1. An Analysis of theWestpac Offer to St. George
The Dream Team

2. Agenda
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3. Our Team
4. Brief Background of the Westpac Offer
Consideration
Proposal to exchange 1.25 WBC ordinary shares for each SGB ordinary share
All-scrip merger
A Scheme of Arrangement (Scheme) is to be effected subject to SGB shareholders vote
Senior management team to be drawn from both banks
SGB Chairman appointed as Deputy Chairman with two other SGB Directors to join the WBC Board
Operating model for the merged entity is to retain all WBC and SGB brands and branches/ATM networks
A two-week Exclusivity Period to conduct reciprocal due diligenceand negotiate a Merger Implementation Agreement
Break fee of $100m is proposed
Conditions precedent
An Independent Experts Report concluding the Scheme
SGB shareholders vote
Court approval and other regulatory rulings and consents
5. St. George: Current Position in Market Capitalisation
Currently
5th Largest
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6. Advantages and Disadvantages of Westpac Offer
Advantages
Be part of the largest market capitalisation in Australian banking history

Benefit from cheaper cost of funding using WBCs AA credit rating

Cross-selling opportunities in the largest retail and wealth management network in Australia
Cooperate with Westpac to tackle intense competition in the regional banking sector
Access to WBCs resources and expertise
Accretive EPS for SGB
SGBshareholders obtain CGT rollover relief on the all-scrip merger

Guaranteed SGB representation in senior management

Disadvantages

Potential customer attrition

7. Integration risks involved 8. Staff resistance due to job security issues6
9. Westpac Offer: Risks Considerations
Customer Attrition
Issue:
Existing customers leave SGB resulting in shrinking market share and damaging its reputation
Recommendations:
Customer relations management
Media publicity management
Retain SGB branches and ATM networks to maintain presence
Integration Risks
Issues:
Concerns over disruptions to operations during the integration process
Culture integration issues SGB Big enough but small enough to be customer-focused
Recommendations:
Appoint transformation advocates from both SGB and WBC
Utilise WBCs market -leading risk management systems
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10. Proposed Merged Operations
Merged Westpac and St. George Business Model
Product & Operations
Technology
Core/Support
Opportunities for Growth after merging with WBC
Cross-selling to within the wider distribution channel in retail banking segment
Extension of wealth management segment
More prominent presence in NSW and other states
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11. How likely is the proposed model to be successful?
Key Features of the Proposed Operating Model
Minimises the risk of the large-scale disruption
Minimises customer and value leakage
Offering a broad range of products
Multi-Brand
Strategy

Higher possibility of success in the integration process

12. Better consolidation of products and operations 13. Easier alignment of business structuresCommon Strategic Framework

Catering to a broad range of customers

14. Westpac : A professional, aspirational bank with a social conscience 15. St. George: A bank with humanityDistinct Brand Personalities
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16. Factors Determining Whether the Merger is Successful
Key Factors
Successful When
Customers
Customer Attrition Rate
Market Share
Customer Satisfaction Index
Low
Increase
Maintain or Increase
Synergies
Realised Cost Synergies
Realised Revenue Benefits
Realised Funding Benefits
Actual Integration Costs
Cost to Income Ratio
As Expected or Higher
As Expected or Higher
As Expected or Higher
As Expected or Lower
Decrease
Employees

