westpac - the next growth phasemar-01 sep-01 sep-02 sep-03 consumer advisers priority advisers &...

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Deutsche B

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Westpac - the nextWestpac - the nextgrowth phasegrowth phaseDr David Morgan,Chief Executive Officer

Deutsche BankAsia Pacific Financial Institutions Conference,London, 9-10 July 2001

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DisclaimerDisclaimer

The material contained in the following presentation isintended to be general background information on WestpacBanking Corporation and its activities as at 9 July 2001.

The information is supplied in summary form and is thereforenot necessarily complete. Also, it is not intended that it berelied upon as advice to investors or potential investors, whoshould consider seeking independent professional advicedepending upon their specific investment objectives, financialsituation or particular needs.

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• Growth momentum review

• Strategic focus

- Organic growth

- Wealth management

- Internet based distribution

- Our people & social responsibility• Strategic options

• Outlook & summary

The next growth phaseThe next growth phase

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Growth momentum clearly wellGrowth momentum clearly wellestablishedestablished

• First half NPAT up 13% to $924 million

• Strong revenue momentum

• Tight expense management

• Continued sound asset quality

• Continues growth trend of previous threehalves

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Consistent earnings growth...Consistent earnings growth...

653 666 676701

755

924897

818

500

600

700

800

900

1,000

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

30

35

40

45

50

55

NPAT pre abn EPS pre abn

Net profit after tax +13%Earnings per Share +19% cents$m

NPATCAGR

4%

14%

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…and increasing shareholder…and increasing shareholderreturns...returns...

362386

308

397

493

565 584

272

100

200

300

400

500

600

2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H0114.0

16.0

18.0

20.0

22.0

EP ROE

Economic Profit: +18%ROE: +303bps to 20.9%

%$m

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

#

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%

* Excludes goodwill

50

52

54

56

58

60

62

1H98 2H98 1H99 2H99 1H00 2H00 1H0128,000

30,000

32,000

34,000

36,000

Expense/income Staff numbers (FTE - implied)

FTECost to income ratio* and

Staff numbers

...while delivering productivity...while delivering productivityenhancements...enhancements...

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…through a range of efficiency…through a range of efficiencyinitiatives...initiatives...

Productsolutions

Servicing &processing

• Branch network redesign

• Business Banking process re-engineering

• CRM - including training, simplified sales processes, improvedsales management

• Migration to lower cost channels & extend capability - egbroker channel / Internet

• Product & process simplification

• Innovative products - eg RapidRepayPac, Investor Options A/c

• Insourcing / aggregating products & services

• Outsourcing, eg. IT & Telecommunications, printing &distribution

• E-enabling & straight through processing

• Shared services, Trans Tasman initiatives

Sales &marketing

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…combined with …combined with outsourcingoutsourcing of ofservicing & processingservicing & processing• Outsourcing partnerships

• IBM GSA - core IT operations• Telstra - telecommunications services• Investa - property services• Unisys - voucher processing• Palms Consortium - printing & logistics

• Recruitment resourcing• TMP Worldwide and seven specialist providers

• Investigating mortgage processing outsourcing• Due diligence with EDS & Unisys

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Overall we are well placed on peerOverall we are well placed on peerrankingsrankings

Revenue Growth*Rank: 1

Return on Equity(reported) Rank: 1

Cost to Income Ratio(reported) Rank: 2

10.39.5

6.3

3.6

0

5

10

15

WBC ANZ NAB # CBA

%

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

20.919.5 18.9

12.6

0

5

10

15

20

25

WBC ANZ NAB CBA

52.2

49.4

53.1

56.3

40

45

50

55

60

WBC ANZ NAB CBA

%

%

NPAT Growth*Rank: 1

14

10

43

0

5

10

15

WBC ANZ NAB CBA

%

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Sound credit quality...Sound credit quality...

5.0

2.8

1.41.0 0.8 0.6 0.5 0.6

0

1

2

3

4

5

6

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

Total impaired assets tototal loans & acceptances

%

Total bad debt expense toavg. total loans & acceptances

90

43

148

16 16 1727

0

20

40

60

80

100

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

Basispoints

Peer average:0.8%

Peer average:32 bps

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…and rank well on actual…and rank well on actualwrite-offs & provisioning cover...write-offs & provisioning cover...

151

324343

377

0

50

100

150

200

250

300

350

400

Westpac CBA* NAB ANZ

$m

* CBA results for half-year to 31 December 2000.

