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

 

November 4, 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): ___________

 


 

Index to Exhibits

 

Exhibit
No.

 

Description

 

 

 

1

 

Westpac Group 2019 Annual Report as lodged on the Australian Securities Exchange

 


 

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:    November 4, 2019

By:  /s/ Leisha White                       

 

Leisha White

 

Practice Leader

 


Exhibit 1

 

2019 Annual Report it matters.

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Help when it matters. Our commitment to helping started in 1817 when Westpac first opened its doors, helping to build a fledgling colony’s diversified economy and its own currency. Helping is at the heart of what we do and is central to our vision to become one of the world’s great service companies. Whether it’s helping customers buy and pay off their homes, manage their finances or kick start a business – or by supporting them in times of change or difficulty – we are there to help in the moments that matter. By getting service right, customers benefit, the community benefits and shareholders benefit. Cover image and this page: Westpac’s 2019 ‘Baker of Beirut’ campaign Westpac Group’s 2019 Reporting Suite Westpac’s full 2019 reporting suite includes the Group’s Annual Report, Full Year Financial Results, Investor Discussion Pack, Annual Review and Sustainability Report, Sustainability Performance Report, Pillar 3 Report and other shareholder information including a financial calendar. For details, visit the Investor Centre at westpac.com.au/investorcentre. Sustainability Report Performance Report Westpac Banking Corporation ABN 33 007 457 141 it matters. Sustainability Help when 2019 Sustainability Performance Report Annual Review and Help when it matters. 2019 Annual Review & Sustainability Report Annual Report 2019 Annual Report Help when it matters.

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2019 Westpac Group Annual Report 1 Table of contents Annual Report Performance highlights 2 Funding and liquidity risk Market risk Operational risk Conduct and compliance risk Governance risk Risk culture Strategic risk Capital adequacy Cyber risk Reputation risk Sustainability risk Westpac’s approach to sustainability Sustainability performance Five year non-financial summary Other Westpac business information 115 116 116 116 117 117 117 118 118 118 118 121 121 130 132 Section 1 Chairman’s report Chief Executive Officer’s letter Information on Westpac Significant developments Directors’ report Remuneration Report 3 4 8 14 15 26 44 1 Section 2 Five year summary Reading this report Review of Group operations Income statement review Balance sheet review Capital resources Divisional performance Consumer Business Westpac Institutional Bank Westpac New Zealand Group Businesses Risk and risk management Risk factors Risk management Credit risk 75 76 77 79 81 87 90 93 96 97 98 99 101 102 102 113 114 Section 3 Financial statements Notes to the financial statements Statutory statements 135 136 142 279 Section 4 Shareholding information Additional information Information for shareholders Glossary of abbreviations and defined terms 289 290 300 304 307 Contact us inside back cover 2 3 In this Annual Report a reference to ‘Westpac’, ‘Group’, ‘Westpac Group’, ‘we’, ‘us’ and ‘our’ is to Westpac Banking Corporation ABN 33 007 457 141 and its subsidiaries unless it clearly means just Westpac Banking Corporation. For certain information about the basis of preparing the financial information in this Annual Report see ‘Reading this report’ in Section 2. In addition, this Annual Report contains statements that constitute ‘forward-looking statements’ within the meaning of Section 21E of the US Securities Exchange Act of 1934. For an explanation of forward-looking statements and the risks, uncertainties and assumptions to which they are subject, see ‘Reading this report’ in Section 2. Information contained in or accessible through the websites mentioned in this Annual Report does not form part of this report unless we specifically state that it is incorporated by reference and forms part of this report. All references in this report to websites are inactive textual references and are for information only. 4

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2 2019 Westpac Group Annual Report Performance highlights Net profit after tax $6,784 million, down 16% Dividends $1.74, down 14 cents Net profit after tax1 ($m) Dividends per ordinary share (cents) Special dividends 10 11 12 13 14 15 16 17 18 19 10 11 12 13 14 15 16 17 18 19 Cash earnings $6,849 million, down 15% Returns 10.8%, down 225bps Cash earnings2 ($m) Cash earnings to average ordinary equity2,3 (%) 10 11 12 13 14 15 16 17 18 19 10 11 12 13 14 15 16 17 18 19 Cash earnings per ordinary share, down 16% Cash earnings per ordinary share2,4 (cents) 10 11 12 13 14 15 16 1718 19 % change 2018 2019/2018 2019 1. 2. 3. 4. 5. Net profit attributable to ordinary equity holders. The adjustments to our reported results to derive cash earnings are described in Note 2 of our 2019 financial statements. Return on average ordinary equity. Periods prior to 2015 have not been restated for the bonus element of the 2015 share entitlement offer. Economic profit represents the excess of adjusted cash earnings over a minimum required rate of return on equity invested. For this purpose, adjusted cash earnings is defined as cash earnings plus the estimated value of franking credits paid to shareholders. The calculation of economic profit is described in more detail in Section 5 of Westpac’s Full Year 2019 Results (incorporating the requirements of Appendix 4E) lodged with the ASX on 4 November 2019 (the’ASX Announcement’). 197.8 5,879 6,346 209.3 6,301 6,991 214.8 6,564 5,936 227.8 7,063 6,751 245.4 7,628 7,561 248.2 7,820 8,012 235.5 7,822 7,445 239.7 8,062 7,990 236.2 8,065 8,095 198.2 6,849 6,784 16.1 139 16.0 156 15.4 166 15.9 174 20 16.4 182 15.8 187 14.0 188 13.8 188 13.0 188 10.8 174 Reported earnings Net profit after tax1 ($m) Earnings per share (cents) Dividends per share (cents) Return on equity3 (%) Expense to income ratio (%) Common Equity Tier 1 capital ratio (%) 6,784 196.5 174 10.7 48.9 10.7 8,095 (16%) 237.5 (17%) 188(7%) 13.1(240bps) 43.8 Large 10.64bps Cash earnings basis2 Cash earnings ($m) Cash earnings per share (cents) Cash earnings return on equity (%)3 Economic profit5 ($m) 6,849 198.2 10.8 1,619 8,065 (15%) 236.2 (16%) 13.0(225bps) 3,444 (53%)

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2019 Westpac Group Annual Report 3 1 01 2 Chairman’s report Chief Executive Officer’s letter Information on Westpac Directors’ report (including Remuneration Report) 3 4

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4 2019 Westpac Group Annual Report Chairman’s report This year has been a challenging period Lindsay Maxsted Chairman A challenging year This year has been a challenging period for the financial services sector, and for Westpac. At an industry level, the repercussions from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) have continued, self-assessments into governance, culture and accountability have been completed, and there has been an increase in regulatory actions and remediation costs. The operating environment has also become more difficult with lower economic growth, historically low interest rates, and even more competition from international banks, non-banks and niche players. Despite the challenges presented by the environment, our capital remains above the Australian Prudential Regulation Authority’s (APRA) unquestionably strong benchmark, our funding and liquidity is sound, and our customer franchise is healthy with a market share of around 20% across most of the major segments in which we operate. At the same time we have been rated the most sustainable bank in Australia (and rated 9th in world) by the Dow Jones Sustainability Index. Noting our overall position, we do however face a number of challenges. Over the last 12 months we have faced into these, sought to work through the issues and commenced a number of programs to further strengthen our position – particularly in enhancing our approach to governance and risk management. We will continue to do so. to exit the financial planning business. As part of this change we ceased providing personal financial advice by salaried financial advisers under our own brands and discontinued the practice of enabling independent advice groups to operate under our licence. On non-financial risks, in addition to some of the findings of the Royal Commission we completed a detailed analysis through our Culture Governance and Accountability (CGA) self-assessment. This report was produced for the Board and APRA and provided a thorough assessment of our strengths and weaknesses in risk culture, governance and accountability. The report was prepared by a dedicated team supported by Oliver Wyman (a global independent expert in financial services) and is available on our website. The CGA self-assessment indicated that “Westpac’s governance, accountability and culture settings, in their totality generally support sound management of the Group’s non-financial risks.” The report also highlighted that “Westpac’s management of non-financial risks… remains generally less mature than its management of financial risks and this factor is likely near, or at the root cause of many of Westpac’s non-financial risk related issues.” In other findings, the report indicated that some of Westpac’s strengths had side effects that impacted the Group’s culture. For example, the Group’s strong focus on financial risk has contributed to an “organisational imperative for safety” and a tendency to over-analyse issues. On the face of it this could be a strength for a large financial institution however, these characteristics have also meant that we have tended to be slow in decision-making and weak on execution. Royal Commission Last year in my letter to you I spoke about the impact of the Royal Commission and the lessons for Westpac. These were: (1) that we were slow to focus on non-financial risks such as conduct, compliance and reputation; (2) we did not fully appreciate the underlying risks in the financial planning business; and (3) that some remuneration arrangements inadvertently contributed to poor behaviour. Having identified many of our shortcomings last year, our focus this year has been on fixing the issues and beginning to restore the trust that you and customers have placed in us. Dealing with these lessons in reverse order, we have already made a number of changes in remuneration across the organisation to reduce potential conflicts and ensure the right incentives are in place for employees. We’ve also made changes to executive remuneration – which I discuss further below. In relation to the second lesson, in March this year, following a detailed review, we announced our decision Enhancing Governance In response to the findings of our CGA self-assessment, we have commenced a detailed program of work to fix the issues. This work is also aligned with our Royal Commission Response plan. While there is still much to do we have nevertheless made significant progress: • Of the 45 recommendations in our CGA self-assessment, 40% have now been implemented. Of the 49 Royal Commission recommendations that require action by to us, 11 have been implemented and progress is underway with a further 11. The remaining 27 recommendations require further clarity or legislative change before we can fully progress but we are doing all we can now. •

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2019 Westpac Group Annual Report 5 Chairman’s report 1 I want to highlight that the Board sees these changes as a positive and necessary investment in Westpac’s long term sustainability and we are monitoring progress closely. However I do not want to underestimate the task ahead of us. It is complex and it will take some time before we can claim completion. That said, we are determined to invest what is necessary to complete our plans and build an even more sustainable organisation. Shareholders should also be aware that the increase in scrutiny may result in further regulatory action and litigation against your company. We will continue to investigate these matters fully and impartially and where we recognise we have done the wrong thing we will take responsibility; and if customers have been affected we will put things right. There will at times however be genuine disagreement with regulators and in those cases we will continue to engage constructively. Capital Reflecting our priority for strength, Westpac has materially strengthened its capital position over many years with our ordinary equity almost doubling since 2009 while our asset base has increased by closer to 50% - a material reduction in gearing. Our CET1 capital ratio started the decade below 7% and at September 2019 was 10.67%. Despite this position, the lower earnings and a variety of changes in the calculation of the components of the CET1 capital ratio (CET1 capital and risk weighted assets) has meant that, absent any action on our behalf, we would not have had a sufficient buffer above APRA’s unquestionably strong benchmark of 10.5%. As a result, the Board has taken the decision to raise capital through an institutional placement and a share purchase plan to raise around $2.5 billion. The raising is expected to lift the Group’s capital ratios by around 581 basis points giving us extra capacity to support customers, including if the economy weakens, while increasing the buffer for any additional factors that may impact capital in the period ahead, including regulatory actions, litigation or changes in APRA or RBNZ capital requirements. Financial Performance This year our financial performance was disappointing. While we have continued to grow the balance sheet, and customer numbers, the significant costs associated with remediating customers, improving governance and responding to regulatory change have contributed to a reduction in earnings. Brian will deal with financial performance in more detail in his letter but let me cover the key points. Reported net profit in Full Year 2019 was $6,784 million down from $8,095 million in 2018. Cash earnings (our preferred measure of performance) for the year ended 30 September 2019 was $6,849 million, 15% lower than the 2018 financial year. To put performance in perspective, of the $1,216 million decline in cash earnings, $849 million was due to higher costs associated with customer remediation and costs associated with exiting financial planning, what we have called ‘notable items’. The remaining decline was mainly due to lower interest margins, a decline in wealth management and insurance revenue and increased regulatory and compliance costs. On the balance sheet liquidity, funding and credit quality remain strong. Our key liquidity ratios continue to remain comfortably above regulatory minimums and we have maintained a sound funding mix. Credit quality has continued to be a highlight with all elements of the portfolio in good shape. The ratio of stressed assets to total committed exposures has remained near cyclical lows at 1.20%, while impaired assets represent just 0.25% of total lending. There has been some increase in consumer delinquencies over the last couple of years consistent with the softening in the economy but this is not unexpected. Dividends The Board also took the difficult decision this half to reduce the final 2019 dividend to 80 cents per share, fully franked. This is a 15% reduction on both the final 2018 dividend and the interim 2019 dividend of 94 cents per share. This dividend represents a final dividend pay out ratio of 79% and a dividend yield of 5.4% (before franking). This brings the full year dividend to 174 cents per share, down from 188 cents per share in 2018. There were a number of factors that led to the decision to reduce the dividend and we recognise the impact on shareholders, but as a Board we must continue to prioritise strength and make decisions that we believe are in the best long term interests of the company. In setting the dividend, the Group seeks to maintain a payout ratio that is sustainable, which we currently assess as being around 70-75%. While the final dividend payout ratio is above this level, if we exclude the notable items referred to earlier, the payout ratio, on a cash earnings basis, is 71%. 2 3 4 1.Based on risk weighted assets as at 30 September 2019, a 46 basis point increase reflects the impact of the placement only of $2 billion, while a 58 basis point increase reflects the impact of both the placement and the share purchase plan, assuming the share purchase plan raises $500 million (the basis point impacts are net of issue costs).

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6 2019 Westpac Group Annual Report Chairman’s report In response to this feedback, combined with your Board’s assessment, we made a number of changes to executive remuneration outcomes this year. The remuneration report discusses these in more detail, however the key features of remuneration in 2019 include: It is also worth highlighting that the Bank Levy has continued to weigh on earnings and on returns to shareholders. This year, the Bank Levy was equivalent to around 8 cents per share (4 cents per share each half). The Bank Levy is based on the size of certain liabilities, not on earnings. Accordingly while earnings were lower this year, the Bank Levy was higher. The final ordinary dividend will be paid on 20 December 2019 with the record date of 13 November 2019. • The CEO has not received any STVR this year. At the same time, the CEO has had no increase in his base pay, and indeed he has not had an increase in his base pay since he commenced the role in 2015. Group Executives received between 0% and 83% of their STVR. The Board used its discretion to apply downward remuneration adjustments to two Group Executives and two former Group Executives in response to material risk and compliance matters that impacted the Group. These adjustments reduced 2019 STVR outcomes to zero for the two former Group Executives. Many of these adjustments related to events from prior periods. In addition, the Board exercised its discretion to apply downward adjustments to a portion of deferred STVR for two former Group Executives. No LTVR vested for the CEO and Group Executives in 2019 as performance hurdles were not met. These awards typically make up around one third of each of the CEO’s or a Group Executive’s total remuneration; and Director base fees were reduced by 20% for all current Non-executive Directors for the 2019 financial year. Remuneration At our 2018 AGM, we received a significant vote against the adoption of our 2018 Remuneration Report and, as a result, incurred a ‘first strike’. In accordance with Australia’s Corporations Act, if we receive a ‘second strike’ against our 2019 Remuneration Report, a separate resolution must be put to shareholders at the 2019 AGM asking if they wish to hold an extraordinary general meeting, known as a ‘spill meeting’. The Board and I recognise that our decisions on executive remuneration in 2018 were not in line with shareholder expectations. In response, we have consulted extensively over the year to better understand shareholder views and act on their feedback. We met with groups of individuals with the help of the Australian Shareholders’ Association and we held a number of meetings with institutional shareholders and advisory groups. I have also received significant correspondence from shareholders. I greatly appreciate the time that shareholders have taken to share their thoughts directly with me and your Board. In my letter to shareholders accompanying the interim dividend earlier this year, I explained that the key concern of shareholders was that your Board did not apply sufficient discretion to short-term variable reward (STVR) outcomes in 2018, given Westpac’s flat financial performance in 2018 and the significant risk and reputation matters that arose. Shareholders also provided feedback on the overall quantum of executive pay, the use of a fair value allocation methodology to determine the award value of long-term variable reward and the lack of variability in short-term variable reward to executives over time. • • • • Changes have also been made to 2020 remuneration structures including the removal of a fair value allocation methodology (and moving to face value) to determine the number of performance share rights issued under the LTVR to the CEO and Group Executives. This change contributes to a reduction in the total target remuneration of the CEO and Group Executives by 23% and 12.5%, respectively. We will continue to assess our approach to remuneration, taking into account shareholder feedback and new requirements which are being developed by APRA. Further details on Westpac’s 2019 performance, governance and remuneration outcomes, is available in our 2019 Annual Report and our Annual Review and Sustainability Report.

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2019 Westpac Group Annual Report 7 Chairman’s report 1 Board renewal Over recent years, your Board has undergone significant renewal and I am confident the Board has the right mix of skills, experience and diversity to guide our business. This year we welcomed two new members to the Board: Margie Seale and Steve Harker. Margie has already proven to be a valuable addition to your Board with over 25 years of senior executive experience in both Australia and internationally. With a background in consumer goods and global publishing, Margie also has direct experience in how digital can disrupt traditional businesses, which is of great value to your Board. Steve Harker has strengthened the Board’s banking and financial services skills, with a particular focus on investment and institutional banking. Prior to joining the Board, Steve was Vice Chairman of Morgan Stanley Australia and was Managing Director of Morgan Stanley Australia for almost 20 years. The Board’s commitment In closing, I would like to reiterate a point from last year’s report that your Board is here to represent shareholders and we shall unashamedly continue to do so, including striving to provide you with the best possible returns on your investment over the long-term. We recognise that we still have work to do to rebuild the platform that will improve Westpac’s sustainability and restore the trust that you, the community and customers have placed in us – our role will be to ensure that the plans we have put in place will be followed through. Finally, while the Board has been disappointed with the findings of the Royal Commission and the CGA self-assessment we recognise that Westpac is a truly special company. Westpac is Australia’s oldest company with a deep history of not only supporting its customers but supporting the nation and the communities in which we operate. A key part of Westpac’s progress is the incredible people whose hard work and dedication I see every day. It is these same people that will see Westpac emerge from this environment as an even stronger, sustainable company. 2 3 4 Lindsay Maxsted Chairman

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8 2019 Westpac Group Annual Report Chief Executive Officer’s letter The year ahead will continue to be challenging Brian Hartzer Chief Executive Officer Dear Shareholder, The 2019 financial year was a watershed year for the banking industry, and for Westpac. In response to the issues highlighted by the Royal Commission1 and our Culture, Governance, and Accountability (CGA) self-assessment2, various regulatory actions across the industry, and a rapidly evolving competitive environment, we have made significant changes to the way we serve customers, to our business structure, and in the technology we use to support our people and our customers. These changes include the implementation of the new Banking Code of Practice; new policies and approaches for supporting vulnerable customers; the decision to exit our financial planning business; the implementation of a number of new controls and compliance processes, particularly in lending; and the roll-out of a major new technology system—the Customer Service Hub—that provides the foundation for improving both service quality and cost over the next several years. We also booked significant provisions for customer remediation payments and costs associated with our former financial planning network and various other operational issues we identified as part of our ‘get it right, put it right’ initiative. Externally, we confronted the impact of significantly lower interest rates and a substantial fall in demand for lending. This coincided with increased competition from both traditional and new competitors, many of whom are being enabled by advances in digital and mobile technology. Due to these and other factors, our financial performance for the year was disappointing. I am acutely aware of the faith you place in us to look after your investment and deliver acceptable returns— including dividends. And I would like to assure you that, despite the unusually large number of challenges we faced this year, your management team is committed to investing in the changes needed to build a more sustainable business and deliver superior returns over time. As part of this commitment, we made further progress on our aspiration to be one of the world’s great service companies. This included improvements in service quality, digital transformation, productivity, and service culture. While much work remains, we finish this year stronger than we started, with a clear plan and a high quality, motivated workforce who are committed to improving execution and getting things done. As in previous years, my goal with this letter is to explain what happened this year, what we have achieved, and where we have fallen short. I also want to address the changing strategic environment that we face and how we are adapting so we emerge from this period as the best positioned bank to deliver sustainable returns into the future. I’ve organised this letter to respond to the following questions: (1) What drove financial performance this year? (2) Why are we raising capital? (3) How are we progressing on our key priorities? (4) How are we improving non-financial risks, culture, and governance? (5) How is the market evolving, and what are our priorities to respond? (6) What is the outlook for 2020? 1. What drove financial performance this year? We consider financial performance across four dimensions: strength, return, productivity, and growth. To be sustainable, banks must strike the right balance across all these dimensions – and we have had reasonable success on each. Balance sheet strength will always be our number one priority. The lessons of the 1991 recession (the importance of strong credit risk disciplines) and the 2008 Global Financial Crisis (the importance of strong funding, liquidity, and capital) are alive and well. Credit quality remained sound over the year, although as expected we did see a moderate deterioration in delinquencies on housing loans, with 0.88% of loan balances more than 90 days past due. This mostly reflects some increase in stress and a slowdown in housing turnover in certain parts of the country, increasing the time it takes for people to clear their loans when they need to sell. Our institutional bank impaired assets to total exposure remain very low at just 0.08%, while in business lending, impaired assets to total exposure were up just 3 basis points to 0.62% over the last 6 months. In New Zealand, the picture is similar with impaired assets to total exposure just 0.08%, with the ratio almost halving over the year. The quality of our credit book meant that impairment charges declined 2% to $794 million, representing 11 basis points of gross loans. We finished the year with a strong funding and liquidity position, which provides resilience in the event of market disruption. We fully funded new lending with 1.Officially, “The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry” 2. Westpac’s Culture, Governance and Accountability self-assessment (CGA) was produced for the Westpac Board and APRA. A copy is available on our website.

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2019 Westpac Group Annual Report 9 Chief Executive Officer’s letter 1 customer deposits, and our Net Stable Funding ratio (which measures the proportion of our funding that comes from ‘sticky’ deposits and other long-term funding sources) was 112%—well above the 100% regulatory minimum. At the end of September, we held $144 billion in cash and other liquid assets, representing 127% of our short-term liabilities (the Liquidity Coverage Ratio). Our Common equity tier 1 capital ratio finished the year at 10.7%, and above APRA’s ‘unquestionably strong’ benchmark (I will discuss our capital position in more detail later in this letter). Turning to returns, our overall financial result for FY19 was disappointing. Reported profit was down 16% to $6,784 million and cash earnings were $6,849 million in FY19, down 15% or $1,216 million. Performance was significantly impacted by notable items of $1,130 million (after tax) in FY19—$849 million higher than the previous year and accounting for most of the decline in cash earnings. These notable items largely reflect provisions we’ve set aside for customer remediation and costs associated with exiting our financial planning business. Excluding notable items, cash earnings were $367 million lower—down 4% compared to FY18. This decline was mostly due to a 7 basis-point decline in margins to 2.16% as a consequence of a lower Treasury contribution and an extremely competitive environment. Earnings were also impacted by lower revenue in wealth management, and insurance. In wealth, revenue was down following the exit of our financial planning business, the removal of grandfathered commissions, the migration of MySuper accounts and the decision to reprice platform margins—each of which hurts revenue in the short term but supports customers and helps us build a more sustainable business. The lower Insurance income was primarily due to higher claims particularly from the severe weather events (Qld storms and NSW hailstorms) experienced early in 2019. Given the challenging environment, productivity was a major focus this year. We achieved our productivity goal by delivering $405 million in savings. This reflected the continued progress on our digital agenda—as customers shift to self-service and we automate manual processes—as well as better supplier management and the implementation of a simpler management structure across the Group. Growth this year—particularly balance sheet growth— was relatively slow, reflecting lower credit demand in the economy, our risk appetite, and the decision to prioritise margin. In housing, we also implemented a number of changes to our loan assessment approach, and unfortunately, did so in a way that made the application process harder than it needed to be. Given industry competition, some customers and brokers diverted their business elsewhere – and our lending slowed. In response, we’re working hard to simplify our processes, with a number of improvements already rolled out. As a result, we expect home lending to contract early in the year but to be growing in line with the system by the end of the 2020 financial year. Small business growth has also been affected by more onerous lending requirements, given the links between many small business customers’ personal and business finances. Credit demand was also weaker among larger customers—including corporates—but this was more a function of weaker business sentiment and a softer economic outlook. The reduction in cash earnings, and an increase in the strength of our capital base, meant that the return on equity declined to 10.75%—down over 2 percentage points over the year. Given the importance of capital as a driver of return on equity, it is important to understand why we are raising capital at this point. 2. Why are we raising capital? Our common equity tier 1 (CET1) capital ratio of 10.7% remains well above the 8% minimum regulatory requirement and is ahead of APRA’s unquestionably strong benchmark. We hold around $46 billion in common equity, up $7 billion over the last three years. That capital provides the backing to absorb losses in the event of a downturn and forms part of the funding pool for our lending. In addition, banks with high capital backing are generally rewarded with higher credit ratings, which make it cheaper to borrow in capital markets, particularly offshore. The complexity comes in the way regulators assess our capital position—usually through the ratio of capital to risk-weighted assets (the CET1 capital ratio). From time-to-time regulators recalibrate how they measure risk-weighted assets, and what should be included, or excluded, from the capital base. This in turn can reduce the reported capital ratio, despite the actual dollar amount of capital going up. In addition, earlier in the year APRA applied a $500 million capital overlay to Westpac (and other Major banks) until such time as we complete the actions from our CGA self-assessment. This overlay translated into a further reduction in our CET1 capital ratio of 16 basis points. At the end of September, our CET1 capital ratio would have been around 75 basis points higher had it not been for such developments. Looking ahead, we face continued uncertainty around APRA’s capital requirements, the potential for further regulatory actions and costs, and the earnings headwinds of low 2 3 4

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10 2019 Westpac Group Annual Report Chief Executive Officer’s letter interest rates and higher compliance costs. Furthermore, the Reserve Bank of New Zealand is currently proposing to significantly increase the capital requirements for New Zealand Banks (although the amount of the increase is yet to be finalised). Given our priority for balance sheet strength, we concluded that the prudent course of action was to seek to raise $2.5 billion in capital, which increases our CET1 capital ratio by around 581 basis points. This capital is expected to increase our buffer above APRA’s unquestionably strong benchmark of 10.5% and position us to respond to potential future impacts on capital (indicated above) and continue to lend and support the economy in the event of a downturn. Our decision to reduce the dividend to 80 cents per share was not easy, as we know that many shareholders rely on our dividends for income. In addition, we carry a substantial balance of franking credits that we would like to distribute to our shareholders. However, with increased shares on issue and downward pressure on returns, we felt it was prudent to bring our payout to a range that allows us to retain sufficient capital to support future growth. The most significant of these issues is the so-called “fee for no service” issue in financial planning. Under the “Future of Financial Advice” (FOFA) legislation introduced in 2012, financial planning businesses were required to eliminate ‘conflicted remuneration’ (commission) payments to planners and move to a fee-for-service model. As part of this, BT implemented systems (including new contracts, new technology, and an annual fee disclosure statement) seeking to ensure customers received the advice services they were paying for. However, as with other financial planning businesses, we identified some incidences of advice not being provided and cases where insufficient records were retained to meet regulator expectations. We have therefore been working through a process to review our customer files and repay customers where appropriate. This issue is more complex in the case of aligned dealer group planners, who operated separately, but under our licence. This was a standard industry practice, where companies like BT provided licensing and back-office services to planning groups. In these cases, we face significant logistical challenges in obtaining and checking all the historical files of those non-Westpac advisers, particularly if they have left the industry. Other remediation matters include instances where we didn’t meet certain reporting standards, or made administrative or operational errors in certain products. We have established a dedicated remediation hub to streamline the process of refunding customers. Currently there are around 750 staff dedicated to remediation activities, and since 2017 we have paid out $350m in compensation to customers. Beyond remediation, our response to the findings of the Royal Commission and our CGA self-assessment are well underway. We have implemented 11 recommendations as part of our Royal Commission program with a further 11 currently being implemented. We have commenced work on most of the remaining 27 recommendations that presently apply to us, but we will need to wait until the government passes the required legislation before we can fully progress the bulk of these. With our CGA action plan, we have implemented 40% of the recommendations and we expect to implement the remainder by March 2021. Changes we have made so far include centralising our complaints management, enhancing consequence management and remuneration governance, and introducing new board and committee processes. 3. How are we progressing on our strategic priorities? In my letter last year, I identified three priorities for the year ahead: • • • Deal with outstanding issues; Maintain momentum in our customer franchise; and Structural cost reduction. Deal with outstanding issues In recent years a number of issues have emerged relating to past business practices, operational errors, gaps in compliance, or changes in regulation. These were identified through the Royal Commission, our CGA self-assessment, ongoing product reviews, and various regulatory actions. The faster we resolve these issues, the sooner we can refocus investment and management attention on delivering more for customers, thereby increasing the value of our franchise. The most significant change over the year was the exit of our financial planning business and reducing our operating divisions from five to four. The financial planning business had been loss-making for some time and so this change is expected to be EPS positive in 2020. Exiting the business came with an immediate shut-down cost, but this will be quickly offset by cost savings and reduced risk. Our remaining Insurance, Superannuation, Investments, Platforms and Private Wealth businesses have been integrated into our Consumer and Business divisions. Customer remediation was another area of focus. Over the course of the year we continued to work through a backlog of historical issues in our financial planning and banking businesses and we continue to work with regulators to agree on a fair and reasonable approach to remediation. Maintaining momentum in our customer franchise The long-term success of our business depends on the strength and depth of our customer relationships. In 2019 we continued to improve our service offering and the technology needed to deliver better service in the future. 1.Based on risk weighted assets as at 30 September 2019, a 46 basis point increase reflects the impact of the placement only of $2 billion, while a 58 basis point increase reflects the impact of both the placement and the share purchase plan, assuming the share purchase plan raises $500 million (the basis point impacts are net of issue costs).

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2019 Westpac Group Annual Report 11 Chief Executive Officer’s letter In recent years we have built a strong service ethos throughout the company. Employees participate at least weekly in service ‘huddles’, where we review our service standards, share stories and examples of good service, and discuss where we can improve. This reinforces our customer-first approach and is further supported by embedding customer satisfaction and related service metrics in individual scorecards and performance rewards. A focus this year was on improving our ability to identify and support vulnerable customers. This included setting up a new Customer Vulnerability Council, making changes to various complaints policies, and rolling out training to our people on how to identify customers experiencing vulnerability. We promoted this through our Westpac “Help when it matters” advertising, with campaigns around relationship breakdown, loss of a loved one, and the impact of natural disasters. Our continued focus on service has led to a 2% rise in customers to 11.2 million in Australia. In business, we held our #1 NPS1 ranking in each of our key segments and increased our lead on #2 while in consumer, we rank #3 on NPS1 and closed the gap to #1. In technology, we delivered several new digital innovations to make things better for customers. These included our AI chat-bot ‘Red’, which can respond in real time to customer enquiries, a fully digital mortgage process for St.George customers, a new Digital Institutional Bank platform, an online pricing platform for term deposits, and an extensive rollout of the real time New Payments Platform which has seen us process around 40% of the flows on this platform. Around 40% of our digital sales are now completed online – a material uplift from just a few years ago. We have also completed major upgrades to our technology infrastructure that have improved reliability and will ultimately enable us to deliver even more for customers. These include: These and other changes have materially improved system stability with no major system outages in FY19—a big step up when you consider just a few years ago we experienced one or two major issues a month. Further changes and upgrades are planned that will further improve the experience for customers and enable more efficient processes for our bankers. At the same time, competition has intensified, especially in the mortgage business. As I indicated earlier, stepping out of line with the market quickly impacts market share. This happened to us in the latter part of the FY19, although we expect this to normalise through the year ahead. 1 Increasing structural productivity Using technology to drive down costs is an important part of our strategy to remain competitive and deliver good returns over time. This is increasingly important in a low-rate, slow-growth environment where margins are under pressure and regulatory and compliance costs are rising. At the same time, emerging competitors have no physical networks to support and have a cost advantage in delivering some products. This year our $405 million in productivity savings through a company-wide focus on simplification, automation, and digitisation was up one-third on the productivity savings delivered last year. Part of this reflects the benefits from prior investments in digitisation and automation, while a continued shift of customers from physical to digital channels allowed us to rationalise 61 branches and reduce ATM numbers by 375. Physical presence continues to be important for many customers and we are investing to upgrade our branch network in high-volume locations. However, changing customer traffic patterns into regional centres and the increasing use of contactless cards and mobile payments mean that we need fewer, well located branches to meet demand. To further improve efficiency, we have entered into an agreement to sell most of our ‘off-site’ ATM network to a third-party. This agreement materially retains the level of service Westpac customers currently receive from our ATM network but will allow us to benefit from scale efficiencies that this third party can achieve with their other cash processing. Other cost initiatives during the year included renegotiating supplier arrangements, further automating back-office operations, and simplifying our organisational structure. In total, these changes resulted in a net 5% reduction in full-time equivalent headcount across the company, despite adding significant extra resources to support the remediation activities described above. Increased compliance, regulatory, and remediation costs along with revenue headwinds mean that productivity benefits are not yet visible in traditional measures of bank productivity, such as the cost-to-income ratio. However I am confident that, as these programs and the related costs roll off over the next few years, the improved efficiency and competitiveness of our underlying business will become apparent. • Launching our ‘Customer Service Hub’, a modern platform for originating and servicing mortgages and other consumer banking products; Rolling out a new data platform that supports the Government’s ‘Open Banking’ regulations and will allow us to better understand customer needs; Completing the rollout of Panorama, our market-leading investment platform for independent financial advisors and their clients; and Renewing much of our underlying network and data centre infrastructure. This included moving over 600 applications to the new environment and upgrading over 300 applications hosted on legacy infrastructure. • 2 • • 3 4 1. For details on metric definition and provider please refer to the 2019 Full Year Results Presentation & Investor Discussion Pack available at www.westpac.com.au BEAR: The Bank Executive Accountability Regime, administered by APRA 2.

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12 2019 Westpac Group Annual Report Chief Executive Officer’s letter 4. How are we strengthening non-financial risk, governance, and accountability? The findings of the Royal Commission and our CGA self-assessment highlighted a number of areas where we need to improve non-financial risk management, governance, and accountability. To address these, several major programs of work are under way, with specific actions being tracked and reported at both the Group Executive level and to the Board. Specific areas of focus include: • Our ability to meet ever-rising regulatory expectations; and Our ability to attract and retain top quality talent in a small market, given our reputation as an employer of choice. • We recognise that we are a service business: We’ve set the goal for Westpac to be “one of the world’s great service companies, helping our customers, communities and our people to prosper and grow.” To grow the long-term value of the company, our strategy is to build scale in customer relationships through the provision of world-class service; supported by a strong balance sheet, great people, and a modern, highly efficient technology platform, as well as a network of partnerships among new, digitally-savvy competitors and suppliers. To bring this strategy to life, we are continuing to deliver on a multi-year investment program we call the “Service Revolution”, designed to strengthen our competitive offers and reshape the capabilities and cost structure of the company. This program is organised around three themes: • Improving the identification, escalation, and resolution of non-financial risk issues across the Group, with a particular focus on financial crime-related issues; Enhancing our end-to-end lending processes; Providing more detailed reporting on operational and compliance incidents to the Executive team and Board; Improving the efficiency and effectiveness of committee meetings; Clarifying and strengthening resources under the ‘Three Lines of Defence’ approach to risk management; Clarifying individual accountability for all managers, in line with the new BEAR2 regime; and Improving awareness and protection for whistle-blowers. • • • • • Performance disciplines: Prudently managing our capital, funding, and liquidity; seeking to maintain a superior ROE to the peer average while remaining targeted and disciplined on asset growth and credit quality; Service leadership: Continuing to grow the Group’s customer base while increasing the quality and depth of those relationships, as measured through the number of customers who view us as their main financial institution. We look to achieve this by delivering world-class service levels (both personal and digital), as measured by NPS; recognising that a great service business requires a high quality, well-trained, diverse, and engaged workforce; and Digital transformation: Using technology to materially improve efficiency and reduce the Group’s cost-to-income ratio below 40% in the medium-term. This will include migrating more sales and service activity to digital, reshaping the Group’s distribution network, modernising underlying technology platforms, and building an extensive network of digital partnerships and data assets. • • • In addition, we continue to enhance and reinforce general risk awareness across the Group. 5. How is the market evolving, and what are our priorities to respond? In 2015 we recognised that a once-in-a-generation change in banking was underway, as a consequence of changing customer behaviour, new technology, new competitors, and increased community and regulatory expectations. Over the past year, these trends have accelerated. In particular, we see: • • An increasing shift to digital self-service among customers; Increased competition, especially in mortgages, from foreign and regional banks who rely on mortgage brokers for their sales; The rise of digital-only competitors; The growth of fintech businesses offering new, data-driven services; Increased compliance costs and capital requirements across traditional banking businesses; and Continued reputational challenges for banks as a result of issues identified through the Royal Commission. • While we will continue to deliver this program of work over several years, we have set a number of specific priorities over the next couple of years. These are: • • • 1. Service leadership: • Extend our #1 in NPS1 for business •Close the gap to the #1 major bank in consumer • 2. Digital transformation: While these challenges are significant—particularly in the short term—we believe the longer-term outlook for a large bank like Westpac remains positive given: • Complete roll-out of the Customer Service Hub to all our mortgage bankers and to external brokers Launch a new mobile banking app with improved usability and functionality Launch Open Banking data capabilities Drive digital sales to 45% across the Group • The size and strength of our balance sheet (especially our deposit base and diverse funding sources); The quality and scale of our customer franchise, including our portfolio of brands and extensive data assets; The financial resources and skills required to build the technical innovations and partnerships required in a digital world; • • • • • 1.For details on metric definition and provider please refer to the 2019 Full Year Results Presentation & Investor Discussion Pack available at www.westpac.com.au

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2019 Westpac Group Annual Report 13 Chief Executive Officer’s letter 3. Performance discipline: For banks, the environment remains challenging. Interest rates at these low levels put significant pressure on margins, as many deposits are essentially at a ‘floor’ beyond which they can’t be repriced down. In addition, earnings on invested capital and liquidity are progressively lower as the portfolio rolls-over to much lower interest rates. Regulatory actions—flowing from the Royal Commission and other industry reviews and investigations— will continue to require significant investment and management attention. Regulators have substantially stepped up their resources and enforcement activity, leading to a dramatic increase in our own costs as we respond to the various enquiries, make improvements in our non-financial risk and control environment, and deal with the consequences—including fines and other legal fees—related to any adverse findings. In addition, regulators in Australia and New Zealand have a number of reviews underway, in many areas including home loan pricing, remuneration, and capital/ risk weighted asset methodologies across the sector. Further clarity on these reviews is expected in the year ahead. • Deliver $500 million in annual productivity savings in FY20 (23% above FY19) Further reshape the network Improve controls and risk management capabilities to ensure Westpac is resilient for the future, including further implementation of the Royal Commission and CGA self-assessment recommendation • • 1 We will report progress against each of these goals in our regular market updates. 6. What is the outlook for 2020? The economic outlook for Australia remains challenging, in part reflecting a softer global environment. Annualised growth in the June quarter of 2019 was only 1.4%, which is lower than population growth of 1.6%. The dynamics of global trade, weak real wages growth, a softer housing market, low interest rates and subdued economic activity have all dampened consumer confidence. That said, overall GDP growth remains positive and the economy continues to benefit from a strong resources sector, a lower Australian dollar, large infrastructure investments, and targeted income tax cuts. A slowdown in residential construction over the last year, combined with lower interest rates, should see a continued recovery in house prices building on the momentum we have seen in the September quarter, particularly in Sydney and Melbourne. However GDP growth is likely to remain below longer-term averages (which is ~ 2.75%) at 2.3% for calendar 2019 and 2.4% for calendar 2020. With consumer and business confidence relatively weak, credit growth has been slow. Overall credit growth for the Australian financial system slowed to 2.7% in the year to September 2019, down from 4.5% a year ago. That included a decline in housing credit growth from 5.4% to 3.1%; business from 3.8% to 3.3% and personal credit contracting by 4.4% after declining by 1% a year earlier. We expect credit growth to lift slightly in 2020 to 3% overall, with housing credit growth increasing to 3.5%. Business credit growth is also expected to grow by around 3%, while other personal credit is expected to contract by around 2%. Interest rates are expected to remain very low. The RBA reduced the cash rate from 1.5% to 0.75% over the year, and we expect a further rate cut to 0.5% in early 2020. With rates at this level, there are limited options for the RBA to cut further if the economy turns down; however the Commonwealth Budget is set to return to surplus in 2019/20 and the Commonwealth government has the scope for additional stimulus if required. Economic conditions in New Zealand have also softened, with sluggish consumer spending and weak business confidence. We expect a small improvement in 2020 supported by lower interest rates; some fiscal stimulus; and the competitive (lower) New Zealand dollar. Conclusion I want to conclude by thanking shareholders, on behalf of the management team and all of our employees, for your continued support this year. We recognise that reputational issues, regulatory and legal issues, and financial performance challenges have made this a difficult year to be an investor in Westpac. The year ahead will continue to be challenging, from multiple perspectives—economic, competitive, legal, reputational, and regulatory. I hope that my letter has provided some useful context as to the nature of these challenges and the clear-eyed way in which we are responding to this environment. We recognise where we have fallen short, and are absolutely committed to executing better and delivering on our strategy for the future. Through everything that has happened this year, I remain very proud of this company, and its people. We are well positioned, with many talented, dedicated bankers who come to work every day genuinely seeking to deliver world-class service and innovation for customers. I believe Westpac’s future is very bright and 2019 will prove to be a watershed for us in confronting the realities of a changed banking environment and responding decisively in ways that set us up to outperform in the future. Once again, thank you for your continued support and faith in the Westpac Group. 2 3 Brian Hartzer Chief Executive Officer The Westpac Group 4

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14 2019 Westpac Group Annual Report Information on Westpac Westpac is one of the four major banking organisations in Australia and one of the largest banking organisations in New Zealand. We provide a broad range of banking and financial services in these markets, including consumer1, business and institutional banking and wealth management services. We have branches, affiliates and controlled entities2 throughout Australia, New Zealand, Asia and in the Pacific region, and maintain branches and offices in some of the key financial centres around the world.3 We were founded in 1817 and were the first bank established in Australia. In 1850, we were incorporated as the Bank of New South Wales by an Act of the New South Wales Parliament. In 1982, we changed our name to Westpac Banking Corporation following our merger with the Commercial Bank of Australia. On 23 August 2002, we were registered as a public company limited by shares under the Australian Corporations Act 2001 (Cth) (Corporations Act). At 30 September 2019, our market capitalisation was $103 billion4 and we had total assets of $907 billion. also responsible for Private Wealth and the manufacture and distribution of investments (including margin lending and equities broking), superannuation and retirement products as well as wealth administration platforms. Business operates under the Westpac, St.George, BankSA, Bank of Melbourne, and BT brands. Business works with Consumer and WIB in the sale, referral and service of select financial services and risk management products (including corporate superannuation, foreign exchange and interest rate hedging). The revenue from these products is mostly retained by the product originators. Westpac Institutional Bank (WIB) delivers a broad range of financial products and services to commercial, corporate, institutional and government customers operating in, or with connections to Australia and New Zealand. WIB operates through dedicated industry relationship and specialist product teams, with expert knowledge in transactional banking, and financial and debt capital markets. Customers are supported throughout Australia and via branches and subsidiaries located in New Zealand, the US, UK and Asia. WIB is also responsible for Westpac Pacific providing a full range of banking services in Fiji and PNG. WIB works with all the Group’s divisions in the provision of markets related financial needs including foreign exchange and fixed interest solutions. Westpac New Zealand is responsible for sales and service of banking, wealth and insurance products for consumer, business and institutional customers in New Zealand. Westpac conducts its New Zealand banking business through two banks: Westpac New Zealand Limited, which is incorporated in New Zealand and Westpac Banking Corporation (New Zealand Branch), which is incorporated in Australia. Westpac New Zealand operates via an extensive network of branches and ATMs across both the North and South Islands. Business and institutional customers are also served through relationship and specialist product teams. Banking products are provided under the Westpac brand while insurance and wealth products are provided under Westpac Life and BT brands, respectively. New Zealand also maintains its own infrastructure, including technology, operations and treasury. Group Businesses include: Organisational structure Our business is focused in Australia and New Zealand, operating under multiple brands. The Group operates through an extensive branch and ATM network, significant online capability, and call centres supported by specialist relationship and product managers. Our operations comprise the following key divisions: Consumer is responsible for sales and service to consumer customers in Australia. Consumer is also responsible for the Group’s insurance business which covers the manufacture and distribution of life, general and lenders mortgage insurances. The division also uses a third party to manufacture certain general insurance products. Banking products are provided under the Westpac, St.George, BankSA, Bank of Melbourne, and RAMS brands, while insurance products are provided under Westpac and BT brands. Consumer works with Business and WIB in the sales, service, and referral of certain financial services and products including superannuation, platforms, auto lending and foreign exchange. The revenue from these products is mostly retained by the product originators. Business provides business banking and wealth facilities and products for customers across Australia. Business is responsible for manufacturing and distributing facilities to SME and Commercial business customers (including Agribusiness) generally for up to $150 million in exposure. SME customers include relationship managed and non-relationship managed SME customers (generally between $100k-$250k facilities). The division offers a wide range of banking products and services to support their borrowing, payments and transaction needs. In addition, specialist services are provided for cash flow finance, trade finance, automotive and equipment finance and property finance. The division is • Treasury, which is responsible for the management of the Group’s balance sheet including wholesale funding, capital and the management of liquidity. Treasury also manages the interest rate risk and foreign exchange risks inherent in the balance sheet, including managing the mismatch between Group assets and liabilities. Treasury’s earnings are primarily sourced from managing the Group’s balance sheet and interest rate risk, (excluding Westpac New Zealand) within set risk limits; Group Technology, which is responsible for technology strategy and architecture, infrastructure and operations, applications development and business integration in Australia; Core Support, which comprises functions performed centrally, including Australian banking operations, property services, strategy, finance, risk, compliance, legal, human resources, and customer and corporate relations; and • • 1. A consumer is defined as a person who uses our products and services. It does not include business entities. Refer to Note 31 to the financial statements for a list of our material controlled entities as at 30 September 2019. Contact details for our head office, major businesses and offshore locations can be found on the inside back cover. Based on the closing share price of our ordinary shares on the ASX as at 30 September 2019. 2. 3. 4.

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2019 Westpac Group Annual Report 15 Information on Westpac • Following the Group’s decision to restructure its wealth operations and exit its Advice business in March 2019, the residual Advice operations (including associated remediation) and certain support functions of BTFG Australia have been transferred to Group Businesses. Group Technology costs are fully allocated to other divisions in the Group. Core Support costs are partially allocated to other divisions, while Group Head Office costs are retained in Group Businesses. Group Businesses also includes earnings on capital not allocated to divisions, certain intra-group transactions that facilitate the presentation of the performance of the Group’s divisions, gains/losses from most asset sales, earnings and costs associated with the Group’s Fintech investments, and certain other head office items such as centrally raised provisions. Financial crime In an environment of ongoing legislative reform, regulatory change and increased industry focus, Westpac continues to progress a program of work to improve its management of financial crime risks (including Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF), sanctions, Anti-Bribery and Corruption, FATCA and Common Reporting Standards). This work includes a review of our AML/ CTF policies, the completeness of data feeding into our AML/CTF systems and our AML/CTF processes and controls. Westpac has been regularly updating AUSTRAC on progress and continues to implement a number of improvements to its AML/CTF Program, governance, policies, systems and controls together with related remediation work in respect of certain controls and reporting practices. These efforts relate to matters such as customer on-boarding, customer and payment screening; ongoing customer due diligence, transaction monitoring and regulatory reporting (including in relation to International Funds Transfer Instructions (IFTIs), Suspicious Matter Reports and Threshold Transaction Reports). As reported in the Group’s 2018 Annual Report, the Group self-reported to AUSTRAC a failure to report a large number of IFTIs (as required under Australia’s AML/CTF Act). Under the Act, the ‘sender’ financial institution of an IFTI transmitted out of Australia, or the ‘recipient’ financial institution of an IFTI transmitted into Australia, is required to report the IFTI to AUSTRAC within 10 business days of the instruction being sent or received. The majority of the IFTIs which are the subject of the Group’s engagement with AUSTRAC, concern batch instructions received by Westpac through one WIB product between 2009 and 2018 from a small number of correspondent banks for payments made predominantly to beneficiaries living in Australia in Australian dollars, on behalf of clients of those correspondent banks. The majority of the payments were low value, recurring and made by foreign government pension funds and corporates. AUSTRAC has issued a number of detailed statutory notices over the last year requiring information relating to the Group’s processes, procedures and oversight. These notices relate to a range of matters including these IFTI reporting failures and associated potential failings related to record keeping and obligations to obtain and pass on certain data in funds transfer instructions, as well as correspondent banking due diligence, risk assessments and transaction monitoring. Westpac has not yet received an indication from AUSTRAC about the nature of any enforcement action it may take. The Group is continuing to work with AUSTRAC in relation to these matters. Any enforcement action against Westpac may include civil penalty proceedings and result in the payment of a significant financial penalty, which Westpac is currently unable to reliably estimate. Previous enforcement action by AUSTRAC against other institutions has resulted in a range of outcomes, depending on the nature and severity of the relevant conduct and its consequences. Further information about these matters is set out in Note 27 to the financial statements. Details about the consequences of failing to comply with financial crime obligations is set out in ‘Risk Factors’ in section 2. 1 Significant developments Westpac significant developments Customer remediation Through the Group’s ‘get it right, put it right’ initiative we have continued to review products, processes and policies to identify where we may not have got it right for our customers. Where problems have been identified, the Group has committed to fix them and refund customers. These initiatives identified a number of issues that require ongoing remediation. The Group has undertaken steps designed to accelerate the processing of customer refunds and centralise oversight of certain remediation under the Chief Operating Officer. Further information in relation to compliance, reputation and remediation provisions is included in Note 27 to the financial statements. Changes to wealth strategy During the course of the year, Westpac reset its wealth strategy and made a number of changes to its wealth business. This resulted in the realignment of our major BT Financial Group businesses into the Consumer and Business divisions from 1 April 2019. During the financial year ended 30 September 2019, Westpac also completed the exit of its personal financial advice business, which included completing a sale with Viridian Advisory on 1 July 2019 and moving to a referral model for financial advisers utilising a panel of adviser firms. 2 First strike against remuneration report On 12 December 2018 at Westpac’s Annual General Meeting of shareholders, Westpac incurred a first strike against its remuneration report. A strike occurs where a company’s remuneration report receives a ‘no’ vote of 25% or more. If Westpac receives a second strike at its 2019 Annual General Meeting, a spill resolution will be put to shareholders. If 50% or more of votes cast are in favour of that spill resolution, a spill meeting is required to be held within 90 days. At that spill meeting, certain directors will be required to stand for re-election. In response to the first strike and other feedback received Westpac has made changes to both the structure of remuneration and outcomes. Further detail is included in the Remuneration Report included in the Directors’ Report. 3 4

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16 2019 Westpac Group Annual Report Information on Westpac Regulatory and Government focus On 22 May 2019, APRA released a report analysing self-assessments carried out by 36 banks, insurers and superannuation licensees. APRA noted a wide variation in the quality of the self-assessments, however consistent findings in the self-assessments included: Royal Commission into the banking, superannuation and financial services industries On 14 December 2017, the Australian Government established a Royal Commission into potential misconduct in Australia’s banks and other financial services entities. The Royal Commission’s Final Report was released on 4 February 2019 and contained 76 express recommendations. In light of Westpac’s wealth strategy reset and the Government’s signalled approach to implementation, 49 of those recommendations presently apply to Westpac. Of these 49 recommendations, 11 recommendations have now been implemented, with Westpac either establishing new practices and procedures to meet the recommendations or having existing practices consistent with the recommendation, and a further 11 recommendations are in the process of being implemented. Some of these recommendations will require legislative or regulatory action before implementation can be completed. The remaining 27 recommendations require legislative or regulatory action before implementation work can commence. Westpac is undertaking preparatory work where possible, including through participation in Government consultation. The recommendations are broadly aimed at protecting consumers against misconduct, providing adequate redress and addressing asymmetries of power and information between financial services entities and their customers. Implementation of the recommendations is likely to continue to have a significant impact on banking and financial services entities and their regulators. Some of the most significant recommendations include those concerning the regulation of mortgage brokers, the prohibition of unsolicited sales of insurance and superannuation products and removal of grandfathered commissions. The Government has stated that it will take action on all of the recommendations contained within the Final Report. On 19 August 2019, the Government released its Royal Commission implementation roadmap which sets out a timeline for consultation and the introduction of legislation which will implement the recommendations. The implementation roadmap foreshadows that a large number of legislative changes will be enacted into law or introduced before Parliament by mid-2020. Other impacts arising from the Royal Commission include a number of claims being brought against financial institutions in relation to certain matters considered during the Royal Commission, and the referral of several cases of misconduct to the financial regulators by Commissioner Hayne. • non-financial risk management requires improvement; accountabilities are not always clear, cascaded and effectively enforced; acknowledged weaknesses are well-known and some have been long-standing; and risk culture is not well understood, and therefore may not be reinforcing the desired behaviours. • • • Westpac has a program of work underway to address the recommendations identified in the self-assessment report which has oversight of the Westpac Board. Westpac has implemented 40% of the recommendations identified in the self-assessment and expects to complete its program of work by March 2021. Regulatory reviews and inquiries Provision of credit - reviews by and engagement with regulators The provision and availability of credit for residential mortgage holders, property investors and businesses has continued to be a key area of Government, regulator and industry focus throughout the financial year ended 30 September 2019. Regulatory focus on credit from APRA has primarily been related to serviceability at an industry level, while ASIC has continued to consult on proposed changes to its regulatory guide on responsible lending. Judicial guidance on the extent of responsible lending obligations was also obtained from the Federal Court in its judgment in ASIC’s responsible lending test case against Westpac (with the judgment currently under appeal). More information on these proceedings is set out in this section below. APRA has also been engaging with Westpac on the adequacy of our credit risk management framework including our controls, policies and operating systems. Following feedback from APRA, the Group is making a number of changes to its systems and controls to improve its end-to-end approach in relation to its mortgage and business lending portfolios, as well as other key processes. This includes enhancing portfolio management practices, systems upgrades (including data collection and rationalisation), strengthening collateral management processes and improving assurance and oversight over our credit management frameworks. This program of work also addresses issues identified by Westpac’s internal assurance and audit teams. Westpac will continue its work to improve its end to end credit processes and expects engagement with APRA in this regard to continue throughout Full Year 2020. APRA self-assessment On 29 November 2018, Westpac submitted to APRA its self-assessment on its frameworks and practices in relation to governance, culture and accountability. A copy of Westpac’s self-assessment is available on our website.

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2019 Westpac Group Annual Report 17 Information on Westpac Australian Competition and Consumer Commission (ACCC) inquiry into home loan pricing On 14 October 2019, the ACCC was directed by the Treasurer of Australia to conduct an inquiry into home loan pricing since 1 January 2019. The inquiry has been established to: • the Taskforce releasing a report on 2 October 2019. The report sets out ASIC’s observations on director and officer oversight of non-financial risk, how directors and officers of large and complex financial services companies are discharging their duties in relation to oversight and monitoring of non-financial risk, and ways that governance practices could be improved. • investigate the prices charged for home loans across the sector; consider how banks make pricing decisions, including their approach to passing on movements in the official cash rate; examine differences in the prices paid by new and existing customers; examine differences between the interest rates published by suppliers and the interest rates paid by customers; and investigate barriers that may prevent consumers from switching lenders. • 1 Enhanced penalties for corporate and financial sector misconduct On 12 March 2019, the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) received royal assent. The Act strengthens penalties for corporate and financial sector misconduct consistent with the ASIC Enforcement Review Taskforce recommendations. Key aspects of the Act are to: • • • • update the penalties for certain criminal offences in legislation administered by ASIC, including tripling the maximum imprisonment penalties for certain criminal offences (from 5 to 15 years), introducing a formula to calculate financial penalties for contraventions of civil penalty provisions by individuals and companies, and removing imprisonment as a penalty but increasing the financial penalties for all strict and absolute liability offences; introduce ordinary criminal offences that sit alongside strict and absolute liability offences; expand the civil penalty regime by making a wider range of offences subject to civil penalties, such as failures by Australian financial services licensees to act efficiently, fairly and honestly, and failures to report significant breaches within 10 days of becoming aware of the breach or of circumstances where they are likely to breach; introduce a new test that applies to all dishonesty offences under the Corporations Act 2001 (Cth); and ensure the Courts prioritise compensating victims over ordering the payment of financial penalties. An interim report is due by 30 March 2020 and a final report is due by 30 September 2020. ACCC residential mortgage products price inquiry in relation to the Bank Levy The ACCC undertook a specific inquiry into the pricing of residential mortgages by those banks affected by the Bank Levy (including Westpac), which included monitoring the extent to which the Bank Levy was passed on to customers. The final report was published in December 2018 and made a number of findings about the pricing or residential mortgages, including that the banks that were the subject of the inquiry did not change residential mortgage prices specifically to recover the costs of the Bank Levy. • • AFCA look back review On 4 February 2019, the Australian Government announced that, in response to the recommendations contained in the Royal Commission’s Final Report, it would expand the remit of the Australian Financial Complaints Authority (AFCA) for 12 months so that it can consider customer claims dating back to 1 January 2008 and award compensation where appropriate. AFCA has expanded its jurisdiction to consider these legacy complaints for an additional 12 month period to 30 June 2020. • • ASIC’s close and continuous monitoring program ASIC has continued to use a supervisory approach in which ASIC officers are embedded in major financial institutions, including Westpac, in order to actively limit future financial harm to consumers, investors and markets and to catalyse positive, consumer oriented, behavioural change. To date, the model adopted by ASIC is for officers to make extended onsite visits to major financial institutions. ASIC’s program is examining culture and processes in major financial institutions through three streams: Breach Reporting, Corporate Governance and Internal Dispute Resolution (IDR). ASIC’s onsite on Breach Reporting and engagement on Corporate Governance is now complete. The IDR onsite for Westpac commenced on 15 October 2019. 2 Increased regulatory powers and oversight Australian Securities and Investments Commission (ASIC) Enforcement Review Taskforce On 16 April 2018, the Australian Government agreed to implement all of the recommendations made by the ASIC Enforcement Review Taskforce in its review of the suitability of ASIC’s existing regulatory tools. Progress continues to be made in implementing these recommendations, including: •the Australian Treasury releasing five draft Bills on 11 September 2019 for consultation which, if enacted, would further strengthen ASIC’s enforcement and supervision powers by implementing certain recommendations relating to search warrants, access to telecommunications interception information, licensing and banning orders; and 3 4

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18 2019 Westpac Group Annual Report Information on Westpac Product design and distribution obligations and product intervention power On 5 April 2019, the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 (Cth) received royal assent. The Act amends the Corporations Act 2001 (Cth) and the National Consumer Credit Protection Act 2009 (Cth) and grants ASIC a product intervention power and introduces a new ‘principles-based’ product design and distribution obligation on issuers and distributors. care with vulnerable customers and train staff to help, simplified loan contracts for small business written in plain English, better protection for guarantors and stronger enforcement of the Code. The Code will be further updated with key amendments in response to the recommendations contained in the Royal Commission’s Final Report, which recommended changes in relation to the protection of small businesses and having a greater focus on customers in remote areas and those with limited English. These changes include banning informal overdrafts on basic accounts without prior express agreement with the customer, abolishing dishonour fees on basic bank accounts and following AUSTRAC’s guidance on the identification and verification of persons of Aboriginal or Torres Strait Islander heritage. Subject to regulatory approvals, it is expected that these updates will be effective from 1 March 2020. Regulatory enforcement approach On 15 April 2019, APRA released its Enforcement Approach with immediate effect. The new Enforcement Approach follows the results of its Enforcement Review, released on the same day. The Enforcement Review made seven recommendations which were designed to help APRA better leverage its enforcement powers to achieve prudential outcomes. In response to the Enforcement Review, APRA stated it would implement all recommendations including increasing APRA’s enforcement appetite from a ‘last resort’ to a ‘constructively tough’ approach. The new enforcement approach sets out how APRA will use its enforcement powers to prevent and address serious prudential risks, and to hold entities and individuals to account. APRA’s approach states that it may do this well before the risks (whether financial, operational or behavioural) present an immediate threat to financial viability. Further, where entities or individuals are failing to meet prudential obligations, APRA will act quickly and forcefully, and will be willing to set public examples to deter unacceptable practices from occurring in the future. On 26 February 2019, the ACCC outlined its compliance and enforcement priorities in its annual Compliance and Enforcement Policy refresh. The ACCC’s competition enforcement approach and objectives are supported by increased budget support from the Government announced at the end of 2018. In October 2018, ASIC committed to accelerating enforcement activities, conducting more civil and criminal enforcement actions against large financial institutions and adopting a ‘why not litigate?’ enforcement stance. Following the release of the Royal Commission’s Final Report, ASIC has established a separate Office of Enforcement within ASIC. Open banking regime The Treasury Laws Amendment (Consumer Data Right) Act 2019 (Cth) (CDR Act) received royal assent on 12 August 2019. The CDR Act amends the Competition and Consumer Act 2010 (Cth), the Privacy Act 1988 (Cth) and the Australian Information Commissioner Act 2010 (Cth) to introduce a consumer data right. The banking sector is the first sector to which the consumer data right will apply. The introduction of a consumer data right in the Australian economy signifies a shift in how data is regulated. It will give customers in Australia a right to direct that their data (starting with banking data) be shared with accredited third parties and follows a growing global trend to give consumers control over their data. Data sharing is expected to facilitate competition through easier product comparison and switching. This will have significant implications for consumers and banks. On 2 September 2019, the ACCC released the final Competition and Consumer (Consumer Data Right) Rules 2019 (CDR Rules). The CDR Rules outline how the consumer data right is to be implemented in the banking sector. A revised timetable for the introduction of open banking was included as part of the CDR Rules. Both the CDR Act and CDR Rules contain new, detailed privacy protections under 13 Privacy Safeguards. The Privacy Safeguards deal with the disclosure, collection, use, accuracy, storage, security and deletion of consumer data right data. There are also 58 civil penalty provisions under the CDR Rules. A breach of the Privacy Safeguards or the CDR Rules could attract civil penalties of up to the greater of $10 million, 3 times any benefit obtained or 10% of 12 month annual turnover for corporations. Review into corporate criminal responsibility regime On 10 April 2019, the Australian Government commissioned the Australian Law Reform Commission (ALRC) to undertake a comprehensive review of the corporate criminal responsibility regime. The review is to consider reforms to the Criminal Code and other relevant legislation to provide a simpler, stronger and more cohesive regime for corporate criminal responsibility. The ALRC’s report is to be provided to the Australian Government by 30 April 2020. Comprehensive Credit Reporting (CCR) On 15 August 2019, an updated version of the National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018 (Cth) was released for consultation by the Australian Treasury, following the prior introduction of the Bill into the House of Representatives in March 2018. It is expected that this updated Bill will be introduced into Parliament in late 2019. General regulatory changes affecting our business Banking Code of Practice On 31 July 2018, ASIC approved the Banking Code of Practice (the Code) with an implementation date of 1 July 2019 for each bank that has adopted the Code (including Westpac). The Code introduces a range of new measures including a commitment to take extra

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2019 Westpac Group Annual Report 19 Information on Westpac Litigation These proceedings are currently stayed by order of the Court, pending the outcome of an appeal concerning a procedural issue unrelated to the substantive claims made in the class action. ASIC’s responsible lending litigation against Westpac On 1 March 2017, ASIC commenced Federal Court proceedings against Westpac in relation to certain home loans entered into between December 2011 and March 2015, which were automatically approved by Westpac’s systems as part of its broader processes. The proceedings were heard in May 2019. On 13 August 2019, the Court handed down its judgment in the proceedings, and dismissed ASIC’s case. On 10 September 2019 ASIC filed an appeal in relation to the decision. BBSW proceedings Following ASIC’s investigations into the interbank short-term money market and its impact on the setting of the bank bill swap reference rate (BBSW), on 5 April 2016, ASIC commenced civil proceedings against Westpac in the Federal Court of Australia, alleging certain misconduct, including market manipulation and unconscionable conduct. On 24 May 2018, Justice Beach found that Westpac had not engaged in market manipulation or misleading or deceptive conduct under the Corporations Act 2001 (Cth). His Honour also found that there was no ‘trading practice’ of manipulating the BBSW rate. However, the Court found that Westpac engaged in unconscionable conduct on 4 occasions and that Westpac breached certain of its duties as a financial services licensee. On 9 November 2018, the Court ordered Westpac to pay a penalty of $3.3 million and 50% of ASIC’s costs, and have an independent expert review particular aspects of Westpac’s compliance arrangements. Westpac has complied with these orders. The amount of costs recoverable by ASIC is still in the process of being determined. In August 2016, a class action was filed in the United States District Court for the Southern District of New York against Westpac and large number of Australian and international banks alleging misconduct in relation to the bank bill swap reference rate. In April 2019, an amended claim was filed by the Plaintiffs. Westpac is defending the proceedings with a Motion to Dismiss filed in May 2019. 1 Outbound scaled advice division proceedings On 22 December 2016, ASIC commenced Federal Court proceedings against BT Funds Management Limited (BTFM) and Westpac Securities Administration Limited (WSAL) in relation to a number of superannuation account consolidation campaigns conducted between 2013 and 2016. ASIC has alleged that in the course of some of these campaigns, customers were provided with personal advice in contravention of a number of Corporations Act 2001 (Cth) provisions, and selected 15 specific customers as the focus of their claim. In December 2018 the primary Court handed down a judgment in which it held that no personal advice had been provided and that BTFM and WSAL did not contravene the relevant personal advice provisions although it did make a finding that BTFM and WSAL had each contravened section 912A(1)(a) of the Corporations Act. In February 2019, ASIC filed an appeal against this decision. On 28 October 2019, the Full Federal Court handed down its decision in ASIC’s favour and made findings that BTFM and WSAL each provided personal advice on the relevant calls. Once formal declarations of contravention are made, the matter will be remitted for penalty. Responsible lending class action On 21 February 2019, a class action against Westpac was filed in the Federal Court of Australia. As directed by the Court, the Plaintiffs filed a Statement of Claim on 22 May 2019 and an amended statement of claim on 18 October 2019. The claims allege that Westpac did not comply with its responsible lending obligations and entered into certain home loans that it should otherwise have assessed as unsuitable. The allegations include that, during the period from 1 January 2011 to 17 February 2018, Westpac failed to: conduct reasonable inquiries about the customers’ financial situation, requirements and objectives; verify customer’s financial situation; conduct assessments of suitability; and act efficiently and fairly. Westpac is defending the proceedings. ASIC’s proceedings against Westpac for poor financial advice by a financial planner On 14 June 2018, ASIC commenced proceedings in the Federal Court against Westpac in relation to alleged poor financial advice provided by a former financial planner, Mr Sudhir Sinha. Mr Sinha was dismissed by Westpac in November 2014 and subsequently banned by ASIC. Westpac has proactively initiated remediation to identify and compensate affected customers and has completed remediation activities. ASIC’s proceedings relate to advice provided by Mr Sinha in respect of four specific customer files. The matter was heard by the Court on 15 April 2019 and judgment has been reserved. 2 Cash in super class action On 5 September 2019, a class action against BT Funds Management Limited (BTFM) and Westpac Life Insurance Services Limited (WLIS) was commenced in relation to aspects of BTFM’s BT Super for Life cash investment option. The claim follows other industry class actions as part of Slater and Gordon’s ‘Get your super back’ campaign. It is alleged in the proceedings that BTFM failed to adhere to a number of obligations under the general law, the relevant trust deed and the Superannuation Industry (Supervision) Act 1993 (Cth), and that WLIS was knowingly concerned with BTFM’s alleged contraventions. The damages sought by the claim are unspecified. BTFM and WLIS are defending the proceedings. Class action against Westpac Banking Corporation and Westpac Life Insurance Services Limited On 12 October 2017, a class action was filed in the Federal Court of Australia on behalf of customers who, since February 2011, obtained insurance issued by Westpac Life Insurance Services Limited (WLIS) on the recommendation of financial advisers employed within the Westpac Group. The plaintiffs have alleged that aspects of the financial advice provided by those advisers breached fiduciary and statutory duties owed to the advisers’ clients, including the duty to act in the best interests of the client, and that WLIS was knowingly involved in those alleged breaches. Westpac and WLIS are defending the proceedings. 3 4

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20 2019 Westpac Group Annual Report Information on Westpac Regulatory capital transactions APRA regulatory changes Capital raising On 4 November 2019, Westpac announced that it will be undertaking an underwritten placement of fully paid ordinary shares in Westpac to institutional investors to raise $2 billion. As further announced, following the placement, Westpac will make a share purchase plan available to shareholders to raise approximately $500 million, subject to scaleback, and with the ability to raise less or more. APRA’s proposed changes to capital standards On 19 July 2017, APRA released an Information Paper titled ‘Strengthening Banking System Resilience - Establishing Unquestionably Strong Capital Ratios’. In its release, APRA concluded that the four major Australian banks, including Westpac, need to have a common equity tier 1 (CET1) capital ratio of at least 10.5%, as measured under the existing capital framework, to be considered ‘unquestionably strong’. Banks are expected to meet this new benchmark by 1 January 2020. APRA has commenced consultation on revisions to the capital framework which includes proposals on changes to risk weighted assets, including in relation to residential mortgages as well as improving the transparency, comparability and flexibility of the framework. As part of the proposals, APRA has proposed a minimum Leverage Ratio requirement of 3.5% for ADIs, such as Westpac, that use the internal ratings-based approach to determine capital adequacy. APRA has indicated that it expects to finalise the suite of prudential standards to give effect to the ‘unquestionably strong’ benchmark in 2020-21, with the revised prudential standards likely to come into effect from 1 January 2022. In regards to the proposed revisions to the capital treatment of operational risk, APRA has proposed an earlier implementation date of 1 January 2021 for advanced IRB banks, such as Westpac. APRA has announced that its revisions to the capital framework are not intended to necessitate further capital increases for the industry above the 10.5% benchmark. However, given the proposals include higher risk weights for certain mortgage products, such as interest only loans and loans for investment purposes, the impact on individual banks may vary. The proposals are currently under consultation and final details remain unclear, and it is therefore too soon to determine the impact on Westpac. Further details of Westpac’s other regulatory disclosures required in accordance with prudential standard APS 330 can be accessed at https://www.westpac.com.au/about-westpac/investor-centre/financial-information/regulatory-disclosures/. Issue of Westpac Capital Notes 6 On 18 December 2018, Westpac issued approximately $1.42 billion of securities known as Westpac Capital Notes 6 which qualify as Additional Tier 1 capital under APRA’s capital adequacy framework. Transfer and redemption of Westpac Capital Notes On 18 December 2018, approximately $722 million of Westpac Capital Notes were transferred to the Westpac Capital Notes nominated party for $100 each pursuant to the Westpac Capital Notes 6 reinvestment offer. Those Westpac Capital Notes were subsequently redeemed by Westpac. On 8 March 2019, being the optional redemption/ transfer date of the Westpac Capital Notes, the remaining $662 million of Westpac Capital Notes were transferred to the Westpac Capital Notes nominated party for $100 each. Those Westpac Capital Notes were subsequently redeemed by Westpac. Adoption of new accounting standards Adoption of AASB 9 and AASB 15 The Group adopted the classification and measurement, and impairment requirements of AASB 9: Financial Instruments (AASB 9) on 1 October 2018. AASB 9 includes a forward looking ‘expected credit loss’ impairment model, revised classification and measurement model and modifies the approach to hedge accounting. The adoption of AASB 9 reduced the Group’s retained earnings at 1 October 2018 by $722 million (net of tax) primarily due to the increase in impairment provisions under the new standard. The Group also adopted AASB 15: Revenue from Contracts with Customers (AASB 15) on 1 October 2018. AASB 15 provides a systematic approach to revenue recognition by introducing a five-step model governing revenue measurement and recognition. The adoption of AASB 15 reduced the Group’s retained earnings at 1 October 2018 by $5 million (net of tax). Further details of the changes from the adoption of AASB 9 and AASB 15 as well as details of accounting standards that have been issued but are not yet effective for the Group are included in Note 1 to the financial statements. APRA’s additional capital requirements On 11 July 2019, Westpac received APRA’s response to its self-assessment. In its response, APRA decided to apply an additional $500 million to Westpac’s operational risk capital requirement. This follows APRA concluding that Westpac was required to improve its management and oversight of non-financial risk. The additional capital requirement will remain in place until APRA is satisfied that Westpac has completed its action plan. The $500 million requirement, applied through an increase in risk weighted assets, took effect from 30 September 2019. The change reduced Westpac’s Level 2 CET1 capital ratio by 16 basis points. Westpac’s CET1 capital ratio at 30 September 2019 was 10.67%. Transition to AASB 16 AASB 16: Leases (AASB 16) replaced AASB 117: Leases from 1 October 2019. AASB 16 requires all leases of greater than 12 months duration to be presented on balance sheet by the lessee as a right-of-use asset and a lease liability. The application of AASB 16 is expected to result in the recognition of a right-of-use asset of $3.4 billion with a corresponding lease liability, with no impact on retained earnings. Further details of the changes under the new standard are included in Note 1 to the financial statements.

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2019 Westpac Group Annual Report 21 Information on Westpac APRA’s proposed revisions to subsidiary capital investment treatment On 15 October 2019, APRA released a discussion paper on proposed changes to APS 111 Capital Adequacy: Measurement of Capital. The key proposal is in relation to a parent ADI’s treatment of its equity investments in banking and insurance subsidiaries (Level 1). Westpac’s largest investment in banking and insurance subsidiaries is Westpac New Zealand Limited (WNZL). There is no impact from this proposal on the calculation of the Group’s reported regulatory capital ratios on a Level 2 basis. On a Level 1 basis, on a proforma basis as at 30 September 2019, it is estimated that applying APRA’s proposed approach would reduce Westpac’s Level 1 CET1 ratio by approximately 40bps ($1.6 billion). APRA has indicated that the updated standard will come into effect from 1 January 2021. APRA’s proposed amendment to guidance on mortgage lending On 5 July 2019, APRA announced that it no longer required ADIs to assess home loan applications using a minimum interest rate of at least 7%. Instead, ADIs are permitted to review and set their own minimum interest rate floor for use in serviceability assessments and utilise a revised interest rate buffer of at least 2.5% over the loan’s interest rate. Also on 5 July 2019, APRA also released its final version of Prudential Practice Guide APG 223 – Residential Mortgage Lending. 1 APRA Prudential Standard CPS 234: Information Security Management On 1 July 2019, APRA’s Prudential Standard CPS 234: Information Security came into effect, except for information assets managed by a third party which will come into effect from the earlier of the next contract renewal date or 1 July 2020. The standard is aimed at improving the ability of APRA-regulated entities to detect cyber adversaries, ensure appropriate security capabilities are in place commensurate to the risk of the information assets including responding swiftly and effectively in the event of an information security incident. Westpac continues to enhance its systems and processes to further mitigate cybersecurity risks. Associations with Related Entities On 20 August 2019, APRA released the finalised prudential standard APS 222: Associations with Related Entities. The revised standard is intended to strengthen the ability of ADIs to monitor, limit and control risks arising from transactions and other associations with related entities. Key changes include revisions to the limit for exposure to ADIs from 50% of Total Capital to 25% of Tier 1 capital. The revised standard is effective from 1 January 2021. Westpac’s largest exposure to a related entity is WNZL. As at 30 September 2019, Westpac would remain within the revised limits based on the current level of exposure to WNZL. APRA Prudential Standard CPS 511: Remuneration On 23 July 2019, APRA released for consultation a new draft prudential standard and supporting discussion paper on remuneration. It is aimed at clarifying and strengthening remuneration arrangements in APRA-regulated entities. The new standard will replace existing remuneration requirements under CPS/SPS 510 Governance with a proposed implementation date of 1 July 2021. Additional loss absorbing capacity In response to the Financial System Inquiry recommendations, the Australian Government agreed to further reforms regarding crisis management and establishing a framework for minimum loss-absorbing and recapitalisation capacity. On 9 July 2019, APRA announced a requirement for the Australian major banks (including Westpac) to increase their total capital requirements by three percentage points of risk weighted assets (RWA) as measured under the current capital adequacy framework. This increase in total capital will take full effect from 1 January 2024. Based on Westpac’s RWA of $429 billion at 30 September 2019, this represents around $13 billion of additional capital over the four year transition period. The additional capital is expected to be raised through Tier 2 Capital and is likely to be offset by a decrease in other forms of long term wholesale funding. Westpac has commenced progress towards the new requirements and in the financial year ended 30 September 2019 issued a total of $4.2 billion in Tier 2 capital. APRA is still targeting an additional four to five percentage points of loss-absorbing capacity. Over the next four years, APRA will consider feasible alternative methods for raising the remaining 1-2 percentage points. APRA intends to consult on a prudential framework covering both recovery and resolution planning in 2020. International developments affecting Westpac Brexit There continues to be uncertainty on the timing and process for the United Kingdom’s (UK) withdrawal from the European Union (EU). As Westpac’s business and operations are based predominantly in Australia and New Zealand, Westpac expects that the direct impact of the UK’s departure from the EU is unlikely to be material to Westpac. However, it remains difficult to predict the impact that Brexit may have on financial markets, the global economy and the global financial services industry. Westpac has contingency planning in place and has been active in dialogue with affected customers. 2 OTC derivatives reform International regulatory reforms relating to over-the-counter (OTC) derivatives continue to be implemented across the globe, with a current focus on initial margin and risk mitigation practices for non-centrally cleared derivatives. As of 1 September 2019, Westpac is required to post and collect collateral on a gross basis, held at third party custodians. Global initial margin requirements will continue to be introduced in phases until 1 September 2021. 3 4

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22 2019 Westpac Group Annual Report Information on Westpac New Zealand Review of the Reserve Bank of New Zealand Act In November 2017, the New Zealand Government announced it would undertake a review of the Reserve Bank of New Zealand Act 1989 (RBNZ Review). The RBNZ Review will consist of two phases. The legislation for the recommended Phase 1 related changes to New Zealand’s monetary policy framework received royal assent on 20 December 2018, and came into force on 1 April 2019. The terms of reference for Phase 2 were released in June 2018 and will consider the overarching objectives of the RBNZ’s institutional governance and decision-making, the macro-prudential framework, the current prudential supervision model, trans-Tasman coordination, supervision and enforcement and resolution and crisis management. Final policy decisions on all components of the review are expected to be made in 2020. Reserve Bank of New Zealand (RBNZ) - Revised Outsourcing Policy As at 30 September 2019, WNZL is compliant with the requirement in the RBNZ’s revised Outsourcing Policy (BS11) (Revised Outsourcing Policy) to maintain a compendium of outsourcing arrangements and work is underway to comply with the other aspects of the Revised Outsourcing Policy by 30 September 2022 in line with the regulatory timeline. As a result of complying with the Revised Outsourcing Policy, the ongoing cost of operating the WNZL business will increase, in addition to the costs of implementing the changes. RBNZ Capital Review On 14 December 2018, the RBNZ released a consultation paper to seek the public’s view on a proposal to set a Tier 1 capital requirement equal to 16% of risk weighted assets for banks deemed systemically important, such as WNZL. The proposal of a Tier 1 ratio of 6% of risk weighted assets as a regulatory minimum is unchanged, and of this no more than 1.5% of risk weighted assets can be contributed by Additional Tier 1 capital or redeemable preference shares. The RBNZ has also proposed changes to risk weighted asset measurements. The RBNZ has proposed a five year transition period. The proposed changes aim to further strengthen the New Zealand banking system to protect the economy and depositors from bank failure. WNZL would be required to hold a further estimated NZ$2.3 – 2.9 billion of Tier 1 capital (assuming a WNZL Tier 1 capital ratio of 16-17%) if the proposals were applied at 30 September 2019. WNZL is already strongly capitalised with a Tier 1 capital ratio of 13.9% at 30 September 2019. On a pro-forma basis this change would also increase Westpac’s Level 1 capital requirements by NZ$1.2-$1.8 billion if the proposals were applied at 30 September 2019, assuming that some of WNZL’s supplementary capital can be issued externally over time and that APRA’s proposed revisions to subsidiary capital investment treatment are implemented (more information on these proposed revisions is set out above). Further clarity on the proposals is expected from the RBNZ in December 2019 with implementation of any new rules starting from April 2020. RBNZ/Financial Markets Authority (FMA) - Financial Services Conduct & Culture Review In May 2018, the RBNZ and FMA commenced a review in respect of New Zealand’s 10 major banks and 15 life insurers, including WNZL and Westpac Life-NZ-Limited, to explain why conduct issues highlighted by the Australian Royal Commission are not present in New Zealand. An industry thematic review report for the banks was released on 5 November 2018. WNZL submitted a plan responding to recommendations in the review report and in WNZL’s individual feedback letters to the regulators on 29 March 2019. The industry thematic review report into life insurers, including Westpac Life-NZ-Limited, was released on 29 January 2019. The report identified extensive weaknesses in life insurers’ systems and controls, governance and management of conduct risks. Westpac Life-NZ-Limited provided its plan to address the findings to the regulators in June 2019. Conduct of Financial Institutions Review Following the developments and findings of the Financial Services Conduct and Culture Review and the Australian Royal Commission, the Minister of Commerce announced a proposal to introduce a conduct licensing regime for banks, insurers and non-bank deposit takers in respect of their conduct in relation to retail customers. The regime will require licensed institutions to meet a fair treatment standard, and implement effective policies, processes, systems and controls to meet this standard. The regime will also create obligations relating to remuneration and sales incentives. Legislation is expected to be introduced to parliament by the end of 2019. RBNZ - Review under section 95 of the Reserve Bank of New Zealand Act 1989 In June 2019, in response to a review under section 95 of the Reserve Bank of New Zealand Act 1989 of WNZL’s compliance with advanced internal rating based aspects of the RBNZ’s ‘Capital Adequacy Framework (Internal Models Based Approach)’ (BS2B), WNZL presented the RBNZ with a submission providing an overview of its credit risk rating system and activities undertaken to address compliance issues and enhance risk management practices. On 30 October 2019, the RBNZ informed WNZL that it had accepted the submission and measures undertaken by WNZL to achieve satisfactory compliance with BS2B, and that WNZL would retain its accreditation to use internal models for credit risk in the calculation of its regulatory capital requirements. It also advised WNZL that, with effect from 31 December 2019, the RBNZ will remove the requirement imposed on WNZL since 31 December 2017 to maintain minimum regulatory capital ratios which are two percentage points higher than the ratios applying to other locally incorporated banks. Reform of Credit Contracts and Consumer Finance Legislation In April 2019, the Credit Contracts Legislation Amendment Bill was introduced to parliament and is currently before the select committee. The Bill introduces a number of changes to the Credit Contracts and Consumer Finance Act, including new duties for directors and senior managers and increased penalties and statutory damages. The Bill also introduces stricter requirements around suitability and affordability assessments as well as a cap for interest and fees of ‘high cost’ loans (being loans with annualised interest exceeding 50%). The intention is that the Bill will come into effect in March 2020.

