SECURITIES AND EXCHANGE COMMISSION

FORM 6-K Current report of foreign issuer pursuant to Rules 13a-16 and 15d-16 Amendments

Filing Date: 2017-05-09 | Period of Report: 2017-05-09 SEC Accession No. 0001104659-17-030883

(HTML Version on secdatabase.com)

FILER BANKING CORP Mailing Address Business Address 575 FIFTH AVENUE LEVEL 20, 275 KENT CIK:719245| IRS No.: 986008211 | State of Incorp.:C3 | Fiscal Year End: 0930 39TH FLOOR STREET Type: 6-K | Act: 34 | File No.: 001-10167 | Film No.: 17824312 NEW YORK NY 10017-2422 SYDNEY C3 2000 SIC: 6029 Commercial banks, nec 212-551-1835

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

May 9, 2017

Commission File Number 1-10167

WESTPAC BANKING CORPORATION (Translation of registrant’s name into English)

275 KENT STREET, SYDNEY, NEW SOUTH WALES 2000, AUSTRALIA (Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F ______

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S- T Rule 101(b)(1): ______

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S- T Rule 101(b)(7): ______

Incorporation by reference

The information contained in Exhibit 1 to this Report on Form 6-K shall be incorporated by reference in the prospectus relating to the Registrant’s debt securities contained in the Registrant’s Registration Statement on Form F-3 (File No. 333-207931), as such prospectus may be amended or supplemented from time to time.

Index to Exhibits

Exhibit No. Description

1 Westpac Banking Corporation Pillar 3 Report March 2017: Incorporating the requirements of APS330

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2 Presentation: Westpac Group Half Year 2017 Presentation & Investor Discussion Pack 3 Appendix 3A.1 – Notification of dividend / distribution

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESTPAC BANKING CORPORATION (Registrant)

Date: May 9, 2017 By: /s/ Sean Crellin Sean Crellin Director – Corporate, Legal and Secretariat

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 1

Pillar 3 report Table of contents

Structure of Pillar 3 report

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Executive summary 3 Introduction 5 Risk appetite and risk types 6 Controlling and managing risk 7 Group structure 12 Capital overview 14 Leverage ratio disclosure 18 Credit risk management 20 Credit risk exposures 28 Credit risk mitigation 53 Counterparty credit risk 56 Securitisation 59 Market risk 70 Liquidity risk management 74 Liquidity coverage ratio disclosure 75 Operational risk 76 Equity risk 78 Interest Rate Risk in the Banking Book 80 Appendices Appendix I – Regulatory capital reconciliation 82 Appendix II – Entities included in regulatory consolidation 88 Appendix III – Level 3 entities’ asset and liabilities 91 Appendix IV – Regulatory expected loss 93 Appendix V – APS330 quantitative requirements 94 Glossary 97 Disclosure regarding forward-looking statements 102

In this report references to ‘Westpac’, ‘Westpac Group’, ‘the Group’, ‘we’, ‘us’ and ‘our’ are to Westpac Banking Corporation and its controlled entities (unless the context indicates otherwise).

In this report, unless otherwise stated or the context otherwise requires, references to ‘$’, ‘AUD’ or ‘A$’ are to Australian dollars.

Any discrepancies between totals and sums of components in tables contained in this report are due to rounding.

In this report, unless otherwise stated, disclosures reflect the Australian Prudential Regulation Authority’s (APRA) implementation of Basel III.

Information contained in or accessible through the websites mentioned in this 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.

Cover from left: A wheat harvesting image sent to General Manager Sir Alfred Davidson by customers in Perth, circa 1925. Bob MacSmith, fifth generation farmer and Westpac customer, 2016. Bank of New South Wales employee operating Fabacus, the first Australian bank accounting computer used in Sydney, 1965. Bank of New South Wales Walgett branch, employees and their families take refuge from knee-high flood waters, 1890.

2 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Executive summary

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 31 March 2017 30 September 2016 31 March 2016 The Westpac Group at Level 2

Common equity Tier 1 (CET1) capital after deductions $m 40,335 38,875 38,041

Risk weighted assets (RWA) $m 404,382 410,053 363,248

Common equity Tier 1 capital ratio % 9.97 9.48 10.47

Additional Tier 1 capital % 1.71 1.69 1.64

Tier 1 capital ratio % 11.68 11.17 12.11

Tier 2 capital % 2.32 1.94 1.91

Total regulatory capital ratio % 14.00 13.11 14.02

APRA leverage ratio % 5.30 5.20 5.01

Westpac’s common equity Tier 1 (CET1) capital ratio was 9.97% at 31 March 2017, up 49 basis points from 30 September 2016. Capital generated through First Half 2017 cash earnings (99 basis points) was partly offset by payment of the 2016 final dividend net of the dividend reinvestment plan (DRP) and other movements discussed below.

Continued discipline in managing RWA and improved asset quality has supported a 29 basis points increase in organic capital this half.

Organic capital generation of 29 basis points included:

l First Half 2017 cash earnings of $4.0 billion (99 basis points increase); l The 2016 final dividend payment, net of DRP share issuance (70 basis points decrease); l Ordinary RWA was modestly lower (excluding FX movements, RWA initiatives and modelling changes), a 2 basis point increase; and l Other movements decreased the CET1 capital ratio by 2 basis points.

Other items increased the CET1 capital ratio by 20 basis points:

l RWA initiatives including management of unutilised limits reduced RWA by $1.6 billion (4 basis points increase); l Regulatory modelling changes (discussed further below) reduced RWA by $1.0 billion (3 basis points increase); l Reduction in the deferred tax asset (6 basis point increase); l The impact of foreign currency translation (4 basis points increase), mostly related to NZ$ lending; and l A decrease in the accounting obligation for the defined benefit pension plan primarily reflecting higher discount rates used to value defined benefit liabilities (3 basis point increase).

Westpac Group March 2017 Pillar 3 report | 3

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pillar 3 report Executive summary

Risk weighted assets

$m 31 March 2017 30 September 2016 31 March 2016

Credit risk 352,713 358,812 313,048

Market risk 7,471 7,861 9,024

Operational risk 31,653 33,363 32,329

Interest rate risk in the banking book 8,143 5,373 4,678

Other 4,402 4,644 4,169

Total 404,382 410,053 363,248

First Half 2017 – Second Half 2016

Total RWA decreased $5.7 billion or 1.4% this half:

l Credit risk RWA declined $6.1 billion or 1.7%:

- Improved asset quality decreased RWA by $3.1 billion;

- Reduction in mark-to-market related credit risk RWA of $1.8 billion;

- RWA initiatives from management of unutilised limits reduced RWA by $1.6 billion;

- Foreign currency translation impacts, primarily related to the impact of the depreciation of the NZ$ on NZ$ lending which decreased RWA by $1.9 billion; and

- RWA modelling changes reduced RWA by $1.0 billion which included mortgage RWA changes and updates to Probability of Default (PD) parameters for corporate and business lending exposures.

These items were partially offset by portfolio growth which added $3.3 billion to RWA.

l Non-credit RWA increased $0.4 billion or 0.8% primarily due to:

- Interest rate risk in the banking book (IRRBB) RWA increased $2.8 billion. The embedded gain declined as the yield curve steepened and repricing and yield curve risk increased. Both of these added to IRRBB.

- Operational risk RWA decreased $1.7 billion due to an update to loss scenarios;

- Market risk RWA decreased $0.4 billion from lower interest rate exposure in the trading book; and

- Other RWA decreased $0.3 billion.

Exposure at Default

Over the half, exposure at default (EAD) increased $2.8 billion (up 0.3%). Growth in residential mortgage exposures of $9.0 billion was mainly offset by reduced exposure to corporates ($2.8 billion decrease), specialised lending ($1.5 billion decrease) and sovereign exposures associated with liquid assets ($1.6 billion decrease).

Leverage Ratio

The leverage ratio represents the amount of Tier 1 capital relative to exposure. At 31 March 2017, Westpac’s leverage ratio1 was 5.3%, up 10 basis points since 30 September 2016.

APRA has yet to prescribe any minimum leverage ratio requirements.

Liquidity Coverage Ratio (LCR)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The LCR requires banks to hold sufficient high-quality liquid assets, as defined, to withstand 30 days under a regulator-defined acute stress scenario.

The Group’s LCR as at 31 March 2017, including the committed liquidity facility of $49.1 billion, was 125% (30 September 2016:134%) and the average LCR for the quarter ending 31 March 2017 was 122%2.

1 Refer to Glossary. The leverage ratio is based on the same definition of Tier 1 capital as used by APRA capital requirements and is not comparable to the Basel Committee for Banking Supervision leverage ratio calculation. 2 Calculated as a simple average of the daily observations over the 31 March 2017 quarter.

4 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Introduction

Westpac Banking Corporation is an Authorised Deposit-taking Institution (ADI) subject to regulation by APRA. APRA has accredited Westpac 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 (Advanced IRB) for credit risk and the Advanced Measurement Approach (AMA) for operational risk.

In accordance with APS330 Public Disclosure, financial institutions that have received this accreditation, such as Westpac, are required to disclose prudential information about their risk management practices on a semi-annual basis. A subset of this information must be disclosed quarterly.

This report describes Westpac’s risk management practices and presents the prudential assessment of Westpac’s capital adequacy as at 31 March 2017.

In addition to this report, the regulatory disclosures section of the Westpac website1 contains the reporting requirements for:

l Capital instruments under Attachment B of APS330; and l The identification of potential Global-Systemically Important Banks (G-SIB) under Attachment H of APS330 (disclosed annually).

Capital instruments disclosures are updated when:

l A new capital instrument is issued that will form part of regulatory capital; or l A capital instrument is redeemed, converted into CET1 capital, written off, or its terms and conditions are changed.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 http://www.westpac.com.au/about-westpac/investor-centre/financial-information/regulatory-disclosures/

Westpac Group March 2017 Pillar 3 report | 5

Pillar 3 Report Risk appetite and risk types

Westpac’s vision is to be one of the world’s great service companies, helping our customers, communities and people to prosper and grow.

Westpac’s appetite for risk is informed by our planned business strategy, regulatory rules and ratios, and the potential for adverse outcomes to result in material impacts on our customers, our staff, our reputation, our regulatory relationships and our financial position.

Westpac distinguishes between different types of risk and takes an integrated approach toward identifying, assessing and managing all material risks including through the annual review of the Westpac Group Risk Management Strategy and the establishment of additional controls through supporting frameworks and policies.

Overview of key risk types

l credit risk - the risk of financial loss where a customer or counterparty fails to meet their financial obligations to Westpac; l liquidity risk - the risk that the Group will be unable to fund assets and meet obligations as they become due; l 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 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; l operational risk - the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition is aligned to the regulatory (Basel II) definition, including legal and regulatory risk but excluding strategic and reputation risk; l conduct risk - the risk that our provision of services and products results in unsuitable or unfair outcomes for our stakeholders or undermines market integrity; l compliance risk - the risk of legal or regulatory sanction, financial or reputational loss, arising from our failure to abide by the compliance obligations required of us; l business risk - the risk associated with the vulnerability of a line of business to changes in the business environment; l sustainability risk - the risk of reputational or financial loss due to failure to recognise or address material existing or emerging sustainability related environmental, social or governance issues; l equity risk - the potential for financial loss arising from movements in equity values. Equity risk may be direct, indirect or contingent; l insurance risk - the risk of mis-estimation of the expected cost of insured events, volatility in the number or severity of insured events, and mis-estimation of the cost of incurred claims; l related entity (contagion) risk - the risk that problems arising in other Westpac Group members compromise the financial and operational position of the authorised deposit-taking institution in the Westpac Group; and l reputation risk - the risk of the loss of reputation, stakeholder confidence, or public trust and standing.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 6 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Controlling and managing risk

We adopt a Three Lines of Defence approach to risk management which reflects our culture of ‘risk is everyone’s business’ in which all employees are responsible for identifying and managing risk and operating within the Group’s desired risk profile. Effective risk management enables us to:

l accurately measure our risk profile and balance risk and reward within our risk appetite, optimising financial growth opportunities and mitigating potential loss or damage; l protect Westpac’s depositors, policyholders and investors by maintaining a balance sheet with sound credit quality and buffers over regulatory minimums; l embed adequate controls to guard against excessive risk or undue risk concentration; and l meet our regulatory and compliance obligations.

The Board is responsible for approving the Westpac Group Risk Management Strategy and Westpac Group Risk Appetite Statement and monitoring the effectiveness of risk management by the Westpac Group, including satisfying itself through appropriate reporting and oversight that appropriate internal control mechanisms are in place and are being implemented in accordance with regulatory requirements.

The Board has delegated to the Board Risk & Compliance Committee responsibility to review and recommend the Westpac Group Risk Management Strategy and Westpac Group Risk Appetite Statement to the Board for approval; set risk appetite consistent with the Group 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.

Risk management governance structure

Board l approves our overall Westpac Group Risk Management Strategy and the Westpac Group Risk Appetite Statement.

Board Risk & Compliance l reviews and recommends the Risk Management Strategy and Group Risk Appetite Statement to the Board for approval; Committee (BRCC) l sets risk appetite consistent with the Westpac Group Risk Appetite Statement;

l approves the frameworks, policies and processes for managing risk;

l reviews and approves the limits and conditions that apply to credit risk approval authority delegated to the CEO, Deputy CEO and CRO and any other officers of the Westpac Group to whom the Board has delegated credit approval authority;

l monitors the alignment of the Westpac Group’s risk profile and controls with risk appetite, and oversees the identification, management and reporting of risks inherent in the Westpac Group’s operations;

l monitors changes anticipated for the economic and business environment and other factors relevant to our risk profile and risk appetite; and

l may approve risks beyond the approval discretion provided to management.

From the perspective of specific types of risk, the Board Risk & Compliance Committee’s role includes:

l credit risk – approving key policies and limits supporting the Credit Risk Management Framework, and monitoring the risk profile, performance and management of our credit portfolio;

l liquidity risk – approving key policies and limits supporting the Liquidity Risk Management Framework, including our annual funding strategy, recovery and resolution plans and monitoring the liquidity position and requirements;

l market risk – approving key policies and limits supporting the Market Risk Management Framework, including, but not limited to, the Value at Risk and Net Interest Income at Risk limits, and monitoring the market risk profile;

l operational risk – approving key policies supporting the Operational Risk Management Framework and monitoring the performance of operational risk management and controls;

Westpac Group March 2017 Pillar 3 report | 7

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pillar 3 report Controlling and managing risk

Risk management governance structure (continued)

l conduct risk – reviewing and approving the Group’s approach to the management and monitoring of conduct risk and controls;

l reputation risk – reviewing and approving the Reputation Risk Management Framework and reviewing the monitoring of the performance of reputation risk management and controls; and

l compliance risk – reviewing and approving the Compliance Risk Management Framework and reviewing compliance risk processes and our compliance with applicable laws, regulations and regulatory requirements, discussing with management and the external auditor any material correspondence with regulators or government agencies and any published reports that raise material issues, and reviewing policies and procedures relating to complaints and whistleblower concerns.

The Board Risk & Compliance Committee also:

l approves the Internal Capital Adequacy Assessment Process and in doing so reviews the outcomes of enterprise wide stress testing, sets the preferred capital ranges for regulatory capital and reviews and monitors capital levels for consistency with the Westpac Group’s risk appetite;

l provides relevant periodic assurances to the Board Audit Committee;

l refers to other Board Committees any matters that come to the attention of the Board Risk & Compliance Committee that are relevant for those respective Board Committees; and

l in its capacity as the Westpac Group’s US Risk Committee, oversees the key risks, risk management framework and policies of Westpac Group’s US operations.

Board Committees with a Risk Focus Board Audit Committee (BAC)

l oversees the integrity of financial statements and financial reporting systems, and matters relating to taxation risks.

Board Remuneration Committee (BRC)

l oversees remuneration policies and practices of the Westpac Group.

Board Technology Committee

l oversees the implementation of the Westpac Group’s technology strategy, including updates on major programs.

Executive Team Westpac Executive Team (ET)

l executes the Board-approved strategy;

l delivers the Group’s various strategic and performance goals within the approved risk appetite; and

l monitors key risks within each business unit, and the Group’s reputation.

Executive risk committees Westpac Group Executive Risk Committee (RISKCO)

l leads the management and oversight of material risks across the Westpac Group consistent with the Group Risk Appetite Statement;

l oversees the embedding of the Westpac Group Risk Management Strategy in the Group’s approach to risk governance;

l oversees risk-related management frameworks and key supporting policies;

l oversees the Group’s material risks;

l reviews and oversees reputation risk and sustainability risk management frameworks and key supporting policies; and

l identifies emerging risks and allocates responsibility for assessing impacts and implementing appropriate actions to address these.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 8 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Controlling and managing risk

Risk management governance structure (continued)

Westpac Group Asset & Liability Committee (ALCO)

l leads the optimisation of funding and liquidity risk-reward across the Group;

l reviews the level and quality of capital to ensure that it is commensurate with the Group’s risk profile, business strategy and risk appetite;

l reviews and oversees the Liquidity Risk Management Framework and key policies;

l oversees the funding and liquidity risk profile and balance sheet risk profile; and

l identifies emerging funding and liquidity risks and appropriate actions to address these.

Westpac Group Credit Risk Committee (CREDCO)

l leads the optimisation of credit risk-reward across the Group;

l reviews and oversees the Credit risk-related Risk Management Frameworks and key supporting policies;

l oversees Westpac’s credit risk profile;

l identifies emerging credit risks, allocates responsibility for assessing impacts, and responds as appropriate; and

l facilitates continuous improvement in credit risk management by providing a forum for testing risk tolerances and debating alternate approaches.

Westpac Group Operational Risk and Financial Crime Committee (OFCO)

l leads the optimisation of operational risk across the Group;

l reviews and oversees the Operational Risk and Financial Crime Risk Management Frameworks and key supporting policies;

l oversees Westpac’s operational risk and financial crime risk profile; and

l identifies emerging operational and financial crime risks, and appropriate actions to address these.

Westpac Group Remuneration Oversight Committee (ROC)

l provides assurance to the Chief Executive Officer (CEO) and the Board Remuneration Committee (BRC) that remuneration arrangements across Westpac Group including the Westpac Group Remuneration Policy and variable reward plans, are considered from a Human Resources, Risk, Finance, Legal and Compliance perspective in line with regulatory and legislative requirements;

l reviews and makes recommendations to the CEO for recommendation to the BRC on the Westpac Group Remuneration Policy and provides assurance that Westpac operates appropriate remuneration arrangements that fairly and responsibly reward individuals having regard to customer interests, long term financial soundness and prudent risk management;

l reviews and monitors remuneration outcomes (other than for Group Executives) for Responsible Persons (as defined in the Group Fit and Proper Policy), risk and financial control employees, and all other employees for whom a significant portion of total remuneration is based on performance and whose activities, either individually or collectively, may impact the financial soundness of Westpac;

l reviews and makes recommendations to the CEO for recommendation to the BRC on the criteria and rationale for determining the total quantum of the Group variable reward pool; and

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document l reviews and monitors risk adjustments to remuneration across the Group, including the consideration of malus.

Westpac Group March 2017 Pillar 3 report | 9

Pillar 3 report Controlling and managing risk

Risk management governance structure (continued)

Risk and Compliance functions Risk Function

l assist the Board, Board Committees and senior management to establish, maintain and review the Risk Management Strategy and supporting risk management frameworks;

l operate within Board approved risk appetite;

l define risk appetite, risk concentration limits and authorities;

l notify the Board or Board Committees of any significant breach, or material deviation from the risk management framework;

l monitor emerging risk issues and risk concentration;

l monitor resources and capabilities (including systems and data); and

l maintain resources with the skills and tools required to fulfil their risk responsibilities and support the strategy.

Compliance Function

l assist the Board, Board Committees and senior management to establish, maintain and review compliance management frameworks;

l design, implement and monitor controls to ensure compliance with internal, regulatory and legislative requirements;

l provide independent advice on design, implementation and monitoring of controls and compliance;

l reports on compliance standards and directs the review and development of compliance policies, compliance plans, controls and procedures; and

l maintain resources with the skills and tools required to fulfil their compliance responsibilities and support the strategy.

Independent internal review Group Audit

l reviews the adequacy and effectiveness of management controls over risk.

Divisional business units Business Units

l responsible for identifying, evaluating and managing the risks that they originate within approved risk appetite and policies; and

l establish and maintain appropriate risk management and compliance controls, resources and self-assurance processes.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 10 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Controlling and managing risk

Roles and responsibilities

Our approach to risk management is that ‘risk is everyone’s business’ and that responsibility and accountability for risk begins with the business units that originate the risk.

The 1st Line of Defence – Risk identification, risk management and self-assurance

Divisional business units are responsible for identifying, evaluating and managing the risks that they originate within approved risk appetite and policies. They are required to establish and maintain appropriate risk management controls, resources and self-assurance processes.

The 2nd Line of Defence – Establishment of risk management frameworks and policies and risk management oversight

Our 2nd Line of Defence is a separate risk and compliance advisory, control, assurance and monitoring function which establishes frameworks, policies, limits and processes for the management, monitoring and reporting of risk. The 2nd Line of Defence may approve risks outside the authorities granted to the 1st Line, and evaluates and opines on the adequacy and effectiveness of 1st Line controls and application of frameworks and policies and, where necessary, requires improvement and monitors the 1st Line’s progress toward remediation of identified deficiencies.

The 3rd Line of Defence – Independent internal review

Group Audit is an independent assurance function that evaluates and opines on the adequacy and effectiveness of both 1st and 2nd Line risk management approaches and tracks remediation progress, with the aim of providing the Board, and senior executives, with comfort that the Group’s governance, risk management and internal controls are operating effectively.

Our overall risk management approach is summarised in the following diagram:

Westpac Group March 2017 Pillar 3 report | 11

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pillar 3 report Group structure

Westpac seeks to ensure that it is adequately capitalised at all times. APRA applies a tiered approach to measuring Westpac’s capital adequacy1 by assessing financial strength at three levels:

l Level 1, comprising Westpac Banking Corporation and its subsidiary entities that have been approved by APRA as being part of a single ‘Extended Licensed Entity’ (ELE) for the purposes of measuring capital adequacy; l Level 2, the consolidation of Westpac Banking Corporation and all its subsidiary entities except those entities specifically excluded by APRA regulations. The head of the Level 2 group is Westpac Banking Corporation; and l Level 3, the consolidation of Westpac Banking Corporation and all its subsidiary entities.

Unless otherwise specified, all quantitative disclosures in this report refer to the prudential assessment of Westpac’s financial strength on a Level 2 basis2.

The Westpac Group

The following diagram shows the Level 3 conglomerate group and illustrates the different tiers of regulatory consolidation.

Accounting consolidation3

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries (including structured entities) controlled by Westpac. Westpac and its subsidiaries are referred to collectively as the ‘Group’. The effects of all transactions between entities in the Group are eliminated. Control exists when the parent entity is exposed to, or has rights to, variable returns from its involvement with an entity, and has the ability to affect those returns through its power over that entity. Subsidiaries are fully consolidated from the date on which control commences and they are no longer consolidated from the date that control ceases.

Group entities excluded from the regulatory consolidation at Level 2

Regulatory consolidation at Level 2 covers the global operations of Westpac and its subsidiary entities, including other controlled banking, securities and financial entities, except for those entities involved in the following business activities:

l insurance; l acting as manager, responsible entity, approved trustee, trustee or similar role in relation to funds management; l non-financial (commercial) operations; or l special purpose entities to which assets have been transferred in accordance with the requirements of APS120 Securitisation.

Retained earnings and equity investments in subsidiary entities excluded from the consolidation at Level 2 are deducted from capital, with the exception of securitisation special purpose entities.

1 APS110 Capital Adequacy outlines the overall framework adopted by APRA for the purpose of assessing the capital adequacy of an ADI.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2 Impaired assets and provisions held in Level 3 entities are excluded from the tables in this report. 3 Refer to Note 1 of Westpac’s 2016 Annual Financial Report for further details.

12 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Group structure

Westpac New Zealand Limited

Westpac New Zealand Limited (WNZL), a wholly owned subsidiary entity, is a registered bank incorporated in New Zealand and regulated by the Reserve Bank of New Zealand1. WNZL uses the Advanced IRB approach for credit risk and the AMA for operational risk. For the purposes of determining Westpac’s capital adequacy, Westpac New Zealand Limited is consolidated at Level 2.

Restrictions and major impediments on the transfer of funds or regulatory capital within the Group

Minimum capital (‘thin capitalisation’) rules

Tax legislation in most jurisdictions in which the Group operates prescribes minimum levels of capital that must be retained in that jurisdiction to avoid a portion of the interest costs incurred in the jurisdiction ceasing to be tax deductible. Capital for these purposes includes both contributed capital and non-distributed retained earnings. Westpac seeks to maintain sufficient capital/retained earnings to comply with these rules.

Tax costs associated with repatriation

Repatriation of retained earnings (and capital) may result in tax being payable in either the jurisdiction from which the repatriation occurs or Australia on receipt of the relevant amounts. This cost would reduce the amount actually repatriated.

Intra-group exposure limits

Exposures to related entities are managed within the prudential limits prescribed by APRA in APS222 Associations with Related Entities2. Westpac has an internal limit structure and approval process governing credit exposures to related entities. This structure and approval process, combined with APRA’s prudential limits, is designed to reduce the potential for unacceptable contagion risk.

Prudential regulation of subsidiary entities

Certain subsidiary banking, insurance and trustee entities are subject to local prudential regulation in their own right, including capital adequacy requirements and investment or intra-group exposure limits. Westpac seeks to ensure that its subsidiary entities are adequately capitalised and adhere to regulatory requirements at all times. There are no capital deficiencies in subsidiary entities excluded from the regulatory consolidation at Level 2.

1 Other subsidiary banking entities in the Group include Westpac Bank-PNG-Limited and Westpac Europe Limited. 2 For the purposes of APS222, subsidiaries controlled by Westpac, other than subsidiaries that form part of the ELE, represent ‘related entities’. Prudential and internal limits apply to intra-group exposures between the ELE and related entities, both on an individual and aggregate basis.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac Group March 2017 Pillar 3 report | 13

Pillar 3 report Capital overview

Capital Structure

This table shows Westpac’s capital resources under APS111 Capital Adequacy: Measurement of Capital.

31 March 30 September 31 March

$m 2017 2016 2016

Common equity Tier 1 capital

Paid up ordinary capital 33,765 33,469 33,155

Treasury shares (420) (367) (369)

Equity based remuneration 1,226 1,156 1,133

Foreign currency translation reserve (482) (447) (438)

Accumulated other comprehensive income 127 17 (48)

Non-controlling interests - other 57 60 55

Retained earnings 25,206 24,379 23,756

Less retained earnings in life and general insurance, funds management and securitisation entities (1,323) (1,290) (1,156)

Deferred fees 250 258 98

Total common equity Tier 1 capital 58,406 57,235 56,186

Deductions from common equity Tier 1 capital

Goodwill (excluding funds management entities) (8,557) (8,670) (8,745)

Deferred tax assets (1,179) (1,544) (1,499)

Goodwill in life and general insurance, funds management and securitisation entities (1,066) (1,069) (1,069)

Capitalised expenditure (1,859) (1,859) (1,749)

Capitalised software (1,529) (1,521) (1,430)

Investments in subsidiaries not consolidated for regulatory purposes (1,573) (1,533) (1,425)

Regulatory expected loss in excess of eligible provisions1 (915) (737) (730)

General reserve for credit losses adjustment (311) (299) (208)

Securitisation - - (3)

Equity investments (948) (935) (1,045)

Regulatory adjustments to fair value positions (133) (192) (238)

Other Tier 1 deductions (1) (1) (4)

Total deductions from common equity Tier 1 capital (18,071) (18,360) (18,145)

Total common equity Tier 1 capital after deductions 40,335 38,875 38,041

Additional Tier 1 capital

Basel III complying instruments 5,720 5,720 4,019

Basel III transitional instruments 1,190 1,190 1,945

Total Additional Tier 1 capital 6,910 6,910 5,964

Net Tier 1 regulatory capital 47,245 45,785 44,005

Tier 2 capital

Basel III complying instruments 6,703 4,742 3,672

Basel III transitional instruments 3,288 3,840 3,878

Eligible general reserve for credit loss 49 48 48

Basel III transitional adjustment (445) (429) (467)

Total Tier 2 capital 9,595 8,201 7,131

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Deductions from Tier 2 capital

Investments in subsidiaries not consolidated for regulatory purposes (140) (140) (140)

Holdings of own and other financial institutions Tier 2 capital instruments (91) (78) (66)

Total deductions from Tier 2 capital (231) (218) (206)

Net Tier 2 regulatory capital 9,364 7,983 6,925

Total regulatory capital 56,609 53,768 50,930

1 An explanation of the relationship between this deduction, regulatory expected loss and provisions for impairment charges is contained in Appendix IV.

14 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Capital overview

Capital management strategy

Westpac’s approach seeks to balance the fact that capital is an expensive form of funding with the need to be adequately capitalised. Westpac considers the need to balance efficiency, flexibility and adequacy when determining sufficiency of capital and when developing capital management plans.

Westpac evaluates these considerations through an Internal Capital Adequacy Assessment Process (ICAAP), the key features of which include:

l the development of a capital management strategy, including preferred capital range, capital buffers and contingency plans; l consideration of both economic and regulatory capital requirements; l a process that challenges the capital measures, coverage and requirements which incorporates amongst other things, the impact of adverse economic scenarios; and l consideration of the perspectives of external stakeholders including rating agencies, equity investors and debt investors.

Westpac’s preferred capital range

Westpac’s preferred range for its common equity Tier 1 (CET1) capital ratio is 8.75% - 9.25%. The CET1 preferred range takes into consideration:

l Current regulatory minimums; l The capital conservation buffer (CCB) including the Domestic-Systemically Important Bank (D-SIB) surcharge; l Stress testing to calibrate an appropriate buffer against a downturn; and l Quarterly volatility of capital ratios under Basel III due to the half yearly cycle of ordinary dividend payments.

The CCB applicable to Westpac as at 31 March 2017 totals 3.5% and includes a base requirement of 2.5% and Westpac’s D-SIB surcharge of 1%. Should the CET1 capital ratio fall within the CCB (currently between 4.5% and 8.0%) restrictions on distributions apply. Distributions for this purpose are defined as payment of dividends, discretionary bonuses and Additional Tier 1 capital distributions.

The preferred capital range is not currently impacted by the countercyclical buffer requirement, which also came into effect on 1 January 2016, as it is currently set to zero for Australia and New Zealand1.

Westpac’s capital adequacy ratios

% 31 March 2017 30 September 2016 31 March 2016

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Westpac Group at Level 2

Common equity Tier 1 capital ratio 10.0 9.5 10.5

Additional Tier 1 capital 1.7 1.7 1.6

Tier 1 capital ratio 11.7 11.2 12.1

Tier 2 capital 2.3 1.9 1.9

Total regulatory capital ratio 14.0 13.1 14.0

The Westpac Group at Level 1

Common equity Tier 1 capital ratio 10.2 9.7 10.8

Additional Tier 1 capital 1.8 1.9 1.8

Tier 1 capital ratio 12.0 11.6 12.6

Tier 2 capital 2.6 2.1 2.2

Total regulatory capital ratio 14.6 13.7 14.8

Westpac New Zealand Limited’s capital adequacy ratios

% 31 March 2017 30 September 2016 31 March 2016

Westpac New Zealand Limited

Common equity Tier 1 capital ratio 10.7 10.5 10.8

Additional Tier 1 capital - - -

Tier 1 capital ratio 10.7 10.5 10.8

Tier 2 capital 2.1 2.0 2.3

Total regulatory capital ratio 12.8 12.5 13.1

1 The countercyclical buffer has been activated in other jurisdictions where Westpac has exposure. Westpac’s countercyclical buffer requirement resulting from these exposures is less than 1 basis point at 31 March 2017. Refer to Appendix I Regulatory capital reconciliation.

Westpac Group March 2017 Pillar 3 report | 15

Pillar 3 report Capital overview

Capital requirements This table shows risk weighted assets and associated capital requirements1 for each risk type included in the regulatory assessment of Westpac’s capital adequacy. Westpac’s approach to managing these risks, and more detailed disclosures on the prudential assessment of capital requirements, are presented in the following sections of this report.

31 March 2017 IRB Standardised Total Risk Total Capital

$m Approach Approach2 Weighted Assets Required1

Credit risk

Corporate 76,210 1,444 77,654 6,212

Business lending 33,735 1,019 34,754 2,780

Sovereign 1,665 1,148 2,813 225

Bank 5,887 62 5,949 476

Residential mortgages 127,111 4,568 131,679 10,534

Australian credit cards 6,009 - 6,009 481

Other retail 13,538 1,049 14,587 1,167

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Small business 11,482 - 11,482 919

Specialised lending 56,122 392 56,514 4,521

Securitisation 3,992 - 3,992 319

Mark-to-market related credit risk3 - 7,280 7,280 583

Total 335,751 16,962 352,713 28,217

Market risk 7,471 598

Operational risk 31,653 2,532

Interest rate risk in the banking book 8,143 651

Other assets4 4,402 352

Total 404,382 32,350

30 September 2016 IRB Standardised Total Risk Total Capital

$m Approach Approach2 Weighted Assets Required1

Credit risk

Corporate 81,550 1,312 82,862 6,629

Business lending 32,871 1,121 33,992 2,719

Sovereign 1,669 952 2,621 210

Bank 6,815 67 6,882 551

Residential mortgages 123,966 4,352 128,318 10,265

Australian credit cards 5,904 - 5,904 472

Other retail 13,805 1,075 14,880 1,190

Small business 11,930 - 11,930 954

Specialised lending 57,961 349 58,310 4,665

Securitisation 4,067 - 4,067 325

Mark-to-market related credit risk3 - 9,046 9,046 724

Total 340,538 18,274 358,812 28,704

Market risk 7,861 629

Operational risk 33,363 2,669

Interest rate risk in the banking book 5,373 430

Other assets4 4,644 372

Total 410,053 32,804

1 Total capital required is calculated as 8% of total risk weighted assets. 2 Westpac’s Standardised risk weighted assets are categorised based on their equivalent IRB categories. 3 Mark-to-market related credit risk is measured under the standardised approach. It is also known as Credit Valuation Adjustment (CVA) risk. 4 Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets.

16 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Capital overview

31 March 2016 IRB Standardised Total Risk Total Capital

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document $m Approach Approach2 Weighted Assets Required1

Credit risk

Corporate 83,706 1,257 84,963 6,797

Business lending 31,082 1,131 32,213 2,577

Sovereign 1,434 998 2,432 195

Bank 7,884 72 7,956 636

Residential mortgages 77,804 3,994 81,798 6,544

Australian credit cards 6,617 - 6,617 529

Other retail 13,893 1,119 15,012 1,201

Small business 11,150 - 11,150 892

Specialised lending 56,443 352 56,795 4,544

Securitisation 4,424 - 4,424 354

Mark-to-market related credit risk3 - 9,688 9,688 775

Total 294,437 18,611 313,048 25,044

Market risk 9,024 722

Operational risk 32,329 2,586

Interest rate risk in the banking book 4,678 374

Other assets4 4,169 334

Total 363,248 29,060

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Total capital required is calculated as 8% of total risk weighted assets. 2 Westpac’s Standardised risk weighted assets are categorised based on their equivalent IRB categories. 3 Mark-to-market related credit risk and is measured under the standardised approach. It is also known as Credit Valuation Adjustment (CVA) risk. 4 Other assets include cash items, unsettled transactions, fixed assets and other non-interest earning assets.

Westpac Group March 2017 Pillar 3 report | 17

Pillar 3 report Leverage ratio disclosure

Summary leverage ratio

The following table summarises Westpac’s leverage ratio at 31 March 2017. This has been determined using APRA’s definition of the leverage ratio as specified in Attachment D of APS110: Capital Adequacy.1

$ billion 31 March 2017 31 December 2016 30 September 2016 30 June 2016

Tier 1 Capital 47.2 45.0 45.8 43.8

Total Exposures1 892.2 902.2 881.2 889.0

Leverage ratio % 5.3% 5.0% 5.2% 4.9%

Leverage ratio disclosure

$m 31 March 2017

On-balance sheet exposures 1 On-balance sheet items (excluding derivatives and securities financing transactions (SFTs), but including collateral) 793,370 2 (Asset amounts deducted in determining Tier 1 capital) (18,071)

3 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of rows 1 and 2) 775,299

Derivative exposures 4 Replacement cost associated with all derivatives transactions (i.e. net of eligible cash variation margin) 8,832 5 Add-on amounts for potential future credit exposure (PFCE) associated with all derivatives transactions 14,741 6 Gross-up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the Australian Accounting Standards - 7 (Deductions of receivables assets for cash variation margin provided in derivatives transactions) (185) 8 (Exempted central counterparty (CCP) leg of client-cleared trade exposures) - 9 Adjusted effective notional amount of written credit derivatives 7,079 10 (Adjusted effective notional offsets and add-on deductions for written credit derivatives) (6,460)

11 Total derivative exposures (sum of rows 4 to 10) 24,007 SFT exposures 12 Gross SFT assets (with no recognition of netting), after adjusting for sales accounting transactions 12,639 13 (Netted amounts of cash payables and cash receivables of gross SFT assets) - 14 Counterparty credit risk exposure for SFT assets 183 15 Agent transaction exposures -

16 Total SFT exposures (sum of rows 12 to 15) 12,822 Other off-balance sheet exposures 17 Off-balance sheet exposure at gross notional amount 208,601 18 (Adjustments for conversion to credit equivalent amounts) (128,561)

19 Other off-balance sheet exposures (sum of rows 17 and 18) 80,040 Capital and total exposures 20 Tier 1 Capital 47,245

21 Total exposures (sum of rows 3, 11, 16 and 19) 892,168

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Leverage ratio %

22 Leverage ratio 5.3%

1 As defined under APS330 Attachment E leverage ratio disclosure requirements. The definition of total exposures is different to Exposure at Default used elsewhere in this report.

18 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Leverage ratio disclosure

Summary comparison of accounting assets versus leverage ratio exposure measure

$m 31 March 2017

1 Total consolidated assets as per published financial statements 839,993

2 Adjustment for investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes but outside the scope of regulatory (9,339) consolidation

3 Adjustment for assets held on the balance sheet in a fiduciary capacity pursuant to the Australian Accounting Standards but excluded from the leverage ratio - exposure measure

4 Adjustments for derivative financial instruments (638)

5 Adjustment for SFTs (i.e. repos and similar secured lending) 183

6 Adjustment for off-balance sheet exposures (i.e. conversion to credit equivalent amounts of off-balance sheet exposures) 80,040

7 Other adjustments (18,071)

8 Leverage ratio exposure 892,168

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac Group March 2017 Pillar 3 report | 19

Pillar 3 report Credit risk management

Credit risk is the potential for financial loss where a customer or counterparty fails to meet their financial obligations to Westpac. Westpac maintains a credit risk management framework and a number of supporting policies, processes and controls governing the assessment, approval and management of customer and counterparty credit risk. These incorporate the assignment of risk grades, the quantification of loss estimates in the event of default, and the segmentation of credit exposures.

Structure and organisation

The Chief Risk Officer (CRO) is responsible for the effectiveness of overall risk management throughout Westpac, including credit risk. Authorised officers have delegated authority to approve credit risk exposures, including customer risk grades, other credit parameters and their ongoing review. A portion of consumer lending is subject to automated scorecard-based approval. Our largest exposures are approved by our most experienced credit officers. Line business management is responsible for managing credit risks accepted in their business and for maximising risk-adjusted returns from their business credit portfolios, within the approved risk appetite, risk management framework and policies.

Credit risk management framework and policies

Westpac maintains a credit risk management framework and supporting policies that are designed to clearly define roles and responsibilities, acceptable practices, limits and key controls.

The Credit Risk Management Framework describes the principles, methodologies, systems, roles and responsibilities, reports and controls that exist for managing credit risk in Westpac. The Credit Risk Rating System policy describes the credit risk rating system philosophy, design, key features and uses of rating outcomes.

Concentration risk policies cover individual counterparties, specific industries (e.g. property) and individual countries. In addition, we have policies covering risk appetite statements, environmental, social and governance risk (ESG) credit risks and the delegation of credit approval authorities.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document At the divisional level, credit manuals embed the Group’s framework requirements for application in line businesses. These manuals include policies covering the origination, evaluation, approval, documentation, settlement and on-going management of credit risks, and sector policies to guide the extension of credit where industry-specific guidelines are considered necessary.

Credit approval limits govern the extension of credit and represent the formal delegation of credit approval authority to responsible individuals throughout the organisation.

20 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk management

Approach

Westpac adopts two approaches to managing credit risk depending upon the nature of the customer and the product.

Transaction-managed approach

For larger customers, Westpac evaluates credit requests by undertaking detailed individual customer and transaction risk analysis (the ‘transaction-managed’ approach). Such customers are assigned a customer risk grade (CRG) representing Westpac’s estimate of their probability of default (PD). Each facility is assigned a loss given default (LGD). The Westpac credit risk rating system has 20 risk grades for non-defaulted customers and 10 risk grades for defaulted customers. Non-defaulted CRGs down to the level of normally acceptable risk (i.e. D grade – see table below) are mapped to Moody’s and Standard & Poor’s (S&P) external senior ranking unsecured ratings. This mapping is reviewed annually and allows Westpac to integrate the rating agencies’ default history with internal historical data when calculating PDs.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The final assignment of CRGs and LGDs is approved by authorised credit approvers with appropriate delegated approval authority. All material credit exposures are approved by authorised Credit Officers who are part of the risk management stream and operate independently of the areas originating the credit risk proposals. Credit Officer decisions are subject to reviews to ensure consistent quality and confirm compliance with approval authority. Divisional operational units are responsible for maintaining accurate and timely recording of all credit risk approvals and changes to customer and facility data. These units also operate independently of both the areas originating the credit risk proposals and the credit risk approvers. Appropriate segregation of functions is one of the key requirements of our credit risk management framework.

Program-managed approach

High-volume retail customer credit portfolios with homogenous credit risk characteristics are managed on a statistical basis according to pre-determined objective criteria (the ‘program-managed’ approach). Program-managed exposure to a consumer customer may exceed $1 million. Business customer exposures may be program managed for exposure up to $3 million. Quantitative scorecards are used to assign application and behavioural scores to enable risk-based decision making within these portfolios. The scorecard outcomes and decisions are regularly monitored and validated against subsequent customer performance and scorecards are recalibrated or rebuilt when required. For capital estimation and other purposes, risk-based customer segments are created based upon modelled expected PD, Exposure At Default (EAD) and LGD. Accounts are then assigned to respective segments based on customer and account characteristics. Each segment is assigned a quantified measure of its PD, LGD and EAD.

For both transaction-managed and program-managed approaches, CRGs, PDs and LGDs are reviewed at least annually.

Mapping of Westpac risk grades

The table below shows the current alignment between Westpac’s CRGs and the corresponding external rating. Note that only high-level CRG groupings are shown.

Westpac customer Standard & Poor’s Moody’s risk grade rating rating A AAA to AA– Aaa to Aa3 B A+ to A– A1 to A3 C BBB+ to BBB– Baa1 to Baa3 D BB+ to B+ Ba1 to B1 Westpac Rating

E Watchlist F Special mention G Substandard/default H Default

For Specialised Lending Westpac maps exposures to the appropriate supervisory slot based on an assessment that takes into account borrower strength and security quality, as required by APS 113.

Westpac Group March 2017 Pillar 3 report | 21

Pillar 3 report Credit risk management

Mapping of Basel categories to Westpac portfolios

APS113 Capital Adequacy: Internal Ratings-Based Approach to Credit Risk, states that under the Advanced IRB approach to credit risk, an ADI must categorise banking book exposures into six broad IRB asset classes and apply the prescribed treatment for those classes to each credit exposure within them for the purposes of deriving its regulatory capital requirement. Standardised and Securitised portfolios are subject to treatment under APS112 Capital Adequacy: Standardised Approach to Credit Risk and APS120 Securitisation respectively.

APS Asset Class Sub-asset class Westpac category Segmentation criteria

Corporate Corporate Corporate All transaction-managed customers not elsewhere classified where annual turnover exceeds $50 million1.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SME Corporate Business Lending All transaction-managed customers not elsewhere classified where annual turnover is $50 million or less.

Project Finance Specialised Lending-Project Applied to transaction-managed customers where the primary Finance source of debt service, security and repayment is derived from the revenue generated by a completed project (e.g. infrastructure such as toll roads or railways).

Income-producing Real Specialised Lending- Property Applied to transaction-managed customers where the primary Estate Finance source of debt service, security and repayment is derived from either the sale of a property development or income produced by one or more investment properties2.

Sovereign Sovereign Applied to transaction-managed exposures backed by governments.

Bank Bank Applied to transaction-managed exposures to deposit-taking institutions and foreign equivalents.

Residential Mortgage Residential Mortgages Exposures secured by residential mortgages not elsewhere classified.

Qualifying Revolving Retail Australian Credit Cards Program-managed credit cards with low volatility in loss rates. The New Zealand cards portfolio is not eligible for Qualifying Revolving Retail treatment and is classified in Other Retail.

Other Retail Small Business Program-managed business lending exposures under $1 million where complex products are not utilised by the customer.

Other Retail All other program-managed lending to retail customers, including New Zealand credit cards.

1 Includes all NZ agribusiness loans, regardless of turnover. 2 Excludes large diversified property groups and property trusts, which appear in the Corporate asset class.

22 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk management

Mapping of Credit risk approach to Basel categories and exposure types

Approach APS asset class Types of exposures

Transaction-Managed Corporate Direct lending Portfolios Sovereign Contingent lending Bank Derivative counterparty Asset warehousing Underwriting Secondary market trading Foreign exchange settlement Other intra-day settlement obligations

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Program-Managed Residential mortgage Mortgages Portfolios Equity access loans

Qualifying revolving retail Australian credit cards

Other retail Personal loans Overdrafts New Zealand credit cards Auto and equipment finance Business development loans Business overdrafts Other term products

Internal ratings process for transaction-managed portfolios

The process for assigning and approving individual customer PDs and facility LGDs involves:

l Business unit representatives recommend the CRG and facility LGDs under the guidance of criteria set out in established credit policies. Each CRG is associated with an estimated PD; l Authorised officers evaluate the recommendations and approve the final CRG and facility LGDs. Credit officers may override line business unit recommendations; l An expert judgement decisioning process is employed to evaluate CRG and the outputs of various risk grading models are used as one of several inputs into that process; and l Authorised officers’ decisions are subject to reviews to ensure consistent quality and confirm compliance with approval authority.

For on-going exposures to transaction-managed customers, risk grades and facility LGDs are required to be reviewed at least annually, but also whenever material changes occur.

No material deviations from the reference definition of default are permitted.

Internal ratings process for program-managed portfolios

The process for assigning PDs, LGDs and EADs to the program-managed portfolio involves dividing the portfolio into a number of pools per product. These pools are created by analysing the homogeneity of risk characteristics that have historically proven predictive in determining whether an account is likely to go into default.

No material deviations from the reference definition of default are permitted.

Internal credit risk ratings system

In addition to using the credit risk estimates as the basis for regulatory capital purposes, they are also used for the purposes described below:

Economic capital - Westpac allocates economic capital to all exposures. Economic capital includes both credit and non-credit components. Economic credit capital is allocated using a framework that considers estimates of PD, LGD, EAD, total committed exposure and loan tenor, as well as measures of portfolio composition not reflected in regulatory capital formulae.

