Westpac Banking : 1Q20 Capital, Funding and Credit Quality Update

ASXRelease

19 FEBRUARY 2020

Level 18, 275 Kent Street Sydney, NSW, 2000

1Q20 Capital, Funding and Credit Quality Update

Westpac Banking Corporation ("Westpac") today provides the attached 1Q20 Capital, Funding and Credit Quality Update.

For further information:
David Lording	Andrew Bowden
Group Head of Media Relations	Head of Investor Relations
0419 683 411	T. [phone] (ext. 24008)
	M. 0438 284 863

This document has been authorised for release by Tim Hartin, Group Company Secretary.

Summary of 1Q20capital, funding and credit quality

Overview 2

	•	Common equity Tier 1 (CET1) capital ratio 10.8% at 31 December 2019 (10.7% at 30 September 2019). Movement due to:
		‒$2.8bn of additional capital raised (63bps) from a $2.0bn institutional placement and a $770m Share Purchase Plan
CET1 capital		‒Payment of the 2019 final dividend, net of dividend reinvestment plan (DRP) (-57bps)
	‒Risk weighted assets (RWA) increase of $13.7bn (-35bps) mostly from increases in interest rate risk in the banking
(on APRA Level 2		book (IRRBB) ($10.5bn) and operational risk ($6.5bn). The increase in operational risk RWA is mainly from the
basis unless		additional $500 million capital overlay imposed by APRA in response to the issues alleged by AUSTRAC in its
otherwise stated)		Statement of Claim (increased RWA by $6.3bn). Increases were partly offset by a $6.5bn decrease in credit RWAs
		‒1Q20 earnings and other capital movements (38bps)
	•	Level 1 common equity Tier 1 (CET1) capital ratio 11.1% at 31 December 2019 (11.0% at 30 September 2019)
	•	Internationally comparable1CET1 capital ratio 16.1% at 31 December 2019
	•	Credit quality sound
	•	Impaired assets $1.8bn at 31 December 2019 ($1.8bn 30 September 2019)
	•	Stressed assets to TCE2increased 2bps to 1.22%
Credit quality		‒3bps increase in Watchlist due to customer downgrades in WIB, Business and NZ
	‒offset by 1bp decrease in Substandard facilities from customer upgrades
	•	Australian unsecured 90+ day delinquencies increased 5bps to 1.82% mostly from the $0.3bn decline in the portfolio
	•	Total provision balances up 1.7%, total provisions to gross loans up 1bp. Increase in IAP includes a provision raised for one
		large facility >$50m
Australian mortgage	•	Australian mortgage 90+ day delinquencies 0.86% (down 2bps over the quarter)
portfolio	•	Properties in possession 472 (down 86 over the quarter) as housing conditions continue to improve and some seasonality
Funding/liquidity	•	1Q20 average liquidity coverage ratio (LCR) 132% (spot LCR 130%), net stable funding ratio (NSFR) 112% - both well above
	regulatory minimums
position
•	$12.4bn term funding issued to 31 January 2020
Bushfires and other	•	Bushfires have had a significant impact on communities but, as yet, this has only had a small impact on credit quality
•	Cost of insurance claims for severe weather events, including bushfires / hail storms, to 14 February 2020 estimated at $140m
		(pre-tax)

1 Internationally comparable methodology aligns with the APRA study titled 'International Capital Comparison Study' dated 13 July 2015. 2 TCE is total committed exposure.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Update to FY20 considerations

Additional factors impacting FY20 earnings

A number of factors have emerged since Westpac released its FY19 results on 4 November 2019 which are expected to have an impact on FY20 earnings. These include:

• The unprecedented bushfires across Australia, and high storm activity early in 2020
• AUSTRAC's civil penalty proceedings against Westpac, Westpac's response plan, subsequent actions from other regulators, and class actions
• Westpac remains committed to materially lifting its approach to risk management. As a result, we are identifying further issues to address. At the same time, the number of regulatory investigations and reviews into the Group's businesses has risen. The Group expects to incur additional expenses in FY20 associated with this work and will need to reconsider its current cost growth expectations. We announced in FY19 that FY20 expenses excluding notables were expected to be 1% higher and a further update will be provided at the Group's 1H20 results.

