Notable items affecting 2H21 results of $1.3bn

ASX
Release


12 October 2021

Notable items affecting Westpac’s Second Half 2021 (2H21) to reduce profit by $1.3bn
Westpac today announced that its reported net profit and cash earnings in 2H21 will be
reduced by $1.3 billion (after tax) due to notable items. The notable items after tax include:
 a $965m write-down of assets (goodwill, capitalised software and certain other
assets) in Westpac Institutional Bank (WIB) following their annual impairment test;
 additional provisions for customer refunds, payments, associated costs, and
litigation provisions of $172m;
 previously announced separation and transaction costs along with a deferred tax
asset write-off related to the agreed sale of Westpac Life Insurance Services
Limited (WLIS) of $267m
1
; and
 other costs associated with the divestment of the Group’s Specialist Businesses of
$24m.
These charges were partly offset by:
 a gain on sale of Westpac General Insurance, $55m; and
 a reversal of the previous write-downs associated with Westpac Pacific as the
business is no longer held for sale, $54m.
In aggregate these items are estimated to reduce the Group’s CET1 capital ratio by around
15 basis points
2
, noting that the write-down of goodwill and capitalised software has no net
impact on regulatory capital as they are already capital deductions.
Details of notable items in Second Half 2021 are in Appendix 1 and a summary of line item
impacts is in Appendix 2. A more detailed breakdown of these notable items, including
additional Non-interest income and Expense details, will be provided with our Full Year
2021 results.

Changes to information in Westpac’s 2021 Full Year Financial Results
In First Half 2021 we introduced a “Held for sale” designation for businesses under sale
agreements. In Second Half 2021 the following businesses (previously in Held for sale)
were sold and are not included in ‘Held for sale’ after their sale date:
 Vendor Finance;
 Westpac General Insurance; and
 Westpac Lenders Mortgage Insurance.
In addition, Westpac Pacific is no longer in Held for sale following Westpac’s
announcement on 22 September 2021 that the sale to Kina Securities Limited would no
longer proceed.


1
This compares to the post tax loss of c.$0.3bn for FY21 disclosed on 9/8/21. A further loss on sale is expected to be
recorded in FY22 when the sale of WLIS is completed.
2
At June 30 2021.
Level 18, 275 Kent Street
Sydney, NSW, 2000

Page 2 of 4



Following announced sales through Second Half 2021, the following businesses will now
be presented under the “Held for sale” designation:
 Westpac Life Insurance Services Limited;
 Westpac Life-NZ-Limited; and
 Motor vehicle dealer finance and novated leasing.
In Section 5 of the Full Year 2021 Results we will expand our disclosure to outline the cash
earnings contribution of businesses sold and currently Held for sale in Financial Year 2021.
There has been no change to our segment reporting.
We are scheduled to announce our Full Year 2021 results on Monday, 1 November 2021.


For further information:

David Lording Andrew Bowden
Group Head of Media Relations Head of Investor Relations
0419 683 411 0438 284 863


This document has been authorised for release by Tim Hartin, General Manager & Company Secretary.

Page 3 of 4



Appendix 1 – Details of items affecting Westpac’s 2H21 Financial Results

Summary 2H21 Cash
earnings
(after tax)
Detail (pre tax)
Write-down
of goodwill
and other
assets
$965m
reduction
In our annual impairment test, the valuation of our WIB division did not
support the carrying value of its assets (mostly intangibles). This was
partly due to
reducing risk in the division through the exit of energy trading,
consolidating our Asian operations and reducing our correspondent
banking relationships which have all impacted earnings. At the same time,
medium term expectations of a prolonged low interest rate environment,
subdued financial markets income and elevated compliance expenses
have impacted WIB’s earnings outlook. This has resulted in a write-down
of $1,156m for assets, which is processed through expenses. Assets
written down include:
 $487m of goodwill, which is all the goodwill in WIB;
 $344m of capitalised software; and
 $325m of other assets, mostly property leases.
Additional
provisions for
customer
refunds
payments,
associated
costs and
litigation
provisions
$172m
reduction
The ongoing review of customer remediation, litigation and regulatory
investigations has led to the following changes in provisions:
 Revenue: a net benefit of $12m from the release of some provisions
no longer required in Business partially offset by additional provisions
in Westpac New Zealand; and
 Expenses: $215m for additional expenses in our remediation
programs and for litigation matters, including to resolve outstanding
investigations should a regulator decide to bring civil penalty
proceedings.