Provisioning - Impairment provisions are held by Westpac to cover credit losses that are incurred in the loan portfolio. Provisioning includes both individual and collective components. Individual provisions are calculated on impaired loans taking into account management’s best estimate of the present value of future cashflows.

Westpac Group March 2017 Pillar 3 report | 23

Pillar 3 report Credit risk management

Collective provisions are established on a portfolio basis using a framework that considers PD, LGD, EAD, total committed exposure, emergence periods, level of arrears and recent past experience.

Risk-adjusted performance measurement - Business performance is measured using allocated capital, which incorporates charges for economic capital and regulatory capital, including credit capital and capital for other risk types.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pricing - Westpac prices loans to produce an acceptable return on the capital allocated to the loan. Returns include interest income and fees after expected credit losses and other costs.

Credit approval - For transaction-managed facilities, approval authorities are tiered based on the CRG, with lower limits applicable for customers with a higher PD. Program- managed facilities are approved on the basis of application scorecard outcomes and product based approval authorities.

Control mechanisms for the credit risk rating system include:

l Westpac’s credit risk rating system is reviewed annually to confirm that the rating criteria and procedures are appropriate given the current portfolio and external conditions; l All models materially impacting the risk rating process are periodically reviewed in accordance with Westpac’s model risk policy; l Specific credit risk estimates (including PD, LGD and EAD levels) are overseen, reviewed annually and approved by the Credit Risk Estimates Committee (a sub- committee of CREDCO); l Credit Risk Assurance undertake an independent annual end-to-end technical and operational review of the overall process; and l RISKCO and BRCC monitor the risk profile, performance and management of Westpac’s credit portfolio and the development and review of key credit risk policies.

Risk reporting

A comprehensive report on Westpac’s credit risk portfolio is provided to CREDCO, RISKCO and BRCC quarterly. It details the current level of impairment losses, stressed exposures, delinquency trends, provisions, impaired assets and key performance metrics. It reports on portfolio concentrations and large exposures.

Credit risk and asset quality are also reported to the Board each month, including details of impairment losses, stressed exposures, delinquency trends and key performance metrics.

24 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk management

Summary credit risk disclosure

Regulatory

Expected Specific Actual

Risk Regulatory Loss for Provisions Losses for

31 March 2017 Exposure Weighted Expected non-defaulted Impaired for Impaired the 6 months

$m at Default Assets Loss1 exposures Loans Loans ended

Corporate 129,041 76,210 872 503 557 351 159

Business lending 51,143 33,735 662 402 358 213 57

Sovereign 69,130 1,665 2 2 - - -

Bank 20,338 5,887 7 7 - - -

Residential mortgages 528,332 127,111 1,155 970 272 86 38

Australian credit cards 19,953 6,009 326 253 123 63 149

Other retail 18,325 13,538 577 426 259 135 170

Small business 26,884 11,482 301 197 109 50 35

Specialised Lending 66,464 56,122 939 582 278 121 40

Securitisation 24,426 3,992 - - - - -

Standardised2 16,331 16,962 - - 22 11 -

Total 970,367 352,713 4,841 3,342 1,978 1,030 648

Regulatory

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Expected Specific Actual

Risk Regulatory Loss for Provisions Losses for

30 September 2016 Exposure Weighted Expected non-defaulted Impaired for Impaired the 12 months

$m at Default Assets Loss1 exposures Loans Loans ended

Corporate 132,535 81,550 1,026 584 849 412 34

Business lending 48,862 32,871 662 411 316 197 120

Sovereign 70,920 1,669 2 2 - - -

Bank 21,454 6,815 15 8 38 7 5

Residential mortgages 519,560 123,966 951 786 228 79 74

Australian credit cards 20,143 5,904 324 263 83 54 304

Other retail 18,743 13,805 558 446 197 111 370

Small business 28,608 11,930 329 206 106 48 91

Specialised Lending 68,001 57,961 911 615 322 149 53

Securitisation 23,224 4,067 - - - - -

Standardised2 15,527 18,274 - - 20 10 1

Total 967,577 358,812 4,778 3,321 2,159 1,067 1,052

Regulatory

Expected Specific Actual

Risk Regulatory Loss for Provisions Losses for

31 March 2016 Exposure Weighted Expected non-defaulted Impaired for Impaired the 6 months

$m at Default Assets Loss1 exposures Loans Loans ended

Corporate 136,867 83,706 991 478 1,036 468 (4)

Business lending 46,793 31,082 659 371 403 220 50

Sovereign 69,013 1,434 2 2 - - -

Bank 25,486 7,884 22 9 43 14 -

Residential mortgages 499,688 77,804 940 788 199 78 40

Australian credit cards 21,178 6,617 367 302 95 57 147

Other retail 18,401 13,893 601 472 255 137 145

Small business 27,447 11,150 339 195 120 58 32

Specialised Lending 66,011 56,443 902 602 306 137 15

Securitisation 23,713 4,424 - - 3 - -

Standardised2 14,830 18,611 - - 27 16 -

Total 949,427 313,048 4,823 3,219 2,487 1,185 425

1 Includes regulatory expected losses for defaulted and non-defaulted exposures. 2 Includes mark-to-market related credit risk.

Westpac Group March 2017 Pillar 3 report | 25

Pillar 3 report Credit risk management

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Loan impairment provisions

Provisions for loan impairment losses represent management’s best estimate of the losses incurred in the loan portfolios as at the balance date. There are two components of Westpac’s loan impairment provisions: individually assessed provisions (IAPs) and collectively assessed provisions (CAPs).

In determining IAPs, relevant considerations that have a bearing on the expected future cash flows are taken into account, for example:

l the business prospects of the customer; l the realisable value of collateral; l Westpac’s position relative to other claimants; l the reliability of customer information; and l the likely cost and duration of the work-out process.

These judgements and estimates can change with time as new information becomes available or as work-out strategies evolve, resulting in revisions to the impairment provision as individual decisions are made.

CAPs are established on a portfolio basis taking into account:

l the level of arrears; l collateral; l past loss experience; l expected defaults based on portfolio trends; and l the economic environment.

The most significant factors in establishing these provisions are estimated loss rates and the related emergence periods. The future credit quality of these portfolios is subject to uncertainties that could cause actual credit losses to differ from reported loan impairment provisions. These uncertainties include:

l differences between the expected and actual economic environment; l interest rates and unemployment levels; l repayment behaviour; and l bankruptcy rates.

Regulatory classification of loan impairment provisions

APS220 Credit Quality requires that Westpac report specific provisions and a General Reserve for Credit Loss (GRCL). All IAPs raised under Australian Accounting Standards (AAS) are classified as specific provisions. All CAPs raised under AAS are either classified into specific provisions or a GRCL.

A GRCL adjustment is made for the amount of GRCL that Westpac reports for regulatory purposes under APS220 in addition to provisions reported by Westpac under AAS. For capital adequacy purposes the GRCL adjustment is deducted from CET1 capital. Eligible GRCL is included in Tier 2 capital.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 26 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk management

Loan impairment provisions

31 March 2017 AAS Provisions GRCL Total Regulatory

$m IAPs CAPs Total Adjustment Provisions

Specific Provisions

for impaired loans 787 243 1,030 NA 1,030

for defaulted but not impaired loans NA 173 173 NA 173

General Reserve for Credit Loss NA 2,310 2,310 311 2,621

Total provisions for impairment charges 787 2,726 3,513 311 3,824

30 September 2016 AAS Provisions GRCL Total Regulatory

$m IAPs CAPs Total Adjustment Provisions

Specific Provisions

for impaired loans 869 198 1,067 NA 1,067

for defaulted but not impaired loans NA 146 146 NA 146

General Reserve for Credit Loss NA 2,389 2,389 299 2,688

Total provisions for impairment charges 869 2,733 3,602 299 3,901

31 March 2016 AAS Provisions GRCL Total Regulatory

$m IAPs CAPs Total Adjustment1 Provisions

Specific Provisions

for impaired loans 952 233 1,185 NA 1,185

for defaulted but not impaired loans NA 133 133 NA 133

General Reserve for Credit Loss NA 2,351 2,351 208 2,559

Total provisions for impairment charges 952 2,717 3,669 208 3,877

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac Group March 2017 Pillar 3 report | 27

Pillar 3 report Credit risk exposures

The following tables segment the portfolio by characteristics that provide an insight into the assessment of credit risk concentration.

Exposure at Default by major type

31 March 2017 On balance Off-balance sheet Total Exposure Average

$m sheet Non-market related Market related at Default 6 months ended1

Corporate 60,891 57,509 10,641 129,041 132,442

Business lending 37,614 13,529 - 51,143 50,397

Sovereign 63,313 2,073 3,744 69,130 73,596

Bank 12,450 2,157 5,731 20,338 21,184

Residential mortgages 449,596 78,736 - 528,332 525,197

Australian credit cards 10,105 9,848 - 19,953 20,060

Other retail 14,680 3,645 - 18,325 18,592

Small business 21,463 5,421 - 26,884 27,466

Specialised lending 51,518 13,781 1,165 66,464 67,376

Securitisation2 18,037 6,206 183 24,426 23,914

Standardised 13,029 1,173 2,129 16,331 16,078

Total 752,696 194,078 23,593 970,367 976,302

30 September 2016 On balance Off-balance sheet Total Exposure Average

$m sheet Non-market related Market related at Default 12 months ended3

Corporate 63,209 57,928 11,398 132,535 136,839

Business lending 36,394 12,468 - 48,862 47,713

Sovereign 64,879 2,088 3,953 70,920 69,482

Bank 13,592 1,630 6,232 21,454 24,527

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Residential mortgages 440,537 79,023 - 519,560 502,597

Australian credit cards 10,033 10,110 - 20,143 20,715

Other retail 14,987 3,756 - 18,743 17,406

Small business 22,599 6,009 - 28,608 25,782

Specialised lending 52,269 14,258 1,474 68,001 66,231

Securitisation2 18,830 4,222 172 23,224 23,421

Standardised 12,644 1,417 1,466 15,527 17,950

Total 749,973 192,909 24,695 967,577 952,663

31 March 2016 On balance Off-balance sheet Total Exposure Average

$m sheet Non-market related Market related at Default 6 months ended4

Corporate 62,406 62,493 11,968 136,867 138,170

Business lending 34,915 11,878 - 46,793 47,128

Sovereign 62,602 1,934 4,477 69,013 68,847

Bank 13,661 1,539 10,286 25,486 26,564

Residential mortgages 423,467 76,221 - 499,688 494,330

Australian credit cards 10,467 10,711 - 21,178 21,087

Other retail 14,808 3,593 - 18,401 16,492

Small business 21,725 5,722 - 27,447 23,922

Specialised lending 50,067 14,709 1,235 66,011 65,161

Securitisation2 18,550 5,048 115 23,713 23,582

Standardised 11,915 1,343 1,572 14,830 19,637

Total 724,583 195,191 29,653 949,427 944,920

1 Average is based on exposures as at 31 March 2017, 31 December 2016, and 30 September 2016. 2 EAD associated with securitisations is for the banking book only. 3 Average is based on exposures as at 30 September 2016, 30 June 2016, 31 March 2016, 31 December 2015, and 30 September 2015. 4 Average is based on exposures as at 31 March 2016, 31 December 2015, and 30 September 2015.

28 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Exposure at Default by measurement method

31 March 2017 IRB Standardised Total Exposure

$m Approach Approach at Default

Corporate 129,041 3,939 132,980

Business lending 51,143 1,012 52,155

Sovereign 69,130 1,148 70,278

Bank 20,338 62 20,400

Residential mortgages 528,332 7,445 535,777

Australian credit cards 19,953 - 19,953

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other retail 18,325 2,337 20,662

Small business 26,884 - 26,884

Specialised lending 66,464 388 66,852

Securitisation 24,426 - 24,426

Total 954,036 16,331 970,367

30 September 2016 IRB Standardised Total Exposure

$m Approach Approach at Default

Corporate 132,535 3,202 135,737

Business lending 48,862 1,113 49,975

Sovereign 70,920 952 71,872

Bank 21,454 67 21,521

Residential mortgages 519,560 7,232 526,792

Australian credit cards 20,143 - 20,143

Other retail 18,743 2,613 21,356

Small business 28,608 - 28,608

Specialised lending 68,001 348 68,349

Securitisation 23,224 - 23,224

Total 952,050 15,527 967,577

31 March 2016 IRB Standardised Total Exposure

$m Approach Approach at Default

Corporate 136,867 2,963 139,830

Business lending 46,793 1,130 47,923

Sovereign 69,013 987 70,000

Bank 25,486 72 25,558

Residential mortgages 499,688 6,670 506,358

Australian credit cards 21,178 - 21,178

Other retail 18,401 2,658 21,059

Small business 27,447 - 27,447

Specialised lending 66,011 350 66,361

Securitisation 23,713 - 23,713

Total 934,597 14,830 949,427

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac Group March 2017 Pillar 3 report | 29

Pillar 3 report Credit risk exposures

Exposure at Default by industry classification

Property Accommodation,Agriculture, Government services & Total 31 March 2017 cafes & forestry & Finance &administration business Transport & Retail Exposure $m restaurants fishingConstruction insurance & defenceManufacturing Mining Property services Services1 Trade2 storage Utilities3 lending Other at Default

Corporate 2,767 9,150 3,536 12,829 82 23,289 7,793 6,549 9,149 11,476 19,277 10,858 11,409 - 877 129,041

Business 5,631 6,951 3,700 2,437 9 4,540 594 227 6,415 5,953 9,654 2,665 405 - 1,962 51,143 lending

Sovereign - - - 13,890 52,666 149 120 - 7 1,031 - 126 1,141 - - 69,130

Bank - - - 20,254 34 - - - 50 ------20,338

Residential ------528,332 - 528,332 mortgages

Australian ------19,953 - 19,953 credit cards

Other retail ------18,325 - 18,325

Small business 861 2,271 3,547 1,651 287 1,414 231 1,689 4,068 2,595 3,010 1,754 261 - 3,245 26,884

Specialised 419 - 23 117 - 17 1,287 56,928 105 1,965 13 3,479 1,914 - 197 66,464 lending

Securitisation - - - 23,433 - 50 - - 657 - 286 - - - - 24,426

Standardised 108 6 152 3,196 1,149 223 14 393 144 86 775 216 27 9,780 62 16,331

Total 9,786 18,378 10,958 77,807 54,227 29,682 10,039 65,786 20,595 23,106 33,015 19,098 15,157 576,390 6,343 970,367

1 Includes education, health & community services, cultural & recreational services and personal & other services. 2 Includes wholesale trade and retail trade. 3 Includes electricity, gas & water, and communication services.

30 | Westpac Group September 2016 Pillar 3 report

Pillar 3 report Credit risk exposures

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property Total Accommodation, Agriculture, Finance Government services & Exposure 30 September 2016 cafes & forestry & & administration business Transport & Retail at $m restaurants fishing Construction insurance & defence Manufacturing Mining Property services Services1 Trade2 storage Utilities3 lending Other Default

Corporate 2,423 9,291 3,597 14,552 79 21,440 8,853 7,427 8,803 10,470 22,590 10,670 11,292 - 1,048 132,535

Business lending 5,453 6,592 3,471 2,363 9 4,465 669 319 5,969 5,584 9,143 2,659 462 - 1,704 48,862

Sovereign - - - 15,959 53,184 149 125 - 8 593 - 127 775 - - 70,920

Bank - - - 21,299 155 ------21,454

Residential mortgages ------519,560 - 519,560

Australian credit cards ------20,143 - 20,143

Other retail ------18,743 - 18,743

Small business 887 2,433 3,692 1,747 211 1,560 239 2,144 4,143 2,661 3,493 1,815 285 - 3,298 28,608

Specialised lending 351 2 6 123 - 28 1,362 58,305 134 2,324 14 3,425 1,731 - 196 68,001

Securitisation - - - 22,568 - 173 - - 473 - - - 10 - - 23,224

Standardised 110 7 160 2,458 953 232 26 352 129 80 869 212 40 9,842 57 15,527

Total 9,224 18,325 10,926 81,069 54,591 28,047 11,274 68,547 19,659 21,712 36,109 18,908 14,595 568,288 6,303 967,577

1 Includes education, health & community services, cultural & recreational services and personal & other services. 2 Includes wholesale trade and retail trade. 3 Includes electricity, gas & water, and communication services.

Westpac Group September 2016 Pillar 3 report | 31

Pillar 3 report Credit risk exposures

Property Total Accommodation, Agriculture, Government services & Exposure 31 March 2016 cafes & forestry & Finance & administration business Transport & Retail at $m restaurants fishing Construction insurance & defence Manufacturing Mining Property services Services1 Trade2 storage Utilities3 lending Other Default

Corporate 2,459 8,418 3,685 17,091 51 23,107 9,165 8,186 8,647 10,175 22,827 10,636 11,339 - 1,081 136,867

Business lending 5,792 6,361 3,208 2,159 5 4,150 593 306 5,594 5,357 8,807 2,528 395 - 1,538 46,793

Sovereign - - - 18,060 49,460 188 260 - 4 515 5 29 492 - - 69,013

Bank - - - 25,392 24 ------70 25,486

Residential mortgages ------499,688 - 499,688

Australian credit cards ------21,178 - 21,178

Other retail ------18,401 - 18,401

Small business 862 2,495 3,622 1,718 161 1,572 247 2,252 4,064 2,573 3,697 1,789 278 - 2,117 27,447

Specialised lending 330 2 8 116 - 27 1,240 56,804 149 2,138 14 3,432 1,555 - 196 66,011

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Securitisation - - - 23,163 - 173 - 15 353 - - - 9 - - 23,713

Standardised 109 12 154 2,245 987 221 32 355 133 85 808 264 39 9,326 60 14,830

Total 9,552 17,288 10,677 89,944 50,688 29,438 11,537 67,918 18,944 20,843 36,158 18,678 14,107 548,593 5,062 949,427

1 Includes education, health & community services, cultural & recreational services and personal & other services. 2 Includes wholesale trade and retail trade. 3 Includes electricity, gas & water, and communication services.

32 | Westpac Group September 2016 Pillar 3 report

Pillar 3 report Credit risk exposures

Exposure at Default by geography1

31 March 2017 Total Exposure

$m Australia New Zealand Americas Asia Europe Pacific at Default

Corporate 87,751 20,496 6,266 11,559 2,969 - 129,041

Business lending 46,963 4,180 - - - - 51,143

Sovereign 58,524 6,455 3,969 182 - - 69,130

Bank 16,502 413 105 3,285 33 - 20,338

Residential mortgages 479,176 48,770 - 386 - - 528,332

Australian credit cards 19,953 - - - - - 19,953

Other retail 14,654 3,671 - - - - 18,325

Small business 24,628 2,256 - - - - 26,884

Specialised lending 59,577 6,887 - - - - 66,464

Securitisation 21,071 3,015 - 340 - - 24,426

Standardised 12,808 - - 484 - 3,039 16,331

Total 841,607 96,143 10,340 16,236 3,002 3,039 970,367

30 September 2016 Total Exposure

$m Australia New Zealand Americas Asia Europe Pacific at Default

Corporate 87,627 21,439 5,519 14,179 3,771 - 132,535

Business lending 44,317 4,545 - - - - 48,862

Sovereign 57,518 6,612 6,734 56 - - 70,920

Bank 17,383 1,305 105 2,657 4 - 21,454

Residential mortgages 469,999 49,150 - 411 - - 519,560

Australian credit cards 20,143 - - - - - 20,143

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other retail 14,902 3,841 - - - - 18,743

Small business 26,186 2,422 - - - - 28,608

Specialised lending 61,067 6,934 - - - - 68,001

Securitisation 19,963 2,921 - 340 - - 23,224

Standardised 11,845 - - 781 - 2,901 15,527

Total 830,950 99,169 12,358 18,424 3,775 2,901 967,577

31 March 2016 Total Exposure

$m Australia New Zealand Americas Asia Europe Pacific at Default

Corporate 91,682 19,971 5,810 16,208 3,196 - 136,867

Business lending 42,847 3,946 - - - - 46,793

Sovereign 54,682 5,736 8,251 344 - - 69,013

Bank 20,052 1,516 105 3,785 28 - 25,486

Residential mortgages 454,526 44,731 - 431 - - 499,688

Australian credit cards 21,178 - - - - - 21,178

Other retail 14,715 3,686 - - - - 18,401

Small business 25,079 2,368 - - - - 27,447

Specialised lending 59,294 6,717 - - - - 66,011

Securitisation 20,717 2,657 - 339 - - 23,713

Standardised 11,065 - - 787 - 2,978 14,830

Total 815,837 91,328 14,166 21,894 3,224 2,978 949,427

1 Geographic segmentation of exposures is based on the location of the office in which these items were booked.

Westpac Group March 2017 Pillar 3 report | 33

Pillar 3 report Credit risk exposures

Exposure at Default by residual contractual maturity

31 March 2017 Total Exposure

$m On demand < 12 months 1 to < 3 years 3 to < 5 years > 5 years at Default

Corporate 14,734 26,277 54,084 27,880 6,066 129,041

Business lending 3,194 11,873 24,449 6,634 4,993 51,143

Sovereign 761 25,560 13,587 15,403 13,819 69,130

Bank 3,104 5,156 8,000 3,545 533 20,338

Residential mortgages 38,066 5,553 30,153 9,561 444,999 528,332

Australian credit cards 19,953 - - - - 19,953

Other retail 3,310 295 6,329 5,171 3,220 18,325

Small business 3,620 1,933 7,543 8,097 5,691 26,884

Specialised lending 498 21,227 31,812 8,770 4,157 66,464

Securitisation 58 8,255 4,892 3,184 8,037 24,426

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Standardised 1,429 548 5,533 670 8,151 16,331

Total 88,727 106,677 186,382 88,915 499,666 970,367

30 September 2016 Total Exposure

$m On demand < 12 months 1 to < 3 years 3 to < 5 years > 5 years at Default

Corporate 16,033 26,400 54,853 29,182 6,067 132,535

Business lending 2,870 11,108 23,665 6,817 4,402 48,862

Sovereign 808 28,754 11,200 16,547 13,611 70,920

Bank 2,274 6,260 8,342 3,929 649 21,454

Residential mortgages 37,759 5,616 31,490 12,105 432,590 519,560

Australian credit cards 20,143 - - - - 20,143

Other retail 3,491 277 6,421 5,245 3,309 18,743

Small business 2,833 2,326 9,251 8,026 6,172 28,608

Specialised lending 631 20,737 31,248 10,109 5,276 68,001

Securitisation 1,204 7,154 5,183 2,402 7,281 23,224

Standardised 1,456 554 5,302 554 7,661 15,527

Total 89,502 109,186 186,955 94,916 487,018 967,577

31 March 2016 Total Exposure

$m On demand < 12 months 1 to < 3 years 3 to < 5 years > 5 years at Default

Corporate 17,161 28,323 51,092 33,181 7,110 136,867

Business lending 2,857 10,236 22,692 6,828 4,180 46,793

Sovereign 700 29,854 10,560 13,093 14,806 69,013

Bank 3,247 7,627 9,591 3,635 1,386 25,486

Residential mortgages 37,059 6,228 28,677 12,569 415,155 499,688

Australian credit cards 21,178 - - - - 21,178

Other retail 3,444 271 6,273 5,138 3,275 18,401

Small business 2,870 2,326 8,440 7,596 6,215 27,447

Specialised lending 560 19,987 29,096 11,634 4,734 66,011

Securitisation 118 9,559 3,965 1,936 8,135 23,713

Standardised 1,462 535 5,053 604 7,176 14,830

Total 90,656 114,946 175,439 96,214 472,172 949,427

34 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Impaired and past due loans

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The following tables disclose the crystallisation of credit risk as impairment and loss. Analysis of exposures 90 days past due not impaired, impaired loans, related provisions and actual losses are broken down by concentrations reflecting Westpac’s asset categories, industry and geography.

Impaired and past due loans by portfolio

Items Specific Specific Actual

31 March 2017 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 6 months ended

Corporate 23 557 351 63% 159

Business lending 228 358 213 59% 57

Sovereign - - - - -

Bank - - - - -

Residential mortgages 2,712 272 86 32% 38

Australian credit cards - 123 63 51% 149

Other retail - 259 135 52% 170

Small business 124 109 50 46% 35

Specialised lending 323 278 121 44% 40

Securitisation - - - - -

Standardised 22 22 11 50% -

Total 3,432 1,978 1,030 52% 648

Items Specific Specific Actual

30 September 2016 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 12 months ended

Corporate 59 849 412 49% 34

Business lending 274 316 197 62% 120

Sovereign - - - - -

Bank - 38 7 18% 5

Residential mortgages 2,597 228 79 35% 74

Australian credit cards - 83 54 65% 304

Other retail - 197 111 56% 370

Small business 127 106 48 45% 91

Specialised lending 107 322 149 46% 53

Securitisation - - - - -

Standardised 17 20 10 50% 1

Total 3,181 2,159 1,067 49% 1,052

Items Specific Specific Actual

31 March 2016 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 6 months ended

Corporate 69 1,036 468 45% (4)

Business lending 275 403 220 55% 50

Sovereign - - - - -

Bank - 43 14 33% -

Residential mortgages 2,130 199 78 39% 40

Australian credit cards - 95 57 60% 147

Other retail - 255 137 54% 145

Small business 91 120 58 48% 32

Specialised lending 94 306 137 45% 15

Securitisation - 3 - - -

Standardised 10 27 16 59% -

Total 2,669 2,487 1,185 48% 425

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac Group March 2017 Pillar 3 report | 35

Pillar 3 report Credit risk exposures

Impaired and past due loans by industry classification

Items Specific Specific Actual

31 March 2017 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 6 months ended

Accommodation, cafes & restaurants 32 51 32 63% 10

Agriculture, forestry & fishing 52 61 26 43% 7

Construction 46 76 41 54% 8

Finance & insurance 28 22 7 32% 3

Government administration & defence - - - - -

Manufacturing 53 261 154 59% 8

Mining 10 119 68 57% 7

Property 182 301 112 37% 39

Property services & business services 57 132 96 73% 175

Services1 230 137 93 68% 3

Trade2 75 107 72 67% 16

Transport & storage 19 40 19 48% 8

Utilities3 4 3 - - -

Retail lending 2,635 598 304 51% 359

Other 9 70 6 9% 5

Total 3,432 1,978 1,030 52% 648

Items Specific Specific Actual

30 September 2016 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 12 months ended

Accommodation, cafes & restaurants 42 62 42 68% 18

Agriculture, forestry & fishing 76 78 32 41% 13

Construction 52 61 27 44% 20

Finance & insurance 32 68 15 22% (21)

Government administration & defence - - - - -

Manufacturing 43 346 155 45% 21

Mining 19 149 71 48% 18

Property 209 358 175 49% 50

Property services & business services 64 355 231 65% 43

Services1 21 32 19 59% 34

Trade2 86 93 65 70% 29

Transport & storage 19 44 19 43% 47

Utilities3 7 3 - - 1

Retail lending 2,504 440 207 47% 767

Other 7 70 9 13% 12

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total 3,181 2,159 1,067 49% 1,052

Items Specific Specific Actual

31 March 2016 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 6 months ended

Accommodation, cafes & restaurants 44 82 41 50% 22

Agriculture, forestry & fishing 91 83 34 41% 14

Construction 46 54 24 44% 28

Finance & insurance 33 81 28 35% (18)

Government administration & defence - - - - -

Manufacturing 27 455 176 39% 35

Mining 13 149 83 56% 1

Property 141 366 179 49% 29

Property services & business services 70 413 268 65% 51

Services1 32 34 19 56% 56

Trade2 77 97 61 63% 32

Transport & storage 32 117 62 53% 25

Utilities3 2 1 1 100% 1

Retail lending 2,052 500 200 40% 125

Other 9 55 9 16% 24

Total 2,669 2,487 1,185 48% 425

1 Includes education, health & community services, cultural & recreational services and personal & other services. 2 Includes wholesale trade and retail trade. 3 Includes electricity, gas & water, and communication services.

36 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Impaired and past due loans by geography1

Items Specific Specific Actual

31 March 2017 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 6 months ended

Australia 3,297 1,768 957 54% 634

New Zealand 113 192 66 34% 14

Americas - - - - -

Asia - 3 - - -

Europe - - - - -

Pacific 22 15 7 47% -

Total 3,432 1,978 1,030 52% 648

Items Specific Specific Actual

30 September 2016 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 12 months ended

Australia 3,075 1,869 939 50% 988

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document New Zealand 89 244 106 43% 61

Americas - 31 16 52% -

Asia - 3 - - -

Europe - - - - -

Pacific 17 12 6 50% 3

Total 3,181 2,159 1,067 49% 1,052

Items Specific Specific Actual

31 March 2016 past 90 days Impaired Provisions for Provisions to Losses for the

$m not impaired Loans Impaired Loans Impaired Loans 6 months ended

Australia 2,529 2,080 1,038 50% 400

New Zealand 130 325 113 35% 25

Americas - 60 22 37% -

Asia - 2 - - -

Europe - - - - -

Pacific 10 20 12 60% -

Total 2,669 2,487 1,185 48% 425

1 Geographic segmentation of exposures is based on the location of the office in which these items were booked.

Westpac Group March 2017 Pillar 3 report | 37

Pillar 3 report Credit risk exposures

Movement in provisions for impairment

For the For the For the

6 months ended 6 months ended 6 months ended

31 March 30 September 31 March

$m 2017 2016 2016

Individually assessed provisions

Balance at beginning of the period 869 952 669

Provisions raised 364 256 471

Write-backs (144) (128) (82)

Write-offs (289) (188) (99)

Interest adjustment (6) (9) (4)

Exchange rate and other adjustments (7) (14) (3)

Closing balance 787 869 952

Collectively assessed provisions

Balance at beginning of the period 2,733 2,717 2,663

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Provisions raised 357 374 370

Write-offs (443) (484) (418)

Interest adjustment 95 96 97

Exchange rate and other adjustments (16) 30 5

Closing balance 2,726 2,733 2,717

Total provisions for impairment losses on loans and credit commitments 3,513 3,602 3,669

General reserve for credit losses adjustment 311 299 208

Total provisions plus general reserve for credit losses 3,824 3,901 3,877

38 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Portfolios subject to the standardised approach

This table presents exposures subject to the standardised approach for the calculation of risk weighted assets.

As at 31 March 2017, exposures subject to the standardised approach and categorised by risk weight are primarily Westpac Pacific, Asian retail exposures, the margin lending portfolio, self-managed superannuation fund and some other small portfolios. Mark-to-market related credit risk and qualifying central clearing counterparties exposure1 is also included in the standardised approach.

31 March 2017 Total Exposure Risk Weighted

Risk Weight % at Default $m Assets $m

0% 731 -

2% 2,257 45

20% 1,597 319

35% 844 295

50% 3,348 1,674

75% 2,611 1,958

100% 4,814 4,814

150% 27 41

Default fund contributions1 102 536

Mark-to-market related credit risk - 7,280

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total 16,331 16,962

30 September 2016 Total Exposure Risk Weighted

Risk Weight % at Default $m Assets $m

0% 270 -

2% 2,258 45

20% 1,586 317

35% 1,058 370

50% 3,220 1,610

75% 2,328 1,746

100% 4,709 4,709

150% 18 27

Default fund contributions1 80 404

Mark-to-market related credit risk - 9,046

Total 15,527 18,274

31 March 2016 Total Exposure Risk Weighted

Risk Weight % at Default $m Assets $m

0% 270 -

2% 2,066 41

20% 1,586 317

35% 1,035 362

50% 2,982 1,491

75% 2,044 1,533

100% 4,797 4,797

150% 6 9

Default fund contributions1 44 373

Mark-to-market related credit risk - 9,688

Total 14,830 18,611

1 Portfolios subject to the standardised approach include exposures to qualifying central clearing counterparties used to clear derivative transactions. Derivative counterparty exposure and initial margin are risk weighted at 2%. Default fund contributions to qualifying central clearing counterparties are shown separately and are subject to higher risk weights.

Westpac Group March 2017 Pillar 3 report | 39

Pillar 3 report Credit risk exposures

Portfolios subject to supervisory risk-weights in the IRB approach

Exposures subject to supervisory risk-weights in the IRB approach include assets categorised as specialised lending, where a regulatory capital ‘slotting’ approach applies.

Westpac currently has property finance and project finance credit risk exposures categorised as specialised lending. The ‘Credit Risk Management’ section of this report describes the mapping of Westpac risk grades to both external rating equivalents and regulatory capital ‘slots’.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Property finance

31 March 2017 Exposure at Regulatory Risk Weighted

$m Risk Weight Default Expected Loss Assets

Strong 70% 21,546 85 15,081

Good 90% 29,103 233 26,193

Satisfactory 115% 5,992 168 6,891

Weak 250% 458 37 1,145

Default NA 489 262 -

Total 57,588 785 49,310

30 September 2016 Exposure at Regulatory Risk Weighted

$m Risk Weight Default Expected Loss Assets

Strong 70% 21,309 85 14,916

Good 90% 30,131 241 27,118

Satisfactory 115% 6,555 184 7,538

Weak 250% 368 29 920

Default NA 556 296 -

Total 58,919 835 50,492

31 March 2016 Exposure at Regulatory Risk Weighted

$m Risk Weight Default Expected Loss Assets

Strong 70% 19,554 78 13,688

Good 90% 30,065 241 27,059

Satisfactory 115% 6,830 191 7,855

Weak 250% 419 34 1,048

Default NA 550 299 -

Total 57,418 843 49,650

40 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Project finance

31 March 2017 Exposure at Regulatory Risk Weighted

$m Risk Weight Default Expected Loss Assets

Strong 70% 6,543 27 4,580

Good 90% 1,808 14 1,627

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Satisfactory 115% 171 5 197

Weak 250% 163 13 408

Default NA 191 95 -

Total 8,876 154 6,812

30 September 2016 Exposure at Regulatory Risk Weighted

$m Risk Weight Default Expected Loss Assets

Strong 70% 6,828 27 4,780

Good 90% 1,756 14 1,580

Satisfactory 115% 101 3 116

Weak 250% 397 32 993

Default NA - - -

Total 9,082 76 7,469

31 March 2016 Exposure at Regulatory Risk Weighted

$m Risk Weight Default Expected Loss Assets

Strong 70% 6,376 26 4,463

Good 90% 1,967 16 1,770

Satisfactory 115% 48 1 55

Weak 250% 202 16 505

Default NA - - -

Total 8,593 59 6,793

Westpac Group March 2017 Pillar 3 report | 41

Pillar 3 report Credit risk exposures

Portfolios subject to IRB approaches

Westpac has classified its transaction-managed exposures by the external credit rating to which the internally assigned credit risk grade aligns, as outlined in the ‘Credit Risk Management’ section of this report. Westpac’s internal rating system consists of more risk grades than does the range of external grades, and as a result PD will vary from portfolio to portfolio for the same external grade. Westpac’s program-managed exposures are classified by PD band. The average PD within a band likewise varies from portfolio to portfolio.

For non-defaulted exposures, regulatory expected loss is defined as the product of PD, LGD and EAD. For defaulted exposures, regulatory expected loss is based upon best estimates of loss. Regulatory expected loss is calculated at the facility level and then aggregated. However, multiplying the aggregates of the PD, LGD and EAD, as

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document reported in the tables below (e.g. $128,194 million x 0.96% x 48%), does not always equal the aggregate regulatory expected loss ($503 million) because the product of two averages does not equal the average of a product.

Corporate portfolio by external credit rating

Risk Average

31 March 2017 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 31 - 31 0.01% 71% - 6 19%

AA 2,145 1,141 3,287 0.03% 52% 1 501 15%

A 16,508 10,913 27,443 0.08% 54% 11 8,334 30%

BBB 32,236 24,013 56,284 0.22% 50% 63 28,534 51%

BB 25,743 10,905 36,612 1.14% 40% 160 29,099 79%

B 1,397 157 1,555 4.10% 42% 27 2,121 136%

Other 2,456 526 2,982 20.38% 39% 241 5,947 199%

Subtotal 80,516 47,655 128,194 0.96% 48% 503 74,542 58%

Default 787 32 847 NA 61% 369 1,668 197%

Total 81,303 47,687 129,041 1.61% 48% 872 76,210 59%

Risk Average

30 September 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 104 - 104 0.01% 41% - 19 18%

AA 2,493 1,968 4,464 0.03% 53% 1 765 17%

A 16,251 11,077 27,349 0.07% 54% 11 8,517 31%

BBB 33,469 24,995 58,486 0.23% 50% 68 30,531 52%

BB 25,170 10,644 35,726 1.27% 39% 172 29,825 83%

B 1,742 140 1,883 3.70% 41% 29 2,464 131%

Other 3,069 519 3,586 20.92% 40% 303 7,387 206%

Subtotal 82,298 49,343 131,598 1.09% 48% 584 79,508 60%

Default 859 52 937 NA 57% 442 2,042 218%

Total 83,157 49,395 132,535 1.79% 48% 1,026 81,550 62%

Risk Average

31 March 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 248 - 248 0.01% 29% - 28 11%

AA 3,198 2,298 5,498 0.03% 52% 2 848 15%

A 15,618 13,260 28,902 0.07% 51% 12 9,363 32%

BBB 34,646 25,529 60,210 0.23% 49% 71 31,881 53%

BB 25,385 11,782 37,115 1.24% 40% 182 31,976 86%

B 1,356 211 1,567 3.70% 44% 26 2,130 136%

Other 1,628 553 2,177 19.17% 43% 185 4,825 222%

Subtotal 82,079 53,633 135,717 0.81% 47% 478 81,051 60%

Default 1,075 48 1,150 NA 58% 513 2,655 231%

Total 83,154 53,681 136,867 1.64% 47% 991 83,706 61%

1 Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2 Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.

42 | Westpac Group March 2017 Pillar 3 report

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pillar 3 report Credit risk exposures

Business lending portfolio by external credit rating

Risk Average

31 March 2017 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA ------

AA - 11 11 0.03% 57% - 2 18%

A 114 45 159 0.08% 58% - 44 28%

BBB 1,440 546 1,982 0.22% 26% 1 465 23%

BB 34,144 11,027 45,008 1.53% 31% 220 27,597 61%

B 1,319 205 1,524 4.46% 33% 22 1,291 85%

Other 1,666 180 1,845 21.96% 39% 159 3,215 174%

Subtotal 38,683 12,014 50,529 2.31% 31% 402 32,614 65%

Default 560 29 614 NA 47% 260 1,121 183%

Total 39,243 12,043 51,143 3.48% 31% 662 33,735 66%

Risk Average

30 September 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA ------

AA 8 7 15 0.03% 55% - 1 7%

A 181 75 255 0.08% 51% - 65 25%

BBB 1,599 593 2,185 0.23% 28% 1 593 27%

BB 32,681 9,938 42,383 1.64% 32% 225 26,988 64%

B 1,479 236 1,714 3.70% 33% 21 1,387 81%

Other 1,519 167 1,685 24.75% 39% 164 2,931 174%

Subtotal 37,467 11,016 48,237 2.45% 32% 411 31,965 66%

Default 578 18 625 NA 44% 251 906 145%

Total 38,045 11,034 48,862 3.70% 32% 662 32,871 67%

Risk Average

31 March 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA ------

AA 1 12 13 0.03% 54% - 1 8%

A 173 67 240 0.09% 51% - 63 26%

BBB 1,633 620 2,246 0.23% 28% 1 603 27%

BB 31,174 9,496 40,437 1.63% 32% 212 25,511 63%

B 1,623 226 1,848 3.70% 34% 23 1,526 83%

Other 1,211 124 1,333 25.01% 39% 135 2,367 178%

Subtotal 35,815 10,545 46,117 2.31% 32% 371 30,071 65%

Default 590 25 676 NA 46% 288 1,011 150%

Total 36,405 10,570 46,793 3.72% 32% 659 31,082 66%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2 Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.

Westpac Group March 2017 Pillar 3 report | 43

Pillar 3 report Credit risk exposures

Sovereign portfolio by external credit rating

Risk Average

31 March 2017 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 24,601 200 26,531 0.01% 9% - 356 1%

AA 37,632 1,313 40,225 0.02% 8% 2 896 2%

A 1,648 304 1,956 0.05% 45% - 257 13%

BBB 329 19 352 0.24% 28% - 101 29%

BB 48 18 66 1.28% 47% - 55 83%

B ------

Other ------

Subtotal 64,258 1,854 69,130 0.02% 10% 2 1,665 2%

Default - - - NA - - - -

Total 64,258 1,854 69,130 0.02% 10% 2 1,665 2%

Risk Average

30 September 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 24,383 246 26,444 0.01% 10% - 400 2%

AA 39,080 1,322 42,301 0.02% 8% 2 852 2%

A 1,353 301 1,657 0.05% 41% - 213 13%

BBB 456 4 463 0.31% 27% - 146 32%

BB 43 12 55 1.58% 47% - 58 105%

B ------

Other ------

Subtotal 65,315 1,885 70,920 0.02% 10% 2 1,669 2%

Default - - - NA - - - -

Total 65,315 1,885 70,920 0.02% 10% 2 1,669 2%

Risk Average

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 31 March 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 22,493 221 24,003 0.01% 6% - 300 1%

AA 40,606 1,092 43,353 0.02% 7% 1 744 2%

A 664 268 936 0.05% 24% - 101 11%

BBB 555 102 662 0.30% 33% 1 228 34%

BB 41 18 59 1.60% 47% - 61 103%

B ------

Other ------

Subtotal 64,359 1,701 69,013 0.02% 7% 2 1,434 2%

Default - - - NA - - - -

Total 64,359 1,701 69,013 0.02% 7% 2 1,434 2%

1 Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2 Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.

44 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Bank portfolio by external credit rating

Risk Average

31 March 2017 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 200 - 202 0.01% 11% - 8 4%

AA 9,846 7 9,909 0.03% 55% 2 2,627 27%

A 7,998 287 8,303 0.06% 52% 3 2,211 27%

BBB 1,751 87 1,839 0.21% 52% 2 976 53%

BB 61 12 73 1.21% 35% - 57 78%

B 12 - 12 4.45% 22% - 8 67%

Other ------

Subtotal 19,868 393 20,338 0.07% 53% 7 5,887 29%

Default - - - NA - - - -

Total 19,868 393 20,338 0.07% 53% 7 5,887 29%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Risk Average

30 September 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 265 - 268 0.01% 11% - 11 4%

AA 9,841 105 9,983 0.03% 59% 2 2,803 28%

A 8,351 245 8,609 0.07% 53% 3 2,433 28%

BBB 2,353 77 2,433 0.20% 53% 3 1,276 52%

BB 108 15 123 0.94% 37% - 88 72%

B ------

Other ------

Subtotal 20,918 442 21,416 0.07% 55% 8 6,611 31%

Default 38 - 38 NA 60% 7 204 537%

Total 20,956 442 21,454 0.25% 55% 15 6,815 32%

Risk Average

31 March 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

AAA 526 - 529 0.01% 11% - 20 4%

AA 10,467 5 10,493 0.03% 57% 2 2,674 25%

A 10,786 191 10,984 0.07% 54% 4 3,436 31%

BBB 3,297 83 3,382 0.20% 52% 3 1,690 50%

BB 55 - 55 0.59% 21% - 19 35%

B ------

Other ------

Subtotal 25,131 279 25,443 0.07% 54% 9 7,839 31%

Default 43 - 43 NA 39% 13 45 105%

Total 25,174 279 25,486 0.24% 54% 22 7,884 31%

1 Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2 Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.

Westpac Group March 2017 Pillar 3 report | 45

Pillar 3 report Credit risk exposures

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Residential mortgages portfolio by PD band

Risk Average

31 March 2017 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

0.0 to 0.10 137,274 38,520 176,101 0.05% 20% 17 8,243 5%

0.10 to 0.25 67,027 10,551 77,384 0.21% 20% 32 10,528 14%

0.25 to 1.0 164,290 26,574 190,492 0.54% 20% 206 50,111 26%

1.0 to 2.5 49,739 4,089 53,299 1.42% 20% 153 23,739 45%

2.5 to 10.0 20,007 461 20,451 4.77% 21% 199 17,796 87%

10.0 to 99.99 7,545 48 7,612 23.84% 20% 363 10,467 138%

Subtotal 445,882 80,243 525,339 0.92% 20% 970 120,884 23%

Default 2,984 15 2,993 NA 20% 185 6,227 208%

Total 448,866 80,258 528,332 1.48% 20% 1,155 127,111 24%

Risk Average

30 September 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

0.0 to 0.10 142,508 36,998 179,809 0.04% 20% 14 8,302 5%

0.10 to 0.25 64,966 14,447 79,189 0.17% 20% 27 10,909 14%

0.25 to 1.0 153,855 25,255 178,303 0.47% 20% 171 47,338 27%

1.0 to 2.5 57,369 3,712 60,600 1.41% 20% 175 29,816 49%

2.5 to 10.0 12,908 440 13,312 5.37% 21% 147 13,213 99%

10.0 to 99.99 5,376 13 5,403 23.41% 20% 252 8,036 149%

Subtotal 436,982 80,865 516,616 0.75% 20% 786 117,614 23%

Default 2,936 11 2,944 NA 20% 165 6,352 216%

Total 439,918 80,876 519,560 1.31% 20% 951 123,966 24%

Risk Average

31 March 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

0.0 to 0.10 138,782 36,416 175,516 0.04% 20% 13 4,169 2%

0.10 to 0.25 62,356 8,108 70,283 0.17% 20% 23 5,211 7%

0.25 to 1.0 143,541 29,309 172,220 0.48% 20% 168 26,766 16%

1.0 to 2.5 56,645 3,524 59,733 1.42% 20% 174 20,157 34%

2.5 to 10.0 13,568 427 13,963 5.34% 21% 153 10,020 72%

10.0 to 99.99 5,546 18 5,579 23.06% 20% 257 6,409 115%

Subtotal 420,438 77,802 497,294 0.78% 20% 788 72,732 15%

Default 2,387 10 2,394 NA 20% 152 5,072 212%

Total 422,825 77,812 499,688 1.26% 20% 940 77,804 16%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Outstandings are balances that were drawn down as at the reporting date. 2 Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.

46 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Australian credit cards portfolio by PD band

Risk Average

31 March 2017 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

0.0 to 0.10 2,279 11,033 7,373 0.04% 74% 2 160 2%

0.10 to 0.25 1,340 5,362 4,101 0.14% 76% 4 264 6%

0.25 to 1.0 1,486 1,294 2,252 0.40% 76% 7 349 15%

1.0 to 2.5 2,940 1,281 3,847 1.53% 77% 45 1,621 42%

2.5 to 10.0 1,321 309 1,559 5.80% 76% 69 1,658 106%

10.0 to 99.99 632 75 668 24.81% 76% 126 1,366 204%

Subtotal 9,998 19,354 19,800 1.68% 75% 253 5,418 27%

Default 153 16 153 NA 76% 73 591 386%

Total 10,151 19,370 19,953 2.43% 75% 326 6,009 30%

Risk Average

30 September 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

0.0 to 0.10 2,235 10,940 7,296 0.04% 74% 2 159 2%

0.10 to 0.25 1,334 5,594 4,062 0.14% 76% 4 262 6%

0.25 to 1.0 1,463 1,313 2,247 0.40% 76% 7 344 15%

1.0 to 2.5 2,882 1,354 3,767 1.53% 77% 44 1,585 42%

2.5 to 10.0 1,368 692 1,975 5.28% 75% 79 1,945 98%

10.0 to 99.99 653 77 698 24.12% 76% 127 1,416 203%

Subtotal 9,935 19,970 20,045 1.74% 75% 263 5,711 28%

Default 98 11 98 NA 76% 61 193 197%

Total 10,033 19,981 20,143 2.22% 75% 324 5,904 29%

Risk Average

31 March 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

0.0 to 0.10 2,253 11,117 7,366 0.04% 74% 2 167 2%

0.10 to 0.25 1,334 5,633 4,108 0.14% 76% 4 266 6%

0.25 to 1.0 1,546 1,388 2,373 0.42% 76% 8 376 16%

1.0 to 2.5 3,003 2,073 4,369 1.49% 77% 50 1,822 42%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2.5 to 10.0 1,459 667 2,037 5.37% 75% 83 2,034 100%

10.0 to 99.99 758 86 811 25.26% 76% 155 1,657 204%

Subtotal 10,353 20,964 21,064 1.89% 75% 302 6,322 30%

Default 114 12 114 NA 77% 65 295 259%

Total 10,467 20,976 21,178 2.42% 75% 367 6,617 31%

1 Outstandings are balances that were drawn down as at the reporting date. 2 Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.

