than 90 days past due; and
• restructured loans (the original contractual terms have been modified to provide for concessions for a customer
facing financial difficulties).
Items 90 days past due, or otherwise in default but not impaired include:
• currently 90 days or more past due but well secured
2
;
• assets that were, but are no longer 90 days past due but are yet to satisfactorily demonstrate sustained
improvement to allow reclassification; and
• other assets in default and not impaired, including those where an order for bankruptcy or similar legal action
has been taken (e.g. appointment of an Administrator or Receiver).
Further detail of these balances is as follows:
1. Impairment on debt securities at FVOCI is recognised in the income statement with a corresponding amount in other comprehensive
income (refer to Note 15). There is no reduction of the carrying value of the debt securities which remains at fair value.
2. The estimated net realisable value of security to which the Group has recourse is sufficient to cover all principal and interest.
1
2
3
4
5
6
7
99WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Non-performing loans and credit commitments
As atAs atAs at
$m30 Sept 2031 March 202030 Sept 19
Impaired exposures
Australia
Housing and business loans
Gross amount 1,845 1,267 1,215
Provision
1
(690)(530)(491)
Net 1,155 737 724
Personal loans greater than 90 days past due
Gross amount 370 402 384
Provision
2
(206)(285)(233)
Net 164 117 151
Restructured loans
Gross amount 16 14 16
Provision
1
(4)(3)(6)
Net 12 11 10
New Zealand
Housing and business loans
Gross amount 157 175 62
Provision
1
(70)(73)(26)
Net 87 102 36
Personal loans greater than 90 days past due
Gross amount 36 33 20
Provision
2
(26)(26)(15)
Net 10 7 5
Restructured loans
Gross amount- - 12
Provision
1
- - (3)
Net- - 9
Other overseas
Housing and business loans
Gross amount 355 259 50
Provision
1
(156)(161)(17)
Net 199 98 33
Personal loans greater than 90 days past due
Gross amount- 1 1
Provision
2
- - -
Net- 1 1
Restructured loans
Gross amount- 3 3
Provision
1
- (1)(1)
Net- 2 2
Total impaired exposures
Gross amount 2,779 2,154 1,763
Provision
1,2
(1,152)(1,079)(792)
Total net impaired exposures 1,627 1,075 971
Items 90 days past due, or otherwise in default but not impaired
Australia
Gross amount 7,976 4,965 4,684
Provision(941)(575)(521)
Net 7,0 3 5 4,390 4,163
New Zealand
Gross amount 503 389 340
Provision(72)(45)(33)
Net 431 344 307
Overseas
Gross amount 53 55 64
Provision(8)(8)(9)
Net 45 47 55
Total items 90 days past due, or otherwise in default but not impaired
Gross amount 8,532 5,409 5,088
Provision(1,021)(628)(563)
Total net items 90 days past due, or otherwise in default but not impaired 7,511 4,781 4,525
Total non-performing loans and credit commitments
Gross amount 11,311 7,563 6,851
Provision(2,173)(1,707)(1,355)
Total net non-performing loans and credit commitments 9,138 5,856 5,496
Note 11. Credit quality (continued)
1. Includes individually assessed provisions and collectively assessed provisions on impaired exposures.
2. Includes collectively assessed provisions on impaired exposures.
100WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 12. Deposits and other borrowings
As atAs atAs at% Mov't% Mov't
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Australia
Certificates of deposit 25,647 21,029 26,259 22 (2)
Non-interest bearing, repayable at call 48,303 44,557 43,341 8 11
Other interest bearing at call 304,761 274,071 247,161 11 23
Other interest bearing term 125,820 141,933 158,564 (11)(21)
Total Australia 504,531 481,590 475,325 5 6
New Zealand
Certificates of deposit 2,773 3,452 1,058 (20) 162
Non-interest bearing, repayable at call 10,711 9,526 6,368 12 68
Other interest bearing at call 26,300 25,822 22,291 2 18
Other interest bearing term 28,689 31,925 31,084 (10)(8)
Total New Zealand 68,473 70,725 60,801 (3) 13
Other overseas
Certificates of deposit 7,258 14,638 11,414 (50)(36)
Non-interest bearing, repayable at call 868 1,007 824 (14) 5
Other interest bearing at call 1,864 1,834 1,610 2 16
Other interest bearing term 8,137 13,126 13,273 (38)(39)
Total other overseas 18,127 30,605 27,121 (41)(33)
Total deposits and other borrowings 591,131 582,920 563,247 1 5
Notes to the consolidated financial statements
1
2
3
4
5
6
7
101WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 13. Fair values of financial assets and liabilities
Fair Valuation Control Framework
The 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 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 Group categorises all fair value instruments according to the hierarchy described below.
Valuation techniques
The Group applies market accepted valuation techniques in determining the fair valuation of over the counter
(OTC) derivatives. This includes CVA and FVA, which incorporate 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 as follows:
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 judgement.
InstrumentBalance sheet categoryIncludesValuation
Exchange traded
products
DerivativesExchange traded interest
rate futures and options
and commodity, energy and
carbon futures
All these instruments are traded in liquid, active
markets where prices are readily observable.
No modelling or assumptions are used in the
valuation.
FX productsDerivativesFX spot and futures
contracts
Equity productsDerivatives
Trading securities and financial
assets measured at FVIS
Other financial liabilities
Listed equities and equity
indices
Non-asset backed
debt instruments
Trading securities and financial
assets measured at FVIS
Investment securities
Other financial liabilities
Australian Commonwealth
and New Zealand
government bonds
Life insurance assets
and liabilities
Life insurance assets
Life insurance liabilities
Listed equities, exchange
traded derivatives and
short sale of listed equities
within controlled managed
investment schemes
102WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
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 categoryIncludesValuation
Interest rate productsDerivativesInterest rate and inflation
swaps, swaptions, caps,
floors, collars and other
non-vanilla interest rate
derivatives
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 future
markets. Interest rate volatilities are sourced
from brokers and consensus data providers. If
consensus prices are not available, these are
classified as Level 3 instruments.
FX productsDerivativesFX swap, FX forward
contracts, FX options
and other non-vanilla
FX derivatives
Derived from market observable inputs or
consensus pricing providers using industry
standard models.
Other credit productsDerivativesSingle name and index
credit default swaps (CDS)
Valued using an industry standard model that
incorporates the credit spread as its principal
input. Credit spreads are obtained from
consensus data providers. If consensus prices
are not available, these are classified as Level 3
instruments.
Commodity productsDerivativesCommodity, energy and
carbon derivatives
Valued using industry standard models.
The models calculate the expected future value
of deliveries and payments and discount them
back to a present value. The model inputs include
forward curves, volatilities implied from market
observable inputs, discount curves and underlying
spot and futures prices. The significant inputs
are market observable or available through a
consensus data provider. If consensus prices
are not available, these are classified as Level 3
instruments.
Equity productsDerivativesExchange traded equity
options, OTC equity options
and equity warrants
Due to low liquidity, exchange traded options are
Level 2.
Valued using industry standard models based
on observable parameters such as stock prices,
dividends, volatilities and interest rates.
Asset backed debt
instruments
Trading securities and financial
assets measured at FVIS
Investment securities
Australian residential
mortgage backed securities
(RMBS) denominated in
Australian dollar and other
asset backed securities
(ABS)
Valued using an industry approach to value
floating rate debt with prepayment features.
Australian RMBS are valued using prices sourced
from a consensus data provider. If consensus
prices are not available these are classified as
Level 3 instruments.
Non-asset backed
debt instruments
Trading securities and financial
assets measured at FVIS
Investment securities
Other financial liabilities
State and other
government bonds,
corporate bonds and
commercial paper
Repurchase agreements
and reverse repurchase
agreements over non-asset
backed debt securities
Valued using observable market prices which are
sourced from independent pricing services, broker
quotes or inter-dealer prices.
Loans at fair valueLoansFixed rate bills and
syndicated loans
Discounted cash flow approach, using a discount
rate which reflects the terms of the instrument
and the timing of cash flows, adjusted for
creditworthiness, or expected sale amount.
Certificates of depositDeposits and other borrowingsCertificates of depositDiscounted cash flow using market rates offered
for deposits of similar remaining maturities.
Debt issues at fair
value
Debt issuesDebt issuesDiscounted 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 Westpac’s implied credit worthiness.
Note 13. Fair values of financial assets and liabilities (continued)
1
2
3
4
5
6
7
103WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 13. Fair values of financial assets and liabilities (continued)
InstrumentBalance sheet categoryIncludesValuation
Life insurance assets
and liabilities
Life insurance assets
Life insurance liabilities
Corporate bonds, over
the counter derivatives,
units in unlisted unit trusts,
life insurance contract
liabilities, life investment
contract liabilities and
external liabilities of
managed investment
schemes controlled by
statutory life funds
Valued using observable market prices or other
widely used and accepted valuation techniques
utilising observable market input.
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 judgement.
InstrumentBalance sheet categoryIncludesValuation
Debt instrumentsTrading securities and financial
assets measured at FVIS
Investment securities
Certain ABS, offshore
non-ABS and debt
securities issued via private
placement
These securities are evaluated by an independent
pricing service or based on third party
revaluations. Due to their illiquidity and/or
complexity these are classified as Level 3 assets.
Equity instrumentsTrading securities and financial
assets measured at FVIS
Investment securities
Strategic equity
investments
Valued using valuation techniques appropriate to
the instrument, including the use of recent arm’s
length transactions where available, discounted
cash flow approach or reference to the net assets
of the entity.
Due to their illiquidity, complexity and/or use of
unobservable inputs into valuation models, they
are classified as Level 3 assets.
104WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
The following tables summarise the attribution of financial instruments measured at fair value to the fair value
hierarchy:
As at 30 Sept 2020
$mLevel 1Level 2Level 3Total
Financial assets measured at fair value on a recurring basis
Trading securities and financial assets measured at FVIS 8,059 32,387 221 40,667
Derivative financial instruments 10 23,353 4 23,367
Investment securities 18,032 72,370 153 90,555
Loans- 540 21 561
Life insurance assets 617 2,976 - 3,593
Total financial assets measured at fair value on a recurring basis 26,718 131,626 399 158,743
Financial liabilities measured at fair value on a recurring basis
Deposits and other borrowings- 35,764 - 35,764
Other financial liabilities 420 4,229 - 4,649
Derivative financial instruments 10 23,031 13 23,054
Debt issues- 5,333 - 5,333
Life insurance liabilities- 1,396 - 1,396
Total financial liabilities measured at fair value on a recurring basis 430 69,753 13 70,196
As at 31 March 2020
$mLevel 1Level 2Level 3Total
Financial assets measured at fair value on a recurring basis
Trading securities and financial assets measured at FVIS 5,252 20,808 220 26,280
Derivative financial instruments 17 56,620 24 56,661
Investment securities 15,320 69,206 152 84,678
Loans- 246 22 268
Life insurance assets 600 1,974 - 2,574
Total financial assets measured at fair value on a recurring basis 21,189 148,854 418 170,461
Financial liabilities measured at fair value on a recurring basis
Deposits and other borrowings- 38,794 - 38,794
Other financial liabilities 261 10,239 - 10,500
Derivative financial instruments 14 48,031 44 48,089
Debt issues- 6,295 - 6,295
Life insurance liabilities- 604 - 604
Total financial liabilities measured at fair value on a recurring basis 275 103,963 44 104,282
As at 30 Sept 2019
$mLevel 1Level 2Level 3Total
Financial assets measured at fair value on a recurring basis
Trading securities and financial assets measured at FVIS 10,440 21,121 220 31,781
Derivative financial instruments 7 29,828 24 29,859
Investment securities 11,163 61,284 134 72,581
Loans- 239 21 260
Life insurance assets 1,097 8,270 - 9,367
Total financial assets measured at fair value on a recurring basis 22,707 120,742 399 143,848
Financial liabilities measured at fair value on a recurring basis
Deposits and other borrowings- 38,413 - 38,413
Other financial liabilities 262 5,108 - 5,370
Derivative financial instruments 8 29,059 29 29,096
Debt issues- 5,819 - 5,819
Life insurance liabilities- 7,377 - 7,377
Total financial liabilities measured at fair value on a recurring basis 270 85,776 29 86,075
Note 13. Fair values of financial assets and liabilities (continued)
1
2
3
4
5
6
7
105WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Reconciliation of non-market observables
The following table summarises the changes in financial instruments measured at fair value derived from
non-market observable valuation techniques (Level 3):
Full Year Sept 2020
Trading
securities and
financial
assets
measured atInvestmentTotal Level 3Total Level 3
$mFVISSecuritiesOther
1
assetsDerivativesliabilities
Balance as at beginning of year 220 134 45 399 29 29
Gains/(losses) on assets/ (gains)/losses
on liabilities recognised in:
Income statement(2)- (2)(4)(4)(4)
Other comprehensive income- (15)- (15)- -
Acquisitions and issues 26 40 12 78 7 7
Disposals and settlements(23)(6)(30)(59)(19)(19)
Balance as at end of year 221 153 25 399 13 13
Unrealised gains/(losses) recognised in the income
statement for financial instrument held as at end of
year(4)- 3 (1)(3)(3)
Transfers into and out of Level 3 have occurred due to changes in observability in the significant inputs into the
valuation models used to determine the fair value of the related financial instruments. Transfers in and transfers out
are reported using the end of year fair values. No transfers in or transfers out have occurred during the year.
