2001 results presentation - westpac · tsr (rolling 3yr) top quartile 57th ... 1,038 1,142 0 200...

2001 Results2001 ResultsPresentationPresentationDavid MorganChief Executive Officer2 November 2001

2001 Results P

resentation2001 R

esults Presentation

1

Strong & balanced resultStrong & balanced result

• EPS up 16% to 102.8 cents

• Net profit up 11% to $1,903 million

• Economic profit up 13% to $1,198 million

• Dividend up 15% to 62 cents per share

• Expense to income down 300bps to 51.5%

• Return on equity up 2.7% to 21.1%

• Impaired assets steady at 0.6% of loans & accept.

2001 Results P

resentation2001 R

esults Presentation

2

Strategy deliveringStrategy delivering

• Customer focus

– Integrated financial solutions

• Partnering to deliver low cost, global capabilities

– Efficiency gains

• Balancing growth & returns

– Not growth for growth sake

• Australia, New Zealand and near Pacific focus

2001 Results P

resentation2001 R

esults Presentation

3

666 676701

755

818

897924

979

500

600

700

800

900

1,000

1H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01

30

35

40

45

50

55

NPAT pre abn EPS pre abn

Well established earnings Well established earnings growth momentum…growth momentum…

Net Profit after tax & EPScents$m

CAGR ’97-’99 ‘99 –’01

EPS 5% 16%NPAT 6% 14%

2001 Results P

resentation2001 R

esults Presentation

4

…driving strong growth in …driving strong growth in shareholder returnsshareholder returns

386

308

397

272

565 584614

493

200

300

400

500

600

700

1H98 2H98 1H99 2H99 1H00 2H00 1H01 2H0115.0

17.0

19.0

21.0

23.0

EP ROOE

Economic Profit &Return on Ordinary Equity %$m

# Would have been $451m if dividend had been fully franked.

#

2001 Results P

resentation2001 R

esults Presentation

5

Revenue growth the key driverRevenue growth the key driver

$m

Compound Annual Growth Rate

Expenses

1H99 - 2H01

Revenue

Core earnings

9%

2%

15%500

1,0001,5002,0002,5003,0003,5004,000

1H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01

Revenue Expenses (excl. goodwill) Core earnings

2001 Results P

resentation2001 R

esults Presentation

6

500

700

900

1100

1300

1H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01

000’s

Nu

mb

er o

f C

ust

om

ers

* Priority customers are those with whom we have significant,typically multi-product, relationships.

21% growth betweenSept 2000 – Sept 2001

Priority Customers *

Successfully deepening customer Successfully deepening customer relationshipsrelationships

2001 Results P

resentation2001 R

esults Presentation

7

Positive shift in customer valuePositive shift in customer value

Low High

%

Per

cen

tag

e in

Seg

men

t

Value Shift

Value diluting Value creating

Australian personal and business customers

0

5

10

15

20

25

Customer Value Segments

% in segment July 1999 % in segment September 2001

2001 Results P

resentation2001 R

esults Presentation

8

0

5

10

15

20

25

30

Mortgages Credit cards Business lending Deposits

Volume growth in core products*Volume growth in core products*%

gro

wth

* Australia

14%

20%

9%

Outstandings

8%

2001 Results P

resentation2001 R

esults Presentation

9

0.7

2.5

0.5

0.6

0 1 2 3

Deposits

Businesslending

Credit cardoutstandings

Housing -new lending

Market share growth in core Market share growth in core products*products*

* Australia

23.2

21.0

18.0

18.5

0 5 10 15 20 25

Deposits

Business lending

Credit cardoutstandings

Housing - newlending

Market share

% %

Market share movement

+

+

+

+

2001 Results P

resentation2001 R

esults Presentation

10

45

50

55

60

65

1997 1998 1999 2000 2001 2H2001

WBC Peer Average

Expense to income*Expense to income*%

* Excludes goodwill(NAB based upon consensus estimates for 2001)

50.9%

2001 Results P

resentation2001 R

esults Presentation

11

Performance scorecardPerformance scorecard

57th percentileTop quartileTSR (rolling 3yr)

Maintained

6.3%

51.5%

21.1%

16%

Result

AA- ratingRisk profile

Tier 1 6.0 – 6.5%Capital

≤ 51.9% *Efficiency

> 17% #ROE

> 12% *EPS Growth

2001 TargetMeasure

* Peer average (NAB based upon consensus estimates for 2001.)# 5% above cost of 12% capital

