delivering value through customer focus · investor presentation, october 2001 • australasian...

Investor Presentation, O

ctober 2001Investor P

resentation, October 2001

1

Delivering valueDelivering valuethroughthroughcustomer focuscustomer focusPhil ChronicanChief Financial Officer




• Australasian focussed – Australia, New Zealand& near Pacific

• Customer focussed with a customer centricorganisational structure

• A high-return, high-growth wealth managementbusiness

• Multi-channel integrated delivery network

• Strategy is delivering growth and high returns

Strategic focusStrategic focus




3

Large Large diversifieddiversified Australasian Australasiancustomer basecustomer base

7.82.3K0.797.01Total

0.280.2K0.140.14Pacific &other

1.230.2K0.151.08NewZealand

6.301.9K0.505.80Australia

TotalInstitutionalSMEPersonalmillions




4

0

3

6

9

12

CBA WBC NAB ANZ

Australian Customer Numbers

Franchise comparisonFranchise comparison

Source company records & JPMorgan

mill

ion

s




Customer-centric structureCustomer-centric structure

Servicing &Processing

Servicing &Processing

ProductSolutionsProduct

SolutionsSales &

MarketingSales &

Marketing

Shaun MaysWealth Management

Olga ZoutendijkBusiness Products

Ken DouglasConsumer Products

Corporate & Institutional Corporate & Institutional

Jim L’EstrangeConsumer

Personal

Priority

Private

Paul LilleyBusiness

BusinessDirectMiddleMarket

Greg ConwayOperations

Mary Ann MaxwellInformation Technology

Sally HermaneBusiness

David Clarke

Corporate & Institutional

David Willis

David ClarkeTBA




6

The opportunity is largeThe opportunity is large

• 88% of Australian customer base and 81% of priority

customers do not have a wealth management product

• 94% of Business Customers have their super with another

financial institution

– 39% of these have their super with another Bank

• Priority customers up 28% in past year yet still only 24% of

total retail base in Australia

• Credit cards outstandings grew by 33% and market share

by 1.4% to 20.3%, to March 2001, yet only 24% of our

Australian customers hold a card with us




7

020406080

100120140160180200

1997 1998 1999 2000 YTD-June2001

Wes

tpac

No.

Pol

icie

s So

ld

(000

's)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Mar

ket

Shar

e

Westpac No. Policies Sold Market share

General Insurance Business

Market shareMarket share

Source: ABA

$b$b

$b$b %%

%%

Source: APRA

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

Westpac NAB ANZ CBA

Business Loans Market Share MovementJune-99 to June-01

Source: APRA

Home Loans, Investment & Equity Loans

25

30

35

40

45

50

55

60

Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-010

5

10

15

20

25

Outstandings (LHS) Market share (RHS)

Credit Card Outstandings

0

1

2

3

4

5

Mar-99Jun-99 Sep-99

Dec-99

Mar-00Jun-00 Sep-00

Dec-00

Mar-01Jun-0110

12

14

16

18

20

22

Outstandings (LHS) Market share (RHS)

%%




8

Quarterly Retail Inflow Trend

Investment fund inflows improvingInvestment fund inflows improving

Mar`99 Jun`99 Sep`99 Dec`99 Mar`00 Jun`00 Sep`00 Dec`00 Mar`01 Jun`01

$m

Source: ASSIRT

0

100

200

300

400

500

600




9

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 August 2001




10

Wealth managementWealth management

+14.0%

- 0.1%

CAGR

Good growth in retail FUM

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

25,000

27,000

Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01

Total Funds Under Management

Retail Funds Under Management

ISPT

WestpacProperty Trust

$m




11Source Morningstar, Open Funds >$10m

Strong retail funds performanceStrong retail funds performance% of Funds Meeting or Exceeding Peer Group Median

0%

20%

40%

60%

80%

100%

Aug-99 Nov-99 Feb-00 May-00 Aug-00 Nov-00 Feb-01 May-01 Aug-01

55%Equal

4th

0%

20%

40%

60%

80%

100%

Aug-99 Nov-99 Feb-00 May-00 Aug-00 Nov-00 Feb-01 May-01 Aug-01

55%Equal

4th




12

Resulting in a high growth andResulting in a high growth andhigh return wealth managementhigh return wealth managementbusinessbusiness

Source: Westpac Financial Services Group Statutory Accounts

90 101

254

149148

1997 1998 1999 2000 1H 2001

NPAT $m

29% CAGR* 195

Embedded value uplift * Excluding accounting impacts

90 101

254

149148

1997 1998 1999 2000 1H 2001

NPAT $m

29% CAGR* 195

Embedded value upliftEmbedded value uplift * Excluding accounting impacts




13

Multi channel delivery *Multi channel delivery *

1,499ATMs

1,000,000Internetregistrations

2,900,000Telephone bankingregistrations

183In-stores

621Branches &agencies

* Australian points of representation, September 2001.




