Westpac Second Half 2022 notable items

ASX
Release


24 October 2022

Westpac’s Second Half 2022 (2H22) notable items
Westpac today announced that its reported net profit and cash earnings in 2H22 will be
reduced by $1.3 billion (after tax) due to notable items. The majority of these notable items
have been previously disclosed with announced divestments.
The notable items after tax for 2H22 include:
 A loss of $1.1 billion on the sale of Westpac Life Insurance Limited;
 Expenses and revaluations associated with the sale of Advance Asset Management
and successor funds transfer of BT’s personal and corporate superannuation funds;
 Tax benefits from the sales of our motor vehicle and vendor finance businesses;
 Expenses and write-downs associated with reducing our corporate and branch
footprint; and
 An increase in provisions for customer refunds, associated costs and litigation
costs.

The net impact of these notable items on our Common equity Tier 1 capital ratio was a
positive 12 basis points. The impact was positive as the completion of the life insurance
sale added 17 basis points while the other notable items had a 5 basis point impact.

Details of notable items in Second Half 2022 are in Appendix 1 and a summary of line item
impacts is in Appendix 2.

Segment structure changes in Westpac’s FY22 results
From 1H22 we changed our segment reporting for our lines of business operating
structure. At that time, we updated prior period numbers for 2H21 and these have not
changed. We are now providing FY21 data under these segment changes in the same way
they will be presented in FY22. This is in Appendix 3. There are no other prior period
restatements to the P&L. There has been one restatement to the balance sheet, with a
movement in the allocation of intangible items between the Consumer and Business
segments.

We are scheduled to announce our Full Year 2022 results on Monday, 7 November 2022.

For further information:

Hayden Cooper Andrew Bowden
Group Head of Media Relations General Manager Investor Relations
0402 393 619 0438 284 863


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

Level 18, 275 Kent Street
Sydney, NSW, 2000

Appendix 1 – Details of items affecting Westpac’s 2H22 Financial Results

This table details how the notable items will be described in our 2H22 Financial Results.

Summary 2H22 Cash
earnings
(after tax)
Detail
Provisions for
customer
refunds and
payments,
associated
costs and
litigation costs
$68m
reduction
Revenue - $17m (pre-tax)
 Decrease in revenue due to additional remediation provisions
related to wealth products and to New Zealand.
Expenses - $80m (pre-tax)
 Additional costs for our Australian customer remediation program;
and
 An increase in litigation costs and provisions.
The write-
down of assets
(incl. goodwill
and capitalised
software) and
costs
associated
with the
consolidation
of branches
$129m
reduction
 Write-down of assets from a reduction in corporate office space
required. Reduced space requirements are from business sales,
reduced headcount, and more flexible working. The write-down
considers the capitalised value of the remaining term of the lease
less likely sublease income, $118m in costs, $82m after tax; and
 Expenses associated with the accelerated consolidation of branches
that has progressed more rapidly than recent years of $66m in
costs, $47m after tax.
The impact of
asset sales
and
revaluations
$1,089m
reduction
 Loss on sale of Westpac Life Insurance Services Limited of
$1,112m in non-interest income, $1,120m after tax;
 Expenses and revaluations associated with assets sales, including
of Advance Asset Management and successor funds transfer of
BT’s personal and corporate superannuation funds of $125m,
$101m after tax; and
 A tax refund related to the sale of the Group’s motor vehicle dealer
finance and novated leasing business and vendor finance
businesses.

Appendix 2 – Summary of 2H22 and FY22 notable items


2H22 ($m)
Consumer Business WIB
New
Zealand
(in $A)
Specialist
Businesses
Group
Businesses
Total
Net interest income - - - (8) - - (8)
Non-interest income - - - (1) (1,120) - (1,121)
Operating expenses (66) - - - (150) (174) (390)
Core earnings (66) - - (9) (1,270) (174) (1,519)
Income tax benefit/
(expense)
19 - - 2 158 54 233
NCI - - - - - - -
Cash earnings (47) - - (7) (1,112) (120) (1,286)

2H22 ($m)
Provisions for
refunds, payments,
costs & litigation
Write-down of assets
and accelerated
branch closure costs
Asset sales and
revaluations
Total
Net interest income (8) - - (8)
Non-interest income (9) - (1,112) (1,121)
Operating expenses (80) (184) (126) (390)
Core earnings (97) (184) (1,238) (1,519)
Income tax
benefit/(expense)
29 55 149 233
NCI - - - -
Cash earnings (68) (129) (1,089) (1,286)