Westpac Group March 2017 Pillar 3 report | 47

Pillar 3 report Credit risk exposures

Other retail portfolio by PD band

Risk Average

31 March 2017 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

0.0 to 0.10 170 268 428 0.07% 75% - 65 15%

0.10 to 0.25 1,278 1,034 2,095 0.19% 56% 2 471 22%

0.25 to 1.0 3,946 2,173 5,312 0.54% 62% 17 2,526 48%

1.0 to 2.5 5,452 1,042 6,330 1.67% 63% 68 5,042 80%

2.5 to 10.0 2,241 287 2,514 5.55% 68% 96 2,728 109%

10.0 to 99.99 1,286 80 1,365 27.27% 65% 243 2,114 155%

Subtotal 14,373 4,884 18,044 3.61% 63% 426 12,946 72%

Default 277 9 281 NA 66% 151 592 211%

Total 14,650 4,893 18,325 5.08% 63% 577 13,538 74%

Risk Average

30 September 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 0.0 to 0.10 169 261 427 0.07% 75% - 66 15%

0.10 to 0.25 1,230 1,068 2,071 0.18% 57% 2 464 22%

0.25 to 1.0 3,836 2,264 5,233 0.53% 62% 17 2,499 48%

1.0 to 2.5 5,823 1,115 6,765 1.69% 62% 73 5,365 79%

2.5 to 10.0 2,315 318 2,597 5.56% 68% 98 2,802 108%

10.0 to 99.99 1,351 82 1,437 27.63% 65% 256 2,208 154%

Subtotal 14,724 5,108 18,530 3.71% 63% 446 13,404 72%

Default 209 6 213 NA 66% 112 401 188%

Total 14,933 5,114 18,743 4.80% 63% 558 13,805 74%

Risk Average

31 March 2016 Committed Exposure Probability Loss Given Regulatory Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Expected Loss Assets Weight

0.0 to 0.10 168 237 402 0.07% 75% - 61 15%

0.10 to 0.25 1,164 998 1,951 0.18% 57% 2 437 22%

0.25 to 1.0 3,622 2,203 4,930 0.53% 62% 16 2,361 48%

1.0 to 2.5 5,703 1,120 6,648 1.70% 62% 72 5,271 79%

2.5 to 10.0 2,373 312 2,666 5.56% 68% 101 2,864 107%

10.0 to 99.99 1,452 83 1,550 27.93% 65% 281 2,401 155%

Subtotal 14,482 4,953 18,147 3.99% 63% 472 13,395 74%

Default 250 8 254 NA 64% 129 498 196%

Total 14,732 4,961 18,401 5.31% 63% 601 13,893 76%

1 Outstandings are balances that were drawn down as at the reporting date. 2 Committed undrawn balances are committed exposures that were not drawn down as at the reporting date.

48 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Small business portfolio by PD band

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Regulatory Risk Average

31 March 2017 Committed Exposure Probability Loss Given Expected Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Loss Assets Weight

0.0 to 0.10 294 786 871 0.08% 49% - 84 10%

0.10 to 0.25 2,417 1,686 4,080 0.18% 25% 2 421 10%

0.25 to 1.0 5,273 1,408 6,706 0.46% 39% 12 1,862 28%

1.0 to 2.5 10,779 995 11,630 1.42% 42% 68 5,955 51%

2.5 to 10.0 2,129 216 2,341 5.22% 34% 42 1,503 64%

10.0 to 99.99 908 18 927 21.42% 36% 73 933 101%

Subtotal 21,800 5,109 26,555 1.98% 38% 197 10,758 41%

Default 296 5 329 NA 43% 104 724 220%

Total 22,096 5,114 26,884 3.18% 38% 301 11,482 43%

Regulatory Risk Average

30 September 2016 Committed Exposure Probability Loss Given Expected Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Loss Assets Weight

0.0 to 0.10 358 836 986 0.07% 45% - 88 9%

0.10 to 0.25 2,755 1,798 4,543 0.18% 25% 2 459 10%

0.25 to 1.0 5,601 1,641 7,279 0.46% 40% 13 2,043 28%

1.0 to 2.5 10,970 1,107 11,959 1.42% 40% 68 5,996 50%

2.5 to 10.0 2,256 173 2,427 5.12% 33% 42 1,561 64%

10.0 to 99.99 1,044 27 1,073 20.96% 36% 81 1,105 103%

Subtotal 22,984 5,582 28,267 1.99% 37% 206 11,252 40%

Default 279 5 341 NA 42% 123 678 199%

Total 23,263 5,587 28,608 3.15% 37% 329 11,930 42%

Regulatory Risk Average

31 March 20163 Committed Exposure Probability Loss Given Expected Weighted Risk

$m Outstandings1 Undrawn2 at Default of Default Default Loss Assets Weight

0.0 to 0.10 442 747 1,141 0.07% 32% - 64 6%

0.10 to 0.25 2,715 1,654 4,385 0.19% 25% 2 449 10%

0.25 to 1.0 5,430 1,596 7,095 0.46% 39% 12 1,973 28%

1.0 to 2.5 10,300 799 11,025 1.43% 38% 60 5,274 48%

2.5 to 10.0 2,136 142 2,280 5.15% 32% 38 1,445 63%

10.0 to 99.99 1,093 32 1,130 21.71% 34% 83 1,163 103%

Subtotal 22,116 4,970 27,056 2.08% 35% 195 10,368 38%

Default 309 7 391 NA 46% 144 782 200%

Total 22,425 4,977 27,447 3.47% 35% 339 11,150 41%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Outstandings are balances that were drawn down as at the reporting date and include certain off-balance sheet items. 2 Committed undrawn balances are committed exposures that were not drawn down as at the reporting date. 3 Following a review of segmentation criteria, some exposures have been reclassified into the small business asset class from business lending, specialised lending and residential mortgages asset classes.

Westpac Group March 2017 Pillar 3 report | 49

Pillar 3 report Credit risk exposures

Credit Quality

Credit quality remained sound over First Half 2017 with total stressed exposures declining over the half. The fall in stress relates to reductions in both impaired assets and to watchlist and substandard facilities. These decreases can be broadly traced back to the refinance or work-out of some institutional facilities and to an improved outlook for some New Zealand dairy exposures. Where stress in the portfolio has emerged it can mostly be traced back to the slowdown in mining investment along with a seasonal rise in delinquencies.

Actual losses

31 March 2017 Write-offs Legal and Write-offs from Actual Losses for the

$m direct recovery costs provisions1 Recoveries 6 months ended

Corporate - - 163 (4) 159

Business lending 15 1 47 (6) 57

Sovereign - - - - -

Bank - - - - -

Residential mortgages 6 - 33 (1) 38

Australian credit cards 169 - - (20) 149

Other retail 213 7 1 (51) 170

Small business 24 - 12 (1) 35

Specialised lending 3 5 33 (1) 40

Securitisation - - - - -

Standardised - - - - -

Total 430 13 289 (84) 648

30 September 2016 Write-offs Legal and Write-offs from Actual Losses for the

$m direct recovery costs provisions1 Recoveries 12 months ended

Corporate - - 69 (35) 34

Business lending 29 3 95 (7) 120

Sovereign - - - - -

Bank - - 5 - 5

Residential mortgages 15 - 59 - 74

Australian credit cards 323 - - (19) 304

Other retail 426 14 - (70) 370

Small business 72 1 23 (5) 91

Specialised lending 7 10 36 - 53

Securitisation - - - - -

Standardised 2 - - (1) 1

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total 874 28 287 (137) 1,052

31 March 2016 Write-offs Legal and Write-offs from Actual Losses for the

$m direct recovery costs provisions1 Recoveries 6 months ended

Corporate - - 30 (34) (4)

Business lending 35 6 20 (11) 50

Sovereign - - - - -

Bank - - - - -

Residential mortgages 8 - 32 - 40

Australian credit cards 158 1 3 (15) 147

Other retail 172 1 - (28) 145

Small business 27 - 8 (3) 32

Specialised lending 4 5 6 - 15

Securitisation - - - - -

Standardised 1 - - (1) -

Total 405 13 99 (92) 425

1 Write-offs from individually assessed provisions.

50 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk exposures

Regulatory loss estimates and actual losses

The table below compares regulatory credit risk estimates used in the calculation of risk weighted assets to the average of actual outcomes observed since the time of Advanced IRB accreditation for each portfolio.

Predicted parameters represent average internally predicted long-run probabilities of default for non-defaulted obligors at the start of each year, as well as downturn estimates of loss (or the regulatory minimum where required). They are averaged using data from the financial years beginning at the time of Advanced IRB accreditation (2008 for most portfolios) and compared to observed outcomes over the same period1.

Predicted parameters are updated annually and utilise observed outcomes from prior periods as a key input.

Default rates

At the start of each year, a predicted default probability is assigned to all non-defaulted obligors. This is averaged over the portfolio and reported as the predicted default rate. This is compared to the actual default rate for the year. Both predicted and observed annual default rates are then averaged over the observation period.

Loss Given Default (LGD)

The LGD analysis excludes recent defaults in order to allow sufficient time for the full workout of the facility and hence an accurate LGD to be determined. The workout period varies by portfolio: a two year workout period is assumed for transaction-managed and residential mortgage lending; and a one year period for other program-managed portfolios.

Exposure at Default (EAD)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The EAD variance compares the observed EAD to the predicted EAD one year prior to default. For transaction-managed portfolios, predicted EAD is currently mandated to be 100% of committed exposures. The observed EAD is averaged for all obligors that defaulted over the observation period.

Observed EAD

31 March 2017 Regulatory Default rate Loss Given Default variance to

$m Expected Loss2 Predicted Observed Predicted Observed Predicted3 Corporate 872 2.10% 1.07% 50% 41% (23%)

Business lending 662 2.10% 1.51% 34% 18% (12%)

Sovereign 2 0.21% - - - -

Bank 7 0.47% 0.18% - - -

Residential mortgages 1,155 0.65% 0.47% 20% 3% (1%)

Australian credit cards 326 1.75% 1.68% 76% 57% (2%)

Other retail 577 5.03% 3.77% 71% 52% (11%)

Small business 301 2.29% 1.71% 39% 15% (9%)

Specialised lending 939 N/A 2.01% N/A 23% (7%)

Securitisation NA NA NA NA NA NA

Standardised NA NA NA NA NA NA Total 4,841

1 Predicted parameters are not available for specialised lending, securitisation or standardised exposures because risk weights for these portfolios do not rely on credit estimates and are shown as NA in the tables above. 2 Includes regulatory expected losses for defaulted and non-defaulted exposures. 3 A negative outcome indicates observed EAD was lower than predicted EAD, which can happen because exposures were managed down prior to default or off-balance sheet items or undrawn limits were not fully drawn prior to default.

Westpac Group March 2017 Pillar 3 report | 51

Pillar 3 report Credit risk exposures

Observed EAD

30 September 2016 Regulatory Default rate Loss Given Default variance to

$m Expected Loss1 Predicted Observed Predicted Observed Predicted2 Corporate 1,026 2.05% 1.12% 48% 38% (23%)

Business lending 662 2.09% 1.54% 34% 18% (12%)

Sovereign 2 0.21% - - - -

Bank 15 0.52% 0.21% - - -

Residential mortgages 951 0.62% 0.44% 20% 3% (2%)

Australian credit cards 324 1.78% 1.70% 76% 57% (2%)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other retail 558 5.13% 3.76% 71% 54% (12%)

Small business 329 2.15% 1.61% 40% 15% (7%)

Specialised lending 911 NA 2.12% NA 23% (7%)

Securitisation NA NA NA NA NA NA

Standardised NA NA NA NA NA NA Total 4,778

Observed EAD

31 March 2016 Regulatory Default rate Loss Given Default variance to

$m Expected Loss1 Predicted Observed Predicted Observed Predicted2 Corporate 991 2.19% 1.07% 51% 41% (23%)

Business lending 659 2.24% 1.54% 34% 18% (12%)

Sovereign 2 0.21% - - - -

Bank 22 0.54% 0.21% - - -

Residential mortgages 940 0.60% 0.44% 20% 4% (2%)

Australian credit cards 367 1.80% 1.65% 76% 58% (2%)

Other retail 601 5.11% 3.73% 71% 50% (13%)

Small business 339 2.08% 1.69% 41% 20% (9%)

Specialised lending 902 NA 2.12% NA 23% (7%)

Securitisation NA NA NA NA NA NA

Standardised NA NA NA NA NA NA Total 4,823

1 Includes regulatory expected losses for defaulted and non-defaulted exposures 2 A negative outcome indicates observed EAD was lower than predicted EAD, which can happen because exposures were managed down prior to default or off-balance sheet items or undrawn limits were not fully drawn prior to default.

52 | Westpac Group March 2017 Pillar 3 report

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pillar 3 report Credit risk mitigation

This section describes the way in which Westpac reduces its credit risk by using financial collateral, guarantees or credit derivatives for Corporate, Sovereign and Bank asset classes.

Approach

Westpac recognises credit risk mitigation only when formal legal documentation is held that establishes Westpac’s direct, irrevocable and unconditional recourse to the collateral or to an unrelated credit risk mitigation provider. The minimum standards to be met so that credit risk mitigation can be recognised are embodied in Westpac’s credit rules and policies. All proposals for risk mitigation require a formal submission confirming compliance with these standards, for approval by an authorised credit officer. Authorised credit officer approval is also required for existing risk mitigation to be discontinued or withdrawn.

The amount of credit risk mitigation recognised is the face value of the mitigation instrument, which is adjusted by the application of discounts for any maturity and/or currency mismatch with the underlying obligation, so that a discounted amount is recognised when calculating the residual exposure after mitigation.

For regulatory capital purposes Westpac addresses credit risk mitigation as follows:

l exposures secured by cash, eligible financial collateral or where protection is bought via credit linked notes, provided the proceeds are invested in either cash or eligible financial collateral, are included at the gross value, with risk weighted assets for the portion thus secured calculated by applying a 5% LGD1; l exposures that are mitigated by way of eligible guarantees, standby letters of credit or similar instruments, where Westpac has direct recourse to an unrelated third party on default or non-payment by the customer, or credit protection bought via credit default swaps where Westpac is entitled to recover either full principal or credit losses on occurrence of defined credit events, are treated under double default rules where the protection provider is a financial firm rated A/A2 or better; and l exposures that are mitigated by way of guarantees, letters of credit, credit default swaps or similar instruments, where the eligibility criteria for double default treatment are not met, are treated under the substitution approach.

Structure and organisation

Westpac Institutional Bank is responsible for managing the overall risk in Westpac’s corporate, sovereign and bank credit portfolios, and uses a variety of instruments, including securitisation and single name credit default swaps, to manage loan and counterparty risk. Westpac Institutional Bank has a dedicated portfolio trading desk with the specific mandate of actively monitoring the underlying exposure and the offsetting hedge book.

Risk reporting

Monthly reports are issued, which detail risk mitigated facilities where the mitigation instruments mature within 30 to 90 days. Following decisions by the relevant business and credit risk management units, an independent operational unit ensures necessary actions are implemented in a timely fashion.

Specific reporting is maintained and monitored on the matching of hedges with underlying facilities, with any adjustments to hedges (e.g. unwinds or extensions) managed dynamically.

Netting

Risk reduction by way of current account set-offs is recognised for exposures to creditworthy customers domiciled in Australia and New Zealand only. Customers are required to enter into formal agreements giving Westpac the unfettered right to set-off gross credit and debit balances in their nominated accounts to determine Westpac’s net exposure within each of these two jurisdictions. Cross-border set-offs are not permitted.

Close-out netting is undertaken for off-balance sheet financial market transactions with counterparties with whom Westpac has entered into master netting agreements which allow such netting in specified jurisdictions. Close-out netting effectively aggregates pre-settlement risk exposure at time of default, thus reducing overall exposure.

Collateral valuation and management

Westpac revalues financial markets and associated collateral positions on a daily basis to monitor the net risk position, and has formal processes in place so that calls for collateral top-up or exposure reduction are made promptly. An independent operational unit has responsibility for monitoring these positions. The collateralisation arrangements are documented via the Credit Support Annex of the International Swaps and Derivatives Association (ISDA) master agreement for derivatives transactions and Global Master Repurchase Agreement (GMRA) for repurchase transactions and Clearing Agreements for cleared trades.

1 Excludes collateralised derivative transactions.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac Group March 2017 Pillar 3 report | 53

Pillar 3 report Credit risk mitigation

Types of collateral taken

Westpac recognises the following as eligible collateral for credit risk mitigation by way of risk reduction:

l cash (primarily in Australian dollars (AUD), New Zealand dollars (NZD), US dollars (USD), Canadian dollars (CAD), British pounds (GBP), or Euro (EUR)); l bonds issued by Australian Commonwealth, State and Territory governments or their Public Sector Enterprises, provided these attract a zero risk-weighting under APS112; l securities issued by other specified AA-/Aa3 or better rated sovereign governments; and l protection bought via credit-linked notes (provided the proceeds are invested in cash or other eligible collateral described above).

Guarantor/credit derivative counterparties

For mitigation by risk transfer, Westpac only recognises unconditional irrevocable guarantees or standby letters of credit issued by, or eligible credit derivative protection bought from, the following entities provided they are not related to the underlying obligor:

l sovereign entities; l public sector entities in Australia and New Zealand; l authorised deposit taking institutions and overseas banks with a minimum risk grade equivalent of A-/A3. The Global Chief Credit Officer (GCCO) has the authority to approve exceptions to the A-/A3 minimum; and l other entities with a minimum risk grade equivalent of A-/A3. The GCCO has the authority to approve exceptions to the A-/A3 minimum.

Market and/or credit risk concentrations

When Westpac uses credit risk mitigation techniques to reduce counterparty exposure, limits are applied to both gross (i.e. pre-mitigation) and net exposure.

Furthermore, exposure is recorded against the provider of any credit risk mitigation and a limit framework prevents excessive concentration to such counterparties.

All exposures to risk transfer counterparties are separately approved under Westpac’s usual credit approval process, with the amount and tenor of mitigation recorded against the counterparty in Westpac’s exposure management systems. The credit quality of mitigation providers is reviewed regularly in accordance with Westpac’s usual periodic review processes.

Market risks arising from credit risk mitigation activities are managed similarly to market risks arising from any other trading activities.

These risks are managed under either the market risk banking book or trading book frameworks as appropriate.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 54 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Credit risk mitigation

Total exposure covered by collateral, credit derivatives and guarantees

Impact Total exposure for Credit Risk Mitigants

31 March 2017 Total before of credit Total after which some credit Eligible Financial Covered by Covered by

$m mitigation mitigation1 mitigation risk is mitigated Collateral Guarantees Credit Derivatives Corporate 129,218 (177) 129,041 2,470 1,019 381 86

Sovereign 69,140 (10) 69,130 261 10 241 -

Bank 21,028 (690) 20,338 2,012 690 - -

Standardised 16,440 (109) 16,331 1,984 109 - -

Total 235,826 (986) 234,840 6,727 1,828 622 86

Impact Total exposure for Credit Risk Mitigants

30 September 2016 Total before of credit Total after which some credit Eligible Financial Covered by Covered by

$m mitigation mitigation1 mitigation risk is mitigated Collateral Guarantees Credit Derivatives Corporate 132,928 (393) 132,535 2,581 1,262 437 94

Sovereign 71,109 (189) 70,920 480 189 241 -

Bank 22,232 (778) 21,454 1,856 778 - -

Standardised 16,003 (476) 15,527 1,768 476 - -

Total 242,272 (1,836) 240,436 6,685 2,705 678 94

Impact Total exposure for Credit Risk Mitigants

31 March 2016 Total before of credit Total after which some credit Eligible Financial Covered by Covered by

$m mitigation mitigation1 mitigation risk is mitigated Collateral Guarantees Credit Derivatives Corporate 137,074 (207) 136,867 2,380 1,160 317 120

Sovereign 69,147 (134) 69,013 420 134 240 -

Bank 26,197 (711) 25,486 2,391 711 - -

Standardised 15,051 (221) 14,830 1,662 221 - -

Total 247,469 (1,273) 246,196 6,853 2,226 557 120

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Impact of credit mitigation under the substitution approach.

Westpac Group March 2017 Pillar 3 report | 55

Pillar 3 report Counterparty credit risk

This section describes Westpac’s exposure to credit risk arising from derivative and treasury products.

Approach

Westpac’s process for managing derivatives and counterparty credit risk is based on its assessment of the potential future credit risk Westpac is exposed to when dealing in derivatives products and securities financing transactions. Westpac simulates future market rates by imposing shocks on market prices and rates, and assessing the effect these shocks have on the mark-to-market value of Westpac’s positions. These simulated exposure numbers are then checked against pre-settlement risk limits that are set at the counterparty level.

Structure and organisation

The Financial Markets Credit management team is charged with managing the counterparty credit exposure arising from derivatives and treasury products.

Risk reporting

Westpac actively reassesses and manages the counterparty credit exposure arising from derivatives business. A daily simulation of potential future counterparty credit exposure taking into account movements in market rates is conducted. This simulation quantifies credit exposure using the Derivative Risk Equivalent (DRE) methodology and exposure is loaded into a credit limit management system. Limit excesses are reported to credit managers and actioned within strict timeframes.

Market related credit risk

There are two components to the regulatory capital requirements for credit risk arising from derivative products:

l capital to absorb losses arising from the default of derivative counterparties; and l capital to absorb losses arising from mark-to-market valuation movements resulting from changes in the credit quality of derivative counterparties. These valuation movements are referred to as credit valuation adjustments and this risk is sometimes labelled as credit valuation adjustment (CVA) risk. Westpac refers to this requirement as mark-to-market related credit risk.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Risk mitigation

Mitigation is achieved in a number of ways:

l the limit system monitors for excesses of the pre-determined limits, with any excesses being immediately notified to credit officers; l Westpac has collateral agreements with its largest counterparties. The market value of the counterparty’s portfolio is used to recalculate the credit position at each end of day, with collateral being called for when certain pre-set limits are met; and l credit derivatives are used to mitigate credit exposure against certain counterparties.

In addition, the following approaches are also used as appropriate to mitigate credit risk:

l incorporating right-to-break in Westpac’s contracts, effectively reducing the tenor of the risk; l signing netting agreements, thus allowing the exposure across a portfolio of trades to be netted; l regular marking to market and settling of the foreign exchange components of foreign exchange reset contracts; and l downgrade triggers in documentation that, if breached, require the counterparty to provide collateral.

Counterparty derivative exposures and limits

The risk management methodology for counterparty derivatives exposures is similar to the credit methodology for transaction-managed loans. The main difference is in the estimation of the exposure for derivatives which is based on the DRE methodology. DRE is a credit exposure measure for derivative trades which is calibrated to a ‘loan-equivalent’ exposure.

Counterparty credit limits are approved on an uncommitted and unadvised basis by authorised credit officers. This follows an evaluation of each counterparty’s credit worthiness and establishing an agreed credit risk appetite for the nature and extent of prospective business.

56 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Counterparty credit risk

Wrong-way risk exposures

Westpac defines wrong-way risk as exposure to a counterparty which is adversely correlated with the credit quality of that counterparty. With respect to credit derivatives, wrong-way risk refers to credit protection purchased from a counterparty highly correlated to the reference obligation.

Wrong-way risk exposures using credit derivatives are controlled by only buying protection from highly rated counterparties. These transactions are assessed by an authorised credit officer who has the right to decline any transaction where they feel there is an unacceptably high correlation between the ability to perform under the trade and the performance of the underlying counterparty.

Consequences of a downgrade in Westpac’s credit rating1

Where an outright threshold and minimum transfer amount are agreed, there will not be any impact on the amount of collateral posted by Westpac in the event of a credit rating downgrade. Where the threshold and minimum transfer amount are tiered according to credit rating, the impact of Westpac being downgraded below its current credit rating would be: for a one notch downgrade, postings of $76 million; while for a two notch downgrade, postings would be $111 million.

Counterparty credit risk summary

31 March 30 September 31 March

$m 2017 2016 2016

Gross positive fair value of contracts 62,434 74,577 89,320

Netting benefits (37,803) (47,974) (58,329)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Netted current credit exposure 24,631 26,603 30,991

Collateral held (986) (1,835) (1,273)

Mark-to-market credit related risk reduction (140) (164) (196)

Net derivatives credit exposure 23,505 24,604 29,522

Exposure at default

Gross credit exposure amount of credit derivative hedges - - -

Credit exposure - - -

Interest rate contracts 7,748 8,939 9,691

Foreign exchange contracts 8,712 9,529 12,388

Equity contracts - 3 4

Credit derivatives 189 194 413

Commodity contracts 3,886 3,711 4,413

Other 2,970 2,228 2,613

Total 23,505 24,604 29,522

Credit derivative transactions that create exposures to counterparty credit risk

31 March 2017 Westpac Portfolio Intermediation activities

Credit derivatives products used ($m) Bought Sold Bought Sold Total

Credit Default Swaps 89 92 4 6 191

Total Return Swaps - - - - -

Credit options - - - - -

Credit linked notes - - - - -

Collateralised Loan Obligations - - - - -

Other - - - - -

Total 89 92 4 6 191

30 September 2016 Westpac Portfolio Intermediation activities

Credit derivatives products used ($m) Bought Sold Bought Sold Total

Credit Default Swaps 99 85 5 8 196

Total Return Swaps - - - - -

Credit options - - - - -

Credit linked notes - - - - -

Collateralised Loan Obligations - - - - -

Other - - - - -

Total 99 85 5 8 196

1 Credit rating downgrade postings are cumulative.

Westpac Group March 2017 Pillar 3 report | 57

Pillar 3 report Counterparty credit risk

31 March 2016 Westpac Portfolio Intermediation activities

Credit derivatives products used ($m) Bought Sold Bought Sold Total

Credit Default Swaps 199 186 8 23 417

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total Return Swaps - - - - -

Credit options - - - - -

Credit linked notes - - - - -

Collateralised Loan Obligations - - - - -

Other - - - - -

Total 199 186 8 23 417

58 | Westpac Group March 2017 Pillar 3 report

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pillar 3 report Securitisation

A securitisation is a financial structure where the cash flow from a pool of assets is used to service obligations to at least two different tranches or classes of creditors (typically holders of debt securities), with each class or tranche reflecting a different degree of credit risk (i.e. one class of creditors is entitled to receive payments from the pool before another class of creditors).

Securitisation transactions are generally grouped into two broad categories:

l traditional or true sale securitisations, which involve the transfer of ownership of the underlying asset pool to a third party; and l synthetic transactions, where the ownership of the pool remains with the originator and only the credit risk of the pool is transferred to a third party, using credit derivatives or guarantees.

Covered bond transactions, in which bonds issued by Westpac are guaranteed by assets held in a special purpose vehicle, are not considered to be securitisation transactions.

Approach

Westpac’s involvement in securitisation activities ranges from a seller of its own assets to an investor in third-party transactions and includes the arranging of transactions, the provision of securitisation services and the provision of funding for clients, including clients requiring access to capital markets.

Securitisation of Westpac originated assets - Securitisation is a funding, liquidity and capital management tool. It allows Westpac the ability to liquefy a pool of assets and increase Westpac’s wholesale funding capacity. Westpac may provide arm’s length facilities to the securitisation vehicles. The facilities entered into typically include the provision of liquidity, funding, underwriting and derivative contracts.

Westpac has entered into on balance sheet securitisation transactions whereby loans originated by Westpac are transformed into stocks of saleable mortgage backed securities and held in the originating bank’s liquid asset portfolio. These ‘self securitisations’ do not change risk weighted assets1. No securitisation transactions for Westpac originated assets are classified as a resecuritisation.

Securitisation in the management of Westpac’s credit portfolio - Westpac uses securitisation, including portfolio credit default swaps, to manage its corporate and institutional loan and counterparty credit risk portfolios. Single name credit default swaps are not treated as securitisations but as credit risk mitigation facilities. Transactions are entered into to manage counterparty credit risk or concentration risks.

Provision of securitisation services, including funding and management of conduit vehicles - Westpac provides services to clients wishing to access asset-backed financing through securitisation. Those services include access to the Asset Backed Commercial Paper Market through the Waratah conduit, which is the Westpac- sponsored securitisation conduit; the provision of warehouse and term funding of securitised assets on Westpac’s balance sheet; and arranging asset-backed bond issues. Westpac provides facilities to the Waratah securitisation conduit including liquidity, funding, underwriting, credit enhancement and derivative contracts. Securitisation facilities provided by Westpac include resecuritisation exposures which are securitisation exposures in which the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is itself a securitisation exposure. Westpac also buys and sells securitisation exposures in the secondary market to facilitate portfolio management activity by its institutional customers who hold asset backed bonds.

Westpac’s role in the securitisation process

Securitisation activity Role played by Westpac

Securitisation of Westpac originated assets l Arranger l Note holder

l Asset originator l Trust manager

l Bond distributor l Swap provider

l Facility provider l Servicer

Securitisation in the management of Westpac’s credit portfolio l Hedger - protection purchaser

l Investor - protection seller

l Investor - purchaser of securitisation exposures

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 The credit exposures of the underlying loans are measured in accordance with APS113.

Westpac Group March 2017 Pillar 3 report | 59

Pillar 3 report Securitisation

Provision of securitisation services including funding and l Arranger l Liquidity facility provider management of conduit vehicle l Bond distributor l Swap counterparty servicer

l Credit enhancement provider l Market maker and broker for distributed bonds

l Funder

Key Objectives

Securitisation of Westpac originated assets - The securitisation of Westpac’s own assets provides funding diversity, and is a core tool of liquidity management.

Securitisation in the management of Westpac’s credit portfolio - Westpac acts as principal in transactions and will buy and sell protection in order to meet its portfolio management objectives. Westpac also purchases securitisation exposures in order to earn income. All securitisation activity must follow Westpac’s credit policies and approval processes.

Provision of securitisation services including funding and management of conduit vehicles - Westpac receives market-based fees in return for its services as servicer, swap counterparty, arranger and facility provider and program fees, interest margins and bond distribution fees on warehouse and term funding facilities. Westpac facilitates portfolio management activity by its institutional customers by buying and selling securitisation exposures in the secondary market and is compensated through an interest margin and bid-offer spread on the transactions.

Structure and organisation

Securitisation of Westpac originated assets - Westpac’s Treasury operations are responsible for all Westpac originated securitisation activity including funding, liquidity and capital management.

Securitisation in the management of Westpac’s credit portfolio - Westpac’s exposure arising from securitisation, including portfolio hedging, is managed by Westpac Institutional Bank (WIB) and integrated within Westpac’s standard risk reporting and management systems.

Provision of securitisation services including funding and management of conduit vehicles - These services are provided by WIB and include the provision of liquidity, credit enhancement, funding and derivative facilities, servicer and arranger services, and market-making and broking of asset-backed bonds.

Risk reporting

Credit exposure - Funding, liquidity, credit enhancement and redraw facilities, swap arrangements and counterparty exposures are captured and monitored in key source systems along with other facilities/derivatives entered into by Westpac.

Operational risk exposure - The operational risk review process for Westpac includes the identification of risks, controls and key performance indicators in relation to all securitisation activity and services provided by Westpac or any of its subsidiaries.

Market risk exposure - Exposures arising from transactions with the securitisation conduit and other counterparties are captured as part of Westpac’s traded and non- traded market risk reporting and limit management framework.

Liquidity risk exposure - Exposure to, and the impact of, securitisation transactions are managed under the Liquidity Risk Management Framework and are integrated into routine reporting for capital and liquidity positions, net interest margin analysis, balance sheet forecasting and funding scenario testing. The annual funding plan incorporates consideration of overall liquidity risk limits and the securitisation of Westpac originated assets.

Risk mitigation

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Securitisation of Westpac originated assets - The interest rate and basis risks generated by Westpac’s hedging arrangements to each securitisation trust are captured and managed within Westpac’s asset and liability management framework. The liquidity risk generated by Westpac’s liquidity and redraw facilities to each securitisation trust is captured and managed in accordance with Westpac’s liquidity management policies along with all other contingent liquidity facilities.

Securitisation in the management of Westpac’s credit portfolio - Transactions are approved in accordance with Westpac’s credit risk mitigation approach (see pages 53 and 54).

Provision of securitisation services including funding and management of conduit vehicles - All securitisation transactions are approved within the context of a securitisation credit policy that sets detailed

60 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Securitisation

transaction-specific guidelines that regulate servicer counterparty risk appetite, transaction tenor, asset class, third party credit support and portfolio quality. This policy is applied in conjunction with other credit and market risk policies that governs the provision of derivative and other services that support securitisation transactions. In particular, credit hedging transactions are subject to Westpac’s credit risk mitigation approach (see pages 53 and 54). Any interest rate or currency hedging is subject to counterparty credit risk management (see pages 56 and 57) and market risk management (see pages 70 and 71) policies and processes.

Regulatory capital approaches

The regulatory capital treatment of all securitisation exposures is undertaken in accordance with APS120. APS120 specifies that securitisation exposures held in the trading book are subject to the requirements of Prudential Standard APS 116 Capital Adequacy: Market Risk.

Consistent with the current APS120 the approaches employed include the Ratings-Based Approach (RBA), where APRA provides risk-weights that are matched to external credit ratings, and the Internal Assessment Approach (IAA), which largely mirrors the RBA. The Supervisory Formula (SF), which determines a capital charge based on the attributes of the securitisation structure through an industry standard formula with pre-determined parameters, is employed under specific conditions where the RBA and IAA are deemed inappropriate.

Securitisation of Westpac originated assets - The assets sold by Westpac to a securitisation trust are excluded from Westpac’s calculation of credit risk weighted assets if capital relief is sought and the requirements of APS120 are satisfied1. Westpac cannot rely on external rating when risk weighting its exposure to these trusts and must use the Supervisory Formula approach instead.

In instances where insufficient risk transfer is achieved by the transaction for regulatory purposes, the capital calculation is performed on the underlying asset pool while the facilities provided to such securitisation vehicles do not attract regulatory capital charges.

Securitisation in the management of Westpac’s credit portfolio - Unless Westpac makes an election under APS120, the underlying assets subject to synthetic securitisation are excluded from Westpac’s calculation of credit risk weighted assets. They are replaced with the credit risk weight of the applicable securitisation instrument, usually credit default swaps or underlying cash collateral. Westpac applies the RBA and the SF when determining regulatory capital treatments for securitisation exposures arising from the management of its credit portfolio.

Provision of securitisation services including funding and management of conduit services - Westpac uses the RBA and the IAA methodology when determining regulatory capital requirements for the facilities associated with the provision of securitisation services to the Waratah securitisation conduit and facilities for the provision of warehouse and term funding of securitised assets on Westpac’s balance sheet.

The regulatory capital treatment of derivatives for securitisation exposures is currently undertaken in accordance with APS113.The difference in regulatory capital calculations using APS120 and APS113 is immaterial.

The External Credit Assessment Institutions that can be used by Westpac for resecuritisations are Standard & Poor’s, Moody’s and Fitch.

Securitisation exposures held in the trading book are subject to the requirements of Prudential Standard APS 116 Capital Adequacy: Market Risk.

Westpac’s accounting policies for securitisation activities

Securitisation of Westpac originated assets - The assets sold by Westpac to a securitisation trust remain on Westpac’s balance sheet for accounting purposes.

Securitisation in the management of Westpac’s credit portfolio - For risk mitigation using synthetic securitisation, the underlying assets remain on Westpac’s balance sheet for accounting purposes. The accounting treatment of the assets will depend on their nature. They could include loans and receivables, available for sale securities or

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document derivatives. The most common form of synthetic securitisation is via a credit default swap, which is treated as a derivative and recognised in the profit and loss statement at fair value.

For investment in securitisation exposures, if the instrument has been designated on initial recognition at fair value (including instruments containing a credit default swap), the exposure will be measured at fair value through the Income Statement. All other investments in securitisation exposures will be classified as available-for-sale (AFS) and measured at fair value through Other Comprehensive Income (within the AFS securities reserve).

Provision of securitisation services including funding and management of conduit vehicles - Fee income from these services is recognised on an accrual basis. Liquidity and funding facilities are treated as commitments to provide finance, with fee and margin income recognised on an accrual basis. Warehouse and term funding facilities are treated as loans.

1 Including the requirements to achieve capital relief.

Westpac Group March 2017 Pillar 3 report | 61

Pillar 3 report Securitisation

Banking book summary of assets securitised by Westpac

This table shows outstanding Banking book securitisation assets and assets intended to be securitised1 for Westpac originated assets by underlying asset type. It includes the amount of impaired and past due assets, along with any losses recognised by Westpac during the current period.

Securitised assets are held in securitisation trusts. Trusts which meet requirements to achieve capital relief do not form part of the Level 2 consolidated group. Self securitisation trusts remain consolidated at Level 2 and the assets transferred to these trusts are risk weighted in accordance with APS113.

Total outstanding securitised by ADI Assets Westpac

31 March 2017 Traditional Synthetic intended to be Impaired Past due recognised

$m Securitisation2 Securitisation securitised loans assets losses

Residential mortgages 83,540 - - 10 708 -

Credit cards ------

Auto and equipment finance 3,567 - - 13 - -

Business lending ------

Investments in ABS ------

Other ------

Total 87,107 - - 23 708 -

Total outstanding securitised by ADI Assets Westpac

30 September 2016 Traditional Synthetic intended to be Impaired Past due recognised

$m Securitisation2 Securitisation securitised loans assets losses

Residential mortgages 91,223 - - 10 639 -

Credit cards ------

Auto and equipment finance 2,326 - - 9 - -

Business lending ------

Investments in ABS ------

Other ------

Total 93,549 - - 19 639 -

Total outstanding securitised by ADI Assets Westpac

31 March 2016 Traditional Synthetic intended to be Impaired Past due recognised

$m Securitisation2 Securitisation securitised loans assets losses

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Residential mortgages 94,644 - - 6 510 -

Credit cards ------

Auto and equipment finance 1,442 - - 12 - -

Business lending ------

Investments in ABS ------

Other ------

Total 96,086 - - 18 510 -

Banking book summary of total Westpac sponsored third party assets securitised

This table represents Banking book third party assets where Westpac acts a sponsor.

31 March 30 September 31 March $m 2017 2016 2016

Residential mortgages 522 936 1,130

Credit cards - - -

Auto and equipment finance - - -

Business lending - - -

Investments in ABS - - -

Other - - 107

Total 522 936 1,237

1 Represents securitisation activity from the end of the reporting period to the disclosure date of this report. 2 Includes self-securitisation assets of $76,220 million at 31 March 2017 ($82,571 million at 30 September 2016 and $84,514 million at 31 March 2016).

62 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Securitisation

Banking book summary of securitisation activity by asset type

This table shows assets transferred into securitisation schemes by underlying asset type (ADI originated) for the relevant period.

For the 6 months ended

31 March 2017 Amount Recognised gain or

$m securitised loss on sale

Residential mortgages 2,742 -

Credit cards - -

Auto and equipment finance 1,978 -

Business lending - -

Investments in ABS - -

Other - -

Total 4,720 -

For the 12 months ended

30 September 2016 Amount Recognised gain or

$m securitised loss on sale

Residential mortgages 15,317 -

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Credit cards - -

Auto and equipment finance 1,698 -

Business lending - -

Investments in ABS - -

Other - -

Total 17,015 -

For the 6 months ended

31 March 2016 Amount Recognised gain or

$m securitised loss on sale

Residential mortgages 7,498 -

Credit cards - -

Auto and equipment finance 194 -

Business lending - -

Investments in ABS - -

Other - -

Total 7,692 -

Westpac Group March 2017 Pillar 3 report | 63

Pillar 3 report Securitisation

Banking book summary of on and off-balance sheet securitisation by exposure type

31 March 2017 On balance sheet Off-balance Total Exposure

$m Securitisation retained Securitisation purchased sheet at Default

Securities - 7,214 - 7,214

Liquidity facilities 11 - 960 971

Funding facilities 10,703 - 5,298 16,001

Underwriting facilities - - 58 58

Lending facilities - - 182 182

Warehouse facilities - - - -

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total 10,714 7,214 6,498 24,426

30 September 2016 On balance sheet Off-balance Total Exposure

$m Securitisation retained Securitisation purchased sheet at Default

Securities - 6,352 - 6,352

Liquidity facilities 145 - 1,108 1,253

Funding facilities 12,302 - 3,047 15,349

Underwriting facilities - - 98 98

Lending facilities - - 172 172

Warehouse facilities - - - -

Total 12,447 6,352 4,425 23,224

31 March 2016 On balance sheet Off-balance Total Exposure

$m Securitisation retained Securitisation purchased sheet at Default

Securities - 7,000 - 7,000

Liquidity facilities 67 - 1,484 1,551

Funding facilities 11,447 - 3,474 14,921

Underwriting facilities 8 - 118 126

Lending facilities - - 115 115

Warehouse facilities - - - -

Total 11,522 7,000 5,191 23,713

64 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Securitisation

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Banking book securitisation exposure at default by risk weight band

31 March 2017 Exposure Total Exposure Risk Weighted Assets Total Risk

$m Securitisation Resecuritisation at Default Securitisation Resecuritisation Weighted Assets

Less than or equal to 10% 8,123 - 8,123 596 - 596

Greater than 10 - 20% 14,287 - 14,287 2,269 - 2,269

Greater than 20 - 30% ------

Greater than 30 - 50% 1,047 - 1,047 383 - 383

Greater than 50 - 75% 73 652 725 55 424 479

Greater than 75 - 100% 181 58 239 181 58 239

Greater than 100 - 250% ------

Greater than 250 - 425% 2 - 2 9 - 9

Greater than 425 - 650% 3 - 3 17 - 17

Other ------

Deductions ------

Total 23,716 710 24,426 3,510 482 3,992

30 September 2016 Exposure Total Exposure Risk Weighted Assets Total Risk

$m Securitisation Resecuritisation at Default Securitisation Resecuritisation Weighted Assets

Less than or equal to 10% 7,630 - 7,630 565 - 565

Greater than 10 - 20% 13,254 - 13,254 2,158 - 2,158

Greater than 20 - 30% ------

Greater than 30 - 50% 1,034 - 1,034 377 - 377

Greater than 50 - 75% 65 963 1,028 48 626 674

Greater than 75 - 100% 177 98 275 177 98 275

Greater than 100 - 250% ------

Greater than 250 - 425% - - - 1 - 1

Greater than 425 - 650% 3 - 3 17 - 17

Other ------

Deductions ------

Total 22,163 1,061 23,224 3,343 724 4,067

31 March 2016 Exposure Total Exposure Risk Weighted Assets Total Risk

$m Securitisation Resecuritisation at Default Securitisation Resecuritisation Weighted Assets

Less than or equal to 10% 8,192 - 8,192 587 - 587

Greater than 10 - 20% 12,850 - 12,850 2,097 - 2,097

Greater than 20 - 30% ------

Greater than 30 - 50% 1,013 - 1,013 368 - 368

Greater than 50 - 75% 88 786 874 66 511 577

Greater than 75 - 100% 192 586 778 192 586 778

Greater than 100 - 250% ------

Greater than 250 - 425% ------

Greater than 425 - 650% 3 - 3 17 - 17

Other ------

Deductions 3 - 3 - - -

Total 22,341 1,372 23,713 3,327 1,097 4,424

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac Group March 2017 Pillar 3 report | 65

Pillar 3 report Securitisation

Banking book securitisation exposure deducted from capital1

Exposures

deducted from

31 March 2017 Common equity

$m Tier 1 capital

Securities -

Liquidity facilities -

Funding facilities -

Underwriting facilities -

Credit enhancements -

Derivative transactions -

Total -

Exposures

deducted from

30 September 2016 Common equity

$m Tier 1 capital

Securities -

Liquidity facilities -

Funding facilities -

Underwriting facilities -

Credit enhancements -

Derivative transactions -

Total -

Exposures

deducted from

31 March 2016 Common equity

$m Tier 1 capital

Securities 3

Liquidity facilities -

Funding facilities -

Underwriting facilities -

Credit enhancements -

Derivative transactions -

Total 3

Banking book securitisation subject to early amortisation treatment

There is no securitisation exposure in the Banking book that is subject to early amortisation treatment as at 31 March 2017.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Banking book resecuritisation exposure subject to credit risk mitigation (CRM)

As at 31 March 2017 resecuritisation exposures subject for CRM was $710 million with nil CRM taken against these exposures ($1,061 million subject for CRM and nil CRM taken as at 30 September 2016).

Banking book resecuritisation exposure to guarantors

Westpac has no third party guarantors providing guarantees for securitised assets, principal or interest repayments as at 31 March 2017.

Trading book summary of assets securitised by Westpac

As at 31 March 2017 there was nil in outstanding securitisation exposures for Westpac originated assets held in the Trading book (nil as at 30 September 2016).

1 Excludes securitisation start-up costs.

66 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Securitisation

Trading book summary of total Westpac sponsored third party assets securitised

There are no third party assets held in the Trading book where Westpac is responsible for the establishment of the securitisation program and subsequent management as at 31 March 2017.

Trading book summary of securitisation activity by asset type

There is no originated securitisation activity in the trading book for the 6 months to 31 March 2017.

Trading book aggregated amount of exposure securitised by Westpac and subject to APS116 Capital Adequacy: Market Risk

This table shows Westpac originated outstanding securitisation exposure held in the Trading book. These exposures are risk weighted under APS116.