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2019 Westpac Group Annual Report 23 Information on Westpac Supervision and regulation Australia Within Australia, we are subject to supervision and regulation by six principal agencies and bodies: the Australian Prudential Regulation Authority (APRA); the Reserve Bank of Australia (RBA); the Australian Securities and Investments Commission (ASIC); the Australian Securities Exchange (ASX); the Australian Competition and Consumer Commission (ACCC); and the Australian Transaction Reports and Analysis Centre (AUSTRAC). APRA is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, general insurance, re-insurance, life insurance and private health insurance companies, friendly societies and most of the superannuation (pension) industry. APRA’s role includes establishing and enforcing prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made by the institutions it supervises are met within a stable, efficient and competitive financial system. APRA has recently received new and strengthened powers under the Banking Executive Accountability Regime. As an ADI, we report prudential information to APRA, including information in relation to capital adequacy, large exposures, credit quality and liquidity. Our controlled entities in Australia that are authorised insurers and trustees of superannuation funds are also subject to the APRA regulatory regime. Reporting is supplemented by consultations, on-site inspections and targeted reviews. Our external auditor also has an obligation to report on compliance with certain statutory and regulatory banking requirements and on any matters that in their opinion may have the potential to materially prejudice the interests of depositors and other stakeholders. Australia’s risk-based capital adequacy guidelines are based on the approach agreed upon by the BCBS. National discretion is then applied to that approach, which has resulted in Australia’s capital requirements being more stringent. Refer to ‘Capital resources – Basel Capital Accord’ in Section 2. The RBA is responsible for monetary policy, maintaining financial system stability and promoting the safety and efficiency of the payments system. The RBA is an active participant in the financial markets, manages Australia’s foreign reserves, issues Australian currency notes and serves as banker to the Australian Government. ASIC is the national regulator of Australian companies and consumer protection within the financial sector. Its primary responsibility is to regulate and enforce company, consumer credit, financial markets and financial products and services laws that protect consumers, investors and creditors. With respect to financial services, it promotes fairness and transparency by providing consumer protection, using regulatory powers to enforce laws relating to deposit-taking activities, general insurance, life insurance, superannuation, retirement savings accounts, securities (such as shares, debentures and managed investments) and futures contracts and financial advice. ASIC has responsibility for supervising trading on Australia’s domestic licensed markets and of trading participants. ASIC has recently had its existing powers strengthened to provide ASIC with a product intervention power. For further information, refer to ‘Significant developments’ above. The ASX operates Australia’s primary national market for trading of securities issued by listed companies. Some of our securities (including our ordinary shares) are listed on the ASX and we therefore have obligations to comply with the ASX Listing Rules, which have statutory backing under the Corporations Act 2001 (Cth). The ASX has responsibility for the oversight of listed entities under the ASX Listing Rules and for monitoring and enforcing compliance with the ASX Operating Rules by its market, clearing and settlement participants. ASX is now also the benchmark administrator of BBSW. The ACCC is the regulator responsible for the regulation and prohibition of anti-competitive and unfair market practices and mergers and acquisitions in Australia. Its broad objective is to administer the Competition and Consumer Act 2010 (Cth) and related legislation to bring greater competitiveness, fair trading, consumer protection and product safety to the Australian economy. The ACCC’s role in consumer protection complements that of ASIC (for financial services) and Australian state and territory consumer affairs agencies that administer the unfair trading legislation of their jurisdictions. The Australian Government’s present policy, known as the ‘four pillars policy’, is that there should be no fewer than four major banks to maintain appropriate levels of competition in the banking sector. Under the Financial Sector (Shareholdings) Act 1998 (Cth), the Australian Government’s Treasurer must approve an entity acquiring a stake of more than 15% in a particular financial sector company. Proposals for foreign acquisitions of a stake in Australian banks are subject to the Australian Government’s foreign investment policy and, where required, approval by the Australian Government under the Australian Foreign Acquisitions and Takeovers Act 1975 (Cth). For further details refer to ‘Limitations affecting security holders’ in Section 4. AUSTRAC oversees the compliance of Australian reporting entities (including Westpac) with the requirements under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and the Financial Transaction Reports Act 1988 (Cth). These requirements include: 1 2 • implementing programs for identifying and monitoring customers, and for managing the risks of money laundering and terrorism financing; reporting suspicious matters, threshold transactions and international funds transfer instructions; and submitting an annual compliance report. • • AUSTRAC provides financial information to Australian federal law enforcement, national security, human services and revenue agencies, and certain international counterparts. 3 New Zealand The Reserve Bank of New Zealand (RBNZ) is responsible for supervising New Zealand registered banks and protects the financial stability of New Zealand through the application of minimum prudential obligations. The New Zealand prudential supervision regime requires that registered banks publish disclosure statements, which contain information on financial performance and risk positions as well as attestations by the directors about the bank’s compliance with its conditions of registration and certain other matters. 4

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24 2019 Westpac Group Annual Report Information on Westpac The Financial Markets Authority (FMA) and the New Zealand Commerce Commission (NZCC) are the two primary conduct and enforcement regulators. The FMA and NZCC are responsible for ensuring that markets are fair and transparent and are supported by confident and informed investors and consumers. Regulation of markets and their participants is undertaken through a combination of market supervision, corporate governance and licensing approvals. In New Zealand, other relevant regulator mandates include those relating to taxation, privacy and foreign affairs and trade. Banks in New Zealand are also subject to a number of self-regulatory regimes. Examples include Payments NZ, the New Zealand Bankers’ Association and the Financial Services Council (FSC). Examples of industry agreed codes include the New Zealand Bankers’ Association’s Code of Banking Practice and FSC’s Code of Conduct. Anti-money laundering regulation and related requirements Australia Westpac has a Group-wide program to manage its obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). We continue to actively engage with the regulator, AUSTRAC, on our activities. Our Anti-Money Laundering and Counter-Terrorism Financing Policy (AML/CTF Policy) sets out how the Westpac Group complies with its legislative obligations. The AML/CTF Policy applies to all business divisions and employees (permanent, temporary and third party providers) working in Australia, New Zealand and overseas. United States The USA PATRIOT Act of 2001 requires US financial institutions, including the US branches of foreign banks, to take certain steps to prevent, detect and report individuals and entities involved in international money laundering and the financing of terrorism. The required actions include verifying the identity of financial institutions and other customers and counterparties, terminating correspondent accounts for foreign ‘shell banks’ and obtaining information about the owners of foreign bank clients and the identity of the foreign bank’s agent for service of process in the US. The anti-money laundering compliance requirements of the USA PATRIOT Act include requirements to adopt and implement an effective anti-money laundering program, report suspicious transactions or activities, and implement due diligence procedures for correspondent and other customer accounts. Westpac’s New York branch and Westpac Capital Markets LLC maintain an anti-money laundering compliance program designed to address US legal requirements. US economic and trade sanctions, as administered by the Office of Foreign Assets Control (OFAC), prohibit or significantly restrict US financial institutions, including the US branches and operations of foreign banks, and other US persons from doing business with certain persons, entities and jurisdictions. Westpac’s New York branch and Westpac Capital Markets LLC maintain compliance programs designed to comply with OFAC sanctions programs, and Westpac has a Group-wide program to ensure adequate compliance. United States Our New York branch is a US federally licensed branch and therefore is subject to supervision, examination and regulation by the US Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System (the US Federal Reserve) under the US International Banking Act of 1978 (IBA) and related regulations. A US federal branch must maintain, with a US Federal Reserve member bank, a capital equivalency deposit as prescribed by the US Comptroller of the Currency, which is at least equal to 5% of its total liabilities (including acceptances, but excluding accrued expenses, and amounts due and other liabilities to other branches, agencies and subsidiaries of the foreign bank). In addition, a US federal branch is subject to periodic onsite examination by the US Comptroller of the Currency. Such examination may address risk management, operations, asset quality, compliance with the record-keeping and reporting, and any additional requirements prescribed by the US Comptroller of the Currency from time to time. A US federal branch of a foreign bank is, by virtue of the IBA, subject to the receivership powers exercisable by the US Comptroller of the Currency. As of 22 June 2016, we elected to be treated as a financial holding company in the US pursuant to the Bank Holding Company Act of 1956 and Federal Reserve Board Regulation Y. Our election will remain effective so long as we meet certain capital and management standards prescribed by the US Federal Reserve. Westpac and some of its affiliates are engaged in various activities that are subject to regulation by other US federal regulatory agencies, including the US Securities and Exchange Commission, the US Commodity Futures Trading Commission and the National Futures Association. Legal proceedings Our entities are defendants from time to time in legal proceedings arising from the conduct of our business. Material legal proceedings, if any, are described in Note 27 to the financial statements and under ‘Significant developments’ above. Where appropriate as required by the accounting standards, a provision has been raised in respect of these proceedings and disclosed in the financial statements. Principal office Our principal office is located at 275 Kent Street, Sydney, New South Wales, 2000, Australia. Our telephone number for calls within Australia is (+61) 2 9155 7713 and our international telephone number is (+61) 2 9155 7700.

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2019 Westpac Group Annual Report 25 Information on Westpac Corporate governance statement Corporate governance is the framework of systems, policies and processes by which we operate, make decisions and hold people to account. The framework establishes the roles and responsibilities of Westpac’s Board and management. It also establishes the systems, policies and processes for monitoring and evaluating Board and management performance and the practices for corporate reporting, disclosure, remuneration, risk management and engagement of security holders. Our approach to corporate governance is based on a set of values and behaviours that underpin our day-to-day activities, provide transparency and fair dealing and seek to protect stakeholder interests. It includes a commitment to maintaining the highest standards of corporate governance, which Westpac sees as fundamental to the sustainability of our business and our performance. We regularly review local and global developments in corporate governance to assess their implications and to respond to changes in the operating environment. We also improve our systems, processes and policies and look to strengthen our frameworks to reflect changing expectations where appropriate. We comply with the ASX Corporate Governance Principles and Recommendations (third edition) published by the ASX Limited’s Corporate Governance Council. In addition, we already comply with a number of the recommendations contained in the fourth edition of the ASX Corporate Governance Principles and Recommendations. Westpac’s 2019 Corporate Governance Statement and a range of documents referred to in it are available on our corporate governance website at www.westpac.com.au/ corpgov. This website contains copies and summaries of charters, principles and policies referred to in the Corporate Governance Statement. 1 Websites Investor communications and information, including this 2019 Westpac Group Annual Report, the 2019 Westpac Group Annual Review and Sustainability Report, the 2019 Westpac Group Sustainability Performance Report and investor discussion packs and presentations can be accessed at www.westpac.com.au/investorcentre. 2 3 4

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26 2019 Westpac Group Annual Report Directors’ report Our Directors present their report together with the financial statements of the Group for the financial year ended 30 September 2019. Name: Lindsay Maxsted, DipBus (Gordon), FCA, FAICD Age: 65 Term of office: Director since March 2008 and Chairman since December 2011. Date of next scheduled re-election: December 2020. Independent: Yes. Current directorships of listed entities and dates of office: Transurban Group (since March 2008 and Chairman since August 2010), BHP Group Limited (since March 2011) and BHP Group plc (since March 2011). Other principal directorships: Managing Director of Align Capital Pty Ltd and Director of Baker Heart and Diabetes Institute. Other interests: Nil. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Lindsay was formerly a partner at KPMG and was the CEO of that firm from 2001 to 2007. His principal area of practice prior to his becoming CEO was in the corporate recovery field managing a number of Australia’s largest insolvency/workout/turnaround engagements including Linter Textiles (companies associated with Abraham Goldberg), Bell Publishing Group, Bond Brewing, McEwans Hardware and Brashs. He is also a former Director and Chairman of the Victorian Public Transport Corporation. Westpac Board Committee membership: Chairman of the Board Nominations Committee. Member of each of the Board Audit and Board Risk & Compliance Committees. Directorships of other listed entities over the past three years and dates of office: Nil. Name: Brian Hartzer, BA, CFA Age: 52 Term of office: Managing Director & Chief Executive Officer since February 2015. Date of next scheduled re-election: Not applicable. Independent: No. Current directorships of listed entities and dates of office: Nil. Other principal directorships: The Australian National University Business and Industry Advisory Board (Chairman since March 2017), the Financial Markets Foundation for Children and Australian Banking Association Incorporated. Other interests: Nil. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Brian was appointed Managing Director & Chief Executive Officer in February 2015. Brian joined Westpac as Chief Executive, Australian Financial Services in June 2012, encompassing Westpac Retail & Business Banking, St.George Banking Group and BT Financial Group. Prior to joining Westpac, Brian spent three years in the UK as CEO for Retail, Wealth and Ulster Bank at the Royal Bank of Scotland Group. Prior to that, he spent ten years with Australia and New Zealand Banking Group Limited (ANZ) in Australia in a variety of roles, including his final role as CEO, Australia and Global Segment Lead for Retail and Wealth. Before joining ANZ, Brian spent ten years as a financial services consultant in New York, San Francisco and Melbourne. Westpac Board Committee membership: Member of the Board Technology Committee. Directorships of other listed entities over the past three years and dates of office: Nil. 1. Directors The names of the persons who have been Directors, or appointed as Directors, during the period since 1 October 2018 and up to the date of this report are: Lindsay Philip Maxsted, Brian Charles Hartzer, Nerida Frances Caesar, Ewen Graham Wolseley Crouch, Catriona Alison Deans (Alison Deans), Craig William Dunn, Yuen Mei Anita Fung (Anita Fung), Steven John Harker (Director from 1 March 2019), Peter John Oswin Hawkins (retired as a Director on 12 December 2018), Peter Ralph Marriott, Peter Stanley Nash and Margaret Leone Seale (Director from 1 March 2019). Particulars of the skills, experience, expertise and responsibilities of the Directors at the date of this report, including all directorships of other listed companies held by a Director at any time in the three years immediately before 30 September 2019 and the period for which each directorship has been held, are set out in the following pages.

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2019 Westpac Group Annual Report 27 Directors’ report 1 Name: Nerida Caesar, BCom, MBA, GAICD Age: 55 Term of office: Director since September 2017. Date of next scheduled re-election: December 2019. Independent: Yes. Current directorships of listed entities and dates of office: Nil. Other principal directorships: Workplace Giving Australia Limited (Chairman since June 2019) and Spark Investment Holdco Pty Ltd. Other interests: Member of the Advisory Board of IXUP Limited. Advisor to Equifax Australia and New Zealand. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Nerida has over 30 years of broad-ranging commercial and business management experience. She was Group Managing Director and Chief Executive Officer, Australia and New Zealand, of Equifax (formerly Veda Group Limited) from February 2011 to June 2017. Nerida is also a former director of Genome.One Pty Ltd and Stone and Chalk Limited. Ms Caesar was formerly Group Managing Director, Telstra Enterprise and Government, responsible for Telstra’s corporate, government and large business customers in Australia as well as the international sales division. Nerida also worked as Group Managing Director, Telstra Wholesale, and, prior to that, held the position of Executive Director Enterprise & Government, where she was responsible for managing products, services, and customer relationships throughout Australia. Nerida also held several senior management and sales positions with IBM within Australia and internationally over a 20-year period, including as Vice President of IBM’s Intel Server Division for the Asia Pacific region. Westpac Board Committee membership: Member of each of the Board Risk & Compliance and Board Technology Committees. Directorships of other listed entities over the past three years and dates of office: Nil. Name: Ewen Crouch AM, BEc (Hons.), LLB, FAICD Age: 63 Term of office: Director since February 2013. Date of next scheduled re-election: December 2019. Independent: Yes. Current directorships of listed entities and dates of office: Corporate Travel Management Limited (Chairman since March 2019) and BlueScope Steel Limited (since March 2013). Other principal directorships: Sydney Symphony Orchestra Holdings Pty Limited and Jawun. Other interests: Member of the Commonwealth Remuneration Tribunal, Law Committee of the Australian Institute of Company Directors, Corporations Committee of the Law Council of Australia and ASIC’s Director Advisory Panel. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Ewen was a Partner at Allens from 1988 to 2013, where he was one of Australia’s most accomplished mergers and acquisitions lawyers. He served as a member of the firm’s board for 11 years, including four years as Chairman of Partners. His other roles at Allens included Co-Head Mergers and Acquisitions and Equity Capital Markets, Executive Partner, Asian offices and Deputy Managing Partner. Ewen served as a director of Mission Australia from 1995 and as Chairman from 2009, before retiring in November 2016. From 2010 to 2015, Ewen was a member of the Takeovers Panel. In 2013, Ewen was awarded an Order of Australia in recognition of his significant service to the law as a contributor to legal professional organisations and to the community. Westpac Board Committee membership: Chairman of the Board Risk & Compliance Committee. Member of each of the Board Audit, Board Nominations and Board Remuneration Committees. Directorships of other listed entities over the past three years and dates of office: Nil. Name: Alison Deans, BA, MBA, GAICD Age: 51 Term of office: Director since April 2014. Date of next scheduled re-election: December 2020. Independent: Yes. Current directorships of listed entities and dates of office: Cochlear Limited (since January 2015) and Ramsay Health Care Limited (since November 2018). Other principal directorships: SCEGGS Darlinghurst Limited, The Observership Program Limited and Deputy Group Pty Ltd. Other interests: Senior Advisor, McKinsey & Company and Investment Committee member of the CSIRO Innovation Fund (Main Sequence Ventures). Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Alison has more than 20 years’ experience in senior executive roles focused on building digital businesses and digital transformation across e-commerce, media and financial services. During this time, Alison served as the CEO of eCorp Limited, CEO of Hoyts Cinemas and CEO of eBay, Australia and New Zealand. She was the CEO of a technology-based investment company netus Pty Ltd. Alison was an Independent Director of Social Ventures Australia from September 2007 to April 2013 and a director of kikki.K Holdings Pty Ltd from October 2014 to June 2018. Westpac Board Committee membership: Chairman of the Board Technology Committee. Member of each of the Board Nominations, Board Remuneration and Board Risk & Compliance Committees. Directorships of other listed entities over the past three years and dates of office: Insurance Australia Group Limited (February 2013 – October 2017). 2 3 4

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28 2019 Westpac Group Annual Report Directors’ report Name: Craig Dunn, BCom, FCA Age: 56 Term of office: Director since June 2015. Date of next scheduled re-election: December 2021. Independent: Yes. Current directorships of listed entities and dates of office: Telstra Corporation Limited (since April 2016). Other principal directorships: Chairman of The Australian Ballet. Other interests: Chairman of the International Standards Technical Committee on Blockchain and Distributed Ledger Technologies (ISO/ TC 307) and consultant to King & Wood Mallesons. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Craig has more than 20 years’ experience in financial services, including as CEO of AMP Limited from 2008 to 2013. Craig was previously a director of Financial Literacy Australia Limited, a Board member of each of the Australian Japanese Business Cooperation Committee, Jobs for New South Wales, and the New South Wales Government’s Financial Services Knowledge Hub. He is the former Chairman of Stone and Chalk Limited and of the Investment and Financial Services Association (now the Financial Services Council). Craig was also a member of the Financial Services Advisory Committee, the Australian Financial Centre Forum, the Consumer and Financial Literacy Taskforce and a Panel member of the Australian Government’s Financial System Inquiry. Westpac Board Committee membership: Chairman of the Board Remuneration Committee. Member of each of the Board Nominations and Board Risk & Compliance Committees. Directorships of other listed entities over the past three years and dates of office: Nil. Name: Anita Fung, BSocSc, MAppFin Age: 58 Term of office: Director since October 2018. Date of next scheduled re-election: December 2021. Independent: Yes. Current directorships of listed entities and dates of office: Hong Kong Exchanges and Clearing Limited (since April 2015, Hong Kong listed), China Construction Bank Corporation (since October 2016, Hong Kong Listed) and Hang Lung Properties Limited (since May 2015, Hong Kong listed). Other principal directorships: Board member of the Airport Authority Hong Kong. Other interests: Member of the Hong Kong Museum Advisory Committee. Other Westpac related entities directorships and dates of office: Member of Westpac’s Asia Advisory Board since October 2018. Skills, experience and expertise: Anita’s career in the banking industry spans over 30 years, including 19 years at HSBC. During her time at HSBC, Anita held a number of senior management roles including Group General Manager, HSBC Group and most recently as Chief Executive Officer, Hong Kong from 2011 to 2015. Prior to joining HSBC, Anita held various positions at Standard Chartered Bank in its Treasury and Capital markets business. Westpac Board Committee membership: Member of the Board Risk & Compliance Committee. Directorships of other listed entities over the past three years and dates of office: Nil. Name: Steven Harker, BEc (Hons.), LLB Age: 64 Term of office: Director since March 2019. Date of next scheduled re-election: December 2019. Independent: Yes. Current directorships of listed entities and dates of office: Nil. Other principal directorships: The Banking and Finance Oath Limited, The Hunger Project Australia, ASX Refinitiv Charity Foundation, New South Wales Golf Club Foundation Limited and Ascham School Ltd. Other interests: Honorary Treasurer of Ascham School. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Steve has over 35 years of experience in investment banking. Steve was formerly Managing Director and Chief Executive Officer of Morgan Stanley Australia from 1998 to 2016 and then Vice Chairman until February 2019. Prior to joining Morgan Stanley, he spent fifteen years with Barclays de Zoete Wedd (BZW, now Barclays Investment Bank). Steve is a former Chairman and Director of Australian Financial Markets Association Limited and a former Director of Investa Property Group. Steve also previously served on the board of the Centre for International Finance and Regulation. He is also a former Guardian of the Future Fund of Australia. Westpac Board Committee membership: Member of each of the Board Audit and Board Risk & Compliance Committees. Directorships of other listed entities over the past three years and dates of office: Nil.

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2019 Westpac Group Annual Report 29 Directors’ report 1 Name: Peter Marriott, BEc (Hons.), FCA Age: 62 Term of office: Director since June 2013. Date of next scheduled re-election: December 2019. Independent: Yes. Current directorships of listed entities and dates of office: ASX Limited (since July 2009). Other principal directorships: ASX Clearing Corporation Limited, ASX Settlement Corporation Limited and Austraclear Limited. Other interests: Member of Monash University Council and Chairman of the Monash University Council’s Resources and Finance Committee. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Peter has over 30 years’ experience in senior management roles in the finance industry, encompassing international banking, finance and auditing. Peter joined Australia and New Zealand Banking Group Limited (ANZ) in 1993 and held the role of Chief Financial Officer from July 1997 to May 2012. Prior to his career at ANZ, Peter was a banking and finance, audit and consulting partner at KPMG Peat Marwick. Peter was formerly a Director of ANZ National Bank Limited in New Zealand and various ANZ subsidiaries. Westpac Board Committee membership: Chairman of the Board Audit Committee. Member of each of the Board Nominations, Board Technology and Board Risk & Compliance Committees. Directorships of other listed entities over the past three years and dates of office: Nil. Name: Peter Nash, BCom, FCA, F Fin Age: 57 Term of office: Director since March 2018. Date of next scheduled re-election: December 2021. Independent: Yes. Current directorships of listed entities and dates of office: Johns Lyng Group Limited (Chairman since October 2017), Mirvac Group (since November 2018) and ASX Limited (since June 2019). Other principal directorships: Reconciliation Australia Limited and Golf Victoria Limited. Other interests: Board member of the Koorie Heritage Trust and Migration Council Australia. Member of the University of Melbourne Centre for Contemporary Chinese Studies Advisory Board. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Peter was formerly a Senior Partner with KPMG until September 2017, having been admitted to the partnership of KPMG Australia in 1993. He most recently served as the National Chairman of KPMG Australia from 2011 until August 2017, where he was responsible for the overall governance and strategic positioning of KPMG in Australia. In this role, Peter also served as a member of KPMG’s Global and Regional Boards. Peter has experience providing advice on a range of topics including business strategy, risk management, internal controls, business processes and regulatory change. He has also provided both financial and commercial advice to many Government businesses at both a Federal and State level. Peter is a former member of the Business Council of Australia and its Economic and Regulatory Committee. Westpac Board Committee membership: Member of each of the Board Audit and Board Risk & Compliance Committees. Directorships of other listed entities over the past three years and dates of office: Nil. Name: Margaret (Margie) Seale, BA, FAICD Age: 59 Term of office: Director since March 2019. Date of next scheduled re-election: December 2019. Independent: Yes. Current directorships of listed entities and dates of office: Telstra Corporation Limited (since May 2012) and Scentre Group Limited (since February 2016). Other principal directorships: Australian Pacific (Holdings) Pty Limited. Other interests: Member of the Australian Public Service Commission Centre for Learning and Leadership Advisory Board. Other Westpac related entities directorships and dates of office: Nil. Skills, experience and expertise: Margie has more than 25 years’ experience in senior executive roles in Australia and overseas, including in consumer goods, global publishing, sales and marketing, and the successful transition of traditional business models to digital environments. Prior to her non-executive career, Margie was the Managing Director of Random House Australia and New Zealand and President, Asia Development for Random House Inc. Margie is a former Director and then Chair of Penguin Random House Australia Pty Limited, and a former Director of Ramsay Health Care Limited, Bank of Queensland Limited and the Australian Publishers’ Association. She also previously served on the boards of Chief Executive Women (chairing its Scholarship Committee), the Powerhouse Museum, and the Sydney Writers Festival. Westpac Board Committee membership: Member of each of the Board Remuneration and Board Risk & Compliance Committees. Directorships of other listed entities over the past three years and dates of office: Ramsay Health Care Limited (April 2015 to October 2018) and Bank of Queensland Limited (January 2014 to June 2018). 2 3 4

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30 2019 Westpac Group Annual Report Directors’ report Company Secretary Our Company Secretaries as at 30 September 2019 were Rebecca Lim and Tim Hartin. Rebecca Lim (B Econ, LLB (Hons.)) was appointed Group Executive, Compliance, Legal & Secretariat1 and Company Secretary in October 2016. Rebecca joined Westpac in 2002 and has held a variety of senior leadership roles including General Manager, Human Resources for St.George Bank and General Manager, St.George Private Clients. She was appointed Group General Counsel in November 2011 and Chief Compliance Officer from 2013 to 2017. Rebecca held an in-house role in investment banking at Goldman Sachs in London before returning to Australia and joining Westpac. Rebecca was previously with US firm Skadden Arps where she worked in the Corporate Finance area in both New York and London. Prior to that she worked at Blake Dawson Waldron (now Ashurst) as a solicitor. Tim Hartin (LLB (Hons.)) was appointed Group Company Secretary in November 2011. Before that appointment, Tim was Head of Legal - Risk Management & Workouts, Counsel & Secretariat and prior to that, he was Counsel, Corporate Core. Before joining Westpac in 2006, Tim was a Consultant with Gilbert + Tobin, where he provided corporate advisory services to ASX listed companies. Tim was previously a lawyer at Henderson Boyd Jackson W.S. in Scotland and in London in Herbert Smith’s corporate and corporate finance division. 2. Executive Team As at 30 September 2019 our Executive Team was: Year Appointed to Position Year Joined Group Name Position Brian Hartzer Craig Bright Lyn Cobley Peter King Rebecca Lim David Lindberg Carolyn McCann David McLean Christine Parker David Stephen Gary Thursby Alastair Welsh Managing Director & Chief Executive Officer Chief Information Officer Chief Executive, Westpac Institutional Bank Chief Financial Officer Group Executive, Legal & Secretariat Chief Executive, Consumer Group Executive, Customer & Corporate Relations Chief Executive Officer, Westpac New Zealand Group Executive, Human Resources Chief Risk Officer Chief Operating Officer Acting Chief Executive, Business 2012 2018 2015 1994 2002 2012 2013 1999 2007 2018 2008 1992 2015 2018 2015 2014 2016 2019 2018 2015 2011 2018 2019 2019 There are no family relationships between or among any of our Directors or Executive Team members. 1.From 1 October 2018, Rebecca Lim’s role and title has been Group Executive, Legal & Secretariat.

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2019 Westpac Group Annual Report 31 Directors’ report 1 Brian Hartzer BA, CFA. Age: 52 Managing Director & Chief Executive Officer Brian was appointed Managing Director & Chief Executive Officer in February 2015. Brian joined Westpac as Chief Executive, Australian Financial Services in June 2012, encompassing Westpac Retail & Business Banking, St.George Banking Group and BT Financial Group. Brian is a Director of the Australian Banking Association and was formerly the Chairman until December 2015. Prior to joining Westpac, Brian spent three years in the UK as CEO for Retail, Wealth and Ulster Bank at the Royal Bank of Scotland Group. Prior to that, he spent ten years with Australia and New Zealand Banking Group Limited (ANZ) in Australia in a variety of roles, including his final role as CEO, Australia and Global Segment Lead for Retail and Wealth. Before joining ANZ, Brian spent ten years as a financial services consultant in New York, San Francisco and Melbourne. Brian graduated from Princeton University with a degree in European History and is a Chartered Financial Analyst. Craig Bright B.Comp. Age: 54 Chief Information Officer Craig was appointed Group Chief Information Officer in December 2018. Craig has more than 30 years’ experience in technology and financial services. He has held divisional CIO roles in retail banking, business banking and investment banking and led complex global scale technology operations. Prior to joining Westpac, Craig was Chief Technology Officer, Global Consumer Bank at Citigroup. He led a division of technology employees executing a cloud and mobile first strategy supporting digital channels and a mix of Citi Smart Banking formats worldwide. Craig has also held senior roles at Barclays in London, National Australia Bank and Ernst & Young. Craig has a Bachelor of Computing from Monash University and a Computer Field Service Certificate from Royal Melbourne Institute of Technology. Lyn Cobley BEc, SF FIN, GAICD. Age: 56 Chief Executive, Westpac Institutional Bank Lyn was appointed Chief Executive, Westpac Institutional Bank in September 2015. She has responsibility for Westpac’s global relationships with corporate, institutional and government clients as well as all products across financial and capital markets, transactional banking, structured finance and working capital payments. In addition, Lyn oversees Westpac’s International and Pacific Island businesses. Lyn has over 27 years’ experience in financial services. Prior to joining Westpac, Lyn held a variety of senior positions at the Commonwealth Bank of Australia, including serving as Group Treasurer from 2007 to 2013 and most recently as Executive General Manager, Retail Products & Third Party Banking. She also held senior roles at Barclays Capital in Australia and Citibank in Australia and Asia Pacific, and was CEO of Trading Room (a joint venture between Macquarie Bank and Fairfax). Lyn is a Board member of the Australian Financial Markets Association (AFMA), the Banking & Finance Oath and the Westpac Foundation. She is Chairman of Westpac’s Asia Advisory Board and is also a member of Chief Executive Women. Lyn has a Bachelor of Economics from Macquarie University, is a Senior Fellow of the Financial Services Institute of Australia and is a graduate of the Australian Institute of Company Directors. 2 3 4

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32 2019 Westpac Group Annual Report Directors’ report Peter King BEc, FCA. Age: 49 Chief Financial Officer Peter was appointed Chief Financial Officer in April 2014. Peter has responsibility for Westpac’s Finance, Tax, Treasury and Investor Relations functions. Prior to this appointment, Peter was the Deputy Chief Financial Officer for three years and has held other senior finance positions across the Group, including in Group Finance, Business and Consumer Banking, Business and Technology Services, Treasury and Financial Markets. Peter commenced his career at Deloitte Touche Tohmatsu. He has a Bachelor of Economics from Sydney University and completed the Advanced Management Programme at INSEAD. He is a Fellow of the Institute of Chartered Accountants. Rebecca Lim B Econ, LLB (Hons). Age: 47 Group Executive, Legal & Secretariat Rebecca was appointed as a Westpac Group Executive in October 2016 and is responsible for legal and secretariat functions globally. She was appointed Group General Counsel in November 2011 and was Chief Compliance Officer from 2013 to 2017. Rebecca joined Westpac in 2002 and has held a variety of other senior leadership roles including General Manager, Human Resources for St.George Bank and General Manager, St.George Private Clients. Rebecca began her career at Blake Dawson Waldron (now Ashurst) before joining the US firm Skadden Arps where she worked in both New York and London. Rebecca then moved into an in-house role in investment banking at Goldman Sachs in London before returning to Australia and joining Westpac. Rebecca is Deputy Chair of the GC100 Executive Committee and a member of Chief Executive Women. David Lindberg HBA (Hons. Economics). Age: 44 Chief Executive, Consumer David was appointed Chief Executive, Consumer in April 2019, responsible for the end to end relationships with consumer customers. This includes all consumer distribution, digital, marketing, banking and insurance products and services under the Westpac, St.George, BankSA, Bank of Melbourne, BT, and RAMS brands. Prior to this appointment, David was Chief Executive, Business Bank from June 2015, managing relationships with business customers for the Westpac, St.George, BankSA and Bank of Melbourne brands. Before this David was Chief Product Officer for the Group’s retail and business products, as well as overseeing the Group’s digital activities. Before joining Westpac in 2012, David was Executive General Manager, Cards, Payments & Retail Strategy at the Commonwealth Bank of Australia. David was also formerly Managing Director, Strategy, Marketing & Customer Segmentation at Australia and New Zealand Banking Group Limited and Vice President and Head of Australia for First Manhattan.

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2019 Westpac Group Annual Report 33 Directors’ report 1 Carolyn McCann BBus (Com), BA, GradDipAppFin, GAICD. Age: 47 Group Executive, Customer & Corporate Relations Carolyn was appointed as Westpac’s Group Executive, Customer & Corporate Relations in June 2018. This division brings together management of the Group’s customer resolution and reporting, alongside our corporate affairs, communications and sustainability functions, recognising the importance of setting high service standards and quickly resolving customer issues in managing the Group’s relationship with its customers. Carolyn joined the Westpac Group in 2013, as General Manager, Corporate Affairs & Sustainability, during which time she played an instrumental role in leading the Group’s bicentenary program, including the launch of the $100 million Westpac Scholars Trust (formerly known as the Westpac Bicentennial Foundation). Prior to joining Westpac, Carolyn spent 13 years at Insurance Australia Group in various positions, including Group General Manager, Corporate Affairs & Investor Relations. Carolyn began her career in consulting and has extensive experience in financial services. David McLean LLB (Hons.). Age: 61 Chief Executive Officer, Westpac New Zealand David was appointed Chief Executive Officer, Westpac New Zealand in February 2015. Since joining Westpac in February 1999, David has held a number of senior roles, including Head of Debt Capital Markets New Zealand, General Manager, Private, Wealth and Insurance New Zealand and Head of Westpac Institutional Bank New Zealand, and most recently, Managing Director of the Westpac New York branch. Before joining Westpac, David was Director, Capital Markets at Deutsche Morgan Grenfell from 1994. He also established the New Zealand branch of Deutsche Bank and was New Zealand Resident Branch Manager. In 1988, David joined Southpac/National Bank as a Capital Markets Executive. Prior to this, David worked as a lawyer in private practice and also served as in-house counsel for NatWest NZ from 1985. Christine Parker BGDipBus (HRM). Age: 59 Group Executive, Human Resources Christine was appointed to Westpac Group’s Executive Team in October 2011. As Group Executive, Human Resources, Christine leads the HR function for the Group, responsible for strengthening our service oriented and inclusive culture, attracting and retaining the best talent, developing and helping our workforce to grow skills for the future, rewarding and recognising our people and ensuring the health and wellbeing of our people. Christine also oversees the Group’s Customer Advocate function, corporate communications, and supports the CEO and Board on culture and conduct. Christine also has responsibility for Office of the Banking Executive Accountability Regime. Since joining Westpac in 2007, Christine has held a variety of senior leadership roles including Group General Manager, Human Resources and General Manager, Human Resources for Westpac New Zealand Limited. Before joining Westpac, Christine held senior HR roles in a number of high profile organisations and across a range of industries, including Carter Holt Harvey and Restaurant Brands New Zealand. Christine was previously a Director of Women’s Community Shelters and is a current member of Chief Executive Women, Governor of St.George Foundation and member of the Veterans’ Employment Industry Advisory Committee. 2 3 4

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34 2019 Westpac Group Annual Report Directors’ report David Stephen BBus. Age: 55 Chief Risk Officer David was appointed Chief Risk Officer in October 2018, with responsibility for risk management and compliance activities across the Group. Prior to this, David was the Chief Risk Officer for Royal Bank of Scotland (RBS) from 2013, having first joined RBS in 2010 as the Deputy Chief Risk Officer. David has also previously held other senior roles at both retail and investment banks in the UK, USA, Hong Kong and Australia, including serving as Chief Risk Officer at ANZ and Chief Credit Officer at Credit Suisse Financial Products. David has a Bachelor of Business in Banking and Finance from Monash University and is a Board member of both the International Financial Risk Institute and the Financial Services Institute of Australia (FINSIA). Gary Thursby BEc, DipAcc, FCA. Age: 56 Chief Operating Officer Gary was appointed Chief Operating Officer in April 2019, having previously been in the role of Group Executive, Strategy & Enterprise Services since October 2016. In addition to leading the Group’s strategy function, his role is designed to support delivery of the Group’s Service Revolution and provide services to support the Group’s operating businesses. Gary’s responsibilities also include banking operations, advice remediation, procurement, property, analytics and enterprise investments. In addition, Gary oversees the Group’s corporate and business development portfolios. Before joining Westpac in 2008, Gary held a number of senior finance roles at Commonwealth Bank of Australia including Deputy CFO and CFO Retail Bank. Gary has over 20 years’ experience in financial services, covering finance, M&A and large scale program delivery. He commenced his career at Deloitte Touche Tohmatsu. Gary has a Bachelor of Economics and a Post Graduate Diploma in Accounting from Flinders University of South Australia and is a Fellow of the Institute of Chartered Accountants. Alastair Welsh MBA, BCA, CA. Age: 54 Acting Chief Executive, Business Alastair was appointed Acting Chief Executive, Business in April 2019. The Business division leads relationships with Australia’s small, commercial, corporate and agri businesses providing a wide range of banking services and support across Westpac, St George, BankSA, Bank of Melbourne and Capital Finance brands. The division also supports customers’ wealth and investment needs including Private Wealth, Superannuation, Platforms, Investments and Operations businesses through all of our brands. Alastair holds more than 30 years’ experience in banking in the UK, New Zealand and Australia. Since joining Westpac NZ in 1992, he has held a variety of roles from relationship management through to leadership positions for Small Business Banking, BT Financial Group and Group Customer Transformation. Prior to this appointment, Alastair was General Manager for the Westpac Commercial Business Bank.

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2019 Westpac Group Annual Report 35 Directors’ report 3. Report on the business a) Principal activities The principal activities of the Group during the financial year ended 30 September 2019 were the provision of financial services including lending, deposit taking, payments services, investment platforms, superannuation and funds management, insurance services, leasing finance, general finance, interest rate risk management and foreign exchange services. From 30 June 2019 and 30 September 2019 respectively, Westpac ceased to provide personal financial advice through its salaried BT Financial Group planners or its authorised representatives. Other than this change, there have been no significant changes in the nature of the principal activities of the Group during 2019. • Operating expenses increased $540 million or 6% compared to 2018. The increase was mainly due to a $349 million increase in provisions for estimated customer refunds, payments, associated costs, and litigation, higher technology expenses of $174 million, a rise in regulatory, compliance and investment related spend of $170 million, partially offset by the exit of the Hastings business in 2018 of $158 million and a net productivity benefit. Impairment charges were $84 million or 12% higher compared to 2018. Asset quality remained sound, with stressed exposures as a percentage of total committed exposures at 1.20%, up 12 basis points over the year. • 1 A review of the operations of the Group and its divisions and their results for the financial year ended 30 September 2019 is set out in Section 2 of the Annual Report under the sections ‘Review of Group operations’ (see pages 79 to 92), ‘Divisional performance’ (see pages 93 to 101) and ‘Risk and risk management’ (see pages 102 to 120), which form part of this report. Further information about our financial position and financial results is included in the financial statements in Section 3 of this Annual Report (see pages 135 to 288), which form part of this report. b) Operating and financial review The net profit attributable to owners of Westpac Banking Corporation for 2019 was $6,784 million, a decrease of $1,311 million or 16% compared to 2018. Key features of this result were: • Net interest income increased $402 million or 2% compared to 2018 driven by an increase of $686 million due to the reclassification of line fees from net fee income to interest income, partly offset by $239 million increase in provisions for estimated customer refunds, payments, associated costs, and litigation. Excluding the impact of these items, net interest income was flat compared to 2018. Average interest earning assets grew 3% primarily from Australian and New Zealand housing, broadly offset by a lower margin. Reported net interest margin decreased 1 basis point to 2.12%. Net fee income decreased $769 million or 32% compared to 2018 primarily due to the reclassification of line fees to net interest income ($667 million in 2018) and $126 million increase in provisions for estimated customer refunds, payments, associated costs and litigation. Net wealth management and insurance income decreased $1,032 million or 50% compared to 2018 primarily due to additional provisions for estimated customer refunds, payments, associated costs, and litigation of $531 million, higher general insurance claims from severe weather events $69 million, cessation of grandfathered advice commissions $42 million, lower wealth management income due to changes in platform pricing structure, and exit of the Hastings business in 2018. Trading income decreased $16 million or 2% compared to 2018. The decline mainly relates to a change in methodology in derivative valuation adjustments partially offset by higher non-customer income. Other income is up $57 million or 79% compared to 2018, primarily due to the non-repeat of a 2018 impairment charge on an equity holding of $104 million. c) Dividends Since 30 September 2019, Westpac has announced a final ordinary dividend of 80 cents per Westpac ordinary share, totalling approximately $2,791 million for the year ended 30 September 2019 (2018 final ordinary dividend of 94 cents per Westpac ordinary share, totalling $3,227 million). The dividend will be fully franked and will be paid on 20 December 2019. An interim ordinary dividend for the current financial year of 94 cents per Westpac ordinary share for the half year ended 31 March 2019, totalling $3,239 million, was paid as a fully franked dividend on 24 June 2019 (2018 interim ordinary dividend of 94 cents per Westpac ordinary share, totalling $3,213 million). The payment comprised direct cash disbursements of $2,080 million with $1,159 million being reinvested by participants through the DRP. Further, in respect of the year ended 30 September 2018, a fully franked final dividend of 94 cents per ordinary share totalling $3,227 million was paid on 20 December 2018. The payment comprised direct cash disbursements of $2,897 million with $330 million, being reinvested by participants through the DRP. New shares were issued under the DRP for each of the 2018 final ordinary dividend and the 2019 interim ordinary dividend. • • 2 • 3 • 4

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36 2019 Westpac Group Annual Report Directors’ report d) Significant changes in state of affairs and events during and since the end of the 2019 financial year Throughout the financial year ended 30 September 2019, the Group has operated in a challenging external environment, which has included ongoing and heightened scrutiny across the industry (including as a result of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and self-assessments into governance, culture and accountability), as well as challenging economic conditions (refer to the section ‘External environment’ for more details). In this environment, significant changes in the state of affairs of the Group were: e) Business strategies, developments and expected results Our business strategies, prospects and likely major developments in the Group’s operations in future financial years and the expected results of those operations are discussed below and in ‘Significant developments’ in Section 1 of the Annual Report (see pages 15 to 22), which forms part of this report. External environment 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, combined with self-assessments into governance, culture and accountability conducted across the industry have brought to light examples of poor behaviour affecting customers, shortcomings in the management of non-financial risks, and weak risk cultures. These have added to the erosion of public sentiment and trust in the financial services industry. Westpac has taken these developments very seriously and is now working to respond to the findings of the Royal Commission’s final report (released 1 February 2019) and its own CGA self-assessment. At the same time, the Group has been focused on identifying where we got it wrong for customers and putting things right. These efforts aim to strengthen the Group’s focus on leadership, governance and culture, and create better outcomes for customers and shareholders. These issues for Westpac, and the sector, have been accompanied by a weakening in the economic environment with lower GDP growth, continued weak wages growth and subdued business and consumer sentiment. At the same time, interest rates have fallen to unprecedented lows. For financial services, this has contributed to more cautious demand for lending, a decline in deposit growth, lower house prices, and structural pressures on net interest margins. While credit growth has slowed, competition has remained intense across the sector including from domestic and international banks, and from non-banks. • changes to Westpac’s wealth strategy, which resulted in major BT Financial Group businesses being realigned into the Consumer and Business divisions and exiting the provision of personal financial advice by Westpac Group salaried financial advisers and authorised representatives; compliance, reputation and remediation provisions; APRA applying an additional $500 million to Westpac’s operational risk capital requirement as a result of Westpac’s self-assessment into its culture, governance and accountability; the issuance of approximately A$1.42 billion AT1 securities, known as Westpac Capital Notes 6, which qualify as Additional Tier 1 capital under APRA’s capital adequacy framework, as well as the transfer and redemption of approximately A$1.38 billion Westpac Capital Notes; and ongoing regulatory changes and developments, which have included changes relating to financial services, the expansion of penalties for financial sector misconduct, the provision of new powers to regulators, accounting standards, access to data, information security and other regulatory requirements. • • • • For a discussion of these matters, please refer to ‘Significant developments’ in Section 1 of the Annual Report, which forms part of this report (see pages 15 to 22). On 4 November 2019, Westpac announced that it will be undertaking an underwritten placement of fully paid ordinary shares in Westpac to sophisticated and institutional investors to raise $2 billion. As further announced, following the placement, Westpac will make a share purchase plan available to eligible shareholders and is targeting to raise approximately $500 million. The proceeds received under the placement and share purchase plan will be used to strengthen Westpac’s regulatory capital position. Other than set out above, the Directors are not aware of any other matter or circumstance that has occurred since 30 September 2019 that has significantly affected or may significantly affect the operations of the Group, the results of these operations or the state of affairs of the Group in subsequent financial years. Business Strategy The changing environment in which we operate has reinforced the need to deliver better customer outcomes and experiences, and underlined the importance of continuing to deliver on our vision and strategy, including the Service Revolution. Westpac’s vision is ‘To be one of the world’s great service companies, helping our customers, communities and people to prosper and grow’. In delivering on our strategy, we are focused on our core markets, including Australia and New Zealand, where we provide a comprehensive range of financial products and services that we believe assist us in meeting the financial services needs of customers. With over 14 million customers1, our focus is on organic growth, growing customer numbers in our chosen segments and building stronger and deeper customer relationships. 1.All customers with an active relationship (excludes channel only and potential relationships) as at 30 September 2019.

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2019 Westpac Group Annual Report 37 Directors’ report A key element of this approach is our portfolio of financial services brands, which we believe enables us to appeal to a broader range of customers and provides us with the flexibility to offer solutions that better meet individual customer needs. As we continue to build the business, the financial services environment remains challenging and has required us to maintain focus on our financial position. This has involved: Supporting our customer-focused strategy is a strong set of company-wide values, which are embedded in our culture. These are: • • • • • integrity; service; one team; courage; and achievement. 1 • • maintaining the high level and quality of our capital; continuing to improve our funding and liquidity position; and seeking to maintain a high level of asset quality and appropriate provisioning. In delivering our strategy, we have a set of strategic priorities that help guide our activities: Customer Franchise • • • • • Deliver great customer outcomes; Create best-in-class service experience; Enable channels to work together seamlessly; and Maintain strong and differentiated brand portfolio. We continue to focus on ways to simplify our business to make it easier for customers to do business with us and to make work better for our people. We believe these improvement efforts deliver better customer outcomes while also creating capacity for investment. Throughout 2019 we continued our focus on seeking to deliver positive outcomes for our customers and shareholders through our Service Revolution transformation. The Service Revolution is seeking to: Digital transformation • • • Build out data infrastructure and capabilities; Transform our platforms; Strengthen partnerships to efficiently close capability gaps; and Create new digital experiences for customers. • • provide a truly personal service for customers while better anticipating their needs; put customers in control of their finances; respond to the increased pace of innovation, disruption and changing customer behaviours through digitisation and increasing our capacity for innovation; and innovate and simplify to reinvent the customer experience. Performance discipline • • • • • • Uplift risk management capability; Get it right; Enhance execution proficiency; and Drive structural cost reduction. • Competition The Group operates in a highly competitive environment. We serve the banking, wealth and risk management needs of customer segments from consumers and small businesses through to large corporate and institutional clients. The Group competes with other financial services providers in every segment and every product or service. Our competitors include financial services and advisory companies such as banks (both domestic and global), investment banks, credit unions, building societies, mortgage originators, credit card issuers, brokerage firms, fund and asset management companies, insurance companies, online financial services providers, and technology companies large and small. Like other financial services providers, our competitive position across customer segments, products and geographies is determined by a variety of factors. These include: As part of our delivery of the Service Revolution, we have developed an integrated, multi-year plan that will be executed across the Group. In 2019, we continued to deliver outcomes and milestones on a number of our transformation programs focused on the digitisation of the company through the design and development of a single bank technology infrastructure. We expect this will transform customer experiences and drive operational efficiency. At the same time, we believe our divisional transformation programs continue to deliver market-leading customer services, while lowering the cost to serve. Over the year, substantial work has also continued on conduct and culture, with work focused on continuing to strengthen our conduct management across the Group. Much of the effort this year has been focused on improving customer outcomes and on our product reviews, as well as working to ensure we meet customer and community expectations. We are continuing to make adjustments and improvements to our business. In addition, work continues on ensuring that we are responding to the changing regulatory and industry landscape. Sustainability is part of our strategy of seeking to anticipate and shape the most pressing emerging social issues where we have the skills and experience to make a meaningful difference and drive business value. Our approach makes sustainability part of the way we do business, embedded in our strategy, values, culture and processes. 2 3 • the quality, range, innovation and pricing of products and services offered; digital and technology solutions; customer service quality and convenience; the effectiveness of, and access to, distribution channels; brand reputation and preference; the types of customers served; and the talent and experience of our employees. • • • • • • 4

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38 2019 Westpac Group Annual Report Directors’ report We also operate in an environment where digital innovation is changing the competitive landscape. We compete on our ability to offer new products and services that align to evolving customer preferences. The competitive nature of the industry means that if we are not successful in developing or introducing new products and services, or in responding or adapting to changes in customer preferences and habits, we could lose customers to our competitors. Competition within Australia’s financial system is evidenced by both the significant number of providers and the range of products and services available to customers. In Australia, competition for both deposits and lending continues to be fierce, both from established banks as well as new entrants, including technology firms. Slowing growth in some sectors has heightened competitive intensity as financial institutions work to win new customers and retain existing ones. In our wealth businesses, we expect the broader competitive landscape to continue to undergo significant change with ongoing consolidation in life insurance, increased overseas interest and participation in superannuation. In New Zealand, the Group is experiencing strong competition as banks vie for new customers and seek to retain existing ones. Competition for deposits and lending remains intense. With the Commonwealth budget expected to return to surplus in 2019/20, the Commonwealth government may initiate additional stimulus in 2020 to assist the recovery as further stimulus from monetary policy appears to be limited. With the RBA cash rate having been reduced from 1.5% to 0.75% over the course of 2019, one more rate cut is expected in early 2020 to 0.5%. Following that move, if further stimulus is required, the RBA may adopt unconventional monetary policies which may include asset purchases or long term funding for financial institutions. Credit growth for the Australian financial system slowed to 2.7% in the year to September 2019, down from 4.5% a year earlier. That included a slowdown in housing credit to 3.1% from 5.4% and business to 3.3% from 3.8% with personal credit contracting by 4.4% after declining by 1% a year earlier. For the year ending 30 September 2020, total system credit growth is expected to lift to 3%, with housing credit growth rising to 3.5%. The lift in housing credit growth is expected to reflect the improving conditions in major housing markets, particularly following the more recent rise in lending approvals. Business credit growth is likely to expand by 3% in the year to 30 September 2020 while other personal credit is expected to contract by a further 2%. Economic conditions in New Zealand have also softened over the year; in part due to the deterioration in the global back drop which has dampened conditions in export sectors. Domestic New Zealand conditions have also softened with sluggish consumer spending and weak business confidence. Conditions in New Zealand are likely to remain muted for the remainder of 2019 followed by an expected improvement in 2020 supported by lower interest rates, some fiscal stimulus, and the competitive (lower) New Zealand dollar. The environment for financial services companies is expected to continue to be impacted by the actions flowing from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that released its final report in February 2019. The sector will remain focused on implementing the recommendations of the Royal Commission and other company specific reviews. At the same time, regulators have indicated that they will be taking a more active position in prosecuting cases of misconduct as well as stepping up supervisory actions. This will likely see associated costs remain high for the sector in the period ahead. In addition, regulators in Australia and New Zealand have a number of reviews underway, in many areas including mortgage pricing, remuneration, and capital/ risk weighted asset methodologies across the sector. Further clarity on these reviews is expected in the year ahead. Outlook1 The Australian economy had a below-trend year with annual growth to the June quarter 2019 at only 1.4% which was below population growth of 1.6%. Growth has been uneven as private spending contracted over the year while government spending and exports accounted for all of Australia’s growth. Weakness in the private sector largely reflects a contraction in building activity, particularly centred around residential property, and continuing weakness in wages which is constraining consumer spending. The softer Australian growth combined with the slowdown in the world economy is also impacting business confidence and investment plans. Progress in dealing with the shocks to the global outlook from the trade disputes, particularly between the US and China, will be important for the outlook for the global economy and the flow-on effect on business confidence and investment plans in Australia. Looking ahead, the Group expects GDP growth to lift somewhat through the remainder of 2019 and into 2020. This scenario is expected to be supported by interest rate cuts, the lower Australian dollar, targeted income tax cuts, and a recovery in housing sentiment. Nevertheless, GDP growth is likely to remain below longer term averages (of closer to 2.75%) at 2.3% for calendar year 2019 and 2.4% for calendar year 2020. Weakness in wage growth is likely to persist while the contraction in the residential construction cycle will extend well into 2020. The Group expects the recent recovery in house prices, particularly in Sydney and Melbourne, to extend into 2020, providing some boost to households who, nevertheless, are likely to remain cautious on further increasing debt levels. 1.All data and opinions under ‘Outlook’ are generated by our internal economists and management.

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2019 Westpac Group Annual Report 39 Directors’ report Westpac Group remains focused on executing our vision of being one of the world’s great service companies, with three strategic priorities assisting this transformation. These are: Wealth management income is also expected to be lower over the year, from our decisions to exit financial planning, eliminate grandfathered commission payments and change pricing on our wealth administration platforms. The impact of regulatory change may also reduce wealth and insurance income in the year ahead. On capital, our current capital raising will further lift the Group’s CET1 capital ratio and, based on the current outlook and our capital settings, the Group will increase its buffer over APRA’s unquestionably strong benchmark for CET1 capital ratio of over 10.5%. Given the strength of our customer franchise, and our balance sheet, we believe we are well placed to respond to any changes in the operating environment or regulatory requirements. Looking ahead, with our strong positioning, disciplined growth, solid portfolio of businesses, and good progress on our strategic priorities, Westpac believes it is well positioned to continue delivering sound outcomes for shareholders and customers. Further information on our business strategies and prospects for future financial years and likely developments in our operations and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to us. • Customer franchise - continuing to build the Group’s customer base while also increasing the depth of customer relationships. The Group seeks to do this via superior service, as measured by NPS, and by expanding our share of customers that call us their main financial institution. The priority will be supported by our strong portfolio of brands and also recognises that leading in services requires a high quality, diverse and engaged workforce; Digital transformation - utilising technology to materially improve efficiency and reduce the Group’s cost to income ratio to below 40% in the medium term. This will include completing the modernisation of the Group’s technology platforms, and migrating more activity to digital that will assist in the continued restructuring of the Group’s distribution network and create new experiences for customers. At the same time we’ve developed some unique fintech partnerships that will provide new services and close capability gaps; and Performance discipline – continuing to be prudent in the management of capital, funding and liquidity; managing returns effectively seeking to achieve a superior ROE to the peer average and remaining disciplined and targeted on asset growth. At the same time the group is focused on improving its ability to execute on its plans with a focus on leadership. 1 • • f) Risks to our financial performance, position and our operations Our financial position, our future financial results, our operations and the success of our strategy are subject to a range of risks. These risks are set out and discussed in Section 2 of this Annual Report under the section ‘Risk and risk management’, which forms part of this report (see pages 102 to 120). In the period ahead, a key focus will be to resolve outstanding issues, including our response to the findings of the Royal Commission and our own CGA self-assessment. At the same time we are looking to enhance our processes and controls in areas such as financial crime, end-to-end lending, compliance, and risk management. As a result, investment across these areas, is expected to lead to higher costs in 2020. At the same time, we have already provided for customer payments and refunds where we may not have, or have not been able to sufficiently demonstrate that we have, done the right thing for customers. Our review of historical practices will continue into 2020 and further provisions may be required. We will also focus on refunding customers as quickly as practical where needed. The low interest rate environment also has an impact on bank earnings and should interest rates be reduced further it is likely to place additional pressure on earnings and returns, as the ability to fully reprice lending and deposits to account for even lower interest rates is limited. Our lending growth is expected to be modest in the year ahead, partly reflecting the low system growth but also due to our decision to remain disciplined on margins and from low mortgage growth. Mortgage volume declined late in FY19 and are expected to ease further in the early part of FY20. Growth should then recover through the year as the resolution of some process issues gradually sees new applications improve and outflows slow. 2 3 4

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40 2019 Westpac Group Annual Report Directors’ report 4. Directors’ interests a) Directors’ interests in securities The following particulars for each Director are set out in the Remuneration Report in Section 10 of the Directors’ report for the year ended 30 September 2019 and in the tables below: • • their relevant interests in our shares or the shares of any of our related bodies corporate; their relevant interests in debentures of, or interests in, any registered managed investment scheme made available by us or any of our related bodies corporate; their rights or options over shares in, debentures of, or interests in, any registered managed investment scheme made available by us or any of our related bodies corporate; and any contracts: – to which the Director is a party or under which they are entitled to a benefit; and – that confer a right to call for or deliver shares in, debentures of, or interests in, any registered managed investment scheme made available by us or any of our related bodies corporate. • • Directors’ interests in Westpac and related bodies corporate as at 4 November 2019 Number of Relevant Interests in Westpac Ordinary Shares Number of Westpac Share Rights Westpac Banking Corporation Current Directors Lindsay Maxsted Brian Hartzer Nerida Caesar Ewen Crouch Alison Deans Craig Dunn Anita Fung Steven Harker Peter Marriott Peter Nash Margaret Seale Former Directors Peter Hawkins 23,602 151,4781 13,583 78,4503 14,392 8,869 - 10,365 20,870 8,020 21,7194 - 636,5402 - - - - - - - 15,8805 - 1. 2. 3. 4. 5. Brian Hartzer’s interest in Westpac ordinary shares includes 20,933 restricted shares held under the CEO Restricted Share Plan. Share rights issued under the CEO Long Term Variable Plan. Ewen Crouch and his related bodies corporate also hold relevant interests in 250 Westpac Capital Notes 2. Margaret Seale and her related bodies corporate also hold relevant interests in 3,220 Westpac Capital Notes 2. Figure displayed is as at Peter Hawkins’s retirement date of 12 December 2018, at which point Peter Hawkins and his related bodies corporate also held relevant interests in 850 Capital Notes 3, 882 Westpac Capital Notes 4 and 1,370 Westpac Capital Notes 5. Note: Certain subsidiaries of Westpac offer a range of registered schemes. The Directors from time to time invest in these schemes and are required to provide a statement to the ASX when any of their interests in these schemes change. ASIC has exempted each Director from the obligation to notify the ASX of a relevant interest in a security that is an interest in BT Cash Management Trust (ARSN 087 531 539), BT Premium Cash Fund (ARSN 089 299 730), Westpac Cash Management Trust (ARSN 088 187 928) or Advance Cash Multi-Blend Fund (ARSN 094 113 050).

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2019 Westpac Group Annual Report 41 Directors’ report b) Indemnities and insurance Under the Westpac Constitution, unless prohibited by statute, we indemnify each of the Directors and Company Secretaries of Westpac and of each of our related bodies corporate (except related bodies corporate listed on a recognised stock exchange), each employee of Westpac or our subsidiaries (except subsidiaries listed on a recognised stock exchange), and each person acting as a responsible manager under an Australian Financial Services Licence of any of Westpac’s wholly-owned subsidiaries against every liability (other than a liability for legal costs) incurred by each such person in their capacity as director, company secretary, employee or responsible manager, as the case may be; and all legal costs incurred in defending or resisting (or otherwise in connection with) proceedings, whether civil or criminal or of an administrative or investigatory nature, in which the person becomes involved because of that capacity. Each of the Directors named in this Directors’ report and each of the Company Secretaries of Westpac has the benefit of this indemnity. Consistent with shareholder approval at the 2000 Annual General Meeting, Westpac has entered into a Deed of Access and Indemnity with each of the Directors, which includes indemnification in identical terms to that provided in the Westpac Constitution. Westpac also executed a deed poll in September 2009 providing indemnification equivalent to that provided under the Westpac Constitution to individuals acting as: For the year ended 30 September 2019, the Group has insurance cover which, in certain circumstances, will provide reimbursement for amounts which we have to pay under the indemnities set out above. That cover is subject to the terms and conditions of the relevant insurance, including but not limited to the limit of indemnity provided by the insurance. The insurance policies prohibit disclosure of the premium payable and the nature of the liabilities covered. 1 c) Share rights outstanding As at the date of this report there are 4,225,250 share rights outstanding in relation to Westpac ordinary shares. The latest dates for exercise of the share rights range between 1 October 2020 and 1 July 2034. Holders of outstanding share rights in relation to Westpac ordinary shares do not have any rights under the share rights to participate in any share issue or interest of Westpac or any other body corporate. d) Proceedings on behalf of Westpac No application has been made and no proceedings have been brought or intervened in, on behalf of Westpac under section 237 of the Corporations Act. • statutory officers (other than as a director) of Westpac; directors and other statutory officers of wholly-owned subsidiaries of Westpac; and directors and statutory officers of other nominated companies as approved by Westpac in accordance with the terms of the deed poll and Westpac’s Contractual Indemnity Policy. • • Some employees of Westpac’s related bodies corporate and responsible managers of Westpac and its related bodies corporate are also currently covered by a deed poll that was executed in November 2004, which is on similar terms to the September 2009 deed poll. The Westpac Constitution also permits us, to the extent permitted by law, to pay or agree to pay premiums for contracts insuring any person who is or has been a Director or Company Secretary of Westpac or any of its related bodies corporate against liability incurred by that person in that capacity, including a liability for legal costs, unless: •we are forbidden by statute to pay or agree to pay the premium; or •the contract would, if we paid the premium, be made void by statute. Under the September 2009 deed poll, Westpac also agrees to provide directors’ and officers’ liability insurance to Directors of Westpac and Directors of Westpac’s wholly-owned subsidiaries. 2 3 4

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42 2019 Westpac Group Annual Report Directors’ report 5. Environmental disclosure As part of our 2019 Sustainability Strategy, we have set targets for our environmental performance to 2020. The Westpac Group’s environmental framework starts with ‘Our Principles for Doing Business’, which outline our broad environmental principles. This framework includes: 6. Human rights supply chain disclosure Westpac’s overall approach to human rights is set out in our Westpac Group Human Rights Position Statement, and this references our Responsible Sourcing Code of Conduct as the primary framework for managing human rights in our supply chain. The Group is subject to the United Kingdom’s Transparency in Supply Chains provisions under the Modern Slavery Act 2015, which came into effect in March 2015. Westpac releases an annual statement each year for the period ended 30 September to disclose the steps taken during the year to help prevent modern slavery from occurring within the Group’s operations and supply chain. The Group is subject to the Commonwealth of Australia’s Modern Slavery Act 2018 (Cth), with the first reporting year being 2020 and the first report being due six months from the end of 30 September 2020. • our Westpac Group Environment Policy, which has been in place since 1992; our Sustainability Risk Management Framework; our Climate Change Position Statement and 2020 Action Plan; our Responsible Sourcing Code of Conduct; and public reporting of our environmental performance. • • • • We also participate in a number of voluntary initiatives including the Dow Jones Sustainability Index (#9 in global banking group and above our Australian peers), CDP1, the Equator Principles, the Principles for Responsible Banking, the Principles for Responsible Investment and the United Nations Global Compact. The National Greenhouse and Energy Reporting Act 2007 (Cth) (NGER) came into effect in July 2008. The Group reports on greenhouse gas emissions, energy consumption and production under the NGER for the period 1 July through 30 June each year. Our operations are not subject to any other significant environmental regulation under any law of the Commonwealth of Australia or of any state or territory of Australia. We may, however, become subject to environmental regulation as a result of our lending activities in the ordinary course of business and we have policies in place to ensure that this potential risk is addressed as part of our normal processes. We have not incurred any liability (including for rectification costs) under any environmental legislation. Westpac has reported its performance against the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in Section 2 of this Annual Report under the sections titled ‘Risk and risk management – climate change risk’ (see pages 118 to 120); and ‘Climate-related financial disclosures (see page 127). Further information about Westpac’s sustainability performance and approach is also included in Section 2 of this Annual Report under the sections ‘Risk and Risk Management’ (see pages 102 to 120) and ‘Westpac’s approach to sustainability’ (see pages 121 to 131). Additional information about our environmental performance, including information on our climate change approach, details of our greenhouse gas emissions profile and environmental footprint, and progress against our environmental targets and carbon neutral program are available on our website at www.westpac.com.au/sustainability. 7. Rounding of amounts Westpac is an entity to which ASIC Corporations Instrument 2016/191 dated 24 March 2016, relating to the rounding of amounts in directors’ reports and financial reports, applies. Pursuant to this Instrument, amounts in this Directors’ report and the accompanying financial report have been rounded to the nearest million dollars, unless indicated to the contrary. 8. Political engagement In line with Westpac policy, no cash donations were made to political parties during the financial year ended 30 September 2019. In Australia, political expenditure for the financial year ended 30 September 2019 was $166,650. This relates to payment for participation in legitimate political activities where they were assessed to be of direct business relevance to Westpac. Such activities include business observer programs attached to annual party conferences, policy dialogue forums and other political functions, such as speeches and events with industry participants. In New Zealand, political expenditure for the financial year ended 30 September 2019 was NZD$20,170. 1.Formerly known as the Carbon Disclosure Project.

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2019 Westpac Group Annual Report 43 Directors’ report 9. Directors’ meetings Each Director attended the following meetings of the Board and Committees of the Board during the financial year ended 30 September 2019: Risk & Audit Committee Compliance Committee Nominations Committee Remuneration Committee Technology Committee Notes Board Number of meetings held during the year Director 1 A B A B A B A B A B A B Lindsay Maxsted Brian Hartzer Nerida Caesar Ewen Crouch Alison Deans Craig Dunn Anita Fung Steven Harker Peter Hawkins Peter Marriott Peter Nash Margaret Seale 1 2 3 4 5 6 7 8 9 10 11 12 11 11 11 11 11 11 11 7 3 11 11 7 11 11 11 11 11 11 11 7 3 11 11 7 6 n/a n/a 4 n/a n/a n/a n/a 2 6 6 n/a 6 n/a n/a 4 n/a n/a n/a n/a 2 6 6 n/a 5 n/a 5 5 5 5 5 3 1 5 5 3 5 n/a 5 5 5 5 5 3 1 5 5 3 4 n/a n/a 4 4 4 n/a n/a n/a 4 n/a n/a 4 n/a n/a 4 4 4 n/a n/a n/a 4 n/a n/a n/a n/a n/a 6 6 6 n/a n/a n/a n/a n/a n/a n/a n/a n/a 6 6 6 n/a n/a n/a n/a n/a n/a n/a 4 4 n/a 4 n/a n/a n/a 1 4 n/a n/a n/a 4 4 n/a 4 n/a n/a n/a 1 4 n/a n/a This table shows membership of standing Committees of the Board. From time to time the Board may form other committees or request Directors to undertake specific extra duties. A – Meetings eligible to attend as a member B – Meetings attended as a member Unless otherwise stated, each Director has been a member, or the Chairman, of the relevant Committee for the whole of the period from 1 October 2018. 1. 2. 3. 4. Chairman of the Board Nominations Committee. Member of the Board Audit Committee and the Board Risk & Compliance Committee. Member of the Board Technology Committee. Member of the Board Risk & Compliance Committee and Board Technology Committee. Chairman of the Board Risk & Compliance Committee. Member of the Board Nominations Committee and the Board Remuneration Committee, and from 1 January 2019, a member of the Board Audit Committee. Chairman of the Board Technology Committee. Member of the Board Nominations Committee, Board Remuneration Committee and Board Risk & Compliance Committee. Chairman of the Board Remuneration Committee. Member of the Board Risk & Compliance Committee and the Board Nominations Committee. Member of the Board Risk & Compliance Committee. Steven Harker was appointed as a Director and member of the Board Risk & Compliance Committee on 1 March 2019. Peter Hawkins retired from the Board and its Committees on 12 December 2018. Chairman of the Board Audit Committee. Member of the Board Nominations Committee, Board Risk & Compliance Committee and the Board Technology Committee. Member of the Board Audit Committee and Board Risk & Compliance Committee. Margaret Seale was appointed as a Director and member of the Board Risk & Compliance Committee on 1 March 2019. 5. 6. 7. 8. 9. 10. 11. 12. 2 3 4

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44 2019 Westpac Group Annual Report Directors’ report 10. Remuneration Report Introduction from the Chairman of the Board Remuneration Committee 2019 was a year of reflection for the Company and the Board Craig Dunn, Chairman Board Remuneration Committee Dear shareholders, On behalf of the Board, I am pleased to present Westpac’s 2019 Remuneration Report. 2019 Group performance As outlined in the Chairman’s report and the CEO’s annual letter, 2019 has been another challenging period for financial services companies, including Westpac. Examples of poor behaviour affecting customers, shortcomings in the management of non-financial risks and poor risk cultures have been at the heart of challenges faced by the industry. These issues have been accompanied by slowing economic activity, further falls in interest rates, a decline in house prices and weak business and consumer confidence. These operating conditions have contributed to more cautious demand for lending, a decline in deposit growth and intense competition as more lenders target a smaller pool of new lending. With this backdrop, Westpac reported cash earnings of $6,849 million in 2019, a reduction of 15% compared to the prior year. Our performance in 2019 was impacted by estimated customer refunds, payments, associated costs, and litigation, as well as costs incurred with the restructuring of the Wealth business. Excluding these items, cash earnings in 2019 were $7,979 million, down 4% relative to 2018. While earnings were lower, our common equity tier 1 ratio was 10.67% at 30 September 2019 and our liquidity ratios were well above regulatory minimums. Asset quality has remained sound and the overall level of stressed assets remained at low levels over the year. Recognising that much work has commenced on improving our approach to non-financial risks, progress in resolving risk and compliance matters has fallen short of our expectations. Resolution of these matters and continued investment in non-financial risk management remain a focus. Through the year we have continued to improve service for customers, particularly via new digital self-serve options and an enhanced approach to capturing and responding to complaints. Investments in our technology infrastructure have improved the stability and speed of our systems and improved availability for customers. 2019 remuneration outcomes Westpac’s short term variable reward (STVR) is designed to ensure a significant portion of remuneration is variable, at-risk and linked to the delivery of agreed plan targets for financial and non-financial measures. The STVR outcome can range from 0% to 100% depending on performance relative to targets agreed at the beginning of the year, or exceed 100% when exceptional performance is achieved. The targets for STVR sign-post those areas of focus that the Board regards as most critical for management and which encourage the achievement of stretch performance while operating within appropriate risk settings. Long term variable reward (LTVR) is designed to further align the interests of executives with those of shareholders by rewarding the delivery of sustained Group performance over the long term. Key remuneration outcomes for 2019 include: • • The CEO’s STVR award was zero; The average 2019 STVR outcome for Group Executives was 56% of the target opportunity, down from 87% in 2018; The 2016 LTVR lapsed in full; The 2020 total target remuneration has been reduced by 23% and 12.5% for the CEO and Group Executives, respectively reflecting changes made to LTVR; and Board fees were reduced by 20% as a one-off measure. • • • Further detail regarding the key remuneration outcomes for the CEO, Group Executives and Non-executive Directors is provided on the following page, and in sections 3, 6 and 7 of the Remuneration Report.

