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 7, 2019

 

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-F          ____ x _____                   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): ___________

 


 

Incorporation by Reference

 

The information contained in Exhibit 1 to this Report on Form 6-K (excluding the “Auditor’s Independence Declaration” on page 97 and the “Independent auditor’s review report to the members of Westpac Banking Corporation” on page 148 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, 333-228294 and 333-220373), as such prospectuses may be amended or supplemented from time to time.

 

 

Index to Exhibits

 

Exhibit
No.

 

Description

 

 

 

1

 

2019 Interim Financial Results – prepared for distribution in the United States of America

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

101.LAB

 

XBRL Taxonomy Extension Labels Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 


 

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 7, 2019

By:

/s/ Yvette Adiguzel

 

 

Yvette Adiguzel

 


Exhibit 1

 

 

 

 

 

 

 

 

 

2019

Interim

Financial

Results

 

 

 

 

 

 

 

THE INTERIM FINANCIAL RESULTS ANNOUNCEMENT HAS BEEN

 

PREPARED FOR DISTRIBUTION IN THE UNITED STATES OF AMERICA

 

 

 

 

 

 

 

 

 

 


 

2019 Interim financial results

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 2019 (First Half 2019). Throughout this Interim Financial Results Announcement, we also refer to the six months ended 31 March 2018 (First Half 2018) and the six months ended 30 September 2018 (Second Half 2018).

 

The selected financial information for First Half 2019, First Half 2018 and Second Half 2018 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 2019. 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$0.7104, 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 30 March 2019. Refer to Section 5.5 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 2019, Second Half 2018 and First Half 2018.

 

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

 

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 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:

 

·      Material items that key decision makers at the Westpac Group believe do not reflect the Group’s operating performance;

 

·      Items that are not considered when dividends are recommended, such as the amortisation of intangibles, impact of Treasury shares and economic hedging impacts; and

 

·      Accounting reclassifications between individual line items that do not impact reported results.

 

Outlined in Section 6.1 are the cash earnings adjustments to the reported result.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

ii |  Westpac Group 2019 Interim Financial Results Announcement

 

 


 

2019 Interim financial results

Introduction

 

 

 

Disclosure regarding forward-looking statements

 

This Interim Financial Results Announcement (Results Announcement) contains statements that constitute ‘forward-looking statements’ within the meaning of Section 21E of the US 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 Results Announcement and include statements regarding Westpac’s intent, belief or current expectations with respect to its business and operations, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions and financial support to certain borrowers. Words such as ‘will’, ‘may’, ‘expect’, ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘estimate’, ‘anticipate’, ‘believe’, ‘probability’, ‘risk’, ‘aim’ or other similar words are used to identify forward-looking statements. These forward-looking statements reflect Westpac’s current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond Westpac’s control, and have been made based upon management’s expectations and beliefs concerning future developments and their potential effect upon Westpac. There can be no assurance that future developments will be in accordance with Westpac’s expectations or that the effect of future developments on Westpac will be those anticipated. Actual results could differ materially from those expected, depending on the outcome of various factors, including, but not limited to:

 

·      the effect of, and changes in, laws, regulations, taxation or accounting standards or practices and government policy, particularly changes to liquidity, leverage and capital requirements;

 

·      regulatory investigations and other actions, inquiries, litigation, fines, penalties, restrictions or other regulator imposed conditions, including as a result of our actual or alleged failure to comply with laws (such as financial crime laws), regulations or regulatory policy;

 

·      internal and external events which may adversely impact Westpac’s reputation;

 

·      information security breaches, including cyberattacks;

 

·      reliability and security of Westpac’s technology and risks associated with changes to technology systems;

 

·      the stability of Australian and international financial systems and disruptions to financial markets and any losses or business impacts Westpac or its customers or counterparties may experience as a result;

 

·      market volatility, including uncertain conditions in funding, equity and asset markets;

 

·      an increase in defaults in credit exposures because of a deterioration in economic conditions;

 

·      adverse asset, credit or capital market conditions;

 

·      the conduct, behaviour or practices of Westpac or its staff;

 

·      changes to Westpac’s credit ratings or the methodology used by credit rating agencies;

 

·      levels of inflation, interest rates, exchange rates and market and monetary fluctuations;

 

·      market liquidity and investor confidence;

 

·      changes in economic conditions, consumer spending, saving and borrowing habits in Australia, New Zealand and other countries in which Westpac or its customers or counterparties conduct their operations and Westpac’s ability to maintain or to increase market share, margins and fees, and control expenses;

 

·      the effects of competition, including from established providers of financial services and from non-financial services entities, in the geographic and business areas in which Westpac conducts its operations;

 

·      the timely development and acceptance of new products and services and the perceived overall value of these products and services by customers;

 

·      the effectiveness of Westpac’s risk management policies, including internal processes, systems and employees;

 

·      the incidence or severity of Westpac-insured events;

 

·      the occurrence of environmental change (including as a result of climate change) or external events in countries in which Westpac or its customers or counterparties conduct their operations;

 

·      changes to the value of Westpac’s intangible assets;

 

·      changes in political, social or economic conditions in any of the major markets in which Westpac or its customers or counterparties operate;

 

·      the success of strategic decisions involving diversification or innovation, in addition to business expansion activity, business acquisitions and the integration of businesses; and

 

·      various other factors beyond Westpac’s control.

 

 

Westpac Group 2019 Interim Financial Results Announcement | iii

 


 

2019 Interim financial results

Introduction

 

 

 

The above list is not exhaustive. For certain other factors that may impact on forward-looking statements made by Westpac, refer to ‘Risk factors’ in the Directors’ report in this Results Announcement. When relying on forward-looking statements to make decisions with respect to Westpac, investors and others should carefully consider the foregoing factors and other uncertainties and events.

 

Westpac is under no obligation to update any forward-looking statements contained in this Results Announcement, whether as a result of new information, future events or otherwise, after the date of this Interim Financial Results Announcement.

 

References to websites

 

Information contained in or accessible through the websites mentioned in this Results Announcement does not form part of this Results Announcement unless we specifically state that it is incorporated by reference and forms part of this Results Announcement. All references in this Results Announcement to websites are inactive textual references and are for information only.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

iv | Westpac Group 2019 Interim Financial Results Announcement

 

 


 

2019 Interim financial results

Table of contents

 

 

 

Index

 

1.0

Group results

2

 

1.1

Reported results

2

 

1.2

Key financial information

4

 

1.3

Market share and system multiple metrics

6

2.0

Review of Group operations

7

 

2.1

Performance overview

7

 

2.2

Review of reported results

15

 

2.3

Credit quality

31

 

2.4

Balance sheet and funding

34

 

2.5

Capital and dividends

39

 

2.6

Sustainability performance

45

3.0

Divisional results

50

 

3.1

Consumer Bank

52

 

3.2

Business Bank

55

 

3.3

BT Financial Group (Australia)

57

 

3.4

Westpac Institutional Bank

62

 

3.5

Westpac New Zealand

65

 

3.6

Group Businesses

68

4.0

2019 Interim Financial Report

 

 

4.1

Directors’ report

71

 

4.2

Consolidated income statement

99

 

4.3

Consolidated statement of comprehensive income

100

 

4.4

Consolidated balance sheet

101

 

4.5

Consolidated statement of changes in equity

102

 

4.6

Consolidated cash flow statement

103

 

4.7

Notes to the consolidated financial statements

104

 

4.8

Statutory statements

147

5.0

Other information

150

 

5.1

Credit ratings

150

 

5.2

Dividend reinvestment plan

150

 

5.3

Changes in control of Group entities

150

 

5.4

Financial calendar and Share Registry details

151

 

5.5

Exchange rates

154

 

5.6

Group earnings reconciliation

155

6.0

Cash earnings supplementary information

158

 

6.1

Cash earnings adjustments

158

7.0

Glossary

160

 

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

 

Interim Results Announcement

6 May 2019

Ex-dividend date for interim dividend

16 May 2019

Record date for interim dividend (Sydney)

17 May 2019

Interim dividend payable

24 June 2019

Final Results Announcement (scheduled)

4 November 2019

 

 

Westpac Group 2019 Interim Financial Results Announcement | 1

 


 

2019 Interim financial results

Group results

 

 

 

1.0      Group results

 

1.1       Reported results 1

 

Reported net profit attributable to owners of Westpac Banking Corporation is prepared in accordance with the requirements of Australian Accounting Standards (AAS) and regulations applicable to Australian Authorised Deposit-taking Institutions (ADIs). During First Half 2019, Westpac adopted AASB 9 Financial Instruments (AASB 9) and AASB 15 Revenue from Contracts with Customers (AASB 15). As the Group chose to apply the standards prospectively, comparatives have not been restated.