182

154

184

154

100

120

140

160

180

200

Westpac CBA* NAB ANZ

%

Total provisions toGross Impaired Assets

Actual bad debt write-offs

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…with stable delinquency trends…with stable delinquency trends

Mass market/personal - Group *

%

0.44 0.47

0.45

0.440.33

0.34

0.33

0.0

0.3

0.6

0.9

1.2

1.5

Sep-98

Mar-99

Sep-99

Mar-00

Sep-0

0

Mar-01

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

1.91

1.49

1.511.72

1.53 1.471.22

0.0

0.5

1.0

1.5

2.0

2.5

Sep-98

Mar-99

Sep-99

Mar-00

Sep-00

Mar-01

Business banking - Australia

%

May-01

May-01

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Sound capital positionSound capital position

7.1

6.3

5.7

7.26.6

6.1

4.0

5.0

6.0

7.0

8.0

TOE / RAA Tier 1 ratio

1H00 2H00 1H01

%

* Target range

6.5 - 6.0% *

5.8% -5.6% *

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• Strategic focus

- Organic growth

- Wealth management





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Organic strategyOrganic strategy

SuperiorCustomer

Experience

SustainableBusinessPractices

HighPerformance

Ethic

WealthManagement

OperationalExcellence

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Strategic intentStrategic intent

• Focus efforts on the key opportunities

• Help our customers achieve greater financialwell being through providing simple, practicaland ethical solutions

• Meet our wider corporate socialresponsibilities

• While delivering continued double digitearnings growth

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Delivering through a highlyDelivering through a highlyfocused business modelfocused business model

A sales driven solutions aggregator,integrating across all delivery channels

Servicing & Processing

Product Solutions

Sales & Marketing

• ~20%costs outsourced

• access to global scale

• e-enabled organisation

• solutions aggregator

• functional teams

• product & process simplification

• whole of customer sales model

• segmented by value

• CRM tools

• relationship driven

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Organic growth strategy is workingOrganic growth strategy is working& represents highest potential& represents highest potential

• Customer base increased by 2.2 million or 40% to 7.8million between 1995 & 1998 through acquisitions

- Average products per customer acquired was, however, around10% less than in the existing customer base

• Priority customers in Australia up 28% in last 12 months

- however, this represents only 24% of our retail customer base

• Credit cards outstandings grew by 33%and market shareby 1.4% to 20.3%

- yet only 24% of our Australian customers hold a card with us

• In two years the proportion of Australian retail customerscreating value has moved from approx 60% to 72%

- 28%, however, are still value diluting

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0

5

10

15

20

25

Customer Value Segments

% in segment July 1999 % in segment May 2001

Achieving a positive shift inAchieving a positive shift incustomer value...customer value...

Low High

%

Per

cen

tag

e in

Seg

men

t

Value Shift

Value diluting Value creating

Australian personal and business customers

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300

500

700

900

1100

1300

Sep-97

Mar-98

Sep-98

Mar-99

Sep-99

Mar-00

Sep-00

Mar-01

000’s

Nu

mb

er o

f C

ust

om

ers

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

28% growth betweenMar 2000 & Mar 2001

Priority Customers *

…and deepening valuable…and deepening valuablecustomer relationships...customer relationships...

May01

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Mortgage Lending*

25

30

35

40

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

5

10

15

20

25

Outstandings (LHS) Market share (RHS)

Credit Card Outstandings*

0

1

2

3

4

5

Mar-99 Jun-99 Sep-99

Dec-99

Mar-00Jun-00 Sep-00

Dec-00

Mar-01Apr-0110

12

14

16

18

20

22


$b %$b %

Business Lending*

20

25

30

35

40

Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Apr-015

10

15

20

25


$b %

…and is resulting in solid market…and is resulting in solid marketshare trendsshare trends

Principal Corporate Bank Share*

22.6 23.124.5

15.0

20.0

25.0

30.0

Sep-99 Apr-00 Dec-00

East & Partners Surveys

* Australia

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CRM remains a key enablerCRM remains a key enabler

• Focus on high value segments completed:

- Private banking- Priority banking, and

- Business direct

• Next stages include:

- Priority business banking, and

- Financial planners & advisers

• Results include improved customer retention and

increased cross selling opportunities

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• Strategic focus

- Organic growth

- Wealth management





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0

10

20

30

20-39 40-59 60-70 79+

2001 2021

Wealth management opportunityWealth management opportunitydriven by demographic forcesdriven by demographic forces

9 911

18

25

0

10

20

30

Retail d

epos

its

Bank d

epos

its

Loan

& adva

nces

Supe

r fund

s

Unit tru

sts

Financial assets & liabilitiesCAGR 1986 to 2000

%

Source: ABS & APRA

Population Demographic Trend

%

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Value is shifting to distribution andValue is shifting to distribution andadvice in wealth managementadvice in wealth management

AdministrationInvestment

ManagementDistribution/

Retail Service Advice

Proportionof Profit *

17% 29% 34% 20%

ExpectedMarginTrend

Stable Stable

OrganicGrowthInitiatives

• Maintain superior fund performance

• Source best of breed products

• Grow sales force

• Create alternative distribution models

• Grow sales force & upgrade skills

• Upgrade software tools

* Westpac estimates based upon external data

• Upgrade Master Trust platform

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Growth of our adviser network is keyGrowth of our adviser network is key