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2019 Westpac Group Annual Report 45 Directors’ report • The CEO recommended to the Board that he forego his STVR for this year. The Board separately considered the matter and determined that a zero STVR outcome for 2019 for the CEO was appropriate to reflect accountability for poor non-financial risk and financial outcomes, as well as some poor customer outcomes, including those highlighted at the Royal Commission. The 2016 LTVR lapsed in full because the relative TSR and cash EPS performance hurdles were not achieved. The CEO has not received a share-based payment under the LTVR for four consecutive years, equating to $15.96 million worth of lapsed performance share rights over that period. This result is aligned with shareholder outcomes over the period. In 2019, the CEO received $2.69 million in fixed remuneration and $1.33 million in deferred STVR awarded in prior years that vested during the year, equalling $4.02 million in total realised remuneration (i.e. take-home pay). This outcome is 33% of the maximum remuneration he could have received for the year. For 2020, the CEO’s total target remuneration (comprising fixed remuneration, target STVR and LTVR opportunity at face value) has been reduced by 23% as a result of changes made to LTVR, as outlined below. The CEO has not received a total target remuneration increase since his appointment in 2015. • • 1 • • • Group Executives received between 0% and 83% of their 2019 STVR target opportunity. The average 2019 STVR outcome for Group Executives was 56% of the target opportunity, down from 87% in 2018. The 2019 STVR scorecard outcome for non-financial risk measures was reduced to zero for Group Executives. In addition, downward remuneration adjustments were applied to two Group Executives and two former Group Executives in response to material risk and compliance matters that impacted the Group, in some instances reducing 2019 STVR outcomes to zero. Many of these adjustments related to events from prior periods which have continued to develop and, in some cases, for which material remediation costs were accounted for in 2019. The Board exercised its discretion to apply downward adjustments to a portion of deferred STVR awarded in prior years for two former Group Executives. The 2016 LTVR lapsed in full because the relative TSR and cash EPS performance hurdles were not achieved. For 2020, the total target remuneration for Group Executives has been reduced by 12.5%, as a result of changes made to LTVR. Given the above remuneration adjustments to current year and deferred STVR, together with changes made to the LTVR from 2020, the Board determined that further adjustments to the quantum of 2020 LTVR were not required. David McLean (Chief Executive Officer, Westpac New Zealand) and Gary Thursby (Chief Operating Officer) received total target remuneration increases in 2019 of 10.3% and 10.4% respectively to align their remuneration with the market. David Lindberg received a total target remuneration increase in 2019 of 6% given the increased size and scale of his role on appointment as the Group Executive, Consumer. No other Group Executives received total target remuneration increases during 2019. David Stephen (Chief Risk Officer) and Craig Bright (Chief Information Officer) were appointed as Group Executives in 2019. To attract the best international talent, the Board approved remuneration packages which are higher than those of their predecessors. The Board also approved buyout awards to compensate these executives for awards forfeited on resignation from their previous employer. • • • • • • • 2 • The 2019 Group variable reward pool for all employees was reduced by $126 million from 2018 to align with Group performance. In addition to the remuneration adjustments for Group Executives, downward remuneration adjustments were approved for 13 General Managers in response to material risk and compliance matters impacting the Group, ranging from 10% to 100%. The Group managed 1,134 employee conduct matters in Australia in 2019, of which 163 employees exited the business and 545 employees were subject to formal disciplinary outcomes. A range of remuneration consequences were also applied for these matters, including ineligibility for STVR and remuneration adjustments to STVR. • • 3 • The Chairman and other Non-executive Director base fees for 2019 were reduced by 20% as a one-off measure, which equated to a $162,000 reduction for the Chairman. The reduction was applied to all current Non-executive Directors in recognition of our collective accountability as the Board of Westpac for customer outcomes highlighted by the Royal Commission, shareholder sentiment leading to the first strike at the 2018 Annual General Meeting and significant non-financial risk matters. 4 Non-executive Directors All employees Group Executives Chief Executive Officer

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46 2019 Westpac Group Annual Report Directors’ report First strike Westpac received a first strike at the 2018 Annual General Meeting, with 64% of votes cast against the adoption of the 2018 Remuneration Report. This was a disappointing outcome. In 2019, we significantly increased our engagement across different shareholder and shareholder advisory groups to better understand their concerns. In addition to ongoing meetings with shareholder advisory groups and feedback from shareholders in the normal course, we had individual and group meetings with many of our institutional shareholders and roundtable meetings with representative retail shareholders co-facilitated with the Australian Shareholders’ Association. It is clear that our executive remuneration outcomes in 2018 were not in line with shareholder expectations. Based on the feedback from the 2018 Annual General Meeting and our more extensive consultations, the key concerns that led to the first strike included: (1) 2018 STVR outcomes were not considered reflective of performance. Shareholders felt that the scorecard results did not reflect performance in some areas, in particular non-financial risk, and the Board did not apply enough downward discretion to the outcomes. (2) Remuneration was considered too high, particularly for the CEO. LTVR granted to the CEO and Group Executives in 2018 was viewed as high relative to that of peers, which was partially driven by the use of fair value to determine the number of performance share rights to grant for LTVR. (3) There was insufficient transparency in our communication with shareholders. Shareholders believed that further information was required to explain how STVR outcomes were determined. • Reduced total target and maximum remuneration for executives from 2020. The Board reduced the face value of 2020 LTVR opportunities by 43% for the CEO and 23% to 25% for Group Executives. As a result, the 2020 total target remuneration has been reduced by 23% for the CEO and 12.5% for Group Executives. This means the CEO’s total target remuneration becomes comparable to that of other Australian major bank CEOs. CEO target remuneration package ($'000) FY20 FY19 Fixed remuneration STVR LTVR (face value) • Reduced fees paid to Non-executive Directors for 2019. The Chairman and other current Non-executive Director base fees for 2019 were reduced by 20% as a one-off measure to recognise collective accountability as the Board of Westpac for customer outcomes highlighted by the Royal Commission, shareholder sentiment leading to the first strike at the 2018 Annual General Meeting and significant non-financial risk matters. Updated the CEO’s 2019 STVR scorecard. The balanced scorecard was updated to place a greater emphasis on non-financial risk management and customer outcomes. Improved our remuneration governance and decision-making frameworks. We further improved our approach to the assessment of material risk and compliance matters and the flow of information between Board Committees including to support the Board in determining possible remuneration adjustments. Enhanced our remuneration adjustment guidelines to strengthen consequence management. The guidelines build on existing policies and practices to provide greater clarity and consistency in the management of employee conduct and the application of remuneration consequences. Introduced clawback as an additional remuneration adjustment tool. Clawback has been introduced to enable the Board to recover deferred variable remuneration after it has vested (to the extent legally permissible) in circumstances such as serious misconduct or other conduct that may have a serious adverse impact on Westpac or its reputation, customers or people which has resulted in, or would justify, termination of employment or where otherwise required by law. Clawback will apply to variable remuneration awarded in respect of performance periods commencing on or after 1 October 2019 where conduct warranting clawback occurs after this date. Improved disclosure in the Remuneration Report. The Remuneration Report provides greater transparency around the rationale for remuneration decisions, seeks to clearly demonstrate the link between performance and remuneration and provides further detail in relation to Westpac’s minimum shareholding requirement in section 5. • • The Board and management value these insights and appreciate your feedback and willingness to engage constructively. • Changes to remuneration We spent significant time in 2019 reflecting on your feedback. We completed a comprehensive review of executive remuneration including the remuneration strategy, frameworks, governance, decision-making processes, and our approach to communication. A key objective of our review was to identify opportunities for improvement and to develop balanced solutions that consider the expectations of shareholders, shareholder advisory groups, regulators, customers and the broader community. As a result, we have: •Changed the LTVR allocation approach from 2020. The number of performance share rights granted to executives is now determined by the face value of shares at the grant date, instead of the fair value. We believe this approach improves transparency and is in line with changes in market practice. • • $2,686 $2,686 $3,585 $2,686 $2,686 $6,320

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2019 Westpac Group Annual Report 47 Directors’ report Other changes for 2020 In addition, the Board has selected relative TSR as the performance hurdle for the 2020 LTVR plan as it believes this measure best aligns executive remuneration outcomes with long-term shareholder value creation. In recent years, cash ROE has been used as a LTVR performance hurdle in conjunction with relative TSR. The Board considers that setting an absolute cash ROE range over a three year period has become increasingly difficult in light of current uncertainties surrounding future regulatory capital requirements and interest rates, which are at historically low levels. The Board will review the 2021 LTVR plan following the release of APRA’s final regulatory framework for remuneration. 1 Regulatory developments APRA is currently consulting on changes to the regulatory framework for remuneration. The Board recently provided a submission to APRA on the proposed changes which sets out Westpac’s overall support for a stronger, clearer and more consistent set of requirements. Our submission also recommends alternatives for consideration by the regulator in relation to some material aspects of the draft changes, including in relation to the proposed maximum weighting of financial performance measures used to determine variable remuneration. If enacted, some of the proposed changes would require substantial amendment to our remuneration arrangements for executives and employees. The Board will continue to review the remuneration design in 2020 following the release of APRA’s final regulatory framework. On behalf of the Board, I invite you to read our Remuneration Report and welcome your feedback. Craig Dunn, Chairman Board Remuneration Committee 2 3 4

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48 2019 Westpac Group Annual Report Directors’ report In this Report 1. 2. 3. 4. 5. 6. 7. Key Management Personnel Summary of the 2019 executive reward framework 2019 remuneration outcomes and alignment to performance Further detail on the executive variable reward structure Remuneration governance Non-executive Director remuneration Statutory remuneration details 49 50 52 59 62 64 66

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2019 Westpac Group Annual Report 49 Directors’ report 1. Key Management Personnel The remuneration of Key Management Personnel (KMP) for the Group is disclosed in the Report. In 2019, KMP comprised the CEO, Group Executives and Non-executive Directors as set out in the table below. KMP is defined as those persons having authority and responsibility for planning, directing and controlling the activities of an entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. Name Position Term as KMP Brian Hartzer Managing Director & Chief Executive Officer Full Year 1 Craig Bright Lyn Cobley Peter King Rebecca Lim David Lindberg1 Carolyn McCann David McLean Christine Parker David Stephen Gary Thursby2 Alastair Welsh3 Chief Information Officer Chief Executive, Westpac Institutional Bank Chief Financial Officer Group Executive, Legal & Secretariat Chief Executive, Consumer Group Executive, Customer & Corporate Relations Chief Executive Officer, Westpac New Zealand Group Executive, Human Resources Chief Risk Officer Chief Operating Officer Acting Chief Executive, Business Commenced in KMP role on 4 December 2018 Full Year Full Year Full Year Full Year Full Year Full Year Full Year Full Year Full Year Commenced in KMP role on 1 April 2019 Brad Cooper Dave Curran George Frazis Chief Executive Officer, BT Financial Group Chief Information Officer Chief Executive, Consumer Bank Ceased in KMP role on 1 April 2019 Ceased in KMP role on 4 December 2018 Ceased in KMP role on 1 April 2019 Lindsay Maxsted Nerida Caesar Ewen Crouch Alison Deans Craig Dunn Anita Fung Steven Harker Peter Marriott Peter Nash Margaret Seale Chairman Director Director Director Director Director Director Director Director Director Full Year Full Year Full Year Full Year Full Year Full Year Commenced in KMP role on 1 March 2019 Full Year Full Year Commenced in KMP role on 1 March 2019 Peter Hawkins Director Retired on 12 December 2018 following the completion of the 2018 Annual General Meeting 2 3 4 1. 2. 3. David Lindberg was the Chief Executive, Business Bank until 1 April 2019 when he was appointed as the Chief Executive, Consumer. Gary Thursby’s role and title changed from Group Executive, Strategy & Enterprise Services to Chief Operating Officer on 1 April 2019. Alastair Welsh was the General Manager, Commercial Banking until 1 April 2019 when he was appointed as the Acting Chief Executive, Business. Former Non-executive Director Current Non-executive Directors Former Group Executives Current Group Executives Managing Director & Chief Executive Officer

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50 2019 Westpac Group Annual Report Directors’ report 2. Summary of the 2019 executive reward framework The delivery of our vision and strategy is supported by our remuneration strategy, principles and frameworks. Executive reward components Fixed remuneration STVR LTVR Purpose Attract and retain high quality executives through market competitive and fair remuneration. Ensure a portion of remuneration is variable, at-risk and linked to the delivery of agreed plan targets for financial and non-financial measures that support Westpac’s strategic priorities. The STVR outcome can range from 0% to 100% of target depending on performance relative to targets agreed at the beginning of the year, or exceed 100% (up to a maximum of 150% of target) when exceptional performance is achieved. Align executive accountability and remuneration with the long-term interests of shareholders by rewarding the delivery of sustained Group performance over the long-term. Delivery Comprises cash salary, salary sacrificed items and superannuation contributions. Awarded in cash (50%) and restricted shares1 (50%) based on an assessment of performance over the preceding year. Restricted shares vest in equal portions after one and two years following grant subject to continued service and adjustment. Awarded in performance share rights which vest after four years subject to the achievement of relative TSR and cash ROE performance hurdles, continued service and adjustment. Alignment to performance Set with reference to market benchmarks in the financial services industry in Australia and globally as well as the size, responsibilities and complexity of the role, and the skills and experience of the executive. Individual performance impacts fixed remuneration adjustments. Performance is assessed using a balanced scorecard comprising: Performance is assessed against: • Relative TSR2 (50%) which is a comparative measure of Westpac’s performance relative to peers (measured over four years); and Cash ROE3 (50%) which aims to reward the achievement of returns above the cost of capital while generating shareholder value (measured over a three year period with an additional one year holding lock). • financial and non-financial measures linked to Westpac’s key strategic priorities; and a modifier to support the adjustment of the outcome, upwards or downwards (including to zero), for behaviour, risk and reputation matters, people management matters, and any other matters as determined by the Board. • • Alignment to shareholders Minimum shareholding requirements equivalent to five times annual fixed remuneration excluding superannuation for the CEO and $1.2 million for Group Executives. These requirements must be satisfied within five years of appointment as the CEO or as a Group Executive. Half of the STVR award is deferred into equity for a period of up to two years to support alignment with shareholders over the medium term. The LTVR is fully delivered in equity and the relative TSR and cash ROE performance hurdles are aligned to long-term shareholder returns and value creation. 1. 2. 3. The Group Executive outside Australia receives deferred STVR as unhurdled share rights. For the 2020 LTVR plan, the performance hurdle will be relative TSR. Cash ROE is return on equity on a cash earnings basis. Cash earnings are not prepared in accordance with AAS and have not been subject to audit. Refer to Note 2 to the Financial Statements for a description of cash earnings. Westpac’s vision and strategy Westpac’s vision is to be one of the world’s great service companies, helping our customers, communities and people to prosper and grow. Our strategy seeks to deliver on our vision by building deep and enduring customer relationships, being a leader in the community, being a place where the best people want to work and, in so doing, delivering sustainable returns for shareholders. Remuneration strategy Westpac’s remuneration strategy is designed to attract and retain talented employees by rewarding them for achieving high performance and delivering superior long-term results for our customers and shareholders, while adhering to sound risk management and governance principles. Remuneration principles The remuneration strategy is underpinned by the following principles: •Align remuneration with customer and shareholder interests. • Support an appropriate risk culture and employee conduct. •Differentiate pay for behaviour and performance in line with our vision and strategy. • Provide market competitive and fair remuneration. •Enable recruitment and retention of talented employees. • Provide the ability to risk-adjust remuneration. •Be simple, flexible and transparent.

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2019 Westpac Group Annual Report 51 Directors’ report 2.1. Risk Westpac’s remuneration arrangements are designed and managed to support effective risk management, the generation of appropriate risk-based returns and the risk profile associated with our businesses which incorporate products with varying complexity and maturity profiles. • Remuneration outcomes: The performance of the Group and each division is reviewed and measured with reference to how risk is managed in line with Westpac’s Risk Appetite Statement and the results of this review and measurement influence remuneration outcomes. The key risks that are considered include capital, credit, market, equity, liquidity, insurance, risk culture, reputation and sustainability, conduct, operational and compliance risk and financial crime. In addition, STVR outcomes are influenced by relevant risk-related matters through the Board’s application of the scorecard modifier, which is partly informed by individual risk assessments for the CEO and each Group Executive. Variable reward pool: Each year, the Board determines the size of the variable reward pool which funds outcomes across the Group. This is based on the Group’s performance for the year and an assessment of how profit should be shared between shareholders and employees while retaining sufficient capital for growth. The Group variable reward pool reflects financial performance including financial risk outcomes. A broad range of financial and non-financial risk measures and customer outcomes may also be taken into account when allocating the Group variable reward pool. Mandatory risk and compliance requirements: Individuals are only eligible to receive a fixed remuneration adjustment, STVR and LTVR where an individual has satisfied minimum requirement gates which require that behaviours are in line with Westpac’s Values and Code of Conduct and that the individual has met the risk and compliance requirements for their role and business. Remuneration adjustments for prior period matters: The Board may adjust all forms of unvested deferred variable reward downward, including to zero, for matters arising in a prior period if circumstances or information come to light which mean that in the Board’s view all or part of the award was not appropriate. Having decided that a downward adjustment is appropriate and determined the amount of any adjustment, typically the Board will first apply that adjustment against the STVR for the current performance period. In instances where an adjustment to current year STVR is insufficient or unavailable, the Board may apply the adjustment to unvested deferred variable reward. Clawback provides an additional mechanism to recover vested deferred variable reward in certain limited circumstances for awards made in respect of performance periods commencing on or after 1 October 2019. It is the Board’s current intention that clawback will only be considered for relevant conduct that occurred on or after 1 October 2019. 1 • • • 2.2. 2019 remuneration mix1 Chief Executive Officer and Group Executives (excluding control function Group Executives) 34% Fixed Control function Group Executives² 30% LTVR remuneration 32% LTVR 40% Fixed remuneration 15% STVR (deferred component) 17% STVR (deferred component) 17% STVR (cash component) 2 15% STVR (cash component) 1.Based on a fair value methodology for LTVR. 2. Includes the Chief Risk Officer, the Group Executive, Legal & Secretariat, the Group Executive, Customer & Corporate Relations and the Chief Financial Officer. 2.3. Timeline of potential remuneration 3 2023 4 Date eligible for vesting Date paid Date granted 2019 2020 2021 2022 Fixed remuneration Cash STVR award (50%) Deferred STVR award (25%) Deferred STVR award (25%) LTVR award subject to relative TSR performance (50%) – measured over 4 years LTVR award subject to cash ROE performance (50%) – measured over 3 years + 1 year holding lock

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52 2019 Westpac Group Annual Report Directors’ report 3. 2019 remuneration outcomes and alignment to performance 3.1. Snapshot of 2019 remuneration outcomes The assessment of performance against the CEO’s 2019 scorecard focus areas resulted in an outcome of 60% of target (40% of maximum) reflecting Group performance. This includes a zero outcome for non-financial risk measures in the scorecard. Notwithstanding this assessment, the CEO recommended to the Board that he forego his STVR for this year. The Board separately considered the matter and determined that a zero STVR outcome for 2019 was appropriate to reflect accountability for poor non-financial risk and financial outcomes, as well as some poor customer outcomes, including those highlighted at the Royal Commission. The Board adjusted the CEO’s STVR award through the modifier, as outlined in section 3.5. Westpac’s strategic priorities are cascaded from the CEO to Group Executives in combination with other relevant divisional or functional measures. STVR outcomes for Group Executives ranged from 0% to 83% of their 2019 STVR target opportunity. The 2019 scorecard outcome for non-financial risk measures was also reduced to zero for Group Executives. In addition, downward remuneration adjustments were applied to two Group Executives and two former Group Executives in response to material risk and compliance matters impacting the Group, in some instances reducing 2019 STVR outcomes to zero. 50% of the 2019 STVR awards remain subject to continued service and adjustment over a two year period. In addition, the Board exercised its discretion to apply downward adjustments to a portion of deferred STVR awarded in prior years for two former Group Executives. The relative TSR and cash EPS1 performance hurdles for the 2016 LTVR were not met and therefore no LTVR vested during 2019. The Board considered that this outcome was appropriate given the Group’s performance over the relevant period. This is the fourth consecutive year where LTVR has not vested. The table below shows the vesting outcome for the 2016 LTVR award to the CEO and Group Executives that reached the end of its performance period in 2019. Performance range Performance hurdle Performance start date Test date Threshold Maximum Outcome % Vested % Lapsed Exceeds composite TSR index by 21.55 (i.e. 5% CAGR2) Westpac: 14.508 Index: 17.549 TSR 50% of award Equal to composite TSR index 1-Oct-15 1-Oct-19 0 100 EPS 50% of award 1-Oct-15 1-Oct-183 4.0% CAGR 6.0% CAGR (1.6%) CAGR 0 100 1. Cash EPS is cash earnings per share. Cash earnings are not prepared in accordance with AAS and have not been subject to audit. Refer to Note 2 to the Financial Statements for a description of cash earnings. Compound annual growth rate. The cash EPS hurdled performance share rights reached the end of their performance period on 30 September 2018 and were subject to an additional one year holding lock through to 30 September 2019. 2. 3. 3.2. Group performance The table below summarises the key performance indicators for the Group and variable reward outcomes over the last five years. Years ended 30 September 2019 2018 2017 2016 2015 CEO STVR award (% of target) Average Group Executive STVR (% of target) 0% 56% 77.50% 87% 111% 109% 97% 95% 108% 106% LTVR award (% vested) 0% 0% 0% 0% 36% Cash earnings1 ($m) Statutory earnings ($m) Economic profit2 ($m) Cash ROE TSR – three years TSR – five years Dividends per Westpac share (cents) Cash earnings per Westpac share Share price – high Share price – low Share price – close 6,849 6,784 1,619 10.75% 15.33% 14.58% 174 $1.98 $30.05 $23.30 $29.64 8,065 8,095 3,444 13.00% 8.27% 25.67% 188 $2.36 $33.68 $27.24 $27.93 8,062 7,990 3,774 13.77% 11.79% 81.32% 188 $2.40 $35.39 $28.92 $31.92 7,822 7,445 3,774 13.99% 15.24% 100.72% 188 $2.35 $33.74 $27.57 $29.51 7,820 8,012 4,418 15.84% 62.30% 92.78% 187 $2.48 $40.07 $29.10 $29.70 1.Cash earnings are not prepared in accordance with AAS and have not been subject to audit. Refer to Note 2 to the Financial Statements for a description of cash earnings. 2. Economic profit is derived from cash earnings. Long term variable reward Short term variable reward

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2019 Westpac Group Annual Report 53 Directors’ report Return on equity and LTVR vesting (2015 to 2019) 16% 14% 12% 10% 8% 6% 90% 80% 60% 1 40% 30% 10% Total shareholder return (from 1 October 2014) Cash earnings and CEO STVR award (2015 to 2019) 2 2015 2016 2017 2018 2019 3 4 Cash earnings ($m) Return on equity (%) Total shareholder return (%) LTVR award STVR award for the CEO 8,100150% 7,800100% 7,50075% 7,20060% 6,90045% 6,60030% 6,30015% 6,0000% Cash earnings ($m)STVR award for the CEO (% of target) 30 20 10 0 (10) (20) (30) Oct 14 Oct 15 Oct 16 Oct 17 Oct 18 Oct 19 Westpac Peer 1 Peer 2 Peer 3 17% 100% 15% 13% 70% 11% 50% 9% 7% 20% 5% 0% 2015 2016 2017 2018 2019 Return on equity (%) LTVR award (% vested)

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54 2019 Westpac Group Annual Report Directors’ report 3.3. Total realised remuneration – Chief Executive Officer and Group Executives (unaudited) The charts below summarise the actual remuneration paid and the equity vested1 to the CEO and Group Executives relative to the maximum remuneration that could have been received in 2019 and 2018, including: • • • • fixed remuneration earned during the year; cash STVR awarded in respect of the year; deferred STVR awarded in prior years that vested during the year; and LTVR awarded in prior years that vested during the year. The charts below also reference the maximum value of remuneration foregone in 2019, including cash STVR not awarded in respect of the year (based on the maximum STVR opportunity) and deferred STVR and LTVR awarded in prior years that was forfeited, adjusted or lapsed during the year. The value of deferred STVR and LTVR is based on the number of restricted shares or share rights multiplied by the five day volume weighted average share price (VWAP) up to and including the date of vesting. The value of equity differs from the disclosure in section 7. Total realised remuneration ($’000) Fixed remuneration Vesting of prior year LTVR awards Cash STVR payment 2019 maximum realisable remuneration Vesting of prior year deferred STVR awards Managing Director & Chief Executive Officer 0 2,000 4,000 6,000 8,000 10,000 12,000 2019 Total Remuneration Realised: 4,015 Foregone (max): 8,096 2019 2018 Current Group Executives 0 1,000 2,000 3,000 4,000 5,000 2019 Total Remuneration Realised: 1,389 Foregone (max): 308 2019 Realised: 2,043 Foregone (max): 3,211 2019 2018 Realised: 2,216 Foregone (max): 2,954 2019 2018 Realised: 1,622 Foregone (max): 805 2019 2018 Realised: 1,765 Foregone (max): 2,759 2019 2018 1.Equity that vested on 1 October 2019 is included in the 2019 figures. Equity that vested on 1 October 2018 is included in the 2018 figures. 2. The information relates to the period the individual was a KMP. Refer to section 1 for further details. David Lindberg Chief Executive, Consumer Rebecca Lim Group Executive, Legal & Secretariat Peter King Chief Financial Ofcer Lyn Cobley Chief Executive, Westpac Institutional Bank Craig Bright2 Chief Information Ofcer Brian Hartzer Managing Director & Chief Executive Offcer 1,008 381 1,122 339 582 1,122 466 494 1,288 327 601 1,288 517 506 950 263 409 950 357 287 125 1,124 516 1,088 441 440 2,686 1,329 2,686 1,041 1,218

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2019 Westpac Group Annual Report 55 Directors’ report 0 1,000 2,000 3,000 4,000 5,000 2019 Total Remuneration Realised: 1,195 Foregone (max): 703 2019 2018 75 1 Realised: 1,994 Foregone (max): 2,275 2019 2018 Realised: 1,700 Foregone (max): 2,165 2019 2018 Realised: 2,266 Foregone (max): 547 2019 Realised: 1,682 Foregone (max): 1,082 2019 2018 35 Realised: 537 Foregone (max): 165 2019 Former Group Executives Realised: 1,168 Foregone (max): 3,127 2019 2 2018 Realised: 761 Foregone (max): 2,156 2019 3 2018 Realised: 1,278 Foregone (max): 3,006 2019 2018 4 3.4. Other payments made and equity vested during 2019 Craig Bright had 39,827 restricted shares granted under the Restricted Share Plan which vested in August 2019. David Stephen had 15,727 restricted shares granted under the Restricted Share Plan which vested in March 2019. The restricted shares were allocated in respect of equity forfeited from their previous employers on joining Westpac. In addition, Craig Bright received a one-off cash payment of $1,050,000 in lieu of variable reward forfeited from his previous employer on joining Westpac. George Frazis2 Chief Executive, Consumer Bank Dave Curran2 Chief Information Ofcer Brad Cooper2 Chief Executive Offcer, BT Financial Group Alastair Welsh2 Acting Chief Executive, Business Gary Thursby Chief Operating Ofcer David Stephen Chief Risk Ofcer Christine Parker Group Executive, Human Resources David McLean Chief Executive Officer, Westpac New Zealand Carolyn McCann Group Executive, Customer & Corporate Relations 553 615 1,103 400 666 190 571 1,054 485 445 577 701 1,150 480 735 740 195 260 213 202 1,029 427 538 901 498 370 884 315 501 884 428 422 1,800 466 900 315 467 840 396 369 1 402

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56 2019 Westpac Group Annual Report Directors’ report 3.5. 2019 CEO and Group Executive short term variable reward outcomes 2019 CEO short term variable reward scorecard The graphic below illustrates the CEO’s 2019 scorecard outcomes reflecting Group and individual performance. Target Maximum Outcome 21% of target Customer outcomes (20%) Primary measures of performance include net promoter scores (NPS) and complaints handling. • Improved service quality for our customers resulting in solid customer growth and an improvement in NPS. The Business division achieved its target to maintain the Number 1 ranking on both Customer Satisfaction and NPS having widened the gap to Number 2. The Consumer division narrowed the gap to Number 1 on NPS and maintained the Number 2 ranking for the majority of the year. • Improved how we manage complaints across the Group, through rollout of Group-wide Complaints Management Framework, refreshed training, simplified internal processes, detailed root cause analysis and dedicated support for vulnerable customers. This resulted in a 46% reduction in the average time taken to resolve issues for customers (which exceeded the 10% target) and the closure of over 1,100 long dated complaints. 0% 100% 150% 99% of target Weighted outcome: 20% of target (13% of maximum) Risk management (15%) Financial risk management: Performance measurement is based on operating performance relative to Westpac’s Risk Appetite Statement as measured by Capital, Funding and Liquidity Management and Credit Quality. •Our common equity tier 1 ratio was 10.67%, Net Stable Funding Ratio was 112% and the Liquidity Coverage Ratio was 127%. • Maintained sound credit quality across the portfolio, with ratio of stressed assets to total committed exposures at 1.20%. Non-financial risk management: Performance measurement is based on operating performance relative to Westpac’s Risk Appetite Statement, improvements to the control environment and audit and compliance issue resolution. • Increased investment to improve non-financial risk management capability over the year including through targeted hiring in critical roles. • Notwithstanding this improvement, progress in resolving risk and compliance matters fell short of our expectations. • Ongoing significant focus on resolving and remediating compliance, regulatory and customer issues, including enhancing risk management of sales practices, product design and maintenance and financial crime systems and processes. Financial 0% 100% 150% 87% of target Non-financial 0% 100% 150% 0% of target Weighted outcome (combined): 7% of target (4% of maximum) Group financial performance (40%) Primary measures of performance include cash earnings and cash ROE against plan, having regard to cost and margin outcomes. •Cash earnings were $6,849 million, down $1,216 million (or 15%) compared to 2018 and 81% of the target of $8,411 million, resulting in a zero outcome for the cash earnings score. Group financial performance was negatively impacted by increased lending and deposit competition, economy wide slowing of credit growth and higher regulatory and compliance costs. •Cash earnings were also impacted by provisions for estimated customer refunds, payments, associated costs, and litigation, as well as costs associated with the restructuring of the Wealth business. Excluding the impact of these items, Westpac’s cash earnings were $7,979 million, down $367 million (or 4%) compared to 2018. • Impairment charges were slightly lower as asset quality remained sound. Excluding the items outlined above, expenses were a little lower, down $16m on 2018, and margin compression was limited to 4bps with the Group margin (excluding Treasury & Markets) of 2.08%, resulting in a positive outcome for this focus area of the scorecard. • Delivered cash ROE of 10.75%, which is down from 13.00% in 2018 and lower than the 13.15% target, resulting in a zero outcome for the cash ROE score. 0% 100% 150% [Non-financial] Weighted outcome: 8% of target (6% of maximum)

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2019 Westpac Group Annual Report 57 Directors’ report Customer service transformation (15%) Primary measures of performance include delivery of strategic initiatives. 0% 100% 150% • Delivered customer benefits and improved strategic capability through progress in relation to Service Revolution Transformation milestones, including the Customer Service Hub and Panorama. Significant investment in technology simplification and foundational platforms improving stability, functionality and efficiency of the technology environment. Number of digitally active consumers up 4% and an increase in digital sales in the Consumer and Business divisions. Achieved the target structural productivity of $405 million, a 33% uplift from 2018 and a net ~5% reduction in FTE over the year. Execution of the ‘Wealth Reset’ (including the exit of advice business), helping to deliver a better and more integrated experience for customers and reducing structural costs. 100% of target 1 • • • • Weighted outcome: 15% of target (10% of maximum) 2 2019 Group Executive short term variable reward outcomes The focus areas of the CEO scorecard are cascaded to Group Executives in combination with other relevant divisional or functional measures. 2019 STVR outcomes for Group Executives ranged from 0% to 83% of the target opportunity (or 0% to 55% of the maximum opportunity). The average 2019 STVR outcome for Group Executives was 56% of the target opportunity (or 37% of the maximum opportunity), down from 87% in 2018. The average 2019 STVR outcome for functional Group Executives was 70% of the target opportunity. The average 2019 STVR outcome for Australia based Group Executives leading major divisions (including Consumer, Business, Westpac Institutional Bank and the former BT Financial Group) was 30% of the target opportunity. The variability in outcomes reflects the lower weighting of financial and customer measures in scorecards for functional Group Executives in line with the nature of their roles and responsibilities. In addition, individual and divisional performance impacted STVR outcomes, as well as the application of downward remuneration adjustments for material risk and compliance matters. The 2019 STVR outcomes for the CEO and Group Executives are detailed in the following section. 3 4 Modifier and final outcome The 2019 STVR outcome for the CEO was zero. (x ) –= The CEO recommended to the Board that he forego his STVR for this year. Notwithstanding the scorecard outcome of 60% of target, the Board separately considered the matter and determined that a zero STVR outcome for 2019 for the CEO was appropriate to reflect accountability for poor non-financial risk and financial outcomes, as well as some poor customer outcomes, including those highlighted at the Royal Commission. Scorecard modifier reduction Final outcome Zero Scorecard focus areas outcome 60% of target (40% of maximum) Target STVR opportunity $2,686,000 Culture and capability (10%) Performance is measured based on delivery of key people initiatives that further drive the organisation’s change agenda. • Delivered key milestones as part of our people strategy within budget and on schedule, including human capital management systems and the efficiency of the organisation’s structure, for example, reducing layers between decision makers and customers. • Strengthened succession planning across our talent base following the structural shifts made in the first half of the year. • Implemented a number of recommendations stemming from the Royal Commission and our Culture, Governance and Accountability report. • Employee engagement has remained stable in a challenging industry environment. Monthly spot engagement numbers have increased during the year in line with the delivery of our strategy and remediation activity. 0% 100% 150% 102% of target Weighted outcome: 10% of target (7% of maximum)

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58 2019 Westpac Group Annual Report Directors’ report 3.6. Variable reward awarded in 2019 (unaudited) The table below shows the variable reward awarded to the CEO and Group Executives in 2019, including: •STVR outcomes for 20191 (including the cash and deferred equity components2); and • equity granted under the 2019 LTVR plan3. The final value of equity received by the CEO and Group Executives will depend on the share price at the time of vesting and the number of restricted shares or share rights that vest, subject to performance hurdles (where applicable), continued service and adjustment. The value of equity differs from the disclosure in section 7 which provides the annualised accounting value for unvested equity awards prepared in accordance with the AAS. 1. 2. The target STVR opportunity and STVR award have been apportioned for part year KMP to reflect their time as KMP. The deferred STVR (granted as restricted shares or unhurdled share rights) is 50% of the total STVR award for the year. The number of restricted shares granted is determined by reference to the five day VWAP up to and including the day before the grant date. This is adjusted for non-payment of dividends over the vesting period for unhurdled share rights. The five day VWAP for the 2018 award was $24.86. The fair value of the performance share rights is shown as at the commencement of the performance period and is determined by an independent valuer using a Monte Carlo simulation pricing model, taking into consideration the life of the awards, the performance hurdles and likelihood of vesting, non-payment of dividends prior to vesting and appropriate discount rates. The Board Remuneration Committee caps the valuation at a maximum discount of 60% of the share price. The fair value of the 2019 award was capped at $11.12. The face value of the performance share rights is calculated by multiplying the number of performance share rights granted during the year by the five day VWAP up to and including the grant date. For the 2019 awards, the five day VWAP was $24.71 except for Craig Bright and David Stephen where the five day VWAP was $26.81 and $27.64 respectively. The information relates to the period the individual was a KMP. Refer to section 1 for further details. Dave Curran was not eligible to receive a 2019 STVR or 2019 LTVR award. 3. 4. 5. 6. 2019 STVR award 2019 LTVR award STVR Target Maximum STVR award Maximum STVR STVR award (as % (as % of STVR STVR Name opportunity opportunityof target) maximum)outcome2foregone Fair value3 Face value4 Managing Director & Chief Executive Officer Brian Hartzer2,686,000 4,029,0000% 0% 04,029,000 2,528,000 5,616,534 Current Group Executives Craig Bright5 Chief Information Officer 918,0001,377,00083% 55% 762,000 615,000 Lyn Cobley Chief Executive, Westpac Institutional Bank 1,122,0001,683,000 60% 40% 677,0001,006,000 Peter King Chief Financial Officer 1,088,0001,632,00060% 40% 653,000 979,000 Rebecca Lim Group Executive, Legal & Secretariat750,0001,125,00070% 47% 525,000 600,000 David Lindberg Chief Executive, Consumer 1,124,0001,686,000 22%15%250,0001,436,000 Carolyn McCann Group Executive, Customer & Corporate Relations555,000 832,500 70% 47% 389,000443,500 David McLean Chief Executive Officer, Westpac New Zealand 1,028,9001,543,350 83% 55% 853,949 689,401 Christine Parker Group Executive, Human Resources 900,0001,350,00070% 47% 630,000720,000 David Stephen Chief Risk Officer 1,350,0002,025,000 69% 46% 932,000 1,093,000 Gary Thursby Chief Operating Officer 900,0001,350,00070% 47% 630,000720,000 Alastair Welsh5 Acting Chief Executive, Business 400,000600,00068% 45% 270,000 330,000 864,000 2,082,651 1,056,0002,346,148 1,024,0002,275,045 700,0001,555,172 1,052,0002,344,576 555,000 1,233,059 941,090 2,090,840 816,000 1,812,901 1,012,5002,516,258 850,0001,888,451 - - Former Group Executives Brad Cooper5 Chief Executive Officer, BT Financial Group 800,0001,200,0000% 0% 01,200,000 Dave Curran5,6 Chief Information Officer - - - - - - George Frazis5 Chief Executive, Consumer Bank 800,0001,200,0000% 0% 01,200,000 1,050,0002,332,807 - - 1,000,0002,221,730 Average Group Executive STVR award (%) 56% 37%

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2019 Westpac Group Annual Report 59 Directors’ report 4. Further detail on the executive variable reward structure This section provides further details of the 2019 STVR and LTVR plans and changes for 2020. 4.1. Short term variable reward The table below sets out the key design features of the 2019 STVR plan and changes for the 2020 STVR plan. Short term variable reward plan 50% of STVR is awarded in cash and 50% is deferred into equity in the form of restricted shares (or unhurdled share rights for the Group Executive based outside Australia). One unhurdled share right entitles the holder to one ordinary share at the time of vesting with no exercise cost. One restricted share provides the holder with one ordinary share at no cost subject to trading restrictions until the time of vesting. Dividends are paid on restricted shares from the grant date. Plan structure 1 Target and maximum opportunity The target opportunity for the CEO and Group Executives is expressed as a percentage of fixed remuneration. The target opportunity is set by the Board following recommendation from the Board Remuneration Committee which considers a range of factors including market competitiveness and the nature of the role. Remuneration at-risk Westpac’s STVR is designed to award the target opportunity on delivery of agreed plan targets for financial and non-financial measures that support Westpac’s strategic priorities. It is possible for the outcome to fall below the target amount depending on performance relative to targets agreed at the beginning of the year. Reward for exceptional performance There is the possibility to award up to a maximum of 150% of the STVR target in circumstances where exceptional outcomes are achieved that are also in line with the Group’s risk appetite and where an individual has acted in a manner that exemplifies the encouraged behaviours. Performance measures STVR awards are determined based on performance against a balanced scorecard which is designed to align with shareholder interests by setting challenging measures and seeks to ensure that our customers’ and employees’ needs are met and appropriate risk settings are maintained. The scorecard is split into two sections: •Focus areas: Performance is assessed against a balance of financial and non-financial metrics that are imperative to supporting the effective execution of Westpac’s strategy; and •Modifier: The Board and Board Remuneration Committee recognise that performance metrics may not always appropriately reflect overall performance of the Group. The modifier supports adjustment of the outcome, upwards or downwards (including to zero), for behaviour, risk and reputation matters, people management matters, and any other matters that the Board feels are not fully reflected in the focus areas. Further information on focus areas and application of the modifier for the 2019 scorecard is provided in section 3. Deferred STVR awards recognise past performance and are subject to continued service and adjustment. 2 Deferral period 50% of STVR is deferred into equity for a period of up to two years, which aligns executive remuneration with shareholder interests and acts as a retention mechanism. The deferral period also allows the Board to apply discretion to reduce deferred components where necessary. Deferred STVR vests in equal portions one and two years after the grant date, subject to continued service and adjustment. Delayed vesting The Board also has discretion (subject to law) to delay vesting of equity-based awards if the individual is under investigation for misconduct, the subject of or implicated in legal or regulatory proceedings, if the Board is considering an adjustment or if otherwise required by law. 3 Remuneration adjustments for prior period matters The Board has discretion to adjust current year STVR. The Board may also adjust unvested deferred STVR downwards, including to zero, if circumstances or information come to light which mean that in the Board’s view all or part of the award was not appropriate. The Board will typically apply the adjustment to unvested STVR where an adjustment to current year STVR is considered insufficient or unavailable. Changes for 2020 Clawback will apply, to the extent legally permissible and practicable, to deferred STVR awarded in respect of performance periods commencing on or after 1 October 2019 for up to seven years from the date of grant. Clawback may occur in circumstances of serious or gross misconduct, fraud, bribery, severe reputational damage, and any other deliberate, reckless or unlawful conduct that may have a serious adverse impact on Westpac, its customers or its people which has resulted in dismissal or the Board considers at its discretion would have justified the dismissal of the relevant executive or where otherwise required by law. It is the Board’s current intention that clawback will only be considered for relevant conduct that occurred on or after 1 October 2019. 4 Target STVR (100% of fixed remuneration for the CEO and between 75% and 145% of fixed remuneration for Group Executives Maximum STVR (150% of target STVR) 0% 100% 150%

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60 2019 Westpac Group Annual Report Directors’ report 4.2. Long Term Variable Reward The table below sets out the key design features of the 2019 LTVR Plan awarded in December 2018 and changes for the 2020 LTVR plan. Long term variable reward plan LTVR is awarded in performance share rights which vest after four years subject to the achievement of performance hurdles, continued service and adjustment. One performance share right entitles the holder to one ordinary share at the time of vesting with no exercise cost. Dividends are not accumulated on performance share rights. Plan structure Award opportunity The value of LTVR awarded to the CEO and Group Executives is expressed as a percentage of fixed remuneration. The value of LTVR is set by the Board following recommendation from the Board Remuneration Committee which considers a range of factors including market competitiveness and the nature of the role. The face value of the LTVR opportunity for the CEO for 2019 is 235% of fixed remuneration, and the face value of LTVR opportunities for the Group Executives (excluding acting Group Executives) range between 185% and 240% of fixed remuneration. Refer below for changes to apply for the 2020 LTVR award. Allocation methodology In 2019 and prior years, the number of performance share rights each executive received was determined by dividing the dollar value of the LTVR award by the fair value of the share right at the beginning of the performance period. This is valued by an independent valuer using a Monte Carlo simulation pricing model, taking into consideration the life of the awards, the performance hurdles and likelihood of vesting, non-payment of dividends prior to vesting and appropriate discount rates. The Board Remuneration Committee caps the valuation at a maximum discount of 60% of the share price. The value of a relative TSR hurdled performance share right may be different to the value of a cash ROE hurdled performance share right. Refer below for changes to apply for the 2020 LTVR award. Performance hurdles LTVR performance hurdles represent a balance of internal and external measures that aims to achieve long-term growth in shareholders’ value and support alignment between executive reward and shareholder interests. Relative Total Shareholder Return 50% of the award Relative TSR hurdled performance share rights only vest where Westpac’s TSR exceeds that of key competitors. Relative TSR is a measure of the total return delivered to shareholders over the performance period assuming dividends are reinvested, relative to peers. The performance hurdle measures Westpac’s TSR performance over a four year period against a composite index. The composite index is comprised of a group of 10 peers with more weight placed on the three other major Australian banks. At the end of the performance period, TSR performance of each index company is multiplied by its index weighting, and the total of the 10 scores determines the composite TSR index. 50% will vest if Westpac’s TSR performance equals the composite TSR index. For 100% to vest, Westpac’s TSR outcome must exceed the index by 21.55 (i.e. 5% compound annual growth over the four year performance period) as illustrated below. Cash return on equity 50% of the award The performance hurdle measures the average cash return on average ordinary equity over a three year performance period (with an additional one year holding lock). The performance hurdle aims to reward the achievement of returns above Westpac’s cost of capital while generating shareholder value and improving how efficiently the Group uses capital resources within its risk appetite. The performance period for cash ROE differs to the TSR performance period because TSR is an external measure that can be calculated on an ongoing basis whereas cash ROE is an internal measure where the hurdle reflects the time horizon of our financial forecasting. The graph below shows the performance levels required for the cash ROE performance share rights to vest. Cash return on equity vesting Relative Total Shareholder Return vesting 100 100 75 75 50 50 25 25 13% 14% Index exceeded by 21.55 Relative TSR performance Index Cash ROE performance The companies in the 2019 composite TSR index and their relative weightings are: ANZ Banking Group Commonwealth Bank National Australia Bank AMP Bank of Queensland 16.67% 16.67% 16.67% 7.14% 7.14% Bendigo and Adelaide Bank Challenger Macquarie Group Perpetual Suncorp Group 7.14% 7.14% 7.14% 7.14% 7.14% Refer below for changes to apply for the 2020 LTVR award. % of allocation vesting % of allocation

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2019 Westpac Group Annual Report 61 Directors’ report Long term variable reward plan Assessment of performance outcomes Relative Total Shareholder Return The relative TSR result is calculated independently to ensure objectivity and external validation before being provided to the Board to determine the vesting outcome. The Board may exercise discretion in determining the final vesting outcome, for example where relative TSR performance hurdles have been met but the absolute TSR outcome is negative. Performance share rights subject to relative TSR performance will be tested against the performance hurdle on 30 September 2022. Cash return on equity The cash ROE outcome is determined by the Board based on cash ROE disclosed in the Group’s results over the performance period. The Board may exercise discretion in determining the final vesting outcome. Performance share rights subject to cash ROE performance will be tested against the performance hurdle on 30 September 2021 and will be subject to an additional one year holding lock through to 30 September 2022. 1 No re-testing There is no re-testing. Awards that have not vested after the measurement period lapse immediately. Unvested awards may vest before a test date if the executive is no longer employed by the Group due to death or disability (subject to law). In these cases, vesting is generally not subject to the performance hurdles being met. Early vesting The Board also has discretion (subject to law) to delay vesting of equity-based awards if the individual is under investigation for misconduct, the subject of or implicated in legal or regulatory proceedings, if the Board is considering an adjustment or if otherwise required by law. Delayed vesting The Board has the discretion to determine the treatment of unvested performance share rights where the CEO or a Group Executive resigns, retires or otherwise leaves the Group before vesting occurs. The Board may choose to accelerate the vesting of performance share rights or leave the awards on foot for the remainder of the performance period. In exercising its discretion, the Board will consider relevant circumstances including those relating to the departure. The Board also has the ability to adjust the number of performance share rights downwards (including to zero) in the event of misconduct resulting in significant financial and/or reputational impact to the Group and in other circumstances considered appropriate. Where an executive acts fraudulently or dishonestly, or is in material breach of their obligations under the relevant equity plan, unexercised performance share rights (whether vested or unvested) will be forfeited unless the Board determines otherwise. Treatment of awards on cessation of employment Remuneration adjustments for prior period matters The Board has discretion to adjust LTVR which is awarded on a prospective basis. The Board may also adjust unvested LTVR downwards, including to zero, if circumstances or information come to light which mean that in the Board’s view all or part of the award was not appropriate. The Board will typically apply the adjustment to unvested LTVR where an adjustment to current and deferred STVR is considered insufficient or unavailable. Changes for 2020 Allocation methodology: From the 2020 LTVR plan onwards, the number of performance share rights each executive receives will be determined by dividing the dollar value of the LTVR award by the face value of performance share rights. The face value is the five day VWAP up to the commencement of the performance period (which is 1 October 2019 for the 2020 LTVR grant). Award opportunity: The Board reduced the face value of 2020 LTVR opportunities by 43% for the CEO and 23% to 25% for Group Executives (excluding acting Group Executives). When setting LTVR opportunities for the CEO and Group Executives, the Board took into account that no dividends are payable on LTVR performance share rights, the minimum variable remuneration deferrals required by Banking Executive Accountability Regime (BEAR) and the overall market positioning of the executives’ remuneration (including adjusting from a fair value to face value allocation methodology). The face value of the 2020 LTVR opportunity for the CEO is 133% of fixed remuneration, and the 2020 LTVR opportunities for Group Executives (excluding acting Group Executives) range between 140% and 180% of fixed remuneration. The Board intends the same percentages of fixed remuneration to apply to the determination of LTVR grants at face value in future years, subject to market benchmarking and any changes that may flow from the release of APRA’s final regulatory framework for remuneration. Performance hurdle: Relative TSR has been selected as the performance hurdle for the 2020 LTVR plan as the Board believes this measure best aligns executive remuneration outcomes with long-term shareholder value creation. The Board considers that setting an absolute cash ROE range over a three year period has become increasingly difficult in light of current uncertainties surrounding future regulatory capital requirements and interest rates, which are at historically low levels. The Board will review the 2021 LTVR plan following the release of APRA’s final regulatory framework for remuneration. Clawback: Clawback will apply, to the extent legally permissible and practicable, to LTVR awarded in respect of performance periods commencing on or after 1 October 2019 for up to seven years from the date of grant. Clawback may occur in circumstances of serious or gross misconduct, fraud, bribery, severe reputational damage, and any other deliberate, reckless or unlawful conduct that may have a serious adverse impact on Westpac, its customers or its people which has resulted in dismissal or the Board considers at its discretion would have justified the dismissal of the relevant executive or where otherwise required by law. It is the Board’s current intention that clawback will only be considered for relevant conduct that occurred on or after 1 October 2019. 2 3 The table below details other LTVR awards currently on foot. Vesting date Performance hurdles Further detail 2017 LTVR award 30 September 2020 • Relative TSR performance against a weighted composite index Refer to the 2017 of comparator companies (50%) Average cash ROE performance (50%) Annual Report 4 • • 2018 LTVR award 30 September 2021 Relative TSR performance against a weighted composite index Refer to the 2018 of comparator companies (50%) Average cash ROE performance (50%) Annual Report •

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62 2019 Westpac Group Annual Report Directors’ report 5. Remuneration governance 5.1. Remuneration policy and governance oversight Westpac’s remuneration policy sets out the mandatory requirements to be reflected in the design and management of remuneration arrangements across Westpac. The policy supports Westpac’s vision by requiring the design and management of remuneration to align with stakeholder interests, support long-term financial soundness and encourage prudent risk management. The policy is supported by an established governance structure, plans and frameworks, that are designed to support remuneration decision-making across the Group. as appropriate. Board The Board provides strategic guidance for the Group and has oversight of management. The Board has overall accountability for reviewing and approving executive remuneration as well as Non-executive Director Board and Committee fees (subject to the Board fee pool approved by shareholders). Without limiting its role, the Board approves (following recommendation from the Board Remuneration Committee) performance targets for the CEO, the size of variable reward pools, remuneration (including variable reward targets and performance outcomes) for the CEO, Group Executives, any other accountable persons under the BEAR, other persons whose activities in the Board’s opinion affect the financial soundness of the Group, any other person specified by APRA and any other person the Board determines. The Board has the discretion to defer, adjust or withdraw aggregate and individual variable reward. Further detail is contained in the Board and Committee Charters which are available on Westpac’s website. Board Remuneration Committee The Board Remuneration Committee assists the Board to fulfil its remuneration responsibilities to shareholders by monitoring the remuneration policies and practices of the Group and their effectiveness, external remuneration practices, market expectations and regulatory requirements in Australia and globally. The Board Remuneration Committee reviews and makes recommendations to the Board in relation to the individual remuneration levels of individuals outlined above, STVR and LTVR plans and outcomes for the Group Executives and any other Accountable Persons under the BEAR as well as performance goals and objectives relevant to the remuneration of the CEO and any and all equity based plans. In carrying out its duties, the Board Remuneration Committee accesses risk and financial control personnel and engages external advisers who are independent of management. Members of the Board Remuneration Committee are independent Non-executive Directors. Further detail is contained in the Board Remuneration Committee Charter which is available on Westpac’s website. Interaction with other Board Committees Management remuneration oversight committees The Chairman of the Board Risk & Compliance Committee is also a member of the Board Remuneration Committee. Members of the Board Remuneration Committee are all members of the Board Risk & Compliance Committee. The cross membership of both Committees supports alignment between risk and reward. The Board Remuneration Committee seeks feedback from and considers matters raised by the Board Risk & Compliance Committee and Board Audit Committee with respect to remuneration outcomes, adjustments to remuneration in light of relevant matters and alignment of remuneration with the risk management framework. Divisional remuneration oversight committees consider areas of risk within the divisions and consider potential implications for remuneration. These committees report to the Group Remuneration Oversight Committee which in turn considers consistency of remuneration across the Group and provides information to the Board Remuneration Committee and Board for review and decision-making During the financial year, remuneration governance arrangements were reviewed and changes were made to the Terms of Reference for the Group Remuneration Oversight Committee. This included an added responsibility for the Group Remuneration Oversight Committee to review the design and implementation of remuneration systems for front line staff, annually, in line with Recommendation 5.4 from the Royal Commission. Remuneration consultants In 2019, the Board retained Guerdon Associates as its independent consultant to provide specialist information on executive remuneration and other remuneration matters. The services were provided directly to the Board Remuneration Committee independent of management. The Chairman of the Board Remuneration Committee oversees the engagement and associated costs. Work undertaken by Guerdon Associates during 2019 included the provision of information relating to the benchmarking of Non-executive Director, CEO and Group Executive remuneration. In 2019, no remuneration recommendations, as prescribed under the Corporations Act, were made by Guerdon Associates.

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2019 Westpac Group Annual Report 63 Directors’ report 5.2. Executive minimum shareholding requirements and current compliance The CEO and Group Executives are required to build and maintain a significant Westpac shareholding within five years of their appointment to strengthen alignment with shareholder interests. At 30 September 2019, the CEO and all Group Executives comply with the requirement. The table below sets out the minimum shareholding requirement for the CEO and Group Executives. Minimum shareholding requirement Five times annual fixed remuneration excluding superannuation, equivalent to $12.26 million Equivalent to $1.2 million Chief Executive Officer Group Executives 1 The multiple for the CEO’s shareholding requirement is higher than that of his peers and reflects Westpac’s approach to calculating the minimum shareholding requirement. Since 2006, the following has been included for the purpose of calculating the minimum shareholding requirement: • • • shares held outright in the individual’s name either solely or jointly with another person; shares held in an employee share plan (including deferred STVR); and 50% of any unvested performance share rights (including LTVR). The assessment approach has included shares held in a family trust or self-managed super fund since 2012. The minimum shareholding requirement will be reviewed in 2020 following the release of APRA’s final regulatory framework for remuneration. 5.3. Hedging policy Participants in Westpac’s equity plans are forbidden from entering, either directly or indirectly, into hedging arrangements for unvested awards in the STVR and LTVR plans. No financial products may be used to mitigate the risk associated with these awards. Any attempt to hedge awards will result in forfeiture and the Board may consider other disciplinary action. These restrictions satisfy the requirements of the Corporations Act which prohibits hedging of unvested awards. 5.4. Employment agreements The remuneration and other terms of employment for the CEO and Group Executives are formalised in their employment agreements. Each agreement provides for the payment of fixed and variable reward, employer superannuation contributions and other benefits such as death and disablement insurance cover. The table below details the key terms including termination provisions of the employment agreements for the CEO and Group Executives in 2019. Term Who Conditions Duration of agreement CEO and Group Executives • Ongoing until notice given by either party Notice (by the executive or the Group) to terminate employment CEO and Group Executives • 12 months1 Termination payments on termination without cause2 CEO and Group Executives • Deferred STVR and LTVR awards vest according to the applicable equity plan rules Termination for cause CEO and Group Executives (excluding Brad Cooper) • • Immediately for misconduct 3 months’ notice for poor performance 2 Brad Cooper3 • • Immediately for misconduct Contractual notice period for poor performance Post-employment restraints CEO and Group Executives • 12 month non-solicitation restraint 3 4 1. 2. Payment in lieu of notice may in certain circumstances be approved by the Board for some or all of the notice period. The maximum liability for termination benefits for the CEO and Group Executives at 30 September 2019 was $16.0 million (2018: $14.1 million). Brad Cooper ceased in his KMP role as the Chief Executive Officer, BT Financial Group on 1 April 2019. 3.

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64 2019 Westpac Group Annual Report Directors’ report 6. Non-executive Director remuneration 6.1. Structure and policy Westpac’s Non-executive Director remuneration strategy is designed to attract and retain experienced, qualified Board members and provide appropriate remuneration for their time and expertise. Non-executive Director fees are not related to Westpac’s results. All fees are paid in cash and no discretionary payments are made for performance. Non-executive Directors are required to build and maintain a minimum shareholding to align their interests with those of shareholders (refer to section 6.4 for further details). The table below sets out the components of Non-executive Director remuneration. Non-executive Director remuneration Base fee Relates to service on the Westpac Banking Corporation Board. The base fee for the Chairman covers all responsibilities, including for Board Committees. Committee fees Additional fees are paid to Non-executive Directors (other than the Board Chairman) for chairing or participating in Board Committees other than the Board Nominations Committee. Employer superannuation contributions Reflects statutory superannuation contributions which are capped at the superannuation maximum contributions base as prescribed under the Superannuation Guarantee legislation. Subsidiary Board and Advisory Board fees Relates to service on Subsidiary Boards and Advisory Boards and are paid by the relevant subsidiary. 6.2. Non-executive Director remuneration in 2019 The base fees payable to the Chairman and other Non-executive Directors were reduced by 20% for 2019 as a one-off measure. The reduction was applied to all current Non-executive Directors in recognition of the collective accountability as the Board of Westpac for customer outcomes highlighted by the Royal Commission, shareholder sentiment leading to the first strike at the 2018 Annual General Meeting and significant non-financial risk matters. In addition, the Board Risk & Compliance Committee Chairman fee was increased from $70,400 to $90,000 effective 1 October 2018 to reflect the significant increase in the workload of the Committee Chairman. The table below sets out the annual Board and standing Committee fees and the changes for 2019. The Non-executive Director fee pool of $4.5 million per annum was approved by shareholders at the 2008 Annual General Meeting. For 2019, $3.11 million (69%) of the fee pool was used. The fee pool includes employer superannuation contributions. Annual fee $ Base and Committee fees Changes for 2019 Chairman 810,000 One-off reduction of $162,000 to $648,000 One-off reduction of $45,000 to $180,000 Other Non-executive Directors 225,000 Committee Chairman fees Board Audit Committee Board Risk & Compliance Committee 70,400 90,000 No change Fee increase to $90,000 (from $70,400) effective 1 October 2018 No change No change Board Remuneration Committee Board Technology Committee Committee membership fees 63,800 35,200 Board Audit Committee Board Risk & Compliance Committee Board Remuneration Committee Board Technology Committee 32,000 32,000 29,000 20,000 No change No change No change No change Subsidiary Board and Advisory Board fees During the reporting period, additional fees of $7,241 were paid to Peter Hawkins as a member of the Westpac Group Victoria Advisory Board (formerly Bank of Melbourne Advisory Board) (during the period in which he was a KMP) and additional fees of $83,146 were paid to Anita Fung as a member of the Westpac Asia Advisory Board.

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2019 Westpac Group Annual Report 65 Directors’ report 6.3. Changes to Board and Committee composition The table below outlines the changes that were made to the Board and Committee composition during the year ended 30 September 2019. Name of Non-executive Director Change in position Effective date Anita Fung • • • Appointed Non-executive Director Appointed member of the Board Risk & Compliance Committee Retired from the Board 1 October 2018 Peter Hawkins 12 December 2018 following the completion of the 2018 Annual General Meeting 1 January 2019 1 March 2019 1 Ewen Crouch Steven Harker • • • • • Appointed member of the Board Audit Committee Appointed Non-executive Director Appointed member of the Board Risk & Compliance Committee Appointed Non-executive Director Appointed member of the Board Risk & Compliance Committee Margaret Seale 1 March 2019 6.4. Non-executive Director minimum shareholding requirement Non-executive Directors are required to build and maintain a holding in Westpac ordinary shares to align their interests with those of shareholders. Each Non-executive Director is required to hold an interest in shares in Westpac with a market value not less than the Board base fee, within five years of appointment to the Board. At 30 September 2019, all Non-executive Directors comply with the requirement. 2 3 4

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66 2019 Westpac Group Annual Report Directors’ report 7. Statutory remuneration details 7.1. Details of Non-executive Director remuneration The table below details Non-executive Director remuneration. Post-employment benefits Short-term benefits Westpac Banking Corporation Board fees1 $ Subsidiary and Advisory Board fees $ Non-monetary benefits3 $ Superannuation $ Total $ Name Current Non-executive Directors Lindsay Maxsted, Chairman 2018 Nerida Caesar 810,000 - - 20,181 830,181 2018 Ewen Crouch 277,000 - - 20,181 297,181 2018 Alison Deans 324,400 - - 20,181 344,581 2018 Craig Dunn 312,965 - - 20,181 333,146 2018 Anita Fung 320,800 - - 20,181 340,981 2018 Steven Harker2 ----------------------------------Not a KMP in 2018----------------------------------2018 Peter Marriott ----------------------------------Not a KMP in 2018----------------------------------2018 Peter Nash 347,400 - - 20,181 367,581 2018 Margaret Seale2 164,690 - - 11,744 176,434 2018 ----------------------------------Not a KMP in 2018----------------------------------Former Non-executive Director Peter Hawkins2 2018 311,832 35,000 - 20,103 366,935 Total fees 2018 2,869,088 35,000 - 152,931 3,057,020 1. 2. 3. Includes fees paid to the Chairman and members of Board Committees. The information relates to the period the individual was a KMP. Refer to section 1 for further details. Non-monetary benefits are determined on the basis of the cost to the Group (including associated fringe benefits tax (FBT), where applicable) and include provision of taxation advice. 2019 2,825,109 90,387 6,300193,456 3,115,252 2019 64,375 7,241-4,248 75,864 2019 123,667-- 11,972 135,639 2019 244,000 - - 20,658 264,658 2019 302,400 - - 20,658 323,058 2019 123,667-- 11,972 135,639 2019 212,000 83,146 6,30020,658 322,104 2019 275,800 - - 20,658 296,458 2019 276,200 - - 20,658 296,858 2019 323,000 - - 20,658 343,658 2019 232,000 - - 20,658 252,658 2019 648,000 - - 20,658 668,658

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2019 Westpac Group Annual Report 67 Directors’ report 7.2. Remuneration details – Chief Executive Officer and Group Executives The table below sets out details of remuneration for the CEO and Group Executives calculated in accordance with the AAS. Post-employment benefits Other long-term benefits Short-term benefits Share-based payments Cash STVR award2 $ Non-monetary benefits3 $ Other short-term benefits4 $ Long service leave $ Fixed remuneration1 $ Superannuation benefits5 $ Restricted shares6 $ Share rights7,8 $ Total9 $ 1 Managing Director & Chief Executive Officer Brian Hartzer 2018 2,730,714 1,040,825 20,618 - 42,235 40,697 1,449,964 1,247,127 6,572,180 Current Group Executives Craig Bright, Chief Information Officer10,11 2018 -------------------------------------------------------Not a KMP in 2018 -------------------------------------------------------Lyn Cobley, Chief Executive, Westpac Institutional Bank 2018 1,085,585465,500 4,039 - 29,993 17,000 749,930 394,975 2,747,022 Peter King, Chief Financial Officer 2018 1,232,059 517,000 2,924 - 34,957 90,204 597,487 512,401 2,987,032 Rebecca Lim, Group Executive, Legal & Secretariat 2018 903,728 356,500 2,924 - 29,912 55,507 512,169 348,768 2,209,508 David Lindberg, Chief Executive, Consumer 2018 1,049,010 440,500 4,014 - 28,365 25,006 518,657 435,208 2,500,760 Carolyn McCann, Group Executive, Customer & Corporate Relations 2018 241,365 74,500 1,915 - 5,579 12,665 144,344 25,395 505,763 David McLean, Chief Executive Officer, Westpac New Zealand 2018 849,488 498,439 55,885 - 81,444 - - 785,206 2,270,462 Christine Parker, Group Executive, Human Resources 2018 865,802 427,500 2,924 - 26,848 (8,854) 500,697 399,535 2,214,452 David Stephen, Chief Risk Officer 2 2018 -------------------------------------------------------Not a KMP in 2018 -------------------------------------------------------Gary Thursby, Chief Operating Officer 2018 794,889 395,500 2,924 - 28,616 12,693 453,951 344,305 2,032,878 Alastair Welsh, Acting Chief Executive, Business10 2018 -------------------------------------------------------Not a KMP in 2018 -------------------------------------------------------3 Former Group Executives Brad Cooper, Chief Executive Officer, BT Financial Group10,12,14 2018 1,136,073 400,000 17,861 - 29,366 16,700 778,096 538,531 2,916,627 Dave Curran, Chief Information Officer10,14,15 2018 1,021,322485,000 2,924 - 28,806 20,703 531,367 480,835 2,570,957 4 George Frazis, Chief Executive, Consumer Bank10,13,14 2018 1,109,913 480,000 16,771 - 38,132 17,425 858,110 489,032 3,009,383 2019 557,789 - 28,279 522,509 15,989 (97,778)709,940 1,739,9233,476,651 2019 173,917 - 1,115 36,475 6,019(45,839) 140,129 1,309,0461,620,862 2019 1,553,160-27,860 - 95,640 14,402 608,215 1,826,9724,126,249 2019 369,151135,000438 - 11,8616,557 207,06613,321743,394 2019 881,655 315,000 3,123-29,605 23,294 423,765 306,672 1,983,114 2019 1,816,090466,000 263,844-25,90027,265 2,023,326 732,6115,355,036 2019 875,430 315,0003,123-27,420 (33,023) 456,373 384,005 2,028,328 2019 861,551426,975 1,194-87,710-- 907,580 2,285,010 2019 731,367194,500 4,828 - 21,57911,198445,723 186,563 1,595,758 2019 1,129,075125,000 6,592 - 30,434 23,822 470,092 475,368 2,260,383 2019 950,128262,5004,981-31,71814,390 422,793 260,1081,946,618 2019 1,222,006 326,5004,238 - 36,803 19,492549,189483,692 2,641,920 2019 1,108,830338,5004,948 - 30,61116,995 516,242 508,4372,524,563 2019 1,022,829381,000309,495 1,050,00023,81815,1372,075,911170,7975,048,987 2019 2,608,424 - 21,966-44,32040,660 1,169,5811,168,0405,052,991

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68 2019 Westpac Group Annual Report Directors’ report 1. Fixed remuneration is the total cost of salary, salary sacrificed benefits (including motor vehicles, parking and associated FBT) and an accrual for annual leave entitlements. 2019 STVR awards reflect annual cash performance awards accrued but not yet paid in respect of the year ended 30 September 2019. STVR awards are paid in December. Non-monetary benefits are determined on the basis of the cost to the Group (including associated FBT, where applicable) and include annual health checks, provision of taxation advice, bank funded car parking, relocation costs, living away from home expenses and allowances. In the 2018 and 2017 Remuneration Reports, non-monetary benefits were understated and 2018 values for two individuals have been amended in the table above. For 2017, a total of $27,694 was understated reflecting additional car parking benefits. Includes payments on cessation of employment or other contracted amounts. The CEO and Group Executives are provided with life insurance cover under the Westpac Group Plan at no cost. Superannuation benefits have been calculated consistent with AASB 119 Employee Benefits. The value of restricted shares is amortised over the applicable vesting period and the amount shown is the amortisation relating to 2019 (and 2018 for comparison). The restricted shares held by Craig Bright and David Stephen represent an allocation made in substitution for forgone unvested equity on joining the Westpac Group. The restricted shares replicate the vesting periods of the equity forgone. Equity-settled remuneration is based on the amortisation over the vesting period (normally one, two or four years) of the fair value at grant date of hurdled and unhurdled options and share rights that were granted during the four years ended 30 September 2019. Details of prior year grants are disclosed in previous Annual Reports. The 2019 value for David McLean includes 53% attributed to deferred STVR awards. The 2019 value for David Stephen includes an allocation of hurdled share rights made in substitution for unvested equity foregone on joining the Westpac Group, and is subject to Westpac’s 2018 LTVR performance hurdles and vesting criteria. The expensed value of the 2017 LTVR cash ROE hurdled performance share rights has been reduced to zero. The expensed value of the 2018 and 2019 LTVR cash ROE hurdled performance share rights have been reduced by 50%. This reflects the current assessment of the probability of vesting. The percentage of the total remuneration which is performance-related (i.e. cash STVR award plus share-based payments) was: Brian Hartzer 46%, Craig Bright 52%, Lyn Cobley 54%, Peter King 51%, Rebecca Lim 49%, David Lindberg 47%, Carolyn McCann 52%, David McLean 58%, Christine Parker 57%, David Stephen 60%, Gary Thursby 53%, Alastair Welsh 48%, Brad Cooper 59%, Dave Curran 89% and George Frazis 70%. The percentage of total remuneration delivered in the form of options (including share rights) was: Brian Hartzer 23%, Craig Bright 3%, Lyn Cobley 20%, Peter King 18%, Rebecca Lim 13%, David Lindberg 21%, Carolyn McCann 12%, David McLean 40%, Christine Parker 19%, David Stephen 14%, Gary Thursby 15%, Alastair Welsh 2%, Brad Cooper 44%, Dave Curran 81% and George Frazis 50%. The information relates to the period the individual was a KMP. Refer to section 1 for further details. Craig Bright received a one-off cash payment of $1,050,000 in lieu of variable reward forfeited from his previous employer on joining the Westpac Group. The information relates to Brad Cooper’s KMP role. This includes payments made or to be made during his 12 month notice period from 1 August 2019 to 31 July 2020, where Brad continues to receive fixed remuneration and superannuation. From 1 April 2019 to 31 July 2019, Brad acted as an advisor to the Group and received fixed remuneration of $371,730 (including superannuation), which has been excluded from the table on the basis that it did not relate to his KMP role. The information relates to George Frazis’ KMP role. From 1 April 2019 to 31 August 2019, George acted as an advisor to the Group and received fixed remuneration of $480,709 (including superannuation), which has been excluded from the table on the basis that it did not relate to his KMP role. The value of other short-term benefits relates to payments on cessation of employment, including 4 months’ pay in lieu of notice ($383,333) and annual leave and long service leave entitlements ($139,176). The share based payment values for Brad Cooper, Dave Curran and George Frazis reflect the accruals for all unvested equity up to the end of each performance period. For example, the 2019 LTVR will include the accrual for four years until the vesting date in lieu of a single year accrual value for 2018. While the full value is being accrued for all unvested equity, the awards may or may not vest subject to the relevant performance hurdles. Dave Curran was not eligible to receive a 2019 STVR or 2019 LTVR award. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

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2019 Westpac Group Annual Report 69 Directors’ report 7.3. Movement in equity-settled instruments during the year The table shows the movements in the number and value of equity instruments for the CEO and Group Executives under the relevant plan during 2019. Value forfeited or lapsed5 $ Value granted4 $ Value exercised5 $ Number granted1 Number vested2 Number exercised3 Name Type of equity-based instrument Managing Director & Chief Executive Officer Brian Hartzer CEO Performance share rights Performance share rights Shares under the CEO Restricted Share Plan 227,338 - - - - - 3,350,962 - - - 3,176,443 910,932 1 41,867 43,914 - 1,034,352 - - Current Group Executives Craig Bright6 Performance share rights Shares under Restricted Share Plan 77,696 132,151 - 39,827 - - 1,224,953 3,542,324 - - - - Lyn Cobley Performance share rights Shares under Restricted Share Plan 94,964 18,724 - 17,817 - - 1,399,769 462,589 - - - - Peter King Performance share rights Shares under Restricted Share Plan 92,086 20,796 - 18,234 - - 1,357,348 513,779 - - 1,749,043 - Rebecca Lim Performance share rights Shares under Restricted Share Plan 62,948 14,340 - 17,343 - - 927,854 354,279 - - 367,504 - David Lindberg Performance share rights Shares under Restricted Share Plan 94,602 17,719 - 15,875 - - 1,398,440 437,760 - - 784,008 - Carolyn McCann Performance share rights Shares under Restricted Share Plan 49,910 9,818 - 10,541 - - 735,673 242,560 - - 376,943 - David McLean Performance share rights Unhurdled share rights 84,630 22,059 - 13,351 - - 1,247,446 502,783 - - 948,126 - Christine Parker Performance share rights Shares under Restricted Share Plan 73,380 17,196 - 15,210 - - 1,081,621 424,838 - - 1,413,548 - David Stephen Performance share rights Shares under Restricted Share Plan 278,698 135,929 - 15,727 - - 4,461,892 3,644,447 - - - - Gary Thursby Performance share rights Shares under Restricted Share Plan 76,438 15,909 - 13,296 - - 1,126,696 393,042 - - 452,315 - Alastair Welsh6 Performance share rights Shares under Restricted Share Plan - 4,223 - - - - - 116,704 - - - - Former Group Executive Brad Cooper6 Performance share rights Shares under Restricted Share Plan 94,424 16,090 - 24,004 - - 1,391,810 397,514 - - 1,978,989 - Dave Curran6 Performance share rights Shares under Restricted Share Plan - - - 16,038 - - - - - - 1,688,745 - 2 George Frazis6 Performance share rights Shares under Restricted Share Plan 89,928 19,308 - 26,518 - - 1,325,539 477,017 - - 1,548,156 - 1. No performance options were granted in 2019. Deferred STVR awards in the form of restricted shares or unhurdled share rights (for David McLean based in New Zealand) are awarded in December. David McLean’s unhurdled share rights were granted on 19 December 2018 at a fair value of $23.37 (unhurdled share rights which vested on 1 October 2019) and $21.88 (unhurdled rights vesting on 1 October 2020). No hurdled share rights granted in 2014 vested in October 2018 when assessed against the relative TSR and cash EPS performance hurdles. Vested options and share rights that were awarded prior to October 2009 can be exercised up to a maximum of 10 years from their commencement date. Vested share rights awarded between October 2009 and July 2015 are automatically exercised at vesting. Vested share rights granted after July 2015 may be exercised at will up to a maximum of 15 years from their commencement date. For each vested share right and each performance option exercised during the year, the relevant executive received one fully paid Westpac ordinary share. The exercise price for share rights is zero. For performance share rights, the value granted represents the number of securities granted multiplied by the fair value per instrument as set out in the table in the sub-section titled ‘Fair value of Long Term Variable Reward awards made during the year’ below. For restricted shares, the value granted represents the number of ordinary shares granted multiplied by the five day VWAP of a Westpac ordinary share on the date the shares were granted. These values, which represent the full value of the equity-based awards made to the CEO and Group Executives in 2019, do not reconcile with the amount shown in the table in section 7.2 which shows the amount amortised in the current year of equity awards over their vesting period. The minimum total value of the grants for future financial years is zero and an estimate of the maximum possible total value in future financial years is the fair value, as shown above. The value of each option or share right exercised, forfeited or lapsed is calculated based on the five day VWAP of Westpac ordinary shares on the date of exercise (or forfeiture or lapse), less the relevant exercise price (if any). Where the exercise price is greater than the five day VWAP of Westpac ordinary shares, the value has been calculated as zero. The information relates to the period the individual was a KMP. Refer to section 1 for further details. 3 2. 3. 4. 4 5. 6.

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70 2019 Westpac Group Annual Report Directors’ report Fair value of Long Term Variable Reward awards made during the year The table below provides a summary of the fair value of LTVR awards granted to the CEO and Group Executives during 2019 calculated in accordance with AASB 2 Share-based Payment and is used for accounting purposes only. LTVR awards will only vest if performance hurdles are achieved and service conditions are met in future years. Performance hurdle Commencement date1 Fair value2 per instrument Plan name Granted to Grant date Test date Expiry CEO Long Term Variable Reward Plan Brian Hartzer Relative TSR 12 December 2018 12 December 2018 12 December 2018 12 December 2018 1 October 2018 1 October 2022 1 October 2033 $10.45 Cash ROE 1 October 2018 1 October 2021 1 October 2033 $19.03 Westpac Long Term Variable Reward Plan Group Executives Relative TSR 1 October 2018 1 October 2022 1 October 2033 $10.45 Cash ROE 1 October 2018 1 October 2021 1 October 2033 $19.03 7.4. Details of Westpac equity holdings of Non-executive Directors The table below sets out details of relevant interests in Westpac ordinary shares held by Non-executive Directors (including their related parties) during the year ended 30 September 20193. Number held at start of the year Changes during the year Number held at end of the year Name Current Non-executive Directors Lindsay Maxsted Nerida Caesar Ewen Crouch4 Alison Deans Craig Dunn Anita Fung Steven Harker5 Peter Marriott6 Peter Nash Margaret Seale5,7 22,095 9,985 82,264 14,392 8,869 - n/a 41,072 8,020 n/a 1,585 3,598 - - - - 10,365 (2,001) - 1,068 23,680 13,583 82,264 14,392 8,869 - 11,930 39,071 8,020 37,439 Former Non-executive Director Peter Hawkins5 15,880 - n/a 1. 2. The commencement date is the start of the performance period. The fair values of performance share rights granted during the year have been independently calculated at their respective grant dates based on the requirements of AASB 2 Share-based Payment. The fair value of performance share rights with cash ROE hurdles has been assessed with reference to the share price at grant date and a discount rate reflecting the expected dividend yield over their vesting periods which for the performance share rights valued at $19.03 is four years to the 1 October 2022 vesting date. For the purpose of allocating performance share rights with cash ROE hurdles, the valuation also takes into account the average cash ROE outcome using a Monte Carlo pricing simulation model. The fair value of performance share rights with hurdles based on TSR performance relative to that of a group of comparator companies also takes into account the average TSR outcome determined using a Monte Carlo simulation pricing model. Other than as disclosed below, no share interests include non-beneficially held shares. Ewen Crouch holds 42,000 ordinary shares following the grant of probate in a deceased estate for which he is one of the executors. In addition to holdings of ordinary shares, Ewen Crouch and his related parties held interests in 250 Westpac Capital Notes 2 at year end. The information relates to the period the individual was a KMP. Refer to section 1 for further details. Peter Marriott’s related party ceased to hold an interest in 2,001 ordinary shares following the realisation of assets in a deceased estate. In addition to holdings of ordinary shares, Peter Marriott and his related parties held interests in 563 Westpac Capital Notes 2 at year end. In addition to holding shares, Margaret Seale and her related parties held interests in 3,220 Westpac Capital Notes 2 at year end. 3. 4. 5. 6. 7.

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2019 Westpac Group Annual Report 71 Directors’ report 7.5. Details of Westpac equity holdings of Executive Key Management Personnel The table below details Westpac equity held (and movement in that equity) by the CEO and Group Executives (including their related parties) for the year ended 30 September 20191. Received on exercise and/or exercised during the year Number granted during the year as remuneration Number forfeited or lapsed during the year Number vested and exercisable at end of the year Number held at start of the year Other changes during the year Number held at end of the year Type of equity-based instrument Name Managing Director & Chief Executive Officer 1 Brian Hartzer Ordinary shares CEO Performance share rights Performance share rights 109,611 41,867 - - - 151,478 - 732,817 34,263 227,338 - - - (119,476) (34,263) - - 840,679 - - - Current Group Executives Craig Bright2 Ordinary shares Performance share rights n/a n/a 132,151 77,696 - - - - - - 132,151 77,696 - - Lyn Cobley Ordinary shares Performance share rights 91,993 261,846 18,724 94,964 - - - - - - 110,717 356,810 - - Peter King Ordinary shares Performance share rights 97,791 314,259 20,796 92,086 - - - (65,787) - - 118,587 340,558 - - Rebecca Lim Ordinary shares Performance share rights 30,876 144,092 14,340 62,948 - - - (13,823) - - 45,216 193,217 - - David Lindberg Ordinary shares Performance share rights 64,952 254,369 17,719 94,602 - - - (29,489) - - 82,671 319,482 - - Carolyn McCann Ordinary shares Performance share rights 49,435 42,816 9,818 49,910 - - - (14,178) - - 59,253 78,548 - - David McLean Ordinary shares Performance share rights Unhurdled share rights 9,613 237,918 57,218 - 84,630 22,059 - - - - (35,662) - - - - 9,613 286,886 79,277 - 2,148 49,831 Christine Parker Ordinary shares Performance share rights 27,431 240,311 17,196 73,380 - - - (53,168) (15,000) - 29,627 260,523 - - David Stephen Ordinary shares Performance share rights - - 135,929 278,698 - - - - - - 135,929 278,698 - - Gary Thursby Ordinary shares Performance share rights 92,445 154,553 15,909 76,438 - - - (17,013) - - 108,354 213,978 - - Alastair Welsh2 Ordinary shares Performance share rights n/a n/a 4,223 - - - - - (20,802) - 37,256 14,944 - - Former Group Executives Brad Cooper2 Ordinary shares Performance share rights 131,982 329,216 16,090 94,424 - - - (74,436) - - n/a n/a - - 2 Dave Curran2 Ordinary shares Performance share rights 49,425 288,436 - - - - - (63,519) - - n/a n/a - - George Frazis2 Ordinary shares Performance share rights 81,302 300,880 19,308 89,928 - - - (58,231) (10,000) - n/a n/a - - 3 4 1.The highest number of shares held by an individual in the table is 0.0043% of total Westpac ordinary shares outstanding as at 30 September 2019. 2. The information relates to the period the individual was a KMP. Refer to section 1 for further details.

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72 2019 Westpac Group Annual Report Directors’ report 7.6. Loans to Non-executive Directors and Executive Key Management Personnel disclosures Financial instrument transactions that occurred during the financial year between Directors, the CEO or Group Executives and the Group are in the ordinary course of business on terms and conditions (including interest and collateral) as they apply to other employees and certain customers. These transactions consisted principally of normal personal banking and financial investment services. The table below details loans to Non-executive Directors, the CEO and Group Executives (including their related parties) of the Group. Balance at start of the year $ Interest paid and payable for the year $ Interest not charged during the year $ Balance at end of the year $ Number in Group at end of the year Non-executive Directors CEO and Group Executives 3,544,610 9,519,382 306,091 366,076 - - 19,785,162 11,932,845 4 10 13,063,992 672,167 - 31,718,007 14 The table below details KMP (including their related parties) with loans above $100,000 during 2019. Highest indebtedness during the year $ Balance at start of the year $ Interest paid and payable for the year $ Interest not charged during the year $ Balance at end of the year $ Directors Lindsay Maxsted Ewen Crouch Steven Harker1 Peter Nash 1,572,889 979,947 n/a 991,774 71,630 39,833 158,722 35,906 - - - - 2,666,979 928,781 15,000,000 1,189,402 2,666,979 1,479,947 15,000,000 1,498,923 CEO and Group Executives Brian Hartzer Lyn Cobley Brad Cooper1 Rebecca Lim Carolyn McCann David McLean Christine Parker David Stephen Gary Thursby Alastair Welsh1 9,847 2,000,000 2,791,360 732,845 145,000 620,841 1,308,486 - 1,911,003 n/a 15,572 85,800 73,973 13,081 4,788 30,059 46,955 3,112 73,462 19,274 - - - - - - - - - - 806,470 2,000,000 n/a 600,000 307,697 625,816 5,001,866 - 1,864,791 726,205 814,285 2,007,287 3,097,569 778,035 440,001 672,004 5,436,523 672,755 2,034,797 726,205 1.The information relates to the period the individual was a KMP. Refer to section 1 for further details.