Standard Method IMA Method

31 March 2017 Traditional Synthetic Traditional Synthetic

$m Securitisation Securitisation Securitisation Securitisation

Securities 9 - - -

Liquidity facilities - - - -

Funding facilities - - - -

Underwriting facilities - - - -

Credit enhancements - - - -

Derivative transactions - - - -

Total 9 - - -

Standard Method IMA Method

30 September 2016 Traditional Synthetic Traditional Synthetic

$m Securitisation Securitisation Securitisation Securitisation

Securities 10 - - -

Liquidity facilities - - - -

Funding facilities - - - -

Underwriting facilities - - - -

Credit enhancements - - - -

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Derivative transactions - - - -

Total 10 - - -

Standard Method IMA Method

31 March 2016 Traditional Synthetic Traditional Synthetic

$m Securitisation Securitisation Securitisation Securitisation

Securities 17 - - -

Liquidity facilities - - - -

Funding facilities - - - -

Underwriting facilities - - - -

Credit enhancements - - - -

Derivative transactions - - - -

Total 17 - - -

Westpac Group March 2017 Pillar 3 report | 67

Pillar 3 report Securitisation

Trading book summary of on and off-balance sheet securitisation by exposure type1

31 March 2017 On balance sheet Off-balance Total Exposure

$m Securitisation retained Securitisation purchased sheet at Default

Securities 9 237 - 246

Liquidity facilities - - - -

Funding facilities - - - -

Underwriting facilities - - - -

Lending facilities - - - -

Warehouse facilities - - - -

Credit enhancements - - - -

Basis swaps - - 50 50

Other derivatives - - 65 65

Total 9 237 115 362

30 September 2016 On balance sheet Off-balance Total Exposure

$m Securitisation retained Securitisation purchased sheet at Default

Securities 10 36 - 46

Liquidity facilities - - - -

Funding facilities - - - -

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Underwriting facilities - - - -

Lending facilities - - - -

Warehouse facilities - - - -

Credit enhancements - - - -

Basis swaps - - 100 100

Other derivatives - - 78 78

Total 10 36 178 224

31 March 2016 On balance sheet Off-balance Total Exposure

$m Securitisation retained Securitisation purchased sheet at Default

Securities 17 2 - 19

Liquidity facilities - - - -

Funding facilities - - - -

Underwriting facilities - - - -

Lending facilities - - - -

Warehouse facilities - - - -

Credit enhancements - - - -

Basis swaps - - 81 81

Other derivatives - - 73 73

Total 17 2 154 173

Trading book securitisation exposure subject to specific risk

There is no Trading book securitisation exposure subject to specific risk for 31 March 2017.

Trading book securitisation exposure subject to APS120 Securitisation specific risk by risk weight band

There is no Trading book securitisation exposure subject to APS120 specific risk for 31 March 2017.

Trading book capital requirements for securitisation exposures subject to internal models approach (IMA) by risk classification

There is no Trading book capital requirement for securitisation subject to IMA for 31 March 2017.

1 EAD associated with Trading book securitisation is not included in the EAD by Major Type on page 28. Trading book securitisation exposure is captured and risk weighted under APS116.

68 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Securitisation

Trading book capital requirements for securitisation regulatory capital approaches by risk weight band

There is no Trading book capital requirement for securitisation subject to regulatory capital approaches for 31 March 2017.

Trading book securitisation exposure deducted from capital

There is no Trading book capital deduction for 31 March 2017.

Trading book securitisation subject to early amortisation treatment

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document There is no securitisation exposure in the Trading book that is subject to early amortisation treatment for 31 March 2017.

Trading book resecuritisation exposure subject to CRM

Westpac has no resecuritisation exposure subject to CRM at 31 March 2017.

Trading book resecuritisation by guarantor creditworthiness

Westpac has no third party guarantors providing guarantees for securitised assets, principal or interest repayments for 31 March 2017.

Westpac Group March 2017 Pillar 3 report | 69

Pillar 3 report Market risk

Westpac’s exposure to market risk arises out of its Financial Markets and Treasury trading activities. This is quantified for regulatory capital purposes using both the standard method and the internal model approach, details of which are provided below.

Approach

Trading activities are managed within a Board-approved market risk framework that incorporates a Board-approved value at risk (VaR) limit. VaR is the primary mechanism for measuring and managing market risk. Market risk is managed using VaR and structural risk limits (including volume limits and basis point value limits) in conjunction with scenario analysis and stress testing. Market risk limits are allocated to business management based upon business strategies and experience, in addition to the consideration of market liquidity and concentration risk.

All trades are fair valued daily using rates that have been captured automatically from an independent market data source that has been approved by the Revaluation Committee (RC). Where there is no source of independent rates, data will either be derived using a methodology approved by the RC or sourced from dealer contributions. Where dealer-sourced rates/inputs are applied, the RC will meet monthly to review the results of independent price verification performed by the valuation function. In addition, valuation adjustments will be made as deductions from Common Equity Tier 1 Capital for exposures which may not be captured through the fair valuation framework.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The current valuation adjustment considers the impact of the volatility smile in foreign exchange exotic options based on an assessment of the average of at-the-money and non-at-the money volatilities. The resulting adjustment is not material. Rates that have limited independent sources are reviewed at least on a monthly basis.

Financial Markets’ trading activity represents dealings that encompass book running and distribution activity. The types of market risk arising from these activities include interest rate, foreign exchange, commodity, equity price, credit spread and volatility risk.

Treasury’s trading activity represents dealings that include the management of interest rate, foreign exchange and credit spread risks associated with the wholesale funding book, liquid asset portfolios and foreign exchange repatriations. Treasury also manage banking book risk which is discussed in the Interest Rate Risk in the Banking Book section.

VaR limits

Market risk arising from trading book activities is primarily measured using VaR based on an historical simulation methodology. Westpac estimates VaR as the potential loss in earnings from adverse market movements and is calculated over a 1-day time horizon to a 99% confidence level using 1 year of historical data. VaR takes account of all material market variables that may cause a change in the value of the trading portfolio, including interest rates, foreign exchange rates, price changes, volatility, and the correlation between these variables.

In addition to the Board approved market risk VaR limit for trading activities, RISKCO has approved separate VaR sub-limits for the trading activities of Financial Markets and Treasury.

Backtesting

Daily backtesting of VaR results is performed to ensure that model integrity is maintained. A review of both the actual and potential profit and loss outcomes is also undertaken to monitor any skew created by the historical data.

Stress testing

Daily stress testing against pre-determined scenarios is carried out to analyse potential losses beyond the 99% confidence level. An escalation framework around selective stress tests is approved by the Head of Market Risk.

Profit and loss notification framework

The BRCC has approved a profit and loss notification framework. Included in this framework are levels of escalation in accordance with the size of the profit or loss. Triggers are applied to both a 1-day and a rolling 20-day cumulative total.

70 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Market risk

Risk reporting

Daily monitoring of current exposure and limit utilisation is conducted independently by risk managers in the Market Risk team, who monitor market risk exposures against VaR and structural limits. Daily VaR position reports are produced by risk type, by product lines and by geographic region. These are supplemented by structural risk reporting, advice of profit and loss trigger levels and stress test escalation trigger points. Model accreditation has been granted by APRA for the use of an internal model for the determination of regulatory capital for the key classes of interest rate (general market), foreign exchange, commodity and equity risks (including equity specific risk). Under the model, regulatory capital is derived from both the current VaR window (market data is based upon the most recent 12 months of historical data) and a Stressed VaR window (12 months of market data that includes a period of significant financial stress), where these VaR measures are calculated as a 10-day, 99th percentile, one- tailed confidence interval. Specific risk refers to the variations in individual security prices that cannot be explained by general market movements, and event and default risk. Interest rate specific risk capital (specific issuer risk) is calculated using the Standard method and is added to the VaR regulatory capital measure.

Risk mitigation

Market risk positions are managed by the trading desks consistent with delegated trading and product authorities. Risks are consolidated into portfolios based on product and risk type. Risk management is carried out by qualified personnel with varying levels of seniority commensurate with the nature and scale of market risks under management.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The following controls allow monitoring by management:

l trading authorities and responsibilities are clearly delineated at all levels; l a structured system of limits and reporting of exposures; l all new products and significant product variations undergo a rigorous approval process to identify business risks prior to launch; l models that are used to determine risk or profit and loss for Westpac’s accounts are independently reviewed; l duties are segregated so that employees involved in the origination, processing and valuation of transactions operate under separate reporting lines, minimising the opportunity for collusion; and l legal personnel review documentation for compliance with relevant laws and regulations.

In addition, internal audit independently reviews compliance with policies, procedures and limits.

Market Risk regulatory capital and risk weighted assets

The Internal model approach uses VaR and Stressed VaR, while the Standard approach is used for interest rate specific risk.

$m 31 March 2017 30 September 2016 31 March 2016

Internal model approach 526 543 617

Standard approach 72 86 105

Total capital required 598 629 722

Risk weighted assets 7,471 7,861 9,024

Westpac Group March 2017 Pillar 3 report | 71

Pillar 3 report Market risk

VaR by risk type

31 March 2017 For the 6 months ended

$m High Low Average Period end

Interest rate risk 16.0 4.8 8.4 10.9

Foreign exchange risk 9.4 0.8 3.2 1.4

Equity risk 0.2 0.0 0.1 0.1

Commodity risk 10.0 3.3 5.0 5.7

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Other market risks 5.1 3.5 4.5 4.4

Diversification benefit NA NA (8.2) (9.4)

Net market risk1 22.9 9.5 13.0 13.1

30 September 2016 For the 6 months ended

$m High Low Average Period end

Interest rate risk 14.0 6.0 8.8 6.7

Foreign exchange risk 10.0 1.9 4.5 7.1

Equity risk 2.9 0.1 0.3 0.1

Commodity risk 4.0 1.4 2.4 3.2

Other market risks 6.0 3.1 3.9 3.5

Diversification benefit NA NA (6.9) (7.6)

Net market risk1 18.4 9.3 13.0 13.0

31 March 2016 For the 6 months ended

$m High Low Average Period end

Interest rate risk 13.7 4.6 8.8 8.8

Foreign exchange risk 12.2 1.4 5.6 5.5

Equity risk 0.9 0.1 0.3 0.4

Commodity risk 4.5 1.5 3.0 2.3

Other market risks 4.8 2.6 3.2 4.7

Diversification benefit NA NA (8.9) (8.9)

Net market risk1 18.7 7.7 12.0 12.8

Stressed VaR by risk type

31 March 2017 For the 6 months ended

$m High Low Average Period end

Interest rate risk 70.1 22.0 44.8 70.1

Foreign exchange risk 20.5 1.3 6.6 2.5

Equity risk 0.3 0.1 0.2 0.2

Commodity risk 15.5 3.0 6.8 8.3

Other market risks 15.8 11.2 13.2 13.3

Diversification benefit n/a n/a (21.5) (21.5)

Net market risk1 77.2 26.2 50.1 72.9

30 September 2016 For the 6 months ended

$m High Low Average Period end

Interest rate risk 74.6 26.5 44.7 36.6

Foreign exchange risk 26.9 1.8 9.0 17.1

Equity risk 4.0 0.1 0.5 0.2

Commodity risk 11.4 3.8 6.1 6.8

Other market risks 17.1 11.4 14.5 13.5

Diversification benefit NA NA (26.6) (20.0)

Net market risk1 97.9 23.4 48.2 54.2

1 The net market risk measure reflects the aggregate diversified risk position for the period. Therefore, individual risk factors will not sum to this total.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 72 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Market risk

31 March 2016 For the 6 months ended

$m High Low Average Period end

Interest rate risk 84.4 21.7 40.4 41.7

Foreign exchange risk 28.0 1.5 10.7 5.5

Equity risk 1.4 0.4 0.6 0.5

Commodity risk 12.2 2.8 6.2 4.0

Other market risks 19.4 10.0 13.1 14.5

Diversification benefit NA NA (23.6) (13.1)

Net market risk1 86.7 26.4 47.4 53.1

Back-testing results

The following graph gives a comparison of actual profit and loss to VaR over the 6 months ended 31 March 2017.

Each point on the graph represents 1 day’s trading profit or loss. This result is placed on the graph relative to the associated VaR utilisation. The downward sloping line represents the point where a loss is equal to VaR utilisation. Any point below this line represents a back-test exception (i.e. where the loss is greater than the VaR).

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 The net market risk measure reflects the aggregate diversified risk position for the period. Therefore, individual risk factors will not sum to this total.

Westpac Group March 2017 Pillar 3 report | 73

Pillar 3 report Liquidity risk management

Liquidity risk is the risk that Westpac will be unable to fund assets and meet obligations as they become due. This type of risk is inherent in all banks through their role as intermediaries between depositors and borrowers.

Approach

Liquidity risk is measured and managed in accordance with the policies and processes defined in the BRCC approved Liquidity Risk Management Framework.

Responsibility for managing the Group’s liquidity and funding positions in accordance with the Group’s Liquidity Risk Management Framework is delegated to Treasury, under the oversight of ALCO.

Liquidity Risk Management Framework

Westpac’s Liquidity Risk Management Framework sets out the liquidity risk appetite, roles and responsibilities, tools for measuring and managing liquidity risk, reporting procedures and supporting policies. Key components of Westpac’s approach to liquidity risk management are listed below.

Funding strategy

Treasury undertakes an annual funding review that outlines the funding strategy for the coming year. 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. The annual funding strategy is reviewed and supported by ALCO prior to approval by the BRCC.

The Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk appetite. This includes compliance with both the LCR and upcoming Net Stable Funding Ratio (NSFR). See also section 2.4.2 ‘Funding and Liquidity Risk Management’ in the Westpac Group 2017 Interim Results Announcement for further detail.

Liquid asset holdings

Westpac holds a portfolio of liquid assets as a buffer against unforeseen funding requirements. These assets are unencumbered and eligible to be used as collateral for repurchase agreements with the Reserve Bank of Australia or other central banks. The BRCC approves minimum holdings of liquid assets annually.

‘Going Concern’ scenario

The Group maintains a ‘going concern’ model with reports issued and reviewed on a daily basis. Under the ‘going concern’ model wholesale debt maturities are added to planned net asset growth to provide an estimate of the wholesale funding task across a range of time horizons. Maturity concentrations are measured against a Board approved limit structure with limits set at intervals from one week to 15 months.

Stress testing

Stress testing is carried out to assess Westpac’s ability to meet cash flow obligations under a range of market conditions, including idiosyncratic and systemic stress scenarios. These scenarios inform liquidity limits and strategic planning.

Liquidity transfer pricing

Westpac has a liquidity transfer pricing process which measures and allocates liquidity risk across the Group.

Contingency planning

Treasury 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 reviewed and approved by ALCO and is aligned with Westpac’s broader Liquidity Crisis Management Policy which is approved annually by the BRCC.

Liquidity reporting

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Daily liquidity risk reports are circulated to, and reviewed by, local and senior staff in Treasury and the Liquidity Risk team. The liquidity risk position is monitored on a daily basis to ensure adherence to agreed liquidity limits. Liquidity reports are presented to ALCO monthly and to the BRCC quarterly.

74 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Liquidity risk coverage ratio disclosure

Liquidity Coverage Ratio disclosure

The Liquidity Coverage Ratio (LCR) requires banks to hold sufficient high-quality liquid assets, as defined by APRA, to withstand 30 days under a regulator-defined acute stress scenario. The Group’s LCR tracked higher in the December quarter at 131%1 to prepare for the reduced Committed Liquidity Facility allocated to the Group from 1 January 2017. With the reduced CLF for the 2017 calendar year, the Group’s LCR for the quarter ending 31 March 2017 was lower at 122%2.

Liquid assets included in the LCR comprise HQLA, the Committed Liquidity Facility (CLF) from the Reserve Bank of Australia and additional qualifying Reserve Bank of New Zealand securities. Westpac received approval from APRA for a CLF of $49.1 billion for the calendar year 2017 (2016 calendar year: $58.6 billion). The Group maintains a portfolio of HQLA and these averaged $75.8 billion over the quarter3.

Funding is sourced from retail, small business and institutional customer deposits and wholesale funding. The Group seeks to minimise the outflows associated with this funding by targeting customer deposits with lower LCR outflow rates and actively manages the maturity profile of its wholesale funding portfolio. Westpac maintains a buffer over the regulatory minimum of 100%.

31 March 2017 31 December 2016 Total unweighted Total weighted Total unweighted Total weighted $m value (average)3 value (average)3 value (average)4 value (average)4

Liquid assets, of which: 1 High-quality liquid assets (HQLA) 75,772 74,542 2 Alternative liquid assets (ALA) 43,174 53,589 3 Reserve Bank of New Zealand (RBNZ) securities 6,792 6,651

Cash Outflows 4 Retail deposits and deposits from small business customers, of 221,777 20,098 218,041 18,415 which:

5 Stable deposits 106,543 5,327 113,617 5,681 6 Less stable deposits 115,234 14,771 104,424 12,734

7 Unsecured wholesale funding, of which: 124,956 64,916 125,382 65,542

8 Operational deposits (all counterparties) and deposits in networks 40,244 10,010 41,071 10,219 for cooperative banks 9 Non-operational deposits (all counterparties) 70,018 40,212 70,111 41,123 10 Unsecured debt 14,694 14,694 14,200 14,200

11 Secured wholesale funding 568 679

12 Additional requirements, of which: 196,833 24,164 201,470 24,650

13 Outflows related to derivatives exposures and other collateral 8,445 8,445 8,661 8,661 requirements 14 Outflows related to loss of funding on debt products 1,086 1,086 438 438 15 Credit and liquidity facilities 187,302 14,633 192,371 15,551

16 Other contractual funding obligations 1,842 1,842 3,103 3,103 17 Other contingent funding obligations 41,764 3,813 40,953 3,742

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 18 Total cash outflows 115,401 116,131

Cash inflows 19 Secured lending (e.g. reverse repos) 5,527 - 3,892 - 20 Inflows from fully performing exposures 12,325 7,981 13,563 9,239 21 Other cash inflows 4,282 4,282 4,382 4,382

22 Total cash inflows 22,134 12,263 21,837 13,621

23 Total liquid assets 125,738 134,782 24 Total net cash outflows 103,138 102,510

25 Liquidity Coverage Ratio (%) 122% 131%

1 Calculated as total liquid assets divided by total net cash outflows for 31 December 2016. 2 Calculated as total liquid assets divided by total net cash outflows for 31 March 2017. 3 Calculated as a simple average of the daily observations over the 31 March 2017 quarter. 4 Calculated as a simple average of the data points for 31 October 2016, 30 November 2016 and 31 December 2016.

Westpac Group March 2017 Pillar 3 report | 75

Pillar 3 report Operational risk

Operational risk is defined at Westpac 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 and reputation risk. Westpac’s operational risk definition is aligned to APS115 Capital Adequacy: Advanced Measurement Approaches to Operational Risk (AMA).

Approach

Westpac has been accredited to use the AMA in accordance with APS115. Westpac’s operational risk is measured and managed in accordance with the policies and processes defined in its Operational Risk Management Framework.

Westpac’s Operational Risk Management Framework

The Operational Risk Management Framework outlines a consistent approach to the:

l identification, measurement and management of operational risks that may impede Westpac’s ability to achieve its strategic objectives and vision;

l identification and escalation of operational risk and compliance incidents and issues in order to minimise potential financial losses, reputational damage and shareholder, community, employee and regulatory impacts; and

l calculation and allocation of operational risk capital.

The key components of Westpac’s operational risk management framework are listed below:

Governance - The governance structure provides clearly defined roles and responsibilities for overseeing and reviewing operational risk exposure and its management.

The Board and BRCC are supported by committees, including RISKCO, that monitor operational risk profiles and the effectiveness of operational risk management practices, including operational risk capital.

Risk and Control Management (RCM) - RCM is a forward-looking tool used to manage Westpac’s operational risk profile by identifying and assessing key operational risks and the adequacy of controls, with management action planning to reduce risks that are outside risk appetite or where enhancements in the associated control environment are required.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Key Indicators (KIs) - The framework defines requirements and processes for KIs, which are objective measures used by management to monitor the operational risk and control environment.

Incident Management - Incident management involves identifying operational risk incidents, capturing them in the central operational risk system and escalating them to appropriate levels of management. Early identification and ownership supports the ability to minimise any immediate impacts of the incidents, address the root causes, and devise and monitor management actions required to strengthen the control environment.

Data - The framework includes principles and processes to ensure the integrity of operational risk data used to support management decision-making and calculate and allocate capital. The principles apply to the governance, input and capture, reconciliation and validation, correction, reporting and storage of operational risk data. Operational risk data is subject to independent validation on a regular basis.

Scenario Analysis - Scenario analysis is used to assess the impacts of extreme but plausible loss events on Westpac and is an input to the calculation of operational risk capital.

Operational Risk in Projects - The framework defines requirements for understanding and managing the operational risks implications of projects.

Reporting - Regular reporting of operational risk information to governance bodies and senior management is used to support timely and proactive management of operational risk and enable transparent and formal oversight of the risk and control environment.

Controls Assurance - The framework defines the process and requirements for providing assurance over the effectiveness of the operational risk control environment, including the testing and assessment of the design and operating effectiveness of controls.

76 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Operational risk

AMA capital model overview

Operational risk regulatory capital is calculated on a quarterly basis. The capital model is reviewed annually to re-assess the appropriateness of the model framework, methodology, assumptions and parameters in light of changes in the operational risk profile and industry developments.

Westpac’s operational risk capital is based on three data sources:

l Internal Loss Data – operational risk losses experienced by Westpac;

l External Loss Data – operational risk losses experienced by other financial institutions; and

l Scenario Data – potential losses from extreme but plausible events relevant to Westpac.

These data sources together represent the internal and external operational risk profile, across the spectrum of operational risk losses, from both historical and forward- looking perspectives. The model combines these data sources to produce a loss distribution.

Expected loss offsets and risk mitigation

No adjustments or deductions are currently made to Westpac’s measurement of operational risk regulatory capital for the mitigating impacts of insurance or expected operational risk losses.

Operational Risk regulatory capital and risk weighted assets

$m 31 March 2017 30 September 2016 31 March 2016

Advanced measurement approach 2,532 2,669 2,586

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Standardised approach - - -

Total capital required 2,532 2,669 2,586

Risk weighted assets 31,653 33,363 32,329

Westpac Group March 2017 Pillar 3 report | 77

Pillar 3 report Equity risk

Equity risk is defined as the potential for financial loss arising from movements in equity values. The disclosures in this section exclude investments in equities made by Westpac subsidiaries outside the regulatory Level 2 group.

Structure and organisation

Any changes to the portfolio and transactional limits for Westpac’s direct equity investments are approved by the BRCC under delegated authority from the Westpac Board. The BRCC also approves the Equity Risk Management framework. RISKCO approves sub-limits of the BRCC approved Trading Book VaR limit for Financial Markets and Treasury. Any equity Trading Book activity is captured under these limits.

Approach

Westpac has established a comprehensive set of policies defining the management of equity risk. These policies are reviewed and approved periodically (in most cases annually).

Risk mitigation

Westpac does not use financial instruments to mitigate its exposure to equities in the banking book.

Banking book positions

Equity underwriting and warehousing risk - As a financial intermediary Westpac underwrites listed and unlisted equities. Equity warehousing activities require the acquisition of assets in anticipation of refinancing through a combination of senior, mezzanine and capital market debt and listed, unlisted and privately placed equity.

Investment securities - Westpac undertakes, as part of the ordinary course of business, certain investments in strategic equity holdings and over time the nature of underlying investments will vary.

Measurement of equity securities - Equity securities are generally carried at their fair value. Fair value for equities that have a quoted market price (in an active market) is determined based upon current bid prices. If a market for a financial asset is not active, fair value is determined based upon a valuation technique. This includes the use of recent arms-length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants to price similar instruments. In the event that the fair value of an unlisted security cannot be measured reliably, these investments are measured at cost.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Where the investment is held for long term strategic purposes, these investments are accounted for either as available for sale, with changes in fair value being recognised in equity, at fair value through profit and loss, or equity accounted for and recognised as a share in associates.

Other related matters

l The book value of certain unlisted investments are measured at cost because the fair value cannot be reliably measured and cost is considered to be a reasonable approximation of fair value. These investments represent minority interests in companies for which active markets do not exist and quote prices are not available. All other equity exposures are recognised at fair value.

l Fair value should not differ to the listed stock price. Should a listed stock price not be available, it is estimated using the techniques referred to above.

l The equity method of accounting is used for investments in Associates, such as BTIM, and other similar investees. Associates are entities in which the Group has significant influence, but not control, over the operating and financial policies.

Risk reporting

Westpac manages equity risk in two ways, VaR limits and investment limits:

l A VaR limit (in conjunction with structural limits) is used to manage traded equity. This limit is a sub-limit of the RISKCO approved VaR limit for Financial Markets trading activities. Equity trading activity is overseen by the independent Market Risk function applying the same controls used for monitoring other trading book activities in Financial Markets and Treasury; and

l Investment exposures are reported quarterly.

78 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Equity risk

Book value of equity exposures

31 March 30 September 31 March $m 2017 2016 2016

Listed equity exposures (publicly traded) 705 718 737

Unlisted equity exposures (privately traded) 243 217 240

Total book value of equity exposures 948 935 977

Gains/losses

31 March 30 September 31 March $m 2017 2016 2016

Cumulative realised gains (losses) (5) 24 23

Total unrealised gains (losses) through profit & loss (16) (44) (23)

Total unrealised gains (losses) through equity - - -

Total latent revaluation gains (losses) - - -

At 31 March 2017 the carrying value of Westpac’s investment in BT Investment Management Limited (BTIM) was $705 million, and the fair value was $908 million.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac Group March 2017 Pillar 3 report | 79

Pillar 3 report Interest rate risk in the banking book (IRRBB)

Interest Rate Risk in the Banking Book (IRRBB) is the risk to interest income arising from a mismatch between the duration of assets and liabilities that arises in the normal course of banking activities.

Approach

The banking book activities that give rise to market risk include lending activities, balance sheet funding and capital management. Interest rate risk, basis risk, currency risk and funding and liquidity risk are inherent in these activities. Treasury’s Asset & Liability Management (ALM) unit is responsible for managing market risk arising from Westpac’s banking book activity.

All material regions, business lines and legal entities are included in Westpac’s IRRBB framework.

Model accreditation has been granted by APRA for the use of an internal model for the determination of IRRBB regulatory capital. Under the model, regulatory capital is primarily derived from a VaR measure using 6 years of historical data with a scaled 1 year, 99th percentile, one-tailed confidence interval. A standardised calculation of credit spread risk is added to the VaR regulatory capital measure.

Asset and liability management

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The ALM unit manages the structural interest rate mismatch associated with the transfer priced balance sheet, including the investment of Westpac’s capital to its agreed benchmark duration. A key risk management objective is to achieve reasonable stability of Net Interest Income (NII) over time. These activities are performed under the oversight of RISKCO and the Market Risk team.

Net Interest Income sensitivity

NII sensitivity is managed in terms of the net interest income-at-risk (NaR) modelled over a three year time horizon to a 99% confidence interval for movements in wholesale market interest rates. A simulation model is used to calculate Westpac’s potential NaR. The NII simulation framework combines the underlying statement of financial position data with assumptions about runoff and new business, expected repricing behaviour and changes in wholesale market interest rates. Simulations using a range of interest rate scenarios are used to provide a series of potential future NII outcomes. The interest rate scenarios modelled include those projected using historical market interest rate volatility as well as 100 and 200 basis point shifts up and down from current market yield curves. Additional stressed interest rate scenarios are also considered and modelled.

A comparison between the NII outcomes from these modelled scenarios indicates the sensitivity to interest rate changes. On and off-balance sheet instruments are then used to manage this interest rate risk.

NaR limit

The BRCC has approved a NaR limit. This limit is managed by the Treasurer and is expressed as a deviation from benchmark hedge levels over a one-year rolling time frame, to a 99% level of confidence. This limit is monitored by the Market Risk team.

VaR limit

The BRCC has also approved a VaR limit for ALM activities. This limit is managed by the Treasurer and monitored by the Market Risk team. Additionally, the Market Risk team sets structural risk limits to prevent undue concentration of risk.

Structural foreign exchange rate risk

Structural foreign exchange rate risk results from the generation of foreign currency denominated earnings and from Westpac’s capital deployed in offshore branches and subsidiaries, where it is denominated in currencies other than Australian dollars. The Australian dollar equivalent of offshore earnings and capital is subject to change as exchange rates fluctuate, which could introduce significant variability to Westpac’s reported financial results. ALCO provides oversight of the appropriateness of foreign exchange hedges on earnings and capital.

Risk reporting

Interest rate risk in the banking book risk measurement systems and personnel are located in Sydney and Auckland. These include front office product systems, which capture all treasury funding and derivative transactions; the transfer pricing system, which captures all retail and other business transactions; and non-traded Interest Rate Risk systems, which calculate amongst other things, ALM VaR and NaR.

Daily monitoring of market risk exposure against VaR and structural risk limits is conducted independently by the Market Risk team, with NaR monitored on a monthly basis. Management reports detailing structural positions and VaR are produced and distributed daily for use by dealers and management across all stakeholder groups. Quarterly reports are produced for the senior management market risk forums of RISKCO and BRCC to provide transparency of material market risks and issues.

80 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Interest rate risk in the banking book (IRRBB)

Risk mitigation

Market risk arising in the banking book stems from the ordinary course of banking activities, including structural interest rate risk (the mismatch between the duration of assets and liabilities) and capital management. Hedging Westpac’s exposure to interest rate risk is undertaken using derivatives. The hedge accounting strategy adopted utilises a combination of the cash flow, fair value and net investment hedge approaches. Some derivatives held for economic hedging purposes do not meet the criteria for hedge accounting as defined under AASB 139 Financial Instruments: Recognition and Measurement and therefore are accounted for in the same way as derivatives held for trading.

The same controls used to monitor traded market risk allow for continuous monitoring by management.

Change in economic value of a sudden upward and downward movement in interest rates

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 31 March 2017 200bp parallel 200bp parallel

$m increase decrease AUD 163.0 (137.0)

NZD (11.0) 11.0

USD - -

Total 152.0 (126.0)

30 September 2016 200bp parallel 200bp parallel

$m increase decrease AUD 133.0 (153.0)

NZD 24.0 (14.0)

USD - -

Total 157.0 (167.0)

31 March 2016 200bp parallel 200bp parallel

$m increase decrease AUD 26.4 (35.9)

NZD 2.5 (1.9)

USD - -

Total 28.9 (37.8)

VaR results for non-traded interest rate risk1

For the For the For the

6 months ended 6 months ended 6 months ended

31 March 30 September 31 March

$m 2017 2016 2016 High 57.3 53.6 42.4

Low 31.3 31.1 34.7

Average 45.6 41.6 37.1

Period end 38.3 49.5 35.6

Interest rate risk in the banking book regulatory capital and risk weighted assets

31 March 30 September 31 March $m 2017 2016 2016

Total capital required 651 430 374

Risk weighted assets 8,143 5,373 4,678

1 Disclosures of IRRBB 1-day VaR prior to 30 September 2016 were based only on interest rate risk positions used in the measurement of interest rate risk in the banking book for capital adequacy purposes and excluded credit spread and other basis risks. IRRBB VaR now includes interest rate risk, credit spread risk in liquid assets and other basis risks as used for internal management purposes. For purposes of period-to-period comparison, the results for March 2016 reported here have been restated using the internal approach including credit spread risk in liquid assets and other basis risks. This change has no impact on capital required for IRRBB.

Westpac Group September 2015 Pillar 3 report | 81

Pillar 3 report

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Appendix I | Regulatory capital reconciliation

Balance Sheet Reconciliation

Level 2 Reconciliation Table

31 March 2017 Group Balance Regulatory Capital Disclosure

$m Sheet Adjustment Balance Sheet Template

Assets

Cash and balances with central banks 15,912 (170) 15,742

Receivables due from other financial institutions 9,545 (522) 9,023

Due from subsidiaries - 2,427 2,427

Derivative financial instruments 24,619 26 24,645

Trading securities 28,312 - 28,312

Investments in associates 716 - 716

Other financial assets designated at fair value 2,665 (307) 2,358

Available-for-sale-securities 59,952 (59) 59,893

Loans 666,946 - 666,946

Life insurance assets 10,934 (10,934) -

Regulatory deposits with central banks overseas 1,409 - 1,409

Deferred tax assets 1,187 (8) 1,179 Table a

Goodwill and other intangible assets 11,438 (286) 11,152 Table b

Property, plant and equipment 1,574 (1) 1,573

Investments in life & general insurance, funds management & securitisation entities - 1,573 1,573 Table c

Other assets 4,784 (1,076) 3,708

Total assets 839,993 (9,337) 830,656

Liabilities

Payables due to other financial institutions 21,390 (39) 21,351

Due to subsidiaries - 3,859 3,859

Deposits and other borrowings 522,513 (397) 522,116

Other Financial Liabilities at fair value through income statement 4,894 - 4,894

Derivative financial instruments 28,457 - 28,457

Debt issues and acceptances 167,306 (1,091) 166,215

Current tax liabilities 144 (7) 137

Deferred tax liabilities 17 (17) - Table a

Life insurance liabilities 9,158 (9,158) -

Provisions 1,187 (12) 1,175

Loan Capital 17,106 - 17,106 Table d and e

Other liabilities 8,449 (1,042) 7,407

Total liabilities 780,621 (7,904) 772,717

Equity

Ordinary share capital 33,765 - 33,765 Row 1

Treasury shares and RSP treasury shares (501) - (501) Table f

Reserves 845 (110) 735 Table g

Retained Profit 25,206 (1,323) 23,883 Row 2

Non-controlling interest 57 - 57

Total equity 59,372 (1,433) 57,939

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 82 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Appendix I | Regulatory capital reconciliation

Capital Disclosure Template $m 31 March 2017 Reference

Table a

Deferred Tax Assets

Total Deferred Tax Assets per level 2 Regulatory Balance Sheet 1,179

Deferred tax asset adjustment before applying prescribed thresholds 1,179 Row 26e

Less: Amounts below prescribed threshold - risk weighted (1,179) Row 75

Total per Capital Disclosure Template - Deferred Tax Asset - Row 21 / 25

Capital Disclosure Template $m 31 March 2017 Reference

Table b

Goodwill and other intangible assets

Total Goodwill and Intangibles Assets per level 2 Regulatory Balance Sheet 11,152

Less: Capitalised Software Disclosed Under Intangibles (1,529) Row 9

Total per Capital Disclosure Template - Goodwill 9,623 Row 8

Capital Disclosure Template $m 31 March 2017 Reference

Table c

Equity Investments

Significant Investment in financial entities 705

Equity Investments in non-consolidated subsidiaries 1,573

Total Significant Investment in financial entities 2,278 Row 73

Non-significant Investment in financial entities 189 Row 72

Total Investments in financial institutions 2,467 Row 26d

Investment in commercial entities 54 Row 26g

Total Equity Investments before applying prescribed threshold 2,521

Less: Amounts below prescribed threshold (2,521)

Total per Capital Disclosure Template - Equity Investments - Row 18/ 19/ 23

Capital Disclosure $m 31 March 2017 Template Reference

Table d

Additional Tier 1 Capital

Total Loan Capital per Level 2 Regulatory Balance Sheet 17,106

Less: Tier 2 Capital Instruments Reported Below (10,239)

Add: Capitalised Issue Costs for Additional Tier 1 Capital Instruments1 43

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total per Capital Disclosure Template - Tier 1 Capital 6,910 Row 36

Additional Tier 1 Capital included in Regulatory Capital

Westpac Capital Notes 1,384

Westpac Capital Notes 2 1,311

Westpac Capital Notes 3 1,324

Westpac Capital Notes 4 1,701

Total Basel III complying instruments 5,720 Row 30

Convertible preference shares (CPS) 1,190

Total Basel III non complying instruments 1,190 Row 33

Total per Capital Disclosure Template - Additional Tier 1 Capital Instruments 6,910 Row 36

1 Unamortised issue costs relating to capital instruments are netted off against each instrument in the Balance Sheet. For regulatory capital purposes, these capital instruments are shown gross of unamortised issue costs. The unamortised issue costs are deducted from CET1 as part of capitalised expenses in Row 26f in the capital disclosure template.

Westpac Group March 2017 Pillar 3 report | 83

Pillar 3 report Appendix I | Regulatory capital reconciliation

Capital Disclosure Template $m 31 March 2017 Reference Table e Tier 2 Capital Total Tier 2 Capital per Level 2 Regulatory Balance Sheet 10,239 Add: Capitalised Issue Costs for Tier 2 Capital Instruments1 10 Less: Fair Value Adjustment2 93 Less: Cumulative amortisation of Tier 2 Capital Instruments (351) Less: Basel III transitional adjustment (445) Row 56c Provisions 49 Row 50 / 76 Total per Capital Disclosure Template - Tier 2 9,595 Row 51

Tier 2 Capital included in Regulatory Capital AUD1,000 million Westpac Subordinated Notes 1,000 AUD925 million Westpac Subordinated Notes II 925 CNY1,250 million Westpac Subordinated Notes 237 AUD350 million Westpac Subordinated Notes 349 SGD325 million Westpac Subordinated Notes 304 USD100 million Westpac Subordinated Notes 131 AUD700 million Westpac Subordinated Notes 700 JPY20,000 million Westpac Subordinated Notes 234 JPY10,200 million Westpac Subordinated Notes 119 JPY10,000 million Westpac Subordinated Notes 117 AUD175 million Westpac Subordinated Notes 175 NZD400 million Westpac Subordinated Notes 366 USD1,500 million Westpac Subordinated Notes 1,953 JPY8,000 million Westpac Subordinated Notes 93

Total Basel III complying instruments 6,703 Row 46

USD352 million Perpetual Floating Rate Notes 460

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document USD350 million SEC registered Subordinated Notes 106 AUD1,676 million Westpac Subordinated Notes 1,676 USD800 million Subordinated Notes 1,046

Total Basel III non complying instruments 3,288 Less: Basel III transitional adjustment (445) Row 85 Total Basel III non complying instruments after transitional adjustment 2,843 Row 47 Provisions 49 Row 50 / 76 Total per Capital Disclosure Template - Tier 2 Capital Instruments 9,595 Row 51

Capital Disclosure Template $m 31 March 2017 Reference Table f Treasury Shares and RSP Teasury Shares Total treasury shares per Level 2 Regulatory Balance Sheet (501) Less: Treasury Shares not included for Level 2 Regulatory Capital 81

Total per Capital Disclosure Template - Treasury Shares (420) Row 26a

Capital Disclosure Template $m 31 March 2017 Reference Table g Accumulated Other Comprehensive Income Total reserves per Level 2 Regulatory Balance Sheet 735 Less: Share Based Payment Reserve not included within capital (64)

Total per Capital Disclosure Template - Accumulated Other Comprehensive Income 671 Row 3

1 Unamortised issue costs relating to capital instruments are netted off against each instrument in the Balance Sheet. For regulatory capital purposes, these capital instruments are shown gross of unamortised issue costs. The unamortised issue costs are deducted from CET1 as part of capitalised expenses in Row 26f in the capital disclosure template. 2 For regulatory capital purposes, APRA requires these instruments to be included as if they were unhedged.

84 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Appendix I | Regulatory capital reconciliation

The capital disclosure template below represents the post 1 January 2018 Basel III requirements. The Group is applying the Basel III regulatory adjustments in full as implemented by APRA.

Table $m 31 March 2017 Reference Common Equity Tier 1 capital: instruments and reserves 1 Directly issued qualifying ordinary shares (and equivalent for mutually-owned entities) capital 33,765

2 Retained earnings 23,883 3 Accumulated other comprehensive income (and other reserves) 671 Table g 4 Directly issued capital subject to phase out from CET1 (only applicable to mutually-owned companies) - 5 Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) 57

6 Common Equity Tier 1 capital before regulatory adjustments 58,376

Common Equity Tier 1 capital : regulatory adjustments 7 Prudential valuation adjustments - 8 Goodwill (net of related tax liability) (9,623) Table b 9 Other intangibles other than mortgage servicing rights (net of related tax liability) (1,529) Table b 10 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) - 11 Cash-flow hedge reserve 201 12 Shortfall of provisions to expected losses (915) 13 Securitisation gain on sale (as set out in paragraph 562 of Basel II framework) -

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 14 Gains and losses due to changes in own credit risk on fair valued liabilities (133) 15 Defined benefit superannuation fund net assets - 16 Investments in own shares (if not already netted off paid-in capital on reported balance sheet) -

17 Reciprocal cross-holdings in common equity - 18 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of - Table c eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 19 Significant investments in the ordinary shares of banking, financial and insurance entities that are outside the scope of regulatory - Table c consolidation, net of eligible short positions (amount above 10% threshold) 20 Mortgage service rights (amount above 10% threshold) - 21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) - Table a 22 Amount exceeding the 15% threshold - 23 of which: significant investments in the ordinary shares of financial entities - Table c 24 of which: mortgage servicing rights - 25 of which: deferred tax assets arising from temporary differences - Table a 26 National specific regulatory adjustments (sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j) (6,042) 26a of which: treasury shares (420) Table f 26b of which: offset to dividends declared under a dividend reinvestment plan (DRP), to the extent that the dividends are used to - purchase new ordinary shares issued by the ADI 26c of which: deferred fee income 250 26d of which: equity investments in financial institutions not reported in rows 18, 19 and 23 (2,467) Table c 26e of which: deferred tax assets not reported in rows 10, 21 and 25 (1,179) Table a 26f of which: capitalised expenses (1,859) 26g of which: investments in commercial (non-financial) entities that are deducted under APRA prudential requirements (54) Table c 26h of which: covered bonds in excess of asset cover in pools - 26i of which: undercapitalisation of a non-consolidated subsidiary - 26j of which: other national specific regulatory adjustments not reported in rows 26a to 26i (312) 27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions -

28 Total regulatory adjustments to Common Equity Tier 1 (18,041)

29 Common Equity Tier 1 Capital (CET1) 40,335

Westpac Group March 2017 Pillar 3 report | 85

Pillar 3 report Appendix I | Regulatory capital reconciliation

Table $m 31 March 2017 Reference Additional Tier 1 Capital: instruments 30 Directly issued qualifying Additional Tier 1 instruments 5,720 Table d 31 of which: classified as equity under applicable accounting standards - 32 of which: classified as liabilities under applicable accounting standards 5,720 Table d 33 Directly issued capital instruments subject to phase out from Additional Tier 1 1,190 Table d 34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount - allowed in group AT1) 35 of which: instruments issued by subsidiaries subject to phase out -

36 Additional Tier 1 Capital before regulatory adjustments 6,910 Table d Additional Tier 1 Capital: regulatory adjustments 37 Investments in own Additional Tier 1 instruments - 38 Reciprocal cross-holdings in Additional Tier 1 instruments - 39 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of - eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 40 Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation - (net of eligible short positions) 41 National specific regulatory adjustments (sum of rows 41a, 41b and 41c) - 41a of which: holdings of capital instruments in group members by other group members on behalf of third parties -

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 41b of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidations not reported in rows - 39 and 40 41c of which: other national specific regulatory adjustments not reported in rows 41a and 41b - 42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions -

43 Total regulatory adjustments to Additional Tier 1 capital -

44 Additional Tier 1 capital (AT1) 6,910 Table d 45 Tier 1 Capital (T1=CET1+AT1) 47,245

Tier 2 Capital: instruments and provisions 46 Directly issued qualifying Tier 2 instruments 6,703 Table e 47 Directly issued capital instruments subject to phase out from Tier 2 2,843 Table e 48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties - (amount allowed in group T2) 49 of which: instruments issued by subsidiaries subject to phase out - 50 Provisions 49 Table e 51 Tier 2 Capital before regulatory adjustments 9,595 Table e Tier 2 Capital: regulatory adjustments 52 Investments in own Tier 2 instruments (50) 53 Reciprocal cross-holdings in Tier 2 instruments - 54 Investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net - of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 55 Significant investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory (140) consolidation, net of eligible short positions 56 National specific regulatory adjustments (sum of rows 56a, 56b and 56c) (41) 56a of which: holdings of capital instruments in group members by other group members on behalf of third parties - 56b of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidation not reported in rows (41) 54 and 55 56c of which: other national specific regulatory adjustments not reported in rows 56a and 56b -

57 Total regulatory adjustments to Tier 2 capital (231)

58 Tier 2 capital (T2) 9,364

59 Total capital (TC=T1+T2) 56,609

60 Total risk-weighted assets based on APRA standards 404,382

86 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Appendix I | Regulatory capital reconciliation

Table $m 31 March 2017 Reference Capital ratios and buffers 61 Common Equity Tier 1 (as a percentage of risk-weighted assets) 10.0% 62 Tier 1 (as a percentage of risk-weighted assets) 11.7% 63 Total capital (as a percentage of risk-weighted assets) 14.0% 64 Buffer requirement (minimum CET1 requirement of 4.5% plus capital conservation buffer of 2.5% plus any countercyclical buffer 3.5% requirements expressed as a percentage of risk-weighted assets) 65 of which: capital conservation buffer requirement 3.5% 66 of which: ADI-specific countercyclical buffer requirements 0.0% 67 of which: G-SIB buffer requirement (not applicable) NA 68 Common Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets) 5.5%

National minima (if different from Basel III) 69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) 4.5% 70 National Tier 1 minimum ratio (if different from Basel III minimum) 6.0% 71 National total capital minimum ratio (if different from Basel III minimum) 8.0%

Amount below thresholds for deductions (not risk-weighted) 72 Non-significant investments in the capital of other financial entities 189 Table c 73 Significant investments in the ordinary shares of financial entities 2,278 Table c

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 74 Mortgage servicing rights (net of related tax liability) - 75 Deferred tax assets arising from temporary differences (net of related tax liability) 1,179 Table a Applicable caps on the inclusion of provisions in Tier 2 76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to application of cap) 49 Table e 77 Cap on inclusion of provisions in Tier 2 under standardised approach 212 78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) - 79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 1,989

Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022) 80 Current cap on CET1 instruments subject to phase out arrangements NA 81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities NA 82 Current cap on AT1 instruments subject to phase out arrangements 2,787 83 Amount excluded from AT1 instruments due to cap (excess over cap after redemptions and maturities) - 84 Current cap on T2 instruments subject to phase out arrangements 2,843 85 Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) 445 Table e

Countercyclical buffer

The table below details Westpac’s countercyclical buffer requirement.

Risk weighted assets Trading Credit risk Non-private book private Total private 31 March 2017 exposure at sector sector credit sector credit Jurisdictional ADI-specific $m default Credit risk credit risk risk risk buffer buffer Hong Kong 4,254 1,452 - 18 1,332 1.250% 0.0047% Sweden 218 44 - - - 2.000% 0.0000% Norway 7 12 - - 12 1.500% 0.0001% No countercyclical buffer applicable 965,888 355,607 (8,762) 7,453 354,480 0.000% 0.0000% Total 970,367 357,115 (8,762) 7,471 355,824 0.0047%

Total Risk Weighted Asset 404,382 Countercyclical capital buffer 19

Westpac Group March 2017 Pillar 3 report | 87

Pillar 3 report Appendix II | Regulatory consolidation

This appendix lists all subsidiaries controlled by Westpac according to their level of regulatory consolidation.

Level 1 Entities

The following controlled entities have been approved by APRA for inclusion in the Westpac ADI’s ‘Extended Licensed Entity’ (ELE) for the purposes of measuring capital adequacy at Level 1:

Westpac Banking Corporation Westpac Capital-NZ-Limited

1925 (Commercial) Pty Limited Westpac Debt Securities Pty Limited

1925 (Industrial) Pty Limited Westpac Delta LLC

Belliston Pty Limited Westpac Direct Equity Investments Pty Limited

Bill Acceptance Corporation Pty Limited Westpac Equipment Finance Limited

Capital Finance Australia Limited Westpac Equity Investments NZ Limited

CBA Limited Westpac Finance (HK) Limited

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Challenge Limited Westpac Financial Holdings Pty Limited

Mortgage Management Pty Limited Westpac Funding Holdings Pty Limited

Partnership Pacific Pty Limited Westpac Group Investment-NZ-Limited

Partnership Pacific Securities Pty Limited Westpac Holdings-NZ-Limited

Pashley Investments Pty Limited Westpac Investment Capital Corporation

Sallmoor Pty Limited Westpac Investment Vehicle No.2 Pty Limited

Sixty Martin Place (Holdings) Pty Limited Westpac Investment Vehicle Pty Limited

St.George Business Finance Pty Limited Westpac Leasing Nominees-Vic.-Pty Limited

St.George Custodial Pty Limited Westpac New Zealand Group Limited

St.George Equity Finance Limited Westpac Overseas Holdings No. 2 Pty Limited

St.George Finance Holdings Limited Westpac Overseas Holdings Pty Limited

St.George Security Holdings Pty Limited Westpac Properties Limited

The Mortgage Company Pty Limited Westpac Securitisation Holdings Pty Limited

Value Nominees Pty Limited Westpac Structured Products Limited

Westpac Administration 2 Limited Westpac TPS Trust

Westpac Administration Pty Limited Westpac Unit Trust

Westpac Americas Inc. Westpac USA Inc.