Significant unobservable inputs
Sensitivities to reasonably possible changes in non-market observable valuation assumptions would not have a
material impact on the Group’s reported results.
Day one profit or loss
The closing balance of unrecognised day one profit for was $4 million (31 March 2020: $3 million profit;
30 September 2019: $3 million profit).
Financial instruments not measured at fair value
The following table summarises the estimated fair value of financial instruments not measured at fair value for
the Group:
As at 30 Sept 2020As at 31 March 2020As at 30 Sept 2019
CarryingFairCarryingFairCarryingFair
$mamountvalueamountvalueamountvalue
Financial assets not measured at fair value
Cash and balances with central banks 30,129 30,129 45,815 45,815 20,059 20,059
Collateral paid 4,778 4,778 5,339 5,339 5,930 5,930
Investment securities 984 984 1,111 1,111 820 820
Loans 692,498 694,264 719,410 721,740 714,510 716,130
Other financial assets 5,474 5,474 5,849 5,849 5,367 5,367
Total financial assets not measured at fair value 733,863 735,629 777,524 779,854 746,686 748,306
Financial liabilities not measured at fair value
Collateral received 2,250 2,250 12,728 12,728 3,287 3,287
Deposits and other borrowings 555,367 555,621 544,126 544,506 524,834 525,516
Other financial liabilities 36,276 36,276 23,496 23,496 23,845 23,845
Debt issues
2
144,992 146,402 179,540 175,610 175,638 176,838
Loan capital 23,949 23,934 25,807 23,636 21,826 22,076
Total financial liabilities not measured at fair value 762,834 764,483 785,697 779,976 749,430 751,562
A detailed description of how fair value is derived for financial instruments not measured at fair value is disclosed
in Note 22 of the 2020 Annual Report.
1. Other is comprised of derivative financial assets and certain loans.
2. The estimated fair value of debt issues includes the impact of changes in Westpac’s credit spreads since origination.
Note 13. Fair values of financial assets and liabilities (continued)
106WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 14. Provisions, contingent liabilities, contingent assets and credit commitments
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. Provisions raised by the
Group are set out in the table in the “Provisions” section below. Where it is not probable there will be an outflow of
economic resources or where a liability cannot be reliably estimated a contingent liability may exist.
Provisions
Annual leaveLitigationProvisions forCompliance,
Longand otherand non-impairmentLeaseregulation and
serviceemployeelendingon creditrestorationRestructuringremediation
$mleavebenefitslossescommitmentsobligationsprovisionsprovisionsTotal
Balance as at beginning of year 456 614 38 305 24 160 1,572 3,169
Additions 95 795 1,391 225 197 126 1,107 3,936
Utilisation(40)(794)(46)- (12)(110)(567)(1,569)
Reversal of unutilised
provisions- (19)(9)- (1)- (217)(246)
Other- - (3)- - - - (3)
Balance as at end of year 511 596 1,371 530 208 176 1,895 5,287
Litigation and non-lending loss provisions
A provision for a penalty in relation to the AUSTRAC civil proceedings.
On 24 September 2020, Westpac announced that it had reached an agreement with AUSTRAC to resolve the
civil penalty proceedings commenced by AUSTRAC on 20 November 2019, subject to Court approval. Under
the agreement, the parties agreed to file with the Court a Statement of Agreed Facts and Admissions, and to
recommend to the Court that Westpac pay a civil penalty of $1.3 billion in relation to the admitted contraventions
of the AML/CTF Act. Westpac also agreed to pay AUSTRAC’s legal costs of $3.75 million. The settlement was
approved by the Court on 21 October 2020 and the penalty and AUSTRAC’s legal costs are to be paid within 28
calendar days of this date.
In light of the above developments, Westpac has increased the provision in respect of the penalty from $900
million provided for in the First Half 2020 results to $1.3 billion and has also provided for AUSTRAC’s legal costs.
Westpac is defending a class action proceedings filed by Phi Finney McDonald in Australia relating to market
disclosure issues connected to Westpac’s monitoring of financial crime over the relevant period and matters which
are the subject of the recent AUSTRAC proceedings. The claims are brought on behalf of certain shareholders who
acquired an interest in Westpac securities between 16 December 2013 and 19 November 2019. It does not identify
the amount of any damages sought, however given the time period in question and the nature of the claims it is
likely that the damages which will be alleged will be significant. No provision has been recognised in relation to this
potential exposure.
Compliance, regulation and remediation provisions
Provisions for the Full Year 2020 in respect of compliance, regulation and remediation include:
• estimated customer refunds associated with certain ongoing advice service fees charged by the Group’s
salaried financial planners;
• estimated customer refunds associated with certain ongoing advice service fees charged by authorised
representatives of the Group’s wholly owned subsidiaries Securitor Financial Group Limited (Securitor) and
Magnitude Group Pty Ltd (Magnitude);
• refunds for certain Consumer and Business customers that had interest only loans that did not automatically
switch, when required, to principal and interest loans; and
• refunds to certain customers who were provided with business loans where they should have been provided
with loans covered by the National Consumer Credit Protection Act 2009 (Cth).
Certain compliance, regulation and remediation provisions are described further as follows:
Estimated customer refunds associated with certain ongoing advice service fees charged by the Group’s salaried
financial planners
At balance date, Westpac has a provision of $112 million for customer refunds associated with certain ongoing
advice service fees charged by the Group’s salaried financial planners during the period 2008 to 2018. A number
of estimates and judgements continue to be applied in measuring the provision at FY20. The provision includes
estimated interest and estimated program costs.
Ongoing advice service fees charged by authorised representatives of Securitor and Magnitude
At balance date, Westpac has a provision of $646 million relating to estimated customer remediation costs
(including interest on refunded fees and additional costs to run the remediation program) where customers of
authorised representatives of the Group’s wholly owned subsidiaries Securitor and Magnitude paid ongoing advice
service fees to those representatives and where it is not clear that the services were provided. The ongoing advice
service fees were charged during the period from 2008 to 2018. At balance date, A number of estimates and
judgements continue to be applied in measuring the provision at 30 September 2020.
Notes to the consolidated financial statements
1
2
3
4
5
6
7
107WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
It is possible that the final outcome could be below or above the provision, if the actual outcome differs from
the assumptions used in estimating the provision. Remediation processes may change over time as further facts
emerge and such changes could result in a change to the final exposure.
Restructuring provisions
The Group carries restructuring provisions in relation to changes in business restructures primarily for separation
and redundancy costs.
Lease restoration obligations
The addition to the lease restoration provision reflects a reassessment of the cost of making good leasehold premises at
the end of the Group’s property leases. The increase in the expected make-good cost has been treated as an addition
to the right-of-use asset and is being depreciated over the remaining life of those assets.
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
resource is remote.
Regulatory investigations, reviews and inquiries
Regulators, statutory authorities and other bodies routinely conduct investigations, reviews and inquiries involving
the financial services sector, both in Australia and overseas. These regulatory actions may consider a range of
subject matter, and in Australia, a number of regulatory investigations and reviews are currently considering
potential misconduct in credit and financial services.
Domestic regulators such as ASIC, APRA, ACCC, AUSTRAC, the OAIC, the ATO and the Fair Work Ombudsman,
as well as certain international regulators such as the Reserve Bank of New Zealand, Financial Markets Authority in
New Zealand, Hong Kong Monetary Authority, Monetary Authority of Singapore and National Futures Association
are also currently conducting investigations (some of which are industry-wide) involving the Group.
Two specific areas of investigation undertaken by ASIC are:
• Ongoing advice services – A current set of regulatory actions involve investigations by ASIC into alleged ‘fee for
no service’ activity. The first relates to ongoing advice services provided by the Group’s former salaried financial
planners and by authorised representatives of the Group’s wholly owned subsidiaries Securitor and Magnitude
and whether the corresponding ongoing advice was provided in all circumstances. The second relates to advice
service fees charged or deducted from some customer accounts (including platform and superannuation
accounts) following the death of the relevant account holder. ASIC’s investigations relate to the periods
between 2010 and 2019.
ASIC commenced both of these investigations in 2019 and is examining a range of matters, including whether
Westpac had appropriate systems and processes in place to ensure that customers received the advice
services that they had paid for, and the processes for ensuring ongoing fees were terminated quickly enough
following the death of some members. The Group is continuing to cooperate fully with ASIC’s investigations
and remediate affected accounts where appropriate. To date, ASIC has commenced a number of civil penalty
proceedings against other financial entities in relation to fee for no service activity.
• Consumer credit insurance - ASIC is also investigating Westpac’s past sales practices in relation to Consumer
Credit Insurance (CCI). This investigation follows ASIC’s industry-wide review of CCI sales practices between the
period 2011 and 2018.
Westpac ceased selling CCI products in branch and contact centre channels in November 2018, and ceased
online sales in June 2019. ASIC’s investigation is a separate matter to the Federal Court class action proceedings
commenced against Westpac, Westpac General Insurance Limited and Westpac Life Insurance Services Limited.
Further information about this class action is set out in the ‘Litigation’ section below.
In addition, there are investigations covering a range of other matters (some of which are industry-wide) that
involve or may involve the Group in the future, including:
• the provision of financial advice, including whether personal advice obligations have been complied with and
the conduct of financial planners;
• financial markets conduct, including market activity prior to entering into interest rate swaps with certain
customers; Westpac’s practices relating to selling unsecured debt; and the adequacy of fee disclosure charged
for our products and services; and
• other areas such as responsible lending, residential mortgages, credit portfolio management, general insurance,
the provision of superannuation (including insurance in superannuation), privacy and information governance,
competition law conduct and anti-money laundering and counter-terrorism financing processes and
procedures.
Note 14. Provisions, contingent liabilities, contingent assets and credit commitments (continued)
108WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
The Group has not received any indication of what (if any) action regulators will take following the conclusion of
the investigations set out above. No provisions have yet been made in relation to any financial penalty that might
arise in the event that regulators were to pursue enforcement proceedings, as any potential future liability of that
kind cannot be reliably estimated at this time.
These investigations may result in litigation (including class action proceedings), fines and penalties, infringement
notices, enforceable undertakings, imposition of capital requirements, licence revocation or variation, or other
action being taken by regulators or other parties. Given the size of Westpac, these investigations have in some
instances resulted, and could in the future result, in findings of a significant number of breaches of obligations. This
in turn could lead to significant financial and other penalties.
Litigation
There are ongoing Court proceedings, claims and possible claims for and against the Group. Contingent liabilities
exist in respect of actual and potential claims and proceedings, including those listed below. An assessment of
the Group’s likely loss has been made on a case-by-case basis for the purpose of the financial statements but
cannot always be reliably estimated, including in relation to those listed below. Except as otherwise stated, no
provision has been recognised in relation to the matters below because liability is not certain and cannot be reliably
estimated.
Regulatory litigation
• On 22 December 2016, ASIC commenced Federal Court proceedings against BT Funds Management Limited
(BTFM) and Westpac Securities Administration Limited (WSAL) in relation to a number of superannuation
account consolidation campaigns conducted between 2013 and 2016. The litigation has recently gone through
an appeal process, with the most recent appeal being brought by Westpac in the High Court of Australia. The
judgment will relate to whether BTFM and WSAL each provided personal advice on relevant telephone calls
made to 14 of the 15 specific customers (who were the focus of the claim) and consequentially contravened the
Corporations Act 2001 (Cth) (including section 912A(1)(a)).
• On 20 August 2020, ASIC commenced proceedings in the Federal Court against BTFM and Asgard Capital
Management Limited (ACML), in relation to an issue that was a case study in the Financial Services Royal
Commission. The allegations concern the inadvertent charging of financial adviser fees to 404 customers
totalling $130,006 after a request had been made to remove the financial adviser from the customers’ accounts.
The issue was self-reported to ASIC in 2017 and customers have been remediated. BTFM and ACML accept the
allegations made by ASIC and do not intend to defend the proceedings. Westpac is now working through the
relevant Court procedural steps to try to bring the matter to a resolution.