14

Our focus on core valuableOur focus on core valuablecustomers has generated the bestcustomers has generated the bestorganic growth in the sectororganic growth in the sector

Revenue Growth*Rank: 1

Return on Equity(reported) Rank: 1

Cost to Income Ratio(reported) Rank: 2

10.39.5

6.3

3.9

0

5

10

15

WBC ANZ NAB # CBA

%

* Adjusted for acquisitions, divestments, one-offs and non-cash items.# Revenue growth for NAB for traditional banking business only.

20.919.5 18.9

13.3

0

5

10

15

20

25

WBC ANZ NAB CBA

52.2

49.4

53.1

55.6

40

45

50

55

60

WBC ANZ NAB CBA

%

%

NPAT Growth*Rank: 1

14

10

4

-2-3

2

7

12

WBC ANZ NAB CBA

%




15

Double digit core earnings growthDouble digit core earnings growthhas been achieved for over 3 yearshas been achieved for over 3 years

$mCompound Annual

Growth Rate

Expenses

1H99 - 1H01

Revenue

Core earnings

7%

1%

15%1,000

1,500

2,000

2,500

3,000

3,500

2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H01

Revenue Expenses (excl. goodwill) Core earnings




16

• The key value driver will be revenue growth

• Our 4 year average growth has been 7% p.a.

• The medium term outlook will depend on:

Financial settingsFinancial settings

• GDP growth• Credit growth• Margin contraction• Non-interest income

• 3 – 4 percent p.a.• 8 – 10 percent p.a.• 10 – 14 basis points p.a.• 8 – 10 percent p.a.

Driver Base Assumption

Net impact: 5.5 to 6.5% p.a. without majormarket share change




• We seek to keep our core business nominalexpenses broadly flat (i.e. 0 - 2% pa)

• Bad debt cycle to peak in 2001/2002 beforereturning to ‘normal’ levels

• Range of 25 - 35 points of interest earningassets is reasonable

• In 2002 the Corporate tax rate reduces to 30%from 34%

• On average our tax expense should be in the 29- 31% range over the foreseeable period

Financial settingsFinancial settings




Summary of driversSummary of driversMedium Term Outlook

Revenue Growth% 5.5 - 6.5Expense Growth% 0 - 2UP Growth% 11-13Bad Debts bps 25 - 35Tax Rate 29 - 31%NPAT Growth% 8 - 13Surplus Capital 3-4%

Resulting in business growth generatingdouble digit EPS growth without stretching

assumptions.




Market dynamicsMarket dynamics

• Economic climate betterthan anticipated

• Basel capital adequacyframework

• Business tax reform,and

• Further marketconsolidation

• Economic growth not asstrong as anticipated

• Worsening credit cycle

• Greater margincompression

• Regulatory changes

• Changes in businessvolumes may affect ourflat expense objective

Opportunities Risks




20

• Market concerns re high profile corporatefailures, including:

– Ansett – HIH– Pasminco – OneTel

• Westpac’s earnings position intact as at 20September

– Strong revenue growth covering higher baddebt expense

– One-off gains to cover one-off loss in AGC– Dynamic provisioning and good credit

forecasting prepared us for major impacts• Remainder of credit book well diversified and in

good shape

Credit position and outlookCredit position and outlook




21

Overall delinquency trendsOverall delinquency trendsremain very stableremain very stable

Mass market/personal - Group *

%

0.40

0.44 0.43

0.45

0.440.33

0.34

0.33

0.0

0.3

0.6

0.9

1.2

1.5

Sep-98

Mar-99

Sep-99

Mar-00

Sep-0

0

Mar-01

* > 90 day delinquencies for all secured and unsecured personal products.

1.91

1.43

1.501.511.72

1.53 1.471.22

0.0

0.5

1.0

1.5

2.0

2.5

Sep-98

Mar-99

Sep-99

Mar-00

Sep-00

Mar-01

Business banking - Australia

%

Aug-01

Aug-01

Jun-0

1

Jun-0

1




22

… and mortgage & other consumer… and mortgage & other consumerdelinquencies within expectationsdelinquencies within expectations

