US Form 6-K Filing – 2021 Interim Financial Results

05 05 2021
Market Announcements Office
ASX Limited
20 Bridge Street
SYDNEY NSW 2000

Westpac Place
Level 18, 275 Kent Street
Sydney NSW 2000

Dear Sir / Madam
US FORM 6-K (INTERIM FINANCIAL RESULTS ANNOUNCEMENT FOR THE SIX MONTHS ENDED 31
MARCH 2021, PREPARED FOR DISTRIBUTION IN THE UNITED STATES)
Westpac Banking Corporation (Westpac) has filed with the US Securities and Exchange Commission a
Form 6-K, which attaches Westpac’s Interim Financial Results Announcement for the six months ended 31
March 2021, prepared specifically for distribution in the United States (US Interim Financial Results
Announcement). This filing has been prepared to meet US securities law requirements and is necessary
to update Westpac’s US debt issuance programs.
As the US Interim Financial Results Announcement has been prepared to meet US requirements, its
presentation differs in some respects from Westpac’s 2021 Interim Financial Results, incorporating the
requirements of Appendix 4D (lodged with the ASX on 3 May 2020). In particular, the 2021 Interim
Financial Results, incorporating the requirements of Appendix 4D predominately focuses on cash earnings
while the US Interim Financial Results Announcement is focused on Westpac’s consolidated statutory
results.
A copy of the Form 6-K is attached for release to the market.
This document has been authorised for release by Tim Hartin, General Manager & Company Secretary

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
May 4, 2021
Commission File Number 1-10167
WESTPAC BANKING CORPORATION
(Translation of registrant’s name into English)
275 KENT STREET, SYDNEY, NEW SOUTH WALES 2000, AUSTRALIA
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-Fx Form 40-F ̈
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)
(1): ̈
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)
(7): ̈
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Incorporation by Reference
The information contained in Exhibit 1 to this Report on Form 6-K (excluding the “Independent auditor’s review
report to the members of Westpac Banking Corporation”on page 130 of such Exhibit) and Exhibit 101 to this Report on Form 6-K
shall be incorporated by reference in the prospectuses relating to the Registrant’s securities contained in the Registrant’s
Registration Statements on Form F-3 (File Nos. 333-228295 and 333-228294), as such prospectuses may be amended or
supplemented from time to time.
Index to Exhibits
Disclosure regarding forward-looking statements
The information contained in this Report on Form 6-K contains statements that constitute “forward-looking statements”within the
meaning of section 21E of the U.S. 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 Report and include statements regarding
our intent, belief or current expectations with respect to our business and operations, market conditions, results of operations and
financial condition.
We use words such as ‘will’, ‘may’, ‘expect’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘estimate’, ‘anticipate’,
‘believe’, ‘probability’, ‘risk’, ‘aim’or other similar words to identify forward-looking statements. These forward-looking
statements reflect our current views with respect to future events and are subject to change, certain risks, uncertainties and
assumptions which are, in many instances, beyond our control and have been made based upon management’s expectations and
beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will
be in accordance with our expectations or that the effect of future developments on us will be those anticipated. Should one or more
of the risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results could differ materially
from the expectations described in this Report. Factors that may impact on the forward-looking statements made include, but are not
limited to, those described in the section entitled ‘Risk factors’in Westpac’s 2021 Interim Financial Results on Form 6-K with the
U.S. Securities and Exchange Commission, as well as the ongoing impact of COVID-19. When relying on forward-looking
statements to make decisions with respect to us, investors and others should carefully consider such factors and other uncertainties
and events. We are under no obligation, and do not intend, to update any forward-looking statements contained in this Report,
whether as a result of new information, future events or otherwise, after the date of this Report.
Exhibit
No.Description
12021 Interim Financial Results –prepared for distribution in the United States of America
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WESTPAC BANKING CORPORATION
(Registrant)
Date: May 4, 2021By:
/s/ Yvette Adiguzel
Yvette Adiguzel
Tier One Attorney
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Exhibit 1
2021
Interim
Financial Results
THE INTERIM FINANCIAL RESULTS ANNOUNCEMENT HAS BEEN
PREPARED FOR DISTRIBUTION IN THE UNITED STATES OF AMERICA
Westpac Banking Corporation
ABN 33 007 457 141
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Results Announcement to the market
Introduction
This Interim Financial Results Announcement has been prepared for distribution in the United States.
Our interim period refers to the six months ended 31 March 2021 (First Half 2021). Throughout this Interim Financial
Results Announcement, we also refer to the six months ended 31 March 2020 (First Half 2020) and the six months
ended 30 September 2020 (Second Half 2020).
The selected financial information for First Half 2021, First Half 2020 and Second Half 2020 contained in this Interim
Financial Results Announcement is based on the financial statements contained in the unaudited consolidated Interim
Financial Report for Westpac Banking Corporation (Westpac) and its controlled entities (Group) for the six months
ended 31 March 2021. The Interim Financial Report has been prepared and presented in accordance with Australian
Accounting Standards (AAS) as they relate to interim financial reports. The Interim Financial Report also complies with
International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) as they
relate to interim financial reports.
All dollar values in this Interim Financial Results Announcement are in Australian dollars unless otherwise noted.
References to ‘dollars’, ‘dollar amounts’, ‘$’, ‘AUD’or ‘A$’are to Australian dollars, references to ‘US$’, ‘USD’or ‘US
dollars’are to United States dollars and references to ‘NZ$’, ‘NZD’or ‘NZ dollars’are to New Zealand dollars. Solely for
the convenience of the reader, certain Australian dollar amounts have been translated into US dollars at a specified
rate. These translations should not be construed as representations that the Australian dollar amounts actually
represent such US dollar amounts or have been or could be converted into US dollars at the rate indicated. Unless
otherwise stated, the translation of Australian dollar amounts into US dollar amounts has been made at the rate of A$1
= US$0.7613 the noon buying rate in New York City for cable transfers in Australian dollars as certified for customs
purposes by the Federal Reserve Bank of New York (the noon buying rate) on 31 March 2021. Refer to Section 5.7 for
information regarding the rates of exchange between the Australian dollar and the US dollar applied by the Group as
part of its operating activities for First Half 2021, Second Half 2020 and First Half 2020.
In addition to discussing the AAS financial information in this Interim Financial Results Announcement, we also discuss
the following non-AAS financial information:
Cash Earnings Policy
Refer to section 3.0.
Average Ordinary Equity
Average ordinary equity is calculated as the daily average of total equity less average non-controlling interests.
Management believes this measure of average ordinary equity is useful in the calculation of return on equity as it
removes the impact of equity attributable to non-controlling interests.
Other companies may use different methodologies to calculate average ordinary equity or similar non-AAS financial
measures.
Balance sheet presentation changes
As at 31 March 2021, Westpac has announced the sale of certain specialist businesses which include Westpac Vendor
Finance business, Westpac General Insurance Limited, Westpac General Insurance Services Limited, Westpac Pacific
and Westpac Lenders Mortgage Insurance Limited. The assets and liabilities of these businesses have been separately
presented as assets held for sale and liabilities held for sale for First Half 2021. Comparatives were not restated for this
change. Refer to Section 3.5 for cash earnings contribution of businesses held for sale and refer to Note 17 to the 2021
Interim Financial Report for further information.
IIWESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
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Results Announcement to the market
Index
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTSIII
1.0Group results1
1.1 Reported results1
1.2 Key financial information3
1.3 Market share and system multiple metrics5
2.0Review of Group operations6
2.1 Performance overview6
2.2 Review of reported results14
2.3 Credit quality26
2.4 Balance sheet and funding29
2.5 Capital and dividends34
2.6 Sustainability performance40
3.0Divisional results46
3.1 Consumer49
3.2 Business52
3.3 Westpac Institutional Bank55
3.4 Westpac New Zealand58
3.5 Specialist Businesses62
3.6 Group Businesses67
4.02021 Interim financial report69
4.1 Directors’report70
4.2 Consolidated income statement92
4.3 Consolidated statement of comprehensive income93
4.4 Consolidated balance sheet94
4.5 Consolidated statement of changes in equity95
4.6 Consolidated cash flow statement96
4.7 Notes to the consolidated financial statements97
4.8 Statutory statements129
5.0Other information132
5.1 Disclosure regarding forward-looking statements132
5.2 References to websites134
5.3 Credit ratings134
5.4 Dividend reinvestment plan134
5.5 Information on related entities134
5.6 Financial calendar and Share Registry details135
5.7 Exchange rates138
5.8 Group earnings reconciliation138
6.0Cash earnings supplementary information141
6.1 Cash earnings adjustments141
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7.0Glossary142
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Results Announcement to the market
In this Interim 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
IVWESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
Interim Results Announcement released3 May 2021
Ex-dividend date for interim dividend13 May 2021
Record date for interim dividend (Sydney)14 May 2021
Interim dividend payable25 June 2021
Final Results Announcement (scheduled)1 November 2021
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Group 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).
Net Profit attributable to owners of Westpac Banking Corporation for First Half 2021 was $3,443 million, an increase of
$2,253 million or 189% compared to First Half 2020.
The increase in Net Profit was largely due to large impairment charges incurred in First Half 2020 of $2,238 million,
whereas First Half 2021 included an impairment benefit of $372 million. This added $1,827 million to the increase in Net
Profit after tax. Over recent halves Westpac has also incurred certain specific large items. The net after tax impact of
these items was much less in First Half 2021 ($282 million) compared to First Half 2020 ($1,399 million). These items
included:
These are discussed in Section 2.1, Section 2.2.9 and in Note 10 and Note 14 of the 2021 Interim Financial Report.
The following is a summary of the movements in the major line items in Net Profit for First Half 2021 compared to First
Half 2020.
Net interest income (NII) of $8,348 million was $652 million lower compared to First Half 2020. With average interest
earning assets little changed over the year to First Half 2021, the lower NII result reflected a 15 basis point decline in
net interest margin to 2.06%. The decline in net interest margin was due to:
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS1
1.0Group results
1.1Reported results
Half YearHalf YearHalf YearHalf Year
MarchMarchSeptMarch% Mov’t
1
2021202120202020Mar 21 -Mar 21 -
$mUS$A$A$A$Sept 20Mar 20
Net interest income6,3558,3487,6969,0008(7)
Net fee income533700837755(16)(7)
Net wealth management and insurance income45559828646510929
Trading income3364424354602(4)
Other income456598325(76)84large
Net operating income before operating expenses and
impairment charges8,13510,6869,57910,604121
Operating expenses(4,565)(5,997)(6,558)(6,181)(9)(3)
Impairment (charges)/benefits283372(940)(2,238)largelarge
Profit before income tax expense3,8535,0612,0812,185143132
Income tax expense(1,230)(1,616)(980)(994)6563
Net profit for the period2,6233,4451,1011,191large189
Net profit attributable to non-controlling interests (NCI)(2)(2)(1)(1)100100
Net profit attributable to owners of WBC2,6213,4431,1001,190large189
Effective tax rate31.9%31.9%47.1%45.5%largelarge
•Provisions for estimated customer refunds, payments, associated costs and litigation;
•The write-down of intangible items, including goodwill;
•The impact of asset sales and revaluations; and
•Costs of the AUSTRAC proceedings -including the penalty.
•Lower interest rates, which reduced income on average interest earning assets, partly offset by lower funding costs;
•Mix effects on interest earning assets from a decline in higher returning loans and an increase in low returning liquid
assets; and
•Unrealised losses on fair value economic hedges in First Half 2021 of $53 million compared to a gain in First Half
2020 of $300 million.
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Net interest income and net interest margins are discussed in Section 2.2.1 and Section 2.2.4.
Non-interest income of $2,338 million increased by $734 million compared to First Half 2020. The increase was mostly
due to:
•An increase in the valuation of investments;
•Higher life insurance income from the non-repeat of asset impairment recognised in First Half 2020; and
•Lower claims for severe weather events resulting in higher insurance income.
1.Percentage movement represents an increase/(decrease) to the relevant comparative period.
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Group results
These increases were partly offset by lower wealth income along with lower banking fees from lower activity and the
elimination of certain fees following our simplification program. Non-interest income is discussed in Section 2.2.5.
Operating expenses of $5,997 million decreased by $184 million compared to First Half 2020. The decline was due to
$1,058 million in costs associated with the AUSTRAC proceedings in First Half 2020, partly offset by:
Operating expenses are discussed in Section 2.2.8.
In First Half 2021 the Group recognised an impairment benefit of $372 million compared to an impairment charge of
$2,238 million in First Half 2020, a $2,610 million movement. In Full Year 2020 the Group materially increased
provisions in response to the expected economic impact of COVID-19, including forecasts of a prolonged deterioration
in economic activity, a rise in unemployment and a decline in property prices. Over the subsequent year to First Half
2021, the effect of COVID-19 was significantly less than expected at that time across most economic indicators. While a
degree of uncertainty remains, some of the provisions booked through Full Year 2020 are no longer required and this
contributed to the impairment benefits in First Half 2021. Impairment charges and asset quality are discussed further in
Section 2.2.9, Section 2.3, and Note 10 and Note 11 of the 2021 Interim Financial Report.
Tax expense was up 63% in First Half 2021 compared to First Half 2020 from the rise in profit before tax. The effective
tax rate was 31.9% and close to Australia’s corporate tax rate of 30%. This was lower than the 45.5% effective tax rate
in First Half 2020 as penalties provided in that half were not tax deductible. Income tax expense is discussed in Section
2.2.10.
2WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
•An increase in full time equivalent (FTE) employees and associated costs, principally to improve risk management
activities and improve our mortgage processing;
•Higher impairment of intangible assets including capitalised software and goodwill;
•Higher costs associated with the announced divestments of certain specialists businesses, and investments; and
•An increased charge for estimated customer refunds, payments, associated costs and litigation.
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Group results
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS3
1.2
Key financial information
1
Half YearHalf YearHalf YearHalf Year
MarchMarchSeptMarch% Mov’t
2021202120202020Mar 21 -Mar 21 -
US$A$A$A$Sept 20Mar 20
Shareholder value
Earnings per ordinary share (cents)
2
71.994.530.533.2large185
Weighted average ordinary shares (millions)
3
3,6413,6413,6063,57412
Fully franked dividends per ordinary share (cents)445831-87-
Return on average ordinary equity
4
9.92%9.92%3.22%3.52%largelarge
Average ordinary equity ($m)
5
52,97469,58368,40367,62523
Average total equity ($m)
6
53,01269,63468,45467,67823
Net tangible asset per ordinary share ($)
7
12.6416.6015.6715.4368
Business performance
Interest spread
8
1.97%1.97%1.73%2.08%24 bps(11 bps)
Benefit of net non-interest bearing assets, liabilities and
equity
9
0.09%0.09%0.12%0.13%(3 bps)(4 bps)
Net interest margin
10
2.06%2.06%1.85%2.21%21 bps(15 bps)
Average interest earning assets ($m)618,899812,950830,465812,971(2)-
Expense to income ratio
11
56.12%56.12%68.46%58.29%large(217 bps)
Capital, funding and liquidity
Common equity Tier 1 capital ratio
- APRA Basel III12.34%12.34%11.13%10.81%121 bps153 bps
- Internationally comparable18.08%18.08%16.50%15.81%158 bps227 bps
Credit risk weighted assets (credit RWA) ($m)264,268347,127359,389369,142(3)(6)
Total risk weighted assets (RWA) ($m)326,521428,899437,905443,905(2)(3)
Liquidity coverage ratio (LCR)
12,13
124%124%151%140%largelarge
Net stable funding ratio (NSFR)
13
123%123%122%117%78 bpslarge
Asset quality
13
Gross impaired exposures to gross loans0.30%0.30%0.40%0.30%(10 bps)-
Gross impaired exposures to equity and total provisions2.67%2.67%3.74%2.93%(107 bps)(26 bps)
Gross impaired exposures provisions to gross impaired
exposures
14
47.03%47.03%41.45%50.09% large(306 bps)
Total committed exposures (TCE) ($bn)8161,0721,0601,0821(1)
Total stressed exposures as a % of TCE
15
1.60%1.60%1.91%1.32%(31 bps)28 bps
Total provisions to total gross loans79 bps79 bps88 bps80 bps(9 bps)(1 bps)
Mortgages 90+ day delinquencies1.11%1.11%1.50%0.87%(39 bps)24 bps
Other consumer loans 90+ day delinquencies1.92%1.92%2.09%1.94%(17 bps)(2 bps)
Collectively assessed provisions to credit RWA142 bps142 bps154 bps140 bps(12 bps)2 bps
Balance sheet ($m)
Loans523,940688,218693,059719,678(1)(4)
Total assets677,145889,459911,946967,662(2)(8)
Deposits and other borrowings445,666585,401591,131582,920(1)-
Total liabilities622,255817,358843,872900,016(3)(9)
Total equity54,89072,10168,07467,64667
Wealth Management
Average Group Funds ($bn)168.2220.9200.2224.610(2)
Life insurance in-force premiums (Australia) ($m)
16
7189439531,208(1)(22)
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General insurance gross written premiums (Australia) ($m)22028928227326
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Group results
4WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
1.Averages are based on a six month period.
2.Based on the weighted average number of fully paid ordinary shares outstanding for the relevant six month period. Earnings are calculated as
net profit attributable to owners of WBC.
3.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”).
4.Calculated as net profit attributable to owners of WBC divided by average ordinary equity (annualised).
5.Calculated as average total equity less average non-controlling interests.
6.Average total equity is the average balance of shareholders’equity, including non-controlling interests.
7.Total equity attributable to owners of WBC after deducting intangible assets divided by the number of ordinary shares outstanding, less Treasury
shares held.
8.Calculated as the difference between the average yield on all interest earning assets and the average rate paid on all interest bearing liabilities
(annualised).
9.Calculated as the difference between net interest margin and interest spread, and represents benefits derived from holdings of the net non-
interest bearing component of the balance sheet (including equity) (annualised).
10.Calculated by dividing net interest income by average interest earning assets (annualised).
11.Calculated as Group operating expenses excluding impairment charges divided by Group net operating income before operating expenses and
impairment charges.
12.Liquidity coverage ratios is calculated on a quarterly average basis. Comparatives have been restated.
13.Includes balances presented as held for sale.
14.Impairment provisions relating to impaired exposures include individually assessed provisions plus the proportion of the collectively assessed
provisions that relate to impaired exposures.
15.Stressed exposures include program managed loans 90 days plus and non-performing transaction managed loans.
16.Refer to Section 3.5 Insurance key metrics for further details.
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Group results
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS5
1.3Market share and system multiple metrics
1.3.1Market share
As atAs atAs at
31 March30 Sept31 March
202120202020
Australia
Banking system (Australian Prudential Regulation Authority (APRA))
Housing credit
1
22%23%23%
Cards22%22%23%
Household deposits21%21%22%
Business deposits19%19%20%
Financial system (Reserve Bank of Australia (RBA))
Housing credit
1
22%22%22%
Business credit15%16%16%
Retail deposits
2
20%21%21%
New Zealand (Reserve Bank of New Zealand (RBNZ))
3
Consumer lending18%19%18%
Deposits18%18%19%
Business lending17%17%17%
Australian Wealth Management
4
Platforms (includes Wrap and Corporate Super)18%18%18%
Retail (excludes Cash)17%17%18%
Corporate Super15%14%15%
1.3.2System multiples
Half YearHalf YearHalf Year
31 March30 Sept31 March
202120202020
Australia
Banking system (APRA)
Housing credit
1,5
0.4n/an/a
Cards
5
n/an/an/a
Household deposits0.60.60.3
Business deposits0.20.70.6
Financial system (RBA)
Housing credit
1,5
0.4n/an/a
Business credit
5
n/an/a0.2
Retail deposits
2
n/a0.40.3
New Zealand (RBNZ)
3
Consumer lending0.91.31.0
Household deposits1.40.31.6
1.Includes securitised loans.
2.Retail deposits as measured by the RBA, financial system includes financial corporations’deposits.
3.New Zealand comprises New Zealand banking operations.
4.Market Share Australian Wealth Management based on market share statistics from Strategic Insight as at 31 December 2020 (for First Half
2021), as at 30 June 2020 (for Second Half 2020) and as at 31 December 2019 (for First Half 2020).
5.n/a indicates that system growth or Westpac growth was negative.
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Review of Group operations
Section 2 ‘Review of Group operations’focuses on our Group results and key drivers for movements, with reference to
our significant divisions. For more commentary at the divisional level, refer to Section 3 ‘Divisional results’.
Overview
First Half 2021 has been a period of progress for Westpac with higher net profit attributable to owners of WBC, a
stronger balance sheet and momentum on our strategic priorities. Net profit attributable to owners of WBC for First Half
2021 was $3,443 million, up $2,343 million on Second Half 2020 and up $2,253 million on First Half 2020. Westpac’s
return on equity was 9.92% in First Half 2021 while earnings per share was 94.5 cents per share, more than doubling
over the half.
The increase in net profit attributable to owners of WBC in First Half 2021 compared to Second Half 2020 was
predominantly due to a significant turnaround in impairment charges (a $918 million net profit attributable to owners of
WBC increase) and a lower impact from large infrequent items (a $938 million net profit attributable to owners of WBC
impact). In First Half 2021 these infrequent items included:
Further detail on estimated customer refunds, payments, associated costs and litigation, the write-down of intangible
items, including goodwill, and the impact of asset sales and revaluations is provided in this overview and in Section 3.0.
In aggregate, they reduced net profit attributable to owners of WBC in First Half 2021 by $282 million, by $1,220 million
in Second Half 2020 and by $1,399 million in First Half 2020 (Second Half 2020 and First Half 2020 were also impacted
by cost associated with AUSTRAC proceedings, including penalty).
Excluding estimated customer refunds, payments, associated costs and litigation, the write-down of intangible items,
including goodwill, the impact of asset sales and revaluations, and cost associated with AUSTRAC proceedings,
including penalty, net profit attributable to owners of WBC for First Half 2021 was $3,725 million, up $1,405 million or
61% on Second Half 2020 and up 44% on First Half 2020. The increase was mostly due to the impairment benefit from
a combination of better credit quality metrics, a stronger operating environment and an improved economic outlook
which meant that some impairment provisions, first booked in Full Year 2020, were no longer required.
6WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
2.0Review of Group operations
Half YearHalf YearHalf YearHalf Year
MarchMarchSeptMarch% Mov’t
1
2021202120202020Mar 21 -Mar 21 -
$mUS$A$A$A$Sept 20Mar 20
Net interest income6,3558,3487,6969,0008(7)
Net fee income533700837755(16)(7)
Net wealth management and insurance income45559828646510929
Trading income3364424354602(4)
Other income456598325(76)84large
Net operating income before operating expenses and
impairment charges8,13510,6869,57910,604121
Operating expenses(4,565)(5,997)(6,558)(6,181)(9)(3)
Profit before impairment charges and income tax
expense3,5704,6893,0214,423556
Impairment (charges)/benefits283372(940)(2,238)largelarge
Profit before income tax expense3,8535,0612,0812,185143132
Income tax expense(1,230)(1,616)(980)(994)6563
Net profit2,6233,4451,1011,191large189
Net profit attributable to NCI(2)(2)(1)(1)100100
Net profit attributable to owners of WBC2,6213,4431,1001,190large189
2.1Performance overview
•Estimated customer refunds, payments, associated costs and litigation;
•The write-down of intangible items, including goodwill; and
•The impact of asset sales and revaluations.
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Higher earnings, excluding estimated customer refunds, payments, associated costs and litigation, the write-down of
intangible items, including goodwill, the impact of asset sales and revaluations, and cost associated with AUSTRAC
proceedings, including penalty, were supported by an 18 basis point increase in margins and higher non-interest
income, including from higher cards and platforms revenue. These were partly offset by a decline in lending and an
increase in tax expense.
The rise in net profit attributable to owners of WBC contributed to a further strengthening of our balance sheet. Our
common equity tier 1 (CET1) capital ratio increased 121 basis points to 12.34% while our funding and liquidity metrics
are all comfortably above regulatory minimums. Given the improved results and higher capital the Board has
determined to pay an interim ordinary dividend of 58 cents per share.
1.Percentage movement represents an increase/(decrease) to the relevant comparative period.
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Review of Group operations
In 2020, Westpac underwent significant change with a new strategic direction, changes in the Board and management,
establishment of the Specialist Businesses division to manage (and exit) non-core businesses and a reorganisation of
our operations around a Lines of Business operating model. At the same time, we expanded initiatives to fix our issues,
materially enhance our management of risk and improve our risk culture.
Supporting this change, we adopted a new purpose: “Helping Australians and New Zealanders succeed”which
captures a key element of our culture of helping and reinforced our focus on service and customers. Recognising this
new direction, we have aligned our strategy around three priorities; Fix, Simplify and Perform. In First Half 2021, we
made good progress implementing our strategy and finalised our executive appointments including new roles of Chief
Operating Officer and Group Executive Consumer & Business Banking. Developments under each priority are
described below.
Fix
This priority is focused on fixing our issues and lifting our control environment. This includes improving our management
of risk, improving our risk culture and completing customer remediation as quickly as possible. Developments over First
Half 2021 included:
While making progress, we recognise that following the Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry, ASIC still has a number of investigations underway that primarily
relate to our past practices and that these could result in further litigation, fines, penalties or other regulatory action. Our
Contingent liabilities Note 14 to the Interim Financial Statements outlines these further.
Simplify
In simplifying the business we are focused on three dimensions 1. portfolio simplification –the businesses we operate,
2. geographic simplification –where we operate, and 3. banking simplification –making it easier for our customers to
bank with us, using digital to transform our operations.
Under portfolio simplification, our Specialist Businesses division was set-up to manage the businesses we ultimately
plan to exit. In First Half 2021 we:
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS7
•Expanding our CORE (Customer Outcomes and Risk Excellence) program to improve our financial and non-
financial risk governance. The CORE program includes implementing the Integrated Plan, which was approved by
APRA on 7 April 2021, with independent assurance reports to be completed by Promontory Australasia each
quarter;
•Progressing customer remediation, paid over $200 million to approximately 570k customers in First Half 2021;
•ASIC and APRA both announced that no further action would be taken for matters relating to the AUSTRAC
litigation following completion of their investigations; and
•Improving our risk management capacity and capability with the addition of over 100 resources to:
–Support increased credit risk oversight to increase the speed and quality of decision making;
–Improve risk reporting through better data inputs, increasing automation of analysis and improving our tools for
forecasting, behavioural analysis and provision modelling; and
–Lifting the quality and breadth of our stress testing.
•Progress in improving our financial crime program-over the last 18 months we have:
–Lifted capacity and capability via a 60% increase in the team;
–Addressed issues in the AUSTRAC Statement of Claim;
–Upgraded all risk assessment methodologies and monitoring solutions; and
–We are assessing high risk customers more frequently. More than doubling financial crime operations people
investigating and reporting on Financial Crime -including suspicious matters.
•Entered into agreements to sell our General Insurance and Lenders Mortgage Insurance businesses, this followed
the announced exit of Vendor Finance in Second Half 2020. Completion of these divestments is expected in
Second Half 2021; and
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Our remaining businesses for exit include our Auto Finance, Life Insurance and Superannuation, Investments and
Platforms operations (SIP).
Geographic simplification has involved:
•In New Zealand we completed the sale of our Wealth Advisory business.
•The announced sale of Westpac Pacific comprising our PNG and Fiji businesses;
•Announcing the consolidation of our international operations, reducing our presence in Asia from 5 locations to a
single hub in Singapore. The branches in Mumbai and Jakarta have now been closed with the remainder scheduled
to close by the end of 2021; and
•Maintaining our presence in the key capital markets of New York and London and expanding our capability into
Frankfurt in response to Brexit.
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Review of Group operations
Banking simplification in First Half 2021 included:
Perform
In a low interest rate, highly competitive market it is vital that we improve our efficiency and effectiveness to improve
shareholder returns and the sustainability of our dividends. Our Lines of Business operating model is key to this change
facilitating greater clarity, better end-to-end process management and control, clearer accountability and speeding up
decision making. In so doing we are enhancing service and optimising how we manage our business to generate
appropriate returns.
Establishment of the mortgage line of business was a priority and provided end-to-end responsibility for all aspects of
the mortgage process. This included, origination, credit approvals, pricing and servicing. This new approach has
enabled us to simplify all elements of the mortgage process and create a better experience for customers. Progress
over the half included:
Key to improving financial performance is managing the business in a disciplined way across margins, expenses asset
quality and capital. It includes improving efficiency and in First Half 2021 we commenced our cost reset program,
targeting an $8.0 billion cost base by Full Year 2024. While the benefits of this program will initially follow our
simplification initiatives and migrating more activity to digital, we have also commenced work to clarify the resources
needed to run a simpler organisation, completed an analysis of management layers, and continued to reduce our
spending with third parties.
Supporting customers
In implementing our strategy, we have sharpened our focus on supporting customers. In First Half 2021, much of our
attention was on assisting customers though the uncertainties created by COVID-19. Over 200,000 customers utilised
COVID-19 deferral packages, helping them to manage their cash flows. While the vast majority of these customers
have transitioned to full repayment, ongoing help has still been required for some affected customers.
In addition, parts of Eastern Australia were also affected by significant floods in March this year and we provided around
$6 million of emergency grants to almost 2,000 customers while also offering our natural disaster relief packages. We
backed this support with a $10 million flood support fund.
Through the half we have continued to implement initiatives to help customers manage their finances or navigate
difficult circumstances. Initiatives included:
COVID-19
COVID-19 has had a significant impact on economies and businesses around the globe, including on Westpac and its
customers. These impacts were initially significant and far reaching, and while the Australian and New Zealand
economies have rebounded following the more severe shutdowns and social restrictions, some of the effects of the
8WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
•Combining the leadership of the Consumer and Business divisions into the Consumer & Business Banking division;
•Closing 49 branches across Australia and New Zealand and reducing the ATM network by a further 3%;
•Launching our new mobile banking iPhone app for all personal banking and sole trader customers;
•Removed around 100 customer fees to simplify how we operate, and improve the experience for customers; and
•Progressing the return of 1,000 offshore roles to Australia, with around 50% of the roles transitioned. This includes
critical mortgage processes that were impacted through COVID-19.
•Creating one digital origination process across all of our banking brands; and
•Implementing over 60 process and policy improvements to simplify the process for customers and bankers. This
has led to less hand-offs across teams (including credit) and greater process consistency across brands and
channels.
•Enhancing the ability for customers to block their cards to limit online gambling;
•Implementing new measures to block inappropriate messages through payments channels; and
•Helping the more vulnerable in the community with around 18,000 customers receiving assistance through our
specialist team.
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pandemic continue and could be long lasting. The effect of COVID-19 on Westpac can be broadly categorised into five
impacts.
1.The economic impacts reduced loan demand, particularly in business lending, while low interest rates have
contributed to lower net interest margins and put pressure on net interest income. However, low interest rates have
reduced borrowing costs for customers and contributed to a rise in mortgage loan growth through First Half 2021.
2.In 2020, Westpac provided significant support to customers via repayment deferrals, fee waivers, special interest
rates and special loans. These support measures have now been wound down and so the effect on net interest
income and non-interest income has reduced. Where customers require further support we are providing this
through our pre-existing hardship arrangements.
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Review of Group operations
Financial performance summary (First Half 2021 compared to Second Half 2020)
Net profit attributable to owners of WBC for First Half 2021 was $3,443 million, up 213% on Second Half 2020. The
result was higher due to a lower impact from estimated customer refunds, payments, associated costs and litigation, the
write-down of intangible assets, including goodwill, the impact of asset sales and revaluation, and cost associated with
AUSTRAC proceedings including penalty which affected Second Half 2020 (refer to Section 3.0) and an impairment
benefit of $372 million compared to a $940 million impairment charge in Second Half 2020.
The net profit attributable to owners of WBC impact of estimated customer refunds, payments, associated costs and
litigation, the write-down of intangible items, including goodwill, and the impact of asset sales and revaluations was
$282 million in First Half 2021 (compared to $1,220 million in Second Half 2020 which also included cost associated
with AUSTRAC proceedings, including penalty). Excluding these, net profit attributable to owners of WBC was $3,725
million, up $1,405 million or 61% over Second Half 2020.
Net interest income
Net interest income of $8,348 million was up 8% over the six months with a 21 basis point increase in net interest
margins partly offset by a 2% decrease in average interest-earning assets. Excluding estimated customer refunds and
payments, net interest income was higher (up $544 million).
Estimated customer refunds and payments in interest income were mostly related to provisions for customer refunds for
business customers that were provided a business loan instead of a consumer loan regulated by the National
Consumer Credit Protection Act and the National Credit Code. In First Half 2021 some of the provisions were no longer
required and this increased net interest income.
The decline in average interest-earning assets was due to a 2% decline in average loans while average third party liquid
assets were up 2% over the half.
On a spot basis, lending declined $3.0 billion (down <0.5%) mostly due to lower offshore lending, down $3.0 billion
(28%)
1
following our decision to consolidate our Asian points of presence. Australian business, institutional and
personal lending were also lower (down 4%, 6% and 4% respectively). These declines were partly offset by higher
Australian mortgages (up $2.6 billion) and a $1.7 billion increase in New Zealand lending (in A$ terms). All the growth in
New Zealand was in mortgages with a small decline in business lending.
In Australian mortgages, growth was concentrated in owner occupied lending which was up 3%, with first home buyers
making up around 13% of the flow while investment lending was down 3%.
Customer deposits were lower, down 1%, consistent with lower lending and the active management of spreads. Most of
the decline was in offshore deposits in Asia, and in term deposits as customers preferred to keep their funds liquid.
Australian at call balances were higher, up 3%, with stronger growth in transaction and savings deposits in the
Consumer and Business divisions. New Zealand deposits were higher (up 3% in A$ terms) in line with the rise in New
Zealand lending.
Margins were up 21 basis points over the six months to 2.06%, while the margin excluding Treasury and Markets and
estimated customer refunds and payments was 1.94%, up 3 basis points over the half. The higher margin was
predominantly due to lower funding costs, including from deposits and the use of the RBA’s Term Funding Facility
(TFF). Improved margins were partly offset by lower earnings on capital and from competition for new lending resulting
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS9
3.The economic impacts of COVID-19 led to a rise in stressed exposures. This contributed to a rise in impairment
provisions in 2020 as we estimated potential losses. In First Half 2021 it became clear that the potential increase in
stressed exposures will be less than initially expected, and after peaking around September 2020, the proportion of
loans classified as stressed has now declined, although it has not returned to pre-pandemic levels. Despite the
improving outlook, some uncertainty remains, and we will continue to monitor how customers manage the winding
down of government assistance in determining impairment provisions.
4.Costs increased as we responded to higher demand for support, installed new safety measures into our locations
and brought more roles back to Australia. Some of these costs will remain while we continue to focus on supporting
customers and protecting employees through this time.
5.A stronger balance sheet through more capital, higher liquid assets and more customer deposits. These changes
partly impact net-interest income but also reduce returns from higher levels of capital.
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in spreads below the portfolio average.
Non-interest income
Non-interest income in First Half 2021 was up $455 million, or 24%. Excluding estimated customer refunds and
payments and the impact of asset sales and revaluations, non-interest income was $48 million higher, up 3%.
Estimated customer refunds and payments and the impact of asset sales and revaluations benefited non-interest
income by $372 million in First Half 2021 compared to a $35 million reduction in Second Half 2020. This benefit was
due to the gain on the revaluation of Coinbase Inc. (Coinbase) which added $546 million to non-interest income. This
gain was partly offset by increased provisions for customer refunds in Advice and the write-down of some intangible
items.
1.The movement in offshore lending includes offshore lending balances that are treated as held for sale.
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Review of Group operations
The 3% increase (excluding estimated customer refunds and payments and the impact of asset sales and revaluations)
was predominantly due to:
Operating expenses
Operating expenses were lower, down $561 million or 9% over the six months, with much of the decrease due to costs
associated with customer refunds, payments and litigation, the write-down of intangible items, including goodwill, the
impact of asset sales and revaluations, and cost associated with AUSTRAC proceedings, including penalty. Excluding
these, operating expenses were down $23 million.
In First Half 2021 costs associated with customer refunds, payment and litigation, the write-down of intangible items,
including goodwill, and the impact of asset sales and revaluations in operating expenses were $745 million, including
further provisions for remediation costs, litigation matters, the write-down of intangible assets and the cost of exiting our
service agreement with IOOF. Performance fees linked to Reinventure (our fintech venture capital funds) following the
revaluation of Coinbase were also higher. In Second Half 2020, these amounted to $1,283 million including the cost
associated with AUSTRAC proceedings, including penalty, write-downs of intangibles and provisions for remediation
costs.
Through the half, we increased employees by 1,898 FTE, mainly in response to higher mortgage volumes and
additional resources for risk and compliance programs. These increases were more than offset by lower restructuring
expenses, increased use of leave provisions, a decline in some COVID-19 expenses and timing of project spend with
more costs typically invested in the second half of the year. Costs of our distribution network were also lower following
the closure of branches in Australia and New Zealand (49 in First Half 2021) and the prior sale of our offsite ATMs.
Asset quality and impairment charges
After initially deteriorating in 2020, from the economic impacts of COVID-19, credit quality metrics improved in First Half
2021. The improvement has been due to the success of government stimulus measures, better labour market
conditions and the support provided to customers, including repayment deferrals.
Impaired exposures to gross loans were 30 basis points at 31 March 2021 compared to 40 basis points at 30
September 2020. This was mostly due to a significant reduction in new impaired exposures, with no new large impaired
exposures (>$50 million) emerging during the half. Stressed exposures to total committed exposures ended the six
months at 1.60% compared to 1.91% at 30 September 2020. Delinquencies were also lower with mortgage 90+ day
delinquencies down 39 basis points to 1.11% and other consumer 90+ day delinquencies down 17 basis points to
1.92%.
The improvement in credit quality, along with a better economic outlook, has meant that some provisions booked in Full
Year 2020 were no longer required. This combined with the decline in lending led to an impairment benefit in First Half
2021 of $372 million. This compared to a $940 million impairment charge in Second Half 2020 –in aggregate, a $1.3
billion turnaround.
Total provision balances were lower over the half at $5.5 billion, down $655 million reflecting the improved conditions
and outlook. Our ratio of total provisions to credit risk weighted assets was 1.59% at 31 March 2021 down from 1.71%
at 30 September 2020. Our ratio of impaired exposure provisions to impaired exposures was 47% up from 41% at
September 2020.
10WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
•Higher insurance income from improved life insurance and lenders mortgage insurance contributions. These
increases were partly offset by higher general insurance claims associated with seasonal weather events;
•An FX translation loss ($55 million) on the exit of our Mumbai branch incurred in Second Half 2020 led to an
increase in Other income;
•Fee income increased from higher card fees as volumes rose and merchant fee waivers rolled-off. These increases
were partly offset by a reduction in fees from our simplification program which reduced the number of fees charged,
and from higher ATM costs (contra revenue) following the sale of our offsite ATMs;
•Wealth income was lower from a further decline in fund margins as customers migrated to lower fee products partly
offset by higher funds balances from improving markets; and
•Markets related income was lower with lower trading income and lower customer income mostly related to fixed
income.
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Tax
The Group booked a $1,616 million tax expense in First Half 2021 up 65% from Second Half 2020. The rise in tax paid
was less than the 143% increase in profit before income tax expense as the effective tax rate reduced to 31.9%, down
from 47.1% in Second Half 2020. The effective tax rate in First Half 2021 was close to Australia’s 30% corporate tax
rate while effective tax rates were higher in 2020 as the AUSTRAC penalty and some intangible asset write-downs were
not tax deductible.
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Review of Group operations
ROE and EPS
The large increase in net profit attributable to owners of WBC contributed to a significant increase in return and per
share metrics, these increases were partly offset by increases in capital and a 2% rise in shares on issue. The return on
equity (ROE) was 9.9% in First Half 2021 up from 3.2% for Second Half 2020. Earnings per ordinary share were 94.5
cents in First Half 2021, more than doubling from 30.5 cents over the prior six months.
Excluding estimated customer refunds, payments, associated costs and litigation, the write-down of intangible items,
including goodwill, the impact of asset sales and revaluations, and cost associated with AUSTRAC proceedings,
including penalty, earnings per share were 102.3 cents, compared to 64 cents for Second Half 2020, while the ROE
was 10.7%.
Net tangible assets per share were $16.60 at 31 March 2021 up 6% over the past 6 months due to the increase in
capital over the half and lower intangible items.
Capital
The Group’s capital position improved over the half with a CET1 ratio of 12.34% at 31 March 2021 up from 11.13% at
30 September 2020. The rise was due to the increase in net profit after tax, a decline in risk weighted assets and lower
capital deductions. The increase was also due to the full year dividend reinvestment plan being fully underwritten.
The Group’s funding and liquidity ratios remained comfortably above regulatory minimums with the average liquidity
coverage ratio (LCR) for First Half 2021 of 124% and the net stable funding ratio (NSFR) ending the half at 123%.
Dividends
The Board determined an interim ordinary dividend of 58 cents per share, fully franked. This reflects a payout ratio of
62% based on net profit attributable to owners of WBC and 57% excluding estimated customer refunds, payments,
associated costs and litigation, the write-down of intangible assets, including goodwill and the impact of asset sales and
revaluation.
Based on the share price at 31 March 2021, the dividend equates to a yield of 4.8%.
No discount will be applied 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 10 trading days
commencing 19 May 2021. Westpac plans to neutralise the impact of the DRP and intends to arrange for the purchase
of shares by a third party to satisfy the DRP for the 2021 interim dividend.
The 58 cent ordinary dividend is expected to be paid on 25 June 2021. After allowing for the 2021 interim ordinary
dividend, the Group’s adjusted franking account balance was $3,560 million.
Bank Levy
Westpac paid the Government’s Bank Levy of $195 million in First Half 2021. The Bank Levy in First Half 2021 was
equal to 4.0% of net profit attributable to owners of WBC and is equivalent to 4 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 34.5%.
Financial performance First Half 2021 –First Half 2020
Net profit attributable to owners of WBC of $3,443 million was up $2,253 million or 189% over First Half 2020. The
increase was principally due to a $2.6 billion positive movement in impairment charges ($1.8 billion after tax) and a
lower estimated customer refunds, payments, associated costs and litigation, the write-down of intangible items,
including goodwill, the impact of asset sales and revaluations, and cost associated with AUSTRAC proceedings,
including penalty impact ($1.1 billion after tax). Excluding these, net profit attributable to owners of WBC was $3,725
million, up $1,136 million, or 44%.
Estimated customer refunds, payments, associated costs and litigation, the write-down of intangible items, including
goodwill, the impact of asset sales and revaluations for First Half 2021 reduced net profit attributable to owners of WBC
by $282 million and included additional remediation and litigation costs, write-downs of intangible assets, cost of exiting
the agreement with IOOF, and losses linked to the exit of Westpac Pacific. These costs were partly offset by a net gain
on our investment in Coinbase of $288 million. In First Half 2020 these items and costs of the AUSTRAC proceedings,
including the penalty reduced net profit by $1,399 million.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS11
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Net interest income was 7% lower over the prior corresponding period, with net interest margins 15 basis points lower.
Average interest-earning assets were relatively flat over the prior corresponding period with lower lending offset by a
rise in liquid assets. Total spot lending was 4% down over the year (down $29.6 billion) with the decline due to:
•Lower Australian lending split across mortgages (down $2.1 billion), business and institutional lending (down $12.4
billion) and other personal lending (down $3.4 billion);
•Lower NZ lending in A$ terms. In NZ$, New Zealand lending was up $3.5 billion or 4% from growth in mortgages;
and
•Reduced offshore lending mostly from a reduction in trade finance in Asia following our decision to consolidate our
Asian points of presence.
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Review of Group operations
Customer deposits increased $6.5 billion, lifting the customer deposit to loan ratio to 79.8%. Most of the deposit
increase was in at call and non-interest bearing which increased $43.3 billion and $7.0 billion respectively. These
increases were partly offset by lower term deposits.
Net interest margins were 15 basis points lower over the prior corresponding period with the margin, excluding Treasury
and Markets and estimated customer refunds and payments, down 10 basis points. The decline was due to lower
interest rates, loan competition and the mix impact from an increase in low yielding liquid assets. These decreases were
partly offset by lower wholesale funding costs, including the cost of the TFF.
Non-interest income was up 46% over the prior corresponding period and was 7% higher excluding estimated customer
refunds and payments and the impact of asset sales and revaluations. The increase excluding estimated customer
refunds and payments and the impact of asset sales and revaluations was mainly due to higher insurance income
across Life, General and Lenders Mortgage insurance. These gains were partly offset by lower wealth income from
margin contraction and from lower trading income, including from the exit of energy trading.
Operating expenses were down 3% over the prior corresponding period due principally to lower cost associated with
AUSTRAC proceedings, including penalty, costs associated with estimated customer refunds, payments and litigation,
the write-down of intangible items, including goodwill, and the impact of asset sales and revaluations. Excluding these,
expenses were up $327 million or 7%. The increase was mostly due to higher risk and compliance spending (including
more staff), and employing more temporary and permanent employees to meet increased customer demands. These
increases were partly offset by a reduction in the size of the distribution network.
