Form 6-K Westpac Banking Corp

6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]

Published: 2017-11-07 06:09:12
Submitted: 2017-11-07
Period Ending In: 2017-11-07
a17-26037_16k.htm 6-K


 

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

 

November 7, 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):
___________

 



 

Index to Exhibits

 

Exhibit
No.

 

Description

 

 

 

1

 

Westpac Group 2017 Full Year Financial Results - Incorporating the requirements of Appendix 4E

2

 

Westpac Group 2017 Full Year Financial Results – Presentation & Investor Discussion Pack

3

 

Westpac 2017 Full Year Dividend Details

 



 

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:    November 7, 2017

By:
 
/s/ Sean Crellin
                           

 

Sean Crellin

 

Director – Corporate, Legal and

Secretariat

 


a17-26037_1ex1.htm EX-1


Exhibit 1

 

2017 FULL YEAR FINANCIAL RESULTS INCORPORATING THE REQUIREMENTS OF APPENDIX 4E Left to right: Barangaroo, Sydney Westpac branch at corner of Market and Clarence Streets, Sydney Bank of New South Wales Sydney office, 1853 Westpac Banking Corporation ABN 33 007 457 141

 


Results announcement to the market ASX Appendix 4E Results for announcement to the market1 Report for the full year ended 30 September 20172 13 November 2017 (New York) 1 This document comprises the Westpac Group 2017 Full Year Financial Results and is provided to the Australian Securities Exchange under Listing Rule 4.2A. 2 This report should be read in conjunction with the Westpac Group Annual Report 2017 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 2016. ii | Westpac Group 2017 Full Year Financial Results Announcement Revenue f rom ordinary activities3,4 ($m) up 4% to $21,802 Prof it f rom ordinary activities af ter tax attributable to equity holders4 ($m) up 7% to $7,990 Net prof it f or the period attributable to equity holders4 ($m) up 7% to $7,990 Divide nd Dis tributions (ce nts pe r or dinary s har e ) Amount per security Franked amount per security Final Dividend 94 94 Interim Dividend 94 94 Record date f or determining entitlements to the dividend 14 November 2017 (Sydney)

 


Results announcement to the market Media release and outlook Media Release 6 November 2017 Westpac delivers another solid result Financial highlights Full Year 2017 compared to Full Year 20161 Westpac Group CEO, Mr Brian Hartzer said: “This is another solid result. We have continued to successfully navigate a challenging environment while our strategy builds momentum. “Our primary goal in 2017 was to carefully balance growth and returns, while meeting all of our new macro-prudential regulatory requirements. We achieved the required macro-prudential targets for home lending. The credit quality of our loan portfolio is in great shape with stressed assets reducing during the year. “Our balance sheet strength is a particular highlight: with our CET1 capital ratio of 10.6% we are already above APRA’s ‘unquestionably strong’ benchmark of 10.5%, well in advance of the January 2020 deadline. We also met the new standard for the Net Stable Funding Ratio (NSFR), ahead of the January 2018 deadline. “Our portfolio of businesses continues to perform well. WIB was the standout, with a particularly strong First Half, and our Consumer and Business Banks continue to deliver good earnings growth. New Zealand also performed well, benefiting from improved credit quality. BT Financial Group had a softer year – while the underlying business continued to grow, results were impacted by some infrequent items and higher claims.” Mr Hartzer said the Group result also included a provision for customer payments to address legacy issues. “As part of our ‘get it right, put it right’ program we’ve been reviewing our products and services and the way we have engaged with our customers. Where we have found issues that we need to put right, we ensure that no customer has been disadvantaged from those past practices. For example, a review into our superannuation disclosure is resulting in payments to some customers with pre-existing conditions who did not have the benefit of our improved disclosure practices and who 1 Reported on a cash earnings basis unless otherwise stated. For an explanation of cash earnings and reconciliation to reported results refer to pages 6, 7 and 116-119 of the Group’s 2017 Full Year Financial Results Announcement. Statutory net profit $7,990 million, up 7% Cash earnings $8,062 million, up 3% Cash earnings per share 239.7 cents, up 2% Cash return on equity (ROE) 13.8%, within target range Unchanged final fully franked dividend of 94 cents per share (Full year dividend of 188 cents per share, unchanged) Common equity Tier 1 capital ratio of 10.6% Bank Levy $95 million (pre-tax)

 


Results announcement to the market previously had their claims denied. We are also refunding customers who were entitled to certain product discounts, but may not have been aware that they needed to specifically request them. The cash earnings impact of these changes was $118 million this year, equivalent to 1.5% of earnings. “Despite these challenges, our business is in excellent shape: customer satisfaction has risen, employee engagement is above the global high performing benchmark, and we have achieved our goal of welcoming one million new customers since 2015. We’ve continued to improve the functionality and convenience of our digital channels, our wealth system Panorama added around $4 billion funds under administration in FY17, and we’ve originated our first mortgages using our new customer service hub – an important milestone in the modernisation of our technology infrastructure. At a time of substantial change in our industry, we’ve got a clear strategic agenda that is delivering for both customers and shareholders.” (NIM) (%) (%) over FY17 iv | Westpac Group 2017 Full Year Financial Results Announcement Materially strengthened balance sheet Margins well managed CET1 capital ratio (%) Conservative balance sheet 10.6% CET1 capital ratio is already ahead of APRA’s ‘unquestionably strong’ benchmark; CET1 internationally comparable ratio of 16.20% - top quartile of banks globally; Liquidity ratios well above 100% regulatory requirements: - LCR 124%; and - NSFR 109%. Net interest margin Net interest margin 4 basis points lower Margins 4 basis points lower than 12 months ago; excluding Treasury and Markets NIM is down 3 basis points; Margins ex-markets decline due to: - Deposit competition and higher wholesale funding costs; - Introduction of Bank Levy; - Impact of increasing liquidity balances and lower interest rates; and Some asset repricing contributed to rise in margins in the Second Half. Tight cost control Disciplined balance sheet growth Expenses managed tightly; lower end of 2-3% target range Expenses up 2% over the year; Expense to income ratio 42%; Cost to assets improved 3 basis points over the year; Productivity savings of $262 million offset business as usual expense growth; and Most of the cost increase due to investment and regulatory and compliance costs.

 


Results announcement to the market FY17 Division change 2H17 Highlights (FY17 – FY16) 3,104 4 5 Bank productivity with expense growth of 2% versus revenue growth of 4%. 2,099 6 8 up 6% and deposits up 4%). Improved fee income. Expense to income Bank BT payments, higher general insurance claims (Cyclone Debbie), lower Group quality. Disciplined on growth, saw margins increasing. Costs down 2% Institutional 1,304 18 (14) Second Half, impacting Full Year result. Westpac Group 2017 Full Year Financial Results Announcement | v Divisional performance – cash earnings % %change ($m)FY16vs 1H17 ConsumerGood balance sheet growth (loans up 5%, deposits up 6%), improved BusinessDisciplined growth (loans to small and medium enterprises ratio 35%. Positive trends in FUM and FUA - up 10% and 6% respectively - as well as in life insurance in-force premiums (+10%). Financial771(11)(6)Earnings lower from infrequent items including customer refund Advice income, margin impact of migrating to MySuper products, and higher regulatory/compliance costs. WestpacStrong result supported by higher markets income and improved asset Bankreflecting business model change in 2016. Markets income down in WestpacHigher result supported by impairment benefit of $76 million from New Zealand970910improved asset quality. Margins lower from intense deposit competition. ($NZ) Credit quality remains sound Stressed assets to total committed exposures (TCE) lower over year Conservative impaired asset provision coverage at 46%; Lower impaired assets to gross loans ratio - down 10 basis points over the year to 0.22%; and Impairment charges (13 basis points of average loans annualised) down 24% over the year to $853 million.

 


Results announcement to the market Dividends The Westpac Group Board has determined an unchanged final, fully franked dividend of 94 cents per share to be paid on 22 December 2017. The final dividend represents a payout ratio of 78.7% of cash earnings. The Bank Levy cost $95 million for the Full Year. The Board considered a range of factors including the impact of the Bank Levy in determining the dividend. The Bank Levy will be paid out of retained earnings and is equivalent to two cents per share. The dividend reinvestment plan (DRP) will continue to apply and there will be no discount to the market price. Shares will be issued to satisfy the DRP. Outlook Mr Hartzer said the outlook for Australia remains positive overall, with GDP growth expected to be slightly above trend at around 2.5% in 2018. However, the growth outlook will remain mixed across the country. He said global growth is expected to consolidate around 3.5%. “Economic growth is picking up around the world – most major markets are now growing, which is something we haven't seen for a while. In the US, in France, and in other markets around the world governments are cutting taxes, cutting red tape, and investing in infrastructure. It's a good reminder that policy certainty is a great spur to business investment. “Business in Australia is ready to invest, however many of our customers are holding back because of policy uncertainty. Whether it's on energy policy, transport infrastructure, or fixing up the tax arrangements between the states, Governments at all levels need to come together with business for a common purpose to provide the certainty that's needed to drive confidence.” Mr Hartzer said Westpac’s consistent focus on Australia and New Zealand over a long period means its high quality portfolio was strongly positioned. “We remain positive about the Australian housing market, although we expect price growth to moderate through 2018. 90+ day delinquencies remain low by historical measures and our home loan customers continue to take advantage of low interest rates with more than 70% of customers ahead on their repayments1. “We have a strong customer franchise which continues to grow, we are taking advantage of the opportunities created by a digital world, and we are well-positioned in the faster growing parts of our economy. These factors, plus a highly-engaged culture that continues to attract great people, gives me confidence about Westpac’s outlook and our ability to outperform over the long term.” For Further Information David Lording Head of Media Relations M. 0419 683 411 Andrew Bowden Head of Investor Relations T. 02 8253 4008 M. 0438 284 863 1 Loans ahead on payments exclude equity/line of credit products as there are no scheduled principal payments. Includes mortgage offset balances. vi | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Index In this announcement references to ‘Westpac’, ‘WBC’, ‘Westpac Group’, ‘the Group’, ‘we’, ‘us’ and ‘our’ are to Westpac Banking Corporation and its controlled entities, unless it clearly means just Westpac Banking Corporation. All references to $ in this document are to Australian dollars unless otherwise stated. Financial calendar Final results announcement Ex-dividend date for final dividend Record date for final dividend (Sydney) Final dividend payable 6 November 2017 13 November 2017 14 November 2017 22 December 2017 Westpac Group 2017 Full Year Financial Results Announcement | 1 01Group results3 1.1Reported results3 1.2Key financial information4 1.3Cash earnings results5 1.4Market share and system multiple metrics8 02Review of Group operations9 2.1Performance overview10 2.2Review of earnings19 2.3Credit quality34 2.4Balance sheet and funding36 2.5Capital and dividends41 2.6Sustainability performance48 03Divisional results50 3.1Consumer Bank50 3.2Business Bank52 3.3BT Financial Group (Australia)54 3.4Westpac Institutional Bank58 3.5Westpac New Zealand (NZ$)60 3.6Group Businesses62 042017 Full Year financial report64 4.1Significant developments65 4.2Consolidated income statement73 4.3Consolidated statement of comprehensive income74 4.4Consolidated balance sheet75 4.5Consolidated statement of changes in equity76 4.6Consolidated cash flow statement78 4.7Notes to the consolidated financial statements79 4.8Statement in relation to audit of the financial statements107 05Cash earnings financial information108 06Other information121 6.1Disclosure regarding forward-looking statements121 6.2References to websites122 6.3Credit ratings122 6.4Dividend reinvestment plan122 6.5Changes in control of Group entities122 6.6Financial calendar and Share Registry details124 6.7Exchange rates129 07Glossary131

 


2017 Full Year financial results [This page is intentionally blank]. 2 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Group results 1.0 1.1 Group results Reported results Reported net profit attributable to owners of Westpac Banking Corporation is prepared in accordance with the requirements of Australian Accounting Standards (AAS) and regulations applicable to Australian Authorised Deposit-taking Institutions (ADIs). Net profit attributable to owners of Westpac Banking Corporation for Full Year 2017 was $7,990 million, an increase of $545 million or 7% compared to Full Year 2016. Features of this result included an $817 million or 4% increase in net operating income before operating expenses and impairment charges, a $217 million or 2% increase in operating expenses and a $271 million or 24% decrease in impairment charges. Net interest income increased $368 million or 2% compared to Full Year 2016, with total loan growth of 3%, primarily from Australian housing which grew 6%. Reported net interest margin decreased 4 basis points to 2.06% from higher funding costs, the impact of lower interest rates and lower Treasury earnings, partly offset by loan repricing. Net interest income, loans, deposits and other borrowings and net interest margins are discussed further in Sections 2.2.1 to 2.2.4. Non-interest income increased $449 million or 8% compared to Full Year 2016 primarily due to a $279 million gain associated with the sale of shares in BT Investment Management Limited (BTIM), a rise in trading income of $78 million and the impact of volatility in economic hedges of $140 million. These increases were partly offset by provisions for customer refunds and payments and lower wealth management income. Non-interest income is discussed further in Section 2.2.5. Operating expenses increased $217 million or 2% compared to Full Year 2016. The rise in operating expenses includes expenses associated with the further sell down of BTIM shares, annual salary and rental increases, higher technology expenses related to the Group’s investment program and a rise in regulatory and compliance costs. These increases were partially offset by productivity benefits. Operating expenses are discussed further in Section 2.2.8. Impairment charges were $271 million lower or 24% compared to Full Year 2016. Asset quality remained sound, with stressed exposures as a percentage of total committed exposures at 1.05%, down 15 basis points over the year. The decrease in impairment charges was primarily due to significantly lower large individual provisions. Additional provisioning for these larger facilities was required in Full Year 2016, following the downgrade to impaired. Impairment charges are discussed further in Section 2.2.9. The effective tax rate of 30.6% in Full Year 2017 was higher than the Full Year 2016 effective tax rate of 29.9% as Full Year 2016 benefited from the finalisation of some prior period taxation matters. Income tax expense is discussed further in Section 2.2.10. 1 Percentage movement represents an increase / (decrease) to the relevant comparative period. Westpac Group 2017 Full Year Financial Results Announcement | 3 $m % Mov't1 Half YearSept 17 - March 17Mar 17 % Mov't1 Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income Net operating income before operating expenses and impairment charges Operating expenses Net profit before impairment charges and income tax expense Impairment charges Profit before income tax Income tax expense Net profit for the period Net profit attributable to non-controlling interests NET PROFIT ATTRIBUTABLE TO OWNERS OF WESTPAC BANKING CORPORATION 7,903 3,130 7,6134 3,156(1) 15,516 6,286 15,1482 5,8378 11,033 (4,801) 10,7692 (4,633)4 21,802 (9,434) 20,9854 (9,217)2 6,232 (360) 6,1362 (493)(27) 12,368 (853) 11,7685 (1,124)(24) 5,872 (1,787) 5,6434 (1,731)3 11,515 (3,518) 10,6448 (3,184)10 4,085 (2) 3,9124 (5)(60) 7,997 (7) 7,4607 (15)(53) 4,083 3,9075 7,990 7,4457

 


2017 Full Year financial results Group results 1.2 Key financial information 224.6 3,313 188 13.32% 55,896 56,471 13.90 6 1 - 33bps 5 4 5 1.91% (2bps) 0.19% 2.10% 721,843 43.92% (2bps) (4bps) 4 (65bps) 9.48% 14.43% 358,812 410,053 134% 108bps 177bps (3) (1) large 0.32% 3.49% (10bps) (110bps) 49.42% 976,883 1.20% 54bps 0.61% 1.11% 76bps (312bps) 3 (15bps) (9bps) 1bps 46bps - 661,926 839,202 513,071 781,021 58,181 3 2 4 1 5 63.8 128.2 973 503 11 7 10 1 1 Weighted average number of fully paid ordinary shares listed on the ASX for the relevant period less average Westpac shares held by the Group (“Treasury shares”). 2 Comparatives have been restated to reflect the IFRS interpretation committee updated treatment of intangible assets with an indefinite useful life (First Half 2017: $201 million; Second Half 2016: $201 million). 3 Refer Glossary for definition. 4 Spot balances. 5 Averages are based on six months for the halves and twelve months for the full year. 4 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Shareholder value Earnings per ordinary share (cents) Weighted average ordinary shares (millions)1 Fully franked dividends per ordinary share (cents) Return on average ordinary equity Average ordinary equity ($m) Average total equity ($m) Net tangible asset per ordinary share ($)2 Business performance Interest spread Benefit of net non-interest bearing assets, liabilities and equity Net interest margin Average interest-earning assets ($m) Expense to income ratio Capital, funding and liquidity Common equity Tier 1 capital ratio - APRA Basel III - Internationally comparable3 Credit risk weighted assets (credit RWA) ($m) Total risk weighted assets (RWA) ($m) Liquidity coverage ratio (LCR) Asset quality Gross impaired assets to gross loans Gross impaired assets to equity and total provisions Gross impaired asset provisions to gross impaired assets Total committed exposures (TCE) ($m) Total stressed exposures as a % of TCE Total provisions to gross loans Mortgages 90+ day delinquencies Other consumer loans 90+ day delinquencies Collectively assessed provisions to credit RWA Balance sheet4 ($m) Loans Total assets Deposits and other borrowings Total liabilities Total equity Wealth Management Average Funds Under Management ($bn)5 Average Funds Under Administration ($bn)5 Life insurance in-force premiums (Australia) General insurance gross written premiums (Australia) 116.84 3,3441 94-13.57%15bps 57,7443 57,7683 14.243 1.88%2bps 0.17%-2.05%2bps 744,7832 43.02%49bps 9.97%59bps 15.34%86bps 352,713(1) 404,382-125%(100bps) 0.30%(8bps) 3.15%(76bps) 52.07%large 984,7942 1.14%(9bps) 52bps(7bps) 0.63%(1bps) 1.55%2bps 77bps(1bps) 666,9463 839,9931 522,5132 780,6211 59,3723 68.38 134.94 1,0304 2503 121.2 238.0 3,366 3,355 94 188 13.72% 13.65% 59,364 58,556 59,380 58,576 14.66 14.66 1.90% 1.89% 0.17% 0.17% 2.07% 2.06% 759,764 752,294 43.51% 43.27% 10.56% 10.56% 16.20% 16.20% 349,258 349,258 404,235 404,235 124% 124% 0.22% 0.22% 2.39% 2.39% 46.30% 46.30% 1,005,882 1,005,882 1.05% 1.05% 45bps 45bps 0.62% 0.62% 1.57% 1.57% 76bps 76bps 684,919 684,919 851,875 851,875 533,591 533,591 790,533 790,533 61,342 61,342 73.7 71.0 140.2 137.4 1,068 1,068 258 508

 


 

2017 Full Year financial results Group results 1.3 Cash earnings results Throughout this results announcement, reporting and commentary of financial performance for Second Half 2017, First Half 2017, Full Year 2017 and Full Year 2016 will refer to ‘cash earnings results’, unless otherwise stated. Section 4 is prepared on a reported basis. A reconciliation of cash earnings to reported results is set out in Section 5, Note 8. 1.3.1 Key financial information – cash earnings basis 1 In 2017 the Group changed the accounting treatment for Westpac New Zealand credit card rewards scheme to align with Group practice. This change has no impact on cash earnings or reported profit but it has led to the restatement of non-interest income and operating expenses within cash earnings. (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 2 Capital charge is based on an 11% cost of capital and is unchanged from prior periods. 3 Weighted average ordinary shares – cash earnings: represents the weighted average number of fully paid ordinary shares listed on the ASX for the relevant period. 4 Average tangible ordinary equity is calculated as average ordinary equity less goodwill and other intangible assets (excluding capitalised software). Westpac Group 2017 Full Year Financial Results Announcement | 5 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Shareholder value Cash earnings per ordinary share (cents) Economic profit ($m)2 Weighted average ordinary shares (millions)3 Dividend payout ratio Cash earnings on average ordinary equity (ROE) Cash earnings on average tangible ordinary equity (ROTE) Average ordinary equity ($m) Average tangible ordinary equity ($m)4 Business performance Interest spread Benefit of net non-interest bearing assets, liabilities and equity Net interest margin Average interest-earning assets ($m) Expense to income ratio Full time equivalent employees (FTE) Revenue per FTE ($ '000's) Effective tax rate Impairment charges Impairment charges to average loans annualised Net write-offs to average loans annualised 119.9 1,864 3,375 78.86% 13.59% 16.27% 59,364 49,582 1.92% 0.18% 2.10% 759,764 42.65% 35,096 307 30.60% 11bps 25bps 119.8-1,910(2) 3,3521 78.57%29bps 13.95%(36bps) 16.83%(56bps) 57,7443 47,8634 1.90%2bps 0.17%1bps 2.07%3bps 744,7832 41.83%82bps 35,290(1) 306-30.26%34bps 15bps(4bps) 19bps6bps 239.7 3,774 3,364 78.71% 13.77% 16.55% 58,556 48,725 1.91% 0.18% 2.09% 752,294 42.24% 35,096 613 30.43% 13bps 22bps 235.52 3,774-3,3221 80.30%(159bps) 13.99%(22bps) 17.06%(51bps) 55,8965 45,8586 1.94%(3bps) 0.19%(1bps) 2.13%(4bps) 721,8434 42.06%18bps 35,580(1) 6032 29.91%52bps 17bps(4bps) 16bps6bps $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income1 Net operating income Operating expenses1 Core earnings Impairment charges Operating profit before income tax Income tax expense Net profit Net profit attributable to non-controlling interests Cash earnings 8,011 2,784 7,6934 3,068(9) 15,704 5,852 15,3482 5,888(1) 10,795 (4,604) 10,761-(4,501)2 21,556 (9,105) 21,2362 (8,931)2 6,191 (360) 6,260(1) (493)(27) 12,451 (853) 12,3051 (1,124)(24) 5,831 (1,784) 5,7671 (1,745)2 11,598 (3,529) 11,1814 (3,344)6 4,047 (2) 4,0221 (5)(60) 8,069 (7) 7,8373 (15)(53) 4,045 4,0171 8,062 7,8223

 


2017 Full Year financial results Group results Cash earnings policy In assessing financial performance, including divisional results, Westpac Group uses a measure of performance referred to as ‘cash earnings’. Cash earnings is viewed as a measure of the level of profit that is generated by ongoing operations and is therefore considered in assessing distributions, including dividends. Cash earnings is neither a measure of cash flow nor net profit determined on a cash accounting basis, as it includes both cash and non-cash adjustments to statutory net profit. Management believes this allows the Group to more effectively assess performance for the current period against prior periods and to compare performance across business divisions and across peer companies. To determine cash earnings, three categories of adjustments are made to reported results: Material items that key decision makers at the 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; and Accounting reclassifications between individual line items that do not impact reported results. A full reconciliation of reported results to cash earnings is set out in Section 5, Note 8. Reconciliation of reported results to cash earnings 7,445 158 15 203 (9) - 10 7 (13) (100) (66) large - 110 Outlined below are the cash earnings adjustments to the reported result: Amortisation of intangible assets: The merger with St.George and the acquisition of select Lloyds’ Australian businesses resulted in the recognition of identifiable intangible assets. Notional identifiable intangible assets were also recognised within the carrying value of BTIM during the period this investment was equity accounted. 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. This amortisation (excluding capitalised software) is a cash earnings adjustment because it is a non-cash flow item and does not affect cash distributions available to shareholders; Acquisition, transaction and integration expenses: Costs associated with the acquisition of select Lloyds’ Australian businesses were treated as a cash earnings adjustment as they do not reflect the earnings expected from the acquired businesses following the integration period; Fair value on economic hedges (which do not qualify for hedge accounting under AAS) comprise: - The unrealised fair value (gain)/loss on foreign exchange hedges of future New Zealand earnings impacting non-interest income is reversed in deriving cash earnings as they may create a material timing difference on reported results but do not affect the Group’s cash earnings over the life of the hedge; and - The unrealised fair value (gain)/loss on hedges of accrual accounted term funding transactions are reversed in deriving cash earnings as they may create a material timing difference on reported results but do not affect the Group’s cash earnings over the life of the hedge. Ineffective hedges: 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; 6 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17-March 17 Mar 17 % Mov't Full Year Sept 17-Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 NET PROFIT ATTRIBUTABLE TO OWNERS OF WESTPAC BANKING CORPORATION Amortisation of intangible assets Acquisition, transaction and integration expenses Fair value (gain)/loss on economic hedges Ineffective hedges Sale of BTIM shares Treasury shares Total cash earnings adjustments (post-tax) Cash earnings 3,9075 73(12) --7large (4)large --34(138) 4,083 64 - 62 20 (171) (13) 7,990 137 - 69 16 (171) 21 (38) 110(135) 72 377(81) 4,045 4,0171 8,062 7,8223

 


2017 Full Year financial results Group results Sale of BTIM shares: During Second Half 2017 the Group recognised a gain, net of costs, associated with the sale of shares in BTIM. Consistent with the treatment of prior gains from sale, this gain has been treated as a cash earnings adjustment given its size and that it does not reflect ongoing operations. The Group has indicated that it may sell the remaining 10% shareholding in BTIM at some future date. Any future gain or loss on such a sale will similarly be excluded from the calculation of cash earnings; Treasury shares: 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 cannot 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 transactions which are re-valued in determining income; Accounting reclassifications between individual line items that do not impact reported results comprise: - In 2017 the Group changed the accounting treatment for Westpac New Zealand credit card rewards scheme to align with Group practice. This change has no impact on cash earnings or reported profit but it has led to the restatement of non-interest income and operating expenses, within cash earnings, in prior periods. Components of reported profit have not been changed; - Policyholder tax recoveries: Income and tax amounts that are grossed up to comply with the AAS accounting standard covering Life Insurance Business (policyholder tax recoveries) are reversed in deriving income and taxation expense on a cash earnings basis; and - Operating leases: Under AAS rental income on operating leases is presented gross of the depreciation of the assets subject to the lease. These amounts are offset in deriving non-interest income and operating expenses on a cash earnings basis. The guidance provided in Australian Securities and Investments Commission (ASIC) Regulatory Guide 230 has been followed when presenting this information. Audit of 2017 Full Year financial report PricewaterhouseCoopers has audited the financial statements contained within the Westpac 2017 Full Year financial report and has issued an unmodified audit opinion. This Full Year Results Announcement has not been subject to audit by PricewaterhouseCoopers. The financial information contained in this Full Year Results Announcement includes financial information extracted from the audited financial statements together with financial information that has not been audited. The cash earnings disclosed as part of this Full Year Results Announcement have not been separately audited, however they are consistent with the financial information included in Note 2 of the audited 2017 Full Year financial report. Westpac Group 2017 Full Year Financial Results Announcement | 7

 


2017 Full Year financial results Group results 1.4 1.4.1 Market share and system multiple metrics Market share 1.4.2 System multiples 1 Source: Australian Prudential Regulation Authority (APRA). 2 Includes securitised loans. 3 Comparatives have been updated to reflect amendments to APRA and RBA data. 4 Source: Reserve Bank of Australia (RBA). 5 Retail deposits as measured by the RBA, financial system includes financial corporations’ deposits. 6 New Zealand comprises New Zealand banking operations. 7 Source: Reserve Bank of New Zealand (RBNZ). 8 During First Half 2017 the RBNZ extended the definition of Deposits to include wholesale and foreign exchange deposits. Comparative numbers have not been restated for this change. 9 Market Share Funds under Management / Funds under Administration based on published market share statistics from Strategic Insight as at 30 June 2017 (for Full Year 2017), as at 31 December 2016 (for First Half 2017) and 30 June 2016 (for Full Year 2016) 31 December 2015 (First Half 2016) and represents the BT Wealth business market share reported at these times. 10 Source: Life Insurance – Strategic Insight as at 30 June 2017 (for Full Year 2017), 31 December 2016 (for First Half 2017), 30 June 2016 (for Second Half 2016), 31 December 2015 (for First Half 2016). 11 n/a indicates that system growth or Westpac growth was negative. 8 | Westpac Group 2017 Full Year Financial Results Announcement Full Year Half Year Half YearFull Year Half Year Half Year Sept 17 March 17Sept 16Sept 16 March 16 Sept 17 Australia Banking system (APRA)1 Housing credit2 Cards11 Household deposits Business deposits3 Financial system (RBA)4 Housing credit2 Business credit3,11 Retail deposits3,5 New Zealand (RBNZ)6,7 Consumer lending Deposits8,11 0.9 n/a 1.2 1.1 0.9 0.5 1.0 0.6 0.1 1.10.81.21.11.2 n/a1.1n/an/a1.4 1.31.11.11.01.2 1.11.01.91.54.1 1.00.81.21.11.2 1.0n/a1.21.41.1 1.30.71.52.10.9 0.60.70.80.80.8 1.4n/a0.80.11.1 As at As atAs atAs at 31 March30 Sept 31 March 201720162016 30 Sept 2017 Australia Banking system (APRA)1 Housing credit2,3 Cards Household deposits Business deposits Financial system (RBA)4 Housing credit2 Business credit Retail deposits3,5 New Zealand (RBNZ)6,7 Consumer lending Deposits8 Business lending Australian Wealth Management9 Platforms (includes Wrap and Corporate Super) Retail (excludes Cash) Corporate Super Australian Life Insurance10 Life Insurance - in-force Life Insurance - new business 25% 23% 23% 20% 23% 19% 22% 19% 19% 16% 19% 18% 13% 10% 12% 25%25%25% 23%23%23% 23%23%23% 20%20%19% 23%23%23% 19%19%19% 21%22%21% 19%20%20% 19%20%21% 17%17%16% 19%19%19% 18%18%18% 14%13%13% 10%10%10% 12%11%11%

 


2017 Full Year financial results Review of Group operations 2.0 Review of Group operations Movement in cash earnings ($m) Second Half 2017 – First Half 2017 +28 First Half 2017 cash earnings Net interest income Non-interest income Operating expenses Impairment charges Tax & non-controlling interests Second Half 2017 cash earnings Movement in cash earnings ($m) Full Year 2017– Full Year 2016 +240 Full Year 2016 cash earnings Net interest income Non-interest income Operating expenses Impairment charges Tax & non-controlling interests Full Year 2017 cash earnings Westpac Group 2017 Full Year Financial Results Announcement | 9 356 62 7,822 (174) 271 (36)8,0 (177) 4,017 133 4,045 (36) (284) (103) 318

 


2017 Full Year financial results Review of Group operations 2.1 Performance overview Overview Westpac Group generated cash earnings of $8,062 million in Full Year 2017, 3% higher than Full Year 2016. Half on half, cash earnings were little changed with Second Half 2017 cash earnings of $4,045 million, $28 million higher than First Half 2017 cash earnings of $4,017 million. The rise in cash earnings over the year was supported by a 1% rise in core earnings and a 24% reduction in impairment charges. The 1% increase in core earnings was due to a 2% rise in net interest income, a small decline in non-interest income and a 2% rise in expenses. The 3% growth in cash earnings translated to 2% growth in earnings per share following new shares issued to satisfy the dividend reinvestment plan (DRP). Westpac has continued to manage the business in a balanced way across strength, return, productivity and growth. This year, given evolving regulatory requirements for capital and liquidity along with macro-prudential restrictions placed on mortgage lending the Group continued to prioritise strength and return over growth. This focus delivered a lift in Westpac’s CET1 capital ratio to be above the 10.5% APRA ‘unquestionably strong’ benchmark, ensured the Group met the new Net Stable Funding Ratio (NSFR) liquidity requirement ahead of schedule and maintained the Group’s sound asset quality. The Group grew a little below system in lending, remaining cautious on certain low return sectors and managing growth well within mortgage macro-prudential limits. Household deposits on the other hand, grew just ahead of system supporting the Group’s funding position. Margins were lower over the year from strong competition across both lending and deposits. Some repricing and continued discipline on discounting has contributed to margins increasing within the year. The Group’s investment program has made progress in digitising the organisation, contributing to improved service and enhancing the technology infrastructure. This year the Group invested around $1.26 billion in its core business and while most spending was directed to growth and productivity initiatives, additional spending was directed to regulatory and compliance initiatives. The investment highlight was the launch of the Panorama wealth system that is simplifying how customers manage and protect their wealth. There has been further progress in helping customers better manage their finances and a new contact centre platform has been installed supporting all brands and improving both productivity and the customer experience. The Group is making good progress with developing the new customer service hub that will ultimately be the centrepiece of the Group’s origination and service processes. The first mortgages have now been originated on the platform – an important step in confirming the system’s capabilities. The strength of the Group’s infrastructure has also been reflected in the material reduction in Severity 1 issues (those with a major customer impact) over recent years. There were five Severity 1 incidents in Australia in Full Year 2017, with none in Second Half 2017, compared to 19 recorded in Full Year 2016. These developments have supported the implementation of Westpac’s service strategy which has continued to increase the value of the Group’s franchise. Progress over the last 12 months has included: Increasing customer numbers by 3% over 2017, delivering on the Group’s commitment to grow customer numbers by 1 million between 2014 and 2017; Growing lending by 3% and customer deposits by 4%; Expanding funds on platforms with a 5% increase in funds under administration. This was supported by a doubling of the funds now residing on the Panorama system; A significant rise in the Group’s customer satisfaction and Net Promotor Score1 (NPS) rankings across our Australian business; A further 18% reduction in Australian banking customer complaints; Once again being rated as the global banking leader in the Dow Jones Sustainability Index for 2017, the fourth year in a row and the 10th time since 2002; and Workforce engagement increased 10 percentage points to 79% and is now above the level of global high performing companies. While Westpac has continued to grow the business and strengthen the balance sheet, it has been in an environment where the banking industry has seen its reputation weakened. 1 Refer Glossary for details of metric and metric provider. 10 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Review of Group operations Improving the Group’s reputation has been a focus with a number of sector-wide programs and Westpac specific actions launched this year. At an industry level, Westpac has made good progress in implementing the Australian Bankers Association’s “Six point plan” including: appointing an independent customer advocate, changes to remuneration to give greater weight to customer service; updating the Group’s Code of Conduct to better align with the Code of Banking Practice; and further enhancing whistle-blower protections. In addition to these initiatives, the Group has commenced a broader program to reduce complexity and resolve prior issues that have the potential to impact customers and the Group’s reputation. This has included: Reviewing the Group’s products and how we have engaged with our customers; Simplifying fee structures including eliminating “foreign” ATM fees, removing transaction fees for everyday bank accounts, and capping the account-keeping fee to no more than $5 per month; and Introducing a new basic credit card (Westpac Lite) with a low interest rate, lower credit limits, a monthly fee and no fees for missed payments. These reviews have identified some prior instances where we are now taking action to put things right, so that our customers are not at a disadvantage from certain past practices. In Full Year 2017, the Group provided for customer refunds and payments of $169 million, with an after tax cash earnings impact of $118 million. These items have been included as a negative revenue in net interest income ($58 million) and non-interest income ($111 million). Some of the items provided for include: payments to superannuation customers with pre-existing conditions who did not have the benefit of our improved disclosure practices and who previously had their claims denied; payments to customers who did not receive all the benefits to which they were entitled to under their ‘packaged accounts’; and refunds where ongoing advice fees were paid but we are unable to formally demonstrate that the advice service was provided in the relevant period. In May of this year, the Commonwealth Government introduced a levy on Australia’s five largest banks (Bank Levy) as part of its efforts to repair Australia’s fiscal budget deficit. The Bank Levy is being applied to the Group’s liabilities (excluding Additional Tier 1 capital, financial claims eligible deposits, RBA exchange settlement account balances, and net derivatives). The Bank Levy has been applied since 1 July 2017 and had a cost of $95 million in Full Year 2017 with a cash earnings impact of $66 million (which is equivalent to 2 cents per share). The Bank Levy is reported as an interest expense, reducing net interest income in the Second Half 2017 and over the year. The Bank Levy also impacted a number of the Group’s performance metrics including margins (reducing margins by 2 basis points in Second Half 2017 and 1 basis point for Full Year 2017), expense to income ratio (increasing the ratio by 37 basis points for Second Half 2017 and 19 basis points for the Full Year 2017), and return on equity (reducing ROE by 22 basis points for Second Half 2017 and 11 basis points for the Full Year 2017). Asset quality remains sound with stressed assets to TCE down 15 basis points over the year. Impaired assets took another step down with less new problems emerging and the continued work-out of impaired and stressed facilities – particularly some of the larger facilities. Provision cover also remained sound with gross impaired asset provisions to impaired assets at 46%. The ratio was lower over the year following the write-off of a number of large facilities that had relatively high provision levels. The economic provision overlay was $66 million lower as some centrally held provisions have now been utilised (with the impairment charge booked in the divisions) and from the net reduction of some provisions following the improved performance of certain sectors, particularly New Zealand dairy. The Group’s tax rate for the year was 30.4%, marginally higher than the 29.9% recorded in Full Year 2016. Higher earnings for 2017 were accompanied by a further strengthening of the Group’s balance sheet in particular: The CET1 capital ratio increased by more than a full percentage point to 10.56%. This is just above the ‘unquestionably strong’ benchmark set by APRA, in advance of the January 2020 deadline; Liquidity remained sound with a liquidity coverage ratio (LCR) of 124% (above the 100% regulatory minimum); and The NSFR finished the year at 109%, above the NSFR threshold of 100% that applies from 1 January 2018. The strengthening of the balance sheet has continued to impact returns, with the increase in capital contributing to a 22 basis point decline in ROE to 13.8%, although it remains within the 13% to 14% range the Group is seeking to achieve. Higher capital also led to a flat outcome for economic profit over the year. Consistent with the higher capital, net tangible assets per share increased 5%. The Board determined a final ordinary dividend of 94 cents per share, fully franked unchanged over the half. Dividends for Full Year 2017 were also unchanged compared to Full Year 2016. Westpac Group 2017 Full Year Financial Results Announcement | 11

 


2017 Full Year financial results Review of Group operations The final ordinary dividend of 94 cents represents a payout ratio of 79% and a dividend yield of 5.9%1. The Board has also determined to issue shares to satisfy the DRP for the Second Half 2017 dividend and to apply no discount to the market price used to determine the number of shares issued under the DRP. The final ordinary dividend will be paid on 22 December 2017 with the record date of 14 November 20172. After allowing for the final dividend, the Group’s adjusted franking account balance is $1,063 million. All operating divisions, with the exception of BT Financial Group (BTFG), reported an increase in cash earnings over the year. Consumer Bank, which contributed 39% to Group earnings, lifted cash earnings 4% to $3,104 million. Business Bank recorded a 6% rise in cash earnings with a 4% rise in core earnings and lower impairment charges. Westpac Institutional Bank (WIB) reported an 18% increase in cash earnings, supported by a rise in markets income and a lower impairment charge. The New Zealand business recorded a 9% increase in NZ$ cash earnings, mostly from improving asset quality which led to an impairment benefit for the year. BTFG recorded an 11% decline in cash earnings with performance impacted by provisions for customer payments, a rise in insurance claims and a reduction in income following the further sale of shares in BTIM. Strategic Progress In September 2015 Westpac updated its strategy, outlining the strategic priorities that will assist the Group achieve its vision. Two years on, the strategy remains unchanged. This consistency has enabled the Group to make significant progress on implementation and delivery through the year. Westpac’s vision is: To be one of the world’s great service companies, helping our customers, communities and people to prosper and grow. The five strategic priorities supporting that vision are: performance discipline, service leadership, digital transformation, targeted growth and workforce revolution. Progress on these priorities is outlined below. Performance discipline This strategic priority is focused on delivering a superior financial and risk management performance by achieving balanced outcomes across strength, return, productivity, and growth. One of the most significant developments in 2017 has been that after a decade of strengthening the balance sheet from a capital and liquidity perspective, our ratios are now in line with APRAs updated benchmarks. On capital, the Group materially lifted its capital levels and ratios over 2017 to end the year with a CET1 capital ratio of 10.56%. While final capital rules are yet to be released by APRA, the Group is well placed to meet any subsequent changes by the scheduled 1 January 2020 commencement date. With liquidity, the Group is already meeting the new NSFR arrangements that become effective on 1 January 2018. The Group’s deposit to loan ratio was 57 basis points higher over the year at 71.1% while the duration of new term funding also increased. Westpac met APRAs mortgage macro prudential rules operating through the year – including maintaining investor property growth below 10% per annum and reducing the proportion of new interest only mortgage lending to less than 30% by the September 2017 quarter. These targets were managed well, with investor lending growing at around 6% through the year and with interest only facilities representing 26% of new mortgage lending in the September quarter 2017 down from 50% in First Half 2017. Importantly, these requirements were achieved while delivering 6% growth in Australian mortgages, which was a little below mortgage system growth. Productivity has also remained a focus through the year, with the Group’s productivity programs realising $262 million of savings in 2017 (representing almost 3% of the cost base). The cost to income ratio of 42.2% was little changed over the year (up 18 basis points). Major developments included: The full period impact of changes to service models across the organisation. While this incorporates a wide variety of changes it has principally involved removing manual activity and better aligning customer needs with bankers. This has led to a reduction of roles; A material reduction in paper statements across the organisation. Starting with consumers the program has been extended to business customers; Consolidation of head office locations and a net reduction of 59 branches across the Group; and Moving certain technology activities to cloud based infrastructure. As mentioned earlier, the strengthening of the balance sheet has seen the Group’s ROE decline to 13.8% for Full Year 2017. The fall in ROE can be traced back to the further strengthening of the balance sheet with a 5% lift in average ordinary equity greater than the 3% rise in cash earnings. All the Group’s operating divisions continued to generate sound returns with ROEs above 13% for Full Year 2017. 1 Based on the closing share price as at 30 September 2017 of $31.92. 2 Record date for 2017 final dividend in New York is 13 November 2017. 12 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Review of Group operations In actively managing returns, the Group has continued to focus on improving capital efficiency. This has included reducing lending to low returning sectors, rationalisation of life insurance entities, optimising unused limits and continuing to transform the Group’s cost base. Service leadership Westpac’s goal of being one of the world’s great service companies means the Group continues to strive to deliver market-leading customer experiences. When reaffirming this priority two years ago the Group set a target to increase customer numbers by 1 million between 2015 and 2017. The Group achieved that goal, growing customers by 458,000 this year (up 3%) being a total increase of 1.2 million over this three year period. Customer service has also improved across the Group; although there is still further work to do. Developments over 2017 included: Customer satisfaction and NPS for the consumer bank increased over the year ranking second for customer satisfaction and first for NPS of the major banks at September 2017. Westpac ranked first of the major banks for both business customer satisfaction and business NPS at September 2017; Simplifying our product suite reducing the number of consumer products for sale in Australia from 150 to less than 75, and on track to reduce that to below 50 products; An 18% reduction in complaints across the Australian Consumer and Business Banks and BT compared to Full Year 2016. Complaints are down more than 40% over the last two years; and Completing the roll out of “Our Service Promise”, a set a behaviours and values that assist employees to deliver great customer service. Digital transformation Advances in digital technology provide the Group with the ability to improve the customer experience while simultaneously enhancing productivity and risk management. In seeking to measure the success of this strategic priority the Group aims to reduce its expense to income ratio to below 40% over the medium term. Developments through the year have included: Further enhancing the features and functionality of mobile and online banking including: - Launch of a new mobile feature allowing customers to analyse their credit card spending; - Launching new calculators to better help customers manage their finances including for home loan repayments, home loan costs, term deposits, and credit card repayments; and - Security upgrades for electronic identity verification for Westpac customers. Installation of a new call centre infrastructure that will materially improve the experience of calling Westpac as well as providing the foundation for a range of new customer service initiatives. At the same time the Group has further enhanced its technology infrastructure including: Largely completing the functionality of the Panorama wealth management platform; and Commencing development of the customer service hub. The first stage of this program has now been completed and the first mortgages have been originated on the platform. Targeted growth Westpac is seeking to grow value by targeting a small number of higher growth segments over the medium term. Wealth and SME have continued to be the major areas of focus this year. In Wealth, the Group’s strong franchise and investment has led to continuing funds management and administration flows along with growth in insurance premiums. These trends have, however, been partially offset by a more cautious approach from consumers and significant regulatory uncertainty. At the same time FUM and FUA margins have been lower and insurance claims were higher. During Full Year 2017, the Group has seen: FUM and FUA balances up 12% and 5% respectively; Australian Life insurance in-force premiums up 10% and general insurance gross written premiums up 1%; and $3.9 billion of net flows onto the Panorama platform. In SME, the Group’s distribution model including video conferencing and new lending and payment solutions, continue to gain traction. The LOLA (loan origination) system has simplified origination processes and increased the speed of lending decisions, contributing to a 6% increase in small business lending over the year. Westpac Group 2017 Full Year Financial Results Announcement | 13

 


2017 Full Year financial results Review of Group operations Further developments include: Expansion of digital capabilities to new deposit account opening, instant decisioning on some overdrafts and enrolment to receive eStatements; and Simplified merchant pricing plans and deposit product range. Workforce revolution Successful achievement of the Group’s vision depends on the quality of our people and culture. Westpac is already regarded as a leader in staff engagement, diversity and flexibility but we recognise that there is more to do. Highlights for the year have included: Focusing scorecards for employees on service; Achieving an employee engagement score of 79% in 2017, a 10 percentage point increase over the last year and now above the global high performing norm; Achieving the Group’s target of 50% of women in senior leadership positions. This is up from 48% over the year; and Implementing a new performance management system called “Motivate”. The new system is centred on a behaviours-first approach while removing performance rankings and better aligns with modern ways of working. Financial performance summary Second Half 2017 – First Half 2017 Cash earnings were up 1% with core earnings down 1% and a 27% reduction in impairment charges. Performance was impacted by infrequent items during the half; including provisions for customer refunds and payments, reducing cash earnings by $118 million or just over 3%. Net interest income rose 4% reflecting a 2% rise in average interest-earning assets and a 3 basis point increase in margins. Margins excluding Treasury and Markets improved 6 basis points over the half, benefiting from differential pricing for certain mortgage types and features (including investor lending and loans with an interest only feature) and the maturity of some more highly priced term deposits. Margins in Second Half 2017 were also impacted by the introduction of the Bank Levy, which reduced the margin by 2 basis points. Total loans grew 3%, with most of the rise due to an increase in Australian housing. Other major areas of growth included Australian business lending, which was 2% higher with growth across SME customers and in mortgage warehouse facilities while in New Zealand lending was up 1% (up 2% in A$ terms) with most growth in mortgages. Australian personal lending was lower over the half mostly reflecting lower demand. Deposits grew 2% over Second Half 2017, with customer deposits also rising 2%. New Zealand customer deposits grew 3% in NZ$ (3% in A$). Non-interest income was down 9%, impacted by infrequent items indicated above. Excluding these impacts, non-interest income was little changed over the half. Behind this performance was an increased insurance contribution and higher performance fees offset by lower markets income (after a strong first half). Expenses increased 2%, with higher ongoing costs largely offset by $144 million of productivity savings following the further digitisation of activities. The increase in expenses was mostly due to higher technology investment and increased regulatory and compliance costs. Impairment charges were $133 million (or 27%) lower than First Half 2017, due to a decline in new impairment provisions, a reduction in stressed assets and additional write-backs including in the NZ dairy portfolio. Consumer delinquencies were largely unchanged over the half although there was some variance across regions with lower delinquencies in the larger states and higher delinquencies in regions more affected by the continued slowdown in mining investment. In aggregate, mortgage delinquencies were 1 basis point lower and consumer unsecured delinquencies were 2 basis points higher. The effective tax rate was 30.6% in Second Half 2017. 14 | Westpac Group 2017 Full Year Financial Results Announcement

