Westpac 2021 Half Year Result

ASX
Release
3 MAY 2021
Westpac 2021 Half Year Result
Westpac Banking Corporation (“Westpac”) today provides the attached Westpac
2021 Half Year Result.
For further information:
D
avid 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

MEDIA RELEASE 3 MAY 2021
FINANCIAL RESULTS SNAPSHOT
1

FIRST HALF 2021 COMPARED TO FIRST HALF 2020 FIRST HALF 2021 COMPARED TO SECOND HALF 2020
• Statutory net profit $3,443m, up 189%
• Cash earnings $3,537m, up 256%
• Cash EPS 97 cents, more than tripled
• NIM 2.09%, down 4 bps
• ROE 10.2%, up from 2.9%
• CET1 capital ratio 12.34%, up 153 bps
• Excluding notable items
2
, cash earnings,
$3,819m, up 60%
• Excluding notable items
2
, ROE 11.0%, up
394 bps
• Interim dividend, 58 cents per share
• Statutory net profit $3,443m, up 213%
• Cash earnings $3,537m, up 119%
• Cash EPS 97 cents, more than doubled
• NIM 2.09%, up 6 bps
• ROE 10.2%, up from 4.7%
• CET1 capital ratio 12.34%, up 121 bps
• Excluding notable items
2
, cash earnings,
$3,819m, up 35%
• Excluding notable items
2
, ROE 11.0%, up
272 bps


GOOD PROGRESS ON STRATEGIC PRIORITIES
FIX SIMPLIFY PERFORM
• Integrated Plan to
address financial and
non-financial risk
governance approved –
first assurance report
released
• Increased resources in
risk and financial crime
teams
• $200 million in payments
to customers as part of
customer remediation
programs
• Announced sales of
General Insurance,
Westpac Pacific and
Lenders Mortgage
Insurance
• Well progressed on
consolidating offshore
locations
• End-to-end digital
mortgage platform,
Customer Service Hub,
completed more than
20,000 settlements
• New Line of Business operating
model driving performance
• Australian mortgages up $2.6
billion since September 2020
• Three-year cost plan – targeting
$8 billion cost base by FY24
• Strong balance sheet, higher
capital ratio, good margin
management and improved
credit quality metrics

1
Reported on a cash earnings basis unless otherwise stated. For an explanation of cash earnings and reconciliation to reported results, refer to Section 1.3.3 of Westpac Group’s 2021 Interim
Financial Results announcement.
2
References to notable items in this release include (after tax) provisions related to AUSTRAC proceedings; estimated customer refunds, payments, costs and litigation; write-down of intangible
items; and asset sales/revaluations.
Westpac 2021
Half Year
Result

2

THE RESULT

Westpac Group CEO, Peter King, said: “It has been a promising start to the year with increased cash earnings, growth
in mortgages and continued balance sheet strength.
“First half earnings were considerably higher than the prior corresponding period, mainly due to an impairment benefit
reflecting improved asset quality and a better economic outlook. Notable items were also lower. We improved balance
sheet strength, with our Common Equity Tier 1 capital ratio rising 153 basis points to 12.34 per cent.
“Importantly, we are beginning to see the benefits of our new operating model through improved performance.
“Our Australian mortgage book increased $2.6 billion over the past six months, with good growth in owner occupier
loans partly offset by lower investor lending. Owner occupier loans increased 3 per cent, with first home buyers
making up 13 per cent of new loans.
“We also managed margins well, with the margin up six basis points from Second Half 2020,” he said.
“Australia and New Zealand have managed the pandemic well and we are proud to have helped so many customers
return to full repayments. Stressed exposures to total committed exposures ended the half at 1.60 per cent, compared
to 1.91 per cent at 30 September 2020.
“While the economic outlook is more positive, there is still some uncertainty and we have remained prudent in our
impairment provisioning,” Mr King said.


CASH EARNINGS ($m) 1H21 – 2H20


2 Notable items include (after tax) provisions related to AUSTRAC proceedings; estimated customer refunds, payments, costs and litigation; write-down of intangible items; and asset
sales/revaluations.
3 NCI is non-controlling interests.