2001 Results P

resentation2001 R

esults Presentation

12

The detailsThe details

Phil ChronicanChief Financial Officer2 November 2001

2001 Results P

resentation2001 R

esults Presentation

13

$m 2000 2001% increase/

(decrease)

Net interest income 3,838 4,200 9Non-interest income #1 2,414 2,537 5Operating income #2 6,252 6,737 8Expenses (3,405) (3,472) 2Core earnings 2,847 3,265 15Bad debts (202) (433) 114Goodwill (98) (98) -NPBT 2,547 2,734 7Tax and OEI (832) (831) (3)NPAT 1,715 1,903 11

Underlying earnings growthUnderlying earnings growth

#1 Growth 10% ) Adjusted for the impact of tax recoveries on #2 Growth 10% ) policyholders’ earnings in the life company.

2001 Results P

resentation2001 R

esults Presentation

14

Significant items in the 2001 resultSignificant items in the 2001 result

(35)(53)AGC systems conversion

2527Sale of foreign banknote business

Post-taxPre-tax

7(15)Net Impact

2828Sale of Property Trust

(11)(17)Qvalent/Metiom

2001 Results P

resentation2001 R

esults Presentation

15

6,737 -1727

109

6,252

248

127

111

107

66 756,836

6,000

6,200

6,400

6,600

6,800

7,000

2000

Incom

e

Interes

t Volu

me

Interes

t rate

Fees

& comm.

Finan

cial m

arkets

incom

e

Life & fun

ds mgt

Other in

come

Operat

ional I

ncome

Tax re

covery

move

ment

Foreig

n ban

k note

busin

ess

Qvalen

t write

down

Net prop

erty tr

ansac

tions

2001

Incom

e

Revenue growth a particular Revenue growth a particular strengthstrength

$m

2001 Results P

resentation2001 R

esults Presentation

16

Net interest income & margin Net interest income & margin trendstrends

Margin (%)$bn

2.0

2.5

3.0

3.5

4.0

4.5

1996 1997 1998 1999 2000 2001

2

2.5

3

3.5

4

Net interest income (LHS) Average margin (RHS)Peer average margin (RHS)

(NAB based upon latest published results)

2001 Results P

resentation2001 R

esults Presentation

17

NonNon--interest incomeinterest income

10%2,5782,346Non-interest income attributable to shareholders

41(68)Tax recoveries – policy holders

5%2,5372,414Non-interest income

Change20012000$m

133128EV uplift

28-Property trust management rights

27Sale of properties

10%2,5402,319Normalised (unusual items)

10%2,4072,191Normalised (ex – ev uplift & unusual items)

27-Sale of foreign banknotes business

(17)-Qvalent/Metiom

2001 Results P

resentation2001 R

esults Presentation

18

Wealth management businessWealth management business

Source: Westpac Financial Services Group Statutory Accounts

Embedded value uplift

Net Profit After Tax

0

50

100

150

200

250

300

1997 1998

254

1999 2000 2001

258

210195148

10190

$m

2001 Results P

resentation2001 R

esults Presentation

19

Adviser/planner network growthAdviser/planner network growth

0

200

400

600

800

1000

1200

Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03

Planner/Advisernumbers up 26%

Consumer advisers

Priority advisers & financial planners

Business advisers

Target

Direct business advisers

2001 Results P

resentation2001 R

esults Presentation

20

Expense containmentExpense containment

$m 2000 2001

% increase/

(decrease)

Salaries & other staff expenses 1,815 1,744 (4)

Equipment & occupancy 632 648 3

Other expenses 958 1,080 13

Amortisation of goodwill 98 98 -

Reported expenses 3,503 3,570 2

Implied FTE 30,520 28,534 (7)

Productivity ratio 3.53 4.03 14

2001 Results P

resentation2001 R

esults Presentation

21

Expense containmentExpense containment

277245Restructure

607818GST

Change20012000$m

Total expense growth of $67m

Other factors contributing to growth:

• Volume growth

• Transition costs in IT

• Wage growth

Productivity improvement programs largely offset above expense growth

2001 Results P

resentation2001 R

esults Presentation

22

Expense initiative pipelineExpense initiative pipeline

% 2001 2002 2003 2004 2005+ (*)