 


 

2017 Full Year financial results Review of Group operations Financial performance summary Full Year 2017 – Full Year 2016 Cash earnings of $8,062 million were $240 million, or 3%, higher than Full Year 2016. Core earnings grew 1% and impairment charges were 24% lower. Core earnings growth comprised a 2% lift in net interest income, a small decline in non-interest income (down $36 million) and a 2% increase in operating expenses. Performance was impacted by infrequent items indicated above, reducing Full Year 2017 cash earnings by 1%. The rise in net interest income reflected a 4% increase in average interest-earning assets, partly offset by a 4 basis point decline in net interest margin. Margins excluding Treasury and Markets were 3 basis points lower with the decline mostly due to higher funding costs, partly offset by loan repricing. Lending increased 3% with Australian housing the largest contributor, growing 6%. Australian business lending was little changed over the year as growth across SME and services sector lending was offset by a decline in some lower returning facilities, including commercial property. Lending in New Zealand increased 3% in NZ$ (down 1% in A$). Customer deposits rose 4% over the year, increasing the deposit to loan ratio to over 71%. Non-interest income was a little lower over the year (down 1%) with infrequent items reducing growth by 2 percentage points. Excluding these items, non-interest income increased from higher markets income including a number of large customer transactions, improved collection and pricing of business line fees and increased insurance premiums. This was partly offset by a reduction in credit card interchange fees, higher insurance claims, and lower advice income. Business as usual expenses continue to be offset by productivity gains, with the 2% rise in overall expenses due to higher investment related spending and an increase in regulatory and compliance costs. Salaries and staff expenses were 2% higher with annual salary increases partially offset by lower FTE, while occupancy costs were 2% higher, with rental increases partially offset by savings from the consolidation of the Group’s head office into two Sydney CBD locations and benefits from restructuring the branch network. Technology expenses also increased (up 4%) mostly from higher software amortisation and software maintenance and licensing costs from the Group’s investment programs. Productivity savings were $262 million for the year, almost 3% of the cost base. Overall asset quality remains sound with total stressed assets to TCE down 15 basis points to 1.05% at 30 September 2017. This mostly reflects the write-off of some larger impaired facilities and the reduction in stress in the New Zealand dairy portfolio. Impairment charges were $271 million lower; the decrease mostly relates to lower new impaired assets as Full Year 2016 included a small number of larger impaired assets. Write-backs and recoveries were also higher in Full Year 2017. Divisional performance summary The performance of each division in Full Year 2017 compared to Full Year 2016 is discussed below. Consumer Bank Consumer Bank has continued to be a key driver of the Group’s growth, expanding its customer base by 4% and lifting cash earnings by 4%. Net interest income was the key contributor to the performance supported by a 6% rise in mortgages and a 6% increase in deposits partly offset by a 3 basis point decline in margins. Margins were impacted by higher funding costs, including deposits. Non-interest income was lower, mostly due to regulatory changes in credit card interchange fees which were partly offset by some fee repricing. Expenses were well managed as the division continues to transform itself via digital while enhancing service. Over the counter transactions are down 23% over the last two years, with digital transactions increasing 19%. Customer service also continued to improve with NPS1 rising to number one of the major banks and complaints significantly lower, down 17% over the year. Business Bank Business Bank delivered a 6% increase in cash earnings with the division’s disciplined growth contributing to a 6% rise in small business lending and a 4% lift in deposits. Non-interest income was 4% higher across business line fees and transaction fees. Expenses were 2% higher. Asset quality has been sound with stressed assets to TCE of 2.16%, down 8 basis points over the year mostly in the commercial portfolio. This improvement in asset quality contributed to a 10% reduction in impairment charges. The division has made good strategic progress through its focus on enhancing digital for both customers and bankers and on building its payments capability. This includes extending the range of products and services online and simplifying risk reviews and onboarding processes. Customer advocacy remains high with NPS retained at number one ranking. 1 Refer Glossary for metric definition including details of the metric provider. Westpac Group 2017 Full Year Financial Results Announcement | 15

 


2017 Full Year financial results Review of Group operations BT Financial Group BTFG continued to be strongly positioned across all elements of its business with good fund flows, higher insurance premiums and a $58 million lift in the contribution from Private Wealth. However, the provision for customer payments, a revaluation loss on investments in boutique funds, and reduced earnings from the further sale of shares in BTIM contributed to lower cash earnings over the year. Cash earnings in Full Year 2017 were 11% below Full Year 2016 and excluding the items above, cash earnings were relatively flat. FUM and FUA balances were up 10% and 6%, supported by Panorama going live while Life in-force premiums were up 10% and General Insurance gross written premiums were up 1%. Offsetting these gains were lower FUM/FUA margins, higher insurance claims and an increase in regulatory and compliance costs. Westpac Institutional Bank Westpac Institutional Bank (WIB) delivered an 18% lift in cash earnings to $1,304 million, reflecting a rise in customer transactions, increased markets income, well managed expenses and lower impairment charges. WIB has managed the business in a disciplined way over recent periods including changing its business model in 2016, controlling expense growth, reducing exposures with low returns and continuing to focus on service and deepening relationships. This active management of the balance sheet has led to little change in loans outstanding and a 7 basis point rise in net interest margin. The focus on relationships has supported a 1% rise in deposits and an 11% increase in non-interest income as the division supported customers involved in significant transactions. Institutional asset quality improved in the year. Impairment charges in Full Year 2017 were $121 million lower, as Full Year 2016 reflected the downgrade of a small number of larger exposures. Westpac New Zealand Westpac New Zealand delivered cash earnings of NZ$970 million, up 9%, over the year, with most of the rise due to impairments which were a benefit of NZ$76 million in Full Year 2017 compared to a NZ$59 million charge in Full Year 2016. Core earnings were flat over the year reflecting little change in operating income and a 1% increase in expenses. Balance sheet growth (loans up 3% and deposits up 2%) was offset by a 13 basis point decline in net interest margin over the year. Most of the decline in net interest margin occurred in the first half of the year from higher deposit costs and increased wholesale funding costs. Expenses were 1% higher as the division continued to invest in its transformation program. Productivity benefits, from this multi-year program more than offset inflationary increases. Asset quality has improved over the year with stressed assets to TCE down 48 basis points to 2.06% and a NZ$76 million impairment benefit for Full Year 2017. The improvement reflects the improved outlook for the dairy sector and the work-out of one larger facility. Group Businesses Cash earnings of negative $132 million for Full Year 2017 compared to positive cash earnings in Full Year 2016 of $64 million. Around half of the decline was due to a lower Treasury contribution with the remaining fall due to the impact of exchange rate movements on the hedging of NZ$ earnings, higher investment costs and an increase in tax expense. The higher tax was due to the settlement of some tax matters in 2016 and from an increase in hybrid distributions which are not tax deductible. 16 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Review of Group operations Divisional cash earnings summary Movement in core earnings by division ($m) Second Half 2017 – First Half 2017 -69 55 (196) First Half 2017 Consumer Business Bank BTFG WIB Westpac New Zealand (A$) Group Businesses Second Half 2017 core earnings core earnings Bank 1 Refer to Section 3.5 for the Westpac New Zealand NZ$ divisional result. 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). Westpac Group 2017 Full Year Financial Results Announcement | 17 6,260 6,191 (98) 77 122 (29) Mov't Sept 17 - Mar 17BT FinancialWestpacWestpac ConsumerBusinessGroup Institutional New Zealand1Group %BankBank(Australia)Bank(A$) Businesses Group Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment (charges) / benefits Operating profit before income tax Income tax expense Net profit Non-controlling interests Cash earnings 7%4%14%3% 6%(37%) (11%)3% (5%)(22%)(4%)(32%) 4% (9%) 5%4%(1%)(11%)3%(38%) 5%2%3%1%(4%)(1%) - 2% 5%5%(5%)(19%)10%large 3%(21%)(67%)(113%)6%191% (1%) (27%) 5%8%(5%)(13%)9%large 5%9%(2%)(10%)6%(23%) 1% 2% 5%8%(6%)(14%)11%200% ---(25%)-(200%) 1% (60%) 5%8%(6%)(14%)11%188% 1% Half Year March 17BT FinancialWestpacWestpac ConsumerBusinessGroup Institutional New Zealand2Group $mBankBank(Australia)Bank(A$) Businesses Group Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment (charges) / benefits Operating profit before income tax Income tax expense Net profit Non-controlling interests Cash earnings 3,6311,990251743790288 424567894957245(19) 7,693 3,068 4,0552,5571,1451,7001,035 269 (1,629)(911) (578) (657) (461)(265) 10,761 (4,501) 2,4261,6465671,0435744 (267)(205)(3)(64)3511 6,260 (493) 2,1591,44156497960915 (648)(433)(167)(275)(174)(48) 5,767 (1,745) 1,5111,008397704435(33) ---(4)-(1) 4,022 (5) 1,5111,008397700435(34) 4,017 Half Year Sept 17BT FinancialWestpacWestpac ConsumerBusinessGroup Institutional New Zealand1Group $mBankBank(Australia)Bank(A$) Businesses Group Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment (charges) / benefits Operating profit before income tax Income tax expense Net profit Non-controlling interests Cash earnings 3,8782,065286764837181 378586850749234(13) 8,011 2,784 4,2562,6511,1361,5131,071 168 (1,708)(928) (598) (666) (442)(262) 10,795 (4,604) 2,5481,723538847629(94) (274)(162)(1)83732 6,191 (360) 2,2741,561537855666(62) (681)(470)(163)(248)(185)(37) 5,831 (1,784) 1,5931,091374607481(99) ---(3)-1 4,047 (2) 1,5931,091374604481(98) 4,045

 


2017 Full Year financial results Review of Group operations Divisional cash earnings summary (continued) Movement in core earnings by division ($m) Full Year 2017 – Full Year 2016 +146 Full Year 2016 Consumer Business Bank BTFG WIB Westpac New Zealand (A$) Group Full Year 2017 Businesses core earnings core earnings Bank 1 Refer to Section 3.5 for the Westpac New Zealand NZ$ divisional result. 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 18 | Westpac Group 2017 Full Year Financial Results Announcement 12,451 12,305 (211) 136 127 4 219 (129) Mov't Sept 17 - Sept 16BT FinancialWestpacWestpac ConsumerBusinessGroup Institutional New Zealand1Group %BankBank(Australia)Bank(A$) Businesses Group Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment (charges) / benefits Operating profit before income tax Income tax expense Net profit Non-controlling interests Cash earnings 5%3%10% (4%) 1%(19%) (6%)4% (9%)11%(1%) large 2% (1%) 4%4%(5%)3%1%(26%) 2%2%1%(2%)2%12% 2% 2% 5%4%(10%)7%-(174%) 10%(10%)-(68%)largelarge 1% (24%) 4%6%(11%)16%11%(136%) 4%6%(10%)11%12%47% 4% 6% 4%6%(11%)18%11%large -----(100%) 3% (53%) 4%6%(11%)18%11%large 3% Full Year Sept 16BT FinancialWestpacWestpac ConsumerBusinessGroup Institutional New Zealand2Group $mBankBank(Australia)Bank(A$) Businesses Group Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment (charges) / benefits Operating profit before income tax Income tax expense Net profit Non-controlling interests Cash earnings 7,1753,9254861,5741,606582 8501,1041,9081,5364828 15,348 5,888 8,025 5,029 2,3943,1102,088590 (3,270)(1,796)(1,160)(1,347)(889)(469) 21,236 (8,931) 4,7553,2331,2341,7631,199121 (492)(410)-(177)(54)9 12,305 (1,124) 4,2632,8231,2341,5861,145130 (1,279)(848)(366)(473)(320)(58) 11,181 (3,344) 2,9841,9758681,11382572 ---(7)-(8) 7,837 (15) 2,9841,9758681,10682564 7,822 Full Year Sept 17BT FinancialWestpacWestpac ConsumerBusinessGroup Institutional New Zealand1Group $mBankBank(Australia)Bank(A$) Businesses Group Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment (charges) / benefits Operating profit before income tax Income tax expense Net profit Non-controlling interests Cash earnings 7,5094,0555371,5071,627469 8021,1531,7441,706479(32) 15,704 5,852 8,311 5,208 2,2813,2132,106437 (3,337)(1,839)(1,176)(1,323)(903)(527) 21,556 (9,105) 4,9743,3691,1051,8901,203(90) (541)(367)(4)(56)7243 12,451 (853) 4,4333,0021,1011,8341,275(47) (1,329)(903)(330)(523)(359)(85) 11,598 (3,529) 3,1042,0997711,311916(132) ---(7)--8,069 (7) 3,1042,0997711,304916(132) 8,062

 


2017 Full Year financial results Review of Group operations 2.2Review of earnings 2.2.1 Net interest income1 14,849 437 62 3 (18) 15 607,180 84,469 30,194 4 13 (22) 2.13% 2.06% (4bps) (3bps) Second Half 2017 – First Half 2017 Net interest income increased $318 million or 4% compared to First Half 2017. Key features include: A 2% increase in average interest-earning assets (AIEA) largely from Australian housing, which grew 3%; Group net interest margin excluding Treasury & Markets increased 6 basis points. Loan repricing and lower wholesale funding costs were partly offset by the impact of lower interest rates; The introduction of the Bank Levy effective 1 July 2017 impacted margin by 2 basis points; and Treasury net interest income decreased $117 million, with lower market volatility impacting returns from interest rate risk management. Full Year 2017 – Full Year 2016 Net interest income increased $356 million or 2% compared to Full Year 2016. Key features include: 4% AIEA growth, primarily from Australian housing which grew 6%. Third party liquid assets increased $11 billion or 13% in response to a $10 billion lower Committed Liquidity Facility (CLF), which reduced from $59 billion to $49 billion on 1 January 2017; Group net interest margin excluding Treasury & Markets decreased 3 basis points. Higher funding costs primarily from term deposit competition and the impact of lower interest rates, were partly offset by loan repricing; and Treasury net interest income reduced $80 million or 18%, with lower market volatility impacting returns from interest rate risk management. 1 Refer to Section 4 Note 3 for reported results breakdown. Refer to Section 5 Note 3 for cash earnings results breakdown. As discussed in Section 1.3, commentary is reflected on a cash earnings basis. 2 Treasury net interest income excludes capital benefit. 3 Refer Glossary for definition. 4 Calculated by dividing net interest income excluding Treasury and Markets by total average interest earning assets. Westpac Group 2017 Full Year Financial Results Announcement | 19 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Net interest income excluding Treasury & Markets 7,844 7,4326 15,276 Treasury net interest income2 120 237(49) 357 Markets net interest income 47 2496 71 Net interest income 8,011 7,6934 15,704 15,3482 Average interest-earning assets Loans 640,339 627,2672 633,821 Third party liquid assets3 96,262 93,7983 95,033 Other interest-earning assets 23,163 23,718(2) 23,440 Average interest-earning assets 759,764 744,7832 752,294 721,8434 Net interest margin Group net interest margin 2.10% 2.07%3bps 2.09% Group net interest margin excluding Treasury & Markets4 2.06% 2.00%6bps 2.03%

 


2017 Full Year financial results Review of Group operations Loans1 2.2.2 Second Half 2017 – First Half 2017 Total loans increased $18.0 billion or 3% compared to First Half 2017. Excluding foreign currency translation impacts, total loans increased $17.8 billion or 3%. Key features of total loan growth were: Australian housing loans increased $13.2 billion or 3%. In the September 2017 quarter, the Group reduced the proportion of interest only lending flows to 26%, below the 30% macro-prudential limit and down from 50% during First Half 2017. In addition, customers switched $18.6 billion of interest only loans to principal and interest during Second Half 2017. Interest only loans now comprise 46% of the portfolio (March 2017: 50%); Australian personal loans and cards decreased $0.8 billion or 3%, primarily in auto finance and credit cards (consistent with a reduction in the system balances); Australian business loans increased $2.8 billion or 2%, primarily from a 2% increase in Business Bank with growth largely in higher returning segments including SME (3%), professional services and health. Institutional lending was up 2% from increased utilisation of existing mortgage warehouse facilities; New Zealand loans increased NZ$0.7 billion or 1% as the business focused on improving margins and returns. Housing was up 2% mostly in fixed rates and in owner occupied balances, with owner occupied comprising 72% of the portfolio; and Other overseas lending increased $1.2 billion or 9%, primarily from growth in Asia. Full Year 2017 – Full Year 2016 Total loans increased $23.0 billion or 3% compared to Full Year 2016. Excluding foreign currency translation impacts, total loans increased $26.0 billion or 4%. Key features of total loan growth were: Australian housing loans increased $23.0 billion or 6%. During the year, the Group further tightened origination standards, reduced new lending discounts and adjusted interest rates on different loan categories. Based on the APRA definition of investor lending, the Group’s investor property lending grew 6%, below the 10% cap. Fixed rate loans increased from 17% of the portfolio at Full Year 2016 to 21% at Full Year 2017; Australian business loans increased $0.3 billion, with growth in Business Bank across SME, professional services and health, largely offset by lower institutional lending including a decline in the utilisation of mortgage warehouse facilities; and 1 Spot loan balances. 2 Includes margin lending. 20 | Westpac Group 2017 Full Year Financial Results Announcement $m As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Australia Housing Personal (loans and cards) Business Other2 Provisions New Zealand (A$) New Zealand (NZ$) Housing Personal (loans and cards) Business Other Provisions Other overseas Trade finance Other loans Provisions Total loans 599,162 583,546576,39134 413,938404,19036 22,71622,825(3)(4) 147,705150,2092-2,0332,020(2)(2) (2,846)(2,853)(13)(13) 70,35072,0802(1) 76,94875,58213 46,24545,12624 1,9771,95623 29,03428,834-1 901012(9) (398)(435)(12)(19) 13,05013,45596 2,2812,3582420 10,82111,15963 (52)(62)15(3) 427,167 21,952 150,542 1,985 (2,484) 71,484 77,680 46,943 2,017 28,979 92 (351) 14,273 2,818 11,515 (60) 684,919 666,946661,92633

 


2017 Full Year financial results Review of Group operations New Zealand lending increased NZ$2.1 billion or 3%. Housing loans grew at 4% and business lending increased 1% primarily from growth in SME and agriculture. Following the LVR restrictions imposed by the RBNZ on investor property loans (with an LVR of greater than 60%), the proportion of new flows for investor property lending decreased by 9 percentage points to 22%. Deposits and other borrowings1 2.2.3 Second Half 2017 – First Half 2017 Total customer deposits increased $8.0 billion or 2% compared to First Half 2017. Excluding foreign currency translation impacts, customer deposits increased $7.7 billion or 2%. Key features of total customer deposits growth were: Australian customer deposits increased $6.1 billion or 1%, with above system2 growth in household deposits, particularly at-call deposits which were up 3% in the half. Term deposits were 1% lower primarily from the Government sector; and New Zealand customer deposits increased NZ$1.6 billion or 3%, mainly from term deposits (up 8%) as the business focused on higher quality deposits and customers had a preference for yield and duration. Certificates of deposits increased $3.1 billion or 7%, primarily reflecting the Group’s increased issuance in the Australian market in Second Half 2017. Full Year 2017 – Full Year 2016 Total customer deposits increased $20.1 billion or 4% compared to Full Year 2016. Excluding foreign currency translation impacts, customer deposits increased $22.3 billion or 5%. Key features of total customer deposits growth were: Australian customer deposits increased $23.8 billion or 6%, with above system2 growth in household deposits and growth in institutional deposits. Customers continued to direct funds to mortgage offset accounts, supporting 8% growth in Australian non-interest bearing deposits. The Group continues to focus on growing higher quality deposits in preparation for the introduction of NSFR on 1 January 2018; New Zealand customer deposits increased NZ$0.9 billion or 2%, with a 14% increase in non-interest bearing deposits from growth in business and consumer transaction accounts; and Other overseas deposits decreased $2.6 billion or 18% due to a decline in Asian deposits. 1 Spot deposit balances. 2 Source: APRA Westpac Group 2017 Full Year Financial Results Announcement | 21 $m As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Customer deposits Australia At call Term Non-interest bearing New Zealand (A$) New Zealand (NZ$) At call Term Non-interest bearing Other overseas (A$) Total customer deposits Certificates of deposit Australia New Zealand (A$) Other overseas (A$) Total deposits and other borrowings 414,706397,03316 219,445210,66638 155,777148,876(1)3 39,48437,49128 51,94254,8753(2) 56,81257,54132 23,89423,742(3)(3) 27,83729,17983 5,0814,620414 12,01214,7001(18) 420,841 226,920 153,597 40,324 53,746 58,405 23,117 30,014 5,274 12,083 486,670 478,660466,60824 43,85346,46371 31,01129,7742126 1,4781,192(63)(54) 11,36415,497(22)(43) 46,921 37,515 546 8,860 533,591 522,513513,07124

 


2017 Full Year financial results Review of Group operations 2.2.4 Net interest margin Group Net Interest Margin Movement (%) Second Half 2017 – First Half 2017 Group margin up 3bps 7bps 0bps 0bps (1bps) (3bps) First Half 2017 Loans Customer deposits Term Bank Levy Capital Liquidity Treasury Second & Markets Half 2017 wholesale funding & other Second Half 2017 – First Half 2017 Group net interest margin was 2.10%, an increase of 3 basis points from First Half 2017. Key features include: 7 basis points increase from loan spreads. This reflected differential pricing changes for certain Australian mortgages, including investor lending and interest only loans, partly offset by broad based competition. While there was some customer switching from interest only to principal and interest loans during the final quarter of the year, this only had a minimal impact on loan spreads in the half; Customer deposit spreads were little changed, with term deposit repricing offset by the continuing impact of lower interest rates on the hedging of transaction deposits; 2 basis points increase from term wholesale funding, as pricing for new term senior issuance was lower than maturing deals; 2 basis points decrease from the introduction of the Bank Levy, effective 1 July 2017 (equivalent to a levy of 6 basis points for three months on $631 billion of applicable liabilities); Capital and other was unchanged as the impact of lower interest rates was offset by the positive impact from higher capital balances; 1 basis point decrease from liquidity, reflecting the increase holdings of third party liquid assets. This was partly offset by a lower CLF fee following a $10 billion reduction to the CLF from 1 January 2017; and Treasury and markets contribution decreased 3 basis points, with lower market volatility impacting returns from interest rate risk management. 22 | Westpac Group 2017 Full Year Financial Results Announcement 2.07% 2.10% Excluding Treasury and Markets up 6bps 2.06% 2.00% 2bps (2bps)

 


2017 Full Year financial results Review of Group operations Group Net Interest Margin Movement (%) Full Year 2017 – Full Year 2016 Group margin down 4bps (1bps) (2bps) (1bps) 2.09% Full Year 2016 Loans Customer Term Bank Levy deposits wholesale funding Capital & other Liquidity Treasury & Markets Full Year 2017 Full Year 2017 – Full Year 2016 Group net interest margin was 2.09%, a decrease of 4 basis points from Full Year 2016. Key components of the decrease include: 9 basis points increase from loan spreads primarily from the full period impact of Australian mortgage and business lending repricing in 2016 and changes to Australian mortgage rates for interest only and investor loans during 2017. This was partly offset by broad based competition and higher short term funding costs; 5 basis points decrease from customer deposit spreads, driven by increased competition for term deposits in late 2016 and early 2017 (4 basis points) and the impact of lower interest rates on the hedging of transaction deposits; 2 basis points decrease from higher term wholesale funding costs as the Group lengthened average tenors in preparation for the implementation of NSFR on 1 January 2018 and an increase in Additional Tier 1 and Tier 2 capital balances and the higher cost of these instruments; 1 basis point decrease from the introduction of the Bank Levy; Capital and other decreased 2 basis points primarily from the impact of lower interest rates; 2 basis point decrease from liquidity, due to increases in third party liquid assets; and 1 basis point decrease from Treasury and Markets, with lower market volatility impacting returns from interest rate risk management. Westpac Group 2017 Full Year Financial Results Announcement | 23 2.13% (2bps) (2bps) Excluding Markets Treasury and down 3bps 2.06% 2.03% 9bps (5bps)

 


2017 Full Year financial results Review of Group operations Non-interest income1 2.2.5 1,911 1,124 65 (5) 8 8 Second Half 2017 – First Half 2017 Non-interest income decreased $284 million, or 9% compared to First Half 2017. This was primarily due to lower trading income ($209 million) following a strong first half and the impact of infrequent items including $111 million in provisions for customer refunds and payments (refer to Section 2.1 for further information). Excluding these items, non-interest income rose from an increase in insurance income and business lending fees. Fees and commissions Fees and commissions decreased $97 million or 7% compared to First Half 2017, primarily from: Lower Advice income including provisions for customer refunds and payments ($55 million); Lower Australian credit card income ($28 million) primarily from lower revenue associated with rewards programs and regulatory changes to interchange rates from 1 July 2017; and Lower institutional fee income ($19 million) from lower deal volumes; partly offset by Higher business lending fees ($13 million) from business growth. Wealth management and insurance income Wealth management and insurance income increased $38 million or 4% during the half, with: Insurance income $75 million higher: - General insurance income increased $74 million from lower claims, with First Half 2017 impacted by Cyclone Debbie claims. Net earned premiums were flat in the half; Life Insurance income increased $11 million, primarily from lower claims and a 4% increase in in-force premiums; and LMI contribution was $10 million lower from a reduction in loans written in higher LVR bands and higher claims. - - WIB wealth management income was up $33 million with performance fees recognised in Second Half 2017; and FUM/FUA income was little changed as the benefit of higher asset markets and positive net flows was largely offset by margin compression as legacy products were transferred to lower fee ‘MySuper’ products (Refer to Section 2.2.6 for further information on FUM/FUA balance movements); partly offset by Provisions for customer refunds and payments related to wealth products ($56 million); and Contribution from investments in boutique funds $19 million lower. Trading income Trading income was $209 million lower compared to First Half 2017. The majority of the reduction was due to lower risk income, with customer activity also lower in WIB markets. Refer to Section 2.2.7 for further detail on Markets related income. Other income The decline in other income ($16 million) was mostly due to a lower share of associates profit, following the further sale of BTIM shares. 1 Refer to Section 4 Note 4 for reported results breakdown. Refer to Section 5 Note 4 for cash earnings results breakdown. As discussed in Section 1.3, commentary is reflected on a cash earnings basis. 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 24 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Fees and commissions2 1,329 1,426(7) 2,755 2,788(1) Wealth management and insurance income 924 8864 1,810 Trading income 504 713(29) 1,217 Other income 27 43(37) 70 Non-interest income 2,784 3,068(9) 5,852 5,888(1)

 


 

2017 Full Year financial results Review of Group operations Full Year 2017 – Full Year 2016 Non-interest income was down $36 million or 1% over the year with business growth more than offset by a number of infrequent items. Drivers of business growth include higher markets income in WIB and business lending fees, partly offset by higher insurance claims and a reduction in Australian credit card interchange fees. Fees and commissions Fees and commissions decreased $33 million, or 1% compared to Full Year 2016, largely due to: Lower Advice income including provisions for customer refunds and payments ($55 million); Lower Australian credit card income ($39 million) primarily from lower revenue associated with rewards programs and regulatory changes to interchange rates from 1 July 2017; partly offset by Increased business lending fees ($50 million) supported by higher line fees from business growth; and Higher transaction fees ($15 million) from an increase in account numbers, pricing changes and transaction volumes across the Group. Wealth management and insurance income Wealth management and insurance income decreased $101 million or 5% with the main components being: Provisions for customer refunds and payments related to wealth products ($56 million); Insurance income decreased $29 million, primarily from: - General insurance income reduced $32 million from higher claims, including the impact of Cyclone Debbie in First Half 2017, partly offset by a 2% increase in net earned premiums; Higher LMI income ($6 million) related to arrangements for mortgages with an LVR >90%; and Life insurance income was little changed (down $3 million) with higher claims offset by a 6% increase in net earned premiums. - - Lower contribution from investments in boutique funds ($26 million); and A decrease in FUM/FUA income ($13 million), with the benefit from higher asset markets and positive net flows more than offset by margin compression from the transfer of legacy products to lower fee ‘MySuper’ products. Refer to Section 2.2.6 for further information on FUM/FUA balance movements; partly offset by Increase in WIB wealth management income ($6 million). Trading income Trading income increased $93 million or 8% compared to Full Year 2016. Refer to Section 2.2.7 for further detail on Markets related income. Other income Other income increased $5 million, or 8% compared to Full Year 2016. Higher operating lease rental income was partly offset by a decrease in share of associates profit following the further sale of BTIM shares. Westpac Group 2017 Full Year Financial Results Announcement | 25

 


2017 Full Year financial results Review of Group operations 2.2.6 Funds Under Management / Funds Under Administration 42.5 12.6 11.3 7.1 35.8 12.6 10.2 7.1 3 (25) 11 8 22 (25) 23 8 99.3 37.1 1.8 94.3 36.5 2.0 4 (5) (11) 9 (4) (20) 128.2 7 1 FUM balances represent a range of Retail and Superannuation investments where the individual investor selects the risk profile and investment options managed by Advance (multi manager of investment management companies). 2 Averages are based on a six month period. 26 | Westpac Group 2017 Full Year Financial Results Announcement $bn % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Average FUM for the Group2 73.7 68.38 71.0 63.811 Average FUA for the Group2 140.2 134.94 137.4 $bn As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Funds Under Management (FUM)1 BTFG 43.6 Advance Asset Management 9.5 Westpac Institutional Bank 12.5 New Zealand (A$) 7.7 Group FUM 73.3 73.565.7-12 Funds Under Administration (FUA) BTFG 103.2 Asgard 35.1 New Zealand (A$) 1.6 Group FUA 139.9 138.2132.815

 


2017 Full Year financial results Review of Group operations 2.2.7 Markets related income1 1,093 11 231 12 38 large Markets income comprises sales and risk management revenue derived from the creation, pricing and distribution of risk management products to the Group’s consumer, business, corporate and institutional customers. Dedicated relationship specialists provide product solutions to these customers to help manage their interest rate, foreign exchange, commodity, credit and structured products risk exposures. Second Half 2017 – First Half 2017 Total markets income decreased by $213 million or 28% compared to the First Half 2017, primarily due to a fall in non-customer income. Non-customer income decreased $175 million or 71% compared to First Half 2017, due to lower market volatility during Second Half 2017. Customer income decreased $46 million or 10% compared to First Half 2017, from lower fixed income sales. Full Year 2017 – Full Year 2016 Total markets income increased by $128 million or 11% compared to Full Year 2016, primarily due to higher non-customer income. Non-customer income increased $88 million or 38% compared to Full Year 2016, due to higher risk management income from fixed income and commodities in Full Year 2017. Customer income increased $6 million or 1% on Full Year 2016, across both fixed income and foreign currency sales. Markets Value at Risk (VaR)2 High Low $m Average Six months ended 31 March 2017 9.4 13.1 6.5 Six months ended 30 September 2016 7.0 9.7 4.7 The Components of Markets VaR are as follows: 1 Markets income includes WIB Markets, Business Bank, Consumer Bank, BTFG and Westpac New Zealand markets. 2 The daily VaR presented above reflects a WIB divisional view of VaR. It varies from presentations of VaR in Westpac’s 2017 Annual Report and Australian Prudential Standard (APS) 330 Prudential Disclosure under Basel III where market risk disclosures are segregated into trading and banking book. VaR measures the potential for loss using a history of price volatility. 3 Includes electricity risk. 4 Includes pre-payment risk and credit spread risk. Westpac Group 2017 Full Year Financial Results Announcement | 27 Average $m Half Year Sept 17 Half YearHalf Year March 17Sept 16 Interest rate risk Foreign exchange risk Equity risk Commodity risk3 Credit and other market risks4 Diversification benefit Net market risk 3.0 1.5 0.1 8.1 3.4 (4.9) 3.73.9 2.33.0 0.10.3 5.02.4 3.62.5 (5.3)(5.1) 11.2 9.47.0 Six months ended 30 September 2017 11.216.07.6 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income 47 2496 71 6215 Non-interest income 488 724(33) 1,212 Total Markets income 535 748(28) 1,283 1,15511 Customer income 482(10) 9121 436 918 Non-customer income 72 247(71) 319 Derivative valuation adjustments 27 1942 46 Total Markets income 535 748(28) 1,283 1,15511

 


2017 Full Year financial results Review of Group operations 2.2.8 Operating expenses1 (939) (1,922) (1,479) 2 4 (1) Second Half 2017 – First Half 2017 Operating expenses increased $103 million or 2% compared to First Half 2017. Productivity benefits of $144 million offset operating cost growth, with the increase due to investment related spending ($54 million) and higher regulatory and compliance costs ($50 million). Staff expenses increased $14 million during the half. The full period impact of salary increases and higher FTE to support regulatory and compliance activities were partly offset by productivity benefits, lower share based payments and lower restructuring costs. Occupancy expenses increased $8 million or 2% in the half primarily due to exit costs associated with retail property consolidation and rental increases across corporate sites. Australian branch numbers reduced by 13 in the half. Technology expenses increased $30 million or 3% compared to First Half 2017, largely from the impact of the Group’s investment programs. Higher amortisation of software assets ($16 million), higher depreciation of IT equipment ($6 million) and an increase in software maintenance and licensing costs ($23 million) was largely driven by programs including the customer service hub, new payments platform and enhancing the Group’s technology infrastructure. Technology services costs were lower, supported by benefits from renegotiation with vendors. Other expenses increased $51 million from increased regulatory and compliance related expenses and higher marketing costs, largely seen through higher professional and processing services costs. This was partly offset by disciplined cost management and lower credit card loyalty program costs ($16 million) from seasonally lower redemptions and changes to reward programs. Full Year 2017 – Full Year 2016 Operating expenses increased $174 million or 2% compared to Full Year 2016. Productivity benefits of $262 million largely offset growth in operating costs. Increase in expenses was driven primarily by higher regulatory and compliance related costs ($84 million) and the impact of the Group’s investment program ($82 million). Staff expenses increased $75 million or 2% compared to Full Year 2016. Annual salary increases and higher investment costs were partly offset by productivity benefits, lower restructuring costs and reduced share based payments. Occupancy expenses increased $23 million or 2% over the year, primarily due to annual rental expense increases and exit costs associated with retail property consolidation. Australian branch numbers reduced by 42 over the year. Technology expenses increased $86 million or 4% compared to Full Year 2016, largely from the completion of key elements of the Group’s investment programs. This included higher amortisation of software assets ($57 million) and higher software maintenance and licensing costs ($37 million) from programs including the customer service hub, Panorama, new payments platform and enhanced systems for regulatory and compliance purposes. Other expenses were down $10 million or 1% during the year. The increase in regulatory and compliance costs has been mostly offset by lower outsourced operational costs and a decrease in credit card loyalty program costs ($25 million) as a result of changes to reward programs. In addition, non-lending losses were $8 million lower from reduced credit card and digital fraud, which has benefited from recent enhancements to early detection capability and additional security. 1 Refer to Section 4 Note 5 for reported results breakdown. Refer to Section 5 Note 5 for cash earnings breakdown. As discussed in Section 1.3, commentary is on a cash earnings basis. 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 28 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Staff expenses (2,340) (2,326)1 (4,666) (4,591)2 Occupancy expenses (485) (477)2 (962) Technology expenses (1,019) (989)3 (2,008) Other expenses2 (760) (709)7 (1,469) Total expenses (4,604) (4,501)2 (9,105) (8,931)2

 


2017 Full Year financial results Review of Group operations Full Time Equivalent Employees (FTE) 3,296 3,390 (7) (10) Second Half 2017 – First Half 2017 FTE decreased 194 or 1% in the half from productivity initiatives that have streamlined and digitised processes across both operations and contact centres, partly offset by additional resources directed to the Group’s investment programs and compliance related activities. Full Year 2017 – Full Year 2016 FTE decreased 484 or 1% over the year from productivity initiatives that have streamlined and digitised processes across both technology and operations, partly offset by growth to support investments, productivity initiatives and compliance related activities. Investment spend 710 9 278 171 17 (19) In Full Year 2017, the Group spent $1.26 billion on its investment program with around 54% spent in the second half of the year. The majority of spending continues to be directed to growth and productivity initiatives although there has been a significant lift in regulatory change investment over the year. Of the $1.26 billion investment, 38% was expensed while the remaining 62% was capitalised. The 17% increase in investment spend in the second half of the year is consistent with patterns over recent years where second half spending typically exceeds that of the first half. In 2017, the increase principally relates to the timing of spending on the customer service hub and higher regulatory spending/investment in cyber security. Across major investment categories the following progress was achieved in Second Half 2017: Growth and Productivity The customer service hub is a major program to upgrade the Group’s banking infrastructure to enable a one bank multi-brand operating model creating greater efficiencies and a more agile environment. The system will support a single and complete view of the customer, and it will enable continuous customer conversations across various channels. The system is beginning with home ownership creating an ability to process all elements of a home loan, including offset accounts, and will ultimately be broadened across other product sets. The program reached a key milestone through the year, originating its first Westpac home loans; Investment to connect to the industry’s new payments platform to enable customers to make and receive real time, data rich payments. The system is expected to begin its roll out in 2018; Enhancing digital useability by making common tasks more accessible and simplifying other tasks to make it easier for customers. Improvements included: - Making it easier to become a customer via mobile; customers can now open an account and sign on in five minutes; and - Providing better access to features on mobile such as locking/unlocking credit cards with one click, and ability to transfer funds or check balances without needing to log on. 1 Averages are based on a six month period. Westpac Group 2017 Full Year Financial Results Announcement | 29 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Expensed 243 2363 479 517(7) Capitalised software and fixed assets 433 34426 777 Total 676 58017 1,256 1,2272 Growth and productivity 417 37511 792 7782 Regulatory change 182 14327 325 Other technology 77 6224 139 Total 676 58017 1,256 1,2272 Analysis of movement in FTE As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Permanent employees 32,044 31,99432,190--Temporary employees 3,052 FTE 35,096 35,29035,580(1)(1) Average FTE1 35,216 35,13235,410-(1)

 


2017 Full Year financial results Review of Group operations Digital enhancements for Business Bank customers included: - Enabling St.George sole trader customers to open a deposit account via a contact centre in under 10 minutes compared to 45 minutes previously; - Increased access to electronic statements with over 300,000 digitally active customers migrated; - Improving the opening of new transaction accounts for Westpac Commercial customers. By better capturing existing information approximately 25 forms have been reduced to 1 application form; and - Enhancements to the credit risk management system has reduced manual processing and saved time by simplifying risk reviews, serviceability assessments and automated covenant monitoring. Implemented a new process for cheque imaging allowing branches to submit cheques digitally. This has shortened the process time and reduced courier and processing costs, particularly for more remote locations; and Continued enhancements to Panorama (BT’s funds administration system) with automation of the Super Stream contributions (super stream is an industry hub for clearing superannuation payments). Regulatory Change A number of programs are underway under this category including: Enhancing regulatory reporting for Super Stream Government to Business, work on common reporting standards, preparing for AASB 9 and supporting collection and reporting of new economic and financial statistics; Updating systems to enhance both the management and reporting of the NSFR (applying from 1 January 2018) and intraday liquidity; Strengthening compliance processes and systems including a new integrated risk and compliance platform and improving data management and analytics; and Implementing various industry changes including national mortgage forms and conveyancing industry changes. Other technology Major initiatives under this category included further upgrades to the Group’s infrastructure, additional migration of applications onto cloud technologies and upgrades to the Group’s 24/7 Cybersecurity Co-ordination Centre. Capitalised software 696 (565) (6) 2 10 9 133 large Capitalised software Increased 6% during Second Half 2017 and was 8% higher than Full Year 2016. In Second Half 2017 additions increased $78 million (23%) compared to First Half 2017 consistent with the higher investment spend. Full Year 2017 additions were 10% higher compared to Full Year 2016 from both increased investment spending and higher capitalisation as some major programs (customer service hub, Panorama and new payments platform) progressed from planning to development and delivery stages. Software amortisation Increased $49 million (9%) compared to Full Year 2016. In the Second Half 2017 amortisation increased $8 million (3%) compared to First Half 2017 as projects or major project components were completed. As part of the Group’s regular asset review, $11 million of capitalised software was written off in Second Half 2017. The average amortisation period for capitalised software assets was 2.9 years, which has been consistent with recent periods. 30 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Opening balance 1,814 1,7812 1,781 1,6548 Total additions 422 34423 766 Amortisation expense (311) (303)3 (614) Impairment expense (11) (3)large (14) Foreign exchange translation 2 (5)(140) (3) Closing balance 1,916 1,8146 1,916 1,7818

 


2017 Full Year financial results Review of Group operations 2.2.9 Impairment charges (727) 210 137 (16) 37 23 (902) 158 7 70 Asset quality improved through Full Year 2017 with stressed assets to total committed exposures reducing 15 basis points to 1.05%. The reduction in stress mostly reflects the work-out or return to health of a number of watchlist and substandard facilities. Impaired assets were also lower, with gross impaired assets to gross loans reducing 10 basis points to 0.22%. The reduction in impaired assets principally related to the work-out or write-off of a small number of institutional facilities. Where stress in the portfolio has emerged it can mostly be traced back to the slowdown in mining investment, sectors undergoing structural change, along with a rise in delinquencies and properties in possession in these regions, particularly in Western Australia and Queensland. The improved asset quality and the write-off of a small number of larger impaired facilities led to a reduction in provisions balances which were down $483 million. IAPs were $389 million lower while CAPs were $94 million lower. Within CAPs the economic overlay was reduced by $66 million, ending at $323 million as at 30 September 2017. This trend of improved asset quality and work-out of existing stressed facilities has contributed to the reduction in impairment charges both over the year and in Second Half 2017 compared to First Half 2017. Second Half 2017 – First Half 2017 Impairment charges for Second Half 2017 were $360 million, down $133 million compared to First Half 2017, and were equivalent to 11 basis points of average gross loans. The decrease was mostly due to lower new IAPs and lower total new CAPs. Key movements included: Total IAPs less write-backs and recoveries were $118 million lower than First Half 2017 due to a $118 million reduction in new IAPs. New IAPs were lower particularly in WIB and in the Business Bank. Much of this was due to a decline in impairments in regions impacted by the slowdown in mining investment and manufacturing. Write-backs and recoveries were unchanged. Total new CAPs were $15 million lower than First Half 2017. Key movements included: - Write-offs were $82 million higher in Second Half 2017, consistent with normal seasonal patterns in unsecured personal lending and from changes to reporting of customers granted hardship assistance; - Benefits from other changes in CAPs were $97 million higher from changes in the economic overlay and improved asset quality. This was partially offset by lower benefits in the institutional book where fewer customers were downgraded to impaired; and - The economic overlay was $55 million lower over the Second Half 2017. The reduction in the half was mostly due to provisions utilised or no longer required for the mining and related exposures and New Zealand dairy portfolios. Westpac Group 2017 Full Year Financial Results Announcement | 31 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Individually assessed provisions (IAPs) New IAPs (246) (364)(32) (610) Write-backs 144 144-288 Recoveries 84 84-168 Total IAPs, write-backs and recoveries (18) (136)(87) (154) (380)(59) Collectively assessed provisions (CAPs) Write-offs (525) (443)19 (968) Other changes in CAPs 183 86113 269 Total new CAPs (342) (357)(4) (699) (744)(6) Total impairment charges (360) (493)(27) (853) (1,124)(24)

 


2017 Full Year financial results Review of Group operations Full Year 2017 – Full Year 2016 Impairment charges of $853 million were down $271 million or 24% compared to Full Year 2016. Key movements included: Total new IAPs less write-backs and recoveries were $226 million lower than Full Year 2016. New IAPs decreased $117 million primarily due to a small number of large impairments in WIB in Full Year 2016 whereas there were only two larger facilities that migrated to impaired over Full Year 2017. This was partially offset by higher new IAPs in the Business bank and in mortgages. Full Year 2017 also benefited from a larger number of write-backs and recoveries which were $109 million higher than Full Year 2016 as impaired facilities were worked out; and Total new CAPs were $45 million lower due to a $111 million increase in the benefit from other changes in CAPs partially offset by a $66 million lift in write-offs principally in personal lending associated with changes to reporting of customers granted hardship assistance. Total economic overlays were $66 million lower compared to Full Year 2016. 2.2.10 Tax Expense Second Half 2017 – First Half 2017 The effective tax rate of 30.6% in Second Half 2017 was higher than the First Half 2017 effective tax rate of 30.3%. The effective tax rate is above the Australian corporate tax rate of 30% and reflects several Additional Tier 1 instruments whose distributions are not deductible for Australian taxation purposes. Full Year 2017 – Full Year 2016 The effective tax rate of 30.4% in Full Year 2017 was higher than the Full Year 2016 effective tax rate of 29.9%. The increase was largely due to benefits following the finalisation of prior period taxation matters in 2016 that were not repeated. 2.2.11 Non-controlling Interests Non-controlling interests represent profits of non-wholly owned subsidiaries attributable to shareholders other than Westpac. These include profits on the 10.1% shareholding in Westpac-PNG-Limited and the 25% shareholding in St.George Motor Finance Limited that are not owned by Westpac. 32 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Review of Group operations 2.3 Credit quality Credit quality improved over the year with total stressed exposures to TCE declining and remaining low relative to historical experience. Stressed exposures to TCE were 1.05%, 15 basis points lower than 30 September 2016 and 9 basis points down on 31 March 2017 (see 2.3.1 Credit Quality Key Metrics). The fall in stress was due to reductions in both impaired assets and to watchlist and substandard facilities. These decreases can be broadly traced back to the write-off, refinance or work-out of some institutional facilities and to an improved outlook for the New Zealand dairy sector. Overall trends in the portfolio remain positive and, in general, sectors that were being closely monitored, such as mining, New Zealand dairy, and commercial property have seen improved or stable credit quality metrics. Across regions, Western Australia (WA) and regional Queensland (Qld) continue to experience elevated levels of stress and higher delinquencies as these markets continue to readjust to the slowing of the mining investment cycle. Late in the year there were early signs of an improvement in WA. Consistent with the fall in stressed assets, provisioning levels were $483 million lower, due mainly to a decrease in IAPs. The ratio of impairment provisions to impaired assets remained high at 46% but was lower over the year and the half mostly from the write-off of some highly provisioned facilities. The ratio of collectively assessed provisions to credit risk weighted assets was unchanged at 76 basis points. Portfolio segments The institutional and commercial segments continue to perform well with the level of stress reducing as a number of facilities that were stressed were refinanced, repaid or written off. Over recent periods, the depth of distressed debt markets has increased and this has enabled the Group to reduce its impaired exposures. Two new large (>$50 million) facilities were downgraded to impaired during Full Year 2017, both in First Half 2017. The commercial property segment has continued to perform well and improve. Stress peaked in this portfolio in the midst of the financial crisis with the proportion of the portfolio (stress as a percent of total committed exposure) stressed reached 15.5%. Since then stress has steadily declined to 1.3% and remains well below long term averages. The small and medium business portfolio has also performed well. Stress has eased over the Full Year 2017 with decreases in agriculture, manufacturing and mining. Where new stress has emerged it has been more concentrated in WA and regional Qld. The New Zealand business portfolio saw an increase in stress in Second Half 2016 as lower milk prices impacted the dairy industry. Since that period milk prices have increased, improving the prospects for the sector. As a result, a number of stressed facilities returned to performing through Full Year 2017. Facilities remaining in the watchlist and substandard categories are likely to return to fully performing when they achieve a sustained period of improved cash flow and/or debt reduction. The quality of the mortgage portfolio remains high with Australian mortgage 90+ day delinquencies just one basis point higher over the twelve months to 30 September 2017 to end the year at 0.67%. The implementation of new prudential rules for the reporting of delinquencies for customers granted hardship assistance, which are being progressively applied to the industry, have matured. There has been a 4 basis point increase in 90+ day delinquencies for those customers impacted by Cyclone Debbie and who were provided with disaster packages. Excluding this impact, 90+ day delinquencies decreased 3 basis points as mortgage delinquencies across Australia have improved slightly on average. Conditions are different across states with more modest growth and higher unemployment in some regions, particularly in WA and regional Qld, contributing to higher delinquencies in those regions. This has been offset by continued low and stable delinquencies in NSW and Victoria. The investment property and interest only segments continue to have delinquency profiles well below the portfolio average with 90+ day delinquencies of 0.49% and 0.52% respectively. Australian properties in possession increased over Full Year 2017 by 175 to 437 as at 30 September 2017 with the majority of the increases from WA and Qld. Realised mortgage losses across the Group were $87 million for Full Year 2017, equivalent to 2 basis points. Consumer unsecured delinquencies trended higher over the year with the increase principally due the prudential changes in delinquency reporting and not an increase in underlying stress. Total Group other consumer 90+ day delinquencies were 1.57%, up 46 basis points since 30 September 2016 and 2 basis points higher compared to 31 March 2017. Around 50 basis points of the increase over the year was due to the change in delinquency reporting for customers granted hardship assistance. This was offset by a 4 basis point underlying improvement in delinquencies mostly related to the reduction in unemployment. New Zealand mortgage 90+ day delinquencies increased 2 basis points over the year to 0.12% at 30 September 2017. While delinquencies were higher, they remain at or near historical lows reflecting the quality of the portfolio and prudential controls that have materially reduced the level of higher LVR lending across the country. Westpac Group 2017 Full Year Financial Results Announcement | 33