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2019 Westpac Group Annual Report 73 Directors’ report 11. Auditor a) Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act is below: 1 2 3 4 Auditor’s Independence Declaration As lead auditor for the audit of Westpac Banking Corporation for the year-ended 30 September 2019, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b)no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Westpac Banking Corporation and the entities it controlled during the period. Lona Mathis Sydney Partner4 November 2019 PricewaterhouseCoopers PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650 Sydney NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au, Liability limited by a scheme approved under Professional Standards Legislation.

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74 2019 Westpac Group Annual Report Directors’ report b) Non-audit services We may decide to engage PwC on assignments additional to their statutory audit duties where their expertise or experience with Westpac or a controlled entity is important. Details of the non-audit service amounts paid or payable to PwC for non-audit services provided during the 2018 and 2019 financial years are set out in Note 39 and Note 35 to the respective financial statements. PwC also provides audit and non-audit services to non-consolidated entities, non-consolidated trusts of which a Westpac Group entity is trustee, manager or responsible entity and non-consolidated superannuation funds or pension funds. The fees in respect of these services were approximately $7.5 million in total (2018: $7.5 million). PwC may also provide audit and non-audit services to other entities in which Westpac holds a minority interest and which are not consolidated. Westpac is not aware of the amount of any fees paid to PwC by those entities. Westpac has a policy on engaging PwC, details of which are set out in Westpac’s Corporate Governance Statement and in the subsection entitled ‘Engagement of the external auditor’, which forms part of this Directors’ report. The Board has considered the position and, in accordance with the advice received from the Board Audit Committee, is satisfied that the provision of the non-audit services during 2019 by PwC is compatible with the general standard of independence for auditors imposed by the Corporations Act. The Directors are satisfied, in accordance with advice received from the Board Audit Committee, that the provision of non-audit services by PwC, as set out above, did not compromise the auditor independence requirements of the Corporations Act for the following reasons: •all non-audit services provided by PwC for the year have been reviewed by the Board Audit Committee, which is of the view that they do not impact the impartiality and objectivity of PwC; and •based on Board quarterly independence declarations made by PwC to the Board Audit Committee during the year, none of the services undermine the general principles relating to auditor independence including reviewing or auditing PwC’s own work, acting in a management or a decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards. 12. Responsibility statement The Directors of Westpac Banking Corporation confirm that to the best of their knowledge: •the consolidated financial statements for the financial year ended 30 September 2019, which have been prepared in accordance with the accounting policies described in Note 1 to the consolidated financial statements, being in accordance with Australian Accounting Standards (AAS), give a true and fair view of the assets, liabilities, financial position and profit of the Group; and •the Annual Report from the section entitled ‘Information on Westpac’ to and including the section entitled ‘Other Westpac business information’ includes a fair review of the information required by the Disclosure Guidance and Transparency Rules 4.1.8R to 4.1.11R of the United Kingdom Financial Conduct Authority, together with a description of the principal risks and uncertainties faced by the Group. Signed in accordance with a resolution of the Board. Lindsay Maxsted Chairman 4 November 2019 Brian Hartzer Managing Director & Chief Executive Officer 4 November 2019

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2019 Westpac Group Annual Report 75 1 02 Five year summary Reading this report Review of Group operations Divisional performance Risk and risk management Westpac’s approach to sustainability Other Westpac business information 2 3 4

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76 2019 Westpac Group Annual Report Five year summary1 (in $m unless otherwise indicated) 2019 2018 2017 2016 2015 1. Where accounting classifications have changed or where changes in accounting policy are adopted retrospectively, comparatives have been restated and may differ from results previously reported. The above income statement extracts for 2019, 2018 and 2017 and balance sheet extracts for 2019 and 2018 are derived from the consolidated financial statements included in this Annual Report. The above income statement extracts for 2016 and 2015 and balance sheet extracts for 2017, 2016 and 2015 are derived from financial statements previously published. Adjusted for Treasury shares. Total equity attributable to owners of Westpac Banking Corporation, after deducting intangible assets divided by the number of ordinary shares outstanding, less Treasury shares held. Provisions for expected credit losses (ECL) for the 30 September 2019 year end have been determined based on AASB 9 Financial Instruments (December 2014) (AASB 9). Comparatives based on AASB 139 Financial Instruments: Recognition and Measurement (AASB 139) have not been restated. Refer to Note 1 and Note 13 to the financial statements for further details. Full-time equivalent employees include full-time, pro-rata part-time, overtime, temporary and contract staff. 2. 3. 4. 5. 6. Income statements for the years ended 30 September2 Net interest income Net fee income Net wealth management and insurance income Trading income Other income 16,907 1,655 1,029 929 129 16,505 15,51615,14814,267 2,424 2,603 2,6112,808 2,0611,800 1,8992,228 945 1,2021,124964 72 529 59 1,241 Net operating income before operating expenses and impairment charges Operating expenses Impairment charges 20,649 (10,106) (794) 22,007 21,650 20,841 21,508 (9,566) (9,282)(9,073) (9,339) (710) (853) (1,124)(753) Profit before income tax Income tax expense Profit attributable to non-controlling interests 9,749 (2,959) (6) 11,731 11,51510,644 11,416 (3,632) (3,518) (3,184) (3,348) (4) (7) (15) (56) Net profit attributable to owners of Westpac Banking Corporation 6,784 8,095 7,990 7,4458,012 Balance sheet as at 30 September2 Loans Other assets 714,770 191,856 709,690 684,919 661,926 623,316 169,902 166,956 177,276188,840 Total assets 906,626 879,592 851,875 839,202 812,156 Deposits and other borrowings Debt issues Loan capital Other liabilities 563,247 181,457 21,826 74,589 559,285 533,591513,071475,328 172,596168,356 169,902 171,054 17,265 17,66615,805 13,840 65,873 70,920 82,243 98,019 Total liabilities 841,119 815,019790,533781,021758,241 Total shareholders’ equity and non-controlling interests 65,507 64,573 61,342 58,18153,915 Key financial ratios Shareholder value Dividends per ordinary share (cents) Dividend payout ratio (%)3 Return on average ordinary equity (%) Basic earnings per share (cents) Net tangible assets per ordinary share ($)4 Share price ($): High Low Close 174 88.83 10.65 196.5 15.36 30.05 23.30 29.64 188188188187 79.52 79.28 84.1973.39 13.0513.6513.3216.23 237.5 238.0 224.6 255.0 15.3914.6613.9013.02 33.68 35.39 33.74 40.07 27.24 28.92 27.57 29.10 27.93 31.9229.5129.70 Business performance Operating expenses to operating income ratio (%) Net interest margin (%) Capital adequacy Total equity to total assets (%) Total equity to total average assets (%) APRA Basel III: Common equity Tier 1 (%) Tier 1 ratio (%) Total capital ratio (%) Credit quality Net impaired assets to equity and collectively assessed provisions (%) Total provisions for expected credit losses/impairment on loans and credit commitments to total loans (basis points)5 Other information Full time equivalent employees (number at financial year end)6 48.94 2.12 7.2 7.3 10.67 12.84 15.63 1.41 54 33,288 43.47 42.87 43.53 43.42 2.132.06 2.102.09 7.3 7.2 6.9 6.6 7.4 7.2 7.0 6.8 10.63 10.56 9.48 9.50 12.78 12.6611.17 11.38 14.7414.8213.11 13.26 1.141.291.791.80 43 45 54 53 35,02935,096 35,580 35,484

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2019 Westpac Group Annual Report 77 Reading this report Disclosure regarding forward-looking statements This Annual Report 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 Annual Report 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: 1 • 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; adverse asset, credit or capital market conditions; an increase in defaults in credit exposures because of a deterioration in economic 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 (including low or negative 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 (including as a result of tariffs and protectionist trade measures) 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 new businesses; and various other factors beyond Westpac’s control. • • • • • • • • • • • • • • • 2 • • • • • 3 • • The above list is not exhaustive. For certain other factors that may impact on forward-looking statements made by Westpac, refer to ‘Risk factors’ under the section ‘Risk and risk management’. 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 Annual Report, whether as a result of new information, future events or otherwise, after the date of this Annual Report. 4

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78 2019 Westpac Group Annual Report Reading this report Significant developments For a discussion of significant developments impacting the Group, refer to ‘Significant developments’ under ‘Information on Westpac’ in Section 1. Currency of presentation, exchange rates and certain definitions In this Annual Report, ‘financial statements’ means our audited consolidated balance sheets as at 30 September 2019 and 30 September 2018 and income statements, statements of comprehensive income, changes in equity and cash flows for each of the years ended 30 September 2019, 2018 and 2017 together with accompanying notes which are included in this Annual Report. Our financial year ends on 30 September. As used throughout this Annual Report, the financial year ended 30 September 2019 is referred to as 2019 and other financial years are referred to in a corresponding manner. We publish our consolidated financial statements in Australian dollars. In this Annual Report, unless otherwise stated or the context otherwise requires, 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 translations of Australian dollars into US dollars have been made at the rate of A$1.00 = US$0.6746, 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’) as of Monday, 30 September 2019. The Australian dollar equivalent of New Zealand dollars at 30 September 2019 was A$1.00 = NZ$1.0790, being the closing spot exchange rate on that date. Refer to ‘Exchange rates’ in Section 4 for information regarding the rates of exchange between the Australian dollar and the US dollar for the financial years ended 30 September 2015 to 30 September 2019. Any discrepancies between totals and sums of components in tables contained in this Annual Report are due to rounding.

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2019 Westpac Group Annual Report 79 Review of Group operations Selected consolidated financial and operating data We have derived the following selected financial information as of, and for the financial years ended, 30 September 2019, 2018, 2017, 2016 and 2015 from our audited consolidated financial statements and related notes. This information should be read together with our audited consolidated financial statements and the accompanying notes included elsewhere in this Annual Report. Accounting standards The financial statements and other financial information included elsewhere in this Annual Report, unless otherwise indicated, have been prepared and presented in accordance with Australian Accounting Standards (AAS). Compliance with AAS ensures that the financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The financial statements have been prepared in accordance with the accounting policies described in the Notes to the financial statements. 1 Recent accounting developments For a discussion of recent accounting developments refer to Note 1 to the financial statements. Critical accounting estimates Our reported results are sensitive to the accounting policies, assumptions and estimates that underlie the preparation of the income statement and the balance sheet. Note 1(b) includes details of the areas of our critical accounting assumptions and estimates and a reference to the relevant note in the financial statements providing further information. Each of the assumptions and estimates have been discussed at our Board Audit Committee (BAC). The following is a summary of the areas involving our most critical accounting estimates. Provisions (other than loan impairment charges) Provisions are held in respect of a range of obligations such as employee entitlements, litigation and non-lending losses, impairment charges on credit commitments, surplus lease space, restructuring costs and compliance, regulation and remediation provisions. Some of the provisions involve significant judgement about the likely outcome of various events and estimated future cash flows. Refer to Note 27. Provisions for expected credit losses (ECL)/impairment charges on loans Provisions for ECL are a probability-weighted estimate of the cash shortfalls expected to result from defaults over the relevant timeframe. They are determined by evaluating a range of possible outcomes and taking into account the time value of money, past events, current conditions and forecasts of future economic conditions. The models use three main components to determine the ECL (as well as the time value of money) including: • • • Probability of default (PD): the probability that a counterparty will default; Loss given default (LGD): the loss that is expected to arise in the event of a default; and Exposure at default (EAD): the estimated outstanding amount of credit exposure at the time of the default. The provisions for ECL are determined based on three stages as follows: Stage 1: 12 months ECL - performing For financial assets where there has been no significant increase in credit risk since origination a provision for 12 months ECL is recognised. 2 Stage 2: Lifetime ECL - performing For financial assets where there has been a significant increase in credit risk since origination but where the asset is still performing a provision for lifetime ECL is recognised. Stage 3: Lifetime ECL – non-performing For financial assets that are non-performing a provision for lifetime ECL is recognised. Indicators include a breach of contract with the Group such as a default on interest or principal payments, a borrower experiencing significant financial difficulties or observable economic conditions that correlate to defaults on a group of loans. Determining when a financial asset has experienced a significant increase in credit risk since origination is a critical accounting judgement which is primarily based on changes in internal customer risk grades since origination of the facility. The change in the internal customer risk grade that the Group uses to represent a significant increase in credit risk is based on a sliding scale. This means that a higher credit quality exposure at origination would require a more significant downgrade compared to a lower credit quality exposure before it is considered to have experienced a significant increase in credit risk. Interest income is calculated based on the gross carrying amount of financial assets in stages 1 and 2 of the Group’s ECL model and on the carrying amount net of the provision for ECL for financial assets in stage 3. The measurement of ECL for each stage and the assessment of significant increase in credit risk consider information about past events and current conditions as well as reasonable and supportable projections of future events and economic conditions. The estimation of forward looking information is a critical accounting judgement. The Group considers three future macroeconomic scenarios including a base case scenario along with upside and downside scenarios. 3 4

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80 2019 Westpac Group Annual Report Review of Group operations The macroeconomic variables used in these scenarios, based on current economic forecasts, include (but are not limited to) unemployment rates, real gross domestic product growth rates and residential and commercial property price indices. The macroeconomic scenarios are weighted based on the Group’s best estimate of the relative likelihood of each scenario. The weighting applied to each of the three macroeconomic scenarios takes into account historical frequency, current trends, and forward looking conditions. As at 30 September 2019, gross loans to customers were $718,378 million (2018: $712,504 million) and the provision for ECL/impairment charges on loans was $3,608 million (2018: $2,814 million)1. Fair value of financial instruments Financial instruments classified as held-for-trading (including derivatives) are measured at fair value through income statement. Investment securities measured at fair value through other comprehensive income (AASB 9)/available-for-sale (AASB 139)2 are also recognised in the financial statements at fair value. As much as possible, financial instruments are valued with reference to quoted, observable market prices or by using models which employ observable valuation parameters. Where valuation models rely on parameters for which inputs are not observable, judgements and estimation may be required. As at 30 September 2019, the fair value of trading securities and financial assets measured at fair value through profit or loss, investment securities measured at fair value through other comprehensive income (2019) / available-for-sale securities (2018), loans designated at fair value and life insurance assets was $113,989 million (2018: $94,247 million). The fair value of deposits and other borrowings at fair value, other financial liabilities at fair value, debt issues at fair value and life insurance liabilities was $56,979 million (2018: $56,427 million). The fair value of outstanding derivatives was a net asset of $763 million (2018: $306 million net liability). The fair value of financial assets and financial liabilities determined by valuation models that use unobservable market prices was $399 million (2018: $964 million) and $29 million (2018: $6 million), respectively. The fair value of financial assets and financial liabilities, including derivatives, is largely determined based on valuation models using observable market prices and rates. Where observable market inputs are not available, day one profits or losses are not recognised. We believe that the judgements and estimates used are reasonable in the current market. However, a change in these judgements and estimates would lead to different results as future market conditions can vary from those expected. Goodwill Goodwill represents the excess of purchase consideration, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree, over the fair value of the identified net assets of acquired businesses. The determination of the fair value of the assets and liabilities of acquired businesses requires the exercise of management judgement. Different fair values would result in changes to the goodwill and to the post-acquisition performance of the acquisitions. Goodwill is tested for impairment annually by determining if the carrying value of the cash-generating unit (CGU) that it has been allocated to is recoverable. The recoverable amount is the higher of the CGU’s fair value less costs to sell and its value-in-use. Determination of appropriate cash flows and discount rates for the calculation of the value in use is subjective. As at 30 September 2019, the carrying value of goodwill was $8,895 million (2018: $8,890 million). Superannuation obligations The actuarial valuation of our defined benefit plan obligations are dependent upon a series of assumptions, the key ones being price inflation, salary growth, mortality, morbidity, discount rate and investment returns. Different assumptions could significantly alter the amount of the difference between plan assets and defined benefit obligations and the amount recognised directly in retained profits. The net superannuation deficit across all our plans as at 30 September 2019 was $335 million (2018: net superannuation surplus of $64 million). As at 30 September 2019, one superannuation plan was in surplus of $73 million (2018: two plans in surplus of $89 million) and three superannuation plans were in deficit of $408 million (2018: two plans in deficit of $25 million). Income taxes The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. All our businesses predominantly operate in jurisdictions with similar tax rates to the Australian corporate tax rate. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. For these circumstances, we hold appropriate provisions. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period where such determination is made. Life insurance contract liabilities The actuarial valuation of life insurance contract liabilities and associated deferred policy acquisition costs are dependent upon a number of assumptions. The key factors impacting the valuation of these liabilities and related assets are the cost of providing benefits and administering the contracts, mortality and morbidity experience, discontinuance experience and the rate at which projected future cash flows are discounted. 1.The provision for ECL on loans relates to the 30 September 2019 year end balance determined under AASB 9. The provision for impairment charges on loans related to the 2018 year end balance determined under AASB 139. 2. On adoption of AASB 9, the majority of available-for-sale securities were reclassified to Investment securities measured at fair value through other comprehensive income (FVOCI). Refer to Note 1 to the financial statements for more details.

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2019 Westpac Group Annual Report 81 Review of Group operations Income statement review Consolidated income statement1 For the years ending 30 September (in $m unless otherwise indicated) 2019 US$2 2019 A$ 2018 A$ 2017 A$ 2016 A$ 2015 A$ 1 Overview of performance – 2019 v 2018 During 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 2019 and prior years. The significant differences are: • • the measurement of credit loss provision and impairment charges are now on an expected loss basis; line fees (mainly in Business) are now recognised in net interest income, previously most was 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. • • 2 The changes have little impact on net profit but a more significant impact on individual line items. As these changes have only been applied from 1 October 2018, it is difficult to compare some line items across years. These changes are discussed further in Section 3, Note 1. Net profit attributable to owners of Westpac Banking Corporation for 2019 was $6,784 million, a decrease of $1,311 million or 16% compared to 2018. 2019 included significant increases in provisions for estimated customer refunds, payments, associated costs, and litigation, along with costs associated with restructuring of the wealth business, which together reduced net profit after tax by $1,130 million. These items are discussed further in Note 27 to the financial statements. A summary of the impact of provisions for estimated customer refunds, payments, associated costs, and litigation and wealth restructuring costs split across income statement line items is shown in the ‘Divisional performance’ section. Net interest income increased $402 million or 2% compared to 2018 driven by an increase of $686 million due to the reclassification of line fees from net fee income to interest income, partly offset by $239 million increase in provisions for estimated customer refunds, payments, associated costs, and litigation. Excluding the impact of these items, net interest income was flat compared to 2018. Average interest earning assets grew 3% primarily from Australian and New Zealand housing, offset by a lower margin. Reported net interest margin decreased 1 basis point to 2.12%. 3 1. Where accounting classifications have changed or where changes in accounting policy are adopted retrospectively, comparatives have been restated and may differ from results previously reported. Australian dollar amounts have been translated into US dollars solely for the convenience of the reader at the rate of A$1.00 = US$0.6746 (refer to ‘Reading this report’ section). Based on basic earnings per share, with the weighted average number of fully paid ordinary shares outstanding adjusted for the conversion of dilutive potential ordinary shares, issued for no consideration, and after adjusting earnings for distributions on dilutive potential ordinary shares. Adjusted for Treasury shares. 4 2. 3. 4. Interest income 22,412 Interest expense (11,007) 33,222 (16,315) 32,57131,23231,82232,295 (16,066)(15,716)(16,674) (18,028) Net interest income 11,405 Net fee income 1,116 Net wealth management and insurance income 694 Trading income 627 Other income88 16,907 1,655 1,029 929 129 16,505 15,51615,14814,267 2,424 2,603 2,6112,808 2,0611,800 1,8992,228 945 1,2021,124964 72 529 59 1,241 Net operating income before operating expenses and impairment charges 13,930 Operating expenses (6,817) Impairment charges (536) 20,649 (10,106) (794) 22,007 21,650 20,841 21,508 (9,566) (9,282)(9,073) (9,339) (710) (853) (1,124)(753) Profit before income tax 6,577 Income tax expense (1,996) 9,749 (2,959) 11,731 11,51510,644 11,416 (3,632) (3,518) (3,184) (3,348) Net profit for the year 4,581 Net profit attributable to non-controlling interests(5) 6,790 (6) 8,099 7,997 7,460 8,068 (4) (7) (15) (56) Net profit attributable to owners of Westpac Banking Corporation 4,576 6,784 8,095 7,990 7,4458,012 Weighted average number of ordinary shares (millions) 3,450 Basic earnings per ordinary share (cents) 132.6 Diluted earnings per share (cents)3 127.8 Dividends per ordinary share (cents) 117 Dividend payout ratio (%)4 88.83 3,450 196.5 189.5 174 88.83 3,4063,355 3,3133,140 237.5 238.0 224.6 255.0 230.1229.3 217.8248.2 188188188187 79.52 79.28 84.1973.39

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82 2019 Westpac Group Annual Report Review of Group operations Net fee income decreased $769 million or 32% compared to 2018 primarily due to the reclassification of line fees to net interest income ($667 million in 2018) and $126 million increase in provisions for estimated customer refunds, payments, associated costs and litigation. Net wealth management and insurance income decreased $1,032 million or 50% compared to 2018 primarily due to additional provisions for estimated customer refunds, payments, associated costs, and litigation of $531 million, higher general insurance claims from severe weather events $69 million, cessation of grandfathered advice commissions $42 million, lower wealth management income due to changes in platform pricing structure, and exit of the Hastings business in 2018. Trading income decreased $16 million or 2% compared to 2018. The decline mainly relates to a change in methodology in derivative valuation adjustments partially offset by higher non-customer income. Other income is up $57 million or 79% compared to 2018, primarily due to the non-repeat of a 2018 impairment charge on an equity holding of $104 million. Operating expenses increased $540 million or 6% compared to 2018. The increase was mainly due to a $349 million increase in provisions for estimated customer refunds, payments, associated costs, and litigation and wealth reset, higher technology expenses of $174 million, a rise in regulatory, compliance and investment related spend of $170 million, partially offset by the exit of the Hastings business in 2018 of $158 million and a net productivity benefit. Impairment charges were $84 million or 12% higher compared to 2018. Asset quality remained sound, with stressed exposures as a percentage of total committed exposures at 1.20%, up 12 basis points over the year. The effective tax rate of 30.4% in 2019 was lower than the 2018 effective tax rate of 31.0%. The lower effective tax rate in 2019 reflects a decrease in non-deductible expenses from the non-repeat of the 2018 goodwill write-off associated with the exit of Hastings. The Board has determined a final dividend of 80 cents per ordinary share. The full year ordinary dividends of 174 cents is lower than the ordinary dividends declared in 2018 and represents a pay-out ratio of 88.83%. The full year ordinary dividend is fully franked. Income statement review – 2019 v 2018 Net interest income – 2019 v 2018 $m 2019 2018 2017 Net interest income increased $402 million or 2% compared to 2018. Key features include: •3% growth in average interest-earning assets, primarily from Australian and New Zealand housing and higher third party liquids; •Group net interest margin decreased 1 basis point to 2.12%. Refer to Interest spread and margin – 2019 v 2018 for primary drivers of margin movement. Interest income Interest expense 33,222 (16,315) 32,57131,232 (16,066)(15,716) Net interest income 16,907 16,505 15,516 Increase/(decrease) in net interest income Due to change in volume Due to change in rate 397 5 648 855 341(487) Change in net interest income 402 989 368

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2019 Westpac Group Annual Report 83 Review of Group operations Loans increased $5.1 billion or 1% compared to 2018. Excluding foreign currency translation impacts, loans increased $2.9 billion. Key features of loan growth were: • Australian housing loans increased $4.5 billion or 1% with $60.6 billion of new lending partially offset by $56.1 billion of run off. Owner occupied balances grew 3% and comprised 58% of the portfolio, while investor property lending decreased 1%; Australian personal loans decreased $1.8 billion or 8%, across personal lending, credit cards and auto finance. Demand for unsecured lending continued to decline in 2019 with our experience in line with the market; Australian business and institutional loans decreased $2.0 billion or 1%, mostly due to lower institutional property lending as divisions prioritised returns over growth, partially offset by growth in agricultural lending; Australian provision balances increased $0.8 billion or 32% at the start of the year mostly from the implementation of AASB 9 on 1 October 2018 , which calculates credit loss provisioning on an expected loss basis; and New Zealand lending increased A$4.4 billion or 6%. Housing loans grew 7%, mostly in fixed rate products and business lending increased 6%, supported by growth in agricultural, and property lending. This was partially offset by a decline personal lending and credit cards. • • 1 • • Deposits and other borrowings excluding certificates of deposit increased $6.8 billion or 1% compared to 2018. Excluding foreign currency translation impacts, deposits and other borrowings excluding certificates of deposit increased $4.7 billion. Key features of deposits and other borrowings excluding certificates of deposit growth were: • Australian deposits and other borrowings excluding certificates of deposit increased $2.4 billion or 1%, mostly from an increase in savings and transactional deposits, partially offset by a reduction in term deposits. Non-interest bearing deposits were up 4% from increased mortgage offset balances; and •New Zealand deposits and other borrowings excluding certificates of deposit increased A$3.1 billion or 5%, as term deposits were up 4% and interest bearing transactional deposits were up 12%. Non-interest bearing deposits increased 18%, from growth in business and consumer transactional deposits. Certificates of deposit decreased $2.8 billion or 7%, reflecting reduced short-term wholesale funding issuance in this form. Interest spread and margin – 2019 v 2018 $m 2019 2018 2017 Group net interest margin of 2.12% decreased 1 basis point from 2018. Key features include: 2 • Provisions for estimated customer refunds, payments, associated costs, and litigation contributed to a reduction in margin of 3 basis points; 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; and Except for these items, net interest margin decreased 9 basis points driven by: • • • Changes in short term wholesale funding rates having little impact with the average cost being similar in 2018 and 2019 despite the sharp reduction in bank bill swap rate (BBSW) in the second half of 2019; Loan spreads were little changed, with the impact from changes to pricing of Australian variable mortgages being offset by competition, retention pricing and changes in the mix of the mortgage portfolio with customers switching from interest only to principal and interest; 2 basis point decrease from lower customer deposit spreads due to broad based competition and the impact from lower interest rates, particularly in the second half of 2019; and 2 basis point decrease from liquidity primarily due to increased balances of third party liquid assets. Treasury & Markets contribution decreased 5 basis points due to lower Treasury revenue from interest rate risk management (3 basis points), and fair value adjustments (2 basis points). 3 • • • • 4 1. Interest spread is the difference between the average yield on all interest earning assets and the average yield on all interest bearing liabilities. The benefit of net non-interest bearing assets, liabilities and equity is determined by applying the average yield paid on all interest bearing liabilities to the average level of net non-interest bearing funds as a percentage of average interest earning assets. 2. 3. Net interest margin is calculated by dividing net interest income by average interest earning assets. Group Net interest income Average interest earning assets Average interest bearing liabilities Average net non-interest bearing assets, liabilities and equity 16,907 798,924 734,282 64,642 16,505 15,516 774,944 752,294 715,509 694,924 59,435 57,370 Interest spread1 Benefit of net non-interest bearing assets, liabilities and equity2 1.94% 0.18% 1.95%1.89% 0.18%0.17% Net interest margin3 2.12% 2.13%2.06%

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84 2019 Westpac Group Annual Report Review of Group operations Non-interest income - 2019 v 2018 $m 2019 2018 2017 Non-interest income decreased $1,760 million or 32% compared to 2018. Key features include: • $657 million decrease from provisions for estimated customer refunds, payments, associated costs, and litigation; $508 million decrease from the adoption of AASB 15 primarily related to the reclassification of line fees from net fee income to net interest income ($667 million) and reclassification of certain items previously netted that are now presented on a gross basis (up $159 million); Exit of Hastings business in 2018 ($203 million); and Except for these items, non-interest income decreased by $392 million due to reduced net wealth management and insurance income and lower trading income. • • • Net fee income decreased $769 million or 32%, including $126 million additional provisions for estimated customer refunds, payments, associated costs, and litigation mostly related to financial planning, reclassification of line fees from non-interest income to net interest income as a result of the adoption of AASB 15 to more appropriately reflect the relationship with drawn lines of credit (down $667 million) and the reclassification of certain items previously netted that are now presented on a gross basis including card scheme support payments (up $153 million). Except for these items, net fee income decreased $129 million or 6% mainly from: • • Lower advice income following the exit of financial planning (down $76 million); Lower revenue from payments and transaction fees (down $34 million) driven by increased merchant costs and lower account based fees in New Zealand following the decision to simplify certain consumer fees; and A decrease in business lending and mortgage fees largely due to reduced new lending volumes (down $27 million); partly offset by Higher corporate and institutional lending fees largely from syndication fees generated in the first half of 2019 (up $10 million). • • Net wealth management and insurance income decreased $1,032 million or 50% compared to 2018, including additional provisions for estimated customer refunds, payments, associated costs, and litigation (mostly related to financial planning) of $531 million. Additionally, there was no contribution from Hastings, following the exit of the business in 2018 (down $203 million). Except for these items, net wealth management and insurance income decreased $298 million, mainly from: • Insurance income decreased $139 million from: – A reduction in general insurance income (down $69 million) from higher claims, including the New South Wales hailstorm and Queensland floods; A reduction in life insurance income (down $39 million) following the implementation of regulatory reforms (“Protect Your Super”) and higher claims and movement in policyholder tax recoveries (down $23 million); and Lower LMI income (down $8 million) primarily from a reduction in loans written at higher LVR bands. – – • Lower Platforms and Superannuation income (down $98 million) primarily driven by margin compression from full year impact of platform repricing, implementation of regulatory reforms (‘Protect your Super’), product mix changes and outflows in legacy platforms. This has been partly offset by an 89% increase in BT Panorama funds to $23 billion due to inflows and higher asset markets; and Cessation of grandfathered commission payments (down $42 million). • Trading income decreased $16 million or 2% compared to 2018, primarily driven by the derivative valuation adjustment (down $78 million) partially offset by higher non-customer income. Other income increased $57 million or 79% compared to 2018, reflecting the impairment loss on the remaining Pendal shares in 2018 that did not repeat ($104 million), higher gains from asset sales and revaluation of a Fintech investment ($98 million), partially offset by loss on financial instruments measured at fair value ($100 million), lower rental income from operating leases ($35 million) and the impact of hedging future earnings (down $19 million). Net fee income Net wealth management and insurance income Trading income Other income 1,655 1,029 929 129 2,424 2,603 2,0611,800 945 1,202 72 529 Non-interest income 3,742 5,502 6,134

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2019 Westpac Group Annual Report 85 Review of Group operations Operating expenses – 2019 v 2018 $m 2019 2018 2017 1 Operating expenses increased $540 million or 6% compared to 2018. Key features include: • • increased costs associated with the Wealth Reset ($241 million higher); estimated costs associated with implementing customer refunds and payments and litigation ($108 million higher); an increase due to the reclassification of $238 million predominantly related to merchant and card schemes from non-interest income to operating expenses; and reduced costs from the exit of the Hastings business ($158 million). • • Except for these items, operating expenses increased $111 million, primarily driven by regulatory and compliance costs ($99 million higher) and investment related spend ($71 million higher) with productivity offsetting underlying cost growth. Staff expenses increased $151 million or 3% compared to 2018. This was due to costs associated with the Wealth Reset and estimated costs associated with implementing customer refunds and payments and litigation ($231 million higher). Except for these items, staff expenses decreased $80 million primarily due to a 5% decrease in FTE from productivity initiatives related to organisation simplification and channel optimisation along with lower variable reward. This was partly offset by annual salary increases and the Group’s investment programs having a higher proportion of spend expensed during the year. Occupancy expenses decreased $10 million or 1% compared to 2018, driven by the reduction in branch numbers (down 61), the exit of 4 corporate sites and the removal of 375 ATMs. This was partly offset by annual rental increases and costs associated with branch and ATM rationalisation. Technology expenses increased $209 million or 10%. This was due to costs associated with the Wealth Reset and estimated costs associated with implementing customer refunds and payments and litigation ($35 million higher). Except for these items, technology expenses increased $174 million largely due to higher amortisation of software assets ($91 million higher) as key platforms became operational, including the Customer Service Hub, New Payments Platform and Panorama. Other expenses increased $190 million or 12%. This was due to costs associated with the Wealth Reset and estimated costs associated with implementing customer refunds and payments and litigation ($83 million higher). Except for these items, expenses increased $107 million from increased professional services costs primarily related to regulatory and compliance activity on Financial Crime, data privacy, product and system simplification and risk management, and higher marketing expenses, partly offset by lower costs associated with the exit of Hastings business ($111 million lower) and the Royal Commission 2 3 4 Staff expenses Occupancy expenses Technology expenses Other expenses 5,038 1,023 2,319 1,726 4,887 4,701 1,0331,073 2,110 2,008 1,5361,500 Total operating expenses 10,106 9,566 9,282 Total operating expenses to net operating income ratio 48.94% 43.47% 42.87%

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86 2019 Westpac Group Annual Report Review of Group operations Impairment charges – 2019 v 2018 $m 2019 2018 2017 Asset quality remained sound through 2019 with stressed exposures to total committed exposures increasing by 12 basis points to 1.20%. The increase in stressed exposures was due to higher impaired and higher 90+ days but not impaired facilities. Emerging stress is mostly from an increase in mortgage delinquencies due to the softening of economic activity and falling house prices. Given modest change in asset quality, impairment charges have remained low at $794 million in 2019, equal to 11 basis points of gross loans. Impairment charges for 2019 of $794 million were up $84 million when compared to 2018. Key movements included: • The introduction of AASB9 required the removal of the recognition of the time value of money on performing collective provisions which contributed $115 million increase in impairment charges; and Write-offs, included in non-performing provisions, were $95 million higher principally in Australian unsecured lending portfolios including Auto finance and from increases in customers utilising hardship; partially offset by Non performing provisions relating to new individually assessed provisions (IAPs) were $28 million lower due to lower provisions required in the Business division and New Zealand, partially offset by an increase in WIB; and A higher economic overlay release of $96 million 2019 (2018: $22 million). Refer to Note 13. • • • Income tax expense – 2019 v 2018 $m 2019 2018 2017 The effective tax rate of 30.4% in 2019 was lower than the 2018 effective tax rate of 31.0%. The lower effective tax rate in 2019 reflects a decrease in non-deductible expenses which included penalties and the non-repeat of the 2018 write-off of the Hastings goodwill associated with the exit of that business which was non-deductible. The effective tax rate above the Australian corporate tax rate of 30% reflects several Tier 1 Instruments whose distributions are not deductible for Australian taxation purposes. Income tax expense Tax as a percentage of profit before income tax expense (effective tax rate) 2,959 30.35% 3,632 3,518 30.96% 30.55% Impairment charges 794 710853 Impairment charges to average gross loans (basis points) 11 1013

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2019 Westpac Group Annual Report 87 Review of Group operations Balance sheet review Selected consolidated balance sheet data1 The detailed components of the balance sheet are set out in the notes to the financial statements. 2019 US$m2 2019 A$m 2018 A$m 2017 A$m 2016 A$m 2015 A$m As at 30 September 1 2 3 1. Where accounting classifications have changed or where changes in accounting policy are adopted retrospectively, comparatives have been restated and may differ from results previously reported. Australian dollar amounts have been translated into US dollars solely for the convenience of the reader at the rate of A$1.00 = US$0.6746 (refer to ‘Reading this report’ section). Includes interest earning balances. Effective from 1 October 2018, loans and other receivables are net of Stage 3 provisions to reflect the adoption of AASB 9. For prior years, loans and receivables are net of provisions for impairment charges on loans (refer to Note 9 of the financial statements). Other receivables include cash and balances with central banks and other interest earning assets. 4 2. 3. Cash and balances with central banks 13,532 Collateral paid 4,000 Trading securities and financial assets measured at fair value through income statement and investment securities/available-for-sale securities70,956 Derivative financial instruments 20,143 Loans 482,184 Life insurance assets 6,319 All other assets 14,476 20,059 5,930 105,182 29,859 714,770 9,367 21,459 26,788 18,78617,397 15,135 4,7875,7168,205 8,137 84,25186,693 82,84183,231 24,10124,033 32,227 48,173 709,690 684,919 661,926 623,316 9,450 10,643 14,19213,125 20,525 21,08522,41421,039 Total assets611,610 906,626 879,592 851,875 839,202 812,156 Collaterial received 2,217 Deposits and other borrowings 379,966 Other financial liabilities 19,708 Derivative financial instruments 19,628 Debt issues 122,411 Life insurance liabilities 4,977 All other liabilities3,788 3,287 563,247 29,215 29,096 181,457 7,377 5,614 2,1842,477 1,7844,045 559,285 533,591513,071475,328 28,105 30,79928,704 30,671 24,407 25,375 36,07648,304 172,596168,356 169,902 171,054 7,597 9,01912,36111,559 3,580 3,250 3,3183,440 Total liabilities excluding loan capital 552,695 Loan capital14,724 819,293 21,826 797,754 772,867765,216 744,401 17,265 17,66615,805 13,840 Total liabilities 567,419 841,119 815,019790,533781,021758,241 Net assets44,191 65,507 64,573 61,342 58,18153,915 Total equity attributable to owners of Westpac Banking Corporation 44,155 Non-controlling interests36 65,454 53 64,52161,28858,120 53,098 52 54 61817 Total shareholders’ equity and non-controlling interests 44,191 65,507 64,573 61,342 58,18153,915 Average balances Total assets 603,581 Loans and other receivables3469,009 Total equity attributable to owners of Westpac Banking Corporation 42,981 Non-controlling interests34 894,724 695,240 63,714 50 873,310 854,058 831,439 791,719 681,201657,628 631,266 596,378 62,01758,556 55,896 49,361 3120 575 854

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88 2019 Westpac Group Annual Report Review of Group operations Summary of consolidated ratios As at 30 September (in $m unless otherwise indicated) 2019 US$1 2019 A$ 2018 A$ 2017 A$ 2016 A$ 2015 A$ Balance sheet review Assets – 2019 v 2018 Total assets as at 30 September 2019 were $906.6 billion, an increase of $27.0 billion or 3% compared to 30 September 2018. Significant movements during the year included: • cash and balances with central banks decreased $6.7 billion or 25% reflecting lower liquid assets held in this form; collateral paid increased $1.1 billion or 24% mainly due to an increase in collateralised derivative liabilities; trading securities and financial assets measured at fair value through income statement (FVIS), available-for-sale securities and investment securities increased $20.9 billion or 25% reflecting higher liquid assets held in this form; derivative assets increased $5.8 billion or 24% mainly driven by movements in cross currency swaps, foreign currency forward contracts and interest rate swaps; and loans grew $5.1 billion or 1%. Refer to loan quality – 2019 v 2018 below for further information. • • • • Liabilities and equity – 2019 v 2018 Total liabilities as at 30 September 2019 were $841.1 billion, an increase of $26.1 billion or 3% compared to 30 September 2018. Significant movements during the year included: • • • collateral received increased $1.1 billion or 51% due to an increase in collateralised derivative assets; deposits and other borrowings increased $4.0 billion or 1%; other financial liabilities increased $1.1 billion or 4% mainly driven by securities sold under agreements to repurchase and interbank deposits, partially offset by decreases in accrued interest payable and other financial liabilities; derivative liabilities increased $4.7 billion or 19% driven by movements in cross currency swaps and interest rate swaps; debt issues increased $8.9 billion or 5% ($1.8 billion or 1% decrease excluding foreign currency translation impacts, fair value and hedge accounting adjustments); and loan capital increased $4.6 billion or 26% mainly due to $3.2 billion net issuance of Tier 2 capital instruments in response to APRA’s Total Loss Absorbing Capital announcement and $1.3 billion impact of hedging and foreign currency translation. • • • 1. Australian dollar amounts have been translated into US dollars solely for the convenience of the reader at the rate of A$1.00 = US$0.6746 (refer to ‘Reading this report’ section). Calculated by dividing net interest income by average interest earning assets. Calculated by dividing net profit attributable to owners of Westpac Banking Corporation by average total assets. Calculated by dividing net profit attributable to owners of Westpac Banking Corporation by average ordinary equity. Calculated by dividing net profit attributable to owners of Westpac Banking Corporation by average ordinary equity and non-controlling interests. Based on the weighted average number of fully paid ordinary shares. Based on basic earnings per share, with the weighted average number of fully paid ordinary shares outstanding adjusted for the conversion of dilutive potential ordinary shares, issued for no consideration, and after adjusting earnings for distributions on dilutive potential ordinary shares. 2. 3. 4. 5. 6. 7. Profitability ratios (%) Net interest margin22.12 Return on average assets3 0.76 Return on average ordinary equity4 10.65 Return on average total equity510.64 Capital ratios (%) Average total equity to average total assets 7.13 Common equity Tier 110.67 Tier 1 ratio 12.84 Total capital ratio 15.63 Earning ratios Basic earnings per ordinary share (cents)6 132.6 Diluted earnings per ordinary share (cents)7 127.8 Dividends per ordinary share (cents) 117 Dividend payout ratio (%) 88.83 Credit quality ratios Loans written off (net of recoveries)662 Loans written off (net of recoveries) to average loans (bps) 14 2.12 0.76 10.65 10.64 7.13 10.67 12.84 15.63 196.5 189.5 174.0 88.83 982 14 2.132.06 2.102.09 0.930.94 0.90 1.01 13.0513.6513.3216.23 13.0513.6413.1815.96 7.10 6.86 6.79 6.34 10.63 10.56 9.48 9.50 12.78 12.6611.17 11.38 14.7414.8213.11 13.26 237.5 238.0 224.6 255.0 230.1229.3 217.8248.2 188188188187 79.52 79.28 84.1973.39 948 1,4881,0521,107 1422 1618

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2019 Westpac Group Annual Report 89 Review of Group operations Equity attributable to owners of Westpac Banking Corporation increased $0.9 billion or 1% reflecting retained profits and shares issued under the 2019 interim dividend reinvestment plan (DRP) and 2018 final DRP, partially offset by $0.7 billion opening retained earnings adjustment due to the adoption of new accounting standards and dividends paid during the year. Loan quality – 2019 v 20181 As at 30 September $m 2019 2018 2017 1 Total gross loans represented 79% of the total assets of the Group as at 30 September 2019, 2% lower compared with 30 September 2018. The decrease was mainly due to greater holdings of liquid assets and movements in cross currency swaps and interest rate swaps. Australian average gross loans were $622.2 billion in 2019, an increase of $10.8 billion or 2% from $611.4 billion in 2018. This increase was primarily due to growth in housing loans. New Zealand average gross loans were A$78.1 billion in 2019, an increase of A$5.1 billion or 7% from A$73.0 billion in 2018. Excluding foreign currency translation impacts, New Zealand average gross loans grew A$2.7 billion or 4%. The growth was mostly from fixed rate housing loans and business lending, partially offset by lower personal lending and credit cards. Other overseas average loans were $16.6 billion in 2019, an increase of $0.4 billion or 2% from $16.2 billion in 2018. This was primarily due to the depreciation of AUD against USD. Approximately 14% of the loans at 30 September 2019 mature within one year and 17% mature between one year and five years. Retail lending comprises the majority of the loan portfolio maturing after five years. Housing and personal loans that were past due, can be disaggregated based on days overdue at 30 September 2019 as follows: Consolidated $m 2019 90+ days 2018 90+ days 30-89 days Total 30-89 days Total Loans Loans - housing Loans - personal 3,574 395 4,063 356 7,637 751 3,133 427 3,271 371 6,404 798 Total 3,969 4,419 8,388 3,560 3,642 7,202 Impaired exposures2,3 As at 30 September $m 2019 2018 2017 2016 2015 2 3 4 1. 2. 3. Gross loans are stated before related provision for ECL/impairment charges on loans and credit commitments. The Group has adopted AASB9 and AASB15 from 1 October 2018. Comparatives have not been restated. Refer to Note 1 for further detail. Impaired provisions relating to impaired loans include IAP plus the proportion of the CAP that relates to impaired loans. The proportion of the CAP that relates to impaired loans was $380 million as at 30 September 2019 (2018: $231 million, 2017: $234 million, 2016: $198 million, 2015: $208 million). This sum is compared to the total gross impaired loans to determine this ratio. Impaired exposures Housing and business loans: Gross Provisions 1,327 (534) 1,019 1,142 1,8511,593 (458) (507) (885)(689) Net 793 561635 966 904 Personal loans greater than 90 days past due: Gross Provisions 405 (248) 371 373 277 263 (189) (195) (166) (172) Net 157 182178 11191 Restructured: Gross Provisions 31 (10) 26 27 31 39 (6) (12)(16) (16) Net 21 20 151523 Net impaired exposures 971 763 828 1,092 1,018 Provisions for ECL/impairment on loans and credit commitments Individually assessed provisions Collectively assessed provisions 412 3,501 422 480 869 669 2,6312,639 2,733 2,663 Total provisions for ECL/impairment on loans and credit commitments 3,913 3,053 3,1193,602 3,332 Loan quality Total provisions for ECL/impairment charges on impaired exposures to total impaired exposures3 Gross impaired exposures to total gross loans Total provisions for ECL/impairment on loans and credit commitments to gross loans Total provisions for ECL/impairment on loans and credit commitments to gross impaired exposures 44.92% 0.25% 0.54% 222.0% 46.12% 46.30% 49.42% 46.28% 0.20% 0.22%0.32%0.30% 0.43% 0.45% 0.54% 0.53% 215.6% 202.3% 166.8%175.8% Total gross loans1 718,378 712,504 687,785 Average gross loans Australia New Zealand Other overseas 622,241 78,065 16,615 611,398588,920 73,000 72,269 16,22812,837 Total average gross loans 716,921 700,626674,026

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90 2019 Westpac Group Annual Report Review of Group operations The credit quality remained sound over 2019, with total stressed exposures to TCE increasing by 12 basis points to 1.20%. Total impaired exposures as a percentage of total gross loans were 0.25% at 30 September 2019, an increase of 0.05% from 0.20% at 30 September 2018. At 30 September 2019, we had one impaired counterparty with exposure greater than $50 million, accounting for 4% of total impaired loans. This compares to one impaired counterparty with exposure greater than $50 million in 2018 accounting for 4% of total impaired loans. There was one impaired counterparty at 30 September 2019 that was less than $50 million and greater than $20 million (2018: two impaired counterparties). At 30 September 2019, 79% of our exposure was to either investment grade or secured consumer mortgage segment (2018: 79%, 2017: 78%, 2016: 78%, 2015: 77%) and 96% of our exposure as at 30 September 2019 was in Australia, New Zealand and the Pacific region (2018: 95%, 2017: 96%, 2016: 96%, 2015: 95%). We believe that Westpac remains appropriately provisioned. Total impairment provisions for impaired exposure to total impaired exposure coverage at 44.9% at 30 September 2019 compared to 46.1% at 30 September 2018. Total provisions for ECL on loans and credit commitments to total impaired exposures represented 222.0% of total impaired loans as at 30 September 2019, up from 215.6%1 at 30 September 2018. Total provisions for ECL on loans and credit commitments to total loans were 0.54% at 30 September 2019, up from 0.43%1 at 30 September 2018 (2017: 0.45%)1. Group mortgage loans 90 days past due at 30 September 2019 were 0.82% of outstandings, up from 0.67% of outstandings at 30 September 2018 (2017: 0.62%). Group other consumer loan delinquencies (including credit card and personal loan products) were 1.69% of outstandings as at 30 September 2019, up from 1.64% of outstandings as at 30 September 2018 (2017: 1.57%). Potential problem loans as at 30 September 2019 amounted to $1,297 million, a decrease of 23% from $1,691 million at 30 September 2018. The decrease in potential problem loans was mainly due to the downgrade of a Institutional counterparty to impaired over the year. Potential problem loans are facilities that are performing and no loss is expected, but the customer demonstrates significant weakness in debt servicing or security cover that could jeopardise repayment of debt on current terms if not rectified. Potential problem loans are identified using established credit frameworks and policies, which include the ongoing monitoring of facilities through the use of watchlists. Capital resources APRA measures an ADI’s regulatory capital using three measures: • Common Equity Tier 1 Capital (CET1) comprises the highest quality components of capital that consists of paid-up share capital, retained profits and certain reserves, less certain intangible assets, capitalised expenses and software, and investments and retained profits in insurance and funds management subsidiaries that are not consolidated for capital adequacy purposes; Tier 1 Capital being the sum of CET1 and Additional Tier 1 Capital. Additional Tier 1 Capital comprises high quality components of capital that consist of certain securities not included in CET1, but which include loss absorbing characteristics; and Total Regulatory Capital being the sum of Tier 1 Capital and Tier 2 Capital. Tier 2 Capital includes subordinated instruments and other components of capital that, to varying degrees, do not meet the criteria for Tier 1 Capital, but nonetheless contribute to the overall strength of an ADI and its capacity to absorb losses. • • Under APRA’s Prudential Standards, Australian ADIs, including Westpac, are required to maintain a minimum CET1 ratio of at least 4.5%, Tier 1 Capital ratio of at least 6.0% and Total Regulatory Capital ratio of at least 8.0%. APRA may also require ADIs, including Westpac, to meet Prudential Capital Requirements (PCRs) above the minimum capital ratios. APRA does not allow the PCRs for individual ADIs to be disclosed. APRA also requires ADIs to hold additional CET1 buffers comprising of: •a capital conservation buffer (CCB) of 3.5% for ADIs designated by APRA as domestic systemically important banks (D-SIBs) unless otherwise determined by APRA, which includes a 1.0% surcharge for D-SIBs. APRA has determined that Westpac is a D-SIB; and •a countercyclical capital buffer. The countercyclical buffer is set on a jurisdictional basis and APRA is responsible for setting the requirement in Australia. The countercyclical buffer requirement is currently set to zero for Australia and New Zealand. Collectively, the above buffers are referred to as the “Capital Buffer” (CB). Should the CET1 capital ratio fall within the capital buffer range restrictions on the distributions of earnings will apply. This includes restrictions on the amount of earnings that can be distributed through dividends, Additional Tier 1 Capital distributions and discretionary staff bonuses. 1.The provisions for impairment charges on loans and credit commitments were determined under AASB139.

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2019 Westpac Group Annual Report 91 Review of Group operations Capital actions While Westpac’s CET1 capital ratio is above APRA’s ‘unquestionably strong’ benchmark of 10.5%, the Group’s lower cash earnings, new operational risk capital overlays and changes in the calculation of risk weighted assets has impacted the Group’s capital generation over the year. Given our priority for balance sheet strength and our goal to support customer growth, we are seeking to raise approximately $2.5 billion in capital to provide an increased buffer above APRA’s unquestionably strong benchmark. The raising also creates flexibility for changes in capital rules and potential litigation or regulatory action. The raising is expected to lift the Group’s CET1 ratios by around 46-581 basis points. Capital management strategy Westpac’s approach to capital management seeks to ensure that it is adequately capitalised as an ADI. Westpac evaluates its approach to capital management through an Internal Capital Adequacy Assessment Process (ICAAP), the key features of which include: 1 • the development of a capital management strategy, including consideration of regulatory minimums, capital buffers and contingency plans; consideration of both economic and regulatory capital requirements; a stress testing framework that challenges the capital measures, coverage and requirements including the impact of adverse economic scenarios; and consideration of the perspectives of external stakeholders, including rating agencies and equity and debt investors. • • • In light of APRA’s ‘unquestionably strong’ capital benchmarks, Westpac will seek to operate with a CET1 capital ratio above 10.5% in March and September as measured under the existing capital framework. Additional buffers may also be held to reflect challenging or uncertain environments. This also takes into consideration: • Current regulatory capital minimums and the capital conservation buffer (CCB), which together are the total CET1 requirement2; Stress testing to calibrate an appropriate buffer against a downturn; and Quarterly volatility of capital ratios due to the half yearly cycle of ordinary dividend payments. • • Westpac will revise its target capital level once APRA finalises its review of the capital adequacy framework. Total regulatory capital developments On 9 July 2019 APRA announced that it will require the major banks (including Westpac) to lift Total Regulatory Capital by three percentage points of RWA by 1 January 2024 in order to boost loss absorbing capacity and support orderly resolution. APRA also confirmed that its overall long term target of an additional four to five percentage points of loss absorbing capacity remains unchanged, and that it will consider the most feasible alternative method of sourcing the remaining one to two percentage points, taking into account the particular characteristics of the Australian financial system. Further details of APRA’s regulatory changes are set out in the Significant Developments section of the 2019 Annual Report. 2 3 4 1.Based on risk weighted assets as at 30 September 2019, a 46 basis point increase reflects the impact of the placement only of $2 billion, while a 58 basis point increase reflects the impact of both the placement and the share purchase plan, assuming the share purchase plan raises $500 million (the basis point impacts are net of issue costs). 2. Noting that APRA may apply higher CET1 requirements for an individual ADI.

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92 2019 Westpac Group Annual Report Review of Group operations Basel Capital Accord APRA’s Prudential Standards are generally consistent with the International Regulatory Framework for Banks, also known as Basel III, issued by the Basel Committee on Banking Supervision (BCBS), except where APRA has exercised certain discretions. On balance, the application of these discretions acts to reduce capital ratios reported under APRA’s Prudential Standards relative to the BCBS approach and to those reported in some other jurisdictions. Westpac is accredited by APRA to apply advanced models permitted by the Basel III global capital adequacy regime to the measurement of its regulatory capital requirements. Westpac uses the Advanced Internal Ratings Based approach for credit risk, the Advanced Measurement Approach (AMA) for operational risk and the internal model approach for Interest Rate Risk in the Banking Book (IRRBB). Westpac’s Level 2 regulatory capital ratios as at 30 September are summarised in the table below. As the table summarises Westpac’s Level 2 regulatory capital structure, the capital amounts shown are not the same as the Westpac Group’s consolidated financial statements. Westpac’s Pillar 3 Report provides further details regarding Westpac’s capital structure. Westpac’s Level 2 regulatory capital ratios as at 30 September are summarised in the table below. Westpac’s Pillar 3 Report provides further details regarding Westpac’s capital structure. $m 2019 2018 Common equity Deductions from common equity 64,320 (18,568) 63,576 (18,337) Total common equity after deductions Additional Tier 1 capital 45,752 9,299 45,239 9,144 Net Tier 1 regulatory capital 55,051 54,383 Tier 2 capital Deductions from Tier 2 capital 12,226 (255) 8,565 (233) Total Tier 2 capital after deductions 11,971 8,332 Total regulatory capital 67,022 62,715 Credit risk Market risk Operational risk Interest rate risk in the banking book Other assets 367,864 9,350 47,680 530 3,370 362,749 6,723 39,113 12,989 3,810 Total risk weighted assets 428,794 425,384 Common Equity Tier 1 capital ratio Additional Tier 1 capital ratio 10.67% 2.17% 10.63% 2.15% Tier 1 capital ratio Tier 2 capital ratio 12.84% 2.79% 12.78% 1.96% Total regulatory capital ratio 15.63% 14.74%

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2019 Westpac Group Annual Report 93 Divisional performance Divisional performance – 2019 v 2018 On 19 March 2019, the Group announced changes to the way it supports customer’s wealth and insurance needs, realigning its BT Financial Group (BTFG) businesses into expanded Consumer and Business divisions and exiting the provision of personal financial advice by Westpac Group salaried financial advisers and authorised representatives. As a result, the insurance business was transferred to Consumer, the funds management business was transferred to Business , and the Advice business and certain support functions were transferred to Group Businesses. Changes to the Group’s organisation structure were effective from 1 April 2019 and the results of the operating segments for 2018 and 2017 have been restated. Westpac reports under the following four primary customer-facing business divisions: 1 • Consumer: – is responsible for sales and service of banking and financial products and services to consumer customers in Australia; responsible for the Group’s Australian insurance business, which covers the manufacture and distribution of life, general and lenders mortgage insurance; and operates under the Westpac, St.George, BankSA, Bank of Melbourne, RAMS and BT brands. – – • Business: – is responsible for sales and service of banking and financial products and services for SME and commercial business customers in Australia. SME and Commercial business customers typically have facilities up to approximately $150 million; is responsible for Private Wealth, serving the banking needs of high net worth customers across the banking brands; is responsible for the manufacture and distribution of investments (including margin lending and equities broking), superannuation and retirement products as well as wealth administration platforms; and operates under the Westpac, St.George, BankSA, Bank of Melbourne and BT brands. – – – • Westpac Institutional Bank: – is responsible for delivering a broad range of financial products and services to commercial, corporate, institutional and government customers with connections to Australia and New Zealand; services include financing, transactional banking, financial and debt capital markets; customers are supported throughout Australia, as well as via branches and subsidiaries located in New Zealand, US, UK and Asia; and also responsible for Westpac Pacific, providing a range of banking services in Fiji and Papua New Guinea. – – – • Westpac New Zealand: – – – responsible for sales and service of banking, wealth and insurance products to customers in New Zealand; customer base includes consumers, business and institutional customers; and operates under the Westpac brand for banking products, the Westpac Life brand for life insurance products and the BT brand for wealth products. • Group Businesses include: – Treasury, which is responsible for the management of the Group’s balance sheet including wholesale funding, capital and management of liquidity. Treasury also manages the interest rate risk and foreign exchange risks inherent in the balance sheet, including managing the mismatch between Group assets and liabilities. Treasury’s earnings are primarily sourced from managing the Group’s balance sheet and interest rate risk, (excluding Westpac New Zealand) within set risk limits; Group Technology, which comprises functions for the Australian businesses, is responsible for technology strategy and architecture, infrastructure and operations, applications development and business integration; Core Support, which comprises functions performed centrally, including Australian banking operations, property services, strategy, finance, risk, compliance, legal, human resources, and customer and corporate relations; Following the Group’s decision to restructure the Wealth operating segment and to exit of the Advice business in March 2019, the remaining Advice activities (including associated remediation) and certain support functions have been transferred to Group Businesses; and Group Businesses also includes earnings on capital not allocated to divisions, certain intra-group transactions that facilitate presentation of performance of the Group’s operating segments, earnings from non-core asset sales, earnings and costs associated with the Group’s Fintech investments, and certain other head office items such as centrally held provisions. 2 – – – 3 – The accounting standard AASB 8 Operating Segments requires segment results to be presented on a basis that is consistent with information provided internally to Westpac’s key decision makers. 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 net profit attributable to owners of Westpac Banking Corporation. 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. 4

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94 2019 Westpac Group Annual Report Divisional performance A reconciliation of cash earnings to net profit attributable to owners of Westpac Banking Corporation for each business division is set out in Note 2 of the Financial Statements. To determine cash earnings, three categories of adjustments are made to statutory results: • • material items that key decision makers at the Westpac Group believe do not reflect operating performance; items that are not considered when dividends are recommended, such as the amortisation of intangibles, impact of Treasury shares and economic hedging; and accounting reclassifications between individual line items that do not impact statutory results. • The discussion of our divisional performance in this section is presented on a cash earnings basis unless otherwise stated. Cash earnings is not directly comparable to statutory results presented in other parts of this Annual Report. Outlined below are the cash earnings adjustments to the reported result: • amortisation of intangible assets: Identifiable intangible assets arising from business acquisitions are amortised over their useful lives, ranging between four and twenty years. This amortisation (excluding capitalised software) is a cash earnings adjustment because it is a non-cash flow item and does not affect cash distributions available to shareholders. The last of these intangible assets were fully amortised in December 2017; fair value (gain)/loss on economic hedges (which do not qualify for hedge accounting under AAS) comprise: – the unrealised fair value (gain)/loss on foreign exchange hedges of future New Zealand earnings impacting non-interest income is reversed in deriving cash earnings as they may create a material timing difference on reported results but do not affect the Group’s cash earnings over the life of the hedge; and – the unrealised fair value (gain)/loss on hedges of accrual accounted term funding transactions are reversed in deriving cash earnings as they may create a material timing difference on reported results but do not affect the Group’s cash earnings over the life of the hedge; ineffective hedges: The unrealised (gain)/loss on ineffective hedges is reversed in deriving cash earnings because the gain or loss arising from the fair value movement in these hedges reverses over time and does not affect the Group’s profits over time; adjustment related to Pendal (previously BTIM): Consistent with prior years’ treatment, this item have been treated as a cash earnings adjustment given their size and that it does not reflect ongoing operations. The Group has indicated that it may sell the remaining 10% shareholding in Pendal at some future date. From September 2018, this adjustment relates to the mark to market of the shares and separation costs related to the original sell down. Any future gain or loss on this shareholding will similarly be excluded from the calculation of cash earnings; Treasury shares: Under AAS, Westpac shares held by the Group in the managed funds and life businesses are deemed to be Treasury shares and the results of holding these shares cannot be recognised in the reported results. In deriving cash earnings, these results are included to ensure there is no asymmetrical impact on the Group’s profits because the Treasury shares support policyholder liabilities and equity derivative transactions which are re-valued in determining income; and accounting reclassifications between individual line items that do not impact reported results comprise: – policyholder tax recoveries: Income and tax amounts that are grossed up to comply with the AAS covering Life Insurance Business (policyholder tax recoveries) are reversed in deriving income and taxation expense on a cash earnings basis; and – operating leases: Under AAS rental income on operating leases is presented gross of the depreciation of the assets subject to the lease. These amounts are offset in deriving non-interest income and operating expenses on a cash earnings basis. for Westpac, AASB 9 and AASB 15 were adopted on 1 October 2018 and as comparatives were not restated, line item movements in our reported results are not directly comparable across periods. In order to provide the operational trends in business, we have revised the 2018 and 2017 cash earnings comparatives as if the standards applied on 1 October 2017, except for expected credit loss provisioning which is not feasible. These adjustments do not impact 2018 and 2017 cash earnings but affect individual line items. These adjustments are comprised of: • • • • • • – line fees: The Group has reclassified line fees (mostly Business) from non-interest income to net interest income to more appropriately reflect the relationship with drawn lines of credit; card scheme: Support payments received from Mastercard and Visa have been reclassified to non-interest income and related expenses have been reclassified to operating expenses; interest carrying adjustment: Interest on performing loans (stage 1 and stage 2 loans) is now measured on the gross loan value. Previously, interest on performing loans was recognised on the loan balance net of provisions. This adjustment increases interest income and impairment charges; other fees and expenses: The Group has restated the classification of a number of fees and expenses. This has resulted in the grossing up of net interest income, non-interest income, impairment charges and operating expenses; and merchant terminal costs: Some variable costs related to Westpac’s merchant terminal business have been reclassified between non-interest income and operating expenses. – – – –

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2019 Westpac Group Annual Report 95 Divisional performance The guidance provided in Australian Securities and Investments Commission (ASIC) Regulatory Guide 230 has been followed when presenting this information. Comparatives have also been restated for: • recent customer migration between divisions. This includes restatements to divisional income statements and balance sheets; refinement in expense allocations; and changes to the Group’s organisation structure following the realignment of the BTFG businesses into Consumer, Business and Group Businesses. • • 1 Cash earnings by division The following tables present, for each of the key divisions of our business, the cash earnings and total assets at the end of the financial years ended 30 September 2019, 2018 and 2017. Refer to Note 2 to the financial statements for the disclosure of our geographic and business segments and the reconciliation to net profit attributable to owners of Westpac Banking Corporation. $m 2019 2018 2017 In presenting divisional results on a management reporting basis, internal charges and transfer pricing adjustments are included in the performance of each division reflecting the management structure rather than the legal entity (these results cannot be compared to results for individual legal entities). Where management reporting structures or accounting classifications have changed, financial results for comparative periods have been revised and may differ from results previously reported. Our internal transfer pricing frameworks facilitate risk transfer, profitability measurement, capital allocation and business unit alignment, tailored to the jurisdictions in which we operate. Transfer pricing allows us to measure the relative contribution of our products and divisions to the Group’s interest margin and other dimensions of performance. Key components of our transfer pricing frameworks are funds transfer pricing for interest rate and liquidity risk and allocation of basis and contingent liquidity costs, including capital allocation. Additional provisions Net profit for 2019 was impacted by additional provisions after tax of $1,130 million for: •Estimated customer refunds and payments, associated costs, and litigation of $958 million; and • Restructuring costs associated with the restructuring of the Wealth business of $172 million. The tables below show the impact of the estimated customer refunds, payments, associated costs, litigation, and restructuring costs on the divisions for 2019 and 2018. Restructuring costs associated with the restructuring of the wealth business is only reflected in Group Business and were only incurred in 2019. 2019 Westpac Institutional Bank Westpac New Zealand ($A) 2 Group Businesses $m Consumer Business Group Net interest income Non-interest income Benefits/(expenses) (85) (2) 25 (246) (55) (87) – – – (13) (4) (15) – (759) (384) (344) (820) (461) Core earnings Tax and non-controlling interests (62) 29 (388) 118 – – (32) 9 (1,143) 339 (1,625) 495 Cash earnings (33) (270) – (23) (804) (1,130) 3 2018 Westpac Institutional Bank Westpac New Zealand ($A) Group Businesses $m Consumer Business Group Net interest income Non-interest income Expenses (99) (12) (39) – – (5) – – – (2) (11) (3) (4) (140) (65) (105) (163) (112) Core earnings Tax and non-controlling interests (150) 36 (5) – – – (16) 4 (209) 59 (380) 99 4 Cash earnings (114) (5) – (12) (150) (281) Consumer Business Westpac Institutional Bank Westpac New Zealand Group Businesses 3,288 2,431 1,014 985 (869) 3,423 3,452 2,756 2,554 1,0931,163 934 917 (141)(24) Total cash earnings 6,849 8,065 8,062

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96 2019 Westpac Group Annual Report Divisional performance Consumer Consumer is responsible for sales and service to consumer customers in Australia. Consumer is also responsible for the Group’s insurance business which covers the manufacture and distribution of life, general and lenders mortgage insurances. The division also uses a third party to manufacture certain general insurance products. Banking products are provided under the Westpac, St.George, BankSA, Bank of Melbourne, and RAMS brands, while insurance products are provided under Westpac and BT brands. Consumer works with Business and WIB in the sales, service, and referral of certain financial services and products including superannuation, platforms, auto lending and foreign exchange. The revenue from these products is mostly retained by the product originators. Financial performance $m 2019 2018 2017 2019 v 2018 Cash earnings were 4% lower from a decline in non-interest income mainly reflecting weather related general insurance claims, and an increased impairment charge. Cash earnings also benefited from a reduction in provisions for estimated customer refunds, payments, associated costs and litigation. Non-interest income down $170 million, 13% • The decline was mostly due to lower insurance income down ($116 million), from higher weather related claims ($70 million), and lower life insurance income related to the impact of the Protecting Your Super legislation and from higher claims; and Lower fee income from a contraction in net interchange fees and reduced transaction volumes across banking products. • Impairment charges up $95 million, 20% • Credit quality remains sound, although stress was higher with stressed exposures to TCE at 0.81% up 16 basis points consistent with the deterioration in the operating environment; Mortgage 90+ day delinquencies were up 16 basis points to 0.90% while other consumer 90+ day delinquencies were up 25 basis points; and Impairment charges were higher driven by the rise in delinquencies. • • Operating• Operating expenses benefited from the reversal of provisions raised for estimated associated expenses up $43 costs and litigation in respect to customer refunds and payments, a benefit of $25 million, million, 1%compared to a charge of $39 million in 2018. Excluding the benefit of this turnaround, operating expenses were up 3%; •The rise was due to higher investment related costs including for the customer service hub, and costs associated with regulatory change projects; and •Higher costs from annual salary reviews and inflation based increases were more than offset by productivity gains of $125 million mostly from organisational redesign, rationalisation of 57 branches and 349 ATMs, and further use of digital channels, all of which contributed to a reduction in FTE. Lower variable remuneration also contributed. Net interest income • Lending increased 1% with growth in mortgages, partly offset by a decline in other personal up $92 million, 1%lending and higher provisions associated with the adoption of AASB 9. The decline in personal lending was due to a 6% reduction in cards and lower personal loans; •A 4% rise in transaction accounts, and 5% increase in savings accounts supported the 2% rise in deposits. Term deposits were 6% lower; and •Net interest margin was down 3 basis points. The decline was due to lower mortgage spreads from increased competition and changes in mortgage mix with less interest only lending. The decline was partly offset by mortgage repricing late in 2018. Net interest income Non-interest income 7,942 1,141 7,850 7,733 1,3111,351 Net operating income before operating expenses and impairment charges Operating expenses Impairment charges 9,083 (3,817) (581) 9,1619,084 (3,774)(3,548) (486) (600) Profit before income tax Income tax expense 4,685 (1,397) 4,9014,936 (1,478) (1,484) Cash earnings for the year Net cash earnings adjustments 3,288 – 3,423 3,452 (15) (116) Net profit attributable to owners of Westpac Banking Corporation 3,288 3,408 3,336 Deposits and other borrowings Net loans Total assets $bn 209.3 388.5 399.2 $bn $bn 206.2 196.2 385.4 370.3 395.6 381.8 Total operating expenses to net operating income ratio 42.02% 41.20%39.06%

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2019 Westpac Group Annual Report 97 Divisional performance Business Business provides business banking and wealth facilities and products for customers across Australia. Business is responsible for manufacturing and distributing facilities to SME and Commercial business customers (including Agribusiness) generally for up to $150 million in exposure. SME customers include relationship managed and non-relationship managed SME customers (generally between $100k-$250k facilities). The division offers a wide range of banking products and services to support their borrowing, payments and transaction needs. In addition, specialist services are provided for cash flow finance, trade finance, automotive and equipment finance and property finance. The division is also responsible for Private Wealth and the manufacture and distribution of investments (including margin lending and equities broking), superannuation and retirement products as well as wealth administration platforms. Business operates under the Westpac, St.George, BankSA, Bank of Melbourne, and BT brands. Business works with Consumer and WIB in the sale, referral and service of select financial services and risk management products (including corporate superannuation, foreign exchange and interest rate hedging). The revenue from these products is mostly retained by the product originators. 1 Financial performance $m 2019 2018 2017 2019 v 2018 Cash earnings of $2,431 million were $325 million (or 12%) lower than 2018 with performance impacted by provisions for estimated customer refunds and payments and associated costs of $270 million after tax. Excluding these provisions, cash earnings were $60 million or 2% lower from a reduction in non-interest income and increased regulatory expenditure, partially offset by an increase in net interest margin and a reduction in impairment charges. 4% offset by a 4% decline in term deposits; and 2 Non-interest income down $176 million, 11% • Provisions for estimated customer refunds and payments of $55 million contributed to a decrease in non-interest income. Excluding these provisions, non-interest income was down $121 million or 7% mostly due to: – A reduction in merchant income due to changes in scheme charges; and – Lower wealth income ($85 million) from platform margin compression due to new platform pricing, product mix changes, the cessation of grandfathered commission payments and implementation of Protecting Your Super reforms. 3 4 Impairment charges down $49 million, 15% • The level of stressed exposures increased 24 basis points from increased Commercial stressed exposures across a broad number of industries; and Impairment charges decreased from lower individual and collective provisions. • Operating • Provisions for estimated costs of $87 million, to implement the division’s remediation expenses up $154program, was one of the main drivers increasing expenses. Excluding these costs, expenses million, 6% were up 3% due to; – Higher regulatory and compliance costs as well as increased amortisation of investments and wealth project costs; and – Other cost increases, mostly salary rises, were largely offset by lower variable reward and productivity benefits including operating model simplification and continued digitisation and product simplification. Net interest income• Lending was largely flat with growth in business lending offset by slower new auto lending; down $192 million, • Deposits increased 3% mostly in transaction and at call balances. These gains were partly •Net interest margin declined 12 basis points with provisions for customer refunds and payments ($246 million) contributing 15 basis points to the decline. Excluding this impact, the net interest margin was up 3 basis points from loan repricing, partly offset by lower deposit spreads and a shift in the mortgage mix from interest only to principal and interest. Net interest income Non-interest income 5,092 1,464 5,284 4,950 1,640 1,617 Net operating income before operating expenses and impairment charges Operating expenses Impairment charges 6,556 (2,805) (272) 6,924 6,567 (2,651) (2,548) (321) (369) Profit before income tax Income tax expense 3,479 (1,048) 3,952 3,650 (1,196)(1,096) Cash earnings for the year Net cash earnings adjustments 2,431 (45) 2,756 2,554 (76) 150 Net profit attributable to owners of Westpac Banking Corporation 2,386 2,6802,704 Deposits and other borrowings Net loans Total assets $bn 147.8 173.0 187.4 $bn $bn 143.8137.9 173.6 169.4 188.2183.7 Total operating expenses to net operating income ratio 42.79% 38.29% 38.80%

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98 2019 Westpac Group Annual Report Divisional performance Westpac Institutional Bank Westpac Institutional Bank (WIB) delivers a broad range of financial products and services to commercial, corporate, institutional and government customers operating in, or with connections to Australia and New Zealand. WIB operates through dedicated industry relationship and specialist product teams, with expert knowledge in financing, transactional banking, and financial and debt capital markets. Customers are supported throughout Australia and via branches and subsidiaries located in New Zealand, the US, UK and Asia. WIB is also responsible for Westpac Pacific providing a full range of banking services in Fiji and PNG. WIB works with all the Group’s divisions in the provision of markets related financial needs including foreign exchange and fixed interest solutions. Financial performance $m 2019 2018 2017 Net interest income Non-interest income 1,443 1,292 1,442 1,565 1,354 1,716 Net operating income before operating expenses and impairment charges Operating expenses Impairment (charges)/benefits 2,735 (1,284) (46) 3,007 (1,449) 16 3,070 (1,358) (79) Profit before income tax Income tax expense Profit attributable to non-controlling interests 1,405 (386) (5) 1,574 (476) (5) 1,633 (463) (7) Cash earnings for the year Net cash earnings adjustments 1,014 – 1,093 – 1,163 – Net profit attributable to owners of Westpac Banking Corporation 1,014 1,093 1,163 $bn 101.3 75.4 98.0 $bn 104.9 77.4 102.5 $bn 92.2 74.8 103.3 Deposits and other borrowings Net loans Total assets Total operating expenses to net operating income ratio 46.95% 48.19% 44.23% 2019 v 2018 Cash earnings of $1,014 million was $79 million (or 7%) lower compared to 2018, primarily from a $78 million movement in derivative valuation adjustments, no contribution from Hastings and a $62 million increase in impairment charges. The exit of Hastings in 2018 had a $17 million impact on cash earnings but had a more significant impact on the movements in individual line items. In 2018 Hastings added $203 million to non-interest income, $158 million to expenses and $29 million to tax. Non-interest income down $273 million, 17% • Excluding Hastings (2018 $203 million; 2019 nil), non-interest income was down $70 million, or 5%, from: – A $78 million movement in derivative valuation adjustment (a $14 million benefit in 2018 to a $64 million charge in 2019); and Partly offset by increase in syndication fees from some large transactions in 2019. – down $165 million, reward costs; and Partly offset by higher regulatory, risk and compliance costs, particularly related to – Impairment charge of $46 million (compared to a benefit of $16 million in FY18) • Credit quality remains sound with stressed exposures to TCE of 0.68%. This was up 2 basis point over the year but remains low in historical terms; and Impairment charges were higher due to provisions associated with the migration of two long standing stressed exposures into impaired. • Operating• Excluding Hastings (2018 $158 million; 2019 nil), expenses were down $7 million, or 1%, from expenses – Productivity benefits from organisation redesign (FTE down 8%) and lower variable 11% updated requirements for the new Banking Code of Practice and responding to regulator requests. Net interest income• Net loans were 3% lower reflecting a focus on return. This included a decline in property up $1 million, flat lending; • Deposits were 3% lower, mostly from a reduction in government balances; and •Net interest margin down 1 basis point from lower deposits spreads and a change in funding mix, partly offset by higher loan spreads consistent with the return focus.

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2019 Westpac Group Annual Report 99 Divisional performance Westpac New Zealand Westpac New Zealand is responsible for sales and service of banking, wealth and insurance products for consumers, business and institutional customers in New Zealand. Westpac conducts its New Zealand banking business through two banks in New Zealand: Westpac New Zealand Limited, which is incorporated in New Zealand and Westpac Banking Corporation (New Zealand Branch), which is incorporated in Australia. Westpac New Zealand operates via an extensive network of branches and ATMs across both the North and South Islands. Business and institutional customers are also served through relationship and specialist product teams. Banking products are provided under the Westpac brand while insurance and wealth products are provided under Westpac Life and BT brands, respectively. New Zealand also maintains its own infrastructure, including technology, operations and treasury. 1 Financial performance NZ$m 2019 2018 2017 Net interest income Non-interest income 1,967 448 1,958 406 1,819 438 Net operating income before operating expenses and impairment charges Operating expenses Impairment (charges)/benefits 2,415 (993) 10 2,364 (930) (25) 2,257 (949) 55 Profit before income tax Income tax expense Profit attributable to non-controlling interests 1,432 (390) – 1,409 (393) – 1,363 (392) – Cash earnings for the year Net cash earnings adjustments 1,042 (1) 1,016 14 971 (15) Net profit attributable to owners of Westpac Banking Corporation 1,041 1,030 956 $bn 64.5 84.2 97.1 11.5 $bn 61.9 80.4 90.0 10.7 $bn 58.4 77.3 88.3 10.1 Deposits and other borrowings1 Net loans Total assets Total funds Total operating expenses to net operating income ratio 41.12% 39.34% 42.05% 2019 v 2018 Cash earnings increased 3% over 2018. The increase in cash earnings was supported by a NZ$40 million gain on the sale of Paymark, and a NZ$10 million impairment benefit partly offset by higher risk management and regulatory costs. 2 Non-interest income up NZ$42 million, 10% • The gain on sale of Paymark contributed most (NZ$40 million) of the increase in non-interest income; Higher investment income from a 7% increase in fund balances, higher business fees, and a reduction in provisions for customer refunds and payments, also contributed to the increase; and This was partly offset by lower fee income following the decision to simplify certain consumer fees. • • 3 Impairment benefit of NZ$10 million (compared to an impairment charge of NZ$25 million in FY18) • Credit quality remains sound, with stressed exposures to TCE of 1.66%, 9 basis points higher than September 2018 with most of the increase in stress in exposures that are well secured. Other consumer 90+ day delinquencies increased 20 basis points to 82 basis points, with much of the rise due to the decline in the portfolio; and Impairment benefit mostly from write-back of collectively assessed provision. 4 • 1.Refers to total customer deposits in this table. Operating• Most of the increase was driven by further investment in risk management and regulatory expenses up programs. NZ$63 million, 7%• Provisions for estimated costs of NZ$16 million, to implement the division’s remediation program also contributed to the increase; and • Excluding investment and the above provisions, costs were broadly unchanged with increases in salaries and other inflation linked costs offset by productivity savings from increased digitisation of activities, with FTE down 1% and lower variable remuneration. Net interest income• Loans increased 5%, or NZ$3.8 billion. Mortgages increased NZ$2.6 billion, with the majority up NZ$9 million, of mortgage growth in fixed rate products. Business growth (up NZ$1.3 billion) was Flatdistributed across a range of sectors; • Deposits increased 4% with a NZ$1.7 billion rise in non-interest bearing and at call accounts and a NZ$0.9 billion rise in term deposits; and •Net interest margin declined 8 basis points. Most of the decline (5 basis points) was due to mix from the increase in lower spread products, particularly fixed rate mortgages. A fall in deposit spreads from lower interest rates also contributed to the decline in margin.

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100 2019 Westpac Group Annual Report Divisional performance AUD$m 2019 2018 2017 Net interest income Non-interest income 1,860 423 1,799 373 1,706 410 Net operating income before operating expenses and impairment charges Operating expenses Impairment (charges)/benefits 2,283 (939) 10 2,172 (855) (22) 2,116 (890) 51 Profit before income tax Income tax expense Profit attributable to non-controlling interests 1,354 (369) - 1,295 (361) - 1,277 (360) - Cash earnings for the year Net cash earnings adjustments 985 (1) 934 13 917 (14) Net profit attributable to owners of Westpac Banking Corporation 984 947 903 $bn $bn $bn Deposits and other borrowings Net loans Total assets Total funds Total operating expenses to net operating income ratio1 59.7 78.0 90.0 10.7 41.12% 56.7 73.6 82.4 9.8 39.34% 53.7 71.1 81.3 9.3 42.05% 1.Ratios calculated using NZ$.