Class actions
The Group is currently defending the following five class actions:
• On 12 October 2017, a class action against Westpac and Westpac Life Insurance Services Limited (WLIS)
was filed in the Federal Court of Australia. The class action was filed on behalf of customers who, since
February 2011, obtained insurance issued by WLIS on the recommendation of financial advisers employed within
the Westpac Group. The plaintiffs have alleged that aspects of the financial advice provided by those advisers
breached fiduciary and statutory duties owed to the advisers’ clients, including the duty to act in the best
interests of the client, and that WLIS was knowingly involved in those alleged breaches. The matter has been
set down for an initial trial in May 2021. The damages sought are unspecified.
• On 5 September 2019, a class action against BTFM and WLIS was commenced in the Federal Court of Australia
in relation to aspects of BTFM’s BT Super for Life cash investment option. The claim follows other industry
class actions. It is alleged that BTFM failed to adhere to a number of obligations under the general law, the
relevant trust deed and the Superannuation Industry (Supervision) Act 1993 (Cth), and that WLIS was knowingly
concerned with BTFM’s alleged contraventions. The damages sought are unspecified.
• A class action proceeding was commenced in December 2019 in the Federal Court of Australia, on behalf
of certain investors who acquired an interest in Westpac securities between 16 December 2013 and
19 November 2019. The proceeding involves allegations relating to market disclosure issues connected to
Westpac’s monitoring of financial crime over the relevant period and matters which are the subject of the
recent AUSTRAC proceedings. The damages sought are unspecified. However, given the time period in question
and the nature of the claims it is likely that the damages which will be alleged will be significant.
• On 28 February 2020, a class action was commenced against Westpac, Westpac General Insurance Limited
and WLIS in the Federal Court of Australia in relation to Westpac’s sale of CCI. The claim follows other industry
class actions. It is alleged that the three entities failed to adhere to a number of obligations in selling CCI in
conjunction with credit cards, personal loans and flexi loans. The damages sought are unspecified. Westpac no
longer sells CCI products.
Note 14. Provisions, contingent liabilities, contingent assets and credit commitments (continued)
1
2
3
4
5
6
7
109WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
• On 16 July 2020, a class action was commenced against Westpac and St George Finance Limited (SGF)
in the Supreme Court of Victoria in relation to flex commissions paid to auto dealers from 1 March 2013 to
31 October 2018. This proceeding is one of two class actions commenced against a number of lenders in the
auto finance industry. It is alleged that Westpac and SGF are liable for the unfair conduct of dealers acting as
credit representatives and engaged in misleading or deceptive conduct. The damages sought are unspecified.
Another law firm publicly announced in July 2020 that it is preparing to commence a class action against
Westpac entities for similar conduct. Westpac has not paid flex commissions since 1 November 2018 following
an industry-wide ban issued by ASIC.
Westpac is aware from media reports and other publicly available material that other class actions against Westpac
entities are being investigated. In July 2020, one law firm publicly stated that it intends to commence a class action
against BTFM alleging that since 2014, BTFM did not act in the best interests of members of certain superannuation
funds when obtaining group insurance policies. In August 2020, another law firm announced that it is investigating
claims on behalf of persons who in the past 6 years acquired, renewed or continued to hold a financial product
(including life insurance) on the advice or recommendation of a financial adviser from Magnitude, Securitor or
Westpac. Westpac does not have any further information about the proposed claims beyond the public statements
issued by the law firms involved.
Internal reviews and remediation
As in prior periods, Westpac is continuing to undertake a number of reviews to identify and resolve prior issues
that have the potential to impact our customers and reputation. These internal reviews continue to identify
a number of issues in respect of which we are taking steps or will take steps to put things right so that our
customers are not at a disadvantage from certain past practices, including making compensation/remediation
payments to customers and providing refunds where identified. These issues include compliance with lending
obligations (including responsible lending) which is an area of industry focus, the provision of credit in accordance
with the National Consumer Credit Protection Act 2009 (Cth), the charging of certain Wealth fees, the processing
of corporate actions, reviewing third party remuneration arrangements and the way some product terms and
conditions are operationalised. By undertaking these reviews we can also improve our processes and controls.
An assessment of the Group’s likely loss has been made on a case-by-case basis for the purpose of the financial
statements but cannot always be reliably estimated. Contingent liabilities may exist in respect of actual or potential
claims (which could be brought by customers or regulators), compensation/remediation payments and/or refunds
identified as part of these reviews.
Australian Financial Complaints Authority
Contingent liabilities may also exist in relation to customer complaints brought before the Australian Financial
Complaints Authority (AFCA). AFCA has the power to make determinations about complaints and can award
compensation up to certain thresholds. AFCA has a broader jurisdiction than previous dispute resolution bodies which
it has replaced and, up until 30 June 2020, could also consider customer complaints dating back to 1 January 2008.
Financial Claims Scheme
Under the Financial Claims Scheme (FCS), the Australian Government provides depositors a free guarantee of
deposits in eligible ADIs up to and including $250,000. The FCS applies to an eligible ADI if APRA has applied for
the winding up of the ADI and the responsible Australian Government minister has declared that the FCS applies to
the ADI.
The Financial Claims Scheme (ADIs) Levy Act 2008 provides for the imposition of a levy to fund the excess of
certain APRA FCS costs connected to an ADI, including payments by APRA to deposit holders in a failed ADI.
The levy would be imposed on liabilities of eligible ADIs to their depositors and cannot be more than 0.5% of the
amount of those liabilities. A contingent liability may exist in respect of any levy imposed under the FCS.
Contingent tax risk
Tax and regulatory authorities in Australia and in other jurisdictions are reviewing the taxation treatment of certain
transactions (both historical and present-day transactions) undertaken by the Group in the course of normal
business activities and the claiming of tax incentives and indirect taxes such as GST. The Group also responds to
various notices and requests for information it receives from tax and regulatory authorities.
These reviews, notices and requests may result in additional tax liabilities (including interest and penalties).
The Group has assessed these and other taxation claims arising in Australia and elsewhere, including seeking
independent advice.
Settlement risk
The Group is subject to a credit risk exposure in the event that another counterparty fails to settle for its payments
clearing activities (including foreign exchange). The Group seeks to minimise credit risk arising from settlement risk
in the payments system by aligning our processing method with the legal certainty of settlement in the relevant
clearing mechanism.
Note 14. Provisions, contingent liabilities, contingent assets and credit commitments (continued)
110WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Parent Entity guarantees and undertakings
The Parent Entity makes the following guarantees and undertakings to subsidiaries:
• letters of comfort for certain subsidiaries which recognise that Westpac has a responsibility that those
subsidiaries continue to meet their obligations; and
• guarantees to certain wholly owned subsidiaries which are Australian financial services or credit licensees to
comply with legislative requirements. Each guarantee is capped at $40 million per year and can only be utilised
if the entity concerned becomes legally obliged to pay for a claim under the relevant licence. The Parent Entity
has a right to recover any funds payable under the guarantees from the relevant subsidiary.
Contingent assets
The credit commitments shown in the following table also constitute contingent assets. These commitments would
be classified as loans in the balance sheet on the contingent event occurring.
Undrawn credit commitments
The 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.
They expose the 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. Some of the arrangements can be cancelled by the Group at any time and a significant portion is
expected to expire without being drawn. The actual liquidity and credit risk exposure varies in line with amounts
drawn and may be less than the amounts disclosed.
The Group uses the same credit policies when entering into these arrangements as it does for on-balance
sheet instruments. Refer to Note 21 of the 2020 Annual Report for further details of liquidity risk and credit risk
management.
Undrawn credit commitments excluding derivatives are as follows:
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Undrawn credit commitments
Letters of credit and guarantees
1
12,610 14,746 15,150 (14)(17)
Commitments to extend credit
2
184,064 175,794 176,002 5 5
Other 267 158 188 69 42
Total undrawn credit commitments 196,941 190,698 191,340 3 3
Note 14. Provisions, contingent liabilities, contingent assets and credit commitments (continued)
1. Standby letters of credit 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 Group may hold cash as
collateral for certain guarantees issued.
2. Commitments to extend credit include all obligations on the part of the Group to provide credit facilities. As facilities may expire without
being drawn upon, the notional amounts do not necessarily reflect future cash requirements. In addition to the commitments disclosed
above, at 30 September 2020 the Group had offered $4.9 billion (31 March 2020: $5.2 billion, 30 September 2019: $5.0 billion) of
facilities to customers, which had not yet been accepted.
1
2
3
4
5
6
7
111WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 15. Shareholders’ equity
As atAs atAs at
30 Sept31 March30 Sept
$m202020202019
Share capital
Ordinary share capital, fully paid 40,509 40,503 37,508
RSP treasury shares held
1
(618)(616)(572)
Other treasury shares held
2
55 30 19
Total treasury shares held(563)(586)(553)
Total share capital 39,946 39,917 36,955
NCI 51 56 53
Ordinary Shares
Westpac does not have authorised capital and the ordinary shares have no par value. Ordinary shares entitle the
holder to participate in dividends and, in the event of Westpac winding up, to a share of the proceeds in proportion
to the number of and amounts paid on the shares held.
Each ordinary share entitles the holder to one vote, either in person or by proxy, at a shareholder meeting.
Reconciliation of movement in number of ordinary shares
Half YearHalf YearHalf Year
SeptMarchSept
202020202019
Balance as at beginning of period 3,611,684,870 3,489,928,773 3,447,571,023
Share issuances
3
- 110,919,861 -
Dividend reinvestment plan
4
- 10,836,236 42,357,750
Issued shares for the period- 121,756,097 42,357,750
Balance as at end of period 3,611,684,870 3,611,684,870 3,489,928,773
Ordinary shares purchased on market
Full Year Sept 2020
Average price
ConsolidatedNumber($)
For share-based payment arrangements:
Employee share plan (ESP) 931,524 26.46
RSP
5
1,931,521 24.06
Westpac Performance Plan (WPP) - share rights exercised 175,957 26.00
As treasury shares:
Treasury shares purchased 114,376 24.52
Treasury shares sold(1,835,908) 20.23
Net number of ordinary shares purchased/(sold) on market 1,317,470
1. 30 September 2020: 4,588,277 unvested shares held (31 March 2020: 4,578,297, 30 September 2019: 4,784,213).
2. 30 September 2020: Nil shares held (31 March 2020: 1,284,249, 30 September 2019: 1,721,532).
3. The average price per share for the issuance of shares was $24.81.
4. The price for the issuance of shares in relation to the dividend re-investment plan for was $25.17 (2019 final dividend) and $27.36 (2019
interim dividend). No 2020 Interim dividends were declared and paid.