 


2017 Full Year financial results Review of Group operations Unsecured delinquencies in New Zealand also remain low in absolute terms although they increased over the year. Other consumer 90+ day delinquencies were 0.57% an increase of 9 basis points from 30 September 2016 and were 1 basis point lower than 31 March 2017. Provisioning Westpac has maintained adequate provisioning coverage with: The ratio of gross impaired asset provisions to gross impaired assets remains high at 46.3%. This ratio was lower over the year (down 3.1 percentage points compared to 30 September 2016) as a number of large, highly provisioned impaired exposures were worked out or written-off; and The ratio of collectively assessed provisions to credit risk weighted assets was 76 basis points, unchanged from 30 September 2016. Total impairment provisions were $3,119 million with IAPs of $480 million and CAPs of $2,639 million. IAPs were $389 million lower primarily from a small number of large institutional names worked out and written off during Full Year 2017. CAPs balances were $94 million lower compared to 30 September 2016. The movement in the CAPs can principally be traced to: The economic overlay was $66 million lower over the year at $323 million at 30 September 2017. This was due to the partial release and utilisation of the overlay for the mining and mining related manufacturing sectors and for the New Zealand dairy sector; and The reduction in stressed assets. 2.3.1 Credit quality key metrics 0.35% 0.59% 0.33% 0.65% 0.28% 0.49% 0.63% 0.68% 0.17% 0.55% 0.71% 0.32% 0.59% 0.77% 0.40% 0.67% 0.14% 0.66% 0.10% 0.55% 0.15% 1.63% 0.58% 1.17% 0.48% 1.49% 0.56% 52.07% 52bps 67bps 77bps 87bps 15bps 19bps 49.42% 54bps 67bps 76bps 88bps 14bps 19bps 47.65% 57bps 75bps 87bps 101bps 21bps 13bps 1 Averages are based on a six month period. 34 | Westpac Group 2017 Full Year Financial Results Announcement As at As atAs atAs at 31 March 1730 Sept 1631 March 16 30 Sept 17 Stressed exposures by credit grade as a % of TCE: Impaired 90 days past due and not impaired Watchlist and substandard Total stressed exposures Gross impaired assets to TCE for business and institutional: Business Australia Business New Zealand Institutional Mortgage 90+ day delinquencies: Group Australia New Zealand Other consumer loans 90+ day delinquencies: Group Australia New Zealand Other: Gross impaired assets to gross loans Gross impaired asset provisions to gross impaired assets Total provisions to gross loans Collectively assessed provisions to risk weighted assets Collectively assessed provisions to credit risk weighted assets Total provisions to risk weighted assets Impairment charges to average loans annualised1 Net write-offs to average loans annualised1 0.20%0.22%0.26% 0.15% 0.34% 0.56% 1.05% 1.14%1.20%1.03% 0.47% 0.62% 0.06% 0.63%0.61%0.52% 0.62% 0.67% 0.12% 1.55%1.11%1.42% 1.57% 1.66% 0.57% 0.30%0.32%0.39% 0.22% 46.30% 45bps 65bps 76bps 77bps 11bps 25bps

 


 

2017 Full Year financial results Review of Group operations 2.4 2.4.1 Balance sheet and funding Balance sheet Second Half 2017 – First Half 2017 Key movements during the half included: Assets Cash and balances with central banks increased $2.5 billion or 16% reflecting higher liquid assets; Receivables due from other financial institutions decreased $2.4 billion or 25% mainly due to reduction in collateral posted with derivative counterparties; Trading securities and financial assets designated at fair value and available-for-sale securities decreased $4.9 billion or 5% primarily due to lower securities purchased under agreement to resell; Derivative assets decreased $0.6 billion or 2% mainly driven by the closing out of positions via cash settlement, partly offset by movements in foreign currency translation impacts on cross currency swaps and forward contracts; and Loans grew $18.0 billion or 3%. Refer to Section 2.2.2 Loans for further information. Liabilities Payables due to other financial institutions increased $0.5 billion or 2% due to increased cash collateral posted by derivative counterparties, mostly offset by lower funding of securities through repurchase agreement and interbank borrowings; Deposits and other borrowings increased $11.1 billion or 2%. Refer to Section 2.2.3 Deposits and other borrowings for further information; Derivative liabilities decreased $3.1 billion or 11% mainly driven by the closing out of positions via cash settlement, partly offset by movements in foreign currency translation impacts on cross currency swaps and forward contracts; Westpac Group 2017 Full Year Financial Results Announcement | 35 $m As at As atAs at% Mov't% Mov't 31 March30 Sept Sept 17 - Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Assets 15,91217,015168 9,5459,951(25)(28) 90,92981,833(5)5 24,61932,227(2)(25) 666,946661,92633 10,93414,192(3)(25) 21,10822,058(2)(6) Cash and balances with central banks 18,397 Receivables due from other financial institutions 7,128 Trading securities and financial assets designated at fair value and available-for-sale securities 86,034 Derivative financial instruments 24,033 Loans 684,919 Life insurance assets 10,643 Other assets 20,721 Total assets 851,875 839,993839,20212 Liabilities 21,39018,209220 522,513513,07124 4,8944,752(17)(15) 28,45736,076(11)(30) 167,306169,9021(1) 9,15812,361(2)(27) 17,10615,805312 9,79710,8458(3) Payables due to other financial institutions 21,907 Deposits and other borrowings 533,591 Other financial liabilities at fair value through income statement 4,056 Derivative financial instruments 25,375 Debt issues 168,356 Life insurance liabilities 9,019 Loan capital 17,666 Other liabilities 10,563 Total liabilities 790,533 780,621781,02111 Equity 59,31558,12035 5761(5)(11) Total equity attributable to owners of Westpac Banking Corporation 61,288 Non-controlling interests 54 Total equity 61,342 59,37258,18135

 


2017 Full Year financial results Review of Group operations Debt issues increased $1.1 billion or 1% ($1.7 billion or 1% increase excluding foreign currency translation impacts). Refer to Section 2.4.2 Funding and liquidity risk management for further information; and Loan capital increased $0.6 billion or 3% mainly due to issuances of $1.6 billion of US$ Additional Tier 1 securities (Additional Tier 1 capital), mostly offset by the redemption of $1.0 billion of Tier 2 subordinated notes (including foreign currency translation impacts). During Second Half 2017 $1.7 billion of Tier 2 Basel III transitional subordinated notes were redeemed, offset by the issue of $0.7 billion of Tier 2 Basel III fully compliant subordinated notes. Equity attributable to owners of Westpac Banking Corporation increased $2.0 billion reflecting additional retained profits less dividends paid during the period and shares issued under the 2017 interim DRP. Full Year 2017 – Full Year 2016 Key movements included: Assets Cash and balances with central banks increased $1.4 billion or 8% reflecting higher liquid assets; Receivables due from other financial institutions decreased $2.8 billion or 28% mainly due to reduction in collateral posted with derivative counterparties; Trading securities and financial assets designated at fair value and available-for-sale securities increased $4.2 billion or 5% in response to the CLF reduction on 1 January 2017; Derivative assets decreased $8.2 billion or 25% mainly driven by the closing out of positions via cash settlement, partly offset by movements in foreign currency translation impacts on cross currency swaps and forward contracts; Loans grew $23.0 billion or 3%. Refer to Section 2.2.2 Loans for further information; and Life insurance assets decreased $3.5 billion or 25% mainly due to the deconsolidation of 16 managed funds as a result of a decline in the Group’s unit holdings. Liabilities Payables due to other financial institutions increased $3.7 billion or 20% due to increased funding of securities through repurchase agreements and interbank borrowings, partially offset by lower offshore central bank deposits; Deposits and other borrowings increased $20.5 billion or 4%. Refer to Section 2.2.3 Deposits and other borrowings for further information; Other financial liabilities at fair value through the income statement decreased $0.7 billion or 15% reflecting reduced securities sold through repurchase agreements; Derivative liabilities decreased $10.7 billion or 30% mainly driven by the closing out of positions via cash settlement, partly offset by movements in foreign currency translation impacts on cross currency swaps and forward contracts; Debt issues decreased $1.5 billion or 1% ($1.7 billion or 1% increase excluding foreign currency translation impacts). Refer to Section 2.4.2 Funding and liquidity risk management for further information; Life insurance liabilities decreased $3.3 billion or 27% mainly due to the deconsolidation of 16 managed funds as a result of a decline in the Group’s unit holdings; and Loan capital increased $1.9 billion or 12% mainly due to issuances of $1.6 billion of US$ Additional Tier 1 securities (Additional Tier 1 capital) and net issuances of $0.3 billion of Tier 2 subordinated notes. During the year $2.5 billion of Tier 2 Basel III fully compliant subordinated notes were issued, mostly offset by the redemption of $2.2 billion of Tier 2 Basel III transitional subordinated notes (including foreign currency translation impacts). Equity attributable to owners of Westpac Banking Corporation increased $3.2 billion reflecting additional retained profits less dividends paid during the period and shares issued under the 2017 interim DRP and 2016 final DRP. 36 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Review of Group operations 2.4.2 Funding and liquidity risk management Liquidity risk is the risk that the Group 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. The Group has a liquidity risk management framework which seeks to meet the objective of meeting cash flow obligations under a wide range of market conditions, including name specific and market-wide stress scenarios, as well as meeting the regulatory requirements of the LCR and NSFR1. In Full Year 2017 the Group maintained its sound funding and liquidity profile, funding loan growth of $23 billion through a mix of customer deposits, wholesale funding and equity, with little change in the overall composition of the Group’s total funding. Key metrics remained comfortably above regulatory minimums, including an LCR of 124% despite a $10 billion reduction in the CLF for the 2017 calendar year. The Group’s NSFR as at 30 September 2017 was estimated at 109% based on current APRA guidelines. Liquid Assets The Group’s liquid asset portfolio includes both high-quality liquid assets (HQLA) and other securities that are eligible for repurchase with a central bank. In total, Westpac held $137.8 billion in unencumbered liquid assets as at 30 September 2017 (30 September 2016: $144.3 billion). At 30 September 2017 the portfolio comprised: $72.1 billion of cash, deposits at central banks, government and semi-government bonds; $17.8 billion of repo-eligible private securities; and $47.9 billion of self-originated AAA rated mortgage backed securities, which are eligible collateral for repurchase agreement with the RBA or the RBNZ. LCR The LCR requires banks to hold sufficient HQLA, as defined, to withstand 30 days under a regulator-defined acute stress scenario. Given the limited amount of government debt in Australia, the RBA, jointly with APRA, makes available to ADIs a CLF. Subject to satisfaction of qualifying conditions, the CLF can be accessed to help meet the LCR requirement. In order to have access to a CLF, ADIs are required to pay a fee of 15 basis points (0.15%) per annum to the RBA on the approved undrawn facility. APRA approved Westpac’s CLF allocation of $49 billion for the 2017 calendar year (2016 calendar year: $59 billion). APRA has approved a CLF allocation for Westpac of $57 billion for the 2018 calendar year. The Group’s LCR as at 30 September 2017 was 124% (30 September 2016: 134%) and the average LCR for the quarter ended 30 September 2017 was 124%2. NSFR The Group will be required to maintain a NSFR, designed to encourage longer-term funding resilience, of at least 100% when it comes into effect on 1 January 2018. Based on the latest guidance from APRA, Westpac had an estimated NSFR of 109% at 30 September 2017 (estimated at 108% as at 31 March 2017). Improvement in the ratio since 31 March 2017 was due mainly to a continued lengthening of wholesale funding duration, improvement in the composition of deposits and some data refinement. Funding 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 NSFR. Over the Full Year 2017 the Group continued to prepare for the introduction of the NSFR at the start of calendar 2018. Customer deposits increased by 91 basis points to 61.8% of total funding (30 September 2016: 60.9%). There was little change in other sources of stable funding, with the proportion of long term funding, securitisation and equity to total funding remaining relatively stable. Short term funding as a proportion of total funding decreased 106 basis points over Full Year 2017, which further lengthened the tenor of wholesale funding. Short term funding comprised 14.1% of the Group’s total funding (30 September 2016: 15.2%). This portfolio of $110.9 billion has a weighted average maturity of 148 days and is more than covered by the $137.8 billion of repo-eligible liquid assets held by the Group. In Full Year 2017, the Group raised $36.6 billion of long term wholesale funding in a range of currencies, including USD, EUR, AUD and GBP, and through a diverse range of products. Approximately two-thirds of new issuance was issued as senior unsecured bonds, a further 18% as covered bonds, and the balance was issued in capital securities and securitisation, providing a mix of tenor, investor and cost to the Group’s funding. 1 Refer to Glossary for definition. 2 Calculated using a daily average of LCR liquid assets and cash flows. Westpac Group 2017 Full Year Financial Results Announcement | 37

 


2017 Full Year financial results Review of Group operations The Group also continued to lengthen the tenor of its long term funding portfolio. In Full Year 2017, 43% of new term issuance had a contractual maturity of greater than five years and this contributed to a weighted average maturity (excluding securitisation) of new term issuance in Full Year 2017 of 5.8 years (Full Year 2016: 5.4 years). Notable transactions during the year included the Group’s A$2.15 billion Crusade ABS Series 2017-1 transaction and two inaugural offshore benchmark-sized capital transactions. The Group issued US$1.5 billion of Basel III compliant Tier 2 securities issued in November 2016 and US$1.25 billion of Basel III compliant Additional Tier 1 securities issued in September 2017. Both issues were registered with the US Securities and Exchange Commission (SEC), with Westpac continuing to benefit in US markets from being the only major Australian bank to have SEC registration. Liquidity coverage ratio 49,100 58,600 - (16) 65,861 13,238 19,121 63,521 13,149 19,152 - (8) 5 3 (7) 5 Funding by residual maturity 64,890 17,446 25,942 8.3 2.3 3.4 73,284 10,638 32,150 9.6 1.4 4.2 108,278 14.0 116,072 15.2 116,825 15.1 115,264 15.0 126,681 16.4 124,709 16.2 Deposits to net loans ratio 666,946 71.8 661,926 70.5 1 Refer to Glossary for definition. 2 Other flows includes credit and liquidity facilities, collateral outflows and inflows from customers. 3 Calculated on a spot basis. 4 Scroll represents wholesale funding with an original maturity greater than 12 months that now has a residual maturity less than 12 months. 5 Includes total share capital, share based payments, reserve and retained profits. 38 | Westpac Group 2017 Full Year Financial Results Announcement As at 30 Sept 2017 As at 31 March 2017As at 30 Sept 2016 $mRatio %$mRatio % $mRatio % Customer deposits 486,670 478,660466,608 Net loans 684,91971.1 As at 30 Sept 2017 As at 31 March 2017As at 30 Sept 2016 $mRatio %$mRatio % $mRatio % Wholesale funding Less than 6 months 63,1738.0 6 to 12 months 19,7762.5 Long term to short term scroll4 27,9553.6 Wholesale funding - residual maturity less than 12 months 110,90414.1 Securitisation 8,2091.0 9,8561.39,4451.2 Greater than 12 months 119,49415.2 Wholesale funding - residual maturity greater than 12 months 127,70316.2 Customer deposits 486,67061.8 478,66061.9466,60860.9 Equity5 61,9257.9 59,8687.758,7267.7 Total funding 787,202100.0 773,487100.0766,115100.0 $m As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 High Quality Liquid Assets (HQLA)1 71,904 73,56569,360(2)4 Committed Liquidity Facility (CLF)1 49,100 Total LCR liquid assets 121,004 122,665127,960(1)(5) Cash outflows in a modelled 30-day APRA defined stressed scenario Customer deposits 65,612 Wholesale funding 12,231 Other flows2 20,109 Total 97,952 98,22095,822-2 LCR3 124% 125%134%(100bps)large

 


2017 Full Year financial results Review of Group operations Funding view of the balance sheet As at 31 March 2017 Total assets Total liabilities Total equity Total Net loans2 138,511 - - - (478,660) - - (234,959) - 633,255 - (59,868) 68,227 (67,002) 496 839,993 (780,621) (59,372) 138,511 (478,660) (234,959) 573,387 1,721 - 47,691 - - 619,255 - 666,946 As at 30 Sept 2016 Total assets Total liabilities Total equity Total Net loans2 144,284 - - - (466,608) - - (240,781) - 620,856 - (58,726) 74,062 (73,632) 545 839,202 (781,021) (58,181) 144,284 (466,608) (240,781) 562,130 975 - 56,057 - - 605,869 - 661,926 1 Refer to Glossary for definition. 2 Liquid assets in net loans include internally securitised assets that are eligible for re-purchase agreements with the RBA / RBNZ. Westpac Group 2017 Full Year Financial Results Announcement | 39 $m Total liquidCustomerWholesaleCustomerMarket assets1depositsfundingfranchiseinventoryTotal As at 30 Sept 2017 Total assets 137,797--651,57362,505851,875 Total liabilities -(486,670)(238,607)-(65,256)(790,533) Total equity ---(61,925)583(61,342) Total 137,797(486,670)(238,607)589,648(2,168)-Net loans2 47,935--636,984-684,919

 


2017 Full Year financial results Review of Group operations 2.5 Capital and Dividends 40,335 404,382 38,875 410,053 6 - 10 (1) 1.71% 1.69% 39bps 41bps 2.32% 1.94% (16bps) 22bps Capital management strategy In light of APRA’s announcement on ‘unquestionably strong’ capital on 19 July 2017, Westpac has ceased to use its preferred range of 8.75% to 9.25% as a guide to managing capital levels. Westpac will revise its preferred range for the CET1 ratio once APRA finalises its review of the capital adequacy framework. In the interim, Westpac will seek to operate with a CET1 ratio of at least 10.5% in March and September as measured under the existing capital framework. This also takes into consideration: current regulatory capital minimums and the capital conservation buffer (CCB), which together are the total CET1 requirement. In line with the above, the total CET1 requirement for Westpac is at least 8.0%, based upon an industry minimum CET1 requirement of 4.5% plus a capital buffer of at least 3.5% applicable to domestic systemically important banks (D-SIBs)1; stress testing to calibrate an appropriate buffer against a downturn; and quarterly volatility of capital ratios due to the half yearly cycle of ordinary dividend payments. Should the CET1 ratio fall below the total CET1 requirement restrictions on the distribution of earnings will apply. This includes restrictions on the amount of earnings that can be distributed through dividends, Additional Tier 1 capital distributions and discretionary staff bonuses. Common Equity Tier 1 capital ratio movement for Second Half 2017 (2bps) (50bps) (4bps) 31 March 2017 Cash earnings Interim dividend (net of DRP) Ordinary RWA growth Other movements BTIM sale Life insurance statutory fund consolidation Regulatory modelling change FX translation impact Defined benefit impact 30 September 2017 Westpac’s CET1 capital ratio was 10.56% at 30 September 2017, 59 basis points higher than recorded at 31 March 2017. 1 Noting that APRA may apply higher CET1 requirements for an individual ADI. 40 | Westpac Group 2017 Full Year Financial Results Announcement 9.97% 100bps 6bps4bps2bps 10.56% 10bps (7bps) Organic Other items (+39bps) (+20bps) As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Regulatory capital structure Common equity Tier 1 capital after deductions ($m) 42,670 Risk weighted assets (RWA) ($m) 404,235 Common equity Tier 1 capital ratio 10.56% 9.97%9.48%59bps108bps Additional Tier 1 capital ratio 2.10% Tier 1 capital ratio 12.66% 11.68%11.17%98bps149bps Tier 2 capital ratio 2.16% Total regulatory capital ratio 14.82% 14.00%13.11%82bps171bps APRA leverage ratio 5.66% 5.30%5.20%36bps46bps

 


2017 Full Year financial results Review of Group operations Organic capital generation of 39 basis points included: econd Half 2017 cash earnings of $4.0 billion (100 basis points increase); The 2017 interim dividend payment, net of DRP share issuance (50 basis points decrease); Ordinary RWAs before the impact of FX movements and RWA modelling changes increased mainly driven by non-credit RWA (4 basis point decrease); and Other movements reduced the CET1 capital ratio by 7 basis points, mainly from an increase in capitalised costs and a small increase in other equity investments including fintech businesses. Other items increased the CET1 capital ratio by 20 basis points mainly driven by: The sale of shares in BTIM (10 basis points increase); Consolidation of statutory funds in the life insurance business (6 basis points increase); and Regulatory modelling changes which reduced RWA by $1.8 billion (4 basis points increase). Additional Tier 1 and Tier 2 capital movement for Second Half 2017 During the half: New Additional Tier 1 capital was issued, which increased Additional Tier 1 capital by $1.6 billion or 39 basis points; New Tier 2 capital was issued, which increased Tier 2 capital by $0.7 billion or 18 basis points; and A Tier 2 transitional capital instrument was redeemed, which reduced Tier 2 capital by $1.7 billion or 41 basis points. Common Equity Tier 1 capital ratio movement for Full Year 2017 6bps 30 September 2016 Cash earnings Dividends (net of DRP) Ordinary RWA growth Other movements BTIM sale Life insurance statutory fund consolidation Regulatory modelling changes Deferred tax asset FX translation impact Defined benefit impact 30 September 2017 The 30 September 2017 CET1 capital ratio of 10.56% is 108 basis points higher than reported at 30 September 2016 and reflects: Organic capital generation added 72 basis points with cash earnings (net of dividends) and shares issued to satisfy the DRP adding 79 basis points. These gains were partially offset mainly by other capital movements (9 basis points decrease); and Other items resulted in a 36 basis points increase in the CET1 capital ratio. These included the sale of BTIM shares (10 basis points increase), consolidation of statutory funds in the life insurance business (6 basis points increase), regulatory modelling changes (7 basis points increase) and a reduction in the deferred tax asset (6 basis points increase). Westpac Group 2017 Full Year Financial Results Announcement | 41 9.48% 199bps 10bps6bps7bps 2bps5bps 10.56% 2bps (120bps) (9bps) Organic Other items (+72bps) (+36bps)

 


2017 Full Year financial results Review of Group operations Leverage Ratio The leverage ratio represents the amount of Tier 1 capital relative to exposure. At 30 September 2017, Westpac’s leverage ratio1 was 5.7%, up 36 basis points since 31 March 2017. The increase is primarily due to increased capital highlighted earlier. APRA has yet to prescribe any minimum leverage ratio requirements. Internationally Comparable Capital Ratios The APRA Basel III capital adequacy requirements are more conservative than those of the Basel Committee on Banking Supervision (BCBS), leading to lower reported capital ratios when compared to international peers. In order to facilitate comparisons, APRA conducted a study in July 2015 outlining its methodology for measuring internationally comparable capital ratios. For details on the adjustments refer to Westpac’s 2017 Full Year Investor Discussion Pack, available at https://www.westpac.com.au/about-westpac/investor-centre/financial-information/. The table below calculates the Group’s reported capital ratios consistent with this methodology. 15.34% 19.37% 6.01% 14.43% 17.73% 5.93% 86bps 172bps 32bps 177bps 336bps 40bps 1 The leverage ratio is based on the same definition of Tier 1 as used for APRA capital requirements and is not comparable to the Basel Committee for Banking Supervision leverage ratio calculation. 42 | Westpac Group 2017 Full Year Financial Results Announcement As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Internationally comparable capital ratios Common equity Tier 1 capital ratio 16.20% Total regulatory capital ratio 21.09% Leverage ratio 6.33%

 


2017 Full Year financial results Review of Group operations Risk Weighted Assets (RWA) 33,735 1,665 5,887 127,111 6,009 13,538 11,482 56,122 3,992 9,682 7,280 32,871 1,669 6,815 123,966 5,904 13,805 11,930 57,961 4,067 9,228 9,046 3 (10) - 1 (6) (2) 2 2 4 3 (12) 5 (10) (13) 3 (4) (4) (2) (2) 2 8 (29) 7,471 31,653 8,143 4,402 7,861 33,363 5,373 4,644 8 (1) 36 3 3 (6) 107 (2) Second Half 2017 – First Half 2017 Total RWA decreased $0.2 billion this half: Credit risk RWA decreased $3.4 billion or 1.0%: - - - Improved asset quality reduced RWA by $4.6 billion; RWA modelling changes as part of ongoing model refinement reduced RWA by $1.8 billion; and Reduction in mark-to-market related credit risk RWA of $0.9 billion. These items were partially offset by portfolio growth which added $3.9 billion to RWA, reflecting ongoing discipline in RWA management. Non-credit RWA increased $3.2 billion or 6.4%: - Interest rate risk in the banking book (IRRBB) RWA increased $3.0 billion. Repricing and yield curve risk increased, as well as capital for credit spread risk from holdings of liquid assets. The embedded gain declined, which also added to IRRBB RWA; Market risk RWA increased $0.6 billion from higher interest rate risk exposure in the trading book; and Operational risk RWA decreased $0.4 billion. - - 1 Corporate – Typically includes exposure where the borrower has annual turnover greater than $50 million, and other business exposures not captured under the definitions of either Business lending or Small Business. 2 Business Lending – Includes exposures where the borrower has annual turnover less than or equal to $50 million and exposure greater than $1 million. 3 Sovereign – includes exposures to Governments themselves and other non-commercial enterprises that are owned or controlled by them. 4 Bank – includes exposures to licensed banks and their owned or controlled subsidiaries, and overseas central banks. 5 Small Business – includes exposures less than or equal to $1 million. 6 Specialised lending – property and project finance – includes exposures to entities created to finance and/or operates specific assets where, apart from the income received from the assets being financed, the borrower has little or no independent capacity to repay from other activities or assets. 7 Securitisation – exposures reflect Westpac’s involvement in activities ranging from originator to investor and include the provision of securitisation services for clients wishing to access capital markets. 8 Operational risk – the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk but excluding strategic or reputational risk. Westpac Group 2017 Full Year Financial Results Announcement | 43 $m As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Corporate1 71,160 76,21081,550(7)(13) Business lending2 34,638 Sovereign3 1,505 Bank4 5,905 Residential mortgages 127,825 Australian credit cards 5,665 Other retail 13,250 Small business5 11,708 Specialised lending: Property and project finance6 57,081 Securitisation7 4,167 Standardised 9,946 Mark-to-market related credit risk 6,408 Credit risk 349,258 352,713358,812(1)(3) Market risk 8,094 Operational risk8 31,229 Interest rate risk in the banking book (IRRBB) 11,101 Other 4,553 Total 404,235 404,382410,053-(1)

 


2017 Full Year financial results Review of Group operations Full Year 2017 – Full Year 2016 Total RWA decreased $5.8 billion or 1.4% over the year: Credit risk RWA declined $9.6 billion or 2.7%: - - - Improved asset quality decreased RWA by $7.7 billion; Reduction in mark-to-market related credit risk RWA of $2.6 billion; Foreign currency translation impacts, primarily related to the impact of the depreciation of the NZ$ on NZ$ lending which decreased RWA by $1.9 billion; RWA modelling changes reduced RWA by $2.8 billion which included updates to Probability of Default (PD) parameters for corporate and business lending exposures and ongoing model refinement; and - These items were partially offset by portfolio growth which added $5.4 billion to RWA, reflecting ongoing discipline in RWA management. Non-credit RWA increased $3.8 billion or 7.3% primarily due to: - IRRBB RWA increased $5.7 billion. The embedded gain declined as the yield curve repricing and yield curve risk increased; Operational risk RWA decreased $2.1 billion due to an update to loss scenarios; and Market risk RWA increased $0.2 billion. steepened and - - 44 | Westpac Group 2017 Full Year Financial Results Announcement

 


 

2017 Full Year financial results Review of Group operations Capital adequacy (482) 127 57 25,206 (447) 17 60 24,379 (1,323) 250 (1,290) 258 (8,557) (1,179) (1,066) (1,859) (1,529) (1,573) (915) (311) - (948) (133) (1) (8,670) (1,544) (1,069) (1,859) (1,521) (1,533) (737) (299) - (935) (192) (1) 1,190 1,190 3,288 49 (445) 3,840 48 (429) (91) (78) 1.71% 1.69% 2.32% 1.94% Westpac Group 2017 Full Year Financial Results Announcement | 45 $m As at As atAs at 31 March30 Sept 20172016 30 Sept 2017 Tier 1 capital Common equity Tier 1 capital Paid up ordinary capital Treasury shares Equity based remuneration Foreign currency translation reserve Accumulated other comprehensive income Non-controlling interests - other Retained earnings Less retained earnings in life and general insurance, funds management and securitisation entities Deferred fees Total common equity Tier 1 capital Deductions from common equity Tier 1 capital Goodwill (excluding funds management entities) Deferred tax assets Goodwill in life and general insurance, funds management and securitisation entities Capitalised expenditure Capitalised software Investments in subsidiaries not consolidated for regulatory purposes Regulatory expected loss in excess of eligible provisions General reserve for credit losses adjustment Securitisation Equity investments Regulatory adjustments to fair value positions Other Tier 1 deductions Total deductions from common equity Tier 1 capital Total common equity Tier 1 capital after deductions Additional Tier 1 capital Basel III complying instruments Basel III transitional instruments Total Additional Tier 1 capital Net Tier 1 regulatory capital Tier 2 capital Basel III complying instruments Basel III transitional instruments Eligible general reserve for credit loss Basel III transitional adjustment Total Tier 2 capital Deductions from Tier 2 capital Investments in subsidiaries not consolidated for regulatory purposes Holdings of own and other financial institutions Tier 2 capital instruments Total deductions from Tier 2 capital Net Tier 2 regulatory capital Total regulatory capital Risk weighted assets Common equity Tier 1 capital ratio Additional Tier 1 capital ratio Tier 1 capital ratio Tier 2 capital ratio Total regulatory capital ratio 33,76533,469 (420)(367) 34,889 (436) 1,356 1,2261,156 (558) 15 54 26,100 (1,153) 253 60,520 58,40657,235 (8,670) (1,110) (1,065) (1,913) (1,603) (1,589) (861) (332) - (679) (27) (1) (17,850) (18,071)(18,360) 42,670 40,33538,875 7,315 5,7205,720 1,190 8,505 6,9106,910 51,175 47,24545,785 7,375 6,7034,742 1,526 51 - 8,952 9,5958,201 (140) (140)(140) (77) (217) (231)(218) 8,735 9,3647,983 59,910 56,60953,768 404,235 404,382410,053 10.56% 9.97%9.48% 2.10% 12.66% 11.68%11.17% 2.16% 14.82% 14.00%13.11%

 


2017 Full Year financial results Review of Group operations Dividends 94 - 80.30% 911 14.0 (159bps) 17 - The Board has determined a final fully franked dividend of 94 cents per share, to be paid on 22 December 2017, to shareholders on the register at the record date of 14 November 20171. The final dividend represents a payout ratio on a cash earnings basis of 78.9%. In addition to being fully franked, the dividend will also carry NZ$0.07 in New Zealand imputation credits that may be used by New Zealand residents. The Board has determined to satisfy the DRP for the 2017 final dividend by issuing Westpac ordinary shares. The Market Price used to determine the number of shares issued to DRP participants will be set over the 10 trading days commencing 17 November 2017, and will not include any discount. The Board considered a range of factors including the impact of the Bank Levy on shareholders (which equated to 2 cents per share in Second Half 2017), however decided to leave the dividend unchanged at 94 cents per share. Capital deduction for regulatory expected credit loss For capital adequacy purposes APRA requires the amount of regulatory expected credit losses in excess of eligible provisions deduction. to be deducted from CET1 capital. The table below shows the calculation of this capital 1 Record date in New York is 13 November. 2 Provisions associated with portfolios subject to the Basel standardised approach to credit risk are not eligible. 46 | Westpac Group 2017 Full Year Financial Results Announcement $m As at As atAs at 31 March30 Sept 20172016 30 Sept 2017 Provisions associated with eligible portfolios Total provisions for impairment charges (Section 4 Note 10) plus general reserve for credit losses adjustment plus provisions associated with partial write-offs less ineligible provisions2 Total eligible provisions Regulatory expected downturn loss Shortfall in eligible provisions compared to regulatory expected downturn loss Common equity Tier 1 capital deduction for regulatory expected downturn loss in excess of eligible provisions 3,119 332 148 (74) 3,5133,602 311299 174208 (72) (68) 3,525 3,9264,041 4,386 4,8414,778 861 915737 (861) (915)(737) Payout ratio (reported) 78.05% 80.57%(252bps) 79.28% 84.19%large Payout ratio (cash earnings) 78.86% 78.57%29bps 78.71% Adjusted franking credit balance ($m) 1,063 74243 1,063 Imputation credit (cents per share - NZ) 7.0 7.0-14.0 Ordinary dividend (cents per share) % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Interim (fully franked) - 94(100) 94 94-Final (fully franked) 94 --94 Total ordinary dividend 94 94-188 188-

 


2017 Full Year financial results Review of Group operations 2.6 Sustainability performance Approach to operating sustainably The Group’s approach to operating sustainably is designed to anticipate, respond to and shape the most pressing emerging topics (issues and opportunities) that have the potential to materially impact customers, employees, suppliers, shareholders and communities. We believe that as one of Australia’s largest companies we have a role to play in helping to create positive social, economic and environmental impact, for the benefit of all. This view is embedded within our core business activities, and aligns with the priorities set out in the Group’s strategy. Sustainability leadership Our leadership in sustainability is regularly acknowledged and validated by a number of third party ratings and awards. During 2017, these included: Assessed as the most sustainable bank globally in the 2017 Dow Jones Sustainability Indices (DJSI) achieving a score of 94. This marks the fourth year in a row and 10th time that Westpac has achieved global banking sector leadership, and the 16th year in a row that Westpac has been recognised among global banking leaders; Assigned a Gold Class ranking in the RobecoSAM Sustainability Yearbook for 2017, released in January 2017; and Recognised as one of only ten Australian companies to achieve Leadership level in the 2017 CDP1, with a climate score A-. This puts Westpac among the top 22% of companies globally to achieve this level. Sustainability objectives Our 2013-2017 Sustainability Strategy sets out the following three priority areas: Embracing societal change: helping improve the way people work and live, as our society changes; Environmental solutions: helping find solutions to environmental challenges; and Better financial futures: helping customers to have a better relationship with money, for a better life. These areas are supported by measurable objectives, which are regularly tracked and reported. The following table provides a summary of 2017 progress against those objectives and their targets. During the year, work continued on refreshing and resetting our strategic objectives post-2017. 1 Formerly the Carbon Disclosure Project. Westpac Group 2017 Full Year Financial Results Announcement | 47

 


2017 Full Year financial results Review of Group operations Performance against sustainability objectives1 Ensure our workforce is representative of the community Proportion of leadership roles held by women increased from 48% to 50% in 2017, achieving the Group’s 2017 target; Recruited an additional 177 people who identify as Aboriginal and Torres Strait Islander peoples, bringing to 628 those recruited and exceeding our three year goal of 500 by 2017; Participation of mature aged workers (50+) is 22.2%, up from 21.5% a year ago; and Financial wellbeing of women aged 40+ as rated by the BT Financial Health Index survey remained stable. Extend length and quality of working lives Mean employee retirement age was 62.3 years, up compared to a year ago; and Workplace wellbeing as measured by the Work Ability Index remained within the ‘good’ range. Help improve the way people work and live, as our society changes Anticipate the future product and service needs of ageing and culturally diverse customers Increased convenience for multi-cultural customers by enabling foreign currency accounts in core currencies to be opened via Westpac Live online banking; Introduced new Bereavement Support sites on the websites for all our major bank brands, as well as Bereavement customer guide booklets; Improved online guidance and banker training supporting bereaved customers for all four bank brands in Australia; Launched educational videos via the Davidson Institute to help new arrivals and multicultural Australians better understand Australian super, tax and the process of transferring money overseas; and Launched live stream videos via our social media platforms with tips on how Chinese students in the midst of planning their move to Australia can manage their finance. Provide products and services to help customers adapt to environmental challenges Since 2013 launched nine unique products/services, including incorporation of sustainability market data into the Panorama investment platform and announced as the preferred financial partner for the Tasmanian Energy Efficiency Loan Scheme. Increase lending and investment in CleanTech and environmental services Increased committed exposure to the CleanTech and environmental services sector relative to FY16, taking total committed exposure to $7.0 billion, surpassing the 2017 target by 16%. Help find solutions to environmental challenges Reduce our environmental footprint Maintained carbon neutral status and achieved a reduction of more than 40% in office paper consumption since 2012; Bank of Melbourne’s 525 Collins Street branch became the first 6 Star Green Star bank branch in Victoria, reflecting leading eco-efficient practices; Achieved 2017 power usage effectiveness target of 1.6 and surpassed the 2017 energy efficiency target with 169 kWh/m2; and Recycling rates and water consumption in Sydney head offices improved to 75% and 104,866 kL respectively. Ensure all our customers have access to the right advice to achieve a secure retirement Lifted engagement between customers and BT Adviser View to increase transparency on quality of advice and service; BT Advice average customer satisfaction rating was 4.91 out of 5.00 for 2017, outperforming the FY17 target of 4.90. Help our customers meet their financial goals in retirement The proportion of Group customers with Group superannuation was 7.5%, a decrease compared to 7.8% in 2016; Launched SuperCheck, a tool which allows our customers to find all their superannuation within 60 seconds and open an account and rollover in three clicks, in Westpac and St.George group channels; and ‘Wealth Review’ tool provided members and their families key insights into their financial position. Help customers to have a better relationship with money, for a better life Increase access to financial services in the Pacific Launched Choice Wantok, an ambitious financial inclusion program in PNG as part of a joint venture between Westpac and the Pacific Financial Inclusion Program; Met 2017 target for the number of 300,000 Choice Basic banking customers in our Pacific operations ahead of schedule; and There were nearly 177,000 mobile banking activations and over 330,000 In-store transactional volumes as at 30 September 2017. Help people gain access to social and affordable housing and services Lent over $1.32 billion to the social and affordable housing sector, up from $1.05 billion at 30 September 2016 and short of our $2 billion 2017 target. 1 All results as at 30 September 2017 except environmental footprint which is as at 30 June 2017. Refer to www.westpac.com.au/sustainability for glossary of terms and metric definitions. 48 | Westpac Group 2017 Full Year Financial Results Announcement PriorityObjectivesFull Year 2017 progress

 


2017 Full Year financial results Review of Group operations [This page is intentionally blank]. Westpac Group 2017 Full Year Financial Results Announcement | 49

 


2017 Full Year financial results Divisional results 3.0 3.1 Divisional results Consumer Bank 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 originator. 1 Averages are based on a six month period for the halves and a twelve month period for the full year. 50 | Westpac Group 2017 Full Year Financial Results Announcement As at As atAs atAs at 31 March30 Sept31 March 201720162016 30 Sept 2017 Credit quality Impairment charges to average loans annualised1 Mortgage 90+ day delinquencies Other consumer loans 90+ day delinquencies Total stressed assets to TCE 0.15%0.13%0.16% 0.72%0.70%0.58% 1.83%1.34%1.48% 0.64%0.61%0.51% 0.15% 0.70% 1.62% 0.62% $bn As at As at% Mov't 31 MarchSept 17 - 2017Mar 17 As at As at% Mov't 30 SeptSept 17 - 2016Sept 16 30 Sept 30 Sept 2017 2017 Deposits Term deposits Other Total deposits Net loans Mortgages Other Provisions Total net loans Deposit to loan ratio Total assets TCE Average interest-earning assets1 55.12 130.84 54.63 126.08 56.3 56.3 135.5 135.5 191.8 185.93 339.03 14.1(4) (0.9)-191.8 180.66 331.46 14.3(5) (0.9)-349.8 349.8 13.6 13.6 (0.9) (0.9) 362.5 352.23 362.5 344.85 52.91% 52.78%13bps 52.91% 52.38%53bps 369.5 359.33 369.5 351.55 425.0 414.33 318.83 425.0 407.14 304.76 328.7 323.7 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16 Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment charges Operating profit before tax Tax and non-controlling interests Cash earnings Economic profit Expense to income ratio Net interest margin 3,878 3,6317 424(11) 7,509 7,1755 850(6) 378 802 4,256 4,0555 (1,629)5 8,311 8,0254 (3,270)2 (1,708) (3,337) 2,548 2,4265 (267)3 4,974 4,7555 (492)10 (274) (541) 2,274 2,1595 (648)5 4,433 4,2634 (1,279)4 (681) (1,329) 1,593 1,5115 3,104 2,9844 1,2788 40.17%(4bps) 2.28%7bps 2,5993 40.75%(60bps) 2.35%(3bps) 1,386 2,664 40.13% 40.15% 2.35% 2.32%

 


2017 Full Year financial results Divisional results Financial performance Second Half 2017 – First Half 2017 Cash earnings of $1,593 million, was 5% higher than First Half 2017, largely due to a 7% increase in net interest income. This was partly offset by lower non-interest income, higher operating expenses and a small rise in impairment charges. (consistent with a reduction in system1 balances); Full Year 2017 – Full Year 2016 The 4% rise in cash earnings to $3,104 million, was due to good balance sheet growth and disciplined expense management. and personal loans, in line with lower system1 balances; 1 RBA September 2017. Westpac Group 2017 Full Year Financial Results Announcement | 51 Net interest income up $334m, 5% Mortgages growth was slightly below system1. The decline in other lending was in credit cards The above system growth in deposits, included a 9% lift in transaction account balances; and Net interest margin was 3 basis points lower primarily from higher wholesale funding and deposits costs, partly offset by some repricing and continued discipline on discounting. Non-interest income down $48m, 6% Decline mostly due to lower cards income (net impact of interchange fee changes, loyalty point redemption costs, and a prior year benefit not repeated) and provisions for customer refunds; and Partly offset by some fee repricing and higher foreign exchange income. Expenses up $67m, 2% Higher technology and investment related costs; A rise in regulatory and compliance spending; Increased product development and marketing costs; and Productivity benefits largely offset business as usual expense increases. Impairment charges up $49m, 10% Higher impairments were mostly due to an increase in mortgage IAPs for regions impacted by the slowing of the mining investment cycle and CAPs for hardship changes in the other consumer lending portfolio; and 90+ day other consumer loan delinquencies were higher mostly due to changes in the measurement and reporting of customers in hardship arrangements. Excluding hardship changes, 90+ day delinquencies improved. Economic profit up $65m, 3% Increase was lower than the rise in cash earnings due to more capital allocated to the division in the prior year from increased regulatory capital requirements for mortgages. Net interest income up $247m, 7% Mortgages grew at system1 while effectively managing macro-prudential rules for both investor and interest only lending. Other personal lending was lower in credit cards and personal loan Deposits growth of 3% was spread broadly across term and at call accounts with most growth in online and savings accounts. Mortgage offset accounts also increased (up 4%); Net interest margin was 7 basis points higher from pricing changes across different mortgage categories including investor mortgages and interest only lending. Deposit spreads benefited from the maturity of some highly priced term deposits; and Margins were also impacted by some switching of mortgage products and from a customer preference for fixed rate home loan products. The Bank Levy, applied from July 2017 (3 months), reduced margins by 3 basis points. Non-interest income down $46m, 11% Decline was mostly due to a fall in cards income (lower interchange income and the seasonal and mix impact in loyalty point redemptions, partially offset by reward point repricing); and A $24 million provision for customer refunds and payments also contributed to the decline; partly offset by The full period impact of some fee repricing in First Half 2017. Expenses up $79m, 5% After remaining relatively flat in the first half of the year, expenses were higher due mostly to: - Investment, including in the customer service hub and new call centre platform; - Regulatory and compliance costs including effort around product reviews; and - Increased marketing spend, including the roll out new products such as the ‘Bump’ and Westpac Life deposit accounts, and the Westpac Lite credit card. Partially offsetting these increases has been improved efficiency from increased digitisation and the full period benefit of restructuring of the network including the closure of 16 branches in Second Half 2017 which followed the closure of 29 branches in First Half 2017. Impairment charges up $7m, 3% Asset quality remains sound, with stressed assets to TCE at 0.62%, however, impairment charges were higher due mostly to changes in the reporting and treatment of facilities in hardship. Economic profit up $108m, 8% Driven by higher cash earnings and completion of a number of initiatives that have improved the capital efficiency of mortgage lending.