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2019 Westpac Group Annual Report 101 Divisional performance Group Businesses This segment comprises: • Treasury, which is responsible for the management of the Group’s balance sheet including wholesale funding, capital and the management of liquidity. Treasury also manages the interest rate risk and foreign exchange risks inherent in the balance sheet, including managing the mismatch between Group assets and liabilities. Treasury’s earnings are primarily sourced from managing the Group’s balance sheet and interest rate risk, (excluding Westpac New Zealand) within set risk limits; Group Technology1, which is responsible for technology strategy and architecture, infrastructure and operations, applications development and business integration in Australia; Core Support2, which comprises functions performed centrally, including Australian banking operations, property services, strategy, finance, risk, compliance, legal, human resources, and customer and corporate relations; and Following the Group’s decision to restructure its wealth operations and exit its Advice business in March 2019, the residual Advice operations (including associated remediation) and certain support functions of BTFG Australia have been transferred to Group Businesses. • 1 • • Group Technology costs are fully allocated to other divisions in the Group. Core Support costs are partially allocated to other divisions, while Group Head Office costs are retained in Group Businesses. Group Businesses also includes earnings on capital not allocated to divisions, certain intra-group transactions that facilitate the presentation of the performance of the Group’s divisions, gains/losses from most asset sales, earnings and costs associated with the Group’s Fintech investments, and certain other head office items such as centrally raised provisions. Financial performance $m 2019 2018 2017 Net interest income Non-interest income 616 (618) 812 89 712 181 Net operating income before operating expenses and impairment charges Operating expenses Impairment benefits (2) (1,186) 95 901 (969) 1 893 (834) 43 Profit before income tax Income tax (expense)/benefit Profit attributable to non-controlling interests (1,093) 225 (1) (67) (75) 1 102 (126) – Cash earnings for the year Net cash earnings adjustments (869) (19) (141) 108 (24) (92) Net profit attributable to owners of Westpac Banking Corporation (888) (33) (116) 2019 v 2018 Provisions for estimated customer refunds, payments, associated costs, and litigation of $632 million and costs associated with the Wealth Reset of $172 million incurred during the year was the key driver of the cash earnings loss of $869 million in 2019. Excluding provisions for estimated customer refunds, payments, associated costs, and litigation and costs associated with the Wealth Reset, Group Businesses cash earnings was $74 million lower as the division recorded a loss of $65 million in 2019 compared to cash earnings of $9 million in 2018. The result was driven by a lower contribution from Treasury partially offset by a higher impairment benefit. 2 million, large to Advice; 3 Operating expenses up $217 million, large • Estimated costs associated with implementing customer refunds and payments, the Wealth Reset and litigation were $319 million higher; and Lower costs associated with the Royal Commission ($62 million) and lower variable reward. • 4 1.Costs are fully allocated to other divisions in the Group. 2. Costs are partially allocated to other divisions in the Group, with costs attributed to enterprise activity retained in Group Businesses. Impairment• An impairment benefit of $95 million reflect a reduction in centrally held overlays in 2019, benefit $95 million, principally for the mining sector, partially offset by the introduction of an overlay for areas in a $94 millionAustralia impacted by persistent drought conditions, compared to a $1 million benefit in 2018. increase Net operating• Net operating income was lower primarily from: income down $903 – an increased charge for estimated customer refunds and payments ($619 million) related – a reduced contribution from Treasury related to interest rate risk management (down $230 million) and lower Advice income; partly offset by – a gain on asset sales and revaluation gains on a fintech investment ($24 million).

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102 2019 Westpac Group Annual Report Risk and risk management Risk factors Our business is subject to risks that can adversely impact our financial performance, financial condition and future performance. If any of the following risks occur, our business, prospects, reputation, financial performance or financial condition could be materially adversely affected, with the result that the trading price of our securities could decline and as a security holder you could lose all, or part, of your investment. You should carefully consider the risks described and the other information in this Annual Report before investing in our securities. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently deem to be immaterial, may also become important factors that affect us. Risks relating to our business Our businesses are highly regulated and we have been and could be adversely affected by changes in laws, regulations or regulatory policy As a financial institution, we are subject to detailed laws and regulations in each of the jurisdictions in which we operate or obtain funding, including Australia, New Zealand, the United Kingdom, the United States and various jurisdictions in Asia and the Pacific. We are also supervised by a number of different regulatory and supervisory authorities which have broad administrative powers over our businesses. The Group’s business, prospects, reputation, financial performance and financial condition could all be affected by changes to law and regulation, changes to policies and changes in the supervisory activities and expectations of our regulators. The Group is currently operating in an environment where there is increased scrutiny of the financial services sector and specifically, increased scrutiny of financial services providers by regulators. In this environment, the Group faces increasing supervision and regulation in the jurisdictions in which we operate or obtain funding. This environment has also served to increase the pace and scope of regulatory change. Regulatory change could directly and adversely affect the Group’s financial condition and financial position. In recent years, new laws have required Westpac to maintain increased levels of liquidity and hold higher levels of, and better quality, capital and funding. Regulatory change may continue in this area. Regulation also affects the way we operate our business. New regulation could require us to change our existing business models (including by imposing restrictions on the types of businesses we can conduct) or amend our corporate structure. Recently, policy makers and regulators have developed and implemented a range of regulations that affect how we provide products and services to our customers. New laws have been introduced that further regulate our ability to provide products and services to certain customers and that require us to alter our product and service offerings. Our ability to set prices for certain products and services may also be impacted by future regulation. The competitive landscape may also be altered by new laws affecting banks and financial services companies, or our agents, authorised representatives and external service providers. The phasing in of Open Banking is one example of new laws that are likely to affect competition amongst banks and other financial services providers in Australia. Regulatory changes of this type could adversely affect one or more of our businesses, restrict our flexibility, require us to incur substantial costs, impact the profitability of one or more of our business lines, result in the Group being unable to increase or maintain market share and/or create pressure on our margins and fees, any of which could adversely affect our business, prospects, financial performance or financial condition. There are numerous sources of regulatory change that could affect our business. In some cases, changes to regulation are driven by international bodies, such as the Basel Committee on Banking Supervision (BCBS). Regulatory change may also flow from reviews and inquiries commissioned by Governments or regulators. These reviews and commissions of inquiry may lead to, and in some cases already have led to, substantial regulatory change or investigations, which could have a material impact on our business, prospects, reputation, financial performance or financial condition. It is also possible that governments or regulators in jurisdictions in which we operate or obtain funding might revise their application of existing regulatory policies that apply to, or impact, our business (including by instituting macro-prudential limits on lending). Regulators or governments may take this action for a variety of reasons, including for reasons relating to national interest and/or systemic stability. Regulatory changes and the timing of their introduction continue to evolve and we manage our businesses in the context of regulatory uncertainty and complexity. The nature and impact of future changes are not predictable and are beyond our control. Regulatory compliance and the management of regulatory change are an important part of our planning processes. We expect that we will continue to invest significantly in compliance and the management and implementation of regulatory change and, at the same time, significant management attention and resources will be required to update existing or implement new processes to comply with new regulations (such as obligations to provide certain data and information to regulators) or new interpretations of existing laws or regulations. The failure of the Group to appropriately manage and implement regulatory change, including by failing to implement effective processes to comply with new regulations, has, in some instances, resulted in, and could in the future result in, the Group failing to meet a compliance obligation. Further information about the consequences of failing to meet a compliance obligation is set out in the section titled ‘Our businesses are highly regulated and we have been or could be adversely affected by failing to comply with laws, regulations or regulatory policy’ below. Another consideration in managing regulatory change arises when regulation is introduced in one jurisdiction in which we operate that conflicts with the way it is introduced in other jurisdictions in which we operate. For further information about regulatory changes affecting the Group, refer to ‘Significant developments’ in Section 1 and the sections ‘Critical accounting assumptions and estimates’ and ‘Future developments’ in Note 1 to the financial statements.

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2019 Westpac Group Annual Report 103 Risk and risk management Our businesses are highly regulated and we have been or could be adversely affected by failing to comply with laws, regulations or regulatory policy We are responsible for ensuring that we comply with all applicable legal and regulatory requirements and industry codes of practice in the jurisdictions in which we operate or obtain funding, as well as meeting our ethical standards. The Group is subject to compliance risk, which is the risk of legal or regulatory sanction or financial or reputational loss, arising from our failure to abide by the compliance obligations required of us. This risk is exacerbated by the increasing complexity and volume of regulation and can also arise where we interpret our obligations and rights differently to our regulators or a Court. The potential for this to occur may be heightened in circumstances where regulation is untested and/or not accompanied by extensive regulatory guidance. The Group employs a compliance management system which is designed to identify, assess and manage compliance risk. While this system is currently in place, it may not always have been or continue to be effective. Breakdowns may occur in this system due, for example, to flaws in the design of controls or processes. This has resulted in, and may in the future result in, potential breaches of our compliance obligations, as well as poor customer outcomes. The Group also depends on its employees, contractors, agents, authorised representatives and external service providers to ‘do the right thing’ for it to meet its compliance obligations. Inappropriate conduct by these individuals, such as neglecting to follow a policy or engaging in misconduct, could result in poor customer outcomes and a failure by the Group to comply with compliance obligations. The Group’s failure, or suspected failure, to comply with a compliance obligation could lead to a regulator commencing surveillance or an investigation into the Group. This may, depending on the circumstances, result in the regulator taking administrative or enforcement action against the Group and/or its representatives. Regulators could seek to pursue civil or criminal proceedings, seeking substantial fines, civil penalties or other enforcement outcomes. In addition, the failure or alleged failure of our competitors to comply with their obligations could lead to increased regulatory scrutiny across the financial services sector. In many cases, our regulators have broad powers. For example, under the Banking Act 1959 (Cth), APRA can, in certain circumstances, issue a direction to us (such as a direction to comply with a prudential requirement, to conduct an audit, to remove a Director, executive officer or employee, to take remedial action or not to undertake transactions) or disqualify an ‘Accountable Person’ under the Banking and Executive Accountability Regime. APRA also has the power to require us to hold additional capital, which they exercised earlier this year by applying a $500 million overlay to our operational risk capital requirement following the completion of our self-assessment into our frameworks and practices in relation to governance, culture and accountability. If the Group incurs additional capital overlays in the future it may need to raise additional capital which could have an adverse impact on our business, prospects, financial performance and financial condition. The current political and regulatory environment that the Group is operating in has also seen (and may in the future see) our regulators receive new powers. Recently, legislation was passed by the Australian Parliament that provided ASIC with a product intervention power which enables ASIC to make orders that prevent issuers of financial products from engaging in certain conduct. In addition, legislation has been passed that materially increases the penalties that can be imposed for corporate and financial sector misconduct. In particular, ASIC can commence civil penalty proceedings and seek significant civil penalties against an Australian Financial Services licensee (such as Westpac) for failing to do all things necessary to ensure that financial services provided under the licence are provided efficiently, honestly and fairly. The Group may also face significant penalties for failing to comply with other obligations, such as those provided for under the recently legislated Consumer Data Right. This trend towards increasingly severe penalties for failing to meet compliance obligations could continue in the future and be expanded into other areas of regulation that the Group is subject to. Changes may also occur in the oversight approach of regulators, which could result in a regulator preferring its enforcement powers over a more consultative approach. In recent years, there have been significant increases in the nature and scale of regulatory investigations, enforcement actions and the quantum of fines issued by global regulators. This dynamic is apparent, with ASIC committing to conducting more enforcement actions against large financial institutions and adopting a ‘why not litigate?’ enforcement stance. ASIC has also continued to implement its ‘Close and Continuous Monitoring’ program, which has seen ASIC staff embedded within the institutions they supervise, including Westpac. APRA has publicly committed to a revised approach to enforcement as well. APRA has indicated that it will use enforcement where appropriate to prevent and address serious prudential risks and hold entities and individuals to account. The current environment may see a shift in the nature of enforcement proceedings commenced by regulators. As well as conducting more civil penalty proceedings, our regulators may be more likely to bring criminal proceedings against institutions and/or their representatives in the future. Alternatively, regulators may elect to make criminal referrals to the Commonwealth Department of Public Prosecutions or other prosecutorial bodies. The provision of new powers to regulators, coupled with the increasingly active supervisory and enforcement approaches adopted by them, increases the prospect of adverse regulatory action being brought against the Group. Further, the severity and consequences of that action are now greater, given the expansion of penalties for corporate and financial sector misconduct. 1 2 3 4

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104 2019 Westpac Group Annual Report Risk and risk management Regulatory action brought against the Group may expose the Group to an increased risk of litigation brought by third parties (including through class action proceedings), which may require the Group to pay compensation to third parties and/or undertake further remediation activities. Regulatory investigations, inquiries, litigation, fines, penalties, infringement notices, revocation, suspension or variation of conditions of relevant regulatory licences or other enforcement or administrative action or agreements (such as enforceable undertakings) could, either individually or in aggregate with other regulatory action, adversely affect our business, prospects, reputation, financial performance or financial condition. For further details about regulatory matters that may affect the Group, refer to ‘Significant Developments’ in Section 1. The failure to comply with financial crime obligations could have an adverse effect on our business and reputation The Group is subject to anti-money laundering and counter-terrorism financing (AML/CTF) laws, anti-bribery and corruption laws, economic and trade sanctions laws and tax transparency laws in the jurisdictions in which it operates. These laws can be complex and, in some circumstances, impose a diverse range of obligations. For example, AML/CTF laws require Westpac and other regulated institutions to (amongst other things) undertake customer identification and verification, conduct ongoing due diligence on customers, maintain and comply with an AML/CTF program and undertake ongoing risk assessments. AML/CTF laws also require Westpac to report certain matters and transactions to regulators (including in relation to International Funds Transfer Instructions, Threshold Transaction Reports and Suspicious Matter Reports) and ensure that certain information is not disclosed to third parties in a way that would contravene the ‘tipping off’ provisions in AML/CTF legislation. In recent years there has been increased focus on compliance with financial crime obligations, with regulators around the globe commencing large-scale investigations and taking enforcement action where they have identified non-compliance (often seeking significant monetary penalties). Further, due to the large volume of transactions that the Group processes, the undetected failure or the ineffective implementation, monitoring or remediation of a system, policy, process or control (including in relation to a regulatory reporting obligation) has in some instances, and could in the future result in, a significant number of breaches of AML/CTF obligations. This in turn could lead to significant monetary penalties. While the Group has systems, policies, processes and controls in place that are designed to manage its financial crime obligations (including its reporting obligations), these have not always been, and may not in the future always be effective. The Group is currently undertaking a multi-year program designed to address areas of control weaknesses in its financial crime management framework and improve the management of this risk class. If we fail, or where we have failed, to comply with these obligations, we could face regulatory enforcement action such as litigation, significant fines, penalties and the revocation, suspension or variation of licence conditions. As reported in the Group’s 2018 Annual Report, the Group self-reported to AUSTRAC a failure to report a large number of ITFIs (as required under Australia’s AML/CTF Act). AUSTRAC has issued a number of detailed statutory notices over the last year requiring information relating to the Group’s processes, procedures and oversight. These notices relate to a range of matters including these IFTI reporting failures and associated potential failings related to record keeping and obligations to obtain and pass on certain data in funds transfer instructions, as well as correspondent banking due diligence, risk assessments and transaction monitoring. Further information is set out in ‘Significant Developments’ in section 1 and in Note 27 to the financial statements. Non-compliance with financial crime obligations could also lead to litigation commenced by third parties (including class action proceedings) and cause reputational damage. These actions could, either individually or in aggregate, adversely affect our business, prospects, reputation, financial performance or financial condition. Reputational damage could harm our business and prospects Our ability to attract and retain customers and our prospects could be adversely affected if our reputation is damaged. Reputation risk is the risk of loss of reputation, stakeholder confidence or public trust and standing. It arises where there are differences between stakeholders’ current and emerging perceptions, beliefs and expectations and our past, current and planned activities, processes, performance and behaviours. There are various potential sources of reputational damage. Westpac’s reputation may be damaged where any of its policies, processes, practices or behaviours result in a negative outcome for a customer or a class of customers. Other potential sources of reputational damage include the failure to effectively manage risks in accordance with our risk management frameworks , failure to comply with legal and regulatory requirements, adverse findings from regulatory reviews (including Westpac-specific and industry-wide reviews), environmental, social and ethical issues, failure of information security systems, technology failures, security breaches and inadequate record keeping which may prevent Westpac from demonstrating that a past decision was appropriate at the time it was made. Westpac may suffer reputational damage where its conduct, practices, behaviours or business activities do not align with the evolving standards and expectations of the community, our regulators and other stakeholders. As these expectations may exceed the standard required in order to comply with the law, Westpac may incur reputational damage even where it has met its legal obligations. Our reputation could also be adversely affected by the actions of the financial services industry in general or from the actions of our competitors, customers, suppliers, joint-venture partners, strategic partners and other counterparties. Furthermore, the risk of reputational damage may be heightened by factors such as the increasing use of social media or the increasing prevalence of groups which seek to publicly challenge the Group’s strategy or approach to aspects of its business.

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2019 Westpac Group Annual Report 105 Risk and risk management Failure, or perceived failure, to appropriately address issues that could or do give rise to reputational risk could also impact the regulatory change agenda, give rise to additional legal risk, subject us to regulatory investigations, regulatory enforcement actions, fines and penalties or litigation brought by third parties (including class actions), require us to remediate and compensate customers and incur remediation costs or harm our reputation among customers, investors and the marketplace. This could lead to loss of business which could adversely affect our business, prospects, financial performance or financial condition. The Royal Commission has led to, and may continue to lead to, regulatory enforcement activity, litigation and changes in laws, regulations or regulatory policy, and has resulted in, and may continue to result in, ongoing reputational damage to the Group, all of which has and may continue to have an adverse effect on our business and prospects The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry investigated (amongst other things) whether any conduct, practices, behaviours or business activities engaged in by financial services entities amounted to potential misconduct, or fell below community standards and expectations. These investigations (including the public hearings, submissions, evidence and findings of the Royal Commission) had, and may continue to have, an adverse impact on the Group’s reputation and potentially the financial performance of the Group’s businesses. In addition, the Royal Commission’s findings have led to, and may continue to lead in the future to, regulators commencing investigations and/or enforcement action against financial institutions (including the Group). This environment has also resulted in an increase in class actions or other litigation being commenced by the Group’s customers, including in relation to matters raised at the Royal Commission. For further information about this risk, refer to the section titled ‘We have and could suffer losses due to litigation (including class action proceedings)’ below. In addition, the recommendations made in the Final Report of the Commission (which was publicly released on 4 February 2019) have resulted and will, depending on how its recommendations are implemented, result in further changes to legislation, and further influence the policies and practices of our regulators. In some instances, this has already had, and may continue to have in the future, an adverse effect on our business, prospects, financial performance or financial condition. The Royal Commission has also led to increased political or regulatory scrutiny of the financial industry in New Zealand, and may continue to do so. 1 We have and could suffer losses due to litigation (including class action proceedings) The Group (and individual entities within the Group) may, from time to time, be involved in legal proceedings, regulatory actions or arbitration arising from the conduct of their business and the performance of their legal and regulatory obligations. Proceedings could be commenced against the Group by a range of potential plaintiffs, such as our customers, shareholders, suppliers and counterparties. These plaintiffs may commence proceedings individually or they may commence class action proceedings. In recent years, there has been an increase in the number of class action proceedings brought against financial services companies (and other organisations more broadly), many of which have resulted in significant monetary settlements. The risk of class action proceedings being commenced is heightened by findings from regulatory investigations or inquiries (such as the Royal Commission into Misconduct in the Financial Services Industry), adverse media, an adverse judgment or the settlement of proceedings brought by a regulator. Furthermore, there is a risk that class action proceedings commenced against a competitor could lead to similar class action proceedings being commenced against the Group. The growth in third party litigation funding in Australia has also contributed to a recent increase in the number of class actions being commenced in Australia. This trend may continue in light of recent court judgments which have clarified the courts’ approach to liability and loss on certain types of class action claims. This clarification may encourage plaintiffs, law firms and funders to bring and maintain class action proceedings, as well as potentially improve the ability of plaintiffs to establish certain types of class action claims. From time to time, class action proceedings are commenced against the Group. For further information about class action proceedings that the Group is currently involved in, refer to Note 27 in the financial statements. Litigation (including class action proceedings) may, either individually or in aggregate, adversely affect the Group’s business, operations, prospects, reputation or financial condition. This risk is heightened by the recent increases in the severity of penalties for certain breaches of the law. Such matters are subject to many uncertainties (for example, the outcome may not be able to be predicted accurately). Furthermore, the Group’s ability to respond to and defend litigation may be adversely affected by inadequate record keeping. Depending on the outcome of any litigation, the Group may be required to comply with broad court orders, including compliance orders, enforcement orders or otherwise pay money such as damages, fines, penalties or legal costs. The Group’s material contingent liabilities are described in Note 27 to the financial statements. There is a risk that these contingent liabilities may be larger than anticipated or that additional litigation or other contingent liabilities may arise, which could adversely affect our business, prospects, reputation, financial performance or financial condition. 2 3 4 We have suffered and could in the future suffer information security risks, including cyberattacks The proliferation of new technologies, the increasing use of the internet and telecommunications to conduct financial transactions and the growing sophistication and activities of attackers (including organised crime and state-sponsored actors) have resulted in increased information security risks for major financial institutions such as Westpac and our external service providers.

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106 2019 Westpac Group Annual Report Risk and risk management While Westpac has systems in place to protect against, detect and respond to cyberattacks, these systems have not always been, and may not in the future always be effective. There can be no assurance that we will not suffer losses from cyberattacks or other information security breaches. The Group may not be able to anticipate and prevent a cyberattack, or it may not be able to implement effective measures to respond to a cyberattack in progress. Further, there is a risk that the Group will not be able to rectify or minimise the damage resulting from a cyberattack. If the Group incurs a successful cyberattack, technology systems might fail to operate properly or become disabled and it could result in the unauthorised release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of the Group, its employees, customers or third parties or otherwise adversely impact network access, business operations or availability of services. In addition, as cyber threats continue to evolve, we may be required to expend significant additional resources to modify or enhance our systems or to investigate and remediate any vulnerabilities or incidents. Our operations rely on the secure processing, storage and transmission of information on our computer systems and networks, and the systems and networks of external suppliers. Although we implement measures to protect the security, integrity and confidentiality of our information, there is a risk that the computer systems, software and networks on which we rely may be subject to security breaches, unauthorised access, malicious software, external attacks or internal breaches that could have an adverse impact on our confidential information or that of our customers and counterparties. Major banks in other jurisdictions have suffered security breaches from sophisticated cyberattacks. Our external service providers, other parties that facilitate our business activities and financial platforms and infrastructure (such as clearing houses, payment systems and exchanges) are also subject to the risk of cyberattacks. Any such security breach could result in the loss of customers and business opportunities, significant disruption to Westpac’s operations, misappropriation of Westpac’s confidential information and/or that of our customers and damage to Westpac’s computers or systems and/or those of our customers. Such a security breach could also result in reputational damage, claims for compensation and regulatory investigations and penalties, which could adversely affect our business, prospects, financial performance or financial condition. Our risk and exposure to such threats remains heightened because of the evolving nature of technology, Westpac’s prominence within the financial services industry, the prominence of our customers (including those in the government, mining and health sectors), increasing obligations to make data and information available to external third parties and our plans to continue to improve and expand our internet and mobile banking infrastructure. We could suffer losses due to technology failures or our inability to appropriately manage and upgrade our technology The reliability, integrity and security of our information and technology is crucial in supporting our customers’ banking requirements and meeting our compliance obligations and our regulators’ expectations. While the Group has a number of processes in place to provide for and monitor the availability and recovery of our systems, there is a risk that our information and technology systems might fail to operate properly or become disabled, including as a result of events that are wholly or partially beyond our control. If we incur a technology failure we may fail to meet a compliance obligation (such as the obligation to retain records and data for requisite periods of time), or our customers may be adversely affected. This could potentially result in reputational damage, remediation costs and a regulator commencing an investigation and/or taking administrative or enforcement action against us. The overuse or overreliance on legacy or outdated systems may heighten the risk of a technology failure occurring. Further, in order to continue to deliver new products and services to customers, comply with our regulatory obligations (such as obligations to report certain data and information to regulators) and meet the ongoing expectations of our regulators and our customers, we need to regularly renew and enhance our technology. We are constantly managing technology projects including projects to consolidate technology platforms, simplify and enhance our technology and operations environment, assist us to comply with legal obligations, improve productivity and provide for a better customer experience. Failure to implement these projects or manage associated change effectively could result in cost overruns, unrealised productivity, operational instability, failure to meet compliance obligations, reputational damage and/or result in the loss of market share to competitors. In turn, this could place us at a competitive disadvantage and adversely affect our financial performance. Adverse credit and capital market conditions or depositor preferences may significantly affect our ability to meet funding and liquidity needs and may increase our cost of funding We rely on deposits, and credit and capital markets, to fund our business and as a source of liquidity. Our liquidity and costs of obtaining funding are related to credit and capital market conditions. Global credit and capital markets can experience periods of extreme volatility, disruption and decreased liquidity as was demonstrated during the Global Financial Crisis. While there have now been extended periods of stability in these markets, the environment remains unpredictable. The main risks we face are damage to market confidence, changes to the access and cost of funding and a slowing in global activity or other impacts on entities with whom we do business. As of 30 September 2019, approximately 30% of our total funding originated from domestic and international wholesale markets. Of this, around 65% was sourced outside Australia and New Zealand. Customer deposits provide around 63% of total funding. Customer deposits held by Westpac are comprised of both term deposits which can be withdrawn after a certain period of time and at call deposits which can be withdrawn at any time.

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2019 Westpac Group Annual Report 107 Risk and risk management A shift in investment preferences could result in deposit withdrawals by customers which could increase our need for funding from other, potentially less stable, or more expensive, forms of funding. If market conditions deteriorate due to economic, financial, political or other reasons, there may also be a loss of confidence in bank deposits and we could experience unexpected deposit withdrawals. In this situation our funding costs may be adversely affected and our liquidity and our funding and lending activities may be constrained. If our current sources of funding prove to be insufficient, we may be forced to seek alternative financing. The availability of such alternative financing, and the terms on which it may be available, will depend on a variety of factors, including prevailing market conditions, the availability of credit, our credit ratings and credit market capacity. Even if available, these alternatives may be more expensive or on unfavourable terms, which could adversely affect our financial performance, liquidity, capital resources or financial condition. There is no assurance that we will be able to obtain adequate funding, do so at acceptable prices, or that we will be able to recover any additional costs. If Westpac is unable to source appropriate funding, we may also be forced to reduce our lending or begin selling liquid securities. Such actions may adversely impact our business, prospects, liquidity, capital resources, financial performance or financial condition. If Westpac is unable to source appropriate funding for an extended period, or if it can no longer sell liquid securities, there is a risk that Westpac will be unable to pay its debts as and when they become due and payable. Westpac enters into collateralised derivative obligations, which may require Westpac to post additional collateral based on movements in market rates, which has the potential to adversely affect Westpac’s liquidity or ability to use derivative obligations to hedge its interest rate, currency and other financial instrument risks. For a more detailed description of liquidity risk, refer to ‘Funding and liquidity risk’ in Note 21 to the financial statements. 1 Sovereign risk may destabilise financial markets adversely Sovereign risk is the risk that governments will default on their debt obligations, will be unable to refinance their debts as they fall due or will nationalise parts of their economy including assets of financial institutions such as Westpac. Sovereign defaults could negatively impact the value of our holdings of high quality liquid assets. There may also be a cascading effect to other markets and countries, the consequences of which, while difficult to predict, may be similar to or worse than those experienced during the Global Financial Crisis. Such an event could destabilise global financial markets, adversely affecting our liquidity, financial performance or financial condition. Failure to maintain credit ratings could adversely affect our cost of funds, liquidity, competitive position and access to capital markets Credit ratings are independent opinions on our creditworthiness. Our credit ratings can affect the cost and availability of our funding from capital markets and other funding sources and they may be important to customers or counterparties when evaluating our products and services. Therefore, maintaining high credit ratings is important. The credit ratings assigned to us by rating agencies are based on an evaluation of a number of factors, including our financial strength, the quality of our governance, structural considerations regarding the Australian financial system and the credit rating of the Australian Government. A credit rating downgrade could be driven by a downgrade of the Australian Government, the occurrence of one or more of the other risks identified in this section or by other events including changes to the methodologies used by the rating agencies to determine ratings. A downgrade or series of downgrades to our credit ratings could have an adverse effect on our cost of funds and related margins, collateral requirements, liquidity, competitive position and our access to capital markets. The extent and nature of these impacts would depend on various factors, including the extent of any ratings change, whether our ratings differ among agencies (split ratings) and whether any ratings changes also impact our competitors or the sector. 2 A systemic shock in relation to the Australian, New Zealand or other financial systems could have adverse consequences for Westpac or its customers or counterparties that would be difficult to predict and respond to There is a risk that a major systemic shock could occur that causes an adverse impact on the Australian, New Zealand or other financial systems. As outlined above, during the past decade the financial services industry and capital markets have been, and may continue to be, adversely affected by market volatility, global economic conditions, geopolitical instability (such as threats of or actual conflict occurring around the world) and political developments. In particular, there are significant and ongoing global political developments that have the potential to impact major global economies, including Brexit and the introduction of tariffs and other protectionist measures by various countries, such as the US and China. A shock to one of the major global economies could again result in currency and interest rate fluctuations and operational disruptions that negatively impact the Group. Any such market and economic disruptions could adversely affect financial institutions such as Westpac because consumer and business spending may decrease, unemployment may rise and demand for the products and services we provide may decline, thereby reducing our earnings. These conditions may also affect the ability of our borrowers to repay their loans or our counterparties to meet their obligations, causing us to incur higher credit losses and affect investors’ willingness to invest in the Group. These events could also result in the undermining of confidence in the financial system, reducing liquidity, impairing our access to funding and impairing our customers and counterparties and their businesses. If this were to occur, our business, prospects, financial performance or financial condition could be adversely affected. 3 4

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108 2019 Westpac Group Annual Report Risk and risk management The nature and consequences of any such event are difficult to predict and there can be no certainty that we could respond effectively to any such event. Declines in asset markets could adversely affect our operations or profitability Declines in Australian, New Zealand or other asset markets, including equity, residential and commercial property and other asset markets, could adversely affect our operations and profitability. Declining asset prices also impact our wealth management business. Earnings in our wealth management business are, in part, dependent on asset values because we typically receive fees based on the value of securities and/or assets held or managed. A decline in asset prices could negatively impact the earnings of this business. Declining asset prices could also impact customers and counterparties and the value of security (including residential and commercial property) we hold against loans and derivatives. This may impact our ability to recover amounts owing to us if customers or counterparties were to default. It may also affect our level of provisioning which in turn impacts our profitability and financial condition. Our business is substantially dependent on the Australian and New Zealand economies Our revenues and earnings are dependent on economic activity and the level of financial services our customers require. In particular, lending is dependent on various factors including economic growth, business investment, business and consumer sentiment, levels of employment, interest rates, asset prices and trade flows in the countries in which we operate. We conduct the majority of our business in Australia and New Zealand and, consequently, our performance is influenced by the level and cyclical nature of lending in these countries. These factors are in turn impacted by both domestic and international economic conditions, natural disasters and political events. A significant decrease in Australian and New Zealand housing valuations could adversely impact our home lending activities because borrowers with loans in excess of their property value show a higher propensity to default. In the event of defaults our security may be eroded, causing us to incur higher credit losses. The demand for our home lending products may also decline due to adverse changes in tax legislation (such as changes to tax rates, concessions or deductions), regulatory requirements or other buyer concerns about decreases in values. Adverse changes to economic and business conditions in Australia and New Zealand and other countries such as China, India, Japan and the US could also adversely affect the Australian economy and our customers. In particular, due to the current economic relationship between Australia and China, particularly in the mining and resources sectors, a slowdown in China’s economic growth, including as the result of the implementation of tariffs or other protectionist trade measures, could negatively impact the Australian economy. Changes in commodity prices, Chinese government policies and broader economic conditions could, in turn, result in reduced demand for our products and services and affect the ability of our borrowers to repay their loans. If this were to occur, it could negatively impact our business, prospects, financial performance or financial condition. Monetary policy can also significantly affect the Group. Interest rate settings (including low or negative rates), as well as other actions taken by central banks (such as quantitative easing), may adversely affect our cost of funds, the value of our lending and investments and our margins. Monetary policies also impact the broader economic conditions of the various jurisdictions that the Group operates or obtains funding in. These policies could affect demand for our products and services and/or have a negative impact on the Group’s customers and counterparties, potentially increasing the risk that they will default on their obligations to the Group. All of these factors could adversely affect our business, prospects, financial performance or financial condition. An increase in defaults in credit exposures could adversely affect our liquidity, capital resources, financial performance or financial condition Credit risk is the risk of financial loss where a customer or counterparty fails to meet their financial obligations to Westpac. It is a significant risk and arises primarily from our lending activities. We establish provisions for credit impairment based on current information and our expectations. If economic conditions deteriorate outside of our expectations, some customers and/or counterparties could experience higher levels of financial stress and we may experience a significant increase in defaults and write-offs, and be required to increase our provisioning. Such events would diminish available capital and could adversely affect our liquidity, capital resources, financial performance or financial condition. Credit risk also arises from certain derivative, clearing and settlement contracts we enter into, and from our dealings with, and holdings of, debt securities issued by other banks, financial institutions, companies, clearing houses, governments and government bodies, the financial conditions of which may be affected to varying degrees by economic conditions in global financial markets. For a discussion of our risk management procedures, including the management of credit risk, refer to the ‘Risk management’ section and Note 21 in the financial statements. We face intense competition in all aspects of our business The financial services industry is highly competitive. We compete, both domestically and internationally, with a range of firms, including retail and commercial banks, asset managers, investment banking firms, brokerage firms, other financial service firms and businesses in other industries with emerging financial services aspirations. This includes specialist competitors that may not be subject to the same capital and regulatory requirements and therefore may be able to operate more efficiently. Digital technologies are changing consumer behaviour and the competitive environment. The use of digital channels by customers to conduct their banking continues to rise and emerging competitors are increasingly utilising new technologies and seeking to disrupt existing business models,

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2019 Westpac Group Annual Report 109 Risk and risk management including in relation to digital payment services. The Group faces competition from established providers of financial services as well as from banking businesses developed by non-financial services companies. The competitive environment may also change as a result of legislative reforms. If we are unable to compete effectively in the increasingly competitive environment in which our various businesses operate, our market share may decline. This may adversely affect us by diverting business to our competitors or creating pressure to lower margins and fees. Increased competition for deposits could also increase our cost of funding and lead us to seek access to other types of funding or reduce lending. We rely on bank deposits to fund a significant portion of our balance sheet and deposits have been a relatively stable source of funding. We compete with banks and other financial services firms for such deposits. To the extent that we are not able to successfully compete for deposits, we would be forced to rely more heavily on other, potentially less stable or more expensive forms of funding, or reduce lending. We are also dependent on our ability to offer products and services that match evolving customer preferences. If we are not successful in developing or introducing new products and services or responding or adapting to changes in customer preferences and habits, we may lose customers to our competitors. This could adversely affect our business, prospects, financial performance or financial condition. For more detail on how we address competitive pressures refer to the section titled Competition in the Directors’ Report in Section 1. 1 We could suffer losses due to market volatility We are exposed to market risk as a consequence of our trading activities in financial markets, our defined benefit plan and through the asset and liability management of our financial position. This is the risk of an adverse impact on earnings resulting from changes in market factors, such as foreign exchange rates, commodity prices, equity prices, and interest rates including the potential for low or negative interest rates. This includes interest rate risk in the banking book, such as the risk to interest income from a mismatch between the duration of assets and liabilities that arises in the normal course of business activities. Changes in market factors could be driven by a number of developments. As an example, in July 2017, the FCA which regulates the London Interbank Offered Rate (“LIBOR”), announced that it would not require panel banks to continue to submit rates for the calculation of the LIBOR benchmark after 2021. Accordingly, the continuation of LIBOR in its current form will not be guaranteed after 2021, and it appears likely that LIBOR will be discontinued or modified by 2021. Any such developments or future changes in the administration of LIBOR or any other benchmarks could result in adverse consequences to the return on, value of and market for securities and other instruments whose returns are linked to any such benchmark, including those securities or other instruments issued by the Group. If we were to suffer substantial losses due to any market volatility (including changes in the return on, value of or market for, securities or other instruments) it may adversely affect our business, prospects, liquidity, capital resources, financial performance or financial condition. For a discussion of our risk management procedures, including the management of market risk, refer to the ‘Risk management’ section. We have and could suffer losses due to operational risks Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. It also includes, among other things, reputational risk, technology risk, model risk and outsourcing risk, as well as the risk of business disruption due to external events such as natural disasters, environmental hazard, damage to critical utilities, and targeted activism and protest activity. While we have policies, processes and controls in place to manage these risks, these may not always have been, or continue to be effective. Ineffective processes and controls have resulted in, and could in the future result in an adverse outcome for Westpac’s customers. For example, a process breakdown could result in a customer not receiving a product on the terms and conditions, or at the pricing, they agreed to. In addition, inadequate record keeping may prevent Westpac from demonstrating that a past decision was appropriate at the time it was made or that a particular action or activity was undertaken. If this was to occur, Westpac may incur significant costs in paying refunds and compensation to customers, as well as remediating any underlying process breakdown. Failed processes could also result in Westpac incurring losses because it is not able to enforce its contractual rights. This could arise in circumstances where Westpac did not correctly document its rights or failed to perfect a security interest. These types of operational failures, may also result in increased regulatory scrutiny and depending on the nature of the failure and its impact, result in a regulator potentially commencing an investigation and/or taking other enforcement, administrative or supervisory action. We could incur losses from fraudulent applications for loans or from incorrect or fraudulent payments and settlements, particularly real-time payments. Fraudulent conduct can also emerge from external parties seeking to access the bank’s systems and customers’ accounts. If systems, procedures and protocols for managing fraud fail, or are ineffective, they could lead to losses which could adversely affect our customers, as well as our business, prospects, reputation, financial performance or financial condition. Accurate and complete data is critical to ensure that Westpac’s systems (both customer facing and back-office) and financial reporting processes operate effectively. In some areas of its business and operations, Westpac is 2 3 4

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110 2019 Westpac Group Annual Report Risk and risk management affected by poor data quality. This has arisen and could in the future arise in a number of ways, including through inadequacies in systems, processes and policies. This could lead to deficiencies or failings in customer service, risk management, financial reporting (including in the calculation of risk weighted assets), credit systems and processes, compliance with legal obligations (including obligations to provide data to regulators) and also result in poor decision making, including in relation to the provision of credit and the terms on which it is provided. Poor data quality could affect the ability of Westpac to improve systems and processes. Westpac is also exposed to model risk, being the risk of loss arising from errors or inadequacies in data or a model, or in the control and use of a model. Westpac is required to retain and access data and documentation for specific retention periods in order to satisfy its compliance obligations. In some cases, Westpac also retains data to enable it to demonstrate that a past decision was appropriate at the time it was made. Failings in systems, processes and policies could all adversely affect Westpac’s ability to retain and access data. In recent times, financial services entities have been increasingly sharing data with third parties, such as suppliers and regulators (both domestic and offshore), in order to conduct their business activities and meet regulatory obligations. A breakdown in a process or control related to the transfer, storage or protection of data transferred to a third party, or the failure of a third party to use and handle this data correctly, could result in the Group failing to meet a compliance obligation (including any relevant privacy obligations) and/or have an adverse impact on our customers and the Group. Westpac also relies on a number of suppliers, both in Australia and overseas, to provide services to it and its customers. Failure by these suppliers to deliver services as required could disrupt services and adversely impact Westpac’s operations, profitability or reputation. The Group could also be adversely affected by events that cause disruption within the banking and financial services industry. For example, there is a risk that if central banks adopt negative interest rates in the future, the technology systems used by the Group, its counterparties and/or financial infrastructure providers may fail to operate correctly and this may cause loss or damage to the Group and/or its counterparties. Operational risks can impact our reputation and result in financial losses (including through decreased demand for our products and services) which would adversely affect our financial performance or financial condition. For a discussion of our risk management procedures, including the management of operational risk, refer to the ‘Risk management’ section. Operational risk, technology risk, conduct risk or compliance risk events have required, and could in the future require, Westpac to undertake customer remediation activity Westpac relies on a large number of policies, processes, procedures, systems and people to conduct its business. Breakdowns or deficiencies in one of these areas (arising from one or more operational risk, technology risk, conduct risk or compliance risk events) have resulted, and could in the future result in, adverse outcomes for customers which Westpac is required to remediate. These events could require the Group to incur significant remediation costs (which may include compensation payments to customers and costs associated with correcting the underlying issue) and result in reputational damage. There are significant challenges and risks involved in customer remediation activities. Westpac’s ability to investigate an adverse customer outcome that may require remediation could be impeded if the issue is a legacy matter spanning beyond our record retention period, or if our record keeping is otherwise inadequate. Depending on the nature of the issue, it may be difficult to quantify and scope the remediation activity. Determining how to properly and fairly compensate customers can also be a complicated exercise involving numerous stakeholders, such as the affected customers, regulators and industry bodies. The Group’s proposed approach to a remediation may be affected by a number of events, such as a group of affected customers commencing class action proceedings on behalf of the broader population of affected customers, or a regulator exercising their powers to require that a particular approach to remediation be taken. These factors could impact the timeframe for completing the remediation activity, potentially resulting in Westpac failing to execute the remediation in a timely manner. A failure of this type could lead to a regulator commencing enforcement action against the Group. The ineffective or slow completion of a remediation also exposes the Group to reputational damage, with the Group potentially being criticised by regulators, affected customers, the media and other stakeholders, resulting in reputational damage. The significant challenges and risks involved in scoping and executing remediations in a timely way also create the potential for remediation costs actually incurred to be higher than those initially estimated by the Group. If the Group cannot effectively scope, quantify or implement a remediation activity in a timely way, there could be a negative impact on our business, prospects, reputation, financial performance or financial condition. We have and could suffer losses due to conduct risk Conduct risk is the risk that our provision of services and products results in unsuitable or unfair outcomes for our stakeholders or undermines market integrity. Conduct risk could occur through the provision of products and services to our customers that do not meet their needs or do not support market integrity, as well as the poor conduct of our employees, contractors, agents, authorised representatives and external service providers, which could include deliberate attempts by such individuals to circumvent Westpac’s controls, processes and procedures. This could occur through a failure to meet professional obligations to specific clients (including fiduciary and suitability requirements), poor product design and implementation, failure to adequately consider customer needs

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2019 Westpac Group Annual Report 111 Risk and risk management or selling products and services outside of customer target markets. Conduct risk may also arise where there has been a failure to adequately provide a product or services that we had agreed to provide a customer. While we have frameworks, policies, processes and controls that are designed to manage poor conduct outcomes, these policies and processes may not always have been or continue to be effective. The failure of these policies and processes could result in financial losses and reputational damage and this could adversely affect our business, prospects, financial performance or financial condition. We could suffer losses and our business has been and could be adversely affected by the failure to adopt and implement effective risk management We have implemented risk management strategies, policies and internal controls involving processes and procedures intended to identify, monitor and manage risks facing the Group. However, our risk management framework has not always been, or may not in the future prove to be, effective. This could be because the design of the framework may be inadequate, which could result in key information not being provided to decision-makers in the right form and in a timely manner, or because of weaknesses in underlying data. There is also the possibility that key risk management policies, controls and processes may be ineffective, either due to inadequacies in their design, or because of the poor implementation of these policies, controls and processes. There are also inherent limitations with any risk management framework as there may exist, or emerge in the future, risks that we have not anticipated or identified and our controls may not be effective. Risk management frameworks may also prove ineffective because of weaknesses in risk culture, which may result in risks and control weaknesses not being identified, escalated and acted upon. Further, while the development of appropriate remuneration structures can play an important role in supporting a sound risk culture, a deficiency in the design or operation of our remuneration structures could have a negative effect, potentially resulting in staff engaging in excessive risk taking behaviours. Risk management failings of the type outlined above could adversely the Group in numerous ways, with the Group potentially being exposed to higher levels of risk than expected, which may result in the Group incurring unexpected losses, breaches of compliance obligations and reputational damage. As part of the Group’s risk management framework, the Group measures and monitors risks against its risk appetite. Where the Group identifies a risk as being out-of-appetite, the Group needs to take steps to bring this risk back into appetite in a timely way. However, the Group may not always be able to achieve this within proposed timeframes. This may occur because, for example, the Group experiences delays in enhancing its information technology systems to better manage the out-of-appetite risk, or in recruiting sufficient numbers of appropriately trained staff to undertake required activities. It is also possible that, because of external factors beyond the Group’s control, certain risks may be inherently outside of appetite for periods of time. In addition, the Group is required to periodically review its risk management framework to determine whether it remains appropriate. If the Group is unable to bring risks back into appetite, or if it is determined that the Group’s risk management framework is no longer appropriate, the Group may incur unexpected losses and be required to undertake considerable remedial work. The failure to remedy this situation could result in increased scrutiny from regulators, who could take supervisory action such as requiring the Group to hold additional capital or directing the Group to spend money to enhance its’ risk management systems and controls. The Group has been adversely affected by weaknesses in risk management systems and controls in the recent past, with APRA requiring Westpac to hold additional capital following the completion of its Compliance, Governance and Accountability self-assessment. Inadequacies in addressing risks or in the Group’s risk management framework could also result in the Group failing to meet a compliance obligation and/or financial losses. If any of our governance or risk management processes and procedures prove ineffective or inadequate or are otherwise not appropriately implemented, we could suffer unexpected losses and reputational damage which could adversely affect our business, prospects, financial performance or financial condition. For a discussion of our risk management procedures, refer to the ‘Risk management’ section. 1 2 The Group’s failure to recruit and retain key executives, employees and Directors may have adverse effects on our business Key executives, employees and Directors play an integral role in the operation of Westpac’s business and its pursuit of its strategic objectives. The unexpected departure of an individual in a key role, or the Group’s failure to recruit and retain appropriately skilled and qualified persons into these roles, could each have an adverse effect on our business, prospects, reputation, financial performance or financial condition. 3 Climate change may have adverse effects on our business We, our customers and external suppliers, may be adversely affected by the physical risks of climate change, including increases in temperatures, sea levels, and the frequency and severity of adverse climatic events including fires, storms, floods and droughts. These effects, whether acute or chronic in nature, may directly impact us and our customers through reputational damage, environmental factors, insurance risk and business disruption and may have an adverse impact on financial performance (including through an increase in defaults in credit exposures). Initiatives to mitigate or respond to adverse impacts of climate change may impact market and asset prices, economic activity, and customer behaviour, particularly in geographic locations and industry sectors adversely affected by these changes. Failure to effectively manage these transition risks could adversely affect our business, prospects, reputation, financial performance or financial condition. 4

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112 2019 Westpac Group Annual Report Risk and risk management We could suffer losses due to environmental factors We and our customers operate businesses and hold assets in a diverse range of geographic locations. Any significant environmental change or external event (including fire, storm, flood, earthquake, pandemic, civil unrest or terrorism) in any of these locations has the potential to disrupt business activities, impact on our operations, damage property and otherwise affect the value of assets held in the affected locations and our ability to recover amounts owing to us. In addition, such an event could have an adverse impact on economic activity, consumer and investor confidence, or the levels of volatility in financial markets, all of which could adversely affect our business, prospects, financial performance or financial condition. We could suffer losses due to insurance risk We have exposure to insurance risk in our life insurance, general insurance and lenders mortgage insurance businesses, which may adversely affect our business, operations or financial condition. Insurance risk is the risk in our licensed regulated insurance entities of lapses being greater than expected, or the costs of claims being greater than expected due to a failure in product design, underwriting, reinsurance arrangements or an increase in the severity and/or frequency of insured events. In the life insurance business, risk arises primarily through mortality (death) and morbidity (illness and injury) risks, the costs of claims relating to those risks being greater than was anticipated when pricing those risks and policy lapses (including through an unexpected or sustained increase in the rate of policy lapses). In the general insurance business, insurance risk arises mainly through environmental factors (including storms, floods and bushfires) and other calamities, such as earthquakes, tsunamis and volcanic activity, as well as general variability in home and contents insurance claim amounts. The frequency and severity of external events such as natural disasters is difficult to predict and it is possible that the amounts we reserve for potential losses from existing events, such as those arising from natural disaster events, may not be adequate to cover actual claims that may arise. In the lenders mortgage insurance business, insurance risk arises primarily from unexpected downturns in economic conditions leading to higher levels of mortgage defaults from unemployment or other economic factors. If our reinsurance arrangements are ineffective, this could lead to greater risk, and more losses than anticipated. There is also a risk that we will not be able to renew an expiring reinsurance arrangement on similar terms, including in relation to the cost, duration and amount of reinsurance cover provided under that arrangement. Changes in critical accounting estimates and judgements could expose the Group to losses The Group is required to make estimates, assumptions and judgements when applying accounting policies and preparing its financial statements, particularly in connection with the calculation of provisions (including those related to remediations or credit losses) and the determination of the fair value of financial instruments. A change in a critical accounting estimate, assumption and/or judgement resulting from new information or from changes in circumstances or experience could result in the Group incurring losses greater than those anticipated or provided for. This may have an adverse effect on the Group’s financial performance, financial condition and reputation. The Group’s financial performance and financial condition may also be impacted by changes to accounting standards or to generally accepted accounting principles. We could suffer losses due to impairment of capitalised software, goodwill and other intangible assets that may adversely affect our business, operations or financial condition In certain circumstances Westpac may be exposed to a reduction in the value of intangible assets. As at 30 September 2019, Westpac carried goodwill principally related to its investments in Australia, other intangible assets principally relating to assets recognised on acquisition of subsidiaries and capitalised software balances. Westpac is required to assess the recoverability of the goodwill and other intangible asset balances on at least an annual basis or wherever an indicator of impairment exists. For this purpose, Westpac uses a discounted cash flow calculation. Changes in the methodology or assumptions upon which the calculation is based, together with changes in expected future cash flows, could materially impact this assessment, resulting in the potential write-off of part or all of the intangible assets. In the event that an asset is no longer in use, or its value has been reduced or that its estimated useful life has declined, an impairment will be recorded, adversely impacting the Group’s financial condition. The estimates and assumptions used in assessing the useful life of an asset can be affected by a range of factors including changes in strategy and the rate of external changes in technology and regulatory requirements. We could suffer losses if we fail to syndicate or sell down underwritten securities As a financial intermediary, we underwrite listed and unlisted debt and equity securities. Underwriting activities include the development of solutions for corporate and institutional customers who need capital and investor customers who have an appetite for certain investment products. We may guarantee the pricing and placement of these facilities. We could suffer losses if we fail to syndicate or sell down our risk to other market participants. This risk is more pronounced in times of heightened market volatility.

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2019 Westpac Group Annual Report 113 Risk and risk management Certain strategic decisions may have adverse effects on our business Westpac, at times, evaluates and may implement strategic decisions and objectives including diversification, innovation, divestment or business expansion initiatives. The expansion or integration of a new business, or entry into a new business, can be complex and costly and may require Westpac to comply with additional local or foreign regulatory requirements which may carry additional risks. Westpac also acquires and invests in businesses owned and operated by external parties. These transactions involve a number of risks for the Group. For example, Westpac may incur financial losses if a business it invests in does not perform as anticipated or subsequently proves to be overvalued at the time that the transaction was entered into. In addition, we may be unable to successfully divest businesses or assets. These activities may, for a variety of reasons, not deliver the anticipated positive business results and could have a negative impact on our business, prospects, reputation, engagement with regulators, financial performance or financial condition. Electing not to pursue a course of action can have an adverse effect on the Group. If Westpac fails to appropriately respond to changes in the business environment it operates in (including changes related to economic, geopolitical, regulatory, technological, social and competitive factors) this could have a range of adverse effects on the Group’s business, such as being unable to increase or maintain market share as well as creating pressure on margins and fees, any of which could have a negative impact on the Group’s business, prospects, financial performance or financial condition. 1 Risk management At Westpac, our risk management framework is designed to help achieve our vision to be one of the world’s great service companies, helping our customers, communities and people to prosper and grow, sustainably and within risk appetite. Our risk management strategy is to deliver effective risk management outcomes through the robust execution of our risk management framework. Effective risk management outcomes mean that we: • • deliver suitable, fair and clear outcomes for our customers that support market integrity; protect Westpac Group’s depositors, policyholders and investors by maintaining a balance sheet with sound credit quality and buffers over regulatory minimums; and meet our regulatory and statutory obligations. • The Risk Management Framework (RMF) and Risk Management Strategy (RMS) is approved by the Board following review and recommended by the Board Risk and Compliance Committee (BRCC) on an annual basis or more frequently where required by a material business or strategy change or a material change to the Group’s risk profile. For further information regarding the role and responsibilities of the BRCC and other Board committees in managing risk, refer to Westpac’s 2019 Corporate Governance Statement available at www.westpac.com.au/corpgov. The Westpac Board (the Board) is ultimately responsible for our risk management framework and the oversight of its operation by management. The Board has delegated the oversight of the RMF and its implementation to the Chief Risk Officer (CRO) as the Accountable Executive. The Chief Executive Officer (CEO) is the Accountable Executive for the RMS and oversees its implementation by business units and functions, including in relation to customers, shareholders and Westpac employees and contractors. We adopt a Three Lines of Defence model to ensure we practice end-to-end management of risk, within which all employees play an active role. This necessitates co-operation between businesses and functions, such that there are no gaps in risk coverage. Following the conclusion of the Culture, Governance and Accountability review conducted at the request of APRA, Westpac is conducting a review of, and upgrades to, its end to end risk management capabilities. This is part of an ongoing program of work that spans both financial and non-financial risk. Two of the key steps under this complex, multi-year initiative are a renewed focus on the implementation of our three lines of defence model and the implementation of a new Risk Management Framework, both of which are underway. Westpac believes that investing in and enhancing end to end risk management capabilities are essential imperatives. Recent reviews have identified various policies, systems, data, and risk capabilities which require improvement. A detailed implementation plan is being designed to facilitate these improvements as soon as possible, including hiring additional experts in areas such as operational risk, stress testing, modelling, financial crime, risk systems and data management. For a discussion of the risks to which Westpac is exposed, and its policies to manage these risks, refer to Westpac’s Corporate Governance Statement and Note 21 to the financial statements. 2 3 4

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114 2019 Westpac Group Annual Report Risk and risk management Credit risk Credit risk is the risk of financial loss where a customer or counterparty fails to meet their financial obligations to Westpac. We have a framework and supporting policies for managing the credit risk associated with lending across our business divisions. The framework and policies encompass all stages of the credit cycle – origination, evaluation, approval, documentation, settlement, ongoing administration and problem management. For example, we have established product-based standards for lending to individuals, with key controls including minimum serviceability standards and maximum loan to security value ratios. We offer residential property loans to both owner-occupiers and investors at both fixed and variable rates, secured by a mortgage over the property or other acceptable collateral. Where we lend to higher loan to value ratios, we typically also require lenders mortgage insurance. Similarly, we have established criteria for business, commercial, corporate and institutional lending, which can vary by industry segment. In this area we focus on the performance of key financial risk ratios, including interest coverage, debt serviceability and balance sheet structure. When providing finance to smaller business, commercial and corporate borrowers we typically obtain security, such as a mortgage over property and/or a general security agreement over business assets. For larger corporates and institutions, we typically also require compliance with selected financial ratios and undertakings and may hold security. In respect of commercial property lending, we maintain loan origination and ongoing risk management standards, including specialised management for higher value loans. We consider factors such as the nature, location, quality and expected demand for the asset, tenancy profile and experience and quality of management. We actively monitor the Australian and New Zealand property markets and the composition of our commercial property loan book across the Group. The extension of credit is underpinned by the Group’s Principles of Responsible Lending. This is reflected in our commitment to comply with all local legislation, codes of practice and relevant guidelines and obligations to market our products responsibly and stay in touch with the expectations of customers and the community. Refer to Note 21 to the financial statements for details of our credit risk management policies. Provisions for expected credit losses/impairment charges on loans For information on the basis for determining the provision for expected credit losses/impairment charges on loans refer to ‘Critical accounting assumptions and estimates’ in Note 13 to the financial statements. Credit risk concentrations We monitor our credit portfolio to manage risk concentrations. At 30 September 2019, our exposure to consumers comprised 72% (2018: 72%, 2017: 72%) of our on-balance sheet loans and 59% (2018: 59%, 2017: 59%) of total credit commitments. At 30 September 2019, 92% (2018: 92%, 2017: 92%) of our exposure to consumers was supported by residential real estate mortgages. The consumer category includes owner-occupier and investment property loans to individuals, credit cards, personal loans, overdrafts and lines of credit. Our consumer credit risks are diversified, with substantial consumer market share in every state and territory in Australia, New Zealand and the Pacific region. Moreover, these customers service their debts with incomes derived from a wide range of occupations, in city as well as country areas. Exposures to businesses, government and other financial institutions are classified into a number of industry clusters based on groupings of related Australian and New Zealand Standard Industrial Classification (ANZSIC) codes and are monitored against industry risk limits. The level of industry risk is measured and monitored on a dynamic basis. We also control the concentration risks that can arise from large exposures to individual borrowers

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2019 Westpac Group Annual Report 115 Risk and risk management Funding and liquidity risk Funding and liquidity risk is the risk that Westpac cannot meet its payment obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets. Westpac has a Liquidity Risk Management Framework which sets out Westpac’s funding and liquidity risk appetite, roles and responsibilities of key people managing funding and liquidity risk within Westpac, risk reporting and control processes and limits and targets used to manage Westpac’s balance sheet. Refer to Note 21 to the financial statements for a more detailed discussion of our liquidity risk management policies. Westpac debt programs and issuing shelves Access in a timely and flexible manner to a diverse range of debt markets and investors is provided by the following programs and issuing shelves as at 30 September 2019: 1 Program Limit Issuer(s) Program/Issuing Shelf Type Australia No limit WBC Debt Issuance Program Euro Market USD 2.5 billion WBC Euro Transferable Certificate of Deposit Program USD 20 billion WBC/WSNZL1 Euro Commercial Paper and Certificate of Deposit Program USD 70 billion WBC Euro Medium Term Note Program USD 10 billion WSNZL1 Euro Medium Term Note Program USD 40 billion WBC2 Global Covered Bond Program EUR 5 billion WSNZL3 Global Covered Bond Program Japan JPY 750 billion WBC Samurai shelf JPY 750 billion WBC Uridashi shelf United States USD 45 billion WBC US Commercial Paper Program USD 10 billion WSNZL1 US Commercial Paper Program USD 35 billion WBC US Medium Term Note Program USD 15 billion WBC (NY Branch) US Medium Term Deposit Note Program No limit WBC (NY Branch) Certificate of Deposit Program No limit WBC US Securities and Exchange Commission registered shelves New Zealand 2 No limit WNZL Medium Term Note and Registered Certificate of Deposit Program 3 4 1. Notes issued under this program by Westpac Securities NZ Limited, London branch are guaranteed by Westpac New Zealand Limited, its parent company. Notes issued under this program are guaranteed by BNY Trust Company of Australia Limited as trustee of the Westpac Covered Bond Trust. Notes issued under this program by Westpac Securities NZ Limited, London branch are guaranteed by Westpac New Zealand Limited, its parent company, and Westpac NZ Covered Bond Limited. 2. 3.

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116 2019 Westpac Group Annual Report Risk and risk management Market risk Market risk is the risk of an adverse impact on earnings resulting from changes in market factors, such as foreign exchange rates, interest rates, commodity prices or equity prices. This includes interest rate risk in the banking book – the risk to interest income from a mismatch between the duration of assets and liabilities that arises in the normal course of business activities. Market risk arises in both trading and banking book activities. Our trading activities are conducted in our Financial Markets and Treasury businesses. Financial Markets trading book activity represents dealings that encompass book running and distribution activity. Treasury’s trading activity represents dealings that include the management of interest rate, foreign exchange (FX) and credit spread risk associated with wholesale funding, liquid asset portfolios and hedging of foreign currency earnings and capital deployed offshore. Refer to Note 21 to the financial statements for a more detailed discussion of our market risk management policies. The table below depicts the aggregate Value at Risk (VaR), by risk type, for traded risk for the respective year ended 30 September:1,2 Consolidated and Parent Entity $m 2019 Low Average 2018 Low Average 2017 Low Average High High High Operational risk Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal and regulatory risk but excludes strategic risk. Westpac’s operational risk definition is aligned to APS115 Capital Adequacy: Advanced Measurement Approaches to Operational Risk (AMA). The way operational risk is managed has the potential to positively or negatively impact our customers, our employees, our financial performance and our reputation. The Operational Risk Management Framework outlines Westpac’s approach to the: • identification, measurement and management of operational risks that may impede Westpac’s ability to achieve its strategic objectives and vision; identification and escalation of operational risk incidents in order to mitigate potential financial loss, regulatory impacts and reputational damage that may impact shareholders, the community, and employees; and calculation of operational risk capital. • • The Operational Risk Management Framework is further supported by a number of key Group-wide operational risk policies. For information on our management of operational, refer to Westpac’s Corporate Governance Statement, available at www.westpac.com.au/corpgov. Conduct and Compliance risk Conduct Risk The risk that our provision of services and products results in unsuitable or unfair outcomes for our stakeholders or undermines market integrity. The Westpac Group Conduct Framework sets out our approach to Conduct and Conduct Risk Management. We establish an umbrella view of Conduct Risk by leveraging existing risk frameworks, in particular Operational, Compliance, Reputation and Sustainability risk to improve customer outcomes. Conduct also underpins Our Compass, which brings together our Vision, Values, Code of Conduct and Service Promise to provide our people with a consistent understanding of what it means to ‘Do the Right Thing’. Compliance risk Compliance risk is the risk of legal or regulatory sanction, financial or reputational loss, arising from our failure to adhere to the compliance obligations required of the Group. For information on our management of operational and compliance risk, refer to Westpac’s Corporate Governance Statement, available at www.westpac.com.au/corpgov. 1.Includes electricity risk. 2. Includes prepayment risk and credit spend risk (exposure to movements in generic credit rating brands). Interest rate risk Foreign exchange risk Equity risk Commodity risk1 Other market risks2 Diversification effect Net market risk 14.96.6 10.9 8.6 0.8 4.1 0.2 0.0 0.0 42.0 1.78.2 5.5 2.0 3.5 n/a n/a(12.3) 45.3 7.9 14.4 15.65.18.6 16.04.6 8.5 6.9 0.7 3.0 9.4 0.6 3.1 1.00.0 0.10.4 0.0 0.1 24.3 1.76.5 14.13.3 6.6 5.8 1.4 3.8 5.13.5 4.2 n/an/a(8.6) n/a n/a (8.6) 28.16.7 13.422.9 9.7 13.9

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2019 Westpac Group Annual Report 117 Risk and risk management Governance risk The risk that the right information does not get to the right people or governance fora in the right format and timeframe to empower decision making. It is driven by organisational structures and relationships including between the Board, management, its shareholders and other stakeholders, which leads to deficient decision making, poor accountability and ineffective structures and processes. We have a formal risk governance structure to support our Risk Management Framework which supports having the right people making the right decisions in the right format and in the right timeframe. This structure consists of the Board, BRCC and management committees. Our risk governance structure includes documented approval authorities and delegations to committees and individuals, formal reporting structures, escalation processes and oversight for the management of risks, transparent and regular reporting, and evidencing of discussion and decision making by committees and individuals. We also apply standard protocols to communicate with regulators and critical stakeholders. 1 Risk Culture Risk culture is the shared beliefs, attitudes, and norms that determine the way our people consider, identify, understand, discuss and manage current and emerging risks the Group is exposed to. A strong risk culture is essential for effective risk management as it promotes individual and organisational risk awareness, shaping behaviours and judgements around sound risk-taking. At Westpac, all employees are responsible for strengthening Westpac’s risk culture through fulfilling their risk-related obligations to allow Westpac to operate within risk appetite. A strong risk culture continuously improves risk practices, so that key learnings and experiences are integrated into Group-wide and customer outcomes. Having a strong risk culture also assists emerging risks and risk-related behaviours being within risk appetite and those risks that are outside of appetite being recognised, assessed, escalated and addressed to return within appetite in a proactive and responsive way. Westpac’s Foundations of Strong Risk Culture outline the key structural mechanisms (systems, policies and processes) and behavioural characteristics (responsiveness, speaking up) that shape and influence our risk culture. We use these foundations to monitor and assess Westpac’s risk culture through a suite of diagnostic approaches, including: • a Risk Culture Dashboard to monitor trends and identify areas for management focus, supported by a database of risk culture and conduct metrics; a Risk Culture Insights Program, which enables a deep dive into a specific business area to identify key risk culture strengths and opportunities for improvement; and a Risk Culture Maturity assessment methodology that enables us to determine our current risk culture maturity relative to our target state. • • Strategic risk The risks arising from key elements of the strategic objectives and business plans. Strategic risk is the potential for financial loss or reputational damage arising from choosing the wrong strategy, poorly executing on the right strategy, or choosing not to pursue certain strategies. Strategic risk may result from a lack of responsiveness to changes in the business environment within which Westpac operates – including economic, geopolitical, regulatory, technological, environmental, social and competitive factors. While these external factors cannot be controlled, their impact can be understood and limited through an effective strategic risk management framework, including scenario analysis and stress testing. Group Strategy supports the management of strategic risk through the ongoing business strategy planning cycle, ensuring alignment across our business, financial, capital and risk planning. Key elements of this are the annual Board Strategy Review (BSR), annual Financial Target setting, and project investment approval processes which enable the identification, monitoring and mitigation of strategic risk throughout the Group. Risk provides oversight of strategic risk by providing independent review of these processes and independently monitoring and reporting on the level of risk established against our risk appetite metrics. They also consider the impact on the current and emerging risk landscape, stress testing outcomes of our business plans through different scenarios and our risk infrastructure. 2 3 4

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118 2019 Westpac Group Annual Report Risk and risk management Capital Adequacy The risk that the firm has an insufficient level or composition of capital to support its normal business activities and to meet its regulatory capital requirements under normal operating environments or stressed conditions (both actual and as defined for internal planning or regulatory testing purposes). This includes the risk from the Westpac’s pension plans. Our approach to capital management seeks to ensure that it is adequately Capitalised as an ADI. Westpac evaluates its approach to Capital management through an Internal Capital Adequacy Assessment Process (ICAAP), the key features of which include: • the development of a capital management strategy, including consideration of regulatory minimums, capital buffers and contingency plans; consideration of both economic and regulatory capital requirements; a stress testing framework that challenges the capital measures, coverage and requirements including the impact of adverse economic scenarios; and consideration of the perspectives of external stakeholders including rating agencies and equity and debt investors. • • • Cyber risk The potential for loss or harm to the business and stakeholders related to the use of technology. Our cyber risk management approach focuses on having an ‘end to end’ view of the Westpac Group Cyber ecosystem and whether policies, processes, systems and structures support the management of cyber risk. It is based on the Operational Risk Management Framework (ORMF) and Risk Management Strategy (RMS) across the Three Lines of Defence, and benchmarked against cyber risk management approaches considered by Australian and international regulations, international frameworks, current and emerging approaches within financial services, consulting firms and insurance. Reputation risk Reputation risk is the risk that an action, inaction, transaction, investment or event will reduce trust in Westpac’s integrity and competence by clients, counterparties, investors, regulators, employees or the public. Reputation risk arises where there are differences between these stakeholders’ current and emerging perceptions, beliefs and expectations relative to our current and planned activities, performance and behaviours. We have a Reputation Risk Management Framework and key supporting policies in place covering the way we manage reputation risk as one of our key risks across the Group, including the setting of risk appetite and roles and responsibilities for risk identification, measurement and management, monitoring and reporting. The Reputation Risk Management Framework was reviewed and updated in 2019. Sustainability risk The risk of reputation or financial loss due to failure to recognise or address material existing or emerging sustainability related environmental, social or governance issues. The Group has in place a Board-approved Sustainability Risk Management Framework (Framework) that is supported by a suite of key policies and position statements. These include Our Principles for Doing Business, Responsible Investment Position Statement, Environmental, Social and Governance (ESG) Credit Risk Policy, Climate Change Position Statement and 2020 Action Plan, Human Rights Position Statement and 2020 Action Plan, sensitive sector position statements and Responsible Sourcing Code of Conduct, many of which are publicly available. The Sustainability Risk Management Framework was reviewed and updated in 2019. Westpac is also a signatory to several voluntary principles-based frameworks that guide the integration of ESG-related issues to banking, lending and investment analysis. These include the Equator Principles, the United Nations Environment Programme Finance Initiative’s Principles for Responsible Banking, the Principles for Responsible Investment, and the Task Force on Climate-related Financial Disclosures (TCFD). Climate change risk Within the Sustainability Risk Management Framework climate change-related risks are managed by the Group in the same way as other transformational issues facing the economy. The Group examines the policy, regulatory, technology and market changes related to climate change (‘transition risks’), and the impacts of changes in climate patterns and extreme weather events (‘physical risks’). The Group seeks to understand the potential for these changes to impact its business, in particular the possible impact on credit risk, regulatory and reporting obligations, and its reputation. Through its Climate Change Position Statement and 2020 Action Plan (CCPS), Westpac has an enhanced approach to lending to emissions-intensive sectors, supporting customers that are in or reliant on these sectors and who assess the financial implications of climate change on their business, including how their strategies are likely to perform under various forward-looking scenarios, and demonstrate a rigorous approach to governance, strategy setting, risk management and reporting.

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2019 Westpac Group Annual Report 119 Risk and risk management Westpac uses scenario analysis to inform its assessment of climate-related risks over short, medium and long-term horizons. The findings from scenario analysis conducted in 2016 were reflected in Westpac’s current CCPS which outlined enhanced lending standards for the thermal coal mining and energy sectors. These lending parameters have been included in the Group’s risk framework and, where appropriate, are applied at the portfolio, customer and transaction level. In 2019 the Group undertook scenario analysis to assess the resilience of Westpac’s Australian Business and Institutional lending1 to transition risks brought about by rapid decarbonisation of the Australian economy under a 1.5-degree scenario. Westpac also continued to assess: •The resilience of its Business and Institutional lending to transition risks under a 2-degree scenario (based on scenarios from work undertaken in 2018); and •The potential impact of climate-related physical risks on the Australian mortgage portfolio2 arising from global warming scenarios of both 2 and 4-degrees. The approach and results are summarised below. Further detail can be found in the Westpac Sustainability Performance Report. 1 Scenario analysis - transition risk Approach3 To assess the possible implications of climate-related transition risks, the Group used scenario analysis to study how the Australian economy, electricity market and other industry sectors might perform when emissions are constrained in line with 2-degree and 1.5-degree transition pathways. • The emission constraints used in the modelling were informed by the International Energy Agency’s Sustainable Development Scenario, the International Renewable Energy Agency’s Renewable Energy Roadmap and the Intergovernmental Panel on Climate Change (IPCC) Special Report on Global Warming of 1.5 Degrees; Each sector’s performance under the two pathways was analysed and categorised according to risk profile; Sectors whose medium (2030) and long-term (2050) performance under a scenario deviated significantly4 from average GDP growth, were classified as ‘higher risk’; and These results were applied to the Australian Business and Institutional lending portfolio to assess the extent of current exposure to these higher risk sectors. • • • Results •1.5-degrees: Westpac’s current exposure to sectors that by 2030 may face growth constraints under a 1.5-degree scenario is approximately 2.5% of its Business and Institutional lending; and • 2-degrees: Westpac’s current exposure to sectors that by 2030 may face growth constraints under a 2-degree scenario is approximately 0.9% of its Business and Institutional lending. Westpac continues to assess the resilience of its Business and Institutional lending portfolio to transition risks. Lending to higher risk sectors may be subject to enhanced due diligence or restrictions under the parameters laid out in the CCPS. The Group reviews its CCPS every three years. Scenario analysis - physical risk 2 Approach • To assess the possible implications of climate-related physical risks, the Group studied the potential impact of natural perils on its Australian mortgage portfolio under a 4-degree scenario: The selected perils were inundation, soil contraction, floods, wind and cyclones, and bushfires; The core scenario is based on the IPCC’s RCP8.5 scenario and a series of conservative assumptions about the vulnerability of Australian homes to natural perils; Changes under the scenario in average annual costs as a result of climate change were estimated to 2050; A set of ‘higher risk’ postcodes were defined where the net present value of changes in these costs was greater than an interest rate increase above a defined threshold - consistent with our typical stress testing parameters; and We applied these results to the Australian mortgage portfolio to assess the extent of the Group’s current exposure to these postcodes. • • • • 3 • 4 1. 2. 3. 4. Excludes retail, sovereign, and bank exposures. Excludes RAMS. Updated transition risk methodology applied from 1H19. Greater than one standard deviation.

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120 2019 Westpac Group Annual Report Risk and risk management Results • 4-degrees: Approximately 1.6% of the Australian mortgage portfolio is exposed to postcodes that may experience higher physical risk at 2050. Westpac continues to assess the resilience of its Australian mortgage portfolio to physical risks. The Group understands the importance of both climate mitigation and adaptation efforts, including government planning measures, and the benefits of climate-resilient building characteristics to reduce property damage and impacts on customers and communities. Along with the Group’s broader commitment to the Paris Agreement, Westpac expects to continue to help individual customers respond to climate change, and to continue to advocate for more research and investment into helping communities adapt and become resilient to climate-related impacts. Structured entities We are associated with a number of structured entities in the ordinary course of business, primarily to provide funding and financial services products to our customers. Structured entities are typically set up for a single, pre-defined purpose, have a limited life, generally are not operating entities and do not have employees. The most common form of structured entity involves the acquisition of financial assets by the structured entity that is funded by the issuance of securities to external investors (securitisation). Repayment of the securities is determined by the performance of the assets acquired by the structured entity. Under AAS, a structured entity is consolidated and reported as part of the Group if it is controlled by the parent entity in line with AASB 10 Consolidated Financial Statements. The definition of control is based on the substance rather than the legal form. Refer to Note 32 to the financial statements for a description of how we apply the requirements to evaluate whether to consolidate structured entities and for information on both consolidated and unconsolidated structured entities. In the ordinary course of business, we have established or sponsored the establishment of structured entities in relation to securitisation, as detailed below. Covered bond guarantors Through our covered bond programs we assign our equitable interests in residential mortgage loans to a structured entity covered bond guarantor which guarantees the obligations of our covered bonds. We provide arm’s length swaps to the covered bond guarantor in accordance with relevant prudential guidelines. We have no obligation to repurchase any assets from the covered bond guarantor, other than in certain circumstances where there is a breach of representation or warranty. We may repurchase loans from the covered bond guarantor at our discretion, subject to the conditions set out in the transaction documents. As at 30 September 2019, the carrying value of assets pledged for the covered bond programs for the Group was $44.7 billion (2018: $43.1 billion). Refer to Note 24 to the financial statements for further details. Securitisation structured entities Through our securitisation programs we assign our equitable interests in assets (in respect of RMBS, principally residential mortgage loans, and in respect of ABS, principally auto receivables) to structured entities, which issue securities to investors. We provide arm’s length interest rate swaps and liquidity facilities to the structured entities in accordance with relevant prudential guidelines. We have no obligation to repurchase any securitisation securities, unless there is a breach of representation or warranty within 120 days of the initial sale (except in respect of our program in New Zealand, which imposes no such time limitation). We may remove assets from the program where they cease to conform with the terms and conditions of the securitisation programs or through a program’s clean-up features. As at 30 September 2019, our assets securitised through a combination of privately or publicly placed issuances to a combination of domestic and offshore investors were $8.2 billion (2018: $7.6 billion). Under AAS, all of the structured entities involved in our loan securitisation programs are consolidated by the Group. Refer to Note 24 to the financial statements for further details. Structured finance transactions We have entered into transactions with structured entities to provide financing to customers or to provide financing to the Group. Any financing arrangements to customers are entered into under normal lending criteria and are subject to our normal credit approval processes. The assets arising from these financing activities are generally included in loans or Investment securities (2019)/available-for-sale securities (2018). The liabilities arising from these financing activities are generally included in debt issues or other financial liabilities. Exposures in the form of guarantees or undrawn credit lines are included within contingent liabilities and credit-related commitments. Other off-balance sheet arrangements Refer to Note 34 to the financial statements for details of our superannuation plans and Note 27 for details of our contingent liabilities, contingent assets and credit commitments.