% of cost base

Printing and logistics 18 37 57 78 100 1

IT & telecommunications 4 46 53 56 100 10

Head office restructure -ve 100 100 100 100 1

Cheque processing -ve 86 86 91 100 1

The Mortgage Company -ve nominal nominal 100 3

Property services -ve 50 100 100 100

% of targeted savings achieved

* 100% of savings reached in 2005 or beyond

2001 Results P

resentation2001 R

esults Presentation

23

51.6

84.4

57.4

95.9

0204060

80100120

Deposits & other publicborrowings

Net loans & accept

2000 2001

Business Group ResultsBusiness Group ResultsAustralian Retail Financial Services

802937

1,0381,142

0

200

400

600

800

1,000

1,200

Net profit Economic profit

+ 11 % + 14 %

+ 10 % + 17 %• Lending volumes up 14%

• Housing outstandings +14%

• Business lending +9%

• Credit card outstandings +21%

• Net interest income + 9%

• Economic profit up 17% to $937m

• Internet registrations up 155%

• ROE up 180bps to 20.7%

$m

$bn

2001 Results P

resentation2001 R

esults Presentation

24

Business Group ResultsBusiness Group ResultsWestpac Institutional Bank

9.3

22.5

11.9

23.1

0

10

20

30

Deposits Net loans & accept

2000 2001

316

227

385

267

050

100150200250300350400450


+ 28 % + 3 %

+ 22 % + 18 %• Operating income up 25%, acrossall core businesses

• Expense to income ratio 36.9%,down 840bps on pcp


• Leading principal corporatebanker to 25% of largest Australiancompanies #

• Expanded eCommerce initiatives

• ROE up 40bps at 24.1%

$m

$bn

# Greenwich large corporate banking survey

2001 Results P

resentation2001 R

esults Presentation

25

Business Group ResultsBusiness Group ResultsNew Zealand Retail (A$)

10.4

14.912.4

17.5

0

5

10

15

20

Deposits Net loans & accept

2000 2001

251

115

283

142

050

100150

200250300350


+19% +17 %

+13 % + 23 %• Net interest income up 8% andnon-interest income up 8%

• 11% volume growth in businessbanking


• Internet registrations 126,000

• ROE up 140bps to 18.0%

$m

$bn

2001 Results P

resentation2001 R

esults Presentation

26

• Sound underwriting standards & counterparty grading

• Dynamic monitoring and collection processes

• Active risk management:

– Industry risk concentrations– Single name exposures– Total exposure focus

• Real time, prudent provisioning approach

Key credit principlesKey credit principles

2001 Results P

resentation2001 R

esults Presentation

27

High quality loan bookHigh quality loan book

Other consumer

7%

Mortgages49%

Business / Institutional

44%

Cards

Personal Loans

Motor Retail

CreditLine

* On balance sheet funded lending September 2001

Total Westpac Group *

3.3%

1.6%1.2%

1.0%

2001 Results P

resentation2001 R

esults Presentation

28

BBB+ to BBB-

BB+ to B+

<B+

A+ to A-

AAA to AA-

62%

5%

33%

Business/Institutional

Consumer Mortgages

Other Consumer

Mostly investment grade Mostly investment grade portfolio exposures * portfolio exposures *

* Total Committed Exposure - 30 September 2001

Total Westpac Group

Business/Institutional credit grade mix

18 %

12 %13 %

18 %

1.5 %

2001 Results P

resentation2001 R

esults Presentation

29

0 2 4 6 8 10 12

10

9

8

7

6

5

4

3

2

1

Co

rpo

rate

s &

NB

FIs

Limited single name Limited single name exposure concentrationsexposure concentrations

* Group Total Committed Exposure as a percentageof equity plus general provision - September 2001.

Credit exposures* to Top 10 corporations and NBFIsS&P Rating or

EquivalentAAA

A+

A+

A

A

AA

BBB+

A

AA-

A+

2001 Results P

resentation2001 R

esults Presentation

30

Industry exposure

0 1 2 3 4 5 6 7 8

Substantial non-bank financiersPropertyGovernmentDurable products manufactureElectricity, gas & waterOther agriculture & servicesPetroleum refining & chemicalsRetailingBusiness technical servicesGrain, sheep & poultryInsuranceHotels & restaurantsMetal mining & servicesNon-residential constructionTelecommunicationsHospitals & health services Transport & storageMotor vehicle tradeFood manufactureWholesalingTransport & equipment servicesRecreation servicesForestry, printing & paper productsResidential constructionOther manufacturing