 


2017 Full Year financial results Divisional results 3.2 Business Bank Business Bank (BB) is responsible for sales and service to micro, SME and commercial business customers in Australia 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 borrowing, 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 originator. 1 Averages are based on a six month period for the halves and a twelve month period for the full year. 52 | Westpac Group 2017 Full Year Financial Results Announcement As at As atAs atAs at 31 March30 Sept31 March 201720162016 30 Sept 2017 Credit quality Impairment charges to average loans annualised1 Mortgage 90+ day delinquencies Other consumer loans 90+ day delinquencies Business: impaired assets to TCE Total stressed assets to TCE 0.21% 0.63% 1.71% 0.47% 2.16% 0.27%0.27%0.27% 0.58%0.61%0.54% 1.34%0.92%1.34% 0.63%0.55%0.62% 2.32%2.24%2.13% $bn As at As at% Mov't 31 MarchSept 17 - 2017Mar 17 As at As at% Mov't 30 SeptSept 17 - 2016Sept 16 30 Sept 30 Sept 2017 2017 Deposits Term deposits Other Total deposits Net loans Mortgages Business Other Provisions Total net loans Deposit to loan ratio Total assets TCE Average interest-earning assets1 47.1 68.2 46.71 65.34 47.1 68.2 47.9(2) 62.79 115.3 61.4 88.2 9.1 (1.2) 112.03 59.83 86.62 9.2(1) (1.3)(8) 115.3 61.4 88.2 9.1 (1.2) 110.64 58.35 86.82 9.5(4) (1.2)-157.5 154.32 157.5 153.43 73.21% 72.59%62bps 73.21% 72.10%111bps 161.1 157.82 161.1 156.83 206.4 150.5 203.12 148.12 206.4 149.3 201.33 144.33 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment charges Operating profit before tax Tax and non-controlling interests Cash earnings Economic profit Expense to income ratio Net interest margin 2,065 586 1,9904 5673 4,055 1,153 3,9253 1,1044 2,651 (928) 2,5574 (911)2 5,208 (1,839) 5,0294 (1,796)2 1,723 (162) 1,6465 (205)(21) 3,369 (367) 3,2334 (410)(10) 1,561 (470) 1,4418 (433)9 3,002 (903) 2,8236 (848)6 1,091 1,0088 2,099 1,9756 797 35.01% 2.74% 66121 35.63%(62bps) 2.70%4bps 1,458 35.31% 2.72% 1,31011 35.71%(40bps) 2.72%-

 


2017 Full Year financial results Divisional results Financial performance Second Half 2017 - First Half 2017 Cash earnings of $1,091 million were $83 million, or 8%, higher than First Half 2017. Operating income increased 4% supported by targeted balance sheet growth, higher margins and increased fee income. Expenses were 2% up, with business as usual costs being offset by efficiency gains. Impairment charges decreased from a reduction in commercial provisions. Full Year 2017 – Full Year 2016 Cash earnings of $2,099 million are $124 million, or 6% higher than Full Year 2016 from core earnings growth of 4% and a 10% decline in impairment charges. The result was supported by increased fee income, solid balance sheet growth and productivity gains. Westpac Group 2017 Full Year Financial Results Announcement | 53 Net interest income up $130m, 3% Lending growth of 3% was supported by SME and targeted industries while commercial property lending was lower from optimising risk return profile; A 15% rise in transaction balances supported the 4% rise in deposits. Term deposit balances declined following the migration of some customers to Private Wealth (in BTFG); and Net interest margin was little changed over the year. Asset spreads were higher following some repricing, although these were offset by lower deposit spreads and higher wholesale funding costs. Non-interest income up $49m, 4% Higher line fees from both portfolio growth and some repricing for facilities; and Fees were also supported by the strong growth in transaction balances and repricing. Expenses up $43m, 2% Business as usual cost increases were largely offset by efficiency gains from digitisation of processes and streamlining in the division’s service model including specialist industry teams and more targeted handling of customer service requests; and Increased investment spending and technology costs led to most of the increase. Impairment charges down $43m, 10% Lower impairments were principally due to improved collections processes for auto finance. This was partly offset by increased provisions across the property, construction, mining and manufacturing sectors, particularly in Queensland; and Credit quality remains sound, with total stressed assets to TCE lower. Auto delinquencies were higher due to the changes in hardship reporting. Economic profit up $148m, 11% Growth was higher than the 6% rise in cash earnings as the division focused on managing returns and reducing its exposure to more capital intensive segments. Net interest income up $75m, 4% The 2% increase in lending was supported by 3% growth in SME and across targeted industries including health, agriculture and professional services. Partially offsetting this growth has been the continued reduction in some lower returning facilities including in commercial property and auto finance; Deposits increased 3% fully funding loan growth. Most of the growth was in transaction accounts (up 7%); and Net interest margins were higher from increased asset spreads, from repricing associated with business lending and certain mortgages, including for interest only. This increase was partially offset by provision for customer refunds and payments, higher funding costs and the Bank Levy which had a 4 basis point impact on margins. Non-interest income up $19m, 3% The rise was supported by higher business lending fees and transaction fees from a combination of portfolio growth, more transaction accounts and an uplift in facility fees. Expenses up $17m, 2% Most of the expense increase was due to higher technology and investment related costs and regulatory and compliance costs; and Increases from business as usual costs have largely been offset by productivity benefits from: - Improvements to the customer service model with dedicated service request teams and segmentation of customers to industry specialists; - Using digital to increase customer self-serve, improve customer on-boarding and simplify credit risk review processes, enabling bankers to spend more time with customers; and - Further take-up of e-statements. Impairment charges down $43m, 21% Decline mostly due to a reduction in new individual provisions on commercial exposures; Credit quality remains sound, with the level of stressed assets 16 basis points lower; and Other consumer loan delinquencies increased due to changes in the reporting and treatment of hardship. Economic profit up $136m, 21% Economic profit increased more than cash earnings as the division focused on managing returns and reducing its exposure to more capital intensive segments.

 


2017 Full Year financial results Divisional results 3.3 BT Financial Group (Australia) BT Financial Group (Australia) (BTFG) is the Australian wealth management and insurance arm of the 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 to manufacture certain general insurance products. In managing risk across all insurance classes the division reinsures certain risks using external providers. BTFG operates a range of wealth, funds management and financial advice brands and operates under the banking brands of Westpac, St.George, Bank of Melbourne and BankSA for Private Wealth and Insurance. In Second Half 2017 Westpac sold down its investment in BTIM from 29% to 10%. That sale led to a change in the way the business is accounted for from being equity accounted to being reflected investment. Profit on the partial sell down of BTIM is not included in BTFG’s results. as an available-for-sale 1 Income on Invested Capital represents revenue generated from investing BTFG’s capital balances (required for regulatory purposes). 2 Averages are based on a six month period for the halves and a twelve month period for the full year. 54 | Westpac Group 2017 Full Year Financial Results Announcement Cash earnings $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Funds management business Insurance Total funds management and insurance Capital and other Total cash earnings 181 254(29) 11946 435 520(16) 309(5) 174 293 355 373(5) 24(21) 728 829(12) 3910 19 43 374 397(6) 771 868(11) $bn As at As at% Mov't 31 MarchSept 17 - 2017Mar 17 As at As at% Mov't 30 SeptSept 17 - 2016Sept 16 30 Sept 30 Sept 2017 2017 Deposits Net loans Loans Provisions Total net loans Deposit to loan ratio Funds Under Management (FUM) Average Funds Under Management2 Funds Under Administration (FUA) Average Funds Under Administration2 29.7 28.64 19.34 --29.7 25.516 18.68 --20.1 20.1 - - 20.1 19.34 20.1 18.68 147.76% 148.19%(43bps) 147.76% 137.10%large 53.1 55.1(4) 50.67 136.41 133.04 53.1 48.410 47.710 130.86 126.47 54.2 52.4 138.3 138.3 138.4 135.6 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment charges Operating profit before tax Tax and non-controlling interests Cash earnings Economic profit Expense to income ratio Income on invested capital1 286 25114 894(5) 537 48610 1,908(9) 850 1,744 1,136 1,145(1) (578)3 2,281 2,394(5) (1,160)1 (598) (1,176) 538 567(5) (3)(67) 1,105 1,234(10) --(1) (4) 537 564(5) (167)(2) 1,101 1,234(11) (366)(10) (163) (330) 374 397(6) 771 868(11) 325(8) 50.48%216bps 36(17) 766(18) 48.45%311bps 5422 300 625 52.64% 51.56% 30 66

 


 

2017 Full Year financial results Divisional results Financial performance Second Half 2017 - First Half 2017 Cash earnings of $374 million, was $23 million or 6% lower than First Half 2017. While the business has continued to grow with higher funds under administration, improved insurance premiums and a 4% increase in lending, performance was impacted by some infrequent items totalling $129 million before tax. The cash earnings impacts of infrequent items (after tax) include a provision for customer refunds and payments ($58 million), revaluation loss on investments in boutique funds ($24 million) and lower revenue following the further sale of shares in BTIM ($10 million). Full Year 2017 – Full Year 2016 Cash earnings was 11% lower than Full Year 2016, impacted by a number of infrequent items. The underlying business was flat over the year with volume growth partly offset by lower FUM and FUA margins, lower Advice activity levels, higher insurance claims and increased regulatory and compliance costs. Westpac Group 2017 Full Year Financial Results Announcement | 55 Net interest income up $51m, 10% Good balance sheet growth primarily in Private Wealth, deposits up 16% and loans up 8%; and Net interest margin was up 13 basis points mostly due to repricing of certain mortgages and improved term deposit spreads. Non-interest income down $164m, 9% Funds Management contribution down $151 million: - Infrequent items indicated above ($129 million); - Advice income was lower mostly from reduced activity ($33 million); and - FUM and FUA revenue was higher with growth in average FUM and FUA (10% and 7% respectively) offsetting lower margins from product mix changes, including the migration to MySuper products. FUM and FUA net flows were $4 billion for the year. Insurance income down $26 million (or 5%); - General insurance income was lower ($33 million) mostly from higher claims concentrated in the first half of the year; - Life insurance income was flat as the 10% growth in in-force premiums and improved lapses was offset by higher claims; and - LMI contribution was higher mostly due to the arrangements for loans with a LVR >90%. Partly offsetting this was improved returns on capital mostly related to lower hedging costs. Expenses up $16m, 1% Regulatory and compliance costs were $28 million higher over the year; Investment related spending was up from costs associated with the launch of Panorama; and Productivity benefits mostly offset these increases. Economic profit down $141m, 18% The decline in economic profit was due to the lower cash earnings and higher levels of capital. This reflected an increase in capital provided to the lenders mortgage insurance business. Net interest income up $35m, 14% Good balance sheet growth in Private Wealth with deposits and loans up 4%; and Net interest margin up 23 basis points from repricing of certain mortgages and improved term deposit spreads. Non-interest income down $44m, 5% Funds Management contribution was down $109 million (or 17%): - Infrequent items totalled $129 million (indicated above); - FUM and FUA related income was higher with average FUM and FUA up 7% and 4% respectively, partly offset by margin compression; - FUM and FUA increase was supported by positive net inflows and improved markets including $3 billion of net flows onto the Panorama system, Panorama FUA now $7 billion; and - Fund margins were lower due to product mix changes including the completion of the migration of customers from legacy superannuation products to lower fee MySuper products. Insurance income was $71 million (or 33%) higher including from: - General insurance income was $74 million higher, mostly due to lower claims. First Half 2017 experienced a number of large storms, including Cyclone Debbie ($37 million); - Life insurance income was $6 million higher, mostly due to lower claims and 4% growth in in-force premiums; and - LMI contribution was $9 million lower from a reduction in loans written in higher LVR bands. Returns on capital were down due to a lower investment contribution. Expenses up $20m, 3% Higher regulatory and compliance costs due to elevated regulatory requests and from the costs associated with processing customer refunds and payments; Investment expenses increased, including costs associated with Panorama; Expenses tend to be higher in the second half of the year given end of financial year processing; and Productivity savings including full period benefits from centralising certain activities partly offset these increases. Economic profit down $25m, 8% The decline in economic profit was consistent with the lower cash earnings.

 


2017 Full Year financial results Divisional results 3.3.1 Funds Management business Movement of FUM / FUA Market share in key Australian wealth products are displayed below. Current Australian market share5 Product Market share Rank Platforms (includes Wrap and Corporate Super) Retail (excludes Cash) Corporate Super 18.9% 18.0% 12.8% 1 1 3 1 Includes investments revaluation loss of $32 million as a result of annual valuations. 2 Other movement includes market movement and other client transactions including fund transfers, account fees and distributions. 3 Retail includes Annuities, Retail Investment, Retirement Products and Retail Superannuation. 4 Other includes Capital and Reserves. 5 Market share FUM / FUA based on published market share statistics from Strategic Insight as at 30 June 2017 and represents the addition of St.George Wealth and BT Wealth business market share at this time. 56 | Westpac Group 2017 Full Year Financial Results Announcement $bn As at As at% Mov'tAs at% Mov't Net Other30 SeptSept 17 -31 MarchSept 17 - Inflows OutflowsFlowsMov't22016Sept 162017Mar 17 30 Sept 2017 Retail3 Institutional Wholesale Total FUM Wrap Corporate Super Other4 Total FUA 17.5 1.9(2.1)(0.2)0.617.1217.5-0.6(0.5)0.10.22.1142.34 11.0(8.8)2.21.829.21435.3(6) 2.4 33.2 53.1 13.5(11.4)2.12.648.41055.1(4) 29.7(28.6)1.15.5106.56111.02 2.6(2.3)0.30.920.5621.41 ---(0.3)3.8(8)4.0(13) 113.1 21.7 3.5 138.3 32.3(30.9)1.46.1130.86136.41 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income1 Net operating income Operating expenses Core earnings Impairment charges Operating profit before tax Tax and non-controlling interests Cash earnings Expense to income ratio 281 24415 646(17) 525 47411 1,334(11) 537 1,183 818 890(8) (529)5 1,708 1,808(6) (1,067)1 (553) (1,082) 265 361(27) (1)100 626 741(16) --(2) (3) 263 360(27) (106)(23) 623 741(16) (221)(15) (82) (188) 181 254(29) 435 520(16) 67.60% 59.44%large 63.35% 59.02%large

 


2017 Full Year financial results Divisional results 3.3.2 Insurance business The Insurance business result includes the Westpac Lenders Mortgage Insurance (LMI) businesses. and St.George Life Insurance, General Insurance and Half Year Sept 17 - Half Year Sept 17 - 18 large Insurance key metrics Half Year Sept 17 - 213 (132) 10 5 Half Year Sept 17 - Half Year Sept 17 - Current Australian market share4 Product Market share Rank Life insurance - in-force Life insurance - new business 10.4% 11.7% 5 5 1 Sales/New Business in First Half 2017 includes a methodology change for the calculation of premium discounts, creating a one off increase of $32 million. This has no impact on earned premiums. Adjusting for this change, in-force premiums growth on Second Half 2017 is 4% and growth on Full Year 2016 is 6%. 2 Claims ratios are claims over earned premium plus reinsurance rebate plus exchange commission. General Insurance claims ratios have been calculated to align with industry standards and exclude internal commission payments from earned premiums. 3 LMI gross written premium includes loans >90% LVR reinsured with Arch Reinsurance Limited. Second Half 2017 gross written premium includes $73 million from the arrangement (First Half 2017: $107 million, Full Year 2016: $227 million). 4 Source: Life Insurance – Strategic Insight June 2017. Westpac Group 2017 Full Year Financial Results Announcement | 57 Gross written premiums $m Half Year Sept 17 % Mov't% Mov't Full YearSept 17 - Sept 16Sept 16 Full Year March 17Mar 17 Sept 17 General Insurance gross written premium Lenders Mortgage Insurance gross written premium3 258 109 25035085031 287(13) 141(23) 250 Claims ratios2 for Insurance Business (%) Half Year Sept 17 % Mov't% Mov't Full YearSept 17 - Sept 16Sept 16 Full Year March 17Mar 17 Sept 17 Life Insurance General Insurance Lenders Mortgage Insurance 35 35 27 38(8) 71(51) 7large 37 53 17 363 498 1421 Life Insurance in-force premiums $m Half Year Sept 17 % Mov't% Mov't Full YearSept 17 - Sept 16Sept 16 Full Year March 17Mar 17 Sept 17 Life Insurance in-force premiums at start of period Sales / New Business1 Lapses Life Insurance in-force premiums at end of period 1,030 112 (74) 9736 122(8) (65)14 973 234 (139) 8929 1,068 1,0304 1,068 97310 Cash earnings $m Half Year Sept 17 % Mov't% Mov't Full YearSept 17 - Sept 16Sept 16 Full Year March 17Mar 17 Sept 17 Life Insurance General Insurance Lenders Mortgage Insurance Total cash earnings 81 76 17 7841591562 117(20) 3611 94 23(26) 40 174 11946 293 309(5) $m Half Year Sept 17 % Mov't% Mov't Full YearSept 17 - Sept 16Sept 16 Full Year March 17Mar 17 Sept 17 Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment charges Operating profit before tax Tax and non-controlling interests Cash earnings Expense to income ratio 3 285 5(40)8560 525(5) 21433 499 288 (46) 21932507530(4) (88)5 (46)-(92) 242 2 17340415442(6) --(2)(200) - 244 (70) 17143415442(6) (133)(8) (52)35 (122) 174 11946 293 309(5) 15.97% 21.00%large 18.15% 16.60%155bps

 


2017 Full Year financial results Divisional results 3.4 Westpac Institutional Bank 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. Revenue contribution 1 2 Averages are based on a six month period for the halves and a twelve month period for the full year. Includes capital benefit. 58 | Westpac Group 2017 Full Year Financial Results Announcement $m Half Year Sept 17 % Mov't Half YearSept 17 - March 17Mar 17 Full Year Sept 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Lending and deposit revenue Markets, sales and fee income Total customer revenue Derivative valuation adjustments Trading revenue Hastings Other2 Total WIB revenue 827 452 8013 513(12) 1,628 965 1,6111 9373 1,279 1,314(3) 2,593 2,5482 27 71 63 73 1942 246(71) 30110 91(20) 46 317 93 164 12large 22839 877 235(30) 1,513 1,700(11) 3,213 3,1103 $bn As at 30 Sept 2017 As at% Mov't 31 MarchSept 17 - 2017Mar 17 As at 30 Sept 2017 As at% Mov't 30 SeptSept 17 - 2016Sept 16 Deposits Net loans Loans Provisions Total net loans Deposit to loan ratio Total assets TCE Average interest-earning assets1 Impairment charges to average loans annualised Impaired assets to TCE Total stressed assets to TCE Funds under management 89.4 74.3 (0.3) 93.8(5) 72.03 (0.5)(40) 89.4 74.3 (0.3) 88.41 74.4-(0.6)(50) 74.0 71.53 74.0 73.8-120.81% 131.19%large 120.81% 119.78%103bps 102.9 249.1 82.4 (0.02%) 0.07% 0.55% 12.5 103.8(1) 245.22 84.4(2) 0.18%(20bps) 0.18%(11bps) 0.59%(4bps) 11.311 102.9 249.1 83.4 0.08% 0.07% 0.55% 12.5 110.4(7) 243.92 90.5(8) 0.23%(15bps) 0.33%(26bps) 0.88%(33bps) 10.223 $m Half Year Sept 17 % Mov't Half YearSept 17 - March 17Mar 17 Full Year Sept 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment (charges) / benefits Operating profit before tax Tax and non-controlling interests Cash earnings Economic profit Expense to income ratio Net interest margin 764 749 7433 957(22) 1,507 1,706 1,574(4) 1,53611 1,513 (666) 1,700(11) (657)1 3,213 (1,323) 3,1103 (1,347)(2) 847 8 1,043(19) (64)(113) 1,890 (56) 1,7637 (177)(68) 855 (251) 979(13) (279)(10) 1,834 (530) 1,58616 (480)10 604 700(14) 1,304 1,10618 274 44.02% 1.85% 348(21) 38.65%large 1.77%8bps 622 41.18% 1.81% 33884 43.31%(213bps) 1.74%7bps

 


2017 Full Year financial results Divisional results Financial performance Second Half 2017 - First Half 2017 Cash earnings of $604 million was $96 million, or 14%, lower than First Half 2017, mostly from lower markets income from both customer and trading. This was partly offset by lower impairment charges. Full Year 2017 – Full Year 2016 Cash earnings of $1,304 million, was $198 million or 18% higher compared to Full Year 2016, supported by higher customer and trading income, disciplined expense management and lower impairments. Westpac Group 2017 Full Year Financial Results Announcement | 59 Net interest income down $67m, 4% Average loan balances were lower over the year, which contributed to lower net interest income; partly offset by 7 basis points improvement in margin from the run down in lower return assets and pricing disciplines. Non-interest income up $170m, 11% Higher trading revenue across both fixed income and commodities; Customer revenue was higher reflecting some larger customer transactions; and Positive movement in derivative valuation adjustments. Expenses down $24m, 2% Disciplined expense management, productivity initiatives and lower investment in Asia contributed to the 2% reduction in expenses. Impairment charges down $121m, 68% Asset quality sound, with the ratio of impaired assets to TCE down 26 basis points following the work-out and write-off of some larger facilities; and The lower charge was partly due to higher impairment charges in 2016 with increased provisions for the downgrade of a small number of large names. Economic profit up $284m, 84% Improved portfolio quality and reviews of unused limits and committed facilities, has reduced allocated capital. This combined with the higher cash earnings led to the 84% increase in economic profit. Net interest income up $21m, 3% Growth in lending of 3% was primarily due to higher utilisation of mortgage warehouse facilities following a large drop in First Half 2017. Trade finance was also a little higher; Deposits were 5% lower from the roll off of some government deposits late in the half; The rise in margins reflects continued discipline on lending spreads and from an improved funding mix with average deposit balances higher over the half; partly offset by the Bank Levy, which had a 3 basis points impact on margins. Non-interest income down $208m, 22% After a strong performance in First Half 2017, trading income was lower. Markets income from customers was also down as First Half 2017 benefited from some larger customer transactions; and Partly offset by higher performance fees in Hastings ($30 million) which typically occur in the second half of the year. Expenses up $9m, 1% Expenses were well managed with productivity initiatives (including refinement of the offshore operating model) limiting expense growth to 1%. Impairment charges down $72m, 113% Asset quality remains sound with impaired assets to TCE declining 11 basis points to 0.07%; and Impairment charges were a small benefit from higher write-backs following the successful work-out of some impaired facilities. New individually assessed provisions were also lower. Economic profit down $74m, 21% Economic profit is 21% lower from the reduction in contribution to cash earnings from lower Financial Markets income.

 


2017 Full Year financial results Divisional results 3.5 Westpac New Zealand 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 maintains its technology, operations and Treasury. All figures are in New Zealand dollars (NZ$). own infrastructure, including 1 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $19 million, Second Half 2016: $16 million and First Half 2016: $19 million). 2 Total deposits in this table refer to total customer deposits. 3 Averages are based on a six month period for the halves and a twelve month period for the full year. 4 During Second Half 2017 NZ$0.2 billion transferred from FUA to FUM. 60 | Westpac Group 2017 Full Year Financial Results Announcement As at As atAs atAs at 31 March30 Sept31 March 201720162016 30 Sept 2017 Credit quality Impairment charges to average loans annualised3 Mortgage 90+ day delinquencies Other consumer loans 90+ day delinquencies Impaired assets to TCE Total stressed assets to TCE (0.10%) 0.12% 0.57% 0.18% 2.06% (0.09%)0.14%0.03% 0.14%0.10%0.15% 0.58%0.48%0.56% 0.20%0.24%0.35% 2.41%2.54%1.78% NZ$bn As at As at% Mov't 31 MarchSept 17 - 2017Mar 17 As at As at% Mov't 30 SeptSept 17 - 2016Sept 16 30 Sept 30 Sept 2017 2017 Deposits Term deposits Other Total deposits2 Net loans Mortgages Business Other Provisions Total net loans Deposit to loan ratio Total assets TCE Third party liquid assets Average interest-earning assets3 Funds under management4 Funds under administration4 30.0 28.4 27.88 29.0(2) 30.0 28.4 29.23 28.3-58.4 46.9 28.6 2.2 (0.4) 56.83 46.22 28.6-2.15 (0.4)-58.4 46.9 28.6 2.2 (0.4) 57.52 45.14 28.41 2.010 (0.4)-77.3 76.51 77.3 75.13 75.55% 74.25%130bps 75.55% 76.56%(101bps) 88.3 87.11 88.3 86.03 108.8 8.7 86.0 8.3 1.8 107.02 8.44 85.6-7.78 2.0(10) 108.8 8.7 85.8 8.3 1.8 106.22 8.35 80.27 7.511 2.0(10) NZ$m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income1 Net operating income Operating expenses1 Core earnings Impairment (charges) / benefits Operating profit before tax Tax and non-controlling interests Cash earnings Economic profit Expense to income ratio Net interest margin 897 253 8387 259(2) 1,735 512 1,7251 517(1) 1,150 (476) 1,0975 (487)(2) 2,247 (963) 2,242-(954)1 674 40 61010 3611 1,284 76 1,288-(59)large 714 (206) 64611 (184)12 1,360 (390) 1,22911 (343)14 508 46210 970 8869 245 41.39% 2.08% 19824 44.39%(300bps) 1.96%12bps 443 42.86% 2.02% 38415 42.55%31bps 2.15%(13bps)

 


2017 Full Year financial results Divisional results Financial performance (NZ$) Second Half 2017 - First Half 2017 Cash earnings up 10% to NZ$508 million, supported by a 12 basis point improvement in net interest margin and productivity benefits. Full Year 2017 – Full Year 2016 Cash earnings up 9% to NZ$970 million, with an impairment benefit of $76 million, from higher write-backs and recoveries, and flat core earnings. Operating income was flat, with volume growth offset by margin decline. Expenses were up 1% driven by investment in the division’s transformation program. Westpac Group 2017 Full Year Financial Results Announcement | 61 Net interest income up $10m, 1% Loan growth of 3% was mostly in mortgages, up 4% with business lending 1% higher; Deposits growth of 2% mostly term deposits (up 3%) with customers preferring higher rate term products over at call accounts; and Net interest margin was 13 basis points lower mostly from increased term deposit competition and increased wholesale funding costs. Repricing of certain mortgages and business loans partly offset the margin decline. Non-interest income down $5m, 1% Increased investment income (from a 6% increase in FUM and FUA) and higher cards income were offset by higher insurance claims and lower banking fees following the removal of some consumer fees. Expenses up $9m, 1% The increase was due to investment in the division’s transformation program; and Outside this increase expenses were 3% lower through a range of productivity initiatives including a net reduction of 20 branches, a 3% reduction in FTE, increased self-serve adoption and the digitisation of more processes. Impairment benefit of $76m compared to a $59m charge Asset quality remained sound with stressed assets to TCE reducing 48 basis points to 2.06%. The decline was due to reduction of stress in the dairy sector (improving milk prices). Consumer 90+ day delinquencies were higher but continue to be near historical lows; and The impairment benefit reflects the work-out and write-back of a few large facilities combined with lower levels of stress. Economic profit up $59m, 15% Economic profit growth (15%) is higher than the increase in cash earnings (9%) from the significant impairment benefit. Net interest income up $59m, 7% Loan growth was modest over the half as the division focused on improving returns. All growth achieved was in mortgages, mostly in the fixed rate book. Business lending was flat with new lending in Agriculture offset by lower institutional demand; Deposits fully funded lending with most growth in term deposits (up 8%) as customers preferred higher rate products over at call accounts; and Net interest margin was up 12 basis points supported by disciplined growth and focused repricing of mortgages and business lending and the accelerated amortisation of deferred mortgage costs in First Half 2017 (3 basis points). These were partly offset by lower deposit spreads from competition for deposits, particularly longer dated term deposits. Non-interest income down $6m, 2% Decline was primarily due to the full period impact of removing certain consumer fees in First Half 2017 and lower cards income and institutional fees; partly offset by Higher insurance income (from lower claims) and investment income (supported by a 4% rise in FUM and FUA). Expenses down $11m, 2% The decline was mostly due to productivity benefits from a range of initiatives associated with the division's transformation program. This has included optimising the network and using digital to increase self-serve; and These improvements were partly offset by a $7 million increase in the cost of the transformation program. Impairment benefit of $40m. $4m higher over the first half Asset quality improved with stressed assets to TCE reducing 35 basis points. The decline in stressed assets was due to improved conditions in the dairy sector (following higher milk prices). Consumer delinquencies continue to be at historical lows; and; Impairments continued to be a benefit as write-backs have remained high and improving asset quality has reduced new provision requirements. Economic profit up $47m, 24% With growth skewed to lower risk assets (including mortgages and certain business loans) allocated equity was flat over the half. This contributed to economic profit growing 24% and above the growth in cash earnings.

 


2017 Full Year financial results Divisional results 3.6 Group Businesses Group Businesses include: Treasury which is responsible for the management of the Group’s balance sheet including wholesale funding, capital and management of liquidity. Treasury also manages the interest rate risk and foreign exchange risks inherent in the balance sheet, including managing the mismatch between Group assets and liabilities. Treasury’s earnings are primarily sourced from managing the Group’s balance sheet and interest rate risk, (excluding Westpac New Zealand) within set risk limits; Group Technology1 which comprises functions for the Australian businesses is responsible for technology strategy and architecture, infrastructure and operations, applications development and business integration; Core Support2, which comprises functions performed centrally, including Australian banking operations, property services, strategy, finance, risk, compliance, legal and human resources; and Group Businesses also includes: earnings on capital not allocated to divisions, accounting entries for certain intra-group transactions that facilitate the presentation of the performance of the Group’s operating segments, earnings from non-core asset sales, earnings and costs associated with the Group’s fintech investments and certain other head office items such as centrally raised provisions. Treasury Value at Risk (VaR)3 $m Average High Low Six months ended 31 March 2017 Six months ended 30 September 2016 43.6 41.1 56.4 53.7 31.4 29.5 1 Costs are fully allocated to other divisions in the Group. 2 Costs are partially allocated to other divisions in the Group, with costs attributed to enterprise activity retained in Group Businesses. 3 VaR includes trading book and banking book exposures. The banking book component includes interest rate risk, credit spread risk in liquid assets and other basis risks as used for internal management purposes. 62 | Westpac Group 2017 Full Year Financial Results Announcement Six months ended 30 September 2017 33.257.424.2 Treasury $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income Net operating income Cash earnings 127 4 254(50) 333 381 7 487(22) 22(68) 131 72 257(49) 161(55) 388 233 509(24) 329(29) $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment (charges) / benefits Operating profit before tax Tax and non-controlling interests Cash earnings 181 (13) 288(37) (19)(32) 469 (32) 582(19) 8large 168 (262) 269(38) (265)(1) 437 (527) 590(26) (469)12 (94) 32 4large 11191 (90) 43 121(174) 9large (62) (36) 15large (49)(27) (47) (85) 130(136) (66)29 (98) (34)188 (132) 64large

 


2017 Full Year financial results Divisional results Financial performance Second Half 2017 – First Half 2017 Cash earnings decreased $64 million in the half primarily due to a reduction in Treasury revenue. Full Year 2017 – Full Year 2016 Cash earnings expense. decreased $196 million from lower Treasury revenue, increased expenses and a higher tax Westpac Group 2017 Full Year Financial Results Announcement | 63 Net operating income down $153m, 26% Net interest income decreased $113 million largely from lower Treasury revenue related to interest rate risk management. Non-interest income decreased $40 million primarily due to the impact of exchange rate movements on the hedging of New Zealand earnings. Expenses up $58m, 12% Increase in expenses primarily from higher expenses associated with the Group’s fintech investments and higher regulatory and compliance costs. Impairment benefits up $34m Impairment benefit increased $34 million due to a reduction to the centrally held economic overlay provisions, largely related to the mining sector. This reduction offsets provisions raised in the relevant divisions. Tax and non-controlling interests up $19m, 29% Tax and non-controlling interests increased $19 million, as Full Year 2016 benefited from the finalisation of prior period taxation matters and hybrid distributions (not deductible for tax purposes) were also higher in the current year. Net operating income down $101m, 38% Net interest income decreased $107 million primarily from lower Treasury revenue related to interest rate risk management. This was partly offset by the benefit of higher centrally held capital balances. Non-interest income increased $6 million mostly due to the impact of hedging New Zealand earnings. Expenses down $3m, 1% Expenses were little changed with lower employee costs, mostly offset by higher regulatory and compliance related costs. Impairment benefits up $21m Impairment benefit increased $21 million due to a reduction in the centrally held economic overlay provision, primarily related to the mining sector. This reduction offsets provisions raised in the divisions. Tax and non-controlling interests down $13m, 27% Group Businesses effective tax rate is higher than the Australian company tax rate of 30%, mostly due to the impact of hybrid distributions which are not deductible for Australian taxation purposes.

 


2017 Full Year financial report Table of contents 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Significant developments 65 Consolidated income statement 73 Consolidated statement of comprehensive income 74 Consolidated balance sheet 75 Consolidated statement of changes in equity 76 Consolidated cash flow statement 78 Notes to the consolidated financial statements 79 Note 1 Basis of preparation 79 Note 2 Segment reporting 80 Note 3 Net interest income 84 Note 4 Non-interest income 85 Note 5 Operating expenses 86 Note 6 Income tax 87 Note 7 Earnings per share 88 Note 8 Average balance sheet and interest rates 89 Note 9 Loans 90 Note 10 Provisions for impairment charges 91 Note 11 Credit quality 92 Note 12 Deposits and other borrowings 94 95 Note 13 Fair values of financial assets and liabilities Note 14 Contingent liabilities, contingent assets and credit commitments 101 Note 15 Shareholders’ equity 103 Note 16 Notes to the consolidated cash flow statement 105 Note 17 Subsequent events 106 4.8 Statement in relation to the audit of the financial statements 107 64 | Westpac Group 2017 Full Year Financial Results Announcement 4.0 Full Year financial report 2017

 


 

2017 Full Year financial report Consolidated financial statements 4.1 Significant developments Corporate significant developments Bank Levy for Authorised Deposit-taking Institutions (ADIs) On 23 June 2017, legislation was enacted that introduced a new levy on ADIs with liabilities of at least $100 billion (Bank Levy). The Bank Levy became effective from 1 July 2017 and the rate is set at 0.06% per annum of certain ADI liabilities. There is no end date provided for the Bank Levy. The Bank Levy applies to liabilities of Westpac (including its offshore branches), but does not apply to liabilities of Westpac’s subsidiaries. Furthermore, the Bank Levy is not charged on Additional Tier 1 capital, deposits protected by the Financial Claims Scheme and RBA exchange settlement balances. The legislation also provides for inclusion of derivative liabilities on a net basis and for the Bank Levy to be tax deductible. The Bank Levy cost Westpac $95 million in Full Year 2017, with an after tax impact of $66 million and is estimated to cost Westpac approximately $405 million in Full Year 2018, with an after tax impact of approximately $284 million. House of Representatives Standing Committee on Economics’ Review of the Four Major Banks and other reviews On 16 September 2016, the Chairman of the House of Representatives Standing Committee on Economics announced that the Committee had commenced its Review of the Four Major Banks (Parliamentary Review). The terms of reference for the Parliamentary Review are wide-ranging, with one area of focus being how individual banks and the industry as a whole are responding to issues identified through other inquiries, including through the Australian Bankers’ Association (ABA) action plan. Westpac attended public hearings of the Parliamentary Review on 6 October 2016, 8 March 2017 and 11 October 2017. The first report of the Parliamentary Review was published on 24 November 2016 and contained ten recommendations. The second report was published on 21 April 2017. In its second report, the Committee restated its support for the recommendations in the first report and supported a recommendation of the Australian Small Business and Family Enterprise Ombudsman to remove non-monetary default clauses in small business loan contracts. In May 2017, the Australian Government announced that it supported nine of the ten recommendations made by the Committee in its first report and announced a range of measures designed to implement these recommendations, such as: the introduction of the Banking Executive Accountability Regime (discussed below); an independent review to recommend the best approach to implement an open banking regime with respect to banking product and consumer data; and the creation of a new dispute resolution framework, including the establishment of the Australian Financial Complaints Authority, which is designed to be a single external dispute resolution body for the handling of financial and superannuation disputes. On 29 November 2016, the Senate referred an inquiry into the regulatory framework for the protection of consumers, including small businesses, in the banking, insurance and financial services sector to the Senate Economics References Committee. The terms of reference for the inquiry focus on a range of matters relating to the protection of consumers against wrongdoing in the sector. They also require the inquiry to examine the availability and adequacy of redress and support for consumers that have been victims of wrongdoing. The inquiry is scheduled to produce a report in the first half of 2018. Further, there are a number of other reviews commissioned by the Australian Government, including an independent review to recommend the best approach to implement an open banking regime in Australia. The review will advise on the design of the model and regulatory framework to require banks to share product and customer data with customers and third parties, including the scope of data sets to be shared, data transfer mechanisms, risks such as customer trust and privacy safeguard requirements, and costs of implementation. The review will report to the Government by the end of 2017. In addition to the reviews and inquiries mentioned above, the ACCC is undertaking a specific inquiry, until 30 June 2018, into the pricing of residential mortgages by those banks affected by the Bank Levy (including Westpac), which includes monitoring the extent to which the Bank Levy is passed on to customers. As these reviews and inquiries progress, they may lead to further regulation and reform. Westpac Group 2017 Full Year Financial Results Announcement | 65

 


2017 Full Year financial report Consolidated financial statements Banking Executive Accountability Regime In May 2017, the Australian Government announced that it would introduce the Banking Executive Accountability Regime (BEAR). The Government’s stated intention is to introduce a strengthened responsibility and accountability framework for the most senior and influential directors and executives in ADI groups (referred to as ‘accountable persons’ under BEAR). The Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017 was introduced into Parliament on 19 October 2017. The Bill has been referred to the Senate Economics Legislation Committee, which is expected to report on the Bill by 24 November 2017. If enacted in the form currently proposed, BEAR will involve a range of new measures, including: imposing a set of requirements to be met by ADIs and accountable persons, including accountability obligations; requirements for ADIs to register accountable persons with APRA prior to their commencement in an accountable person role, to maintain and provide APRA with a map of the roles and responsibilities of accountable persons across the ADI group, and to give APRA accountability statements for each accountable person detailing that individual’s roles and responsibilities; and new and stronger APRA enforcement powers, including disqualification powers in relation to accountable persons who breach the obligations of BEAR and a new civil penalty regime that will enable APRA to seek civil penalties in the Federal Court of up to $210 million (for large ADIs, such as Westpac) where an ADI breaches its obligations under BEAR and the breach relates to ‘prudential matters’. The proposed commencement date for implementation of BEAR is 1 July 2018 (with transitional arrangements for certain aspects of BEAR). Productivity Commission Inquiry into Competition in the Australian Financial System In May 2017, the Australian Government announced a Productivity Commission inquiry into competition in the financial system. This review was a recommendation of the Financial System Inquiry. The terms of reference are broad and require the Productivity Commission to review competition in Australia's financial system with a view to improving consumer outcomes, the productivity and international competitiveness of the financial system and the economy more broadly, and supporting ongoing financial system innovation, while balancing these with financial stability objectives. The review commenced on 1 July 2017 and the Productivity Commission is due to hand its final report to the Government by 1 July 2018. Australian Bankers’ Association Banking Reform Program and industry initiatives On 21 April 2016, the ABA announced an action plan to protect consumer interests, increase transparency and accountability and build trust and confidence in banks. The reform program includes a number of industry-led initiatives including: a review of product sales commissions and product based payments; the establishment of an independent customer advocate in each bank; supporting the broadening of external dispute resolution schemes; evaluating the establishment of an industry-wide, mandatory, last resort compensation scheme; strengthening protections available to whistleblowers; the implementation of a new information sharing protocol to help stop individuals with a history of poor conduct moving around the industry; strengthening the commitment to customers in the Code of Banking Practice; and supporting ASIC as a strong regulator. On 20 October 2017, the independent governance expert overseeing the ABA action plan released his sixth report titled Australian banking industry: Package of Initiatives, which noted that banks are continuing to make good progress in delivering the initiatives, with a number of the initiatives now implemented or moving into implementation stage. Australian Securities and Investments Commission (ASIC) Enforcement Review Taskforce On 19 October 2016, the Australian Government released the terms of reference for the ASIC Enforcement Review Taskforce (Taskforce), which will assess the suitability of ASIC’s existing regulatory tools (including the penalties available) and whether they need to be strengthened. The Taskforce has completed consultations on a range of matters, including proposed reforms to the mandatory breach reporting framework. These reforms include clarifying when a reporting obligation is triggered, expanding the class of reports that must be made to include misconduct by individual advisers and employees and strengthening the penalties for failing to report, including through the introduction of an infringement notice regime. 66 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial report Consolidated financial statements The Taskforce has also consulted on: strengthening ASIC’s licensing powers, which would enable ASIC to take action to refuse to grant, or to suspend or cancel, a licence where the applicant or licensee is not considered to be a fit and proper person; and proposals to expand ASIC’s powers to ban senior managers working in financial services businesses. It is currently consulting on proposals to strengthen penalties for corporate and financial sector misconduct. The Taskforce is scheduled to report its recommendations to the Australian Government in 2017. Product design and distribution obligations and product intervention power As part of a package of reforms announced by the Australian Government in 2016, the Federal Government announced that it would accelerate the implementation of certain recommendations made by the Financial System Inquiry (FSI), including granting ASIC a product intervention power and introducing a new ‘principles-based’ product design and distribution obligation on issuers and distributors. On 13 December 2016, the Australian Government released a consultation paper seeking feedback on these proposed reforms. Submissions on the consultation paper closed on 15 March 2017 and it is anticipated that draft legislation will be released for consultation in 2018. Financial benchmarks reform In October 2016, the Australian Government announced a package of measures designed to strengthen the regulation of financial benchmarks. The measures were recommended to the Australian Government by the Council of Financial Regulators following a consultation process on financial benchmark reform. The key measures to be implemented include: ASIC will be empowered to develop enforceable rules for administrators and entities that make submissions to significant benchmarks (such as Westpac), including the power to compel submissions to benchmarks in the case that other calculation mechanisms fail; administrators of significant benchmarks will be required to hold a new ‘benchmark administration’ licence issued by ASIC (unless granted an exemption); and the manipulation of any financial benchmark or financial product used to determine a financial benchmark (such as negotiable certificates of deposit) will be made a specific criminal and civil offence. These measures are expected to be implemented over the next 6-12 months. Residential mortgage lending – reviews by and engagement with regulators APRA has been looking at, and speaking publicly about, the broader issue of bank serviceability standards pertaining to residential mortgage lending. Westpac is engaging proactively with APRA in relation to its work in this area. In the mortgage area, ASIC continues to focus on interest only mortgage origination and high risk customer groups. ASIC has also initiated a review into public statements by some banks (including Westpac) about interest rate changes. We are working with ASIC on their reviews in these areas. BBSW proceedings Following ASIC’s investigations into the interbank short-term money market and its impact on the setting of the bank bill swap reference rate (BBSW), on 5 April 2016, ASIC commenced civil proceedings against Westpac in the Federal Court of Australia, alleging certain misconduct, including market manipulation and unconscionable conduct. The conduct that is the subject of the proceedings is alleged to have occurred between 6 April 2010 and 6 June 2012. Westpac is defending these proceedings. ASIC is seeking from the court declarations that Westpac breached various provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth), pecuniary penalties of unspecified amounts and orders requiring Westpac to implement a comprehensive compliance program for persons involved in Westpac’s trading in the relevant market. In August 2016, a class action was filed in the United States District Court for the Southern District of New York against Westpac and a large number of other Australian and international banks alleging misconduct in relation to BBSW. These proceedings are at an early stage and the level of damages sought has not been specified. Westpac is defending these proceedings. Westpac Group 2017 Full Year Financial Results Announcement | 67

 