 

Adopting the new standards has resulted in measurement and classification differences between First Half 2019 and prior periods.  The significant differences are:

 

·     the measurement of credit loss provision and impairment charges are now on an expected loss basis;

 

·     line fees (mainly Business Bank) are now recognised in net interest income, previously recognised in net fee income;

 

·     interest on performing loans is now measured on the gross loan value. Previously, interest was recognised on the loan balance net of impairment provision; and

 

·     certain items previously netted are now presented on a gross basis, including payments from credit card schemes which were previously netted against related expenditure.

 

The changes have little impact on net profit but do impact individual line items.  As these changes have only been applied from 1 October 2018, it is difficult to compare line items across periods.  These changes are discussed further in Note 1 of the 2019 Interim Financial Report.

 

 

Half Year

 

Half Year

 

Half Year

 

Half Year

 

% Mov’t 2

 

% Mov’t 2

 

 

March 19

 

March 19

 

Sept 18

 

March 18

 

Mar 19 -

 

Mar 19 -

 

$m

 

US$

 

A$

 

A$

 

A$

 

Sept 18

 

Mar 18

 

Net interest income

 

5,870 

 

8,263 

 

8,227 

 

8,278 

 

 

 

Net fee income

 

587 

 

826 

 

1,146 

 

1,278 

 

(28)

 

(35)

 

Net wealth management and insurance income

 

232 

 

326 

 

1,110 

 

951 

 

(71)

 

(66)

 

Trading income

 

310 

 

437 

 

458 

 

487 

 

(5)

 

(10)

 

Other income

 

90 

 

127 

 

(17)

 

89 

 

 large

 

43 

 

Net operating income before operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

and impairment charges

 

7,089 

 

9,979 

 

10,924 

 

11,083 

 

(9)

 

(10)

 

Operating expenses

 

(3,616)

 

(5,091)

 

(4,911)

 

(4,655)

 

 

 

Net profit before impairment charges and

 

 

 

 

 

 

 

 

 

 

 

 

 

income tax expense

 

3,473 

 

4,888 

 

6,013 

 

6,428 

 

(19)

 

(24)

 

Impairment charges

 

(237)

 

(333)

 

(317)

 

(393)

 

 

(15)

 

Profit before income tax

 

3,236 

 

4,555 

 

5,696 

 

6,035 

 

(20)

 

(25)

 

Income tax expense

 

(980)

 

(1,379)

 

(1,797)

 

(1,835)

 

(23)

 

(25)

 

Net profit for the period

 

2,256 

 

3,176 

 

3,899 

 

4,200 

 

(19)

 

(24)

 

Net profit attributable to non-controlling interests

 

(2)

 

(3)

 

(2)

 

(2)

 

50 

 

50 

 

Net profit attributable to owners of Westpac

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking Corporation

 

2,254 

 

3,173 

 

3,897 

 

4,198 

 

(19)

 

(24)

 

Effective tax rate

 

30.3%

 

30.3%

 

31.5%

 

30.4%

 

(128bps)

 

(14bps)

 

 

 

 

 

 

 

 

 

 

 

1       The Group has adopted AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers from 1 October 2018. Statutory comparatives have not been restated. Refer to Note 1 in Section 4 for further detail. In addition, during First Half 2019, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Both statutory and cash earnings comparatives have been restated. Refer to Note 1 in Section 4 for further detail.

2      Percentage movement represents an increase / (decrease) to the relevant comparative period.

 

2 | Westpac Group 2019 Interim Financial Results Announcement

 


 

2019 Interim financial results

Group results

 

 

 

Net profit attributable to owners of Westpac Banking Corporation for First Half 2019 was $3,173 million, a decrease of $1,025 million or 24% compared to First Half 2018. First Half 2019 included significant provisions for estimated customer refunds, payments and associated costs, and costs associated with the restructuring of the Wealth business, which together reduced net profit after tax by $753 million. These items are discussed further in Section 2.1 and in Note 14 of the 2019 Interim Financial Report.

 

Net interest income decreased $15 million compared to First Half 2018. Average interest-earning assets grew 4% mostly from total loan growth but this was more than offset by a net interest margin decrease of 7 basis points to 2.09%. The movement in net interest income included:

 

·      $212 million of provisions for estimated customer refunds and payments;

 

·      a net reduction from economic hedges of $123 million; and

 

·      lower revenue from our Treasury division outweighed the growth in other divisions; offset by

 

·      an increase of $330 million due to the reclassification of line fees from net fee income to interest income.

 

Net interest income, loans, deposits and other borrowings and net interest margin are discussed further in Sections 2.2.1 to 2.2.4.

 

Net fee income decreased $452 million or 35% compared to First Half 2018 primarily due to the reclassification of line fees to net interest income and a $165 million impact of provisions for estimated customer refunds and payments.

 

Net wealth management and insurance income decreased $625 million or 66% compared to First Half 2018 primarily due to additional provisions for estimated customer refunds and payments of $435 million, higher general insurance claims and lower wealth management income due to changes in pricing structure, the cessation of grandfathered commissions and the exit of Hastings in Second Half 2018.

 

Trading income decreased $50 million or 10% due to lower income in the markets business.

 

Other income increased $38 million or 43% mainly due to the profit on sale of an associate.

 

Net fee income, net wealth management and insurance income, trading income and other income are discussed further in Section 2.2.5.

 

Operating expenses increased $436 million or 9% compared to First Half 2018. The rise was mainly due to:

 

·      $84 million of provisions for estimated costs associated with implementing customer refunds and payments;

 

·      $190 million of provisions for the restructuring of the Wealth business; and

 

·      $162 million increase in other costs including $97 million of higher costs associated with the Group’s investment program, largely across banking and wealth platforms.

 

Operating expenses are discussed further in Section 2.2.8.

 

Impairment charges were $60 million or 15% lower compared to First Half 2018. Asset quality remained sound, with stressed exposures as a percentage of total committed exposures at 1.10%, up 1 basis point compared to First Half 2018. Impairment charges are discussed further in Section 2.2.9.

 

The effective tax rate of 30.3% was lower than the First Half 2018 effective tax rate of 30.4%. Income tax expense is discussed further in Section 2.2.10.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Westpac Group 2019 Interim Financial Results Announcement | 3

 


 

2019 Interim financial results

Group results

 

 

 

1.2                     Key financial information 1

 

 

Half Year

 

Half Year

 

Half Year

 

Half Year

 

% Mov’t

 

% Mov’t

 

 

March 19

 

March 19

 

Sept 18

 

March 18

 

Mar 19 -

 

Mar 19 -

 

 

 

US$

 

A$

 

A$

 

A$

 

Sept 18

 

Mar 18

 

Shareholder value

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per ordinary share (cents) 2

 

65.6 

 

92.3 

 

113.8 

 

123.7 

 

(19)

 

(25)

 

Weighted average ordinary shares (millions) 3

 

3,436 

 

3,436 

 

3,421 

 

3,392 

 

 

 

Fully franked dividends per ordinary share (cents)

 

67 

 

94 

 

94 

 

94 

 

 

 

Return on average ordinary equity 4

 

10.05%

 

10.05%

 

12.34%

 

13.79%

 

(229bps)

 

(374bps)

 

Average ordinary equity ($m) 5

 

45,002 

 

63,348 

 

62,978 

 

61,051 

 

 

 

Average total equity ($m) 6

 

45,039 

 

63,400 

 

63,026 

 

61,065 

 

 

 

Net tangible asset per ordinary share ($) 7

 

10.74 

 

15.12 

 

15.39 

 

15.00 

 

(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business performance

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest spread 8

 

1.89%

 

1.89%

 

1.92%

 

2.00%

 

(3bps)

 

(11bps)

 

Benefit of net non-interest bearing assets,

 

 

 

 

 

 

 

 

 

 

 

 

 

liabilities and equity 9

 

0.20%

 

0.20%

 

0.18%

 

0.16%

 

2bps

 

4bps

 

Net interest margin 10

 

2.09%

 

2.09%

 

2.10%

 

2.16%

 