Credit exposures to governments, corporations and businesses*

* 30 September 2001, excluding banks. % Group Total Committed Exposure

2001 Results P

resentation2001 R

esults Presentation

31

0

0.5

1

1.5

2

2.5

Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01

%

Mortgages Other consumer loans Business Banking *

90 90 dday delinquencies remain near ay delinquencies remain near historical lowshistorical lows

* Data not available prior to 1998

2001 Results P

resentation2001 R

esults Presentation

32

Stressed loans remain near Stressed loans remain near historic lowshistoric lows

0.00

0.50

1.00

1.50

2.00

2.50

3.00

FY 96 FY 97 FY 98 FY 99 FY 00 1H 01 FY 01

Impaired 90 days past due well secured Watchlist & substandard

%

* Includes retail stressed loans

Exposure by credit grade - stressed loans*% of total commitments

2001 Results P

resentation2001 R

esults Presentation

33

Provisioning coverage relativeProvisioning coverage relativeto domestic peersto domestic peers

1.76%1.47%1.85%1.63%General provisions to non-housing performing loans & acceptances

34%31%33%38%Specific provisions to impaired assets

WBCNABCBAANZ

NAB Based upon latest published results

2001 Results P

resentation2001 R

esults Presentation

34

Impaired assets ratio and total Impaired assets ratio and total provisioning cover provisioning cover

%

6288

137

183 188

233249

177

0

50

100

150

200

250

300

Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01

Total provisions to total impaired assets

%

5.0

2.8

1.41.0 0.8 0.6 0.5 0.6

0

1

2

3

4

5

6

Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01

Total impaired assets tototal loans & acceptances

2001 Results P

resentation2001 R

esults Presentation

35

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

CB

A

WB

C BK

NA

B

AN

Z

BM

O

RB

C

CIB

C

PN

C

TD

WB

BA

C

BN

S

FBF

WF

C

JPM

/Cha

se

ON

E

Australian Peers US Peers Canadian Peers

BBad debt charges ad debt charges are low by are low by world standardsworld standards

Westpac

Annualised Bad Debt Charge / Average Loans(International Peer Comparison *)

* Based on most recent published results

2001 Results P

resentation2001 R

esults Presentation

36

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

CB

A

BK

WB

C

NA

B

PN

C

AN

Z

BA

C

WF

C

TD

WB

JPM

/Ch

ase

FB

F

RB

C

BM

O

CIB

C

ON

E

BN

S


ImpairedImpaired assetsassets also at low levelsalso at low levelsImpaired Assets / Loans

(International Peer Comparison *)

Westpac

*Based on most recent published results

2001 Results P

resentation2001 R

esults Presentation

37

0%

50%

100%

150%

200%

250%

BM

O

BN

S

RB

C

CIB

C

TD

ON

E

JPM

/Cha

se

AN

Z

NA

B

WB

BA

C

FBF

WB

C

PN

C

WFC B

K

CB

A


And we are well provisionedAnd we are well provisioned

Total Provisions / Impaired Assets(International Peer Comparison *)

Westpac

* Based on most recent published results

2001 Results P

resentation2001 R

esults Presentation

38

6.76.3 6.1

7.2

6.66.3

4.0

5.0

6.0

7.0

8.0

TOE / RAA Tier 1 ratio

1999 2000 2001

6.5% -6.0% *

Capital ratiosCapital ratios%

* Target range

5.8% -5.6%*

2001 Results P

resentation2001 R

esults Presentation

39

Capital strategyCapital strategy

• Target ranges unchanged

• Expect to be above target Tier 1 early in calendar 2002

• Revised capital strategy in early 2002 to address:

– Further hybrid Tier 1 scope– Long term options for NZ Class Shares– Target capital structure including buy-

back capacity

2001 Results P

resentation2001 R

esults Presentation

40

OutlookOutlook

David MorganChief Executive Officer2 November 2001

2001 Results P

resentation2001 R

esults Presentation

41

OutlookOutlook

• August strategy presentation demonstrated double-digit EPS growth scenarios

• Revised view on Australian economy– Around 3% GDP growth in year to 30 June

2002– Inflation in 2%-3% range– Credit growth slowing to 6%- 8% range– Unemployment peaking at 7.5% in 2002

• This scenario remains consistent with expectation of double-digit EPS growth outlook

2001 Results P

resentation2001 R

esults Presentation

42

OpportunitiesOpportunities

• Have achieved second to none positioning on balance sheet quality and core earnings growth momentum

• Well positioned for growth

– Ample potential to increase average product holdings of 2.5 per customer

• Low cost base with ongoing productivity enhancements embedded

– Tapping low cost, global capabilities through outsourcing

– Pipeline of expense reductions in place

• “Open for business”

