WESTPAC FIXED INCOME INVESTOR PRESENTATION FOR THE SIX MONTHS ENDED 31 MARCH 2014 UNLESS OTHERWISE STATED EUROPEAN ROADSHOW MAY 2014 Disclaimer The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (“Westpac”) and its activities. It does not constitute a prospectus, offering memorandum or offer of securities. It should not be reproduced, distributed or transmitted to any person without the consent of Westpac and is not intended for distribution in any jurisdiction in which such distribution would be contrary to local law or regulation. This presentation is directed only at persons who (i) have professional experience in matters relating to investments; or (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (as amended); or (iii) are outside the United Kingdom (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on by persons who are not relevant persons. The information is supplied in summary form and is therefore not necessarily complete. Also, 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. Financial information in this presentation may be presented on a cash earnings basis. Cash earnings is a non-GAAP measure. Refer to Westpac’s Interim 2014 Results (incorporating the requirements of Appendix 4D) for the half year ended 31 March 2014 available at www.westpac.com.au for details of the basis of preparation of cash earnings. Refer to Appendix 1 for a reconciliation of reported net profit to cash earnings. In forma tion cont ai ned i n or o therwi se accessibl e th rough th e web sit es men tione d in this presen ta tion does no t form par t o f the presenta tion un less we spec ifica lly s ta te tha t the in forma tion is incorporated by reference thereby forming part of the presentation. All references in this presentation to web sites are inactive textual references and are for information only. Disclosure regarding forward-looking statements This presentation contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the US Securities Exchange Act of 1934. The forward-looking statements 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, 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’, or similar words to identify forward-looking statements. These 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 effect upon us. Should one or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from the expectations described in this presentation. Factors that may impact on the forward-looking statements made include those described in the section entitled ‘Risk factors’ in Westpac’s Interim Financial Report for the half year ended 31 March 2014 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 factorfactorss and other uncertainties and events. We are under no obligation, and do not intend, to update any forward-looking statements contained in this presentation. Westpac Group | May 2014 | European Investor Roadshow 2 INDEX 1H14 HIGHLIGHTS 4 AUSTRALIAN HOME LENDING 20 ECONOMICS 28 SECURED FUNDING 40 ADDITIONAL INFORMATION 50 APPENDICES 60 Another quality financial performance from Westpac % Change 1H14 Cash earnings results 1H14 Strong financial performance Net interest margin (%) 1H14 – 1H13 Cash earningg($)s ($m) NIM Financial results (A$m) NIM excl. Treasury and Markets 3,772 Cash earnings 3,772 8 3,508 3,555 Reported net profit after tax 3,622 10 2.19 2.12 2.11 NtNet opera ting income 98599,859 5 2.06 2.06 Expenses 4,065 6 2.01 Impairment charges 341 (22) 1H13 2H13 1H14 H10 H10 H11 H11 H12 H12 H13 H13 H14 Financial metrics 11 22 11 22 11 22 11 22 11 Cash earnings per share 121.3c 7 Portfolio quality continues to improve Net interest margin 2.11% (8bps) Impairment charges to average gross loans annualised (%) Expense to income ratio 41.2% 35bps 73 Cash earnings return on equity 16.5% 43bps Asset quality 33 31 31 30 Net write-offs to avg loans annualised 22bps 1bp 23 22 24 24 19 17 19 19 17 15 12 Total impaired assets to gross loans 51bps (31bps) Total provisions