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2019 Westpac Group Annual Report 121 Westpac's approach to sustainability Sustainability performance Westpac’s approach to sustainability The Group’s approach to operating sustainably is designed to anticipate, respond to and shape the most pressing emerging topics (issues and opportunities) that have the potential to materially impact customers, employees, suppliers, shareholders and communities. As one of Australia’s largest companies, Westpac Group plays a role in helping to create positive social, economic and environmental impact, for the benefit of all. Our approach to sustainability is embedded within the Group’s business activities and aligns with the priorities set out in the Group’s strategy. We are aligned with the Paris Climate Agreement and contribute to the United Nations Sustainable Development Goals. 1 Guiding our approach Accountability for the Group’s Sustainability Strategy starts with the Board, which has responsibility for considering the social, ethical and environmental impact of the Group’s activities, setting standards and monitoring compliance with sustainability policies and practices. The Westpac Sustainability Council comprising senior leaders from across the business, meets at least four times a year and oversees strategic progress and guides the Group’s approach. Progress against the Sustainability Strategy is reported to and discussed with the Executive Team and Board twice each year, with other items discussed as needed. Our approach is aligned to the widely accepted global standard for corporate responsibility and sustainable development, the AA1000 AccountAbility Principles Standard (2008), and its three key principles of Inclusivity, Materiality and Responsiveness. Westpac’s sustainability performance is regularly benchmarked by a number of third-party ratings and awards, including the Dow Jones Sustainability Indices (DJSI), where the Group has been recognised as a global leader as a member of DJSI World for 18 years in a row. In 2019, Westpac ranked number one bank in Australia and ninth globally. Frameworks and policies Westpac responds to enduring and emerging material topics through frameworks and policies that are complementary to its business strategy and form part of the Group’s approach to governance and risk management. Collectively, they help to guide decisions, manage risk and drive action. Key frameworks and policies include: • Principles for Doing Business, which set out the behaviours the Group expects to be judged against in pursuit of its vision, and the framework to embed sustainable practices throughout the business in the areas of governance and ethics, customer practices, employee practices, care for the environment, community involvement and supply chain management; Sustainability Risk Management Framework, which sets out how the Group manages sustainability risks in operations, lending and investment decisions, and the supply chain, providing a guide for roles and responsibilities within the organisation, reflecting the Group’s ‘three lines of defence’ risk management approach; and A suite of policies that embed the principles and management requirements in day-to-day operations, including our Code of Conduct, divisional ESG policies, and position statements on sensitive sectors and issues including climate change and human rights. • • 2 3 4

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122 2019 Westpac Group Annual Report Westpac's approach to sustainability Material sustainability topics Informed by engagement with internal and external stakeholders, including the Group’s Stakeholder Advisory Council, review of policies, industry trends, peer analysis and regulatory and non-regulatory requirements, Westpac’s materiality process is aligned with the Global Reporting Initiative Standards (2016) and the AA1000 AccountAbility Principles Standard (2008). Prioritisation of material topics is subject to annual independent external assurance. Westpac’s top ten material topics are outlined below. Conduct and culture Instances of poor conduct have eroded public trust in the financial services sector, driving an increased focus on corporate culture and improved outcomes for customers Changing regulatory landscape Supervision and regulation in jurisdictions that the Group operates in continue to evolve, creating uncertainty in the operating environment Customers’ needs are becoming more complex, and at the same time their expectations around how they want to engage with us are evolving Digitisation offers opportunities to improve efficiency and deliver new and better customer experiences when, how and where customers choose to engage with us Customer satisfaction and experience Digital product and service transformation Governance and risk Clear governance practices, active management of risk, commitment to compliance, and fair remuneration in our operations, supplier and partner relationships are critical to the longevity and financial wellbeing of the Group Customer vulnerability and hardship Our ability to support customers in times of financial hardship and anticipating times when they can become vulnerable allows us to help when it matters most Maintaining customer confidentiality and the security of our systems is paramount to maintaining trust and confidence Appropriate remuneration structures align executive remuneration and accountability with stakeholder interests over the long term, and play an important role in effective corporate governance Information security and data privacy Executive remuneration Financial and economic performance Maintaining a healthy financial performance and strong balance sheet is vital to the Group’s long-term sustainability Climate change risks and opportunities As a major financial institution, we have an important role to play in managing the risks and opportunities of climate change, and supporting collaborative efforts to limit global warming, while also taking steps to help the economy and communities become more resilient to the expected effects For further detail, please see our Annual Review and Sustainability Report and Sustainability Performance Report at www.westpac.com.au/sustainability. Material sustainability topic

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2019 Westpac Group Annual Report 123 Westpac's approach to sustainability Sustainability goals Westpac Group’s 2018-2020 Sustainability Strategy outlines the Group’s commitment to building a sustainable future. This includes taking action in the areas where the Group can have the greatest impact and create sustainable, long-term value for customers, communities and the nation by: • • • helping people make better financial decisions; helping people by being there when it matters most to them; and helping people create a prosperous nation. Underpinning these three priority areas is a commitment to fostering a culture of care and doing the right thing and continuing to lead on the sustainability fundamentals – policies, action plans, frameworks and metrics reporting. We continue to progress on our climate change, human rights and reconciliation action plans. Westpac is committed to regular reporting to enable a comparison of performance over time. The table below summarises progress against the goals set out in the Group’s Sustainability Strategy with a focus on activity in the past 12 months. 1 Performance against sustainability goals Priority areas Goals 2019 performance Help more people better understand their financial position, improving their financial confidence • Continued to offer financial health check programs for superannuation members, including the digital Wealth Review tool and My Wellbeing online portal; Delivered a range of financial literacy programs to individuals, businesses, not-for-profit organisations and community groups through Westpac’s Davidson Institute in Australia and the Managing Your Money program in New Zealand; and Delivered financial capability communications for different demographic segments including for young Australians, in partnership with 26 universities and TAFE NSW (900,000 interactions); women, via Ruby Connection (724,000 interactions); and older Australians, via Starts at 60 (over 3 million interactions). Helping people make better financial decisions • • Help people recover • from financial hardship Helped customers experiencing financial hardship, issuing over 52,000 financial assistance packages during the year. Help people lift out of a difficult time and recover stronger • Extended the $100 million drought relief fund launched last year to support Australian farmers; Committed $50 million to a flood relief fund dedicated to helping farmers in North Queensland; Delivered a portable ‘Bank in a Box’ branch to Townsville to help those affected by floods; Provided over 500 relief packages for customers impacted by natural disasters across Australia; Donated $150,000 to the Salvation Army and a further $100,000 to the Foundation for Rural & Regional Renewal (FRRR) to support disaster recovery and programs to build local community resilience; Joined the Government-led Drought Finance Taskforce to both share information with the government on the impact of drought on our customers and advise on measures to help alleviate the impact; and Continued work with the Australian Business Roundtable for Disaster Resilience and Safer Communities to define approaches to assist government, business and communities mitigate and respond to natural disasters. • • • • • Helping people by being there when it matters most to them • 2 Helping our most vulnerable customers • Published the 2020 Customer Vulnerability Action Plan outlining the Group’s principles for engaging with customers experiencing vulnerability, including providing guidance, help and support for customers experiencing domestic and family violence and financial abuse; Assisted more than 900 customers since launching the Priority Assist 1800 telephone line to support customers experiencing domestic and family violence and financial abuse; Established specialist teams to support bankers with complex customer queries; Established a dedicated 24/7 Scams Assist team to protect customers who may be victims of fraud or scams; Launched a series of Life Moments tools and resources to assist customers and their families going through challenging circumstances such as the loss of a loved one, divorce or separation; and Supported over 3,000 Indigenous Australians through a dedicated customer care team established this year to support remote Indigenous communities. • • • 3 • • 4

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124 2019 Westpac Group Annual Report Westpac's approach to sustainability Priority areas Goals 2019 performance Build the workforce of the future • Identified 10 core capabilities to enable our people to prepare for the future of work and built curricula to support their growth in these areas; and Updated our Science, Technology, Engineering and Mathematics (STEM) Commitment, reflecting a wide range of interventions and initiatives to help build a STEM-confident nation that is diverse and future ready. • Invest and back the people and ideas shaping Australia • Awarded $4.3 million in educational scholarships, through Westpac Scholars Trust, to the next 102 Westpac Scholars, bringing the total cohort to 416; Helped to create over 700 jobs1 for vulnerable Australians through Westpac Foundation job creation grants to social enterprises; Westpac Foundation awarded 100 Community Grants to the total of $1 million, to support approximately 12,000 people; Supported the establishment of 359 businesses through our Many Rivers partnership; the partnership has created jobs1 for more than 2,300 people, with 829 identifying as Indigenous; Maintained a portfolio of direct investment in nine early stage companies; and Maintained our commitment to Reinventure - $150 million across three funds, supporting Reinventure’s investment in 27 early stage companies. • • • • • Back the growth of climate change solutions • Increased lending to climate change solutions, taking total committed exposure to $9.3 billion, progressing towards our 2020 target of $10 billion; Facilitated $3.6 billion in funding for climate change solutions, exceeding our 2020 target of $3 billion; and Analysed climate change risks under 1.5, 2 and 4-degree scenarios. Helping people create a prosperous nation • • Back the growth of housing affordability solutions • Undertook research with Indigenous consultancy firm Origin Communications to consider how Westpac can support more Indigenous Australians to own their own home – with insights informing further exploration, such as intergenerational home ownership; Westpac New Zealand launched a dedicated home loan solution - ‘Westpac Prebuilt’ - offering a simple and streamlined process to help customers into prefabricated homes, the first bank in New Zealand to do so; and Extended our support to Head Start Homes (HSH) – a charity that helps people move out of social housing into their own homes. • • Bring together partners and harness the Group capacity to tackle pressing social issues that matter most to the nation • A founding bank and signatory to the Principles for Responsible Banking, developed as an initiative of the United Nations Environment Programme Finance Initiative (UNEP FI); Joined other Australian banks, insurers, super funds, investors and industry groups to form the Australian Sustainable Finance Initiative; and Joined an Expert Advisory Council, through WEConnect International, focusing on best-in-class approaches to supply chain, supplier diversity and access to capital for women-owned businesses. • • 1.All results for the year ended 30 September except jobs created through the Westpac Foundation job creation grants to social enterprises and Many Rivers job creation which are for the year ended June. Refer to www.westpac.com.au/sustainability for glossary of terms and metrics definitions.

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2019 Westpac Group Annual Report 125 Westpac's approach to sustainability Priority areas Goals 2019 performance A culture of doing the right thing • Continued programs to rebuild trust, strengthen governance and deliver more consistent customer outcomes, including our Royal Commission response plan and our Culture, Governance, Accountability Self-Assessment action plan; Maintained ongoing Navigate training to reinforce Our Compass – a framework which brings together our vision, service promise, values and Code of Conduct – with smaller sessions facilitated by team leaders to continue the conversation locally; and Continued to assess employee performance through the ‘Motivate’ framework – a behaviours-first approach to people management. • • 1 Promote an inclusive society, where our workforce reflects our customers • • • • Maintained 50% women in leadership1 roles; 36% women on the Westpac Board; 161 new-to-bank Aboriginal or Torres Strait Islander hires; Introduced a leadership shadowing program for culturally and linguistically diverse employees to build exposure to new networks and career pathways; and Updated leave entitlements to include 20 days paid leave for employees undergoing a gender transition, three days Sorry Business leave for Aboriginal and Torres Strait Islander employees, increased paid leave for employees experiencing domestic and family violence to 20 days, and increased paid parental leave for support carers to three weeks. • A culture that is caring, inclusive and innovative Increase channels where customers can provide feedback • Established a new complaints strategy centred on customer connection, service excellence, priority support for vulnerable customers and root cause and complaints prevention; Embedded a Customer Outcome Committee to work through complex cases; Reduced non-external dispute resolution average time to close for complaints from 13 days to seven days; Commenced tracking customer satisfaction of the complaint resolution experience; Launched our ‘FAIRGO’ decision principles that set out our approach to resolving complaints; Launched the “Spot it, Log it, Own it” internal campaign, promoting an improved culture of complaints handling; and 97% of Australia-based employees completed the “Why Complaints Matter” training. • • • • • • 2 3 4 1.Women in Leadership refers to the proportion of women (permanent and maximum term) in leadership roles across the Group. It includes the CEO, Group Executives, General Managers, senior leaders with significant influence on business outcomes (direct reports to General Managers and their direct reports) large (3+) team people leaders three levels below General Manager, and Bank and Assistant Bank Managers.

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126 2019 Westpac Group Annual Report Westpac's approach to sustainability Priority areas Goals 2019 performance Employees • Implemented the recommendations of the Sedgwick Review for employees effective from 1 October 2018, two years ahead of schedule; Embedded a Group Consequence Management Framework which sets out the standards expected of our employees and ensures greater consistency and transparency in the management of employee conduct matters; Achieved total recordable injury frequency rate (TRIFR) of 3.1, a 20% reduction from 2018, and lost time injury frequency rate (LTIFR) of 0.4; Improved Employee Assistance Program utilisation from 9.0% in 2018 to 10.2%; and Continued commitment to supporting workplace wellbeing, appointing a Chief Mental Health Officer to drive a range of activities focused on improving the psychological health and safety of our workforce. • • • • Human rights • Identified key categories of products and services that are supplied to the Group that have a higher likelihood of modern slavery risk; Commenced work to meet the requirements of the Australian Modern Slavery Act (2018) ahead of our 2021 reporting obligations; Became the first bank to be accredited as a Living Wage employer in New Zealand; and The only Australian bank to contribute to the Liechtenstein Initiative for a Financial Sector Commission on Modern Slavery and Human Trafficking - a public-private partnership that aims to put the financial sector at the heart of global efforts to end modern slavery and human trafficking - with the outcomes now published the Finance Against Slavery and Trafficking Blueprint. • • • Sustainable lending and investment • Launched the world’s first Green Tailored Deposit to be certified by internationally recognised Climate Bonds Initiative (CBI); Delivered several sustainability-linked loans designed to incentivise and reward customers for meeting pre-determined sustainability targets; Undertook an extensive review of our Sustainability Risk Management Framework focusing on improvements to risk identification, governance and reporting; Updated our position statement on Financing Agribusiness and continued our work to embed the management of key climate change and human rights-related risks across our business; and Updated our BT climate-related financial disclosures (superannuation and investments), in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). • • Continuing to lead on the Sustainability Fundamentals • • Environment1 • • Maintained carbon neutral status; Achieved a 5.6% reduction in greenhouse gas emissions (‘emissions’) compared to 2018 and 17.9% compared to our 2016 baseline; Achieved a 15.7% reduction in Group paper consumption compared to 2018 and 45.3% reduction against our 2016 baseline; Achieved a 3.9% reduction in water consumption in our Australian workplaces2 compared to 2018 and 23.7% reduction against our 2016 baseline; Achieved a 75% diversion of waste from landfill in our main Australian offices3; and Committed to source 100% of global electricity consumption through renewable energy sources by 2025 and joined RE100. • • • • Responsible Sourcing• Sourced $18.6 million from diverse suppliers, including $3.6 million from Indigenous suppliers; and Joined ‘Raising the Bar’ as one of 16 inaugural signatories – a joint initiative of the Business Council of Australia and Indigenous business advocate Supply Nation, and committed to spend $21 million with Indigenous businesses by 2024. • Community and social impact • Contributed over $130 million to community investment excluding commercial sponsorships across the Group; and 13% employees participated in our volunteering programs, with more than 500 Westpac employees contributing more than 24,000 hours of skilled volunteering support to community partners and social enterprises to build their financial sustainability and social impact. • 1. All results for the year ended 30 September except environmental footprint which is for the year ended 30 June. Refer to www.westpac. com.au/su/sustainability for glossary of terms and metric definitions. Australian workplaces include commercial offices, retail branches, data centres and subsidiaries sites. Our main Australian offices are Sydney based Westpac buildings located at Kent Street, Barangaroo and Kogarah. 2. 3.

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2019 Westpac Group Annual Report 127 Westpac's approach to sustainability Climate-related financial disclosures The Group has long recognised that climate change is one of the most significant issues that will impact the long-term prosperity of our economy and way of life. Westpac was the first Australian bank to recognise the importance of limiting global warming to less than two degrees and that to do this, global emissions need to reach net zero in the second half of this century. Westpac continues to integrate the consideration of climate-related risks and opportunities into its business operations. This includes alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which the Group has publicly committed to support. Westpac Group’s performance against the recommendations of the TCFD is summarised below. 1 Governance The Board has oversight of Westpac Group’s response to climate change. The Group’s third Climate Change Position Statement and 2020 Action Plan (CCPS) was approved by the Executive Team and the Board in 2017. It covers the management of the Group’s climate change risks and opportunities, including lending to climate solutions, the Group’s approach to financing emissions-intensive sectors, commitment to reporting and transparency, direct carbon footprint management, and incorporation of climate change considerations into the Group’s Sustainability Risk Management Framework1. The Board Risk and Compliance Committee reviews and approves updates to the Sustainability Risk Management Framework (which includes climate change risks) every two years. Management of climate change is delegated to the Executive Team. The Sustainability Council (Council), formed in 2008 and sponsored by the Group Executive, Customer and Corporate Relations, brings together senior leaders from across the Group with the explicit responsibility for managing Westpac’s sustainability agenda, including climate change. The Council meets at least quarterly and has climate change as a fixed agenda item. The Council reports to the Executive Team and Board through twice-yearly updates. The Council has oversight of committees established to oversee aspects of the Group’s CCPS. This includes: • The Climate Change Solutions Committee which meets at least quarterly and oversees initiatives to achieve Westpac’s targets for lending to and facilitating climate change solutions; The Climate Change Risk Committee which oversees initiatives to address credit, regulatory and legal risks of climate change, including scenario analysis. Reports on climate change-related risks are provided to the Council on a quarterly basis; and The Environment Management Committee which oversees strategies and initiatives to reduce the Group’s direct environmental footprint, particularly targets around energy and emissions, and reports to the Council on a quarterly basis. • • In addition, the Sustainable Bonds Committee provides risk governance and oversight of Climate Bonds and other sustainable funding programs to ensure compliance with relevant standards. It reports to the Treasury Risk and Compliance Committee. Strategy The Group’s 2018-2020 Sustainability Strategy and CCPS describe Westpac’s climate change strategy. The strategy is underpinned by principles which recognise that: • • • • • A transition to a net zero emissions economy is required; Economic growth and emissions reductions are complementary goals; Addressing climate change creates financial opportunities; Climate-related risk is a financial risk; and Transparency and disclosure matters. 2 To address climate change risk and opportunities the CCPS identifies five focus areas where the Group is expected to direct its attention over the short, medium and long term2: • • • • • Provide finance to back climate change solutions; Support businesses that manage their climate-related risks; Help individual customers respond to climate change; Improve and disclose our climate change performance; and Advocate for policies that stimulate investment in climate change solutions. 3 Westpac uses scenario analysis to guide its climate change strategy and to analyse the implications of climate-related factors to its business. Westpac expects to be well positioned to capitalise on opportunities arising out of growth in sectors benefiting from a transition to a low carbon economy over the short and medium term. The Group has lending targets to climate change solutions of $10 billion by 2020 and $25 billion by 2030. 4 1.Westpac’s Climate Change Position Statement and 2020 Action Plan does not apply to investments made where a Westpac Group entity is acting as a trustee (for example Responsible Super Entity licensee or Responsible Entity) or insurer. The governance and strategies for ESG risk in these portfolios (including climate change) are the responsibility of the relevant board and management of these entities. For more information visit the BT website at www.bt.com.au/sustainability. 2. See: Westpac Group’s Climate Change Position Statement and 2020 Action Plan.

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128 2019 Westpac Group Annual Report Westpac's approach to sustainability Risk management and scenario analysis Further details about Westpac’s approach to climate related risks and its use of scenario analysis to analyse the implications of climate-related factors to its business are set out in the ‘Risk and risk management’ section. Metrics and targets Support for climate solutions •Total committed exposure (TCE) to climate solutions • Facilitation of climate solutions • • $9.3 billion vs 2020 target - $10 billion $3.6 billion climate-related bonds vs 2020 target - $3 billion Energy generation •Emission intensity of electricity generation portfolio • 0.26 (tCO e/MWh) vs 2020 target 0.30 (tCO e/MWh) 2 75% renewable versus 25% non-renewables. 2 • Energy mix of electricity generation exposure (WIB only) • Coal mining and coal exposure • • • Lending to all mining (TCE) Lending to coal mining (metallurgical and thermal) (TCE) Thermal coal mining portfolio quality thresholds • $10.5 billion mining exposure representing 1% of Group TCE $0.8 billion lending to coal mining representing 0.07% of Group TCE Coal quality – Existing projects > 5,700 kCal/kg – Compliant – New projects > 6,300 kCal/Kg - Compliant • • Direct footprint • • • • Total Scope 1 and 2 emissions (tCO e) • 121,168 tCO e1 - an annual reduction of 5.6% towards 2020 2 2 target of 9% (2016 baseline) Total Scope 3 emissions (tCO e) 2 • • • 62,242 tCO e 2 2 Carbon neutral operations Commitment to 100% renewable energy Carbon neutrality maintained Committed to source 100% global electricity consumption through renewable energy sources by 2025 Climate change portfolio resilience • • • Transition risk – 1.5-degree scenario Transition risk – 2-degree scenario Physical risk – 4-degree scenario • Approximately 2.5% of current business lending exposed to sectors which by 2030 may experience higher risk in a transition to a 1.5-degree economy Approximately 0.9% of current business lending exposed to sectors which by 2030 may experience higher risk in a transition to a 2-degree economy Approximately 1.6% of current Australian mortgage portfolio in postcodes which by 2050 may be exposed to higher physical risks under a 4-degrees scenario • • Further Information Further details on Westpac’s climate change reporting can be found across the Group’s annual reporting suite: Governance • • • Annual Report Climate-related financial disclosures Sustainability Performance Report – Climate Change Climate Change Position Statement and 2020 Action Plan Strategy • • • Annual Report – Climate-related financial disclosures Sustainability Performance Report – Climate Change Climate Change Position Statement and 2020 Action Plan Risk Management including scenario analysis • • • Annual Report – Risk and risk management Sustainability Performance Report – Climate Change Climate Change Position Statement and 2020 Action Plan Metrics and Targets • Annual Report - Climate-related financial disclosures Sustainability Performance Report – Climate Change; Performance Metrics ESG Dashboard – Westpac website • 1.Total Scope 1 and 2 emissions are for the year ended 30 June. Refer to www.westpac.com.au/sustainability for glossary of terms and metric definitions. 2. Total Scope 3 emissions are for the year ended 30 June. Refer to www.westpac.com.au/sustainability for glossary of terms and metric definitions. TCFD recommendation Location Metrics 2019 performance

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2019 Westpac Group Annual Report 129 Westpac's approach to sustainability Westpac’s commitment to human rights Westpac recognises that respecting and advancing human rights helps us to achieve our vision to help our customers, communities and employees to prosper and grow. Westpac is a signatory of the United Nations Global Compact and supporter of the UN’s ‘Protect, Respect, Remedy’ framework. The Group’s implementation of the framework is guided by the UN Guiding Principles on Business and Human Rights (UNGP). The Group’s Human Rights Position Statement and 2020 Action Plan (Statement) outlines Westpac’s approach to human rights-related commitments, principles, focus, approach, governance and related policies, statements, frameworks and action plans; considering its role as an employer, a customer services provider, a purchaser of goods and services, a financial services provider, a supporter of communities and a responsible business. 1 Governance and oversight The Board has oversight of Westpac Group’s approach to human rights. The Statement was approved by the Group Executive and the Board in 2017. Management of human rights is delegated to Group Executives and the Sustainability Council brings together senior leaders from across the Group with explicit responsibility for managing Westpac’s sustainability agenda including human rights. The Council meets at least quarterly and has human rights as a fixed agenda item. The Council reports to the Board through twice-yearly updates. The Council has oversight of the Human Rights Working Group which meets quarterly to implement the consideration of human rights into day-to-day decision-making with a focus on the Group’s salient human rights issues. Salient human rights issues The Group has determined the following salient human rights issues – the human rights at risk of the most severe negative impact through a company’s activities and business relations. Managing and protecting the privacy rights of individuals Retail and business customers, employees, contractors, suppliers Abuse, loss and breach of personal data and privacy Customer vulnerability Customers and wider customer value chain Economic and social disadvantage of customers Individual exclusion and discrimination in employment Current and prospective employees and contractors Inability to full and equal participation in employment Unfair wages and conditions for workers in the value chain Contractors, suppliers, third-party service providers Impact to an individual’s prosperity, security and standard of living Management of human rights issues A range of policies and strategies outlined in the Human Rights Position Statement and 2020 Action Plan guide Westpac’s response to human rights issues. Westpac’s approach to engagement with stakeholders is set out in the Group’s Stakeholder Engagement Framework and aligned to the AA1000 Stakeholder Engagement Standard. The Group has a range of mechanisms in place to enable effective engagement with stakeholders such as its Whistleblower hotline, Office of the Customer Advocate, feedback and complaints webpages and phonelines. Where appropriate these mechanisms are also equipped to remediate human rights issues. This year the Group engaged with stakeholders in several ways to manage and advance its approach to human rights issues, including: • • • • • • The Group’s Stakeholder Advisory Council on the role of banks and modern slavery; Customers and the management of human rights risks arising in different industry sectors; Suppliers and the integration of human rights risk assessments in contracts; Civil society and evolving expectations on corporate approaches to human rights risk management; Specialist advisors and best practice in human rights risk management for companies; and Peers, government and industry groups to support collective efforts to address modern slavery. 2 Australian Modern Slavery Act 2018 With the introduction of the Modern Slavery Act in Australia, Westpac has begun work to embed its requirements into its procurement practices. Westpac will publish its first Australian Slavery and Human Trafficking Statement in 2021, reporting on its activities for the FY20 period. The Group reports further detail on its human rights performance in its Sustainability Performance Report. It also produces a slavery and human trafficking statement in line with its obligations under the United Kingdom’s Modern Slavery Act. 3 4 Salient issueStakeholders at risk of being impacted Potential impacts

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130 2019 Westpac Group Annual Report Westpac's approach to sustainability Five year non-financial summary1 Key trends across a range of non-financial areas of performance are provided in the following five year non-financial summary, with a more detailed account of sustainability performance included in our Sustainability Performance Report. 2019 2018 2017 2016 2015 2 2 2 Customer Total customers (millions)2 Digitally active customers (millions)3 Branches4 Branches with 24/7 capability (%)5 ATMs Smart ATMs (%)6 Change in consumer complaints (%) - Australia7 Change in consumer complaints (%) - NZ 14.2 5.8 1,143 35 2,847 54 94 2 14.213.913.413.2 5.6 5.3 4.9 4.9 1,204 1,2511,3101,429 33 29 27 22 3,222 3,665 3,757 3,850 47 44 37 31 12(18) (31) (28) (16) (21) (7) (18) Employees Total employees (full-time equivalent)8 Employee voluntary attrition (%)9 New starter retention (%)10 Employee Commitment Index (%)11 Lost Time Injury Frequency Rate (LTIFR)12 Women as percentage of the total workforce (%) Women in leadership (%)13 33,288 10.3 84.5 71 0.4 58 50 35,02935,096 35,580 35,484 10.09.6 10.610.6 84.184.7 85.5 85.3 73 76 - - 0.4 0.6 0.80.8 57 58 58 59 50 50 48 46 Environment Total Scope 1 and 2 emissions - (tonnes CO -e)14 Total Scope 3 emissions - (tonnes CO -e)15 Paper consumption - Aust and NZ (tonnes)16 121,168 62,242 1,812 128,339 134,237156,7011175,806 65,783 68,83063,347 68,484 2,1612,706 3,304 4,857 Sustainable lending and investment Climate change solutions attributable financing - Aust and NZ ($m) Proportion of electricity generation financing in renewables including hydro - Aust and NZ (%)17 Electricity generation portfolio emissions intensity (tonnes CO -e/MWh)18 Finance assessed under the Equator Principles - Group ($m)19 9,263 75 0.26 454 9,1136,979 6,1936,054 7165 59 61 0.280.36 0.38 0.38 773 891617 1,065 Social impact Community investment excluding commercial sponsorship ($m)20 Community investment as a percentage of pre-tax profits - Group (%)20 Community investment as a percentage of pre-tax operating profit (cash earnings basis)20 Financial education (participants)21 130 1.33 1.32 619,995 128164148149 1.091.421.391.30 1.101.411.321.33 133,844 112,26359,596 65,538 Supply chain Number of suppliers assessed against Responsible Sourcing Code of Conduct Spend with Indigenous Australian suppliers - Australia ($m)22 98 3.6 100 31-- 3.8 2.8 1.71.2

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2019 Westpac Group Annual Report 131 Westpac's approach to sustainability 1. 2. 3. All data represents Group performance as at 30 September unless otherwise stated. All customers with an active relationship (exclude channel only and potential relationships). Unique customers who have successfully authenticated (including Quickzone) into the digital banking platforms within 90 days. Figures prior to 2016 are not comparable. Include six advisory centres and one community banking centre. Branches that allow customers to self-serve 24/7 via a range of devices that allow them to withdraw and deposit cash, coin exchange etc. (not all these services would be available at every 24/7 zone). Access determined by individual location (i.e. shopping centre opening hours may prevent 24/7 access). ATMs with deposit taking functionality. Excludes old style envelope deposit machines. Change in trend reflects updates to our complaints policy and standard which now requires people to log all complaints, even if they are resolved within 5 days. Full-time equivalent employees include permanent (full-time and pro-rata part-time staff) employees, and temporary (overtime, temporary and contract staff) employees. Employee voluntary attrition refers to the total voluntary separation of permanent employees over the 12 months average total permanent headcount for the period (includes full time, part time and maximum term employees). New starter retention over the 12 months rolling new starter headcount for the period (includes full time and part time permanent employees). New monthly employee survey conducted from 2017. Six month rolling average results reported and prior data not included due to change in survey methodology. Lost Time Injury Frequency Rate (LTIFR) measures the number of Lost Time Injuries, defined as injuries or illnesses (based on workers compensation claims accepted) resulting in an employee being unable to work for a full scheduled day (or shift) other than the day (or shift) on which the injury occurred where work was a significant contributing factor, per one million hours worked in the rolling 12 months reported. Westpac Pacific figures included since FY16. Women in Leadership refers to the proportion of women (permanent and maximum term) in leadership roles across the Group. It includes the CEO, Group Executives, General Managers, senior leaders with significant influence on business outcomes (direct reports to General Managers and their direct reports) large (3+) team people leaders three levels below General Manager, and Bank and Assistant Bank Managers. Scope 1 emissions are the release of greenhouse gases into the atmosphere as a direct result of the Westpac Group banking operations. Scope 2 emissions are indirect greenhouse gas emissions from consumption of purchased electricity from the Westpacing operations. Australian data is prepared in accordance with the NGER Act 2007. New Zealand data is prepared in accordance with the guidance for Voluntary Corporate Greenhouse Gas Reporting published by the New Zealand Ministry for the Environment. These definitions also align with the GHG protocol and ISO 14064-1 standard and are reported for the period 1 July to 30 June. Prior comparison periods adjusted to reflect Group numbers. Scope 3 emissions are greenhouse gases emitted as a consequence of Westpac Group banking operations but by another facility. Australian data is prepared in accordance with the National Carbon Offset Standard. New Zealand data is prepared in accordance with the New Zealand Ministry for the Environment for GHG reporting. These definitions also align with the GHG protocol and ISO 14064-1 standard and are reported for the period 1 July to 30 June. Prior comparison periods adjusted to reflect Group numbers. Total office paper and paper products purchased (in tonnes) by Westpac Group as reported by key suppliers. Includes office copy paper, paper products and printed materials, including direct mail and marketing documents (e.g. office stationery, marketing brochures, customer statements) and are reported for the period 1 July to 30 June. Measured as the percentage of indirect and direct financing (total committed exposure) to energy generation assets in the Australian and New Zealand electricity markets. Data is based on the reported exposures to energy generation (AUD lending only). The average financed emissions intensity is calculated by weighting each loan (total committed exposures) by the emissions intensity of each company. The Equator Principles is a voluntary set of standards for determining, assessing and managing social and environmental risk in project financing. 4. 5. 6. 7. 1 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Indicator name changed from ‘Community investment ($m)’ to ‘Community investment excluding commercial sponsorships ($m)’ in 2018. 2017 figures were restated to be comparable with 2018. 2018 and 2017 figures include monetary contributions, time contributions, management costs and in-kind contributions comprising gifts and foregone fee revenue. 2016 and prior periods were not restated, and also include commercial sponsorships. 21. Total number of interactions by employees, customers and general public with financial education materials offered by the Westpac Group during the year, delivered through face to face and online platforms. Uplift in 2019 number of participants driven by the inclusion of our Life Moments and Help for your Business Education pages. 22. Annual spend with businesses that are 50% or more owned and operated by an Aboriginal or Torres Strait Islander person and certified with a relevant member organisation. Include Tiers 1 and 2 spend with Indigenous Australians suppliers. Prior periods restated to reflect inclusion of Tier 2 spend, first reported in 2018. 2 3 4

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132 2019 Westpac Group Annual Report Other Westpac business information Employees The number of employees in each area of business as at 30 September: 2019 2018 2017 2019 v 2018 FTE decreased 1,741 or 5% compared to 2018. Delivery of productivity initiatives including organisation simplification and channel optimisation, the exit of the Advice business more than offset additional resources required for regulatory, compliance and customer remediation related activities. Property We occupy premises primarily in Australia and New Zealand including 1,143 branches (2018: 1,204) as at 30 September 2019. As at 30 September 2019, we owned approximately 0.7% (2018: 1.5%) of the premises we occupied in Australia and none (2018: none) in New Zealand. The remainder of premises are held under commercial lease with terms generally averaging three to five years. As at 30 September 2019, the carrying value of our directly owned premises and sites was $78 million (2018: $89 million). Westpac Place in the Sydney CBD is the Group’s head office. In December 2015, an Agreement for Lease was executed for 275 Kent Street, allowing for Westpac’s continued occupation of levels 1-23 until 2030 and levels 24-32 until 2024. This site is currently undergoing a refurbishment program and will have the capacity for over 6,000 staff in an agile environment upon its completion. Westpac also occupies levels 1-28 of T2 in International Towers Sydney with a lease running until 2030. This site has a capacity for over 6,000 personnel in an agile environment. We continue a corporate presence in Kogarah, in the Sydney metro area, which is a key corporate office of St.George, with a 2,400 seat capacity. A lease commitment at this site extends to 2034 with options to extend. In Melbourne, Westpac has occupied the majority of 150 Collins Street since October 2015 with a lease term that extends to 2026. This was Westpac’s first fully agile workspace environment with over 1,000 staff now occupying our new Melbourne Head Office. Westpac on Takutai Square is Westpac New Zealand’s head office, located at the eastern end of Britomart Precinct near Customs Street in Auckland, contains 21,903 square metres of office space across two buildings. Lease commitment at this site extends to 2031, with two six-year options to extend on each lease. 1.Total employees include full-time, pro-rata part time, overtime, temporary and contract staff. Consumer Business Westpac Institutional Bank Westpac New Zealand Group Businesses 10,510 5,081 2,434 4,140 11,123 11,01510,855 5,1035,258 2,646 2,725 4,1824,328 12,08311,930 Total Group1 33,288 35,029 35,096

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2019 Westpac Group Annual Report 133 Other Westpac business information Significant long term agreements Westpac has no individual contracts, other than contracts entered into in the ordinary course of business, that would constitute a material contract. Related party disclosures Details of our related party disclosures are set out in Note 36 to the financial statements and details of Directors’ interests in securities are set out in the Remuneration Report included in the Directors’ Report. Other than as disclosed in Note 36 to the financial statements and the Remuneration Report, if applicable, loans made to parties related to Directors and other key management personnel of Westpac are made in the ordinary course of business on normal terms and conditions (including interest rates and collateral). Loans are made on the same terms and conditions (including interest rates and collateral) as they apply to other employees and certain customers in accordance with established policy. These loans do not involve more than the normal risk of collectability or present any other unfavourable features. 1 Auditor’s remuneration Auditor’s remuneration, including goods and services tax, to the external auditor for the years ended 30 September 2019 and 2018 is provided in Note 35 to the financial statements. Audit related services Westpac Group Secretariat monitors the application of the pre-approval process in respect of audit, audit-related and non-audit services provided by PricewaterhouseCoopers (PwC) and promptly brings to the attention of the BAC any exceptions that need to be approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. The pre-approval guidelines are communicated to Westpac’s divisions through publication on the Westpac intranet. During the year ended 30 September 2019, there were no fees paid by Westpac to PwC that required approval by the BAC pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. 2 3 4

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2019 Westpac Group Annual Report 135 1 03 Intangible assets, provisions, commitments and contingencies Financial statements Income statements Statements of comprehensive income Balance sheets Statements of changes in equity Cash flow statements Note 25 Note 26 Note 27 Intangible assets Operating lease commitments Provisions, contingent liabilities, contingent assets and credit commitments Note 1 Financial statements preparation Capital and dividends Note 28 Note 29 Note 30 Shareholders’ equity Capital adequacy Dividends Financial performance Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8 Note 9 Segment reporting Net interest income Non-interest income Operating expenses Impairment charges Income tax Earnings per share Average balance sheet and interest rates 2 Group structure Note 31 Note 32 Investments in subsidiaries and associates Structured entities Other Note 33 Note 34 Note 35 Note 36 Note 37 Note 38 Note 39 Share-based payments Superannuation commitments Auditor’s remuneration Related party disclosures Notes to the cash flow statements Subsequent events Accounting policies relating to prior years Financial assets and financial liabilities Note 10 Trading securities and financial assets measured at fair value through income statement Available-for-sale securities / Investment securities Loans Provisions for expected credit losses / impairment charges Other financial assets Life insurance assets and life insurance liabilities Deposits and other borrowings Other financial liabilities Debt issues Loan capital Derivative financial instruments Financial risk Fair values of financial assets and financial liabilities Offsetting financial assets and financial liabilities Securitisation, covered bonds and other transferred assets 3 Note 11 Note 12 Note 13 Note 14 Note 15 Note 16 Note 17 Note 18 Note 19 Note 20 Note 21 Note 22 Note 23 Note 24 Statutory statements Directors’ declaration Management’s report on internal control over financial reporting Independent auditor’s report to the members of Westpac Banking Corporation Report of independent registered public accounting firm 4

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136 2019 Westpac Group Annual Report Financial statements Income statements1 for the years ended 30 September Westpac Banking Corporation Consolidated 2018 Parent Entity 2019 $m Note 2019 2017 2018 The above income statements should be read in conjunction with the accompanying notes. 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Interest income: Calculated using the effective interest rate method 3 Other 3 32,518 704 31,98730,614 584 618 32,736 776 32,190 640 Total interest income Interest expense 3 33,222 (16,315) 32,57131,232 (16,066)(15,716) 33,512 (19,295) 32,830 (18,977) Net interest income Net fee income4 Net wealth management and insurance income 4 Trading income 4 Other income4 16,907 1,655 1,029 929 129 16,505 15,516 2,424 2,603 2,0611,800 945 1,202 72 529 14,217 922 - 956 2,684 13,853 2,172 - 919 2,633 Net operating income before operating expenses and impairment charges Operating expenses 5 Impairment charges 6 20,649 (10,106) (794) 22,007 21,650 (9,566) (9,282) (710) (853) 18,779 (8,631) (750) 19,577 (8,000) (682) Profit before income tax Income tax expense 7 9,749 (2,959) 11,731 11,515 (3,632) (3,518) 9,398 (2,277) 10,895 (2,751) Net profit for the year Net profit attributable to non-controlling interests 6,790 (6) 8,099 7,997 (4) (7) 7,121 - 8,144 - Net profit attributable to owners of Westpac Banking Corporation 6,784 8,095 7,990 7,121 8,144 Earnings per share (cents) Basic 8 Diluted8 196.5 189.5 237.5 238.0 230.1229.3

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2019 Westpac Group Annual Report 137 Financial statements Statements of comprehensive income1 for the years ended 30 September Westpac Banking Corporation Consolidated 2018 Parent Entity 2019 $m 2019 2017 2018 1 2 The above statements of comprehensive income should be read in conjunction with the accompanying notes. 3 4 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Net profit for the year 6,790 8,099 7,997 7,121 8,144 Other comprehensive income Items that may be reclassified subsequently to profit or loss Gains/(losses) recognised in equity on: Available-for-sale securities Debt securities measured at fair value through other comprehensive income (FVOCI) Cash flow hedging instruments Share of associates’ other comprehensive income (net of tax) Transferred to income statements: Available-for-sale securities Debt securities measured at FVOCI Cash flow hedging instruments Foreign currency translation reserve Share of associates’ other comprehensive income (net of tax) Exchange differences on translation of foreign operations (net of associated hedges) Income tax on items taken to or transferred from equity: Available-for-sale securities reserve Debt instruments measured at FVOCI Cash flow hedge reserve Items that will not be reclassified subsequently to profit or loss Gains/(losses) on equity instruments measured at FVOCI Own credit adjustment on financial liabilities measured at fair value (net of tax) Remeasurement of defined benefit obligation - (46) (203) - - (29) 197 (10) - 182 - 20 2 11 (10) (276) (102) 75 - - (161)(91) - 3 66 (3) - - 203 115 (3) - - 9 181(116) 9 (18) - - (13) (6) - - 43 (164) 45 190 - (39) (121) - - (29) 128 - - 162 - 18 (3) (2) (10) (268) (32) - (125) - (33) - 160 - - 174 19 - (10) - 43 47 Other comprehensive income for the year (net of tax) (162) 268 (6) (164) 243 Total comprehensive income for the year 6,628 8,367 7,991 6,957 8,387 Attributable to: Owners of Westpac Banking Corporation Non-controlling interests 6,620 8 8,363 7,984 4 7 6,957 - 8,387 - Total comprehensive income for the year 6,628 8,367 7,991 6,957 8,387

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138 2019 Westpac Group Annual Report Financial statements Balance Sheets1 as at 30 September Westpac Banking Corporation Consolidated 2019 Parent Entity 2019 $m Note 2018 2018 The above balance sheets should be read in conjunction with the accompanying notes. 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Assets Cash and balances with central banks Collateral paid Trading securities and financial assets measured at fair value through income statement (FVIS) 10 Derivative financial instruments 20 Available-for-sale securities11 Investment securities11 Loans 12 Other financial assets 14 Life insurance assets 15 Due from subsidiaries Investment in subsidiaries Investment in associates31 Property and equipment Deferred tax assets 7 Intangible assets 25 Other assets 20,059 5,930 31,781 29,859 - 73,401 714,770 5,367 9,367 - - 129 1,155 2,048 11,953 807 26,788 4,787 23,132 24,101 61,119 - 709,690 5,517 9,450 - - 115 1,329 1,180 11,763 621 17,692 5,773 29,565 29,283 - 68,398 631,936 4,615 - 142,961 6,436 100 948 1,925 9,687 420 24,976 4,722 21,415 23,562 56,513 - 630,168 4,666 - 140,597 4,508 76 1,120 1,102 9,494 311 Total assets 906,626 879,592 949,739 923,230 Liabilities Collateral received Deposits and other borrowings 16 Other financial liabilities 17 Derivative financial instruments 20 Debt issues 18 Current tax liabilities Life insurance liabilities 15 Due to subsidiaries Provisions 27 Deferred tax liabilities 7 Other liabilities 3,287 563,247 29,215 29,096 181,457 163 7,377 - 3,169 44 2,238 2,184 559,285 28,105 24,407 172,596 296 7,597 - 1,928 18 1,338 2,849 501,430 28,516 28,867 156,674 88 - 148,607 2,980 - 1,064 1,748 500,468 27,266 24,229 152,288 184 - 142,400 1,766 3 257 Total liabilities excluding loan capital 819,293 797,754 871,075 850,609 Loan capital19 21,826 17,265 21,826 17,265 Total liabilities 841,119 815,019 892,901 867,874 Net assets 65,507 64,573 56,838 55,356 Shareholders’ equity Share capital: Ordinary share capital 28 Treasury shares and Restricted Share Plan (RSP) treasury shares 28 Reserves 28 Retained profits 37,508 (553) 1,311 27,188 36,054 (493) 1,077 27,883 37,508 (575) 1,338 18,567 36,054 (508) 1,114 18,696 Total equity attributable to owners of Westpac Banking Corporation Non-controlling interests 28 65,454 53 64,521 52 56,838 - 55,356 - Total shareholders’ equity and non-controlling interests 65,507 64,573 56,838 55,356

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2019 Westpac Group Annual Report 139 Financial statements Statements of changes in equity1 for the years ended 30 September Westpac Banking Corporation Total equity attributable to owners of Westpac Banking Corporation Total shareholders’ equity and non-controlling interests Non-controlling interests (Note 28) Consolidated $m Share capital (Note 28) Reserves (Note 28) Retained profits Balance at 1 October 2016 33,014 727 24,379 58,120 61 58,181 Net profit for the year Net other comprehensive income for the year - - - (32) 7,990 26 7,990 (6) 7 - 7,997 (6) 1 Total comprehensive income for the year - (32) 8,016 7,984 7 7,991 Transactions in capacity as equity holders Dividends on ordinary shares2 Dividend reinvestment plan Other equity movements Share-based payment arrangements Exercise of employee share options and rights Purchase of shares (net of issue costs) Net (acquisition)/disposal of treasury shares Other - 1,452 - - (6,291) - (6,291) 1,452 - - (6,291) 1,452 - 98 - 98 - 98 11 (43) (40) - - - - 1 - - - (4) 11 (43) (40) (3) - - - (14) 11 (43) (40) (17) Total contributions and distributions 1,380 99 (6,295) (4,816) (14) (4,830) Balance at 30 September 2017 34,394 794 26,100 61,288 54 61,342 Net profit for the year Net other comprehensive income for the year - - - 180 8,095 88 8,095 268 4 - 8,099 268 Total comprehensive income for the year - 180 8,183 8,363 4 8,367 Transactions in capacity as equity holders Dividends on ordinary shares2 Dividend reinvestment plan Conversion of Convertible Preference Shares Other equity movements Share-based payment arrangements Exercise of employee share options and rights Purchase of shares (net of issue costs) Net (acquisition)/disposal of treasury shares Other - 631 566 - - - (6,400) - - (6,400) 631 566 - - - (6,400) 631 566 - 103 - 103 - 103 3 (35) 2 - - - - - - - - - 3 (35) 2 - - - - (6) 3 (35) 2 (6) Total contributions and distributions 1,167 103 (6,400) (5,130) (6) (5,136) Balance at 30 September 2018 35,561 1,077 27,883 64,521 52 64,573 2 3 The above statements of changes in equity should be read in conjunction with the accompanying notes. 4 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. 2. 2019 comprises 2019 interim dividend 94 cents per share ($3,239 million) and 2018 final dividend 94 cents per share ($3,227 million) (2018: 2018 interim dividend 94 cents per share ($3,213 million) and 2017 final dividend 94 cents per share ($3,187 million), 2017: 2017 interim dividend 94 cents per share ($3,150 million) and 2016 final dividend 94 cents per share ($3,141 million)), all fully franked at 30%. Impact on adoption of new accounting standards1 - 2 (727)(725) - (725) Restated opening balance 35,561 1,07927,156 63,796 52 63,848 Net profit for the year Net other comprehensive income for the year - - - 6,784 6,784 122(286) (164) 6 6,790 2 (162) Total comprehensive income for the year - 1226,4986,620 8 6,628 Transactions in capacity as equity holders Dividends on ordinary shares2 Dividend reinvestment plan Other equity movements Share-based payment arrangements Purchase of shares (net of issue costs) Net (acquisition)/disposal of treasury shares Other - 1,489 - (33) (62) - - (6,466)(6,466) - - 1,489 108-108 - - (33) - - (62) 2 - 2 - (6,466) - 1,489 - 108 - (33) - (62) (7) (5) Total contributions and distributions 1,394 110(6,466) (4,962) (7) (4,969) Balance at 30 September 2019 36,955 1,31127,188 65,454 53 65,507

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140 2019 Westpac Group Annual Report Financial statements Statements of changes in equity1 for the years ended 30 September (continued) Westpac Banking Corporation Total equity attributable to owners of Westpac Banking Corporation Share capital (Note 28) Parent Entity $m Reserves (Note 28) Retained profits Balance at 1 October 2017 34,452 858 16,871 52,181 Net profit for the year Net other comprehensive income for the year - - - 153 8,144 90 8,144 243 Total comprehensive income for the year - 153 8,234 8,387 Transactions in capacity as equity holders Dividends on ordinary shares2 Dividend reinvestment plan Conversion of Convertible Preference Shares Other equity movements Share-based payment arrangements Exercise of employee share options and rights Purchase of shares (net of issue costs) Net (acquisition)/disposal of treasury shares - 631 566 - - - (6,409) - - (6,409) 631 566 - 3 (35) (71) 103 - - - - - - - 103 3 (35) (71) Total contributions and distributions 1,094 103 (6,409) (5,212) Balance at 30 September 2018 35,546 1,114 18,696 55,356 The above statements of changes in equity should be read in conjunction with the accompanying notes. 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. 2. 2019 comprises 2019 interim dividend 94 cents per share ($3,241 million) and 2018 final dividend 94 cents per share ($3,229 million) (2018: 2018 interim dividend 94 cents per share ($3,218 million) and 2017 final dividend 94 cents per share ($3,191 million)), all fully franked at 30%. Impact on adoption of new accounting standards - 2 (502)(500) Restated opening balance 35,546 1,116 18,194 54,856 Net profit for the year Net other comprehensive income for the year - - - 114 7,1217,121 (278) (164) Total comprehensive income for the year - 114 6,8436,957 Transactions in capacity as equity holders Dividends on ordinary shares2 Dividend reinvestment plan Other equity movements Share based payment arrangements Purchase of shares (net of issue costs) Net (acquisition)/disposal of treasury shares - - 1,489-- 108 (33) - (69) - (6,470) (6,470) - 1,489 - 108 - (33) - (69) Total contributions and distributions 1,387 108 (6,470) (4,975) Balance at 30 September 2019 36,933 1,338 18,567 56,838

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2019 Westpac Group Annual Report 141 Financial statements Cash flow statements1 for the years ended 30 September Westpac Banking Corporation Consolidated 2018 Parent Entity 2019 $m Note 2019 2017 2018 1 2 3 4 The above cash flow statements should be read in conjunction with the accompanying notes. 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Cash flows from operating activities Interest received Interest paid Dividends received excluding life business Other non-interest income received Operating expenses paid Income tax paid excluding life business Life business: Receipts from policyholders and customers Interest and other items of similar nature Dividends received Payments to policyholders and suppliers Income tax paid 33,093 (16,486) 6 3,865 (9,080) (3,406) 2,189 6 553 (2,250) (94) 32,639 31,133 (15,789) (15,415) 9 27 4,995 4,926 (7,889) (7,828) (3,585)(3,388) 2,008 2,239 1724 642 433 (2,089) (1,861) (143) (164) 33,770 (19,444) 2,218 2,982 (7,491) (3,081) - - - - - 32,947 (18,728) 2,016 3,832 (6,543) (3,349) - - - - - Cash flows from operating activities before changes in operating assets and liabilities Net (increase)/decrease in: Collateral paid Trading securities and financial assets measured at FVIS Derivative financial instruments Loans Other financial assets Life insurance assets and liabilities Other assets Net increase/(decrease) in: Collateral received Deposits and other borrowings Other financial liabilities Other liabilities 8,396 (847) (7,629) 7,605 (4,188) 336 (134) (13) 1,007 1,113 1,463 (5) 10,815 10,126 969 2,320 3,492 (4,729) 8,584 (5,042) (24,740) (26,815) 859 466 (230) 219 1067 (295) 739 23,928 23,062 (3,632) 2,506 10(82) 8,954 (755) (7,358) 6,581 (3,312) 324 - (41) 1,004 963 1,555 (24) 10,175 662 2,815 8,263 (23,661) 502 - 33 (606) 20,783 (3,742) 17 Net cash provided by/(used in) operating activities 37 7,104 19,770 2,837 7,891 15,241 Cash flows from investing activities Proceeds from available-for-sale securities Purchase of available-for-sale securities Proceeds from investment securities Purchase of investment securities Net movement in amounts due to/from controlled entities Proceeds/(payments) from disposal of controlled entities, net of cash disposed37 Net (increase)/decrease in investments in controlled entities Proceeds from disposal of associates Purchase of associates Proceeds from disposal of property and equipment Purchase of property and equipment Purchase of intangible assets - - 19,768 (29,527) - (1) - 45 (25) 157 (280) (906) 23,878 25,717 (24,376) (27,028) - - - - - - 9 - - - - 630 (30) (52) 9165 (310) (264) (882) (766) - - 16,483 (25,719) 2,110 - 94 - (24) 143 (209) (846) 21,525 (22,230) - - 923 - (577) - (30) 62 (251) (823) Net cash provided by/(used in) investing activities (10,769) (1,620)(1,698) (7,968) (1,401) Cash flows from financing activities Proceeds from debt issues (net of issue costs) Redemption of debt issues Issue of loan capital (net of issue costs) Redemption of loan capital Proceeds from exercise of employee options Purchase of shares on exercise of employee options and rights Shares purchased for delivery of employee share plan Purchase of RSP treasury shares Net sale/(purchase) of other treasury shares Payment of dividends Payment of distributions to non-controlling interests 61,484 (63,313) 4,935 (1,662) - (6) (27) (69) 7 (4,977) (5) 59,456 72,368 (64,698) (69,119) 2,342 4,437 (2,387) (2,188) 3 11 (8) (17) (27) (27) (71)(68) 73 7 (5,769) (4,839) (6) (13) 50,375 (56,347) 4,935 (1,662) - (6) (27) (69) - (4,981) - 57,440 (58,005) 2,342 (2,387) 3 (8) (27) (71) - (5,778) - Net cash provided by/(used in) financing activities (3,633) (11,092) 552 (7,782) (6,491) Net increase/(decrease) in cash and balances with central banks Effect of exchange rate changes on cash and balances with central banks Cash and balances with central banks as at the beginning of the year (7,298) 569 26,788 7,0581,691 944 (302) 18,78617,397 (7,859) 575 24,976 7,349 936 16,691 Cash and balances with central banks as at the end of the year 20,059 26,788 18,786 17,692 24,976

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142 2019 Westpac Group Annual Report Notes to the financial statements Note 1. Financial statements preparation This financial report of Westpac Banking Corporation (the Parent Entity), together with its controlled entities (the Group or Westpac), for the year ended 30 September 2019, was authorised for issue by the Board of Directors on 4 November 2019. The Directors have the power to amend and reissue the financial report. The principal accounting policies are set out below and in the relevant notes to the financial statements. The accounting policy for the recognition and derecognition of financial assets and financial liabilities precedes Note 10. These accounting policies provide details of the accounting treatments adopted for complex balances and where accounting standards provide policy choices. These policies have been consistently applied to all the years presented, unless otherwise stated. a. Basis of preparation (i) Basis of accounting This financial report is a general purpose financial report prepared in accordance with: • • the requirements for an authorised deposit-taking institution under the Banking Act 1959 (as amended); Australian Accounting Standards (AAS) and Interpretations as issued by the Australian Accounting Standards Board (AASB); and the Corporations Act 2001. • Westpac Banking Corporation is a for-profit entity for the purposes of preparing this financial report. The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and Interpretations as issued by the IFRS Interpretations Committee (IFRIC). It also includes additional disclosures required for foreign registrants by the United States Securities and Exchange Commission (US SEC). All amounts have been rounded in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, to the nearest million dollars, unless otherwise stated. (ii) Historical cost convention The financial report has been prepared under the historical cost convention, as modified by applying fair value accounting to financial assets and financial liabilities (including derivative instruments) measured at fair value through income statement (FVIS) or in other comprehensive income (OCI). (iii) Changes in accounting policies Balance sheet The following voluntary presentation changes to the balance sheet (and related notes) have been made to improve consistency and provide more relevant information to the users of the financial statements by reporting balances of a similar nature together in the same place in the balance sheet. These changes have no effect on the measurement of these items and therefore had no impact on retained earnings or net profit. These changes are: • the addition of new balance sheet lines for ‘collateral paid’, ‘other financial assets’, ‘collateral received’ and ‘other financial liabilities’; removal of the balance sheet line ‘receivables due from other financial institutions’ and reclassification to ‘collateral paid’ and ‘other financial assets’; removal of the balance sheet line ‘regulatory deposits with central banks overseas’ and reclassification to ‘cash and balances with central banks’ and ‘trading securities and financial assets measured at FVIS; removal of the balance sheet line ‘payables due to other financial institutions’ and reclassification to ‘collateral received’ and ‘other financial liabilities’; reclassification of collateral balances with non-financial institutions from ‘other assets’ and ‘other liabilities’ to ‘collateral paid’ and ‘collateral received’ respectively; reclassification of financial assets or financial liabilities included in other assets or other liabilities respectively to other financial assets and other financial liabilities respectively; and reclassification of other financial liabilities at FVIS to other financial liabilities. • • • • • •

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2019 Westpac Group Annual Report 143 Notes to the financial statements Note 1. Financial statements preparation (continued) Collateral paid/collateral received includes cash provided to/received from counterparties as collateral over financial liabilities/assets arising from derivative contracts, stock borrowing arrangements and funding transactions. It includes initial and variation margin placed as security for derivative transactions. Comparatives for 30 September 2018 have been restated for these voluntary presentation changes and are detailed as follows. Consolidated Parent Entity Presentation changes Presentation changes 1 $m Reported Restated Reported Restated Assets Cash and balances with central banks Receivables due from other financial institutions Collateral paid Trading securities and financial assets measured at FVIS Regulatory deposits with central banks overseas Other financial assets1 Other assets All other assets 26,431 5,790 - 357 (5,790) 4,787 26,788 - 4,787 24,726 5,711 - 250 (5,711) 4,722 24,976 - 4,722 22,134 1,355 - 5,135 818,747 998 (1,355) 5,517 (4,514) - 23,132 - 5,517 621 818,747 20,417 1,248 - 3,988 867,140 998 (1,248) 4,666 (3,677) - 21,415 - 4,666 311 867,140 Total assets 879,592 - 879,592 923,230 - 923,230 Liabilities Payables due to other financial institutions Collateral received Other financial liabilities at FVIS Other financial liabilities1 Other liabilities All other liabilities 18,137 - 4,297 - 9,193 783,392 (18,137) 2,184 (4,297) 28,105 (7,855) - - 2,184 - 28,105 1,338 783,392 17,682 - 4,297 - 7,292 838,603 (17,682) 1,748 (4,297) 27,266 (7,035) - - 1,748 - 27,266 257 838,603 Total liabilities 815,019 - 815,019 867,874 - 867,874 2 3 4 1.Refer to Note 14 and Note 17 for further information.

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144 2019 Westpac Group Annual Report Notes to the financial statements Note 1. Financial statements preparation (continued) Income statement The following voluntary presentation changes to the income statement (and related notes) have been made to provide more relevant information to the users of the financial statements. These changes have no effect on the measurement of these items and therefore had no impact on retained earnings or net profit. Net interest income •The components of interest income and interest expense relating to the balance sheet reclassifications have been restated accordingly. Note that there was no net impact to total interest income, total interest expense or to net interest income. Comparatives have been restated for these voluntary presentation changes and are detailed in the following table. •In addition, to comply with disclosure requirements, interest income calculated using the effective interest rate method has been presented separately from other interest income. For consistency, interest expense is presented in the same way. The details are provided in Note 3. Consolidated 2018 Presentation changes Consolidated 2017 Presentation changes Parent Entity 2018 Presentation changes $m Reported Restated Reported Restated Reported Restated Note 3: Net interest income Interest income Cash and balances with central banks Receivables due from other financial institutions Collateral paid Net ineffectiveness on qualifying hedges Trading securities and financial assets measured at FVIS Available-for-sale securities Investment securities Loans Regulatory deposits with central banks overseas Due from subsidiaries Other interest income 325 1 326 241 1 242 300 1 301 108 - (108) 129 - 129 110 - (110) 96 - 96 102 - (102) 126 - 126 (18) - (18) (22) - (22) (22) - (22) 542 1,914 - 29,621 22 - - - 564 1,914 - 29,621 558 1,795 - 28,504 16 - - - 574 1,795 - 28,504 499 1,743 - 25,801 22 - - - 521 1,743 - 25,801 23 - 56 (23) - (21) - - 35 17 - 29 (17) - 14 - - 43 23 4,328 56 (23) - (24) - 4,328 32 Total interest income 32,571 - 32,571 31,232 - 31,232 32,830 - 32,830 Interest expense Payable due to other financial institutions Collateral received Deposits and other borrowings Trading liabilities Debt issues Due to subsidiaries Loan capital Bank levy Other interest expense (319) - 319 (45) - (45) (279) - 279 (19) - (19) (314) - 314 (41) - (41) (9,021) (959) (4,480) - (774) (378) (135) - - - - - - (274) (9,021) (959) (4,480) - (774) (378) (409) (8,868) (2,065) (3,585) - (693) (95) (131) - - - - - - (260) (8,868) (2,065) (3,585) - (693) (95) (391) (7,817) (754) (3,958) (4,851) (774) (378) (131) - - - - - - (273) (7,817) (754) (3,958) (4,851) (774) (378) (404) Total interest expense (16,066) - (16,066) (15,716) - (15,716) (18,977) - (18,977) Net interest income 16,505 - 16,505 15,516 - 15,516 13,853 - 13,853

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2019 Westpac Group Annual Report 145 Notes to the financial statements Note 1. Financial statements preparation (continued) Non-interest income and operating expenses • Disaggregating the non-interest income line on the income statement into four separate lines for net fee income, net wealth management and insurance income, trading income and other income. Separating net fee income in the non-interest income note into fee income and fee expenses. Reclassifying credit card loyalty program expense from operating expenses to the new fee expenses category in the non-interest income note. • • Fee expenses include those expenses that are incremental external costs that vary directly with the provision of goods or services to customers (excluding expenses which would qualify as transaction costs relating to the issue, acquisition or disposal of a financial asset or a financial liability which are deferred and included in the effective interest rate and recognised in net interest income). An incremental cost is one that would not have been incurred if a specific good or service had not been provided to a specific customer. Comparatives have been restated for these voluntary presentation changes and are detailed in the following table. 1 Consolidated 2018 Presentation changes Consolidated 2017 Presentation changes Parent Entity 2018 Presentation changes $m Reported Restated Reported Restated Reported Restated Income statement Net interest income Non-interest income Net fee income Net wealth management and insurance income Trading income Other income 16,505 5,628 – – (5,628) 2,424 16,505 – 2,424 15,516 6,286 – – (6,286) 2,603 15,516 – 2,603 13,853 5,825 – – (5,825) 2,172 13,853 – 2,172 – – – 2,061 945 72 2,061 945 72 – – – 1,800 1,202 529 1,800 1,202 529 – – – – 919 2,633 – 919 2,633 Net operating income before operating expenses and impairment charges 22,133 (126) 22,007 21,802 (152) 21,650 19,678 (101) 19,577 Operating expenses Impairment charges (9,692) (710) 126 – (9,566) (710) (9,434) (853) 152 – (9,282) (853) (8,101) (682) 101 – (8,000) (682) Profit before income tax Income tax expense 11,731 (3,632) – – 11,731 (3,632) 11,515 (3,518) – – 11,515 (3,518) 10,895 (2,751) – – 10,895 (2,751) Net profit for the year 8,099 – 8,099 7,997 – 7,997 8,144 – 8,144 Note 4: Non-interest income (extract) Net fee income Facility fees Transaction fees Other non-risk fee income 1,347 1,105 98 18 77 – 1,365 1,182 98 1,333 1,193 229 17 65 – 1,350 1,258 229 1,333 886 54 18 53 – 1,351 939 54 Fee income 2,550 95 2,645 2,755 82 2,837 2,273 71 2,344 2 Credit card loyalty programs Transaction fee related expenses – (126) (126) – (152) (152) – (101) (101) – (95) (95) – (82) (82) – (71) (71) Fee expenses – (221) (221) – (234) (234) – (172) (172) Net fee income 2,550 (126) 2,424 2,755 (152) 2,603 2,273 (101) 2,172 Note 5: Operating expenses (extract) Credit card loyalty programs 126 (126) – 152 (152) – 101 (101) – Total other expenses 1,662 (126) 1,536 1,652 (152) 1,500 1,357 (101) 1,256 3 Total operating expenses 9,692 (126) 9,566 9,434 (152) 9,282 8,101 (101) 8,000 4

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146 2019 Westpac Group Annual Report Notes to the financial statements Note 1. Financial statements preparation (continued) (iv) Standards adopted during the year ended 30 September 2019 AASB 9 Financial Instruments (December 2014) (AASB 9) The Group adopted AASB 9 on 1 October 2018. The adoption of AASB 9 has been applied by adjusting the opening balance sheet at 1 October 2018, with no restatement of comparatives as permitted by the standard. The adoption of AASB 9 reduced retained earnings at 1 October 2018 by $722 million (net of tax) for the Group and by $495 million (net of tax) for the Parent Entity. This was primarily due to the increase in impairment provisions under the new standard. Impairment AASB 9 introduces a revised impairment model which requires entities to recognise expected credit losses (ECL) based on unbiased forward looking information, replacing the incurred loss model under AASB 139 Financial instruments: Recognition and Measurement (AASB 139) which only recognised impairment if there was objective evidence that a loss had been incurred. The revised impairment model applies to all financial assets at amortised cost, lease receivables, debt securities measured at FVOCI, and credit commitments. The accounting policy for the provision for ECL under AASB 9 is detailed in Notes 6 and 13. Classification and measurement AASB 9 replaced the classification and measurement model in AASB 139 with a new model that categorises financial assets based on: a) the business model within which the assets are managed and b) whether the contractual cash flows under the instrument represent solely payments of principal and interest (SPPI). The accounting policies for the classification and measurement of financial assets and financial liabilities precede Note 10 and are also located in the relevant notes to the financial statements for financial assets and financial liabilities. In the 2014 financial year, the Group early adopted part of AASB 9 which relates to the recognition of the changes in fair value of financial liabilities designated at fair value attributable to Westpac’s own credit risk in other comprehensive income (except where it would create an accounting mismatch, in which case all changes in fair value are recognised in the income statement). As a result, the accounting for this remains unchanged for the Group. Hedging AASB 9 changes hedge accounting by increasing the eligibility of both hedged items and hedging instruments and introducing a more principles-based approach to assessing hedge effectiveness. Adoption of the new hedge accounting model is optional until the IASB completes its accounting for dynamic risk management project. Until this time, current hedge accounting under AASB 139 can continue to be applied. The Group has applied the option to continue hedge accounting under AASB 139, however the Group has adopted the amended AASB 7 Financial Instruments: Disclosures (AASB 7) hedge accounting disclosures as required. AASB 15 Revenue from Contracts with Customers (AASB 15) The Group adopted AASB 15 on 1 October 2018. It replaced AASB 118 Revenue and related interpretations and applies to all contracts with customers, except leases, financial instruments and insurance contracts. The standard provides a systematic approach to revenue recognition by introducing a five-step model governing revenue measurement and recognition. This includes: • • • • • identifying the contract with customer; identifying each of the performance obligations included in the contract; determining the amount of consideration in the contract; allocating the consideration to each of the identified performance obligations; and recognising revenue as each performance obligation is satisfied. The Group has applied AASB 15 by reducing the opening balance of retained earnings at the date of initial application, 1 October 2018, by $5 million (net of tax) for the Group and by $7 million (net of tax) for the Parent Entity with no comparative restatement. In addition, the Group identified certain income and expenses which were previously reported on a net basis primarily within fee income which are now being presented on a gross basis. Finally, certain facility fees have been reclassified from non-interest income to interest income.

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2019 Westpac Group Annual Report 147 Notes to the financial statements Note 1. Financial statements preparation (continued) Transition (AASB 9 and AASB 15) Impact of the adoption of AASB 9 – impairment The following tables show the impact of the adoption of AASB 9 on impairment balances. Provisions on debt Loss allowance on debt securities at securities and other financial assets at amortised cost Provisions for credit commitments Consolidated $m Provisions on loans FVOCI 1 Total 1 30 September 2018 - carrying amount ECL on amortised cost financial instruments ECL on debt securities measured at FVOCI 2,814 882 – 239 98 – – – 2 – 9 – 3,053 989 2 1 October 2018 - AASB 9 carrying amount 3,696 337 2 9 4,044 Provisions on debt securities and other financial assets at amortised cost Loss allowance on debt securities at FVOCI1 Provisions for credit commitments Parent Entity $m Provisions on loans Total 30 September 2018 - carrying amount ECL on amortised cost financial instruments ECL on debt securities measured at FVOCI 2,407 751 – 206 95 – – – 2 – – – 2,613 846 2 1 October 2018 - AASB 9 carrying amount 3,158 301 2 – 3,461 Impact of the adoption of AASB 9 – classification and measurement Investment securities Investment securities represent all debt and equity securities not measured at FVIS. Investment securities include debt securities at amortised cost and both debt and equity securities at FVOCI. As a result of the adoption of AASB 9, available-for-sale debt securities of $811 million for the Group and $10 million for the Parent Entity have been reclassified to investment securities - debt securities at amortised cost as the business model for these instruments is achieved by collecting the contractual cash flows and these cash flows represent SPPI. The remaining available-for-sale debt securities of $60 billion for the Group and $56 billion for the Parent Entity have been reclassified to investment securities measured at FVOCI. In addition, available-for-sale equity securities have been assessed on an instrument-by-instrument basis. For the Group, $275 million of available-for-sale equity securities have been reclassified to trading securities and financial assets measured at FVIS. The Group has elected to irrevocably designate the remaining $109 million of available-for-sale equity securities to continue to be measured at FVOCI. For the Parent Entity, all $67 million of available-for-sale equity securities were irrevocably designated to continue to be measured at FVOCI. Loans As a result of the adoption of AASB 9, for both the Group and the Parent Entity, $56 million of loans which were measured at amortised cost are measured at FVIS as the cash flows of the loan do not represent SPPI. 2 3 4 1.Impairment on debt securities at FVOCI is recognised in the income statement with a corresponding amount in other comprehensive income (refer to Note 28). There is no reduction of the carrying value of the debt security which remains at fair value.

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148 2019 Westpac Group Annual Report Notes to the financial statements Note 1. Financial statements preparation (continued) 30 September 2018 AASB 139 measurement basis 1 October 2018 AASB 9 measurement basis Change in measurement basis under AASB 9 Consolidated $m Amortised cost Amortised cost FVIS FVOCI Total FVIS FVOCI Total Financial assets Cash and balances with central banks Collateral paid Trading securities and financial assets measured at FVIS Derivative financial instruments Available-for-sale securities Loans1 Other financial assets Life insurance assets 26,788 4,787 – – – – 26,788 4,787 No No 26,788 4,787 – – – – 26,788 4,787 23,132 24,101 61,119 709,690 5,517 9,450 No No Yes Yes No No – – 811 709,088 5,517 – 23,132 24,101 275 602 – 9,450 23,132 24,101 61,119 709,690 5,517 9,450 – – – 709,144 5,517 – 23,132 24,101 – 546 – 9,450 – – 61,119 – – – – – 60,033 – – – Total financial assets 746,236 57,229 61,119 864,584 746,991 57,560 60,033 864,584 Financial liabilities Collateral received Deposits and other borrowings Other financial liabilities Derivative financial instruments Debt issues Life insurance liabilities Loan capital 2,184 518,107 23,808 – 169,241 – 17,265 – 41,178 4,297 24,407 3,355 7,597 – – – – – – – – 2,184 559,285 28,105 24,407 172,596 7,597 17,265 No No No No No No No 2,184 518,107 23,808 – 169,241 – 17,265 – 41,178 4,297 24,407 3,355 7,597 – – – – – – – – 2,184 559,285 28,105 24,407 172,596 7,597 17,265 Total financial liabilities 730,605 80,834 – 811,439 730,605 80,834 – 811,439 30 September 2018 AASB 139 measurement basis 1 October 2018 AASB 9 measurement basis Change in measurement basis under AASB 9 Parent Entity $m Amortised cost Amortised cost FVIS FVOCI Total FVIS FVOCI Total Financial assets Cash and balances with central banks Collateral paid Trading securities and financial assets measured at FVIS Derivative financial instruments Available-for-sale securities Loans1 Other financial assets Due from subsidiaries2,3 24,976 4,722 – – – – 24,976 4,722 No No 24,976 4,722 – – – – 24,976 4,722 – – – 629,622 4,666 133,808 21,415 23,562 – 546 – 278 – – 56,513 – – – 21,415 23,562 56,513 630,168 4,666 134,086 No No Yes Yes No No – – 10 629,566 4,666 133,808 21,415 23,562 – 602 – 278 – – 56,503 – – – 21,415 23,562 56,513 630,168 4,666 134,086 Total financial assets 900,108 797,794 45,801 56,513 900,108 797,748 45,857 56,503 Financial liabilities Collateral received Deposits and other borrowings Other financial liabilities Derivative financial instruments Debt issues Due to subsidiaries4 Loan capital 1,748 460,406 22,969 – 149,065 141,877 17,265 – 40,062 4,297 24,229 3,223 523 – – – – – – – – 1,748 500,468 27,266 24,229 152,288 142,400 17,265 No No No No No No No 1,748 460,406 22,969 – 149,065 141,877 17,265 – 40,062 4,297 24,229 3,223 523 – – – – – – – – 1,748 500,468 27,266 24,229 152,288 142,400 17,265 Total financial liabilities 793,330 72,334 – 865,664 793,330 72,334 – 865,664 1. As at 30 September 2018, loans at amortised cost were restated from $706,440 million to $709,144 million for the Group, and from $626,918 million to $629,622 million for the Parent Entity. Loans at FVIS were also restated from $3,250 million to $546 million for both the Group and the Parent Entity. Due from subsidiaries excludes $6,511 million of long-term debt instruments with equity like characteristics which are part of the total investment in subsidiaries. Comparatives have been restated to reclassify $278 million from amortised cost to FVIS. Comparatives have been restated to reclassify $523 million from amortised cost to FVIS. 2. 3. 4.

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2019 Westpac Group Annual Report 149 Notes to the financial statements Note 1. Financial statements preparation (continued) Reconciliation of the opening balance sheet The following tables reconcile the reported 30 September 2018 balance sheet to the 1 October 2018 opening balance sheet on adoption of AASB 9 and AASB 15 showing separately the impact of adjustments relating to reclassification and remeasurement including the related tax impacts. 30 September 2018 1 October 2018 1 Restated Carrying Amount Opening carrying amount AASB 9 changes Consolidated $m AASB 15 changes Reclassifications Remeasurement1 Assets Cash and balances with central banks Collateral paid Trading securities and financial assets measured at FVIS Derivative financial instruments Available-for-sale securities Investment securities Loans (at amortised cost) Loans (at fair value) Other financial assets Deferred tax assets All other assets 26,788 4,787 23,132 24,101 61,119 – 709,144 546 5,517 1,180 23,278 – – 275 – (61,119) 60,844 (56) 56 – – – – – – – – (9) (925) – – 300 – – – – – – – – – – – – 26,788 4,787 23,407 24,101 – 60,835 708,163 602 5,517 1,480 23,278 Total assets 879,592 – (634) – 878,958 Liabilities Collateral received Deposits and other borrowings Other financial liabilities Derivative financial instruments Debt issues Provisions Loan capital All other liabilities 2,184 559,285 28,105 24,407 172,596 1,928 17,265 9,249 – – – – – – – – – – – – – 98 – (12) – – (12) – – – – 17 2,184 559,285 28,093 24,407 172,596 2,026 17,265 9,254 Total liabilities 815,019 – 86 5 815,110 Net assets 64,573 – (720) (5) 63,848 Shareholders’ equity Share capital: Ordinary shares Treasury shares and RSP treasury shares Reserves Retained profits 36,054 (493) 1,077 27,883 – – – – – – 2 (722) – – – (5) 36,054 (493) 1,079 27,156 2 Total equity attributable to owners of Westpac Banking Corporation Non-controlling interests 64,521 52 – – (720) – (5) – 63,796 52 Total shareholder’s equity and Non-controlling interests 64,573 – (720) (5) 63,848 3 4 1.The impact on adoption of expected credit loss provisioning resulted in increases in provisions on loans by $882 million, provisions for credit commitments by $98 million and loss allowance on debt securities at FVOCI by $2 million and provisions on debt securities at amortised cost by $9 million.

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150 2019 Westpac Group Annual Report Notes to the financial statements Note 1. Financial statements preparation (continued) 30 September 2018 1 October 2018 Restated Carrying Amount Opening carrying amount AASB 9 changes AASB 15 changes Parent Entity $m Reclassifications Remeasurement1 Assets Cash and balances with central banks Collateral paid Trading securities and financial assets measured at FVIS Derivative financial instruments Available-for-sale securities Investment securities Loans (at amortised cost) Loans (at fair value) Other financial assets Due from subsidiaries Investment in subsidiaries Deferred tax assets All other assets 24,976 4,722 21,415 23,562 56,513 – 629,622 546 4,666 140,597 4,508 1,102 11,001 – – – – (56,513) 56,513 (56) 56 – – – – – – – – – – – (786) – – – – 258 – – – – – – – – – – – – – – 24,976 4,722 21,415 23,562 – 56,513 628,780 602 4,666 140,597 4,508 1,360 11,001 Total assets 923,230 – (528) – 922,702 Liabilities Collateral received Deposits and other borrowings Other financial liabilities Derivative financial instruments Debt issues Due to subsidiaries Provisions Loan capital All other liabilities 1,748 500,468 27,266 24,229 152,288 142,400 1,766 17,265 444 – – – – – – – – – – – – – – (118) 95 – (12) – – (9) – – – – – 16 1,748 500,468 27,257 24,229 152,288 142,282 1,861 17,265 448 Total liabilities 867,874 – (35) 7 867,846 Net assets 55,356 – (493) (7) 54,856 Shareholders’ equity Share capital: Ordinary shares Treasury shares and RSP treasury shares Reserves Retained profits 36,054 (508) 1,114 18,696 – – – – – – 2 (495) – – – (7) 36,054 (508) 1,116 18,194 Total equity attributable to owners of Westpac Banking Corporation Non-controlling interests 55,356 – – – (493) – (7) – 54,856 – Total shareholder’s equity and non-controlling interests 55,356 – (493) (7) 54,856 As permitted by AASB 9 and AASB 15, comparatives have not been restated. Comparatives have been restated for voluntary presentation changes as detailed in the section “Changes in accounting policies” above. 1.The impact on adoption of expected credit loss provisioning resulted in increases in provisions on loans by $751 million, provisions for credit commitments by $95 million and loss allowance on debt securities measured at FVOCI by $2 million. Included in the increase in provision on loans was $118 million relating to loans which have been securitised by the Parent Entity to subsidiaries. The due to subsidiaries balance has been reduced by this amount as the relevant subsidiary records the expected credit loss on these loans and adjusts its intergroup receivable from the Parent Entity accordingly.

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2019 Westpac Group Annual Report 151 Notes to the financial statements Note 1. Financial statements preparation (continued) (v) Business combinations Business combinations are accounted for using the acquisition method of accounting. Acquisition cost is measured as the aggregate of the fair value at the date of acquisition of the assets given, equity instruments issued or liabilities incurred or assumed. Acquisition-related costs are expensed as incurred (except for those costs arising on the issue of equity instruments which are recognised directly in equity). Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at fair value on the acquisition date. Goodwill is measured as the excess of the acquisition cost, the amount of any non-controlling interest and the fair value of any previous Westpac equity interest in the acquiree, over the fair value of the identifiable net assets acquired. 1 (vi) Foreign currency translation Functional and presentational currency The consolidated financial statements are presented in Australian dollars which is the Parent Entity’s functional and presentation currency. The functional currency of offshore entities is usually the main currency of the economy it operates in. Transactions and balances Foreign currency transactions are translated into the functional currency of the relevant branch or subsidiary using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income for qualifying cash flow hedges and qualifying net investment hedges. Foreign operations Assets and liabilities of foreign branches and subsidiaries that have a functional currency other than the Australian dollar are translated at exchange rates prevailing on the balance date. Income and expenses are translated at average exchange rates prevailing during the year. Equity balances are translated at historical exchange rates. The resulting exchange differences are recognised in the foreign currency translation reserve and in other comprehensive income. On consolidation, exchange differences arising from the translation of borrowings and other foreign currency instruments designated as hedges of the net investment in foreign operations are reflected in the foreign currency translation reserve and in other comprehensive income. When all or part of a foreign operation is disposed or borrowings that are part of the net investments are repaid, a proportionate share of such exchange differences is recognised in the income statement as part of the gain or loss on disposal or repayment of borrowing. b. Critical accounting assumptions and estimates Applying the Group’s accounting policies requires the use of judgement, assumptions and estimates which impact the financial information. The significant assumptions and estimates used are discussed in the relevant notes below: • • • • • • • Note 7 Note 13 Note 15 Note 22 Note 25 Note 27 Note 34 Income tax Provisions for expected credit losses/impairment charges Life insurance assets and life insurance liabilities Fair values of financial assets and financial liabilities Intangible assets Provisions, contingent liabilities, contingent assets and credit commitments Superannuation commitments 2 3 4

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152 2019 Westpac Group Annual Report Notes to the financial statements Note 1. Financial statements preparation (continued) c. Future developments in accounting standards The following new standards and interpretations which may have a material impact on the Group have been issued but are not yet effective, and unless otherwise stated, have not been early adopted by the Group: AASB 16 Leases (AASB 16) was issued on 23 February 2016 and will be effective for the 30 September 2020 financial year. The standard will not result in significant changes for lessor accounting. The main changes under the standard are: •all operating leases of greater than 12 months duration will be required to be presented on balance sheet by the lessee as a right-of-use (ROU) asset and lease liability. The asset and liability will initially be measured at the present value of non-cancellable lease payments and payments to be made in optional periods where it is reasonably certain that the option will be exercised; and •all leases on balance sheet will give rise to a combination of interest expense on the lease liability and depreciation of the ROU asset. The AASB 16 implementation and governance program is led by Finance with representatives from the impacted areas of the business with oversight from the Chief Financial Officer. The project has identified the portfolios impacted by that standard which are predominantly property leases. In addition, the project has updated finance systems and processes, established a governance framework, updated relevant policies and addressed key judgements including the transition option that will be applied in order to determine the expected impact to the Group. The Group will adopt the standard using the simplified approach of transition with no restatement of comparative information. The expected impact on adoption of the standard will be to recognise a ROU asset of approximately $3.4 billion and an equivalent lease liability with no impact on retained earnings. The Group has determined that it will use the incremental borrowing rate as the discount rate when determining present value. This discount rate will be based on the remaining maturity of the lease at the date of transition. The Group will also apply the practical exemptions for low-value assets and short-term leases. AASB 17 Insurance Contracts (AASB 17) was issued on 19 July 2017 and will be effective for the 30 September 2022 year end unless early adopted. This will replace AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts. The main changes under the standard are: • the scope of the standard may result in some contracts that are currently “unbundled”, i.e. accounted for separately as insurance and investment contracts being required to be “bundled” and accounted for as an insurance contract; portfolios of contracts (with similar risks which are managed together) will be required to be disaggregated to a more granular level by both the age of a contract and the likelihood of the contract being onerous in order to determine the recognition of profit over the contract period (i.e. the contractual service margin). The contractual service margin uses a different basis to recognise profit to the current Margin on Services approach for life insurance and therefore the pattern of profit recognition is likely to differ; risk adjustments, which reflect uncertainties in the amount and timing of future cash flows, are required for both general and life insurance contracts rather than just general insurance contracts under the current accounting standards; the contract boundary, which is the period over which profit is recognised, differs and is determined based on the ability to compel the policyholder to pay premiums or the substantive obligation to provide coverage/ services. For some general insurance contracts (e.g. some lender mortgage insurance and reinsurance contracts) this may result in the contract boundary being longer. For life insurance, in particular term renewable contracts, the contract boundary is expected to be shorter. Both will be impacted by different patterns of profit recognition compared to the current standards; a narrower definition of what acquisition costs may be deferred; an election to recognise changes in assumptions regarding discount rate in other comprehensive income rather than in profit and loss; an election to recognise changes in the fair value of assets supporting policy liabilities in other comprehensive income rather than through profit and loss; reinsurance contracts and the associated liability are to be determined separately to the gross contract liability and may have different contract boundaries; and additional disclosure requirements. • • • • • • • • The standard is expected to result in a reduction in the level of deferred acquisition costs, however the quantum of this and the profit and loss impacts to the Group are not yet practicable to determine.