(1bps)

 

(7bps)

 

Average interest-earning assets ($m)

 

564,526 

 

794,660 

 

782,834 

 

767,011 

 

 

 

Expense to income ratio 11

 

51.01%

 

51.02%

 

44.96%

 

42.00%

 

large

 

large

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital, funding and liquidity

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity Tier 1 capital ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

- APRA Basel III

 

10.64%

 

10.64%

 

10.63%

 

10.50%

 

1bps

 

14bps

 

- Internationally comparable 12

 

16.17%

 

16.17%

 

16.14%

 

16.13%

 

3bps

 

4bps

 

Credit risk weighted assets (credit RWA) ($m)

 

257,706 

 

362,762 

 

362,749 

 

361,391 

 

-

 

-

 

Total risk weighted assets (RWA) ($m)

 

298,239 

 

419,819 

 

425,384 

 

415,744 

 

(1)

 

 

Liquidity coverage ratio (LCR)

 

138%

 

138%

 

133%

 

134%

 

large

 

351bps

 

Net stable funding ratio (NSFR)

 

113%

 

113%

 

114%

 

112%

 

(54bps)

 

81bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset quality

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross impaired exposures to gross loans

 

 

 

0.24%

 

0.20%

 

0.22%

 

4bps

 

2bps

 

Gross impaired exposures to equity and

 

 

 

 

 

 

 

 

 

 

 

 

 

total provisions

 

 

 

2.57%

 

2.09%

 

2.33%

 

48bps

 

24bps

 

Gross impaired exposures provisions to

 

 

 

 

 

 

 

 

 

 

 

 

 

gross impaired exposures 13

 

 

 

45.74%

 

46.12%

 

45.54%

 

(38bps)

 

20bps

 

Total committed exposures (TCE) ($m)

 

 

 

1,046,776 

 

1,038,006 

 

1,023,017 

 

 

 

Total stressed exposures as a % of TCE

 

 

 

1.10%

 

1.08%

 

1.09%

 

2bps

 

1bps

 

Total loan provisions to gross loans

 

 

 

56bps

 

43bps

 

45bps

 

13bps

 

11bps

 

Mortgages 90+ day delinquencies

 

 

 

0.75%

 

0.67%

 

0.65%

 

8bps

 

10bps

 

Other consumer loans 90+ day delinquencies

 

 

 

1.80%

 

1.64%

 

1.64%

 

16bps

 

16bps

 

Collectively assessed provisions to credit RWA

 

 

 

98bps

 

73bps

 

75bps

 

25bps

 

23bps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet ($m) 14

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

507,437 

 

714,297 

 

709,690 

 

701,393 

 

 

 

Total assets

 

633,010 

 

891,062 

 

879,592 

 

871,855 

 

 

 

Deposits and other borrowings

 

394,277 

 

555,007 

 

559,285 

 

547,736 

 

(1)

 

 

Total liabilities

 

587,591 

 

827,127 

 

815,019 

 

809,190 

 

 

 

Total equity

 

45,419 

 

63,935 

 

64,573 

 

62,665 

 

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth Management

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Group funds ($bn) 15

 

147.3 

 

207.3 

 

217.3 

 

217.3 

 

(5)

 

(5)

 

Life insurance in-force premiums (Australia) ($m)

 

894 

 

1,259 

 

1,277 

 

1,276 

 

(1)

 

(1)

 

General insurance gross written premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

(Australia) ($m)

 

184 

 

259 

 

252 

 

251 

 

 

 

 

 

 

 

 

 

4 | Westpac Group 2019 Interim Financial Results Announcement

 

 


 

2019 Interim financial results

Group results

 

 

 

1

 

The Group has adopted AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers from 1 October 2018. Statutory comparatives have not been restated. Refer to Note 1 in Section 4 for further detail. In addition, during First Half 2019, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Both statutory and cash earnings comparatives have been restated. Refer to Note 1 in Section 4 for further details

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.

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).

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

 

Refer to Glossary for definition.

13

 

Impairment provisions relating to impaired loans include individually assessed provisions plus the proportion of the collectively assessed provisions that relate to impaired exposures.

14

 

Spot balances.

15

 

Averages are based on a six month period.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Westpac Group 2019 Interim Financial Results Announcement | 5

 


 

2019 Interim financial results

Group results

 

 

 

1.3                     Market share and system multiple metrics

 

1.3.1     Market share

 

 

 

 

 

 

As at

 

As at

 

As at

 

 

 

 

 

 

31 March

 

30 Sept

 

31 March

 

 

 

 

 

 

2019

 

2018

 

2018

 

Australia

 

 

 

 

 

 

 

 

 

 

 

Banking system (APRA) 1

 

 

 

 

 

 

 

 

 

 

 

Housing credit 2

 

 

 

 

 

24%

 

24%

 

25%

 

Cards

 

 

 

 

 

23%

 

23%

 

23%

 

Household deposits

 

 

 

 

 

23%

 

23%

 

23%

 

Business deposits

 

 

 

 

 

20%

 

20%

 

20%

 

Financial system (RBA) 3

 

 

 

 

 

 

 

 

 

 

 

Housing credit 2

 

 

 

 

 

23%

 

23%

 

23%

 

Business credit

 

 

 

 

 

18%

 

19%

 

19%

 

Retail deposits 4

 

 

 

 

 

21%

 

22%

 

21%

 

New Zealand (RBNZ) 5,6

 

 

 

 

 

 

 

 

 

 

 

Consumer lending

 

 

 

 

 

18%

 

19%

 

19%

 

Deposits

 

 

 

 

 

19%

 

18%

 

19%

 

Business lending

 

 

 

 

 

17%

 

16%

 

16%

 

Australian Wealth Management 7

 

 

 

 

 

 

 

 

 

 

 

Platforms (includes Wrap and Corporate Super)

 

 

 

 

 

18%

 

19%

 

18%

 

Retail (excludes Cash)

 

 

 

 

 

17%

 

18%

 

18%

 

Corporate Super

 

 

 

 

 

13%

 

13%

 

13%

 

 

 

 

 

 

 

 

 

 

 

1.3.2    System multiples

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Half Year

 

Half Year

 

Half Year

 

 

 

 

 

 

March 19

 

Sept 18

 

March 18

 

Australia

 

 

 

 

 

 

 

 

 

 

 

Banking system (APRA) 1

 

 

 

 

 

 

 

 

 

 

 

Housing credit 2

 

 

 

 

 

0.5

 

0.9

 

1.0

 

Cards 8

 

 

 

 

 

n/a

 

n/a

 

n/a

 

Household deposits

 

 

 

 

 

0.1

 

1.1

 

0.8

 

Business deposits 8

 

 

 

 

 

0.1

 

n/a

 

0.9

 

Financial system (RBA) 3

 

 

 

 

 

 

 

 

 

 

 

Housing credit 2

 

 

 

 

 

0.5

 

0.8

 

0.9

 

Business credit 8

 

 

 

 

 

n/a

 

0.6

 

0.9

 

Retail deposits 4,8

 

 

 

 

 

n/a

 

1.3

 

0.6

 

New Zealand (RBNZ) 5,6

 

 

 

 

 

 

 

 

 

 

 

Consumer lending

 

 

 

 

 

0.4

 

0.6

 

0.7

 

Deposits

 

 

 

 

 

1.4

 

0.1

 

1.2

 

 

 

 

 

 

 

 

 

 

1           Source: Australian Prudential Regulation Authority (APRA).

2           Includes securitised loans.

3           Source: Reserve Bank of Australia (RBA).

4           Retail deposits as measured by the RBA, financial system includes financial corporations’ deposits.

5           New Zealand comprises New Zealand banking operations.

6           Source: Reserve Bank of New Zealand (RBNZ).

7           Market Share Funds under Management / Funds under Administration based on published market share statistics from Strategic Insight as at 31 December 2018 (for First Half 2019), as at 30 June 2018 (for Second Half 2018) and as at 31 December 2017 (for First Half 2018) and represents the BT Wealth business market share reported at these times.

8           n/a indicates that system growth or Westpac growth was negative.

 

6 | Westpac Group 2019 Interim Financial Results Announcement

 

 


 

 

2019 Interim financial results

Review of Group operations

 

 

 

2.0         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’.