Impairment charges were a benefit of $372 million in First Half 2021 compared to a cost of $2,238 million in First Half
2020, a $2.6 billion improvement. Individually assessed provisions were lower, mostly from a decline in new impaired
exposures and from collectively assessed provisions no longer required, consistent with the better asset quality and
improving economic outlook.
12WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
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Review of Group operations
Divisional Net Profit After Tax (NPAT) Summary
1
Movement NPAT by division ($m)
First Half 2021 –First Half 2020
Summary of movement in NPAT by Business Divisions (First Half 2021 - First Half 2020)
Consumer NPAT of $1,592 million was $120 million or 8% higher than First Half 2020. Excluding estimated customer
refunds, payments, associated costs and litigation and the write-down of intangible items, NPAT was $176 million
higher mostly due to an impairment benefit of $80 million in First Half 2021 compared to a $416 million impairment
charge in First Half 2020, partly offset by lower non-interest income and higher operating expenses.
Business NPAT of $920 million was $442 million higher than First Half 2020. Most of the improvement was due to an
impairment benefit of $129 million compared to an impairment charge of $697 million in First Half 2020. Lower
estimated customer refunds, payments, associated costs and litigation ($113 million) also contributed to the increase in
NPAT.
Westpac Institutional Bank (WIB) NPAT of $230 million was $83 million or 56% higher than First Half 2020. The impact
of write-down of intangible assets reduced NPAT by $26 million in First Half 2021. Excluding this, NPAT was $109
million or 74% higher mostly from lower impairment charges and partly offset by a lower net interest income.
New Zealand NPAT of $542 million was $250 million or 86% higher than First Half 2020, primarily driven by an
impairment benefit ($92 million) compared to an impairment charge in First Half 2020 ($200 million). Profit before
impairment charges and income tax expense was 12% higher mostly from a 6% increase in net interest income and a
3% decline in operating expenses.
Specialist Businesses NPAT of $134 million was $104 million higher than First Half 2020. Excluding estimated customer
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS13
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refunds, payments, associated costs and litigation, the write-down of intangible items, including goodwill and the impact
of asset sales and revaluations, First Half 2021 NPAT was $431 million, $299 million higher than First Half 2020, mostly
from an impairment benefit of $80 million in First Half 2021 compared to an impairment charge of $160 million in First
Half 2020.
Group Businesses NPAT was $25 million for First Half 2021. Excluding estimated customer refunds, payments,
associated costs and litigation, the impact of asset sales and revaluations, and cost associated with AUSTRAC
proceedings, including penalty, net loss after tax was $77 million compared to a loss of $45 million in First Half 2020.
1.The NPAT graph illustrates the movements in NPAT (in $ value) for each division.
2.Certain items include estimated customer refunds, payments, associated costs and litigation, write-down of intangibles, asset sales and
revaluations, and cost associated with AUSTRAC proceedings, including penalty.
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Review of Group operations
First Half 2021 –Second Half 2020
Net interest income increased $652 million or 8% compared to Second Half 2020. Key features include:
First Half 2021 –First Half 2020
Net interest income decreased $652 million or 7% compared to First Half 2020. Key features include:
14WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
2.2Review of reported results
2.2.1
Net interest income
1
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
202120202020Sept 20Mar 20
Net interest income ($m)8,3487,6969,0008(7)
Average interest-earning assets ($m)812,950830,465812,971(2)-
Group net interest margin (%)2.06%1.85%2.21%21 bps(15 bps)
•Group net interest margin increased 21 basis points, reflecting a $604 million increase in Treasury and Markets
revenue, primarily driven by fair value movements in economic hedges;
•A 2% decrease in average interest earning assets due to reductions in offshore institutional lending and Australian
consumer and business lending. This was partly offset by an increase in New Zealand mortgages Other interest
earning assets decreased mainly due to a reduction in reverse repurchase agreements and lower collateral
balances; and
•Group net interest margin excluding Treasury and Markets increased 6 basis points. The increase was due to a
reduction in estimated customer refunds and payments which contributed to higher net interest income, higher
deposit spreads, a change in deposit mix to at call products from term deposits, and lower funding costs. This was
partly offset by competition for lending and lower interest rates impacting income earned on hedged deposits and
capital.
•Group net interest margin decreased 15 basis points, reflecting a $439 million decrease in Treasury and Markets
revenue, primarily driven by fair value movements in economic hedges;
•Average interest earning assets were broadly flat against First Half 2020. Reductions in offshore institutional
lending, Australian variable rate mortgages and business lending were offset by increased holdings of third party
liquid assets and higher New Zealand lending; and
•Group net interest margin excluding Treasury and Markets decreased 5 basis points. The decline was primarily due
to lower interest rates impacting customer deposit spreads and income earned on capital, lower lending spreads
from competition and the increase in third party liquid assets. This was partly offset by a reduction in estimated
customer refunds and payments, a change in deposit mix to at call products from term deposits, and lower funding
costs.
1.Refer to Section 4 Note 3 for reported results breakdown.
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Review of Group operations
First Half 2021 –Second Half 2020
Total loans (including held for sale loans) decreased $3.0 billion compared to September 2020. Excluding foreign
currency translation impacts, total loans were $1.7 billion lower.
Key features of total loan movements were:
First Half 2021 –First Half 2020
Total loans (including held for sale loans) decreased $29.6 billion or 4% compared to March 2020. Excluding foreign
currency translation impacts, total loans were $22.4 billion lower or 3%.
Key features of total loan movements were:
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
15
2.2.2Loans
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21-
$m202120202020Sept 20Mar 20
Australia598,663600,780616,328-(3)
Housing443,557440,933445,6631-
Personal16,45817,08119,854(4)(17)
Business142,965147,584155,322(3)(8)
Provisions(4,317)(4,818)(4,511)(10)(4)
New Zealand (A$)83,48681,78885,1762(2)
New Zealand (NZ$)90,92388,35387,42534
Housing58,29755,23153,41169
Personal1,4091,4691,652(4)(15)
Business31,71332,26132,867(2)(4)
Provisions(496)(608)(505)(18)(2)
Other overseas (A$)6,06910,49118,174(42)(67)
Total loans688,218693,059719,678(1)(4)
Loans held for sale
1
1,819----
Total loans (including held for sale)690,037693,059719,678-(4)
•Australian housing loans increased $2.6 billion supported by targeted campaigns. The growth was in owner
occupied lending, up $8.8 billion or 3% partly offset by lower investor property lending, down $5.2 billion or 3%;
•Australian personal lending was lower with most of the decline across personal loans and auto lending. This was
consistent with market trends in personal lending;
•Australian business lending contracted due to lower new lending and increased repayments.
•New Zealand lending increased in NZ$ terms with higher housing lending, supported by the continued strength in
the housing market, partly offset by lower institutional lending;
•Overseas lending decreased primarily in Asia, as the Group commenced exiting some operations in Asia. Loans of
$1.4 billion in Westpac Pacific were reclassified into held for sale in First Half 2021; and
•Provisions decreased from lower collectively assessed provisions due to improved asset quality and a better
economic outlook.
•Australian housing loans declined mostly from accelerated payments exceeding new lending. The decline was in
investor property lending, down $10.8 billion or 6% combined with a $3.0 billion or 23% decline in line of credit
facilities. The decline was partly offset by higher owner occupied lending up $11.2 billion or 4%;
•Australian personal lending decreased across each of the major categories: credit cards, personal loans and auto
lending. This was consistent with market trends in unsecured lending and auto finance with customers reducing
debt and using other forms of finance;
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•Australian business lending contracted as institutional customers repaid facilities drawn down in First Half 2020 in
response to COVID-19. This combined with lower demand for investment, working capital and higher repayments;
•New Zealand lending was higher primarily in housing, supported by rising demand for housing credit and increased
prices. These increases were partly offset by lower institutional lending and lower personal loan and card balances;
and
•Overseas lending decreased primarily in trade finance in Asia, as the Group commenced exiting some operations in
Asia. Loans of $1.4 billion in Westpac Pacific were reclassified into held for sale in First Half 2021.
1.Loans held for sale included Westpac Pacific ($1.4 billion) and Vendor Finance ($0.4 billion) and prior to March 2021 were included in Other
overseas and Australian business lending, respectively.
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Review of Group operations
First Half 2021 –Second Half 2020
Total customer deposits (including held for sale deposits) decreased $5.1 billion or 1% compared to September 2020.
Excluding foreign currency translation impacts, customer deposits decreased $3.6 billion or 1%. Key features of total
customer deposits movements were:
First Half 2021 –First Half 2020
Total customer deposits (including held for sale deposits) increased $6.5 billion or 1% compared to March 2020.
Excluding foreign currency translation impacts, customer deposits increased $13.9 billion or 3%.
Key features of total customer deposits growth were:
16WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
2.2.3Deposits and other borrowings
1
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Customer deposits
Australia475,155478,884460,561(1)3
At call315,218304,761274,071315
Term110,470125,820141,933(12)(22)
Non-interest bearing49,46748,30344,557211
New Zealand (A$)67,99965,70067,27331
New Zealand (NZ$)74,05670,97469,05047
At call31,60828,41126,5041119
Term28,73930,99232,768(7)(12)
Non-interest bearing13,70911,5719,7781840
Other overseas (A$)5,09510,86915,967(53)(68)
Total customer deposits548,249555,453543,801(1)1
Customer deposits held for sale
2
2,088----
Total customer deposits (including held for sale)550,337555,453543,801(1)1
Certificates of deposit37,15235,67839,1194(5)
Australia26,27325,64721,029225
New Zealand (A$)3,0202,7733,4529(13)
Other overseas (A$)7,8597,25814,6388(46)
Total deposits and other borrowings (including held for sale)587,489591,131582,920(1)1
•Australian customer deposits declined mostly from lower institutional at call balances as customers sought higher
yields. Consumer and Business deposits were both up 2% with growth across savings and transaction accounts.
The mix of deposits has continued to shift with term deposits lower and at call deposits rising. Non-interest bearing
deposits were higher mostly due to an increase in mortgage offset balances, up $1.5 billion;
•New Zealand customer deposits increased in NZ$ terms across both consumers and businesses with term deposits
declining and at call increasing; and
•Other overseas deposits decreased primarily in Asia, as the Group commenced exiting some operations in Asia.
Deposits of $2.1 billion in Westpac Pacific were reclassified into held for sale in First Half 2021.
•Australian customer deposits grew with the mix shifting from term deposits to at call products, particularly
transaction accounts, up 20%. Non-interest bearing deposits grew $4.9 billion mainly from higher mortgage offset
balances;
•New Zealand customer deposits increased across both households and businesses with term deposits declining
and at call increasing; and
•Other overseas deposits decreased primarily in Asia, as the Group commenced exiting some operations in Asia.
Deposits of $2.1 billion held in Westpac Pacific were reclassified into held for sale in First Half 2021.
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1.Non-interest bearing relates to instruments which do not carry a rate of interest.
2.Customer deposits held for sale included Westpac Pacific ($2.1 billion) which were included in Other overseas in prior periods.
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Review of Group operations
Group net interest margin movement (%)
First Half 2021 –Second Half 2020
First Half 2021 –Second Half 2020
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
17
2.2.4Net interest margin
•Group net interest margin of 2.06% increased 21 basis points from Second Half 2020 with key features including:
–4 basis point decrease from loan spreads primarily due to increased competition for mortgages driving lower
rates on new lending, particularly fixed rate mortgages, along with retention pricing, and a change in portfolio
mix with customers reducing their unsecured personal debt;
–6 basis point increase from higher deposit spreads, primarily due to the repricing of deposits and changes in
deposit mix with customers moving to at call products from term deposits. This was partly offset by the low
interest rate environment impacting low rate deposits and reduced earnings on hedged deposit balances;
–2 basis point increase from lower wholesale funding costs;
–2 basis point decrease from capital and other primarily due to lower income earned on hedged capital balances;
–1 basis point increase from improved yields on liquid assets; and
–3 basis point increase from lower estimated customer refunds and payments.
•The contribution from Treasury and Markets increased 15 basis points due to higher Treasury income driven by fair
value movements in economic hedges.
1.Certain items relate to estimated customer refunds and payments.
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Review of Group operations
Group net interest margin movement (%)
First Half 2021 –First Half 2020
First Half 2021 –First Half 2020
18WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
•Group net interest margin of 2.06% decreased 15 basis points from First Half 2020 with key features including:
–Loan spreads remain unchanged with lower funding costs offset by increased competition for mortgages driving
lower rates on new lending, particularly fixed rate mortgages, along with retention pricing, and a change in
portfolio mix with customers reducing their unsecured personal debt;
–3 basis point decrease from the low interest rate environment impacting customer deposit spreads and income
earned on hedged deposit balances. This was partly offset by deposit repricing and changes in deposit mix with
customers moving to at call products from term deposits;
–6 basis point increase from lower wholesale funding costs;
–7 basis point decrease from capital and other primarily due to lower income earned on hedged capital balances;
–6 basis point decrease from higher holdings of third party liquid assets; and
–5 basis point increase from lower estimated customer refunds and payments.
•The contribution from Treasury and Markets decreased 10 basis points due to lower Treasury income driven by fair
value movements in economic hedges.
1.Certain items relate to estimated customer refunds and payments.
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Review of Group operations
First Half 2021 –Second Half 2020
Non-interest income of $2,338 million increased $455 million or 24% compared to Second Half 2020.
Net fee income
Net fee income decreased by $137 million or 16% due to:
Net wealth management and insurance income
Net wealth management and insurance income increased $312 million or 109% due to:
Trading income
Trading income increased $7 million or 2% due to:
Other income
Other income increased $273 million primarily due to a revaluation related to the investment in Coinbase. Second Half
2020 included a gain relating to the revaluation of the investment in Zip Co Limited ($303 million) partly offset by foreign
currency translation losses incurred following the closure of the Mumbai branch.
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
19
2.2.5
Non-interest income
1
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net fee income700837755(16)(7)
Net wealth management and insurance income59828646510929
Trading income4424354602(4)
Other income598325(76)84large
Total non-interest income
2,3381,8831,6042446
•Estimated customer refunds and payments which decreased net fee income by $104 million in First Half 2021
compared to an increase of $59 million in Second Half 2020;
•Increased ATM usage costs following the sale of our offsite ATMs to a third party in Second Half 2020;
•Lower account and transaction fees from simplification initiatives; partly offset by
•Higher credit cards income as transaction volumes recovered from the initial COVID-19 impact and a seasonal
increase in First Half 2021 and higher merchant fees as fee waivers for COVID-19 support rolled off; and
•Higher corporate and institutional commitment fee income due to lower utilisation of credit facilities.
•Higher life insurance income due to an asset impairment relating to loss recognition of retail disability insurance
products in Second Half 2020. A favourable movement in the valuation of life policy liabilities in First Half 2021 was
partly offset by a change in actuarial assumptions;
•Estimated customer refunds and payments which decreased net wealth management and insurance income by $88
million in First Half 2021 compared to a decrease of $137 million in Second Half 2020; partly offset by
•Lower general insurance income ($62 million) primarily due to higher severe weather-related claims in First Half
2021 compared to Second Half 2020.
•The impact of economic hedges ($53 million);
•Positive movement in derivative valuation adjustments ($34 million); partly offset by
•Lower trading income ($74 million) from fixed income and foreign exchange;
•Lower customer sales income ($8 million) in fixed income from lower customer demand.
1.Refer to Section 4, Note 4 for reported results breakdown.
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Review of Group operations
First Half 2021 –First Half 2020
Non-interest income of $2,338 million increased $734 million or 46% compared to First Half 2020.
Net fee income
Net fee income decreased by $55 million or 7% compared to First Half 2020 due to:
Net wealth management and insurance income
Net wealth management and insurance income increased $133 million or 29% compared to First Half 2020 due to:
Trading income
Trading income decreased $18 million or 4% due to:
Other income
Other income increased $674 million due to a revaluation related to the investment in Coinbase and gains on other
disposals ($8 million). First Half 2020 included a decrease in the valuation of Pendal ($91 million).
Group funds comprises non-superannuation and superannuation regulated products provided to Australian and New
20WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
•The impacts of COVID-19 including a decline in international card volumes and lower interchange fees;
•Increased ATM usage costs following the sale of our offsite ATMs to a third party in Second Half 2020;
•The removal of certain account and transaction fees as part of our simplification initiatives; partly offset by
•Estimated customer refunds and payments which decreased net fee income by $104 million in First Half 2021
compared to a decrease of $147 million in First Half 2020.
•Higher life insurance income primarily due to deferred acquisition cost write-offs in First Half 2020. A favourable
movement in the valuation of life policy liabilities in First Half 2021 was partly offset by a change in actuarial
assumptions;
•Higher general insurance income ($58 million) primarily due to lower severe weather-related claims in First Half
2021 compared to First Half 2020;
•Higher lenders mortgage insurance income ($31 million) from release of loss provisions due to lower than expected
claims and higher premium income; partly offset by
•Estimated customer refunds and payments which decreased net wealth management and insurance income by $88
million in First Half 2021 compared to an increase of $16 million in First Half 2020; and
•Lower superannuation income ($17 million) due to margin compression.
•Lower trading income ($86 million) due to the closure of the Energy desk and lower fixed income trading;
•The impact of economic hedges ($42 million);
•Lower customer sales income ($39 million) from foreign exchange; partly offset by
•Positive movement in derivative valuation adjustments ($149 million) with First Half 2020 impacted by widening
credit spreads resulting from COVID-19.
2.2.6Group funds
As atAs at% Mov’tAs at% Mov’t
31 MarchNetOther30 SeptMar 21 -31 MarchMar 21 -
$bn2021InflowsOutflowsflowsMov’t2020Sept 202020Mar 20
Superannuation42.31.9(1.9)-4.138.21135.320
Platforms128.211.8(11.7)0.110.3117.89109.018
Packaged Funds45.42.8(2.5)0.34.141.01138.817
Other
1
-------2.8(100)
Total Australia funds215.916.5(16.1)0.418.5197.010185.916
Total NZ funds (A$)10.92.0(2.9)(0.9)0.511.3(4)10.63
Total Group funds226.818.5(19.0)(0.5)19.0208.39196.515
Total NZ funds (NZ$)11.92.2(3.1)(0.9)0.612.2(2)10.99
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Zealand customers through advised and direct channels. This includes wealth products distributed to Australian
customers by the Specialist Businesses and Business Bank divisions, and to New Zealand customers through the BT
brand operating in Westpac New Zealand.
Group funds increased by $18.5 billion (or 9%) over the First Half 2021, primarily driven by market movements. Inflows
of $18.5 billion were offset by outflows of $19 billion.
1.Other included investable capital and other amounts related to subsidiaries, which are not related to funds and therefore were removed in
September 2020.
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Review of Group operations
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.
First Half 2021 –Second Half 2020
Total markets income decreased by $64 million, or 12%, compared to Second Half 2020 primarily due to lower fixed
income. This was partly offset by higher contribution from derivative valuation adjustments, up $37 million.
Customer income reduced $28 million compared to Second Half 2020 primarily due to lower fixed income contribution.
Non-customer income reduced $73 million compared to Second Half 2020, primarily due to lower fixed income trading.
First Half 2021 –First Half 2020
Total markets income decreased by $38 million, or 8%, compared to First Half 2020, primarily due to lower customer
and non-customer income. This was partly offset by derivative valuation adjustments increasing $146 million from
narrowing of credit spreads.
Customer income reduced $85 million compared to First Half 2020, primarily due to lower foreign exchange sales.
Non-customer income reduced $99 million compared to First Half 2020, due to the exit of energy desk and lower foreign
exchange income.
Markets Value at Risk (VaR)
2
The Components of Markets VaR are as follows:
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
21
2.2.7
Markets related income
1
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income456767(33)(33)
Non-interest income418460434(9)(4)
Total Markets income463527501(12)(8)
Customer income
335363420(8)(20)
Non-customer income75148174(49)(57)
Derivatives valuation adjustments5316(93)largelarge
Total Markets income463527501(12)(8)
$mAverageHighLow
Half Year 31 March 202123.534.74.6
Half Year 30 September 202024.132.816.7
Half Year 31 March 20208.136.74.0
AverageHalf YearHalf YearHalf Year
MarchSeptMarch
$m202120202020
Interest rate risk8.09.44.0
Foreign exchange risk
1.63.51.4
Equity risk0.40.30.1
Commodity risk
3
1.51.62.2
Credit and other market risks
4
16.919.26.2
Diversification benefit(4.9)(9.9) (5.8)
Net market risk23.524.18.1
1.Markets income includes WIB Markets, Business division, Consumer division and Westpac New Zealand markets.
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2.The daily VaR presented above reflects a Market’s view of VaR. VaR measures the potential for loss using a history of price volatility. Second
Half 2020 and First Half 2020 have been restated to align with First Half 2021, to include VaR on the banking book.
3.Includes electricity risk.
4.Includes pre-payment risk and credit spread risk (exposures to generic credit rating bonds).
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Review of Group operations
Full Time Equivalent (FTE) employees
First Half 2021 –Second Half 2020
Operating expenses decreased $561 million or 9% compared to Second Half 2020 with the majority of the decline due
to the following key features:
The following discussion excludes the impact of these key items.
Except for these items, operating expenses decreased $23 million. Through the half, we added 1,898 FTE mainly in
response to higher mortgage volumes and additional resources for risk and compliance programs. These increases and
the lower capitalisation of project spend from changes to our software capitalisation policy were more than offset by
lower restructuring expenses, a decline in some COVID-19 expenses, productivity benefits, and the timing of project
spend with more costs typically invested in the second half of the year.
Staff expenses increased $182 million or 7% from:
Occupancy expenses decreased $25 million or 5% mostly from lower distribution network costs including:
Technology expenses decreased $39 million or 3% from lower amortisation.
Other expenses decreased $141 million or 14% from:
22WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
2.2.8
Operating expenses
1
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Staff expenses(2,771)(2,571)(2,444)813
Occupancy expenses(559)(502)(514)119
Technology expenses(1,405)(1,366)(1,277)310
Other expenses(1,262)(2,119)(1,946)(40)(35)
Total operating expenses(5,997)(6,558)(6,181)(9)(3)
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
Number of FTE202120202020Sept 20Mar 20
Permanent employees33,60732,36730,91349
Temporary employees5,1404,4823,2861556
FTE38,74736,84934,199513
•Non-repeat of provisions and costs for the AUSTRAC proceedings ($420 million lower);
•Write-down of intangible items ($353 million lower);
•Partly offset by asset sales and revaluation ($121 million higher); and
•Costs associated with estimated customer refunds, payments, costs and litigation ($114 million higher).
•Higher salaries from increased operational requirements associated with mortgage processing including insourcing,
additional risk and compliance resources, lower capitalisation of project spend and increased short-term incentives;
•Partly offset by lower restructuring expenses and greater utilisation of leave provisions as staff took more leave over
the half.
•Prior sale of offsite ATMs; and
•Branch closures.