2017 Full Year financial report Consolidated financial statements ASIC’s responsible lending litigation against Westpac On 1 March 2017, ASIC commenced Federal Court proceedings against Westpac in relation to home loans entered into between December 2011 and March 2015, which were automatically approved by Westpac’s systems. ASIC has alleged that the way in which Westpac used the Household Expenditure Measure (HEM) benchmark to assess the suitability of home loans for customers during this period was in contravention of the National Consumer Credit Protection Act 2009 (Cth) (NCCPA). On 26 September 2017, ASIC amended its court documents to include an additional allegation that the way serviceability was assessed for interest only loans during the same period also contravened the NCCPA. ASIC has also raised specific allegations in respect of seven loan applications. ASIC alleges that Westpac improperly assessed whether those loans were unsuitable because of the way Westpac used HEM, and for five of the loan applications (which are loans with an interest-only period), because of the way Westpac assessed serviceability. ASIC has not made any criminal allegations, or allegations against specific individuals. Westpac is defending the proceedings. Outbound scaled advice division proceedings On 22 December 2016, ASIC commenced Federal Court proceedings against BT Financial Management Limited (BTFM) and Westpac Securities Administration Limited (WSAL) in relation to a number of superannuation account consolidation campaigns conducted between 2013 and 2016. ASIC has alleged that in the course of some of these campaigns, customers were provided with personal advice in contravention of a number of Corporations Act 2001 (Cth) provisions. ASIC has selected 15 specific customers as the focus of their claim. BTFM and WSAL are defending the proceedings. The proceedings are scheduled to be heard in February 2018. Class action against Westpac Banking Corporation and Westpac Life Insurance Services Limited On 12 October 2017, a class action was filed in the Federal Court of Australia on behalf of customers who, since October 2011, have obtained insurance issued by Westpac Life Insurance Services Limited (WLIS) on the recommendation of financial advisers at Westpac Banking Corporation, St George Bank, Bank of Melbourne, BankSA or BT Advice. The action is in relation to the premiums these customers have been charged for the WLIS policies. The plaintiffs have alleged, amongst other things, that in providing the financial advice Westpac breached the fiduciary duties it owed to the members of the class, the conduct was unconscionable and WLIS was knowingly involved in these breaches. Westpac and WLIS are defending the proceedings. Brexit On 29 March 2017, the Prime Minister of the United Kingdom (UK) notified the European Council in accordance with Article 50 of the Treaty on European Union of the UK’s intention to withdraw from the European Union (EU), triggering a two year period for the negotiation of the UK’s withdrawal from the EU. As Westpac’s business and operations are based predominantly in Australia and New Zealand, the direct impact of the UK’s departure from the EU is unlikely to be material to Westpac. However, it remains difficult to predict the impact that Brexit may have on financial markets, the global economy and the global financial services industry. Reduction to the corporate tax rate On 11 May 2017, the Australian Government introduced into Parliament a bill to reduce the corporate tax rate progressively from 30% to 25% over the next 10 years for all corporate entities in a staged approach with reference to aggregated annual turnover thresholds. If the legislation is passed in its current form, the benefit will begin to take effect from 1 July 2023, when the corporate tax rate for Westpac will reduce to 27.5%. Accordingly, the proposed reduction to the corporate tax rate will not significantly impact Westpac in the short term. A reduction to the corporate tax rate will reduce the value of imputation credits ultimately attached to franked dividends and distributions to certain securityholders. Taxation of cross-border financing arrangements The Australian and New Zealand Governments have each decided to implement the Organisation for Economic Co-operation and Development’s (OECD) proposals relating to the taxation treatment of cross-border financing arrangements. These proposals may affect the taxation arrangements for ‘hybrid’ regulatory capital instruments issued by Westpac. If implemented without grandfathering, the potential effect of the OECD proposals is to increase the after-tax cost to Westpac of certain previously issued Additional Tier 1 capital securities. Neither Government has released draft legislation. Comprehensive Credit Reporting (CCR) On 2 November 2017, the Federal Treasurer announced that the Australian Government will legislate for a mandatory comprehensive credit reporting regime to come into effect by 1 July 2018. This would require credit providers to provide a monthly update to credit reporting agencies of all open consumer credit accounts, including credit cards, personal loans, mortgages and auto loans. According to the announcement, the four major banks will be required to have 50 per cent of their credit data ready for reporting by 1 July 2018, increasing to 100 per cent a year later. 68 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial report Consolidated financial statements Westpac is currently moving to implement CCR on a voluntary basis, as we recognise that CCR supports our principles for responsible lending by enhancing transparency of consumers’ existing liabilities. Westpac is also focused on ensuring the highest level of security of personal data is maintained within the data sharing arrangements that will underpin CCR data supply and use. Sale of shares in BTIM On 26 May 2017, Westpac sold 60 million shares in BTIM at a price of $10.75 per share, pursuant to a fully underwritten institutional offer. Following completion of the sale, Westpac’s holding in BTIM decreased to approximately 10%. Westpac has announced that it intends to sell its remaining 10% shareholding in BTIM in the future, subject to favourable market conditions. In accordance with escrow arrangements communicated to BTIM in respect of the retained shareholding, any sale would not occur prior to the release of BTIM’s First Half 2018 results (expected to be in May 2018). Issue of Additional Tier 1 capital securities On 21 September 2017, Westpac issued US$1.25 billion US Securities and Exchange Commission (SEC) registered securities, which qualify as Additional Tier 1 capital under APRA’s capital adequacy framework. Regulatory significant developments Financial System Inquiry’s (FSI) recommendations on bank capital The Australian Government’s response to the FSI has endorsed APRA’s actions in implementing the FSI’s capital-related recommendations, and has confirmed APRA’s responsibility for implementing the remaining recommendations. On 19 July 2017, APRA released an Information Paper titled, Strengthening banking system resilience – establishing ‘unquestionably strong’ capital ratios. In its release, APRA concluded that the four major Australian banks, including Westpac, need to have a CET1 ratio of at least 10.5%, as measured under the existing capital framework to be considered ‘unquestionably strong’. Banks are expected to meet this new benchmark by 1 January 2020. APRA’s implementation of capital standards to produce ‘unquestionably strong’ capital ratios will also incorporate changes to the prudential framework, including consideration of the finalisation of international Basel III reforms. The final Basel III reforms may result in significant changes in the risk weighted asset framework including the introduction of a revised capital floor for internal model-based methods, based on standardised approaches. Whilst APRA has signalled that its revisions to the capital framework will not necessitate further capital increases for the industry above the 10.5% benchmark, the details of the changes (including at a product level) remain unclear. APRA has announced that it intends to release a discussion paper on proposed revisions to the capital framework later in 2017 and, following release of the discussion paper, that it expects to consult on draft prudential standards giving effect to the new framework in 2018, leading to the release of final prudential standards in 2019. The new framework is anticipated to take effect in early 2021. In addition to the risk based capital ratio, APRA may also implement other key FSI recommendations, including: the introduction of a leverage ratio that acts as a backstop to an ADI’s risk-based capital requirements. Whilst APRA requires the disclosure of the leverage ratio on a quarterly basis, it is yet to be implemented as a minimum requirement; and the implementation of a framework for additional loss-absorbing capacity, discussed further below. Resolution planning including additional loss-absorbing capacity and APRA’s crisis management powers In response to the FSI recommendations, the Australian Government also agreed to further reforms regarding crisis management. In August 2017, Treasury issued draft legislation to strengthen APRA’s crisis management powers. This was introduced into Parliament in October 2017. The intention of these reforms is to strengthen APRA’s powers to facilitate the orderly resolution of an institution so as to protect the interests of depositors and to protect the stability of the financial system. The reforms also enhance APRA’s ability to take actions in relation to resolution planning, including measures to ensure regulated entities and their groups are better prepared for resolution. Consistent with international developments, APRA may also establish a framework for additional loss absorbing capacity for the four major Australian banks, including Westpac. The intention of this would be to facilitate the orderly resolution of banks and minimise taxpayer support. APRA is yet to release any consultation on additional loss-absorbing capacity. Westpac Group 2017 Full Year Financial Results Announcement | 69

 


2017 Full Year financial report Consolidated financial statements Macro-prudential regulation From December 2014, APRA has made use of macro-prudential measures targeting mortgage lending that continue to impact lending practices in Australia. The measures include limiting investment property lending growth to below 10% and imposing additional levels of conservatism in serviceability assessments. On 31 March 2017, APRA added to these measures, requiring ADIs to restrict mortgage lending with interest-only terms to 30% of new mortgage lending. APRA also indicated that it expects ADIs to place strict internal limits on the volume of interest only loans with loan-to-valuation ratios above 80%. Westpac has implemented steps to achieve these limits, including introducing differential pricing for investor property loans and interest only loans, a restriction on the volume of interest only loans with an LVR of greater than 80% (includes limit increases, interest only term extension and switches), no repayment switch fee for customers switching to principal and interest from interest only loans and no longer accepting external refinances (from other financial institutions) for owner occupied interest only loans. Interest only residential mortgages constituted 26% of new mortgage lending for the quarter ended 30 September 2017 (currently 46% of Westpac’s overall Australian residential mortgage portfolio as at 30 September 2017). Further details of Westpac’s other regulatory disclosures required in accordance with prudential standard APS 330 can be accessed at www.westpac.com.au/aboutwestpac/investor-centre/financial-information/regulatorydisclosures. Other regulatory developments Net Stable Funding Ratio APRA released a revised prudential standard on liquidity (APS 210) on 20 December 2016. This prudential standard includes the Net Stable Funding Ratio (NSFR) requirement, a measure designed to encourage longer-term funding of assets and better match the duration of assets and liabilities. The revised APS 210, inclusive of the NSFR, will commence from 1 January 2018. During Full Year 2017, Westpac continued to take steps in preparation for the introduction of the NSFR from 1 January 2018. Based on the latest guidance from APRA, Westpac had an estimated NSFR at 30 September 2017 which is above that required from 1 January 2018. OECD Common Reporting Standard The OECD has developed Common Reporting Standard (CRS) rules for the automatic exchange of customer tax residency and financial account information amongst participating CRS countries. CRS requires the Westpac Group to collect and check the tax residency of all customers and to report the tax residency and financial account details of non-resident customers to the relevant authorities in jurisdictions with which Australia has entered into an exchange of information agreement. Together with other Australian financial institutions, Westpac began collecting tax residency information from 1 July 2017 and will report these details and associated financial account information from July 2018. Westpac has implemented changes to its business operations to comply with the CRS requirements in countries which have implemented the rules prior to 1 July 2017. European Union General Data Protection Regulation The European Union General Data Protection Regulation (the GDPR) contains new data protection requirements that will apply from 25 May 2018. The GDPR is intended to “strengthen and unify” data protection for individuals across the EU and supersedes the existing EU Data Protection Directive. Australian businesses of any size may need to comply if they have an establishment in the EU, if they offer goods or services in the EU, or if they monitor the behaviour of individuals in the EU. Westpac is evaluating the impact of GDPR on its businesses with a view to implementing the necessary changes before commencement of the GDPR. 70 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial report Consolidated financial statements OTC derivatives reform International regulatory reforms relating to over-the-counter (OTC) derivatives continue to be implemented by financial regulators across the globe, with the focus moving to implementing variation margin and initial margin requirements for non-centrally cleared derivatives. Variation margin requirements in a number of key jurisdictions for Westpac (being Australia, the EU, US and Hong Kong) became applicable during Full Year 2017. Westpac has completed a substantial amount of work to comply with all applicable variation margin requirements. In addition, initial margin requirements commenced on 1 September 2016. These requirements are being introduced in phases through to 1 September 2020. Westpac currently expects that it will be required to commence exchanging initial margin by either September 2018 or September 2019. New Zealand Regulatory reforms and significant developments in New Zealand include: Reserve Bank of New Zealand (RBNZ) – macro-prudential policy framework On 8 June 2017, the RBNZ published a consultation paper seeking feedback on serviceability restrictions such as debt-to-income ratio (DTI) limits being added to its macro-prudential toolkit. The RBNZ stated in the consultation paper that the RBNZ would not utilise a DTI policy in current market conditions, but considers DTI limits a useful option in the future. RBNZ – Review of Outsourcing Policy On 19 September 2017, the RBNZ released the final version of its revised Outsourcing Policy (and updated conditions of registration). These took effect on 1 October 2017. Key changes under the revised policy are: banks will need to obtain a non-objection letter from the RBNZ before entering into outsourcing arrangements with a parent or other related party; a bank that outsources certain functions to any third party will need to have certain prescribed contractual terms with that third party and ensure that the third party has adequate disaster recovery and business continuity plan capability in relation to the outsourced function; a bank that outsources certain functions to its overseas parent or to another non-controlled related party will need to have robust back-up arrangements in place; banks will be required to maintain a compendium of functions and processes that have been outsourced; and banks that are members of foreign-owned banking groups, such as WNZL, will be required to have a separation plan which describes how they would operate previously outsourced services if a statutory manager is appointed or they are otherwise separated from their overseas parent. There will be a five year transitional period in relation to existing outsourcing arrangements. The key impact of the revised policy will be in respect of outsourcing arrangements related to institutional products, settlements, finance, risk management and regulatory reporting. RBNZ Capital Review In March 2017, the RBNZ outlined its plans for its review of bank capital requirements. The RBNZ’s aim is to agree a capital regime that ensures a very high level of confidence in the solvency of the banking system while avoiding economic inefficiency. The review will look at the three key components of the regulatory capital regime: the definition of eligible capital instruments; the measurement of risk, in particular the risk weights attached to credit exposures; and the minimum capital ratio and buffers. The RBNZ has said that the outcomes of the review will be heavily influenced by the international regulatory context, the risk characteristics of the New Zealand system, and the RBNZ’s regulatory capital approach. The RBNZ released a high-level Issues Paper in May 2017 and a consultation paper considering what type of financial instruments should qualify as bank capital. The RBNZ expects to conclude its review in the first quarter of 2018. Based on the high level information released to date, the expectation is that the RBNZ will likely propose increasing capital ratios and certain risk weights, with internal ratings-based (IRB) banks having fewer models to use (to reduce the difference between standardised and IRB banks). Reform of the regulation of financial advice The New Zealand Government announced plans for changes to the regime regulating financial advice in July 2016. In August 2017, the Financial Services Legislation Amendment Bill was introduced into Parliament. Westpac Group 2017 Full Year Financial Results Announcement | 71

 


2017 Full Year financial report Consolidated financial statements Under the proposed new regime, financial advice will be provided by licensed firms who will employ financial advisers and nominated representatives. A Code of Conduct will apply to all advice and advisers and representatives will be subject to the same duties and ethical standards, including a duty to give priority to the client's interests. Firms will be responsible for ensuring their advisers and representatives comply with these duties. The reforms will also remove legislative barriers to the provision of robo-advice. A two stage transition is proposed with all industry participants being required to be operating under a full licence by May 2021. RBNZ – Review under section 95 of the Reserve Bank of New Zealand Act 1989 On 10 February 2017, the RBNZ issued WNZL with a notice under section 95 of the Reserve Bank of New Zealand Act 1989, requiring WNZL to obtain an independent review of its compliance with advanced internal rating-based aspects of the RBNZ’s ‘Capital Adequacy Framework (Internal Models Based Approach) (BS2B)’ (BS2B). WNZL has disclosed non-compliance with BS2B (compliance with which is a condition of registration for WNZL) in its quarterly disclosure statements. WNZL expects to receive the RBNZ’s final decision in 2017. There are a range of possible consequences for WNZL, including potential increases in minimum capital requirements. 72 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial report Consolidated financial statements 4.2 Consolidated income statement Westpac Banking Corporation and its controlled entities (16,674) (6) 5,837 8 20,985 (9,217) (1,124) 4 2 (24) (3,184) 10 (15) (53) 7,445 7 224.6 217.8 6 5 The above consolidated income statement should be read in conjunction with the accompanying notes. Westpac Group 2017 Full Year Financial Results Announcement | 73 $mNote % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Interest income3 15,839 15,3933 31,232 31,822(2) Interest expense3 (7,936) (7,780)2 (15,716) Net interest income 7,903 7,6134 15,516 15,1482 Non-interest income4 3,130 3,156(1) 6,286 Net operating income before operating expenses and impairment charges 11,033 10,7692 21,802 Operating expenses5 (4,801) (4,633)4 (9,434) Impairment charges10 (360) (493)(27) (853) Profit before income tax 5,872 5,6434 11,515 10,6448 Income tax expense6 (1,787) (1,731)3 (3,518) Net profit for the period 4,085 3,9124 7,997 7,4607 Profit attributable to non-controlling interests (2) (5)(60) (7) Net profit attributable to owners of Westpac Banking Corporation 4,083 3,9075 7,990 Earnings per share (cents) Basic7 121.2 116.84 238.0 Diluted7 115.6 113.72 229.3

 


2017 Full Year financial report Consolidated financial statements 4.3 Consolidated statement of comprehensive income Westpac Banking Corporation and its controlled entities 56 (8) 34 (63) (304) 21 (70) large (238) (51) (13) 85 38 (107) (17) - (118) - (54) large (47) large (519) (99) 6,926 15 15 (53) The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 74 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net profit for the period 4,085 3,9124 7,997 7,4607 Other comprehensive income Items that may be reclassified subsequently to profit or loss Gains/(losses) on available-for-sale securities: Recognised in equity (93) 168(155) 75 Transferred to income statements (2) (1)100 (3) Gains/(losses) on cash flow hedging instruments: Recognised in equity (20) (71)(72) (91) Transferred to income statements 86 29197 115 Exchange differences on translation of foreign operations (78) (38)105 (116) Income tax on items taken to or transferred from equity: Available-for-sale securities reserve 28 (46)(161) (18) Cash flow hedging reserve (19) 13large (6) Share of associates' other comprehensive income: Recognised in equity (net of tax) 5 (2)large 3 Cash flow hedging reserve 9 --9 Items that will not be reclassified subsequently to profit or loss Own credit adjustment on financial liabilities designated at fair value (net of tax) (111) (53)109 (164) Remeasurement of defined benefit obligation recognised in equity (net of tax) 76 114(33) 190 Other comprehensive income for the period (net of tax) (119) 113large (6) Total comprehensive income for the period 3,966 4,025(1) 7,991 6,94115 Attributable to: Owners of Westpac Banking Corporation 3,964 4,020(1) 7,984 Non-controlling interests 2 5(60) 7 Total comprehensive income for the period 3,966 4,025(1) 7,991 6,94115

 


 

2017 Full Year financial report Consolidated financial statements 4.4 Consolidated balance sheet Westpac Banking Corporation and its controlled entities 15,912 9,545 17,015 9,951 16 (25) 8 (28) 30,977 24,619 59,952 666,946 10,934 1,409 716 1,574 986 11,639 4,784 21,168 32,227 60,665 661,926 14,192 1,390 726 1,737 1,351 11,721 5,133 (18) (2) 1 3 (3) (26) (92) (6) 13 - 12 20 (25) - 3 (25) (25) (92) (14) (18) (1) 4 21,390 522,513 18,209 513,071 2 2 20 4 4,894 28,457 167,306 144 9,158 1,187 17 8,449 4,752 36,076 169,902 385 12,361 1,420 36 9,004 (17) (11) 1 114 (2) 23 (41) 4 (15) (30) (1) (20) (27) 3 (72) (2) 33,765 (501) 845 25,206 33,469 (455) 727 24,379 3 (1) (6) 4 4 9 9 7 59,315 58,120 3 5 59,372 58,181 3 5 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 1 For further details, refer Note 35 of the 2017 Westpac Group Annual Report. 2 Comparatives have been restated to reflect the IFRS Interpretations Committee updated treatment of intangible assets with an indefinite useful life. Westpac Group 2017 Full Year Financial Results Announcement | 75 $mNote As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Assets Cash and balances with central banks Receivables due from other financial institutions Trading securities and financial assets designated at fair value Derivative financial instruments Available-for-sale securities Loans9 Life insurance assets Regulatory deposits with central banks overseas Investments in associates1 Property and equipment Deferred tax assets2 Intangible assets2 Other assets 18,397 7,128 25,324 24,033 60,710 684,919 10,643 1,048 60 1,487 1,112 11,652 5,362 Total assets 851,875 839,993839,20212 Liabilities Payables due to other financial institutions Deposits and other borrowings12 Other financial liabilities at fair value through income statement Derivative financial instruments Debt issues Current tax liabilities Life insurance liabilities Provisions Deferred tax liabilities Other liabilities 21,907 533,591 4,056 25,375 168,356 308 9,019 1,462 10 8,783 Total liabilities excluding loan capital 772,867 763,515765,21611 Loan capital 17,666 17,10615,805312 Total liabilities 790,533 780,621781,02111 Net assets 61,342 59,37258,18135 Shareholders’ equity Share capital: Ordinary share capital15 Treasury shares and RSP treasury shares15 Reserves15 Retained profits 34,889 (495) 794 26,100 Total equity attributable to owners of Westpac Banking Corporation 61,288 Non-controlling interests 54 5761(5)(11) Total shareholders' equity and non-controlling interests 61,342

 


2017 Full Year financial report Consolidated financial statements 4.5 Consolidated statement of changes in equity Westpac Banking Corporation and its controlled entities 1 2017 comprises 2017 interim dividend 94 cents and 2016 final dividend 94 cents (2016: 2016 interim dividend 94 cents and 2015 final dividend 94 cents), all fully franked at 30%. 76 | Westpac Group 2017 Full Year Financial Results Announcement Total equity attributable to owners Shareof WestpacNon-CapitalRetainedBanking controlling $m(Note 15) Reservesprofits CorporationInterests Total shareholders' equity and non-controlling interests Balance at 1 October 2015 Net profit for the year Net other comprehensive income for the year Total comprehensive income for the year Transactions in capacity as equity holders Dividends on ordinary shares1 Dividend reinvestment plan Share entitlement offer Other equity movements Share based payment arrangements Exercise of employee share options and rights Purchase of shares (net of issue costs) (Acquisition)/disposal of treasury shares Other Total contributions and distributions Balance at 30 September 2016 28,8951,03123,17253,098817 53,915 --7,4457,44515 -(418)(101)(519)-7,460 (519) -(418)7,3446,92615 6,941 --(6,128)(6,128)-726--726-3,510--3,510--116-116-2 - - 2 - (49) - - (49) - (70) - - (70) - -(2)(9)(11)(771) (6,128) 726 3,510 116 2 (49) (70) (782) 4,119114(6,137)(1,904)(771) (2,675) 33,01472724,37958,12061 58,181 Net profit for the year Net other comprehensive income for the year Total comprehensive income for the year Transactions in capacity as equity holders Dividends on ordinary shares1 Dividend reinvestment plan Other equity movements Share based payment arrangements Exercise of employee share options and rights Purchase of shares (net of issue costs) (Acquisition)/disposal of treasury shares Other Total contributions and distributions Balance at 30 September 2017 --7,9907,9907 -(32)26(6)-7,997 (6) -(32)8,0167,9847 7,991 --(6,291)(6,291)-1,452--1,452--98-98-11 - - 11 - (43) - - (43) - (40) - - (40) - -1(4)(3)(14) (6,291) 1,452 98 11 (43) (40) (17) 1,38099(6,295)(4,816)(14) (4,830) 34,39479426,10061,28854 61,342

 


2017 Full Year financial report Consolidated financial statements 4.5 Consolidated statement of changes in equity (continued) Westpac Banking Corporation and its controlled entities The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 1 Second Half 2017 reflects the 2017 interim dividend 94 cents and First Half 2017 reflects the 2016 final dividend 94 cents all fully franked at 30%. Westpac Group 2017 Full Year Financial Results Announcement | 77 Total equity attributable to owners Shareof WestpacNon-CapitalRetainedBanking controlling $m(Note 15) Reservesprofits CorporationInterests Total shareholders' equity and non-controlling interests Balance at 1 October 2016 Net profit for the period Net other comprehensive income for the period Total comprehensive income for the period Transactions in capacity as equity holders Dividends on ordinary shares1 Dividend reinvestment plan Share entitlement offer Other equity movements Share based payment arrangements Exercise of employee share options and rights Purchase of shares (net of issue costs) (Acquisition)/disposal of treasury shares Other Total contributions and distributions Balance at 31 March 2017 33,01472724,37958,12061 58,181 --3,9073,9075 -5261113-3,912 113 -523,9684,0205 4,025 --(3,141)(3,141)-327--327-------65-65-6 - - 6 - (37) - - (37) - (46) - - (46) - -1-1(9) (3,141) 327 - 65 6 (37) (46) (8) 25066(3,141)(2,825)(9) (2,834) 33,26484525,20659,31557 59,372 Net profit for the period Net other comprehensive income for the period Total comprehensive income for the period Transactions in capacity as equity holders Dividends on ordinary shares1 Dividend reinvestment plan Other equity movements Share based payment arrangements Exercise of employee share options and rights Purchase of shares (net of issue costs) (Acquisition)/disposal of treasury shares Other Total contributions and distributions Balance at 30 September 2017 --4,0834,0832 -(84)(35)(119)-4,085 (119) -(84)4,0483,9642 3,966 --(3,150)(3,150)-1,125--1,125--33-33-5--5-(6)--(6)-6--6---(4)(4)(5) (3,150) 1,125 33 5 (6) 6 (9) 1,13033(3,154)(1,991)(5) (1,996) 34,39479426,10061,28854 61,342

 


2017 Full Year financial report Consolidated financial statements 4.6 Consolidated cash flow statement Westpac Banking Corporation and its controlled entities The above consolidated cash flow statement should be read in conjunction with the accompanying notes. Details of the reconciliation of net cash provided by/(used in) operating activities to net profit are provided in Note 16. 78 | Westpac Group 2017 Full Year Financial Results Announcement $mNote % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Cash flows from operating activities Interest received Interest paid Dividends received excluding life business Other non-interest income received Operating expenses paid Income tax paid excluding life business Life business: Receipts from policyholders and customers Interest and other items of similar nature Dividends received Payments to policyholders and suppliers Income tax paid Cash flows from operating activities before changes in operating assets and liabilities Net (increase)/decrease in: Trading securities and financial assets designated at fair value Loans Receivables due from other financial institutions Life insurance assets and liabilities Regulatory deposits with central banks overseas Derivative financial instruments Other assets Net increase/(decrease) in: Other financial liabilities at fair value through income statement Deposits and other borrowings Payables due to other financial institutions Other liabilities Net cash provided by/(used in) operating activities16 Cash flows from investing activities Proceeds from available-for-sale securities Purchase of available-for-sale securities Purchase of intangible assets Purchase of property and equipment Proceeds from disposal of property and equipment Net (increase)/decrease in investments in associates Proceeds from sale of associates Proceeds from disposal of controlled entities, net of cash disposed 16 Net cash provided by/(used in) investing activities Cash flows from financing activities Issue of loan capital (net of issue costs) Redemption of loan capital Net increase/(decrease) in debt issues Proceeds from Share Entitlement Offer Proceeds from exercise of employee options Purchase of shares on exercise of employee options and rights Shares purchased for delivery of employee share plan Purchase of RSP treasury shares Net sale/(purchase) of other treasury shares Payment of dividends Payment of distributions to non-controlling interests Redemption of 2006 Trust Preferred Securities Net cash provided by/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents as at the beginning of the period Cash and cash equivalents as at the end of the period 15,301 3 (7,693) - 24(88) 2,856 (23) (4,278) (14) (1,934) (25) 1,06710 12-161 69 (961)(6) (67)45 31,817 (2) (16,721)(8) 43(37) 5,050 - (8,106) (2) (3,373) - 1,893 18 30(20) 34824 (1,642)13 (96)71 15,832 31,133 (7,722) (15,415) 3 27 2,208 5,064 (3,688) (7,966) (1,454) (3,388) 1,172 2,239 12 24 272 433 (900) (1,861) (97) (164) 4,48826 (10,518)(152) (8,712)108 343large 44large (28)large (2,055)45 558(164) 159large 11,521-3,243(81) 279large 9,24310 6,755(175) (38,082) (30) (896) large (253)(187) (209) large (5,107) (1) (476)(142) (4,488)(85) 38,771(41) (73)large 312(105) 5,638 10,126 5,464 (5,054) (18,103) (26,815) 2,310 2,653 175 219 336 308 (2,987) (5,042) (358) 200 (840) (681) 11,541 23,062 616 3,859 (294) (15) 3,498 (678)large 2,820 5,497(49) 16,155 (41) (16,553) (37) (344)23 (101)61 41(41) ---- --18,77937 (24,724) 9 (707)8 (521)(49) 32103 ---- (104)(100) 9,562 25,717 (10,475) (27,028) (422) (766) (163) (264) 24 65 (52) (52) 630 630 - - (896) (802)12 (1,698) (7,245)(77) 2,10711 (516)large 1,784(18) --6 (17) (11) (45) (27) (100) (65) (95) 19(163) (2,814) (28) (8)(38) --3,59623 (1,444)52 5,213(38) 3,510(100) 2 large (24) (29) (27) - (62)10 (8)(188) (5,402) (10) (18)(28) (763)(100) 2,330 4,437 (1,672) (2,188) 1,465 3,249 - - 5 11 (6) (17) - (27) (3) (68) (12) 7 (2,025) (4,839) (5) (13) - - 77 475(84) 552 4,573(88) 2,679 (1,005)large (98)98 17,015(6) 1,674 2,825(41) (580)(50) 14,77015 (194) (292) 15,912 17,015 18,397 15,91216 18,397 17,0158

 


2017 Full Year financial report Notes to the consolidated financial statements 4.7 Notes to the consolidated financial statements Note 1. Basis of preparation The accounting policies and methods of computation adopted in the financial year were in accordance with the requirements for an authorised deposit-taking institution under the Banking Act 1959 (as amended), Australian Accounting Standards (AAS) and Interpretations as issued by the Australian Accounting Standards Board and the Corporations Act 2001. Westpac’s financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current period. All amounts have been rounded to the nearest million dollars unless otherwise stated. Westpac Group 2017 Full Year Financial Results Announcement | 79

 


2017 Full Year financial report Notes to the consolidated financial statements Note 2. Segment reporting Operating segments are presented on a basis consistent with information provided internally to Westpac’s key decision makers and reflects the management of the business, rather than the legal structure of the Group. Internally, Westpac uses ‘cash earnings’ in assessing the financial performance of its divisions. Management believes this allows the Group to: more effectively assess current year performance against prior years; compare performance across business divisions; and compare performance across peer companies. Cash earnings is viewed as a measure of the level of profit that is generated by ongoing operations and is therefore considered in assessing distributions, including dividends. Cash earnings is neither a measure of cash flow nor net profit determined on a cash accounting basis, as it includes both cash and non-cash adjustments to statutory net profit. To determine cash earnings, three categories of adjustments are made to reported results: material items that key decision makers at Westpac 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; and accounting reclassifications between individual line items that do not impact statutory results. Internal charges and transfer pricing adjustments have been reflected in the performance of each operating segment. Inter-segment pricing is determined on an arm’s length basis. Reportable operating segments The operating segments are defined by the customers they service and the services they provide: Consumer Bank (CB): - responsible for sales and service of banking and financial products and services; - customer base is consumer customers in Australia; and - operates under the Westpac, St.George, BankSA, Bank of Melbourne and RAMS brands. Business Bank (BB): - responsible for sales and service of banking and financial products and services; - customer base is micro, SME and commercial business customers for facilities up to approximately $150 million; and - operates under the Westpac, St.George, BankSA and Bank of Melbourne brands. BT Financial Group (Australia) (BTFG): - Westpac’s Australian wealth management and insurance division; - services 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 mortage insurance; - operates under the Advance, Ascalon Capital Managers, Asgard, Licensee Select, BT Select, and Securitor brands, as well as the Advice, Private Banking and Insurance operations of Westpac, St.George, Bank of Melbourne and BankSA brands; and - includes the share of the Group’s interest in BT Investment Management (BTIM), which was equity accounted from July 2015 to May 2017. In May 2017 the Group sold a further interest in BTIM which reduced its ownership to approximately 10%. Following completion of the sale, the remaining interest in BTIM was reclassified to available-for-sale securities. 80 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial report Notes to the consolidated financial statements Note 2. Segment reporting (continued) Westpac Institutional Bank (WIB): - Westpac’s institutional financial services division delivering a broad range of financial products and services; - expert knowledge in transactional banking, financial and debt capital markets, specialised capital and alternative investment solutions; - customer base includes commercial, corporate, institutional and government customers in Australia and New Zealand; - supports customers through branches and subsidiaries located in Australia, New Zealand, US, UK and Asia; and - also responsible for Westpac Pacific, providing a range of banking services in Fiji and Papua New Guinea. Westpac New Zealand: - responsible for sales and service of banking, wealth and insurance products to customers in New Zealand; - customer base includes consumers, business and institutional customers; and - operates under the Westpac brand for banking products, the Westpac Life brand for life insurance products and the BT brand for wealth products. Group Businesses include: - Treasury which is responsible for the management of the Group’s balance sheet including wholesale funding, capital and management of liquidity. Treasury also manages the interest rate risk and foreign exchange risks inherent in the balance sheet, including managing the mismatch between Group assets and liabilities. Treasury’s earnings are primarily sourced from managing the Group’s balance sheet and interest rate risk, (excluding Westpac New Zealand) within set risk limits; - Group Technology1 which comprises functions in Australia responsible for technology strategy and architecture, infrastructure and operations, applications development and business integration; - Core Support2 which comprises functions performed centrally, including Australian banking operations, property services, strategy, finance, risk, compliance, legal and human resources; and - Group Business also includes items, including earnings on capital not allocated to divisions, accounting entries for certain intra-group transactions that facilitate the presentation of the performance of the Group’s operating segments, earnings from non-core asset sales, earnings and costs associated with the Group’s fintech investments and certain other head office items such as centrally held provisions. Revisions to Westpac New Zealand In 2017 the Group changed the accounting treatment for Westpac New Zealand credit card reward scheme to align with Group practice. This change had no impact on cash earnings or reported profit. The following tables present the segment results on a cash earnings basis for the Group: 1 Costs are fully allocated to other divisions in the Group. 2 Costs are partially allocated to other divisions in the Group, with costs attributed to enterprise activity retained in Group Businesses. Westpac Group 2017 Full Year Financial Results Announcement | 81

 


2017 Full Year financial report Notes to the consolidated financial statements Note 2. Segment reporting (continued) The tables below present the segment results on a cash earnings basis for the Group: Half Year Sept 17 Half Year March 17 1 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017 $18 million). 82 | Westpac Group 2017 Full Year Financial Results Announcement $m Westpac BT FinancialWestpacNew ConsumerBusinessGroupInstitutionalZealand1Group BankBank(Australia)Bank(A$)Businesses Group Net interest income Non-interest income Net operating income before operating expenses and impairment charges Operating expenses Impairment (charges) / benefits Profit before income tax Income tax expense Profit attributable to non-controlling interests Cash earnings for the period Net cash earnings adjustments Net profit for the period attributable to owners of Westpac Banking Corporation Total assets Total liabilities 3,6311,990251743790288 7,693 424567894957245(19) 3,068 4,0552,5571,1451,7001,035269 10,761 (1,629)(911)(578)(657)(461)(265) (4,501) (267)(205)(3)(64)3511 (493) 2,1591,44156497960915 5,767 (648)(433)(167)(275)(174)(48) (1,745) ---(4)-(1) (5) 1,5111,008397700435(34) 4,017 (58)(5)(10)-(7)(30) (110) 1,4531,003387700428(64) 3,907 359,252157,83635,230103,77879,605104,292 839,993 190,478116,98639,603120,54369,828243,183 780,621 $m Westpac BT FinancialWestpacNew ConsumerBusinessGroupInstitutionalZealandGroup BankBank(Australia)Bank(A$)Businesses Group Net interest income Non-interest income Net operating income before operating expenses and impairment charges Operating expenses Impairment (charges) / benefits Profit before income tax Income tax expense Profit attributable to non-controlling interests Cash earnings for the period Net cash earnings adjustments Net profit for the period attributable to owners of Westpac Banking Corporation Total assets Total liabilities 3,8782,065286764837181 8,011 378586850749234(13) 2,784 4,2562,6511,1361,5131,071168 10,795 (1,708)(928)(598)(666)(442)(262) (4,604) (274)(162)(1)83732 (360) 2,2741,561537855666(62) 5,831 (681)(470)(163)(248)(185)(37) (1,784) ---(3)-1 (2) 1,5931,091374604481(98) 4,045 (58)(5)170-(7)(62) 38 1,5351,086544604474(160) 4,083 369,522161,10735,187102,92981,285101,845 851,875 198,065119,73140,383116,19471,433244,727 790,533

 


2017 Full Year financial report Notes to the consolidated financial statements Note 2. Segment reporting (continued) Full Year Sept 17 Full Year Sept 16 1 Comparatives have been restated for the accounting charge to the Westpac New Zealand credit card rewards scheme (Full Year 2016: $33 million) Westpac Group 2017 Full Year Financial Results Announcement | 83 $m Westpac BT FinancialWestpacNew ConsumerBusinessGroupInstitutionalZealand1Group BankBank(Australia)Bank(A$)Businesses Group Net interest income Non-interest income Net operating income before operating expenses and impairment charges Operating expenses Impairment (charges) / benefits Profit before income tax Income tax expense Profit attributable to non-controlling interests Cash earnings for the period Net cash earnings adjustments Net profit for the period attributable to owners of Westpac Banking Corporation Total assets Total liabilities 7,1753,9254861,5741,606582 15,348 8501,1041,9081,5364828 5,888 8,0255,0292,3943,1102,088590 21,236 (3,270)(1,796)(1,160)(1,347)(889)(469) (8,931) (492)(410)-(177)(54)9 (1,124) 4,2632,8231,2341,5861,145130 11,181 (1,279)(848)(366)(473)(320)(58) (3,344) ---(7)-(8) (15) 2,9841,9758681,10682564 7,822 (116)(10)(32)-2(221) (377) 2,8681,9658361,106827(157) 7,445 351,528156,80438,217110,41682,071100,166 839,202 186,629116,80439,710120,65372,408244,817 781,021 $m Westpac BT FinancialWestpacNew ConsumerBusinessGroupInstitutionalZealandGroup BankBank(Australia)Bank(A$)Businesses Group Net interest income Non-interest income Net operating income before operating expenses and impairment charges Operating expenses Impairment (charges) / benefits Profit before income tax Income tax expense Profit attributable to non-controlling interests Cash earnings for the period Net cash earnings adjustments Net profit for the period attributable to owners of Westpac Banking Corporation Total assets Total liabilities 7,5094,0555371,5071,627469 15,704 8021,1531,7441,706479(32) 5,852 8,3115,2082,2813,2132,106437 21,556 (3,337)(1,839)(1,176)(1,323)(903)(527) (9,105) (541)(367)(4)(56)7243 (853) 4,4333,0021,1011,8341,275(47) 11,598 (1,329)(903)(330)(523)(359)(85) (3,529) ---(7)--(7) 3,1042,0997711,304916(132) 8,062 (116)(10)160-(14)(92) (72) 2,9882,0899311,304902(224) 7,990 369,522161,10735,187102,92981,285101,845 851,875 198,065119,73140,383116,19471,433244,727 790,533

 


2017 Full Year financial report Notes to the consolidated financial statements Note 3. Net interest income 260 100 12 (7) 10 large 645 1,808 28,953 13 31 (13) (1) (2) 31 (6) (345) (9,369) (2,520) (3,737) (589) - (114) (19) (5) (18) (4) 18 - 15 84 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Interest income Cash and balances with central banks 146 9554 241 Receivables due from other financial institutions 59 5116 110 Net ineffectiveness on qualifying hedges (28) 6large (22) Trading securities and financial assets designated at fair value 292 26610 558 Available-for-sale securities 881 914(4) 1,795 Loans 14,467 14,0373 28,504 Regulatory deposits with central banks overseas 8 9(11) 17 Other interest income 14 15(7) 29 Total interest income 15,839 15,3933 31,232 31,822(2) Interest expense Payables due to other financial institutions (145) (134)8 (279) Deposits and other borrowings (4,433) (4,435)-(8,868) Trading liabilities (1,045) (1,020)2 (2,065) Debt issues (1,811) (1,774)2 (3,585) Loan capital (343) (350)(2) (693) Bank levy (95) --(95) Other interest expense (64) (67)(4) (131) Total interest expense (7,936) (7,780)2 (15,716) (16,674)(6) Total net interest income 7,903 7,6134 15,516 15,1482

 


 

2017 Full Year financial report Notes to the consolidated financial statements Note 4. Non-interest income 1,297 1,177 281 3 1 (19) 1,657 (4) 242 (13) 974 150 (10) 118 7 - 1 (6) (71) - large 100 (88) 159 (6) 1 109 30 11 large (100) 31 (43) 73 1 Wealth management and insurance income includes policy holder tax recoveries. 2 Trading income represents a component of total markets income from our WIB markets business, Westpac Pacific and Treasury foreign exchange operations in Australia and New Zealand. 3 Comparatives have been revised for consistency. 4 On 26 May 2017, the Group sold 60 million shares of BTIM (19% of BTIM’s shares on issue). 5 Income from derivatives held for risk management purposes reflects the impact of economic hedges of foreign currency capital and earnings. Westpac Group 2017 Full Year Financial Results Announcement | 85 $mNote % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Fees and commissions Facility fees 671 6621 1,333 Transaction fees and commissions received 598 5951 1,193 Other non-risk fee income 78 151(48) 229 Total fees and commissions 1,347 1,408(4) 2,755 2,755-Wealth management and insurance income Life insurance and funds management net operating income1 801 7892 1,590 General insurance and lenders mortgage insurance net operating income 130 8063 210 Total wealth management and insurance income 931 8697 1,800 1,899(5) Trading income2,3 Foreign exchange income 401 474(15) 875 Other trading products 88 239(63) 327 Total trading income 489 713(31) 1,202 1,1247 Other income Dividends received from other entities 1 1-2 Net gain on disposal of associates4 279 --279 Net gain on disposal of assets - 6(100) 6 Net gain/(loss) on hedging overseas operations - --- Net gain/(loss) on derivatives held for risk management purposes5 (2) 54(104) 52 Net gain/(loss) on financial instruments designated at fair value 5 6(17) 11 Gain/(loss) on disposal of controlled entities16 - --- Rental income on operating leases 69 74(7) 143 Share of associates' net profit 2 15(87) 17 Other 9 10(10) 19 Total other income 363 166119 529 59large Total non-interest income 3,130 3,156(1) 6,286 5,8378

 


2017 Full Year financial report Notes to the consolidated financial statements Note 5. Operating expenses 4,005 369 135 92 3 3 (16) (18) 622 285 125 4 2 7 571 156 672 277 181 72 10 1 (5) 13 5 11 741 2 216 217 156 144 81 100 (11) - (1) 6 (10) 8 1 Professional and processing services relates to: services provided by external suppliers including items such as cash handling and security services, marketing costs, & research and recruitment fees (Full Year 2017: $268 million; Full Year 2016: $283 million), operations processing (Full Year 2017: $184 million; Full Year 2016: $196 million), consultants (Full Year 2017: $162 million; Full Year 2016: $120 million), credit assessment (Full Year 2017: $53 million; Full Year 2016: $60 million), legal and audit fees (Full Year 2017: $61 million; Full Year 2016: $51 million), and regulatory fees and share market related costs (Full Year 2017: $27 million; Full Year 2016: $31 million). 86 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Staff expenses Employee remuneration, entitlements and on-costs 2,111 2,0224 4,133 Superannuation expense 186 194(4) 380 Share-based payments 48 65(26) 113 Restructuring costs 30 45(33) 75 Total staff expenses 2,375 2,3262 4,701 4,6012 Occupancy expenses Operating lease rentals 324 324-648 Depreciation of property and equipment 143 148(3) 291 Other 72 6216 134 Total occupancy expenses 539 5341 1,073 1,0324 Technology expenses Amortisation and impairment of software assets 322 3065 628 Depreciation and impairment of IT equipment 82 768 158 Technology services 299 340(12) 639 Software maintenance and licenses 168 14516 313 Telecommunications 106 8426 190 Data processing 42 3811 80 Total technology expenses 1,019 9893 2,008 1,9294 Other expenses Professional and processing services1 417 33823 755 Amortisation and impairment of intangible assets and deferred expenditure 94 98(4) 192 Postage and stationery 109 1081 217 Advertising 80 757 155 Credit card loyalty programs 86 6630 152 Non-lending losses 36 37(3) 73 Other expenses 46 62(26) 108 Total other expenses 868 78411 1,652 1,655-Total operating expenses 4,801 4,6334 9,434 9,2172

 


2017 Full Year financial report Notes to the consolidated financial statements Note 6. Income tax The income tax expense for the half year is reconciled to the profit before income tax as follows: 3,193 8 50 28 (2) - (4) (10) 35 (26) (65) 13 large - (25) (70) (9) 15 (106) (162) Westpac Group 2017 Full Year Financial Results Announcement | 87 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Profit before income tax 5,872 5,6434 11,515 10,6448 Tax at the Australian company tax rate of 30% 1,762 1,6934 3,455 The effect of amounts which are not deductible/(assessable) in calculating taxable income Hybrid capital distributions 32 32-64 Life insurance: Tax adjustment on policyholder earnings (5) 13(138) 8 Adjustment for life business tax rates (1) --(1) Dividend adjustments (1) (2)(50) (3) Other non-assessable items (2) (1)100 (3) Other non-deductible items 15 17(12) 32 Adjustment for overseas tax rates (15) (15)-(30) Income tax (over)/under provided in prior periods 2 2-4 Other items - (8)(100) (8) Total income tax expense 1,787 1,7313 3,518 3,18410 Effective income tax rate 30.43% 30.68%(25bps) 30.55% 29.91%64bps

 


 

2017 Full Year financial report Notes to the consolidated financial statements Note 7. Earnings per share Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares on issue during the period, adjusted for treasury shares. Diluted EPS is calculated by adjusting the basic earnings per share by assuming all dilutive potential ordinary shares are converted. (5) - - 222 3,322 (9) 3,322 (9) - - 4 203 1 Some RSP share rights have not vested and are not ordinary shares but do receive dividends. These RSP dividends are deducted to show the profit attributable to ordinary shareholders. 2 The Group has issued convertible loan capital which is expected to convert into ordinary shares in the future. These convertible loan capital instruments are all dilutive and diluted EPS is therefore calculated as if the instruments had already been converted. 88 | Westpac Group 2017 Full Year Financial Results Announcement $m Half Year Sept 17 Half Year March 17 BasicDiluted Full Year Sept 17 Full Year Sept 16 BasicDiluted BasicDiluted BasicDiluted Net profit attributable to shareholders 4,0834,083 3,9073,907 7,9907,990 7,4457,445 Adjustment for Restricted Share Plan (RSP) dividends1 (5)-(1)-(6)-Adjustment for potential dilution: Distributions to convertible loan capital holders2 -126 -127 -253 Adjusted net profit attributable to shareholders 4,0784,209 3,9064,034 7,9848,243 7,4407,667 Weighted average number of ordinary shares (millions) Weighted average number of ordinary shares on issue 3,3753,375 3,3523,352 3,3643,364 Treasury shares (including RSP share rights) (9)(9) (8)(8) (9)(9) Adjustment for potential dilution: Share-based payments -5 -3 -4 Convertible loan capital2 -270 -202 -236 Adjusted weighted average number of ordinary shares 3,3663,641 3,3443,549 3,3553,595 3,3133,520 Earnings per ordinary share (cents) 121.2115.6 116.8113.7 238.0229.3 224.6217.8

 


 

2017 Full Year financial report Notes to the consolidated financial statements Note 8. Average balance sheet and interest rates 30 September 2016 balance $m rate % $m 11,357 100 0.9 26,076 54,054 1,197 629,159 645 1,808 13 29,256 2.5 3.3 1.1 4.7 721,843 31,822 4.4 2,431 48,666 12,702 57,913 19,948 453,702 13,837 179,789 345 9,369 589 6,371 1.7 2.1 4.3 3.5 667,276 16,674 2.5 41,722 55,956 10,985 11,145 575 532,172 68,370 28,617 25,162 3,617 477 4.7 5.3 1.7 376,115 48,251 29,336 7,801 1,280 288 2.1 2.7 1.0 1 Loans and other receivables are stated net of provisions for impairment charges on loans. Other receivables include cash and balances with central banks and other interest earning assets. Westpac Group 2017 Full Year Financial Results Announcement | 89 Full Year Full Year 30 September 2017 AverageInterestAverage AverageInterestAverage balancerate $m$m% Assets Interest earning assets Receivables due from other financial institutions Trading securities and financial assets designated at fair value Available-for-sale securities Regulatory deposits with central banks overseas Loans and other receivables1 Total interest earning assets and interest income Non-interest earning assets Cash, receivables due from other financial institutions and regulatory deposits Derivative financial instruments Life insurance assets All other assets Total non-interest earning assets Total assets Liabilities Interest bearing liabilities Payables due to other financial institutions Deposits and other borrowings Loan capital Other interest bearing liabilities Total interest bearing liabilities and interest expense Non-interest bearing liabilities Deposits and payables due to other financial institutions Derivative financial instruments Life insurance policy liabilities All other liabilities Total non-interest bearing liabilities Total liabilities Shareholders' equity Non-controlling interests Total equity Total liabilities and equity Loans and other receivables1 Australia New Zealand Other overseas Deposits and other borrowings Australia New Zealand Other overseas 9,1231101.2 25,8705582.2 58,2081,7953.1 1,035171.6 658,05828,7524.4 752,29431,2324.2 2,000 37,673 12,447 60,111 112,231 121,712 864,525 843,555 18,8332791.5 484,7138,8681.8 17,2086934.0 174,1705,8763.4 694,92415,7162.3 46,099 42,780 10,560 11,586 111,025 119,808 805,949 787,084 58,556 55,896 20 58,576 56,471 864,525 843,555 557,86524,7724.4 72,9383,4604.7 27,2555201.9 409,5867,3441.8 51,0421,1732.3 24,0853511.5

 


2017 Full Year financial report Notes to the consolidated financial statements Note 9. Loans 413,938 22,716 147,705 1,928 105 404,190 22,825 150,209 1,912 108 3 (3) 2 (2) (5) 6 (4) - (1) (7) 42,281 1,807 26,544 82 43,035 1,865 27,499 96 2 3 - 4 - - (3) (11) 2,281 10,821 2,358 11,159 24 6 20 3 (3,262) (3,330) (12) (14) 1 Total net loans include securitised loans of $7,651 million as at 30 September 2017 ($8,783 million as at 31 March 2017 and $9,166 million as at 30 September 2016). The level of securitised loans excludes loans where Westpac is the holder of the related debt securities. 2 Total net loans include assets pledged for the covered bond programs of $35,544 as at 30 September 2017 ($30,950 million as at 31 March 2017 and $38,325 million as at 30 September 2016). 90 | Westpac Group 2017 Full Year Financial Results Announcement $mNote As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Australia Housing 427,167 Personal (loans and cards) 21,952 Business 150,542 Margin lending 1,885 Other 100 Total Australia 601,646 586,392579,24434 New Zealand Housing 43,198 Personal (loans and cards) 1,856 Business 26,667 Other 85 Total New Zealand 71,806 70,71472,4952(1) Other overseas Trade finance 2,818 Other 11,515 Total other overseas 14,333 13,10213,51796 Total loans 687,785 670,208665,25633 Provisions for impairment charges on loans10 (2,866) Total net loans1,2 684,919 666,946661,92633