 

2.1         Performance overview 1

 

Overview

 

 

Half Year

 

Half Year

 

Half Year

 

Half Year

 

% Mov’t

 

% Mov’t

 

 

March 19

 

March 19

 

Sept 18

 

March 18

 

Mar 19 -

 

Mar 19 -

 

$m

 

US$

 

A$

 

A$

 

A$

 

Sept 18

 

Mar 18

 

Net interest income

 

5,870 

 

8,263 

 

8,227 

 

8,278 

 

 

 

Net fee income

 

587 

 

826 

 

1,146 

 

1,278 

 

(28)

 

(35)

 

Net wealth management and insurance income

 

232 

 

326 

 

1,110 

 

951 

 

(71)

 

(66)

 

Trading income

 

310 

 

437 

 

458 

 

487 

 

(5)

 

(10)

 

Other income

 

90 

 

127 

 

(17)

 

89 

 

 large

 

43 

 

Net operating income before operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

and impairment charges

 

7,089 

 

9,979 

 

10,924 

 

11,083 

 

(9)

 

(10)

 

Operating expenses

 

(3,616)

 

(5,091)

 

(4,911)

 

(4,655)

 

 

 

Profit before impairment charges and

 

 

 

 

 

 

 

 

 

 

 

 

 

income tax expense

 

3,473 

 

4,888 

 

6,013 

 

6,428 

 

(19)

 

(24)

 

Impairment charges

 

(237)

 

(333)

 

(317)

 

(393)

 

 

(15)

 

Profit before income tax

 

3,236 

 

4,555 

 

5,696 

 

6,035 

 

(20)

 

(25)

 

Income tax expense

 

(980)

 

(1,379)

 

(1,797)

 

(1,835)

 

(23)

 

(25)

 

Net profit for the period

 

2,256 

 

3,176 

 

3,899 

 

4,200 

 

(19)

 

(24)

 

Net profit attributable to non-controlling interests

 

(2)

 

(3)

 

(2)

 

(2)

 

50 

 

50 

 

Net profit attributable to owners of Westpac

 

 

 

 

 

 

 

 

 

 

 

 

 

Banking Corporation

 

2,254 

 

3,173 

 

3,897 

 

4,198 

 

(19)

 

(24)

 

 

First Half 2019 has been another challenging period for financial services companies, including Westpac. In particular, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission), brought to light confronting stories and examples of poor behaviour affecting customers. This in turn has eroded public sentiment and trust in the financial services industry. Across the industry, firms such as Westpac are now working to respond to the findings of the Royal Commission’s final report (released 1 February 2019), as well as to remediate customer issues. These efforts will strengthen the focus on leadership, governance and culture, and create better outcomes for customers and shareholders. Westpac’s response to the Royal Commission is summarised later in this overview.

 

At the same time, the economic environment has softened over the last six months, with lower economic growth, subdued inflation and lower business and consumer sentiment. For financial services, this has contributed to more cautious demand for lending, a decline in deposit growth, and lower house prices. Although growth has slowed, competition has remained intense across the sector including from domestic and international banks and from non-bank operators.

 

With this backdrop, the reported net profit attributable to owners of WBC was $3,173 million in First Half 2019, a reduction of $724 million (or 19%) compared to Second Half 2018 and down $1,025 million (or 24%) from First Half 2018. The Group’s performance in First Half 2019 was impacted by two notable items: provisions for estimated customer refunds and payments (and associated costs) of $617 million (after tax); and provisions for costs associated with the reset of Westpac’s wealth strategy announced on 19 March 2019 ($136 million after tax). In First Half 2019, the majority of these items were recorded in BT Financial Group (BTFG) and the Business Bank. These notable items are explained in more detail later in this overview. For more information see Note 14 of the 2019 Interim Financial Report.

 

Excluding movements in notable items, net profit attributable to owners of WBC in First Half 2019 was $252 million lower, down 6% compared to Second Half 2018. Excluding notable items, the Business Bank, Westpac New Zealand, and Westpac Institutional Bank all increased cash earnings over the half. These increases were more than offset by a lower contribution from the Group’s Treasury operations, and higher insurance claims (from severe weather events) contributing to a lower BTFG result. Before notable items, the Consumer Bank result was relatively flat (down $7 million).

 

 

 

1           The Group has adopted AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers from 1 October 2018. Statutory comparatives have not been restated. Refer to Note 1 in Section 4 for further detail. In addition, during First Half 2019, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Both statutory and cash earnings comparatives have been restated. Refer to Note 1 in Section 4 for further detail.

 

Westpac Group 2019 Interim Financial Results Announcement | 7

 


 

2019 Interim financial results

Review of Group operations

 

 

 

In addition to the notable items mentioned above, reported net profit attributable to owners of WBC was also impacted by a fair value charge on economic hedges of $125 million in First Half 2019, compared to a $163 million benefit in Second Half 2018 (a net $289 million turnaround).

 

The strength of the Group’s balance sheet has been maintained. The Group’s common equity tier 1 ratio was 10.6% at 31 March 2019 and above APRA’s unquestionably strong benchmark. The liquidity coverage ratio (LCR) was higher at 138% (133% at September 2018) while the net stable funding ratio was little changed at 113% (114% at September 2018). Asset quality has also been little changed, with stressed exposures to total committed exposures up 2 basis points over the last six months and up 1 basis point over the last year. Within this measure, consumer delinquencies were higher, consistent with slower economic activity.

 

Dividends

 

While net profit attributable to owners of WBC was lower, the strength of the Group’s capital ratio and lower growth environment has enabled the Board to determine an interim ordinary dividend of 94 cents per share, fully franked, unchanged over both Second Half 2018 and First Half 2018.

 

The interim ordinary dividend represents a payout ratio of 102.0% and a dividend yield of 7.3% 1 . The payout ratio excluding notable items was 82.4%. The Board has determined to issue shares to satisfy the dividend reinvestment plan (DRP) for the interim 2019 dividend and to apply a 1.5% discount 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 22 May 2019. The discount to the DRP market price has been applied to give the Group additional capital flexibility including for regulatory changes to the measurement of capital and risk weighted assets likely to be announced in Second Half 2019.

 

The interim ordinary dividend will be paid on 24 June 2019 with the record date of 17 May 2019 2 . After allowing for the interim dividend, the Group’s adjusted franking account balance was $1,234 million.

 

The Government’s Bank Levy cost $193 million in First Half 2019, up from $192 million in Second Half 2018, and $186 million in First Half 2018. Despite the decline in net profit attributable to owners of WBC, the Levy increased as it is based on applicable liabilities which were higher over the period. The $193 million Bank Levy is equivalent to 4 cents per share and is included in net interest income where it reduced net interest margin by 5 basis points.

 

2019 priorities

 

As part of its Full Year 2018 Results Announcement, Westpac reiterated that its service strategy remains unchanged and is fundamental to its future. However, given the environment the Group highlighted its three priorities for 2019 were to: 1. Deal with outstanding issues, 2. Build momentum in the customer franchise and 3. Structural cost reduction. Discussion in this Performance Overview is structured in line with these priorities.

 

Dealing with outstanding issues

 

Over recent years, the Group has conducted extensive work across the organisation to review its products and operations, assess culture, and enhance governance. This has included: ongoing product reviews; finalising a detailed culture and governance assessment; resetting the Group’s wealth operations, exiting Hastings funds management and Ascalon and commencing the implementation of the recommendations from the Royal Commission’s Final Report. The Group is now accelerating the implementation of the changes needed to address the issues identified, further strengthen culture and accountability, and accelerating customer remediation.

 

The Royal Commission represents an inflection point for the industry, and Westpac. The Royal Commission Final Report’s recommendations raise important points of policy and principle for the industry and regulators. Westpac is actively responding to the findings with a detailed response plan that has Board oversight.

 

Of the 51 recommendations relevant to Westpac, around 10 are largely implemented. This includes the removal of grandfathered commission payments for its financial planners from 1 October 2018 and implementation of the Sedgwick Review recommendations for the Group’s employees. For other recommendations requiring action, preparatory work is underway or further guidance from government or regulators is required before substantive work can commence.

 

For more details on the Royal Commission refer to Section 4.1, Directors’ Report (Significant developments).

 

Culture, Governance and Accountability self-assessment

 

Westpac’s Culture, Governance and Accountability self-assessment (CGA) report was finalised in November 2018 and provided to APRA at that time. The report has assessed Westpac’s risk culture, governance and accountability frameworks and practices, and the impact they have on the management of non-financial risk. Work has commenced to implement the 45 actions recommended in the report to enhance governance, accountability and culture across Westpac and supplementary activities in these areas. The Board is also overseeing implementation of the CGA action plan.