1.04

0.640.38

0.26

0.33 0.3

0.260.250.0

0.3

0.6

0.9

1.2

1.5

Sep-96Dec-

96Mar-

97Ju

n-97

Sep-97Dec-

97Mar-

98Ju

n-98

Sep-98Dec-

98Mar-

99Ju

n-99

Sep-99Dec-

99Mar-

00Ju

n-00Sep

-00Dec-

00Mar-

01Ju

n-01

%

Sep 96 Sep 97 Sep 98 Sep 99 Sep 00 Aug 01

90 days Past DueMortgage Loans

90 days Past Due OtherConsumer Loans

1.68

0.790.810.920.77

1.111.07

1.23

0.0

0.3

0.6

0.9

1.2

1.5

1.8

Sep-96Dec

-96Mar-

97Ju

n-97Sep

-97Dec

-97Mar-

98Ju

n-98Sep

-98Dec

-98

Mar-99Ju

n-99Sep

-99Dec

-99

Mar-00Ju

n-00

Sep-00Dec

-00

Mar-01Ju

n-01

%

Sep 96 Sep 97 Sep 98 Sep 99 Sep 00 Aug 01




23

BBB+ to BBB-

BB+ to B+

<B+

A+ to A-

AAA to AA-

65%

5%

30%

Business/Institutional

ConsumerMortgages

OtherConsumer

Mostly investment gradeMostly investment gradeportfolio exposures *portfolio exposures *

* Total Committed Exposure - 31 March 2001

Total WestpacGroup

Business/Institutionalcredit grade mix

20 %

15 %14 %

15 %

1.3 %




24

Industry exposure diversifiedIndustry exposure diversifiedCredit exposures to governments, corporations and businesses*

* 30 June 2001, excluding banks. The cluster names are short titles for groups of similar industries.

% Group Total Committed Exposure0 1 2 3 4 5 6 7 8

Substantial non-bank financiersPropertyGovernmentDurable products manufactureOther agriculture & servicesElectricity, gas & waterPetroleum refining & chemicalsRetailingBusiness technical servicesGrain, sheep & poultryInsuranceHotels & restaurants Metal mining & servicesNon-residential constructionTransport & storageWholesalingOther transport, equipment & services Motor vehicle tradeHospitals & health servicesRecreation servicesFood manufactureForestry, printing & paper productsTelecommunicationsIron & steel manufactureMining other

0 1 2 3 4 5 6 7 8

Substantial non-bank financiersPropertyGovernmentDurable products manufactureOther agriculture & servicesElectricity, gas & waterPetroleum refining & chemicalsRetailingBusiness technical servicesGrain, sheep & poultryInsuranceHotels & restaurants Metal mining & servicesNon-residential constructionTransport & storageWholesalingOther transport, equipment & services Motor vehicle tradeHospitals & health servicesRecreation servicesFood manufactureForestry, printing & paper productsTelecommunicationsIron & steel manufactureMining other




25

Limited single nameLimited single nameexposure concentrationsexposure concentrations

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

Credit exposures* to Top 10 corporations and NBFIsRating

(S&P 30 June)AAA

A-

A+

A+

A+

AA

A

AAA

A

A+

0 2 4 6 8 10 12

10

9

8

7

6

5

4

3

2

1

Co

rpo

rate

s &

NB

FIs




26

Comparatively low level ofComparatively low level ofimpaired assets...impaired assets...

Impaired Assets / Loans(International Peer Comparison *)

Westpac

*Based on most recent published results – August 2001.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

CB

A

WB

C

BK

WB

NA

B

PN

C

AN

Z

WF

C

TD

FB

F

JPM

/Ch

ase

RB

C

BM

O

CIB

C

BA

C

ON

E

BN

S

Australian Peers US Peers Canadian Peers




27

Comparatively well provisionedComparatively well provisionedTotal Provisions / Impaired Assets

(International Peer Comparison *)

Westpac

* Based on most recent published results- August 2001.

0%

50%

100%

150%

200%

250%

300%

BM

O

BN

S

RB

C

CIB

C

BA

C

TD

ON

E

JPM

/Cha

se

AN

Z

NA

B

PN

C

WB

C

FBF

CB

A

WF

C

WB BK

Australian Peers US Peers Canadian Peers




Looking aheadLooking ahead




29

Organic growthOrganic growth

Focus Actions• Wealth management • Expanding number of

advisors and planners

• Accessing & integratingbest of breed products

• Matching services to needs

• Building industry expertise

• CRM driven solutions

• Small / medium businesses

• Segmentation focus

• Invest in CRM, training

• Referral & leadsmanagement program

• Consumer share of wallet




30

Focusing on our strengths andFocusing on our strengths andlooking beyondlooking beyond

• Geographic focus remains Australia, NewZealand & near Pacific

• Strategic growth opportunities, subject tostrict criteria:– Australasian consolidation– Australasian convergence

• Value will lie in ability to accelerateachievement of targets earlier




31

Capital ManagementCapital Management

• Organic capital generated from 20+%ROE

• Add dividend reinvestment plan

• Expect to be through top of targetranges by end of calendar year

• Buybacks likely to be on agenda in earlycalendar 2002




32

In shortIn short

• Strong growth and returns

• Major opportunities in our customerbase

• Relentless focus on customers - gettingthe basics right

• Risk management practices provingtheir worth

delivering value through customer focus · investor presentation, october 2001 • australasian...

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