2001 Results P

resentation2001 R

esults Presentation

43

Recap Recap –– strategy is deliveringstrategy is delivering

• Disciplined execution delivering results

• Underlying growth in revenue equal to or better than peers – 10%

• Sector leading improvements in efficiency in terms of absolute expense growth – 2%

• Leading position in credit quality, and provisioning coverage remains intact

• Resulting in highest EPS growth and highest ROE versus peers

2001 Results P

resentation2001 R

esults Presentation

Supplementary Supplementary InformationInformation

2 November 2001

2001 Results P

resentation2001 R

esults Presentation

45

Impaired loans and provisionsImpaired loans and provisions

Total provisions to total impaired assets

%%

Impaired assets to loans & acceptances

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01

WBC ANZ CBA NAB

0

50

100

150

200

250

300

Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01

WBC ANZ CBA NAB

2001 Results P

resentation2001 R

esults Presentation

46

Average probability of defaultAverage probability of default

0%

1%

2%

3%

4%Ju

n-9

6

Sep

-96

Dec

-96

Mar

-97

Jun

-97

Sep

-97

Dec

-97

Mar

-98

Jun

-98

Sep

-98

Dec

-98

Mar

-99

Jun

-99

Sep

-99

Dec

-99

Mar

-00

Jun

-00

Sep

-00

Dec

-00

Mar

-01

Jun

-01

Sep

-01

Ave

rag

e p

rob

abili

ty o

f d

efau

lt

AGC AB&PB NZR WIB Total

2001 Results P

resentation2001 R

esults Presentation

47

Impaired assets & provisioning Impaired assets & provisioning covercover

Total provisions(Actual & ratio to

total impaired assets)

Net impaired assets(Actual & ratio to

equity & general provision)% %

200

400

600

800

1000

1996 1997 1998 1999 2000 20010

1

2

3

4

5

6

7

8

9

10

Impaired assets Ratio Net Impaired assets to equity & general provision

$m

0

500

1000

1500

2000

1996 1997 1998 1999 2000 20010

50

100

150

200

250

300

General Specific Ratio total provisions to total impaired assets total impaired

$m 177%

5.4%

2001 Results P

resentation2001 R

esults Presentation

48

49%

7%

27%

17%

MortgagesOther Personal CreditBusinessCorporate

4%

17%

25%

Portfolio Analysis Portfolio Analysis -- September 2001September 2001

On Balance Sheet Outstandings

Contribution to Bad Debt Charge

54%

12% - Finance company collection issues

2001 Results P

resentation2001 R

esults Presentation

49

Bad debt charge by componentBad debt charge by component

-50

0

50

100

150

200

250

300

Mortgages Other personal Business Corporate

$m

2000 2001

Effect of finance company collection issues

2001 Results P

resentation2001 R

esults Presentation

50

Online growth continuesOnline growth continues

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Sep-9

9

Dec-9

9

Ma

r-00

Jun-0

0

Sep-0

0

Dec-0

0

Ma

r-01

Jun-0

1

Sep-0

1

Australia New Zealand

On-line Banking

0

10,000

20,000

30,000

40,000

50,000

60,00070,000

80,000

90,000

100,000

Sep-9

9

Dec-9

9

Ma

r-00

Jun-0

0

Sep-0

0

Dec-0

0

Ma

r-01

Jun-0

1

Sep-0

1

On-line Broking - Australia

1,140,000* 93,000*

* 30 September 2001

2001 Results P

resentation2001 R

esults Presentation

51

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

25,000

27,000

Jun1999

Sep1999

Dec1999

Mar2000

Jun2000

Sep2000

Dec2000

Mar2001

Jun2001

Sep2001

+10%

+2.5%

CAGR

Source: ASSIRT

ISPTWestpac Property

Trust

Total Funds Under Management

Retail Funds Under Management

$m

Growth in retail FUMGrowth in retail FUM

2001 Results P

resentation2001 R

esults Presentation

52

Business banking Business banking --stressed loansstressed loans

Watchlist & below Impaired Assets

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

1997 1998 1999 2000 20010.0%

0.4%

0.8%

1.2%

1.6%

2.0%

1997 1998 1999 2000 2001

% of total business banking commitments

2001 Results P

resentation2001 R

esults Presentation

53

2001 results presentation - westpac · tsr (rolling 3yr) top quartile 57th ... 1,038 1,142 0 200...

Documents