Employee Turnover Rate

17. Employee Satisfaction IndexMaintain or Decrease
Maintain or Increase
Shareholders

Earnings Per Share

18. Share Price PerformanceIncrease
Better
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19. Valuation
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20. Valuation Summary
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WBC Offer:
32.46
Current SGB:
26.65
21. Synergies
Total Benefits: $222 million
Assumptions:
Cost Synergies - 25% of operating expenses (Empirical evidence of 20-30%)
Restructuring Costs - 161.5% of cost synergies(Average of precedent transactions)
Funding Benefits - 48% of Deposits and other borrowings at 60 bp (May 2008)
Revenue Synergies - 25% of SGB revenue $2.3 billion realised over 10 years.
Who Benefits?
Both St. George and Westpac
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22. Implied Value
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Implied Value is NEGATIVE
considering Synergies
23. EPS vs. Exchange Ratio Analysis
Westpac Offer
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SGB Current EPS
24. Next Steps for St. George
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25. Alternatives and Impact
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26. Alternatives and Impact
Renegotiate
SGB renegotiates terms to benefit SGB stakeholders:
Higher offer price
Retention of key SGBsenior management team
SGB final dividend to be declaredto SGB shareholders
No break fee of $100m at the moment
Confidentiality Agreement
WBCs Potential Reaction:
Proceed to renegotiate additional terms taking into consideration of WBCs maximum offer price
Accept
Agree on Merger Implementation Agreement
WBC Offer is communicated to SGB shareholders and prepare for shareholders vote
In the mean time, regulatory and government approval processes are underway
If SGB shareholders vote in favour of the merger proposition, a Court Approval needs to be obtained
Subsequent to the Court Approval, merger becomes official
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27. Alternatives and Impact
Reject
SGB continues to grow organically, however, explore alternative fundingsources
WBCs Potential Reactions:
Offer a higher premium to sweeten the merger deal
Abandon the merger proposition entirely
Hostile takeover
SGBs Defensive Action:
Super-majority shareholder voting
Delay
SGB appoints experts to perform in-depth reviews of the merger proposition
WBCs Potential Reactions:
Further negotiations to convince SGB Board
If delay too long, WBC may change the WBC Offer or abandon the merger proposition entirely
SGBs Defensive Action:
Negotiate for SGB Review Period clause including a Confidentiality Agreement
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28. Other Matters
Exclusivity Period
Include an exclusivity period of two weeks to conduct reciprocal due diligence and negotiate a Merger Implementation Agreement
Break Fee
Exclude the break fee of $100million as proposed by WBC to allow SGB to have more optimal alternatives for consideration
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29. Key Messages to St. George Shareholders
WBC Offer
Renegotiate the WBC Offer and additional terms with WBC
All scrip-merger
Scheme of Arrangement
Merits of the merger proposition
Benefit from cheaper cost of funding using WBCs AA credit rating
Cross-selling opportunities in the largest retail and wealth management network in Australia
Outcome of the merger proposition
Accretive EPS
Retain SGB brand and branch/ATM networks
Be part of the largest market capitalisation in Australian banking history
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30. Other Considerations
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31. Other Considerations
Potential Bidders
for SGB
Other Big Four Banks CBA, NAB and ANZ may counter-bid the offer to acquire SGB. This will increase the premium that WBC has to offer in order to clinch the deal.
CBA
Huge cash surplus and high share prices
However, facing domestic competition issues
NAB
Previously a major shareholder in SGB
Could make an offer for SGB if it opts to forego overseas expansion
However, massive capital investment has been injected overseas
ANZ
Previously a major shareholder in SGB
However, ANZ changed its strategic focus and moved on to expanding in the Asian region
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32. Other Considerations
Government Approval on the Proposed Merger
Issues:
Possibility of monopoly subsequent to the merger
ACCC may view each Australian state as a separate banking market NSW is the main issue
WBC and SGB, combined, will be the largest amongst all the Big Four Banks in Australia
The merger would lessen competition in the wealth management sector possibility of reduced product diversity for consumers
The state of Australian banking industry
Four Pillars policy maintained
Impacts on national interests
Recommendations:
Merger plan, demonstrating the impacts of the merger onvarious aspects, need government approval
Bring in government lobbyists
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33. Final Recommendation
Renegotiate with WBC
Offer price
Retention of key SGBsenior management team
SGB final dividend to be declaredto SGB shareholders
No break fee of $100m at the moment
Confidentiality Agreement
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34. Thank you
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35. GDP Forecast
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European Exchange Rate Crisis.
Asian Financial Crisis.
Global Financial Crisis.
Assumption: Lowest GDP could happen is -200% of 2007.
Assumption:
It follows 1995 and 1996 when the economy falls from the maximum.
Assumption: The movement from one year to another year is on a gradual basis to the maximum (120% of 2007) as the economy recovers.
36. Relative Valuation Approach