 

 

1   Based on the closing share price as at 29 March 2019 of $25.92.

2   Record date for 2019 interim dividend in New York is 16 May 2019.

 

8 | Westpac Group 2019 Interim Financial Results Announcement

 

 


 

2019 Interim financial results

Review of Group operations

 

 

 

Get it right, put it right

 

Through the Group’s ‘get it right, put it right’ initiatives we have continued to review products, processes and policies to identify where we may not have got it right for customers. Where problems were identified, the Group has committed to fix them and refund customers. These initiatives identified a number of issues that have required remediation.

 

The Group booked an after tax cost of $617 million of provisions for estimated customer refunds, payments and associated costs. This half, the Group has taken steps designed to accelerate the processing of customer refunds and centralise oversight of certain remediation under the Chief Operating Officer.

 

In First Half 2019 the major items included in the provisions were related to:

 

·     Customer refunds of ongoing advice service fees associated with the Group’s salaried financial planners. These provisions add to those in prior periods and reflect an increase in the estimated proportion of instances where records of financial advice are insufficient for the purposes of the remediation;

 

·     Estimated customer refunds of ongoing advice service fees charged by the Group’s authorised representatives that provided financial planning services under the Magnitude and Securitor brands. The provisions have been based on an estimate of the proportion of instances where records of financial advice are insufficient for the purposes of the remediation. The provision is an estimate of fees and interest that may be refunded to customers along with costs of implementing the remediation;

 

·     Refunds for certain consumer and business customers that had interest only loans that did not automatically switch, when required, to principal and interest loans; and

 

·     Refunds to certain business customers who were provided with business loans where they should have been provided with loans covered by the National Consumer Credit Protection Act.

 

Resetting Wealth

 

In 2018, Westpac indicated that, while it was committed to its Wealth and Insurance operations, it was considering its ability to efficiently and effectively provide personal financial advice. In March 2019, the Group announced that it would change the way it supports customers’ wealth and insurance needs by exiting the provision of personal financial advice and moving to a referral model for these services.

 

At the same time, the Group announced an organisational realignment of BTFG’s businesses, with the Private Wealth, Platforms & Investments, and Superannuation businesses moving into an expanded Business division, with the Insurance business moving to the expanded Consumer division. As these changes were effective from 1 April 2019, the new organisational structure is not presented in the First Half 2019 financial results.

 

As a result of these changes, the Group raised a provision for exit and transition costs of $190 million ($136 million after tax). As the Group’s advice business was loss making, the exit is expected to be EPS accretive (excluding remediation provisions) for Westpac in 2020. The exit of advice and resetting the Group’s wealth operations is expected to reduce costs by around $280 million per annum over 2019 and 2020.

 

Given these changes, from Full Year 2019, BTFG will no longer be reported as a standalone division.

 

Customer complaints

 

A fundamental lesson of the Royal Commission was that while Westpac had made material progress in reducing complaints over recent years, it had not managed certain categories of complaints as effectively as it should have. For example, some complaints took too long to resolve, and the Group did not do enough to identify and prioritise vulnerable customers. In June 2018 Westpac established the Customer and Corporate Relations division to embed a focus on customer complaints. The change centralised the management, reporting and resolution of complaints. Although complaints are higher over the last 12 months because of the change in customer expectations, an increase in our efforts around formal logging of complaints has reduced complaint handling times by over 22% in First Half 2019.

 

Momentum in customer franchise

 

The Group has continued to build momentum in its customer franchise by growing the number of customers, deepening relationships, digitising processes and making banking and financial services easier for customers.

 

Progress over the half has included:

 

·     Increased the number of Australian banking customers by over 36,000 in the last six months (up 1.6%);

 

·     Number 1 in NPS for Business Bank and number 2 for Consumer Bank;

 

·     Piloting a new virtual chat assistant called ‘Red’ for Westpac customers. Available 24/7, Red has already helped over 100,000 customers with their queries;

 

·     Made the New Payments Platform available to Westpac consumer customers, enabling them to make real time payments and to establish their own PayID;

 

Westpac Group 2019 Interim Financial Results Announcement | 9

 


 

2019 Interim financial results

Review of Group operations

 

 

 

·     After five years of development, the Group’s Customer Service Hub (CSH) is now live with the first mortgages originated via the system. The CSH provides a simplified home ownership process for Westpac bankers and customers and will gradually be rolled out to other brands and product sets;

 

·     Continued to roll out the Group’s “Life Moments” services program to help customers when they need it most. In First Half 2019 Westpac customers could access new resources to help manage their finances after a break-up or separation. This builds on enhanced support for people who have lost a loved one, are having a baby or have been involved in a natural disaster; and

 

·     Grew general insurance gross written premiums by 3% over the prior half with improved sales through digital channels.

 

Structural cost reduction

 

In response to the challenges facing industry revenues, the Group announced a goal of achieving $400 million in structural productivity savings in 2019. This would be a 32% uplift to the productivity savings achieved in 2018. In First Half 2019 a range of productivity initiatives delivered $146 million in savings. As the benefits from these initiatives flow through to Second Half 2019 and further plans are implemented, the Group believes it is well placed to achieve the $400 million Full Year 2019 target.

 

The Group’s Wealth reset has enabled Westpac to close its advice business, which was a high cost, loss making business and restructure the Group’s wealth operations to reduce the costs associated with running a separate operating division. While the initial savings from this change are relatively small, additional opportunities are expected to emerge in Full Year 2020 as the new operating model is bedded down.

 

Other efficiency initiatives completed over the half included:

 

·     Reduced FTE by 788 (or 2%). Around 1,000 roles were reduced through the half from completion of various organisational reviews of head office and support roles. These declines were partially offset by around 200 new FTE to support regulatory and compliance programs;

 

·     Consolidated property, including the exit of two operations centres in Sydney (Epping and Norwest), the net reduction of 38 branches, and the removal of almost 350 ATMs (12% of the fleet);

 

·     Continued to rationalise physical currency in the network, removing over $700 million in cash from branches. In addition to savings from holding less cash, there are flow-on benefits to courier costs, security, and branch processing times; and

 

·     An additional $23 million in savings from further modernisation of technology including a 20% rise in cloud volumes and the removal of 13 applications.

 

Financial Performance Summary First Half 2019 – Second Half 2018 1

 

Net profit attributable to owners of WBC of $3,173 million in First Half 2019 was $724 million (or 19%) lower than Second Half 2018, and $1,025 million (or 24%) lower than First Half 2018.

 

The reduction in net profit attributable to owners of WBC, combined with a 0.4% increase in the weighted average shares on issue, led to a 19% decline in earnings per share (EPS) to 92.3 cents in First Half 2019. Average ordinary equity increased 1% which in turn contributed to the Group’s return on equity (ROE) falling to 10.05%, down 229 basis points.

 

These results were impacted by notable items detailed below:

 

Notable items

 

To help explain Westpac’s performance, two major items in this result are described as “notable items”:

 

·     Provisions for estimated customer refunds and payments, along with associated costs. These provisions were incurred in First Half 2019 and in Second Half 2018; and

 

·     Exit and restructuring costs associated with the reset of Westpac’s wealth strategy. These provisions were incurred in First Half 2019.

 

No notable items were recorded in First Half 2018.

 

Throughout this Results Announcement, the term “notable items” refer to these items only. These items are discussed further in Note 14 of the 2019 Interim Financial Report.

 

 

 

 

 

 

1   Unless otherwise stated.

 

10 | Westpac Group 2019 Interim Financial Results Announcement

 

 


 

2019 Interim financial results

Review of Group operations

 

 

 

Financial Performance Summary First Half 2019 – Second Half 2018 1  (continued)

 

Notable items impact net profit attributable to owners of WBC, the major income statement line items and certain performance metrics. The following tables present the quantum of these items and their impact on movements in the income statement (Table 1) and certain performance metrics (Table 2) over First Half 2019, Second Half 2018 and First Half 2018.