In addition to the above, the bushfires, storms and Coronavirus are expected to have an economic impact which may ultimately affect banking activity and growth. Westpac Economics recently updated their Australian GDP forecast for calendar year 2020 to 1.9% (down from 2.4% forecast at November 2019). The tourism and education sectors are expected to be particularly impacted.

FY20 considerations

3

Bushfires and storms

• Insurance claims for severe weather events currently estimated at approximately $140m(pre-tax) (estimate at 14 February 2020)
• Around 1,500 disaster relief packages accessed
• Bushfire relief packages and grants (consumer and businesses) in FY20 estimated to cost approximately $26m (pre- tax), with most of the costs in 2H20

AUSTRAC and related matters

• Additional expenses in FY20, including $80m(pre-tax) announced from the response plan1
• Increased litigation and regulatory investigation expenses
• Potential significant civil penalty

1 The $80m will be included in cash earnings and treated as notable items.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Update on AUSTRAC matters

Progress on response plan

Immediate fixes

• Reported outstanding IFTIs1to AUSTRAC
• Closed the relevant Australasian Cash Management Product
• Closed the LitePay product
• Lookback screen of customer transactions to further identify suspicious activity to report to AUSTRAC

Lifting our standards

• Board Financial Crime Committee established
• Promontory appointed to provide assurance over Westpac's assessment of management's accountability and the adequacy of Westpac's Financial Crime Program, review underway
• Independent Advisory Panel for AUSTRAC Accountability Review established, to provide recommendations on Board risk governance and Board accountability, review underway
• Updated transaction monitoring rules and implemented enhanced governance over monitoring processes
• Implemented priority screening and reporting of transactions indicative of child exploitation to AUSTRAC within 24 hours
• Elevated the financial crime function to report directly to the Chief Risk Officer

Protecting people2

• Commenced engagement with key external organisations with details of agreement in progress, including committed arrangements with
• • SaferKidsPH with first contribution of $1m made in January 2020. The remainder of $5m to be completed by end of 2025
  • The International Justice Mission with $18m to be contributed by end of 2022
• Roundtable established, with supporting Advisory Group, to advise on work program to address child safety and human rights, with $30m funding to be distributed, guided by an impact framework, by end of 2022

1 International Funds Transfer Instructions. 2 The commitments noted here are included in the $80m expenses noted on the previous slide.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

AUSTRAC update

4

Outstanding items

Litigation

• Continue to work cooperatively with AUSTRAC to agree Statement of Agreed Facts and Admissions
• Second case management hearing scheduled for 2 March 2020
• Not able to reliably estimate penalty and no provision raised

Regulatory investigations

• Ongoing regulatory investigations from ASIC and APRA with outcomes of these investigations unknown

Class actions

• In December, Phi Finney McDonald commenced a class action against Westpac in Australia relating to alleged market disclosure issues connected to Westpac's monitoring of financial crime and matters which are the subject of the AUSTRAC proceeding
• In February, the US based Rosen Law Firm commenced a class action lawsuit naming Westpac, former CEO, Brian Hartzer and current CEO, Peter King, as defendants relating to similar alleged market disclosure issues
• The damages sought by the claims are unspecified
• The Group will be defending both claims
• Westpac notes other similar lawsuits may be filed

Helpingcustomers through natural disaster - Bushfires

Service leadership

5

Westpac employees volunteering with BlazeAid assisting to rebuild fences destroyed by bushfire in Wingham (335 kmnorth of Sydney)

In 2019/20 Australia faced unprecedented bushfires. The impacts on individuals and communities was devastating. Westpac supported people, businesses and communities impacted in a number of ways