to gross loans 67bps (13bps) 2002 2003 2004 2005 2006 2007 2008 2009 2010 Impairment provisions to impaired assets 46.4% large 1H11 2H11 1H12 2H12 1H13 2H13 1H14 Westpac Group | May 2014 | European Investor Roadshow 4 Westpac has clear strategic priorities... ...managed in a balanced way Remain strong TtdthTargeted growth Strength Return A strong company Maintain discipline Capital within Maintain strong ROE preferred range Maintain dividend path Target stable funding ratio >75% Customer relationships Productivity Growth Sector leading Investment driven Maintain expense to Higher growth in target Materially simplify income ratio segments, including below peers Deposits, Asia, SME, Trade and Natural Resources One team Westpac Group | May 2014 | European Investor Roadshow 5 Strategy delivering growth in targeted areas Aust. housing growth vs system (times) Customer deposits ($bn) Customer numbers (#m) Westpac RBB St.George 0.9x 383 389 0.8x 0.8x 360 348 6.13 6.17 6.22 0.7x 3223.22 3263.26 3.55 3Q13 4Q13 1Q14 2Q14 2H12 1H13 2H13 1H14 1H13 2H13 1H14 FUA2 and FUM3 ($bn) Insurance premiums ($m) WIB trade finance volumes ($bn) FUA FUM Life in-force premiums Asia Australia General gross written premiums 104 108 7.1 97 685 734 93 635 89 86 601 5.5 76 68 3.9 3.3 186 198 218 227 2H12 1H13 2H13 1H14 2H12 1H13 2H13 1H14 2H12 1H13 2H13 1H14 1 RBA Financial Aggregates March 2014. 2 Funds under administration. 3 Funds under management. Westpac Group | May 2014 | European Investor Roadshow 6 Strong portfolio of brands All comparisons to 1H13 Westpac Retail & Business • 1H14 cash earnings $1,251m Contribution to Cash Earnings (%) Banking • Up 10% on 1H13 ss Australian retail and business Westpac Retail & • Strong franchise; lending up 4%, banking for consumers, SMEs and Business Banking deposits up 8%, as the division tilts to 3 commercial customers under the 2 33 St.George Banking growth Westpac brand Group BT Financial Group St.George Banking Group • 1H14 cash earnings $772m 10 cial Service Australian retail and business • Up 12% on 1H13 Westpac Institutional nn banking under the St.George, Bank • Each brand contributing positively; 20 BankSA, Bank of Melbourne and solid revenue growth; decline in 20 Westpac New Zealand RAMS brands impairment charges 12 Westpac Pacific BT Financial Group • 1H14 cash earnings $438m Wealth division with $82bn funds Group (inc. Treasury) stralian Fina • Up 21% on 1H13 under management an d $107bn Au • Funds management earnings up 28%; funds under administration at 31 strong insurance flows in life and March 2014 general insurance Market share at 31 March 2014 (%) Australia Westpac Institutional Bank • 1H14 cash earnings $752m al n n LLdiAtlieading Australasian itittilinstitutional • DD4%1H13own 4% on 1H13 Household deposit market share1 23% bank, with branches and • Underlying business continues to representative offices in Australia, perform well; customer revenue up Housing credit market share2 23% NZ, US, UK and Asia 3%; strong contribution from markets 2 Institutio businesses Business credit market share 19% Wealth platforms market share3 20% Westpac New Zealand • 1H14 cash earnings NZ$432m Banking and wealth services to • Up 17% on 1H13 New Zealand consumers, businesses and • Improving asset quality driving lower NZ Household deposit market share4 21% institutions in New Zealand impairment charges; lending up 6%, deposits up 8% Consumer lending market share4 20% 1 APRA Banking Statistics. 2 Reserve Bank of Australia. 3 Plan for Life December 2013, All Master Funds Admin. 4 Reserve Bank of New Zealand. Westpac Group | May 2014 | European Investor Roadshow 7 Improving balance sheet momentum Australian private sector credit growth (% ann) Net loans ($bn) Housing Total credit Business 11 6 565 25 4 16 7 20 f/cs 521 end 15 '15 10 Up 8% 5 0 -5 1H13 Aust. Aust. Aust. NZ (A$) Overseas 1H14 -10 Housing Business Personal & Jan-94 Jan-98 Jan-02 Jan-06 Jan-10 Jan-14 other