5. Ordinary shares allocated to employees under the RSP are classified as treasury shares until the shares vest.
Notes to the consolidated financial statements
112WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Reconciliation of movement in reserves
Half YearHalf YearHalf Year
SeptMarchSept
202020202019
Debt securities at FVOCI reserve
Balance as at beginning of period(142)(22) 59
Net gains/(losses) from changes in fair value 500 (140)(111)
Income tax effect(138) 42 33
Transferred to income statement(51)(28)(4)
Income tax effect 7 8 1
Loss allowance on debt securities measured at FVOCI 1 1 -
Exchange differences- (3)-
Balance as at end of period 177 (142)(22)
Equity securities at FVOCI reserve
Balance as at beginning of period(1) 17 7
Net gains/(losses) from changes in fair value (3)(18) 10
Balance as at end of period(4)(1) 17
Share-based payment reserve
Balance as at beginning of period 1,702 1,642 1,604
Share-based payment expense 18 60 38
Balance as at end of period 1,720 1,702 1,642
Cash flow hedge reserve
Balance as at beginning of period 64 (129)(204)
Net gains/(losses) from changes in fair value (240) 145 (11)
Income tax effect 71 (43) 4
Transferred to income statement 90 128 117
Income tax effect(27)(37)(35)
Balance as at end of period(42) 64 (129)
Foreign currency translation reserve
Balance as at beginning of period 86 (179)(306)
Exchange differences on translation of foreign operations(884) 707 (112)
Gains/(losses) on net investment hedges 451 (442) 239
Transferred to income statement 55 - -
Balance as at end of period(292) 86 (179)
Other reserves
Balance as at beginning of period(21)(18)(19)
Transactions with owners 6 (3) 1
Balance as at end of period(15)(21)(18)
Total reserves 1,544 1,688 1,311
Note 15. Shareholders’ equity (continued)
1
2
3
4
5
6
7
113WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Note 16. Notes to the consolidated cash flow statement
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Reconciliation of net cash provided by/(used in)
operating activities to net profit for the period
Net profit for the period 1,101 1,191 (8) 2,292 6,790 (66)
Adjustments:
Depreciation, amortisation and impairment 1,489 984 51 2,473 1,079 129
Impairment charges 1,033 2,338 (56) 3,371 966 large
Net decrease/(increase) in current and deferred tax(343)(769)(55)(1,112)(541) 106
(Increase)/decrease in accrued interest receivable 157 82 91 239 132 81
(Decrease)/increase in accrued interest payable(597)(663)(10)(1,260)(341)large
(Decrease)/increase in provisions 618 1,307 (53) 1,925 1,143 68
Other non-cash items(749) 56 large(693)(832)(17)
Cash flows from operating activities before changes in
operating assets and liabilities 2,709 4,526 (40) 7,235 8,396 (14)
Net (increase)/decrease in derivative financial instruments(3,115) 4,966 large 1,851 7,605 (76)
Net (increase)/decrease in life insurance assets and
liabilities(134)(143)(6)(277)(134) 107
(Increase)/decrease in other operating assets:
Collateral paid(529) 877 large 348 (847)large
Trading securities and other financial assets measured
at FVIS(16,870) 8,114 large(8,756)(7,629) 15
Loans 18,966 (694)large 18,272 (4,188)large
Other financial assets 272 1 large 273 336 (19)
Other assets 1 69 (99) 70 (13)large
(Decrease)/increase in other operating liabilities:
Collateral received(9,996) 8,900 large(1,096) 1,007 large
Deposits and other borrowings 16,002 12,908 24 28,910 1,113 large
Other financial liabilities 9,190 2,627 large 11,817 1,463 large
Other liabilities(4) 8 large 4 (5)large
Net cash provided by/(used in) operating activities 16,492 42,159 (61) 58,651 7,104 large
Non-cash financing activities
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Shares issued under the dividend reinvestment plan- 273 (100) 273 1,489 (82)
Increase in lease liabilities 89 88 1 177 - -
Businesses disposed in Half Year September 2020
There were no businesses disposed of during Half Year September 2020.
Businesses disposed in Half Year March 2020
There were no businesses disposed of during Half Year March 2020.
114WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Notes to the consolidated financial statements
Businesses disposed in Full Year 2019
Westpac sold its interest in Ascalon Capital Managers (Asia) Limited and Ascalon Capital Managers Limited on
8 February 2019, for a combined profit of $3 million recognised in non-interest income. The total cash consideration
paid, net of transaction costs and cash held, was $1 million.
Restricted cash
Certain of our foreign operations are required to maintain reserves or minimum balances with central banks in
their respective countries of operation, totalling $457 million (31 March 2020: $307 million, 30 September 2019:
$330 million) which are included in cash and balances with central banks.
Note 17. Subsequent events
Since 30 September 2020, the Board has determined to pay a fully franked final dividend of 31 cents per fully
paid ordinary share. The dividend is expected to be $1,120 million. The dividend is not recognised as a liability at
30 September 2020. The proposed payment date of the dividend is 18 December 2020.
The Board has determined to issue shares to satisfy the Dividend Reinvestment Plan (DRP) for the 2020 final
ordinary dividend. The DRP will include a 1.5% discount to the market price used to determine the number of shares
issued under the DRP. The market price used to determine the number of shares issued under the DRP will be set
over the 15 trading days commencing 17 November 2020.
Subsequent to the end of the financial year the Group’s General Insurance business met the criteria to be classified
as held for sale. The General Insurance business currently forms part of the Specialist Businesses segment.
Completion of the expected sale would have no material impact on the Group.
No other matters have arisen since the year ended 30 September 2020, which are not otherwise dealt with in this
report, that have significantly affected or may significantly affect the operations of the Group, the results of its
operations or the state of affairs of the Group in subsequent periods.
Note 16. Notes to the consolidated cash flow statement (continued)
1
2
3
4
5
6
7
115WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Statutory statements
4.8 Statement in relation to the audit of the financial statements
PricewaterhouseCoopers has audited the financial statements contained within the Westpac 2020 financial report
and has issued an unmodified audit report. A copy of their report is available with the Annual financial report. This
full year results announcement has not been subject to audit by PricewaterhouseCoopers. The preceding financial
information contained in Section 4 “Full Year 2020 Financial Report” includes financial information extracted from
the audited financial statements together with financial information that has not been audited.
Dated at Sydney this 1st day of November 2020 for and on behalf of the Board.
Tim Hartin
General Manager and Company Secretary
Statutory statements
116WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
5.0 Cash earnings financial information
Note 1Interest spread and margin analysis (cash earnings basis)117
Note 2Average balance sheet and interest rates (cash earnings basis)118
Note 3Net interest income (cash earnings basis)120
Note 4Non-interest income (cash earnings basis)121
Note 5Operating expenses (cash earnings basis)122
Note 6Deferred expenses123
Note 7Earnings per share (cash earnings basis)123
Note 8Group earnings reconciliation124
Note 9Divisional result and economic profit128
Cash earnings financial information
1
2
3
4
5
6
7
117WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 1. Interest spread and margin analysis (cash earnings basis)
Half YearHalf YearFull YearFull Year
SeptMarchSeptSept
$m2020202020202019
Group
Average interest earning assets ($m) 830,465 812,971 821,718 798,924
Net interest income ($m) 8,420 8,666 17,086 16,953
Interest spread1.92%1.99%1.96%1.94%
Benefit of net non-interest bearing assets, liabilities and equity0.11%0.14%0.12%0.18%
Net interest margin2.03%2.13%2.08%2.12%
Analysis by division
Average interest earning assets ($m)
Consumer 358,173 363,618 360,895 365,873
Business 137,639 140,499 139,069 140,838
Westpac Institutional Bank 82,088 82,894 82,491 84,247
Westpac New Zealand (A$) 94,468 91,326 92,897 86,172
Specialist Businesses 17,090 18,284 17,687 19,041
Group Businesses 141,007 116,350 128,679 102,753
Group total 830,465 812,971 821,718 798,924
Westpac New Zealand (NZ$) 101,190 95,766 98,478 91,099
Net interest income ($m)
1
Consumer 4,313 4,234 8,547 8,130
Business 2,019 2,144 4,163 4,456
Westpac Institutional Bank 506 605 1,111 1,337
Westpac New Zealand (A$) 892 940 1,832 1,860
Specialist Businesses 247 287 534 555
Group Businesses 443 456 899 615
Group total 8,420 8,666 17,086 16,953
Westpac New Zealand (NZ$) 956 987 1,943 1,967
Interest margin
Consumer 2.41% 2.33% 2.37% 2.22%
Business 2.93% 3.05% 2.99% 3.16%
Westpac Institutional Bank 1.23% 1.46% 1.35% 1.59%
Westpac New Zealand (NZ$) 1.89% 2.06% 1.97% 2.16%
Specialist Businesses 2.89% 3.14% 3.02% 2.91%
Group Businesses 0.63% 0.78% 0.70% 0.60%
Group total 2.03% 2.13% 2.08% 2.12%
1. Includes capital benefit. Capital benefit represents the notional revenue earned on capital allocated to divisions under Westpac’s
economic capital framework.
118WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 2. Average balance sheet and interest rates (cash earnings basis)
Half Year Sept 2020Half Year March 2020
AverageAverageAverageAverage
balanceInterestratebalanceInterestrate
$m$m%$m$m%
Assets
Interest earning assets
Collateral paid 18,338 6 0.1 13,126 69 1.1
Trading securities and other financial assets measured
at FVIS 32,021 124 0.8 27,237 235 1.7
Investment securities 84,010 640 1.5 72,352 881 2.4
Loans and other receivables
1
696,096 11,540 3.3 700,256 13,465 3.8
Total interest earning assets and interest income 830,465 12,310 3.0 812,971 14,650 3.6
Non-interest earning assets
Derivative financial instruments 32,051 30,617
Life insurance assets 2,397 6,831
All other assets
2
62,883 61,945
Total non-interest earning assets 97,331 99,393
Total assets 927,796 912,364
Liabilities
Interest bearing liabilities
Collateral received 8,583 7 0.2 6,579 19 0.6
Deposits and other borrowings 524,744 1,899 0.7 512,522 3,155 1.2
Loan capital 23,240 370 3.2 22,182 430 3.9
Other interest bearing liabilities
3
192,147 1,614 1.7 201,285 2,380 2.4
Total interest bearing liabilities and interest expense 748,714 3,890 1.0 742,568 5,984 1.6
Non-interest bearing liabilities
Deposits and other borrowings 56,961 52,823
Derivative financial instruments 36,219 30,279
Life insurance policy liabilities 387 5,611
All other liabilities
4
17,061 13,405
Total non-interest bearing liabilities 110,628 102,118
Total liabilities 859,342 844,686
Shareholders’ equity 68,403 67,625
NCI 51 53
Total equity 68,454 67,678
Total liabilities and equity 927,796 912,364
Loans and other receivables
1
Australia 583,758 9,857 3.4 587,528 11,380 3.9
New Zealand 86,527 1,504 3.5 83,841 1,724 4.1
Other overseas 25,811 179 1.4 28,887 361 2.5
Deposits and other borrowings
Australia 445,733 1,412 0.6 426,021 2,333 1.1
New Zealand 57,728 366 1.3 56,464 516 1.8
Other overseas 21,283 121 1.1 30,037 306 2.0
1. Loans and other receivables are net of Stage 3 provision for ECL, where interest income is determined based on their carrying value.
Stages 1 and 2 provisions for ECL are not included in the average interest earning assets balance, as interest income is determined
based on the gross value of loans and other receivables.
2. Includes property and equipment, intangible assets, deferred tax assets, non-interest bearing loans relating to mortgage offset accounts
and all other non-interest earning financial assets.
3. Includes net impact of Treasury balance sheet management activities and the Bank Levy.
4. Includes other financial liabilities, provisions, current and deferred tax liabilities and other non-interest bearing liabilities.
1
2
3
4
5
6
7
119WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 2. Average balance sheet and interest rates (cash earnings basis) (continued)
Full Year Sept 2020Full Year Sept 2019
AverageAverageAverageAverage
balanceInterestratebalanceInterestrate
$m$m%$m$m%
Assets
Interest earning assets
Collateral paid 15,732 75 0.5 10,823 201 1.9
Trading securities and other financial assets measured
at FVIS 29,629 359 1.2 29,074 662 2.3
Investment securities 78,181 1,521 1.9 63,787 1,919 3.0
Loans and other receivables
1
698,176 25,005 3.6 695,240 30,412 4.4
Total interest earning assets and interest income 821,718 26,960 3.3 798,924 33,194 4.2
Non-interest earning assets
Derivative financial instruments 31,334 25,959
Life insurance assets 4,614 9,610
All other assets
2
62,414 60,231
Total non-interest earning assets 98,362 95,800
Total assets 920,080 894,724
Liabilities
Interest bearing liabilities
Collateral received 7,581 26 0.3 3,617 57 1.6
Deposits and other borrowings 518,633 5,054 1.0 506,789 8,945 1.8
Loan capital 22,711 800 3.5 18,181 776 4.3
Other interest bearing liabilities
3
196,716 3,994 2.0 205,695 6,463 3.1
Total interest bearing liabilities and interest expense 745,641 9,874 1.3 734,282 16,241 2.2
Non-interest bearing liabilities
Deposits and other borrowings 54,892 49,270
Derivative financial instruments 33,249 26,568
Life insurance policy liabilities 2,999 7,653
All other liabilities
4
15,233 13,187
Total non-interest bearing liabilities 106,373 96,678
Total liabilities 852,014 830,960
Shareholders’ equity 68,014 63,714
NCI 52 50
Total equity 68,066 63,764
Total liabilities and equity 920,080 894,724
Loans and other receivables
1
Australia 585,643 21,237 3.6 589,427 25,905 4.4
New Zealand 85,184 3,228 3.8 79,255 3,648 4.6
Other overseas 27,349 540 2.0 26,558 859 3.2
Deposits and other borrowings
Australia 435,877 3,745 0.9 425,799 7,023 1.6
New Zealand 57,096 882 1.5 54,720 1,235 2.3
Other overseas 25,660 427 1.7 26,270 687 2.6
1. Loans and other receivables are net of Stage 3 provision for ECL, where interest income is determined based on their carrying value.
Stages 1 and 2 provisions for ECL are not included in the average interest earning assets balance, as interest income is determined
based on the gross value of loans and other receivables.
2. Includes property and equipment, intangible assets, deferred tax assets, non-interest bearing loans relating to mortgage offset accounts
and all other non-interest earning financial assets.