Deployed mobile customer support teams across affected areas and regions

• Set up mobile branches and ATMs
• Provided customers access to cash at a time when networks across the area were affected and mobile payments were not possible
• Established a central team to support customers' needs

Provided around 1,500 disaster relief packages1

to help make it easier for customers to manage their finances, including providing alternative arrangements such as repayment holidays. This comprised around:

• 190 across cards and personal lending (excluding Auto loans)
• 620 for home loans
• 670 for business banking products (including Auto and equipment finance)

Received around 500 General Insurance claims

• The total claims from this event currently estimated at $37 million2

•235 claims finalised

Supporting communities and customers

• Provided over $3m in emergency cash grants to consumer and business customers
• Donated over $1m to community groups and charities, including $500k to Financial

Counselling Australia; $300k to state-based volunteer fire services, $250k to the Foundation for Rural and Regional Renewal and $100k to the Victoria Bushfire Appeal

• Collected over $1.7m in donations from customers for the Salvation Army

Supporting our people

• Uncapped paid leave for employees who are emergency services volunteers in bushfire affected areas
• 3 days paid volunteering leave for employees wanting to volunteer in bushfire affected areas

1 Bushfire Recovery Support Packages provided to customers to 14 February 2020. Full details of Bushfire Recovery Support Packages are available at www.westpac.com.au2 Estimated gross cost for Westpac.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Key capital ratios

Capital 6

Capital ratios1	CET1 capital ratio (%) and CET1 capital ($bn)
(APRA basis)

%	Mar-19	Sep-19	Dec-19
CET1 capital ratio	10.6	10.7	10.8
Additional Tier 1 capital	2.2	2.2	2.1
Tier 1 capital ratio	12.8	12.8	12.8
Tier 2 capital	1.8	2.8	2.7
Total regulatory capital ratio	14.6	15.6	15.5
Risk weighted assets (RWA) ($bn)	420	429	442
Leverage ratio	5.7	5.7	6.0
Level 1 CET1 capital ratio	10.7	11.0	11.1
Internationally comparable ratios2
Leverage ratio (internationally	6.4	6.4	6.7
comparable)
CET1 capital ratio (internationally	16.2	15.9	16.1
comparable)

Westpac CET1 capital (lhs, $bn)

Westpac CET1 capital ratio (rhs, %)

$bn													%
55													12
50		10.0	10.0	10.6	10.1	10.5	10.4	10.6	10.4	10.6	10.5	10.7	10.8
9.3									10
45
40													8
35													6
30						44	44	45	44	45	44	46	48
	40	41	43	42	4
	38
25
20													2
15		Mar-17				Mar-18				Mar-19			0
	Dec-16	Jun-17	Sep-17	Dec-17	Jun-18	Sep-18	Dec-18	Jun-19	Sep-19	Dec-19

1 Table may not add due to rounding. 2 Internationally comparable methodology aligns with the APRA study titled 'International Capital Comparison Study' dated 13 July 2015.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

CET1 capital ratio10.8% at 31 December 2019

Capital 7

Capital update

• CET1 ratio of 10.8%, up from 10.7% at 30 September 2019
• Over the quarter, the ratio has been impacted by the $2.0bn institutional share placement, $0.8bn Share Purchase Plan, payment of the 2019 final dividend and higher RWAs
• RWA up $13.7bn mostly from an operational risk overlay and higher
  IRRBB RWA
• Level 1 CET1 ratio of 11.1%, up from 11.0% at 30 September 2019

Regulatory developments

• Final RBNZ capital review released and confirmed a revised Tier 1 requirement for WNZL of 16%
• Revisions commence from 1 July 2020 and Westpac well placed to implement the changes within the seven year transitional period
• APRA consulting on changes to the capital treatment of a parent ADI ("Level 1"), expected to reduce the Level 1 CET1 ratio by 40bps primarily from Westpac's equity investment in WNZL1
• Further clarity on revised APRA capital framework expected over 2020 including on advanced credit risk RWA and the "capital stack"

CET1 capital ratio (%)