Westpac Capital Holdings Inc.

Level 2 Entities

The following controlled entities are included in the Level 2 consolidation (along with the ELE entities) for the purposes of measuring capital adequacy:

1925 Advances Pty Limited BT Australia Pty Limited

A.G.C. (Pacific) Limited BT Financial Group (NZ) Limited

Altitude Administration Pty Limited BT Financial Group Pty Limited

Altitude Rewards Pty Limited BT Securities Limited

Aotearoa Financial Services Limited BT Short Term Income Fund

Ascalon Funds Seed Pool Trust Capital Corporate Finance Limited

Australian Loan Processing Security Company Pty Limited Capital Finance (NZ) Limited

Australian Loan Processing Security Trust Capital Finance New Zealand Limited

BT (Queensland) Pty Limited Capital Fleetlease Limited

88 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Appendix II | Regulatory consolidation

Level 2 Entities (Continued)

Capital Motor Finance Limited St.George Finance Limited

Capital Rent Group Limited St.George Motor Finance Limited

Crusade ABS Series 2012-1 Trust The Home Mortgage Company Limited

Crusade ABS Series 2013-1 Trust W2 Investments Pty Limited

Crusade ABS Series 2015-1 Trust Westpac (NZ) Investments Limited

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Crusade ABS Series 2016-1 Trust Westpac Administration 3 Limited

Crusade ABS Series 2017-1 Trust Westpac Administration 4 Pty Limited

Crusade CP No.1 Pty Limited Westpac Altitude Rewards Trust

Crusade Management Limited Westpac Asian Lending Pty Limited

Crusade Trust No.2P of 2008 Westpac Bank-PNG-Limited

Danaby Pty Limited Westpac Capital Markets Holding Corp.

General Credits Pty Limited Westpac Capital Markets LLC

Halcyon Securities Pty Limited Westpac Cash PIE Fund

Hastings Management Pty Limited Westpac Covered Bond Trust

Hitton Pty Limited Westpac Equity Holdings Pty Limited

Net Nominees Limited Westpac Europe Limited

Number 120 Limited Westpac Financial Consultants Limited

Oniston Pty Limited Westpac Financial Services Group Limited

Qvalent Pty Limited Westpac Financial Services Group-NZ-Limited

RAMS Financial Group Pty Limited Westpac Global Capital Markets Pty Limited

RMS Warehouse Trust 2007-1 Westpac Investment Vehicle No.3 Pty Limited

Seed Pool Trust No. 2 Westpac New Zealand Limited

Series 2008-1M WST Trust Westpac Notice Saver PIE Fund

Series 2009-1 WST Trust Westpac NZ Covered Bond Holdings Limited

Series 2011-1 WST Trust Westpac NZ Covered Bond Limited

Series 2011-2 WST Trust Westpac NZ Operations Limited

Series 2011-3 WST Trust Westpac NZ Securitisation Holdings Limited

Series 2012-1 WST Trust Westpac NZ Securitisation Limited

Series 2013-1 WST Trust Westpac NZ Securitisation No.2 Limited

Series 2013-2 WST Trust Westpac Securities Limited

Series 2014-1 WST Trust Westpac Securities NZ Limited

Series 2014-2 WST Trust Westpac Securitisation Management Pty Limited

Series 2015-1 WST Trust Westpac Singapore Limited

SIE-LEASE (Australia) Limited Westpac Syndications Management Pty Limited

SIE-LEASE (New Zealand ) Pty Limited Westpac Term PIE Fund

Westpac Group March 2017 Pillar 3 report | 89

Pillar 3 report Appendix II | Regulatory consolidation

Level 3 Entities

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The following controlled entities are excluded from the Level 2 consolidation but form part of the conglomerate group at Level 3:

Advance Asset Management Limited Hastings Investments GP LLC

Ascalon Capital Managers (Asia) Limited Hastings Korea Company Limited

Ascalon Capital Managers Limited Hastings Private Equity Fund IIA Pty Limited

Asgard Capital Management Limited Infrastructure GP 2 LLP

Asgard Wealth Solutions Limited Infrastructure GP LLP

BT Funds Management (NZ) Limited Infrastructure Research and Advisory Services Private Limited

BT Funds Management Limited Magnitude Group Pty Limited

BT Funds Management No. 2 Limited Neo Investment GP Limited

BT Long Term Income Fund Planwise AU Pty Ltd

BT Portfolio Services Limited Reinventure Fund II I.L.P

BT Private Nominees Pty Limited Reinventure Fund, I.L.P.

Canning Park Pte. Ltd Securitor Financial Group Limited

Core Infrastructure Income Feeder 1 L.P. St.George Life Limited

Core Infrastructure Income Feeder 2 L.P. Sydney Capital Corporation Inc.

Core Infrastructure Income Holdings Limited Waratah Receivables Corporation Pty Limited

Core Infrastructure Income Master L.P. Waratah Securities Australia Limited

Crusade CP Management Pty Limited Westpac Cook Cove Trust I

Crusade Euro Trust 1E of 2007 Westpac Cook Cove Trust II

Crusade Global Trust 1 of 2007 Westpac Custodian Nominees Pty Limited eQR Securities Pty. Limited Westpac Databank Pty Limited

Europe Infrastructure Debt LP Westpac Equity Pty Limited

Hastings Advisers LLC Westpac Financial Services Limited

Hastings Forestry Investments Limited Westpac Funds Financing Holdco Pty Limited

Hastings Forests Australia Pty Limited Westpac Funds Financing Pty Limited

Hastings Funds Management (UK) Limited Westpac General Insurance Limited

Hastings Funds Management (USA) Inc. Westpac General Insurance Services Limited

Hastings Funds Management Asia Pte Limited Westpac Lenders Mortgage Insurance Limited

Hastings Funds Management Limited Westpac Life Insurance Services Limited

Hastings Infrastructure 1 Limited Westpac Life-NZ-Limited

Hastings Infrastructure 2 Limited Westpac New Zealand Staff Superannuation Scheme Trustee Limited

Hastings Infrastructure 3 Limited Westpac Nominees-NZ-Limited

Hastings Infrastructure 4 Limited Westpac RE Limited

Hastings Investment Capital LP Westpac Securities Administration Limited

Hastings Investment Management Pty Ltd Westpac Superannuation Nominees-NZ-Limited

90 | Westpac Group March 2017 Pillar 3 report

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Pillar 3 report Appendix III | Level 3 entities’ assets and liabilities

The following legal entities are excluded from the regulatory scope of consolidation.

The total assets and liabilities should not be aggregated because some of the entities are holding companies for other entities in the table shown below.

31 March 2017 Liabilities $m Total Assets (excluding equity)

a) Securitisation

Crusade CP Management Pty Limited 1 -

Crusade Euro Trust 1E of 2007 232 232

Crusade Global Trust 1 of 2007 415 415

Sydney Capital Corporation Inc. - -

Waratah Receivables Corporation Pty Limited 526 526

Waratah Securities Australia Limited 523 523

b) Insurance, funds management and other

Advance Asset Management Limited 42 30

Ascalon Capital Managers (Asia) Limited 58 1

Ascalon Capital Managers Limited 60 7

Asgard Capital Management Limited 62 31

Asgard Wealth Solutions Limited 66 6

BT Funds Management (NZ) Limited 60 18

BT Funds Management Limited 334 249

BT Funds Management No. 2 Limited 14 2

BT Long Term Income Fund 405 405

BT Portfolio Services Limited 123 29

BT Private Nominees Pty Limited 7 -

Canning Park Pte. Ltd - -

Core Infrastructure Income Feeder 1 L.P. - -

Core Infrastructure Income Feeder 2 L.P. - -

Core Infrastructure Income Holdings Limited - -

Core Infrastructure Income Master L.P. - -

eQR Securities Pty. Limited 1 -

Europe Infrastructure Debt LP - -

Hastings Advisers LLC - -

Hastings Forestry Investments Limited - -

Hastings Forests Australia Pty Limited - -

Hastings Funds Management (UK) Limited 10 3

Hastings Funds Management (USA) Inc. 4 (4)

Hastings Funds Management Asia Pte Limited 2 1

Hastings Funds Management Limited 21 4

Hastings Infrastructure 1 Limited - -

Hastings Infrastructure 2 Limited - -

Hastings Infrastructure 3 Limited - -

Hastings Infrastructure 4 Limited - -

Hastings Investment Capital LP - -

Hastings Investment Management Pty Ltd 1 -

Hastings Investments GP LLC - -

Hastings Korea Company Limited 1 -

Hastings Private Equity Fund IIA Pty Limited - -

Infrastructure GP 2 LLP - -

Infrastructure GP LLP - -

Infrastructure Research and Advisory Services Private Limited - -

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Magnitude Group Pty Limited 19 10

Neo Investment GP Limited 209 14

Planwise AU Pty Ltd 13 1

Reinventure Fund, I.L.P. 49 -

Reinventure Fund II I.L.P 10 -

Westpac Group March 2017 Pillar 3 report | 91

Pillar 3 report Appendix III | Level 3 entities’ assets and liabilities

31 March 2017 Liabilities $m Total Assets (excluding equity)

Securitor Financial Group Limited 19 12

St.George Life Limited 69 6

Westpac Cook Cove Trust I - -

Westpac Cook Cove Trust II - -

Westpac Custodian Nominees Pty Limited - -

Westpac Databank Pty Limited 5 -

Westpac Equity Pty Limited - -

Westpac Financial Services Limited 19 3

Westpac Funds Financing Holdco Pty Limited - -

Westpac Funds Financing Pty Limited - -

Westpac General Insurance Limited 756 641

Westpac General Insurance Services Limited 64 5

Westpac Lenders Mortgage Insurance Limited 915 656

Westpac Life Insurance Services Limited 9,069 7,536

Westpac Life-NZ-Limited 186 (13)

Westpac New Zealand Staff Superannuation Scheme Trustee Limited - -

Westpac Nominees-NZ-Limited 4 -

Westpac RE Limited 11 1

Westpac Securities Administration Limited 15 6

Westpac Superannuation Nominees-NZ-Limited - -

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 92 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Appendix IV | Regulatory expected loss

Capital deduction for regulatory expected loss

For capital adequacy purposes APRA requires the amount of regulatory expected credit losses in excess of eligible provisions to be deducted from capital. The following table shows how the deduction is calculated.

31 March 30 September 31 March $m 2017 2016 2016

Provisions associated with eligible portfolios

Total provisions for impairment charges 3,513 3,602 3,669

plus general reserve for credit losses adjustment 311 299 208

plus provisions associated with partial write-offs 174 208 288

less ineligible provisions1 (72) (68) (72)

Total eligible provisions 3,926 4,041 4,093

Regulatory expected downturn loss 4,841 4,778 4,823

Shortffall in eligible provisions compared to regulatory expected downturn loss (915) (737) (730)

2 Common equity Tier 1 capital deduction for regulatory expected downturn loss in excess of eligible provisions (915) (737) (730)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1 Provisions associated with portfolios subject to the Basel standardised approach to credit risk are not eligible. 2 Regulatory expected loss is calculated for portfolios subject to the Basel advanced IRB approach to credit risk. The comparison between regulatory expected loss and eligible provisions is performed separately for defaulted and non-defaulted exposures. As at 31 March 2017, there was no excess of eligible provisions compared to regulatory expected loss for defaulted exposures (30 September 2016: nil).

Westpac Group March 2017 Pillar 3 report | 93

Pillar 3 report Appendix V | APS330 quantitative requirements

The following table cross-references the quantitative disclosure requirements given by Attachments A, C, D and E of APS330 to the quantitative disclosures made in this report. The continuous reporting requirements for capital instruments under Attachment B are satisfied separately and can be found on the regulatory disclosures section on the Westpac website

In addition to this report, the regulatory disclosures section of the Westpac website1 contains the reporting requirements for:

l Capital instruments under Attachment B of APS330; and

l The identification of potential Global-Systemically Important Banks (G-SIB) under Attachment H of APS330 (disclosed annually).

APS330 reference Westpac disclosure Page General Requirements Paragraph 12 (a) (c) to (d) Balance Sheet Reconciliation 82 Paragraph 13 Level 3 entities’ assets and liabilities 91 Paragraph 47 Summary leverage ratio 18

Attachment A: Table 1: Capital disclosure template Capital disclosure template 85

Attachment C: Table 3: Capital adequacy (a) to (e) Capital requirements 16 (f) Westpac’s capital adequacy ratios 15 Capital adequacy ratios of major subsidiary banks 15

Table 4: Credit risk (a) Exposure at Default by major type 28 (b) Impaired and past due loans by portfolio 35 (c) General reserve for credit losses 27

Table 5: Securitisation exposures (a) Banking book summary of securitisation activity by asset type 63

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Banking book summary of on and off-balance sheet securitisation by 64 exposure type Trading book summary of on and off-balance sheet securitisation by exposure 68 type

Attachment D: Table 6: Capital adequacy (b) to (f) Capital requirements 16 (g) Westpac’s capital adequacy ratios 15 Capital adequacy ratios of major subsidiary banks 15 Table 7: Credit risk - general disclosures (b) Exposure at Default by major type 28 (c) Exposure at Default by geography 33 (d) Exposure at Default by industry classification 30 (e) Exposure at Default by residual contractual maturity 34 (f) Impaired and past due loans by industry classification 36 (g) Impaired and past due loans by geography 37 (h) Movement in provisions for impairment charges 38 (h) Loan impairment provisions 27 (i) Exposure at Default by measurement method 29 (j) General reserve for credit losses 27 Table 8: Credit risk - disclosures for portfolios subject to (b) Portfolios subject to the standardised approach 39 the standardised approach and supervisory risk-weights Property finance 40 in the IRB approaches (formerly Table 5) Project finance 41

1 http://www.westpac.com.au/about-westpac/investor-centre/financial-information/regulatory-disclosures/

94 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Appendix V | APS330 quantitative requirements

APS330 reference Westpac disclosure Page Table 9: Credit risk - disclosures for portfolios subject to (d) Corporate portfolio by external credit rating 42 IRB approaches Business lending portfolio by external credit rating 43 Sovereign portfolio by external credit rating 44 Bank portfolio by external credit rating 45 Residential mortgages portfolio by PD band 46 Australian credit cards portfolio by PD band 47 Other retail portfolio by PD band 48 Small business portfolio by PD band 49 (e) Actual losses 50 (f) Comparison of regulatory expected and actual loss rates 51 Table 10: Credit risk mitigation disclosures (b) to (c) Total exposure covered by collateral, credit derivatives and guarantees 55 Table 11: General disclosure for exposures related to (b) Counterparty credit risk summary 57 counterparty credit risk (c) Credit derivative transactions that create exposures to counterparty credit risk 57 Table 12: Securitisation exposures Banking Book (g) part i and (h) to (i) Summary of assets securitised by Westpac 62 (g) part ii Summary of total Westpac sponsored third party assets securitised 62 (j) Summary of securitisation activity by asset type 63 (k) Summary of on and off-balance sheet securitisation by exposure type 64 (l) part i Securitisation exposure by risk weight band 65

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (l) part ii Securitisation exposures deducted from capital 66 (m) Securitisation subject to early amortisation treatment 66 (n) part i Resecuritisation exposure subject to credit risk mitigation 66 (n) part ii Resecuritisation exposure to guarantors 66 Trading Book

(o) part i and (p) Summary of assets securitised by Westpac 66 (o) part ii Summary of total Westpac sponsored third party assets securitised 67 (q) Summary of securitisation activity by asset type 67 (r) Aggregate amount of exposures securitised by Westpac and subject to 67 APS116 Capital Adequacy: Market Risk (s) Summary of on and off-balance sheet securitisation by exposure type 68 (t) part i Securitisation exposure retained or purchase subject to specific risk 68 (t) part ii Securitisation exposure subject to APS120 for Specific risk by risk weight 68 band (u) part i Capital requirements for securitisation exposure subject to internal models 68 approach (IMA) by risk classification (u) part ii Capital requirements for securitisation regulatory capital approaches by risk 69 weight band (u) part iii Securitisation exposures deducted from capital 69 (v) Securitisation subject to early amortisation treatment 69 (w) part i Aggregate resecuritisation exposures retain or purchased subject to credit 69 risk mitigation (w) part ii Resecuritisation exposure to guarantors credit worthiness 69

Westpac Group March 2017 Pillar 3 report | 95

Pillar 3 report Appendix V | APS330 quantitative requirements

APS330 reference Westpac disclosure Page Table 13: Market risk - disclosures for ADIs using the (b) Market Risk regulatory capital and risk weighted assets 71 standard method Table 14: Market risk - disclosures for ADIs using the IMA (d) VaR and Stressed VaR by risk type 72 for trading portfolios Table 16: Equities - disclosures for banking book (b) to (c) Book value of listed equity exposures by industry classification / Book value 79 positions of unlisted equity exposures by industry classification (d) to (e) Gains/losses 79 (f) Capital requirement1 NA Table 17: Interest rate risk in the banking book (b) Change in economic value of sudden upward and downward movement in 81 interest rates (b) Capital requirement 81

Attachment E Table 18: Leverage ratio disclosure template Leverage ratio disclosure 18 Table 19: Summary comparison of accounting assets vs Summary comparison of accounting assets vs leverage ratio exposure 19 leverage ratio exposure measure measure

Attachment F Table 20: Liquidity Coverage Ratio disclosure template Liquidity Coverage Ratio disclosure 75

Attachment G2 Table 21: Remuneration disclosure requirements (g) Governance structure NA (h) Senior manager and material risk taker payments NA (i) Deferred remuneration NA

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (j) Total value of remuneration awards NA (k) Implicit and explicit adjustments NA

1 Equity exposures are not risk weighted at Level 2. 2 Remuneration disclosure is an annual reporting requirement under APS330.

96 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Glossary

Term Description

Actual losses Represent direct write-offs and write-offs from provisions after adjusting for recoveries.

Additional Tier 1 capital Comprises high quality components of capital that provide a permanent and unrestricted commitment of funds that are freely available to absorb losses but rank behind claims of depositors and other more senior creditors. They also provide for fully discretionary capital distributions.

Alternate Liquid Assets (ALA) Assets that qualify for inclusion in the numerator of the LCR in jurisdictions where there is insufficient supply of HQLA.

Advanced measurement approach (AMA) The capital requirement using the AMA is based on a bank’s internal operational risk systems, which must both measure and manage operational risk.

Assets intended to be securitised Represents securitisation activity from the end of the reporting period to the disclosure date of this report.

Australian accounting standards (AAS) A set of Australian reporting standards and interpretations issued by the Australian Accounting Standards Board.

Australian and New Zealand standard industrial A code used by the Australian Bureau of Statistics and Statistics New Zealand for classifying businesses. classification (ANZSIC)

Authorised deposit-taking institution (ADI) ADIs are corporations that are authorised under the Banking Act 1959 to carry on banking business in Australia.

Banking book The banking book includes all securities that are not actively traded by Westpac.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Cash EPS compound annual growth rate (CAGR) An internal measure used to assess performance by measuring growth in cash earnings per share over a three year performance period. Committed Liquidity Facility (CLF) Facility established with the RBA to cover the shortfall in Australian dollars between the ADI’s holding of HQLA and net cash outflows. The CLF is an ALA for the Group’s LCR calculation.

Common equity Tier 1 (CET1) capital The highest form of capital. The key components of common equity are shares, retained earnings and undistributed current year earnings.

Credit valuation adjustment (CVA) risk Refer to mark-to-market related credit risk.

Default A customer default is deemed to have occurred when Westpac considers that either or both of the following events have taken place:

l the customer is unlikely to pay its credit obligations to its financiers in full, without recourse by any of them to actions such as realising security (where held); and

l the customer is past due 90 or more calendar days on any material credit obligation to its financiers. Overdrafts will be considered past due once the customer has breached an advised limit, or been advised of a limit smaller than the current outstandings.

Double default rules Double default applies to exposures where a particular obligor’s exposure has been hedged by the purchase of credit protection from a counterparty and loss will only occur if both obligor and counterparty default. In this instance, capital can be reduced.

Exposure at default (EAD) EAD represents an estimate of the amount of committed exposure expected to be drawn by the customer at the time of default.

Extended licensed entity (ELE) An Extended Licensed Entity (ELE) comprises an ADI and any subsidiaries of the ADI that have been approved by APRA as being part of a single ‘stand-alone’ entity.

External credit assessment institution ECAI is an external institution recognised by APRA (directly or indirectly) to provide credit assessment in (ECAI) determining the risk-weights on financial institutions’ rated credit exposures (including securitisation exposures).

Westpac Group March 2017 Pillar 3 report | 97

Pillar 3 report Glossary

Facilities 90 days or more past due date not Includes facilities where: impaired

l contractual payments of interest and/or principal are 90 or more calendar days overdue, including overdrafts or other revolving facilities that remain continuously outside approved limits by material amounts for 90 or more calendar days (including accounts for customers who have been granted hardship assistance); or

l an order has been sought for the customer’s bankruptcy or similar legal action has been instituted, which may avoid or delay repayment of its credit obligations; and

l the estimated net realisable value of assets/security to which Westpac has recourse is sufficient to cover repayment of all principal and interest, or where there are otherwise reasonable grounds to expect payment in full and interest is being taken to profit on an accrual basis.

These facilities, while in default, are not treated as impaired for accounting purposes.

Geography Geographic segmentation of exposures is based on the location of the office in which these items were booked.

High-quality liquid assets (HQLA) Assets which meet APRA’s criteria for inclusion as HQLA in the numerator of the LCR.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Impaired assets Includes exposures that have deteriorated to the point where full collection of interest and principal is in doubt, based on an assessment of the customer’s outlook, cashflow, and the net realisation of value of assets to which recourse is held:

l facilities 90 days or more past due, and full recovery is in doubt: exposures where contractual payments are 90 or more days in arrears and the net realisable value of assets to which recourse is held may not be sufficient to allow full collection of interest and principal, including overdrafts or other revolving facilities that remain continuously outside approved limits by material amounts for 90 or more calendar days;

l non-accrual assets: exposures with individually assessed impairment provisions held against them, excluding restructured loans;

l restructured assets: exposures where the original contractual terms have been formally modified to provide for concessions of interest or principal for reasons related to the financial difficulties of the customer;

l other assets acquired through security enforcement (includes other real estate owned): includes the value of any other assets acquired as full or partial settlement of outstanding obligations through the enforcement of security arrangements; and

l any other assets where the full collection of interest and principal is in doubt.

Industry Exposures to businesses, government and other financial institutions are classified into industry clusters based upon groups of related ANZSIC codes. Companies that operate in multiple industries are classified according to their primary industry. Consumer customers as classified as “retail” and not further broken down.

Interest rate risk in the banking book (IRRBB) The risk to current and future year interest income arising from a mismatch between the duration of assets and liabilities that arises in the normal course of banking activities.

98 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Glossary

Internal assessment approach Basel III provides three approaches to determine the risk-weight for a securitisation transaction, where the term (IAA) securitisation includes any complex credit derivative. The internal assessment approach, a more complex approach, and subject to approval from APRA for use, may be used when there is an inability to use either the Ratings- Based Approach (no external rating available) or the supervisory formula approach. The internal assessment approach may be used to risk-weight exposures relating to residential mortgages (excluding reverse mortgages), trade receivables, equipment receivables and auto loans.

Internal ratings-based approach (IRB & Advanced These approaches allow banks to use internal estimates of the risks of their loans as inputs into the determination IRB) of the amount of credit risk capital needed to support the organisation. In the Advanced IRB approach, banks must supply their own estimates for all three credit parameters – Probability of Default, Loss Given Default and Exposure at Default.

Leverage ratio The leverage ratio is defined by APRA as Tier 1 capital divided by the “Exposure measure” and is expressed as a percentage. “Exposure measure” includes on-balance sheet exposures, derivatives exposures, securities financing transaction (SFT) exposures, and other off-balance sheet exposures.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Liquidity coverage ratio (LCR) An APRA requirement to maintain an adequate level of unencumbered high quality liquid assets, to meet liquidity needs for a 30 calendar day period under an APRA-defined severe stress scenario. Absent a situation of financial stress, the value of the LCR must not be less than 100%, effective 1 January 2015. LCR is calculated as the percentage ratio of stock of HQLA, CLF and qualifying Reserve Bank of New Zealand securities over the total net cash out flows in a modelled 30 day defined stressed scenario.

Loss given default (LGD) The LGD represents an estimate of the expected severity of a loss to Westpac should a customer default occur during a severe economic downturn. Westpac assigns LGD to each credit facility, assuming an event of default has occurred and taking into account a conservative estimate of the net realisable value of assets to which Westpac has recourse and over which it has security. LGDs also reflect the seniority of exposure in the customer’s capital and debt structure.

Maturity The maturity date used is drawn from the contractual maturity date of the customer loans.

Mark-to-market related credit risk The risk of mark-to-market losses related to deterioration in the credit quality of a derivative counterparty also referred to as credit valuation adjustment (CVA) risk.

Monte Carlo simulation A method of random sampling to achieve numerical solutions to mathematical problems.

Net cash outflows Total expected cash outflows minus total expected cash inflows in the specified LCR stress scenario calculated in accordance with APRA’s liquidity standard.

Net interest income at risk (NaR) BRCC-approved limit expressed as a deviation from the benchmark hedge level over a 1-year time frame, at a 99% confidence level.

Off-balance sheet exposure Credit exposures arising from facilities that are not recorded on Westpac’s balance sheet (under accounting methodology). Undrawn commitments and the expected future exposure calculated for Westpac’s derivative products are included in off-balance sheet exposure.

On balance sheet exposure Credit exposures arising from facilities that are recorded on Westpac’s balance sheet (under accounting methodology).

Potential future credit exposure (PFCE) The PFCE for each transaction is calculated by multiplying the effective notional principal amount by a credit conversion factor specified in APS112.

Probability of default (PD) Probability of default is a through-the-cycle assessment of the likelihood of a customer defaulting on its financial obligations within one year.

Westpac Group March 2017 Pillar 3 report | 99

Pillar 3 report Glossary

Ratings-based approach (RBA) APRA provides three approaches to determine the risk-weight for a securitisation transaction, where the term securitisation includes any complex credit derivative. The Ratings-Based Approach relies on the number of assets in the transaction and the external credit rating of the tranche to determining a regulatory risk-weight.

Regulatory expected loss (EL) For regulatory purposes EL is defined as:

· for non-defaulted exposures, the product of PD, LGD and EAD; and

· for defaulted exposures, the best estimate of expected loss for that exposure. It is equivalent to provisions for impaired assets and represents charges already realised through Westpac’s earnings.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Regulatory EL is not calculated for standardised portfolios and is based on mandated risk-weights for specialised lending portfolios. Regulatory EL should not be interpreted as an estimate of long-run expected loss because the LGDs used in all regulatory calculations are calibrated to reflect stressed economic conditions rather than long run averages.

Resecuritisation A resecuritisation exposure is a securitisation exposure in which the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitisation exposure. In addition, an exposure to one or more resecuritisation exposures is a resecuritisation exposure;

Risk weighted assets (RWA) Assets (both on and off-balance sheet) are risk weighted according to each asset’s inherent potential for default and what the likely losses would be in case of default. In the case of non asset based risks (ie market and operational risk), RWA is determined by multiplying the capital requirements for those risks by 12.5.

Securitisation purchased The purchase of third party securitisation exposure, for example residential mortgage backed securities.

Securitisation retained Securitisation exposures arising through Westpac originated assets or generated by Westpac third party securitisation activity.

Securities financing transactions (SFT) APRA defines SFTs as “transactions such as repurchase agreements, reverse repurchase agreements, and security lending and borrowing, and margin lending transactions, where the value of the transactions depends on the market valuation of securities and the transactions are typically subject to margin agreements.”

Sponsor An ADI would generally be considered a sponsor if it, in fact or substance, manages or advises the securitisation program, places securities into the market, or provide liquidity and/or credit enhancements.

Standard model The standard model for Market risk applies supervisory risk weights to trading positions.

Stressed VaR Stressed VaR uses the approved VaR model but applies a period of significant market stress. Market risk capital is estimated by adding Stressed VaR to regular VaR.

Substitution approach Substitutions refers to the rules governing the circumstances when capital can be reduced because an obligor’s exposure has been hedged by the purchase of credit protection from a counterparty and the counterparty’s PD is used in place of the obligors’ PD.

Supervisory formula (SF) APRA provides three approaches to determine the risk-weight for a securitisation transaction, where the term securitisation includes any complex credit derivative. The supervisory formula is used when the Ratings-Based Approach is unable to be used.

Tier 2 capital Includes other capital elements, which, to varying degrees, fall short of the quality of Tier 1 capital but still contribute to the overall strength of an entity as a gone concern capital.

100 | Westpac Group March 2017 Pillar 3 report

Pillar 3 report Glossary

Trading book Trading book activity represents dealings that encompass book running and distribution activity. The types of market risk arising from trading activity include interest rate risk, foreign exchange risk, commodity risk, equity price risk, credit spread risk and volatility risk. Financial Markets and Treasury are responsible for managing market risk arising from Westpac’s trading activity.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Value at risk (VaR) VaR is the potential loss in earnings from adverse market movements and is calculated over a one-day time horizon at a 99% confidence level using a minimum of one year of historical rate data. VaR takes account of all material market variables that may cause a change in the value of the trading portfolio and the banking book including interest rates, foreign exchange rates, price changes, volatility, and the correlation among these variables.

Exchange rates

The following exchange rates were used in the Westpac Pillar 3 report, and reflect spot rates for the period end.

$ 31 March 2017 30 September 2016 31 March 2016

USD 0.7646 0.7618 0.7652

GBP 0.6124 0.5875 0.5336

NZD 1.0938 1.0487 1.1092

EUR 0.7161 0.6788 0.6763

Westpac Group March 2017 Pillar 3 report | 101

Pillar 3 report Disclosure regarding forward-looking statements

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document This 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 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:

l 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;

l regulatory investigations, litigation, fines, penalties, restrictions or other regulator imposed conditions;

l 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;

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

l adverse asset, credit or capital market conditions;

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

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

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

l market liquidity and investor confidence;

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

l the effects of competition in the geographic and business areas in which Westpac conducts its operations;

l information security breaches, including cyberattacks;

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

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

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

l the incidence or severity of Westpac insured events;

l 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;

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

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

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

l the success of strategic decisions involving diversification or innovation, in addition to business expansion and integration of new businesses; and

l various other factors beyond Westpac’s control.

The above list is not exhaustive. For certain other factors that may impact on forward-looking statements made by Westpac refer to ‘Risk factors’ in Westpac’s 2017 Interim Financial Results Announcement. When relying on forward-looking statements to make decisions with respect to Westpac, investors and others should carefully consider the foregoing factors and other uncertainties and events.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Westpac is under no obligation to update any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise, after the date of this report.

102 | Westpac Group March 2017 Pillar 3 report

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 2

2017 INTERIM FINANCIAL RESULTS 200 200 years proudly supporting Australia Westpac Banking Corporation ABN 33 007 457 141

Westpac 2017 Interim result index 3 Cover images, from left: 2017 Interim Result Presentation Bank of New South Wales employees with their families at the Officers’ Recreation Club annual staff picnic and sports day, Northbridge, Sydney, 1909. 26 Investor Discussion Pack of 2017 Interim Result 27 Strategy Westpac Young Technologists Scholar, Alicia Hastie (image from Flashpoint Labs). Overview Performance discipline Service leadership Digital transformation Workforce revolution Sustainable futures 33 36 39 41 49 50 Bank of New South Wales providing banking facilities for the US Pacific Fleet Task Force in Sydney, 1966. A wheat harvesting image sent to General Manager Sir Alfred Davidson by customers in Perth, circa 1925. Earnings drivers Revenue Expenses Impairment charges 54 55 61 64 This page: Bank of New South Wales Wyalong tent branch, 1894. 65 Asset quality 83 Capital, Funding and Liquidity Divisional results Consumer Bank Business Bank BT Financial Group Westpac Institutional Bank Westpac New Zealand 93 94 97 99 103 107 111 Economics 127 Appendix and Disclaimer 133 Contact us Westpac Group Interim 2017 Presentation & Investor Discussion Pack Please put back all the footers on the pages

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2017 INTERIM FINANCIAL RESULTS 200 years proudly supporting Australia BRIAN HARTZER CHIEF EXECUTIVE OFFICER Westpac Banking Corporation ABN 33 007 457 141

Another solid result 4 Westpac Group Interim 2017 Presentation & Investor Discussion Pack •Cash earnings up 3% over the half and the prior corresponding period •Disciplined performance –Prioritised strength and return – CET1 10%, ROE 14% –Well-managed balance sheet – deposit to loan ratio 72% –Flat costs – expense to income ratio 41.7% •Good operating performance across divisions – WIB a standout •Delivering on major programs, especially digital •Unchanged dividend, pay-out ratio lower

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Headline results 5 1H17 – 2H16 1H17 – 1H16 1 Cash EPS is cash earnings per weighted average ordinary shares. 2 Common equity Tier 1 capital ratio on an APRA Basel III basis. 3 Return on equity is cash earnings divided by average ordinary equity. 4 Cash earnings basis. 5 Cents per share. Westpac Group Interim 2017 Presentation & Investor Discussion Pack 1H17 Change Change Reported net profit after tax $3,907m 4% 6% Cash earnings $4,017m 3% 3% Cash EPS1 119.8c 2%1% Common equity Tier 1 capital ratio2 10.0% 49bps(50bps) Return on equity (ROE)3 14.0% 11bps(20bps) Net tangible assets per share $14.30 2%4% Margin (excl. Treasury and Markets)4 2.00%(4bps)(7bps) Expense to income ratio4 41.7%(59bps) 12bps Impairment charge to avg. gross loans 15bps 1bps(6bps) Fully franked dividend 594c--

Prioritised strength and managing return 6 • Higher ROE • Reduced low return assets; Property & WIB • Risk weighted assets down 1% • Capital above preferred range • LCR1 & NSFR1 above minimums • Asset quality improved – stressed assets lower IAP2 coverage 52% • • Margins lower – action taken • Expense to income ratio down $118 million in 1H17 productivity from; business model changes, property and digitising manual processes • 1H17 growth focused on – – – Customer deposits up 3% mortgages up 2% SME up 3% • • Wealth/insurance well positioned although sales soft • Regulatory/compliance spend remains high 1 LCR is liquidity coverage ratio. NSFR is net stable funding ratio. 2 IAP is individually assessed provision Westpac Group Interim 2017 Presentation & Investor Discussion Pack

Portfolio of businesses delivering 7 Comments 1H17 – 2H16 change -2H16 -1H16 Business Bank 1 3 Westpac • Improved efficiency from new operating model 6 2 (NZ$) • Core earnings lower from ongoing margin pressure 1 General insurance. Westpac Group Interim 2017 Presentation & Investor Discussion Pack Cash earnings %1H17 1H17 • Higher funding costs led to unchanged core earnings Consumer Bank(2)5• Flat expenses • Rise in impairments from higher delinquencies • Disciplined growth and expense management • Core earnings up 1% • Income down from GI1 claims and MySuper migration BT Financial Group(5)(11)• Productivity leading to lower costs • Solid underlying FUM/FUA growth • Stronger sales and markets income Institutional Bank2034• Continued capital and pricing discipline – ROE 14.1% New Zealand• Lower impairments contributed to higher earnings

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Strong balance sheet 8 134 127 125 121 114 9.0 9.1 40 regulatory 25 from 2015 NSFR - Jan 2018 0.62 1 Includes one peer with balance dates of end of June and December. 2 Impaired asset provisions to impaired assets. Westpac Group Interim 2017 Presentation & Investor Discussion Pack Impaired assets to gross loans (%) WestpacPeer average 1 Sep-14Sep-15Sep-16Mar-17 0.40 0.490.47 0.42 0.30 0.30 0.32 Impaired asset coverage ratio2 (%) 1 WestpacPeer average52 454649 38 Sep-14Sep-15Sep-16Mar-17 41 39 36 Capital stronger 10.5 CET1 capital ($bn)10.050 CET1 capital ratio (%)9.59.545 9.5 35 8.5 30 7.5 20 6.5 15 Sep-12Sep-13Sep-14Sep-15Sep-16Mar-17 40 39 8.2 34 30 28 25 High quality liquidity position (%) LCRNSFR 100% minimum LCR - Jan 105 108 Mar-15Sep-15Mar-16Sep-16Mar-17

Dividend maintained 9 Special dividends Payout ratio (cash earnings basis) 65 64 63 1 55 60 49 1 Effective payout ratio assumes 1H17 DRP participation of 30%. Westpac Group Interim 2017 Presentation & Investor Discussion Pack Dividend payout ratio (%) Effective payout ratio (after DRP) 7876767774747774808079 7677747272 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Dividends per ordinary share (cents) 10 828486 10 909293949494 94 88 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Dividend considerations • Sustainability of the payout ratio over the long term – ratio lower • CET1 capital ratio comfortably above preferred range • RWA lower • Surplus franking credits

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Progress on our five strategic priorities 10 • • • Continued to balance capital, returns and funding Taken action on loan pricing to address margin pressure Good progress on productivity: $118m in 1H17 savings Performance Discipline • • • Restructured frontline incentives to emphasise service 11% fall in complaints across Australian retail/wealth divisions Rolled out ~100 new online features and enhancements Service Leadership • • Launched digital personal loans 6m accounts registered for e-statements (+25% vs Sept 2016) Digital Transformation • • • SME lending up 3% over prior half, 6% over the year Panorama development largely complete, $3.9bn in FUA Sound FUA/FUM flows; sales below expectations Targeted Growth • • • Launched Motivate a new performance management framework New service leadership training completed Women in leadership 49% Workforce Revolution Westpac Group Interim 2017 Presentation & Investor Discussion Pack

Outlook 11 Westpac Group Interim 2017 Presentation & Investor Discussion Pack •Australian economy resilient, with good prospects •Increased global volatility remains a risk •House price growth expected to slow Prices high in Sydney and Melbourne Some weakness in other markets Mortgage serviceability remains strong with significant equity •Increased business investment important as next source of economic growth; government clarity on commitments to infrastructure will help •Westpac well positioned for the environment with good momentum on our service strategy

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2017 INTERIM FINANCIAL RESULTS 200 years proudly supporting Australia PETER KING CHIEF FINANCIAL OFFICER Westpac Banking Corporation ABN 33 007 457 141

Results at a glance 13 3,918 (2) margins down 4bps 1 CVA is credit valuation adjustment. Westpac Group Interim 2017 Presentation & Investor Discussion Pack 2H16 Net interest income Non-interest income Expenses Impairment charges Tax & non-controlling interests 1H17 Cash earnings movements ($m) $118m in productivity savings 161(4)(36)(20)4,017 Markets income up30.3% tax Wealth/insurance down rate AIEA up 2%, Up 3% Infrequent/volatile items ($m) Cash earnings impact1H162H161H17 Asset sales 0(4)4 Performance fees 0220 Group CVA1 3315 Tax matters resolved 5700 Total impact 602119

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Targeted balance sheet growth 14 2 Bank Bank Zealand Business Bank1 1 Business Bank loans include mortgage backed. Other is all other lending in the business bank including auto. 2 Institutional bank includes Australian and offshore balance sheet. Westpac Group Interim 2017 Presentation & Investor Discussion Pack Growth in key loan segments 1H17-2H16 (%) 2.5 of $1.2bn (3%) (3.1) Consumer SME Other Institutional New (NZ$) 2.1 Includes decline in 1.9 commercial property (0.4) Loan & deposit growth 1H17-2H16 (% and $bn) Customer deposit to loan ratio 72% up from 70% 2.6% 0.8% $12bn $5bn Total loans Customer deposits

Margins impacted by funding costs 15 (1bps) 3 year swap rate (spot) Tractor 1 Tractor is the 3 year moving average hedge rate for hedges on capital and low rate deposits. Westpac Group Interim 2017 Presentation & Investor Discussion Pack Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16 Term deposit costs over benchmark (portfolio) 1.5% 1.0% 0.5% 0.0% Lower returns on capital and low rate deposits 9% 7% 5% 3% 1% 1 Net interest margin movement (% and bps) Treasury & Markets impact on NIMNIM excl. Treasury & Markets 2.11(4bps)(1bps)(2bps)4bps0bps2.07 2H16 Customer Term Capital Liquidity Loans Treasury &1H17 deposits wholesale funding& other markets 0.07 0.07 2.04 2.00

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Non-interest income 16 DVA Trading Customer 748 131 claims up 49% management 1 DVA is derivative valuation adjustments includes CVA and FVA adoption in 1H15. Westpac Group Interim 2017 Presentation & Investor Discussion Pack Selected wealth related non-interest income ($m) 667667646 General insurance 273252214 246230737371 1H16 2H16 1H171H16 2H16 1H171H16 2H16 1H171H16 2H16 1H17 BT Funds BT Insurance WIB New Zealand Non-interest income ($m) 3,050 Up 3% 1H162H161H17 2,966 2,889 Up 6% Markets income ($m) 1 500210546 (22) 2H141H152H151H162H161H17 46758060919 247 147 142 89 72 482 473 462 465 450 447 (153) (13)

Expenses tightly managed 17 Westpac Group Interim 2017 Presentation & Investor Discussion Pack Sources of productivity savings • Further digitisation of manual processes • Operating model changes in the Business Bank and in the Institutional Bank • Property, including consolidation and net reduction of 45 branches across Australia and New Zealand Movement in expenses ($m) 121(118) 4,4795(4)4,483 Flat (up $4m) 2H16 Ongoing Productivity Regulatory/ Investment 1H17 expenses compliance Divisional expense growth 1H17 – 2H16 $m% Consumer Bank(4)0 Business Bank111 BTFG(17)(3) WIB(21)(3) New Zealand (in NZ$)61 Group Businesses2611

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investment spend 18 1H15 2H15 1H16 2H16 1H17 Westpac Group Interim 2017 Presentation & Investor Discussion Pack Total investment spend (expensed and capitalised) ($m) 700 11% 24% 65% Growth & productivity Regulatory change Other technology 567 580 458 527 Amortisation of capitalised software Amortisation ($m) 310.00 6 Average amortisation period (years)303 5.5 300.00 291 5 290.00 4.5 280.00 4 270.00 3.5 260.00 3 250.00 2.5 240.00 2 230.00 1.5 220.00 1 1H152H151H162H161H17 294 2.9 2.8 4.1 254 3.6 271

Australian mortgage trends 19 42.1 404.2 390.8 Westpac Group Interim 2017 Presentation & Investor Discussion Pack Mortgage 90+ day delinquencies by state (%) 2.0 • Delinquencies up 2 bps 1.0• Hardship impact flowed through • Delinquencies up in WA 0.0 Mar-14Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17 NSW/ACTVic/TasQldWASA/NTALL Mortgage portfolio ($bn) (27.1)41.8(28.4)38.4(28.7)413.9 375.8 Slowdown in new lending •Reduced discounts •Higher proportion of proprietary flows •Fixed rate flow higher at 23% in 1H17 Sep-15NewRun-offMar-16NewRun-offSep-16NewRun-offMar-17 LendingLendingLending

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Australian mortgages well secured 20 Dynamic LVR bands (%) 1 Excludes RAMS. 2 Dynamic LVR is the loan-to-value ratio taking into account the current outstanding loan balance, estimated changes in security value and other loan adjustments. Monitors. Property valuation source Australian Property Westpac Group Interim 2017 Presentation & Investor Discussion Pack Interest-only lending by LVR1,2 and income band (%) Applicant gross income bands 57%<$100k$100k - $250k>$250k <=60%60%<=80%>80% •92% of IO with dynamic LVR <=80% •2% of IO has a dynamic LVR > 80% and gross income < $100k •1H17 IO flow 46% of new lending (portfolio 50%) 13% 35% 29% 7% 8%1% 2% 19% 15% 9% 5% Australian mortgages annual growth (%) 14 12 10 8 6.4 66.3 4 2 0 Mar-15Sep-15Mar-16Sep-16Mar-17 •Investor property growth well below 10% cap •Investor dynamic LVR average of 47% Investor Owner occupied

Asset quality remains sound 21 2.5 0.0 1 TCE is total committed exposure. 2 Includes government, admin and defence. Westpac Group Interim 2017 Presentation & Investor Discussion Pack Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Mar-17 Agriculture, forestry & fishing Wholesale & retail trade Property Manufacturing Property services & business services Services Construction Transport & storage Accommodation, cafes & restaurants Mining 2 Other Finance & insurance Utilities Stressed assets as a % of TCE1 Watchlist & substandard 90+ days past due and not impaired Impaired 3.093.20 2.48 2.17 1.60 1.241.201.14 1.30 0.99 Corporate/business stressed exposure by sector ($bn) Mar-16Sep-16Mar-17 2.0 1.5 1.0 0.5

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Asset quality – topical areas 22 15 5 Unsecured consumer delinquencies (%) Apartment development >$20m Sept-16 Mar-17 Sept-16 Mar-17 Lending ($bn) $5.1 $4.1 30+ day 2.95 3.99 Major market loans ($bn) $3.2 $2.8 90+ day 1.17 1.63 Estimated impact of hardship Average LVR (%) 54 52 0.01 0.28 changes1 on 90+ day 1. APRA hardship policy was adopted across Westpac’s Australian unsecured portfolios in late 2016. March 2017 unsecured consumer delinquencies excluding hardship reporting changes are 14 bps lower than March 2016 Westpac Group Interim 2017 Presentation & Investor Discussion Pack Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Mar-17 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Commercial property 8% of TCE (lhs)% in stress (rhs)20 7 6 510 4 3 20 Unsecured consumer Australian unsecured lending 90+ day delinquencies (%) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Total unsecured consumer lending Credit cards

Impairment charge components ($m) 23 Write-backs Write-offs New IAPs in Collective (110) (86) (114) (228) Westpac Group Interim 2017 Presentation & Investor Discussion Pack 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 Individually assessed provisions Collectively assessed provisions Total Other movement & recoveries direct provisions 667 457 493 (64)(48) (218) (210)(174)(173) 471463484 443 364330341 418412 293 273256

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CET1 capital ratio well positioned 24 • Total CET1 capital ratio increased 49 bps • Organic capital generated (after dividends) 29bps with credit RWA declining • Capital initiatives includes management of unused limits and DTA in LMI • Other includes FX translation, defined benefit and regulatory model changes • In 2H17 known regulatory changes on RWA calculations likely to reduce capital ratios by around 10bps Westpac Group Interim 2017 Presentation & Investor Discussion Pack CET1 Capital ratio (% and bps) 15.34 10109.97 9.4829 Sep-16 Organic Capital Other Mar-17 Mar -17 APRA capital initiatives APRA Internationally comparable