•Lower COVID-19 related expenses linked to protecting customers and staff;
•Lower third-party spend as we insourced certain activities;
•A revaluation of fintech investments; and
•Timing of project spend which was partly offset by costs relating to the Customer Outcomes and Risk Excellence
(CORE) program.
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First Half 2021 –First Half 2020
Operating expenses decreased $184 million or 3% compared to First Half 2020. Key features include:
•Non-repeat of provisions and costs for the AUSTRAC proceedings ($1,058 million lower);
•Partly offset by asset sales and revaluation ($240 million higher);
•Write-down of intangible items ($183 million higher); and
•Costs associated with estimated customer refunds, payments, costs and litigation ($124 million higher).
1Refer to Section 4 Note 5 for reported results breakdown.
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Review of Group operations
The following discussion excludes the impact of these key items.
Except for these items, operating expenses increased $327 million or 7%. Most of the increase was from adding 4,548
FTE over the year in response to higher mortgage volumes, additional resources for risk and compliance programs and
COVID-19 related activities. This increase and the lower capitalisation of project spend from changes to our software
capitalisation policy were partly offset by productivity benefits.
Staff expenses increased $305 million or 13% from the increase in employees over the year and lower capitalisation of
project spend.
Occupancy expenses decreased $37 million or 7% from lower distribution network costs including:
Technology expenses increased $19 million or 2% from software licensing costs to support increased FTE. Other
expenses increased $40 million or 5% from:
Investment spend
The Group invested $771 million in First Half 2021, with 34% directed to growth and productivity initiatives, 52% to risk
and compliance, and 14% to other technology programs.
Lower investment spend in First Half 2021 compared to Second Half 2020 was principally due to the completion of
some transformation initiatives though the period. Compared to First Half 2020 investment spend was 6% higher with
most of the increase directed to risk and compliance initiatives.
Across major investment categories the following progress was achieved in First Half 2021.
Productivity and growth
Customer Service Hub (CSH) is a major program resolving multi brand issues in Consumer bank. A new online
application process was launched in December 2020 for Westpac customers, completing the end to end digital
mortgage experience for customers. This new capability improves the experience for customers and streamlines the
process for bankers. Customers can apply, track their application, upload documents and accept their loan offer online.
Bankers can monitor a customer’s application online. CSH is now being used by Westpac, St.George, Bank of
Melbourne and BankSA bankers. Availability for brokers is expected to be in place by the end of 2021.
Further development of Panorama, our wealth administration platform, including simplifying our products and processes
to support the migration of BT Wrap accounts to Panorama. The migration commenced in December 2020 and is
scheduled to complete by 30 June 2021.
The Group has continued to improve its digital capability with key initiatives delivered in First Half 2021 including:
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
23
•Prior sale of offsite ATMs; and
•Branch closures.
•Costs relating to the CORE program; and
•Higher COVID-19 expenses;
•Partly offset by a revaluation of fintech investments.
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Expensed417384296941
Capitalised software and fixed assets354608432(42) (18)
Total771992728(22) 6
Growth and productivity264368296(28)(11)
Regulatory change401470336(15)19
Other technology10615496(31)10
Total771992728(22)6
•First launched in late 2020 the new Westpac mobile banking iPhone app has now been rolled out to all personal
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banking and sole trading customers. The app provides a faster and simpler banking experience including through
smarter searching, more intuitive navigation and reducing the steps to make a payment from 12 to 4. The new
functionality will be available to Android users in 2021;
•Simplifying fee structures by reducing over 100 fees;
•Migrating over 1 million customers onto contemporary products;
•Introduced biometrics (primarily facial recognition) as the preferred method for verification of identity for St.George
customers applying for a mortgage online; and
•Digitised and simplified a number of processes (while simultaneously improving data quality and security) including:
enabling customers to update their details real-time online; simplifying the process to link cards to Apple Pay;
providing proof of balance verification for business customers online.
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Review of Group operations
Risk and compliance
Other technology
Major initiatives under this category included:
Capitalised software
The capitalised software balance was $2,260 million, a $170 million or 7% decrease compared to 30 September 2020,
and a $75 million or 3% decrease compared to 31 March 2020.
Compared to Second Half 2020, additions were $257 million lower, due to lower investment and a lower level of
capitalisation (46% compared to 61%) mostly from a change in our software capitalisation policy which increased the
minimum project cost before it can be capitalised to $20 million (refer to Note 1 to the financial statements in this 2021
Interim Financial Report for further details). Compared to First Half 2020, additions were $82 million lower.
Following our regular reviews, $133 million in software was impaired. Most of this was due to either assets no longer in
use or superseded by new functionality, rescoping of design resulting in previous work no longer being used or
diminution of benefits due to changes in the economic environment.
Software amortisation expense decreased $22 million (or 5%) compared to Second Half 2020 and $9 million (or 2%)
compared to First Half 2020, due to $171 million write down in Full Year 2020.
24WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
•Financial Crime Management capability has been strengthened through further enhancements to the NetReveal
system. NetReveal provides the capability to identify and monitor financial crime risk and supports compliance
across multiple jurisdictions, business units and risk types. Enhancements include updated detection rules,
customer risk assessment, customer and payment screening and IFTI reporting;
•Enabling customers to access and transfer mortgage and personal loan information securely with trusted third
parties through open banking;
•Employed additional resources to strengthen first and second line of defence, and additional risk and culture
training;
•Rolled-out a new centralised records management capability across the Group to improve visibility and
accountability of records; and
•Updated systems and processes for the transition to the alternative reference rate (IBOR), new derivatives
regulations, and Brexit trading obligations.
•Further strengthened document and data security:
–Improved responsiveness to applying security patches;
–New system to share files with third parties to speed-up file transfer and eliminate need for using (higher risk)
external drives to share information;
–Extended data loss prevention function including measures to block loss of sensitive data; and
–Strengthened document and email security through new data and email classifications;
•Upgraded branch IT infrastructure that is more secure and faster. The upgrade has improved banker productivity
and customer service speed;and
•New command centre to improve management of cyber threats.
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Balance as at beginning of period2,4302,3352,36543
Total additions
1
348605430(42) (19)
Amortisation expense(384) (406) (393) (5) (2)
Impairment expense(133) (96) (75) 3977
Foreign exchange translation(1) (8) 8(88) large
Balance as at end of period2,2602,4302,335(7) (3)
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In aggregate, the average amortisation period for our capitalised software assets is 3.0 years.
1Includes capitalised borrowing costs and card scheme.
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Review of Group operations
In First Half 2021, Westpac reported an impairment benefit of $372 million, compared to the Second Half 2020
impairment charge of $940 million.
Through the 2020 financial year, there was the expectation that the economic effects of COVID-19 would lead to a
significant deterioration in asset quality, including from lower economic growth, higher unemployment and a decline in
both commercial and residential property prices. These expectations were factored into our provision calculations, and
our judgements leading to a significant increase in expected credit loss provisions during 2020.
Through First Half 2021 the impact of various measures introduced by governments, regulators, central banks, banks
and others in response to COVID-19 have to date protected the Australian and New Zealand economies from the
downside first feared at the pandemic’s outbreak. Fiscal support has sustained economic activity and improved the
finances of many borrowers with lower interest rates reducing financial obligations for many and helping to boost
financial buffers. This was reflected in the rebound in economic activity, an improving labour market (including lower
unemployment) and higher housing prices.
In First Half 2021 we updated the forward-looking economic inputs in our provision calculations and along with an
improvement in credit quality metrics, and a reduction in lending in some higher risk portfolios meant that some
expected credit loss provisions booked through Full Year 2020 were no longer required. This led to an impairment
benefit in First Half 2021.
While both credit quality metrics and the operating environment have improved, much uncertainty remains. In particular,
it is possible that a further wave of the pandemic could occur in Australia and New Zealand prior to the vaccine roll-out
reaching critical saturation. Similarly, it is not clear how the economy will respond to the wind-back in government
support, and other industry initiatives.
As a result, we have maintained our current economic scenario weights and increased our COVID-19 related overlays
to capture the potential for the future emergence of losses in our business portfolios.
The following table indicates the weightings applied by the Group at 31 March 2021, 30 September 2020 and 31 March
2020:
First Half 2021 –Second Half 2020
First Half 2021 was an impairment benefit of $372 million, compared to a $940 million impairment charge in Second
Half 2020.
Total new CAP was a benefit of $322 million compared with a charge of $804 million in Second Half 2020. The CAP
benefit was due to:
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
25
2.2.9Impairment charges
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Individually assessed provisions (IAPs)
New IAPs(144)(283)(351)(49)(59)
Write-backs62547015(11)
Recoveries132931004232
Total IAPs, write-backs and recoveries50(136)(181)largelarge
Collectively assessed provisions (CAPs)
Write-offs(318)(438)(438)(27)(27)
Other changes in CAPs640(366)(1,619)largelarge
Total new CAPs322(804)(2,057)largelarge
Total impairment (charges)/benefits372(940)(2,238)largelarge
As atAs atAs at
31 March30 Sept31 March
Macroeconomic scenario weightings (%)202120202020
Upside555
Base555555
Downside404040
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Total IAPs, write-backs and recoveries were a $50 million benefit, compared to a $136 million charge in Second Half
2020. Key drivers included:
•the use of more positive forward-looking economic inputs in the provision calculations;
•improved credit quality metrics, particularly in the mortgage and business lending portfolios, along with a decline in
lending in unsecured portfolios;
•lower write-offs, predominately from lower delinquencies and a reduction in our consumer unsecured portfolios;
partially offset by
•an increase in COVID-19 related overlays to address the risk of delayed loss emergence in business lending.
•significantly lower new IAPs ($144 million) compared to Second Half 2020 ($283 million). There were no large IAPs
(greater than $50 million) raised in First Half 2021 compared to one in Second Half 2020; and
•higher recoveries compared to Second Half 2020 predominately in unsecured consumer lending.
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Review of Group operations
First Half 2021 –First Half 2020
First Half 2021 was an impairment benefit of $372 million compared to an impairment charge of $2,238 million in First
Half 2020.
Total new CAP was a benefit of $322 million compared with a charge of $2,057 million in First Half 2020. The benefit
was due to:
Total IAPs, write-backs and recoveries were a $50 million benefit, compared to a $181 million charge in First Half 2020.
The benefit was due to:
First Half 2021 –Second Half 2020
The effective tax rate of 31.9% in First Half 2021 was significantly lower than the Second Half 2020 effective tax rate of
47.1% mainly due to the non-deductible provisions relating to the AUSTRAC civil proceedings recognised in Second
Half 2020, and a reduction in goodwill impairments. The effective tax rate is above the Australian corporate tax rate of
30%.
First Half 2021 –First Half 2020
The effective tax rate of 31.9% in First Half 2021 was also significantly lower than the effective tax rate of 45.5% in First
Half 2020 mainly due to the non-deductible provisions relating to the AUSTRAC civil proceedings recognised in First
Half 2020.
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.
The portfolio performed well in First Half 2021 with stressed exposures as a percentage of total committed exposures
reducing 31 basis points to 1.60% at 31 March 2021. This reduction comprised:
Lower impaired exposures saw the ratio of gross impaired exposures to gross loans decline by 10 basis points to 0.30%
compared to 30 September 2020. Institutional impaired loans declined $216 million while Australian business impaired
loans were $168 million lower.
At 31 March 2021, the ratio of gross impaired exposure provisions to gross impaired exposures was 47.0% (up from
41.5% at 30 September 2020) while the ratio of collectively assessed provisions to credit risk weighted assets
26WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
•more positive forward-looking economic inputs in the provision calculations in First Half 2021;
•no change to the downside economic scenario weighting (in First Half 2020 more weight was assigned to the
downside scenario) reflecting the high degree of uncertainty over the future impact of the pandemic; and
•a lower increase in overlay provisions in First Half 2021.
•significantly lower new IAPs ($144 million) compared to First Half 2020 ($351 million). There were no large IAPs
(greater than $50 million) raised in First Half 2021 compared to two in First Half 2020; and
•higher recoveries compared to First Half 2020 predominately in unsecured consumer lending driven by customers
completing their hardship serviceability requirements.
2.2.10Income tax expense
2.2.11Non-controlling interests
2.3Credit quality
•a 10 basis point fall in watchlist and substandard exposures, from more rating upgrades in business lending and a
lower number of downgrades. The improvement was across most industry sectors;
•a 14 basis point decline in 90 days past due and not impaired exposures from lower mortgage accounts in hardship.
This decline was due to accounts exiting hardship in mid-calendar 2020 and have now completed their six-month
serviceability requirements; and
•7 basis point decrease in impaired exposures, driven by loans refinanced and regraded from impaired.
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decreased to 142 basis points (a 12 basis point reduction compared to September 2020).
Portfolio segments
The institutional segment has seen a decrease in stress with stressed exposures to TCE falling 24 basis points to
0.32% compared to 30 September 2020. This was due to a reduction in both watchlist exposures and impaired
exposures, from rating upgrades, the pay-down of debts and some write-offs.
The Australian business segment has seen stressed exposures to TCE fall 17 basis points to 6.74% compared to 30
September 2020. This was due to lower stress in Commercial portfolios, including Agriculture, Accommodation /
Hotels / Clubs / Pubs, and Transport and Storage. Within total stressed exposures, impaired assets also declined
leading to the ratio of impaired assets to TCE falling 19 basis points to 0.88% compared to 30 September 2020.
The commercial property sector has continued to perform well but has been one of the few sectors to experience an
increase in stress. Stressed property exposures to TCE increased 9 basis points to 2.91% compared to 30 September
2020. The rise in stress has been most evident in the office and retail sectors.
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Review of Group operations
Australian mortgage 90+ day delinquencies were 42 basis points lower than 30 September 2020 at 1.20%. This
improvement comprised:
Properties in possession continued to decline over First Half 2021, down by 76 to 180 compared to 30 September 2020.
The fall was due in part to a pause in repossession activities.
Other Australian consumer 90+ day delinquencies were 17 basis points lower than 30 September 2020 at 1.92%. The
decline was due to a 26 basis point reduction from portfolio performance, partly offset by a 9 basis point increase from a
decline in lending. Most of the reduction in delinquencies was in auto finance where the 90+ day delinquency was 35
basis points lower over the half at 2.45%. The 35 basis point decline included 85 basis points from portfolio
performance partially offset by a 54 basis point increase from customers ending their COVID-19 deferral package and
requiring additional support.
The New Zealand business portfolio has seen a small increase in stress from a rise in watchlist exposures partially
offset by a fall in impaired exposures. Impaired business exposures to TCE fell 10 basis points to 0.44% compared to
September 2020. The reduction in impaired assets was primarily due to the upgrade / sale / exposure reduction of two
larger customers.
New Zealand mortgage 90+ day delinquencies were 19 basis points lower than 30 September 2020 at 0.33%. New
Zealand other consumer 90+ day delinquencies were 18 basis points lower than 30 September 2020 at 1.91%. The
improved 90+ day delinquencies were driven in part by improved performance along with the re-aging of customers
after the exit of a COVID-19 package.
Provisions
Total provisions were $5,508 million at 31 March 2021, $655 million lower than 30 September 2020. This was due to the
use of more positive forward-looking economic inputs in the provisioning calculation, improved portfolio performance
and a decline in some of our higher risk exposures.
However, the impact of COVID-19 on the Australian economy and the Group remains uncertain. To address this
uncertainty, we have increased our COVID-19 related overlays to allow for the potential emergence of losses once the
effect of support and stimulus measures reduces in our business portfolios. Total overlays increased $250 million to
$902 million over the last 6 months.
IAPs were $564 million at 31 March 2021, $47 million lower than at 30 September 2020. The new and increased IAP
result of $144 million was significantly lower than prior periods, especially considering the impact of the pandemic.
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
27
•customers who exited hardship in 2020 and have now completed their 6 month serviceability period in First Half
2021 (43 basis points lower);
•recommencement of some collection activities that were put on hold as we prioritised supporting customers on
deferral packages (9 basis points lower); partially offset by
•accounts that have exited a deferral package and have now become delinquent or migrated to hardship (10 basis
points higher).
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Review of Group operations
28WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
2.3.1Credit quality key metrics¹
As atAs atAs at
31 March30 Sept31 March
202120202020
Stressed exposures by credit grade as a % of TCE:
Impaired0.19%0.26%0.20%
90 days past due and not impaired0.66%0.80%0.50%
Watchlist and substandard0.75%0.85%0.62%
Total stressed exposures1.60%1.91%1.32%
Gross impaired exposures to TCE for business and institutional:
Business Australia0.88%1.07%0.71%
Business New Zealand0.44%0.54%0.59%
Institutional0.08%0.15%0.08%
Mortgage 90+ day delinquencies:
Group1.11%1.50%0.87%
Australia1.20%1.62%0.94%
New Zealand0.33%0.52%0.27%
Other consumer loans 90+ day delinquencies:
Group1.92%2.09%1.94%
Australia1.92%2.09%1.97%
New Zealand1.91%2.09%1.59%
Other:
Gross impaired exposures to gross loans0.30%0.40%0.30%
Gross impaired exposure provisions to gross impaired exposures47.03%41.45%50.09%
Total provisions to gross loans79 bps88 bps80 bps
Collectively assessed provisions to credit risk weighted assets142 bps154 bps140 bps
Total provisions to credit risk weighted assets159 bps171 bps157 bps
Impairment charges/(benefits) to average gross loans annualised
2
(11 bps)27 bps62 bps
Net write-offs to average gross loans annualised
2
9 bps15 bps12 bps
2.3.2Movement in gross impaired exposures
1
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Balance as at beginning of period2,7792,1541,7632958
New and increased - individually managed222864897(74)(75)
Write-offs(431)(633)(537)(32)(20)
Returned to performing or repaid(369)(488)(516)(24)(28)
Portfolio managed - new/increased/returned/repaid(104)842572largelarge
Exchange rate and other adjustments(26)40(25)large4
Balance as at end of period2,0712,7792,154(25)(4)
1.Includes balances presented as held for sale.
2.Averages are based on a six month period.
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Review of Group operations
First Half 2021 –Second Half 2020
During First Half 2021, total assets decreased $22.5 billion mainly attributed to lower liquid assets in line with a
reduction in debt issues.
Key movements included:
Assets
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
29
2.4Balance sheet and funding
2.4.1Balance sheet
As atAs atAs atAs at
31 March31 March30 Sept31 March% Mov’t
2021202120202020Mar 21 -Mar 21 -
$mUS$A$A$A$Sept 20Mar 20
Assets
Cash and balances with central banks25,79133,87730,12945,81512(26)
Collateral paid2,9823,9174,7785,339(18)(27)
Trading securities and financial assets measured at fair value
through income statement (FVIS) and investment securities
85,441112,231132,206112,069(15)-
Derivative financial instruments17,03322,37323,36756,661(4)(61)
Loans523,940688,218693,059719,678(1)(4)
Life insurance assets2,6013,4163,5932,574(5)33
Other assets16,03821,06824,81425,526(15)(17)
Assets held for sale3,3194,359----
Total assets677,145889,459911,946967,662(2)(8)
Liabilities
Collateral received1,9062,5042,25012,72811(80)
Deposits and other borrowings445,666585,401591,131582,920(1)-
Other financial liabilities32,73342,99640,92533,996526
Derivative financial instruments15,45720,30323,05448,089(12)(58)
Debt issues97,332127,850150,325185,835(15)(31)
Life insurance liabilities8151,0701,396604(23)77
Loan capital20,01826,29423,94925,807102
Other liabilities6,0077,89110,84210,037(27)(21)
Liabilities held for sale2,3213,049----
Total liabilities622,255817,358843,872900,016(3)(9)
Equity
Total equity attributable to owners of WBC54,85372,05268,02367,59067
NCI37495156(4)(13)
Total equity54,89072,10168,07467,64667
Average balances
Total assets686,259901,431927,796912,364(3)(1)
Loans and other receivables517,902680,286696,096700,256(2)(3)
Total equity53,01269,63468,45467,67823
•Cash and balances with central banks increased $3.7 billion or 12% reflecting higher liquid assets held in this form;
•Collateral paid reduced $0.9 billion or 18% reflecting lower collateralised derivative balances;
•Trading securities and other financial assets measured at FVIS and investment securities decreased $20.0 billion or
15% to reduce liquid assets;
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Liabilities
•Derivative assets decreased $1.0 billion or 4% mainly driven by movements in interest rate swaps, partly offset by
foreign currency forward contracts;
•Loans decreased $4.8 billion or 1%. Refer to Section 2.2.2 Loans for further information;
•Other assets decreased $3.7 billion due to reductions in securities sold not delivered included in other financial
assets, property and equipment and deferred tax assets; and
•Assets held for sale increased $4.4 billion reflecting the assets of certain Specialist Businesses classified in this
category. Refer to Note 17 to the financial statements in this 2021 Interim Financial Report for further information.
•Deposits and other borrowings decreased $5.7 billion or 1%. Refer to Section 2.2.3 Deposits and other borrowings
for further information;
•Other financial liabilities increased $2.1 billion or 5% due to an increase in securities sold under agreements to
repurchase, partly offset by decreases in interbank deposits and securities purchased not delivered;
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Review of Group operations
Equity attributable to owners of WBC increased $4.0 billion or 6% reflecting retained profits during the period.
First Half 2021 –First Half 2020
In First Half 2021, total assets decreased compared to 31 March 2020 reflecting the reduction in loans during the year
to 31 March 2021. The Group’s funding composition also saw a decline in debt issues, partly offset by an increase in
other financial liabilities from the drawdown of the Term Funding Facility.
Key movements included:
Assets
Liabilities
30WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
•Derivative liabilities decreased $2.8 billion or 12% mainly driven by movements in interest rate and cross currency
swaps, partly offset by foreign currency forward contracts;
•Debt issues decreased $22.5 billion or 15% ($16.4 billion or 11% decrease excluding foreign currency impacts).
Refer to Section 2.4.2 Funding and liquidity risk management for further information;
•Loan capital increased $2.3 billion or 10% reflecting $4.3 billion net issuances of Additional Tier 1 instruments
(issuance of Westpac Capital Notes 7, partly offset by redemption of Westpac Capital Notes 3) and Tier 2 capital
instruments. This was partly offset by $2.0 billion of foreign currency translation and fair value hedging impacts;
•Other liabilities decreased $3.0 billion or 27% due to reduction in provisions to settle the AUSTRAC civil
proceedings and lower insurance related liabilities included in other liabilities as these were reclassified to liabilities
held for sale; and
•Liabilities held for sale increased $3.0 billion reflecting the liabilities of certain Specialist Businesses classified in this
category. Refer to Note 17 to the financial statements in this 2021 Interim Financial Report for further information.