10.6	10.7	(0.6)	0.6	0.1	10.8	11.1

1Q20 earnings, RWA

movements and other capital

movements

Mar-19	Sep-19	Final dividend	Capital raisings	Other	Dec-19	Dec-19
APRA	APRA	(net of DRP)			APRA	Level 1 APRA

1 "Revisions to APS 111 Capital Adequacy: Measurement of Capital" released on 15 October 2019. For this purpose equity investments includes Additional Tier 1 and Tier 2 capital.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

RWA higherfrom higher operational risk and interest rate risk in the banking book

Capital 8

Risk weighted assets ($bn)

419.8	428.8	(6.5)	(0.3)	10.5	6.5	3.5	442.5
			Up $13.7bn or 3%

Mar-19Sep-19	Credit	Market	IRRBB Operational Other	Dec-19
	risk	risk	risk

• Higher IRRBB from:
• • Westpac's implementation of a new IRRBB model more suited to low interest rates, which will need to be approved by APRA. Until the model is finalised and approved, Westpac is including an overlay in its IRRBB RWA. At December 2019 the overlay increased RWA by $6.3bn ($500m capital); and
  • Higher repricing and yield risk and a lower embedded gain from rising interest rates over the quarter ($4.2bn)
• Operational risk RWA higher mainly from the additional $500m capital overlay imposed by APRA in response to the issues alleged by AUSTRAC in its Statement of Claim
• Other RWA increased by $3.5bn mostly from the adoption of AASB16 Leasing from October 2019

Movement in credit risk weighted assets ($bn)

362.8	367.9	(2.2)	1.0	(3.9)	(1.4)	361.4
			Down $6.5bn or 2%

Mar-19	Sep-19	Volume, quality and	FX	Derivatives including	Model	Dec-19
		portfolio mix	impacts	mark-to-market related	change
				credit risk

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Expected timetable on various regulatory changes1	Second half	Regulatory timeline		9
	First half	Second half		First half	2022+2
	2020	2020	2021	2021
Standardised approach to	Consult, additional
quantitative impact	Finalise				Implementation
credit risk
study
Advanced approach to	Consult, additional
quantitative impact	Finalise				Implementation
credit risk
study
Operational risk	Consult and finalise			Implementation
Leverage ratio
Consult		Finalise		Implementation
Measurement of capital	Consult	Finalise				Implementation
Capital floor	Consult	Finalise				Implementation
Interest rate risk in the			Finalise				Implementation
banking book3
Level 1 equity investments	Consult and finalise			Implementation
in subsidiaries
RBNZ capital framework			Implementation date 1 July 2020 with a 7 year transition period
Related party exposures
				Implementation
Loss absorbing capacity			Further consultation on 2nd phase		2024
			Implementation

1 Regulatory change timeline based on APRA's papers "Revisions to the capital framework for authorised deposit-taking institutions" (published 12 June 2019) and "APRA's Policy Priorities" (published 30 January 2020). 2 Implementation 2022 unless otherwise stated. 3 This refers to the review of IRRBB as part of ARPA's review of the capital framework. Other changes to Westpac's IRRBB model are on a different timeframe.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Raised $12.4bn in new term funding FY20 YTD1

Funding and Liquidity 10

1Q20 funding and liquidity highlights

Term debt issuance and maturity profile2,3,4($bn)

• Average LCR for 1Q20 132% (average 132% for 4Q19)
• NSFR 112% at 1Q20 (112% at 4Q19)
• Well progressed on FY20 term funding plan, with $12.4bn issued at 31 January 2020
• Constructive market conditions at the start of calendar 2020 provided good opportunities to issue across a number of products and markets, including senior unsecured bonds, covered bonds, RMBS and Tier 2 capital securities

		42				Covered bond				Hybrid		Senior/Securitisation			Sub debt
		37				Issuance		Maturities
31				32	34							33
											26
														20					20		25						21
										12																13	8
	FY15		FY16		FY17	FY18		FY19		FY20 YTD		FY20				FY21		FY22		FY23		FY24	FY25		FY26		>FY26

New term issuance by tenor3,5(%)

Chart may not add to 100 due to rounding.