Considerations for FY17 25 Westpac Group Interim 2017 Presentation & Investor Discussion Pack •Continued discipline on growth/return •Margins – recent changes in pricing to flow into 2H17 •Expense growth likely below 2-3% range although subject to revenue outlook •Well positioned for unquestionably strong

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investor Discussion Pack Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)

200 200 years proudly supporting Australia Strategy Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document WBC listed on ASX & NZX Westpac Group at a glance: Australia’s First Bank Strategy 28 Bank Bank Group Bank New Zealand • Australia’s 2nd largest bank; 15th largest bank in the world; focused on customers and differentiated through service and customers with ties to these markets including consumer, business and institutional banking, One of the most efficient banks globally2 • 1 31 March 2017. Source: S&P Capital IQ, based in US$. 2 Credit Suisse analysis of expense to income ratio of world’s largest banks April 2017. 3 S&P Global Ratings, Moody’s Investors Service and Fitch Ratings respectively. S&P Global Ratings and Moody’s Investors Services have Westpac on a negative outlook, Fitch Ratings has Westpac on a stable outlook. 4 Included in 2017 Global 100 most sustainable companies, announced at World Economic Forum in January 2017. 5 APRA Banking Statistics, March 2017. 6 RBA Financial Aggregates, March 2017. 7 RBNZ, February 2017. 8 Plan for Life, December 2016, All Master Funds Admin. 9 Cash earnings basis. 10 Based on share price at 31 March 2017 of $35.06. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Key statistics at 31 March 2017 Customers 13.6m Australian household deposit market share 5 23% Australian mortgage market share 6 23% Australian business market share 6 19% New Zealand deposit market share 7 19% New Zealand consumer lending market share 7 19% Australian wealth platforms market share 8 19% Key financial data for First Half 2017 Reported net profit after tax$3,907m Cash earnings $4,017m Expense to income ratio 9 41.7% Common equity T ier 1 capital ratio (APRA basis)10.0% Return on equity 9 14.0% Total assets $840bn Market capitalisation 10 $118bn •Australia’s first bank and first company, opened in 1817 Consumer Business BT Financial Institutional Westpac ranked by market capitalisation1 •Well positioned across key markets

with a service-led strategy •Supporting consumers and businesses in Australia and New Zealand •Unique portfolio of brands providing a full range of financial services wealth management and insurance Pacific •Consistent earnings profile over time •Strong capital, funding, liquidity, with sound asset quality •Credit ratings 3 AA-/ Aa2 / AA-•Leader in sustainability4

Progress on our five strategic priorities Strategy 29 Vision: To be one of the world’s great service companies, helping our customers, communities and people to prosper and grow The Service Revolution Priorities Performance Discipline Service Leadership Digital Transformation Targeted Growth Workforce Revolution Employee engagement in top of high performing norms, women in leadership 50% by end of 2017 Seeking to achieve 13-14% ROE (medium-term) Cost growth 2-3% per annum and expense to income ratio below 40% Measures Stronger growth in wealth and SME +1m customers (2015-2017) Women in leadership 49% Employee engagement to be measured in 2H17 1H17 expenses flat Expense to income ratio 41.7% down 59bps FUM up 12% FUA up 4% SME lending up 3% ROE 14.0% up 11bps Progress 1H17-2H16 13.6m customers up 3% Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Sources of comparative advantage Strategy 30 capability 1 Gross impaired asset provisions to gross impaired loans. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Global efficiency leader • Expense to income ratio of 41.7% at lower end of global peers and below average of Australian major banks • Only major Australian bank with a target of reducing expense to income ratio below 40% • Productivity focus has delivered $1.9bn of savings FY09 to 1H17 Sustainability culture • Australia’s first bank and first company, reached 200 year anniversary on 8th April 2017 • Global banking leader in Dow Jones Sustainability Index since 2002, named sector leader 9 times, including 2014, 2015 and 2016 • Ranked as one of the Global 100 most sustainable corporations in the world by Corporate Knights for 10 of the last 11 years • Only major Australian bank SEC registered and listed on NYSE Excellent strategic position • Seeking to differentiate on service • No. 1 or 2 position across key markets - all divisions well placed • Unique portfolio of brands, reaching a broader customer set • Comparative advantage in wealth platforms • Embracing digital opportunities with leading online and mobile • Underweight mining sector, NZ dairy and Western Australia Sector leading balance sheet • Asset quality Sector leading through global financial crisis Sound quality; balance sheet skewed to mortgages Low impaired assets; well provisioned at 52%1 • Capital CET1 capital ratio in top quartile of international peers • Liquidity High liquidity levels; LCR of 125% Estimated NSFR of 108%

Consistent performer over the long term Strategy 31 227.8 7.6 Common equity Tier 1 capital ratio (%) 15.3 comparable1 1 Internationally comparable methodology aligns with the APRA study titled ‘International Capital Comparison Study’ dated 13 July 2015. For more details on adjustments refer slide 89. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 9.19.09.59.510.0 7.48.2 Sep-11Sep-12Sep-13Sep-14Sep-15Sep-16Mar-17 International Cash earnings ($bn) 7.87.8 4.0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 1H17 7.1 6.6 6.3 5.9 5.0 4.7 3.5 3.1 Cash earnings per share (cents) 245.4 248.2 235.5 119.8 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 1H17 209.3 214.8 189.4 198.3197.8 167.2163.7

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document A conservative, high quality bank Strategy 32 impaired assets1 (%) 0.47 amortisation period1,2 (years) 29.5 28.7 28.4 1 Based on 1H17 results 2 Peer 2 data based on 1H17 cash earnings results excludes write-offs. Amortisation expense is based on amortisation expense excluding any impairment or accelerated amortisation. Based on 1H17 annualised expense. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Capitalised software, average 6.5 4.2 2.9 3.5 Peer 1Peer 2Peer 3WBC Effective tax rate1 (%) 30.3 Peer 1Peer 2Peer 3WBC Capitalised software balance and amortisation1,2 ($bn) 2.49 1.921.90 1.81 0.59 0.44 0.36 0.61 Peer 1Peer 2Peer 3WBC Individually assessed provisions to 52.1 43.244.9 35.0 Peer 1Peer 2Peer 3WBC Impaired assets to gross loans1 (%) 0.51 0.44 0.30 Peer 1Peer 2Peer 3WBC Collectively assessed provisions to credit RWA1 (bps) 85 81 77 75 Peer 1Peer 2Peer 3WBC

200 200 years proudly supporting Australia Overview Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Cash earnings and reported net profit reconciliation Results 34 earnings adjustments ($m) Reported net profit and cash earnings ($bn) % chg 1H17-1H16 % chg 1H17-2H16 1H17 ($m) Reported profit Cash earnings 4.4 Cash earnings 4,017 3% 3% 4.0 4.0 3.9 3.9 3.9 Cash EPS (cents) 119.8 1% 2% Reported net profit 3,907 6% 4% 1 Cash earnings is not a measure of cash flow or net profit determined on a cash accounting basis, as it includes non-cash items reflected in net profit determined in accordance with AAS (Australian Accounting Standards). The specific adjustments outlined include both cash and non-cash items. Cash earnings is reported net profit adjusted for material items to ensure they appropriately reflect profits available to ordinary shareholders. All adjustments shown are after tax. For further details refer to slide 128. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 3.9 3.9 3.83.8 3.63.6 3.73.7 1H142H141H152H151H162H161H17 Reported net profit and cash 2H161H17 Reported net profit3,7443,907 Amortisation of intangible assets7973 Acquisition transaction and integration expenses8-Fair value (gain)/loss on economic hedges1207 Ineffective hedges(35)(4) Treasury shares 234 Cash earnings3,9184,017 Cash earnings1 policy •Westpac Group uses a measure of performance referred to as cash earnings to assess financial performance at both a Group and divisional level •This measure has been used in the Australian banking market for over a decade and management believes it is the most effective way to assess performance for the current period against prior periods and to compare performance across divisions and across peer companies •To calculate cash earnings, reported net profit is adjusted for: Material items that key decision makers at 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 Accounting reclassifications between individual line items that do not impact reported results

1H17 financial snapshot Results 35 Earnings per share (cents) 119.8 1% 2% (CET1) capital ratio (APRA basis) (%) Core earnings ($m) 6,260 1% 3% 15.3 67bps 91bps (Internationally comparable) (%) Asset quality Impairment charges to average gross Net stable funding ratio (%) (estimate) 108 n/a n/a Liquidity coverage ratio (%) 125 (2ppts) (9ppts) 52.1 5ppts 3ppts Total liquid assets2 ($bn) 139 flat (4%) (%) 1 All measures on a cash earnings basis. 2 Total liquid assets represent cash, interbank deposits and assets eligible for existing repurchase agreements with a central bank. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Change Change Change Change 1H171H17 – 1H16 1H17 – 2H161H171H17 – 1H16 1H17 – 2H16 Earnings1 Balance sheet Total assets ($bn)840.01%flat Common equity Tier 19.97(50bps)49bps CET1 capital ratio Cash earnings ($m)4,0173%3% CET1 capital ($bn)40.36%4% Return on equity (%)14.0(20bps)11bps Risk weighted assets ($bn)404.411%(1%) Dividend (cents per share) 94 flat flat Loans ($bn)666.94%1% Expense to income ratio (%)41.712bps(59bps)Customer deposits ($bn)478.78%3% Net interest margin (%)2.07(7pbs)(4bps)Net tangible assets per share ($)14.304%2% Funding and liquidity Customer deposit to loan ratio (%)71.8279bps128bps loans (bps)15(6bps)1bp Impaired assets to gross loans (bps)30(9bps)(2bps) Impaired provisions to impaired assets

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Cash earnings up 3% over the year and prior half Performance discipline 36 ($m) 1H16 2H16 3,918 (2) 3,050 3 6 income margins down 7bps regulatory and compliance costs 40 3,904 income income charges Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Cash earnings features of 1H17 - 1H16 ($m) AIEA up 4%,Additional investment and higher 84(64)174(121)4,017 Higher markets income, Lower single name provisions partially offset by higher and additional write-backs and general insurance claims recoveries Up 3% 1H16 Net interest Non-interest Expenses Impairment Tax & NCI1H17 % chg% chg 1H171H17-1H17-Net interest income 7,6931-Non-interest Expenses(4,483)1-Core earnings 6,26013 Impairment charges(493)(26)8 Tax and non controlling(1,750)71 interests Cash earnings 4,01733 Reported net profit 3,90764 Cash earnings features of 1H17 – 2H16 ($m) AIEA up 2%, margins down 4bps 161(4)(36)(20)4,017 Higher markets income Higher individually assessed partly offset by higher provisions partly offset by higher general insurance claims write-backs and recoveries Up 3% 2H16 Net interest Non-interest Expenses Impairment Tax & NCI1H17 income income charges

WIB up strongly, demonstrating value of portfolio diversification Performance discipline 37 NZ2 Other3 1H17 ($m) CB BB BTFG WIB Group Operating income 4,055 2,557 1,145 1,700 1,017 269 10,743 Expenses (1,629) (911) (578) (657) (443) (265) (4,483) Core earnings 2,426 1,646 567 1,043 574 4 6,260 Impairment (charges) / benefits (267) (205) (3) (64) 35 11 (493) Tax & non-controlling interests (648) (433) (167) (279) (174) (48) (1,750) Cash earnings 1,511 1,008 397 700 435 (34) 4,017 % of Group cash earnings 38 25 10 17 11 (1) 1 Refer to division definitions, slide 129. 2 In A$. 3 Other is Group Businesses (including Treasury). Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 2H16 CB BB BTFG WIB 2 NZ 3 Other 1H17 2H16 CB BB BTFG WIB 2 NZ 3 Other 1H17 1H17 divisional1 cash earnings movements ($m) 3,918(28)9(23)1152604,017 Up 3% 1H17 divisional1 core earnings movements ($m) 6,105612(29)216(40)(10)6,260 Up 3%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Dividends Performance discipline 38 Dividends (cents per share) Special dividend 8.2 55 1 Data using half year dividends and share price at 31 March 2017, or period end. 2 Effective pay-out ratio assumes 1H17 DRP participation of 30% Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Westpac dividend yield1 (%) Ordinary yield Including franking 9.08.89.1 6.2 7.7 6.86.3 5.7 4.7 6.4 5.4 2H141H152H151H162H161H17 Ordinary dividend payout ratio (%) Payout ratio (cash earnings basis)Effective payout ratio (after DRP) 79 2 1H122H121H132H131H142H141H152H151H162H161H17 Key dividend considerations for 1H17 • Sustainability of payout ratios over medium term • Strong capital comfortably above preferred range • Modest RWA growth • Final regulatory capital requirements remain uncertain • Surplus franking credits 10 828486 10 949494 88909293 94 1H122H121H132H131H142H141H152H151H162H161H17

Building long term franchise value Service leadership 39 #m) Bank 10.62 10.44 1.45 19.5 1 Restated due to transfer of customers between Consumer Bank and Business Bank. 2 Refer slide 132 for metric definition. 3 No peer data available for New Zealand. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack New Zealand customer numbers (#m) 1.321.341.351.351.36 Mar-15Sep-15Mar-16Sep-16Mar-17 New Zealand customers with a wealth product 2,3 (%) 28.6 Mar-15Sep-15Mar-16Sep-16Mar-17 Australian banking customer numbers ( Consumer Bank Business 9.9410.0910.26 1.69 1.71 1.48 1.65 8.91 8.75 8.49 8.61 8.61 Mar-15 Sep-15 Mar-16 1 Sep-16 1 Mar-17 Australian customers with a wealth product 2 (%) Westpac St. George brands Peers 20.7 15.4 14.3 12.4 Mar-15Mar-16Mar-17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Building long term franchise value Service leadership 40 82.7% 7.2 7.1 77.0% 1 Refer slide 132 for metric definition. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack New Zealand Business Consumer Customer complaints (#) Australian retail (CB, BB and BT) Down 56% 2H141H152H151H162H161H17 New Zealand retail Down 15% Down 33% 2H141H152H151H162H161H17 Down 26% Customer satisfaction1 Consumer and New Zealand (%), Business (mean) Westpac St. George brands Peers 84.7% 82.7% 81.9% 79.9% Mar-15Mar-16Mar-17 Westpac St. George brands Peers 7.3 7.1 7.0 Mar-15Mar-16Mar-17 80.0% 76.0% 69.0% 67.0% Mar-15Mar-16Mar-17

Customers continue to move to digital channels Digital transformation 41 4% 9% Down 11% 1 Australian Consumer and Business customers. 2 Digital transactions are typically payments and transfers. Branch transactions are typically withdrawals and deposits along with transfers and payments. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Branch transactions1,2(#m) 30.7 29.7 26.9 Do 26.4 wn 23.9 1H152H151H162H161H17 Digital transactions1,2 (#m) 287 279 Up 8% Up 3% 262 254 241 1H152H151H162H161H17 Digitally active customers1 (#m) 4.33 4.18 Up 7% Up 4.05 3.96 3.84 Mar-15Sep-15Mar-16Sep-16Mar-17 Digital sales1 (#000) Impacted by lower credit card balance transfers D 433 Up 16% own 2 % 425 367 347 273 1H152H151H162H161H17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document New digital services launched over the last six months Digital transformation 42 Helping customers get more from digital Making digital services easier to find Easy set up of key digital features: Quick Balance and Quick Transfer help customers check balances or transfer funds with one swipe An enhanced menu giving customers faster access to key features in one tap • • • Simple Sign In Quick Zone Register for eStatements Set up push notifications • Anticipating customer needs Digitally resolving customer pain points If a transaction looks unfamiliar customers can access more information about merchants with a simple search SuperCheck allows customers to search for and see their Super accounts (including those considered lost) in real time Allows customers to reset and retrieve their login credentials Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Uptake of recently launched capabilities Digital transformation 43 (#’000 events) 2 944 Up 25% 1 Consumer Bank accounts only. 2 Password change/reset and retrieving customer number. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Customer self-serve On line password change/reset 1,179 988 Up 19% Up 25% 1H162H161H17 Transition to digital Proof of balance statements (# and % of total) Online Manual 770k780k795k866k 3Q164Q161Q172Q17 63% 61% 57% 48% 52% 43% 39% 37% Taking out paper Total accounts on eStatements (#m) 36% Proportion of accounts1 29% 28% 6.0 4.8 Up 30% 4.6 Mar-16Sep-16Mar-17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Digital used to transform customer service: new capabilities Digital transformation 44 Westpac Keyboard1 Expense splitter1 Quick transfers1 Samsung Pay1 • • An Asia-Pacific first Make payments in context while inside social chat apps (such as Facebook, Instagram) No need to log into banking app • Manage what you’re owed, and who has paid you SMS friends to let them know how much they owe you, and what account to pay into • Allows customers to transfer between three accounts without the need to log into mobile banking More control over finances on the go CANSTAR 2017 Innovation Excellence Award Winner • First major Australian bank to offer Samsung Pay Secure payments at contactless terminals with a compatible Samsung phone or smartwatch Free way to pay on the go, offering greater convenience • • • • • • 1 Keyboard and Samsung Pay for Westpac brand only. Expense splitter for St.George brands only. Quick balance is active for both Westpac and St.George brands. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

loans1 Deep dive: Digitisation of personal Digital transformation 45 From up to 1-2 days to 10-15 minutes Simple form with instant decision 75% conditionally approved 25% unconditionally approved Applicants approved (predominantly existing customers)/or declined Simpler verification process From 4 days to 1-2 days Straight through process Customers accept offer and receive funds electronically (occurs in minutes 24/7 if a Westpac customer) Electronic acceptance and receipt of funds From 3-4 days to 15 minutes Improved process for online applicants, as well as branch or call centre applicants Customers save time: no need to visit a branch to sign contracts or collect funds Branch and call centre staff save time: 5 minutes per application Operations team saves time: 5 minutes per application in verification 25% of approvals receive funds on same day, 65% of these in 60 seconds: previous process took up to 9 days 1 This applies to the Westpac branded unsecured loan process. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Actively responding to new digital opportunities Digital transformation 46 Residence to help solve customer and 275 Kent St, Sydney within Westpac’s employee network, creating new edge of innovation at Westpac to 2020 through Stone & Chalk allows Westpac and bring the best of the outside in distributed ledger-based systems to simplify and 1 Logos are of the respective companies Stone & Chalk, R3, Uno, Surgical Partners and LanternPay. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Accelerating innovation “The Hothouse” provides innovation services supported by Entrepreneurs-In-problems. Dedicated space at Kogarah The Hotbox program unleashes the entrepreneurs products and services that will form the leading 1 Sponsoring the innovation ecosystem to partner with the fintech community 1 Active member of R3 creating opportunities through industry collaboration. Utilising automate more financial services Investing and partnering to build new businesses and help solve customer problems Invested in QuintessenceLabs creating opportunities with quantum technology that strongly encrypts confidential data 1 Uno is a new mortgage broker disrupting the traditional market by providing consumers with the ability to search, compare and apply for a home loan digitally , from a choice of 20 lenders 1Invested and partnered with Surgical Partners to help medical practices improve their operating efficiency by connecting practice management software to cloud based accounting Westpac and Australian fintech innovators in Loop have partnered to create LanternPay – a scalable,1 cloud based claiming and payments platform designed for use in Consumer Directed Care programs such as the NDIS, Aged / Home Care and Government insurance schemes

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Reinventure – Investing in new technology businesses1 Digital transformation 47 Westpac has committed $100m to Reinventure, an independently run venture capital fund. The operation allows Westpac to gain insights into emerging fintech business models, adjacent business opportunities and entrepreneurial ways to execute at speed Using data, sheds light on high volume crimes, improving prevention and detection A bitcoin wallet and platform where merchants and consumers can transact the digital currency, bitcoin A social media platform for local communities. Nabo differentiates itself by helping residents develop real online geographical communities (by suburbs) A trust framework and secure platform that allows users to exchange data safely and securely A free, all-in-one HR and benefits platform that manages on-boarding and compliance and lets HR professionals focus on value added tasks A platform to help home sellers find and compare real estate agents A one-stop payments platform that helps marketplaces, merchants and their customers transact simply and securely online (previously PromisePay) A peer -to-peer lending platform reducing the cost of originating and managing consumer loans, sharing its operating cost advantage with both borrowers and investors to get a better deal A business loan marketplace that matches SMEs to the best lender based on their characteristics and needs A global Big Data, business intelligence and enterprise data warehousing company New New A natural language AI system for data analysis tar geting relatively simple business queries that comprise 70% of an analysts work in a large organisation New Connects ordering apps, payment devices, loyalty and reservations platforms to any POS An app to revolutionise the payment process for customers when dining out or grabbing a coffee on the go Standardises mobile forms into a format you can easily read and fill at the tap of a button 1. Logos are of the

respective companies. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Significant momentum in our technology transformation Digital transformation 48 * Westpac 3 * Longer-term consolidation opportunities 1 2 3 4 5 Common IaaS (Infrastructure as a Service) foundations implemented across Group. St.George Hogan deposit & transaction core system upgraded to Celeriti in 2016. Significant Panorama functionality delivered including SMSF. Customer Service Hub vendor selected and “steel thread” developed to validate strategy of connecting channels and systems of record through a customer hub. Human Digital Connections telephony platform rolled out by the Customer Contact Centres. 1 Excludes RAMS and BT. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 2015 Channels (customer interface) Unassisted Customer BT Systems of record BT Infrastructure Westpac St.George BT Common St.George Westpac St.George Westpac Assisted Underway (degree of shading represents completion) Channel Starting with home ownership in Phase One Customer Service Hub profile 4 BT rama Common 1 Pano-St.George 2 Credit decisioning Brand agnostic view & source of customer Digitised originations process Brand agnostic origination platform1 5

Workforce revolution delivering Workforce revolution 49 Office (275 Kent St) to agile 0.7 (rolling 12 months) (%) 1 Based on survey of employees in 150 Collins St. Melbourne post move to agile. 2 Spot number as at 31 March for each period. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack High performer retention 9696969595 Mar-13Mar-14Mar-15Mar-16Mar-17 Embedding customer service During 1H17 made changes to incentives and performance management programs: •Removed all product-related incentives for tellers across the Group. Teller performance is now assessed on customer feedback and the quality of service provided •Introduced a new approach to performance, development and reward (Motivate). Motivate focuses on supporting people to develop and grow, removes forced rankings, and places a greater emphasis on behaviours Agile work space providing benefits •Around 10,300 employees now in agile workplaces •Commenced work on transforming Westpac Head •Delivering the following benefits - Employee to desk ratio now 1.3 across Sydney CBD locations - A further 72% reduction in paper and storage - 15-20% increase in staff satisfaction and pride with the workspace1 Agile working is supported with our Worksmart app Women in leadership positions2 (%) 49 43 Mar-13Mar-14Mar-15Mar-16Mar-17 46 44 41 Lost time injury frequency rate (rolling 12 months) (#) 1.8 1.4 0.90.8 Mar-13Mar-14Mar-15Mar-16Mar-17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Continued sustainability leadership Sustainable futures 50 Strategic priorities and 1H17 progress highlights Embracing societal change 1 • Leadership roles held by women increased to 49% (up from 46% a year ago). On track to achieve the 2017 target of 50% Recruited an additional 76 Indigenous Australians Help improve the way people work and live as our society changes • Environmental solutions 2 • Total committed exposure to the CleanTech and environmental services sector was $6.7bn as at 31 March 2017, remaining ahead of target1 Westpac Green Bond issued January 2017 Help find solutions to environmental challenges • Better financial futures 3 • BT Advice customer satisfaction rating was 4.9 for 1H17, meeting target of 4.9 out of 5 Lending to the social and affordable housing sector increased to $1.24bn, up from $1.05bn a year ago Help customers to have a better relationship with money, for a better life • Further information on Westpac’s Sustainability and progress on our strategic priorities is available at www.westpac.com.au/sustainability 1 From 2015, a higher threshold for green buildings was introduced in line with industry trends. 2 Formerly the Carbon Disclosure Project. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Leading track record • Most sustainable bank globally in the 2016 Dow Jones Sustainability Index for the third year in a row, and among sector leaders annually since 2002 • Assigned a Gold Class ranking in the RobecoSAM Sustainability Yearbook for 2017, released in January 2017 • Included in the 2016 CDP2 Climate A list, ranking Westpac among the top 9% of participating companies globally Significant achievements • ‘Industry-first’ introduction of ESG (Environmental, Social and Governance) scoring data in BT Invest and BT Panorama • Highest ever customer satisfaction rating achieved in BT Advice • Significant progress against Sustainability Strategy with more than

half of the 2017 targets met or exceeded ahead of schedule

Continued support for customers through sustainable investing Sustainable futures 51 Industry first sustainability scoring on ASX200 and managed funds BTFG is the first to provide customers with integrated sustainability information, to assist them in decision making 1 2016 BT Australian Financial Health Index. More information available at bt.com.au/sustainability Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Making sustainable investing easier • BT launched sustainability scoring, providing financial advisers and customers visibility of how investments rate on key sustainability factors • Available on BT Invest and BT Panorama’s investment menu for over 200 managed funds and ASX200 listed companies • Research shows more than 90 per cent of Australians believe sustainable investing is important, with almost one in five saying it is extremely important for their investments, to be in sustainable companies1 • BT Panorama is the only platform to offer integrated ESG scoring

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Continued support for the environmental, energy and mining transition Sustainable futures 52 services, with over $6.7bn TCE in Australia remains low, at approximately 1%. The of a transitioning economy Change Position Statement and 2020 change solutions (including CleanTech) services exposure ($bn) 6.3 6.2 6.1 1 Targets adopted by companies to reduce greenhouse gas emissions are considered “science-based” if they are in line with the level of decarbonisation required to keep global temperature increase below 2 degrees Celsius compared to pre-industrial temperatures, as described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. 2 As at 31 March 2017, Westpac had no exposure to water or land remediation projects that met the criteria for the Group’s CleanTech exposures. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack CleanTech and environmental 6.7 Sep-15Mar-16Sep-16Mar-17 Mining portfolio (TCE) by sector (%) TCE as at 31 March 2017 $10.3bn 50 2H151H162H161H17 40 30 20 10 0 Oil and Other Iron ore Mining Coal Other gas metal services ore • Supporting CleanTech and environmental and New Zealand • Mining as a percentage of Group TCE portfolio mix continues to evolve as a result • Launched in April 2017, a revised Climate Action Plan - new and updated criteria: - $25bn target for lending to climate by 2030 (currently $6.7bn) - Strengthened criteria for financing coal mines - Commitment to actively reduce the emissions intensity of exposure to the power generation sector, targeting 0.30 tCO2e/MWh by 2020 - Setting a Science-Based Target1 to reduce Westpac’s direct footprint emissions by 9% at or before 2020 CleanTech and environmental services exposure (%)2 3.7 3.80.4 0.2 4.6Green buildings Renewable energy Forestry Waste 52.3 35.0 Other Energy efficiency Green businesses TCE as at 31 March 2017 $6.7bn Group mining portfolio to total

lending TCE (%) 1Total Group lending (ex. Mining) Mining 99

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Actively supporting Australia Sustainable futures 53 new lending2 $584bn Notional income tax based on the Australian company tax rate of 30% Backing economic their home or grow their business Support the efficient flow of funds in the economy and keep deposits safe • Aust. loans (40) 30 15 (not assessable) 1,620 1,724 1,745 Market of many either directly (611k shareholders) or via in the income statement $118bn The line • 2nd largest Australian taxpayer3 paying income tax the half The worce • Employ 37,425 people in payments Net GST, Payroll tax, FBT 230 217 238 including fees for the committed liquidity facility, APRA fees and stamp duties community • First 200 Westpac Scholars Similarly, Westpac also collects tax on behalf of others, such as withholding nation to pre-tax • 40+ years continuous support of the 1 All figures for the half year to 31 March 2017 unless otherwise stated. Dividends paid represents the 1H17 dividend. 2 New mortgage and new business lending in Australian retail operations which includes CB, BB and BTFG. 3 Source: ATO’s Corporate Tax Transparency Report for the 2014 - 15 Income Year, published December 2016. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Supporting communities1Income tax expense on a cash earnings basis ($m)1H162H161H17 •Provide loans to help Australians own$49.3bn 1,6601,6941,730 activitytotal Net amounts not deductible/ $3.2bn Wealth• Support working and retired Australians dividends; Total income tax expense Australians their super funds capitalisation Effective tax rate (%)29.330.530.3 >$1.7bn bottom more than $3bn in income tax in 2016 expense for Other tax/government payments ($m)1H162H161H17 $2.3bn rkfo employees •Westpac 200 Businesses of Tomorrow>1%Westpac also makes a number of other government and regulatory payments The•200 Community Grants ontributionswhich are not included in the above.

Westpac Rescue Helicopter Service profittax, PAYG and GST. These are excluded from this analysis

Earnings Drivers Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)

Net operating income up 2% over the half Revenue 55 10,619 28 (15) 10,584 39 81 41 (84) 10,619 9 BB 1H16 CB BB BTFG WIB NZ Group 2H16 CB BB BTFG WIB NZ Group 1H17 1 AIEA is average interest-earning assets. 2 New Zealand contribution represented in A$. 3 Group Businesses. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Net operating income by division ($m) 1H17 Divisional contribution (%) 2 (12)(100)195(31)1610,743CB 1638BTFG WIB 11NZ 2 24Group 3 2323 10,584223(46) Flat (down $35m) Up 2% Net operating income movement ($m) 150(108)529(96)168(170)(84)1991810,743 1H16AIEA1MarginsFees &WealthTradingOther2H16AIEA1MarginsFees &WealthTradingOther1H17 growthcommissionsgrowthcommissions Net interest up 1%Non-interest down 3% Net interest flatNon-interest up 6%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Composition of lending Revenue 56 640.7 62.0 13.2 148.7 (2.3) 0.1 147.7 1 Gross loans. 2 Run-off includes repayment. 3 Other includes business lending in Private Wealth. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Mar-16 Sep-16 New lending Net run-off 2 Mar-17 Mar-16 Sep-16 BB new lending BB run-off 2 Mar-16 WIB net lending 3 Other Sep-16 Mar-17 Consumer Bank Mar-16 Business Bank Sep-16 WIB New Zealand Consumer Other (inc. BT) Business Mar-17 Mar-17 Australian mortgage lending1 ($bn) 38.4(28.7) 390.8404.2413.9 Up 2% New Zealand net loans (NZ$bn) 71.775.11.20.276.5 Up 2% Australian business lending1 ($bn) 10.7(11.0) 150.2 Down 2% Composition of lending (% of total) 2.0 Aust. mortgages 10.5 3.5Aust. business Aust. institutional Aust. other consumer New Zealand lending Other overseas lending Net loans ($bn) 661.97.40.9(2.3)(1.7)0.7666.9 New Zealand lending up NZ$1.4bn Up 1%

Customer deposits Revenue 57 467 479 442 Up 6% Up 3% 2% customer Up 5% Down 1% 33.6 12.8 1 Included in transaction accounts. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack New Zealand customer deposits (NZ$bn) Term depositsSavingsOnlineTransaction 555857 49% 12 12 21% 23% 12 14 13 14 3 4 4 29 28 25 Mar-16Sep-16Mar-17 Mortgage offset1 balances ($bn) 36.6 26.8 20.8 16.2 Mar-12Mar-13Mar-14Mar-15Mar-16Mar-17 Customer deposit mix ($bn) and % of total Term depositsSavingsOnlineTransaction 40% 136 28% 19%1 130 123 84 92 80 64 60 68 189 191 171 Mar-16Sep-16Mar-17 Custo LCR deposit mer deposit composition ($bn) CBBBWIBBTFG, NZ & Other 442467479 87 87 79 94 88 83 111 112 106 186 174 181 Mar-16Sep-16Mar-17 run-off14.2%13.5%13.7%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Net interest margin down 4bps, primarily due to higher funding costs and lower interest rates Revenue 58 by cost of holding and business loans capital held (2bps) 0bp 2.07 Lengthening of average competition 1.96 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H16 2H16 Loans Customer deposits Term wholesale funding Capital & other Liquidity Treasury & Markets 1H17 Net interest margin by division (%) 1H162H161H17 2.722.72 2.70 2.34 2.28 CBBBWIBNZ 2.37 2.18 2.13 1.721.76 1.77 Net interest margin movement (%) NIM excl. Treasury & MarketsTreasury & Markets impact on NIM Repricing of certain mortgagesLower rates onLower CLF fee offset more HQLA 2.144bps(4bps) 0.07 2.11(1bp) 0.07 (1bp) 2.07 Mostly term deposit tenor in preparation for NSFR. Higher Tier 1 and Tier 2 costs 0.07 2.04 2.00 Net interest margin (NIM) (%) NIMNIM excl. Treasury & Markets 2.172.07 2.072.00 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17

Non-interest income up 6%, primarily from higher markets income Revenue 59 199 2,966 (84) 28 2,889 1,408 1,375 1,380 1,134 general insurance claims from Cyclone Debbie 970 1,090 539 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Wealth and insurance income ($m) Lower funds management income from margin compression and higher insurance claims, including 941886 1H152H151H162H161H17 Trading income ($m) Higher foreign exchange and commodity risk management income and higher sales activity713 610 514 425 1H152H151H162H161H17 Non-interest income contributors ($m) 183,050 1H162H16Fees &Wealth &TradingOther1H17 commisions insurance income Up 6% Fees and commissions income ($m) Higher institutional and business fee income partly offset by lower card income 1,4781,464 1H152H151H162H161H17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Wealth and insurance and markets and Treasury income Revenue 60 614 product mix including Treasury DVA Total related 1 DVA is derivative valuation adjustments. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H16 1H16 2H16 2H16 1H17 1H17 1H16 1H16 2H16 2H16 1H17 1H17 1H16 1H16 2H16 2H16 1H17 1H17 1H16 1H16 2H16 2H16 1H17 1H17 1H16 1H16 2H16 2H16 1H17 1H17 1H16 1H16 2H16 2H16 1H17 1H17 1H16 1H16 2H16 2H16 1H17 1H17 1H16 1H16 2H16 2H16 1H17 1H17 Markets income by activity ($m) 748 609 CustomerMarket risk relatedDVA1 Total Rise in fixed income and FX sales Higher FX, fixed income and commodities546 247 142 21019 465 447 482trading with positive market conditions 89 Total Group market risk-related income ($m) 523 349 Market risk1 403 259 250 257247 142 89 21019 Funds management income ($m) Margin compression from665 622 FUM/FUABT OtherNZ & WIBTotal migration to MySuperHastings performance fees 372 382 365 199 201 206 438251 Insurance income ($m) Mostly higher claims,327 305 264 LifeGeneralLMI & NZTotal including Cyclone Debbie and lower premiums 152 9497818286 42 126 136

Expense to income ratio 41.7% Expenses 61 6 35,290 162 34,964 Global peer comparison of expense to income ratios1 (%) Divisional expense to income (%) 1H16 2H16 1H17 62.9 62.3 60.5 59.9 50.0 50.5 51.0 45.9 45.9 42.7 41.7 41.5 45.0 43.4 41.8 41.4 1 Company data, Credit Suisse. Expense to income ratio average for Peer 1, 2 and 3 based on their 1H17 results, all others based on FY16. European average excludes Deutsche Bank. Peer 2 is based on underlying cash to income ratio. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack European average US regional average Canadian average Korean average Hong Kong average Singapore average Peer 1 Peer 3 WBC Peer 2 47.0 41.2 40.3 40.2 35.9 35.5 35.6 41.7 38.6 CBBBBTFGWIBNZ Expense movements ($m) 4,479121(118)(4)54,483 Flat 2H16OngoingProductivityInvestment Regulatory/1H17 expensescompliance FTE run versus change (#) 45435,580(296) 1H16RunChange2H16RunChange1H17 Run: for ongoing operations Change: project based

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Investment spend focused on growth and productivity Expenses 62 527 700 580 spend 49% 37% 41% expensed 3.1yrs 2.8yrs 2.9yrs period and amortisation2 ($bn) 1 Investment spend capitalised also includes technology hardware equipment. 2 Data based on 1H17 results, excludes write-offs. Amortisation expense is based on amortisation expense excluding any impairment and is based on 1H17 annualised amortisation expense. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Average amortisation period2 (years) 6.5 4.2 2.9 3.5 Peer 1Peer 2Peer 3WBC Capitalised software balance 2.49 1.921.90 1.81 0.59 0.44 0.36 0.61 Peer 1Peer 2Peer 3WBC Total investment spend mix (% of total) Growth & productivityRegulatory change Other technology 14 14 11 24 22 23 65 64 63 1H162H161H17 Investment spend ($m) 1H162H161H17 Expensed256261236 Capitalised1 271439344 Total investment Investment spend Software amortisation271294303 Average amortisation Investment spend capitalised1 ($m) 1H162H161H17 Capitalised software Opening balance1,6541,6511,781 Additions268428344 Amortisation(271)(294)(303) Write-offs, impairments and foreign exchange translation-(4)(8) Closing balance1,6511,7811,814 Other deferred expenses Deferred acquisition costs11610191 Other deferred expenses274556

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Productivity track record: $1.9bn in savings since 2009 Expenses 63 • Business Connect and Connect Now video 118 1,946 1,828 263 Targeting FY16-1H17 annual Bank has supported an increase in the number of document delivery and completion, enabling from application to funds from 10 days to same day Queensland. Enables digital cheque imaging at 1 Total branches in Australia, New Zealand and Westpac Pacific. 2 Cumulative numbers. 3 Represents % of Australian branches with Business Connect/Connect Now. 4 Percentage change is based on prior corresponding period. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Metrics FY15FY161H17 Number of branches1 1,4291,3091,264 Australian % of Smart ATMs of ATM network2 34%41%42% Business Connect/Connect Now video conferencing3 86%90%91% Consumer Bank and Business Bank active digital customers2 (# m)4.04.24.3 Retail and business banking and wealth complaint reduction4 28%31%26% Number of IT applications closed2 119151161 Efficiency initiatives: conferencing now in 91% of sites1 •Improved e-Statement functionality in Consumer accounts registered for e-Statements to 6 million •Digitised St.George mortgage top-up loan customers to sign and return documents electronically, improving quality and reducing time •Cheque digitisation has been rolled out to over 500 branches across NT, SA, WA, Tasmania and each branch, reducing courier costs and results in faster and more efficient processing •Annual audit certificates requested by auditors now digitised, ~120k requests, with delivery reduced to 2 days from 15 days •Launched Virtual Data Vault (VDV) portal, uses ‘drop box’ style technology, enabling Westpac to provide large volumes of data to regulatory and legislative bodies. Increasing security, saving paper and reducing time to meet requests •24/7 portal introduced that allows Westpac Credit Card customers with overdue

payments to manage their payment arrangements online. Used by over 5,000 customers per month with 92% of payment arrangements set up on the same day $1.9bn saved from efficiency programs since FY09 ($m) productivity savings to average $270m239 219 225 238 289 212 143 FY09FY10FY11FY12FY13FY14FY15FY16FY09-FY161H17Cumulative cumulative

1H17 impairment charge lift mainly due to higher IAPs Impairment charges 64 667 Institutional Bank 457 (114) (110) (173) (174) (210) (228) Impairment charge to average loans 100 400 80 1 Pre-2008 does not include St.George. 2008 and 2009 are pro forma including St.George for the entire period with 1H09 ASX Profit Announcement providing details of pro forma adjustments. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Impairment charges and stressed exposures1 (bps) 120500 annualised (lhs) Stressed exposures to TCE (rhs) 300 60 200 40 20100 00 200720082009201020112012201320141H152H151H162H161H17 114bps 15bps Impairment charges ($m) Individually assessedCollectively assessed New IAPsWrite-backs & recoveriesWrite-offs directOther movements in CAPTotal Rise reflects new impairments in 493 (48)(86) 2H151H162H161H172H151H162H161H172H151H162H161H172H151H162H161H172H151H162H161H17 471364Workout of Institutional463418484443412 273256and NZ facilities

200 200 years proudly supporting Australia Asset quality Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document High quality portfolio with bias to secured consumer lending Asset Quality 66 Derivative financial instruments 1 1 2 Housing Cash and balances with central banks 17 80 68 Other consumer 4 1 Risk grade equivalent. 2 Exposure by booking office. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Exposure by risk grade as at 31 March 2017 ($m) Standard and Poor’s Risk Grade1 AustraliaNZ / PacificAsiaAmericasEuropeGroup% of Total AAA to AA-97,8656,8771,9384,676528111,88411% A+ to A-28,0164,7834,6505,3102,95645,7155% BBB+ to BBB-59,89810,2057,4171,9151,95081,3858% BB+ to BB74,39510,4431,98034956787,7349% BB-to B+57,6279,56914683-67,4257%

A well diversified portfolio Asset Quality 67 Finance & insurance Property 1.2 1.2 1.1 1.1 at 31 March 2017 ($m) A-1 Exposures at default is an estimate of the committed exposure expected to be drawn by a customer at the time of default. Excludes consumer lending. 2 Finance and insurance includes banks, non-banks, insurance companies and other firms providing services to the finance and insurance sectors. 3 Property includes both residential and non-residential property investors and developers, and excludes real estate agents. 4 Construction includes building and non-building construction, and industries serving the construction sector . 5 NBFI is non-bank financial institutions. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack S&P rating or equivalent Top 10 exposures to corporations & NBFIs5 A+ BBB-BBB+ A-A BBB-A- BBB+ BBB 03006009001,2001,500 Exposures at default1 by sector ($bn) 2 3 Government admin. & defence Wholesale & retail trade Manufacturing Services Property services & business servicesSep-16 Transport & storage Agriculture, forestry & fishing Utilities Mining Construction4 Accommodation, cafes & restaurants Other 020406080100 Mar-17 Mar-16 Top 10 exposures to corporations and NBFIs5 as a % of TCE (%) Largest corporation/NBFI single name 1.9exposure represents less than 0.2% of TCE 1.41.31.3 1.01.0 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Mar-17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Strong provisioning maintained Asset Quality 68 Impairment charges to average loans annualised (bps) 21 14 15 mainly due to improved credit 24 17 18 including interest carrying adjustment 4,414 1 Change in mortgage risk weights increased credit RWA by $43bn, reducing the collectively assessed provisions to credit RWA ratio by 11bps. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Asset qualityTotal provisions ($m) Individually assessed provisions 1H162H161H17Collectively assessed provisions Economic overlay 5,061 Impairment charges to average loans annualised (bps)Lower total provisions 4,241quality in WIB Gross impaired assets to gross loans (%)0.390.320.303,949 3,4813,6023,513 Stressed exposures to TCE (%)1.031.201.14 Provisions Total provisions to gross loans (bps)575452 Impaired asset provisions to impaired assets (%)484952 Collectively assessed provisions to credit RWA (bps)87761 77 Economic overlay ($m)393389378 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16Mar17 4,734 502 3,004 1,228 453 2,986 1,622 346 2,607 1,461 363 2,408 1,470 389 2,196 3,332 389 2,225 2,275 1,364 867669 389 388 2,344 869 378 2,348 787

Stressed exposures lower Asset Quality 69 90+ day past due and not impaired 3.09 refinance and work-out of 2.17 and an improved outlook for 1,519 1,194 997 958 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Mar-16 Sep-16 Mar-17 1H10 Mar-16 2H10 Impaired 1H11 90+ dpd not impaired 2H11 1H12 Substandard 2H12 Watchlist 1H13 2H13 Sep-16 1H14 Impaired 2H14 90+ dpd not impaired 1H15 2H15 Substandard 1H16 Watchlist 2H16 Mar-17 1H17 New and increased gross impaired assets ($m) 1,748 1,343 1,0601,078 477 589 1,218 708 609 607633 Stressed exposures as a % of TCE Impaired Watchlist & substandard 3.20. 2.48Lower stress reflects some institutional facilities some NZ dairy exposures 1.60 1.241.201.14 2.23 0.29 0.57 2.07 0.46 0.67 1.45 0.41 0.62 1.24 0.35 0.58 0.85 0.31 0.44 0.71 0.991.03 0.540.49 0.260.250.28 0.270.200.26 0.65 0.33 0.22 0.59 0.35 0.20 Movement in stress categories (bps) 10120(2)2(2)(4) 6 103(4)5 114 Mainly due to work-out of WIB exposures Mainly NZ dairy and exposures in WIB

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Stressed exposures lower across industries reflecting both work-out and return to health of facilities Asset Quality 70 1 Includes Government admin. & defence Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Agriculture, forestry & fishing Wholesale & retail trade Property Manufacturing Property services & business services Services Construction Transport & storage Accommodation, cafes & restaurants Mining 1 Other Finance & insurance Utilities Corporate and business portfolio stressed exposures by industry ($bn) 2.5 2.0 1.5 1.0 0.5 0.0 Mar-16Sep-16Mar-17

Areas of interest: Commercial property Asset Quality 71 9 & diversified groups 16 15 Vic Qld SA & NT 20 44 Retail Investors >$10m Diversified Property 6 NZ & Pacific Institutional 28 Trusts >$10m 1 Includes impaired exposures. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Commercial property portfolio composition (%) Region (%)Borrower type (%)Sector (%) NSW & ACTExposures <$10mCommercial offices Developers >$10mResidential 114443 9WA30 Industrial 9511Groups and Property (diversified) Commercial property portfolio Sep-16Mar-17 Total committed exposures (TCE)$67.1bn$65.5bn Lending$52.6bn$51.4bn Commercial property as a % of Group TCE6.876.65 Median risk grade1 BB equivalentBB equivalent % of portfolio graded as ‘stressed’1 1.321.39 % of portfolio in impaired0.530.46 Commercial property exposures % of TCE and % in stress 10Commercial property as % of TCE (lhs)20 815 6 10 4 25 00 Commercial property % in stress (rhs)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Areas of interest: Inner city apartments Asset Quality 72 Sep-16 Mar-17 TCE %1 3.2 2.8 4.3% >$20m in major markets, shown below average LVR (%) 50.2 49.3 $13.0bn$13.5bn for inner city apartments 1 Percentage of commercial property TCE. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Consumer mortgages Consumer mortgages where security is within a residentialSep-16Mar-17 apartment development >$20m Total consumer mortgage loans Average LVR at origination69%71% Average dynamic LVR54%53% Dynamic LVR >90%2.9%2.0% 90+ day delinquencies30bps37bps Residential apartment development >$20m weighted 55.1 Average portfolio LVR 52% 45.0 2017201820192020 Residential apartment development >$20m5.14.16.3% •Progressively tightened risk appetite in areas of higher concern since 2012 •Actively monitoring settlements for >$20m residential development book •While settlements have been slightly slower, Westpac’s debt has been repaid in full given low LVRs Residential apartment development Sydney major markets1.21.32.0%•1H17 new lending LVR 49.2% Inner Melbourne1.41.01.5%•1H17 new lending LVR 51.4% Inner Brisbane0.40.20.3%•Exposure low and falling Perth metro0.20.20.3%•Exposure low and falling Adelaide CBD0.10.10.2%•One project Commercial property portfolio TCE ($bn)