1,615
1,2202,835
58
21
1,312
3,819
(59)
(348)
(282)
3,537
2H202H20
notable items
2H20 excl.
notable items
Net interest
income
Non-interest
income
ExpensesImpairment
charges
Tax
& NCI
1H21 excl.
notable items
1H21
notable items
1H21
2
2
2
3
2
Up 35% ex-notable items
More than doubled, up $1,922m
Core earnings up $20m

3

2.0
(3.5)
(4.7)
2.6
2H191H202H201H21
FIX. SIMPLIFY. PERFORM

Mr King said with its refreshed leadership team in place, Westpac had made good progress in the first half on its
strategic priorities while continuing to focus on improving customer experience.
Fix
“Strengthening risk governance across financial and non-financial risk is one of my top priorities, and we have a
comprehensive plan underway. Promontory is providing independent assurance on our progress and in its first report
released in April, it noted our plan sets the foundation for a successful risk remediation program.
“We have more than doubled the number of people in our financial crime operations team over the past 18 months
and added more than 100 roles in risk to improve our risk management capability.
“We are also focused on completing legacy customer remediation as quickly as possible,” Mr King said.
Over the half, Westpac paid $200 million to approximately 500,000 customers as part of customer remediation.
Simplify
“We continue to simplify how we operate to be more responsive to our customers’ needs,” Mr King said.
“Our end-to-end digital mortgage platform is now in place and has completed more than 20,000 settlements.
“We have also rolled out our new mobile banking app to 1.3 million iPhone customers – containing simpler search
tools, digital card functionality, and more personalised banking services – ahead of releasing the Android version later
this year. In the app, customers can access an instant digital version of their debit and credit card which can be used
for purchases or if their physical card is lost or stolen,” he said.
“We made good progress on portfolio simplification this half, announcing the sales of our general insurance, lenders
mortgage insurance, and Pacific businesses.
“We are embedding the Lines of Business operating model, with more responsibility delegated to our leaders. We
consolidated the divisional leadership of Consumer and Business banking to simplify our operating model, improve
accountability and drive efficiency.
“We are also well progressed on consolidating our international operations into the key locations of Singapore,
London and New York,” he said.
Perform
“Our performance over the past six months has improved, particularly in mortgages,” Mr King said.
“Under our mortgage Line of Business, we have returned to growth through end-to-end management of the mortgage
process. Getting the process right for customers and being more competitive has delivered benefits.
“We are strengthening our focus on costs and today have announced a three-year cost reset plan to set us up for
being a more streamlined, simpler organisation with a stronger digital focus and smaller head office. As part of this
plan, we will maintain our level of investment and expect to invest around $3.5-$4 billion back into the business over
the next three years.”


AUSTRALIAN GROSS MORTGAGE MOVEMENT ($bn)

4

Mr King said Westpac was targeting an $8 billion cost base by financial year 2024 to materially improve its efficiency.
“A significant reset is required to ensure the business is cost competitive over the long term, particularly as we
navigate the pandemic’s recovery phase and an extended low-rate environment.
“The main drivers are simplification and digitisation as we exit all specialist businesses and accelerate our digital
transformation. We need to do things differently to deliver a competitive cost base, including redesigning and digitising
many of our processes.
“We expect costs to increase in FY21 as we deliver on our Fix priority, before starting to fall from FY22,” he said.

COST TARGET ($bn)
4




DIVIDENDS, CAPITAL AND BALANCE SHEET

The Westpac Board has determined an interim dividend of 58 cents per share to be paid on 25 June 2021.
The rise in cash earnings contributed to a further strengthening of the Group’s balance sheet. The CET1 capital ratio
increased by 153 basis points to 12.34% while funding and liquidity metrics are all above regulatory minimums.
At 31 March 2021, the Group’s average Liquidity Coverage Ratio was 124% and Net Stable Funding Ratio was 122%
compared to regulatory minimums of 100% for both.