	6.5yrs		6.0yrs			5.2yrs	WAM6
	46		41			30			>5years
									5 years
						48			4 years
			42					3 years
	38
								2 years
	7	1		0.6	22
	11			1 year
	1
	7	5
	FY18		FY19			FY20 YTD

New term issuance by type (%)

Chart may not add to 100 due to rounding.

4	5	13		18				Subordinated
5
			4						debt
13		8		20				Hybrid
			24
									Securitisation
						21
73		51		41				Covered bonds
							Senior
											unsecured
	FY18			FY19			FY20 YTD

New term issuance by currency (%)

Chart may not add to 100 due to rounding.

32					20				AUD
			46
										USD
32
									EUR
21				27	80
			21						Other
		15
		7
	FY18				FY19	FY20 YTD

1 FY20 YTD is 1 October 2019 to 31 January 2020. 2 Based on residual maturity and FX spot currency translation. Includes all debt issuance with contractual maturity greater than 13 months excluding US Commercial Paper and Yankee Certificates of Deposit. 3 Contractual maturity date for hybrids and callable subordinated instruments is the first scheduled conversion date or call date for the purposes of this disclosure. 4 Perpetual sub-debt has been included in >FY26 maturity bucket. Maturities exclude securitisation amortisation. 5 Tenor excludes RMBS and ABS. 6 WAM is weighted average maturity.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Well provisioned,credit quality remains sound

Credit quality 11

Total impairment provisions ($m)

						Overlay
						Collectively assessed provisions
						Individually assessed provisions
3,949									4,042	3,995	3,922	3,987
389	3,481	3,332		3,602				215	229	171	171
		389		389	3,119	3,053
		388
						323	301
2,196
		2,225	2,275		2,344				3,405	3,333	3,339	3,333
					2,316	2,330
1364	867				869
		669			480	422		422	433	412	483
	Sep-13Sep-14Sep-15Sep-16Sep-17Sep-18	Oct-18	Mar-19	Sep-19Dec-19
											Mar-19	Sep-19	Dec-19
Loan provisions1to gross loans (bps)					56		54	55
Impaired asset provisions to impaired assets (%)			46		45	48
Collectively assessed provisions to credit RWA (bps)			98		95	99

Stressed exposures as a % of TCE

								Watchlist and substandard
2.0								90+ day past due and not impaired
	1.60						Impaired
		0.85	1.24	0.99	1.20	1.05	1.08	1.20	1.22
1.0
		0.71	0.54	0.65	0.56	0.55	0.55	0.57
		0.31
		0.26					0.33					0.48	0.48
		0.44	0.25	0.34	0.39
		0.27	0.22
		0.20	0.15	0.14	0.17	0.17
0.0
		Sep-13Sep-14		Sep-15		Sep-16		Sep-17		Sep-18		Sep-19		Dec-19

Movement in stressed exposure categories (bps)

		5	(2)	7	120	0	0	(1)	3	122
110	0
Mar-19	Impaired	90+ dpd not impaired	Substandard	Watchlist	Sep-19	Impaired	90+ dpd not impaired	Substandard	Watchlist	Dec-19

1 Includes provisions for credit commitments.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Australian consumer unsecured lending, 3% of Group loans

Credit quality 12

Australian consumer unsecured lending portfolio

	Mar-19	Sep-19	Dec-19
Lending	$20.7bn	$19.5bn	$19.2bn
30+ day delinquencies (%)	4.08	3.68	3.80
90+ day delinquencies (%)	1.87	1.77	1.82

Consumer unsecured 90+ day delinquencies up 5bps mostly due to portfolio contraction, and temporary changes to collections operations

90+ day delinquencies (%)