Asset quality areas of interest Asset Quality 73 (TCE) 25.29 21.70 ‘stressed’1,2 7 14 1 Includes impaired exposures. 2 Percentage of portfolio TCE. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack NZ dairy portfolio (TCE) by security (%) 261 73 Fully secured Partially secured Unsecured Mining portfolio (TCE) by sector (%) 10 12 41 16 Oil and gasIron ore Other metal oreCoal Mining servicesOther Retail portfolio (TCE) by sector (%) 25 42 33 Food Retailing Motor Vehicle Retailing and Services Personal and Household Good Retailing New Zealand dairy portfolio Sep-16Mar-17 Total committed exposureNZ$5.9bn NZ$5.9bn LendingNZ$5.7bn NZ$5.6bn % of Group TCE0.580.55 % of portfolio graded as % of portfolio in impaired2 0.340.34 Mining (inc. oil and gas) portfolio Sep-16Mar-17 Total committed exposures (TCE)$11.3bn$10.4bn Lending$6.2bn$6.0bn % of Group TCE1.161.05 % of portfolio graded as ‘stressed’1,2 3.942.90 % of portfolio in impaired2 1.321.15 Retail trade portfolio Sep-16Mar-17 Total committed exposures (TCE)$16.3bn$15.3bn Lending$12.1bn$11.3bn % of Group TCE1.671.55 % of portfolio graded as ‘stressed’1,2 2.682.51 % of portfolio in impaired2 0.340.40

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Provision cover by portfolio category Asset Quality 74 PROVISIONING TO TCE (%) Sep-15 Mar-16 Sep-16 Mar-17 Fully performing portfolio •Small cover as low probability of default (PD) •Includes economic overlay 0.21 0.22 0.22 0.21 portfolio Watchlist & substandard •Still performing but higher cover reflects elevated PD 6.93 4.89 4.51 4.52 90+ day past due and not impaired •In default but strong security 5.28 4.99 4.57 5.04 due and not Impaired assets •In default. High provision cover reflects expected recovery 46.27 47.65 49.44 52.07 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Impaired asset provisions Collective provisions Exposures as a % of TCE Fully performing Watchlist & substandard 90+ day past impaired Impaired Sep-15Mar-16Sep-16Mar-17 0.26 0.20 0.22 0.20 0.25 0.35 0.33 0.28 0.54 0.49 0.59 0.65 98.97 99.01 98.86 98.80

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Changes in the treatment of hardship now flowing through other consumer delinquencies Asset Quality 75 APRA is standardising the delinquency treatment of facilities in hardship Hardship allows eligible customers to reduce or defer repayments in the short term to manage through a period of financial difficulty (e.g. unemployment, injury, natural disasters). Solutions are tailored to customer circumstances and may include extending the loan or restructuring. through delinquency buckets until 90+ day maintained for 6 months (‘serviceability period’) months Accounts in serviceability period now fully flowed through •Increased mortgage 90+ day 90+ day delinquencies excl. hardship changes assets offset by change to correlation factor in 1H17 0.5 higher write-backs 0.5 Sep-15 Mar-16 Sep-16 Mar-17 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Impact on mortgages - completed •Implemented in 1H16 and hasAustralian mortgage delinquencies (bps) Accounts in hardship increase delinquencies by 13bps0.7 •Increase to risk weighted0.6 0.01 0.4 0.3 0.2 0.12 0.01 0.12 0.03 0.01 0.53 0.54 0.51 0.45 Impact on unsecured consumer lending •Portfolios impacted areAustralian unsecured consumer delinquencies (bps) credit cards, personal loans and autoAccounts in serviceability period •Impact on 90+ dayAccounts in hardship increase delinquencies in 1H172.090+ day delinquencies excl. hardship changes was 28bps and will continue to rise in 2H17 1.5 •The change has yet to flow through to risk weighted assets 1.0 •Expected to result in higher write-of fs and 0.12 1.49 0.16 1.35 1.16 0.01 1.11 Sep-15Mar-16Sep-16Mar-17 Current Westpac approach •An account in hardship continues to migrate •Accounts reported as delinquent until repayments •Average hardship period granted is 3-4 months •Hardship plus serviceability period averages 10 •Changes have no impact on Westpac’s risk profile Prior Westpac approach •When

an account entered hardship its delinquency status (30, 60, or 90 days etc.) was frozen until after hardship arrangements ended or the facility returned to performing (or not) Industry comparability •Westpac changed hardship treatment following guidance from APRA. Implemented change for mortgage portfolio; changes for NZ and consumer unsecured currently underway •Treatment across banks and non-banks, including serviceability period applied is not yet aligned. This makes comparability of 90+ day delinquencies more difficult

Australian consumer unsecured lending Asset Quality 76 Mar-16 Sep-16 Mar-17 30+ day delinquencies (%) 3.88 2.95 3.99 90+ day delinquencies (%) 1.49 1.17 1.63 Estimated impact of changes to hardship treatment for 90+ day delinquencies (bps) - 1bp 28bps • APRA hardship policy adopted across Westpac’s Australian unsecured portfolios in 1H17 March 2017 unsecured consumer delinquencies, excluding hardship reporting changes are 14bps lower than March 2016 • 8 8 8 555 Group unsecured Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Australian consumer unsecured lending portfolio (% and $bn) Composition (%)Portfolio ($bn) 3.4% of Group lendingMar-16Sep-16Mar-17 23 23 23 310 10 10 97 Credit cardsPersonal Auto loansTotal loans(consumer) consumer Consumer unsecured portfolio Australian unsecured lending 90+ day delinquencies (%) Personal loans (excl Auto)Auto loans (consumer) 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Mar-14Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17 Personal loans ex-hardshipAuto loans ex-hardship Australian unsecured lending 90+ day delinquencies (%) 3.00Total unsecured consumer lending 2.50 2.00 1.50 1.00 0.50 0.00 Mar-14Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17 Credit cards Total ex-hardship Credit cards ex-hardship Australian unsecured consumer portfolio

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document High levels of borrower equity create buffers in the Australian mortgage portfolio Asset Quality 77 100 balance balance balance flow1 60 72 72 71 including offset accts2,6 (%) net of insurance7 ($m) 0 1 Flow is all new mortgages settled during the 6 month period ended 31 March 2017 and includes RAMS. 2 Excludes RAMS. 3 Dynamic LVR is the loan-to-value ratio taking into account the current loan balance, changes in security value, offset account balances and other loan adjustments. Property valuation source Australian Property Monitors. 4 Average LVR of new loans is on rolling 6 month window. 5 Includes amortisation. 6 Customer loans ahead on payments exclude equity/line of credit products as there are no scheduled principal payments. Includes mortgage offset balances. ‘Behind’ is more than 30 days past due. ‘On time’ includes up to 30 days past due. 7 Mortgage insurance claims 1H17 $3m (2H16 $7m, 1H16 $4m). Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Australian housing portfolioAustralian housing loan-to-value ratios (LVRs)2,3 (%) Mar-16Sep-16Mar-171H17 Total portfolio ($bn)390.8404.2413.938.4 Owner occupied (%)54.355.055.355.190 Investment property loans (%)39.539.339.543.580 Portfolio loan/line of credit (%)6.25.75.31.4 Variable rate / Fixed rate (%)83 / 1783 / 1782 / 1877 / 2370 Low doc (%)2.72.42.20.4 Proprietary channel (%)58.257.957.756.7 First home buyer (%)8.98.68.47.950 Mortgage insured (%)18.818.418.114.1 Mar-16Sep-16Mar-1740 Average LVR at origination2 (%)707070 30 Average dynamic LVR2,3 (%)434342 Average LVR of new loans2,4 (%)70706820 Average loan size5 ($’000)249254259 Customers ahead on repayments10 Actual mortgage losses353136 Actual mortgage loss rate annualised (bps)2220<=6060<=7070<=8080<=9090<=9595+ 1H17 drawdowns LVR at origination Portfolio LVR at origination Portfolio dynamic LVR • 83% of portfolio with

origination LVR ≤80% • 94% of portfolio with dynamic LVR ≤80%

Australian mortgage serviceability supporting payments ahead Asset Quality 78 Key serviceability requirements Discounts of 20% apply to less certain income sources such as rental income/bonuses/pensions Income Higher of declared expenses or HEM1 adjusted by income and geography Expenses Higher of customer rate plus 2.25% or the minimum assessment (‘floor’) rate of 7.25% applied Interest rate buffer Restrictions • LVR restrictions apply to single-industry towns and higher-risk postcodes LVR restrictions to Australian and NZ citizens and permanent visa holders using foreign income Loans to non-residents not offered since April 2016 (limited exceptions) Minimum property size and location restrictions apply • • • 1 HEM is the Household Expenditure Measure, produced by the University of Melbourne. 2 Excludes RAMS. Customer loans ahead on payments exclude equity/line of credit products as there are no scheduled principal payments. Includes mortgage offset account balances. ‘Behind’ is more than 30 days past due. ‘On time’ includes up to 30 days past due. Calculated by loan balance. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Westpac Australian offset account balances ($bn) 36.2 Mortgage interest rate buffers (%) 9 7.25 7 54.42 3 Mar-14Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17 Westpac owner occupied SVR inc package discount Westpac minimum assessment ('floor') rate Australian home loan customers ahead on repayments2(%) Mar-16Sep-16Mar-17 30 25 20 15 10 5 0 BehindOn Time< 1 Month< 1 Year< 2 Years> 2 Years

Australian mortgage delinquencies remain low Asset Quality 79 55 66 67 4 13 13 hardship treatment (bps) conditions in those states Housing lending portfolio by State (%) Australian banking system1 Westpac Group portfolio 1H17 Westpac Group drawdowns 44 40 27 27 26 18 17 17 12 10 7 7 7 6 1 Source ABA Cannex February 2017. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 35 NSW & ACTVIC & TASQLDWASA & NT Australian mortgages 90+ day delinquencies by state (%) 3.0 2.0 1.0 0.0 Mar-14Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17 NSW/ACTVIC/TASQLD WASA/NTALL Introduced new hardship treatment Australian mortgage portfolio Mar-16Sep-16Mar-17 30+ day delinquencies (bps)134130139 90+ day delinquencies (bps) (includes impaired mortgages) Estimated cumulative impact of changes to Consumer properties in possession253262382 •Increase in 1H17 mainly due to rise in WA and Qld reflecting weaker economic Australian mortgages delinquencies (%) 90+ day past due total90+ day past due investor 3.030+ day past due totalLoss rates 2.0 1.0 0.0 Mar-14Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17 Introduced new hardship treatment

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Sound underwriting supports quality across the mortgage book Asset Quality 80 90+ day delinquencies 48bps Owner occupied IPL 50 2% of the IO portfolio with income <$100k 1% 0 0 1 Excludes RAMS. 2 Average LVR of new loans is on a rolling 6 month window. 3 Dynamic LVR is the loan-to-value ratio taking into account the current loan balance, changes in security value, offset account balances and other loan adjustments. Property valuation source Australian Property Monitors. 4 An adequate surplus test measures the extent to which a borrowers income exceeds loan repayments, expenses and other commitments, as assessed. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 0<=60 60<=70 70<=75 75<=80 80<=85 85<=90 90<=95 95<=97 97+ <=50 50<=75 75<=100 100<=125 125<=150 150<=200 200<=500 500<=1m 1m+ Interest-only lending by LVR1,3 and income band (%) 57%Applicant gross income bands 13% <$100k$100k - $250k>$250k 35% 29% 7% dynamic LVR >80% and 8% 2% 19% 15% 9% <=60%60%<=80%>80% Dynamic LVR bands (%) 5% Applicants by gross income band1 (%) 30Owner occupiedIPL 25 20 15 10 5 LVR at origination1 (%) 40 30 20 10 Interest-only portfolio •Interest-only (IO) loans assessed on a principal and interest basis, now over the residual term. IO loans are full recourse •Serviceability assessments include an interest rate buffer (at least 2.25%), minimum assessment rate (7.25%) and adequate surplus test4 •IO is 50% of the mortgage portfolio and 46% of flows in 1H17. •Portfolio statistics as at 31 March 2017 67% average LVR of interest-only loans at origination1 66% of customers ahead of repayments (including offset accounts)1 Annualised loss rate 1bp (net of insurance claims) Investment property portfolio Mar-16Sep-16Mar-17 Average LVR of new IPL loans in the period1,2 (%)676665 Average LVR of IPL loans at origination1 (%)727272 % IPL loans

originated at or below 80% LVR878888 Average dynamic LVR1,3 (%)484847 Average loan size ($’000)299305309 Customers ahead on repayments including offset accounts1 (%)626261 90+ day delinquencies (bps)384847 Annualised loss rate (net of insurance claims) (bps)222

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Lenders mortgage insurance Asset Quality 81 Lenders mortgage insurance arrangements LVR Band Insurance • LVR ≤80% • Low doc LVR ≤60% Not required • LVR >80% to ≤ 90% • Low doc LVR >60% to ≤ 80% • • • Where insurance required, insured through captive insurer, WLMI LMI not required for certain borrower groups Reinsurance arrangements: - 40% risk retained by WLMI - 60% risk transferred through quota share arrangements2 with Arch Reinsurance Limited, Tokio Millennium Re, Endurance Re, Everest Re, Trans Re and AWAC • LVR >90% • 100% reinsurance through Arch Reinsurance Limited - Reinsurance arrangements see loans with LVR >90% insured through WLMI with 100% of risk subsequently transferred to Arch Reinsurance Limited Insurance statistics 1H16 2H16 1H17 Insurance claims ($m) 4 7 3 WLMI loss ratio4 (%) 10 17 7 WLMI gross written premiums5 ($m) 133 154 141 1 Prudential Capital Requirement (PCR) calculated in accordance with APRA standards. 2 For all new business from 1 October 2014. 3 Insured coverage is net of quota share. 4 Loss ratio is claims over the total of earned premium plus reinsurance plus exchange commission. 5 LMI gross written premium includes loans >90% LVR reinsured with Arch Reinsurance Limited. 1H17 gross written premium includes $107m from the arrangement (2H16: $125m, 1H16: $102m). Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Australian mortgage portfolio (%) 82Not insured Insured by third parties3 Insured by WLMI 810 Lenders mortgage insurance •Where mortgage insurance is required, mortgages are insured through Westpac’s captive mortgage insurer, Westpac Lenders Mortgage Insurance (WLMI), and through external LMI providers, based on risk profile •WLMI is well capitalised (separate from bank capital) and subject to APRA regulation. WLMI targets a capitalisation range of 1.25x PCR1 and have

consistently been above this target •Scenarios indicate sufficient capital to fund claims arising from events of severe stress – estimated losses for WLMI from a 1 in 200 year event are $130m net of re-insurance recoveries (2H16: $132m)

Mortgage portfolio stress testing outcomes Asset Quality 82 of its regulatory and risk management activities six consecutive quarters of negative GDP growth. This results in a uninsured portfolio (September 2016: $2.9bn) 1 Assumes 30% of LMI claims will be rejected in a stressed scenario. 2 Represents 1H17 actual losses of $36 annualised. 3 Stressed loss rates are calculated as a percentage of mortgage exposure at default. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack • Westpac regularly conducts a range of portfolio stress tests as part • The Australian mortgage portfolio stress testing scenario presented represents a severe recession and assumes that significant reductions in consumer spending and business investment lead to material increase in unemployment and nationwide falls in property and other asset prices • Estimated Australian housing portfolio losses under these stressed conditions are manageable and within the Group’s risk appetite and capital base Cumulative total losses of $3bn over three years for the Cumulative claims on LMI, both WLMI and external insurers, of $903m over the three years (September 2016: $856m) Cumulative loss rates have increased (74bps compared to 69bps at September 2016) mainly due to more conservative modelling assumptions, changes in portfolio quality , as well as changes in the non-delinquent portfolio WLMI separately conducts stress testing to test the sufficiency of its capital position to cover mortgage claims arising from a stressed mortgage environment • Preferred capital ranges incorporate buffers at Westpac Group level that also consider the combined impact on the mortgage portfolio and WLMI of severe stress scenarios Australian mortgage portfolio stress testing as at 31 March 2017 Key assumptionsStressed scenario CurrentYear 1Year 2Year 3 Portfolio size ($bn)413398390388 Unemployment rate (%)5.812.011.09.7 Interest rates (cash rate, %)1.500.500.500.50

House prices (% change cumulative)0.0(13.0)(22.4)(26.2) Annual GDP growth (%)2.7(3.9)(0.2)1.7 Stressed loss outcomes (net of LMI recoveries)1 $ million722 1,0841,646486 Basis points3 2243812

Capital, Funding and Liquidity Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CET1 capital ratio above preferred range Capital, Funding and Liquidity 84 11.0 9.5 10.1 9.5 9.0 8.0 Leverage ratio 5.0 5.2 5.3 1 Countercyclical buffer currently set at nil for Australia and New Zealand. 2 APRA’s revision to the calculation of RWA for Australian residential mortgages, which came into effect on 1 July 2016 increased RWA by $43bn (reduced CET1 capital ratio by 110bps). 3 Internationally comparable methodology aligns with the APRA study titled ‘International Capital Comparison Study’ of 13 July 2015. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Common equity Tier 1 (CET1) capital ratio (%)Key capital ratios (%) %Mar-16Sep-16Mar-17 CET1 capital ratio10.59.510.0 10.0 Additional Tier 1 capital1.61.71.7 8.89.0 Tier 2 capital1.91.92.3 Total regulatory capital ratio14.013.114.0 7.0 Risk weighted assets (RWA) ($bn)2 363410404 6.0 5.0Internationally comparable ratios3 4.0Leverage ratio (internationally comparable)5.85.96.0 CET1 ratio (internationally comparable)14.714.415.3 10.5 10.0 10.2 8.89.3 9.0 Regulatory minimum plus 8.38.4regulatory capital buffers 8.0% Regulatory capital buffers of 3.5% include: •Capital conservation buffer (2.5%) •Domestic systemically important bank buffer (1%) and •Countercyclical buffer1 (0%) Regulatory minimum 4.5% Preferred CET1 capital ratio range 8.75% - 9.25%

Capital a strength Capital, Funding and Liquidity 85 • CET1 capital ratio above preferred BIS 75th percentile3 • Well placed to respond to future APRA 14.0 benchmarks • Near S&P’s “strong” assessment of 10% Basel III fully compliant instruments. Should Westpac do this, pro weighted management, both on and off balance 1 Westpac’s estimate of RAC ratio based on current S&P RAC Framework. 2 Internationally comparable methodology aligns with the APRA study titled ‘International Capital Comparison Study’ dated 13 July 2015. For more details on adjustments refer slide 129. 3 Group 1 banks BIS 75th percentile fully phased-in Basel III capital ratios from BIS monitoring report released 28 February 2017. 4 Includes transitional capital instruments eligible as Additional Tier 1 and Tier 2 capital under APRA Basel III rules. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack HighlightsRegulatory capital ratios (%) APRA basisInternationally comparable2 basis CET1range19.4 announcements15.3 Leverage• 5.3%, up from 5.2% ratio• Well above the 3.0% Basel minimum CET1Tier 1TotalCET1Tier 1Total Internationally• Top quartile for CET1 capital ratioregulatory capitalregulatory capital comparable• Leverage ratio well positioned against ratiosinternational peers • Internationally comparable ratios exclude Basel III transitional instruments, which are included in the APRA capital ratios on a Rating agency• Estimated S&P risk adjusted capitaltransitional basis capital(RAC) ratio of 9.9%1• Westpac is seeking to replace Basel III transitional instruments with forma internationally comparable: Tier 1 capital ratio would be 17.6%4 (up from 17.2%) Risk• Reduced by 1% due to discipline in RWA Total regulatory capital ratio would be 20.7%4 (up from 19.4%) assetssheet, and improved asset quality CET1 capital ratio would be unchanged 17.2 16.8 11.7 13.8 14.3 10.0

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Strong capital generation supported by disciplined loan growth Capital, Funding and Liquidity 86 to mortgage improved asset quality on NZ$ loans 6 9.97 2 1 1 APRA’s revision to the calculation of RWA for Australian residential mortgages, which came into effect on 1 July 2016. 2 Internationally comparable methodology aligns with the APRA study titled ‘International Capital Comparison Study’ dated 13 July 2015. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack CET1 capital ratio (% and bps) 15.3 APRA changesDisciplined growth andMostly FX translation impacts RWA 10.47(110)99(70) 119.482(2)4343 Organic +29bpsOther +20ps Up 49 basis points Mar-16MortgageOtherSep-16CashFinalOrdinaryOtherRWARegulatory FX impactsDefinedDeferred taxMar-17Mar-17 APRARWAmovementsAPRAearningsdividend RWAmovementsinitiativesmodellingbenefitassetAPRAInt. Comp. change(net of DRP)growth changesimpact

Disciplined management and improved asset quality reduce RWA Capital, Funding and Liquidity 87 352.7 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Movement in credit risk weighted assets ($bn) 358.83.3(1.9)(1.0)(3.1)(1.8)(1.6) Mar-16Sep-16Business growthFX translationRegulatoryCredit qualityMark-to-marketRWA initiativesMar-17 impactsmodelling changes 313.0 TranslationUpdates to PD for corporate andChanges in Reduced impact, mostlybusiness, and for hardship ininterest rateunutilised NZ$ loansmortgagesswapslimits Down $6.1bn or 2% Movement in risk weighted assets ($bn) 410.1(6.1)(0.4)(1.7)2.8(0.3)404.4 Updated lossgain as the yield Mar-16Sep-16Credit riskMarketOperationalIRRBBOtherMar-17 riskrisk 363.2 Reduced embedded scenarioscurve steepened Down $5.7bn or 1%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Well placed on internationally comparable CET1 and leverage ratios Capital, Funding and Liquidity 88 15% 6.0% Peer group comprises listed commercial banks with assets in excess of A$700bn and which have disclosed fully implemented Basel III ratios or provided sufficient disclosure to estimate. Based on company reports/presentations. Ratios at 31 Dec 2016, except for Westpac, ANZ and NAB, which are at 31 Mar 2017, while Scotiabank, Bank of Montreal, Royal Bank of Canada and Toronto Dominion are at 31 Jan 2017, assumes Basel III capital reforms fully implemented. Where accrued expected dividends have been deducted, these have been added back for comparability. US banks are excluded from leverage ratio analysis due to business model differences, for example from loans sold to US Government sponsored enterprises. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Nordea ICBC Norinchukin Bank Bank of China CBA China Construction Bank Westpac Bank of Communications ANZ BBVA ING Intesa Sanpaolo Lloyds Agricultural Bank of China NAB HSBC BPCE Westpac HSBC Standard Chartered ANZ Rabobank Standard Chartered RBS RBS China Construction Bank NAB ICBC China Merchants Bank Intesa Sanpaolo Lloyds Credit Agricole SA CBA Citigroup Norinchukin Bank Barclays Rabobank Commerzbank Credit Agricole SA JPMorgan Chase Societe Generale Barclays BNP Paribas Santander Deutsche Bank BPCE Sumitomo Mitsui Nordea Credit Suisse ING China Merchants Bank Commerzbank Natixis Mitsubishi UFG Bank of China Sumitomo Mitsui Wells Fargo Credit Suisse Scotiabank Mitsubishi UFG BNP Paribas Bank of Montreal Scotiabank Royal Bank of Canada Royal Bank of Canada Bank of Communications Societe Generale BBVA Bank of Montreal Toronto Dominion Bank Toronto Dominion Bank Bank of America Mizuho FG Mizuho FG Deutsche Bank Santander

Natixis Agricultural Bank of China Unicredit Unicredit Leverage ratio (%) 8.0% 6.0% 4.0% 2.0% 0.0% Common equity Tier 1 ratio (%) 20% 15.3% 10% 5% 0%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Internationally comparable capital ratio reconciliation Capital, Funding and Liquidity 89 APRA’s Basel III capital requirements are more conservative than those of the Basel Committee on Banking Supervision (BCBS), leading to lower reported capital ratios by Australian banks. In July 2015, APRA published a study that compared the major banks’ capital ratios against a set of international peers1. The following details the adjustments from this study and how Westpac’s APRA Basel III CET1 capital ratio aligns to an internationally comparable ratio (%) Westpac’s CET1 capital ratio (APRA basis) 10.0 Equity investments Balances below prescribed threshold are risk weighted, compared to a 100% CET1 deduction under APRA’s requirements 0.5 Deferred tax assets Balances below prescribed threshold are risk weighted, compared to a 100% CET1 deduction under APRA’s requirements 0.3 Interest rate risk in the banking book (IRRBB) APRA requires capital to be held for IRRBB. The BCBS does not have a Pillar 1 capital requirement for IRRBB 0.3 Loss given default (LGD) of 15%, compared to the 20% LGD floor under APRA’s requirements. correlation factor for mortgages higher than the 15% factor prescribed in the Basel rules APRA also applies a Residential mortgages 1.7 Unsecured non-retail exposures LGD of 45%, compared to the 60% or higher LGD under APRA’s requirements 0.7 Non-retail undrawn commitments Credit conversion factor of 75%, compared to 100% under APRA’s requirements 0.5 Use of internal-ratings based (IRB) probabilities of default (PD) and LGDs for income producing real estate and project finance exposures, reduced by application of a scaling factor of 1.06. APRA applies higher risk weights under a supervisory Specialised lending 0.7 slotting approach, but does not require the application of the scaling factors Increase in the A$ equivalent concessional threshold level for small business retail and small to

medium enterprise corporate exposures Currency conversion threshold 0.2 APRA requires these items to be deducted from CET1. The BCBS only requires exposures classified as intangible assets under relevant accounting standards to be deducted from CET1 Capitalised expenses 0.4 Internationally comparable CET1 capital ratio 15.3 Internationally comparable Tier 1 capital ratio 17.2 Internationally comparable total regulatory capital ratio 19.4 1 Methodology aligns with the APRA study titled “International capital comparison study", dated 13 July 2015. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Optimising returns by actively managing capital Capital, Funding and Liquidity 90 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Capital allocated to divisions ($bn) Division1H162H161H17 Total Group55.256.657.7 Consumer Bank and Business Bank22.423.724.4 BTFG3.23.33.4 WIB9.79.69.4 Westpac NZ (A$)4.14.44.6 Return on equity (%) Division1H162H161H17 Total Group14.213.814.0 Consumer Bank and Business Bank16.516.616.4 BTFG16.214.914.4 WIB9.911.314.1 Westpac NZ (A$)17.916.517.3 Ordinary equity (spot and includes reserves) ($bn) 57.20.30.658.10.30.959.3 Mar-16DRPOtherSep-16DRPOtherMar-17 Actively managing returns • 1H17 ROE increased as cash earnings growth (3%) was higher than the increase in average ordinary equity (AOE) of 2% • Leverage ratio improved from the increased AOE • Continue to refine capital allocation model with more capital allocated to divisions in 1H17 • Capital held centrally includes surplus capital, capital for Treasury, and capital for the next dividend payment

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Maintained strong funding and liquidity profile Capital, Funding and Liquidity 91 maturity (%) Sep-16 Mar-17 Estimated NSFR 105% 108% 47.3 57.8 1 Includes HQLA as defined in APS 210, RBNZ eligible liquids, less RBA open repos funding end of day ESA balances with the RBA. 2 The RBA makes available to Australian Authorised Deposit-taking Institutions a committed liquidity facility (CLF) that, subject to qualifying conditions, can be accessed to meet LCR requirements under APS210 – Liquidity. 3 Other flows include credit and liquidity facilities, collateral outflows and inflows from customers. 4 LCR is calculated as the percentage ratio of stock of HQLA and CLF over the total net cash outflows in a modelled 30 day defined stressed scenario. Calculated on a spot basis. 5 Private securities include Bank paper, RMBS, and Supra-nationals. 6 Includes long term wholesale funding with a residual maturity less than or equal to 1 year. 7 Equity excludes FX translation, Available-for-Sale securities and Cash Flow Hedging Reserves. 8 All figures shown on a Level 2 basis and based on current estimates. 9 Other includes derivatives and other assets. 10 Other loans includes off balance sheet exposures and residential mortgages >35% risk weight. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack NSFR composition8 as at 31 March 2017 ($bn) $557bn and other9 institutional deposits <35% Available Stable Funding Required Stable Funding Wholesale funding and other liabilities $514bn Liquids Other loans10 Corporate & deposits Retail & SME Residential mortgages Capital Funding composition by residual Wholesale Onshore <1yr Wholesale Offshore <1yr Wholesale Onshore >1yr Wholesale Offshore >1yr Securitisation Equity 7 Customer deposits 11 Sep-08Sep-16Mar-17 4 4 11 11 8 8 4 1 61 62 10 5 44 16 20 6 8 7 8 Liquidity Coverage Ratio ($bn and %) Sep-16Mar-17 HQLA1 69.473.6 CLF2 58.649.1 Total LCR

Liquid assets128.0122.7 Customer deposits63.565.9 Wholesale funding13.113.2 Other flows3 19.219.1 Total cash outflows95.898.2 LCR4 134%125% Unencumbered liquid assets ($bn) Self securitisation Private securities5 and deposits with other banks Cash, governmet and semi-government bonds 138.5144.3138.5 55.7 108.3 21.0 16.2 75.0 66.9 67.6 Mar-16Sep-16 Mar-17 Total short term wholesale debt6 outstanding at 31 Mar 17 Net Stable Funding Ratio (NSFR)

New term issuance reflects investor preferences Capital, Funding and Liquidity 92 11 8 2 65 27 82 9 14 21 23 Europe North America Subordinated Debt JPY GBP Other Charts may not add to 100 due to rounding. 1 Based on residual maturity and FX spot currency translation. Includes all debt issuance with contractual maturity greater than 370 days excluding US Commercial Paper and Yankee Certificates of Deposit. 2 Contractual maturity date for hybrids and callable subordinated instruments is the first scheduled conversion date or call date for the purposes of this disclosure. 3 Tenor excludes RMBS and ABS. 4 Perpetual sub-debt has been included in >FY22 maturity bucket. Maturities exclude securitisation amortisation. 5 Sources: Westpac, APRA Banking Statistics March 2017. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Term debt issuance and maturity profile1,2,4 ($bn) Senior/Securitisation 2325 Issuance 42 333331 MaturitiesSub Debt Hybrid Covered Bond 2828 22 21 10 1314 FY12FY13FY14FY15FY161H17 2H17FY18FY19FY20FY21FY22>FY22 Australian covered bond issuance5 ($bn) OutstandingRemaining capacity (8% cap & over-collateralisation) Peer 1Peer 2Peer 3Westpac 36 32 26 28 23 23 23 14 1H17 new term issuance composition1 (%) By typeBy investor locationBy currencyBy tenor2,3 380.532 8213.4 10 25180.3 Senior UnsecuredABSAsiaAustralia & NZAUDUSDEUR1 Year2 Years3 Years UKOther4 Years5 Years>5 years

Divisional Results Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Consumer Bank disciplined 1H17 result in a competitive environment Consumer 94 2H16 1H16 2H16 1H17 1 Refer slide 132 for metric definition and details of provider. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H16 2H16 Net interest income Non-interest income Operating expenses Impairment charges Tax and NCI 1H17 Key operating metrics Change on Total customers (#m)8.68.88.92% Active digital customers (#m)3.53.63.84% Total branches (#)1,0961,0851,059(26) Customer satisfaction1 (%)83.181.381.630bps Service quality – complaints (#‘000)16.813.111.8(10%) Key financial metrics Change on 1H162H161H172H16 Revenue ($m)3,9724,0534,055-Net interest margin (%)2.372.342.28(6bps) Expense to income (%)41.240.340.2(12bps) Customer deposit to loan ratio (%)52.152.452.840bps Stressed assets to TCE (%)0.510.610.643bps Cash earnings ($m) Volume growth and higher mortgageLower operating expenses with margins offset by increased fundingproductivity offsetting run, regulatory and deposit costsand compliance cost increases 1,53912(10)4(44)101,511 1,445 Lower cards feesRise in other consumer lending delinquencies, mostly from changes to hardship Down $28m or 2%

A disciplined 1H17 performance Consumer 95 1,511 1,380 41.2 1 Following an update to the Group’s capital allocation framework, 1H16 and 2H16 numbers have been restated to ensure comparability to 1H17. 1H15 and 2H15 have not been restated at this time. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Revenue per FTE1 ($’000) 393398396 360 324 1H152H151H162H161H17 Expense to income ratio1 (%) 43.1 41.8 40.340.2 1H152H151H162H161H17 Loans ($bn) and customer deposit to loan ratio (%) LoansCustomer deposit to loan ratio 51.752.452.152.452.8 345352 334 321 311 Mar-15Sep-15Mar-16Sep-16Mar-17 Core earnings1 ($m) 2,4202,426 2,335 2,198 2,025 1H152H151H162H161H17 Revenue1 ($m) 4,0534,055 3,972 3,776 3,560 1H152H151H162H161H17 Cash earnings1 ($m) 1,539 1,445 1,240 1H152H151H162H161H17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Improving the digital customer experience: Consumer Bank & Business Bank Consumer 96 online platform with improved customer 1 This applies to Westpac branded unsecured loan process. 2 Existing customers. 3 For existing customers with credit limits. 4 At 2Q17. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Digital for customers •Completed of customer migration to our leading satisfaction reported •Providing more digital self service options, including new deposit account opening and instant decision on overdrafts3. Digital sales have increased 35% Business Digital for bankers •Simple and fast process for extending maturing facilities. LOLA sales almost doubled over the half Credit risk management •Improved system has reduced manual processing and saved time by simplifying risk reviews, serviceability assessments and automated covenant monitoring Payments •Supporting 600 merchants with Genie (mPOS), enabling payment acceptance using a portable card reader linked to a smart phone •Introduced simplified merchant pricing plans, Union Pay card acceptance online and transaction reporting tools. Net merchant growth up 19% Quick transfer •Enables customers to transfer between three accounts without the need to log in to mobile banking •CANST AR 2017 Innovation Excellence Award Winner •1.1 million quick transfers since launch in December 2016 Consumer Proof of balance •Following the successful launch of proof of balance for Westpac customers, this has now been rolled out to St.George customers •Removes the need for customers to visit a branch to obtain a proof of income for third party applications •52%4 of proof of balance statements obtained online Digitisation of personal loans •During 1H17 completed the digitisation of the unsecured personal loan process1 •Improved process time across all channels •25% of approvals2 receive funds on same day, 65% of these in 60 seconds (see

detailed case study slide 45)

Business Bank delivers a solid 1H17 result Business 97 from deposit competition and higher and investment costs offset by repricing 11 999 1 Refer slide 132 for metric definition and details of provider. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H16 2H16 Net interest income Non-interest income Operating expenses Impairment charges Tax and NCI 1H17 Key operating metrics Change on 1H162H161H172H16 Total business customers (‘000’s)1,1501,1701,1831% Customer satisfaction1 (rank)=#2#1=#1-Customer satisfaction - SME1 (rank)#2#1#2-1 place Digital sales (%)8910+ 1ppt Loans via LOLA ($m)3367291,42195% Cash earnings ($m) AIEA up 2%, margin down 2bpsIncreased technology wholesale funding costs, partially 12(11)1(4)1,008 charges offset by higher auto 976 Higher line feesLower business lending finance charge Up $9m or 1% Key financial metrics Change on 1H162H161H172H16 Revenue ($m)2,4952,5342,5571% Net interest margin (%)2.722.722.70(2bps) Expense to income (%)35.935.535.611bps Customer deposit to loan ratio (%)71.272.172.649bps Stressed assets to TCE (%)2.132.242.328bps

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document A disciplined 1H17 performance Business 98 2,534 1,008 999 69.5 35.6 35.6 35.5 149 146 141 1 Following an update to the Group’s capital allocation framework, 1H16 and 2H16 numbers have been restated to ensure comparability to 1H17. 1H15 and 2H15 have not been restated at this time. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Revenue per FTE1 ($’000) 792818811811 725 1H152H151H162H161H17 Expense to income ratio1 (%) 36.035.9 1H152H151H162H161H17 Loans ($bn) and customer deposit to loan ratio (%) LoansCustomer deposit to loan ratio 72.571.272.172.6 153154 Mar-15Sep-15Mar-16Sep-16Mar-17 Core earnings1 ($m) 1,6341,646 1H152H151H162H161H17 1,599 1,563 1,541 Revenue1 ($m) 2,557 2,495 2,443 2,392 1H152H151H162H161H17 Cash earnings1 ($m) 1,017 976 962 1H152H151H162H161H17

BT franchise impacted by challenging environment BT Financial Group 99 Reduced advice activity levels and improvement more than offset by higher MySuper migration Debbie impact 19.6 19.0 19.0 - (inc. Corp Super) (%) 1 Refer slide 132 for wealth metrics provider. 2 Strategic Insight, All Master Funds Admin as at December 2016 (for 1H17), as at June 2016 (for 2H16), as at December 2015 (for 1H16) and represents the BT Wealth business market share at these times. 3 Strategic Insight (Individual Risk) rolling 12 month average. New sales includes sales, premium re-rates, age and CPI indexation December 2016. 4 Internally calculated from APRA quarterly general insurance performance statistics, December 2016. 5 Spot number as at balance date. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H16 2H16 Funds Mgt Insurance income Capital & other income Expenses Impairment charge Tax and NCI 1H17 Key operating metrics Change on 1H162H161H172H16 Customers with a wealth product1 (%)19.219.118.5(60bps) Planners (salaried & aligned) (#) (spot)1,1161,1341,094(4%) BT Super for Life customers (#’000)4895065274% Platform market share2 Retail market share2 (exc. cash) (%)18.618.018.110bps Life Insurance market share3 (%)10.911.011.660bps H&C insurance market share4 (%)5.75.75.7-Women in leadership5 (%)42.145.046.0100bps Cash earnings movement 2H16 – 1H17 ($m) Growth in premium income and lapse margin compression including fromgeneral insurance claims and Cyclone 448 (36)17(5)11397 420(17) 7 Productivity benefits partially offset by increased regulatory and compliance costs Down $23m or 5% Key financial metrics Change on 1H162H161H172H16 Revenue ($m)1,2031,1911,145(4%) Expense to income (%)47.050.050.552bps FUM ($bn) (spot)46.448.455.114% FUA ($bn) (spot)123.3130.8136.44%

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Funds management business: Positive flows offset by margin compression from product mix changes BT Financial Group 100 remediation program 136.4 130.8 125.0 121.9 123.3 4.0 FUM margins down 7bps from shift in portfolio mix BT Wrap/Asgard platforms FUA increased $3.3bn on 2H16 2H15 1H16 2H16 1H17 1 Includes $4bn increase due to MySuper migrations which occurred in late 1H17. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack FUM ($bn) AdvanceRetail Super/other Up 14% 55.1 1 46.346.448.4 19.1 18.3 18.3 17.8 36.0 30.1 28.0 28.6 FUA by asset class (%) Equities Aust.Equities Intl.Property CashFixed interestOther inc. diversified 20 1H152H151H162H161H17 8 12 18 7 7 9 10 13 13 12 12 19 18 18 16 19 20 19 20 39 37 36 36 36 Earning drivers 1H17 v 2H16 • Continued growth in Private Wealth • Advice income lower from reduced activity and compliance • FUM related revenue down 9% on 2H16: • FUA related revenue was down 3% on 2H16: Panorama had positive flows of $1.1bn FUA margins were down 2bps on 2H16 due to shift in portfolio mix including MySuper migration FUA ($bn) BT Wrap/Asgard/PanoramaCorporate superOther Up 4% 3.43.93.6 19.3 1H152H151H162H161H17 21.4 20.5 3.8 20.1 19.6 111.0 106.5 101.5 98.7 100.1

Sound insurance fundamentals BT Financial Group101 Insurance claims rates (%) General Insurance claims rate Life Insurance claims rate 71 973 927 892 38 1 Strategic Insight December 2016. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Life Insurance individual new sales market share1 (%) WBCPeer1Peer2Avg next top 4 Dec-12Dec-13Dec-14Dec-15Dec-16 Life Insurance lapse rates1 (%) WBCPeer 1Peer 2Market Avg Dec-12Dec-13Dec-14Dec-15Dec-16 Insurance premiums ($m) General Insurance gross written premiumsLife in-force premiums Up 6%1,030 827 Down 3% 1H152H151H162H161H17 250 258 245 246 246 62 515049 38 34 33 34 1H152H151H162H161H17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Improving the digital customer experience: BTFG BT Financial Group 102 Superannuation & Insurance super. 5,400 customers have consolidated $100m of super in less than 60 seconds to different clients needs momentum accounting software February accounting partner to complete fund and trade their portfolio on the go Compliance - compliance embedded Investor offerings complete Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Panorama Commercialising Panorama – a market leading wealth management platform for customers and advisers Functionality and capability Modular - flexible architecture to cater•Over 3,000 SMSF accounts - growing Connectivity - connect to existing•Successful launch of Super Wrap in Collaboration - collaborate with•Mobile - advisers and investors can view administration for SMSF•Advised Investment Platform and Direct trading platform to assist administration•SMSF offer - a complete end to end offer for all customers including trustees, advisers and accountants SuperCheck •Innovative solution enabling customers to find their lost their super •Westpac Live customers can search and see all their •Customers can then open a BT Super for Life account and combine their super Super profile •Launched BT Super Profile •Supports customers by providing 7 key actions to get their super “sorted” •Customers are given a score out of 100%, and a list of actions to complete their profile Digital in insurance •Policy display – customers can see their home and contents, motor and travel insurance policies in Online Banking •Single sign-on and pre-population of customer details into online home and contents and motor quote and sale

WIB 1H17 result driven by lift in customer activity and markets Westpac Institutional Bank 103 Lift in FX, fixed income and program market conditions and stronger 700 Net loans down 3% 1 WIB customer revenue is lending revenue, deposit revenue, sales and fee income. Excludes trading, derivative valuation adjustments and Hastings. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H16 2H16 Net interest income Non-interest income Expenses Impairment charges Tax and NCI 1H17 Operating metrics Change on 1H162H161H172H16 Customer revenue1 / total revenue (%)828277(Large) Trading revenue / total revenue (%)9614Large Revenue per average FTE ($’000)57355563114% Deposits ($bn)83.488.493.86% Cash earnings ($m) Flow through of 2016 productivity commodities trading with positive customer deal flow 23621(65) (36) 585(41) 521 Portfolio continues to perform well. Increase in new IAPs partly offset by reduction in CAP, reflecting lower stressed assets Up $115m or 20% Financial metrics Change on 1H162H161H172H16 Revenue ($m)1,6051,5051,70013% Net interest margin (%)1.721.761.771bp Expense to income (%)41.745.038.6(Large) Customer deposit to loan ratio (%)110.6119.8131.2Large Stressed assets to TCE (%)0.770.880.59(29bps)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Disciplined performance maintained Westpac Institutional Bank 104 Net loans ($bn) 93.8 669 low relative stress levels Watchlist & substandard assets with impairment 1H17 66.6% 0.6 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H16 2H16 Business as usual and productivity Regulation and compliance Projects and amortisation Restructuring costs 1H17 Well managed credit portfolio •Portfolio performing well, with4.6Stres.sed exposures as a % of TCE •Prudent coverage of impaired provisions to impaired assets (2H16: 46.8%) 0.90.80.80.9 FY10FY11FY12FY13FY14FY151H162H161H17 90+ days past due and not impaired Impaired 2.6 2.1 1.2 Disciplined balance sheet management Deposits ($bn) 88.4 71.5 83.4 73.8 75.4 Mar-16Sep-16Mar-17 Net loans •3% reduction in net loans reflects continued disciplined balance sheet management •Review of unused limits and committed facilities Deposits •Deposits up 6% benefiting from being the country’s leading transactional banker to government clients Margin •Margin up 1 basis point to 1.77% reflecting disciplined new deal pricing Expense control •Business as usual costs lower from full period benefit of productivity initiatives and new operating model •Lower investment in Asia contributed to a fall in project costs •Regulatory and compliance costs unchanged •2H16 included restructuring costs associated with implementing the new operating model which were not repeated WIB expenses ($m) 678(6)0(5) (10) 657

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Australasia’s leading Institutional Bank Westpac Institutional Bank105 • 170 years longLeset acudsitonmger relationship Institutional Franchise Enduring Customer Relationships Innovative Products and solutions Public sector WIB / Business, wealth and consumer partnership • Enduring Institutional customer relationships across the public sector, including some going back almost 200 years Leading transactional banker to institutional and government clients, banking 4 of the 8 Australian State and Territory Governments Leveraging insight and expertise, as well as leading solutions in health (e.g. LanternPay), digital payments and cash management Continues to lead the way in supporting the government and industry with the SuperStream superannuation reforms Leading player in infrastructure, with a number of significant transactions closed in 1H17 Strong customer deal flow around PPP, privatisations and renewable energy in addition to business as usual • LitePay enables international payments straight from online and mobile banking, focus on supporting our migrant customers with a low cost and fast service for sending funds overseas Added 3 new currencies and 21 new countries in 1H17 94% of the ASX top 100 bank with WIB 2,840+ customers • • • Superannuation • Largest provider of superannuation transaction services through WIB’s Clearing House and Gateway, QuickSuper Over 150,000 employers using QuickSuper, with 42m transactions in 1H17, up 30% over 1H16 • • • 99% retention rate1 transactional banking relationships LanternPay 170 years longest customer relationship • • Custom-built claiming and payments platform designed for use in the NDIS, aged/home care and third party insurance schemes Recently secured its first major institutional mandate to transform payments for a State Government insurance scheme • Connecting customers •Core franchise in Australia and NZ •Presence in key global centres to connect

customers to trade and capital flows - Shanghai, Beijing, Hong Kong, Singapore, Mumbai as well as London, New York and PNG Financial Markets digitisation provided with FX ATM machines to enable instant fulfilment of foreign cash in the four most used currencies of USD, EUR, GBP & NZD • Launched FX ATM pilot – 10 branches (multi-brand) 1 Transactional banking relationships retention rate defined as the percentage of customers qualifying as a ‘transactional relationship’ for the duration of the half. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

New Zealand result reflects highly competitive market, and improving credit quality New Zealand 106 driven by competitive deposit market and the 2H16 not repeated and large deferred mortgage costs branch re-design, digital 1 Refer slide 132 for metric definition. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 1H16 2H16 Net interest income Non-interest income Operating expenses Impairment charges Tax and NCI 1H17 Key operating metrics Change on 1H162H161H172H16 Customers (#m)1.351.351.36-Customers with a wealth product1 (%)28.328.428.619bps FUM (NZ$bn)7.07.57.73% FUA (NZ$bn)2.02.02.0-Service quality - complaints (000’s)13.413.211.4(14%) Cash earnings (NZ$m) AIEA up 4% offset by margin, down 17bpsIncreased dairy provisions in one-off impact of faster amortisation ofwrite-back in 1H17 Investment costs from86(15) investment and business462 offset by lower FTE 452restructure were partly 434(38) 1(6) Up $28m or 6% Key financial metrics Change on 1H162H161H172H16 Revenue (NZ$m)1,0921,1151,078(3%) Net interest margin (%)2.182.131.96(17bps) Expense to income (%)41.841.443.4198bps Customer deposit to loan ratio (%)76.676.674.2(231bps) Stressed assets to TCE (%)1.782.542.41(13bps)

New Zealand key metrics New Zealand 107 634 635 452 1,078 434 2.18 2.13 75 72 69 67 1 Following an update to the Group’s capital allocation framework, 1H16 and 2H16 numbers have been restated to ensure comparability to 1H17. 1H15 and 2H15 have not been restated at this time. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Net interest margin1 (%) 2.232.27 1H152H151H162H161H17 1.96 Expense to income ratio1 (%) 43.4 41.841.4 40.140.5 1H152H151H162H161H17 Loans (NZ$bn) and customer deposit to loan ratio (%) LoansCustomer deposit to loan ratio 77.375.276.676.674.2 77 Mar-15Sep-15Mar-16Sep-16Mar-17 Core earnings1 (NZ$m) 658653 610 1H152H151H162H161H17 Revenue1 (NZ$m) 1,1061,0921,115 1H152H151H162H161H17 1,058 Cash earnings1 (NZ$m) 468462 437 1H152H151H162H161H17