 


2017 Full Year financial report Notes to the consolidated financial statements Note 10. Provisions for impairment charges Westpac Group 2017 Full Year Financial Results Announcement | 91 $m Half Year Half Year March 17 Full Year Full Year Sept 16 Sept 17 Sept 17 Reconciliation of impairment charges Individually assessed provisions raised Write-backs Recoveries Collectively assessed provisions raised Impairment charges 246 (144) (84) 342 364 (144) (84) 357 610 (288) (168) 699 727 (210) (137) 744 360 493 853 1,124 $m Half Year Half Year March 17 Full Year Full Year Sept 16 Sept 17 Sept 17 Individually assessed provisions Opening balance Provisions raised Write-backs Write-offs Interest adjustment Other adjustments Closing balance Collectively assessed provisions Opening balance Provisions raised Write-offs Interest adjustment Other adjustments Closing balance Total provisions for impairment charges on loans and credit commitments Less: provisions for credit commitments Total provisions for impairment charges on loans 787 246 (144) (399) (10) - 869 364 (144) (289) (6) (7) 869 610 (288) (688) (16) (7) 669 727 (210) (287) (13) (17) 480 787 480 869 2,726 342 (525) 93 3 2,733 357 (443) 95 (16) 2,733 699 (968) 188 (13) 2,663 744 (902) 193 35 2,639 2,726 2,639 2,733 3,119 (253) 3,513 (251) 3,119 (253) 3,602 (272) 2,866 3,262 2,866 3,330

 


 

2017 Full Year financial report Notes to the consolidated financial statements Note 11. Credit quality Impaired assets Australia New Zealand Other Overseas Total 1,570 (801) 1,851 (885) 29 (15) 31 (16) 379 (214) 277 (166) 1,978 (1,030) 2,159 (1,067) 1 Includes individually assessed provisions and collectively assessed provisions on impaired loans. 2 Includes collectively assessed provisions on impaired loans. 92 | Westpac Group 2017 Full Year Financial Results Announcement $m As at 30 Sept 2017 As atAs at 31 March30 Sept 20172016 As at 30 Sept 2017 As atAs at 31 March30 Sept 20172016 As at 30 Sept 2017 As atAs at 31 March30 Sept 20172016 As at 30 Sept 2017 As atAs at 31 March30 Sept 20172016 Non-Performing loans: Gross amount 975 1,3881,589 152 164218 15 1844 1,142 Impairment provisions1 (460) (740)(769) (41) (54)(95) (6) (7)(21) (507) Net 515 648820 111 110123 9 1123 635 769966 Restructured loans: Gross amount 12 1213 15 1716 - -2 27 Impairment provisions1 (7) (11)(11) (5) (4)(4) - -(1) (12) Net 5 12 10 1312 - -1 15 1415 Overdrafts, personal loans and revolving credit facilities greater than 90 days past due: Gross amount 362 368267 11 1110 - --373 Impairment provisions2 (187) (206)(159) (8) (8)(7) - --(195) Net 175 162108 3 33 - --178 165111 Total impaired assets: Gross amount 1,349 1,7681,869 178 192244 15 1846 1,542 Impairment provisions1 (654) (957)(939) (54) (66)(106) (6) (7)(22) (714) Net 695 811930 124 126138 9 1124 828 9481,092

 


 

2017 Full Year financial report Notes to the consolidated financial statements Note 11. Credit quality (continued) Movement in gross impaired loans1 589 (732) (570) 534 (2) 477 (672) (532) 395 4 (25) 26 (17) (3) (150) (8) 38 (11) 31 75 Items 90 days past due, or otherwise in default, and not impaired 2,619 678 2,538 537 2 (4) 5 21 92 21 22 59 30 17 (3) 33 (14) 51 (7) 12 1 Movement represents a six month period. Westpac Group 2017 Full Year Financial Results Announcement | 93 $m As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Australia Housing products 2,672 Other products 650 Total Australia 3,322 3,2973,07518 New Zealand Housing products 89 Other products 28 Other overseas 19 Total overseas 136 135106128 Total 3,458 3,4323,18119 $m As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Opening balance 1,978 2,1592,487(8)(20) New and increased - individually managed 440 Write-offs (924) Returned to performing or repaid (471) Portfolio managed - new/increased/returned/repaid 518 Exchange rate and other adjustments 1 Balance as at period end 1,542 1,9782,159(22)(29)

 


2017 Full Year financial report Notes to the consolidated financial statements Note 12. Deposits and other borrowings 31,011 39,484 219,445 155,777 29,774 37,491 210,666 148,876 21 2 3 (1) 26 8 8 3 1,478 4,646 21,845 25,451 1,192 4,407 22,642 27,826 (63) 4 (3) 9 (54) 10 (6) (1) 11,364 820 1,459 9,733 15,497 845 1,441 12,414 (22) (1) 3 - (43) (4) 4 (21) 478,770 468,844 2 4 94 | Westpac Group 2017 Full Year Financial Results Announcement $m As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Australia Certificates of deposit 37,515 Non-interest bearing, repayable at call 40,324 Other interest bearing at call 226,920 Other interest bearing term 153,597 Total Australia 458,356 445,717426,80737 New Zealand Certificates of deposit 546 Non-interest bearing, repayable at call 4,853 Other interest bearing at call 21,273 Other interest bearing term 27,620 Total New Zealand 54,292 53,42056,0672(3) Overseas Certificates of deposit 8,860 Non-interest bearing, repayable at call 810 Other interest bearing at call 1,505 Other interest bearing term 9,768 Total overseas 20,943 23,37630,197(10)(31) Total deposits and other borrowings 533,591 522,513513,07124 Deposits and other borrowings at fair value 46,569 43,74344,22765 Deposits and other borrowings at amortised cost 487,022 Total deposits and other borrowings 533,591 522,513513,07124

 


2017 Full Year financial report Notes to the consolidated financial statements Note 13. Fair values of financial assets and liabilities Fair Valuation Control Framework The Group uses a Fair Valuation Control Framework where the fair value is either determined or validated by a function independent of the originator of the transaction. This framework formalises the policies and procedures used to achieve compliance with relevant accounting, industry and regulatory standards. The framework includes specific controls relating to: the revaluation of financial instruments; independent price verification; fair value adjustments; and financial reporting. A key element of the Framework is the Revaluation Committee, comprising senior valuation specialists from within the Group. The Revaluation Committee reviews the application of the agreed policies and procedures to assess that a fair value measurement basis has been applied. The method of determining fair value differs depending on the information available. Fair value hierarchy A financial instrument’s categorisation within the valuation hierarchy is based on the lowest level input that is significant to the fair value measurement. The Group categorises all fair value instruments according to the hierarchy described below. Valuation techniques The Group applies market accepted valuation techniques in determining the fair valuation of over-the-counter (OTC) derivatives. This includes credit valuation adjustments (CVA) and funding valuation adjustments (FVA), which incorporates credit risk and funding costs and benefits that arise in relation to uncollateralised derivative positions, respectively. The specific valuation techniques, the observability of the inputs used in valuation models and the subsequent classification for each significant product category are outlined below: Level 1 instruments The fair value of financial instruments traded in active markets based on recent unadjusted quoted prices. These prices are based on actual arm’s length basis transactions. The valuations of Level 1 instruments require little or no management judgement. Instrument Balance sheet category Includes: Valuation Exchange traded interest rate futures and options and commodity, energy and carbon futures Exchange traded products Derivatives Derivatives Trading securities and financial assets designated at fair value Other financial liabilities at fair value through income statement Listed equities and equity indices Equity products All these instruments are traded in liquid, active markets where prices are readily observable. No modelling or assumptions are used in the valuation. Other financial liabilities at fair Listed equities, exchange traded derivatives and short sale of listed equities within controlled managed investment schemes Life insurance assets and liabilities Life insurance assets Life insurance liabilities Westpac Group 2017 Full Year Financial Results Announcement | 95 Trading securities and financial assets designated at fair value Non-asset backed Available-for-sale securities debt instruments value through income statement Australian and New Zealand Commonwealth government bonds Foreign exchange productsDerivatives FX spot and futures contracts

 


2017 Full Year financial report Notes to the consolidated financial statements Note 13. Fair values of financial assets and liabilities (continued) Level 2 instruments The fair value for financial instruments that are not actively traded are determined using valuation techniques which maximise the use of observable market prices. Valuation techniques include: the use of market standard discounting methodologies; option pricing models; and other valuation techniques widely used and accepted by market participants. Balance sheet Instrument category Includes: Valuation Industry standard valuation models are used to calculate the expected future value of payments by product, which is discounted back to a present value. The model’s interest rate inputs are benchmark interest rates and active broker Interest rate and inflation swaps, swaptions, caps, Interest rate products Derivatives floors, collars and other non-vanilla interest rate derivatives quoted interest rates in the swap, bond and futures markets. Interest rate volatilities are sourced from brokers and consensus data providers. pricing providers using industry standard models. Valued using an industry standard model that incorporates the credit spread as its principal input. Credit spreads are obtained from consensus data providers. If consensus prices are not available, these are classified as Level 3 instruments. Other credit products Single Name and Index credit default swaps (CDS) Derivatives volatilities implied from market observable inputs, discount Due to low liquidity exchange traded options are Level 2. Valued using industry standard models based on observable parameters such as stock prices, dividends, volatilities and interest rates. Exchange traded equity options, OTC equity options and equity warrants Equity products Derivatives debt with prepayment features. The main inputs to the life (WAL) of the security. These inputs are sourced from a available these are classified as Level 3 instruments. 96 | Westpac Group 2017 Full Year Financial Results Announcement Australian residential Trading securities andmortgage backed securities Asset backedfinancial assets designated at (RMBS) denominated in debt instrumentsfair valueAustralian dollar and other Available-for-sale securitiesasset backed securities (ABS). Valued using an industry approach to value floating rate model are the trading margin and the weighted average consensus data provider. If consensus prices are not CommodityCommodity, energy and productsDerivativescarbon derivatives Valued using industry standard models. The models calculate the expected future value of deliveries and payments and discounts them back to a present value. The model inputs include forward curves, curves and underlying spot and futures prices. The significant inputs are market observable or available through a consensus data service. If consensus prices are not available, these are classified as Level 3 instruments. FX swap, FX forward Foreign exchangeDerivativescontracts, FX options and productsother non-vanilla FX derivatives Derived from market observable inputs or consensus

 


2017 Full Year financial report Notes to the consolidated financial statements Note 13. Fair values of financial assets and liabilities (continued) Level 2 instruments (continued) Instrument Balance sheet category Includes: Valuation Trading securities and financial assets designated at fair value Available-for-sale securities Regulatory deposits Other financial liabilities through income statement State and other government bonds, corporate bonds and commercial paper. Valued using observable market prices which are sourced from consensus pricing services, broker quotes Non-asset backed debt instruments Security repurchase agreements or inter-dealer prices. and reverse repurchase agreements over non-asset backed debt securities. of cash flows, adjusted for creditworthiness based on Certificates of deposit Deposits and other borrowings Discounted cash flow using market rates offered for deposits of similar remaining maturities. Certificates of deposit reflects the terms of the instrument and the timing of Corporate bonds, over the counter derivatives, units in unlisted unit trusts, life insurance contract liabilities, life investment contract liabilities and external liabilities of managed investment schemes controlled by statutory life funds. Life insurance assets Valued using observable market prices or other widely used and accepted valuation techniques utilising observable market input. Life insurance assets and liabilities Life insurance liabilities Level 3 instruments Financial instruments valued where at least one input that could have a significant effect on the instrument’s valuation is not based on observable market data due to illiquidity or complexity of the product. These inputs are generally derived and extrapolated from other relevant market data and calibrated against current market trends and historical transactions. These valuations are calculated using a high degree of management judgement. Instrument Balance sheet category Includes: Valuation Trading securities and financial assets designated at fair value As prices for these securities are not available from a consensus data provider these are revalued based on third party revaluations (lead manager or inter-dealer). Due to their illiquidity and/or complexity they are classified as Level 3 assets. Collateralised loan obligations and offshore asset-backed debt instruments Asset backed debt instruments Available-for-sale securities as Level 3. Fair value is monitored by reference to recent Westpac Group 2017 Full Year Financial Results Announcement | 97 Trading securities and financial assets designated Non-asset backedat fair value debt instruments Available-for-sale securities Government securities (predominantly PNG government bonds) Government securities from illiquid markets are classified issuances. Debt issues at fair valueDebt issuesDebt issues Discounted cash flows, using a discount rate which cash flows adjusted for market observable changes in Westpac’s implied credit worthiness. Loans at fair valueLoansFixed rate bills Discounted cash flow approach, using a discount rate which reflects the terms of the instrument and the timing market observable inputs.

 


 

2017 Interim financial report Notes to the consolidated financial statements Note 13. Fair values of financial assets and liabilities (continued) The table below summarises the attribution of financial instruments carried at fair value to the fair value hierarchy: 4,909 12 4,309 - 2,987 - 25,247 24,584 55,044 5,202 7,947 1,004 821 23 599 - - - 30,977 24,619 59,952 5,202 10,934 1,004 2,431 21 5,047 - 5,076 - 17,897 32,163 54,914 5,562 9,116 1,008 840 43 704 - - - 21,168 32,227 60,665 5,562 14,192 1,008 - 325 16 - - 43,743 4,569 28,433 5,551 9,158 - - 8 - - 43,743 4,894 28,457 5,551 9,158 - 151 12 - 1,180 44,227 4,601 36,047 6,303 11,181 - - 17 - - 44,227 4,752 36,076 6,303 12,361 98 | Westpac Group 2017 Interim Financial Results Announcement $m As at 30 Sept 2017 As at 31 March 2017As at 30 Sept 2016 Level 1Level 2Level 3Total Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total Financial assets measured at fair value on a recurring basis Trading securities and financial assets designated at fair value 6,81517,74276725,324 Derivative financial instruments 924,0091524,033 Available-for-sale securities 7,25252,84161760,710 Loans -4,587-4,587 Life insurance assets 2,7687,875-10,643 Regulatory deposits with central banks overseas -659-659 Total financial assets carried at fair value 16,844107,7131,399125,956 12,217119,0281,443132,68812,575120,6601,587134,822 Financial liabilities measured at fair value on a recurring basis Deposits and other borrowings at fair value -46,569-46,569 Other financial liabilities at fair value through income statement 2083,848-4,056 Derivative financial instruments 825,358925,375 Debt issues at fair value -4,673-4,673 Life insurance liabilities -9,019-9,019 Total financial liabilities carried at fair value 21689,467989,692 34191,454891,8031,343102,35917103,719

 


 

2017 Full Year financial report Notes to the consolidated financial statements Note 13. Fair values of financial assets and liabilities (continued) Analysis of movements between Fair Value Hierarchy Levels Transfers into or out of Level 3 are discussed in the following table. The table below summarises the changes in financial instruments carried at fair value derived from non-market observable valuation techniques (Level 3): Full Year Sept 17 Transfers into and out of Level 3 have occurred due to changes in observability in the significant inputs into the valuation models used to determine the fair value of the related financial instruments. Transfers in and transfers out are reported using the end of period fair values. Significant unobservable inputs Sensitivities to reasonably possible changes in non-market observable valuation assumptions would not have a material impact on the Group’s reported results. Day one profit or loss The closing balance of unrecognised day one profit for the period was $5 million (30 September 2016: $6 million profit). Westpac Group 2017 Full Year Financial Results Announcement | 99 $m Trading Securities and Financial AssetsAvailable-Designated for-Sale at Fair Value Derivatives Securities Total Level 3 Assets Debt Issues at Fair DerivativesValue Total Level 3 Liabilities Balance as at 1 October 201684043704 1,587 17-17 Gains/(losses) on assets and (gains)/losses on liabilities recognised in: Income statements(26)(8)-(34) (3)-(3) Available-for-sale reserve--4 4 --- Acquisitions and issues12251,572 1,699 6-6 Disposals and settlements(162)(13)(1,645) (1,820) (9)-(9) Transfers into or out of non-market observables10(12)-(2) (2)-(2) Foreign currency translation impacts(17)-(18) (35) --- Balance as at 30 Sept 201776715617 1,399 9-9 Unrealised gains/(losses) recognised in the income statement for financial instrument held as at 30 Sept 2017(29)(2)-(31) (3)-(3)

 


2017 Full Year financial report Notes to the consolidated financial statements Note 13. Fair values of financial assets and liabilities (continued) Financial instruments not measured at fair value The following table summarises the estimated fair value of financial instruments not measured at fair value for the Group: Amount Value Amount Value 161,755 17,106 7,069 163,075 17,377 7,069 163,599 15,805 7,531 164,811 15,773 7,531 A detailed description of how fair value is derived for financial instruments not measured at fair value is disclosed in Note 23 of the Group’s annual financial statements for the year ended 30 September 2017. 1 The estimated fair value of debt issues includes the impact of changes in Westpac’s credit spreads since origination. 100 | Westpac Group 2017 Full Year Financial Results Announcement As at 30 Sept 2017 As at 31 March 2017As at 30 Sept 2016 $m CarryingFair CarryingFairCarryingFair AmountValue Financial assets not measured at fair value Cash and balances with central banks Receivables due from other financial institutions Available-for-sale securities Loans Regulatory deposits with central banks overseas Other financial assets Total financial assets Financial liabilities not measured at fair value Payables due to other financial institutions Deposits and other borrowings Debt issues1 Loan capital Other financial liabilities Total financial liabilities 18,39718,397 7,1287,128 --680,332680,568 389389 4,7544,754 15,91215,91217,01517,015 9,5459,5459,9519,951 ----661,744662,184656,364657,594 405405382382 3,8623,8624,5014,501 711,000711,236 691,468691,908688,213689,443 --21,90721,907 487,022487,723 21,39021,39018,20918,209 478,770479,624468,844469,709 163,683165,151 17,66618,087 7,4907,490 697,768700,358 686,090688,535673,988676,033

 


2017 Full Year financial report Notes to the consolidated financial statements Note 14. Contingent liabilities, contingent assets and credit commitments Undrawn credit commitments The Group enters into various arrangements with customers which are only recognised in the balance sheet when called upon. These arrangements include commitments to extend credit, bill endorsements, financial guarantees, standby letters of credit and underwriting facilities. They expose the Group to liquidity risk when called upon and also to credit risk if the customer fails to repay the amounts owed at the due date. The maximum exposure to credit loss is the contractual or notional amount of the instruments disclosed below. Some of the arrangements can be cancelled by the Group at any time and a significant portion is expected to expire without being drawn. The actual required liquidity and credit risk exposure is therefore less than the amounts disclosed. The Group uses the same credit policies when entering into these arrangements as it does for on-balance sheet instruments. Refer to Note 22 of the Group’s annual financial statements for the year ended 30 September 2017 for further details of liquidity risk and credit risk management. Undrawn credit commitments excluding derivatives at 30 September are as follows: 17,702 177,449 314 16,435 176,811 235 (13) 1 106 (6) 1 176 Contingent assets The credit commitments shown in the table above also constitute contingent assets. These commitments would be classified as loans in the balance sheet on the contingent event occurring. Contingent liabilities Regulatory action and internal reviews Globally, regulators continue to progress various reviews involving the financial services sector. The nature of these reviews can be wide ranging and, in Australia, currently include investigations into potential misconduct in credit and financial services. For example, regulators such as ASIC, APRA, ACCC and AUSTRAC are currently conducting reviews (some of which are industry-wide) that consider a range of matters including in relation to sales practices, responsible lending (including in the context of reverse mortgages and interest only lending), financial adviser conduct (including compliance with the obligation to act in the client’s best interests), the provision of personal and general advice, life insurance claims handling and the pricing of residential mortgages. These reviews may result in litigation, fines, penalties, revocation, suspension or variation of conditions of relevant regulatory licences or other enforcement or administrative action by regulators. Westpac has received various notices and requests for information from its regulators as part of both industry-wide and Westpac-specific reviews. In addition, Westpac is undertaking a number of reviews to identify and resolve prior issues that have the potential to impact our customers and reputation. These reviews have identified, and may continue to identify, some prior instances where we are now taking or will take action to put things right (including in relation to areas of industry focus such as record keeping and the way some product terms and conditions are operationalised) so that our customers are not at a disadvantage from certain past practices. 1 Letters of credit and guarantees are undertakings to pay, against presentation documents, and obligation in the event of a default by a customer. Guarantees are unconditional undertakings given to support the obligations of a customer to third parties. The Group may hold cash as collateral for certain guarantees issued. 2 Commitments to extend credit include all obligations on the part of the Group to provide credit facilities. As facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements. In addition to the commitments disclosed above, at 30 September 2017 the Group had offered $5.5 billion (31 March 2017: $5.9 billion, 30 September 2016: $5.6 billion) of facilities to customers, which had not yet been accepted. Westpac Group 2017 Full Year Financial Results Announcement | 101 2017 $m Up toOver 1 toOver 3 toOver 1 Year3 Years5 Years5 YearsTotal Letters of credit and guarantees Commitments to extend credit Other Total undrawn credit commitments 8,7972,8601,0092,79415,460 66,66334,52316,90660,351178,443 --100548648 75,46037,38318,01563,693194,551 $m As at As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 30 Sept 2017 Undrawn credit commitments Letters of credit and guarantees1 15,460 Commitments to extend credit2 178,443 Other 648 Total undrawn credit commitments 194,551 195,465193,481-1

 


2017 Full Year financial report Notes to the consolidated financial statements An assessment of the likely cost to the Group of these reviews and actions has been made on a case-by-case basis for the purpose of the financial statements and specific provisions have been made where appropriate. Litigation There are outstanding court proceedings, claims and possible claims for and against the Group. Contingent liabilities exist in respect of actual and potential claims and proceedings, including those listed below. An assessment of the Group’s likely loss has been made on a case-by-case basis for the purpose of the financial statements and specific provisions have been made where appropriate. As part of ASIC’s ongoing industry-wide investigations into the interbank short-term money market and its impact on the setting of the bank bill swap reference rate (BBSW), on 5 April 2016, ASIC commenced civil proceedings against Westpac in the Federal Court of Australia, alleging certain misconduct, including market manipulation and unconscionable conduct. The conduct that is the subject of the proceedings is alleged to have occurred between 6 April 2010 and 6 June 2012. Westpac is defending these proceedings. ASIC is seeking from the court declarations that Westpac breached various provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth), pecuniary penalties of unspecified amounts and orders requiring Westpac to implement a comprehensive compliance program for persons involved in Westpac’s trading in the relevant market. In August 2016, a class action was filed in the United States District Court for the Southern District of New York against Westpac and a large number of Australian and international banks alleging misconduct in relation to BBSW. Those proceedings are at a very early stage and the level of damages sought has not been specified. Westpac is defending these proceedings. On 1 March 2017, ASIC commenced litigation in relation to certain Westpac home loans (including certain interest only loans) alleging contraventions of the National Consumer Credit Protection Act 2009 (Cth). For further information, refer to ‘Significant developments’ in this Full Year Results Announcement. On 22 December 2016, ASIC commenced Federal Court proceedings against BT Financial Management Limited (BTFM) and Westpac Securities Administration Limited (WSAL) in relation to a number of superannuation account consolidation campaigns conducted between 2013 and 2016. ASIC has alleged that in the course of some of these campaigns, customers were provided with personal advice in contravention of a number of Corporations Act 2001 (Cth) provisions, BTFM and WSAL are defending the proceedings. Financial Claims Scheme Under the Financial Claims Scheme (FCS) the Australian Government provides depositors a free guarantee of deposits in eligible ADIs up to and including $250,000. The FCS applies to an eligible ADI if APRA has applied for the winding up of the ADI and the responsible Australian Government minister has declared that the FCS applies to the ADI. The Financial Claims Scheme (ADIs) Levy Act 2008 provides for the imposition of a levy to fund the excess of certain APRA FCS costs connected to an ADI. The levy would be imposed on liabilities of eligible ADIs to their depositors and cannot be more than 0.5% of the amount of those liabilities. Contingent tax risk Tax and regulatory authorities are reviewing the taxation treatment of certain transactions undertaken by the Group in the course of normal business activities and the claiming of tax incentives (including research and development tax incentives). The Group also responds to various notices and requests for information it receives from tax and regulatory authorities. Risk reviews and audits are also being undertaken by revenue authorities in other jurisdictions, as part of normal revenue authority activity in those countries. These reviews, notices and requests may result in additional tax liabilities (including interest and penalties). The Group has assessed these and other taxation claims arising in Australia and elsewhere, including seeking independent advice where appropriate, and holds appropriate provisions. Settlement risk The Group is subject to a credit risk exposure in the event that another counterparty fails to settle for its payments clearing activities (including foreign exchange). The Group seeks to minimise credit risk arising from settlement risk in the payments system by aligning our processing method with the legal certainty of settlement in the relevant clearing mechanism. 102 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial report Notes to the consolidated financial statements Note 15. Shareholders’ equity Ordinary Shares Westpac does not have authorised capital and the ordinary shares have no par value. Ordinary shares entitle the holder to participate in dividends and, in the event of Westpac winding up, to a share of the proceeds in proportion to the number of and amounts paid on the shares held. Each ordinary share entitles the holder to one vote, either in person or by proxy, at a shareholder meeting. Reconciliation of movement in number of ordinary shares Consolidated Ordinary shares purchased on market 1 30 September 2017: 3,549,035 unvested shares held (31 March 2017: 3,606,211, 30 September 2016: 3,472,010). 2 30 September 2017: 4,652,579 shares held (31 March 2017: 5,577,632, 30 September 2016: 5,577,632). 3 The price for the issuance of shares in relation to the dividend re-investment plan for the 2017 interim dividend was $29.79, 2016 final dividend was $31.32, 2016 Interim dividend was $30.43. 4 Ordinary shares allocated to employees under the RSP are classified as treasury shares until the shares vest. 5 The average exercise price received was $23.98 on the exercise of the WPP options and $28.54 on the exercise of the LTI options. 6 Treasury shares include ordinary shares held by statutory life funds and managed investment schemes and ordinary shares held by Westpac for equity derivatives sold to customers. 7 The purchase of ordinary shares on market resulted in a tax benefit of $0.7 million being recognised as contributed equity. Westpac Group 2017 Full Year Financial Results Announcement | 103 Consolidated Full Year SeptFull Year Sept 20172017 NumberAverage Price ($) For share-based payment arrangements: Employee share plan (ESP) Restricted share plan (RSP)4 WPP - options exercised5 WPP - share rights exercised LTI - options exercised5 As treasury shares: Treasury shares purchased (excluding RSP)6 Treasury shares sold Total ordinary shares purchased/(sold) on market7 862,91230.97 2,123,63532.08 52,74531.55 142,09331.03 326,17833.52 275,01433.59 (1,200,067)32.62 2,582,510 As at 30 Sept 2017 As atAs at 31 March 201730 Sept 2016 Opening balance Dividend reinvestment plan3 Issued shares for the period Closing balance 3,356,614,808 37,749,471 3,346,166,8533,335,774,947 10,447,95510,391,906 37,749,471 10,447,95510,391,906 3,394,364,279 3,356,614,8083,346,166,853 $m As at As atAs at 31 March30 Sept 20172016 30 Sept 2017 Share capital Ordinary share capital, fully paid Restricted Share Plan (RSP) treasury shares held1 Other treasury shares held2 Total treasury shares held Total share capital Non-controlling interests 34,889 (434) (61) 33,76533,469 (431) (366) (70)(89) (495) (501)(455) 34,394 33,26433,014 54 5761

 


2017 Full Year financial report Notes to the consolidated financial statements Note 15. Shareholders’ equity (continued) Reconciliation of movement in reserves 104 | Westpac Group 2017 Full Year Financial Results Announcement Reserves $m As at 30 Sept 2017 As atAs at 31 March 201730 Sept 2016 Available-for-sale securities reserve Opening balance Net gains/(losses) from changes in fair value Income tax effect Transferred to income statements Income tax effect Exchange differences Closing balance Share-based payment reserve Opening balance Share-based payment expense Closing balance Cash flow hedging reserve Opening balance Net gains/(losses) from changes in fair value Income tax effect Transferred to income statements Income tax effect Closing balance Foreign currency translation reserve Opening balance Exchange differences on translation of foreign operations (net of associated hedges) Closing balance Other reserves Opening balance Transactions with owners Closing balance Group's share of reserves of associates Total reserves 131 (93) 27 (2) 1 - 10(55) 16888 (46)(24) (1)(3) -1 -3 64 13110 1,398 33 1,3331,287 6546 1,431 1,3981,333 (201) (20) 6 86 (25) (172) (89) (71)(146) 2143 2927 (8) (7) (154) (201)(172) (451) (78) (413)(410) (38)(3) (529) (451)(413) (18) - (19)(17) 1(2) (18) (18)(19) - (14)(12) 794 845727

 


2017 Full Year financial report Notes to the consolidated financial statements Note 16. Notes to the consolidated cash flow statement 7,460 7 1,208 1,261 (285) 25 (47) (68) (311) 5 (19) (88) large large (162) (22) 9,243 10 (5,107) (1) (253) (187) 6,755 (38,082) (896) (209) (476) (175) (30) large large (142) (4,488) 38,771 (73) 312 (85) (41) large (105) Non-cash financing activities Businesses disposed in Full Year September 2017 No businesses were sold in Full Year September 2017. Businesses disposed in Full Year September 2016 Pacific Islands Westpac sold its banking operations in Solomon Islands and Vanuatu to the Bank of South Pacific Limited (BSP). Settlement occurred on 30 October 2015 and 1 July 2016 respectively, with a gain of $1 million recognised in non-interest income. The total cash consideration paid, net of transaction costs and cash held, was $104 million. Westpac Group 2017 Full Year Financial Results Announcement | 105 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Shares issued under the dividend reinvestment plan 1,125 327large 1,452 726100 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Reconciliation of net cash provided by/(used in) operating activities to net profit for the period Net profit for the period 4,085 3,9124 7,997 Adjustments: Depreciation, amortisation and impairment 645 6243 1,269 Impairment charges 444 577(23) 1,021 Net (decrease)/increase in current and deferred tax 236 (270)(187) (34) (Increase)/decrease in accrued interest receivable 5 (80)(106) (75) (Decrease)/increase in accrued interest payable 61 87(30) 148 (Decrease)/increase in provisions 275 (233)large 42 Other non-cash items (113) (129)(12) (242) Cash flows from operating activities before changes in operating assets and liabilities 5,638 4,48826 10,126 Net (increase)/decrease in derivative financial instruments (2,987) (2,055)45 (5,042) Net (increase)/decrease in life insurance assets and liabilities 175 44large 219 (Increase)/decrease in other operating assets: Trading securities and financial assets designated at fair value 5,464 (10,518)(152) (5,054) Loans (18,103) (8,712)108 (26,815) Receivables due from other financial institutions 2,310 343large 2,653 Regulatory deposits with central banks overseas 336 (28)large 308 Other assets (358) 558(164) 200 (Decrease)/increase in other operating liabilities: Other financial liabilities at fair value through income statement (840) 159large (681) Deposits and other borrowings 11,541 11,521-23,062 Payables due to other financial institutions 616 3,243(81) 3,859 Other liabilities (294) 279large (15) Net cash provided by/(used in) operating activities 3,498 (678)large 2,820 5,497(49)

 


2017 Full Year financial report Notes to the consolidated financial statements Note 16. Notes to the consolidated cash flow statement (continued) Details of the assets and liabilities of controlled entities over which control ceased Restricted cash The amount of cash and cash equivalents not available for use at 30 September (31 March 2017: $120 million, 30 September 2016: $48 million) for the Group. 2017 was $38 million Note 17. Subsequent events On 3 November 2017, the Group announced that it has entered into an agreement with Northill Capital regarding the sale of its interest in Hastings Management Pty Limited (HMPL). The proposed sale is subject to confirmatory due diligence and regulatory approvals. No other matters have arisen since the year ended 30 September 2017 which is not otherwise dealt with in this report, that has significantly affected or may significantly affect the operations of the Group, the results of its operations or the state of affairs of the Group in subsequent periods. 106 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full YearSept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Assets: Cash and balances with central banks Trading securities and financial assets designated at fair value Available-for-sale securities Loans Regulatory deposits with central banks overseas Property and equipment Deferred tax assets Goodwill and other intangible assets Other assets Total assets Liabilities: Deposits and other borrowings Debt issues Current tax liabilities Provisions Deferred tax liabilities Other liabilities Total liabilities Net assets Non-controlling interests Total equity attributable to owners of Westpac Banking Corporation Cash proceeds (net of transaction costs) Fair value of retained interest Total consideration Reserves recycled to income statement Gain/(loss) on disposal Reconciliation of cash proceeds from disposal Cash proceeds received (net of transaction costs) Less: Cash deconsolidated Cash consideration (paid)/received (net of transaction costs and cash held) ---- ---- ---- ---- --138(100) --1(100) 132(100) 5(100) 3(100) 1(100) 1(100) 27(100) - - - - - - - - - - - - - - - - - - - --- 308(100) ---- ---- ---- 264(100) --2(100) 1(100) --6(100) - - - - - - - - - - - - - --- 273(100) - --- 35(100) - --- ---- 35(100) - - - ---- - 34(100) --- - - --- 34(100) - --- 2(100) - --- 1(100) ---- 34(100) (138)(100) - - - - --(104)(100) - -

 


2017 Full Year financial report Statutory statements 4.8 Statement in relation to the audit of the financial statements. PricewaterhouseCoopers has audited the financial statements contained within the Westpac 2017 financial report and has issued an unmodified audit report. A copy of their report is available with the Annual financial report. This full year results announcement has not been subject to audit by PricewaterhouseCoopers. The preceding financial information contained in Section 4 “Full Year 2017 reported financial information” includes financial information extracted from the audited financial statements together with financial information that has not been audited. Dated at Sydney this 6th day of November 2017 for and on behalf of the Board. Tim Hartin Company Secretary Westpac Group 2017 Full Year Financial Results Announcement | 107

 


 

2017 Full Year financial results Cash earnings financial information Note 1 Interest spread and margin analysis (cash earnings basis) 109 110 Note 2 Average balance sheet (cash earnings basis) Note 3 Net interest income (cash earnings basis) 112 Note 4 Non-interest income (cash earnings basis) 113 Note 5 Operating expense analysis (cash earnings basis) 114 Note 6 Deferred expenses 114 Note 7 Earnings per share (cash earnings basis) 115 Note 8 Group earnings reconciliation 116 Note 9 Divisional result and economic profit 120 108 | Westpac Group 2017 Full Year Financial Results Announcement 5.0 Cash earnings financial information

 


2017 Full Year financial results Cash earnings financial information Interest spread and margin analysis (cash earnings basis)1 Note 1. Sept 16 721,843 15,348 1.94% 0.19% 2.13% 304,686 144,319 16,582 90,518 74,701 91,037 7,175 3,925 486 1,574 1,606 582 2.35% 2.72% 2.93% 1.74% 2.15% 0.64% 1 Includes capital benefit. Capital benefit represents the notional revenue earned on capital allocated to divisions under Westpac’s economic capital framework. Westpac Group 2017 Full Year Financial Results Announcement | 109 Half Year Half Year Full Year Full Year Sept 17 March 17 Sept 17 Group Average interest-earning assets ($m) 759,764 744,783 752,294 Net interest income ($m) 8,011 7,693 15,704 Interest spread 1.92% 1.90% 1.91% Benefit of net non-interest bearing assets, liabilities and equity 0.18% 0.17% 0.18% Net interest margin 2.10% 2.07% 2.09% Analysis by division Average interest-earning assets ($m) Consumer Bank 328,655 318,792 323,737 Business Bank 150,528 148,085 149,310 BT Financial Group 18,028 17,095 17,563 Westpac Institutional Bank 82,428 84,375 83,399 Westpac New Zealand (A$) Group Businesses 80,142 80,864 95,572 80,502 99,983 97,783 Group total 759,764 744,783 752,294 721,843 Westpac New Zealand (NZ$) Net interest income ($m)1 Consumer Bank Business Bank BT Financial Group Westpac Institutional Bank Westpac New Zealand (A$) Group Businesses 85,988 85,647 3,631 1,990 251 743 790 288 85,818 80,153 3,878 7,509 2,065 4,055 286 537 764 1,507 837 1,627 181 469 Group total 8,011 7,693 15,704 15,348 Westpac New Zealand (NZ$) Interest margin Consumer Bank Business Bank BT Financial Group Westpac Institutional Bank Westpac New Zealand (NZ$) Group Businesses 897 838 2.28% 2.70% 2.94% 1.77% 1.96% 0.60% 1,735 1,725 2.35% 2.32% 2.74% 2.72% 3.16% 3.06% 1.85% 1.81% 2.08% 2.02% 0.36% 0.48% Group total 2.10% 2.07% 2.09% 2.13%

 


2017 Full Year financial results Cash earnings financial information Note 2. Average balance sheet (cash earnings basis) 1 Loans and other receivables are stated net of provisions for impairment charges on loans. Other receivables include cash and balances held with central banks and other interest earning assets. 2 Includes property and equipment, intangibles, deferred tax, non-interest bearing loans relating to mortgage offset accounts and other assets. 3 Includes net impact of Treasury balance sheet management activities. 4 Includes provisions for current and deferred income tax. 110 | Westpac Group 2017 Full Year Financial Results Announcement Half Year Half Year 31 March 2017 30 September 2017 AverageInterestAverage AverageInterestAverage balanceRate $m$m% balanceRate $m$m% Assets Interest earning assets Receivables due from other financial institutions Trading securities and other financial assets designated at fair value Available-for-sale securities Regulatory deposits with central banks overseas Loans and other receivables1 Total interest earning assets and interest income Non-interest earning assets Cash, receivables due from other financial institutions and regulatory deposits Derivative financial instruments Life insurance assets All other assets2 Total non-interest earning assets Total assets Liabilities Interest bearing liabilities Payables due to other financial institutions Deposits and other borrowings Loan capital Other interest bearing liabilities3 Total interest bearing liabilities and interest expense Non-interest bearing liabilities Deposits and payables due to other financial institutions Derivative financial instruments Life insurance policy liabilities All other liabilities4 Total non-interest bearing liabilities Total liabilities Shareholders' equity Non-controlling interests Total equity Total liabilities and equity Loans and other receivables1 Australia New Zealand Other overseas Deposits and other borrowings Australia New Zealand Other overseas 10,354511.0 24,8512662.1 59,2989143.1 1,16391.6 649,11714,1474.4 7,899591.5 26,8832922.2 57,1248813.1 90881.8 666,95014,6274.4 759,76415,8674.2 744,78315,3874.1 2,209 39,764 13,937 60,982 1,792 35,593 10,965 59,245 107,595 116,892 867,359 861,675 18,4981341.5 479,6924,4351.9 17,1993504.1 174,2662,7753.2 - - 19,1661451.5 489,7074,4331.8 17,2173434.0 174,0752,9353.4 700,1657,8562.2 689,6557,6942.2 --45,165 45,709 11,980 11,398 47,028 39,867 9,148 11,771 107,814 114,252 807,979 803,907 59,364 57,744 24 16 59,380 57,768 867,359 861,675 551,26112,1884.4 72,8721,7284.8 24,9842311.9 401,7813,6641.8 51,7915962.3 26,1201751.3 564,43212,5954.5 73,0041,7424.8 29,5142902.0 417,3493,6801.8 50,2975772.3 22,0611761.6

 


2017 Full Year financial results Cash earnings financial information Note 2. Average balance sheet (cash earnings basis) 1 Loans and other receivables are stated net of provisions for impairment charges on loans. Other receivables includes cash and balances held with central banks and other interest bearing assets. 2 Includes property and equipment, intangibles, deferred tax, non-interest bearing loans relating to mortgage offset accounts and other assets. 3 Includes net impact of Treasury balance sheet management activities. 4 Includes provisions for current and deferred income tax. Westpac Group 2017 Full Year Financial Results Announcement | 111 Full Year Full Year 30 September 2016 30 September 2017 AverageInterestAverage AverageInterestAverage balanceRate $m$m% balanceRate $m$m% Assets Interest earning assets Receivables due from other financial institutions Trading securities and other financial assets designated at fair value Available-for-sale securities Regulatory deposits with central banks overseas Loans and other receivables1 Total interest earning assets and interest income Non-interest earning assets Cash, receivables due from other financial institutions and regulatory deposits Derivative financial instruments Life insurance assets All other assets2 Total non-interest earning assets Total assets Liabilities Interest bearing liabilities Payables due to other financial institutions Deposits and other borrowings Loan capital Other interest bearing liabilities3 Total interest bearing liabilities and interest expense Non-interest bearing liabilities Deposits and payables due to other financial institutions Derivative financial instruments Life insurance policy liabilities All other liabilities4 Total non-interest bearing liabilities Total liabilities Shareholders' equity Non-controlling interests Total equity Total liabilities and equity Loans and other receivables1 Australia New Zealand Other overseas Deposits and other borrowings Australia New Zealand Other overseas 11,3571000.9 26,0766452.5 54,0541,8083.3 1,197131.1 629,15929,2454.6 9,1231101.2 25,8705582.2 58,2081,7953.1 1,035171.6 658,05828,7744.4 752,29431,2544.2 721,84331,8114.4 2,431 48,666 12,702 57,913 2,000 37,673 12,447 60,111 112,231 121,712 864,525 843,555 19,9483451.7 453,7029,3692.1 13,8375894.3 179,7896,1603.4 18,8332791.5 484,7138,8681.8 17,2086934.0 174,1705,7103.3 694,92415,5502.2 667,27616,4632.5 41,722 55,956 10,985 11,145 46,099 42,780 10,560 11,586 111,025 119,808 805,949 787,084 58,556 55,896 575 20 58,576 56,471 864,525 843,555 532,17225,1554.7 68,3703,6145.3 28,6174761.7 376,1157,8012.1 48,2511,2802.7 29,3362881.0 557,86524,7834.4 72,9383,4704.8 27,2555211.9 409,5867,3441.8 51,0421,1732.3 24,0853511.5

 


2017 Full Year financial results Cash earnings financial information Note 3. Net interest income (cash earnings basis) 260 100 - (7) 10 - 645 1,808 28,953 13 32 (13) (1) (2) 31 (9) (345) (9,369) (2,309) (3,737) (589) - (114) (19) (5) (18) (4) 18 - 16 112 | Westpac Group 2017 Full Year Financial Results Announcement $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Interest income Cash and balances with central banks 146 9554 241 Receivables due from other financial institutions 59 5116 110 Net ineffectiveness of qualifying hedges - --- Trading securities and financial assets designated at fair value 292 26610 558 Available-for-sale securities 881 914(4) 1,795 Loans 14,467 14,0373 28,504 Regulatory deposits with central banks overseas 8 9(11) 17 Other interest income 14 15(7) 29 Total interest income 15,867 15,3873 31,254 31,811(2) Interest expense Payables due to other financial institutions (145) (134)8 (279) Deposits and other borrowings (4,433) (4,435)-(8,868) Trading liabilities (964) (934)3 (1,898) Debt issues (1,811) (1,774)2 (3,585) Loan capital (343) (350)(2) (693) Bank levy (95) --(95) Other interest expense (65) (67)(3) (132) Total interest expense (7,856) (7,694)2 (15,550) (16,463)(6) Total net interest income 8,011 7,6934 15,704 15,3482

 


2017 Full Year financial results Cash earnings financial information Note 4. Non-interest income (cash earnings basis) 1,297 1,210 281 3 (1) (19) 1,669 (4) 242 (13) 974 150 (10) 128 7 1 (6) (71) large (100) (11) 173 (6) 1 16 52 11 large (100) 100 (42) 73 Wealth management and insurance income reconciliation (230) (36) 146 87 - 1 7 - 1 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 2 Trading income represents a component of total markets income from our WIB markets business, Westpac Pacific, Westpac New Zealand and Treasury foreign exchange operations in Australia and New Zealand. 3 Comparatives have been revised for consistency. 4 Net gain/(loss) on derivatives held for risk management purposes reflects the impact of economic hedges of foreign currency capital and earnings. Westpac Group 2017 Full Year Financial Results Announcement | 113 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 BTFG non-interest income 850 894(5) 1,744 1,908(9) Net commission, premium, fee and banking income (38) (109)(65) (147) BTFG wealth management and insurance income 812 7853 1,597 1,678(5) NZ wealth management and insurance income 77 718 148 WIB wealth management income 63 30110 93 CB and BB wealth management and insurance income (28) --(28) Total wealth management and insurance income 924 8864 1,810 1,911(5) $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Fees and commissions Facility fees 671 6621 1,333 Transaction fees and commissions received1 580 613(5) 1,193 Other non-risk fee income 78 151(48) 229 Total fees and commissions 1,329 1,426(7) 2,755 2,788(1) Wealth management and insurance income Life insurance and funds management net operating income 794 806(1) 1,600 General insurance and lenders mortgage insurance net operating income 130 8063 210 Total wealth management and insurance income 924 8864 1,810 1,911(5) Trading income2,3 Foreign exchange income 401 474(15) 875 Other trading products 103 239(57) 342 Total trading income 504 713(29) 1,217 1,1248 Other income Dividends received from other entities 1 1-2 Net gain on disposal of assets - 6(100) 6 Net gain/(loss) on hedging overseas operations - --- Net gain/(loss) on derivatives held for risk management purposes4 (7) (23)(70) (30) Net gain/(loss) on financial instruments designated at fair value 5 6(17) 11 Gain on disposal of controlled entities - --- Rental income on operating leases 15 17(12) 32 Share of associates net profit 4 26(85) 30 Other 9 10(10) 19 Total other income 27 43(37) 70 658 Total non-interest income 2,784 3,068(9) 5,852 5,888(1)

 