•Cash and balances with central banks decreased $11.9 billion or 26% reflecting lower liquid assets held in this form;
•Collateral paid reduced $1.4 billion or 27% reflecting lower collateralised derivative balances;
•Derivative assets decreased $34.3 billion or 61% mainly driven by movements in cross currency swaps, foreign
currency forward contracts and interest rate swaps;
•Loans decreased $31.5 billion or 4%. Refer to Section 2.2.2 Loans for further information;
•Life insurance assets increased $0.8 billion or 33% mainly due to consolidation of new funds, partly offset by the
transfer of assets to non-consolidated funds which all occurred during Second Half 2020;
•Other assets decreased $4.5 billion due to reductions in securities sold not delivered and interbank balances
included in other financial assets, property and equipment and impairment of intangible assets; and
•Assets held for sale increased $4.4 billion reflecting the assets of certain Specialist Businesses classified in this
category. Refer to Note 17 to the financial statements in this 2021 Interim Financial Report for further information.
•Collateral received decreased $10.2 billion or 80% reflecting lower collateralised derivative balances;
•Deposits and other borrowings increased $2.5 billion. Refer to Section 2.2.3 Deposits and other borrowings for
further information;
•Other financial liabilities increased $9.0 billion or 26% due to an increase in securities sold under agreements to
repurchase, partly offset by decreases in interbank deposits and securities purchased not delivered;
•Derivative liabilities decreased $27.8 billion or 58% mainly driven by movements in cross currency swaps, foreign
currency forward contracts and interest rate swaps;
•Debt issues decreased $58.0 billion or 31% ($37.5 billion or 20% decrease excluding foreign currency impacts).
Refer to Section 2.4.2 Funding and liquidity risk management for further information;
•Loan capital increased $0.5 billion or 2% reflecting $4.3 billion net issuance of Additional Tier 1 instruments
(issuance of Westpac Capital Notes 7, partly offset by redemption of Westpac Capital Notes 3) and Tier 2 capital
instruments. This was partly offset by $3.8 billion of foreign currency translation and fair value hedging impacts;
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Equity attributable to owners of WBC increased $4.5 billion or 7% reflecting retained profits. The 2020 final dividend did
not impact equity as the dividend reinvestment plan was fully underwritten.
•Other liabilities decreased $2.1 billion or 21% due to reduction in provisions to settle the AUSTRAC civil
proceedings and lower insurance related liabilities included in other liabilities as these were reclassified to liabilities
held for sale; and
•Liabilities held for sale increased $3.0 billion reflecting the liabilities of certain Specialist Businesses classified in this
category. Refer to Note 17 to the financial statements in this 2021 Interim Financial Report for further information.
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Review of Group operations
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 Group maintained funding and liquidity metrics comfortably above regulatory minimums throughout the First Half
2021. The Group’s March 2021 quarterly average LCR was 124% and its NSFR at 31 March 2021 was 123% as
compared to regulatory minimums of 100% for both.
During First Half 2021, measures introduced by the Reserve Bank to support the economy remained in place. These
include an historically low cash rate, additional liquidity injected into the financial system through daily market
operations, the purchase of Australian Government bonds in the secondary market, and the Term Funding Facility
(TFF). Through the TFF, funding is provided to eligible ADIs at a fixed interest rate of 10 to 25 basis points, for a
maximum of three years.
At 31 March 2021, Westpac’s total TFF allowance was $30 billion and Westpac had drawn down $22 billion. Westpac
has included its TFF allowance in the LCR and NSFR calculations for 31 March 2021 in accordance with prudential
guidance.
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.
The Group’s total unencumbered liquid assets were $195.2 billion as at 31 March 2021 (30 September 2020: $221.2
billion). The reduction in liquid assets over the First Half 2021 mainly reflects lower HQLA and lower self-originated
AAA-rated mortgage-backed securities.
LCR
The LCR is designed to enhance banks’short-term resilience, by measuring the level of HQLA, as defined, held against
its liquidity needs for a 30 calendar day period under a regulator-defined 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 average LCR for the quarter ended 31 March 2021 was 124 % (Westpac’s average LCR for the quarter
ended 30 September 2020 was: 151%).
The reduction in the Group’s LCR mainly reflects a $15 billion reduction in the CLF (effective 1 December 2020) and an
increase in other flows. The main driver of other flows was the Group’s requirement to increase the value of its net cash
outflows by 10% for the purpose of calculating LCR (effective 1 January 2021). The overlay to the Group’s net cash
outflows has been required by APRA in response to breaches of liquidity requirements predominantly relating to
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
31
2.4.2Funding and liquidity risk management
•At 31 March 2021, Westpac held $113.4 billion in HQLA (30 September 2020: $131.7 billion). HQLA include 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. HQLA
decreased over the six months to 31 March 2021, in line with a reduction in debt maturities.
•Westpac’s CLF allocation for the 2021 calendar year, as approved by APRA, is $37 billion (2020 calendar year: $52
billion). The Group’s CLF allocation was reduced due to the significant increase in available HQLA, as well as
higher system liquidity driven by fiscal and monetary policy. The fee to access the CLF was increased by the RBA
on 1 January 2021 to 20 basis points (from 17 basis points).
•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.
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Westpac New Zealand Limited (WNZL). Further details are set out in the Significant Developments section of the 2021
Half Year Financial Results.
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 123% at 31 March 2021 (30 September 2020: 122%).
Movements in the Group’s NSFR over the half represent a $1.1 billion increase in available stable funding, mainly due
to deposits (up $2.9 billion) and equity (up $3.4 billion), partly offset by wholesale funding (down $4.9 billion). Required
stable funding decreased by $2.4 billion.
Funding
The Group monitors the composition and stability of its funding so it remains within the Group’s funding risk appetite.
This includes compliance with both the LCR and NSFR.
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Review of Group operations
Customer deposits
Customer deposits have continued to increase as a proportion of the Group’s funding. In the First Half 2021, customer
deposits increased by 70 basis points to 65.7% of the Group’s total funding, including equity. While customer deposits
decreased by $5.1 billion over the First Half, the Group’s total net funding also decreased, by $15.9 billion, in line with
reductions in the Group’s balance sheet.
Long term wholesale funding
Long term funding with a residual maturity greater than 12 months decreased 100 basis points or $11.0 billion to 15.6%.
The bank’s wholesale funding needs were limited over the First Half, reflecting a high proportion of customer deposits, a
contraction in lending and the availability of the TFF.
The Group raised $7.4 billion of long term wholesale funding the First Half of 2021, including $1.7 billion in Additional
Tier 1 and $4.7 billion in Tier 2 capital securities, the latter continuing the Group’s progress towards its Total Loss
Absorbing Capital (TLAC) requirements.
Funding from securitisation decreased to 0.8% of total funding.
Short term wholesale funding
Wholesale funding with a residual maturity less than 12 months decreased by 30 basis points to 10.1%, or $85.0 billion.
This portfolio (including long term to short term scroll) had a weighted average maturity of 146 days.
Equity
Funding from equity increased by 60 basis points to 8.6% of total funding.
Liquidity coverage ratio
Net stable funding ratio
32WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
QuarterQuarterQuarter% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
High Quality Liquid Assets (HQLA)
1,3
117,759118,944100,638(1)17
Committed Liquidity Facility (CLF)
3
37,00052,00052,000(29)(29)
Term Funding Facility (TFF)
2,3
10,32110,830280(5)large
Total LCR liquid assets165,080181,774152,918(9)8
Cash outflows in a modelled 30-day APRA defined stressed scenario
Customer deposits
1
85,28287,92575,983(3)12
Wholesale funding13,02410,18212,043288
Other flows
4
35,28122,22320,9425968
Total133,587120,330108,9681123
LCR
1,5
124%151%140%largelarge
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Available stable funding
1
625,185624,097627,676--
Required stable funding510,287512,656536,601-(5)
Net stable funding ratio123%122%117%78 bpslarge
1.Includes balances presented as held for sale.
2.Represents the Group’s average undrawn TFF allowance as per APRA guidance.
3.Refer to Glossary for definition.
4.Other flows include credit and liquidity facilities, collateral outflows and inflows from customers.
5.Calculated on a quarterly average basis. Comparatives have been restated.
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Review of Group operations
Funding by residual maturity
Deposits to net loans ratio
Funding view of the balance sheet²
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
33
As at 31 March 2021As at 30 Sept 2020As at 31 March 2020
$mRatio %$mRatio %$mRatio %
Wholesale funding
Less than 6 months45,4155.443,5435.149,0975.7
6 to 12 months11,9511.45,4450.717,3012.0
Long term to short term scroll
1
27,6313.339,4894.638,5394.4
Wholesale funding - residual maturity less than 12 months84,99710.188,47710.4104,93712.1
Securitisation6,6870.88,0000.99,5231.1
Greater than 12 months124,05014.8133,73215.7140,97416.3
Wholesale funding - residual maturity greater than 12 months130,73715.6141,73216.6150,49717.4
Customer deposits
2
550,33765.7555,45365.0543,80162.7
Equity
3
71,8778.668,1998.067,6047.8
Total funding
837,948100.0853,861100.0866,839100.0
As at 31 March 2021As at 30 Sept 2020As at 31 March 2020
$mRatio %$mRatio %$mRatio %
Customer deposits
2
550,337555,453543,801
Net customer loans
2
690,03779.8693,05980.1719,67875.6
$m
Total
liquid
assets
Customer
deposits
Wholesale
funding
Customer
franchise
Market
inventoryTotal
As at 31 March 2021
Total assets195,177--643,49250,790889,459
Total liabilities-(550,337)(215,734)-(51,287)(817,358)
Total equity---(71,877)(224)(72,101)
Total195,177(550,337)(215,734)571,615(721)-
Net loans
4
60,894--629,143-690,037
As at 30 September 2020
Total assets221,176--637,88052,890911,946
Total liabilities-(555,453)(230,210)-(58,209)(843,872)
Total equity---(68,199)125(68,074)
Total221,176(555,453)(230,210)569,681(5,194)-
Net loans
4
71,616--621,443-693,059
As at 31 March 2020
Total assets199,949--673,99493,719967,662
Total liabilities-(543,801)(255,434)-(100,781)(900,016)
Total equity---(67,604)(42)(67,646)
Total199,949(543,801)(255,434)606,390(7,104)-
Net loans
4
63,189--656,489-719,678
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 balances presented as held for sale.
3.Includes total share capital, share-based payment reserve and retained profits.
4.Liquid assets in net loans include internally securitised assets that are eligible for repurchase agreements with the RBA/RBNZ.
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Review of Group operations
APRA announcements on capital
On 15 December 2020 APRA issued revised capital management guidance
2
. From 1 January 2021 APRA will no longer
hold banks to a minimum level of earnings retention (previously 50% of net profit after tax in 2020). APRA has also
stated that it expects banks to moderate dividend payout ratios, consider the use of dividend reinvestment plans (DRPs)
and/or other capital management initiatives to offset the impact from distributions and conduct regular stress testing.
In addition, APRA has released further guidance on the implementation of Basel III reforms which will embed the
“unquestionably strong”level of capital in the framework. On 8 December 2020, APRA outlined its proposals for
changes to the capital framework including proposed changes to RWA effective from 1 January 2023
3
.
Further details of regulatory changes are set out in the Significant Developments section of the 2021 Interim Financial
Report.
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:
During the period of disruption caused by COVID-19, Westpac is operating with the following principles in relation to
capital:
These principles take into consideration:
34WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
2.5Capital and dividends
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
202120202020Sept 20Mar 20
Level 2 regulatory capital structure
Common equity Tier 1 (CET 1) capital after deductions ($m)52,93248,73347,982910
Risk weighted assets (RWA) ($m)428,899437,905443,905(2)(3)
CET 1 capital ratio12.34%11.13%10.81%121 bps153 bps
Additional Tier 1 capital ratio2.21%2.10%2.13%11 bps8 bps
Tier 1 capital ratio14.55%13.23%12.94%132 bps161 bps
Tier 2 capital ratio3.88%3.15%3.35%73 bps53 bps
Total regulatory capital ratio18.43%16.38%16.29%205 bps214 bps
APRA leverage ratio
1
6.27%5.78%5.66%49 bps61 bps
Level 1 regulatory capital structure
CET 1 capital after deductions ($m)53,31349,45348,482810
Risk weighted assets ($m)424,656433,727437,137(2)(3)
Level 1 CET 1 capital ratio12.55%11.40%11.09%115 bps146 bps
•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.
•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 requirement including
buffers (currently at least 8% for D-SIBs including Westpac).
•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
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Westpac will revise its capital management preferred range once APRA’s review of the capital adequacy framework is
finalised.
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.
1.Refer to Glossary for definition.
2.Letter to all authorised deposit taking institutions and insurers – “Capital Management”dated 15 December 2020.
3.Discussion paper: A more flexible and resilient capital framework for ADIs published 8 December 2020.
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.
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Review of Group operations
CET1 capital ratio movement for First Half 2021 (basis points)
Westpac’s Common Equity Tier 1 (CET1) capital ratio was 12.34% at 31 March 2021, 121 basis points higher than 30
September 2020. Key movements in the CET1 capital ratio over the half were:
Payment of Westpac’s 2020 final dividend had no net impact on capital as the dividend reinvestment plan was fully
underwritten. On 18 December 2020 Westpac issued 56.9 million new ordinary shares (Shares) ($1.12 billion)
comprising 20.2 million Shares ($401 million) to participants in the dividend reinvestment plan (approximately 36%
participation rate) and 36.7 million Shares ($719 million) to the underwriter.
1. Reflecting the net impact of movements in the foreign currency translation reserve and RWA.
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS35
•First Half 2021 NPAT of $3,443 million (80 basis point increase);
•A decline in Risk Weighted Assets (RWA) (20 basis point increase) mostly from a decrease in credit risk RWA from a
reduction in lending and an improvement in credit metrics;
•Capital deductions and other capital movements (14 basis point increase) from lower deferred tax assets and from
higher other comprehensive income from a revaluation of debt securities. This was partly offset by higher earnings
held in entities that are not consolidated for regulatory purposes which are deducted from capital;
•
Foreign currency impacts from the appreciation of the A$ against the US$ and NZ$ (1 basis point decrease)
1
; and
•An 8 basis points increase from the sale of Westpac’s stake in Zip Co Limited.
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Review of Group operations
Additional Tier 1 and Tier 2 capital movement for First Half 2021
On 4 December 2020, Westpac issued $1.72 billion of Additional Tier 1 capital (Westpac Capital Notes 7), of which
approximately $0.87 billion comprised reinvestment by the holders of Westpac Capital Notes 3 (WCN 3). On 22 March
2021, Westpac redeemed approximately $0.46 billion WCN 3 that remained on issue. The net impact was an increase
in Tier 1 capital of approximately 9 basis points.
During the half, Westpac issued US$2.5 billion and A$1.25 billion of Tier 2 capital. Westpac also redeemed A$0.7 billion
of Tier 2 capital instruments. The net impact was an increase in the total regulatory capital ratio of approximately 90
basis points. These issues will assist to meet APRA’s increased total capital requirements that must be achieved by 1
January 2024.
Leverage ratio
The leverage ratio represents the amount of Tier 1 capital relative to exposure
1
. At 31 March 2021, Westpac’s leverage
ratio was 6.27%, up 49 basis points since 30 September 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 2021 Interim Investor Discussion Pack.
The table below calculates the Group’s reported capital ratios consistent with this methodology.
1. As defined under Attachment D of APS110: Capital Adequacy.
36WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
%202120202020Sept 20Mar 20
Internationally comparable capital ratios
CET 1 capital ratio18.08%16.50%15.81%158 bps227 bps
Tier 1 capital ratio20.98%19.25%18.55%173 bps243 bps
Total regulatory capital ratio25.94%23.19%22.69%275 bps325 bps
Leverage ratio6.87%6.46%6.28%41 bps59 bps
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Review of Group operations
Risk Weighted Assets (RWA)
Total RWA decreased $9.0 billion or 2.1% over the half from lower credit risk RWA partially offset by an increase in non-
credit RWA.
The $12.3 billion decline in credit risk RWA included:
At 31 March 2021 Westpac applied a floor of 23.8% to its mortgage risk weights in response to the temporary positive
effects of COVID-19 stimulus and support measures on customer account behaviours. The floor is consistent with the
mortgage risk weight at 30 September 2020 and has resulted in a $3.7 billion increase in mortgage RWA.
Non-credit risk RWA increased by $3.3 billion mainly due to a $2.9 billion increase in Interest Rate Risk in the Banking
Book (IRRBB). IRRBB has increased as the embedded gain balance has declined over the period as historical interest
rate hedges that were entered into at higher interest rates have matured.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS37
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Credit risk:
Corporate
1
66,08673,66678,288(10)(16)
Business lending
2
34,06136,77734,493(7)(1)
Sovereign
3
2,3552,3762,192(1)7
Bank
4
5,7085,6406,9561(18)
Residential mortgages133,938130,787131,42422
Australian credit cards4,2794,4054,837(3)(12)
Other retail9,26610,17411,594(9)(20)
Small business
5
16,09716,97716,812(5)(4)
Specialised lending: Property and project finance
6
55,31457,01956,004(3)(1)
Securitisation
7
5,5135,4135,7472(4)
Standardised8,0918,8539,506(9)(15)
Mark-to-market related credit risk6,4197,30211,289(12)(43)
Total credit risk347,127359,389369,142(3)(6)
Market risk9,4908,7618,396813
Operational risk
8
54,09054,09054,093--
Interest rate risk in the banking book (IRRBB)11,9989,1245,30531126
Other6,1946,5416,969(5)(11)
Total risk weighted assets428,899437,905443,905(2)(3)
•A $1.6 billion decrease from lower lending, mostly from the further reduction in Trade Finance in Asia, as we
consolidated our international operations along with lower personal, auto and business lending. This was partially
offset by an increase in residential mortgage exposure over the half;
•A $4.4 billion decrease from improved credit metrics driven by lower stressed assets, mainly across small business
and corporate lending;
•A $1.6 billion reduction in the RWA overlay for corporate, business and specialised lending. This overlay balance is
currently $0.4 billion and was established in June 2020 to take account of facilities where reviews had not been
completed. The overlay will be reassessed as customer reviews are completed;
•A methodology change within business lending which decreased RWA by $1.0 billion;
•Foreign currency translation impacts which decreased RWA by $1.4 billion mostly from the appreciation of the A$
against the US$ and NZ$; and
•A decrease in credit RWA associated with derivative exposures (counterparty credit risk and mark-to-market related
credit risk) of $2.3 billion mainly due to market and collateral movements.
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.
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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.
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Review of Group operations
Capital adequacy
38WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
As atAs atAs at
31 March30 Sept31 March
$m202120202020
Tier 1 capital
CET 1 capital
Paid up ordinary capital41,60440,50940,503
Treasury shares(660)(620)(619)
Equity based remuneration1,7311,6611,645
Foreign currency translation reserve(519)(309)59
Accumulated other comprehensive income507126(190)
Non-controlling interests - other495761
Retained earnings29,09726,53325,985
Less retained earnings in life and general insurance, funds management and securitisation entities(1,680)(1,132)(1,326)
Deferred fees230214229
Total CET 1 capital70,35967,03966,347
Deductions from CET 1 capital
Goodwill (excluding funds management entities)(8,529)(8,532)(8,673)
Deferred tax assets(2,260)(2,963)(2,610)
Goodwill in life and general insurance, funds management and securitisation entities(451)(535)(935)
Capitalised expenditure(1,749)(1,576)(1,656)
Capitalised software(2,049)(2,137)(2,029)
Investments in subsidiaries not consolidated for regulatory purposes(2,063)(1,941)(1,633)
Regulatory expected downturn loss in excess of eligible provisions(93)(40)-
Defined benefit superannuation fund surplus(69)(71)(80)
Equity investments(162)(492)(327)
Regulatory adjustments to fair value positions(1)(18)(407)
Other Tier 1 deductions(1)(1)(15)
Total deductions from CET 1 capital(17,427)(18,306)(18,365)
Total CET 1 capital after deductions52,93248,73347,982
Additional Tier 1 capital
Basel III complying instruments9,4939,2069,473
Total Additional Tier 1 capital9,4939,2069,473
Deductions from Additional Tier 1 capital
Holdings of own and other financial institutions Additional Tier 1 capital instruments(25) --
Total deductions from Additional Tier 1 capital(25)--
Net Additional Tier 1 regulatory capital9,4689,2069,473
Net Tier 1 regulatory capital62,40057,93957,455
Tier 2 capital
Basel III complying instruments16,37313,16114,455
Basel III transitional instruments462494567
Eligible general reserve for credit loss16139779
Total Tier 2 capital16,99614,05215,101
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(199)(121)(102)
Total deductions from Tier 2 capital(339)(261)(242)
Net Tier 2 regulatory capital16,65713,79114,859
Total regulatory capital79,05771,73072,314
Risk weighted assets428,899437,905443,905
CET 1 capital ratio12.34%11.13%10.81%
Additional Tier 1 capital ratio2.21%2.10%2.13%
Tier 1 capital ratio14.55%13.23%12.94%
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Tier 2 capital ratio3.88%3.15%3.35%
Total regulatory capital ratio18.43%16.38%16.29%
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Review of Group operations
Dividends
The Board has determined an interim fully franked dividend of 58 cents per share, to be paid on 25 June 2021 to
shareholders on the register at the record date of 14 May 2021
1
. The 2021 interim dividend represents a payout ratio of
61.75%. In addition to being fully franked, the dividend will also carry NZ$0.07 in New Zealand imputation credits that
may be used by New Zealand tax residents.
The Board has determined to satisfy the DRP for the 2021 interim dividend by arranging for the purchase of existing
shares by a third party. The Market Price used to determine the number of shares allocated to DRP participants will be
set over the 10 trading days commencing on 19 May 2021 and will not include a discount.
Capital deduction for regulatory expected credit loss
For capital adequacy purposes APRA requires the amount of regulatory expected credit losses in excess of eligible
provisions to be deducted from CET1 capital. The table below shows the calculation of this capital deduction.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS39
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
Ordinary dividend (cents per share)202120202020Sept 20Mar 20
Interim (fully franked)58----
Final (fully franked)-31-(100)-
Total ordinary dividend5831-87-
Payout ratio (reported)61.75%101.65%-large-
Adjusted franking credit balance ($m)3,5603,4482,881324
Imputation credit (cents per share - NZ)7.07.0---
As atAs atAs at
31 March30 Sept31 March
$m202120202020
Provisions associated with eligible portfolios
Total provisions for expected credit losses (Section 4, Note 10)5,5086,1635,791
plus provisions associated with partial write-offs202641
less ineligible provisions
2
(106)(118)(129)
Total eligible provisions5,4226,0715,703
Regulatory expected downturn loss5,4195,8015,540
(Excess)/shortfall in eligible provisions compared to regulatory expected downturn loss(3)(270)(163)
CET 1 capital deduction for regulatory expected downturn loss in excess of eligible provisions
3
(93)(40)-
1.Record date in New York is 13 May 2021.