3. Includes net impact of Treasury balance sheet management activities and the Bank Levy.
4. Includes other financial liabilities, provisions, current and deferred tax liabilities and other non-interest bearing liabilities.
120WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 3. Net interest income (cash earnings basis)
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Interest income
Cash and balances with central banks 21 114 (82) 135 334 (60)
Collateral paid 6 69 (91) 75 201 (63)
Net ineffectiveness on qualifying hedges- - - - - -
Trading securities and financial assets measured at
FVIS 124 235 (47) 359 662 (46)
Investment securities 640 881 (27) 1,521 1,919 (21)
Loans 11,514 13,339 (14) 24,853 30,043 (17)
Other financial assets 5 12 (58) 17 35 (51)
Total interest income 12,310 14,650 (16) 26,960 33,194 (19)
Interest expense
Collateral received(7)(19)(63)(26)(57)(54)
Deposits and other borrowings(1,899)(3,155)(40)(5,054)(8,945)(43)
Trading liabilities
1
(188)(122) 54 (310)(841)(63)
Debt Issues(1,117)(1,897)(41)(3,014)(4,869)(38)
Loan capital(370)(430)(14)(800)(776) 3
Bank levy(212)(196) 8 (408)(391) 4
Other interest expense(97)(165)(41)(262)(362)(28)
Total interest expense(3,890)(5,984)(35)(9,874)(16,241)(39)
Net interest income 8,420 8,666 (3) 17,086 16,953 1
1. Includes net impact of Treasury balance sheet management activities.
1
2
3
4
5
6
7
121WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 4. Non-interest income (cash earnings basis)
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Net fee income
Facility fees 359 372 (3) 731 730 -
Transactions fees and commissions 439 582 (25) 1,021 1,225 (17)
Other non-risk fee income 134 (86)large 48 (76)large
Fee income 932 868 7 1,800 1,879 (4)
Credit Card Loyalty(40)(62)(35)(102)(121)(16)
Other Transaction Fees(55)(51) 8 (106)(103) 3
Fee expense(95)(113)(16)(208)(224)(7)
Net fee income 837 755 11 1,592 1,655 (4)
Net wealth management and insurance income
Wealth management income 247 384 (36) 631 276 129
Life insurance premium income 609 688 (11) 1,297 1,443 (10)
General insurance and lenders mortgage insurance
(LMI) net premium earned 252 247 2 499 482 4
Life insurance investment and other income
1
60 12 large 72 403 (82)
General insurance and LMI investment and other
income 18 24 (25) 42 52 (19)
Total insurance premium, investment and other income 939 971 (3) 1,910 2,380 (20)
Life insurance claims and changes in life insurance
liabilities
1
(710)(574) 24 (1,284)(1,266) 1
General insurance and LMI claims and other expenses(198)(300)(34)(498)(367) 36
Total insurance claims, changes in life insurance liabilities
and other expenses(908)(874) 4 (1,782)(1,633) 9
Net wealth management and insurance income 278 481 (42) 759 1,023 (26)
Trading income
2
499 429 16 928 907 2
Other Income
Dividends received from other entities- 1 (100) 1 6 (83)
Net gain/(loss) on derecognition/sale of associates 316 - - 316 38 large
Net gain/(loss) on disposal of assets 9 2 large 11 61 (82)
Net gain/(loss) on derivatives held for risk
management purposes
3
18 (7)large 11 (12)large
Net gain/(loss) on financial assets designated at fair
value(33)(1)large(34) 4 large
Net gain/(loss) on disposal of controlled entities- - - - 3 (100)
Rental income on operating lease 7 8 (13) 15 18 (17)
Share of associates’ net profit/(loss)(9)(14)(36)(23)(23)-
Other(57) 21 large(36) 22 large
Total other income 251 10 large 261 117 123
Total non-interest income 1,865 1,675 11 3,540 3,702 (4)
1. Movements in life insurance investment income and changes in life insurance liabilities are broadly correlated.
2. Trading income represents a component of total markets income from our WIB markets business, Westpac Pacific, Westpac New
Zealand and Treasury foreign exchange operations in Australia and New Zealand.
3. Net gain/(loss) on derivatives held for risk management purposes reflects the impact of economic hedges of earnings.
122WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 5. Operating expenses (cash earnings basis)
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Staff expenses
Employee remuneration, entitlements and on-costs 2,273 2,155 5 4,428 4,299 3
Superannuation expense 206 207 - 413 378 9
Share-based payments 33 47 (30) 80 108 (26)
Restructuring costs 59 35 69 94 232 (59)
Total staff expenses 2,571 2,444 5 5,015 5,017 -
Occupancy expenses
Operating lease rentals 84 64 31 148 658 (78)
Depreciation and impairment of property and
equipment 302 367 (18) 669 168 large
Other 98 62 58 160 143 12
Total occupancy expenses 484 493 (2) 977 969 1
Technology expenses
Amortisation and impairment of software assets 502 468 7 970 719 35
Depreciation and impairment of IT equipment 147 125 18 272 129 111
Technology services 350 348 1 698 810 (14)
Software maintenance and licenses 205 193 6 398 371 7
Telecommunications 117 99 18 216 207 4
Data processing 45 44 2 89 83 7
Total technology expenses 1,366 1,277 7 2,643 2,319 14
Other expenses
Professional and processing services 774 600 29 1,374 1,060 30
Amortisation and impairment of intangible and
deferred expenditure 520 3 large 523 9 large
Postage and stationery 81 83 (2) 164 179 (8)
Advertising 95 122 (22) 217 245 (11)
Non-lending losses 474 969 (51) 1,443 58 large
Other expenses 175 169 4 344 175 97
Total other expenses 2,119 1,946 9 4,065 1,726 136
Total operating expenses 6,540 6,160 6 12,700 10,031 27
1
2
3
4
5
6
7
123WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 6. Deferred expenses
1
As atAs atAs at% Mov’t
30 Sept31 March30 SeptSept 20 -Sept 20 -
$m202020202019Mar 20Sept 19
Deferred acquisition costs 52 53 61 (2)(15)
Other deferred expenditure 31 29 29 7 7
Note 7. Earnings per share (cash earnings basis)
Half YearHalf Year% Mov’tFull YearFull Year% Mov’t
SeptMarchSept 20 -SeptSeptSept 20 -
$m20202020Mar 2020202019Sept 19
Cash earnings 1,615 993 63 2,608 6,849 (62)
Weighted average number of fully paid ordinary shares
(millions) 3,612 3,579 1 3,595 3,456 4
Cash earnings per ordinary share (cents) 44.7 2 7.7 61 72.5 198.2 (63)
Half YearHalf YearFull yearFull Year
Reconciliation of ordinary shares on issue before the effect of own shares heldSeptMarchSeptSept
$m2020202020202019
Balance as at beginning of period 3,612 3,490 3,490 3,435
Number of shares issues from capital raising- 111 111 -
Number of shares issued under the Dividend Reinvestment Plan (DRP)- 11 11 55
Balance as at end of period 3,612 3,612 3,612 3,490
1. Deferred expenses principally relate to a small number of capitalised costs in the wealth business. It does not include insurance deferred
acquisition costs (which are offset to revenue) or mortgage broker costs (which are offset to net interest income).
124WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 8. Group earnings reconciliation
Half Year Sept 2020Fair value
(gain)/lossAdjustmentsPolicyholder
Reportedon economicIneffectiverelated toTreasuryOperatingtaxCash
$mresultshedgeshedgesPendalsharesleasesrecoveriesearnings
Net interest income 7,696 777 (53)- - - - 8,420
Net fee income 837 - - - - - - 837
Net wealth management
and insurance income 286 - - - 2 - (10) 278
Trading income 435 64 - - - - - 499
Other income 325 (9)- (47)- (18)- 251
Non-interest income 1,883 55 - (47) 2 (18)(10) 1,865
Net operating income 9,579 832 (53)(47) 2 (18)(10) 10,285
Staff expenses(2,571)- - - - - - (2,571)
Occupancy expenses(502)- - - - 18 - (484)
Technology expenses(1,366)- - - - - - (1,366)
Other expenses(2,119)- - - - - - (2,119)
Operating expenses(6,558)- - - - 18 - (6,540)
Core earnings 3,021 832 (53)(47) 2 - (10) 3,745
Impairment charges(940)- - - - - - (940)
Profit before income tax 2,081 832 (53)(47) 2 - (10) 2,805
Income tax expense(980)(251) 16 15 1 - 10 (1,189)
Net profit 1,101 581 (37)(32) 3 - - 1,616
Net profit attributable to NCI(1)- - - - - - (1)
Net profit attributable to
owners of WBC 1,100 581 (37)(32) 3 - - 1,615
Cash earnings adjustments:
Fair value (gain)/loss on
economic hedges 581 (581)- - - - - -
Ineffective hedges(37)- 37 - - - - -
Adjustment related to Pendal(32)- - 32 - - - -
Treasury shares 3 - - - (3)- - -
Cash earnings 1,615 - - - - - - 1,615
1
2
3
4
5
6
7
125WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 8. Group earnings reconciliation (continued)
Half Year March 2020Fair value
(gain)/lossAdjustmentsPolicyholder
Reportedon economicIneffectiverelated toTreasuryOperatingtaxCash
$mresultshedgeshedgesPendalsharesleasesrecoveriesearnings
Net interest income 9,000 (300)(34)- - - - 8,666
Net fee income 755 - - - - - - 755
Net wealth management
and insurance income 465 - - - (18)- 34 481
Trading income 460 (31)- - - - - 429
Other income(76) 16 - 91 - (21)- 10
Non-interest income 1,604 (15)- 91 (18)(21) 34 1,675
Net operating income 10,604 (315)(34) 91 (18)(21) 34 10,341
Staff expenses(2,444)- - - - - - (2,444)
Occupancy expenses(514)- - - - 21 - (493)
Technology expenses(1,277)- - - - - - (1,277)
Other expenses(1,946)- - - - - - (1,946)
Operating expenses(6,181)- - - - 21 - (6,160)
Core earnings 4,423 (315)(34) 91 (18)- 34 4,181
Impairment charges(2,238)- - - - - - (2,238)
Profit before income tax 2,185 (315)(34) 91 (18)- 34 1,943
Income tax expense(994) 96 10 (28) 1 - (34)(949)
Net profit 1,191 (219)(24) 63 (17)- - 994
Net profit attributable to NCI(1)- - - - - - (1)
Net profit attributable to
owners of WBC 1,190 (219)(24) 63 (17)- - 993
Cash earnings adjustments:
Fair value (gain)/loss on
economic hedges(219) 219 - - - - - -
Ineffective hedges(24)- 24 - - - - -
Adjustment related to Pendal 63 - - (63)- - - -
Treasury shares(17)- - - 17 - - -
Cash earnings 993 - - - - - - 993
126WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Full Year Sept 2020Fair value
(gain)/lossAdjustmentsPolicyholder
Reportedon economicIneffectiverelated toTreasuryOperatingtaxCash
$mresultshedgeshedgesPendalsharesleasesrecoveriesearnings
Net interest income 16,696 477 (87)- - - - 17,086
Net fee income 1,592 - - - - - - 1,592
Net wealth management
and insurance income 751 - - - (16)- 24 759
Trading income 895 33 - - - - - 928
Other income 249 7 - 44 - (39)- 261
Non-interest income 3,487 40 - 44 (16)(39) 24 3,540
Net operating income 20,183 517 (87) 44 (16)(39) 24 20,626
Staff expenses(5,015)- - - - - - (5,015)
Occupancy expenses(1,016)- - - - 39 - (977)
Technology expenses(2,643)- - - - - - (2,643)
Other expenses(4,065)- - - - - - (4,065)
Operating expenses(12,739)- - - - 39 - (12,700)
Core earnings 7,444 517 (87) 44 (16)- 24 7,926
Impairment charges(3,178)- - - - - - (3,178)
Profit before income tax 4,266 517 (87) 44 (16)- 24 4,748
Income tax expense(1,974)(155) 26 (13) 2 - (24)(2,138)
Net profit 2,292 362 (61) 31 (14)- - 2,610
Net profit attributable to NCI(2)- - - - - - (2)
Net profit attributable to
owners of WBC 2,290 362 (61) 31 (14)- - 2,608
Cash earnings adjustments:
Fair value (gain)/loss on
economic hedges 362 (362)- - - - - -
Ineffective hedges(61)- 61 - - - - -
Adjustment related to Pendal 31 - - (31)- - - -
Treasury shares(14)- - - 14 - - -
Cash earnings 2,608 - - - - - - 2,608
Note 8. Group earnings reconciliation (continued)
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127WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 8. Group earnings reconciliation (continued)
Full Year Sept 2019Fair value
(gain)/lossAdjustmentsPolicyholder
Reportedon economicIneffectiverelated toTreasuryOperatingtaxCash
$mresultshedgeshedgesPendalsharesleasesrecoveriesearnings
Net interest income 16,907 74 (28)- - - - 16,953
Net fee income 1,655 - - - - - - 1,655
Net wealth management
and insurance income 1,029 - - - 6 - (12) 1,023
Trading income 929 (22)- - - - - 907
Other income 129 (1)- 43 - (54)- 117
Non-interest income 3,742 (23)- 43 6 (54)(12) 3,702
Net operating income 20,649 51 (28) 43 6 (54)(12) 20,655
Staff expenses(5,038)- - 21 - - - (5,017)
Occupancy expenses(1,023)- - - - 54 - (969)
Technology expenses(2,319)- - - - - - (2,319)
Other expenses(1,726)- - - - - - (1,726)
Operating expenses(10,106)- - 21 - 54 - (10,031)
Core earnings 10,543 51 (28) 64 6 - (12) 10,624
Impairment charges(794)- - - - - - (794)
Profit before income tax 9,749 51 (28) 64 6 - (12) 9,830
Income tax expense(2,959)(16) 8 (19)(1)- 12 (2,975)
Net profit 6,790 35 (20) 45 5 - - 6,855
Net profit attributable to NCI(6)- - - - - - (6)
Net profit attributable to
owners of WBC 6,784 35 (20) 45 5 - - 6,849
Cash earnings adjustments:
Fair value (gain)/loss on
economic hedges 35 (35)- - - - - -
Ineffective hedges(20)- 20 - - - - -
Adjustment related to Pendal 45 - - (45)- - - -
Treasury shares 5 - - - (5)- - -
Cash earnings 6,849 - - - - - - 6,849
128WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Cash earnings financial information
Note 9. Divisional result and economic profit
Group economic profit is defined as cash earnings plus a franking benefit equivalent of 70% of the value of
Australian tax expense less a capital charge calculated at 11% of average ordinary equity.