FY22 ($m)
Consumer Business WIB
New
Zealand
(in $A)
Specialist
Businesses
Group
Businesses
Total
Net interest income - - - (1) - - (1)
Non-interest income - - - 118 (1,011) - (893)
Operating expenses (66) - - - (365) (190) (621)
Core earnings (66) - - 117 (1,376) (190) (1,515)
Income tax benefit/
(expense)
19 - - - 150 54 223
NCI - - - - - - -
Cash earnings (47) - - 117 (1,226) (136) (1,292)

FY22 ($m)
Provisions for
refunds, payments,
costs & litigation
Write-down of assets
and accelerated
branch closure costs
Asset sales and
revaluations
Total
Net interest income (1) - - (1)
Non-interest income (52) - (841) (893)
Operating expenses (126) (351) (144) (621)
Core earnings (179) (351) (985) (1,515)
Income tax
benefit/(expense)
46 68 109 223
NCI - - - -
Cash earnings (133) (283) (876) (1,292)

Appendix 3 – Selected comparative disclosures

3.1 Consumer and Business Banking




Half Year Half Year % Mov't Full Year Full Year % Mov't
Sept March Sept 22 - Sept Sept Sept 22 -
$m2022 2022 Mar 22 2022 2021 Sept 21
Net interest income5,70012,473
Non-interest income487867
Net operating income6,18713,340
Operating expenses(3,351)(7,116)
Core earnings2,8366,224
Impairment (charges)/benefits(131)609
Profit before income tax expense2,7056,833
Income tax expense and NCI(820)(2,049)
Cash earnings1,8854,784
Add back notable items-20
Cash earnings excluding notable items1,8854,804
Expense to income ratio54.16%53.34%
Net interest margin2.29%2.54%
As at As at % Mov't As at As at % Mov't
30 Sept 31 March
Sept 22 -
30 Sept 30 Sept
Sept 22 -
$bn2022 2022 Mar 22 2022 2021 Sept 21
Customer deposits
Term deposits75.676.5
Other335.3318.5
Total customer deposits410.9395.0
Net loans
Mortgages458.4455.7
Business82.479.8
Other9.08.8
Provisions(3.2)(3.2)
Total net loans546.6541.1
Deposit to loan ratio75.16%73.00%
Total assets561.0555.4
TCE660.6653.9
Average interest earning assets499.9490.8
Average allocated capital33.133.0
Credit quality
Impairment charges/(benefits) to average loans0.05%(0.15%)
Total stressed exposures to TCE1.49%1.74%

3.1.1 Consumer






Half Year Half Year % Mov't Full Year Full Year % Mov't
Sept March Sept 22 - Sept Sept Sept 22 -
$m2022 2022 Mar 22 2022 2021 Sept 21
Net interest income4,3779,486
Non-interest income324518
Net operating income4,70110,004
Operating expenses(2,369)(4,898)
Core earnings2,3325,106
Impairment (charges)/benefits27184
Profit before income tax expense2,3595,290
Income tax expense and NCI(713)(1,583)
Cash earnings1,6463,707
Add back notable items-105
Cash earnings excluding notable items1,6463,812
Expense to income ratio50.39%48.96%
Net interest margin2.09%2.30%
As at As at % Mov't As at As at % Mov't
30 Sept 31 March
Sept 22 -
30 Sept 30 Sept
Sept 22 -
$bn2022 2022 Mar 22 2022 2021 Sept 21
Customer deposits
Term deposits50.550.2
Other225.7216.2
Total customer deposits276.2266.4
Net loans
Mortgages458.4455.7
Other9.08.8
Provisions(1.7)(1.8)
Total net loans465.7462.7
Deposit to loan ratio59.30%57.58%
Total assets477.8474.8
TCE554.0551.8
Average interest earning assets420.3411.7
Average allocated capital25.224.8
Credit quality
Impairment charges/(benefits) to average loans(0.01%)(0.04%)
Mortgage 90+ day delinquencies0.88%1.07%
Other consumer loans 90+ day delinquencies1.48%1.60%
Total stressed exposures to TCE0.81%0.98%

3.1.2 Business






Half Year Half Year % Mov't Full Year Full Year % Mov't
Sept March Sept 22 - Sept Sept Sept 22 -
$m2022 2022 Mar 22 2022 2021 Sept 21
Net interest income1,3232,987
Non-interest income163349
Net operating income1,4863,336
Operating expenses(982)(2,218)
Core earnings5041,118
Impairment (charges)/benefits(158)425
Profit before income tax expense3461,543
Income tax expense and NCI(107)(466)
Cash earnings2391,077
Add back notable items-(85)
Cash earnings excluding notable items239992
Expense to income ratio66.08%66.49%
Net interest margin3.33%3.78%
As at As at % Mov't As at As at % Mov't
30 Sept 31 March
Sept 22 -
30 Sept 30 Sept
Sept 22 -
$bn2022 2022 Mar 22 2022 2021 Sept 21
Customer deposits
Term deposits25.126.3
Other109.6102.3
Total customer deposits134.7128.6
Net loans
Loans82.479.8
Provisions(1.5)(1.4)
Total net loans80.978.4
Deposit to loan ratio166.42%164.00%
Total assets83.280.6
TCE106.6102.1
Average interest earning assets79.679.1
Average allocated capital7.98.2
Credit quality
Impairment charges/(benefits) to average loans0.40%(0.80%)
Impaired exposures to TCE0.60%0.72%
Total stressed exposures to TCE5.07%5.90%