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.
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Review of Group operations
Helping Australians and New Zealanders succeed: Our Sustainability Strategy
This year marks the start of Westpac Group’s refreshed Sustainability Strategy which sets out how we can best serve
our customers, communities and nation, and contribute to solving global challenges over the next three years.
Our Sustainability Strategy is centred around three areas:
The table below summarises progress in the last six months against the goals set out in the Group’s Sustainability
Strategy.
40WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
2.6Sustainability performance
•helping when it matters most;
•backing a stronger Australia; and
•collaborating for impact.
Priorities and
ambitionsTargeted Outcomes First Half 2021 performance
Helping when it
matters most:
supporting
customers and
businesses
through times of
change and
hardship.
Providing emergency and longer-
term financial support to help people
and businesses recover and adapt to
changes in their circumstances.
•276 customers supported with natural disaster relief packages;
•announced a $10 million Flood Support Fund to provide emergency grants for
customers in flood-affected areas across New South Wales and South-East
Queensland;
•donated $150,000 to the Salvation Army to help support disaster recovery in flood
affected areas; and
•launched the Disaster Help Hub in November 2020, to provide guidance on preparing
homes and accessing disaster support and financial resources to help during
recovery, with 52,744visits to the hub.
Supporting vulnerable customers in
difficult personal and financial
circumstances (including those
affected by domestic and family
abuse, financial abuse, frauds and
scams) to manage, recover and find
appropriate solutions.
•Over 18,000 customers received assistance through vulnerability specialist teams;
•formed a new partnership with national social enterprise, The Violet Initiative, to
provide caregivers and their families greater access to emotional and practical
support when caring for a family member or friend in the last stage of life; and
•announced new measures to make digital banking safer for customers, including
giving customers the ability to report abusive messages via online and mobile
banking, and blocking inappropriate language from outgoing payments.
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Review of Group operations
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS41
Priorities and
ambitionsTargeted Outcomes First Half 2021 performance
Helping when it
matters most:
supporting
financial
wellbeing.
Supporting the financial wellbeing of
customers and communities through
products, services and resources to
help them in life moments big and
small.
•Continued to offer a range of resources and tools, including access to podcasts and
a financial fitness course through the Davidson Institute.
Improving banking accessibility for
Indigenous Australians, including for
customers accessing Yuri
Ingkarninthi, our dedicated
Indigenous Connection Team.
•Improved banking accessibility for over 4,500 Indigenous and remote Australians
through Yuri Ingkarninthi, our Indigenous Connection Team.
Supporting young people to build
confidence and knowledge in
preparation for their future financial
decisions.
•Continued to offer a spend and save program that helps young Australians become
more conscious about both their spending and saving habits, whilst earning a
competitive rate of interest.
Backing a
stronger
Australia:
backing people,
jobs and ideas
shaping
Australia’s future.
Supporting diverse Australian
businesses and social enterprises,
including Indigenous entrepreneurs
and communities seeking to build
their own businesses.
•$5.5 million spend with diverse suppliers, of which $1 million are Indigenous-owned
businesses.
Creating employment and
educational opportunities for people
who have the drive to shape
Australia, including our Westpac
Scholars.
•Westpac Scholars Trust¹has awarded 100 new scholarships.
Job creation opportunities for
vulnerable and under-employed
people across our value chain.
•From 1 July to 31 December 2020, Westpac Foundation
2
job creation grants to
social enterprises helped to create 614 jobs
3
for vulnerable Australians.
Supporting our corporate and
institutional customers move to more
sustainable business models through
sustainable finance structures that
connect their financing requirements
and sustainability priorities.
•Announced the structuring of a A$350 million sustainability-linked loan (SLL) facility
for G8 Education, Australia’s largest publicly listed early childhood care and
education company.
Backing a
stronger
Australia:
helping
Australians
respond to
climate change.
Supporting solutions and technology
that accelerate the transition to a low
carbon economy.
•$0.5 billion of new lending to climate change solutions.
Reducing our direct environmental
footprint.
•On track to reduce our Scope 1 and 2 emissions by 50% and Scope 3 supply chain
emissions by 15% compared to Full Year 2016 baseline.
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 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 Westpac Foundation.
3.Jobs created through the Westpac Foundation job creation grants to social enterprises are for the six months ended 31 December 2020.
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Review of Group operations
42WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
Priorities and
ambitionsTargeted Outcomes First Half 2021 performance
Collaborating for
impact:
respecting human
rights and
amplifying
Indigenous
voices.
Sharing insights as we deliver on the
commitments under our 2023 Human
Rights Action Plan and work towards
the elimination of modern slavery
across our business operations and
supply chain.
•Published our 2020 Modern Slavery Statement in response to the Australian Modern
Slavery Act 2018 (Cth) and the United Kingdom’s Modern Slavery Act 2015 (UK);
•continued to implement a Vulnerable Customer Mental Health Framework, providing
extra support and escalation pathways for our people who support customers at
increased risk of vulnerability due to the financial and societal impacts of COVID-19;
and
•refreshed our Inclusion and Diversity Strategy, including a focus on women in
leadership, cultural diversity and Indigenous parity.
Safeguarding children from online
child exploitation through our Safer
Children Safer Communities
program, including investing up to
$10 million per year for three years in
child protection initiatives.
•Allocated $9.7million, of which $4.2 million was invested in First Half 2021, to raise
awareness of child exploitation and support child protection initiatives as part of our
commitment to invest up to $10 million per year for three years in child protection
initiatives.
Supporting the empowerment of
Aboriginal and Torres Strait Islander
people through self-determination,
amplifying their voices and building
cultural competency amongst our
people and partners to progress
Reconciliation.
•Hosted a Deadly Talk with Aboriginal and Torres Strait Islander leaders to support
employee cultural awareness; and
•refreshed our cultural competency training, enabling our people to be able to better
support our Aboriginal and Torres Strait Islander customers.
Collaborating for
impact:
supporting the
transition to a
climate resilient
future.
Sharing insights as we work with
customers in the most emissions
intensive and climate-vulnerable
sectors to develop financing
strategies that can support their
response to climate change impacts.
•Updated our lending approach to customers in the oil and gas sector¹(see Climate-
related financial disclosures, below).
Aligning our financing activity with
efforts to support the goals of the
Paris Agreement.
Participating in international, national
and industry-based initiatives to
progress collective action on climate
change, including sharing
methodologies and investing in
research, in support of the goals of
the Paris Agreement.
•Actively engaged with the UN Principles for Responsible Banking, helping to establish
a global banking Civil Society Advisory Body and Australian Sustainable Finance
Initiative to develop the Australian Sustainable Finance Roadmap.
1.This applies to WIB oil and gas exploration, production and refining customers.
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Review of Group operations
Westpac Group is committed to managing our business in alignment with the Paris Agreement and the need to
transition to a net zero emissions economy by 2050. The Group continues to integrate the consideration of climate-
related risks and opportunities into our business operations. A summary of Westpac Group’s performance against the
recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) is provided below.
Oversight
The Board has oversight of the Group’s approach to and management of climate change. Our Climate Change Position
Statement and Action Plan (Climate Action Plan)
1
is approved by the Board every three years. Updates on progress are
provided on a twice-yearly basis.
The Board Risk Committee (BRC) considers and approves Westpac’s Sustainability Risk Management Framework
(SRMF), which includes climate change risk, at least every two years. Quarterly updates to the BRC on climate change
risk commenced from April 2021.
Implementation and management of the Climate Action Plan is led by Group Executives. A newly-established
Reputation and Sustainability Risk team has taken accountability for the Group’s framework for managing reputation
and sustainability risk. To ensure appropriate arrangements remain in place, work has commenced to review oversight
arrangements in place of the Group Sustainability Council.
The Climate Change Financial Risk Committee focusses on work to identify and manage climate-related financial risks,
including the potential impact on credit exposures from climate change-related transition and physical risks. The
Committee is chaired by the Group Chief Credit Officer and is a sub-committee of the Group Credit Risk Committee.
An Environment Management Committee chaired by the Chief Property Officer is held quarterly to set and track
strategies and initiatives to reduce the Group’s direct environmental footprint, particularly targets around energy and
emissions.
Divisional risk committees consider the climate change dimensions of business activities as required. The WIB ESG
Risk Committee considers transactions requiring enhanced environmental, social and governance (‘ESG’) due
diligence, including for climate change risk.
Strategy
The Climate Action Plan describes Westpac’s climate change strategy. The strategy is underpinned by principles which
recognise that:
The Climate Action Plan identifies three focus areas where the Group is expected to direct its attention over the short,
medium and long term:
Risk management overview
Westpac Group’s Climate Action Plan sets out our overall approach to managing climate-related risks. Climate change
risks are managed within the Group’s risk management framework including the SRMF, Group ESG Credit Policy and
Risk Appetite Statements. We seek to understand the potential for climate-related transition, physical and litigation risks
to impact our business, including the possible impact on credit risk, regulatory and reporting obligations, and our
reputation. Climate change is included in the Group Risk Taxonomy under the credit risk, and reputational and
sustainability risk categories. The Group regularly reviews this framework and ensures relevant aspects are
appropriately reflected in the Climate Action Plan.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS43
2.6.1Climate-related financial disclosures
•a transition to a net zero emissions economy is required by 2050;
•economic growth and emissions reductions are complementary goals;
•addressing climate change creates opportunities;
•climate-related risk is a financial risk; and
•collective action, transparency and disclosure matter.
•help customers and communities respond to climate change;
•improve the climate change performance of our operations; and
•support initiatives and policies to achieve the goals of the Paris Agreement.
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The Climate Action Plan sets out specific climate-related lending criteria which are applied at the portfolio and customer
level where appropriate. If climate-related risks associated with a transaction are not within appetite then the application
of conditions to sufficiently manage the risks will be considered, or the transaction may be declined. Climate-related
risks may be escalated to relevant divisional and Group risk committees in accordance with the SRMF.
During First Half 2021, APRA commenced engagement with Westpac and other major Australian banks on its Climate
Vulnerability Assessment. The Climate Vulnerability Assessment is expected to focus on stress testing material parts of
Westpac’s credit strategy, under two climate scenarios focussed on transition and physical risk. A qualitative
assessment of operational, market and liquidity risk, and data quality is also expected. The ADIs are engaged with
APRA, directly and via the ABA on the final design of the Climate Vulnerability Assessment and have commenced
preparations to respond. We will continue to evolve our approach to climate change risk management as required to
1.The term ‘Climate Action Plan’as used in this document refers to the most recent version: Climate Change Position Statement and 2023 Action
Plan.
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Review of Group operations
align with changes in legal and regulatory requirements. In April APRA released a draft Prudential Practice Guide –
Draft CPG 229 Climate Change Financial Risks (PPG) which sets out guidance on better practice in management of
climate change financial risks. The draft PPG focusses on identification, measurement, monitoring, management and
reporting of climate-related risks, and the role of scenario analysis, and is broadly aligned with the recommendations of
the Taskforce on Climate-related Disclosures. We will review our current practices and future plans in light of the draft
guidance, and provide feedback to APRA as part of its consultation process.
Scenario Analysis
Westpac used scenario analysis to inform our identification of industries exposed to climate-related risks over short,
medium and long-term horizons
1
-summary results are shown in the Metrics and Targets section, below. The findings
from scenario analysis conducted in 2019 are reflected in our current Climate Action Plan which outlines enhanced
lending standards for emissions-intensive sectors including management of lending exposure to thermal coal mining
customers (as defined in that document) to zero by 2030, and emissions reduction targets for lending to the electricity
generation sector to support Paris-aligned transition pathways.
In line with our Climate Action Plan we progressed analysis to further understand material climate-related risks in two
areas of our portfolio during the First Half 2021: transition risk in the oil and gas sector, and physical risk in the
mortgage book.
Transition risk in the oil and gas sector
We completed an initial study of how global oil and gas demand might perform when carbon emissions are constrained
in line with ‘well-below’2-degree and 1.5-degree transition pathways.
2
Based on our initial findings we have updated our approach and internal ESG criteria by which climate-related risks and
opportunities are assessed in the oil and gas sector, with a focus on WIB’s oil and gas exploration, production and
refining customers.
Our updated approach means we will:
We will continue to provide annual updates on our progress.
Physical risk in the Australian mortgage book
We updated our approach to assessing the impact of extreme weather events under climate change scenarios on our
Australian mortgage portfolio
4
. The analysis:
The analysis suggests that while climate change will drive an ongoing increase in annual average losses over time,
Westpac’s exposure in the Australian mortgage portfolio to locations identified as likely to be exposed to higher physical
risks under a RCP8.5 scenario is around 1.7% of the current portfolio, increasing to around 2.0% by 2050.
Westpac understands the importance of both climate mitigation and adaptation efforts, including government and
community planning measures, and the benefits of climate-resilient building characteristics to reduce property damage
and impacts on customers, communities and shareholders. We continue to advocate for more research and investment
44WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
•expect any new oil and gas exploration, production and refining customers, to whom we provide lending, to have
publicly disclosed Paris-aligned business goals;
•continue to support existing customers (particularly via sustainable finance structures) to develop Paris-aligned
financing strategies using our internal ESG criteria to guide our approach; and
•continue to develop our approach and understanding of climate-related risk and opportunities in the oil and gas
sector (including downstream segments) through engagement with our customers
3
.
•used a generalised model of how extreme weather and climate change may affect a number of physical risks to a
‘Representative Property’(an archetype of a modern Australian home) under a 4-degree scenario
5
;
•considered riverine flooding, coastal inundation, forest fires, extreme wind and soil subsidence;
•computed physical risk for each year from 1990 to 2100, allowing us to identify the potential impacts of current and
future extreme weather and climate change;
•modelled a ‘static’balance sheet with no population growth or movement, and did not consider the impact of
adaptation measures or management actions to mitigate risks; and
•
identified locations that may be at higher risk
6
and assessed the Group’s current exposure to these locations.
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into helping communities adapt and become resilient to climate-related impacts. The updated analysis is being used to
improve our understanding of how to help individual customers respond to the impacts of climate change and in the
potential for climate change to impact on loan serviceability and property values. We will continue to provide regular
updates on our progress.
1.Further details explaining the Group’s approach to scenario analysis can be found in Westpac’s 2020 Sustainability Performance Report
2.The ‘well below’2-degree scenario used the International Energy Agency’s Sustainable Development Scenario (SDS-2019) and the 1.5-degree
scenario used the Asia-Pacific Integrated Model Shared Socio-Economic Pathways (AIM/CGE 2.0 SSP1-19) model.
3.Initial focus on WIB customers.
4.Excludes RAMS and Equity Acess.
5.IPCC RCP8.5 scenario.
6.‘Higher risk’were locations where insurance may become more expensive or unavailable.
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Review of Group operations
Metrics and targets
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS45
MetricsHalf Year 2021 performance
Support for climate solutions
•New lending to climate solutions (cumulative
from September 2020)
•Lending to climate solutions (TCE)
• $0.5 billion vs 2023 target -$3.5 billion
• $10 billion
Energy generation
1
•Emission intensity of electricity generation
portfolio
•Energy mix of electricity generation exposure
(WIB only)
• 0.25 (tCO2-e/MWh) vs 2023 target 0.23 (tCO2-e/MWh)
• 75% renewable versus 25% non-renewables.
Mining and coal exposure
•Lending to mining (TCE)
•Lending to coal mining (metallurgical and
thermal) (TCE)
•Lending to thermal coal mining % of coal
mining
2
•Thermal coal mining portfolio quality
thresholds
•Oil and gas extraction (TCE)
• $8.0 billion mining exposure representing 0.75% of Group TCE
• $0.5 billion lending to coal mining representing 0.05 % of Group TCE
• 56%
• Coal quality
–Existing projects > 5,700 kCal/kg –Consistent with Climate Action Plan
–New projects > 6,300 kCal/Kg -Consistent with Climate Action Plan
• $2.3 billion lending to oil and gas extraction representing 0.22% of Group TCE
3
Climate change portfolio resilience –scenario
analysis
•Transition risk
4
• 1.2% of current Australian Business and Institutional portfolio exposed to sectors which by
2030 may face relatively higher growth constraints under a 1.5-degrees scenario.
• 2.5% of current Australian Business and Institutional portfolio exposed to sectors which by
2050 may face relatively higher growth constraints under a 1.5-degrees scenario.
• 0.7% of current Australian Business and Institutional portfolio exposed to sectors which by
2030 may face relatively higher growth constraints under a 2-degrees scenario.
• 2.0% of current Australian Business and Institutional portfolio exposed to sectors which by
2050 may face relatively higher growth constraints under a 2-degrees scenario.
•Physical risk
• 2.0% of current Australian mortgage portfolio
5
which by 2050 may be exposed to higher
physical risks under a RCP8.5 scenario.
1.Metrics updated annually. Data as at 30 September, 2020.
2.Thermal coal mining exposure as % of coal mining -WIB only
3.The reduction in lending to oil and gas extraction from September 2020 is mainly due to the consolidation of Westpac’s international operations.
4.Excludes retail, sovereign, and bank exposures. Sectors whose medium (2030) and long-term (2050) performance under a scenario deviated by
more than one standard deviation below average GDP growth, were classified as ‘may face relatively higher growth constraints’.
5.Excludes RAMS and Equity Access. The methodology to assess climate-related physical risk in our Australian mortgage portfolio has been
updated in First Half 2021. See ‘Scenario analysis’above, for more details.
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Divisional results
Cash earnings policy
The accounting standard AASB 8 Operating Segments requires segment results to be presented on a basis that is
consistent with information provided internally to Westpac’s key decision makers. 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:
The guidance provided in Australian Securities and Investments Commission (ASIC) Regulatory Guide 230 has been
followed when presenting this information.
In presenting divisional results 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 revised and may differ
from results previously reported.
Our internal transfer pricing frameworks facilitate risk transfer, profitability measurement, capital allocation and business
unit alignment, tailored to the jurisdictions in which we operate. Transfer pricing allows us to measure the relative
contribution of our products and divisions to the Group’s net interest margin and other dimensions of performance. Key
components of our transfer pricing frameworks are funds transfer pricing for interest rate and liquidity risk, and
allocation of basis and contingent liquidity costs, including capital allocation.
The discussion of our divisional results and certain data in Sections 3 and 5 are presented on a cash earnings basis,
unless otherwise stated. Cash earnings are not directly comparable to statutory results presented in other parts of this
Results Announcement.
46WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
3.0Divisional results
•Material items that key decision makers at the Westpac Group believe do not reflect the Group’s ongoing operations;
•Items that are not typically considered when dividends are recommended, mainly economic hedging impacts; and
•Accounting reclassifications between individual line items that do not impact reported results.
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Divisional results
In First Half 2021 a number of large items have impacted results that do not reflect underlying performance. These can
be divided into four categories:
Impact of estimated customer refunds, payments, associated costs and litigation, write-down of intangibles,
asset sales and revaluations, and costs associated with AUSTRAC proceedings, including a penalty
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS47
Category
Cash earnings
impact 1H21
$m Detail
1. AUSTRAC proceedings-•There were no costs or provisions associated with the AUSTRAC proceedings in First
Half 2021. These proceedings were settled in Full Year 2020 with costs significant in
that year.
2. Additional provisions for customer
refunds payments, associated
costs and litigation provisions
$276 million
reduction
•Additional provisions for estimated refunds in First Half 2021 including for:
–Increase in provisions for aligned and salaried advisor fees;
–Increase in provisions for some customers on our platforms who were not advised
of certain corporate actions; partly offset by
–Release of provision 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.
•Additional costs for the implementation and completion of our remediation
program.
•Cost associated with ending the Group’s IOOF service agreement.
•Costs of settling litigation matters, including settlements.
3. Write-down of intangible items$199 million
reduction
•Write down and impairment of capitalised software balances following a review.
•Write down of goodwill in the Group’s Lenders Mortgage Insurance business as
it is now held for sale.
4. Asset sales and revaluations$193 million
increase
•Gain on revaluation of the Group’s stake in Coinbase Inc held in the Reinventure
Fund 1;
•Estimated future earn out associated with the sale of the Group’s Vendor Finance
business; and
•Gain on sale of Westpac’s holding in Zip Co Limited; partly offset by
•Loss on sale of Westpac Pacific; and
•Transaction and other costs related to the announced sales within the Specialist
Businesses division.