 

Table 1. Impact from notable items and impact on movements in key line items

 

 

Size of notable items ($m)

% Mov’t
Mar 19 – Sept 18

% Mov’t
Mar 19 – Mar 18

 

Half Year
March 19

Half Year
Sept 18

As reported

Ex notable
items

As reported

Ex notable
items

Net interest income

(212)

(105)

-

2

-

2

Non-interest income

(600)

(163)

(36)

(19)

(39)

(17)

Operating expenses

(274)

(112)

4

-

9

3

Profit before impairment charges
and income tax expense

(1,086)

(380)

(19)

(7)

(24)

(7)

Impairment charges

-

-

5

5

(15)

(15)

Tax

333

99

(23)

(10)

(25)

(7)

Net profit attributable to owners
of WBC

(753)

(281)

(19)

(6)

(24)

(6)

 

Table 2. Certain performance metrics including and excluding notable items

 

 

Half Year March 19

Half Year Sept 18

Half Year March 18

(%)

As reported

Ex notable
items

As reported

Ex notable
items

As reported

Ex notable
items

Return on equity

10.05

12.43

12.34

13.23

13.79

13.79

Net interest margin

2.09

2.14

2.10

2.12

2.16

2.16

Expense to income ratio

51.02

44.64

44.96

42.88

42.00

42.00

 

First Half 2019 net profit attributable to owners of WBC, excluding notable items, was $252 million lower than Second Half 2018 (down 6%) and were $272 million lower (down 6%) than First Half 2018.

 

Excluding notable items the ROE was 12.43%. Net tangible assets per share, which was impacted by the adoption of AASB 9, decreased 2% to $15.12.

 

While the economic environment generally remains positive, with GDP growth of 2.3% for the year to December 2018, unemployment remaining at historical lows and inflation holding below 2%, economic activity has slowed over the last six months. Modest wages growth, a peaking construction cycle, falling house prices and weaker business and consumer sentiment have all contributed to weaker activity. For financial services this has contributed to lower credit and deposit growth and lower demand for wealth and insurance services. At the same time, increased data and verification requirements have made the process of borrowing more difficult for customers, particularly for smaller businesses.

 

These conditions contributed to a slowing in system credit growth in Australia to around 4% from almost 5% a year earlier with both housing and business lending growth moderating. In New Zealand, private sector credit has been a little stronger, growing at around 6% up from approximately 5% a year earlier.

 

For Westpac, total lending grew at 1% over the six months to March 2019 and by 2% over the prior 12 months. Most of the growth over the half was in New Zealand, supported by a stronger NZ exchange rate and 2% growth in total loans. Growth in Australia was more modest with a 1% increase in mortgages, mostly in owner occupied lending, partly offset by a decline in both business lending and in other personal lending.

 

Customer deposits decreased 1% over the half, mostly from lower government deposits and from lower flows following the repricing of both term deposits and online savings products. New Zealand deposits were up 4% (9% in A$ terms), with good growth across all categories.

 

Given the lower deposit balances, the deposit to loan ratio was down over the half to 71.6% at 31 March 2019.

 

Net interest margin of 2.09% was down 1 basis point over the half. Notable items decreased net interest margin by 3 basis points over the half. Excluding these items, the net interest margin was 2 basis points higher over the half.

 

This 2 basis point rise was due to higher loan and deposit spreads (adding 1 basis point each) partially offset by higher securities holdings, both for market inventory and liquidity. Most of the increase in loan spreads was due to the mortgage repricing that occurred in September 2018, although this was largely offset by competition for new lending, retention pricing and the impact of customers switching to lower rate principal and interest lending from interest only facilities. Improved deposit spreads (up 1 basis point) followed the repricing of term deposits and online deposits.

 

 

 

1    Unless otherwise stated.

 

Westpac Group 2019 Interim Financial Results Announcement | 11

 


 

2019 Interim financial results

Review of Group operations

 

 

 

Financial Performance Summary First Half 2019 – Second Half 2018 1  (continued)

 

Non-interest income declined $981 million in First Half 2019 to $1,716 million (down 36%). Most of the decline was due to an increase in notable items of $437 million, the non-repeat of Hastings income ($180 million), and the adoption of AASB 15 resulting in reclassification of line fees from net fee income to net interest income (down $340 million). Westpac finalised the exit of its infrastructure funds business ‘Hastings’ in Second Half 2018. The exit had a small impact on net profit attributable to owners of WBC but had a more significant impact on non-interest income (including from large exit related fees) and costs (from the write-down of goodwill).

 

Excluding these items (notable items, adoption of AASB 15 and Hastings) non-interest income was down $24 million or 1%, with the decline mostly due to lower wealth and insurance income including from higher general insurance claims ($94 million) for major weather events (Queensland Floods and NSW hailstorms), and lower fees following decisions to reduce platform fees and eliminate grandfathered commission payments.

 

In aggregate, the 36% decline in non-interest income led to net operating income before operating expenses and impairment charges declining 9%. Excluding notable items, net operating income before operating expenses and impairment charges was 4% lower over the Second Half 2018.

 

Operating expenses increased 4% or $180 million in First Half 2019 compared to Second Half 2018. Operating expense growth this period was also impacted by notable items which added $162 million to costs. Operating expenses excluding notable items were flat.

 

Within business as usual costs, salary costs were higher following annual salary increases from January 2019, along with mix impacts from employing more highly qualified individuals. Occupancy costs were higher from annual rent increases and cost of branch closures. Technology costs were also higher mostly associated with investment in the Group’s infrastructure, including enhancements to cybersecurity, Panorama and launching the CSH. These increases were broadly offset by structural productivity savings of $146 million mentioned earlier.

 

Given the notable items (higher expenses and reduced revenues) the expense to income ratio increased over 6 percentage points to 51.0% for First Half 2019. Excluding notable items, the expense to income ratio was 44.6%, 1.8% higher over the last six months and around 2.6% higher compared to First Half 2018.

 

Credit quality remained sound, with key metrics relatively stable over the half and over the prior corresponding period. Stressed exposures to total committed exposures were little changed at 1.10% at March 2019, up 2 basis points from September 2018 and up 1 basis point from March 2018.

 

Within stressed exposures, impaired exposures were higher including from one facility over $50 million migrating to impaired in the second quarter. Mortgage delinquencies were also higher (up 8 basis points over the last six months) which contributed to a rise in 90 days past due and not impaired category within stressed exposures. The proportion of watchlist and substandard exposures declined over the period due in part to the migration of one larger facility to impaired.

 

Slowing economic activity and low wages growth has contributed to a rise in customers experiencing difficulty. At the same time, current conditions have led to an increase in the time taken (on average) to sell a property. Together, these factors have contributed to the rise in mortgage delinquencies over the half. Net mortgage write-offs for the half remained low at $52 million (2 basis points) compared to $42 million in Second Half 2018 and $47 million in First Half 2018.

 

Consistent with these trends, properties in possession remained low at 482, but were up from 396 at September 2018.

 

Given the credit quality picture, impairment charges were $333 million for First Half 2019, up 5% (or $16 million) on Second Half 2018 and representing 9 basis points to average gross loans. The increase was mostly due to higher total new collectively assessed provisions linked to an increase in consumer delinquencies. These were partially offset by lower provisions from lower new stress in Business Bank and a reduction in the centrally held overlays.

 

Following the adoption of AASB 9, overall provisioning levels have increased, mostly associated with facilities that are still performing but have experienced a significant increase in credit risk (called Stage 2 facilities). As a result, total provisions were $3,995 million at March 2019, up from $3,053 million at September 2018.

 

The ratio of impaired exposure provisions to total impaired exposures was 46% at March 2019, which was unchanged compared to First Half 2018. Consistent with the rise in overall provisions the ratio of collectively assessed provisions to credit risk weighted assets has increased to 98 basis points, up from 73 basis points at September 2018.

 

The effective tax rate was 30.3% for the half. This is above the corporate tax rate due to the non-deductibility of certain expenses, including hybrid distributions.

 

 

 

1   Unless otherwise stated.

 

12 | Westpac Group 2019 Interim Financial Results Announcement

 

 


 

2019 Interim financial results

Review of Group operations

 

 

 

Financial Performance Summary First Half 2019 – Second Half 2018 1  (continued)

 

Across divisions earnings results were mixed compared to Second Half 2018 with BTFG and the Business Bank particularly affected by notable items. The Consumer Bank recorded a 7% rise in cash earnings, with higher net interest margin and lower expenses. New Zealand (in NZ$) recorded a 4% increase in cash earnings, and WIB recorded a 1% increase in cash earnings from higher trading income and improved efficiency. The Business Bank’s cash earnings were down $67 million (6%) due to an increase in notable items while BT Financial Group reported a loss of $305 million with the decline due to notable items.