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2019 Westpac Group Annual Report 153 Notes to the financial statements Note 1. Financial statements preparation (continued) On 26 June 2019, the IASB issued an exposure draft proposing a number of amendments to the insurance contracts standard. If approved, these amendments would allow entities to: •defer acquisition costs for anticipated renewals outside of the initial contract boundary; and • recognise a gain in the P&L for reinsurance contracts, to offset losses from onerous contracts on initial recognition (to the extent the reinsurance contracts held covers the losses of each contract on a proportionate basis). In addition, the effective date of the standard would be deferred by one year to be applicable to the Group for the 30 September 2023 financial year. AASB Interpretation 23 Uncertainty over Income Tax Treatments (Interpretation 23) was issued in July 2017 and will be effective for the 30 September 2020 financial year. Interpretation 23 clarifies the recognition and measurement criteria in AASB 112 Income Taxes (AASB 112) where there is uncertainty over income tax treatments, and requires an assessment of each uncertain tax position as to whether it is probable that a taxation authority will accept the position. Where it is not considered probable, the effect of the uncertainty will be reflected in determining the relevant taxable profit or loss, tax bases, unused tax losses and unused tax credits or tax rates. The amount will be determined as either the single most likely amount or the sum of the probability weighted amounts in a range of possible outcomes, whichever better predicts the resolution of the uncertainty. Judgements will be reassessed as and when new facts and circumstances are presented. The interpretation is not expected to have a material impact on the Group. A revised Conceptual Framework (Framework) was issued in May 2019. This will be effective for the Group for the 30 September 2021 financial year. The revised Framework includes new definitions and recognition criteria for assets, liabilities, income and expenses and other relevant financial reporting concepts. The changes are not expected to have a material impact on the Group. Other amendments to existing standards that are not yet effective are not expected to have a material impact to the Group. 1 Interbank-offered rates (IBOR) reform IBORs are interest rate benchmarks used in financial markets for pricing, valuing and hedging a wide variety of financial instruments such as derivatives, loans and bonds. Examples of IBOR include ‘LIBOR’ and ‘EURIBOR’. A review of the global major IBORs is being conducted to reform or replace existing IBORs with more suitable alternative reference rates (ARRs). This IBOR reform will impact the accounting for financial instruments that reference IBORs including hedge accounting, fair value methodologies and existing financial instruments that reference IBORs at transition. This replacement process is at different stages and is progressing at different speeds in different jurisdictions. Therefore, there is uncertainty as to the basis, method, timing and implications of transition to the ARRs. In October 2019, the AASB issued amendments to AASB 9, AASB 139 and AASB 7 which enable hedge accounting to continue for certain hedges that might otherwise need to be discontinued due to uncertainties arising from IBOR reform and requires certain disclosures. These amendments are effective for the Group for the 30 September 2021 financial year with early application permitted. As a result of these developments, the Group has applied judgement in the current reporting period to determine that hedge relationships that include IBORs as a hedged risk continue to qualify for hedge accounting. The Group continues to monitor these developments and the expected impact. 2 3 4

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154 2019 Westpac Group Annual Report Notes to the financial statements FINANCIAL PERFORMANCE Note 2. Segment reporting Accounting policy Reportable operating segments On 19 March 2019, the Group announced changes to the way it supports customer’s wealth and insurance needs, realigning its BTFG businesses into expanded Consumer and Business divisions and exiting the provision of personal financial advice. As a result, the insurance business was transferred to Consumer, the funds management business was transferred to Business, and the Advice business and certain support functions of BTFG Australia were transferred to Group Businesses. Changes to the Group’s organisational structure were effective from 1 April 2019 and the results of the operating segments for 2018 and 2017 have been restated. The operating segments are defined by the customers they service and the services they provide: •Consumer: – is responsible for sales and service of banking and financial products and services to consumer customers in Australia; is also responsible for the Group’s Australian insurance business, which covers the manufacture and distribution of life, general and lenders mortgage insurance; and operates under the Westpac, St.George, BankSA, Bank of Melbourne, RAMS and BT brands. – – •Business: – is responsible for sales and service of banking and financial products and services for SME and commercial business customers in Australia. SME and Commercial business customers typically have facilities up to approximately $150 million; is responsible for Private Wealth, serving the banking needs of high net worth customers across the banking brands; is responsible for the manufacture and distribution of investments (including margin lending and equities broking), superannuation and retirement products as well as wealth administration platforms; and operates under the Westpac, St.George, BankSA, Bank of Melbourne and BT brands. – – – Operating segments are presented on a basis consistent with information provided internally to Westpac’s key decision makers and reflects the management of the business, rather than the legal structure of the Group. Internally, Westpac uses ‘cash earnings’ in assessing the financial performance of its divisions. Management believes this allows the Group to: •more effectively assess current year performance against prior years; • compare performance across business divisions; and • compare performance across peer companies. 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. To determine cash earnings, three categories of adjustments are made to statutory results: •material items that key decision makers at the Westpac Group believe do not reflect ongoing operations; • 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 statutory results. Internal charges and transfer pricing adjustments have been reflected in the performance of each operating segment. Inter-segment pricing is determined on an arm’s length basis.

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2019 Westpac Group Annual Report 155 Notes to the financial statements Note 2. Segment reporting (continued) • Westpac Institutional Bank (WIB): – is responsible for delivering a broad range of financial products and services to commercial, corporate, institutional and government customers with connections to Australia and New Zealand; services include financing, transactional banking, financial and debt capital markets; customers are supported throughout Australia, as well as via branches and subsidiaries located in New Zealand, US, UK and Asia; and also responsible for Westpac Pacific, providing a range of banking services in Fiji and Papua New Guinea. – – – 1 • Westpac New Zealand: – – – is responsible for sales and service of banking, wealth and insurance products to customers in New Zealand; customer base includes consumers, business and institutional customers; and operates under the Westpac brand for banking products, the Westpac Life brand for life insurance products and the BT brand for wealth products. • Group Businesses include: – Treasury, which is responsible for the management of the Group’s balance sheet including wholesale funding, capital and management of liquidity. Treasury also manages the interest rate risk and foreign exchange risks inherent in the balance sheet, including managing the mismatch between Group assets and liabilities. Treasury’s earnings are primarily sourced from managing the Group’s balance sheet and interest rate risk, (excluding Westpac New Zealand) within set risk limits; Group Technology1, which comprises functions for the Australian businesses, is responsible for technology strategy and architecture, infrastructure and operations, applications development and business integration; Core Support2, which comprises functions performed centrally, including Australian banking operations, property services, strategy, finance, risk, compliance, legal, human resources, and customer and corporate relations; Following the Group’s decision to restructure the Wealth operating segment and to exit the Advice business in March 2019, the remaining Advice business (including associated remediation) and support functions have been transferred to Group Business; and Group Businesses also includes earnings on capital not allocated to divisions, for certain intra-group transactions that facilitate presentation of performance of the Group’s operating segments, earnings from non-core asset sales, earnings and costs associated with the Group’s fintech investments, and certain other head office items such as centrally held provisions. – – – – • For Westpac, AASB 9 and AASB 15 were adopted on 1 October 2018 and as comparatives were not restated, line item movements in our reported results are not directly comparable across periods. In order to provide the operational trends in business, we have revised the 2018 cash earnings comparatives as if the standards applied on 1 October 2017, except for expected credit loss provisioning which is not feasible. These adjustments do not impact 2018 cash earnings but do affect individual line items. These adjustments are comprised of: – Line fees: The Group has reclassified line fees (mostly Business) from non-interest income to net interest income to more appropriately reflect the relationship with drawn lines of credit; Card scheme: Support payments received from Mastercard and Visa have been reclassified to non-interest income and related expenses have been reclassified to operating expenses; Interest carrying adjustment: Interest on performing loans (stage 1 and stage 2 loans) is now measured on the gross loan value. Previously, interest on performing loans was recognised on the loan balance net of provisions. This adjustment increases interest income and impairment charges; Other fees and expenses: The Group has restated the classification of a number of fees and expenses. This has resulted in the grossing up of net interest income, non-interest income, impairment charges and operating expenses; and Merchant terminal costs: Some variable costs related to Westpac’s merchant terminal business have been reclassified between non-interest income and operating expenses. – 2 – – – 3 4 1. 2. Costs are fully allocated to other divisions in the Group. Costs are partially allocated to other divisions in the Group, with costs attributed to enterprise activity retained in Group Businesses.

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156 2019 Westpac Group Annual Report Notes to the financial statements Note 2. Segment reporting (continued) Comparatives have also been restated for: • recent customer migration between divisions and accompanying impacts on divisional income statement and balance sheet; refinement in expense allocations; and changes to Group’s organisation structure following the realignment of the BTFG businesses into Consumer, Business and Group Businesses. • • The following tables present the segment results on a cash earnings basis for the Group:1 Westpac Institutional Bank Westpac New Zealand Net cash earnings adjustment 2019 $m Group Businesses Income Statement Consumer Business Total 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Statutory comparatives have not been restated. However, where applicable, cash earnings comparatives (excluding expected credit loss provisioning) have been restated to aid comparability. In addition, 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 for further detail. Net interest income 7,942 5,092 1,4431,860 616 Net fee income 608 464 610163(190) Net wealth management and insurance income 425 899 –177(478) Trading income 93 106 695 37 (24) Other income 15(5) (13) 46 74 16,953 1,655 1,023 907 117 (46) – 6 22 12 16,907 1,655 1,029 929 129 Net operating income before operating expenses and impairment charges 9,083 6,5562,735 2,283 (2) 20,655 (6) 20,649 Operating expenses (3,817) (2,805)(1,284) (939) (1,186) Impairment (charges)/benefits (581) (272)(46) 1095 (10,031) (794) (75) – (10,106) (794) Profit before income tax 4,685 3,479 1,405 1,354 (1,093) Income tax expense (1,397) (1,048) (386) (369) 225 Net profit attributable to non-controlling interests ––(5) –(1) 9,830 (2,975) (6) (81) 16 – 9,749 (2,959) (6) Cash earnings for the year 3,288 2,431 1,014985 (869) 6,849 (65) 6,784 Net cash earnings adjustments –(45)–(1)(19) (65) Net profit attributable to owners of Westpac Banking Corporation 3,288 2,386 1,014984 (888) 6,784

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2019 Westpac Group Annual Report 157 Notes to the financial statements Note 2. Segment reporting1 (continued) Westpac Institutional Bank Westpac New Zealand Net cash earnings adjustment 2018 $m Group Businesses Income Statement Consumer Business Total Net interest income Net fee income Net wealth management and insurance income Trading income Other income 7,850 659 5,284 511 1,442 610 1,799 164 812 (34) 17,187 1,910 (682) 514 16,505 2,424 549 96 7 1,012 100 17 212 697 46 149 51 9 95 (18) 46 2,017 926 125 44 19 (53) 2,061 945 72 1 Net operating income before operating expenses and impairment charges 9,161 6,924 3,007 2,172 901 22,165 (158) 22,007 Operating expenses Impairment (charges)/benefits (3,774) (486) (2,651) (321) (1,449) 16 (855) (22) (969) 1 (9,698) (812) 132 102 (9,566) (710) Profit before income tax Income tax expense Net profit attributable to non-controlling interests 4,901 (1,478) 3,952 (1,196) 1,574 (476) 1,295 (361) (67) (75) 11,655 (3,586) 76 (46) 11,731 (3,632) – – (5) – 1 (4) – (4) Cash earnings for the year 3,423 2,756 1,093 934 (141) 8,065 30 8,095 Net cash earnings adjustments (15) (76) – 13 108 30 Net profit attributable to owners of Westpac Banking Corporation 3,408 2,680 1,093 947 (33) 8,095 Westpac Institutional Bank Westpac New Zealand Net cash earnings adjustment 2017 $m Group Businesses Income Statement Consumer Business Total Net interest income Net fee income Net wealth management and insurance income Trading income Other income 7,733 745 4,950 518 1,354 628 1,706 197 712 82 16,455 2,170 (939) 433 15,516 2,603 488 100 18 951 100 48 93 967 28 148 51 14 130 – (31) 1,810 1,218 77 (10) (16) 452 1,800 1,202 529 Net operating income before operating expenses and impairment charges 9,084 6,567 3,070 2,116 893 21,730 (80) 21,650 Operating expenses Impairment (charges)/benefits (3,548) (600) (2,548) (369) (1,358) (79) (890) 51 (834) 43 (9,178) (954) (104) 101 (9,282) (853) Profit before income tax Income tax expense Net profit attributable to non-controlling interests 4,936 (1,484) 3,650 (1,096) 1,633 (463) 1,277 (360) 102 (126) 11,598 (3,529) (83) 11 11,515 (3,518) – – (7) – – (7) – (7) Cash earnings for the year 3,452 2,554 1,163 917 (24) 8,062 (72) 7,990 2 Net cash earnings adjustments (116) 150 – (14) (92) (72) Net profit attributable to owners of Westpac Banking Corporation 3,336 2,704 1,163 903 (116) 7,990 3 4 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Statutory comparatives have not been restated. However, where applicable, cash earnings comparatives (excluding expected credit loss provisioning) have been restated to aid comparability. In addition, 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 for further detail.

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158 2019 Westpac Group Annual Report Notes to the financial statements Note 2. Segment reporting (continued) Reconciliation of cash earnings to net profit $m 2019 2018 2017 Revenue from products and services Details of revenue from external customers by product or service are disclosed in Notes 3 and 4. No single customer amounted to greater than 10% of the Group’s revenue. Geographic segments Geographic segments are based on the location of the office where the following items were recognised: 2019 2018 2017 $m % $m % $m % 1. 2. 3. Comparatives have been restated for consistency. Other overseas included Pacific Islands, Asia, the Americas and Europe. Non-current assets represent property and equipment and intangible assets. Revenue Australia1 New Zealand1 Other overseas2 31,113 84.2 4,520 12.2 1,3313.6 32,595 85.6 32,21086.2 4,38111.54,326 11.6 1,0972.9 830 2.2 Total 36,964100.0 38,073 100.037,366 100.0 Non-current assets3 Australia New Zealand Other overseas2 12,28093.7 7615.8 67 0.5 12,27193.7 12,32693.8 756 5.8 745 5.7 65 0.5 68 0.5 Total 13,108 100.0 13,092 100.013,139100.0 Cash earnings for the year 6,849 8,065 8,062 Cash earning adjustments: Amortisation of intangible assets Fair value gain/(loss) on economic hedges Ineffective hedges Adjustments relating to Pendal Treasury shares – (35) 20 (45) (5) (17) (137) 126 (69) (13) (16) (73) 171 7 (21) Total cash earnings adjustments (65) 30 (72) Net profit attributable to owners of Westpac Banking Corporation 6,784 8,095 7,990

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2019 Westpac Group Annual Report 159 Notes to the financial statements Note 3. Net interest income1 Accounting policy 1 Consolidated 2018 Parent Entity $m 2019 2017 2019 2018 2 3 4 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Statutory comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. 2. Interest income includes items relating to customer refunds recognised as a reduction in interest income of $372 million (2018: $127 million, 2017: $58 million) for the Group, and $353 million (2018: $125 million) for the Parent Entity. Refer to Note 27 for further details. Interest income2 Calculated using the effective interest rate method Cash and balances with central banks Collateral paid Available-for-sale securities Investment securities Loans Other financial assets Due from subsidiaries 334 201 – 1,919 30,029 35 – 326 242 12996 1,9141,795 –– 29,583 28,438 35 43 –– 311 197 – 1,750 26,171 33 4,274 301 126 1,743 – 25,763 32 4,225 Total interest income calculated using the effective interest rate method 32,518 31,987 30,614 32,736 32,190 Other Net ineffectiveness on qualifying hedges Trading securities and financial assets measured at FVIS Loans Due from subsidiaries 28 662 14 – (18) (22) 564 574 38 66 –– 26 633 14 103 (22) 521 38 103 Total other 704 584 618 776 640 Total interest income 33,222 32,57131,232 33,512 32,830 Interest expense Calculated using the effective interest rate method Collateral received Deposits and other borrowings Debt issues Due to subsidiaries Loan capital Other financial liabilities (57) (7,967) (4,706) – (776) (274) (45) (19) (8,141) (8,026) (4,325) (3,448) –– (774) (693) (318)(307) (51) (6,745) (4,218) (4,905) (776) (273) (41) (6,949) (3,820) (4,840) (774) (316) Total interest expense calculated using the effective interest rate method (13,780) (13,603) (12,493) (16,968) (16,740) Other Deposits and other borrowings Trading liabilities Debt issues Bank levy Due to subsidiaries Other interest expense (978) (915) (163) (391) – (88) (880) (842) (959) (2,065) (155) (137) (378) (95) –– (91)(84) (961) (828) (140) (391) 78 (85) (868) (754) (138) (378) (11) (88) Total other (2,535) (2,463) (3,223) (2,327) (2,237) Total interest expense (16,315) (16,066) (15,716) (19,295) (18,977) Net interest income 16,907 16,505 15,516 14,217 13,853 Interest income and interest expense for all interest earning financial assets and interest bearing financial liabilities at amortised cost or FVOCI, detailed within the table below, are recognised using the effective interest rate method. Net income from treasury’s interest rate and liquidity management activities and the cost of the Bank levy are included in net interest income. The effective interest rate method calculates the amortised cost of a financial instrument by discounting the financial instrument’s estimated future cash receipts or payments to their present value and allocates the interest income or interest expense, including any fees, costs, premiums or discounts integral to the instrument, over its expected life. Interest income is calculated based on the gross carrying amount of financial assets in stages 1 and 2 of the Group’s ECL model and on the carrying amount net of the provision for ECL for financial assets in stage 3. Refer to Note 13 for further details of the Group’s ECL model.

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160 2019 Westpac Group Annual Report Notes to the financial statements Note 4. Non-interest income Accounting policy Non-interest income includes net fee income, net wealth management and insurance income, trading income and other income. Net fee income When another party is involved in providing goods or services to a Group customer, the Group assesses whether the nature of the arrangement with its customer is as a principal provider or an agent of another party. Where the Group is acting as an agent for another party, the income earned by the Group is the net consideration received (i.e. the gross amount received from the customer less amounts paid to a third party provider). As an agent, the net consideration represents fee income for facilitating the transaction between the customer and the third party provider with primary responsibility for fulfilling the contract. Fee income Fee income is recognised when the performance obligation is satisfied by transferring the promised good or service to the customer. Fee income includes facility fees, transaction fees and other non-risk fee income. Facility fees include certain line fees, annual credit card fees and fees for providing customer bank accounts. They are recognised over the term of the facility/period of service on a straight line basis. Transaction fees are earned for facilitating banking transactions such as foreign exchange fees, telegraphic transfers and issuing bank cheques. Fees for these one-off transactions are recognised once the transaction has been completed. Transaction fees are also recognised for credit card transactions including interchange fees net of scheme charges. These are recognised once the transaction has been completed, however, a component of interchange fees received is deferred as unearned income as the Group has a future service obligation to customers under the Group’s credit card reward programs. Other non-risk fee income includes advisory and underwriting fees which are recognised when the related service is completed. Income which forms an integral part of the effective interest rate of a financial instrument is recognised using the effective interest method and recorded in interest income (for example, loan origination fees). Fee expenses Fee expenses include incremental external costs that vary directly with the provision of goods or services to customers. An incremental cost is one that would not have been incurred if a specific good or service had not been provided to a specific customer. Fee expenses which form an integral part of the effective interest rate of a financial instrument are recognised using the effective interest method and recorded in net interest income. Fee expenses include the costs associated with credit card loyalty programs which are recognised as an expense when the services are provided on the redemption of points as well as merchant transaction costs. Net wealth management and insurance income Wealth management income Wealth management fees earned for the ongoing management of customer funds and investments are recognised when the performance obligation is satisfied which is over the period of management. Insurance premium income Insurance premium income includes premiums earned for life insurance, life investment, loan mortgage insurance and general insurance products: •life insurance premiums with a regular due date are recognised as revenue on an accrual basis; •life investment premiums include a management fee component which is recognised as income over the period the service is provided. The deposit components of life insurance and investment contracts are not revenue and are treated as movements in life insurance liabilities; •general insurance premium comprises amounts charged to policyholders, excluding taxes, and is recognised based on the likely pattern in which the insured risk is likely to emerge. The portion not yet earned based on the pattern assessment is recognised as unearned premium liability. Insurance claims expense •life and general insurance contract claims are recognised as an expense when the liability is established; •claims incurred in respect of life investment contracts represent withdrawals and are recognised as a reduction in life insurance liabilities. Trading income •realised and unrealised gains or losses from changes in the fair value of trading assets, liabilities and derivatives are recognised in the period in which they arise (except day one profits or losses which are deferred, refer to Note 22); •net income related to Treasury’s interest rate and liquidity management activities is included in net interest income. Other income - dividend income • dividends on quoted shares are recognised on the ex-dividend date; • dividends on unquoted shares are recognised when the company’s right to receive payment is established.

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2019 Westpac Group Annual Report 161 Notes to the financial statements Note 4. Non-interest income1 (continued) Consolidated 2018 Parent Entity $m 2019 2017 2019 2018 1 2 Deferred income in relation to the credit card loyalty programs for the Group was $322 million as at 30 September 2019 (2018: $318 million) and $47 million for the Parent Entity (2018: $34 million). This will be recognised as fee income as the credit card reward points are redeemed. There were no other material contract assets or contract liabilities for the Group or the Parent Entity. 3 1. The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Compliance, regulation and remediation provisions relating to customer refunds were recognised as a reduction of other non-risk fee income and wealth management income of $860 million (2018: $171 million; 2017: $111 million) for the Group, and $842 million (2018: $154 million) for the Parent Entity. Refer to Note 27 for further details. Includes policy holder tax recoveries. On 26 May 2017, the Group sold 60 million (19% of Pendal’s shares on issue) Pendal shares. Income from derivatives held for risk management purposes reflects the impact of economic hedges of foreign currency capital and earnings. The Group recognised $104 million of impairment on the remaining shareholdings of Pendal in 2018. 2. 4 3. 4. 5. 6. Net fee income Facility fees Transaction fees Other non-risk fee income2 730 1,225 (76) 1,3651,350 1,1821,258 98 229 680 1,046 (638) 1,351 939 54 Fee income 1,879 2,6452,837 1,088 2,344 Credit card loyalty programs Transaction fee related expenses (121) (103) (126) (152) (95) (82) (90) (76) (101) (71) Fee expenses (224) (221) (234) (166) (172) Net fee income 1,655 2,424 2,603 922 2,172 Net wealth management and insurance income Wealth management income2 276 1,145997 – – Life insurance premium income General insurance and lenders mortgage insurance (LMI) net premium earned Life insurance investment and other income3 General insurance and LMI investment and other income 1,443 482 409 52 1,4101,204 472 451 666 544 50 77 – – – – – – – – Total insurance premium, investment and other income 2,386 2,598 2,276 – – Life insurance claims and changes in insurance liabilities General insurance and LMI claims and other expenses (1,266) (367) (1,396) (1,155) (286) (318) – – – – Total insurance claims, changes in liabilities and other expenses (1,633) (1,682) (1,473) – – Net wealth management and insurance income 1,029 2,0611,800 – – Trading income 929 945 1,202 956 919 Other income Dividends received from subsidiaries Transactions with subsidiaries Dividends received from other entities Net gain on sale of associates4 Net gain on disposal of assets Net gain/(loss) on hedging overseas operations Net gain/(loss) on derivatives held for risk management purposes5 Net gain/(loss) on financial instruments measured at fair value Net gain/(loss) on disposal of controlled entities Rental income on operating leases Share of associates’ net profit/(loss) Other2,6 – – 6 38 61 – (11) (39) 3 72 (23) 22 –– –– 3 2 –279 24 6 –– 8 52 38 11 (9) – 107143 (10) 17 (89) 19 2,215 457 3 – 60 (71) (11) (25) – 50 – 6 2,013 472 3 – – 19 8 36 – 77 – 5 Total other income 129 72 529 2,684 2,633 Total non-interest income 3,742 5,502 6,134 4,562 5,724

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162 2019 Westpac Group Annual Report Notes to the financial statements Note 5. Operating expenses1,2 Consolidated 2018 Parent Entity $m 2019 2017 2019 2018 1. The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Operating expenses include costs recognised in relation to compliance, regulation and remediation provisions of $196 million (2018: $111 million; 2017: $12 million) for the Group, and $180 million (2018: $108 million) for the Parent entity. Refer to Note 27 for further details. Superannuation expense includes both defined contribution and defined benefit expense. Further details of the Group’s defined benefit plans are in Note 34. 2. 3. Staff expenses Employee remuneration, entitlements and on-costs Superannuation expense3 Share-based payments Restructuring costs 4,320 378 108 232 4,292 4,133 386 380 95 113 11475 3,611 313 101 202 3,537 315 97 97 Total staff expenses 5,038 4,887 4,701 4,227 4,046 Occupancy expenses Operating lease rentals Depreciation of property and equipment Other 658 222 143 632 648 245 291 156134 597 176 122 565 196 134 Total occupancy expenses 1,023 1,0331,073 895 895 Technology expenses Amortisation and impairment of software assets Depreciation and impairment of IT equipment Technology services Software maintenance and licences Telecommunications Data processing 719 129 810 371 207 83 620 628 141158 721 639 342 313 209 190 77 80 653 117 670 321 182 81 567 124 564 289 183 76 Total technology expenses 2,319 2,1102,008 2,024 1,803 Other expenses Professional and processing services Amortisation and impairment of intangible assets and deferred expenditure Postage and stationery Advertising Non-lending losses Impairment on investments in subsidiaries Other 1,060 9 179 245 58 – 175 824 755 138192 182217 173155 13373 –– 86 108 860 – 143 196 43 136 107 638 21 152 127 112 44 162 Total other expenses 1,726 1,536 1,500 1,485 1,256 Total operating expenses 10,106 9,566 9,282 8,631 8,000

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2019 Westpac Group Annual Report 163 Notes to the financial statements Note 6. Impairment charges Accounting policy 1 The following table details impairment charges for year ending 30 September 2019 based on the requirements of AASB 9. Consolidated 2019 Parent Entity 2019 $m 2 As comparatives have not been restated for the adoption of AASB 9, the following table details impairment charges for comparative year ends based on the requirements of AASB 139. Once AASB 9 has been effective for all comparative year ends, this table will no longer be presented. Consolidated 2018 Parent Entity 2018 $m 2017 Individually assessed provisions raised Write-backs Recoveries Collectively assessed provisions raised 371 (150) (179) 668 610 (288) (168) 699 341 (131) (138) 610 3 Impairment charges 710 853 682 There were no impairment charges for debt securities at FVOCI, debt securities at amortised cost and due from subsidiaries balances. 4 Provisions raised/(released) Performing Non-performing Recoveries (209) (180) 1,1751,073 (172) (143) Impairment charges of which relates to: Loan and credit commitments 794 750 794 750 Impairment charges 794 750 As comparatives have not been restated upon the adoption of AASB 9 the accounting policy applied in 2019 differs to that applied in comparative periods. The accounting policy applied in comparative periods is discussed in Note 39. The accounting policy applied in 2019 is as follows. Impairment charges are based on an expected loss model which measures the difference between the current carrying amount and the present value of expected future cash flows taking into account past experience, current conditions and multiple probability-weighted macroeconomic scenarios for reasonably supportable future economic conditions. Further details of the calculation of expected credit losses and the critical accounting assumptions and estimates relating to impairment charges are included in Note 13. Impairment charges are recognised in the income statement, with a corresponding amount recognised as follows: •Loans, debt securities at amortised cost and due from subsidiaries balances: as a reduction of the carrying value of the financial asset through an offsetting provision account (refer to Note 13); •Debt securities at FVOCI: in reserves in other comprehensive income with no reduction of the carrying value of the debt security (refer to Note 28); and • Credit commitments: as a provision (refer to Note 27). Uncollectable loans A loan may become uncollectable in full or part if, after following the Group’s loan recovery procedures, the Group remains unable to collect that loan’s contractual repayments. Uncollectable amounts are written off against their related provision for expected credit losses, after all possible repayments have been received. Where loans are secured, amounts are generally written off after receiving the proceeds from the security, or in certain circumstances, where the net realisable value of the security has been determined and this indicates that there is no reasonable expectation of full recovery, write-off may be earlier. Unsecured consumer loans are generally written off after 180 days past due. The Group may subsequently be able to recover cash flows from loans written off. In the period which these recoveries are made, they are recognised in the income statement.

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164 2019 Westpac Group Annual Report Notes to the financial statements Note 7. Income tax Accounting policy The tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised directly in other comprehensive income, in which case it is recognised in the statement of comprehensive income. Current tax is the tax payable for the year using enacted or substantively enacted tax rates and laws for each jurisdiction. Current tax also includes adjustments to tax payable for previous years. Deferred tax accounts for temporary differences between the carrying amounts of assets and liabilities in the financial statements and their values for taxation purposes. Deferred tax is determined using the enacted or substantively enacted tax rates and laws for each jurisdiction which are expected to apply when the assets will be realised or the liabilities settled. Deferred tax assets and liabilities have been offset where they relate to the same taxation authority, the same taxable entity or group, and where there is a legal right and intention to settle on a net basis. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available to utilise the assets. Deferred tax is not recognised for the following temporary differences: •the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither the accounting nor taxable profit or loss; •the initial recognition of goodwill in a business combination; and • retained earnings in subsidiaries which the Parent Entity does not intend to distribute for the foreseeable future. The Parent Entity is the head entity of a tax consolidated group with its wholly owned, Australian subsidiaries. All entities in the tax consolidated group have entered into a tax sharing agreement which, in the opinion of the Directors, limits the joint and several liabilities in the case of a default by the Parent Entity. Current and deferred tax are recognised using a ‘group allocation basis’. As head entity, the Parent Entity recognises all current tax balances and deferred tax assets arising from unused tax losses and relevant tax credits for the tax-consolidated group. The Parent Entity fully compensates/is compensated by the other members for these balances. Critical accounting assumptions and estimates The Group operates in multiple tax jurisdictions and significant judgement is required in determining the worldwide current tax liability. There are many transactions with uncertain tax outcomes and provisions are determined based on the expected outcomes.

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2019 Westpac Group Annual Report 165 Notes to the financial statements Note 7. Income tax (continued) Income tax expense The income tax expense for the year reconciles to the profit before income tax as follows: Consolidated Parent Entity 2019 $m 2019 2018 2017 2018 1 The effective tax rate was 30.35% in 2019 (2018: 30.96%, 2017: 30.55%). 2 3 4 1.As the Bank Levy is not a levy on income, it is not included in income tax. It is included in Note 3. Profit before income tax 9,749 11,731 11,515 9,398 10,895 Tax at the Australian company tax rate of 30% The effect of amounts which are not deductible/(assessable) in calculating taxable income Hybrid capital distributions Life insurance: Tax adjustment on policyholder earnings Adjustment for life business tax rates Dividend adjustments Other non-assessable items Other non-deductible items Adjustment for overseas tax rates Income tax (over)/under provided in prior years Other items 2,925 72 8 (1) (1) (14) 12 (32) (10) – 3,5193,455 69 64 24 8 (1) (1) (1)(3) (5) (3) 64 32 (28) (30) 9 4 (18) (8) 2,819 72 – – (664) (2) 9 (5) 3 45 3,269 69 – – (604) (2) 34 (3) – (12) Total income tax expense 2,959 3,632 3,518 2,277 2,751 Income tax analysis Income tax expense comprises: Current income tax Movement in deferred tax Income tax (over)/under provision in prior years 3,370 (401) (10) 3,704 3,404 (81) 110 9 4 2,711 (437) 3 2,806 (55) – Total income tax expense 2,959 3,632 3,518 2,277 2,751 Total Australia Total Overseas 2,526 433 3,178 3,072 454 446 2,215 62 2,677 74 Total income tax expense1 2,959 3,632 3,518 2,277 2,751

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166 2019 Westpac Group Annual Report Notes to the financial statements Note 7. Income tax (continued) Deferred tax assets The balance comprises temporary differences attributable to: Consolidated 2019 Parent Entity 2019 $m 2018 2018 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Statutory comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. 2. Comparatives has been restated for consistency. Amounts recognised in the income statements Provisions for impairment charges on loans1 Provisions for expected credit losses on loans1 Provision for long service leave, annual leave and other employee benefits Financial instruments Property and equipment Other provisions2 All other liabilities2 – 802 309 2 195 590 366 827 – 323 5 196 225 216 – 695 286 2 173 561 358 708 – 301 2 177 207 204 Total amounts recognised in the income statements 2,264 1,792 2,075 1,599 Amounts recognised directly in other comprehensive income Investment securities Cash flow hedges Defined benefit 10 52 105 – 50 – 11 28 101 – 31 – Total amounts recognised directly in other comprehensive income 167 50 140 31 Amount recognised in opening retained profits Provision for expected credit losses on loans Provision for impairment on credit commitments Expected credit losses on investment securities Financial instruments 266 30 1 3 – – – – 227 30 1 – – – – – Impact on adoption of AASB 91 300 – 258 – Gross deferred tax assets 2,731 1,842 2,473 1,630 Set-off of deferred tax assets and deferred tax liabilities (683) (662) (548) (528) Net deferred tax assets 2,048 1,180 1,925 1,102 Movements Opening balance Impact on adoption of new accounting standards1 1,180 300 1,112 – 1,102 258 1,053 – Restated opening balance Recognised in the income statements Recognised in other comprehensive income Set-off of deferred tax assets and deferred tax liabilities 1,480 472 117 (21) 1,112 84 (16) – 1,360 476 109 (20) 1,053 100 (13) (38) Closing balance 2,048 1,180 1,925 1,102

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2019 Westpac Group Annual Report 167 Notes to the financial statements Note 7. Income tax (continued) Deferred tax liabilities The balance comprises temporary differences attributable to: Consolidated 2019 Parent Entity 2019 $m 2018 2018 1 Unrecognised deferred tax balances The following potential deferred tax balances have not been recognised. The values shown are the gross balances and not tax effected. The tax effected balances would be approximately 30% of the values shown. Consolidated 2019 Parent Entity 2019 $m 2018 2018 2 3 4 Unrecognised deferred tax asset Tax losses on revenue account Unrecognised deferred tax liability Gross retained earnings of subsidiaries which the Parent Entity does not intend to distribute in the foreseeable future 291 51 190 58 237 – 151 – Amounts recognised in the income statements Finance lease transactions Property and equipment Life insurance assets All other assets 230 128 57 312 158 135 51 312 206 129 – 213 161 135 – 213 Total amounts recognised in the income statements 727 656 548 509 Amounts recognised directly in other comprehensive income Available-for-sale securities Defined benefit – – 10 14 – – 7 15 Total amounts recognised directly in other comprehensive income – 24 – 22 Gross deferred tax liabilities 727 680 548 531 Set-off of deferred tax assets and deferred tax liabilities (683) (662) (548) (528) Net deferred tax liabilities 44 18 – 3 Movements Opening balance Recognised in the income statements Recognised in other comprehensive income Set-off of deferred tax assets and deferred tax liabilities 18 71 (24) (21) 10 3 5 – 3 39 (22) (20) – 45 (4) (38) Closing balance 44 18 – 3

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168 2019 Westpac Group Annual Report Notes to the financial statements Note 8. Earnings per share Accounting policy Consolidated $m 2019 Basic 2018 Basic 2017 Basic Diluted Diluted Diluted 1.RSP share rights are explained in Note 33. Some RSP share rights have not vested and are not ordinary shares but do receive dividends. These RSP dividends are deducted to show the profit attributable to ordinary shareholders. In 2019, RSP share rights were antidilutive. 2. The Group has issued convertible loan capital which may convert into ordinary shares in the future (refer to Note 19 for further details). These convertible loan capital instruments are all dilutive, and diluted EPS is therefore calculated as if the instruments had been converted at the beginning of the year or, if later, the instruments’ issue date. Net profit attributable to shareholders Adjustment for RSP dividends1 Adjustment for potential dilution: Distributions to convertible loan capital holders2 6,784 6,784 (6) (6) –290 8,095 8,095 7,990 7,990 (5) –(6) – –283 –253 Adjusted net profit attributable to shareholders 6,778 7,068 8,090 8,378 7,984 8,243 Weighted average number of ordinary shares (millions) Weighted average number of ordinary shares on issue Treasury shares (including RSP share rights)1 Adjustment for potential dilution: Share-based payments Convertible loan capital2 3,456 3,456 (6) (6) –1 –278 3,4143,4143,364 3,364 (8) (8) (9) (9) –3 –4 –232 –236 Adjusted weighted average number of ordinary shares 3,4503,729 3,4063,6413,355 3,595 Earnings per ordinary share (cents) 196.5 189.5 237.5 230.1238.0 229.3 Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares on issue during the year, adjusted for treasury shares. Diluted EPS is calculated by adjusting the basic EPS by assuming all dilutive potential ordinary shares are converted. Refer to Note 19 and Note 33 for further information on the potential dilutive instruments.

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2019 Westpac Group Annual Report 169 Notes to the financial statements Note 9. Average balance sheet and interest rates1 The daily average balances of the Group’s interest earning assets and interest bearing liabilities are shown below along with their interest income or expense. 2019 Interest Income $m 2018 Interest Income $m 2017 Interest Income $m Average Balance $m Average Rate % Average Balance $m Average Rate % Average Balance $m Average Rate % Consolidated 1 2 3 1. The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. For 2019, loans and other receivables are net of Stage 3 provisions to reflect the adoption of AASB 9 where interest income is determined based on their carrying value, net of Stage 3 provisions. Stages 1 and 2 provisions were not included in the average interest earning assets balance as interest income is determined based on the gross value of loans and other receivables. For 2018 and 2017, loans and other receivables are net of provisions for impairment charges on loans as interest income is determined based on their carrying value, net of provisions for impairment charges on loans. Derivative assets for the year ended 30 September 2018 were restated from $34,702 million to $26,443 million (30 September 2017: $37,673 million to $28,897 million) and all other assets were restated from $61,938 million to $61,259 million (30 September 2017: $60,111 million to $60,420 million). Accordingly, total non-interest earning assets and total assets were restated. 2. 4 3. Assets Interest earning assets Collateral paid Australia New Zealand Other overseas Trading securities and financial assets measured at FVIS: Australia New Zealand Other overseas Available-for-sale securities: Australia New Zealand Other overseas Investment securities Australia New Zealand Other overseas Loans and other receivables2: Australia New Zealand Other overseas 8,428 152 364 7 2,03142 20,691 468 3,862 85 4,521 109 - - - - - - 56,875 1,691 3,850 130 3,062 98 589,427 25,931 79,255 3,650 26,558 859 1.8 1.9 2.1 2.3 2.2 2.4 - - - 3.0 3.4 3.2 4.4 4.6 3.2 5,239 86 1.66,926 65 0.9 252 4 1.6733 5 0.7 2,594 39 1.52,042 26 1.3 17,420423 2.4 18,4184162.3 3,538 80 2.3 4,238 96 2.3 3,160 611.94,10162 1.5 55,458 1,6923.152,457 1,5733.0 3,304 1364.13,479 1474.2 2,778 86 3.12,272 75 3.3 - - - - - - - - - - - - - - - - - - 578,679 25,700 4.4 558,36124,789 4.4 73,902 3,5164.8 73,055 3,463 4.7 28,620 748 2.6 26,2125152.0 Total interest earning assets and interest income 798,924 33,222 4.2 774,944 32,5714.2 752,294 31,232 4.2 Non-Interest earning assets Derivative financial instruments3 Life insurance assets All other assets3 25,959 9,610 60,231 26,44328,897 10,664 12,447 61,25960,420 Total non-interest earning assets3 95,800 98,366101,764 Total assets3 894,724 873,310 854,058

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170 2019 Westpac Group Annual Report Notes to the financial statements Note 9. Average balance sheet and interest rates1 (continued) 2019 2018 2017 Average Balance $m Interest Expense $m Average Rate % Average Balance $m Interest Expense $m Average Rate % Average Balance $m Interest Expense $m Average Rate % Consolidated 1. The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Include net impact of Treasury balance sheet management activities and the Bank Levy. Derivative liabilities for the year ended 30 September 2018 were restated from $37,504 million to $26,218 million (30 September 2017: $42,780 million to $32,488 million), and all other liabilities were restated from $12,199 million to $13,484 million (30 September 2017: $11,586 million to $12,628 million). Accordingly, total non-interest bearing liabilities, total liabilities and total liabilities and equity were restated. 2. 3. Liabilities Interest bearing liabilities Collateral received: Australia New Zealand Other overseas Deposits and other borrowings: Australia New Zealand Other overseas Loan capital: Australia New Zealand Other overseas Other interest bearing liabilities2: Australia New Zealand Other overseas 2,039 390 1,188 425,799 54,720 26,270 15,080 1,777 1,324 188,736 15,665 1,294 412.0 8 2.1 8 0.7 7,0231.6 1,2352.3 687 2.6 632 4.2 915.1 53 4.0 5,937 3.1 575 3.7 25 1.9 2,383 37 1.61,641150.9 342 6 1.898 2 2.0 1842 1.1 242 2 0.8 422,006 7,308 1.7409,586 7,344 1.8 51,3681,1962.3 51,042 1,1732.3 26,599 5171.924,085 3511.5 15,028635 4.2 15,841638 4.0 1,64584 5.143 2 4.7 1,32455 4.2 1,32453 4.0 177,7465,594 3.1171,940 5,343 3.1 15,0115913.9 16,366 754 4.6 1,873412.2 2,71639 1.4 Total interest bearing liabilities and interest expense 734,282 16,3152.2 715,50916,066 2.2 694,924 15,7162.3 Non-interest bearing liabilities Deposits and other borrowings: Australia New Zealand Other overseas Derivative financial instruments3 Life insurance liabilities All other liabilities3 42,455 5,996 819 26,568 7,653 13,187 41,15639,355 5,204 4,660 817867 26,21832,488 8,874 10,560 13,484 12,628 Total non-interest bearing liabilities3 96,678 95,753 100,558 Total liabilities3 830,960 811,262 795,482 Shareholders’ equity Non-controlling interests 63,714 50 62,01758,556 3120 Total equity 63,764 62,04858,576 Total liabilities and equity3 894,724 873,310 854,058

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2019 Westpac Group Annual Report 171 Notes to the financial statements Note 9. Average balance sheet and interest rates1 (continued) Net interest income may vary from year to year due to changes in the volume of, and interest rates associated with, interest earning assets and interest bearing liabilities. The table below allocates the change in net interest income between changes in volume and interest rate for those assets and liabilities. Calculation of variances • volume changes are determined based on the movements in average asset and liability balances; •interest rate changes are determined based on the change in interest rate associated with those assets and liabilities. Where variances arise due to a combination of volume and interest rate changes, the absolute dollar value of each change is allocated in proportion to their impact on the total change. 1 2019 Change due to 2018 Change due to Consolidated $m Volume Rate Total Volume Rate Total 2 3 4 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. 2. The volume rate calculations for 2019 Investment securities has been completed against the equivalent Available-for-sale securities. Interest earning assets Collateral paid: Australia New Zealand Other overseas Trading securities and financial assets measured at FVIS: Australia New Zealand Other overseas Investment securities2: Australia New Zealand Other overseas Loans and other receivables: Australia New Zealand Other overseas 52 1466 2 13 (8) 113 79 (34) 45 7 (2) 5 26 22 48 43 (44)(1) 22 (28) (6) 9 3 12 477 (246) 231 255 (121)134 (54)165 111 (16) 37 21 (3) 2 (1) 7 6 13 (23) 30 7 (16) - (16) (13) 12(1) 90 29 119 (7) (4) (11) 17(6) 11 952 (41) 911 39 1453 50 183233 Total change in interest income 910 (259) 651 1,077262 1,339 Interest bearing liabilities Collateral received: Australia New Zealand Other overseas Deposits and other borrowings: Australia New Zealand Other overseas Loan capital: Australia New Zealand Other overseas Other interest bearing liabilities: Australia New Zealand Other overseas (5) 9 4 112 11(5) 6 66 (351) (285) 78 (39) 39 (6) 176 170 2 (5) (3) 7 - 7 - (2) (2) 346 (3) 343 26 (42) (16) (13) (3) (16) 7 1522 5 (1)4 - - - 223 (259)(36) 7 1623 37 129166 (33) 30 (3) 75 7 82 - 2 2 19853 251 (74) (89) (163) (16) 18 2 Total change in interest expense 513(264)249 429 (79) 350 Change in net interest income: Australia New Zealand Other overseas 242 40 282 174(70) 104 (19) 35 16 608 216824 - 79 79 40 46 86 Total change in net interest income 397 5 402 648 341989

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172 2019 Westpac Group Annual Report Notes to the financial statements FINANCIAL ASSETS AND FINANCIAL LIABILITIES Accounting policy Recognition Purchases and sales by regular way of financial assets, except for loans and receivables, are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Loans and receivables are recognised on settlement date, when cash is advanced to the borrowers. Financial liabilities are recognised when an obligation arises. Derecognition Financial assets are derecognised when the rights to receive cash flows from the asset have expired, or when the Group has either transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full under a ‘pass through’ arrangement and transferred substantially all the risks and rewards of ownership. There may be situations where the Group has partially transferred the risks and rewards of ownership but has neither transferred nor retained substantially all the risks and rewards of ownership. In such situations, the asset continues to be recognised on the balance sheet to the extent of the Group’s continuing involvement in the asset. Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, the exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, with the difference in the respective carrying amounts recognised in the income statement. The terms are deemed to be substantially different if the discounted present value of the cashflows under the new terms (discounted using the original effective interest rate) is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability. Qualitative factors such as a change in the currency the instrument is denominated in, a change in the interest rate from fixed to floating and conversion features are also considered. Classification and measurement As comparatives have not been restated upon the adoption of AASB 9 the accounting policy applied in 2019 differs to that applied in comparative periods. The accounting policy applied in comparative periods is discussed in Note 39. The accounting policy applied in 2019 is as follows. Financial assets are grouped into the following classes: cash and balances with central banks; collateral paid, trading securities and financial assets measured at FVIS, derivative financial instruments, investment securities, loans, other financial assets and life insurance assets. Financial assets Financial assets are classified based on a) the business model within which the assets are managed, and b) whether the contractual cash flows of the instrument represent solely payment of principal and interest (SPPI). The Group determines the business model at the level that reflects how groups of financial assets are managed. When assessing the business model the Group considers factors including how performance and risks are managed, evaluated and reported and the frequency and volume of, and reason for, sales in previous periods and expectations of sales in future periods. When assessing whether contractual cash flows are SPPI, interest is defined as consideration primarily for the time value of money and the credit risk of the principal outstanding. The time value of money is defined as the element of interest that provides consideration only for the passage of time and not consideration for other risks or costs associated with holding the financial asset. Terms that could change the contractual cash flows so that they may not meet the SPPI criteria include contingent and leverage features, non-recourse arrangements, and features that could modify the time value of money. Debt instruments If the debt instruments have contractual cash flows which represent SPPI on the principal balance outstanding they are classified at: • amortised cost if they are held within a business model whose objective is achieved through holding the financial asset to collect these cash flows; or •FVOCI if they are held within a business model whose objective is achieved both through collecting these cash flows or selling the financial asset; or •FVIS if they are held within a business model whose objective is achieved through selling the financial asset. Debt instruments are measured at FVIS where the contractual cash flows do not represent SPPI on the principal balance outstanding or where it is designated at FVIS to eliminate or reduce an accounting mismatch. Debt instruments at amortised cost are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method. They are presented net of provisions for expected credit losses determined using the ECL model. Refer to Notes 6 and 13 for further details.

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2019 Westpac Group Annual Report 173 Notes to the financial statements FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued) Accounting policy (continued) 1 2 3 4 Debt instruments at FVOCI are measured at fair value with unrealised gains and losses recognised in other comprehensive income except for interest income, impairment charges and foreign exchange gains and losses, which are recognised in the income statement. Impairment on debt instruments at FVOCI is determined using the ECL model and is recognised in the income statement with a corresponding amount in other comprehensive income. There is no reduction of the carrying value of the debt security which remains at fair value. The cumulative gain or loss recognised in other comprehensive income is subsequently recognised in the income statement when the instrument is derecognised. Debt instruments at FVIS are measured at fair value with subsequent changes in fair value recognised in the income statement. Equity securities Equity securities are measured at FVOCI where they: •are not held for trading; and •an irrevocable election is made by the Group. Otherwise, they are measured at FVIS. Equity securities at FVOCI are measured at fair value with unrealised gains and losses recognised in other comprehensive income, except for dividend income which is recognised in the income statement. The cumulative gain or loss recognised in other comprehensive income is not subsequently recognised in the income statement when the instrument is disposed. Equity securities at FVIS are measured at fair value with subsequent changes in fair value recognised in the income statement. Financial liabilities Financial liabilities are grouped into the following classes: collateral received, deposits and other borrowings, other financial liabilities, derivative financial instruments, debt issues and loan capital. Financial liabilities are measured at amortised cost if they are not held for trading or designated at FVIS, otherwise they are measured at FVIS. Financial assets and financial liabilities measured at fair value through income statement are recognised initially at fair value. All other financial assets and financial liabilities are recognised initially at fair value plus or minus directly attributable transaction costs respectively. Further details of the accounting policy for each category of financial asset or financial liability mentioned above is set out in the note for the relevant item. The Group’s policies for determining the fair value of financial assets and financial liabilities are set out in Note 22.

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174 2019 Westpac Group Annual Report Notes to the financial statements Note 10. Trading securities and financial assets measured at FVIS1 Accounting policy Consolidated 2018 Parent Entity 2019 $m 2019 2017 2018 Trading securities include the following: Consolidated 2018 Parent Entity 2019 $m 2019 2017 2018 Other financial assets measured at FVIS include: Consolidated 2018 Parent Entity 2019 $m 2019 2017 2018 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Other debt securities Equity securities 2,394 344 2,7152,259 261318 2,057 58 2,302 63 Total other financial assets measured at FVIS 2,738 2,9762,577 2,115 2,365 Government and semi-government securities Other debt securities Equity securities Other 16,625 5,497 6 82 13,32811,402 5,354 5,049 8 11 87 57 15,585 5,046 6 82 12,519 5,057 8 87 Total trading securities 22,210 18,777 16,519 20,719 17,671 Trading securities Reverse repurchase agreements Other financial assets measured at FVIS 22,210 6,833 2,738 18,77716,519 1,3796,887 2,976 2,577 20,719 6,731 2,115 17,671 1,379 2,365 Total trading securities and financial assets measured at FVIS 31,781 23,132 25,983 29,565 21,415 Trading securities Trading securities include actively traded debt (government and other) and equity instruments and those acquired for sale in the near term. As part of its trading activities, the Group also lends and borrows securities on a collateralised basis. Securities lent remain on the Group’s balance sheet and securities borrowed are not reflected on the Group’s balance sheet, as the risk and rewards of ownership remain with the initial holder. Where cash is provided as collateral, the amount advanced to or received from third parties is recognised as a receivable in collateral paid or as a borrowing in collateral received respectively. Reverse repurchase agreements Securities purchased under these agreements are not recognised on the balance sheet, as Westpac has not obtained the risks and rewards of ownership. The cash consideration paid is recognised as a reverse repurchase agreement, which forms part of a trading portfolio that is measured at fair value. Other financial assets measured at FVIS Other financial assets measured at FVIS include: • non-trading securities managed on a fair value basis; • non-trading debt securities that do not have contractual cash flows that represent SPPI on the principal balance outstanding; or • non-trading equity securities for which we have not made irrevocable designation to be measured at FVOCI. Gains and losses on these financial assets are recognised in the income statement. Interest earned from debt securities is recognised in interest income (Note 3) while dividends on equity securities are recognised in non-interest income (Note 4).

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2019 Westpac Group Annual Report 175 Notes to the financial statements Note 11. Available-for-sale securities/Investment securities Accounting policy 1 Transition to AASB 9 The following table shows how the available-for-sale securities under AASB 139 were classified on adoption of AASB 9 and the balance sheet line items they are reflected in. Refer to Note 1 for further details. Trading securities and financial assets 2 Investment Securities measured at FVIS Debt securities at FVOCI Equity securities at FVOCI Debt securities at amortised cost Equity securities at FVIS $m Total Available-for-sale securities Consolidated 1 October 2018 Debt securities Equity securities 59,924 - - 109 811 - - 275 60,735 384 Total available-for-sale securities 59,924 109 811 275 61,119 3 Parent Entity 1 October 2018 Debt securities Equity securities 56,436 - - 67 10 - - - 56,446 67 Total available-for-sale securities 56,436 67 10 - 56,513 4 As comparatives have not been restated upon the adoption of AASB 9 the accounting policy applied in 2019 differs to that applied in comparative years. The accounting policy applied in comparative years is discussed in Note 39. The accounting policy applied in 2019 is as follows. Investment securities include debt securities (government and other) and equity securities. It includes debt and equity securities that are measured at FVOCI and debt securities measured at amortised cost. These instruments are classified based on the criteria disclosed under the heading “Financial assets and financial liabilities” prior to Note 10. Debt securities measured at FVOCI Includes debt instruments that have contractual cash flows which represent SPPI on the principal balance outstanding and they are held within a business model whose objective is achieved both through collecting these cash flows or selling the financial asset. These securities are measured at fair value with gains and losses recognised in OCI except for interest income, impairment charges and foreign exchange gains and losses which are recognised in the income statement. Impairment is measured using the same ECL model applied to financial assets measured at amortised cost. Impairment is recognised in the income statement with a corresponding amount in OCI with no reduction of the carrying value of the debt security which remains at fair value. Refer to Note 13 for further details. The cumulative gain or loss recognised in OCI is subsequently recognised in the income statement when the instrument is disposed. Debt securities measured at amortised cost Include debt instruments that have contractual cash flows which represent SPPI on the principal balance outstanding and are held within a business model whose objective is achieved through holding the financial asset to collect these cash flows. These securities are initially recognised at fair value plus directly attributable transaction costs. They are subsequently measured at amortised cost using the effective interest rate method and are presented net of any provisions for ECL. Equity securities Equity securities are measured at FVOCI where they are not held for trading, the Group does not have control or significant influence over the investee and where an irrevocable election is made to measure them at FVOCI. These securities are measured at fair value with unrealised gains and losses recognised in OCI except for dividend income which is recognised in the income statement. The cumulative gain or loss recognised in OCI is not subsequently recognised in the income statement when the instrument is disposed.

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176 2019 Westpac Group Annual Report Notes to the financial statements Note 11. Available-for-sale securities/Investment securities1 (continued) Balances recognised under AASB 9 Consolidated 2019 Parent Entity 2019 $m Investment securities Investment securities measured at FVOCI Government and semi-government debt securities Other debt securities Equity securities 53,389 19,058 134 50,980 17,325 66 Total investment securities measured at FVOCI 72,581 68,371 Investment securities measured at amortised cost Government and semi-government debt securities Other debt securities 736 93 23 4 Total investment securities measured at amortised cost Provisions for ECL on debt securities at amortised cost 829 (9) 27 - Total net investment securities measured at amortised cost 820 27 Total investment securities 73,401 68,398 The expected credit losses recognised in relation to investment securities – debt securities are detailed in Note 13. The following table shows the maturities of the Group’s investment securities as at 30 September 2019 and their weighted average yield. There are no tax-exempt securities. Over 1 Year to 5 years $m Over 5 years to 10 years $m Within 1 year $m Over 10 years $m No specific maturity $m Weighted average % Total $m 2019 % % % % % The maturity profile is determined based upon contractual terms for investment securities. Investment securities include: •US Government treasury notes of $10,398 million (2018: $5,229 million, 2017: $6,796 million); and • total holdings of debt securities, where the aggregate book value exceeds 10% of equity attributable to Westpac’s owners: – – – Queensland Treasury Corporation totalling $13,218 million; Australian Commonwealth Government totalling $10,191 million; and New South Wales Treasury Corporation totalling $6,630 million. Balances recognised under AASB 139 Consolidated 2018 Parent Entity 2018 $m 2017 Available-for-sale securities Government and semi-government securities Other debt securities Equity securities 42,979 17,756 384 43,382 16,863 465 40,345 16,101 67 Total available-for-sale securities 61,119 60,710 56,513 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Statutory comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Carrying amount Government and semi-government debt securities5,6914.2% 24,1372.9% 23,040 2.8%1,248 2.2%-- Other debt securities4,040 2.8%15,060 2.7%512.8%-- - - Equity securities-- - - - - - - 134-54,116 19,151 134 3.1% 2.7% - Total by maturity 9,73139,19723,091 1,248 134 73,401

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2019 Westpac Group Annual Report 177 Notes to the financial statements Note 12. Loans1 Accounting policy 1 The loan portfolio is disaggregated by location of booking office and product type, as follows: Consolidated 2019 Parent Entity 2019 $m 2018 2018 2 3 1. The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Margin lending and other which were separately presented in prior years are now included in Personal loans. Comparatives have been revised for consistency. Total net loans include securitised loans of $7,737 million (2018: $7,135 million) for the Group and $91,061 million (2018: $85,965 million) for the Parent Entity. 4 2. 3. Australia Housing Personal2 Business 449,201 21,247 152,360 444,741 22,997 154,347 449,192 20,848 148,850 444,730 22,008 150,580 Total Australia 622,808 622,085 618,890 617,318 New Zealand Housing Personal2 Business 47,731 1,709 29,285 44,772 1,869 27,701 - - 411 - - 376 Total New Zealand 78,725 74,342 411 376 Total other overseas 16,845 16,077 15,738 14,881 Total loans Provisions for ECL on loans (refer to Note 13) Provisions for impairment charges on loans (refer to Note 13) 718,378 (3,608) - 712,504 - (2,814) 635,039 (3,103) - 632,575 - (2,407) Total net loans3 714,770 709,690 631,936 630,168 As comparatives have not been restated upon the adoption of AASB 9 the accounting policy applied in 2019 differs to that applied in comparative years. The accounting policy applied in comparative years is discussed in Note 39. The accounting policy applied in 2019 is as follows. Loans are financial assets initially recognised at fair value plus directly attributable transaction costs and fees. Loans are subsequently measured at amortised cost using the effective interest rate method where they have contractual cash flows which represent SPPI on the principal balance outstanding and they are held within a business model whose objective is achieved through holding the loans to collect these cash flows. They are presented net of any provisions for ECL. Loans are subsequently measured at FVIS where they do not have cash flows which represent SPPI, are held within a business model whose objective is achieved by selling the financial asset, or are designated at FVIS to eliminate or reduce an accounting mismatch. Refer to Note 22 for balances which are measured at fair value and amortised cost. Loan products that have both mortgage and deposit facilities are presented gross on the balance sheet, segregating the asset and liability component, because they do not meet the criteria to be offset. Interest earned on these products is presented on a net basis in the income statement as this reflects how the customer is charged.

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178 2019 Westpac Group Annual Report Notes to the financial statements Note 12. Loans1 (continued) The following table shows loans presented based on their industry classification: Consolidated $m 2019 2018 2017 2016 2015 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. 2. 2018 comparatives have been revised for consistency. Australia Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other 8,039 9,210 7,186 14,069 753 9,337 2,869 44,769 14,035 12,099 16,144 8,268 4,077 466,550 5,403 8,297 8,1777,536 7,490 8,642 8,1827,9537,667 6,7516,043 5,797 5,596 14,059 12,92314,298 13,175 628 554 675 796 9,298 9,0549,1409,342 3,3113,025 3,6414,415 45,47143,220 44,785 44,667 13,47712,05011,67410,703 12,158 12,950 12,36210,798 16,50116,063 16,044 15,484 8,853 8,624 9,0159,940 4,350 5,237 4,025 3,554 463,609 451,315429,522 400,441 6,6804,229 2,777 1,587 Total Australia 622,808 622,085 601,646579,244 545,655 New Zealand Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other 355 8,553 493 3,009 85 1,913 278 6,412 1,182 1,973 2,344 1,131 1,429 49,473 95 323 290 256 182 8,1387,7727,7886,860 502 447 396 359 2,903 2,478 2,682 1,725 114137163292 2,1992,090 2,324 2,110 206 141280 407 5,997 5,858 5,925 5,301 1,0731,113 1,084925 1,7331,8101,3961,173 2,509 2,1632,333 2,003 1,0291,0801,2571,094 1,0031,2371,600 1,021 46,613 45,190 45,01140,277 - - - - Total New Zealand 78,725 74,342 71,806 72,495 63,729 Other overseas Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance2 Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade2 Transport and storage Utilities Retail lending Other 109 150 55 4,628 2 3,784 468 492 1,610 243 2,293 997 1,086 863 65 11297 118111 195 12568 7155 147247 4,774 4,289 2,767 4,297 25 4 4 130 3,257 2,982 2,6193,848 322 349 535 778 467 491479 409 1,684540 526 403 205 205 99 182 2,3122,680 3,463 2,898 1,2321,3891,1861,099 736 514442 722 683 657 1,1201,191 178 76 - 77 Total other overseas 16,845 16,077 14,333 13,51716,960 Total loans Provisions for ECL on loans (refer to Note 13) Provisions for impairment charges on loans (refer to Note 13) 718,378 (3,608) - 712,504687,785665,256626,344 - - - - (2,814) (2,866)(3,330) (3,028) Total net loans 714,770 709,690 684,919661,926623,316

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2019 Westpac Group Annual Report 179 Notes to the financial statements Note 12. Loans1 (continued) Parent Entity $m 2019 2018 1 2 3 4 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. 2. 2018 comparatives have been restated for consistency. Australia Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other 7,967 9,151 6,810 14,005 746 9,155 2,849 44,707 13,192 11,853 15,961 7,961 4,053 465,535 4,945 8,228 8,584 6,247 14,006 620 9,072 3,279 45,471 12,433 11,891 16,291 8,456 4,324 462,568 5,848 Total Australia 618,890 617,318 New Zealand Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other - 5 8 - - 94 - - 7 - 297 - - - - - 2 5 - - 98 - - 8 - 263 - - - - Total New Zealand 411 376 Other overseas Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance2 Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade2 Transport and storage Utilities Retail lending Other 67 130 47 4,624 2 3,780 465 226 1,528 216 2,115 886 1,036 587 29 70 4 59 4,769 24 3,253 323 234 1,595 187 2,126 1,127 734 277 99 Total other overseas 15,738 14,881 Total loans Provisions for ECL on loans Provisions for impairment charges on loans 635,039 (3,103) - 632,575 - (2,407) Total net loans 631,936 630,168

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180 2019 Westpac Group Annual Report Notes to the financial statements Note 12. Loans1 (continued) The following table shows the consolidated contractual maturity distribution of all loans by industry as at 30 September 2019: Consolidated 2019 $m Up to 1 year 1 to 5 years Over 5 years Total 2019 Loans at fixed interest rates 2018 Loans at fixed interest rates Loans at variable interest rates Loans at variable interest rates Consolidated $m Total Total 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Interest rate segmentation of Group loans maturing after one year By offices in Australia By offices in New Zealand1 By offices in other overseas1 418,494 9,102 9,881 129,035547,529 50,49959,601 943 10,824 423,886127,077550,963 10,634 45,852 56,486 8,182927 9,109 Total loans maturing after one year 437,477 180,477 617,954 442,702 173,856 616,558 Loans by type of customer in Australia Accommodation, cafes and restaurants 2,776 4,883 380 Agriculture, forestry and fishing2,676 5,967 567 Construction 1,7854,514887 Finance and insurance 6,278 5,054 2,737 Government, administration and defence 286 189278 Manufacturing 3,420 5,413504 Mining 353 1,734782 Property 18,41024,8211,538 Property services and business services 3,0118,969 2,055 Services 3,9156,395 1,789 Trade 7,3147,649 1,181 Transport and storage1,603 5,758 907 Utilities1,0092,839 229 Retail lending21,725 12,394432,431 Other 7183,5111,174 8,039 9,210 7,186 14,069 753 9,337 2,869 44,769 14,035 12,099 16,144 8,268 4,077 466,550 5,403 Total Australia 75,279100,090 447,439 622,808 Total New Zealand 19,124 12,790 46,811 78,725 Total other overseas 6,0219,529 1,295 16,845 Total loans 100,424 122,409495,545 718,378

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2019 Westpac Group Annual Report 181 Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges Accounting policy 1 2 3 4 As comparatives have not been restated upon the adoption of AASB 9 the accounting policy applied in 2019 differs to that applied in comparative years. The accounting policy applied in comparative years is discussed in Note 39. The accounting policy applied in 2019 is as follows. Note 6 provides details of impairment charges. Impairment under AASB 9 applies to all financial assets at amortised cost, lease receivables, debt securities measured at FVOCI and credit commitments. The ECL determined under AASB 9 is recognised as follows: •Loans (including lease receivables), debt securities at amortised cost and due from subsidiaries: as a reduction of the carrying value of the financial asset through an offsetting provision account (refer to Notes 11 and 12); •Debt securities at FVOCI: in reserves in other comprehensive income with no reduction of the carrying value of the debt security itself (refer to Notes 11 and 28); and • Credit commitments: as a provision (refer to Note 27). Measurement The Group calculates the provisions for ECL based on a three stage approach. ECL are a probability-weighted estimate of the cash shortfalls expected to result from defaults over the relevant timeframe. They are determined by evaluating a range of possible outcomes and taking into account the time value of money, past events, current conditions and forecasts of future economic conditions. The models use three main components to determine the ECL (as well as the time value of money) including: • Probability of default (PD): the probability that a counterparty will default; •Loss given default (LGD): the loss that is expected to arise in the event of a default; and • Exposure at default (EAD): the estimated outstanding amount of credit exposure at the time of the default. Model stages The three stages are as follows: Stage 1: 12 months ECL - performing For financial assets where there has been no significant increase in credit risk since origination a provision for 12 months ECL is recognised. Stage 2: Lifetime ECL – performing For financial assets where there has been a significant increase in credit risk since origination but where the asset is still performing a provision for lifetime ECL is recognised. The indicators of a significant increase in credit risk are described on the following page. Stage 3: Lifetime ECL – non-performing For financial assets that are non-performing a provision for lifetime ECL is recognised. Indicators include a breach of contract with the Group such as a default on interest or principal payments, a borrower experiencing significant financial difficulties or observable economic conditions that correlate to defaults on a group of loans. Financial assets in stage 3 are those that are in default. A default occurs when Westpac considers that the customer is unlikely to repay its credit obligations in full, irrespective of recourse by the Group to actions such as realising security, or the customer is more than 90 days past due on any material credit obligation. This definition is aligned to the APRA regulatory definition of default. Collective and individual assessment Financial assets that are in stages 1 and 2 are assessed on a collective basis as are financial assets in stage 3 below specified thresholds. Financial assets that are collectively assessed are grouped in pools of similar assets with similar credit risk characteristics including the type of product and the customer risk grade. Those financial assets in stage 3 above the specified thresholds are assessed on an individual basis. Expected life In considering the lifetime time frame for expected credit losses in stages 2 and 3, the standard generally requires use of the remaining contractual life adjusted where appropriate for prepayments, extension and other options. For certain revolving credit facilities which include both a drawn and undrawn component (e.g. credit cards and revolving lines of credit), the Group’s contractual ability to demand repayment and cancel the undrawn commitment does not limit our exposure to credit losses to the contractual notice period. For these facilities, lifetime is based on historical behaviour.

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182 2019 Westpac Group Annual Report Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) Accounting policy (continued) Movement between stages Assets may move in both directions through the stages of the impairment model. Assets previously in stage 2 may move back to stage 1 if it is no longer considered that there has been a significant increase in credit risk. Similarly, assets in stage 3 may move back to stage 1 or stage 2 if they are no longer assessed to be non-performing. Critical accounting assumptions and estimates Key judgements include when a significant increase in credit risk has occurred and estimation of forward looking macroeconomic information. Other factors which can impact the provision include the borrower’s financial situation, the realisable value of collateral, the Group’s position relative to other claimants, the reliability of customer information and the likely cost and duration of recovering the loan. Significant increase in credit risk Determining when a financial asset has experienced a significant increase in credit risk since origination is a critical accounting judgement which is primarily based on changes in internal customer risk grades since origination of the facility. A change in an internal customer risk grade is based on both quantitative and qualitative factors. The change in the internal customer risk grade that the Group uses to represent a significant increase in credit risk is based on a sliding scale. This means that a higher credit quality exposure at origination would require a more significant downgrade compared to a lower credit quality exposure before it is considered to have experienced a significant increase in credit risk. The Group does not rebut the presumption that instruments that are 30 days past due have experienced a significant increase in risk but this is used as a backstop rather than the primary indicator. In addition, retail accounts in hardship are considered to have experienced a significant increase in credit risk. The Group does not apply the low credit risk exemption which assumes investment grade facilities do not have a significant increase in credit risk. Forward looking macroeconomic information The measurement of ECL for each stage and the assessment of significant increase in credit risk consider information about past events and current conditions as well as reasonable and supportable projections of future events and economic conditions. The estimation of forward looking information is a critical accounting judgement. The Group considers three future macroeconomic scenarios including a base case scenario along with upside and downside scenarios. The macroeconomic variables used in these scenarios, based on current economic forecasts, include (but are not limited to) unemployment rates, real gross domestic product growth rates and residential and commercial property price indices. •Base case scenario This scenario utilises the internal Westpac economics forecast used for strategic decision making and forecasting. •Upside scenario This scenario represents a modest improvement on the base case scenario. • Downside scenario This scenario represents a moderate recession. The macroeconomic scenarios are weighted based on the Group’s best estimate of the relative likelihood of each scenario. The weighting applied to each of the three macroeconomic scenarios takes into account historical frequency, current trends, and forward looking conditions. The macroeconomic variables and probability weightings of the three macroeconomic scenarios are subject to the approval of the Group Chief Financial Officer and Chief Risk Officer with oversight from the Board of Directors (and its Committees). Where appropriate, adjustments will be made to modelled outcomes to reflect reasonable and supportable information not already incorporated in the models. Judgements can change with time as new information becomes available which could result in changes to the provision for expected credit losses.

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2019 Westpac Group Annual Report 183 Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) Loans and credit commitments The reconciliation of the provision for ECL tables for loans and credit commitments as at 30 September 2019 below are based on the requirements of AASB 9. They have been determined by an aggregation of monthly movements over the year. The key line items in the reconciliation represent the following: • The transfers between stages lines represent transfers between stage 1, stage 2 and stage 3 prior to remeasurement of the provision for ECL. The business activity during the year line represents new accounts originated during the year net of those that were derecognised due to final repayments during the year. The net remeasurement of ECL line represents the impact on the provision for ECL due to changes in credit quality during the period (including transfers between stages), changes due to forward looking economic scenarios and partial repayments and additional drawdowns on existing facilities over the year. Write-offs represent a reduction in the provision for ECL as a result of derecognition of exposures where there is no reasonable expectation of full recovery. • 1 • • 2 3 4

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184 2019 Westpac Group Annual Report Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) Collectively assessed provisions Individually assessed provisions Consolidated $m Performing Non-performing Stage 3 Stage 1 Stage 2 Total Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 877 - 1,884 - 1,272 2,631 (2,631) 422 (422) 3,053 980 Restated provision for ECL as at 1 October 2018 Transfers to Stage 1 Transfers to Stage 2 Transfers to Stage 3 Business activity during the year Net remeasurement of provision for ECL Write-offs Exchange rate and other adjustments 877 1,458 (242) (5) 179 (1,385) - 2 1,884 (1,404) 956 (621) (19) 874 - 4 1,272 (54) (714) 626 (330) 1,647 (1,154) 62 - - - - - - - - - - - - - - - - 4,033 - - - (170) 1,136 (1,154) 68 Total provision for ECL on loans and credit commitments as at 30 September 2019 884 1,674 1,355 - - 3,913 Presented as: Provision for ECL on credit commitments (refer to Note 27) Provision for ECL on loans (refer to Note 12) 121 763 178 1,496 6 1,349 - - - - 305 3,608 Total provision for ECL on loans and credit commitments as at 30 September 2019 884 1,674 1,355 - - 3,913 Of which: Individually assessed provisions Collectively assessed provisions - 884 - 1,674 412 943 - - - - 412 3,501 Total provision for ECL on loans and credit commitments as at 30 September 2019 884 1,674 1,355 - - 3,913 The provisions for ECL on loans can be further disaggregated into the following classes: Consolidated Housing loans $m Collectively assessed provisions Individually assessed provisions Performing Non-performing Stage 3 Stage 1 Stage 2 Total Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 130 - 351 - 501 385 (385) 97 (97) 482 500 Restated provision for ECL as at 1 October 2018 Transfers to Stage 1 Transfers to Stage 2 Transfers to Stage 3 Business activity during the year Net remeasurement of provision for ECL Write-offs Exchange rate and other adjustments 130 343 (38) - 17 (289) - - 351 (317) 396 (145) (35) 104 - - 501 (26) (358) 145 (141) 567 (119) 22 - - - - - - - - - - - - - - - - 982 - - - (159) 382 (119) 22 Total provision for ECL on loans and credit commitments as at 30 September 2019 163 354 591 - - 1,108 Presented as: Provision for ECL on credit commitments (refer to Note 27) Provision for ECL on loans (refer to Note 12) 5 158 2 352 - 591 - - - - 7 1,101 Total provision for ECL on loans and credit commitments as at 30 September 2019 163 354 591 - - 1,108

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2019 Westpac Group Annual Report 185 Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) Consolidated Personal loans $m Collectively assessed provisions Individually assessed provisions Performing Non-performing Stage 3 Stage 1 Stage 2 Total Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 263 - 589 - 240 761 (761) 3 (3) 764 328 Restated provision for ECL as at 1 October 2018 Transfers to Stage 1 Transfers to Stage 2 Transfers to Stage 3 Business activity during the year Net remeasurement of provision for ECL Write-offs Exchange rate and other adjustments 263 849 (148) (2) 62 (757) - 1 589 (839) 368 (350) (18) 708 - 1 240 (10) (220) 352 (160) 838 (822) 30 - - - - - - - - - - - - - - - - 1,092 - - - (116) 789 (822) 32 1 Total provision for ECL on loans and credit commitments as at 30 September 2019 268 459 248 - - 975 Presented as: Provision for ECL on cedit commitments (refer to Note 27) Provision for ECL on loans (refer to Note 12) 36 232 35 424 - 248 - - - - 71 904 Total provision for ECL on loans and credit commitments as at 30 September 2019 268 459 248 - - 975 Consolidated Business loans $m Collectively assessed provisions Individually assessed provisions Performing Non-performing Stage 3 Stage 1 Stage 2 Total Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 484 - 944 - 531 1,485 (1,485) 322 (322) 1,807 152 Restated provision for ECL as at 1 October 2018 Transfers to Stage 1 Transfers to Stage 2 Transfers to Stage 3 Business activity during the year Net remeasurement of provision for ECL Write-offs Exchange rate and other adjustments 484 266 (56) (3) 100 (339) - 1 944 (248) 192 (126) 34 62 - 3 531 (18) (136) 129 (29) 242 (213) 10 - - - - - - - - - - - - - - - - 1,959 - - - 105 (35) (213) 14 Total provision for ECL on loans and credit commitments as at 30 September 2019 453 861 516 - - 1,830 Presented as: Provision for ECL on credit commitments (refer to Note 27) Provision for ECL on loans (refer to Note 12) 80 373 141 720 6 510 - - - - 227 1,603 2 Total provision for ECL on loans and credit commitments as at 30 September 2019 453 861 516 - - 1,830 3 4

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186 2019 Westpac Group Annual Report Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) The following table reconciles the 30 September 2019 provision for ECL on loans and commitments for the Parent Entity based on the requirements of AASB 9. Collectively assessed provisions Individually assessed provisions Parent Entity $m Performing Non-performing Stage 3 Stage 1 Stage 2 Total Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 741 - 1,605 - 1,113 2,238 (2,238) 375 (375) 2,613 846 Restated provision for ECL as at 1 October 2018 Transfers to Stage 1 Transfers to Stage 2 Transfers to Stage 3 Business activity during the year Net remeasurement of provision for ECL Write-offs Exchange rate and other adjustments 741 1,191 (220) (3) 168 (1,130) - - 1,605 (1,153) 860 (554) 7 654 - 1 1,113 (38) (640) 557 (358) 1,552 (1,023) 48 - - - - - - - - - - - - - - - - 3,459 - - - (183) 1,076 (1,023) 49 Total provision for ECL on loans and credit commitments as at 30 September 2019 747 1,420 1,211 - - 3,378 Presented as: Provision for ECL on credit commitments (refer to Note 27) Provision for ECL on loans (refer to Note 12) 107 640 163 1,257 5 1,206 - - - - 275 3,103 Total provision for ECL on loans and credit commitments as at 30 September 2019 747 1,420 1,211 - - 3,378 Of which: Individually assessed provisions Collectively assessed provisions - 747 - 1,420 364 847 - - - - 364 3,014 Total provision for ECL on loans and credit commitments as at 30 September 2019 747 1,420 1,211 - - 3,378 Parent Entity Housing loans $m Collectively assessed provisions Individually assessed provisions Performing Non-performing Stage 3 Stage 1 Stage 2 Total Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 105 - 334 - 402 516 (516) 82 (82) 598 243 Restated provision for ECL as at 1 October 2018 Transfers to Stage 1 Transfers to Stage 2 Transfers to Stage 3 Business activity during the year Net remeasurement of provision for ECL Write-offs Exchange rate and other adjustments 105 322 (36) - 15 (265) - - 334 (302) 386 (141) (33) 91 - - 402 (20) (350) 141 (127) 606 (115) 20 - - - - - - - - - - - - - - - - 841 - - - (145) 432 (115) 20 Total provision for ECL on loans and credit commitments as at 30 September 2019 141 335 557 - - 1,033 Presented as: Provision for ECL on credit commitments (refer to Note 27) Provision for ECL on loans (refer to Note 12) 4 137 1 334 - 557 - - - - 5 1,028 Total provision for ECL on loans and credit commitments as at 30 September 2019 141 335 557 - - 1,033

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2019 Westpac Group Annual Report 187 Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) The provisions for ECL on loans can be further disaggregated into the following classes: Parent Entity Personal loans $m Collectively assessed provisions Individually assessed provisions Performing Non-performing Stage 3 Stage 1 Stage 2 Total Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 215 - 540 - 200 524 (524) 3 (3) 527 428 Restated provision for ECL as at 1 October 2018 Transfers to Stage 1 Transfers to Stage 2 Transfers to Stage 3 Business activity during the year Net remeasurement of provision for ECL Write-offs Exchange rate and other adjustments 215 635 (138) (1) 62 (544) - - 540 (633) 319 (311) (11) 497 - - 200 (2) (181) 312 (158) 753 (733) 22 - - - - - - - - - - - - - - - - 955 - - - (107) 706 (733) 22 1 Total provision for ECL on loans and credit commitments as at 30 September 2019 229 401 213 - - 843 Presented as: Provision for ECL on credit commitments (refer to Note 27) Provision for ECL on loans (refer to Note 12) 29 200 32 369 - 213 - - - - 61 782 Total provision for ECL on loans and credit commitments as at 30 September 2019 229 401 213 - - 843 Parent Entity Business loans $m Collectively assessed provisions Individually assessed provisions Performing Non-performing Stage 3 Stage 1 Stage 2 Total Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 421 - 731 - 511 1,198 (1,198) 290 (290) 1,488 175 Restated provision for ECL as at 1 October 2018 Transfers to Stage 1 Transfers to Stage 2 Transfers to Stage 3 Business activity during the year Net remeasurement of provision for ECL Write-offs Exchange rate and other adjustments 421 234 (46) (2) 91 (321) - - 731 (218) 155 (102) 51 66 - 1 511 (16) (109) 104 (73) 193 (175) 6 - - - - - - - - - - - - - - - - 1,663 - - - 69 (62) (175) 7 Total provision for ECL on loans and credit commitments as at 30 September 2019 377 684 441 - - 1,502 Presented as: Provision for ECL on credit commitments (refer to Note 27) Provision for ECL on loans (refer to Note 12) 2 74 303 130 554 5 436 - - - - 209 1,293 Total provision for ECL on loans and credit commitments as at 30 September 2019 377 684 441 - - 1,502 3 4

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188 2019 Westpac Group Annual Report Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) Impact of changes in credit exposures on the provision for ECL • Stage 1 exposures had a net increase of $7.6 billion for the Group and $4.1 billion for the Parent Entity driven by housing and business portfolio growth, partly offset by net transfers from Stage 1 to Stage 2 and Stage 3 and repayments. Stage 1 ECL has a marginal increase driven by the exposure growth. Stage 2 credit exposures reduced by $2.1 billion for both the Group and the Parent Entity mainly driven by reduction in Stage 2 balances in personal portfolio. The Stage 2 exposure decrease has been driven by lower delinquent balances in the Australian personal portfolio. Stage 2 ECL has decreased. Stage 3 credit exposures had a net increase of $0.9 billion for both the Group and the Parent Entity driven by net transfers to Stage 3 from Stage 1 and Stage 2 with the increase driven by housing and business portfolio. The increase in Stage 3 exposures is in line with increase in 90 days past due for the home loans portfolio. Stage 3 ECL has increased in line with the increase in Stage 3 exposures. • • Sensitivity of the provision for ECL As noted in the accounting policy, the critical accounting assumptions in determining the provision for ECL are the determination of a significant increase in credit risk and the use of probability weighted forward looking macroeconomic scenarios. Staging sensitivity If 1% of the stage 1 gross exposure from loans and credit commitments (calculated on a 12 month ECL) was reflected in stage 2 (calculated on a lifetime ECL) the provision for ECL would increase by $236 million for the Group and $209 million for the Parent Entity based on applying the average provision coverage ratios by stage to the movement in the gross exposure by stage. Weighting of macroeconomic scenarios The Group uses three macro-economic scenarios which are probability weighted based on the Group’s best estimate of the relative likelihood of each scenario. The Group assigned a weighting of 62.5% to the base case scenario, 27.5% to the downside scenario and 10% to the upside scenario as at 30 September 2019. During September 2019 there was a 2.5% reduction in the weighting on the base case scenario from 65% and a corresponding 2.5% increase in the weighting on the downside scenario from 25%. The increase in weighting to the downside scenario was primarily driven by global economic uncertainties. The base case scenario utilises Westpac Economics forecasts and assumes the following one-year outlook: a GDP growth of 2.5%, a reduction in the rate of growth in commercial property prices to 1.1%, a return to positive growth of 1% in residential property prices, a 50bps reduction in the cash rate to 0.50% and an increase in the unemployment rate to 5.6%. The downside scenario represents a moderate recession. In this scenario there is negative GDP growth, declines in commercial and residential property prices and an increase in the unemployment rate. The following table shows the reported provision for ECL based on the probability weighted scenarios and what the provisions for ECL would be assuming a 100% weighting is applied to the base case scenario and to the downside scenario (with all other assumptions held constant). $m Consolidated Parent Entity Reported probability-weighted ECL 100% base case ECL 100% downside ECL 3,913 2,748 7,065 3,378 2,387 6,067

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2019 Westpac Group Annual Report 189 Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) Investment Securities – debt securities The following table reconciles the 30 September 2019 provision for ECL on debt securities based on the requirements of AASB 9. Total Investment securities - debt securities Debt securities at amortised cost Debt securities at FVOCI1 $m 1 Consolidated Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 2 - 9 - 11 Restated provision for ECL as at 1 October 2018 Stage 1 - change in the provision during the year 2 - 9 - 11 - Total provision for ECL on investment securities - debt securities as at 30 September 2019 2 9 11 Parent Entity Provision for impairment charges as at 30 September 2018 Restatement for adoption of AASB 9 - 2 - - - 2 Restated provision for ECL as at 1 October 2018 Stage 1 - change in the provision during the year 2 - - - 2 - Total provision for ECL on investment securities - debt securities as at 30 September 2019 2 - 2 As comparatives have not been restated for the adoption of AASB 9, the following table reconciles the provision for impairment charges on loans and credit commitments based on the requirements of AASB 139 for prior years. Consolidated Parent Entity 2018 $m 2018 2017 Individually assessed provisions Opening balance Provisions raised Write-backs Write-offs Interest adjustment Other adjustments 480 371 (150) (269) (11) 1 869 610 (288) (688) (16) (7) 417 341 (131) (248) (11) 7 Closing balance 422 480 375 Collectively assessed provisions Opening balance Provisions raised Write-offs Interest adjustment Other adjustments 2,639 668 (858) 179 3 2,733 699 (968) 188 (13) 2,180 610 (742) 148 42 2 Closing balance 2,631 2,639 2,238 Total provisions for impairment charges on loans and credit commitments Less provisions for credit commitments (refer to Note 27) 3,053 (239) 3,119 (253) 2,613 (206) Total provisions for impairment charges on loans 2,814 2,866 2,407 There were no provisions for impairment charges in prior years under AASB 139 for the securities included in investment securities (which were previously classified as Available-for-sale securities) or for due from subsidiaries as no impairment had been incurred. 3 4 1.Impairment on debt securities at FVOCI is recognised in the income statement with a corresponding amount in other comprehensive income (refer to Note 28). There is no reduction of the carrying value of the debt securities which remain at fair value (refer to Note 11).