Half Year March 2021
$m
Refunds,
payments,
costs, and
litigation
Write-down of
intangibles
Asset
sales and
revaluationsTotal
Net interest income71--71
Non-interest income(199)-571372
Operating expenses(256)(249)(240)(745)
Profit before impairment charges and income tax expense(384)(249)331(302)
Income tax (expense)/benefit and NCI10850(138)20
Cash earnings(276)(199)193(282)
Half Year September 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)
Operating expenses(420)(142)(602)(119)(1,283)
Profit before impairment charges and income tax
expense(420)(257)(602)(76)(1,355)
Income tax (expense)/benefit and NCI5753421135
Cash earnings(415)(182)(568)(55)(1,220)
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Divisional results
Impact of estimated customer refunds, payments, associated costs and litigation, write-down of intangibles,
asset sales and revaluations, and costs associated with AUSTRAC proceedings, including a penalty, by
Division
48WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
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)
Operating expenses(1,058)(132)(66)-(1,256)
Profit before impairment charges and income tax
expense(1,058)(369)(66)(97)(1,590)
Income tax (expense)/benefit and NCI311112029191
Cash earnings(1,027)(258)(46)(68)(1,399)
Half Year March 2021Westpac
$m ConsumerBusiness
Westpac
Institutional
Bank
New
Zealand
(A$)
Specialist
Businesses
Group
BusinessesGroup
Net interest income-74-(3)--71
Non-interest income(3)1-(5)1378372
Operating expenses(106)(40)(37)(6)(336)(220)(745)
Profit before impairment charges and
income tax expense(109)35(37)(14)(335)158(302)
Income tax (expense)/benefit and NCI33(10)11438(56)20
Cash earnings(76)25(26)(10)(297)102(282)
Half Year Sept 2020Westpac
$m ConsumerBusiness
Westpac
Institutional
Bank
New
Zealand
(A$)
Specialist
Businesses
Group
BusinessesGroup
Net interest income-(34)-(3)--(37)
Non-interest income4(3)-(4)(305)273(35)
Operating expenses(31)(106)-1(653)(494)(1,283)
Profit before impairment charges and
income tax expense(27)(143)-(6)(958)(221)(1,355)
Income tax (expense)/benefit and NCI843-2138(56)135
Cash earnings(19)(100)-(4)(820)(277)(1,220)
Half Year March 2020Westpac
$m ConsumerBusiness
Westpac
Institutional
Bank
New
Zealand
(A$)
Specialist
Businesses
Group
BusinessesGroup
Net interest income5(107)-(4)--(106)
Non-interest income-5-(3)(104)(126)(228)
Operating expenses(33)(24)--(41)(1,158)(1,256)
Profit before impairment charges and
income tax expense(28)(126)-(7)(145)(1,284)(1,590)
Income tax (expense)/benefit and NCI838-243100191
Cash earnings(20)(88)-(5)(102)(1,184)(1,399)
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Divisional results
Consumer is responsible for sales and service of banking products, including mortgages, credit cards, personal loans,
and savings and deposit products to consumers in Australia. Products are provided under the Westpac, St.George,
BankSA, Bank of Melbourne, and RAMS brands. Consumer works with the other operating divisions in Australia in the
sales, service, and referral of certain specialist financial services such as auto lending and foreign exchange.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS49
3.1Consumer
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income4,2164,3134,234(2)-
Non-interest income241247326(2)(26)
Net operating income before operating expenses and impairment
charges4,4574,5604,560(2)(2)
Operating expenses(2,270)(2,141)(2,035)612
Profit before impairment charges and income tax expense2,1872,4192,525(10)(13)
Impairment (charges)/benefits80(599)(416)largelarge
Profit before income tax expense2,2671,8202,109257
Income tax expense and non-controlling interests (NCI)(675)(546)(637)246
Cash earnings1,5921,2741,472258
Cash earnings adjustments-----
Net profit after tax1,5921,2741,472258
Cash earnings 1,5921,2741,472258
Add back
Estimated customer refunds, payments, associated costs and
litigation2(3)(3)largelarge
Write-down of intangible assets742223largelarge
Cash earnings excluding estimated customer refunds, payments,
associated costs and litigation, and write-down of intangible assets1,6681,2931,4922912
Operating expenses to net operating income ratio (cash earnings basis)50.93%46.95%44.63%398 bpslarge
As atAs atAs at% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$bn202120202020Sept 20Mar 20
Customer deposits
Term deposits42.347.550.0(11)(15)
Other180.8171.8158.4514
Total customer deposits223.1219.3208.427
Net loans
Mortgages387.9382.4385.811
Other8.99.311.4(4)(22)
Provisions(1.7)(1.9)(1.6)(11)6
Total net loans395.1389.8395.61-
Total assets403.3398.3404.31-
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Divisional results
Financial performance
First Half 2021 –Second Half 2020
Cash earnings of $1,592 million were $318 million or 25% higher than Second Half 2020. Excluding a number of large
items, cash earnings were $375 million higher, mostly due to an impairment benefit of $80 million in First Half2021
compared to a $599 million impairment charge in Second Half 2020.
50WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
Net interest income down
$97m, 2%
• Net loans increased 1% (or $5.3 billion) over the half. The increase in mortgage
lending (up $5.5 billion) was due to targeted campaigns and more digital
applications. Other personal lending declined $0.4 billion (or 4%) from customers
paying down this form of debt;
•Deposits increased 2% (or $3.8 billion), with growth in at call balances as
customers chose to hold less of their funds in term deposits; and
•Net interest margin was 2 basis points lower. Mortgage spreads were down from
lower spreads on new mortgages, particularly fixed rate mortgages, and retention
pricing. This was partly offset by lower funding costs along with higher deposit
spreads.
Non-interest income down
$6m, 2%
• Most of the decline was due to fees paid to a third party following the sale of our
offsite ATMs and lower fee income from the removal of certain fees as part of our
simplification strategy.
Expenses up $129m, 6% • Write-down of intangible assets increased expenses $75 million. Excluding this,
expenses were up $54 million. The increase was due to:
–Higher spending on risk and compliance programs, including financial crime,
fraud prevention and our financial and non-financial risk programs; and
–Increase in mortgage processing costs and additional resources to support
customers, in particular customers exiting deferral packages and experiencing
hardship.
•These increases were partly offset by savings from further use of our digital
channels, organisation redesign, a reduction in our branch network (40 branches
were closed in First Half 2021, adding to the 24 branches closed in 2020), and a
reduction in our ATM network. Restructuring costs were also lower.
Impairment benefit of $80m
compared to an impairment
charge of $599m
•Impairment benefit from lower collectively assessed provisions from the improved
economic outlook and improved asset quality; and
•Mortgage 90+ day delinquencies of 1.18%, 42 basis points lower than September
2020 (1.60%) from reduced levels of hardship. Other consumer 90+ day
delinquencies of 1.65%, down 4 basis points over the half.
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Divisional results
Financial performance
First Half 2021 –First Half 2020
Cash earnings of $1,592 million were $120 million or 8% higher than First Half 2020. Cash earnings excluding a number
of large items, were $176 million higher mostly due to an impairment benefit of $80 million in First Half 2021 compared
to a $416 million impairment charge in First Half 2020, partly offset by lower non-interest income and higher expenses.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS51
Net interest income down
$18m, flat
• Net loans were $0.5 billion lower over the year, with a $2.5 billion decline in other
personal lending partly offset by a $2.1 billion increase in mortgages, with an
increase in owner occupied loans partly offset by a decline in investor loans. Other
personal lending declined as customers continued to pay down this form of debt;
• Deposits increased 7% (or $14.7 billion), from growth in at call deposits including
switching from term deposits; and
• Net interest margin was 6 basis points higher from lower funding costs and higher
deposit spreads. These improvements were partly offset by elevated retention
pricing, lower spreads on new mortgages, lower other consumer lending, and lower
interest rates.
Non-interest income down
$85m, 26%
• Non-interest income was lower mostly from reduced activity following COVID-19
restrictions which reduced credit and debit card revenue and foreign ATM fees,
while lower international travel reduced foreign currency fees; and
• The removal of certain fees as part of our simplification strategy also contributed to
the decline.
Expenses up $235m, 12% • Excluding the impact of write-down of intangible assets, expenses were $162
million higher (or 8%) from:
–Increases from higher spending on risk, regulatory and compliance programs,
annual salary reviews, and increased mortgage processing costs from higher
volumes and from bringing jobs onshore; and
–These increases were partially offset by benefits from organisational redesign,
rationalisation of a further 40 branches, and the further use of digital channels.
Impairment benefit of $80m
compared to an impairment
charge of $416m
• Impairment benefit from lower collectively assessed provisions from the improved
economic outlook, lower write-offs, and a reduction in the other consumer lending
portfolios; and
•Mortgage 90+ day delinquencies of 1.18% were 24 basis points higher than March
2020 (0.94%) from an increase in customers requiring hardship support, including
from those customers who exited COVID-19 deferral packages. Other consumer
90+ day delinquencies of 1.65%, decreased 31 basis points over the year.
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Divisional results
Business is responsible for sales and service of banking products for Australian SME and Commercial businesses
(including Agribusiness) generally up to $200 million in exposure. The division also includes Private Wealth, meeting the
personal banking needs of high net worth individuals. The division offers a wide range of banking products and services
to support their borrowing, savings and transaction needs. Specialist services including cash flow finance, trade finance,
equipment finance and property finance are also provided. Business operates under the Westpac, St.George, BankSA,
and Bank of Melbourne, brands. Business works with the other operating divisions for select products and services
including financial risk management products, corporate superannuation and mortgages.
52WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
3.2Business
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income2,0832,0192,1443(3)
Non-interest income27324931110(12)
Net operating income before operating expenses and impairment
charges2,3562,2682,4554(4)
Operating expenses(1,170)(1,230)(1,068)(5)10
Profit before impairment charges and income tax expense1,1861,0381,38714(14)
Impairment (charges)/benefits129(674)(697)largelarge
Profit before income tax expense1,315364690large91
Income tax expense and NCI(395)(108)(212)large86
Cash earnings920256478large92
Cash earnings adjustments-----
Net profit after tax920256478large92
Cash earnings920256478large92
Add back
Estimated customer refunds, payments, associated costs and litigation(36)8088largelarge
Write-down of intangible assets1120-(45)-
Cash earnings excluding estimated customer refunds, payments,
associated costs and litigation, and write-down of intangible assets89535656615158
Operating expenses to net operating income ratio (cash earnings basis) 49.66%54.23%43.50%largelarge
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
$bn202120202020Sept 20Mar 20
Customer deposits
Term deposits44.951.757.3(13)(22)
Other109.6100.284.9929
Total customer deposits154.5151.9142.229
Net loans
Mortgages55.758.559.9(5)(7)
Business80.683.986.1(4)(6)
Other0.60.50.720(14)
Provisions(2.1)(2.2)(1.7)(5)24
Total net loans134.8140.7145.0(4)(7)
Total assets139.5145.8150.1(4)(7)
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Divisional results
Financial performance
First Half 2021 –Second Half 2020
Cash earnings of $920 million were $664 million higher than Second Half 2020. Most of the improvement in cash
earnings was due to an impairment benefit of $129 million compared to an impairment charge of $674 million in Second
Half 2020. Lower estimated customer refunds, payments, associated costs and litigation and write-down of intangible
assets ($125 million reduction) also contributed to the increase in cash earnings.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS53
Net interest income up
$64m, 3%
• The rise in net interest income was due to lower estimated customer refunds and
payments in First Half 2021 which were $108 million lower than Second Half 2020.
Excluding this, net interest income was down $44 million (or 2%), with the higher
net interest margin more than offset by lower lending;
•Net interest margin was 7 basis points higher excluding the impact of estimated
customer refunds and payments mostly from a change in the mix of deposits to
transaction and other at call products, and improved term deposit spreads;
• Net loans were 4% (or $5.9 billion) lower over the half across business lending and
mortgages. Business lending was lower across most sectors with the largest
declines in property and professional services; and
• Deposits were 2% (or $2.6 billion) higher with a $6.2 billion increase in transaction
balances and a $3.2 billion increase in other at call balances supported by
government stimulus measures and a customer preference to hold funds in
transaction and other at call accounts. This was partly offset by a decline in term
deposits.
Non-interest income up
$24m, 10%
•Estimated customer refunds and payments had little impact on non-interest income
($4 million lower) with the increase mostly from higher merchant fees as fee
waivers for COVID-19 support rolled off; and
• Other card revenue was also higher as activity and spending increased.
Expenses down $60m, 5% • Costs associated with customer refunds, payments and litigation and write-down of
intangible assets were $66 million lower than Second Half 2020. Excluding this
impact, expenses were $6 million higher than Second Half 2020; and
• Most of the increase related to further spend on risk and compliance, with business
as usual increases were largely offset by benefits from productivity savings.
Impairment benefit of $129m
compared to an impairment
charge of $674m
•Impairment benefit from lower collectively assessed provisions from the improved
economic outlook and improved asset quality. Individually assessed provisions
were also lower in the half; and
• The level of stressed assets to TCE decreased 10 basis points to 4.60%, mostly
from a reduction in mortgage 90+ day delinquencies, and a decrease in watchlist
and substandard exposures in the Commercial portfolio.
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Divisional results
First Half 2021 –First Half 2020
Cash earnings of $920 million were $442 million higher than First Half 2020. Most of the improvement was due to an
impairment benefit of $129 million compared to an impairment charge of $697 million in First Half 2020. Lower
estimated customer refunds, payments, associated costs and litigation and write-down of intangible assets ($113
million) also contributed to the increase in cash earnings.
54WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
Net interest income down
$61m, 3%
• Excluding estimated customer refunds and payments, net interest income was
down $242 million (11%);
•Net loans were 7% (or $10.2 billion) lower over the year, with the decline from
lower investor mortgages and a 6% decline in business lending. Business lending
was lower across most sectors with the largest declines in property, professional
services, and retail. Higher provisions also contributed to the decline;
• Deposits were 9% (or $12.3 billion) higher over the year with a $16.1 billion rise in
transaction balances and a $8.6 billion increase in other at call balances supported
by government stimulus packages. This was partially offset by a $12.4 billion
decline in term deposits given a preference to retain funds in transaction and other
at call accounts; and
•Net interest margin was 12 basis points higher, but down 15 basis points excluding
estimated customer refunds and payments. The lower margin was mostly from
reduced deposit spreads from low interest rates along with special low interest
rates on certain products as part of our COVID-19 support. These reductions were
partly offset by deposit repricing and changes in deposit mix.
Non-interest income down
$38m, 12%
•Estimated customer refunds and payments had little impact on movement in non-
interest income (up $4 million); and
• Most of the decline was due to lower fees consistent with lower activity, a decline
in overdrawn fees, and lower markets related income.
Expenses up $102m, 10% • Costs associated with customer refunds, payments and litigation and write-down of
intangible assets were $16 million higher than First Half 2020, excluding this
impact, expenses were $86 million higher than First Half 2020; and
• The increase was due to spending to support customers impacted by COVID-19,
increased spend on risk, regulatory and compliance programs and further
investment in bankers.
Impairment benefit of $129m
compared to an impairment
charge of $697m
• Impairment benefit mostly from lower collectively assessed provisions from the
improved economic outlook. Individually assessed provisions were also lower in
the half; and
•The level of stressed assets to TCE increased 153 basis points to 4.60%, mostly
from an increase in watchlist and substandard exposures in the Commercial
portfolio.
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Divisional results
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 operating divisions in the
provision of markets’related financial needs including foreign exchange and fixed interest solutions.
Revenue contribution
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS55
3.3Westpac Institutional Bank (WIB)
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income464506605(8)(23)
Non-interest income582626556(7)5
Net operating income before operating expenses and impairment
charges1,0461,1321,161(8)(10)
Operating expenses(698)(697)(619)-13
Profit before impairment charges and income tax expense348435542(20)(36)
Impairment charges(8)(111)(293)(93)(97)
Profit before income tax expense340324249537
Income tax expense and NCI(110)(139)(102)(21)8
Cash earnings2301851472456
Cash earnings adjustments-----
Net profit after tax2301851472456
Cash earnings 2301851472456
Add back write-down of intangible assets26----
Cash earnings excluding write-down of intangible assets2561851473874
Operating expenses to net operating income ratio (cash earnings basis)66.73%61.57%53.32%large large
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
$bn202120202020Sept 20Mar 20
Customer deposits91.0102.9110.0(12)(17)
Net loans
Loans62.766.679.0(6)(21)
Provisions(0.3)(0.4)(0.4)(25)(25)
Total net loans62.466.278.6(6)(21)
Total assets74.875.5109.4(1)(32)
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Lending and deposit revenue629644707(2)(11)
Markets, sales and fee income328356389(8)(16)
Total customer revenue9571,0001,096(4)(13)
Derivative valuation adjustments5316(93)large large
Trading revenue75148174(49)(57)
Other
1
(39)(32)(16)22144
Total WIB revenue1,0461,1321,161(8)(10)
1.
Includes capital benefit and the Bank Levy.
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Divisional results
Financial performance
First Half 2021 –Second Half 2020
Cash earnings of $230 million were $45 million or 24% higher than Second Half 2020. Write-down of intangible assets
reduced cash earnings by $26 million in First Half 2021. Excluding write-down of intangible assets, cash earnings were
$71 million or 38% higher mostly from the lower impairment charge.
56WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
Net interest
income
down $42m, 8%
•Net loans decreased 6%, or $3.8 billion, (5% or $3.4 billion excluding FX movements).
Offshore lending was $2.8 billion lower, primarily in Asia, as the division began
consolidating its operations. Lending was also lower from a decline in customer
drawdowns;
•Deposits were 12%, or $11.9 billion lower, (11% or $11.7 billion excluding FX movements),
mostly from lower at call balances. Disciplined pricing and customers seeking higher yields
in the low interest rate environment contributed to the decline. The decision to consolidate
our Asian operations contributed to a $3.4 billion decline in offshore deposits; and
•Net interest margin was up 4 basis points from a portfolio mix benefit in loans and deposits
(including reducing the offshore balance sheet), and improved lending and term deposit
spreads. This was partly offset by the effect of low interest rates on at call deposit spreads
and earnings on capital.
Non-interest income
down $44m, 7%
•Markets revenue was down $85 million from lower non-customer Markets income mostly
from lower fixed income trading. Customer income was also lower as demand fell across
all segments; and
•Partly offset by $37 million higher positive derivative valuation adjustments and higher loan
fees, from an increase in undrawn balances.
Expenses up $1m, flat•Increased expenses in relation to software asset write-down ($37 million), higher software
amortisation expenses and other technology costs were largely offset by lower
restructuring costs, lower professional services expenses and a 4% reduction in FTE.
Impairment charges
down $103m, 93%
•Decline was mostly due to lower new impaired assets. Collectively assessed provisions
were also lower from the better economic outlook and improved asset quality. Reduced
exposures also contributed to the reduction in collectively assessed provisions; and
•Stressed exposures to TCE of 0.56%, down 47 basis points compared to September 2020.
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Divisional results
First Half 2021 –First Half 2020
Cash earnings of $230 million were $83 million or 56% higher than First Half 2020. Write-down of intangible assets
reduced cash earnings $26 million in First Half 2021. Excluding write-down of intangible assets, cash earnings were
$109 million or 74% higher mostly from lower impairment charges and a higher contribution from derivative valuation
adjustments. These gains were partly offset by lower income from a 19 basis point decline in net interest margin and
lower Markets revenue.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS 57
Net interest income
down $141m, 23%
•Net loans decreased 21% or $16.2 billion, (19% or $14.9 billion excluding FX movements),
primarily from a reduction in offshore lending, including lower trade finance in Asia and
from a prioritisation of return. Lending was also lower from a decline in utilisation levels
following a lift in lending in March 2020 as corporates sought to increase liquidity in
response to COVID-19;
•Deposits reduced 17% or $19.0 billion, (16% or $18.1 billion excluding FX movements).
Offshore deposits were $8.3 billion lower, mostly from the decision to consolidate our
Asian operations. Disciplined pricing and customers seeking higher yield in the low interest
rate environment contributed to the decline in onshore deposits; and
•Net interest margin was down 19 basis points, with lower interest rates reducing deposit
spreads and earnings on capital. This was partly offset by more disciplined lending and
deposit pricing and benefits from changes in the lending and deposit mix.
Non-interest income
up $26m, 5%
•$146 million movement in derivative valuation adjustments ($53 million benefit in First Half
2021 compared to a $93 million charge in First Half 2020);
•Higher undrawn loan fees; partly offset by
–Lower non-customer Markets income across FX and commodities including from the
closure of the energy desk along with lower customer Markets income from lower FX
sales and a decline in income in Asia; and
–A reduction in payments revenue due to lower transaction volumes, particularly
offshore.
Expenses up $79m,
13%
•Excluding write-down of intangible assets, expenses increased $42 million (or 7%) mostly
due to increased software amortisation, and higher risk and compliance related costs,
including financial crime.
Impairment charges
down $285m, 97%
•Lowercollectively assessed provisions from an improvement in the economic outlook and
improved asset quality. Reduced exposure and a reduction in new impaired assets also
contributed to the lower impairment charge; and
•Stressed exposures to TCE of 0.56%, down 53 basis points compared to March 2020.
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Divisional results
Westpac New Zealand provides banking, wealth and insurance products and services for consumer, business and
institutional customers in New Zealand. Westpac conducts its business through two banks: Westpac New Zealand
Limited, which is incorporated in New Zealand, and Westpac Banking Corporation (New Zealand Branch), which is
incorporated in Australia. Westpac New Zealand operates through a network of branches and ATMs across the North
and South Islands. Business and institutional customers are also served through relationship and specialist product
teams. Banking products and services are provided under the Westpac brand while insurance and wealth products are
provided under Westpac Life and BT brands, respectively. New Zealand maintains its own infrastructure, including
technology, operations and treasury in accordance with regulatory requirements.
All figures are in NZ$ unless noted otherwise.
58WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
3.4Westpac New Zealand
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
NZ$m202120202020Sept 20Mar 20
Net interest income1,066956987128
Non-interest income17916417592
Net operating income before operating expenses and impairment
charges1,2451,1201,162117
Operating expenses(536)(518)(541)3(1)
Profit before impairment charges and income tax expense7096026211814
Impairment (charges)/benefits99(109)(211)largelarge
Profit before income tax expense8084934106497
Income tax expense and NCI(225)(139)(115)6296
Cash earnings5833542956598
Cash earnings adjustments(3)(5)12(40)large
Net profit after tax5803493076689
Cash earnings5833542956598
Add back
Estimated customer refunds, payments, associated costs and
litigation6455020
Write-down of intangible assets4----
Cash earnings excluding estimated customer refunds, payments,
associated costs and litigation, and write-down of intangible assets5933583006698
Operating expenses to net operating income ratio (cash earnings basis)43.05%46.25%46.56%(320 bps)(351 bps)
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
NZ$bn202120202020Sept 20Mar 20
Customer deposits
Term deposits28.731.032.8(7)(13)
Other45.440.036.31425
Total customer deposits74.171.069.147
Net loans
Mortgages58.455.253.3610
Business31.331.932.5(2)(4)
Other1.41.51.7(7)(18)
Provisions(0.5)(0.6)(0.5)(17)-
Total net loans90.688.087.034
Total assets107.6104.2105.032
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Divisional results
Financial performance (NZ$)
First Half 2021 –Second Half 2020
Cash earnings of $583 million were $229 million or 65% higher than Second Half 2020 mostly due to an impairment
benefit of $99 million compared to an impairment charge of $109 million in Second Half 2020. Excluding a number of
large items, profit before impairment charges and income tax expense increased 18% supported by a 17 basis point
increase in net interest margin primarily from higher deposit spreads.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS 59
Net interest income up
$110m, 12%
•Net loans increased 3%, or $2.6 billion, with growth in mortgages of $3.2 billion partly
offset by lower business lending (down $0.6 billion, or 2%), as Institutional customers
sought to reduce their gearing;
•Deposits were up 4%, or $3.1 billion, fully funding loan growth and lifting the deposit to
loan ratio by more than a full percentage point to 81.8%. Growth was concentrated in at
call accounts across all segments while term deposit balances were lower from a customer
preference to retain ready access to their funds; and
•Net interest margin (NIM) increased 17 basis points, mostly from higher deposit spreads
from repricing and the shift to lower spread at call accounts. NIM also benefited from lower
funding costs.
Non-interest income
up $15m, 9%
•Excluding the impact of estimated customer refunds and payments, non-interest income
increased $17 million;
•This increase included an $8 million gain on the sale of the Wealth Advisory business and
higher cards related revenue primarily from increased activity. These increases were partly
offset by lower insurance income.
Expenses up $18m,
3%
•Excluding the impact ofwrite-down of intangible assets,expenses increased $11 million.
Most of the increase related to higher technology, and risk, regulatory and compliance
costs, including compliance with the RBNZ’s BS11 Outsourcing Policy. Benefits from
digitisation and the reduction in the branch network largely offset salary rises and CPI
related increases.