4 Excludes notable items. References to notable items in this release include (after tax) provisions related to AUSTRAC proceedings; estimated customer refunds, payments, costs and litigation;
write-down of intangible items; and asset sales/revaluations.
10,161
8,000
FY20BAUInvestmentProductivityFY24
Specialist Businesses
Digitise & streamline
Head office & organisational simplification
THREE-YEAR COST PLAN

5

DIVISIONAL PERFORMANCE
Division 1H21 cash
earnings
($m)
% change
1H20
% change
2H20
Commentary
(1H21-1H20)
Consumer 1,592 8 25 Cash earnings were $120m higher than First Half 2020. Excluding
notable items, cash earnings were $176m higher mostly due to an
impairment benefit. Lending was little changed (down $0.5bn) with
higher mortgages offset by lower cards and personal loans.
Deposits increased 7% from growth in at call deposits, including
switching from term deposits.
Business 920 92 259 Cash earnings were $442m higher, mainly due to an impairment
benefit and lower notable items. Excluding notable items, net
interest income was down $242m. Deposits were 9% higher with a
$16.1bn rise in transaction balances and a $8.6bn increase in
savings and online balances.
Westpac
Institutional
Bank
230 56 24 Cash earnings were $83m higher than First Half 2020. Excluding
notable items, cash earnings were up $109m, mostly from lower
impairment charges. These gains were partly offset by 19bp decline
in net interest margin and lower markets revenue.
Westpac New
Zealand (NZ$)
583 98 65 Cash earnings were $288m higher primarily due to an impairment
benefit ($99m) compared to an impairment charge in First Half 2020
($211m). Mortgages increased 10% while deposits were up $5bn
(7%), with growth primarily in household deposits. Excluding the
impact of notable items, expenses decreased $11m, mostly related
to lower restructuring costs.
Specialist
Businesses

134 44 Large/
$733m
Cash earnings were $41m higher than First Half 2020. Excluding
notable items, cash earnings were $236m higher from an
impairment benefit, while non-interest income increased 28%.


OUTLOOK

Mr King said that after a challenging 2020, the Australian economy is now rebounding with consumer sentiment at its
highest level in more than a decade.
“Most significantly, unemployment is falling and there are more people employed now than pre-COVID. A strong
labour market will continue to support growth in the economy,” he said.
“While challenges remain, we expect the Australian economy to expand by 4.5 per cent in 2021, supporting a 4.6 per
cent increase in total credit with residential lending expanding 6.5 per cent.
“New lending for housing has surged, up 49 per cent over the past year, including a 75 per cent jump from the May
2020 low. While most interest has been from owner occupiers, investors are beginning to return to the market, with
investor lending up 31 per cent over the four months to February.
“While we expect continued increases in home prices, as the supply of houses for sale increases, the rate of house
price growth will likely moderate,” Mr King said.
“Businesses are positive, with most industries responding to the brisk rebound in activity and the winding back of
COVID-19 restrictions. Overall business investment is forecast to expand by 3.7 per cent in 2021, centred on a 12.5
per cent lift in equipment.”
Mr King said while there remains significant work to do, Westpac has made good progress in implementing its Fix,
Simplify and Perform strategic priorities.

6


“We have made good progress this half and remain focused on improving the performance of our key businesses,
including reducing loan approval times,” he said.
“We are continuing to assess what is in the best interests of shareholders regarding the ownership of our New
Zealand business.
“I am committed to delivering on the comprehensive plans that are now in place, including strengthening risk
management, growing our core franchise, and delivering a competitive cost base.
“With a stronger economic outlook, and as Westpac becomes a simpler and stronger bank delivering more for
customers, we are well positioned to deliver returns for shareholders,” Mr King said.

Video interviews with Peter King and Chief Financial Officer, Michael Rowland, on 1H21 results, are available on the
Westpac Wire website – www.westpacwire.com.au


For further information:

David Lording Andrew Bowden
Head of Media Relations Head of Investor Relations
M. 0419 683 411 T. 02 8253 4008
M. 0438 284 863