3.2 Westpac Institutional Bank (WIB)



Half Year Half Year % Mov't Full Year Full Year % Mov't
Sept March Sept 22 - Sept Sept Sept 22 -
$m2022 2022 Mar 22 2022 2021 Sept 21
Net interest income481925
Non-interest income5881,313
Net operating income1,0692,238
Operating expenses(577)(2,595)
Core earnings492(357)
Impairment (charges)/benefits(58)(162)
Profit before income tax expense434(519)
Income tax expense and NCI(128)(14)
Cash earnings306(533)
Add back notable items-991
Cash earnings excluding notable items306458
Expense to income ratio53.98%115.95%
Net interest margin1.17%1.25%
As at As at % Mov't As at As at % Mov't
30 Sept 31 March
Sept 22 -
30 Sept 30 Sept
Sept 22 -
$bn2022 2022 Mar 22 2022 2021 Sept 21
Customer deposits104.799.3
Net loans
Loans74.368.3
Provisions(0.3)(0.6)
Total net loans74.067.7
Deposit to loan ratio141.53%146.64%
Total assets94.082.8
TCE190.8179.7
Average interest earning assets82.673.9
Average allocated capital7.77.8
Credit quality
Impairment charges to average loans0.16%0.25%
Impaired exposures to TCE0.14%0.29%
Total stressed exposures to TCE0.20%0.64%
Revenue Contribution
Half Year Half Year % Mov't Full Year Full Year % Mov't
Sept March Sept 22 - Sept Sept Sept 22 -
$m2022 2022 Mar 22 2022 2021 Sept 21
Lending and deposit revenue7101,315
Markets, sales and fee income417823
Total customer revenue1,1272,138
Derivative valuation adjustments(29)97
Trading revenue34100
Other(63)(97)
Total WIB revenue1,0692,238

3.4 Specialist Businesses (SB)













Half Year Half Year % Mov't Full Year Full Year % Mov't
Sept March Sept 22 - Sept Sept Sept 22 -
$m2022 2022 Mar 22 2022 2021 Sept 21
Net interest income242494
Non-interest income5501,455
Net operating income7921,949
Operating expenses(584)(1,478)
Core earnings208471
Impairment (charges)/benefits3866
Profit before income tax expense246537
Income tax expense and NCI(114)(375)
Cash earnings132162
Add back notable items114540
Cash earnings excluding notable items246702
Expense to income ratio73.74%75.83%
Net interest margin3.45%3.10%
As at As at % Mov't As at As at % Mov't
30 Sept 31 March
Sept 22 -
30 Sept 30 Sept
Sept 22 -
$bn2022 2022 Mar 22 2022 2021 Sept 21
Deposits8.48.7
Net loans
Loans12.014.0
Provisions(0.3)(0.4)
Total net loans11.713.6
Deposit to loan ratio71.29%64.46%
Total funds222.9227.4
TCE15.418.1
Average interest earning assets14.115.9
Average allocated capital4.14.6
Average funds224.9214.6
Credit quality
Auto finance 90 day+ delinquencies2.00%1.97%
Total stressed exposures to TCE6.98%6.41%

3.5 Group Businesses


Half Year Half Year % Mov't Full Year Full Year % Mov't
Sept March Sept 22 - Sept Sept Sept 22 -
$m2022 2022 Mar 22 2022 2021 Sept 21
Net interest income564835
Non-interest income36366
Net operating income6001,201
Operating expenses(320)(1,032)
Core earnings280169
Impairment (charges)/benefits3(2)
Profit before income tax expense283167
Income tax expense and NCI(108)(178)
Cash earnings175(11)
Add back notable items16(2)
Cash earnings excluding notable items191(13)
Treasury
Half Year Half Year % Mov't Full Year Full Year % Mov't
Sept March
Sept 22 -
Sept Sept
Sept 22 -
$m2022 2022 Mar 22 2022 2021 Sept 21
Net interest income554838
Non-interest income128
Net operating income566846
Cash earnings368521