3.00	Total unsecured consumer lending
2.00				1.82%
1.00
0.00
Dec-17	Jun-18	Dec-18	Jun-19	Dec-19

Australian unsecured portfolio ($bn)1

Mar-19Sep-19Dec-19

												20.7	19.5	19.2
9.2	8.7	8.7					7.1	6.7	6.5
				4.4	4.1	4.0
	Credit cards		Personal loans		Auto loans		Total consumer
									(consumer)		unsecured

1 Does not include Margin Lending.

Unsecured portfolio ($bn)

Unsecured performing loans balance ($bn lhs)

25

Unsecured 90+ day delinquencies balance ($bn rhs)

20

15

10

5

0

Dec-17

Feb-18

Apr-18

Jun-18

Aug-18

Oct-18

Dec-18

Feb-19

Apr-19

Jun-19

Aug-19

Oct-19

Dec-19

3

2

1

0

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Australian mortgage portfolio performance

Credit quality 13

Australian mortgage portfolio

Mar-19Sep-19Dec-19

30+ day delinquencies (bps)	159	161	161
90+ day delinquencies (bps) (inc. impaired mortgages)	82	88	86
Consumer properties in possession	482	558	472
Mortgage loss rate annualised (bps)1	2	3	3

• Small decrease in mortgage delinquencies driven by improvements in all States
• NSW delinquencies lower at 69bps and remains below the portfolio average. WA delinquencies improved to 179 bps (from 196bps September 2019)
• Properties in possession lower from improved housing conditions and some seasonality. Properties in possession continue to be mostly in WA and Qld

Major banks' total residential mortgage impaired and past due loans ≥ 90days ($bn and %)2

$bn	0.91							%
6					0.87				1.00		Impaired assets
5				0.72			0.74		0.80		(lhs)
							Past due loans ≥90
4
										0.60
3												days (lhs)
										0.40		Total as a %
2
												residential mortgage
1											0.20		exposures (rhs)
0											0.00
		Peer 1		Peer 2		Peer 3		Westpac

Australian mortgage portfolio delinquencies (%)

Australian mortgages 90+ day delinquencies by State (%)

	90+ day past due total		90+ day past due investor			NSW/ACT		VIC/TAS
2.0	30+ day past due total		Loss rates		2.5	QLD		WA
			SA/NT		ALL
1.5					2.0
					1.5
1.0					1.0
0.5					0.5
0.0					0.0
Dec-17	Jun-18	Dec-18	Jun-19	Dec-19	Dec-17	Jun-18	Dec-18	Jun-19	Dec-19

1 Dec 19 mortgage loss rate is for the 3 months ending annualised. Mar 19 and Sept 19 mortgage loss rates are for the 6 months ending annualised. 2 Source: Pillar 3 Reports, based on APRA Residential Mortgage classification. Exposure is on and off balance sheet exposure at default. Data for Peer 2 and 3 at 31 December 2019, Peer 1 at 30 September 2019.

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Appendix 1: Definitions - Capital and liquidity

Appendix and Disclaimer 14

Capital		Liquidity

Capital ratiosAs defined by APRA (unless stated otherwise)

Internationally	Internationally comparable regulatory capital ratios are Westpac's
estimated ratios after adjusting the capital ratios determined under APRA
comparable
Basel III regulations for various items. Analysis aligns with the APRA study
ratios
titled "International capital comparison study" dated 13 July 2015

Committed	The RBA makes available to Australian Authorised Deposit-taking
liquidity facility	Institutions a CLF that, subject to qualifying conditions, can be accessed to
(CLF)	meet LCR requirements under APS210 Liquidity

High quality	Assets which meet APRA's criteria for inclusion as HQLA in the numerator
liquid assets
of the LCR
(HQLA)

As defined by APRA (unless stated otherwise). Tier 1 capital divided by 'exposure measure' and expressed as a percentage. 'Exposure measure'

Leverage ratiois the sum of on-balance sheet exposures, derivative exposures, securities financing transaction exposures and other off-balance sheet exposures

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%. 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

Risk weighted assets or 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-backed risks (i.e. market and operational risk), RWA is determined by multiplying the capital requirements for those risks by 12.5