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190 2019 Westpac Group Annual Report Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) The following table presents provisions for expected credit losses (for 30 September 2019) and provisions for impairment charges (for prior years) on loans and credit commitments by industry classification for the past five years: Consolidated 2019 $m 2018 $m 2017 $m 2016 $m 2015 $m % % % % % 1.Comparatives have been restated to include industry segmentation for collectively assessed provisions. Australia Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other 75 1.9 93 2.4 1483.8 55 1.4 1112.8 36 0.9 2165.5 230 5.9 175 4.5 242 6.2 109 2.8 170.4 1,890 48.3 109 2.8 62 2.0 67 2.195 2.7 86 2.6 69 2.3 59 1.974 2.11153.4 93 3.0 86 2.8 86 2.4 85 2.5 67 2.2 53 1.71313.7 1243.7 1966.4 1645.3 278 7.7 2196.6 913.0 1314.2 246 6.8 190 5.7 204 6.7 240 7.7 287 8.0 3149.4 1284.2 1555.0 2166.0 95 2.8 1374.5 1264.0 1163.2 56 1.7 1996.5 1835.9 2135.9 209 6.3 79 2.6 92 2.9 73 2.0 1424.3 130.4 150.5 9 0.2 27 0.8 1,200 39.3 1,22939.4 1,10230.6 1,04631.4 106 3.5 92 2.9 1383.8 1193.6 Total Australia1 3,50689.6 2,64486.6 2,692 86.3 3,064 85.12,827 84.8 New Zealand Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other 2 0.1 67 1.7 9 0.2 2 0.1 140.4 - - 20 0.5 5 0.1 9 0.2 150.4 3 0.1 1-173 4.4 7 0.2 3 0.12 0.12 0.11-77 2.5 93 3.0 1203.3 64 1.9 160.5 9 0.3 9 0.2 9 0.3 3 0.13 0.14 0.13 0.1 26 0.9 24 0.8 53 1.557 1.7 1-1- 150.4 140.4 27 0.9 38 1.252 1.462 1.9 8 0.2 110.3 210.6 22 0.6 9 0.3 140.4 130.4 120.4 210.7 170.5 180.5 25 0.8 5 0.2 5 0.2 7 0.2 7 0.2 2 0.13 0.14 0.12 0.1 1304.3 1304.2 1253.5 1283.8 1-- - 2 0.11-Total New Zealand1 327 8.4 329 10.8 350 11.2445 12.4 40712.2 Total other overseas 80 2.0 80 2.6 77 2.5 93 2.5 98 3.0 Total provisions for ECL/ impairment charges on loans and credit commitments 3,913 100.0 3,053 100.0 3,119100.0 3,602 100.0 3,332 100.0

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2019 Westpac Group Annual Report 191 Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) The following table shows details of loan write-offs by industry classifications for the past five years: Consolidated $m 2019 2018 2017 2016 2015 1 2 Write-offs still under enforcement activity The amount of current year write-offs which remain subject to enforcement activity was $1,093 million for the Group and $962 million for the Parent Entity. 3 4 Australia Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other (12) (4) (13) (4) (12) (1) (31) (24) (7) (62) (14) (1) (903) (10) (14) (38) (17) (40) (12) (10) (12) (36) (23) (30) (20) (40) (4) (6) (13) (12) (12)(105) (21) (20) (14) (46) (18) (17) (39) (76) (44) (104) (44) (203) (43) (70) (24) (97) (36) (18) (56) (59) (30) (56) (17) (17)(48) (24) (1)-(1) (2) (793) (898) (803) (658) (5) (17) (13) (13) Total Australia (1,098) (1,058) (1,602) (1,119)(1,110) New Zealand Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other - (2) - - - - - - - (2) - - (50) - - - - - - - (1)(3) (1)(1)(1)-- - - - - - - (1) - - - (28) (13) (2) (10) (18) - - (2) - (1)-- (1) (1)(1) (1)(4) - - - - - - - - (53) (49) (51) (55) - - (1)-Total New Zealand (54) (69) (53) (67) (110) Total other overseas (2) - (1) (3) (18) Total write-offs (1,154) (1,127) (1,656)(1,189) (1,238)

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192 2019 Westpac Group Annual Report Notes to the financial statements Note 13. Provisions for expected credit losses/impairment charges (continued) The following table shows details of recoveries of loans by industry classifications for the past five years: Consolidated $m 2019 2018 2017 2016 2015 Note 14. Other financial assets1 Consolidated 2019 Parent Entity 2019 $m 2018 2018 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Accrued interest receivable Securities sold not delivered Trade debtors Interbank lending Clearing and settlement balances Accrued fees and commissions Other 1,144 1,687 998 514 750 159 115 1,276 1,264 1,056 953 736 129 103 1,005 1,668 517 510 706 95 114 1,103 1,264 514 939 678 60 108 Total other financial assets 5,367 5,517 4,615 4,666 Recoveries Australia Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other - - 1 - 1 - 8 1 - 2 1 - 135 5 13 - - - - - - 12 14 1134 8 - 2 13 11-- 7 103 15 13 2 2 1-2 1 2 3 11 111-- - - - 13911884 78 - 5 2 1 Total Australia Total New Zealand Total other overseas 154 18 - 155149 131113 24 196 18 - - - - Total recoveries Total write-offs 172 (1,154) 179 168 137131 (1,127) (1,656)(1,189) (1,238) Net write-offs and recoveries (982) (948) (1,488)(1,052)(1,107)

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2019 Westpac Group Annual Report 193 Notes to the financial statements Note 15. Life insurance assets and life insurance liabilities Accounting policy 1 2 3 4 The Group conducts its life insurance business in Australia primarily through Westpac Life Insurance Services Limited and separate statutory funds registered under the Life Insurance Act 1995 (Life Act) and in New Zealand through Westpac Life-NZ-Limited which are separate statutory funds licensed under the Insurance (Prudential Supervision) Act 2010. Life insurance assets Life insurance assets, including investments in funds managed by the Group, are designated at FVIS. Changes in fair value are recognised in non-interest income. The determination of fair value of life insurance assets involves the same judgements as other financial assets, which are described in the critical accounting assumptions and estimates in Note 22. The Life Act places restrictions on life insurance assets, including that they can only be used: • to meet the liabilities and expenses of that statutory fund; • to acquire investments to further the business of the statutory fund; or •as a distribution, when the statutory fund has met its solvency and capital adequacy requirements. Life insurance liabilities Life insurance liabilities primarily consist of life investment contract liabilities and life insurance contract liabilities. Claims incurred in respect of life investment contracts are withdrawals of customer deposits, and are recognised as a reduction in life insurance liabilities. Life investment contract liabilities Life investment contract liabilities are designated at FVIS. Fair value is the higher of the valuation of life insurance assets linked to the life investment contract, or the minimum current surrender value (the minimum amount the Group would pay to a policyholder if their policy is voluntarily terminated before it matures or the insured event occurs). Changes in fair value are recognised in non-interest income. Life insurance contract liabilities The value of life insurance contract liabilities is calculated using the margin on services methodology (MoS), specified in the Prudential Standard LPS 340 Valuation of Policy Liabilities. MoS accounts for the associated risks and uncertainties of each type of life insurance contract written. At each reporting date, planned profit margins and an estimate of future liabilities are calculated. Profit margins are released to non-interest income over the period that life insurance is provided to policyholders (Note 4). The cost incurred in acquiring specific insurance contracts is deferred provided that these amounts are recoverable out of planned profit margins. The deferred amounts are recognised as a reduction in life insurance policy liabilities and are amortised to non-interest income over the same period as the planned profit margins. External unit holder liabilities of managed investment schemes The life insurance statutory funds include controlling interests in managed investment schemes which are consolidated. When the managed investment scheme is consolidated, the external unit holder liabilities are recognised as a liability and included in life insurance liabilities. They are designated at FVIS. Critical accounting assumptions and estimates The key factors that affect the estimation of life insurance liabilities and related assets are: •the cost of providing benefits and administering contracts; • mortality and morbidity experience, which includes policyholder benefits enhancements; • discontinuance rates, which affects the Group’s ability to recover the cost of acquiring new business over the life of the contracts; and •the discount rate of projected future cash flows. Regulation, competition, interest rates, taxes, securities market conditions and general economic conditions also affect the estimation of life insurance liabilities.

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194 2019 Westpac Group Annual Report Notes to the financial statements Note 15. Life insurance assets and life insurance liabilities (continued) Life insurance assets Consolidated $m 2019 2018 There were no life insurance assets in the Parent Entity as at 30 September 2019 (2018: nil). Life insurance liabilities Consolidated Reconciliation of movements in policy liabilities $m Life investment contracts 2019 Life insurance contracts 2019 Total 2019 2018 2018 2018 There were no life insurance liabilities in the Parent Entity as at 30 September 2019 (2018: nil). Opening balance Movements in policy liabilities reflected in the income statement Contract contributions recognised in policy liabilities Contract withdrawals recognised in policy liabilities Contract fees, expenses and tax recoveries Change in external unit holders of managed investment schemes 8,438 504 898 (1,218) (73) (343) 9,854 704 738 (1,115) (104) (1,639) (841) 12 – – – – (835) (6) – – – – 7,597 516 898 (1,218) (73) (343) 9,019 698 738 (1,115) (104) (1,639) Closing balance 8,206 8,438 (829) (841) 7,377 7,597 Investments held directly and in unit trusts Unit trusts Equities Debt securities Loans and other assets 6,764 989 1,589 25 6,545 1,223 1,622 60 Total life insurance assets 9,367 9,450

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2019 Westpac Group Annual Report 195 Notes to the financial statements Note 16. Deposits and other borrowings Accounting policy 1 Consolidated 2019 Parent Entity 2019 $m 2018 2018 2 3 4 Australia Certificates of deposit Non-interest bearing, repayable at call Other interest bearing at call Other interest bearing term 26,259 43,341 247,161 158,564 28,746 41,783 233,052 171,832 26,259 43,341 247,161 158,564 28,746 41,783 233,052 171,832 Total Australia 475,325 475,413 475,325 475,413 New Zealand Certificates of deposit Non-interest bearing, repayable at call Other interest bearing at call Other interest bearing term 1,058 6,368 22,291 31,084 1,116 5,406 21,368 29,897 – – – – – – – 3 Total New Zealand 60,801 57,787 – 3 Other overseas Certificates of deposit Non-interest bearing, repayable at call Other interest bearing at call Other interest bearing term 11,414 824 1,610 13,273 11,672 830 1,638 11,945 11,414 385 1,233 13,073 11,672 352 1,249 11,779 Total other overseas 27,121 26,085 26,105 25,052 Total deposits and other borrowings 563,247 559,285 501,430 500,468 Deposits and other borrowings are initially recognised at fair value and subsequently either measured at amortised cost using the effective interest rate method or at fair value. Deposits and other borrowings are designated at fair value if they are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative. Where they are measured at fair value, any changes in fair value (except those due to changes in credit risk) are recognised as non-interest income. The change in the fair value that is due to changes in credit risk is recognised in other comprehensive income except where it would create an accounting mismatch, in which case it is also recognised in the income statement. Refer to Note 22 for balances measured at fair value and amortised cost. Interest expense incurred is recognised in net interest income using the effective interest rate method.

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196 2019 Westpac Group Annual Report Notes to the financial statements Note 16. Deposits and other borrowings (continued) The following table shows average balances and average rates in each of the past three years for major categories of deposits: Consolidated 2019 Average balance $m 2018 Average Balance $m 2017 Average balance $m Average rate % Average rate % Average rate % Certificates of deposit and term deposits All certificates of deposit and majority of term deposits issued by foreign offices were greater than US$100,000. The maturity profile of certificates of deposit and term deposits greater than US$100,000 issued by Australian operations is set out below: Consolidated 2019 Between 6 Months and 1 Year Between 3 and 6 Months Less Than 3 Months $m Over 1 Year Total Certificates of deposit greater than US$100,00010,522542 15,15936 Term deposits greater than US$100,00082,29128,166 21,5726,276 26,259 138,305 Australia Non-interest bearing Certificates of deposit Other interest bearing at call Other interest bearing term 42,455 30,367 2.0% 237,420 1.1% 158,0122.4% 41,15639,355 31,424 2.0% 33,350 2.0% 228,328 1.2%222,1221.1% 162,254 2.5%154,114 2.7% Total Australia 468,254 463,162 448,941 Overseas Non-interest bearing Certificates of deposit Other interest bearing at call Other interest bearing term 6,815 11,8542.6% 23,6161.1% 45,520 3.0% 6,0215,527 13,008 1.9%13,151 1.4% 23,0171.2%24,1631.3% 41,942 2.8%37,8132.7% Total overseas 87,805 83,98880,654

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2019 Westpac Group Annual Report 197 Notes to the financial statements Note 17. Other financial liabilities1 Accounting policy 1 Consolidated 2019 Parent Entity 2019 $m 2018 2018 2 3 4 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentational changes to the Balance Sheet and Income Statement. Comparatives have been restated. Refer to Note 1 for further detail. Repurchase agreements Interbank placements Accrued interest payable Securities purchased not delivered Trade creditors and other accrued expenses Settlement and clearing balances Securities sold short Other 10,604 9,884 2,627 1,398 1,154 1,222 766 1,560 9,522 8,848 2,968 1,343 1,410 1,347 780 1,887 10,604 9,834 2,312 1,395 927 1,197 766 1,481 9,522 8,829 2,633 1,343 1,125 1,333 780 1,701 Total other financial liabilities 29,215 28,105 28,516 27,266 Other financial liabilities include liabilities measured at amortised cost as well as liabilities which are measured at FVIS. Financial liabilities measured at FVIS include: • trading liabilities (i.e. securities sold short); and • liabilities designated at fair value through income statement (i.e. certain repurchase agreements). Refer to Note 22 for balances measured at fair value and amortised cost. Repurchase agreements Where securities are sold subject to an agreement to repurchase at a predetermined price, they remain recognised on the balance sheet in their original category (i.e. ‘Trading securities’ or ‘Investment securities’). The cash consideration received is recognised as a liability (‘Repurchase agreements’). Repurchase agreements are designated at fair value where they are managed as part of a trading portfolio, otherwise they are measured on an amortised cost basis. Where a repurchase agreement is designated at fair value, subsequent to initial recognition, these liabilities are measured at fair value with changes in fair value (except credit risk) recognised through the income statement as they arise. The change in fair value that is attributable to credit risk is recognised in other comprehensive income except where it would create an accounting mismatch, in which case it is also recognised through the income statement.

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198 2019 Westpac Group Annual Report Notes to the financial statements Note 18. Debt issues Accounting policy In the table below, the distinction between short-term (12 months or less) and long-term (greater than 12 months) debt is based on the original maturity of the underlying security. Consolidated 2019 Parent Entity 2019 $m 2018 2018 Short-term debt: Own issuances 25,838 26,266 23,695 26,266 Total short-term debt 25,838 26,266 23,695 26,266 Long-term debt: Covered bonds Senior Securitisation Structured notes 38,037 109,340 8,190 52 35,434 103,159 7,588 149 33,160 99,819 – – 30,268 95,754 – – Total long-term debt 155,619 146,330 132,979 126,022 Total debt issues 181,457 172,596 156,674 152,288 Movement Reconciliation ($m) Opening balance Issuances Maturities, repayments, buy backs and reductions 172,596 61,484 (63,313) 168,356 59,456 (64,698) 152,288 50,375 (56,347) 144,116 57,440 (58,005) Total cash movements (1,829) (5,242) (5,972) (565) Foreign exchange translation impact Fair value adjustments Fair value hedge accounting adjustments Other (amortisation of bond issue costs, etc.) 6,713 317 3,512 148 11,022 (244) (1,313) 17 6,514 318 3,376 150 10,252 (240) (1,288) 13 Total non-cash movements 10,690 9,482 10,358 8,737 Closing balance 181,457 172,596 156,674 152,288 Debt issues are bonds, notes, commercial paper and debentures that have been issued by entities in the Group. Debt issues are initially measured at fair value and subsequently either measured at amortised cost using the effective interest rate method or at fair value. Debt issues are designated at fair value if they reduce or eliminate an accounting mismatch or contain an embedded derivative. The change in the fair value that is due to credit risk is recognised in other comprehensive income except where it would create an accounting mismatch, in which case it is also recognised in non-interest income. Refer to Note 22 for balances measured at fair value and amortised cost. Interest expense incurred is recognised within net interest income using the effective interest rate method.

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2019 Westpac Group Annual Report 199 Notes to the financial statements Note 18. Debt issues (continued) Consolidated $m 2019 2018 1 Consolidated $m 2019 2018 2017 The Group manages foreign exchange exposure from debt issuances as part of its hedging activities. Further details of the Group’s hedge accounting are in Note 20. 2 3 4 Short-term borrowings US commercial paper Maximum amount outstanding at any month end Approximate average amount outstanding Approximate weighted average interest rate on: Average amount outstanding Outstanding as at end of the year 26,879 22,502 2.8% 3.2% 28,33127,456 23,31523,025 2.0% 1.3% 2.5%1.2% Short-term debt Own issuances: US commercial paper Senior debt: AUD GBP Other 19,950 100 5,366 422 18,675 550 6,604 437 Total own issuances 25,838 26,266 Total short-term debt 25,838 26,266 Long-term debt (by currency): AUD CHF EUR GBP JPY NZD USD Other 43,532 3,480 37,464 5,545 2,538 3,197 54,490 5,373 37,571 2,953 31,734 5,290 3,226 2,294 60,336 2,926 Total long-term debt 155,619 146,330

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200 2019 Westpac Group Annual Report Notes to the financial statements Note 19. Loan capital Accounting policy Consolidated and Parent Entity $m 2019 2018 Additional Tier 1 (AT1) loan capital Westpac capital notes USD AT1 securities 7,411 1,913 7,370 1,585 Total AT1 loan capital 9,324 8,955 Tier 2 loan capital Subordinated notes Subordinated perpetual notes 11,981 521 7,822 488 Total Tier 2 loan capital 12,502 8,310 Total loan capital 21,826 17,265 Movement Reconciliation ($m) Opening balance Issuances Maturities, repayments, buy backs and reductions 17,265 4,935 (1,662) 17,666 2,342 (2,387) Total cash movements 3,273 (45) Foreign exchange translation impact Fair value hedge accounting adjustments Conversion of Convertible preference shares to ordinary shares Other (amortisation of bond issue costs, etc.) 521 748 – 19 449 (257) (566) 18 Total non-cash movements 1,288 (356) Closing balance 21,826 17,265 Loan capital are instruments issued by the Group which qualify for inclusion as regulatory capital under Australian Prudential Regulation Authority (APRA) Prudential Standards. Loan capital is initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method. Interest expense incurred is recognised in net interest income.

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2019 Westpac Group Annual Report 201 Notes to the financial statements Note 19. Loan capital (continued) Additional Tier 1 loan capital A summary of the key terms and common features of AT1 instruments are provided below1. Consolidated and Parent Entity $m Potential scheduled conversion date2 Optional redemption date3 Distribution interest rate 2019 2018 1 Common features of AT1 instruments Payment conditions Quarterly distributions on the Westpac capital notes and semi-annual interest payments on the USD AT1 securities are discretionary and will only be paid if the payment conditions are satisfied, including that the payment will not result in a breach of Westpac’s capital requirements under APRA’s prudential standards; not result in Westpac becoming, or being likely to become, insolvent; or if APRA does not object to the payment. Broadly, if for any reason a distribution or interest payment has not been paid in full on the relevant payment date, Westpac must not determine or pay any dividends on Westpac ordinary shares or undertake a discretionary buy back or capital reduction of Westpac ordinary shares, unless the unpaid amount is paid in full within 20 business days of the relevant payment date or in certain other circumstances. 2 3 1. 2. A$ unless otherwise noted. Conversion is subject to the satisfaction of the scheduled conversion conditions. If the conversion conditions are not satisfied on the relevant scheduled conversion date, conversion will not occur until the next distribution payment date on which the scheduled conversion conditions are satisfied. Westpac may elect to redeem the relevant AT1 instrument, subject to APRA’s prior written approval. On 18 December 2018, $722 million of WCN were transferred to the WCN nominated party for $100 each pursuant to the Westpac Capital Note 6 reinvestment offer. Those WCN were subsequently redeemed by Westpac. On 8 March 2019, the remaining $662 million of WCN were transferred to the WCN nominated party for $100 each. Following the transfer, those remaining WCN were redeemed by Westpac. 21 September 2027 and every fifth anniversary thereafter is a reset date. Westpac may elect to redeem on 21 September 2027 and every fifth anniversary thereafter. 3. 4. 4 5. 6. Westpac capital notes (WCN) $1,384 million WCN (90 day bank bill rate + 3.20% p.a.) 8 March 2021 8 March 20194 x (1 - Australian corporate tax rate) $1,311 million WCN2 (90 day bank bill rate + 3.05% p.a.) 23 September 2024 23 September 2022 x (1 - Australian corporate tax rate) $1,324 million WCN3 (90 day bank bill rate + 4.00% p.a.) 22 March 2023 22 March 2021 x (1 - Australian corporate tax rate) $1,702 million WCN4 (90 day bank bill rate + 4.90% p.a.) 20 December 2023 20 December 2021 x (1 - Australian corporate tax rate) $1,690 million WCN5 (90 day bank bill rate + 3.20% p.a.) 22 September 2027 22 September 2025 x (1 - Australian corporate tax rate) $1,423 million WCN6 (90 day bank bill rate + 3.70% p.a.) 31 July 2026 31 July 2024 x (1 - Australian corporate tax rate) – 1,308 1,319 1,694 1,677 1,413 1,382 1,305 1,316 1,691 1,676 – Total Westpac capital notes 7,411 7,370 USD AT1 securities US$1,250 million securities5.00% p.a. until but excludingn/a 21 September 20276 21 September 2027 (first reset date). If not redeemed, converted or written-off earlier, from, and including, each reset date5 to, but excluding, the next succeeding reset date, at a fixed rate p.a. equal to the prevailing 5-year USD mid-market swap rate plus 2.89% p.a. 1,913 1,585 Total USD AT1 securities 1,913 1,585

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202 2019 Westpac Group Annual Report Notes to the financial statements Note 19. Loan capital (continued) The AT1 instruments convert into Westpac ordinary shares in the following circumstances: • Scheduled Conversion On the scheduled conversion date, provided certain conversion conditions are satisfied, it is expected that the relevant AT1 instrument1 will be converted and holders will receive a variable number of Westpac ordinary shares calculated using the formula described in the terms of the relevant AT1 instrument, subject to a maximum conversion number. The conversion number of Westpac ordinary shares will be calculated using the face value of the relevant AT1 instrument and the Westpac ordinary share price determined over the 20 business day period prior to the scheduled conversion date, including a 1% discount. Capital Trigger Event or Non-Viability Trigger Event Westpac will be required to convert some or all AT1 instruments into a variable number of Westpac ordinary shares upon the occurrence of a capital trigger event or non-viability trigger event. No conversion conditions apply in these circumstances. A capital trigger event occurs when Westpac determines, or APRA notifies Westpac in writing that it believes, Westpac’s Common Equity Tier 1 Capital ratio is equal to or less than 5.125% (on a level 1 or level 2 basis2). A non-viability trigger event will occur when APRA notifies Westpac in writing that it believes conversion of all or some AT1 instruments (or conversion, write-off or write-down of relevant capital instruments of the Westpac Group), or public sector injection of capital (or equivalent support), in each case is necessary because without it, Westpac would become non-viable. For each AT1 instrument converted, holders will receive a variable number of Westpac ordinary shares calculated using the formula described in the terms of the relevant AT1 instrument, subject to a maximum conversion number. The conversion number of Westpac ordinary shares is calculated using the face value or outstanding principal amount of the relevant AT1 instrument and the Westpac ordinary share price determined over the 5 business day period prior to the capital trigger event date or non-viability trigger event date and includes a 1% discount. For each AT1 instrument, the maximum conversion number is set using a Westpac ordinary share price which is broadly equivalent to 20% of the Westpac ordinary share price at the time of issue. Following the occurrence of a capital trigger event or non-viability trigger event, if conversion of an AT1 instrument does not occur within five business days, holders’ rights in relation to the relevant AT1 instrument will be immediately and irrevocably terminated. Early conversion Westpac is able to elect to convert3, or may be required to convert3, AT1 instruments early in certain circumstances. The terms of conversion and the conversion conditions are broadly similar to scheduled conversion, however the share price floor in the maximum conversion number will depend on the conversion event. • • Early redemption Westpac is able to elect to redeem the relevant AT1 instrument on the optional redemption date or for certain taxation or regulatory reasons, subject to APRA’s prior written approval. 1. 2. Scheduled conversion does not apply to USD AT1 securities. Level 1 comprises Westpac Banking Corporation and subsidiaries approved by APRA as being part of a single ‘Extended Licenced Entity’ for the purposes of measuring capital adequacy. Level 2 includes all subsidiaries except those entities specifically excluded by APRA regulations for the purposes of measuring capital adequacy. Excludes USD AT1 securities. 3.

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2019 Westpac Group Annual Report 203 Notes to the financial statements Note 19. Loan capital (continued) Tier 2 loan capital A summary of the key terms and common features of Westpac’s Tier 2 instruments are provided below1: Consolidated and Parent Entity $m Optional redemption date3 Interest rate2 Maturity date 2019 2018 1 2 3 4 1. 2. 3. Excludes subordinated perpetual notes. Interest payments are made periodically as set out in the terms of the subordinated notes. Westpac may elect to redeem the relevant Tier 2 instrument on the optional redemption date or dates, subject to APRA’s prior written approval. If not redeemed on the first optional redemption date, Westpac may elect to redeem the relevant Tier 2 instrument on any interest payment date after the first optional redemption date (except for US$1,500 million subordinated notes and US$1,250 million subordinated notes), subject to APRA’s prior written approval. The subordinated notes were redeemed in full on the optional redemption date. 4. Subordinated notes A$1,000 million 90 day bank bill rate + 2.05% p.a. 14 March 2024 14 March 20194 subordinated notes CNY1,250 million4.85% p.a. until but excluding 9 February 2020.9 February 2025 9 February 2020 subordinated notes Thereafter, if not redeemed, a fixed rate per annum equal to the one-year CNH HIBOR reference rate plus 0.8345% p.a. A$350 million4.50% p.a. until but excluding 11 March 2022. Thereafter,11 March 2027 11 March 2022 subordinated notes if not redeemed, a fixed rate per annum equal to the five-year AUD semi-quarterly mid-swap reference rate plus 1.95% p.a., the sum of which will be annualised. S$325 million4.00% p.a. until but excluding 12 August 2022. 12 August 2027 12 August 2022 subordinated notes Thereafter, if not redeemed, a fixed rate per annum equal to the five-year SGD swap offer rate plus 1.54% p.a. A$175 million4.80% p.a. until but excluding 14 June 2023. Thereafter,14 June 2028 14 June 2023 subordinated notes if not redeemed, a fixed rate per annum equal to the five-year AUD semi-quarterly mid-swap reference rate plus 2.65% p.a., each of which will be annualised. US$100 millionFixed 5.00% p.a. 23 February 2046 n/a subordinated notes A$700 millionFloating 90 day bank bill rate + 3.10% p.a. 10 March 2026 10 March 2021 subordinated notes JPY20,000 millionFixed 1.16% p.a. 19 May 2026 n/a subordinated notes JPY10,200 millionFixed 1.16% p.a. 2 June 2026 n/a subordinated notes JPY10,000 millionFixed 0.76% p.a. 9 June 2026 n/a subordinated notes NZ$400 million4.6950% p.a. until but excluding 1 September 2021. 1 September 2026 1 September 2021 subordinated notes Thereafter, if not redeemed, a fixed rate per annum equal to the New Zealand 5-year swap rate on 1 September 2021 plus 2.60% p.a. JPY8,000 million 0.9225% p.a until but excluding 7 October 2021. 7 October 2026 7 October 2021 subordinated notes Thereafter, if not redeemed, a fixed rate per annum equal to the five-year JPY mid-swap rate plus 1.0005% p.a. US$1,500 million4.322% p.a. until but excluding 23 November 2026. 23 November 2031 23 November 2026 subordinated notes Thereafter, if not redeemed, a fixed rate per annum equal to the five-year USD mid-swap rate plus 2.236% p.a. JPY12,000 million 0.87% p.a. until but excluding 6 July 2022. Thereafter, if 6 July 2027 6 July 2022 subordinated notes not redeemed, a fixed rate per annum equal to the five-year JPY mid-swap rate plus 0.78% p.a. JPY13,500 million 0.868% p.a. until but excluding 6 July 2022. Thereafter,6 July 2027 6 July 2022 subordinated notes if not redeemed, a fixed rate per annum equal to the five-year JPY mid-swap rate plus 0.778% p.a. HKD600 million3.15% p.a. until but excluding 14 July 2022. Thereafter,14 July 2027 14 July 2022 subordinated notes if not redeemed, a fixed rate per annum equal to the five-year HKD mid-swap rate plus 1.34% p.a. A$350 million4.334% p.a. until but excluding 16 August 2024. 16 August 2029 16 August 2024 subordinated notes Thereafter, if not redeemed, a fixed rate per annum equal to the five-year AUD semi-quarterly mid-swap reference rate plus 1.83% p.a., each of which will be annualised. A$185 millionFixed 5.00% p.a. 24 January 2048n/a subordinated notes A$250 million90 day bank bill rate + 1.40% p.a. 16 February 2028 16 February 2023 subordinated notes A$130 millionFixed 5.00% p.a. 2 March 2048n/a subordinated notes A$725 million90 day bank bill rate + 1.80% p.a. 22 June 2028 22 June 2023 subordinated notes US$1,000 million Fixed 4.421% p.a. 24 July 2039 n/a subordinated notes US$1,250 million4.110% p.a. until but excluding 24 July 2029. Thereafter, if 24 July 2034 24 July 2029 subordinated notes not redeemed a fixed rate per annum equal to the five-year USD treasury rate plus 2% p.a. A$1,000 million Floating 90 day bank bill rate + 1.98% p.a. 27 August 2029 27 August 2024 subordinated notes – 260 362 356 182 161 697 279 142 139 373 110 2,297 166 187 114 349 185 250 130 724 1,606 1,921 991 999 252 347 330 171 114 700 242 123 120 358 97 1,922 146 165 102 347 185 250 130 722 – - – Total subordinated notes 11,981 7,822

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204 2019 Westpac Group Annual Report Notes to the financial statements Note 19. Loan capital (continued) Common features of subordinated notes Interest payments are subject to Westpac being solvent at the time of, and immediately following, the interest payment. These subordinated notes contain non-viability loss absorption requirements. Non-viability trigger event Westpac will be required to convert some or all subordinated notes into a variable number of Westpac ordinary shares upon the occurrence of a non-viability trigger event. A non-viability trigger event will occur on similar terms as described under AT1 loan capital. For each subordinated note converted, holders will receive a variable number of Westpac ordinary shares calculated using the formula described in the terms of the relevant Tier 2 instrument, subject to a maximum conversion number. The conversion number of Westpac ordinary shares will be calculated in a manner similar to that described under AT1 loan capital for a non-viability trigger event. For each Tier 2 instrument, the maximum conversion number is set using a Westpac ordinary share price which is broadly equivalent to 20% of the Westpac ordinary share price at the time of issue. Following the occurrence of a non-viability trigger event, if conversion of a Tier 2 instrument does not occur within five business days, holders’ rights in relation to the relevant Tier 2 instrument will be immediately and irrevocably terminated. Subordinated perpetual notes These notes have no final maturity but Westpac can choose to redeem them at par on any interest payment date falling on or after September 1991, subject to APRA approval and certain other conditions. Interest is cumulative and payable on the notes semi-annually at a rate of 6 month US$ LIBOR plus 0.15% p.a., subject to Westpac being solvent immediately after making the payment and having paid any dividend on any class of share capital of Westpac within the prior 12 month period. These notes qualify for transitional treatment as Tier 2 capital of Westpac under APRA’s Basel III capital adequacy framework. The rights of the noteholders and coupon holders are subordinated to the claims of all creditors (including depositors) of Westpac other than creditors whose claims against Westpac rank equally with, or junior to, these notes.

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2019 Westpac Group Annual Report 205 Notes to the financial statements Note 20. Derivative financial instruments Accounting policy 1 2 3 4 Derivative financial instruments are instruments whose values are derived from the value of an underlying asset, reference rate or index and include forwards, futures, swaps and options. The Group uses derivative financial instruments for meeting customers’ needs, our asset and liability risk management activities (ALM), and undertaking market making and positioning activities. Trading derivatives Derivatives which are used in our ALM activities but are not designated into a hedge accounting relationship are considered economic hedges, and are adjusted for cash earnings purposes due to the accounting mismatch between the fair value of the derivatives and the accounting treatment of the underlying exposure (refer to Note 2 for further details). These derivatives, along with derivatives used for meeting customers’ needs and undertaking market making and positioning activities, are measured at FVIS and are disclosed as trading derivatives. Hedging derivatives Hedging derivatives are those which are used in our ALM activities and have also been designated into one of three hedge accounting relationships: fair value hedge; cash flow hedge; or hedge of a net investment in a foreign operation. These derivatives are measured at fair value. These hedge designations and the associated accounting treatment are detailed below. For more details regarding the Group’s asset and liability risk management activities, refer to Note 21. Fair value hedges Fair value hedges are used to hedge the exposure to changes in the fair value of an asset or liability. Changes in the fair value of derivatives and the hedged asset or liability in fair value hedges are recognised in interest income. The carrying value of the hedged asset or liability is adjusted for the changes in fair value related to the hedged risk. If a hedge is discontinued, any fair value adjustments to the carrying value of the asset or liability are amortised to net interest income over the period to maturity. If the asset or liability is sold, any unamortised adjustment is immediately recognised in net interest income. Cash flow hedges Cash flow hedges are used to hedge the exposure to variability of cash flows attributable to an asset, liability or future forecast transaction. For effective hedges, changes in the fair value of derivatives are recognised in the cash flow hedge reserve through other comprehensive income and subsequently recognised in interest income when the cash flows attributable to the asset or liability that was hedged impact the income statement. For hedges with some ineffectiveness, the changes in the fair value of the derivatives relating to the ineffective portion are immediately recognised in interest income. If a hedge is discontinued, any cumulative gain or loss remains in other comprehensive income. It is amortised to net interest income over the period which the asset or liability that was hedged also impacts the income statement. If a hedge of a forecast transaction is no longer expected to occur, any cumulative gain or loss in other comprehensive income is immediately recognised in net interest income. Net investment hedges Net investment hedges are used to hedge foreign exchange risks arising from a net investment of a foreign operation. For effective hedges, changes in the fair value of derivatives are recognised in the foreign currency translation reserve through other comprehensive income. For hedges with some ineffectiveness, the changes in the fair value of the derivatives relating to the ineffective portion are immediately recognised in non-interest income. If a foreign operation is disposed of, any cumulative gain or loss in other comprehensive income is immediately recognised in non-interest income.

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206 2019 Westpac Group Annual Report Notes to the financial statements Note 20. Derivative financial instruments (continued) Total derivatives The carrying values of derivative instruments are set out in the tables below: Total derivatives carrying value Consolidated 2019 $m Trading Hedging Assets Liabilities Assets Liabilities Assets Liabilities Total derivatives carrying value Consolidated 2018 $m Trading Hedging Assets Liabilities Assets Liabilities Assets Liabilities Interest rate contracts1 Forward rate agreements Swap agreements Options 11 15,626 165 (12) (15,580) (167) – 890 – – (5,301) – 11 16,516 165 (12) (20,881) (167) Total interest rate contracts 15,802 (15,759) 890 (5,301) 16,692 (21,060) Foreign exchange contracts Spot and forward contracts Cross currency swap agreements (principal and interest) Options 6,741 (6,418) – (32) 6,741 (6,450) 6,561 120 (9,019) (184) 2,365 – (182) – 8,926 120 (9,201) (184) Total foreign exchange contracts 13,422 (15,621) 2,365 (214) 15,787 (15,835) Credit default swaps Credit protection purchased Credit protection sold 3 99 (101) – – – – – 3 99 (101) – Total credit default swaps 102 (101) – – 102 (101) Commodity contracts Equities 246 1 (300) – – – – – 246 1 (300) – Total of gross derivatives 29,573 (31,781) 3,255 (5,515) 32,828 (37,296) Impact of netting arrangements (8,222) 8,912 (505) 3,977 (8,727) 12,889 Total of net derivatives 21,351 (22,869) 2,750 (1,538) 24,101 (24,407) 1.The fair value of futures contracts are settled daily with the exchange, and therefore have been excluded from this table. Interest rate contracts1 Forward rate agreements Swap agreements Options 35 (36) ––35 (36) 38,383 (37,051)4,073 (7,568) 42,456(44,619) 294 (303) ––294 (303) Total interest rate contracts 38,712 (37,390) 4,073 (7,568) 42,785(44,958) Foreign exchange contracts Spot and forward contracts Cross currency swap agreements (principal and interest) Options 6,857 (6,393) 181(3) 7,038 (6,396) 8,934 (12,478) 2,172 (69)11,106(12,547) 200 (111)––200 (111) Total foreign exchange contracts 15,991(18,982)2,353 (72) 18,344 (19,054) Credit default swaps Credit protection purchased Credit protection sold –(88)–––(88) 83 –––83 – Total credit default swaps 83 (88)––83 (88) Commodity contracts Equities 251(187) ––251(187) 1(1)––1(1) Total of gross derivatives 55,038(56,648) 6,426(7,640) 61,464 (64,288) Impact of netting arrangements (27,968) 28,703 (3,637) 6,489 (31,605) 35,192 Total of net derivatives 27,070 (27,945) 2,789 (1,151)29,859 (29,096)

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2019 Westpac Group Annual Report 207 Notes to the financial statements Note 20. Derivative financial instruments (continued) Total derivatives carrying value Parent Entity 2019 $m Trading Hedging Assets Liabilities Assets Liabilities Assets Liabilities 1 Total derivatives carrying value Parent Entity 2018 $m Trading Hedging Assets Liabilities Assets Liabilities Assets Liabilities Interest rate contracts1 Forward rate agreements Swap agreements Options 11 15,659 165 (12) (15,751) (167) – 841 – – (5,012) – 11 16,500 165 (12) (20,763) (167) Total interest rate contracts 15,835 (15,930) 841 (5,012) 16,676 (20,942) Foreign exchange contracts Spot and forward contracts Cross currency swap agreements (principal and interest) Options 6,737 (6,417) – (31) 6,737 (6,448) 6,562 120 (9,019) (184) 1,845 – (124) – 8,407 120 (9,143) (184) Total foreign exchange contracts 13,419 (15,620) 1,845 (155) 15,264 (15,775) Credit default swaps Credit protection purchased Credit protection sold 2 3 99 (101) – – – – – 3 99 (101) – Total credit default swaps 102 (101) – – 102 (101) Commodity contracts Equities 246 1 (300) – – – – – 246 1 (300) – Total of gross derivatives 29,603 (31,951) 2,686 (5,167) 32,289 (37,118) Impact of netting arrangements (8,222) 8,912 (505) 3,977 (8,727) 12,889 3 Total of net derivatives 21,381 (23,039) 2,181 (1,190) 23,562 (24,229) 4 1.The fair value of futures contracts are settled daily with the exchange, and therefore have been excluded from this table. Interest rate contracts1 Forward rate agreements Swap agreements Options 35 (36) ––35 (36) 38,489 (37,438) 3,955 (7,018)42,444(44,456) 294 (303) ––294 (303) Total interest rate contracts 38,818 (37,777) 3,955 (7,018) 42,773 (44,795) Foreign exchange contracts Spot and forward contracts Cross currency swap agreements (principal and interest) Options 6,987 (6,389) 46 (3) 7,033 (6,392) 8,934 (12,479) 1,613(6) 10,547 (12,485) 200 (111)––200 (111) Total foreign exchange contracts 16,121(18,979) 1,659 (9)17,780 (18,988) Credit default swaps Credit protection purchased Credit protection sold –(88)–––(88) 83 –––83 – Total credit default swaps 83 (88)––83 (88) Commodity contracts Equities 251(187) ––251(187) 1(1)––1(1) Total of gross derivatives 55,274(57,032) 5,614 (7,027) 60,888(64,059) Impact of netting arrangements (27,968) 28,703 (3,637) 6,489 (31,605) 35,192 Total of net derivatives 27,306 (28,329)1,977 (538) 29,283(28,867)

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208 2019 Westpac Group Annual Report Notes to the financial statements Note 20. Derivative financial instruments (continued) Hedge accounting The Group designates derivatives into hedge accounting relationships in order to manage the volatility in earnings and capital that would otherwise arise from interest rate risk and foreign exchange risk that may result from differences in the accounting treatment of derivatives and underlying exposures. These hedge accounting relationships and the risks they are used to hedge are described below. The Group enters into one-to-one hedge relationships to manage specific exposures where the terms of the hedged item significantly match the terms of the hedging instrument. The Group also uses dynamic hedge accounting where the hedged items are part of a portfolio of assets and/or liabilities that frequently change. In this hedging strategy, the exposure being hedged and the hedging instruments may change frequently rather than there being a one-to-one hedge accounting relationship for a specific exposure. Fair value hedges Interest rate risk The Group hedges its interest rate risk to reduce exposure to changes in fair value due to interest rate fluctuations over the hedging period. Interest rate risk arising from fixed rate debt issuances and fixed rate bonds classified as investment securities at FVOCI is hedged with single currency fixed to floating interest rate derivatives. The Group also hedges its benchmark interest rate risk from fixed rate foreign currency denominated debt issuances using cross currency swaps. In applying fair value hedge accounting the Group primarily uses one-to-one hedge accounting to manage specific exposures. The Group also uses a dynamic hedge accounting strategy for fair value portfolio hedge accounting of some fixed rate mortgages, primarily in New Zealand to reduce exposure to changes in fair value due to interest rate fluctuations over the hedging period. These fixed rate mortgages are allocated to time buckets based on their expected repricing dates and the fixed-to-floating interest rate derivatives are designated accordingly to the capacity in the relevant time buckets. The Group hedges the benchmark interest rate which generally represents the most significant component of the changes in fair value. The benchmark interest rate is a component of interest rate risk that is observable in the relevant financial markets, for example, BBSW for AUD interest rates, LIBOR for USD interest rates and BKBM for NZD interest rates. Ineffectiveness generally arises from timing differences on repricing between the hedged item and the derivative. For the portfolio hedge accounting ineffectiveness also arises from prepayment risk (i.e. the difference between actual and expected prepayment of loans). In order to manage the ineffectiveness from early repayments and accommodate new originations the portfolio hedges are de-designated and redesignated periodically. Cash flow hedges Interest rate risk The Group’s exposure to the volatility of interest cash flows from customer deposits and loans is hedged with interest rate derivatives using a dynamic hedge accounting strategy called macro cash flow hedges. Customer deposits and loans are allocated to time buckets based on their expected repricing dates. The interest rate derivatives are designated accordingly to the gross asset or gross liability positions for the relevant time buckets. The Group hedges the benchmark interest rate which generally represents the most significant component of the changes in fair value. The benchmark interest rate is a component of interest rate risk that is observable in the relevant financial markets, for example, BBSW for AUD interest rates, LIBOR for USD interest rates and BKBM for NZD interest rates. Ineffectiveness arises from timing differences on repricing between the hedged item and the interest rate derivative. Ineffectiveness also arises if the notional values of the interest rate derivatives exceed the capacity for the relevant time buckets. The hedge accounting relationship is reviewed on a monthly basis and the hedging relationships are de-designated and redesignated if necessary. Foreign exchange risk The Group’s exposure to foreign currency principal and credit margin cash flows from fixed rate foreign currency debt issuances is hedged through the use of cross currency derivatives in a one-to-one hedging relationship to manage the changes between the foreign currency and AUD. In addition, for floating rate foreign currency debt issuances, the Group hedges from foreign floating to primarily AUD or NZD floating interest rates. These exposures represent the most significant components of fair value. Ineffectiveness may arise from basis risk or timing differences on repricing between the hedged item and the cross currency derivative.

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2019 Westpac Group Annual Report 209 Notes to the financial statements Note 20. Derivative financial instruments (continued) Net investment hedges Foreign exchange risk Structural foreign exchange risk results from Westpac’s capital deployed in offshore branches and subsidiaries, where it is denominated in currencies other than Australian dollars. As exchange rates move, the Australian dollar equivalent of offshore capital is subject to change that could introduce significant variability to the Bank’s reported financial results and capital ratios. The Group uses foreign exchange forward contracts when hedging the currency translation risk arising from net investments in foreign operations. The Group currently applies hedge accounting to its net investment in New Zealand operations which is the most material offshore operation and therefore the hedged risk is the movement of the NZD against the AUD. Ineffectiveness only arises if the notional values of the foreign exchange forward contracts exceed the net investment in New Zealand operations. 1 Economic hedges As part of the Group’s ALM activities, economic hedges are entered into to hedge New Zealand future earnings and long term funding transactions. These hedges do not qualify for hedge accounting and the impact on profit and loss of these hedges is treated as a cash earnings adjustment. This is due to the accounting mismatch between the fair value accounting of the derivatives used in the economic hedges when compared to the recognition of the New Zealand future earnings as they are earned and the amortised cost accounting of the borrowing respectively. Refer to Note 2 for further details. Hedging instruments The following tables show the carrying value of hedging instruments and a maturity analysis of the notional amounts of the hedging instruments in one-to-one hedge relationships categorised by the types of hedge relationships and the hedged risk. Notional amounts Over Consolidated 2019 Carrying value Within 1 year 1 year to 5 years Over 5 years $m Hedging instrument Hedged risk Total Assets Liabilities One-to-one hedge relationships Fair value hedges Interest rate swap Cross currency swap Cross currency swap Forward contracts Interest rate risk Interest rate risk Foreign exchange risk Foreign exchange risk 16,322 5,632 5,632 8,152 61,707 12,870 15,386 – 48,271 1,708 1,708 – 126,300 20,210 22,726 8,152 2,548 584 1,588 181 (5,672) (69) – (3) Cash flow hedges Net investment hedges Total one-to-one hedge relationships 35,738 89,963 51,687 177,388 4,901 (5,744) Macro hedge relationships Portfolio fair value hedges Macro cash flow hedges Interest rate swap Interest rate swap Interest rate risk Interest rate risk n/a n/a n/a n/a n/a n/a – 1,525 (194) (1,702) 18,813 176,828 Total macro hedge relationships n/a n/a n/a 195,641 1,525 (1,896) Total of gross hedging derivatives n/a n/a n/a 6,426 (7,640) 373,029 Impact of netting arrangements n/a n/a n/a n/a (3,637) 6,489 Total of net hedging derivatives n/a n/a n/a n/a 2,789 (1,151) 2 Notional amounts Over 1 Parent 2019 Carrying value Within 1 year year to 5 years Over 5 years $m Hedging instrument Hedged risk Total Assets Liabilities One-to-one hedge relationships Fair value hedges Interest rate swap Cross currency swap Cross currency swap Forward contracts Interest rate risk Interest rate risk Foreign exchange risk Foreign exchange risk 14,323 4,473 4,473 2,315 59,842 7,185 7,185 – 47,881 1,384 1,384 – 122,046 13,042 13,042 2,315 2,535 441 1,172 46 (5,475) – (6) (3) Cash flow hedges Net investment hedges 3 Total one-to-one hedge relationships 25,584 74,212 50,649 150,445 4,194 (5,484) Macro hedge relationships Portfolio fair value hedges Macro cash flow hedges Interest rate swap Interest rate swap Interest rate risk Interest rate risk n/a n/a n/a n/a n/a n/a – 166,978 – 1,420 – (1,543) Total macro hedge relationships n/a n/a n/a 166,978 1,420 (1,543) Total of gross hedging derivatives n/a n/a n/a 317,423 5,614 (7,027) Impact of netting arrangements n/a n/a n/a n/a (3,637) 6,489 Total of net hedging derivatives n/a n/a n/a n/a 1,977 (538) 4

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210 2019 Westpac Group Annual Report Notes to the financial statements Note 20. Derivative financial instruments (continued) The following tables show the weighted average exchange rate related to significant hedging instruments in one-to-one hedge relationships. Consolidated 2019 $m Currency/ Currency pair Weighted average rate Hedging instrument Hedged risk Cash flow hedges Cross currency swap Foreign exchange risk EUR:AUD EUR:NZD HKD:NZD 0.6929 0.6079 4.9670 Net investment hedges Forward contracts Foreign exchange risk NZD:AUD 1.0545 Parent Entity 2019 $m Currency/ Currency pair Weighted average rate Hedging instrument Hedged risk Cash flow hedges Cross currency swap Foreign exchange risk EUR:AUD JPY:AUD CNH:AUD 0.6929 81.4507 4.9328 Net investment hedges Forward contracts Foreign exchange risk NZD:AUD 1.0546 Impact of hedge accounting on the balance sheet and reserves The following tables show the carrying amount of hedged items in a fair value hedge relationship and the component of the carrying amount related to accumulated hedge accounting adjustments. Accumulated fair value hedge adjustment included in carrying amount Consolidated 2019 $m Carrying amount of hedged item Interest rate risk Investment securities Loans Debt issues and loan capital 53,273 19,235 (100,909) 2,815 133 (2,818) Accumulated fair value hedge adjustment included in carrying amount Parent Entity 2019 $m Carrying amount of hedged item Interest rate risk Investment securities Loans Debt issues and loan capital 49,132 421 (93,296) 2,704 5 (2,661) There were no accumulated fair value hedge adjustments included in the above carrying amounts relating to hedged items that have ceased to be adjusted for hedging gains and losses. The pre-tax impact of cash flow and net investment hedges on reserves is detailed below: Consolidated 2019 $m Interest rate risk Foreign exchange risk Total Cash flow hedge reserve Balance at beginning of the year Net gains/(losses) from changes in fair value Transferred to interest income (87) (158) 146 (89) (45) 51 (176) (203) 197 Balance at end of year (99) (83) (182) Parent Entity 2019 $m Interest rate risk Foreign exchange risk Total Cash flow hedge reserve Balance at beginning of the year Net gains/(losses) from changes in fair value Transferred to interest income (42) (130) 102 (57) 9 26 (99) (121) 128 Balance at end of year (70) (22) (92) There were no balances remaining in the cash flow hedge reserve relating to hedge relationships for which hedge accounting is no longer applied. As disclosed in Note 28, the net losses from changes in the fair value of net investment hedges were $129 million for the Group and $52 million for the Parent Entity. Included in the foreign currency translation reserve is a loss of $210 million for the Group and $214 million for the Parent Entity relating to discontinued hedges of our net investment in USD operations. This would only be transferred to the income statement on disposal of the related USD operations.

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2019 Westpac Group Annual Report 211 Notes to the financial statements Note 20. Derivative financial instruments (continued) Hedge effectiveness Hedge effectiveness is tested prospectively at inception and during the lifetime of hedge relationships. For-one-to one hedge relationships this testing uses a qualitative assessment of matched terms where the critical terms of the derivatives used as the hedging instrument match the terms of the hedged item. In addition, a quantitative effectiveness test is performed for all hedges which could include regression analysis, dollar offset and/or sensitivity analysis. Retrospective testing is also performed to determine whether the hedge relationship remains highly effective so that hedge accounting can continue to be applied and also to determine any ineffectiveness. These tests are performed using regression analysis and the dollar offset method. The following tables provide information regarding the determination of hedge effectiveness: Change in 1 fair value of hedging instrument used for calculating ineffectiveness Change in value of the hedged item used for calculating ineffectiveness Hedge ineffectiveness recognised in non-interest income Hedge ineffectiveness recognised in interest income Consolidated 2019 $m Hedging instrument Hedged risk Fair value hedges Interest rate swap Cross currency swap Interest rate swap Cross currency swap Forward contracts Interest rate risk Interest rate risk Interest rate risk Foreign exchange risk Foreign exchange risk 1,532 192 (6) 6 (129) (1,512) (190) 12 (6) 129 20 2 6 – n/a n/a n/a n/a n/a – Cash flow hedges Net investment hedges Total 1,595 (1,567) 28 – Change in fair value of hedging instrument used for calculating ineffectiveness Change in value of the hedged item used for calculating ineffectiveness Hedge ineffectiveness recognised in non-interest income Hedge ineffectiveness recognised in interest income Parent Entity 2019 $m Hedging instrument Hedged risk Interest rate swap Cross currency swap Interest rate swap Cross currency swap Forward contracts Interest rate risk Interest rate risk Interest rate risk Foreign exchange risk Foreign exchange risk 1,684 56 (21) 35 (52) (1,664) (57) 28 (35) 52 20 (1) 7 – n/a n/a n/a n/a n/a – Fair value hedges Cash flow hedges Net investment hedges Total 1,702 (1,676) 26 – Comparative year information under prior AASB 7 disclosure requirements Ineffectiveness of hedge relationships 2018 Fair value hedges $m Consolidated Parent Entity 2 Change in fair value hedging instruments Change in fair value hedge items attributed to hedged risk (1,203) 1,192 (1,208) 1,197 Ineffectiveness in interest income (11) (11) Cash flow hedges $m 2018 Consolidated Parent Entity Cash flow hedge ineffectiveness (7) (11) 3 Net investment hedges For both the Group and Parent Entity, there was no ineffectiveness for net investment hedges recognised in 2018. Hedging instruments Gross cash inflows and outflows on derivatives designated in cash flow hedges are, as a proportion of total gross cash flows, expected to occur in the following periods: Less than 1 month 1 month to 3 months 3 months to 1 year 1 year to 2 years 2 years to 3 years 3 years to 4 years 4 years to 5 years over 5 years 2018 Cash inflows Cash outflows 0.3% 0.5% 2.1% 1.8% 21.8% 22.4% 23.8% 23.0% 18.9% 19.5% 19.1% 18.0% 4.7% 4.9% 9.3% 9.9% 4

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212 2019 Westpac Group Annual Report Notes to the financial statements Note 21. Financial risk Financial instruments are fundamental to the Group’s business of providing banking and financial services. The associated financial risks (including credit risk, funding and liquidity risk and market risk) are a significant proportion of the total risks faced by the Group. This note details the financial risk management policies, practices and quantitative information of the Group’s principal financial risk exposures. Note number Principal financial risks Note name Overview Risk management frameworks 21.1 Credit risk The risk of financial loss where a customer or counterparty fails to meet their financial obligations. Credit risk ratings system Credit risk mitigation, collateral and other credit enhancements Credit risk concentrations Credit quality of financial assets Non-performing loans and credit commitments Collateral held 21.2.1 21.2.2 21.2.3 21.2.4 21.2.5 21.2.6 Liquidity modelling Sources of funding Assets pledged as collateral Contractual maturity of financial liabilities Expected maturity 21.3.1 21.3.2 21.3.3 21.3.4 21.3.5 Funding and liquidity risk The risk that Westpac cannot meet its payment obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets. Market risk The risk of an adverse impact on earnings resulting from changes in market factors, such as foreign exchange rates, interest rates, commodity prices and equity price. Value-at-Risk (VaR) Traded market risk Non-traded market risk 21.4.1 21.4.2 21.4.3 21.1 Risk management frameworks The Board is responsible for approving the Westpac Group Risk Management Framework, Westpac Group Risk Management Strategy and Westpac Group Risk Appetite Statement and for monitoring the effectiveness of risk management by the Westpac Group. The Board has delegated to the Board Risk and Compliance Committee (BRCC) responsibility to: • review and recommend the Westpac Group Risk Management Framework, Westpac Group Risk Management Strategy and Westpac Group Risk Appetite Statement to the Board for approval; review and monitor the risk profile and controls of the Group consistent with Westpac Group’s Risk Appetite Statement; approve frameworks, policies and processes for managing risk (consistent with the Westpac Group Risk Management Strategy and Westpac Group Risk Appetite Statement); and review and, where appropriate, approve risks beyond the approval discretion provided to management. • • •

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2019 Westpac Group Annual Report 213 Notes to the financial statements Note 21. Financial risk (continued) For each of its primary financial risks, the Group maintains risk management frameworks and a number of supporting policies that define roles and responsibilities, acceptable practices, limits and key controls: Risk Risk management framework and controls Credit risk • The Credit Risk Management Framework describes the principles, methodologies, systems, roles and responsibilities, reports and key controls for managing credit risk. The BRCC, Westpac Group Executive Risk Committee (RISKCO) and Westpac Group Credit Risk Committee (CREDCO) monitor the risk profile, performance and management of the Group’s credit portfolio and the development and review of key credit risk policies. The Credit Risk Rating System Policy describes the credit risk rating system philosophy, design, key features and uses of rating outcomes. All models materially impacting the risk rating process are periodically reviewed in accordance with Westpac’s model risk policies. An annual review is performed of the Credit Risk Rating System by the BRCC and CREDCO. Specific credit risk estimates (including probability of default (PD), loss given default (LGD) and exposure at default (EAD) levels) are overseen, reviewed annually and supported by the Credit Risk Estimates Committee (a subcommittee of CREDCO) prior to approval under delegated authority from the Chief Risk Officer. In determining the provision for expected credit losses, the macroeconomic variables and the probability weightings of the forward looking scenarios as well as any adjustments made to the modelled outcomes are subject to the approval of the Group Chief Financial Officer and the Chief Risk Officer with oversight from the Board of Directors (and its Committees). Policies for the delegation of credit approval authorities and formal limits for the extension of credit are established throughout the Group. Credit manuals are established throughout the Group including policies governing the origination, evaluation, approval, documentation, settlement and ongoing management of credit risks. Sector policies guide credit extension where industry-specific guidelines are considered necessary (e.g. acceptable financial ratios or permitted collateral). The Related Entity Risk Management Framework and supporting policies govern credit exposures to related entities, to minimise the spread of credit risk between Group entities and to comply with prudential requirements prescribed by APRA. • 1 • • • • • • • • • Funding and liquidity risk • Funding and liquidity risk is measured and managed in accordance with the policies and processes defined in the Board-approved Liquidity Risk Management Framework which is part of the Westpac Board-approved Risk Management Strategy. Responsibility for managing Westpac’s liquidity and funding positions in accordance with Westpac’s Liquidity Risk Management Framework is delegated to Treasury, under the oversight of Group ALCO and Group Liquidity Risk. Westpac’s Liquidity Risk Management Framework sets out Westpac’s funding and liquidity risk appetite, roles and responsibilities of key people managing funding and liquidity risk within Westpac, risk reporting and control processes and limits and targets used to manage Westpac’s balance sheet. Treasury undertakes an annual funding review that outlines Westpac’s balance sheet funding strategy over a three year period. This review encompasses trends in global markets, peer analysis, wholesale funding capacity, expected funding requirements and a funding risk analysis. This strategy is continuously reviewed to take account of changing market conditions, investor sentiment and estimations of asset and liability growth rates. Westpac monitors the composition and stability of its funding so that it remains within Westpac’s funding risk appetite. This includes compliance with both the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). Westpac holds a portfolio of liquid assets for several purposes, including as a buffer against unforeseen funding requirements. The level of liquid assets held takes into account the liquidity requirements of Westpac’s balance sheet under normal and stress conditions. Treasury also maintains a contingent funding plan that outlines the steps that should be taken by Westpac in the event of an emerging ‘funding crisis’. The plan is aligned with Westpac’s broader Liquidity Crisis Management Policy which is approved annually by the Board. Daily liquidity risk reports are reviewed by Treasury and the Group’s Liquidity Risk teams. Liquidity reports are presented to ALCO monthly and to the BRCC quarterly. • • 2 • • • 3 • • 4

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214 2019 Westpac Group Annual Report Notes to the financial statements Note 21. Financial risk (continued) Risk Risk management framework and controls Market risk • The Market Risk Framework describes the Group’s approach to managing traded and non-traded market risk. Traded market risk includes interest rate, foreign exchange, commodity, equity price, credit spread and volatility risks. Non-traded market risk includes interest rate and credit spread risks. Market risk is managed using VaR limits, Net interest income at risk (NaR) and structural risk limits (including credit spread and interest rate basis point value limits) as well as scenario analysis and stress testing. The BRCC approves the risk appetite for traded and non-traded risks through the use of VaR, NaR and specific structural risk limits. Westpac Group Market Risk Committee (MARCO) has approved separate VaR sub-limits for the trading activities of Financial Markets and Treasury and for Asset and Liability Management (ALM) activities. Market risk limits are assigned to business management based upon the Bank’s risk appetite and business strategies in addition to the consideration of market liquidity and concentration. Market risk positions are managed by the trading desks and ALM unit consistent with their delegated authorities and the nature and scale of the market risks involved. Daily monitoring of current exposure and limit utilisation is conducted independently by the Market Risk unit, which monitors market risk exposures against VaR and structural risk limits. Daily VaR position reports are produced by risk type, by product lines and by geographic region. Quarterly reports are produced for the MARCO, RISKCO and the BRCC. Daily stress testing and backtesting of VaR results are performed to support model integrity and to analyse extreme or unexpected movements. A review of both the potential profit and loss outcomes is also undertaken to monitor any skew created by the historical data. MARCO has ratified an approved escalation framework. The BRCC has approved a framework for profit or loss escalation which considers both single day and 20 day cumulative results. Treasury’s ALM unit is responsible for managing the non-traded interest rate risk including risk mitigation through hedging using derivatives. This is overseen by the Market Risk unit and reviewed by MARCO, RISKCO and BRCC. • • • • • • • • • • 21.2Credit Risk 21.2.1Credit risk ratings system The principal objective of the credit risk rating system is to reliably assess the credit risk to which the Group is exposed. The Group has two main approaches to this assessment. Transaction-managed customers Transaction managed customers are generally customers with business lending exposures. They are individually assigned a Customer Risk Grade (CRG), corresponding to their expected PD. Each facility is assigned an LGD. The Group’s risk rating system has a tiered scale of risk grades for both non-defaulted customers and defaulted customers. Non-defaulted CRGs are mapped to Moody’s and S&P Global Ratings (S&P) external senior ranking unsecured ratings. The table below shows Westpac’s high level CRGs for transaction-managed portfolios mapped to the Group’s credit quality disclosure categories and to their corresponding external rating.

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2019 Westpac Group Annual Report 215 Notes to the financial statements Note 21. Financial risk (continued) Transaction-managed Financial statement disclosure Westpac CRG Moody’s Rating S&P Rating Strong A B C D Aaa – Aa3 A1 – A3 Baa1 – Baa3 Ba1 – B1 AAA – AA– A+ – A– BBB+ – BBB– BB+ – B+ Westpac Rating Watchlist Special Mention Good/satisfactory 1 Weak E F G H Weak/default/non-performing Substandard/Default Default Program-managed portfolio The program-managed portfolio generally includes retail products including mortgages, personal lending (including credit cards) as well as SME lending. These customers are grouped into pools of similar risk. Pools are created by analysing similar risk characteristics that have historically predicted that an account is likely to go into default. Customers grouped according to these predictive characteristics are assigned a PD and LGD relative to their pool. The credit quality of these pools is based on a combination of behavioural factors, delinquency trends, PD estimates and loan to valuation ratio (housing loans only). 21.2.2 Credit risk mitigation, collateral and other credit enhancements Westpac uses a variety of techniques to reduce the credit risk arising from its lending activities. This includes the Group establishing that it has direct, irrevocable and unconditional recourse to collateral and other credit enhancements through obtaining legally enforceable documentation. Collateral The table below describes the nature of collateral or security held for each relevant class of financial asset: Loans – housing and personal1 Housing loans are secured by a mortgage over property and additional security may take the form of guarantees and deposits. Personal lending (including credit cards and overdrafts) is predominantly unsecured. Where security is taken, it is restricted to eligible motor vehicles, caravans, campers, motor homes and boats. Personal lending also includes margin lending which is secured primarily by shares or managed funds. Trading securities, financial assets measured at FVIS and derivatives These exposures are carried at fair value which reflects the credit risk. For trading securities, no collateral is sought directly from the issuer or counterparty; however this may be implicit in the terms of the instrument (such as an asset-backed security). The terms of debt securities may include collateralisation. For derivatives, master netting agreements are typically used to enable the effects of derivative assets and liabilities with the same counterparty to be offset when measuring these exposures. Additionally, collateralisation agreements are also typically entered into with major institutional counterparties to avoid the potential build-up of excessive mark-to-market positions. Derivative transactions are increasingly being cleared through central clearers. 2 3 4 1.This includes collateral held in relation to associated credit commitments. Loans – business1Business loans may be secured, partially secured or unsecured. Security is typically taken by way of a mortgage over property and/or a general security agreement over business assets or other assets. Other security such as guarantees, standby letters of credit or derivative protection may also be taken as collateral, if appropriate.

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216 2019 Westpac Group Annual Report Notes to the financial statements Note 21. Financial risk (continued) Management of risk mitigation The Group mitigates credit risk through controls covering: Collateral and valuation management The estimated realisable value of collateral held in support of loans is based on a combination of: • formal valuations currently held for such collateral; and • management’s assessment of the estimated realisable value of all collateral held. This analysis also takes into consideration any other relevant knowledge available to management at the time. Updated valuations are obtained when appropriate. The Group revalues collateral related to financial markets positions on a daily basis and has formal processes in place to promptly call for collateral top-ups, if required. These processes include margining for non-centrally cleared customer derivatives as regulated by Australian Prudential Standard CPS226. The collateralisation arrangements are documented via the Credit Support Annex of the International Swaps and Derivatives Association (ISDA) dealing agreements and Global Master Repurchase Agreements (GMRA) for repurchase transactions. In relation to financial markets positions, Westpac only recognises collateral which is: • cash, primarily in Australian dollars (AUD), New Zealand dollars (NZD), US dollars (USD), Canadian dollars (CAD), British pounds (GBP) or European Union euro (EUR); bonds issued by Australian Commonwealth, State and Territory governments or their Public Sector Enterprises, provided these attract a zero risk-weighting under Australian Prudential Standard (APS) 112; securities issued by other sovereign governments and supranationals as approved by an authorised credit officer; protection bought via credit-linked notes (provided the proceeds are invested in cash or other eligible collateral). • • • Offsetting Creditworthy customers domiciled in Australia and New Zealand may enter into formal agreements with the Group, permitting the Group to set-off gross credit and debit balances in their nominated accounts. Cross-border set-offs are not permitted. Close-out netting is undertaken with counterparties with whom the Group has entered into a legally enforceable master netting agreement for their off-balance sheet financial market transactions in the event of default. Further details of offsetting are provided in Note 23. Central clearingThe Group executes derivative transactions through central clearing counterparties. Central clearing counterparties mitigate risk through stringent membership requirements, the collection of margin against all trades placed, the default fund, and an explicitly defined order of priority of payments in the event of default. Other credit The Group only recognises guarantees, standby letters of credit, or credit derivative enhancementsprotection from the following entities (provided they are not related to the entity with which Westpac has a credit exposure): •Sovereign; • Australia and New Zealand public sector; •ADIs and overseas banks with a minimum risk grade equivalent of A3 / A–; and •Others with a minimum risk grade equivalent of A3 / A–. Credit Portfolio Management (CPM) manages the Group’s corporate, sovereign and bank credit portfolios through monitoring the exposure and any offsetting hedge positions. CPM purchases credit protection from entities meeting the criteria above and sells credit protection to diversify the Group’s credit risk.

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2019 Westpac Group Annual Report 217 Notes to the financial statements Note 21. Financial risk (continued) 21.2.3 Credit risk concentrations Credit risk is concentrated when a number of counterparties are engaged in similar activities, have similar economic characteristics and thus may be similarly affected by changes in economic or other conditions. The Group monitors its credit portfolio to manage risk concentrations and rebalance the portfolio. Individual customers or groups of related customers The Group has large exposure limits governing the aggregate size of credit exposure normally acceptable to individual customers and groups of related customers. These limits are tiered by customer risk grade. 1 Specific industries Exposures to businesses, governments and other financial institutions are classified into a number of industry clusters based on related Australian and New Zealand Standard Industrial Classification (ANZSIC) codes and are monitored against the Group’s industry risk appetite limits. Individual countries The Group has limits governing risks related to individual countries, such as political situations, government policies and economic conditions that may adversely affect either a customer’s ability to meet its obligations to the Group, or the Group’s ability to realise its assets in a particular country. Maximum exposure to credit risk The maximum exposure to credit risk (excluding collateral received) is represented by the carrying amount of on-balance sheet financial assets (which comprises cash and balances with central banks, collateral paid, trading securities and financial assets measured at FVIS, derivatives, available-for-sale securities/investment securities, loans; and other financial assets) and undrawn credit commitments. The following tables set out the credit risk concentrations to which the Group and the Parent Entity are exposed for on-balance sheet financial assets and for undrawn credit commitments. Life insurance assets are excluded as primarily the credit risk is passed on to the policyholder and backed by the policyholder liabilities. The balances for trading securities and financial assets measured at FVIS and available-for-sale securities/ investment securities exclude equity securities as the primary financial risk is not credit risk. The credit concentrations for each significant class of financial asset are:1 Trading securities and financial assets measured at FVIS (Note 10) • 45% (2018: 41%) were issued by financial institutions for the Group; 44% (2018: 40%) for the Parent Entity. 51% (2018: 55%) were issued by government or semi-government authorities for the Group; 52% (2018: 56%) for the Parent Entity. 71% (2018: 73%) were held in Australia by the Group; 75% (2018: 76%) by the Parent Entity. • • securities (Note Group; 75% (2018: 72%) for the Parent Entity. 90% (2018: 89%) were held in Australia by the Group; 97% (2018: 96%) by the Parent • 2 Loans (Note 12) • Note 12 provides a detailed breakdown of loans by industry and geographic classification. • 72% (2018: 79%) were issued by financial institutions for both the Group and Parent Entity. financial 3 4 1.The Group has adopted AASB 9 and AASB 15 from 1 October 2018. Comparatives have not been restated. In addition, the Group has made a number of presentation changes to the Balance Sheet. Comparatives have been restated. Refer to Note 1 for further detail. Derivative instruments (Note • 78% (2018: 84%) were held in Australia by the Group; 80% (2017: 86%) by the Parent 20) Entity. Available-for-• 24% (2018: 27%) were issued by financial institutions for the Group; 25% (2018: 28%) for sale securitiesthe Parent Entity. / Investment• 75% (2018: 73%) were issued by government or semi-government authorities for the 11) Entity.

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218 2019 Westpac Group Annual Report Notes to the financial statements Note 21. Financial risk (continued) 2019 Undrawn credit commit-ments 20181 Undrawn credit commit-ments Total on balance sheet Total on balance sheet Consolidated $m Total Total 1.Comparatives have been restated for consistency. Australia Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other 8,0611,0709,131 9,250 2,01411,264 7,229 3,340 10,569 73,052 7,31680,368 63,582 1,76665,348 10,504 5,850 16,354 3,325 3,802 7,127 45,467 10,119 55,586 14,191 5,898 20,089 12,340 6,523 18,863 16,5937,677 24,270 9,529 5,114 14,643 5,567 4,487 10,054 467,206 84,057 551,263 6,668 2,740 9,408 8,3161,404 9,720 8,662 2,035 10,697 6,764 3,324 10,088 68,002 7,781 75,783 50,757 728 51,485 9,979 5,738 15,717 3,6413,079 6,720 45,87112,309 58,180 13,5775,596 19,173 12,3125,700 18,012 16,866 7,95124,817 9,599 4,958 14,557 5,2913,4718,762 464,32986,421 550,750 7,924 1,5979,521 Total Australia 752,564 151,773904,337 731,890152,092883,982 New Zealand Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other 356 36 392 8,631607 9,238 503 350 853 11,6851,50713,192 6,667 856 7,523 2,0791,7583,837 289 29 318 6,977 1,1208,097 1,300 557 1,857 2,023 577 2,600 2,4411,2593,700 1,209755 1,964 1,9381,4473,385 49,542 12,05661,598 151161312 324 39 363 8,205 684 8,889 505 429 934 8,368 1,4379,805 4,867 6915,558 2,3121,5773,889 213101314 6,252 1,0357,287 1,110 5121,622 1,7626132,375 2,573 1,0233,596 1,1057911,896 1,4181,5642,982 46,700 12,114 58,814 14245 259 Total New Zealand 95,791 23,075 118,866 85,728 22,855 108,583 Other overseas Accommodation, cafes and restaurants Agriculture, forestry and fishing Construction Finance and insurance Government, administration and defence Manufacturing Mining Property Property services and business services Services Trade Transport and storage Utilities Retail lending Other 109 11120 1503 153 55 127182 17,7123,093 20,805 5,646 23 5,669 3,830 5,329 9,159 5001,8722,372 493 29 522 1,766863 2,629 244 637 881 2,3182,859 5,177 999 652 1,651 1,0889312,019 864 37 901 17126 197 11212 124 19120 71121192 23,739 3,454 27,