Divisional economic profit is defined as cash earnings plus the franking benefit less a capital charge. The capital
charge is calculated at 11% on allocated capital.
Economic profit is used as a key measure of financial performance because it focuses on shareholder value
generated by requiring a return in excess of a risk-adjusted cost of capital.
Westpac
InstitutionalWestpac NewSpecialist
$mGroupConsumerBusinessBankingZealand
1
Businesses
Half Year Sept 2020
Reported results 1,100 1,274 256 185 327 (567)
Cash earnings adjustments 515 - - - 4 (32)
Cash earnings 1,615 1,274 256 185 331 (599)
Franking benefit 715 383 76 64 - (31)
Adjusted cash earnings 2,330 1,657 332 249 331 (630)
Average equity
2
68,403 21,331 11,999 9,158 6,341 4,873
Capital charge(3,763)(1,173)(660)(503)(349)(268)
Economic profit/(losses)(1,433) 484 (328)(254)(18)(898)
Return on average equity (including intangibles) 4.7 10.2 3.3 3.8 9.7 (19.2)
Half Year March 2020
Reported results 1,190 1,472 478 147 292 30
Cash earnings adjustments(197)- - - (11) 63
Cash earnings 993 1,472 478 147 281 93
Franking benefit 580 445 148 70 - 23
Adjusted cash earnings 1,573 1,917 626 217 281 116
Average equity
2
67,625 20,343 11,167 8,014 6,403 4,777
Capital charge(3,719)(1,119)(614)(441)(352)(263)
Economic profit/(losses)(2,146) 798 12 (224)(71)(147)
Return on average equity (including intangibles) 2.9 12.2 6.5 3.5 8.1 3.0
Full Year Sept 2020
Reported results 2,290 2,746 734 332 619 (537)
Cash earnings adjustments 318 - - - (7) 31
Cash earnings 2,608 2,746 734 332 612 (506)
Franking benefit 1,295 828 224 134 - (8)
Adjusted cash earnings 3,903 3,574 958 466 612 (514)
Average equity
2
68,014 20,837 11,583 8,586 6,372 4,825
Capital charge(7,482)(2,292)(1,274)(944)(701)(531)
Economic profit/(losses)(3,579) 1,282 (316)(478)(89)(1,045)
Return on average equity (including intangibles) 3.8 11.2 4.9 3.7 8.9 (8.2)
Full Year Sept 2019
Reported results 6,784 3,116 1,946 925 984 667
Cash earnings adjustments 65 - - - 1 45
Cash earnings 6,849 3,116 1,946 925 985 712
Franking benefit 1,779 933 587 221 - 186
Adjusted cash earnings 8,628 4,049 2,533 1,146 985 898
Average equity
2
63,714 19,422 10,729 7,158 5,251 4,733
Capital charge(7,009)(2,136)(1,180)(787)(578)(521)
Economic profit 1,619 1,913 1,353 359 407 377
Return on average equity (including intangibles) 10.7 13.5 13.7 12.1 17.1 11.6
1. In A$ equivalents. For the purpose of divisional results, the capital currently allocated to the Westpac New Zealand division is broadly
aligned to the capital required for the New Zealand business measured under APRA requirements. This is different to, and lower
than the capital held by Westpac New Zealand Limited (WNZL), which is regulated by the Reserve Bank of New Zealand. The WNZL
Disclosure Statement contains further detail on WNZL’s financial position.
2. For divisions average equity does not include intangible assets.
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129WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Other information
6.0 Other information
6.1 Disclosure regarding forward-looking statements
This Financial Results Announcement contains statements that constitute ‘forward-looking statements’ within the
meaning of Section 21E of the US Securities Exchange Act of 1934.
Forward-looking statements are statements about matters that are not historical facts. Forward-looking statements
appear in a number of places in this Financial Results Announcement and include statements regarding Westpac’s
intent, belief or current expectations with respect to its business and operations, market conditions, results of
operations and financial condition, including, without limitation, future loan loss provisions and financial support to
certain borrowers. Words such as ‘will’, ‘may’, ‘expect’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘estimate’,
‘anticipate’, ‘believe’, ‘probability’, ‘risk’, ‘aim’ or other similar words are used to identify forward-looking statements.
These forward-looking statements reflect Westpac’s current views with respect to future events and are subject to
change, certain risks, uncertainties and assumptions which are, in many instances, beyond Westpac’s control, and have
been made based upon management’s expectations and beliefs concerning future developments and their potential
effect upon Westpac. There can be no assurance that future developments will be in accordance with Westpac’s
expectations or that the effect of future developments on Westpac will be those anticipated. Actual results could differ
materially from those expected, depending on the outcome of various factors, including, but not limited to:
• the effect of the global COVID-19 pandemic, which has had, and is expected to continue to have, a negative
impact on our business and global economic conditions, adversely affect a wide-range of Westpac’s customers,
create increased volatility in financial markets and may result in increased impairments, defaults and write-offs;
• disruptions to our business and operations and to the business and operations of key suppliers, third party
contractors and customers connected with the COVID-19 pandemic;
• the effect of, and changes in, laws, regulations, taxation or accounting standards or practices and government
policy, particularly changes to liquidity, leverage and capital requirements;
• regulatory investigations, reviews and other actions, inquiries, litigation, fines, penalties, restrictions or other
regulator imposed conditions, including as a result of our actual or alleged failure to comply with laws (such as
financial crime laws), regulations or regulatory policy;
• internal and external events which may adversely impact Westpac’s reputation;
• information security breaches, including cyberattacks;
• reliability and security of Westpac’s technology and risks associated with changes to technology systems;
• the stability of Australian and international financial systems and disruptions to financial markets and any losses
or business impacts Westpac or its customers or counterparties may experience as a result;
• market volatility, including uncertain conditions in funding, equity and asset markets;
• an increase in defaults in credit exposures because of a deterioration in economic conditions;
• adverse asset, credit or capital market conditions;
• the conduct, behaviour or practices of Westpac or its staff;
• changes to Westpac’s credit ratings or the methodology used by credit rating agencies;
• levels of inflation, interest rates (including low or negative interest rates), exchange rates and market and
monetary fluctuations;
• market liquidity and investor confidence;
• changes in economic conditions, consumer spending, saving and borrowing habits in Australia, New Zealand
and other countries (including as a result of tariffs and other protectionist trade measures) in which Westpac
or its customers or counterparties conduct their operations and Westpac’s ability to maintain or to increase
market share, margins and fees, and control expenses;
• the effects of competition, including from established providers of financial services and from non-financial
services entities, in the geographic and business areas in which Westpac conducts its operations;
• the timely development and acceptance of new products and services and the perceived overall value of these
products and services by customers;
• the effectiveness of Westpac’s risk management policies, including internal processes, systems and employees;
• the incidence or severity of Westpac-insured events;
• the occurrence of environmental change (including as a result of climate change) or external events in countries
in which Westpac or its customers or counterparties conduct their operations;
• changes to the value of Westpac’s intangible assets;
• changes in political, social or economic conditions in any of the major markets in which Westpac or its
customers or counterparties operate;
• the success of strategic decisions involving diversification or innovation, in addition to business expansion
activity, business acquisitions and the integration of new businesses; and
• various other factors beyond Westpac’s control.
The above list is not exhaustive. For certain other factors that may impact on forward-looking statements made
by Westpac, refer to ‘Risk factors’ in the 2020 Westpac Group Annual Report. When relying on forward-looking
statements to make decisions with respect to Westpac, investors and others should carefully consider the
foregoing factors and other uncertainties and events.
Westpac is under no obligation to update any forward-looking statements contained in this Financial Results
Announcement, whether as a result of new information, future events or otherwise, after the date of this Financial
Results Announcement.
Other information
130WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Other information
6.2 References to websites
Information contained in or accessible through the websites mentioned in this Full Year Financial Results
Announcement does not form part of this Full Year Financial Results Announcement unless we specifically state
that it is incorporated by reference and forms part of this Full Year Financial Results Announcement. All references
in this Full Year Financial Results Announcement to websites are inactive textual references and are for information
only.
6.3 Credit ratings
1
Rating agencyLong TermOutlookShort. Term
Fitch RatingsA+NegativeF1
Moody’s Investor ServicesAa3StableP-1
S&P Global RatingsAA-NegativeA-1+
On 7 April 2020, following an assessment of the economic impact of the COVID-19 pandemic on the Australian and
New Zealand economies, Fitch Ratings (Fitch) have downgraded their long-term ratings for the major Australian
banks (including Westpac Banking Corporation) by one notch, to A+ (from AA-). Fitch has maintained the rating
outlook for the major Australian banks as “negative”, reflecting the major downside risk to Fitch’s economic outlook
in light of the evolving global situation.
On 8 April 2020, S&P Global Ratings affirmed Australia’s AAA/A-1+ ratings but revised the outlook on these
ratings to “negative”. As a result of the change in Australia’s sovereign rating outlook, S&P Global Ratings affirmed
Westpac Banking Corporation’s current issuer credit rating of AA- long term and A-1+ short term but the outlook
has been revised to “negative”.
6.4 Dividend reinvestment plan
Westpac operates a dividend reinvestment plan (DRP) that is available to holders of fully paid ordinary shares
who are resident in, and whose address on the register of shareholders is in, Australia or New Zealand. As noted in
Section 2.5, the Directors have made certain determinations in relation to the calculation of the market price which
will apply to the DRP for the 2020 final dividend only.
Shareholders who wish to commence participation in the DRP, or to vary their current participation election, must
do so by 5.00pm (AEST) on 13 November 2020.
Shareholders can provide these instructions by:
• For shareholders with holdings that have a market value of less than $50,000 (for a single holding) or less
than $1,000,000 per shareholding held within a Link Market Services portfolio), logging into the Westpac
share registrar’s website at www.linkmarketservices.com.au and electing the DRP or amending their existing
instructions online; or
• Completing and returning a DRP Application or Variation form to Westpac’s share registry. Registry contact
details are listed in Section 6.6.
