Westpac Banking : 2018 Full Year Financial Results Announcement (PDF 2MB)

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Westpac Banking Corporation ABN 33 007 457 141

ASX Appendix 4E

Results for announcement to the market1

Report for the full year ended 30 September 20182

Revenue from ordinary activities3,4 ($m) Profit from ordinary activities after tax attributable to equity holders4 ($m) Net profit for the period attributable to equity holders4 ($m)up up up 2% to $22,133 1% to $8,095 1% to $8,095
Dividend Distributions (cents per ordinary share)	Amount per security	Franked amount per security
Final Dividend Interim Dividend	94 94	94 94
Record date for determining entitlements to the dividend 14 November 2018 (Sydney) 13 November 2018 (New York)

1	This document comprises the Westpac Group 2018 Full Year Financial Results, and is provided to the Australian Securities Exchange
under Listing Rule 4.3A.
2	This report should be read in conjunction with the 2018 Westpac Group Annual Report and any public announcements made in the
period by the Westpac Group in accordance with the continuous disclosure requirements of the Corporations Act 2001 and ASX
Listing Rules.
3	Comprises reported interest income, interest expense and non-interest income.
4	All comparisons are with the reported results for the twelve months ended 30 September 2017.

ii | Westpac Group 2018 Full Year Financial Results Announcement

Media Release

5 November 2018

Westpac announces 2018 Full Year Results

Financial highlights Full Year 2018 compared to Full Year 20171

•  Statutory net profit $8,095 million, up 1%

•  Cash earnings $8,065 million, little changed

•  Cash earnings per share, 236.2 cents, down 1%

•  Cash return on equity (ROE) 13.0%, at the lower end of the range Westpac is seeking to achieve

•  Unchanged, final, fully franked dividend of 94 cents per share (cps), (full year, fully franked dividend of 188 cps)

•  Common equity Tier 1 capital ratio 10.6%, above APRA's unquestionably strong benchmark

•  Bank Levy $378 million (pre-tax), effective tax rate including Bank Levy 33%

Westpac Group CEO, Mr Brian Hartzer said, "In a difficult year, Westpac delivered a flat financial result.

"While the economic environment remains supportive, this result reflects the tough operating conditions for banks, with higher regulatory, compliance, and funding costs, and increased competitive pressure, particularly in the second half. In addition, provisions for customer refunds and related costs, along with legal costs, were $281 million after tax (equivalent to 3.5% of cash earnings) as we continued to work through regulatory investigations, remediations, and putting things right for customers.

"In response to these challenges, we've lifted productivity savings 16% to $304 million over the year.

"While earnings were flat, our balance sheet remains strong across all dimensions of asset quality, capital, and liquidity. We have also made substantial progress on our service-led strategy and digital transformation program.

"Westpac's mortgage book remains fundamentally sound, with around 70% of Australian customers ahead on repayments2 and 90 day delinquencies remaining low.

"Results for the Business Bank and New Zealand divisions were the standout. The Business Bank delivered cash earnings growth of 8% supported by good growth in the small business sector and declining impairment charges. New Zealand's result benefited from the completion of a two-year restructuring program, with cash earnings up 5% (NZD). WIB maintained good discipline on margin and costs, but cash earnings were down 6% mainly due to lower markets income.

"Elsewhere, conditions were more difficult. Provisions for customer refunds were higher for BT Financial Group, and the Consumer division experienced both increased funding costs and higher remediation costs.

1

2

Reported throughout this release on a cash earnings basis unless otherwise stated. For an explanation of cash earnings and reconciliation to reported results refer to pages 4-6 and 125-128 of the Group's 2018 Full Year Financial Results Announcement. Including offset balances.