 

Balance sheet

 

The Group maintained the strength of its balance sheet across all dimensions:

 

·     A CET1 capital ratio of 10.6%, above the “unquestionably strong” benchmark set by APRA. The ratio was little changed over the half as earnings, after dividends, more than offset other capital movements. Risk weighted assets were lower over the half;

 

·     A liquidity coverage ratio (LCR) of 138%, up from 133% six months earlier and comfortably above the 100% regulatory minimum; and

 

·     A net stable funding ratio (NSFR) of 113%, little changed over the half and prior year and also well above the 100% regulatory minimum.

 

Financial performance summary First Half 2019 - First Half 2018

 

Net profit attributable to owners of WBC of $3,173 million was down 24% with profit before impairment charges and income tax expense also down 24%, while impairment charges fell 15%.

 

Net interest income was flat with a 7 basis point decrease in net interest margins only partially offset by a 4% rise in average interest-earning assets. Margins excluding Treasury and Markets decreased 1 basis point from First Half 2018, with the decline due to notable items (5 basis points), higher short term wholesale funding costs (5 basis points) and lower mortgage spreads. The decline in mortgage spreads was due to customers switching from interest only to principal and interest lending, changes in portfolio mix towards lower margin products (fixed rate and basic products), competition contributing to lower rates on new mortgages and more retention pricing. These declines were partially offset by higher deposit spreads and the adoption of AASB 15 primarily from the reclassification of line fees from net fee income to net interest income.

 

Total loans grew 2%, with most of the rise due to an increase in Australian mortgage lending and New Zealand lending. Australian business lending was little changed compared to First Half 2018 with subdued demand and lower utilisation of warehouse facilities. New Zealand lending was up 4% (up 6% in A$ terms) from growth in mortgages and business lending. Australian personal lending was lower, mostly reflecting lower demand and a decline in low return products, particularly Auto lending. Customer deposits grew 2% over First Half 2018.

 

Non-interest income was down 39%, impacted by an increase in notable items of $600 million, the loss of income following the exit of the Hastings business in 2018 ($23 million), and the adoption of AASB 15 resulting in reclassification of line fees from net fee income to net interest income (down $327 million). Excluding these, non-interest income was down 5% mostly from lower financial markets income and a reduction in wealth management income (from a lower advice contribution, the reduction in pricing across platforms and a reduction in average funds). Insurance claims for major weather events were also higher, up $66 million.

 

Operating expenses increased 9%. This included an increase of $274 million in notable items. Excluding notable items, operating expenses were $162 million higher. Most of this operating expense growth was due to higher spending associated with investment and an increase in regulatory and compliance costs with $319 million of structural productivity savings more than offsetting ordinary cost growth.

 

Impairment charges were $60 million (or 15%) lower than First Half 2018, with most of the decrease due to lower new collectively assessed provisions and reduction in write-offs principally in unsecured lending. Individually assessed provisions were higher mostly from lower recoveries.

 

 

 

 

 

 

 

 

 

1    Unless otherwise stated.

 

Westpac Group 2019 Interim Financial Results Announcement | 13

 


 

2019 Interim financial results

Review of Group operations

 

 

 

Divisional Net Profit after Tax (NPAT) Summary 1

 

 

Summary of movement in NPAT by Business Divisions (First Half 2019 – First Half 2018)

 

Consumer Bank (CB) NPAT excluding notable items decreased $178 million or 11% mainly from a decline in net interest income and increased operating expenses.

 

Business Bank (BB) NPAT decreased $65 million or 6%. Excluding notable items, NPAT increased $66 million primarily due to higher net interest income and reduction in impairment charges.

 

BT Financial Group (Australia) (BTFG) reported a net loss after tax of $310 million in First Half 2019 compared to prior comparative period’s NPAT of $406 million. Excluding notable items of $620 million, NPAT decreased $96 million or 24% primarily due to higher weather related insurance claims and lower revenue related to the ceasing of grandfathered commission payments and platforms repricing.

 

Westpac Institutional Bank (WIB) NPAT decreased $11 million or 2% mainly due to lower financial markets revenue and an impairment charge compared to an impairment benefit in First Half 2018. These were offset by higher net interest margin and lower operating expenses.

 

Westpac New Zealand NPAT increased $69 million or 4% primarily due to gain on sale of Paymark and a reduction in impairment charges.

 

Group Businesses reported a net loss after tax of $106 million in First Half 2019 compared to prior comparative period’s NPAT of $16 million, a decline of $122 million mainly due to lower Treasury revenue, partly offset by an impairment benefit in First Half 2019 compared to an impairment charge in First Half 2018 and a fall in expenses.

 

 

 

 

 

 

 

 

 

 

 

 

1    The NPAT graph illustrates the movements in NPAT (in $ value) for each division.

 

14 | Westpac Group 2019 Interim Financial Results Announcement

 

 


 

2019 Interim financial results

Review of Group operations

 

 

 

2.2         Review of reported results

 

2.2.1      Net interest income 1 , 2

 

 

 

 

 

 

 

 

 

% Mov’t

 

% Mov’t

 

 

 

Half Year

 

Half Year

 

Half Year

 

Mar 19 -

 

Mar 19 -

 

$m

 

March 19

 

Sept 18

 

March 18

 

Sept 18

 

Mar 18

 

Net interest income

 

8,263

 

8,227

 

8,278

 

-

 

-

 

Average interest-earning assets

 

794,660

 

782,834

 

767,011

 

2

 

4

 

Group net interest margin

 

2.09%

 

2.10%

 

2.16%

 

(1bps)

 

(7bps)

 

 

First Half 2019 – Second Half 2018

 

Net interest income increased $36 million compared to Second Half 2018. Key features include:

 

·      2% increase in average interest-earning assets largely from Australian housing and New Zealand lending;

 

·      Group net interest margin decreased 1 basis point. Excluding a net 3 basis point impact of notable items, Group net interest margin increased primarily from pricing changes in Australian variable mortgages, partly offset by competition, retention pricing and changes in the mix of the mortgage portfolio with customers switching from interest only to principal and interest;

 

·     The impact from the adoption of AASB 15 was an increase of $360 million primarily from the reclassification of line fees from net fee income to net interest income, and $57 million from the implementation of AASB 9 which now measures interest on performing loans on the gross loan value; partly offset by

 

·     Treasury and Markets net interest income decreased $395 million due to fair value movements in economic hedges and lower Treasury revenue from interest rate risk management.

 

First Half 2019 – First Half 2018

 

Net interest income decreased $15 million compared to First Half 2018. Key features include:

 

·      Group net interest margin decreased 7 basis points primarily due to a 5 basis point impact from provisions for estimated customer refunds and payments, increased short term wholesale funding costs related to movements in BBSW and reduced mortgage spreads. This was partly offset by the full period impact from changes to pricing of Australian variable mortgages and increased spreads across customer deposits;

 

·     Treasury and Markets net interest income decreased $254 million due to fair value movements in economic hedges and lower Treasury revenue from interest rate risk management; partly offset by

 

·     The impact from the adoption of AASB 15 was an increase of $360 million primarily from the reclassification of line fees from net fee income to net interest income and $58 million from the implementation of AASB 9 which now measures interest on performing loans based on the gross loan value; and

 

·      4% growth in average interest-earning assets, primarily from Australian and New Zealand housing.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1        Refer to Section 4 Note 3 for reported results breakdown.

2       The Group has adopted AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers from 1 October 2018. Statutory comparatives have not been restated. Refer to Note 1 in Section 4 for further detail. In addition, during First Half 2019, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Both statutory and cash earnings comparatives have been restated. Refer to Note 1 in Section 4 for further detail.