6.5 Information on related entities
a. Changes in control of Group entities
During the twelve months ended 30 September 2020 the following controlled entities were acquired, formed, or
incorporated:
• Westpac Digital Partnerships Pty Ltd (incorporated 5 December 2019)
• Series 2020-1 WST Trust (created 22 January 2020)
• Red Bird Ventures Limited (incorporated 5 August 2020)
• Platin 1925. GmbH (renamed to Westpac Europe GmbH) (acquired 10 September 2020)
During the year ended 30 September 2020 the following controlled entities ceased to be controlled:
• Crusade Management Pty Limited (deregistered 1 December 2019)
• Hastings Investment Management Pty Ltd (deregistered 18 December 2019)
• Series 2011-1 WST Trust (terminated 14 February 2020)
• Westpac Databank Pty Limited (deregistered on 27 May 2020)
• Series 2011-2 WST Trust (terminated 4 August 2020)
• Crusade ABS Series 2016-1 Trust (terminated 1 September 2020)
• St. George Life Pty Limited (deregistered 24 September 2020)
1. As at 30 September 2020.
Other information
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131WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Other information
b. Associates
As at 30 September 2020Ownership Interest Held (%)
Beat The Q Holdings Pty Ltd23.90%
Data Republic Pty Ltd24.90%
Digital Wallet Pty Ltd29.81%
Ehealthme Pty Ltd15.60%
Flare HR Pty Ltd23.00%
InDebted Holdings Pty Ltd20.40%
Lygon 1B Pty Ltd25.20%
OpenAgent Pty Ltd25.92%
PromisePay Pte Ltd28.80%
Valiant Finance Pty Ltd20.03%
6.6 Financial calendar and Share Registry details
Westpac shares are listed on the securities exchanges in Australia (ASX) and New Zealand (NZX) and as American
Depository Receipts in New York (NYSE). Westpac Capital Notes 2, Westpac Capital Notes 3, Westpac Capital
Notes 4, Westpac Capital Notes 5 and Westpac Capital Notes 6 are listed on the ASX. Westpac NZD Subordinated
Notes are listed on the NZX.
Important dates to note are set out below, subject to change. Payment of any distribution, dividend or interest
payment is subject to the relevant payment conditions and the key dates for each payment will be confirmed to
the ASX for securities listed on the ASX.
Westpac Ordinary Shares (ASX code: WBC, NZX code: WBC, NYSE code: WBK)
New York ex-dividend date for final dividend9 November 2020
New York record date for final dividend10 November 2020
Ex-dividend date for final dividend11 November 2020
Record date for final dividend12 November 2020
Annual General Meeting11 December 2020
Final dividend payable18 December 2020
Financial Half Year end31 March 2021
Interim results and dividend announcement3 May 2021
New York ex-dividend date for interim dividend12 May 2021
New York record date for interim dividend13 May 2021
Ex-dividend date for interim dividend13 May 2021
Record date for interim dividend14 May 2021
Interim dividend payable25 June 2021
Financial Year end30 September 2021
Final results and dividend announcement1 November 2021
New York ex-dividend date for final dividend9 November 2021
New York record date for final dividend10 November 2021
Ex-dividend date for final dividend11 November 2021
Record date for final dividend12 November 2021
Annual General Meeting15 December 2021
1
Final dividend payable21 December 2021
1. Details regarding the location of the meeting and the business to be dealt with will be contained in a Notice of Meeting sent to
shareholders in the November before the meeting.
132WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Other information
Westpac Capital Notes 2 (ASX code: WBCPE)
Ex-date for quarterly distribution14 December 2020
Record date for quarterly distribution15 December 2020
Payment date for quarterly distribution23 December 2020
Ex-date for quarterly distribution12 March 2021
Record date for quarterly distribution15 March 2021
Payment date for quarterly distribution23 March 2021
Ex-date for quarterly distribution11 June 2021
Record date for quarterly distribution15 June 2021
Payment date for quarterly distribution23 June 2021
Ex-date for quarterly distribution14 September 2021
Record date for quarterly distribution15 September 2021
Payment date for quarterly distribution23 September 2021
Ex-date for quarterly distribution14 December 2021
Record date for quarterly distribution15 December 2021
Payment date for quarterly distribution23 December 2021
Westpac Capital Notes 3 (ASX code: WBCPF)
Ex-date for quarterly distribution11 December 2020
Record date for quarterly distribution14 December 2020
Payment date for quarterly distribution22 December 2020
Ex-date for quarterly distribution11 March 2021
Record date for quarterly distribution12 March 2021¹
Payment date for quarterly distribution22 March 2021
Ex-date for quarterly distribution10 June 2021
Record date for quarterly distribution11 June 2021¹
Payment date for quarterly distribution22 June 2021
Ex-date for quarterly distribution13 September 2021
Record date for quarterly distribution14 September 2021
Payment date for quarterly distribution22 September 2021
Ex-date for quarterly distribution13 December 2021
Record date for quarterly distribution14 December 2021
Payment date for quarterly distribution22 December 2021
Westpac Capital Notes 4 (ASX code: WBCPG)
Ex-date for quarterly distribution21 December 2020
Record date for quarterly distribution22 December 2020
Payment date for quarterly distribution30 December 2020
Ex-date for quarterly distribution19 March 2021
Record date for quarterly distribution22 March 2021
Payment date for quarterly distribution30 March 2021
Ex-date for quarterly distribution21 June 2021
Record date for quarterly distribution22 June 2021
Payment date for quarterly distribution30 June 2021
Ex-date for quarterly distribution21 September 2021
Record date for quarterly distribution22 September 2021
Payment date for quarterly distribution30 September 2021
Ex-date for quarterly distribution21 December 2021
Record date for quarterly distribution22 December 2021
Payment date for quarterly distribution30 December 2021
1. Adjusted to immediately preceding business day as record date falls on a non-ASX business day or a date on which banks are not open
for general business in Sydney.
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133WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Other information
Westpac Capital Notes 5 (ASX code: WBCPH)
Ex-date for quarterly distribution11 December 2020
Record date for quarterly distribution14 December 2020
Payment date for quarterly distribution22 December 2020
Ex-date for quarterly distribution11 March 2021
Record date for quarterly distribution12 March 2021¹
Payment date for quarterly distribution22 March 2021
Ex-date for quarterly distribution10 June 2021
Record date for quarterly distribution11 June 2021¹
Payment date for quarterly distribution22 June 2021
Ex-date for quarterly distribution13 September 2021
Record date for quarterly distribution14 September 2021
Payment date for quarterly distribution22 September 2021
Ex-date for quarterly distribution13 December 2021
Record date for quarterly distribution14 December 2021
Payment date for quarterly distribution22 December 2021
Westpac Capital Notes 6 (ASX code: WBCPI)
Ex-date for quarterly distribution9 December 2020
Record date for quarterly distribution10 December 2020
Payment date for quarterly distribution18 December 2020
Ex-date for quarterly distribution9 March 2021
Record date for quarterly distribution10 March 2021
Payment date for quarterly distribution18 March 2021
Ex-date for quarterly distribution9 June 2021
Record date for quarterly distribution10 June 2021
Payment date for quarterly distribution18 June 2021
Ex-date for quarterly distribution9 September 2021
Record date for quarterly distribution10 September 2021
Payment date for quarterly distribution20 September 2021²
Ex-date for quarterly distribution9 December 2021
Record date for quarterly distribution10 December 2021
Payment date for quarterly distribution20 December 2021²
Westpac NZD Subordinated Notes (NZX code: WBC010)
Ex-date for quarterly interest payment19 November 2020
Record date for quarterly interest payment20 November 2020
3
Payment date for quarterly interest payment1 December 2020
Ex-date for quarterly interest payment18 February 2021
Record date for quarterly interest payment19 February 2021
Payment date for quarterly interest payment1 March 2021
Ex-date for quarterly interest payment20 May 2021
Record date for quarterly interest payment21 May 2021
3
Payment date for quarterly interest payment1 June 2021
Ex-date for quarterly interest payment19 August 2021
Record date for quarterly interest payment20 August 2021
3
Payment date for quarterly interest payment1 September 2021
Ex-date for quarterly interest payment18 November 2021
Record date for quarterly interest payment19 November 2021
3
Payment date for quarterly interest payment1 December 2021
1. Adjusted to immediately preceding business day as record date falls on a non-ASX business day or a date on which banks are not open
for general business in Sydney.
2. Adjusted to next business day as payment date falls on a non-ASX business day or a date on which banks are not open for general
business in Sydney.
3. Adjusted to immediately preceding business day as record date falls on a date on which banks are not open for general business in
Wellington and Auckland, New Zealand and Sydney, Australia.
134WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Other information
Registered Office
Level 18
275 Kent Street
Sydney NSW 2000
Australia
Telephone: +61 2 9155 7713
Facsimile: +61 2 8253 4128
International: +61 2 9155 7700
Website: www.westpac.com.au/westpacgroup
Share Registries
AustraliaNew Zealand
Ordinary shares on the main register, Westpac Capital
Notes 2, Westpac Capital Notes 3, Westpac Capital
Notes 4, Westpac Capital Notes 5, Westpac Capital
Notes 6
Ordinary shares on the New Zealand branch register
and Westpac NZD Subordinated Notes
Link Market Services LimitedLink Market Services Limited
Level 12, 680 George StreetLevel 11, Deloitte Centre, 80 Queen Street
Sydney NSW 2000 AustraliaAuckland 1010 New Zealand
Postal Address: Locked Bag A6015, Sydney South NSW
1235, Australia
Postal Address: P.O. Box 91976,
Auckland 1142, New Zealand
Website: www.linkmarketservices.com.au
Email: westpac@linkmarketservices.com.au
Website: www.linkmarketservices.co.nz
Email: enquiries@linkmarketservices.co.nz
Telephone: 1800 804 255 (toll free in Australia)
International: +61 1800 804 255
Facsimile: +61 2 9287 0303
Telephone: 0800 002 727 (toll free in New Zealand)
International: +64 9 375 5998
Facsimile: +64 9 375 5990
New YorkFor further information contact:
Depositary in USA for American Depositary Shares
Listed on New York Stock Exchange
(CUSIP 961214301)
BNY Mellon Shareowner Services
PO Box 505000, Louisville, KY 40233-5000, USA
Telephone: +1 888 269 2377 (toll free in US)
International: +1 201 680 6825
Media:
David Lording, Head of Media Relations
+61 419 683 411
Analysts and Investors:
Andrew Bowden, Head of Investor Relations
+61 438 284 863
Email: shrrelations@cpushareownerservices.com
Website: https://www-us.computershare.com/investor
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135WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Other information
6.7 Exchange rates
6.7.1 Exchange rates against A$
Six months to/as at30 September 202031 March 202030 September 2019
Currency Average Spot Average Spot Average Spot
US$ 0.6866 0.7107 0.6711 0.6191 0.6926 0.6754
GBP 0.5418 0.5540 0.5228 0.5017 0.5504 0.5493
NZ$ 1.0721 1.0803 1.0493 1.0264 1.0565 1.0790
Twelve months to/as at30 September 202030 September 2019
CurrencyAverageSpotAverageSpot
US$ 0.6789 0.7107 0.7038 0.6754
GBP 0.5323 0.5540 0.5514 0.5493
NZ$ 1.0607 1.0803 1.0574 1.0790
6.7.2 Impact of exchange rate movements on Group results
Half Year Sept 2020 vs
Half Year March 2020
Full Year Sept 2020 vs
Full Year Sept 2019
Cash
earnings
growth
FX Impact
$m
Growth
ex-FX
Cash
earnings
growth
FX Impact
$m
Growth
ex-FX
Net interest income(3%)11(3%)1%391%
Non-interest income11%2110%(4%)19(5%)
Net operating income(1%)32(1%)-58-
Operating expenses6%(5)6%27%(22)26%
Core earnings(10%)27(11%)(25%)36(26%)
Impairment charges(58%)(1)(58%)large(6)large
Operating profit before income tax44%2643%(52%)30(52%)
Income tax expense25%(9)24%(28%)(8)(28%)
Net profit63%1761%(62%)22(62%)
Profit attributable to NCI---(67%)-(67%)
Cash earnings63%1761%(62%)22(62%)
6.7.3 Exchange rate risk on future NZ$ earnings
Westpac’s policy in relation to the hedging of the future earnings of the Group’s New Zealand division is to assess
the economic risk for volatility of the NZ$ against A$. Westpac manages these flows over a time horizon under
which up to 100% of the expected earnings for the following 12 months and 100% of the expected earnings for
the subsequent 12 months can be hedged. At the current elevated exchange rate level, Westpac has currently
ceased hedging NZ future earnings and therefore as at 30 September 2020 Westpac has no outstanding NZ future
earnings hedges.
Other information
136WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Glossary
7.0 Glossary
Shareholder value
Average ordinary equityAverage total equity less average non-controlling interests.
Average tangible ordinary equityAverage ordinary equity less average goodwill and other intangible assets
(excluding capitalised software).
Cash earnings per ordinary shareCash earnings divided by the weighted average ordinary shares (cash earnings basis).
Cash ROECash earnings divided by average ordinary equity.
Cash earnings to average tangible
equity (ROTE)
Cash earnings divided by average tangible ordinary equity.
Dividend payout ratio – cash earningsOrdinary dividend paid/declared calculated on issued shares divided by cash
earnings.