 Separate to the above, we are also reviewing premium increases on
certain life insurance products issued by Westpac Life Insurance
Services Limited (WLIS). This review relates to Product Disclosure
Statements for life insurance products issued in the years 2010 to
2017. This is a complex review where the outcomes are currently
uncertain. As such, customer remediation may be required in the
future. There is also a risk that the outcomes of the review could
impact the financial and/or capital position of WLIS.
Asset sales
and
revaluations
$182m
reduction
 Revenue benefitted by $189m, from the gain on sale of Westpac
General Insurance and post sale adjustments mainly related to our
Vendor Finance business, partly offset by a reduction relating to the
sale of our shares in Coinbase Inc.
 Expenses associated with asset sales and revaluations of $291m
including costs related to the sale of WLIS and other divestment
costs. These costs were partially offset by a $60m reversal of
previous write-downs related to Westpac Pacific as the sale is not
currently proceeding.
 Tax expense and Non-controlling interests (NCI) impacts of $140m
related to gains on the above sales partly offset by tax benefits from
transaction and separation costs deductibility.

Page 4 of 4



Appendix 2 – Summary of 2H21 and FY21 notable items

2H21 ($m)
Consumer Business WIB
New
Zealand
(in $A)
Specialist
Businesses
Group
Businesses
Total
Net interest income 3 103 - (32) (18) - 56
Non-interest income - - - (6) 198 (47) 145
Operating expenses (30) (19) (1,156) (17) (304) (76) (1,602)
Core earnings (27) 84 (1,156) (55) (124) (123) (1,401)
Income tax benefit/
(expense)
3 (29) 191 13 (115) 23 86
NCI - - - - (4) - (4)
Cash earnings (24) 55 (965) (42) (243) (100) (1,319)

2H21 ($m)
Provisions for
refunds, payments,
costs & litigation
Write-down of
goodwill and other
assets
Asset sales /
revaluations
Total
Net interest income 60 - (4) 56
Non-interest income (48) - 193 145
Operating expenses (215) (1,156) (231) (1,602)
Core earnings (203) (1,156) (42) (1,401)
Income tax
benefit/(expense)
31 191 (136) 86
NCI - - (4) (4)
Cash earnings (172) (965) (182) (1,319)

FY21 ($m)
Consumer Business WIB
New
Zealand
(in $A)
Specialist
Businesses
Group
Businesses
Total
Net interest income 3 177 - (35) (18) - 127
Non-interest income (3) 1 - (11) 199 331 517
Operating expenses (136) (59) (1,193) (23) (640) (296) (2,347)
Core earnings (136) 119 (1,193) (69) (459) 35 (1,703)
Income tax benefit/
(expense)
36 (39) 202 17 (84) (28) 104
NCI - - - - 3 (5) (2)
Cash earnings (100) 80 (991) (52) (540) 2 (1,601)

FY21 ($m)
Provisions for
refunds, payments,
costs & litigation
Write-down of
goodwill and other
assets
Asset sales /
revaluations
Total
Net interest income 131 - (4) 127
Non-interest income (247) - 764 517
Operating expenses (471) (1,405) (471) (2,347)
Core earnings (587) (1,405) 289 (1,703)
Income tax
benefit/(expense)
139 241 (276) 104
NCI - - (2) (2)
Cash earnings (448) (1,164) 11 (1,601)