Impairment benefit of
$99m compared to an
impairment charge of
$109m
•Impairment benefit from lower collectively assessed provisions from the improved
economic outlook and improved asset quality;
•Stressed exposures to TCE decreased 3 basis points to 1.56% compared to September
2020; and
•Mortgage 90+ day delinquencies of 0.33% were 19 basis points lower compared to
September 2020 (0.52%) from a reduction in customers in hardship. Other consumer 90+
day delinquencies of 1.91%, were down 18 basis points over the half from a reduction in
customers in hardship.
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Divisional results
First Half 2021 –First Half 2020
Cash earnings of $583 million were $288 million or 98% higher than First Half 2020, primarily from an impairment
benefit ($99 million) compared to an impairment charge in First Half 2020 ($211 million). Profit before impairment
charges and income tax expense were 14% higher mostly from an 8% increase in net interest income and a 1% decline
in expenses.
60WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
Net interest income up
$79m, 8%
•The increase in net interest income was due to an 8% increase in average interest-earning
assets (from lending and higher liquid assets) and relatively flat margins;
•Net loans increased 4%, or $3.6 billion, from a $5.1 billion increase in mortgages partly
offset by a $1.2 billion reduction in business lending and a $0.3 billion decline in other
personal lending;
•Deposits were up $5.0 billion with growth primarily in household deposits. Term deposits
were lower from a customer preference to retain funds in at call accounts; and
•Net interest margin was flat, with the impact of the low interest rate environment offset by
repricing and some mix impacts.
Non-interest income
up $4m, 2%
•Excluding the gain on sale of the Wealth Advisory business ($8 million) non-interest
income was $4 million lower mostly from higher estimated customer refunds and
payments; and
•Higher cards related revenue was offset by reduced insurance income and lower fee
revenue.
Expenses down $5m,
1%
•Excluding the impact of write-down of intangible assets, expenses decreased $11 million.
Most of the decline related to lower restructuring costs. This was partly offset by higher
spending on risk, regulatory and compliance projects, including the RBNZ’s BS11
Outsourcing Policy.
Impairment benefit of
$99m compared to an
impairment charge of
$211m
•Impairment benefit from lower collectively assessed provisions from the improved
economic outlook and improved asset quality;
•Stressed exposures to TCE decreased 8 basis points to 1.56% compared to March 2020;
and
•Mortgage 90+ day delinquencies of 0.33% were 6 basis points higher compared to March
2020 (0.27%) from an increase in customers requiring hardship including customers who
exited a COVID-19 deferral package. Other consumer 90+ day delinquencies of 1.91%,
were up 32 basis points over the half, as the portfolio contracted.
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Divisional results
3.4.1 Westpac New Zealand division performance (A$ Equivalent)
Results have been translated into Australian dollars (A$) at the average exchange rates for each reporting period, First
Half 2021: $1.0698 (Second Half 2020: $1.0721; First Half 2020: $1.0493). Unless otherwise stated, assets and
liabilities have been translated at spot rates as at the end of the period, 31 March 2021: $1.0891 (30 September 2020:
$1.0803; 31 March 2020: $1.0264).
1. Ratios calculated using NZ$.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS 61
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income996892940126
Non-interest income16715216710-
Net operating income before operating expenses and impairment
charges1,1631,0441,107115
Operating expenses(500)(482)(516)4(3)
Profit before impairment charges and income tax expense6635625911812
Impairment (charges)/benefits92(102)(200)largelarge
Profit before income tax expense7554603916493
Income tax expense and NCI(210)(129)(110)6391
Cash earnings5453312816594
Cash earnings adjustments(3)(4)11(25)large
Net profit after tax5423272926686
Cash earnings5453312816594
Add back
Estimated customer refunds, payments, associated costs and
litigation6455020
Write-down of intangible assets4----
Cash earnings excluding estimated customer refunds, payments,
associated costs and litigation, and write-down of intangible assets5553352866694
Operating expenses to net operating income ratio
1
(cash earnings basis)
43.05%46.25%46.56%(320 bps)(351 bps)
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
$bn202120202020Sept 20Mar 20
Customer deposits68.065.767.341
Net loans83.281.484.82(2)
Total assets98.896.4102.32(3)
Total funds10.911.310.6(4)3
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Divisional results
3.5 Specialist Businesses
Specialist Businesses provides auto finance, Australian life, general and lenders mortgage insurance, investment
product 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. The division comprises the operations that Westpac ultimately plans to exit with agreements in place for the
sale of Vendor Finance, Westpac Pacific, Westpac General Insurance, and Westpac Lenders Mortgage Insurance.
Businesses where an agreement is in place for sale are treated as held for sale assets and the contribution of those
businesses are included in Specialist Businesses results. Details of the cash earnings contribution of these businesses
are shown within this section.
Cash earnings excluding estimated customer refunds, payments, associated costs and litigation, write-down of
intangibles, and asset sales and revaluations
1. Includes balances presented as held for sale assets/liabilities.
62WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income2532472872(12)
Non-interest income68433442810560
Net operating income before operating expenses and Impairment
charges9375817156131
Operating expenses(740)(1,128)(420)(34)76
Profit before impairment charges and income tax expense197(547)295large(33)
Impairment (charges)/benefits80(95)(160)largelarge
Profit before income tax expense277(642)135large105
Income tax expense and NCI(143)43(42)largelarge
Cash earnings134(599)93large44
Cash earnings adjustments-32(63)(100)(100)
Net profit after tax134(567)30largelarge
Cash earnings134(599)93large44
Add back
Estimated customer refunds, payments, associated costs and
litigation1013211largelarge
Write-down of intangibles8452123(84)large
Asset sales and revaluations11226768(58)65
Cash earnings excluding estimated customer refunds, payments,
associated costs and litigation, write-down of intangibles, and asset
sales and revaluations43122119595121
Operating expenses to net operating income ratio (cash earnings basis) 78.98%194.15%58.74%largelarge
As atAs atAs at% Mov’t
31 March30 Sept31 MarchMar 21 -Mar 21 -
$bn202120202020Sept 20Mar 20
Customer deposits
1
8.59.39.6(9)(11)
Net loans
1
14.514.916.3(3)(11)
Total funds211.7193.0179.11018
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Banking1613434largelarge
Insurance1651493211large
Superannuation, platforms and investments10538129176(19)
Total cash earnings excluding estimated customer refunds,
payments, associated costs and litigation, write-down of intangibles,
and asset sales and revaluations43122119595121
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Divisional results
Cash earnings contribution of businesses held for sale
1
Cash earnings contribution of businesses held for sale1 (ex asset sales and revaluations)
1. Settlement to occur after First Half 2021.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS 63
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income676974(3)(9)
Non-interest income10012829(22)large
Operating expenses(148)(53)(45)179large
Impairment (charges)/benefits24(32)(22)largelarge
Income tax expense and NCI(33)(35)(11)(6)200
Net profit after tax107725(87)(60)
Add back asset sales and revaluations93----
Cash earnings excluding asset sales and revaluations103772534large
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income676974(3)(9)
Non-interest income10012829(22)large
Operating expenses(48)(53)(45)(9)7
Impairment (charges)/benefits24(32)(22)largelarge
Income tax expense and NCI(40)(35)(11)14large
Cash earnings (excluding asset sales and revaluations)103772534large
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Divisional results
Financial performance
First Half 2021 –Second Half 2020
Cash earnings of $134 million in First Half 2021 compared to a loss of $599 million in Second Half 2020, with lower
estimated customer refunds, payments, associated costs and litigation, write-down of intangible assets, and asset sales
and revaluations the driver of this improvement. Excluding these items, First Half 2021 cash earnings were $431 million,
$210 million higher than Second Half 2020, mostly from an impairment benefit of $80 million in First Half 2021
compared to an impairment charge of $95 million in Second Half 2020. Higher income from the insurance business and
lower expenses also contributed to the increase.
64WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
Net interest
income up $6m,
2%
•Net loans decreased 3% (or $0.4 billion), with Auto and Westpac Pacific lending both
lower;
•Deposits decreased 9% (or $0.8 billion), mostly from a reduction in term deposits on
Platforms from the low interest rate environment. Deposits in Westpac Pacific were also
lower; and
•Net interest margin was up 23 basis points mostly from the roll off of interest rate
reductions related to COVID-19 support packages, and lower holdings of other interest-
bearing assets, including liquid assets.
Non-interest
income up
$350m, 105%
•Estimated customer refunds and payments were $306 million lower in First Half 2021.
Excluding these non-interest income increased $44 million or 7%;
•Insurance income increased $44 million or 21% from:
-Life Insurance income was higher mostly from favourable valuation movements in life
insurance policyholder liabilities from changes in the discount rate. Benefits from lower
lapses and claims were offset by changes in actuarial assumptions and reinsurance
costs;
-An increase in Lenders Mortgage Insurance contribution due to lower claims and an
increase in premiums in line with the growth in the mortgage portfolio; partly offset by
-A decrease in General Insurance income due to an increase in severe weather related
claims of $55 million.
•Superannuation, Platforms and Investments contribution increased $14 million from higher
funds mostly due to the increase in the value of securities held on Australian and overseas
securities exchanges. This was partly offset by margin compression from platform and
superannuation pricing changes and lower revenue from lower interest rates on managed
cash balances; and
•Banking income was lower from continued lower levels of activity, including in Westpac
Pacific.
Expenses down
$388m, 34%
•Write down of intangible assets, asset sales and revaluations, and costs associated with
customer refunds, payments and litigation decreased $317 million compared to Second
Half 2020. Excluding these, expenses were $71 million (or 15%) lower; and
•Most of the decline related to lower costs of providing COVID-19 support, cost seasonality
(costs are typically higher in the second half of the year to support end of financial year
processing), and lower project spend.
Impairment
benefit of $80m
compared to
an impairment
charge of $95m
•The impairment benefit reflects a lower collectively assessed provision from improvement
in the economic outlook and improved asset quality; and
•The level of stressed exposures decreased 145 basis points to 7.11%, mostly from a
decrease in watchlist exposures in the Commercial segment in Auto Finance, and a
decrease in Auto delinquencies.
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Divisional results
First Half 2021 –First Half 2020
Cash earnings of $134 million were $41 million higher than First Half 2020. Excluding estimated customer refunds,
payments, associated costs and litigation, write-down of intangible assets, and asset sales and revaluations, First Half
2021 cash earnings were $431 million, $236 million higher than First Half 2020, mostly from an impairment benefit of
$80 million in First Half 2021 compared to an impairment charge of $160 million in First Half 2020.
WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS 65
Net interest
income down
$34m, 12%
•Net loans decreased 11% (or $1.8 billion) over the year, mostly Auto loans, from increased
run off. Lending in Westpac Pacific was also lower;
•Deposits decreased 11% (or $1.1 billion) over the year from a reduction in term deposits
on Platforms from the low interest rate environment, and lower Westpac Pacific deposits;
and
•Net interest margin was down 2 basis points mostly from reduced deposit spreads and
lower earnings on capital from low interest rates.
Non-interest
income up
$256m, 60%
•Estimated customer refunds and payments were $105 million lower in First Half 2021.
Excluding this, non-interest income increased by $151 million or 28%;
•Insurance income was up $179 million from:
-Life Insurance income was higher mostly from favourable valuation movements in life
insurance policyholder liabilities from changes in the discount rate, partly offset by the
impact of exiting Group Life and changes in actuarial assumptions and reinsurance
costs;
-A higher contribution from Lenders Mortgage Insurance; and
-Lower severe weather related claims in General Insurance, $79 million in First Half
2021 compared to $140 million in First Half 2020.
•Superannuation, Platforms and Investments contribution was down $5 million or 1%,
mostly from margin compression from platform and superannuation pricing changes and
the migration to low rate products. Revenue from managed cash balances was also lower;
and
•Banking income was lower, mostly from a reduction in revenue in Westpac Pacific from the
impact of COVID-19 restrictions on tourism and associated merchant fees and foreign
exchange income.
Expenses up
$320m, 76%
•Write down of intangibles, asset sales and revaluations and costs associated with
customer refunds, payments and litigation in First Half 2021 were $295 million higher than
First Half 2020. Excluding these items, expenses were up $25 million or 7%; and
•The increase was due to higher technology related expenses and costs related to COVID-
19 support activities.
Impairment
benefit of $80m
compared to
an impairment
charge of $160m
•The impairment benefit reflects a lower collectively assessed provision from improvement
in the economic outlook and improved asset quality; and
•The level of stressed exposures increased 293 basis points to 7.11%, mostly from an
increase in watchlist exposures in Westpac Pacific and higher delinquencies in the Auto
portfolio.
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Divisional results
Insurance key metrics
Superannuation, Platforms and Investments
Retail as at 31 March 2021 of $938 million (as at 30 September 2020: $942 million, as at 31 March 2020: $949 million); and Group Life Insurance
as at 31 March 2021 of $5 million (as at 30 September 2020: $11 million, as at 31 March 2020: $259 million).
66WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
202120202020Sept 20Mar 20
Life Insurance in-force premiums ($m)
Balance as at beginning of period9531,2081,212(21)(21)
Sales / New Business576767(15)(15)
Lapses(67)(322)(71)(79)(6)
Balance as at end of period
1
9439531,208(1)(22)
Claims ratios
2
for Insurance Business (%)
Life insurance634854largelarge
General insurance8258107largelarge
Lenders mortgage insurance36715largelarge
Gross written premiums ($m)
General insurance gross written premium ($m)28928227326
Lenders mortgage insurance gross written premium
3
15491896973
As atAs at% Mov’tAs at% Mov’t
31 MarchNetNet30 SeptMar 21 -Mar 21 -Mar 21 -
$bn2021InflowsOutflowsFlowsMov’t
1
2020Sept 202020Mar 20
Superannuation42.31.9(1.9)-4.138.21135.320
Platforms124.011.4(11.3)0.110.1113.89105.018
Packaged funds45.42.8(2.5)0.34.141.01138.817
Total funds211.716.1(15.7)0.418.3193.010179.118
Current Australian market share
Market
shareRank
Platforms (includes Wrap and Corporate Super)18%1
Retail (excludes Cash)17%1
Corporate Super15%3
1.The life insurance in-force premium is comprised of:
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. First half March 2021 gross written premiums
include $104 million from the arrangement (Second half 2020: $61 million, First Half 2020: $63 million).
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Divisional results
This segment comprises:
WESTPAC GROUP2021 INTERIM FINANCIAL RESULTS
67
3.6Group Businesses
•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;
•
Chief Operating Office
1
, which includes Group Technology function and Australian banking operations and property
services. Group Technology is responsible for technology strategy and architecture, infrastructure and operations,
applications development and business integration in Australia;
•
Core Support
2
, which comprises functions performed centrally, including strategy, finance, risk, financial crime, legal,
human resources, customer and corporate relations, and Group head office costs;
•
Following the Group’s decision in March 2019 to restructure its wealth operations and exit its Advice business
3
, the
residual Advice operations (including associated remediation) and certain support functions of the former BTFG
division have been transferred to Group Businesses; and
•Group Businesses also includes earnings on capital not allocated to divisions, accounting entries for 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, and certain other head office
items such as centrally raised provisions.
Half YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income4574434563-
Non-interest income383257(113)49large
Net operating income before operating expenses and impairment
charges84070034320145
Operating expenses(603)(862)(1,502)(30)(60)
Profit/(loss) before impairment charges and income tax expense237(162)(1,159)largelarge
Impairment (charges)/benefits(1)641(472)large(100)
Profit/(loss) before income tax expense236479(1,631)(51)large
Income tax expense and NCI(120)(311)153(61)large
Cash earnings116168(1,478)(31)large
Cash earnings adjustments(91)(543)249(83)large
Net profit/(loss) after tax25(375)(1,229)largelarge
Cash earnings116168(1,478)(31)large
Add back
Costs associated with AUSTRAC proceedings including a provision
for penalty-4151,027(100)(100)
Estimated customer refunds, payments, associated costs and
litigation2036915719429
Write-down of intangibles-5-(100)-
Asset sales and revaluations(305)(212)-44-
Cash earnings excluding costs associated with AUSTRAC
proceedings including a provision for penalty, estimated customer
refunds, payments, associated costs and litigation, write-down of
intangibles, and asset sales and revaluations14445(294)(97)large
1.Group Technology and Operations 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.
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Divisional results
Treasury Value at Risk (VaR)
1
Financial performance
First Half 2021 - Second Half 2020
Cash earnings were $116 million for First Half 2021, $52 million lower than Second Half 2020. Excluding the impact of a
number of large items, cash earnings were $14 million compared to $445 million in Second Half 2020. An impairment
charge of $1 million compared to an impairment benefit of $641 million was the key reason for the decline in cash
earnings.
First Half 2021 -First Half 2020
Cash earnings were a profit of $116 million for First Half 2021. Excluding a number of large items, cash earnings were a
profit of $14 million compared to a loss of $294 million in First Half 2020.
68WESTPAC GROUP 2021 INTERIM FINANCIAL RESULTS
TreasuryHalf YearHalf YearHalf Year% Mov’t
MarchSeptMarchMar 21 -Mar 21 -
$m202120202020Sept 20Mar 20
Net interest income46245842918
Non-interest income815(1)(47)large
Net operating income before operating expenses and impairment
charges470473428(1)10
Cash earnings299301273(1)10
Cash earnings adjustments(82)(502)222(84)large
Net profit after tax217(201)495large(56)
$mAverageHighLow
Half Year March 2021197.8232.070.5
Half Year Sept 2020219.4231.1173.1
Half Year March 202046.3176.733.7
Net operating
income
up $140m, 20%
•Revaluation of our investment in Coinbase ($546 million) offset by lower gains in Zip Co Limited
($25 million in First Half 2021, $303 million in Second Half 2020); partly offset by
•Higher provisions for estimated customer refunds and payments ($193 million in First Half 2021,
$30 million in Second Half 2020).
•Treasury was little changed over the half with income of $470 million in First Half 2021 compared
to $473 million in Second Half 2020.
Operating
expenses
down $259m, 30%
•Expenses were lower as Second Half 2020 included a provision for a penalty from AUSTRAC
and the associated costs ($420 million); partly offset by
•Performance fee related to gains on Coinbase ($122 million); and
•Provisions for estimated customer refunds and payments ($98 million in First Half 2021, $68
million in Second Half 2020).
Impairment
charges
up $642m, large
•Second Half 2020 impairment benefit reflected the reallocation of overlays previously held
centrally to the operating divisions.
Net operating
income
•Gains from our investments in Coinbase ($546 million) and Zip Co Limited ($25 million); partly
offset by
up $497m, 145%•Higher provisions for estimated customer refunds and payments ($193 million in First Half 2021,
$126 million in First Half 2020); and
•Higher Treasury income was more than offset by lower earnings on Capital.
Operating
expenses
down $899m, 60%
•Expenses were lower as First Half 2020 included a provision for a penalty from AUSTRAC and
the associated costs ($1,058 million); partly offset by
•Performance fee related to gains on Coinbase ($122 million); and
•Higher CORE program costs.
Impairment
charges
•First Half 2020 impairment charge was due to the raising of a centrally held overlay to capture
the impacts of COVID-19, bushfires and drought.
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down $471m,
100%
1.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.
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Table of contents
WESTPAC GROUP2021 INTERIM FINANCIAL REPORT
69
4.02021 Interim financial report
4.1Directors’report70
4.2Consolidated income statement92
4.3Consolidated statement of comprehensive income93
4.4Consolidated balance sheet94
4.5Consolidated statement of changes in equity95
4.6Consolidated cash flow statement96
4.7Notes to the consolidated financial statements97
Note 1Financial statements preparation97
Note 2Segment reporting99
Note 3Net interest income102
Note 4Non-interest income103
Note 5Operating expenses104
Note 6Income tax105
Note 7Earnings per share105
Note 8Average balance sheet and interest rates106
Note 9Loans107
Note 10Provision for expected credit losses107
Note 11Credit quality111
Note 12Deposits and other borrowings113
Note 13Fair values of financial assets and liabilities114
Note 14Provisions, contingent liabilities, contingent assets and credit commitments119
Note 15Shareholders’equity124
Note 16Notes to the consolidated cash flow statement126
Note 17Assets and liabilities held for sale127
Note 18Subsequent events128
4.8
Statutory statements129
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Directors’report
The Directors of Westpac present their report together with the financial statements of Westpac and its controlled
entities (collectively referred to as ‘the Group’) for the half year ended 31 March 2021.
Directors
The names of the Directors of Westpac holding office at any time during, and since the end of, the half year and the
period for which each has served as a Director are set out below:
Review and results of the Group’s operations
Net Profit attributable to owners of Westpac Banking Corporation for First Half 2021 was $3,443 million, an increase of
$2,253 million or 189% compared to First Half 2020.
The increase in Net Profit was largely due to large impairment charges incurred in First Half 2020 of $2,238 million,
whereas First Half 2021 included an impairment benefit of $372 million. This added $1,827 million to the increase in Net
Profit after tax. Over recent halves Westpac has also incurred certain specific large items. The net after tax impact of
these items was much less in First Half 2021 ($282 million) compared to First Half 2020 ($1,399 million). These items
included:
The following is a summary of the movements in the major line items in Net Profit for First Half 2021 compared to First
Half 2020.
Net interest income (NII) of $8,348 million was $652 million lower compared to First Half 2020. With average interest
earning assets little changed over the year to First Half 2021, the lower NII result reflected a 15 basis point decline in
net interest margin to 2.06%. The decline in net interest margin was due to:
Non-interest income of $ 2,338 million increased by $734 million compared to First Half 2020. The increase was mostly
due to:
70WESTPAC GROUP 2021 INTERIM FINANCIAL REPORT
4.02021 Interim financial report
4.1Directors’report
NamePosition
John McFarlaneDirector since February 2020 and Chairman since April 2020.
Peter KingManaging Director and Acting Chief Executive Officer since December 2019. Chief Executive Officer since April
2020.
Nerida CaesarDirector since September 2017.
Craig DunnDirector since June 2015.
Steven HarkerDirector since March 2019.
Michael Hawker AMDirector since December 2020.
Christopher LynchDirector since September 2020.
Peter MarriottDirector since June 2013.
Peter NashDirector since March 2018.
Nora ScheinkestelDirector since March 2021.
Margaret SealeDirector since March 2019.
Alison DeansRetired on 11 December 2020. Director from April 2014.
•Provisions for estimated customer refunds, payments, associated costs and litigation;
•The write-down of intangible items, including goodwill;
•The impact of asset sales and revaluations; and
•Costs of the AUSTRAC proceedings -including the penalty.
•Lower interest rates, which reduced income on average interest earning assets, partly offset by lower funding costs;
•Mix effects on interest earning assets from a decline in higher returning loans and an increase in low returning liquid
assets; and
•Unrealised losses on fair value economic hedges in First Half 2021 of $53 million compared to a gain in First Half
2020 of $300 million.
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