2017 Full Year financial results Cash earnings financial information Note 5. Operating expenses (cash earnings basis) 3,995 369 135 92 3 3 (16) (18) 622 192 125 4 (7) 7 571 156 666 276 181 72 10 1 (4) 13 5 11 736 12 217 156 177 81 100 3 (17) - (1) (14) (10) 7 Deferred expenses3 Note 6. 1 Professional and processing services relate to: services provided by external suppliers including items such as cash handling and security services, marketing costs, and research and recruitment fees (Full Year 2017: $268 million; Full Year 2016: $278 million), operations processing (Full Year 2017: $184 million; Full Year 2016: $196 million), consultants (Full Year 2017: $162 million; Full Year 2016: $120 million), credit assessment (Full Year 2017: $53 million; Full Year 2016: $60 million), legal and audit fees (Full Year 2017: $61 million; Full Year 2016: $51 million), and regulatory fees and share market related costs (Full Year 2017: $27 million; Full Year 2016: $31 million). 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 3 Deferred expenses principally relates to a small number of capitalised costs in the wealth business. It does not include insurance deferred acquisition costs (which are offset to revenue) or mortgage broker costs (which are offset to net interest income). 114 | Westpac Group 2017 Full Year Financial Results Announcement $m As at 30 Sept 2017 As atAs at% Mov't% Mov't 31 March30 SeptSept 17 -Sept 17 - 20172016Mar 17Sept 16 Deferred acquisition costs Other deferred expenditure 86 91101(5)(15) 5645(50)(38) 28 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Staff expenses Employee remuneration, entitlements and on-costs 2,076 2,0223 4,098 Superannuation expense 186 194(4) 380 Share based payments 48 65(26) 113 Restructuring costs 30 45(33) 75 Total staff expenses 2,340 2,3261 4,666 4,5912 Occupancy expenses Operating lease rentals 325 324-649 Depreciation of property and equipment 88 91(3) 179 Other 72 6216 134 Total occupancy expenses 485 4772 962 9392 Technology expenses Amortisation and impairment of software assets 322 3065 628 Depreciation and impairment of IT equipment 82 768 158 Technology services 299 340(12) 639 Software and maintenance and licenses 168 14516 313 Telecommunications 106 8426 190 Data processing 42 3811 80 Total technology expenses 1,019 9893 2,008 1,9224 Other expenses Professional and processing services1 417 33823 755 Amortisation and impairment of intangible assets 5 5-10 Postage and stationery 109 1081 217 Advertising 80 757 155 Credit card loyalty programs2 68 84(19) 152 Non-lending losses 36 37(3) 73 Other expenses 45 62(27) 107 Total other expenses 760 7097 1,469 1,479(1) Operating expenses 4,604 4,5012 9,105 8,9312

 


2017 Full Year financial results Cash earnings financial information Note 7. Earnings per share (cash earnings basis) 3,322 235.5 1 2 3,184 139 23 Westpac Group 2017 Full Year Financial Results Announcement | 115 Half Year Half Year March 17 Full Year Full Year Sept 16 Sept 17 Sept 17 Reconciliation of ordinary shares on issue before the effect of own shares held (millions) Opening balance 3,357 3,346 3,346 Share entitlement offer - - - Number of shares issued under the Dividend Reinvestment Plan (DRP) 37 11 48 Closing balance 3,394 3,357 3,394 3,346 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Cash earnings 4,045 4,0171 8,062 7,8223 Weighted average number of fully paid ordinary shares (millions) 3,375 3,3521 3,364 Cash earnings per ordinary share (cents) 119.9 119.8-239.7

 


 

2017 Full Year financial results Cash earnings financial information Note 8. Group earnings reconciliation 1 Amortisation of intangible assets reflects the amortisation of St.George intangible assets including the core deposit intangible, credit card and financial planner relationships as well as intangible assets (management contracts) related to the acquisition of select Lloyds’ Australian businesses and for BTIM during the period equity accounted. 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 116 | Westpac Group 2017 Full Year Financial Results Announcement Cash Earnings adjustments Six months to 30 September 2017 $m Acquisition,Fair valueNZ credit Amortisationtransaction and(gain)/losscardPolicyholder of intangibleintegrationon economic IneffectiveSale of BTIMTreasuryrewards Operatingtax assets1 expenses hedgeshedges sharessharesscheme2leasesrecoveries Reported Cash results earnings Net interest income Fees and commission Wealth management and insurance income Trading income Other income Non-interest income Net operating income Salaries and other staff expenses Equipment and occupancy expenses Technology expenses Other expenses Operating expenses Core earnings Impairment charges Operating profit before tax Income tax expense Net profit Net profit attributable to non-controlling interests NET PROFIT ATTRIBUTABLE TO OWNERS OF WBC WBC Cash Earnings adjustments: Amortisation of intangible assets1 Acquisition, transaction and integration expenses Fair value (gain)/loss on economic hedges Ineffective hedges Sale of BTIM shares Treasury shares Cash earnings 7,903 --8028-----8,011 1,347 ------(18)-------(15)--8 --15------2-(5)-(279)--(54)-1,329 931 924 489 504 363 27 3,130 2-10-(279)(15)(18)(54)8 2,784 11,033 2-9028(279)(15)(18)(54)8 10,795 (2,375) ----35-----------54----------90-----18--(2,340) (539) (485) (1,019) (1,019) (868) (760) (4,801) 90---35-1854-(4,604) 6,232 92-9028(244)(15)--8 ---------6,191 (360) (360) 5,872 92-9028(244)(15)--8 (28)-(28)(8)732--(8) 5,831 (1,787) (1,784) 4,085 64-6220(171)(13)------------4,047 (2) (2) 4,083 64-6220(171)(13)---(64)-------------------(62)---------(20)---------171---------13------------4,045 64 - - - 62 - 20 - (171) - (13) - 4,045 4,045

 


 

2017 Full Year financial results Cash earnings financial information Note 8. Group earnings reconciliation (continued) 1 Amortisation of intangible assets reflects the amortisation of St.George intangible assets including the core deposit intangible, credit card and financial planner relationships as well as intangible assets (management contracts) related to the acquisition of select Lloyds’ Australian businesses and for BTIM during the period equity accounted. 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). Westpac Group 2017 Full Year Financial Results Announcement | 117 Cash Earnings adjustments Six months to 31 March 2017 $m Acquisition,Fair valueNZ credit Amortisationtransaction and(gain)/losscardPolicyholder of intangibleintegrationon economic IneffectiveSale of BTIMTreasuryrewards Operatingtax assets1 expenses hedgeshedges sharessharesscheme2leasesrecoveries Reported Cash results earnings Net interest income Fees and commission Wealth management and insurance income Trading income Other income Non-interest income Net operating income Salaries and other staff expenses Equipment and occupancy expenses Technology expenses Other expenses Operating expenses Core earnings Impairment charges Operating profit before tax Income tax expense Net profit Net profit attributable to non-controlling interests NET PROFIT ATTRIBUTABLE TO OWNERS OF WBC WBC Cash Earnings adjustments: Amortisation of intangible assets1 Acquisition, transaction and integration expenses Fair value (gain)/loss on economic hedges Ineffective hedges Sale of BTIM shares Treasury shares Cash earnings 7,613 --86(6)-----7,693 1,408 ------18-------36--(19) ---------11-(77)----(57)-1,426 869 886 713 713 166 43 3,156 11-(77)--3618(57)(19) 3,068 10,769 11-9(6)-3618(57)(19) 10,761 (2,326) ----------------57----------93-----(18)--(2,326) (534) (477) (989) (989) (784) (709) (4,633) 93-----(18)57-(4,501) 6,136 104-9(6)-36--(19) ---------6,260 (493) (493) 5,643 104-9(6)-36--(19) (31)-(2)2-(2)--19 5,767 (1,731) (1,745) 3,912 73-7(4)-34------------4,022 (5) (5) 3,907 73-7(4)-34---(73)-------------------(7)---------4-------------------(34)------------4,017 - - 73 - - - 7 - (4) - - - 34 - 4,017 4,017

 


 

2017 Full Year financial results Cash earnings financial information Note 8. Group earnings reconciliation (continued) 1 Amortisation of intangible assets reflects the amortisation of St.George intangible assets including the core deposit intangible, credit card and financial planner relationships as well as intangible assets (management contracts) related to the acquisition of select Lloyds’ Australian businesses and for BTIM during the period equity accounted. 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 118 | Westpac Group 2017 Full Year Financial Results Announcement Cash Earnings adjustments Twelve months to 30 September 2017 $m Acquisition,Fair valueNZ credit Amortisationtransaction and(gain)/losscardPolicyholder of intangibleintegrationon economic IneffectiveSale of BTIMTreasuryrewards Operatingtax assets1 expenses hedgeshedges sharessharesscheme2leasesrecoveries Reported Cash results earnings Net interest income Fees and commission Wealth management and insurance income Trading income Other income Non-interest income Net operating income Salaries and other staff expenses Equipment and occupancy expenses Technology expenses Other expenses Operating expenses Core earnings Impairment charges Operating profit before tax Income tax expense Net profit Net profit attributable to non-controlling interests NET PROFIT ATTRIBUTABLE TO OWNERS OF WBC WBC Cash Earnings adjustments: Amortisation of intangible assets1 Acquisition, transaction and integration expenses Fair value (gain)/loss on economic hedges Ineffective hedges Sale of BTIM shares Treasury shares Cash earnings 15,516 --16622-----15,704 2,755 --------------21--(11) --15------13-(82)-(279)--(111)-2,755 1,800 1,810 1,202 1,217 529 70 6,286 13-(67)-(279)21-(111)(11) 5,852 21,802 13-9922(279)21-(111)(11) 21,556 (4,701) ----35-----------111----------183--------(4,666) (1,073) (962) (2,008) (2,008) (1,652) (1,469) (9,434) 183---35--111-(9,105) 12,368 196-9922(244)21--(11) ---------12,451 (853) (853) 11,515 196-9922(244)21--(11) (59)-(30)(6)73---11 11,598 (3,518) (3,529) 7,997 137-6916(171)21------------8,069 (7) (7) 7,990 137-6916(171)21---(137)-------------------(69)---------(16)---------171---------(21)------------8,062 137 - - - 69 - 16 - (171) - 21 - 8,062 8,062

 


 

2017 Full Year financial results Cash earnings financial information Note 8. Group earnings reconciliation (continued) 1 Amortisation of intangible assets reflects the amortisation of St.George intangible assets including the core deposit intangible, credit card and financial planner relationships as well as intangible assets (management contracts) related to the acquisition of select Lloyds’ Australian businesses and for BTIM during the period equity accounted. 2 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). Westpac Group 2017 Full Year Financial Results Announcement | 119 Cash Earnings adjustments Twelve months to 30 September 2016 $m Acquisition,Fair valueNZ credit Amortisationtransaction and(gain)/losscardPolicyholder of intangibleintegrationon economic IneffectiveSale of BTIMTreasuryrewards Operatingtax assets1 expenses hedgeshedges sharessharesscheme2leasesrecoveries Reported Cash results earnings Net interest income Fees and commission Wealth management and insurance income Trading income Other income Non-interest income Net operating income Salaries and other staff expenses Equipment and occupancy expenses Technology expenses Other expenses Operating expenses Core earnings Impairment charges Operating profit before tax Income tax expense Net profit Net profit attributable to non-controlling interests NET PROFIT ATTRIBUTABLE TO OWNERS OF WBC WBC Cash Earnings adjustments: Amortisation of intangible assets1 Acquisition, transaction and integration expenses Fair value (gain)/loss on economic hedges Ineffective hedges Sale of BTIM shares Treasury shares Cash earnings 15,148 --212(12)-----15,348 2,755 ------33-------9--3 ---------22-77----(93)-2,788 1,899 1,911 1,124 1,124 59 65 5,837 22-77--933(93)3 5,888 20,985 22-289(12)-933(93)3 21,236 (4,601) -10--------------93--7-------2045----(33)--(4,591) (1,032) (939) (1,929) (1,922) (1,655) (1,479) (9,217) 20422----(33)93-(8,931) 11,768 22622289(12)-9--3 ---------12,305 (1,124) (1,124) 10,644 22622289(12)-9--3 (68)(7)(86)3-1--(3) 11,181 (3,184) (3,344) 7,460 15815203(9)-10------------7,837 (15) (15) 7,445 15815203(9)-10---(158)---------(15)---------(203)---------9-------------------(10)------------7,822 158 - 15 - 203 - (9) - - - 10 - 7,822 7,822

 


 

2017 Full Year financial results Cash earnings financial information Note 9. Divisional result and economic profit Group economic profit is defined as cash earnings plus a franking benefit equivalent of 70% of the value of Australian tax expense less a capital charge calculated at 11% of average ordinary equity4. Divisional economic profit is defined as cash earnings plus the franking benefit less a capital charge. The capital charge is calculated at 11% on allocated capital. Economic profit is used as a key measure of financial performance because it focuses on shareholder value generated by requiring a return in excess of a risk-adjusted cost of capital. The divisional results have been prepared on a consistent basis, with the Group having built up $3.8 billion in average equity for pending regulatory changes. This capital will be allocated across the divisions once further guidance has been received from APRA. 1 Cash earnings adjustment relates to amortisation of intangible assets including the core deposit intangible and credit cards related to the merger with St.George, as well as intangible assets relating to the Lloyds acquisition. 2 Cash earnings adjustment reflects amortisation of intangible assets related to financial planner relationships following merger with St.George, as well as intangible assets related to BTIM up to the sale of shares in May 2017. 3 In A$ equivalents. 4 For divisions average equity does not include intangible assets. 120 | Westpac Group 2017 Full Year Financial Results Announcement Twelve months to 30 September 2016 $m Consumer and BT FinancialWestpac BusinessGroupInstitutional Westpac New Bank1(Australia)2BankZealand3 Group Reported results Cash earnings adjustments Cash earnings Franking benefit Adjusted cash earnings Average equity4 Capital charge Economic profit 7,445 4,8338361,106827 12632-(2) 4,9598681,106825 1,488256290-377 7,822 2,101 9,923 6,4471,1241,396825 55,896 23,0773,259 9,6164,207 (2,538) (358)(1,058) (463) (6,149) 3,774 3,909766338362 Return on average equity (including intangibles) 14.0% 16.6%15.6%10.6%17.2% Twelve months to 30 September 2017 $m Consumer and BT FinancialWestpac BusinessGroupInstitutional Westpac New Bank1(Australia)2BankZealand3 Group Reported results Cash earnings adjustments Cash earnings Franking benefit Adjusted cash earnings Average equity4 Capital charge Economic profit 7,990 5,0779311,304902 126(160)-14 5,2037711,304916 1,562231321-72 8,062 2,153 10,215 6,7651,0021,625916 58,556 24,0293,431 9,1194,501 (2,643) (377)(1,003)(495) (6,441) 3,774 4,122625622421 Return on average equity (including intangibles) 13.8% 17.0%14.0%13.4%18.3% Six months to 31 March 2017 $m Consumer and BT FinancialWestpac BusinessGroupInstitutional Westpac New Bank1(Australia)2BankZealand3 Group Reported results Cash earnings adjustments Cash earnings Franking benefit Adjusted cash earnings Average equity4 Capital charge Economic profit 3,907 2,456387700428 6310-7 2,519397700435 756117163-110 4,017 1,060 5,077 3,275514863435 57,744 24,3593,4459,3834,556 (1,336) (189)(515)(250) (3,167) 1,910 1,939325348185 Return on average equity (including intangibles) 14.0% 16.4%14.4%14.1%17.3% Six months to 30 September 2017 $m Consumer and BT FinancialWestpac BusinessGroupInstitutional Westpac New Bank1(Australia)2BankZealand3 Group Reported results Cash earnings adjustments Cash earnings Franking benefit Adjusted cash earnings Average equity4 Capital charge Economic profit 4,083 2,621544604474 63(170)-7 2,684374604481 806114158-(38) 4,045 1,093 5,138 3,490488762481 59,364 23,7033,4178,8564,446 (1,307) (188)(488)(245) (3,274) 1,864 2,183300274236 Return on average equity (including intangibles) 13.6% 17.6%13.6%12.7%19.4%

 


2017 Full Year financial results Other information 6.0 6.1 Other information Disclosure regarding forward-looking statements This Full Year Financial Results Announcement 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 Full Year Financial Results Announcement 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: 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; regulatory investigations, litigation, fines, penalties, restrictions or other regulator imposed conditions, including as a result of our failure to comply with laws (such as financial crime laws), regulations or regulatory policy; internal and external events which may adversely impact Westpac’s reputation; information security breaches, including cyberattacks; reliability and security of Westpac’s technology and risks associated with changes to technology systems; 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; market volatility, including uncertain conditions in funding, equity and asset markets; adverse asset, credit or capital market conditions; the conduct, behaviour or practices of Westpac or its staff; changes to Westpac’s credit ratings or the methodology used by credit rating agencies; levels of inflation, interest rates, exchange rates and market and monetary fluctuations; market liquidity and investor confidence; 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, margins and fees, and control expenses; the effects of competition in the geographic and business areas in which Westpac conducts its operations; the timely development and acceptance of new products and services and the perceived overall value of these products and services by customers; the effectiveness of Westpac’s risk management policies, including internal processes, systems and employees; the incidence or severity of Westpac-insured events; 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; changes to the value of Westpac’s intangible assets; changes in political, social or economic conditions in any of the major markets in which Westpac or its customers or counterparties operate; the success of strategic decisions involving diversification or innovation, in addition to business expansion and integration of new businesses; and various other factors beyond Westpac’s control. Westpac Group 2017 Full Year Financial Results Announcement | 121

 


2017 Full Year financial results Other information 6.1 Disclosure regarding forward-looking statements (continued) 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 the Westpac Group 2017 Annual Report. 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. Westpac is under no obligation to update any forward-looking statements contained in this Full Year Financial Results Announcement, whether as a result of new information, future events or otherwise, after the date of this Full Year Financial Results Announcement. 6.2 References to websites Information contained in or accessible through the websites mentioned in this Full Year Financial Results Announcement does not form part of this Full Year Financial Results Announcement unless we specifically state that it is incorporated by reference and forms part of this Full Year Financial Results Announcement. All references in this Full Year Financial information only. Results Announcement to websites are inactive textual references and are for Credit ratings1 6.3 Long Term Short Term Outlook Rating agency Fitch Ratings Moody's Investor Services S&P Global Ratings AA-Aa3 AA-F1+ P-1 A-1+ Stable Stable Negative On 19 June 2017, Moody’s lowered the Macro Profile for Australia to “Strong +” from “Very Strong. As a result of this revision, Moody’s lowered the ratings for the major Australian banks, including Westpac, by one notch to Aa3, from Aa2. At the same time, Moody’s updated their rating outlook on Westpac to “stable” from “negative”. 6.4 Dividend reinvestment plan Westpac operates a DRP that is available to holders of fully paid ordinary shares who are resident in, and whose address on the register of shareholders is in, Australia or New Zealand. As noted in Section 2.5, the Directors have made certain determinations in relation to the calculation of the Market Price which will apply to the DRP for the 2017 final dividend only. Shareholders who wish to commence participation in the DRP, or to vary their current participation election, must do so by 5.00pm (AEST) on 15 November 2017. Shareholders can provide these instructions by: For shareholders with holdings that have a market value of less than $50,000 (for a single holding) or less than $1,000,000 (per shareholding held within a Link Market Services portfolio), logging into the Westpac share registrar’s website at www.linkmarketservices.com.au and electing the DRP or amending their existing instructions online; or Completing and returning a DRP Application or Variation form to Westpac’s share registry. Registry contact details are listed in Section 6.6. 6.5 Changes in control of Group entities During the twelve months ended 30 September 2017 the following controlled entities were acquired: Core Infrastructure Income Feeder 1 LP (acquired 3 October 2016); Core Infrastructure Income Feeder 2 LP (acquired 3 October 2016); Core Infrastructure Income Master LP (acquired 3 October 2016); Core Infrastructure Income Holdings Limited (acquired 3 October 2016); Hastings Infrastructure 3 Limited (acquired 7 December 2016); Hastings Infrastructure 4 Limited (acquired 7 December 2016); Neo Investment GP Limited (acquired 7 December 2016); and Crusade ABS Series 2017-1 Trust (created 17 February 2017). 1 As at 30 September 2017. 122 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Other information During the twelve months ended 30 September 2017 the following controlled entities ceased to be controlled: Hickory Trust (terminated 7 October 2016); Hastings Investment Management (Europe) Limited (dissolved 11 October 2016); HLT Custodian Trust (terminated 30 November 2016); MIF Custodian Trust (terminated 30 November 2016); Crusade Euro Trust 1E of 2006 (terminated 24 January 2017); Crusade Global Trust 2 of 2006 (terminated 24 January 2017); Canning Park Capital Pte Limited (struck off 7 April 2017); Hastings Infrastructure 3 Limited (dissolved 9 May 2017); Hastings Infrastructure 4 Limited (dissolved 9 May 2017); Neo Investment GP Limited (dissolved 9 May 2017); Halcyon Securities Pty Limited (deregistered 17 May 2017); Australian Loan Processing Security Trust (terminated 29 May 2017); Crusade ABS Series 2012-1 Trust (terminated 23 June 2017); Westpac Funding Holdings Pty Ltd (deregistered 16 July 2017); Core Infrastructure Income Holdings Limited (dissolved 18 July 2017); The Mortgage Company Pty Limited (deregistered 2 August 2017); Australian Loan Processing Security Company Pty Limited (deregistered 2 August 2017); Crusade CP Management Pty Limited (deregistered 2 August 2017); and Westpac Equipment Finance Limited (deregistered 30 August 2017). Westpac Group 2017 Full Year Financial Results Announcement | 123

 


2017 Full Year financial results Other information 6.6 Financial calendar and Share Registry details Westpac shares are listed on the securities exchanges in Australia (ASX) and New Zealand (NZX) and as American Depository Receipts in New York. Westpac Convertible Preference Shares, Westpac Capital Notes, Westpac Capital Notes 2, Westpac Capital Notes 3, Westpac Capital Notes 4 and Westpac Subordinated Notes II are listed on the ASX. Westpac NZD Subordinated Notes are listed on the NZX. Important dates to note are set out below, subject to change. Payment of any distribution, dividend or interest payment is subject to the relevant payment conditions and the key dates for each payment will be confirmed to the ASX for securities listed on the ASX. Westpac Ordinary Shares (ASX code: WBC, NYSE code: WBK) New York ex-dividend date for final dividend 10 November 2017 Ex-dividend date for final dividend 13 November 2017 New York record date for final dividend 13 November 2017 Record date for final dividend 14 November 2017 8 December 20171 Annual General Meeting Final dividend payable 22 December 2017 Financial Half Year end 31 March 2018 Interim results and dividend announcement 7 May 2018 New York ex-dividend date for interim dividend 16 May 2018 Ex-dividend date for interim dividend 17 May 2018 New York record date for interim dividend 17 May 2018 Record date for interim dividend 18 May 2018 Interim dividend payable 4 July 2018 Financial Year end 30 September 2018 Final results and dividend announcement 5 November 2018 New York ex-dividend date for final dividend 9 November 2018 Ex-dividend date for final dividend 13 November 2018 New York record date for final dividend 13 November 2018 Record date for final dividend 14 November 2018 12 December 20181 Annual General Meeting Final dividend payable 21 December 2018 Westpac Convertible Preference Shares (ASX code: WBCPC) Ex-date for semi-annual dividend 22 March 2018 Record date for semi-annual dividend 23 March 2018 3 April 20182,4 Payment date for semi-annual dividend Ex-date for semi-annual dividend 20 September 2018 21 September 20183 Record date for semi-annual dividend 1 October 20182 Payment date for semi-annual dividend 1 Details regarding the location of the meeting and the business to be dealt with will be contained in a Notice of Meeting sent to shareholders in the November before the meeting. 2 Adjusted to next business day as payment date falls on a non-ASX business day. 3 Adjusted to immediately preceding business day as record date falls on a non-ASX business day. 4 The First Optional Redemption Date for Westpac CPS will be 31 March 2018. Redemption on this date is subject to APRA’s prior written consent. There can be no certainty that APRA will provide its consent and Westpac has not made any decision to redeem Westpac Convertible Preference Shares. 124 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Other information Westpac Capital Notes (ASX code: WBCPD) Ex-date for quarterly distribution 29 November 2017 Record date for quarterly distribution 30 November 2017 Payment date for quarterly distribution 8 December 2017 Ex-date for quarterly distribution 27 February 2018 Record date for quarterly distribution 28 February 2018 Payment date for quarterly distribution 8 March 2018 Ex-date for quarterly distribution 30 May 2018 Record date for quarterly distribution 31 May 2018 Payment date for quarterly distribution 8 June 2018 Ex-date for quarterly distribution 30 August 2018 Record date for quarterly distribution 31 August 2018 10 September 20181 Payment date for quarterly distribution Ex-date for quarterly distribution 29 November 2018 Record date for quarterly distribution 30 November 2018 10 December 20181 Payment date for quarterly distribution Westpac Capital Notes 2 (ASX code: WBCPE) Ex-date for quarterly distribution 14 December 2017 Record date for quarterly distribution 15 December 2017 27 December 20171 Payment date for quarterly distribution Ex-date for quarterly distribution 14 March 2018 Record date for quarterly distribution 15 March 2018 Payment date for quarterly distribution 23 March 2018 Ex-date for quarterly distribution 14 June 2018 Record date for quarterly distribution 15 June 2018 25 June 20181 Payment date for quarterly distribution Ex-date for quarterly distribution 13 September 2018 14 September 20182 Record date for quarterly distribution 24 September 20181 Payment date for quarterly distribution Ex-date for quarterly distribution 13 December 2018 14 December 20182 Record date for quarterly distribution 24 December 20181 Payment date for quarterly distribution 1 Adjusted to next business day as payment date falls on a non-ASX business day. 2 Adjusted to immediately preceding business day as record date falls on a non-ASX business day. Westpac Group 2017 Full Year Financial Results Announcement | 125

 


2017 Full Year financial results Other information Westpac Capital Notes 3 (ASX code: WBCPF) Ex-date for quarterly distribution 13 December 2017 Record date for quarterly distribution 14 December 2017 Payment date for quarterly distribution 22 December 2017 Ex-date for quarterly distribution 13 March 2018 Record date for quarterly distribution 14 March 2018 Payment date for quarterly distribution 22 March 2018 Ex-date for quarterly distribution 13 June 2018 Record date for quarterly distribution 14 June 2018 Payment date for quarterly distribution 22 June 2018 Ex-date for quarterly distribution 13 September 2018 Record date for quarterly distribution 14 September 2018 24 September 20181 Payment date for quarterly distribution Ex-date for quarterly distribution 13 December 2018 Record date for quarterly distribution 14 December 2018 24 December 20181 Payment date for quarterly distribution Westpac Capital Notes 4 (ASX code: WBCPG) Ex-date for quarterly distribution 21 December 2017 Record date for quarterly distribution 22 December 2017 2 January 20181 Payment date for quarterly distribution Ex-date for quarterly distribution 21 March 2018 Record date for quarterly distribution 22 March 2018 3 April 20181 Payment date for quarterly distribution Ex-date for quarterly distribution 21 June 2018 Record date for quarterly distribution 22 June 2018 2 July 20181 Payment date for quarterly distribution Ex-date for quarterly distribution 20 September 2018 21 September 20182 Record date for quarterly distribution 1 October 20181 Payment date for quarterly distribution Ex-date for quarterly distribution 20 December 2018 21 December 20182 Record date for quarterly distribution 24 December 20181 Payment date for quarterly distribution 1 Adjusted to next business day as payment date falls on a non-ASX business day. 2 Adjusted to immediately preceding business day as record date falls on a non-ASX business day. 126 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Other information Westpac Subordinated Notes II (ASX code: WBCHB) Ex-date for quarterly interest payment 13 November 2017 Record date for quarterly interest payment 14 November 2017 Payment date for quarterly interest payment 22 November 2017 Ex-date for quarterly interest payment 13 February 2018 Record date for quarterly interest payment 14 February 2018 Payment date for quarterly interest payment 22 February 2018 Ex-date for quarterly interest payment 11 May 2018 Record date for quarterly interest payment 14 May 2018 Payment date for quarterly interest payment 22 May 2018 Ex-date for quarterly interest payment 13 August 2018 Record date for quarterly interest payment 14 August 2018 22 August 20181 Payment date for quarterly interest payment Ex-date for quarterly interest payment 13 November 2018 Record date for quarterly interest payment 14 November 2018 22 November 20181 Payment date for quarterly interest payment Westpac NZD Subordinated Notes 11 (ASX code: WBC010) Ex-date for quarterly interest payment 20 November 2017 Record date for quarterly interest payment 21 November 2017 Payment date for quarterly interest payment 1 December 2017 Ex-date for quarterly interest payment 16 February 2018 Record date for quarterly interest payment 19 February 2018 Payment date for quarterly interest payment 1 March 2018 Ex-date for quarterly interest payment 21 May 2018 Record date for quarterly interest payment 22 May 2018 Payment date for quarterly interest payment 1 June 2018 Ex-date for quarterly interest payment 21 August 2018 Record date for quarterly interest payment 22 August 2018 3 September 20182 Payment date for quarterly interest payment Ex-date for quarterly interest payment 20 November 2018 Record date for quarterly interest payment 21 November 2018 3 December 20182 Payment date for quarterly interest payment 1 The First Optional Redemption Date for Westpac Subordinated Notes II will be 22 August 2018. Redemption on this date is subject to APRA’s prior written consent. There can be no certainty that APRA will provide its consent and Westpac has not made any decision to redeem Westpac Subordinated Notes II. 2 Adjusted to next business day as payment date does not fall on a day on which banks are open for general business in Wellington and Auckland, New Zealand and Sydney, Australia. Westpac Group 2017 Full Year Financial Results Announcement | 127

 


2017 Full Year financial results Other information Share Registries Australia Ordinary shares on the main register, Westpac Convertible Preference Shares, Westpac Capital Notes, Westpac Capital Notes 2, Westpac Capital Notes 3, Westpac Capital Notes 4 and Westpac Subordinated Notes II New Zealand Ordinary shares on the New Zealand branch register and Westpac NZD Subordinated Notes Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Australia Postal Address: Locked Bag A6015, Sydney South NSW 1235 Website: www.linkmarketservices.com.au Email: westpac@linkmarketservices.com.au Telephone: 1800 804 255 (toll free in Australia) International: +61 1800 804 255 Facsimile: +61 2 9287 0303 Link Market Services Limited Level 11, Deloitte Centre, 80 Queen Street Auckland 1010 New Zealand Postal Address: P.O. Box 91976, Auckland 1142, New Zealand Website: www.linkmarketservices.co.nz Email: enquiries@linkmarketservices.co.nz Telephone: 0800 002 727 (toll free in New Zealand) International: +64 9 375 5998 Facsimile: +64 9 375 5990 New York Depositary in USA for American Depositary Shares BNY Mellon Shareholder Services PO Box 305000 Louiseville, KY 40233-5000, USA Website: www.mybnymdr.com Email: shrrelations@cpushareownerservices.com Telephone: +1 888 269 2377 (toll free in US) International: +1 201 680 6825 For further information contact: Media: David Lording, Group Head of Media Relations, +61 2 8219 8512 Analysts and Investors: Andrew Bowden, Head of Investor Relations, +61 2 8253 4008 128 | Westpac Group 2017 Full Year Financial Results Announcement

 


2017 Full Year financial results Other information 6.7 6.7.1 Exchange rates Exchange rates against A$ 0.5193 1.0742 0.5875 1.0487 0.6078 1.0599 0.6124 1.0938 0.5494 1.0643 0.5875 1.0487 6.7.2 Westpac New Zealand division performance (A$ Equivalent to Section 3.5) Westpac New Zealand operations provide banking, wealth and insurance products and services to New Zealand consumer, business and institutional customers. The New Zealand wealth business includes New Zealand Life Company and BT New Zealand. Results for the Second Half 2017, First Half 2017 and Second Half 2016 have been converted into Australian dollars (A$) at the average exchange rates each month, the average rates for the reporting periods are: 1.0730, 1.0599 and 1.0643 respectively. 482 (1) (889) 2 (54) large (320) 12 362 42.55% 2.15% 16 31bps (13bps) 71.7 76.56% 82.1 101.2 8.0 74.7 7.1 2.0 (1) (101bps) (1) (1) - 8 8 (20) 1 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards scheme (First Half 2017: $18 million, Second Half 2016: $16 million and First Half 2016: $17 million). 2 Ratios calculated using NZ$. 3 Deposits refer to total customer deposits. 4 Averages are based on a six month period for the halves and a twelve month period for the full year. Westpac Group 2017 Full Year Financial Results Announcement | 129 $bn As at As at% Mov't 31 MarchSept 17 - 2017Mar 17 As at As at% Mov't 30 SeptSept 17 - 2016Sept 16 30 Sept 30 Sept 2017 2017 Deposits3 53.7 51.93 53.7 54.9(2) Net loans 71.1 70.02 71.1 Deposit to loan ratio2 75.55% 74.25%130bps 75.55% Total assets 81.3 79.62 81.3 TCE 100.1 97.92 100.1 Third party liquid assets 8.0 7.65 8.0 Average interest-earning assets4 80.1 80.9(1) 80.5 Funds under management 7.7 7.18 7.7 Funds under administration 1.6 1.8(11) 1.6 $m % Mov't Half Year Sept 17 - March 17 Mar 17 % Mov't Full Year Sept 17 - Sept 16Sept 16 Half Year Full Year Sept 17 Sept 17 Net interest income 837 7906 1,627 1,6061 Non-interest income1 234 245(4) 479 Net operating income 1,071 1,0353 2,106 2,0881 Operating expenses1 (442) (461)(4) (903) Core earnings 629 57410 1,203 1,199-Impairment charges 37 356 72 Operating profit before tax 666 6099 1,275 1,14511 Tax and non-controlling interests (185) (174)6 (359) Cash earnings 481 43511 916 82511 Economic profit 236 18528 421 Expense to income ratio2 41.39% 44.39%(300bps) 42.86% Net interest margin2 2.08% 1.96%12bps 2.02% Six months to/as at Currency 30 September 2017 31 March 201730 September 2016 AverageSpotAverageSpot AverageSpot US$ 0.77020.7844 0.75380.76460.75240.7618 GBP 0.59540.5846 NZ$ 1.07311.0867 Twelve months to/as at Currency 30 September 2017 30 September 2016 AverageSpot AverageSpot US$ 0.76200.7844 0.73670.7618 GBP 0.60160.5846 NZ$ 1.06651.0867

 


2017 Full Year financial results Other information 6.7.3 Impact of exchange rate movements on Group results Half Year Sept 17 vs Half Year Mar 17 Full Year Sept 17 vs Full Year Sept 16 6.7.4 Exchange rate risk on future NZ$ earnings Westpac’s policy in relation to the hedging of the future earnings of the Group’s New Zealand division is to manage the economic risk where Westpac believes there is a likelihood of depreciation of NZ$ against A$. Westpac manages these flows over a time horizon under which up to 100% of the expected earnings for the following twelve months and 100% of the expected earnings for the subsequent twelve months can be hedged. As at 30 September 2017, Westpac has hedges in place for forecast First Half 2018 earnings (average rate $1.07) and for forecast up to July 2018 earnings (average rate $1.05). 130 | Westpac Group 2017 Full Year Financial Results Announcement Cash earnings FX impact $mgrowth$m Growth ex-FX Cash earnings FX impact growth$m Growth ex-FX Net interest income Non-interest income Net operating income Operating expenses Core earnings Impairment charges Operating profit before income tax Income tax expense Net profit Net profit attributable to non-controlling interests Cash earnings 4%(13) (9%)7 4% (9%) 2%-(1%)(26) 2% (0%) 0%(6) 2%8 0% 2% 2%(26) 2%9 2% 2% (1%)2 (27%)-(1%) (27%) 1%(17) (24%)1 1% (24%) 1%2 2%(1) 1% 2% 4%(16) 6%5 4% 6% 1%1 (60%)-1% (60%) 3%(11) (53%)-3% (53%) 1%1 1% 3%(11) 3%

 


2017 Full Year financial results Glossary 7.0 Glossary Average ordinary equity Average tangible ordinary equity Cash earnings per ordinary share Cash ROE Cash earnings to average tangible equity (ROTE) Dividend payout ratio – cash earnings Dividend payout ratio – net profit Earnings per ordinary share Economic profit – Divisions Economic profit – Group Fully franked dividends per ordinary shares (cents) Net tangible assets per ordinary share Return on equity (ROE) Weighted average ordinary shares (cash earnings) Weighted average ordinary shares (reported) Average total equity less average non-controlling interests. Average ordinary equity less average goodwill and other intangible assets (excluding capitalised software). Cash earnings divided by the weighted average ordinary shares (cash earnings basis). Cash earnings divided by average ordinary equity. Cash earnings divided by average tangible ordinary equity. Ordinary dividend to be paid divided by cash earnings. Ordinary dividend per share divided by net profit per share attributable to the owners of WBC. Net profit attributable to the owners of WBC divided by the weighted average ordinary shares (reported). Cash earnings less a capital charge calculated at 11% of allocated capital plus 70% of the value of Australian tax expense. Cash earnings less a capital charge calculated at 11% of average ordinary equity plus a value on franking credits calculated as 70% of the Group’s Australian tax expense. Dividends paid out of retained profits which carry a credit for Australian company income tax paid by Westpac. 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 profit attributable to the owners of WBC divided by average ordinary equity. Weighted average number of fully paid ordinary shares listed on the ASX for the relevant period. 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’). Expense to income ratio Full-time equivalent employees (FTE) Revenue per FTE Operating expenses divided by net operating income. 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. Total operating income divided by the average number of FTE for the period. Average interest-earning assets Average interest-bearing liabilities Divisional margin 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. The average balance of liabilities owed by the Group that incur an interest expense. Where possible, daily balances are used to calculate the average balance for the period. Net interest income (including capital benefit) for a division as a percentage of the average interest earning assets for that division. Net interest margin Net interest spread Calculated by dividing net interest income by average interest-earning assets. The difference between the average yield on all interest-earning assets and the average rate paid on interest bearing liabilities. Common equity tier 1 capital ratio Credit risk weighted assets (Credit RWA) Total common equity capital divided by risk weighted assets, as defined by APRA. Credit risk weighted assets represent risk weighted assets (on-balance sheet and off-balance sheet) that relate to credit exposures and therefore exclude market risk, operational risk, interest rate risk in the banking book and other assets. Internationally comparable capital ratios Internationally comparable regulatory capital ratios are Westpac’s estimated ratios after adjusting the capital ratios determined under APRA Basel III regulations for various items. Analysis aligns with the APRA study titled “International capital comparison study” dated 13 July 2015. Westpac Group 2017 Full Year Financial Results Announcement | 131 Capital adequacy Business performance Productivity and efficiency Shareholder value

 


2017 Full Year financial results Glossary 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 backed risks (ie. market and operational risk), RWA is determined by multiplying the capital requirements for those risks by 12.5. Tier 1 capital ratio Total regulatory capital ratio Total Tier 1 capital divided by risk weighted assets, as defined by APRA. Total regulatory capital divided by risk weighted assets, as defined by APRA. Committed Liquidity Facility (CLF) High Quality Liquid Assets (HQLA) Liquidity Coverage Ratio (LCR) 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. Assets which meet APRA’s criteria for inclusion as HQLA in the numerator of the 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 and CLF over the total net cash out-flows in a modelled 30 day defined stressed scenario. 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 off-balance sheet activities. When it is implemented by APRA from 1 January 2018, ADI’s must maintain an NSFR of at least 100%. Net Stable Funding Ratio (NSFR) HQLA and non LCR qualifying liquid assets, but excludes internally securitised assets that are eligible for a repurchase agreement with the RBA and RBNZ. Third party liquid assets Total liquid assets Third party liquid assets and internally securitised assets that are eligible for a repurchase agreement with a central bank. 90 days past due and not impaired 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 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 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. Collectively assessed provisions (CAPs) 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. 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, cash flow, and the net realisation of value of assets to which recourse is held: 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; 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 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. 132 | Westpac Group 2017 Full Year Financial Results Announcement Asset quality Funding and liquidity Capital adequacy (cont’d)

 


2017 Full Year financial results Glossary Individually assessed provisions (IAPs) 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. Stressed assets Total committed exposure (TCE) Watchlist and substandard, 90 days past due and not impaired and impaired assets. 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. 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. Credit Value Adjustment (CVA) CVA adjusts the fair value of over-the-counter derivatives for credit risk. CVA is employed on the majority of derivative positions and reflects the market view of the counterparty credit risk. A Debit Valuation Adjustment (DVA) is employed to adjust for our own credit risk. Divisional results Divisional results are presented on a management reporting basis. Internal charges and transfer pricing adjustments are included in the performance of each division reflecting the management structure rather than the legal entity (these results cannot be compared to results for individual legal entities). Where management reporting structures or accounting classifications have changed, financial results for comparative periods have been revised and may differ from results previously reported. Overhead costs are allocated to revenue generating divisions. The Group’s internal transfer pricing frameworks facilitate risk transfer, profitability measurement, capital allocation and divisional alignment, tailored to the jurisdictions in which the Group operates. Transfer pricing allows the Group to measure the relative contribution of products and divisions to the Group’s interest margin and other dimensions of performance. Key components of the Group’s transfer pricing frameworks are funds transfer pricing for interest rate and liquidity risk and allocation of basis and contingent liquidity costs, including capital allocation. First Half 2017 Full Year 2017 Full Year 2016 Funding Valuation Adjustment (FVA) Lloyds’ Six months ended 31 March 2017. Twelve months ended 30 September 2017. Twelve months ended 30 September 2016. FVA reflects the estimated present value of the future market funding cost or benefit associated with funding uncollateralised derivatives. Refers to the acquisition of select Australian businesses of Lloyds’ Banking Group including Capital Finance Australia Limited and BOS International (Australia) Ltd on 31 December 2013. Net Promoter Score (NPS) Net Promoter Score measures the net likelihood of recommendation to others of the customer’s main financial institution for retail or business banking. Net Promoter ScoreSM is a trademark of Bain & Co Inc., Satmetrix Systems, Inc., and Mr Frederick Reichheld. For retail banking, using a scale of 1 to 10 (1 means ‘extremely unlikely’ and 10 means ‘extremely likely’), the 1-6 raters (detractors) are deducted from the 9-10 raters (promoters); and For business banking, using a scale of 0 to 10 (0 means ‘extremely unlikely’ and 10 means ‘extremely likely’), the 0-6 raters (detractors) are deducted from the 9-10 raters (promoters). Prior corresponding period Prior half / Prior period Run-off Refers to the six months ended 30 September 2016. Refers to the six months ended 31 March 2017. Scheduled and unscheduled repayments and debt repayments (from for example property sales, external refinancing), net of redraws. Second Half 2017 Women in Leadership Six months ended 30 September 2017. Women in Leadership refers to the proportion of women (permanent and maximum term) in leadership roles across the Group. It includes the CEO, Group Executive, General Managers, senior leaders with significant influence on business outcomes, (direct reports to General Managers and their direct reports), large (3+) team people leaders three levels below General Manager, and Bank and Assistant Bank Managers. Westpac Group 2017 Full Year Financial Results Announcement | 133 Other Asset quality (cont’d)

 

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Exhibit 2

200 years proudly supporting Australia 2017 FULL YEAR FINANCIAL RESULTS Westpac Banking Corporation ABN 33 007 457 141

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Westpac Full Year 2017 result index 3 Image on right 2017 Full Year Result Presentation 25 Bank of New South Wales Maldon Branch, Victoria 1870 Investor Discussion Pack of 2017 Full Year Result 26 Strategy Overview Performance discipline Service leadership Digital transformation Workforce revolution Sustainable futures 32 35 38 40 48 49 Earnings drivers Revenue Expenses Impairment charges 53 54 60 63 64 Asset quality 85 Capital, Funding and Liquidity Divisional results Consumer Bank Business Bank BT Financial Group Westpac Institutional Bank Westpac New Zealand 95 96 99 102 106 109 114 Economics 131 Appendix and Disclaimer 137 Contact us 138 Disclaimer

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200 years proudly supporting Australia BRIAN HARTZER CHIEF EXECUTIVE OFFICER Financial results based on cash earnings unless otherwise stated. Refer page 33 for definition. Results principally cover the FY17, FY16 and 2H17 and 1H17 periods. Comparison of 2H17 versus 1H17 (unless otherwise stated) Westpac Banking Corporation ABN 33 007 457 141

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Strong franchise – solid result 4 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack •Cash earnings up 3% over the year and 1% over the half •Continued discipline:Focus on strength and return over growth •Operating divisions all performing well •Strategy delivering for customers and increasing franchise value •Review of products and services underway (‘Get it right/Put it right’) –$169 million in customer refunds/payments (earnings impact 1.5%) •Building a highly engaged workforce and innovative culture

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Headline results 5 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 2017 Full Year Results Presentation & Investor Discussion Pack ChangeChange FY17FY17 – FY162H17 – 1H17 Reported net profit after tax$7,990m7%5% Cash earnings$8,062m3%1% Cash EPS1 239.7c2%-Common equity Tier 1 capital ratio2 10.6%108bps59bps Return on equity (ROE)3 13.8%(22bps)(36bps) Net tangible assets per share$14.665%3% Margin (excl. Treasury & Markets)4 2.03%(3bps)6bps Expense to income ratio4 42.2%18bps82bps Impairment charge to average loans13bps(4bps)(4bps) Full year dividends5 (fully franked)188c--

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Portfolio of businesses delivering 6 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack DivisionComments 2H17 – 1H17 BT Financial • Income down from infrequent items Institutional Bank18(14)• Expense growth limited to 1% New Zealand • Expenses down 2% Cash earnings (% change) FY17-FY162H17-1H17 • Core earnings up 5%; net interest income up 7% Consumer Bank45• Credit cards and customer refunds a drag on non-interest income • Core earnings up 5%; net interest income up 4% Business Bank68• Increased fee income; expense to income ratio 35% • Impairments down 21% • Insurance income higher; claims mostly lower Group(11)(6)• FUA up 1% on prior half, 6% over the year Westpac• Net interest income up 3%; trading income lower • Core earnings up 10%; net interest income up 7% (NZ$)910• Lower loan growth; improved margin

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Our strategy for creating value is delivering 7 • • • Material increase in capital; CET1 capital ratio up 108 basis points Asset quality improved; impaired assets at 22bps of gross loans Prioritised strength and return above growth Strong Balance sheet • • • • Customer numbers up 3.4%; added 1 million new customers since 2015 NPS and customer satisfaction higher1; complaints lower Household deposits grew above system2; SME up 6%; FUA up 5% $4bn net flows on Panorama Grow customer numbers and relationship depth • • • • Cost to average interest earning assets down to 1.21% Delivered Panorama, Big Data, contact centre system, CSH3 Phase 1 Digitisation driving 59 fewer branches, net ~500 reduction in FTE Expanded digital partnerships with Uno, zipMoney, Assembly Drive efficiency via digital • • • • Staff engagement 79%, above global high performing benchmark More than 10,000 people working in an agile environment 50% women in leadership1 World’s most sustainable bank4 4 years in a row Highly engaged, innovative culture 1 Refer to slide 132 for metric definition. 2 APRA banking statistics. 3 CSH is Customer Service Hub. 4 Dow Jones Sustainability Index 2017. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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10 year balance sheet build largely complete 8 121 109 50 2 0.62 1 Minimums applied from Jan 2015 – LCR and Jan 2018 – NSFR. The LCR prior to Sep 15 is an estimate. The NSFR for Sep 16 and Sep 17 is an estimate. 2 Includes one peer with a balance date of June. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Impaired assets to gross loans (%) WestpacPeer average Sep-14Sep-15Sep-16Sep-17 0.40 0.49 0.42 0.38 0.30 0.32 0.22 CET1 Capital ($bn and %) 55 CET1 capital ($bn) CET1 capital ratio (%)10.6 10. 5 45 9.540 9.0 35 8.5 30 25 7.5 20 6.515 Sep-12Sep-13Sep-14Sep-15Sep-16Sep-17 9.59.5 43 9.1 39 8.2 34 30 28 25 Liquidity ratios1 (%) LCRNSFR 134124 mum Sep-14Sep-15Sep-16Sep-17 105 103 1 00% r egulatory mini