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Improving the digital customer experience New Zealand 108 now 56% of total Best Online n 15% p 5% Down 22% Up 9% 1 Digital transactions are typically payments and transfers. Over the counter transactions are typically withdrawals and deposits along with transfers and payments. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Over the counter transactions1 (#m) 4.8 4.6 4.4 Dow 4.0 3.4 1H152H151H162H161H17 Digitally active customers (#’000’s) 758 Up 736 3% 723 U 705 679 1H152H151H162H161H17 Digital transactions1 (#m) 35.9 Up 35.0 3% 33.0 32.0 30.7 1H152H151H162H161H17 CashNav •Integrated app to track finances and deliver spending insights •Market first and leading - Canstar Innovation Excellence Award 2017 •Over 84,000 registrations to date since launched in September 2016 Westpac One •Market leading platform. Canstar Best Online Bank in New Zealand 2016, 2015 •Around 32% of all applications are online, with over 50% of all card applications •758k active digital customers up 11% since launched in April 2015 •Active digital customers 2016 Canstar Bank in New Zealand Transforming the network •Further enhancing 24/7 capability •Market leader with 176 Smart ATM’s across the country •Market first with ATM coin dispenser •Over 700k paper statements have been supressed and migrated to e-Statements •Over 500k transactions migrated to self-serve in the half •Closed 20 branches and consolidated 2 (net 19 closed)

Improvements in stressed exposures as dairy portfolio stabilises New Zealand 109 Property forestry & fishing 2.4 0.4 2.6 62 0.2 Other 1 Westpac DividendMilk price $10 $8 $6 $3 2013/142014/152015/16 2016/172017/18 1 Large reduction in stressed exposures from Sep 2011 to Sep 2012 due primarily to transfer of WIB assets during 2012. 2 Includes impaired exposures. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Milk price & Fonterra dividend (NZ$) Kg Ms $9 $7 $5 $4 $2 $1 $0 forecast Agribusiness portfolio Mar-16Sep-16Mar-17 TCE (NZ$bn)8.18.68.6 Agriculture as a % of total TCE7.98.18.0 % of portfolio graded as ‘stressed’2 7.818.616.9 % of portfolio in impaired0.320.420.44 Key messages • Dairy portfolio has stabilised and risk grade profile is improving following favourable milk price movements • Focus remains on supporting existing dairy customers with proven long-term financial viability • Expect portfolio to continue improving as high milk price translates to cash flow Business stressed exposures as a % of New Zealand business TCE 15.6Impaired90+ day past due not impairedWatchlist & substandard Manufacturing 17 3Agriculture, Wholesale trade Construction .1 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 16.2 7.7 14.4 12.8 13.2 0.2 9.6 6.8 0.3 4.4 4.95.55.3 0.2 3.2 3.83.33.63.43.7 3.4 0.1 2.9 2.3 0.0 2.9 0.10.1 0.1 2.3 0.1 2.2 0.1 1.4 1.5 1.1 0.8 0.9 0.8 4.8 0 5.0 7.1

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Asset quality in good shape New Zealand 110 delinquencies (%) Down $86m 1 LVR based on current loan and property value at latest credit event. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Mortgage 90+ day delinquencies (%) 1.0 0.5 4 0.0 0.1 Mortgage portfolio LVR1 (%) of portfolio 91% of mortgage portfolio less than 80% LVR 42% 23%26% 5%4% 0<=6060<=7070<=8080<=9090+ Mortgage loss rates each half (%) 0.25 0.20 0.15 0.10 0.050.01 0.00 Unsecured consumer 90+ day 1.5 1.0 0.58 0.5 0.0 Movement in impairment charges (NZ$m) 50(5)(49) 9 (31)(1)(36) 1H162H16New IAPSWrite-back +CAP changesWrite-offs1H17 recoveriesand other

200 200 years proudly supporting Australia Economics Financial results based on cash earning unless otherwise stated. Refer page 34 for definition. Results principally cover the 1H17, 2H16 and 1H16 periods. Comparison of 1H17 versus 2H16 (unless otherwise stated)

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Australian and New Zealand economic forecasts Economics 112 CALENDAR YEAR KEY ECONOMIC INDICATORS1 (%) AS AT MAY 2017 2015 2016 2017F 3.1 3.3 3.5 World GDP Private consumption 2.7 2.7 2.7 Business investment2,3 -8.6 -8.8 -1.7 Unemployment – end period 5.8 5.7 6.3 1.7 1.5 2.2 CPI headline – year end Interest rates – cash rate 2.00 1.50 1.50 Credit growth, Total – year end 6.6 5.6 5.0 Credit growth, Housing – year end 7.4 6.3 5.8 6.4 5.5 4.7 Credit growth, Business – year end Unemployment – end period 4.9 5.2 4.6 Consumer prices 0.1 1.3 2.0 Interest rates – official cash rate 2.5 1.8 1.8 Credit growth – Total 6.1 7.5 6.8 Credit growth – Housing 5.8 8.6 7.7 Credit growth – Business 6.5 6.5 5.8 1 Source: Westpac Economics. 2 GDP and components show year average growth rates. 3 Business investment adjusted to exclude the effect of private sector purchases of public assets. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack New ZealandGDP2.53.13.2 AustraliaGDP22.42.52.6

A positive start to 2017 for the Australian economy Economics 113 Australian economy key statistics (latest available as at May 2017) GDP Westpac Forecast (end 2017 over prior year) 2.4% 3.0% Unemployment Rate Westpac Forecast (end 2017) 5.9% deviation from avg. 6.3% Sources: NAB survey, Westpac Economics. Sources: Reuters, Westpac Economics Inflation Westpac Forecast (end 2017) 2.1% 2.0% Cash Rate Westpac Forecast (June 2018) 1.50% Business 400 1.50% Construction AUD/USD Westpac Forecast (June 2018) US$0.76 US$0.70 Sources: ABS, Westpac Economics. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Service sector strength driving job gains Employment (# ’000) 700Household 600services 500 services 300 200 100Mining 0Goods dist’n -100Manufacturing -200 Jun-09Jun-10Jun-11Jun-12Jun-13Jun-14Jun-15Jun-16 Business conditions trending higher 30 net bal.goods related 20 10 0 -10 -20 -30 Mar-05Mar-07Mar-09Mar-11Mar-13Mar-15Mar-17 consumer sectors business services 3 month moving avg. Global lead indicators have turned index 60 55 50 45 global 40 35bal PMI 30 Mar-97 Mar-01 Mar-05 Mar-09 Mar-13 Mar-17 Westpac trade PMI JPMorgan glo manufacturing

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Emerging growth drivers for Australia Economics 114 22 $bn $bn 18 14 10 6 travel 0 Sources: ABS, Deloitte Access Economics Investment Monitor, Westpac Economics investment may become a potential % of Net Capacity utilisation (lhs) 15 14 13 12 years both by historical standards and utilisation •While confidence has not been based upturn, non-mining investment recent years. Sources: ABS, NAB, Westpac Economics 1 Includes legal and professional services, financial services, IT & Telecommunications , intellectual property rights and other. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Capacity utilisation: reduction in spare capacity •A wider pick up in non-mining businessCapacity utilisation vs investment driver further outbalanceGDP •Investment has been low in recent85 compared to firm levels of capacity83 81 sufficiently strong to driver a broad7911 has picked up in NSW and Vic in7710 759 Dec-Dec-Dec-Dec-Dec-Dec-Dec-92960004081216 Investment*, % of GDP (rhs) * Non-mining investment, nominal Services Service exports ($bn) $bnRolling annual, nominalEducation 20 16travel 12 8ation 4 2 Dec-92Dec-98Dec-04Dec-10Dec-16 Sources: ABS, Westpac Economics •International trade in services is contributing to the rebalancing of growth in Australia •Service exports represent 4% of GDP and given the labour intensive nature of these activities, have a significant spill-over effect •Service exports 3-year growth is the fastest since 2001, boosted by the lower Australian dollar and supported by consumer demand from China •NSW and Victoria are benefiting, attracting international visitors and foreign students •NSW accounts for 42% of total service exports, 10ppts above its share of the national economy Business services¹ Leisure Transport Business Infrastructure • While mining investment remains theAustralia’s project pipeline: transport dominant driver of Australia’s investmentUnder

construction (Inv. Monitor) project pipeline, an upswing in public transport projects is an emerging positive200& Committed200 • Definite public transport projects are now valued at $108bn. This represents a sharp increase on a year ago, up $44bn150150 • NSW and Vic lead with $47bn worth of100100 projects already under construction over the two states, a further $28bn is at the committed stage and $37bn is under5050 consideration including a second airport in Sydney and a freight rail line between00 Melbourne and BrisbaneMar-Mar-Mar-Mar-Mar-Mar-060810121416 & Under consideration

Jobs are being created, although wage growth is low Economics 115 Manufacturing Health & education Utilities Agriculture Retail 6 Australian private sector wages mining industry wages 8 8 2 Manufacturing 7 15 9 4 4 14 Health, Social Assistance 1 1 Sources: ABS, Westpac Economics. Sources: ABS, Westpac Economics. 1 Excludes ownership of dwellings and taxes less subsidies. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Australian employment by sector (annual change, ‘000) Government Construction Leisure & hospitality Mining Business services Finance & real estate Wholesale & transp. -60-300306090120150 Sources: ABS, Westpac Economics. Represents 6 month average level compared to 6 month average level a year ago Australian wage inflation (%, yr) %yr%yr 77 66 55 33 22 00 Dec-99Dec-03Dec-07Dec-11Dec-15 last 6mths annualised year ago latest 2qtr avg Services employ a large part of the Australian workforce Sector contribution to GDP (%)1 ServicesMining 52% 411Manufacturing 13Construction 7Transport, Utilities 109Wholesale, Retail Rural Household services 68Education & Health Government 13210Finance Property, Business services Communications Australian employment by sector 2015/16 (%) Services 59%Mining Construction Transport, Utilities 66Wholesale, Retail Agriculture 8Household services Education 133Public Administration 13Finance Business services

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document State differences across Australia are key to understanding trends Economics 116 22 2 2 2 1 Sources: ABS, Westpac Economics 60 9.0 Sources: ABS, Westpac Economics 1. Real, financial years, experimental estimates Sources: ABS, Westpac Economics Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Activity picking up in NSW and Victoria1 $bnNon-mining Business investment 50 40 30 20 10 0 1992199620002004200820122016 NSWQldVicWA Lowest jobless rate in NSW %Unemployment rate by State as at March 2017 (seasonally adjusted %) Mar-08Mar-11Mar-14Mar-17 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 AustraliaNSWVicQldWA 5.96.16.36.5 5.1 NSW and Victoria 57% of population, 58% of employment Relative size of States (Share of Australia, 2015/16, %) GSPPopulationEmploymentExports38 32 32 32 25 26 19 20 20 20 15 6775 NSWVicQldWASATas 11 11 21 12

Credit growth remaining modest Economics 117 25 Sources: RBA, Westpac Economics. Sources: RBA, Westpac Economics. Housing credit in 6 month % change annualised. Sources: Westpac MI, Westpac Economics. Sources: NAB, Westpac Economics. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Consumer confidence (net balance) 130 120 110 100 90 80 70 60 Apr-05Apr-09Apr-13Apr-17 Monthly Business confidence (net balance) 30 20 10 0 -10 -20 -30 -40 Mar-05Mar-09Mar-13Mar-17 Monthly; Deviation from average Australian private sector credit growth (% ann) HousingTotal creditBusiness 20 15 10 5 0 -5 -10 Mar-93Mar-97Mar-05Mar-05Mar-09Mar-13Mar-17 Forecasts end 2018 Australian housing credit growth (% ann) 36 32 28 24 20 16 126 87 48 0 Mar-03Mar-05Mar-07Mar-09Mar-11Mar-13Mar-15Mar-17 TotalInvestorOwner-occupier 8. 6. 5.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Housing market supported by population growth and dwelling supply/demand balance Economics 118 Population versus dwelling stock (annual average change ‘000) Population Dwelling stock* 7 net of demolitions – implied by Census data 350 2.8 140 1.9 Sources: REIA, Westpac Economics. Sources: ABS, Westpac Economics. NSW & Vic Rest of Australia 40 6mths 0.5 Sources: ABS, Westpac Economics Sources: CoreLogic, RBA, Residex, Westpac Economics. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Population growth now strongest in NSW and Victoria ann% 2.5 2.0 1.5 1.0 annualised 0.0 Sep-84 Sep-88 Sep-92 Sep-96 Sep-00 Sep-04 Sep-08 Sep-12 Sep-16 Last Housing affordability: all dwellings %% income required to service mortgage 35 30 25 20 15 10 Mar-82Mar-87Mar-92Mar-97Mar-02Mar-07Mar-12Mar-17 of 75% median dwelling, all regionsDeteriorateIf mortgage rate was 1% higher Improve Long run avg 10yr avg Estimates based on capital cities prior to 1993 * 300 236 114125136125 187196 1970s1980s1990s2000s2011-2017 Residential rental vacancy rates (%) %AustraliaSydneyMelbourne 6 5 4 3 22.5 1 0 Mar-87Mar-92Mar-97Mar-02Mar-07Mar-12Mar-17 Investor housing boom

Housing market responds to both macro prudential measures and rates Economics 119 (annual %) 30 composite of all measures, seasonally adjusted, 6mth annualised growth. Sources: ABS, CoreLogic, APM, Residex, RBA, Westpac Economics. Dwelling prices are all dwellings, composite of all measures, seasonally adjusted, 6mth annualised growth. Sources: ABS, CoreLogic, Westpac Economics. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Change in Australian dwelling prices by capital city %SydneyMelbourneBrisbanePerth 20 10 0 -10 -20 Apr-11Apr-12Apr-13Apr-14Apr-15Apr-16Apr-17 Sources: ABS, CoreLogic, APM, Residex, Westpac Economics. Dwelling prices are all dwellings, Capital cityPop’n% Change YoY (Apr-17)Avg since 2007 Sydney4.9mUp 16.1%Up 7.6% Melbourne4.9mUp 15.3%Up 6.6% Brisbane2.3mUp 2.1%Up 1.4% Perth2.0mDown 6.0%Down 0.2% Adelaide1.3mUp 2.1%Up 2.0% Australian housing market indicators 30ann%Dwelling pricesann%20 2015 1010 05 -100 -20-5 -30-10 90%Auction clearance rates%90 8080 7070 6060 5050 4040 30$bnHousing finance approvals$bn30 2525 2020 1515 1010 Apr-11Apr-12Apr-13Apr-14Apr-15Apr-16Apr-17 macro-prudential tightening rate cuts

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Drivers of investor property lending Economics 120 and gross rental yields similar to the dividend yield on Australian shares and behaviour. However, the latter does not appear to be a significant factor at the even in the stronger Sydney and Melbourne markets Sources: ABS, Westpac Economics. Australia NSW Vic 9.0 Sources: CoreLogic, ABS, Westpac Economics Sources: CoreLogic, REIA, RBA, Westpac Economics. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Dwelling turnover (% total stock) % 8.0 7.0 6.0 5.0 4.0 3.0 Dec-96Dec-00Dec-04Dec-08Dec-12Dec-16 *qtly, annualised Investor housing yields vs shares, deposits (% p.a.) %Rental yield* 10 8 6 4 2 0 Dec-96Dec-00Dec-04Dec-08Dec-12Dec-16 ASX 200 dividend yield 1yr term deposit *Gross yield, median rent on 2bdrm unit as % of median unit price •Investor activity has been a key driver of Australian housing in recent years •Demand from investors tends to be less sensitive to affordability considerations with price expectations and yields more important factors - Both remain supportive for demand with surveyed price expectations positive well above returns on term deposits •Investor activity can be more volatile and susceptible to riskier ‘speculative’ moment. In particular, the proportion of ‘short term’ transactional buying appears to be low: turnover in Australia’s housing markets is low by historical standards, Housing finance approvals: value of housing finance ($bn/mth) $bn/mth 16'Upgraders', ex-refinancing 14 12 10 8 6 4 2 0 Feb-97Feb-02Feb-07Feb-12Feb-17 Investor finance First home buyers

Australian household sector Economics 121 200 160 unds held unts 60 40 Mar-83 Mar-88 Mar-93 Mar-98 Mar-03 Mar-08 Mar-13 Mar-18 Sources: ABS, RBA, Westpac Economics Sources: ABS, RBA, Westpac Economics. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Australian households debt to income ratio (%) Total (gross) debt Total debt net of offset accounts 180 140 120net of all 100ts also 80ge offset since peak 20 0 -20 -40 Total debt net of all deposits* Trend since Jun-07 Debt deposi excludes f in mortga acco –20pts * Westpac estimates prior to 1988 Australian household balance sheets % Annual household disposable income %% Total assets 1200Since Jun-07:1200 10001000 800800 600600 400400 200200 00 Sep-81 Sep-86 Sep-91 Sep-96 Sep-01 Sep-06 Sep-11 Sep-16 Sep-21 Total liabilitiesJun-07+43pts Total net worth +22pts +21pts •Conditions remain mixed across Australia’s household sector •After a period of balance sheet consolidation, debt is now rising again. With income growth subdued, aggregate measures of leverage are at or slightly above previous peaks. Debt servicing costs have also risen although they remain well below the ‘stressed’ peaks in 2011 and 2007 •Gains in household assets have also significantly outstripped the rise in debt, producing strong increases in net worth •However, conditions vary markedly by state reflecting both the divergent performance of housing markets and household incomes

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Australia’s high rise apartment market Economics 122 (annual average change ‘000) 400 400 226 70 70 30 30 0 12 24 36 48 60 Source: RBA, CoreLogic. 2 Estimated proportion of approved dwellings completed by months after approval. Note that not all approved dwellings are completed, reflecting both cancellations and reductions in project size. Also, ‘high rise’ projects often have significant delays between approval and commencement. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Dwelling construction: indicative completion times2 %% 100100 9090 8080 6060 5050 4040 2020 1010 00 Detached houses Low-mid rise High rise Average construction time for ‘high rise’ about 2-2½yrs Population versus dwelling stock Population New 'high rise' apartments^ 350350 300300 250250 200200 150150 100100 5050 00 1950s1960s1970s1980s1990s2000s last 6 yrsnext 4yrs# Total dwelling stock^ 350345 *Average annual change ^Net of demolitions – implied by Census data;300 140 176 ‘high rise’ is completions only; #Westpac estimates 236 125 196 210 187 77 125 136 98 114 •Construction in Australia has responded to low rates and the end of the mining boom •A surge in apartment construction in recent years saw a rise in the number of completions in 2016 that will continue into 2017 and 2018 •Sydney is expected to see 50,000 apartment completions over the two years with 34,000 in Melbourne and 18,000 in Brisbane. New supply is more heavily concentrated in inner city areas in Melbourne (18,000 completions) and Brisbane (7,000) than in Sydney (7,500) •New completions will start to address the large structural deficit that accumulated over the past decade as strong migration-led population growth combined with sustained low levels of building •Market-wide oversupply is not likely but pockets of oversupply may emerge over the short to medium term as new supply is completed

New Zealand economy Economics 123 Source: RBNZ, Westpac Economics 6 6 Source: Statistics NZ, Westpac Economics Source: Statistics NZ, Westpac Economics 1 Seasons ended May. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Inflation %% 55 44 33 22 11 00 200720092011201320152017 CPI inflationWestpac forecast CPI excluding petrol NZD/USD, NZD/AUD and TWI 1.00Westpac forecast90 85 0.9080 0.8075 70 0.7065 60 0.6055 0.5050 45 0.4040 20052008201120142017 NZD/USD NZD/AUD TWI (right axis) Key economic statistics FY16FY17fChange GDP annual average growth2.9%2.9%(0 bps) Inflation rate0.4%2.1%(+170 bps) Official cash rate (OCR)1.75%1.75%(0 bps) Unemployment rate4.9%4.5%(-20 bps) Dairy payout (ex dividend)1 $6.00$6.10(+$0.10) •Inflation rebounded to 2.2% in early 2017, boosted by fuel and food prices Core inflation, while still below 2%, has also lifted Annual inflation is expected to remain around 2% through 2017 – higher than the RBNZ expect in February when it released its most recent projections •Westpac Economics still expects that the OCR will be adjusted at a gradual pace Much of the recent pickup in inflation has been due to temporary factors - food and fuel. To ensure inflation remains around 2% beyond 2017, the economy will need to continue growing at strong pace, and this will require interest rates to remain low for some time yet •Potential changes to the monetary policy framework have been mooted by the NZ Government. These include a possible move from a single decision-maker model to a formal voting committee. The main opposition has also proposed the addition of a ‘full employment’ goal. It is not clear that either change would result in materially dif ferent policy settings

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document New Zealand economy Solid growth outlook, low interest rates a key support Economics 124 Sources: Stats NZ, Westpac economics 40 40 Source: Stats NZ, Westpac economics Sources: Stats NZ, Westpac economics Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Construction spending (annual) $bn$bn 3535 3030 2525 2020 1515 1010 55 00 2005200820112014201720202023 Construction (excl. quake costs) Canterbury rebuild Kaikoura earthquake costs Westpac forecast Net migration (annual) 000s000s 75Total75 5050 2525 00 -25-25 -50-50 2000200220042006200820102012201420162018 New Zealanders Other Westpac forecast •The New Zealand economy is expected to continue growing at around 3% per annum over the next few years •Growth is being supported by strong population of around 2% per annum. From record net migration with a net inflow of 72,000 people over the year Recent policy changes are expected to have a limited impact on migration •There is a very strong outlook for residential construction centred on Auckland, and a large pipeline of non-residential construction, including infrastructure •Planned spending on the Canterbury (Christchurch) rebuild (equal to around 15% of annual GDP) is around two-thirds complete and has started to wind down GDP growth (%) 88 66 44 22 00 -2-2 -4-4 200020022004200620082010201220142016 Qtr % chgAnnual average % change Westpac forecast

New Zealand - conditions improving for the dairy sector Economics 125 some recent pull-back, global dairy prices are nearly 50% higher than mid-2016 Milk price Dividend and New Zealand, was a catalyst for the turnaround in prices in H2 2016. But higher prices. Rising supply is expected to limit further price upside this year above breakeven for most in the industry, it will take time for farmers to repair Source: Fonterra, Westpac Economics Jan 2000 Jan 2000 400 400 Source: ANZ, Westpac Source: RBNZ, DairyNZ, Westpac, Fonterra Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack 2002/03 2002/03 2003/04 2004/05 2003/04 2004/05 2005/06 2006/07 2005/06 2006/07 2007/08 2008/09 2007/08 2008/09 2009/10 2010/11 2009/10 2010/11 2011/12 2012/13 2011/12 2012/13 2013/14 2013/14 2014/15 2015/16 2014/15 2015/16 2016/17 2017/18 2016/17 NZ export commodity price index (NZD) Indexed to 100Indexed to 100 350350 300300 250250 200200 150150 100100 5050 00 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Meat, Skins and Wool Dairy Products Horticultural Products Break-even dairy payout Kg MsBreak Even Effective PayoutKg Ms $10$10 $8$8 $6$6 $4$4 $2$2 $0$0 Fonterra payout including dividendForecast •The outlook for the dairy sector has improved significantly over the year. Despite •A contraction in milk production from key exporting regions, including Europe milk production trends have firmed in recent months, as farmers respond to •At the same time, demand has firmed, particularly out of China and parts of Asia •Westpac Economics is forecasting a farm gate milk price of $6 for the current 2016/17 season, and a similar $6.10 for next season. Although that price is balance sheets following two seasons of poor prices Dairy payout and dividend Kg MsKg Ms $10forecast$10 $8$8 $6$6 $4$4 $2$2 $0$0 Westpac

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document New Zealand economy Housing market conditions evolving, stability concerns persist Economics 126 in supply is limiting the downside for prices in Auckland) sustained impact on house price growth, with further rises in borrowing rates Sources: REINZ, Westpac Economics Source: RBNZ Sources: REINZ Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Index = 100 in 2011 Index = 100 in 2011 Household debt, share of disposable income (%) %% 175175 150150 125125 100100 1999200120032005200720092011201320152017 House sales (monthly) SalesSales 9,0009,000 8,0008,000 7,0007,000 6,0006,000 5,0005,000 4,0004,000 3,0003,000 2008200920102011201220132014201520162017 •House price inflation has cooled substantially in recent months •In Auckland prices have been effectively flat since last August (though tightness •Previous hotspots such as Hamilton and Tauranga have also slowed. Prices are still rising at a moderate pace in many of the smaller regions •Sales level are down around 20% from the peak in 2016 •The tightening of loan-to-value restrictions for investors last July has contributed to the slowdown in the housing market. More significantly, mortgage rates have risen since late last year. Westpac Economics expects this factor to have a more expected this year New Zealand house prices by region (index) 220220 200200 180180 160160 140140 120120 100100 8080 Jan-11Jan-12Jan-13Jan-14Jan-15Jan-16Jan-17 Canterbury Wellington Auckland

Appendix and disclaimer

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Appendix 1: Cash earnings adjustments Appendix and Disclaimer 128 Cash earnings adjustment 1H16 $m 2H16 $m 1H17 $m Description Reported net profit 3,701 3,744 3,907 Net profit attributable to owners of Westpac Banking Corporation The merger with St.George and acquisition of Lloyds resulted in the recognition of identifiable intangible assets. Commencement of equity accounting for BTIM in 2015 also resulted in the recognition of notional identifiable intangible assets within the investments in associate’s carrying value. The intangible assets recognised relate to core deposits, customer relationships, management contracts and distribution relationships. These intangible items are amortised over their useful lives, ranging between four and twenty years. The amortisation of these intangible assets (excluding capitalised software) is a cash earnings adjustment because it is a non-cash flow item and does Amortisation of intangible assets 79 79 73 not af fect cash distributions available to shareholders Acquisition transaction and integration expenses Costs associated with the acquisition of Lloyds were treated as a cash earnings adjustment as they do not reflect the earnings expected from the acquired businesses following the integration period 7 8 - Fair value (gain)/loss on economic hedges The unrealised fair value (gain)/loss on FX hedges of future NZ earnings and accrual accounted term funding transactions are reversed in deriving cash earnings as they may create a material timing dif ference on reported results but they do not affect the Group’s cash earnings over the life of the hedge 83 120 7 The unrealised (gain)/loss on ineffective hedges is reversed in deriving cash earnings for the period 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 Ineffective hedges 26 (35) (4) 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 are not permitted to be recognised as income 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 Treasury shares 8 2 34 transactions which are re-valued in determining income Cash earnings 3,904 3,918 4,017 Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Appendix 2: Definitions Appendix and Disclaimer 129 BT Financial Group (Australia) (BTFG) is the wealth management and insurance arm of Westpac Group providing a broad range of associated services. BTFG’s funds management operations include the manufacturing and distribution of investment, superannuation, retirement products, wealth administration platforms, private banking, margin lending and equities broking. BTFG’s insurance business covers the manufacturing and distribution of life, general and lenders mortgage insurance. The division also uses third parties for the manufacture of certain general insurance products as well as actively reinsuring its risk using external providers across all insurance classes. BTFG operates a range of wealth, funds management (including Ascalon which is a boutique incubator of emer ging fund managers), and financial advice brands and operates under the banking brands of Westpac, St.George, and BankSA for Private Wealth and Insurance. BT Investment Management Limited (BTIM) is 29.3% owned by BTFG (following a partial sale in 2015) with the business being equity accounted from July 2015. BTFG works in an integrated way with all the Group’s Australian divisions Consumer Bank (CB) is responsible for sales and service to consumer customers in Australia under the Westpac, St.George, BankSA, Bank of Melbourne and RAMS brands. Activities are conducted through a dedicated team of specialist consumer relationship managers along with an extensive network of branches, call centres and ATMs. Customers are also supported by a range of internet and mobile banking solutions. CB also works in an integrated way with BTFG and WIB in the sales and service of select financial services and products including in wealth and foreign exchange. The revenue from these products is mostly retained by the product originators Consumer Bank BTFG Business Bank (BB) is

responsible for sales and service to micro, SME and commercial business customers for facilities up to approximately $150 million. The division operates under the Westpac, St.George, BankSA and Bank of Melbourne brands. Customers are provided with a wide range of banking and financial products and services to support their lending, payments and transaction needs. In addition, specialist services are provided for cash flow finance, trade finance, automotive and equipment finance, property finance and treasury. The division is also responsible for consumer customers with auto finance loans. BB works in an integrated way with BTFG and WIB in the sales and service of select financial services and products including corporate superannuation, foreign exchange and interest rate hedging. The revenue from these products is mostly retained by the product originators in supporting the insurance and wealth needs of customers Business Bank 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. Westpac New Zealand also has its own infrastructure, including technology, operations and treasury Westpac NZ Westpac Institutional Bank (WIB) delivers a broad range of financial products and services to commercial,

corporate, institutional and government customers with connections to Australia and New Zealand. WIB operates through dedicated industry relationship and specialist product teams, with expert knowledge in transactional banking, financial and debt capital markets, specialised capital, and alternative investment solutions. Customers are supported throughout Australia as well as via branches and subsidiaries located in New Zealand, the US, UK and Asia. WIB is also responsible for Westpac Pacific currently providing a range of banking services in Fiji and PNG. WIB works in an integrated way with all the Group’s divisions in the provision of more complex financial needs including across foreign exchange and fixed interest solutions WIB This segment provides centralised Group functions including Treasury, Technology and Core Support (finance, human resources etc.). Costs are partially allocated to other divisions in the Group, with costs attributed to enterprise activity retained in Group Businesses. This segment also reflects Group items including: earnings on capital not allocated to divisions, earnings from non-core asset sales and certain other head office items such as centrally raised provisions Group Businesses or GBU Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Appendix 2: Definitions (continued) Appendix and Disclaimer 130 Capital ratios As defined by APRA (unless stated otherwise) The NSFR is defined as the ratio of the amount of available stable funding (ASF) to the amount of required stable funding (RSF) defined by APRA. The amount of ASF is the portion of an ADI’s capital and liabilities expected to be a reliable source of funds over a one year time horizon. The amount of RSF is a function of the liquidity characteristics and residual maturities of an ADI’s assets and of f-balance sheet activities. When it is implemented by APRA from 1 January 2018, ADI’s must maintain an NSFR of at least 100% Assets (both on and off-balance sheet) are risk weighted according to each asset’s inherent potential for default and what the likely losses would be in case of default. In the case of non asset backed risks (ie. market and operational risk), RWA is determined by multiplying the capital requirements for those risks by 12.5 Net stable funding ratio (NSFR) Risk weighted assets or RWA As defined by APRA (unless state otherwise). Tier 1 capital divided by ‘exposure measure’ and expressed as a percentage. ‘Exposure measure’ is the sum of on-balance sheet exposures, derivative exposures, securities financing transaction exposures and other off-balance sheet exposures Leverage ratio Includes facilities where: 1. contractual payments of interest and / or principal are 90 or more calendar days overdue, including overdrafts or other revolving facilities that remain continuously outside approved limits by material amounts for 90 or more calendar days, including accounts for customers who have been granted hardship assistance; or an order has been sought for the customer’s bankruptcy or similar legal action has been instituted which may avoid or delay repayment of its credit obligations; and the estimated net realisable value of assets / security to which W estpac has recourse is sufficient to cover repayment of all

principal and interest, where there are otherwise reasonable grounds to expect payment in full and interest is being taken to profit on an accrual basis. The internationally comparable common equity Tier 1 (CET1) capital ratio is an estimate of Westpac’s CET1 ratio calculated on rules comparable with global peers. The ratio adjusts for differences between APRA’s rules and those applied to global peers. The adjustments are applied to both the determination of regulatory CET1 and the determination of risk weighted assets. Methodology aligns with the APRA study titled “International capital comparison study” dated 13 July 2015 Internationally comparable 90 days past due and not impaired 2. 3. An APRA requirement to maintain an adequate level of unencumbered high quality liquid assets, to meet liquidity needs for a 30 calendar day period under an APRA-defined severe stress scenario. Absent a situation of financial stress, the value of the LCR must not be less than 100%, ef fective 1 January 2015. LCR is calculated as the percentage ratio of stock of HQLA and CLF over the total net cash out flows in a modelled 30 day defined stressed scenario Liquidity coverage ratio (LCR) These facilities, while in default, are not treated as impaired for accounting purposes Loans not found to be individually impaired or significant will be collectively assessed in pools of similar assets with similar risk characteristics. The size of the provision is an estimate of the losses already incurred and will be estimated on the basis of historical loss experience for assets with credit characteristics similar to those in the collective pool. The historical loss experience will be adjusted based on current observable data. Included in the collectively assessed provision is an economic overlay provision which is calculated based on changes that occurred in sectors of the economy or in the economy as a whole High quality liquid assets (HQLA) As defined by APRA in Australian Prudential

Standard APS210 Liquidity, including BS-13 qualifying liquid assets, less RBA open repos funding end of day ESA balances with the RBA Collectively assessed provisions or CAPs Committed liquidity facility (CLF) The RBA makes available to Australian Authorised Deposit-taking Institutions a CLF that, subject to qualifying conditions, can be accessed to meet LCR requirements under APS210 Liquidity Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Appendix 2: Definitions (continued) Appendix and Disclaimer 131 Average interest-earning assets and is the average balance of assets held by the Group that generate interest income. Where possible, daily balances are used to calculate the average balance for the period Includes exposures that have deteriorated to the point where full collection of interest and principal is in doubt, based on an assessment of the customer’s outlook, cashflow, and the net realisation of value of assets to which recourse is held: AIEA Is a measure of the level of profit that is generated by ongoing operation and is therefore available for distribution to shareholders. Three categories of adjustments are made to reported results to determine cash earnings: material items that key decision makers at Westpac believe do not reflect ongoing operations; items that are not considered when dividends are recommended; and accounting reclassifications that do not impact reported results. For details of these adjustments refer to slide 128 1. facilities 90 days or more past due, and full recovery is not in doubt: exposures where contractual payments are 90 or more days in arrears and the net realisable value of assets to which recourse is held may not be suf ficient to allow full collection of interest and principal, including overdrafts or other revolving facilities that remain continuously outside approved limits by material amounts for 90 or more calendar days; non-accrual assets: exposures with individually assessed impairment provisions held against them, excluding restructured loans; restructured assets: exposures where the original contractual terms have been formally modified to provide for concessions of interest or principal for reasons related to the financial dif ficulties of the customer; other assets acquired through security enforcement (includes other real estate owned): includes the value of any other assets acquired as full or partial settlement of outstanding obligations through the

enforcement of security arrangements; and any other assets where the full collection of interest and principal is in doubt. Cash earnings Impaired assets 2. 3. Cash earnings per ordinary share Cash earnings divided by the weighted average ordinary shares (cash earnings basis) 4. Core earnings Net operating income less operating expenses Full-time equivalent employees A calculation based on the number of hours worked by full and part-time employees as part of their normal duties. For example, the full-time equivalent of one FTE is 76 hours paid work per fortnight 5. (FTE) Provisions raised for losses that have already been incurred on loans that are known to be impaired and are assessed on an individual basis. The estimated losses on these impaired loans is based on expected future cash flows discounted to their present value and as this discount unwinds, interest will be recognised in the income statement Individually assessed provisions or IAPs Net interest mar gin Calculated by dividing net interest income by average interest-earning assets Net tangible assets (total equity less goodwill and other intangible assets less minority interests) divided by the number of ordinary shares on issue (reported) Net tangible assets per ordinary share Stressed loans Stressed loans are the total of watchlist and substandard, 90 days past due and not impaired and impaired assets Weighted average ordinary shares (cash earnings) Weighted average number of fully paid ordinary shares listed on the ASX for the relevant period Watchlist and substandard Loan facilities where customers are experiencing operating weakness and financial difficulty but are not expected to incur loss of interest or principal Weighted average ordinary shares (reported) Total committed exposures (TCE) Weighted average number of fully paid ordinary shares listed on the ASX for the relevant period less Westpac shares held by the Group (‘Treasury shares’) Represents the sum of the committed portion

of direct lending (including funds placement overall and deposits placed), contingent and pre-settlement risk plus the committed portion of secondary market trading and underwriting risk Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Appendix 2: Definitions (continued) Appendix and Disclaimer 132 Data based on Roy Morgan Research, Respondents aged 14+ and 12 month rolling. Wealth penetration is defined as the proportion of Australians who have a Deposit or Transaction Account, Mortgage, Personal Lending or Major Card with a Banking Group and also have Managed Investments, Superannuation or Insurance with the same Banking Group. Note: Westpac and St.George use Managed Investments, Superannuation or Insurance with Westpac Group. Australian customers with wealth products metrics provider Source: DBM Consultants Business Financial Services Monitor, March 2012 – March 2017, 6MMA. MFI customers, all businesses. The Customer Satisfaction score is an average of customer satisfaction ratings of the customer’s main financial institution for business banking on a scale of 0 to 10 (0 means ‘extremely dissatisfied’ and 10 means ‘extremely satisfied’) Customer satisfaction – overall business Westpac includes Westpac, BT, Challenge Bank, Rothschild, ASGARD, and Sealcorp. St.George brands include St. George, , BankSA, Bank of Melbourne, Dragondirect, RAMS. Westpac Group includes Westpac, St. George, Advance Bank, ASGARD, BankSA, Bank of Melbourne, BT, Challenge Bank, Dragondirect, RAMS, Rothschild, and Sealcorp. Peers includes: ANZ Group, CBA Group and NAB Group. NZ customers with wealth products (%) Number of customers who have managed investments or superannuation with Westpac NZ as a proportion of the total active customers in Westpac NZ Retail, Private and Business Bank Source: DBM Consultants Business Financial Services Monitor, March 2015 – March 2017, 6MMA. MFI customers, SME businesses. The Customer Satisfaction score is an average of customer satisfaction ratings of the customer’s main financial institution for small business banking on a scale of 0 to 10 (0 means

‘extremely dissatisfied’ and 10 means ‘extremely satisfied’) Customer satisfaction – SME Source: Roy Morgan Research, March 2012 – March 2017, 6MMA. Main Financial Institution (as defined by the customer). Satisfaction ratings are based on the relationship with the financial institution. Customers must have at least a Deposit / Transaction account relationship with the institution and are aged 14 or over. Satisfaction is the percentage of customers who answered ‘very’ or ‘fairly satisfied’ with their overall relationship with their MFI. Customer satisfaction – overall consumer Westpac Group rank The ranking refers to Westpac’s position relative to the other three major Australian banks (ANZ, CBA and NAB) Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Investor Relations Team Contact us 133 www.westpac.com.au/investorcentre [email protected] [email protected] Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Equity Investor Relations Andrew BowdenNicole MehalskiAnnual reports Head of Investor RelationsDirectorPresentations and webcasts +61 2 8253 4008+61 2 8253 16675 year financial summary Prior financial results Debt Investor Relations Jacqueline BoddyLouise Coughlan DirectorDirector (Rating Agencies) +61 2 8253 3133+61 2 8254 0549 [email protected]@westpac.com.au Retail Shareholder Investor Relations Danielle StockRebecca Plackett Senior ManagerSenior Manager +61 2 8253 0922+61 2 8253 6556 [email protected]@westpac.com.au Or email: [email protected]

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Disclaimer Appendix and Disclaimer 134 The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (Westpac) and its activities. The information is supplied in summary form and is therefore not necessarily complete. It is not intended that it be relied upon as advice to investors or potential investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial situation or particular needs. The material contained in this presentation may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy , completeness or reliability of the information. All amounts are in Australian dollars unless otherwise indicated. Unless otherwise noted, financial information in this presentation is presented on a cash earnings basis. Cash earnings is a non-GAAP measure. Refer to Westpac’s 2017 Interim Financial Results (incorporating the requirements of Appendix 4D) for the six months ended 31 March 2017 available at www.westpac.com.au for details of the basis of preparation of cash earnings. Refer to slides 34 for an explanation of cash earnings and Appendix 1 slide 128 for a reconciliation of reported net profit to cash earnings. This presentation 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 presentation and include statements regarding our intent, belief or current expectations with respect to our business and operations, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions, financial support to certain borrowers, indicative drivers,

forecasted economic indicators and performance metric outcomes. We use words such as ‘will’, ‘may’, ‘expect’, 'indicative', ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘probability’, ‘risk’, ‘forecast’, ‘likely’, ‘estimate’, ‘anticipate’, ‘believe’, ‘aim’, or other similar words to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond our control, and have been made based upon management’s expectations and beliefs concerning future developments and their potential ef fect upon us. There can be no assurance that future developments will be in accordance with our expectations or that the effect of future developments on us will be those anticipated. Actual results could differ materially from those which we expect, depending on the outcome of various factors. Factors that may impact on the forward-looking statements made include, but are not limited to, those described in the section titled ‘Risk factors' in Westpac’s Interim Financial Results for the six months ended 31 March 2017 (or Annual Report for the year ended 30 September 2016) available at www.westpac.com.au. When relying on forward-looking statements to make decisions with respect to us, investors and others should carefully consider such factors and other uncertainties and events. We are under no obligation to update any forward-looking statements contained in this presentation, whether as a result of new information, future events or otherwise, after the date of this presentation. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 3

Notification of dividend / distribution Notification of dividend / distribution Announcement Summary Entity name WESTPAC BANKING CORPORATION Security on which the Distribution will be paid WBC - ORDINARY FULLY PAID Announcement Type New announcement Date of this announcement Monday May 8, 2017 Distribution Amount AUD 0.94000000 Ex Date Thursday May 18, 2017 Record Date Friday May 19, 2017 Payment Date Tuesday July 4, 2017 DRP election date Monday May 22, 2017 17:00:00 Refer to below for full details of the announcement Announcement Details Part 1 - Entity and announcement details 1.1 Name of +Entity WESTPAC BANKING CORPORATION Registration Number 1.2 Registered Number Type ABN 1.3 ASX issuer code WBC 1.4 The announcement is New announcement 1.5 Date of this announcement Monday May 8, 2017 Notification of dividend / distribution 1 / 5 33007457141

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notification of dividend / distribution 1.6 ASX +Security Code WBC ASX +Security Description ORDINARY FULLY PAID Part 2A - All dividends/distributions basic details 2A.1 Type of dividend/distribution Ordinary 2A.2 The Dividend/distribution: relates to a period of six months 2A.3 The dividend/distribution relates to the financial reporting or payment period ending ended/ending (date) Friday March 31, 2017 2A.4 +Record Date Friday May 19, 2017 2A.5 Ex Date Thursday May 18, 2017 2A.6 Payment Date Tuesday July 4, 2017 2A.7 Are any of the below approvals required for the dividend/distribution before business day 0 of the timetable? Security holder approval Court approval Lodgement of court order with +ASIC ACCC approval FIRB approval Another approval/condition external to the entity required before business day 0 of the timetable for the dividend/distribution. No 2A.8 Currency in which the dividend/distribution is made ("primary currency") AUD - Australian Dollar 2A.9 Total dividend/distribution payment amount per +security (in primary currency) for all dividends/distributions notified in this form AUD 0.94000000 2A.10 Does the entity have arrangements relating to the currency in which the dividend/distribution is paid to securityholders that it wishes to disclose to the market? Yes Notification of dividend /

distribution 2 / 5

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notification of dividend / distribution 2A.11 Does the entity have a securities plan for dividends/distributions on this +security? We have a Dividend/Distribution Reinvestment Plan (DRP) 2A.11a If the +entity has a DRP, is the DRP applicable to this dividend/distribution? Yes 2A.12 Does the +entity have tax component information apart from franking? Yes 2A.11a(i) DRP Status in respect of this dividend/distribution Full DRP Part 2B - Currency Information 2B.1 Does the entity default to payment in certain currencies dependent upon certain attributes such as the banking instruction or registered address of the +securityholder? (For example NZD to residents of New Zealand and/or USD to residents of the U.S.A.). Yes 2B.2 Please provide a description of your currency arrangements 2B.2a Other currency/currencies in which the dividend/distribution will be paid: GBP - Pound Sterling GBP NZD - New Zealand Dollar NZD 2B.2b Please provide the exchange rates used for non-primary currency payments 2B.2c If payment currency equivalent and exchange rates not known, date for information to be released Tuesday July 4, 2017 Estimated or Actual? Actual 2B.3 Can the securityholder choose to receive a currency different to the currency they would receive under the default arrangements? No Part 3A - Ordinary dividend/distribution 3A.1 Is the

ordinary dividend/distribution estimated at this time? No 3A.1b Ordinary Dividend/distribution amount per security AUD 0.94000000 3A.1a Ordinary dividend/distribution estimated amount per +security AUD Notification of dividend / distribution 3 / 5 Not known at date of this announcement. Details of dividend payment options for Westpac Ordinary Fully Paid Shares are available in Westpac's Investor Centre at http://www.westpac.com.au/about-westpac/investor-centre/dividend-information/dividend-payment/ .

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notification of dividend / distribution 3A.2 Is the ordinary dividend/distribution franked? Yes 3A.3 Percentage of ordinary dividend/distribution that is franked 100.0000 % 3A.4 Ordinary dividend/distribution franked amount per +security AUD 0.94000000 3A.6 Ordinary dividend/distribution unfranked amount per +security excluding conduit foreign income amount AUD 0.00000000 3A.7 Ordinary dividend/distribution conduit foreign income amount per security AUD 0.00000000 3A.2a Is the ordinary dividend/distribution fully franked? Yes 3A.3a Applicable corporate tax rate for franking credit (%) 100.0000 % 3A.5 Percentage amount of dividend which is unfranked 0.0000 % Part 3E - Other - distribution components / tax 3E.1 Please indicate where and when information about tax components can be obtained (you may enter a url). Part 4A - +Dividend reinvestment plan (DRP) 4A.1 What is the default option if +security holders do not indicate whether they want to participate in the DRP? Do not participate in DRP (i.e. cash payment) 4A.2 Last date and time for lodgement of election notices to share registry under DRP Monday May 22, 2017 17:00:00 4A.4 Period of calculation of reinvestment price 4A.3 DRP discount rate 1.5000 % Start Date W ednesday May 24, 2017 4A.5 DRP price calculation methodology End Date Tuesday June 6,

2017 4A.6 DRP Price (including any discount): AUD 4A.7 DRP +securities +issue date Tuesday July 4, 2017 Notification of dividend / distribution 4 / 5 The average of the daily volume weighted average market price per Westpac Ordinary Fully Paid Share sold on the ASX and Chi-X during the 10 trading days commencing 24 May 2017, at a discount of 1.5 percent. A New Zealand imputation credit of NZD 0.07 per Westpac Ordinary Fully Paid Share will attach to the dividend.

Notification of dividend / distribution 4A.8a Do DRP +securities rank pari passu from +issue date? Yes 4A.8 Will DRP +securities be a new issue? Yes 4A.9 Is there a minimum dollar amount or number of +securities required for DRP participation? No 4A.10 Is there a maximum dollar amount or number of +securities required for DRP participation? No 4A.11 Are there any other conditions applying to DRP participation? Yes 4A.11a Conditions for DRP participation 4A.12 Link to a copy of the DRP plan rules https://www.westpac.com.au/about-westpac/investor-centre/dividend-information/dividend-reinve stment-plan/ 4A.13 Further information about the DRP Part 5 - Further information 5.1 Please provide any further information applicable to this dividend/distribution 5.2 Additional information for inclusion in the Announcement Summary Notification of dividend / distribution 5 / 5 http://www.westpac.com.au/about-westpac/investor-centre/ Participation in the DRP is restricted to shareholders who are resident in, and whose address on the register of shareholders is in, Australia or New Zealand.

Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Copyright © 2017 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document