	The NSFR is defined as the ratio of the amount of available stable funding
Net stable	(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
funding ratio	to be a reliable source of funds over a one year time horizon. The amount
(NSFR)	of RSF is a function of the liquidity characteristics and residual maturities of
	an ADI's assets and off-balance sheet activities. ADI's must maintain an
	NSFR of at least 100%

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Appendix 1: Definitions - Credit quality

Appendix and Disclaimer 15

	Includes facilities where:
	•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
90 days past	have been granted hardship assistance); or
•an order has been sought for the customer's bankruptcy or similar legal
due and not	action has been instituted which may avoid or delay repayment of its
impaired	credit obligations; and
	•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
	Loans not found to be individually impaired or significant will be collectively
	assessed in pools of similar assets with similar risk characteristics. The size
Collectively	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
assessed
characteristics similar to those in the collective pool. The historical loss
provisions
experience will be adjusted based on current observable data. Included in
(CAP)
the collectively assessed provision is an overlay provision which is
	calculated based on changes that have occurred in sectors of the economy
	or in the economy as a whole
Individually	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
assessed
estimated losses on these impaired loans is based on expected future cash
provisions
flows discounted to their present value and, as this discount unwinds,
(IAP)
interest will be recognised in the income statement
Stage 1: 12	For financial assets where there has been no significant increase in credit
risk since origination, a provision for 12 months expected credit losses is
months ECL -
recognised. Interest revenue is calculated on the gross carrying amount of
performing
the financial asset
Stage 2:	For financial assets where there has been a significant increase in credit risk
since origination but where the asset is still performing a provision for lifetime
Lifetime ECL -
expected losses is recognised. Interest revenue is calculated on the gross
performing
carrying amount of the financial asset

Stage 3	For financial assets that are non-performing a provision for lifetime
expected losses is recognised. Interest revenue is calculated on the
Lifetime ECL -
carrying amount net of the provision for ECL rather than the gross carrying
non-performing
amount
	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 value of assets to
	which recourse is held and includes:
	•	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
Impaired		approved limits by material amounts for 90 or more calendar days;
•	non-accrual assets: exposures with individually assessed impairment
assets
	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 difficulties 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
Stressed	Total of watchlist and substandard, 90 days past due and not impaired, and
exposures	impaired assets
Total committed	Represents the sum of the committed portion of direct lending (including
funds placement overall and deposits placed), contingent and pre-
exposures	settlement risk plus the committed portion of secondary market trading and
(TCE)
underwriting risk
Watchlist and	Loan facilities where customers are experiencing operating weakness and
substandard	financial difficulty but are not expected to incur loss of interest or principal

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Investor Relations Team

Investor Relations Team

Andrew Bowden	Nicole Mehalski
Head of Investor Relations	Director
[phone]		[phone]
[e-mail]	[e-mail]

Jacqueline Boddy	Louise Coughlan
Director (Debt Investor Relations)	Director
[phone]		[phone]
[e-mail]	[e-mail]

Danielle Stock	Rebecca Plackett
Senior Manager	Senior Manager
[phone]		[phone]
[e-mail]	[e-mail]

Alec Leithhead

Senior Analyst

[phone] [e-mail]

Or email: [e-mail]

Westpac Group 1Q20 Capital, Funding and Credit Quality Update

Contact us 16

www.westpac.com.au/investorcentre

Annual reports Presentations and webcasts 5 year financial summary Prior financial results

Disclaimer
	17

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 2019 Full Year Financial Results (incorporating the requirements of Appendix 4E) for the twelve months ended 30 September 2019 available at www.westpac.com.au for details of the basis of preparation of 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', 'intend', 'seek', 'would', 'should', 'could', 'continue', 'plan', 'estimate', 'anticipate', 'believe', 'probability', 'risk', '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 effect 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 2019 Annual Report for the year ended 30 September 2019 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 1Q20 Capital, Funding and Credit Quality Update