 

Westpac Group 2019 Interim Financial Results Announcement | 15

 


 

2019 Interim financial results

Review of Group operations

 

 

 

2.2.2      Loans 1 , 2

 

 

 

As at

 

As at

 

As at

 

% Mov’t

 

% Mov’t

 

 

31 March

 

30 Sept

 

31 March

 

Mar 19 -

 

Mar 19 -

$m

 

2019

 

2018

 

2018

 

Sept 18

 

Mar 18

Australia

 

618,811

 

619,630

 

610,397

 

-

 

1

Housing

 

447,164

 

444,741

 

437,239

 

1

 

2

Personal

 

22,463

 

22,997

 

23,752

 

(2)

 

(5)

Business

 

152,424

 

154,347

 

151,904

 

(1)

 

-

Provisions

 

(3,240)

 

(2,455)

 

(2,498)

 

32

 

30

 

 

 

 

 

 

 

 

 

 

 

New Zealand (A$)

 

79,000

 

74,045

 

74,687

 

7

 

6

 

 

 

 

 

 

 

 

 

 

 

New Zealand (NZ$)

 

82,470

 

80,860

 

79,557

 

2

 

4

Housing

 

49,584

 

48,893

 

47,907

 

1

 

4

Personal

 

1,937

 

2,040

 

2,128

 

(5)

 

(9)

Business

 

31,308

 

30,251

 

29,898

 

3

 

5

Provisions

 

(359)

 

(324)

 

(376)

 

11

 

(5)

 

 

 

 

 

 

 

 

 

 

 

Other overseas (A$)

 

16,486

 

16,015

 

16,309

 

3

 

1

 

 

 

 

 

 

 

 

 

 

 

Total loans

 

714,297

 

709,690

 

701,393

 

1

 

2

 

First Half 2019 – Second Half 2018

 

Total loans increased $4.6 billion or 1% compared to Second Half 2018. Excluding foreign currency translation impacts, total loans increased $0.8 billion.

 

Key features of total loan growth were:

 

·      Australian housing loans increased $2.4 billion or 1%. A slowdown in system 3  growth and the Group’s decision to prioritise return over growth saw new lending down 18% in the half. Owner occupied housing balances grew 2% and comprised 57% of the portfolio (30 September 2018: 57%, 31 March 2018: 56%), with the investor property lending portfolio little changed in the half;

 

·      Australian business loans decreased $1.9 billion or 1%, primarily from a 2% reduction in institutional balances, from reduced utilisation of existing warehouse facilities and a 1% decrease in Business Bank reflecting lower property lending balances and a decline in demand across industries;

 

·      Australian provision balances increased $0.8 billion or 32% during the half following the implementation of AASB 9; and

 

·      New Zealand loans increased NZ$1.6 billion or 2%, due to broad based business lending growth (up 3%) and housing growth of 1% mostly in fixed rate products to owner occupiers.

 

First Half 2019 – First Half 2018

 

Total loans increased $12.9 billion or 2% compared to First Half 2018. Excluding foreign currency translation impacts, total loans increased $11.4 billion or 2%.

 

Key features of total loan growth were:

 

·      Australian housing loans increased $9.9 billion or 2%. Owner occupier loans increased 5%, while investor property lending was little changed. The Group managed interest only loan growth in a disciplined way, with new interest only facilities representing 19% of new mortgage lending for the half and now comprise 31% of the portfolio (30 September 2018: 35%, 31 March 2018: 40%). Customers have switched $16.0 billion of interest only loans to principal and interest during this period, with principal and interest loans now comprising 65% of the portfolio;

 

·      Australian personal loans decreased $1.3 billion or 5%, from lower auto finance and personal loans; and

 

·      New Zealand lending increased NZ$2.9 billion or 4%. Housing grew 4% mostly in fixed rate products and business lending increased 5%, supported by growth in agriculture and corporate lending. This was partly offset by a 9% decline in personal loans, from lower credit card and personal lending balances.

 

 

 

 

1        Spot loan balances.

2       The Group has adopted AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers from 1 October 2018. Statutory comparatives have not been restated. Refer to Note 1 in Section 4 for further detail. In addition, during First Half 2019, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Both statutory and cash earnings comparatives have been restated. Refer to Note 1 in Section 4 for further detail.

3       Source: RBA March 2019

 

16 | Westpac Group 2019 Interim Financial Results Announcement

 

 


 

2019 Interim financial results

Review of Group operations

 

 

 

2.2.3      Deposits and other borrowings 1

 

 

As at

As at

As at

% Mov’t

% Mov’t

 

31 March

30 Sept

31 March

Mar 19 -

Mar 19 -

$m

2019

2018

2018

Sept 18

Mar 18

Customer deposits

 

 

 

 

 

Australia

433,736

446,667

429,852

(3)

1

At call

222,733

233,052

227,021

(4)

(2)

Term

168,313

171,832

161,864

(2)

4

Non-interest bearing

42,690

41,783

40,967

2

4

 

 

 

 

 

 

New Zealand (A$)

61,516

56,671

57,856

9

6

 

 

 

 

 

 

New Zealand (NZ$)

64,218

61,887

61,628

4

4

At call

24,520

23,339

24,164

5

1

Term

33,320

32,645

31,595

2

5

Non-interest bearing

6,378

5,903

5,869

8

9

 

 

 

 

 

 

Other overseas (A$)

16,391

14,413

14,355

14

14

 

 

 

 

 

 

Total customer deposits

511,643

517,751

502,063

(1)

2

 

 

 

 

 

 

Certificates of deposit

43,364

41,534

45,673

4

(5)

Australia

31,123

28,746

30,387

8

2

New Zealand (A$)

858

1,116

521

(23)

65

Other overseas (A$)

11,383

11,672

14,765

(2)

(23)

 

 

 

 

 

 

Total deposits and other borrowings

555,007

559,285

547,736

(1)

1

 

First Half 2019 – Second Half 2018

 

Total customer deposits decreased $6.1 billion or 1% compared to Second Half 2018. Excluding foreign currency translation impacts, customer deposits decreased $9.1 billion or 2%.

 

Key features of total customer deposits movements were:

 

·       Australian customer deposits decreased $12.9 billion or 3%, primarily from lower institutional deposits across both at-call and term deposits (largely Government balances). Non-interest bearing deposits were up 2% as customers continued to direct funds to mortgage offset accounts;

 

·       New Zealand customer deposits increased NZ$2.3 billion or 4%, with the increase more than fully funding loan growth in the half. At call deposits increased 5% mostly across consumer and institutional segments; and

 

·       Other overseas deposits increased $2.0 billion or 14% due to growth in term deposits in Asia.

 

Certificates of deposit increased $1.8 billion or 4%, from higher short term wholesale funding issuance in this form.

 

First Half 2019 – First Half 2018

 

Total customer deposits increased $9.6 billion or 2% compared to First Half 2018. Excluding foreign currency translation impacts, customer deposits increased $7.4 billion or 1%.

 

Key features of total customer deposits growth were:

 

·       Australian customer deposits increased $3.9 billion or 1%, mostly in term deposits (up 4%). Institutional deposits were down over the prior corresponding period (largely Government balances);

 

·       New Zealand customer deposits increased NZ$2.6 billion or 4%. Term deposits were up 5% as the business focused on higher quality deposits and customer preference for higher rate products. Non-interest bearing deposits increased 9%, from growth in business and consumer transaction deposits.

 

Certificates of deposit decreased $2.3 billion or 5%, from reduced short term wholesale funding issuance in this form.

 

 

 

 

 

 

 

 

 

 

1            Spot deposit balances.

 

Westpac Group 2019 Interim Financial Results Announcement | 17

 


 

2019 Interim financial results

Review of Group operations

 

 

 

2.2.4      Net interest margin

 

 

First Half 2019 – Second Half 2018

 

Group net interest margin of 2.09% decreased 1 basis point from Second Half 2018. Notable items which reflect additional provisions for estimated customer refunds and payments (mostly in Consumer and Business Bank), reduced net interest margin by a net 3 basis points in the half.

 

Excluding notable items, group net interest margin was up 2 basis points with key features including:

 

·     11 basis points increase from the adoption of AASB 15 and AASB 9 primarily related to the reclassification of line fees from net fee income to net interest income and the measurement of interest on performing loans based on the gross loan value;

 

·     1 basis point increase from loan spreads primarily from pricing changes to certain Australian mortgage types. This was partly offset by competition, retention repricing and changes in the mix of the mortgage portfolio with customers switching from higher rate interest only lending to principal and interest facilities, and the impact from changes to the calculation of credit card interest rates; and

 

·      1 basis point increase from customer deposit spreads, mostly from repricing of online and savings accounts; partly offset by

 

·      1 basis point decrease from capital & other, including the impact of increased inventory of trading securities;

 

·      Short term wholesale funding costs, including the impact of bank bill swap rate (BBSW), was little changed over the half, despite volatility across quarters; and

 

·     The contribution from Treasury and Markets reduced by 10 basis points due to lower Treasury revenue from interest rate risk management.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18