Westpac Group 2018 Full Year Financial Results Announcement | iii

"Out of a total investment spend of $1.4 billion, we invested more than $800 million in system upgrades, digital transformation, and innovation to support our ambition to be one of the world's great service companies. Our focus has been on delivering our technology platforms, while simplifying and automating processes to make banking easier for customers. We have already migrated 100 applications onto our cloud infrastructure platforms which are now largely complete. Additionally we have over 120 APIs in production and another 180 in development.

"These capabilities support our Customer Service Hub which is progressing to schedule. While delivering these major projects, we have also significantly improved system reliability and response times, helping our people to provide better service to customers.

"We have introduced a number of new digital initiatives including Siri for Westpac, mobile cheque deposits, new online home loan applications, and E-Sign which allows a customer to complete a mortgage application online or via their mobile. Consumer payment innovations include partnerships with Google Pay, Garmin, Fit Bit, and Beem It-a mobile payment app which enables free and instant payments for anyone in Australia with a debit card, regardless of whom they bank with.

"Strategic investments in companies including Assembly Payments, Zip, Uno, and Open Agent, as well as Reinventure's growing portfolio of Fintech startups, position Westpac to harness the benefits of data and rapid technological change while bringing new value-added services to our customers," Mr Hartzer said.

Royal Commission

Mr Hartzer said Westpac continues to focus on addressing issues that have been highlighted during the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.

"We remain committed to getting things right for our customers and have made good progress on implementing the ABA's Six Point Plan. We have reinforced our values and service culture to all employees through additional training, introduced the Sedgwick remuneration recommendations for employees two years earlier than required, removed grandfathered commission payments for our salaried financial planners, and launched a simpler and more transparent pricing structure for BT's investment platform, Panorama.

"Importantly, our new Customer and Corporate Relations division has been established to oversee complaints handling across the Group, and to improve the way we deal with customer issues, building on the important role of our Customer Advocate," Mr Hartzer said.

Results

Strong balance sheet	Margin management
CET1 capital ratio (%)	Net interest margin (NIM) (%)
 10.6% CET1 capital ratio, above APRA's 'unquestionably strong' benchmark  Liquidity ratios above regulatory minimums of 100%: - Liquidity coverage ratio 133% - Net stable funding ratio 114%	 Net interest margin up 2bps over the year  A rise in Treasury & Markets income contributed 1bp to NIM, and margins excluding Treasury & Markets also increased 1bp  Higher lending and deposit spreads were largely offset by the full period impact of the Bank Levy

iv | Westpac Group 2018 Full Year Financial Results Announcement

Credit quality
 Asset quality remains sound  Stressed assets to total committed exposures (TCE) were up 3bps over the year  Impaired asset provision coverage steady at 46%			Stressed assets to TCE (%)
Mortgage quality
 Mortgage book fundamentally sound  90+ day delinquencies up 5bps over the year  Australian properties in possession reduced to 396, out of a portfolio of about 1.6 million loans			Australian mortgage portfolio delinquencies (%) Introduced new hardship treatment
Divisional performance - cash earnings
Division	FY18 ($m)	% change FY17		% change 2H18 vs 1H18	Comments FY17-FY18
Consumer Bank	3,140	0		(17)	Flat cash earnings (down $15 million) 4 per cent loan growth and lower impairments offset by lower margins, increased provisions for customer refunds and reduced card and ATM fees
Business Bank	2,159	8		flat	Core earnings up 5 per cent with disciplined growth, higher margins (up 5bps) and lower impairment charges
BT Financial Group	645	(12)		(40)	Increased remediation costs and lower margins on funds Partially offset by higher funds and fee income, and sound growth in private wealth
Westpac Institutional Bank	1,086	(6)		(3)	Revenue impacted by lower markets income and fewer large transactions Margins well managed (up 6bps)
Westpac New Zealand ($NZ)	1,017	5		11	Core earnings up 10 per cent, benefiting from two year restructuring program (lower expenses) and a 12bps increase in margins Small impairment charge compared to a benefit in prior year

Westpac Group 2018 Full Year Financial Results Announcement | v