Dividend payout ratio – net profitOrdinary dividend paid/declared on issued shares (net of Treasury shares)
divided by the net profit attributable to owners of WBC.
Earnings per ordinary shareNet profit attributable to the owners of WBC divided by the weighted average
ordinary shares (reported).
Economic profit – DivisionsCash earnings less a capital charge calculated at 11% of allocated capital plus 70%
of the value of Australian tax expense.
Economic profit – GroupCash earnings less a capital charge calculated at 11% of average ordinary equity plus
a value on franking credits calculated as 70% of the Group’s Australian tax expense.
Fully franked dividends per ordinary
shares (cents)
Dividends paid out of retained profits which carry a credit for Australian
company income tax paid by Westpac.
Net tangible assets per ordinary shareNet tangible assets (total equity less goodwill and other intangible assets less
minority interests) divided by the number of ordinary shares on issue (reported).
Return on equity (ROE)Net profit attributable to the owners of WBC divided by average ordinary equity.
Weighted average ordinary shares
(cash earnings)
Weighted average number of fully paid ordinary shares listed on the ASX for the
relevant period.
Weighted average ordinary shares
(reported)
Weighted average number of fully paid ordinary shares listed on the ASX for the
relevant period less Westpac shares held by the Group (‘Treasury shares’).
Productivity and efficiency
Expense to income ratioOperating expenses divided by net operating income.
Full-time equivalent employees (FTE)A calculation based on the number of hours worked by full and part-time
employees as part of their normal duties. For example, the full-time equivalent of
one FTE is 76 hours paid work per fortnight.
Revenue per FTETotal operating income divided by the average number of FTE for the period.
Business performance
Average interest-earning assetsThe average balance of assets held by the Group that generate interest income.
Where possible, daily balances are used to calculate the average balance for the
period.
Average interest-bearing liabilitiesThe average balance of liabilities owed by the Group that incur an interest
expense. Where possible, daily balances are used to calculate the average
balance for the period.
Divisional marginNet interest income (including capital benefit) for a division as a percentage of
the average interest earning assets for that division.
Interest spreadThe difference between the average yield on all interest-earning assets and the
average rate paid on interest bearing liabilities.
Net interest marginCalculated by dividing net interest income by average interest-earning assets.
Capital adequacy
APRA leverage ratioTier 1 capital divided by ‘exposure measure’ and expressed as a percentage.
‘Exposure measure’ is the sum of on-balance sheet exposures, derivative exposures,
securities financing transaction exposures and other off- balance sheet exposures.
Common equity tier 1 capital ratioTotal common equity capital divided by risk weighted assets, as defined by APRA.
Credit risk weighted assets
(Credit RWA)
Credit risk weighted assets represent risk weighted assets (on-balance sheet and
off-balance sheet) that relate to credit exposures and therefore exclude market
risk, operational risk, interest rate risk in the banking book and other assets.
Internationally comparable
capital ratios
Internationally comparable regulatory capital ratios are Westpac’s estimated
ratios after adjusting the capital ratios determined under APRA Basel III
regulations for various items. Analysis aligns with the APRA study titled
“International capital comparison study” dated 13 July 2015.
Risk weighted assets (RWA)Assets (both on and off-balance sheet) are risk weighted according to each
asset’s inherent potential for default and what the likely losses would be in case
of default. In the case of non-asset backed risks (i.e. market and operational risk),
RWA is determined by multiplying the capital requirements for those risks by 12.5.
Tier 1 capital ratioTotal Tier 1 capital divided by risk weighted assets, as defined by APRA.
Total regulatory capital ratioTotal regulatory capital divided by risk weighted assets, as defined by APRA.
Glossary
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137WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Glossary
Funding and liquidity
Committed Liquidity Facility (CLF)The RBA makes available to Australian Authorised Deposit-taking Institutions
(ADIs) a CLF that, subject to qualifying conditions, can be accessed to meet LCR
requirements under APS210 Liquidity.
Deposit to loan ratioCustomer deposits divided by total loans.
High Quality Liquid Assets (HQLA)Assets which meet APRA’s criteria for inclusion as HQLA in the numerator of
the LCR.
Liquidity Coverage Ratio (LCR)An APRA requirement to maintain an adequate level of unencumbered high
quality liquid assets, to meet liquidity needs for a 30 calendar day period under
an APRA-defined severe stress scenario. Absent a situation of financial stress,
the value of the LCR must not be less than 100%, effective 1 January 2015. LCR is
calculated as the percentage ratio of stock of HQLA and CLF over the total net
cash out-flows in a modelled 30 day defined stressed scenario.
Net Stable Funding Ratio (NSFR)The NSFR is defined as the ratio of the amount of available stable funding (ASF)
to the amount of required stable funding (RSF) defined by APRA. The amount
of ASF is the portion of an ADI’s capital and liabilities expected to be a reliable
source of funds over a one year time horizon. The amount of RSF is a function
of the liquidity characteristics and residual maturities of an ADI’s assets and
off-balance sheet activities. ADI’s must maintain an NSFR of at least 100%.
Term Funding Facility (TFF)A facility established by the RBA to provide 3 year term funding to Australian
ADIs via repurchase transactions, subject to qualifying conditions, to help support
lending to Australian businesses.
Third party liquid assetsHQLA and non LCR qualifying liquid assets, but excludes internally securitised
assets that are eligible for a repurchase agreement with the RBA and RBNZ.
Total liquid assetsThird party liquid assets and internally securitised assets that are eligible for a
repurchase agreement with a central bank.
Asset quality
90 days past due and not impairedIncludes facilities where:
• contractual payments of interest and / or principal are 90 or more calendar
days overdue, including overdrafts or other revolving facilities that remain
continuously outside approved limits by material amounts for 90 or more
calendar days (including accounts for customers who have been granted
hardship assistance); or
• an order has been sought for the customer’s bankruptcy or similar legal
action has been instituted which may avoid or delay repayment of its credit
obligations; and
• the estimated net realisable value of assets / security to which Westpac has
recourse is sufficient to cover repayment of all principal and interest, or where
there are otherwise reasonable grounds to expect payment in full and interest
is being taken to profit on an accrual basis.
These facilities, while in default, are not treated as impaired for accounting
purposes.
Collectively assessed provisions (CAPs)Collectively assessed provisions for expected credit loss under AASB 9 represent
the Expected Credit Loss (ECL) which is collectively assessed in pools of
similar assets with similar risk characteristics. This incorporates forward looking
information and does not require an actual loss event to have occurred for an
impairment provision to be recognised.
DefaultFor accounting purposes, a default occurs when Westpac considers that the
customer is unlikely to repay its credit obligations in full, without recourse by the
Group to action such as realising security, or the customer is more than 90 days
past due on any material credit obligation. This definition of default is aligned to
the APRA regulatory definition of default.
Impaired exposuresIncludes exposures that have deteriorated to the point where full collection of
interest and principal is in doubt, based on an assessment of the customer’s outlook,
cash flow, and the net realisation of value of assets to which recourse is held:
• facilities 90 days or more past due, and full recovery is in doubt: exposures
where contractual payments are 90 or more days in arrears and the net
realisable value of assets to which recourse is held may not be sufficient to
allow full collection of interest and principal, including overdrafts or other
revolving facilities that remain continuously outside approved limits by
material amounts for 90 or more calendar days;
• non-accrual facilities: exposures with individually assessed impairment
provisions held against them, excluding restructured loans;
• restructured facilities: exposures where the original contractual terms have
been formally modified to provide for concessions of interest or principal for
reasons related to the financial difficulties of the customer;
• other assets acquired through security enforcement (includes other real
estate owned): includes the value of any other assets acquired as full or
partial settlement of outstanding obligations through the enforcement of
security arrangements; and
• any other facilities where the full collection of interest and principal is in doubt.
138WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Glossary
Individually assessed provisions (IAPs)Provisions raised for losses on loans that are known to be impaired and are
assessed on an individual basis. The estimated losses on these impaired loans is
based on expected future cash flows discounted to their present value and, as
this discount unwinds, interest will be recognised in the income statement.
Non-performing exposuresExposures which are in default.
Performing exposuresExposures which are not in default.
Probability of default (PD)The probability that a counterparty will default.
Provision for expected credit
losses (ECL)
Expected credit losses (ECL) are a probability-weighted estimate of the cash
shortfalls expected to result from defaults over the relevant timeframe. They are
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.
Loss given default (LGD)The loss that is expected to arise in the event of a default.
Exposure at default (EAD)The estimated outstanding amount of credit exposure at the time of the default.
Stage 1: 12 months ECL - performingFor financial assets where there has been no significant increase in credit risk
since origination a provision for 12 months expected credit losses is recognised.
Interest revenue is calculated on the gross carrying amount of the financial asset.
Stage 2: Lifetime ECL - performingFor financial assets where there has been a significant increase in credit risk
since origination but where the asset is still performing a provision for lifetime
expected losses is recognised. Interest revenue is calculated on the gross carrying
amount of the financial asset.
Stage 3: Lifetime ECL -
non-performing
For financial assets that are non-performing a provision for lifetime expected
losses is recognised. Interest revenue is calculated on the carrying amount net of
the provision for ECL rather than the gross carrying amount.
Stressed exposuresWatchlist and substandard, 90 days past due and not impaired and impaired
exposures.
Stressed exposures do not include exposures which are on an active COVID-19
deferral package as of September 2020.
Total committed exposure (TCE)Represents the sum of the committed portion of direct lending (including funds
placement overall and deposits placed), contingent and pre-settlement risk plus
the committed portion of secondary market trading and underwriting risk.
Watchlist and substandardLoan facilities where customers are experiencing operating weakness and
financial difficulty but are not expected to incur loss of interest or principal.
Other
COVID-19A viral disease, declared as a pandemic by the World Health Organisation on
12 March 2020.
Credit Value Adjustment (CVA)CVA adjusts the fair value of over-the-counter derivatives for credit risk. CVA is
employed on the majority of derivative positions and reflects the market view of
the counterparty credit risk. A Debit Valuation Adjustment (DVA) is employed to
adjust for our own credit risk.
Divisional resultsDivisional results are presented on a management reporting basis. Internal
charges and transfer pricing adjustments are included in the performance of
each division reflecting the management structure rather than the legal entity
(these results cannot be compared to results for individual legal entities). Where
management reporting structures or accounting classifications have changed,
financial results for comparative periods have been restated and may differ from
results previously reported. Overhead costs are allocated to revenue generating
divisions.
The Group’s internal transfer pricing frameworks facilitate risk transfer,
profitability measurement, capital allocation and divisional alignment, tailored to
the jurisdictions in which the Group operates. Transfer pricing allows the Group
to measure the relative contribution of products and divisions to the Group’s
interest margin and other dimensions of performance. Key components of the
Group’s transfer pricing frameworks are funds transfer pricing for interest rate
and liquidity risk and allocation of basis and contingent liquidity costs, including
capital allocation.
IFTIInternational Funds Transfer Instructions
First Half 2020Six months ended 31 March 2020.
First Half 2019Six months ended 31 March 2019.
Asset quality (cont’d)
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139WESTPAC GROUP 2020 FULL YEAR FINANCIAL RESULTS ANNOUNCEMENT
Glossary
Net Promoter Score (NPS)Net Promoter Score measures the net likelihood of recommendation to others
of the customer’s main financial institution for retail or business banking. Net
Promoter ScoreSM is a trademark of Bain & Co Inc., Satmetrix Systems, Inc., and
Mr Frederick Reichheld.
• For retail banking, using a scale of 1 to 10 (1 means ‘extremely unlikely’ and
10 means ‘extremely likely’), the 1-6 raters (detractors) are deducted from the
9-10 raters (promoters); and
• For business banking, using a scale of 0 to 10 (0 means ‘extremely unlikely’
and 10 means ‘extremely likely’), the 0-6 raters (detractors) are deducted
from the 9-10 raters (promoters).
Prior corresponding periodRefers to the six months ended 31 March 2020.
Prior half / Prior periodRefers to the six months ended 30 September 2020.
Run-offScheduled and unscheduled repayments and debt repayments (from for example
property sales and external refinancing), net of redraws.
Second Half 2019Six months ended 30 September 2019.
SMESmall to medium sized enterprises
Women in LeadershipWomen in Leadership refers to the proportion of women (permanent and
maximum term) in leadership roles across the Group. It includes the CEO, Group
Executive, General Managers, senior leaders with significant influence on business
outcomes (direct reports to General Managers and their direct reports), large (3+)
team people leaders three levels below General Manager, and Bank and Assistant
Bank Managers.
Other (cont’d)
westpac.com.au
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.