0

200

400

600

800

1000

1200

Sep-95

Sep-96

Sep-97

Sep-98

Sep-99

Sep-00

Mar-01

Sep-01

Sep-02

Sep-03

Consumer advisers

Priority advisers & financial planners

Business advisers

Plan

-100

0

100

200

300

400

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

3

6

9

12

15

Net inflows (excluding annuities) Annuity net inflows Market share (RHS)

Rank: 3rd 5th 13th 13th 6th 9th 8th 8th

Source: Assirt Market Share Report & Westpac accounts* Excludes Cash Management Account balances

$m %

Net Monthly RetailFunds Inflow*

Planner/Adviser Numbers

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• Strategic focus

- Organic growth

- Wealth management





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With on-line experienceWith on-line experienceexpanding rapidly...expanding rapidly...

0

200,000

400,000

600,000

800,000

1,000,000

Oct-99

Jan-00

Apr-00

Jul-00

Oct-00

Jan-01

Apr-01

Australia New Zealand

On-line Banking

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Oct-99

Dec-99

Feb-00

Apr-00

Jun-00

Aug-00

Oct-00

Dec-00

Feb-01

Apr-01

On-line Broking - Australia

967,000* 82,000*

* 30 June 2001

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Share of Australian On-line Banking market

• Registered on-line banking customers

– Overall 25%

– Consumer 24%

– Business 32%

• Logons to on-line banking sites 26%

• On-line Funds transfers 25%

• On-line Bill Payments 26%

• On-line account history retrievals 41%

Source: Market Intelligence Strategy Centre Pty. Ltd. (MISC) Internet Banking Data Pooling Facility Report March Quarter 2001

…delivering superior market shares...…delivering superior market shares...

Above level ofOff-Line

Market Share

Significantly Abovelevel of Off-LineMarket Share

Disproportionatelyhigh activity levels

compared tomarket share

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…and solid growth in on-line…and solid growth in on-lineorigination.origination.

Online#

Proportion oftotal Westpac

sales

Credit card approvals 2,965 14.7%

Personal loans 1,116 9.8%

Savings accounts 800 2.7%

Transaction accts 495 2.4%

Home loans 128 Nom

(Actual for monthof May 2001)

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• Strategic focus

- Organic growth

- Wealth management





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Staff continue to hold the keyStaff continue to hold the key

Alignedmeasurement

and rewardsystems

Productiveculture

World classmanagement

HighPerformance

Ethic

Sharedunderstanding

of vision

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Delivering on the socialDelivering on the socialresponsibility imperativesresponsibility imperatives

• Image & reputation fundamentally linked tosustainable shareholder value creation

• Multi-tiered strategy

• Sustainable & socially responsiblebusiness practices

• Social safety net and access initiatives

• Widespread community involvement

• Managing the risk of social regulation

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• Strategic focus

- Organic growth

- Wealth management





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Strategic optionsStrategic options

Objectives: To enhance medium-term growthin shareholder value

What: - Customer acquisition

- Distribution capability / platforms

- Product capability

Discipline: Any acquisition must:

1. Be a good strategic fit

2. Satisfy strict valuation criteria

3. Not be unduly divertive

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Strategic opportunitiesStrategic opportunities

Banking consolidation: - few likely candidates- ACCC constraints- divertive impact of mergers

Wealth management: - few likely candidates- good growth prospects- risk of overpaying

Offshore: - few cross-border success stories- synergies difficult to extract- maybe over time

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• Strategic focus

- Organic growth

- Wealth management





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Our aspirations: 2001-2003Our aspirations: 2001-2003Our organic strategy, assuming a stable economic

environment, can deliver:

� On average, double digit EPS growth,via:

- revenue growth equal to or better than peers

- declining expense to income ratio

- sound, through the cycle, bad debt experience

- benefit of declining tax rate in 2002 (34% to30%)

- management of surplus capital generated

� And ROE consistently in the range 18 to 22%

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Full year outlookFull year outlook

• Outlook remains positive for earnings growth

• Reflecting economic conditions, credit growth mayslow to high single digits

• GDP recovery in 01/02 to around 4.0%, up from 2.4%

• Interest rates are close to bottom

• Inflation should stay in the 2.5% to 3.5% range

• Expect to deliver broadly flat expenses this year

• Some rise in consumer credit charges, but well withinacceptable levels

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In summary, the next growthIn summary, the next growthphase is well foundedphase is well founded

• Consistent earnings momentum

• Sound credit quality and capital position

• Absolute focus on key differentiator - superiorcustomer experience

• Positive shift in customer value

• Investing in wealth management expansion

• Realising opportunities in existing customer base

• Continuing strong drive on enhancing productivity& efficiency

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westpac - the next growth phasemar-01 sep-01 sep-02 sep-03 consumer advisers priority advisers &...

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