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94 cent Dividend 9 Payout ratio (cash earnings basis) 72 72 71 65 64 1 2H17 assumes DRP participation rate of 10%. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Dividend payout ratio (%) Effective payout ratio (after DRP shares issued) 76777474777480807979 7677741 DRP shares4951 purchased on market 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 Dividends per ordinary share (cents) Special dividend 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 10 10 94 94 94 94 94 93 92 90 88 86 Dividend considerations • Sustainability of the payout ratio over the medium term • Strong CET1 capital ratio • Surplus franking credits • Bank Levy equivalent to 2 cents per share

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Good momentum on service 10 online, spending and fee alerts New Corporate online portal Consumer • customer Australia in 2H17 (vs. 19 in 2016) Mobile banking customers directly connect to call Business • customer 19% Australian 18% Australian 21% New Zealand • Westpac Lite (low rate card), Westpac Life 1 Australian service metrics, unless indicated. Refer slide 132 for customer metric definitions. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Better servicesService metrics1 • Materially improved mobile useability • Credit cards: New payment plans, decrease limits#1#2 Consumer NPSsatisfaction Improved availability • System stability: no Severity 1 incidents in#1#1 Business centre with no additional verificationNPSsatisfaction New products (savings account), Bump savings account • Lite pay: Low cost international funds transfercomplimentscomplaintscomplaints (4 currencies/22 countries)

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Disciplined management 11 System mortgages2 46% 1.20% 1 Gross loans. 2 RBA Financial aggregates. 3 AIEA is average interest earning assets. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Productivity ratios (%) 1.40%Expenses / AIEA3 (LHS)50% 1.35%48% 1.30% 1.25% 44% 1.15%42% 1.10%40% FY11 FY12 FY13 FY14 FY15 FY16 FY17 Expense to income ratio (RHS) Net interest margin (NIM) (%) NIMNIM excl. Treasury & Markets 2.142.11 2.072.10 2.072.042.06 2.00 1H162H161H172H17 Australian mortgage growth1 (annual %) Westpac investor (APRA definition) Westpac total mortgages Sep-16Mar-17Sep-17 7.6 6.4 6.5 6.6 5.9 5.7 6.0 4.5 4.1 Australian mortgages interest only flows (% of total) 50 2Q173Q174Q17 43 26

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Outlook 12 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack •Global growth improved in 2017, further improvement likely in 2018 •Australian growth likely to remain sound but slowing through 2018 -Supported by growth in resources, services and infrastructure -Some moderation from soft income growth and slowing construction •House price growth expected to slow however mortgage serviceability remains strong with significant household equity •Westpac well positioned for the environment with good momentum on strategy

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200 years proudly supporting Australia PETER KING CHIEF FINANCIAL OFFICER Financial results based on cash earning unless otherwise stated. Refer page 33 for definition. Results principally cover the FY17, FY16 and 2H17 and 1H17 periods. Comparison of 2H17 versus 1H17 (unless otherwise stated) Westpac Banking Corporation ABN 33 007 457 141

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Results at a glance 14 133 4,045 (103) (339) 4,017 637 1 CVA is credit valuation adjustment. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 1H17 Markets & Treasury Customer refunds/payments Bank Levy All other income Expenses Impairment charges Tax & non-controlling interests 2H17 Cash earnings movements ($m)Infrequent/volatile items ($m) Revenue up $34m (36) (169) (95) Up 1% Cash earnings impact2H161H172H17 Asset sales(4)40 Performance fees/ manager revaluation220(3) Group CVA131520 Provision for customer refunds/payments(after tax)00(118) Total impact2119(101) Bank Levy from 1 July 2017 (after tax)(66)

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Margins resilient 15 2.10 2.07 1 Tractor is the 3 year moving average hedge rate for hedges on capital and low rate deposits. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Term deposit costs over benchmark (portfolio) 1.5% 1.0% 0.5% 0.0% Lower returns on capital and low rate deposits 9%3 year swap rate (spot)Tractor¹ 7% 5% 3% 1% Net interest margin movement (% and bps) 2.117bps0bp2bps(2bps)0bp(1bp)(3bps) 0.04 2H161H17LoansCustomerTermBank LevyCapital &LiquidityTreasury &2H17 depositswholesaleotherMarkets funding 0.07 0.07 Treasury & Markets impact on NIM NIM excl. Treasury & Markets 2.06 2.04 2.00

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Non-interest income 16 30 (56) Trading Other Debbie claims 2H16 1H17 2H17 1 Fees and commissions in 2H16 and 1H17 restated to reflect the accounting change to the Westpac New Zealand credit card rewards scheme. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 1H17 Insurance income Hastings Performance fees Customer refunds/payments Funds Managment income Other 2H17 Non-interest income ($m)Wealth/insurance non-interest income ($m) Fees and CommissionsWealth/Insurance Down 4%75 Down 9%2(13) 924 2,905433,068 11 25 713 2,784 514 -29% 4% -7% 504 27 970 886 924 1,396 1,426 1,329 886Cyclone $37m in 1H17 Up 4%

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Markets & Treasury1 – soft 2H17 17 482 473 462 465 447 1. Includes net interest income and non-interest income but excludes DVA. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Markets non-customer and Treasury income ($m)Markets customer income ($m) Markets non-customer Treasury504 1H152H151H162H161H172H171H152H151H162H161H172H17 436 401 247 203 362 142 339 266 131 89 147 257 259 250 231 72 131 119

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Expenses well managed 18 1 1H17 restated to reflect the accounting change to the Westpac New Zealand credit card rewards scheme. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 1 1H17 Ongoing expenses Productivity Regulatory/ compliance Investment 2H17 Consistency in productivity (annual savings $m) 2621,208 263 239 219 225 FY13FY14FY15FY16FY17Cumulative Movement in expenses ($m) 143(144)544,604 50 4,501 Up 2% Divisional expense growth 2H17 – 1H17 $m% Consumer Bank795 Business Bank172 BTFG203 WIB91 New Zealand (in NZ$)(11)(2) Group Businesses(3)(1)

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Investment spend 19 676 1H16 2H16 1H17 2H17 Peer 1 Peer 2 Peer 3 WBC 1 Data based on FY17 results, excludes write-offs. Amortisation expense is based on amortisation expense excluding any impairment and is based on FY17. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Total investment spend (expensed and capitalised) ($m)Capitalised software balance and amortisation1 ($bn) Capitalised software Annual software amortisation 7002.71 % of 2H17 spend 11% 27% 62% Growth & productivity Regulatory change Other technology 527 580 1.861.93 1.92 0.38 0.62 0.39 0.57

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Australian mortgage trends 20 Customer initiated 2.0 129 50 52 1 I/O is interest only mortgage lending, restated to include RAMS. 2 Consumer only. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Australian mortgages 90+ day delinquencies (%)Properties in Possession (#)2 3.0NSW/ACTVIC/TASQLD200NSW/ACTVIC/TASQLD 437 150146 100 1.065 45 0.00 Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17Sep-17Sep-14 Mar-15Sep-15Mar-16Sep-16 Mar-17Sep-17 WASA/NT Total: WASA/NTALL Introduced new hardship treatment Mortgage portfolio ($bn)Switching from I/O to P&I1 ($m) 2H161H172H17 2H17 $18.6bn Reached end of I/O period 1Q172Q173Q174Q17 New lending40.237.040.3 Run-off26.827.327.0 Net flows131013 Fixed (% of book)171821 Interest only (% of book)515046 7,913 4,261 2,368 2,604 3,447 3,004 2,554 2,592

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Australian mortgage deep dive 21 1 Portfolio comprised of residential mortgages, excluding RAMS, and business mortgages originated via a separate platform such as construction loans and loans to SMSFs. 2 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. 3 Source, Westpac Economics, CoreLogic. All dwellings Australia - average 8 major capital cities. Prices to Sept 17. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Australian mortgage lending1 by origination date, dynamic LVR2 (%) 2015+2011-14<2011 rate floor (%)7.256.806.80 price changes30 – 23%40% – 23%At least 40% 78 69 46 43 24 16 11 7 6 >8060-80<=60>8060-80<=60>8060<=80<=60 Dynamic LVR bands (%) % of portfolio413326 Westpac interest Average house

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Asset quality remains sound 22 90+ day past due and not impaired 2.0 1.05 1 TCE is total committed exposure. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Mar-17 Sep-17 Agriculture, forestry & fishing Wholesale & retail trade Property Transport & storage Manufacturing Services Property services & business services Construction Accommodation, cafes & restaurants Mining Other Finance & insurance Utilities Stressed assets as a % of TCE1Corporate/business stressed exposure by sector ($bn) Watchlist & substandard2.5 3.20Impaired 1.5 1.0 0.5 0.0 2.07 2.48 1.45 2.17 1.24 1.60 0.85 1.241.201.14 0.71 0.99 0.65 0.46 0.59 0.41 0.56 0.54 0.35 0.31 0.67 0.62 0.58 0.26 0.33 0.35 0.34 0.25 0.44 0.27 0.22 0.20 0.20 0.15 Sep-16Sep-17

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Impairment charge components ($m) 23 Write-backs Write-offs New IAPs in Collective 418 (218)(210) (228) (228) Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H16 1H17 2H17 1H15 2H15 1H16 2H16 1H17 2H17 Individually assessed provisionsCollectively assessed provisionsTotal Other movement & recoveriesdirectprovisions 667 471463484 443457 (64) (174)(173)(183) 525 493 412 360 293 273 364 330 341 256 246 Interest carrying adjustment ($m) (48) (114)(110) (86) 989297969593

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Considerations for FY18 24 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack •Remaining disciplined on growth/return •Expect system lending growth to moderate •Exit margin (Sept 17 month) higher than 2H17.FY18 margin will be impacted by more mortgage switching from interest only to principal & interest •Headwinds from changes in ATM and transaction fees (approximately $50m) •Targeting similar productivity savings and keeping costs in 2-3% range •Asset quality remains in good shape

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200 years proudly supporting Australia Investor Discussion Pack Financial results based on cash earnings unless otherwise stated. Refer page 33 for definition. Results principally cover the FY17, FY16 and 2H17 and 1H17 periods. Comparison of 2H17 versus 1H17 (unless otherwise stated) Westpac Banking Corporation ABN 33 007 457 141

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200 years proudly supporting Australia Strategy

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WBC listed on ASX & NZX Westpac Group at a glance: Australia’s First Bank Strategy 27 New Zealand 1 30 September 2017. Source: S&P Capital IQ, based in US$. 2 Credit Suisse analysis of expense to income ratio of world’s largest banks October 2017. 3 S&P Global Ratings, Moody’s Investors Service and Fitch Ratings respectively. S&P Global Ratings has Westpac on a negative outlook, Moody’s Investor Services and Fitch Ratings have 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, September 2017. 6 RBA Financial Aggregates, September 2017. 7 RBNZ, September 2017. 8 Plan for Life, June 2017, All Master Funds Admin. 9 Cash earnings basis. 10 Based on share price at 29 September 2017 of $31.92. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Key statistics at 30 September 2017 Customers13.8m Australian household deposit market share523% Australian mortgage market share623% Australian business market share619% New Zealand deposit market share719% New Zealand consumer lending market share719% Australian wealth platforms market share819% Key financial data for Full Year 2017 Reported net profit after tax$7,990m Cash earnings$8,062m Expense to income ratio942.2% Common equity Tier 1 capital ratio (APRA basis)10.6% Return on equity913.8% Total assets$852bn Market capitalisation10$108bn •In its 200th year, Australia’s first bank and first company, opened 1817Consumer •Australia’s 2nd largest bank and 24th largest bank in the world;Bank ranked by market capitalisation1 •Well positioned across key markets with a service-led strategy focused on customers and differentiated through service •Supporting consumers and businesses in Australia and New Zealand and customers with ties to these markets •Unique portfolio of brands providing a full range of financial services including consumer, business and institutional banking, wealth management and insurance •One of the most efficient banks globally2 •Consistent earnings profile over time •Capital top quartile globally, with sound asset quality •Credit ratings3 AA-/ Aa3 / AA-•Leader in sustainability4 Business Bank BT Financial Group Westpac Institutional Bank Pacific Westpac

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Progress on our strategic agenda Strategy 28 Our Vision: To be one of the world’s great service companies, helping our customers, communities and people to prosper and grow Strategic Priorities Performance Discipline Service Leadership Digital Transformation Targeted Growth Workforce Revolution Employee engagement in top of high performing norms, women in leadership1 50% by end of 2017 Cost growth 2-3% per annum and expense to income ratio below 40% Seeking to achieve 13-14% ROE (medium-term) Measures Stronger growth in wealth and SME +1m customers (2015-2017) Women in leadership 50% Employee engagement 79% FUM up 12% FUA up 5% SME lending up 6% 13.8m customers up 3% Grew by 1m 2015-2017 Expenses up 2% Expense to income ratio 42.2% Progress FY17 ROE 13.8% Down 22 bps 1 Refer slide 136 for metric definition. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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Areas of comparative advantage Strategy 29 capability 1 Gross impaired asset provisions to gross impaired loans. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Global efficiency leader • Expense to income ratio of 42.2% at lower end of global peers and less than the average of Australian major banks • Targeting expense to income ratio below 40% • Productivity focus has delivered $2.1bn of savings FY09 to FY17 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 10 times, including 2014, 2015, 2016 and 2017 • Ranked as one of the Global 100 most sustainable corporations in the world by Corporate Knights for 10 of the last 11 years • Released refreshed climate change policy Clear 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 Conservative balance sheet • Asset quality - Lowest impaired assets of peers (0.22% of gross loans); well provisioned at 46%1 - Sound quality; balance sheet weighted to mortgages - Sector leading through global financial crisis • Capital - CET1 ratio above APRA’s “unquestionably strong” benchmark internationally harmonised ratio in top quartile of international peers • Liquidity - LCR of 124%; NSFR of 109% • Only major Australian bank SEC registered and listed on NYSE

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Consistent performer over the long term Strategy 30 245.4 227.8 7.8 7.8 8.2 7.4 comparable 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 91. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Common equity Tier 1 capital ratio (%) 16.2 9.19.09.59.5 Sep-11Sep-12Sep-13Sep-14Sep-15Sep-16Sep-17 International 1 10.6 Cash earnings ($bn) 8.1 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 7.6 7.1 6.6 6.3 5.9 5.0 3.5 4.7 Cash earnings per share (cents) 248.2 235.5 239.7 209.3 214.8 189.4 198.3197.8 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 163.7

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A conservative, high quality bank Strategy 31 impaired assets1 (%) 46.3 45.5 amortisation period1,2 (years) 28.7 28.4 1 Based on FY17 results. 2 Peer 2 data based on FY17 cash earnings results, excludes write-offs. Amortisation expense is based on amortisation expense excluding any impairment or accelerated amortisation. Based on FY17 expense. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Capitalised software, average 6.2 Peer 1Peer 2Peer 3WBC 4.8 2.9 3.9 Effective tax rate1 (%) 30.4 29.4 Peer 1Peer 2Peer 3WBC Capitalised software balance and amortisation1,2 ($bn) 2.71 Peer 1Peer 2Peer 3WBC 1.861.93 1.92 0.38 0.62 0.39 0.57 Individually assessed provisions to 47.7 Peer 1Peer 2Peer 3WBC 36.1 Impaired assets to gross loans1 (%) 0.410.43 Peer 1Peer 2Peer 3WBC 0.30 0.22 Collectively assessed provisions to credit RWA1 (bps) 86 Peer 1Peer 2Peer 3WBC 79 76 73

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200 years proudly supporting Australia Overview

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Cash earnings and reported net profit reconciliation Results 33 earnings adjustments ($m) 15 - integration expenses ($bn) 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 132. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Reported net profit and cash earnings Reported profitCash earnings 8.08.0 8.1 7.6 7.6 7.87.8 7.4 7.1 6.8 FY13FY14FY15FY16FY17 % chg% chg FY17FY17-2H17-($m) FY16 1H17 Cash earnings8,0623%1% Cash EPS (cents)239.72%-Reported net profit7,9907%5% Reported net profit and cash FY16FY17 Reported net profit7,4457,990 Amortisation of intangible assets158137 Acquisition transaction and Fair value (gain)/loss on economic hedges20369 Ineffective hedges(9)16 Partial sale of BTIM-(171) Treasury shares1021 Cash earnings7,8228,062 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 around 15 years 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

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FY17 financial snapshot Results 34 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 Full Year Results Presentation & Investor Discussion Pack (CET1) capital ratio (APRA basis) (%) (Internationally comparable) (%) (bps)13(4bps)(4bps) ChangeChange FY17FY17 – FY16 2H17 – 1H17 Balance sheet Total assets ($bn)851.92%1% Common equity Tier 110.56108bps59bps CET1 capital ratio16.20177bps86bps CET1 capital ($bn)42.710%6% Risk weighted assets ($bn)404.2(1%)-Loans ($bn)684.93%3% Customer deposits ($bn)486.74%2% Net tangible assets per share ($)14.665%3% Funding and liquidity Customer deposit to loan ratio (%)71.156bps71bps Net stable funding ratio (%) (estimate)109n/an/a Liquidity coverage ratio (%)124(10ppts)(1ppt) Total liquid assets2 ($bn)138(4%)(1%) ChangeChange FY17FY17 – FY16 2H17 – 1H17 Earnings1 Earnings per share (cents)239.72%-Core earnings ($m)12,4511%(1%) Cash earnings ($m)8,0623%1% Return on equity (%)13.8(22bps)(36bps) Dividend (cents per share)188--Expense to income ratio (%)42.218bps82bps Net interest margin (%)2.09%(4bps)3bps Asset quality Impairment charges to average gross loans Impaired assets to gross loans (bps)22(10bps)(8bps) Impaired provisions to impaired assets (%)46.3(3ppts)(6ppts)

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Cash earnings up 3% over the year and 1% on prior half Performance discipline 35 margins down 4bps regulatory and compliance costs 15,704 2 4 income Lower individually assessed lower cards income, higher insurance claims and recoveries offset by higher markets income regulatory and compliance costs margins up 3bps 133 (36) (103) 4,045 4,017 payments, lower credit card and assessed provisions reduced general Insurance claims income income charges 1 AIEA is average interest-earning assets Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Cash earnings features of FY17 – FY16 ($m) AIEA1 up 4%,Additional investment and higher 7,822356(36)(174)271(177)8,062 Provision for customer refunds and payments, and margin compression on FUM/FUA partlyprovisions and higher write-backs Up 3% FY16Net interestNon-interestExpensesImpairmentTax & NCIFY17 incomeincomecharges Cash earnings features of 2H17 - 1H7 ($m) AIEA up 2%,Additional investment and higher 318(284) Provision for customer refunds and markets income, partially offset byLower individually Up 1% 1H17Net interestNon-interestExpensesImpairmentTax & NCI2H17 % chg % chg FY17 FY17-2H17 - ($m) FY16 1H17 Net interest Non-interest income5,852(1)(9) Expenses(9,105)22 Core earnings12,4511(1) Impairment charges(853)(24)(27) Tax and non-controlling(3,536)52 interests Cash earnings8,06231 Reported net7,99075 profit

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Dividends Performance discipline 36 7.7 1 Data using half year dividends and share price at 29 September 2017, or period end. 2 2H17 assumes DRP participation rate of 10%. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Westpac dividend yield1 (%) Ordinary yieldIncluding franking 9.08.89.18.4 6.86.3 6.2 4.7 6.4 5.4 5.9 1H152H151H162H161H172H17 Ordinary dividend payout ratio (%) Payout ratio (cash earnings basis)Effective payout ratio (after DRP) 78.9 71.0 2 Reflects decision to add a 1.5% discount to the DRP market price 1H132H131H142H141H152H151H162H161H172H17 Key dividend considerations for 2H17 • Sustainability of payout ratio over medium term. Based on current financial position/growth a payout ratio of 70-75% is considered sustainable • CET1 capital ratio well positioned for APRA’s “unquestionably strong” benchmark • Still awaiting final regulatory capital requirements from APRA • Modest RWA growth • Impact of the Bank Levy (2 cents per share in 2H17) • Surplus franking credits Dividends (cents per share) Special dividend 10 10 94 94 94 94 94 93 92 90 88 86 1H132H131H142H141H152H151H162H161H172H17

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Uplift in Consumer and Business divisions Performance discipline 37 6,260 6,191 82 4,017 NZ2 Other3 2H17 ($m) CB BB BTFG WIB Group Operating income 4,256 2,651 1,136 1,513 1,071 168 10,795 Bank Levy impact (pre-tax) (included above) (48) (27) (5) (15) - - (95) Expenses (1,708) (928) (598) (666) (442) (262) (4,604) Core earnings 2,548 1,723 538 847 629 (94) 6,191 Impairment (charges) / benefits (274) (162) (1) 8 37 32 (360) Tax & non-controlling interests (681) (470) (163) (251) (185) (36) (1,786) Cash earnings 1,593 1,091 374 604 481 (98) 4,045 Bank Levy impact (post-tax)4 (34) (19) (3) (11) - - (66) % of Group cash earnings 39 27 9 15 12 (2) 1 Refer to division definitions, slide 133. 2 In A$. 3 Other is Group Businesses (including Treasury). 4 May not add due to rounding. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 2H17 divisional1 cash earnings movements ($m) 83(23)(96)46(64)4,045 1H17CBBBBTFGWIBNZ 2Other 32H17 Up 1% 2H17 divisional1 core earnings movements ($m) 12277(29)(196)55(98) 1H17CBBBBTFGWIBNZ 2Other32H17 Down 1%

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Building long term franchise value Service leadership 38 10.62 10.44 10.26 10.09 9.94 9.90 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 9.0 8.5 7.9 1 September 2014 customer numbers not split between Consumer Bank and Business Bank. 2 Refer slide 136 for metric definition. 3 No peer data available for New Zealand. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack New Zealand customer numbers (#m) 1.281.321.341.351.351.361.35 Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17Sep-17 New Zealand wealth metrics2,3 (%) Total FUM/FUA (NZ$bn)Customers with a wealth product (%) 28.028.128.328.428.629.0 9.59.710.1 Mar-15Sep-15Mar-16Sep-16Mar-17Sep-17 Australian banking customer numbers (#m) Consumer BankBusiness Bank 10.84 1 1.71 1.73 1.65 8.61 1.69 1.45 1.48 8.91 9.11 8.49 8.61 8.75 Australian customers with a wealth product2 (%) Westpac brandSt.George brandsPeers 19.8 18.8 14.9 14.3 11.9 Sep-15Sep-16Sep-17

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Building long term franchise value – customer service Service leadership 39 Customer complaints (#) Consumer and New Zealand (%), Business (mean) 7% 79.1% 80% 1 Refer slide 136 for metric definition. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack New Zealand Business Consumer Customer satisfaction1 Australian retail (CB, BB and BT)WestpacSt.George brandsPeers 83.8% 82.0% 80.8% 80.1% 41%Sep-15Sep-16Sep-17 WestpacSt.George brandsPeers 2H151H162H161H172H177.6 7.3 7.3 7.1 New Zealand retail6.9 Sep-15Sep-16Sep-17 WestpacPeers 79% 75% 70% own 31%66% 1H152H151H162H161H172H17Sep-15Sep-16Sep-17 Down 27% D D own Down

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Actively responding to digital opportunities1 Digital transformation 40 Westpac is actively responding to digital threats and opportunities through three streams of work. These streams seek to encourage digital innovation inside, adjacent and outside the Group. In this way Westpac can both learn directly, and gain access to emerging fintech developments Direct investment/partnering solving business issues & customer problems Accelerating innovation Uno is a disruptor mortgage broker. Enabling consumers to search, compare and apply for a home loan online, from a choice of 20 lenders “The Hothouse” provides innovation services supported by Entrepreneurs-In-Residence to solve customer problems. Dedicated space at Kogarah and 275 Kent St, Sydney Surgical Partners helps medical practices improve efficiency by connecting practice management software to cloud based accounting The Hotbox program supports the entrepreneurs within Westpac in creating products and services that will form the leading edge of innovation at Westpac Offers point-of-sale credit and digital payment services to the retail, health, travel and education sectors. It also owns Pocketbook, a personal financial management app Sponsoring the innovation ecosystem through Stone & Chalk allows Westpac to partner with the fintech community and bring the best of the outside in LanternPay is a scalable, cloud based claims and payments platform for use in consumer directed care programs such as the NDIS, aged / home care and Government insurance schemes Active member of R3 creating opportunities through industry collaboration. Utilising distributed ledger-based systems to simplify and automate financial services QuintessenceLabs (Qlabs) creating opportunities with quantum technology that encrypts confidential data 1 Logos are of the respective companies Stone & Chalk, R3, Uno, Surgical Partners, zipMoney, LanternPay and Qlabs. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Reinventure is a $100m fintech venture capital fund Reinventure has directly invested in a range of fintech businesses to enable Westpac access to insights and assess adjacent business opportunities The model also helps Westpac review different ways of working to be more innovative and deliver faster 16 investments to date covering areas such as: • Blockchain • Digital currencies • Payments • Peer-to-peer lending • Big data • Data analytics • Social networks • B2B networks • Digital processes For further details on these areas see following slide

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Reinventure – Investing in new technology businesses1 Digital transformation 41 Westpac has committed $100m to Reinventure, an independently run venture capital fund. The operation allows Westpac to gain access to emerging fintech business models, adjacent business opportunities and entrepreneurial ways to execute at speed Using data to shed 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 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 global Big Data, business intelligence and enterprise data warehousing company A one-stop payments platform that helps marketplaces, merchants and their customers transact simply and securely online (previously PromisePay) A free, all-in-one HR and benefits platform that manages on-boarding and compliance and lets HR teams focus on value added tasks A platform to help home sellers find and compare real estate agents Connects ordering apps, payment devices, loyalty and reservations platforms to any point of sale Standardises mobile forms into a format you can easily read and fill at the tap of a button A business loan marketplace that matches SMEs to the best lender based on their characteristics and needs New Indebted is providing a new way for businesses to collect outstanding debts. The system helps businesses of all sizes by leveraging modern communications, automation and machine learning New Open Banking API platform that provides connectivity to over 100 financial sources across Australia and NZ A natural language AI system for data analysis targeting relatively simple business queries that comprise 70% of an analyst’s work in a large organisation An app to revolutionise the payment process for customers when dining out or grabbing a coffee on the go 1 Logos are of the respective companies. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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Significant momentum in Customer Service Hub Digital transformation 42 Re-engineering the home loan process: Digitising the end-to-end home loan origination experience by 2020 Customer access via any channel Banker dashboard Application tracker Single point for bankers to view customer information and loan status At any time customers have clarity as to the status of their application Applications available seamlessly across channels Remote digital upload of information Customers can upload documents digitally Settlement Digitised offer and acceptance Plain English terms & conditions and online acceptance Simplified application assessment / approval for customer and banker Digitises a number of manual processes Digital settlement. Integrated with land titles registry More home ownership needs met at origination Improved customer experience Increased banker productivity Lower cost of change Increased efficiency Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Phase 1 Strategy Leading to Capabilities to be delivered

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Customers continue to migrate to digital Digital transformation 43 287 279 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. 3 Prior periods have been restated to exclude certain non-financial transactions that had previously been included. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Branch transactions1,2,3 (#m) 29.528.1 22.521.7 % own 11% 1H152H151H162H161H172H17 25.624.4 D Do wn 4 Digital transactions 1,2 (#m) 304 241254262 Up 9% 1H152H151H162H161H172H17 U p 6% Digitally active customers1 (#m) 4.53 3.96 Up 5% Up 8% Mar-15Sep-15Mar-16Sep-16Mar-17Sep-17 4.33 4.18 4.05 3.84 Digital sales1 (#’000’s) 469 433425 Up 8% 1H152H151H162H161H172H17 347367 Up 10% 273

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Mobile is our dominant channel….. Digital transformation 44 72% of digitally active customers use mobile Strategy of building out mobile capabilities and improving useability is working Building out mobile specific capabilities for banking on the go Improve mobile app useability 2017 Innovation Excellence Award awarded to Quick Transfer Quick zone: Check balances and transfer funds between accounts on your mobile without having to log on, making it easier to use A new on-boarding experience presents our capabilities upfront and helps customers sign on and use them quickly 1 Introduced for SGB customers in June 2016 and Westpac customers in December 2016. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Quick balance checks (#’000’s) 97.8 34% 2H161H172H17 Quick transfer data (#’000’s)1 3,527 115% 2H161H172H17 1,639 204 Up 73.2 54.5 Up

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Increasing use of self-serve options is driving efficiency Digital transformation 45 7.2 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Accounts with e-statements (#m) Number of accounts% of accounts 43% 36% 28%29%6.0 Mar-16Sep-16Mar-17Sep-17 4.64.8 Interest & tax statements (#m) 2.5 32% 1H162H161H172H17 1.9 0.3 1.3 Up Up 92% Proof of balance - Westpac brand (%) DigitalBranch and contact centre 2H161H172H17 62 54 50 50 46 38 Westpac card activation (%) DigitalBranch and contact centre 2H141H152H151H162H161H172H17 70 69 63 58 53 50 49 51 50 47 42 37 30 31 Online overseas notifications (#’000’s) 284 Up 34% 1H162H161H172H17 212210 161 Up 35% Online password change/reset (#’000’s) 1,348 944 Up 36% 1H162H161H172H17 1,179 988 Up 14%

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New digital services launched over the last 6 months Digital transformation 46 Categorisation of spend (St.George brands only) Cardless cash at any Westpac Group ATM Activate card with NFC1 (Westpac brands only) Connect2 across all brands •Transaction, savings and credit card transactions are grouped into categories and sub-categories •Enables customers to obtain insight into their spending patterns • Cardless cash withdrawals are now available from over 3,000 Westpac Group ATMs (Westpac, St.George, BankSA and Bank of Melbourne) • Customers with an eligible Android device can activate their card using the NFC1 chip in their phone rather than scanning their card with their phone's camera or entering their card details manually • Customers can connect to the contact centre directly from mobile app with no need to verify with security questions Saves ~60-90 seconds per call3 Offer to self-serve taken up by ~46% of Connect logins • • 1 NFC is near field communication. 2 Connect allows for customers to connect directly with the contact centre once they are in a mobile app without the need to reverify. 3 Savings for Westpac brand. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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Helping customers manage their finances Digital transformation 47 Keeping on top of credit card repayments Control over spending Choice and flexibility in credit limits Help managing my debt •Credit card reminder alerts allows customers to subscribe to a notification via SMS or email 5 days before their monthly credit card repayment is due • Customers can add extra discipline to their spending habits by restricting all debit transactions on their credit card account including direct debits and scheduled payments • Customers can request a decrease to their credit card limit in an instant through desktop, mobile or tablet1 • SmartPlan is a new structured repayment plan to help customers manage their credit card balance The system can break down payments into a number of regular monthly instalments – all within their existing credit limit • 1 SGB customers can access via desktop, mobile or tablet. Westpac customers can only access via desktop at this point. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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Workforce revolution delivering Workforce revolution 48 79%, with improvements in ’ Risk Culture’ and reflecting the focus and efforts in preventing injury focused on values, conduct, ethics and customer-(rolling 12 months) (%) 1 Spot number as at 30 September for each period. 2 Global high performing norm reflects the benchmark score for high performance organisations in the IBM engagement database. 3 Lost time injuries per hours worked. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack High performer retention 9696959595 Sep-13Sep-14Sep-15Sep-16Sep-17 Lost time injury frequency rate (rolling 12 months) (ratio) 3 1.5 1.1 0.80.8 0.6 Sep-13Sep-14Sep-15Sep-16Sep-17 Major workforce developments •Achieved 50% women in leadership •Employee engagement up 10 percentage points to ‘Senior Leadership’ dimensions •Health, safety and wellbeing metrics improved across the Group. Lost time injury frequency rate 0.6 •Introduced new performance framework ‘Motivate’, centred decision making •Continued to build a service culture through specialist frameworks including: ‘Our Service Promise’, ‘Leadership Star’ and from updating the Group’s Code of Conduct •Remuneration structures for tellers and personal bankers updated to focus on service •Around 10,000 employees now in flexible workplaces Women in leadership positions1 (%) 50 Sep-13Sep-14Sep-15Sep-16Sep-17 48 46 44 42 Staff engagement2(%) WestpacGlobal high performing norm 77 Sep-16Sep-17 79 69

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Continued sustainability leadership Sustainable futures 49 Strategic priorities and 2H17 progress highlights Embracing societal change 1 • Achieved goal of 50% women in leadership roles (up from 48% a year ago) Exceeded 2017 target to recruit 500 Indigenous employees Help improve the way people work and live as our society changes • • Released revised Climate Change Position Statement Total committed exposure to the CleanTech and environmental services sector was $7.0bn at 30 September 2017, exceeding target of $6.0bn1 Issued the first Australian originated offshore foreign currency Climate Bond Environmental solutions 2 • Help find solutions to environmental challenges • • Introduced new products to meet the changing needs of customers, including a low interest rate credit card and new savings accounts Lending to the social and affordable housing sector increased to $1.32bn, up from $1.05bn a year ago Better financial futures 3 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. 3 From the Westpac Bicentennial Foundation. 4 From the Westpac Foundation. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Leading track record • Most sustainable bank globally in the 2017 Dow Jones Sustainability Index for the fourth 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 • Achieved ‘Leadership’ score level in the CDP2 2017 climate change questionnaire Significant achievements • Met or exceeded 80% of 2013-17 Sustainability Strategy measures • Awarded more than 200 scholarships3, 200 community grants4, and recognised 200 Businesses of Tomorrow in our 200th year • Continue to fund social enterprises developing skill pathways and employment opportunities for vulnerable Australians • Industry-first introduction of sustainability scoring data in BT Invest and BT Panorama

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Continue to strengthen sustainability governance Sustainable futures 50 governance frameworks responding to UK Modern Slavery Act Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack • Updated the Group’s sustainabilityClimate changeHuman rightsReconciliation material sustainability topics (issues and opportunities) which included updates to: - Climate Change Position Statement and 2020 Action Plan - Human Rights Position Statement and 2020 Action Plan - Reconciliation Action Plan 2018 - 2020 - Accessibility Action Plan 2018 - 2020 • Released our first Slavery and Human Trafficking Statement in response to theSupply chainModern Slavery ActAccessibility • Released our Responsible Sourcing Code of Conduct and established our global Responsible Sourcing Steering Committee to oversee its application

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Supporting the transition to a sustainable economy Sustainable futures 51 services exposure (%)1,2 32 57 Charts may not add to 100 due to rounding services exposure ($bn) 6.7 1 Exposures in WIB only. 2 At 30 September 2017, Westpac had no exposure to water or land remediation projects that met the criteria for the Group’s CleanTech exposures. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack CleanTech and environmental 7.0 6.16.36.2 Sep-15Mar-16Sep-16Mar-17Sep-17 Emissions intensity (tCO2-e/MWh) – Australia only Westpac electricty generation portfolio National Electricity Market (NEM) Benchmark 0.870.910.900.86 0.38 0.41 0.38 0.36 2014201520162017 Mining portfolio (TCE) by sector (%) TCE at 30 September 2017 $9.7bn 501H162H161H172H17 40 30 20 10 0 Oil andOther Iron ore MiningCoalOther gas metalservices ore CleanTech and environmental TCE at 30 September 2017 $7.0bn 3 4Green buildings Renewable energy Forestry Waste Other Electricity generation exposure (%)1 2 1 Renewable energy 14Gas Black coal 17Brown coal 66Liquid fuel Mining portfolio to total lending TCE (%) 1 Total Group lending (ex. Mining) Mining 99

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Actively supporting Australia Sustainable futures 52 new lending2 $599bn Backing economic their home or grow their business Support the efficient flow of funds in the economy and keep deposits safe • Aust. loans Market of many either directly or via their super funds $108bn The line • 2nd largest Australian taxpayer4 paying n income tax the year The • Employ over 39,000 people in payments • Westpac 200 Businesses of Tomorrow >1% of payments including fees for the committed liquidity facility, APRA fees and stamp duties which are not included in the above. The 200 Community Grants6 • profit to withholding tax and PAYG. These are excluded from this analysis ontributions Westpac Rescue Helicopter Service 1 All figures for the full year to 30 September 2017 unless otherwise stated. 2 New mortgage and new business lending in Australian retail operations which includes CB, BB and BTFG. 3 Dividends paid represents the 1H17 plus 2H17 dividend. 4 Source: ATO’s Corporate Tax Transparency Report for the 2014 - 15 Income Year, published December 2016. 5 From the Westpac Bicentennial Foundation. 6 From the Westpac Foundation. 7 Westpac is liable for the Major Bank Levy, which began to apply from 1 July 2017, and the amount payable for the last quarter of FY17 was $95m. This amount will be paid on 21 March 2018. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Supporting communities1 •Provide loans to help Australians own$101bn 3,3543,479 activitytotal (not assessable)(10)50 $6.3bn Wealth•Support working and retired Australiansin dividends3; Australians(630k shareholders)capitalisation >$3.5bn bottommore than $3bn in income tax in 2017expense for $4.7bn workforceemployees Westpac also makes a number of other government and regulatory •First 200 Westpac Scholars5pre-tax nation•40+ years continuous support of thecommunitySimilarly, Westpac also collects tax on behalf of others, such as Income tax expense on a cash earnings basis ($m)FY16FY17 Notional income tax based on the Australian company tax rate of 30% Net amounts not deductible/ Total income tax expense in the income statement3,3443,529 Effective tax rate (%)29.930.4 Other major tax/government payments ($m)FY16FY17 Bank Levy7n/a95 Net GST, Payroll tax, FBT447469

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200 years proudly supporting Australia Earnings Drivers

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Net operating income flat over the half Revenue 54 156 30 (84) 94 (9)(187) 201 10 36 (101) 23 (46) 10,6002 NZ 2 2H16 CB BB BTFG WIB NZ Group 1H17 CB BB BTFGWIB NZ Group 2H17 1 AIEA is average interest-earning assets. 2 New Zealand contribution represented in A$. 3 Group Businesses. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Net operating income by division ($m) 2H17 Divisional contribution (%) CB 195(29)1610,76110,795BB 39BTFG WIB 11 25Group 3 (1%) 2323 Flat (up $34m) Up 2% Net operating income movement ($m) 162(97)38(209) 168(170)1991810,761(16)10,795 2H16AIEA1MarginsFees &WealthTradingOther1H17AIEA1MarginsFees &WealthTradingOther2H17 growthcommissionsgrowthcommissions 10,600 Non-interest up 6% Net interest up 4% Non-interest down 9% Net interest flat

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Composition of lending Revenue 55 10.4 13.1 62.3 427.2 413.9 404.2 1 Gross loans. 2 Run-off includes repayment. 3 Other includes business lending in Private Wealth. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Sep-16 Mar-17 New lending Net2 run-off Sep-17 Sep-16 Mar-17 BB new lending 2 BB run-off WIB net lending Sep-16 Other3 Mar-17 Sep-17 Consumer Bank Sep-16 Business Bank Mar-17 WIB New Zealand Consumer Other (inc. BT) Business Sep-17 Sep-17 Australian mortgage lending1 ($bn) 40.3(27.0) Up 3% New Zealand net loans (NZ$bn) 75.176.50.80.077.3 Up 1% Australian business lending1 ($bn) 11.5(9.8) 150.2 147.71.00.1150.5 Up 2% Composition of lending (% of total) 2.2 Aust. mortgages 3.3Aust. business Aust. institutional Aust. other consumer New Zealand lending Other overseas lending Net loans ($bn) 661.9666.910.33.22.51.10.9684.9 New Zealand lending up NZ$0.8bn Up 3%

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Customer deposits Revenue 56 479 467 487 Up 3% 87 Down 1% Up 1% 35.1 12 1 Included in transaction accounts. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack New Zealand customer deposits (NZ$bn) and % of to Term depositsSavingsOnlineTransaction 585758 tal 51% 12 13 22% 21% 14 13 12 4 29 30 28 Sep-16Mar-17Sep-17 Mortgage offset1 balances ($bn) 38.1 30.5 23.5 18.4 Sep-13Sep-14Sep-15Sep-16Sep-17 Customer deposit mix ($bn) and % of total Term depositsSavingsOnlineTransaction 136 Up 2% 142 29% 39% 20%12% 130 96 84 92 64 60 58 189 191 191 Sep-16Mar-17Sep-17 Customer deposit composition ($bn) CBBBWIBBTFG, NZ & Other 467479487 87 91 94 89 88 115 111 112 192 186 181 Sep-16Mar-17Sep-17 LCR customer deposit run-off13.5%13.7%13.4%

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Net interest margin up 3bps; rise in asset spreads partly offset by Bank Levy and lower Treasury income Revenue 57 issuance lower cost by the impact of lower 1H16 2H16 1H17 2H17 1.96 2.08 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 2H16 1H17 Loans Customer deposits Term wholesale funding Bank Levy Capital & other Liquidity Treasury & Markets 2H17 Net interest margin by division (%) 2.72 2.72 2.70 2.74 2.34 2.28 CBBBWIBNZ 2.372.35 2.18 2.13 1.72 1.76 1.77 1.85 Net interest margin (NIM) movement (%) NIM excl. Treasury & MarketsTreasury & Markets impact on NIM Repricing ofLower Treasury contribution from certain mortgagesinterest rate risk management 2bps(2bps) 7bps0bp0bp(1bp)(3bps) 2.112.10 0.07 2.07 0.04 0.07 Term deposit repricing offsetNew term senior interest rates on hedging ofthan maturing deals transaction deposits 2.06 2.04 2.00 Net interest margin (NIM) (%) NIMNIM excl. Treasury & Markets 2.182.10 2.032.06 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17

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Non-interest income down 9% from lower markets income and provision for customer refunds and payments Revenue 58 38 2,905 1,426 1,392 1,396 1,329 886 539 1 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Wealth and insurance income ($m) Lower insurance claims, including general insurance claims from Cyclone Debbie, partly offset by provision for customer refunds and payments 1,090 941970924 2H151H162H161H172H17 Trading income ($m) Risk management income lower (fixed income, FX and commodities) 713 610 504 514 2H151H162H161H172H17 Non-interest income contributors ($m) 3,068(97)(209) 2H161H17Fees &Wealth &TradingOther2H17 Comm.insuranceincome (16)2,784 Down 9% Fees and commissions income1 ($m) Provision for customer refunds and payments and lower card income, partly offset by higher business line fees 1,482 2H151H162H161H172H17

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Wealth, insurance, markets and Treasury income Revenue 59 665 performance 622 margin compression and revaluation of 86 51 (mostly BT) 482 447 436 DVA Treasury Total related 1 DVA is derivative valuation adjustments. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 2H16 2H16 1H17 1H17 2H17 2H17 2H16 2H16 1H17 1H17 2H17 2H17 2H16 2H16 1H17 1H17 2H17 2H17 2H16 2H16 1H17 1H17 2H17 2H17 2H16 2H16 1H17 1H17 2H17 2H17 2H16 2H16 1H17 1H17 2H17 2H17 2H16 2H16 1H17 1H17 2H17 2H17 2H16 2H16 1H17 1H17 2H17 2H17 Markets income by activity ($m) 748 Lower fixed income and FX risk management income 101927 CustomerMarket risk relatedDVA1Total Lower fixed income and FX sales 546 535 247 89 72 Total Group market risk-related income ($m) 523 101927 Market risk1 349 230 250 257247 13189 72 Wealth management income ($m) Fund flows partly offset byCustomer refundsHastings 585 382 365 371 12882 FUM/FUAOtherNZ & WIBTotal investment infees boutique funds 201 206 Insurance income ($m) 339 Cyclone DebbieHigher premiums305 and lower claims 97828680 LifeGeneralLMI & NZTotal 126 136 143116 264 42

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Expenses increased up 2% from investments and regulatory and compliance costs Expenses 60 4,501 16 35,096 59.9 50.0 50.5 42.3 1 Comparatives have been restated for the accounting change to the Westpac New Zealand credit card rewards. 2 Company data, Credit Suisse. Expense to income ratio average for Peer 1, 2 and 3 based on their FY17 results, all others based on FY16. European average excludes Deutsche Bank. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack European average US regional average Canadian average Korean average Hong Kong average Peer 1 Singapore average Peer 2 Peer 3 WBC Divisional expense to income ratio (%) 2H161H172H17 52.6 45.044.044.4 40.3 40.2 40.1 38.6 41.4 35.5 35.6 35.0 CBBBBTFGWIBNZ1 Global peer comparison of expense to income ratios2 (%) 62.962.360.5Full Year ratios 51.046.145.9 42.742.742.2 Expense movements ($m) 143(144)54504,604 Up 2% 1H17 1OngoingProductivityInvestment Regulatory/2H17 expensescompliance FTE run versus change (#) 35,580(296)635,290(210) 2H16RunChange1H17RunChange2H17 Run: ongoing operations Change: project based

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Investment spend focused on growth and productivity Expenses 61 700 580 676 spend 37% 41% 36% expensed 2.8yrs 2.9yrs 2.9yrs period and amortisation2 ($bn) 1 Investment spend capitalised also includes technology hardware equipment. 2 Data based on FY17 results, excludes write-offs. Amortisation expense is based on amortisation expense excluding any impairment expense. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Average amortisation period2 (years) 6.2 4.8 2.9 3.9 Peer 1Peer 2Peer 3WBC Capitalised software balance 2.71 1.861.93 1.92 0.38 0.62 0.39 0.57 Peer 1Peer 2Peer 3WBC Total investment spend mix (% of total) Growth & productivityRegulatory change Other technology 14 11 11 27 24 23 65 63 62 2H161H172H17 Investment spend ($m) 2H161H172H17 Expensed261236243 Capitalised1439344433 Total investment Investment spend Software amortisation294303312 Average amortisation Investment spend capitalised1 ($m) 2H161H172H17 Capitalised software Opening balance1,6511,7811,814 Additions428344424 Amortisation(294)(303)(312) Write-offs, impairments and(4)(8)(10) foreign exchange translation Closing balance1,7811,8141,916 Other deferred expenses Deferred acquisition costs1019186 Other deferred expenses455628

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Productivity track record: $2.1bn in savings since 2009 Expenses 62 • Head office consolidation and migration to flexible 59 branches same day with electronic delivery and acceptance 1 Total branches in Australia, New Zealand and Westpac Pacific. 2 Represents % of Australian branches with Business Connect/Connect Now. 3 Cumulative numbers. 4 Percentage change is based on prior corresponding period. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Metrics Sep-15Sep-16Sep-17 Number of branches11,4291,3101,251 Australian SmartATMs as a % of total ATM network34%41%44% Business Connect/Connect Now video conferencing286%90%94% Consumer Bank and Business Bank active digital customers3 (# m)4.04.24.5 Retail and business banking and wealth complaint reduction428%31%18% Number of IT applications closed3119151186 Efficiency initiatives •Business model changes across divisions workspaces •Migration to digital, supporting the net reduction of •Improved e-Statement functionality in Consumer Bank has supported an increase in the number of accounts registered for e-Statements to 7.2 million •67% of customers in New Zealand registered for e-Statements •Fast tracked application to funds from 10 days to of St.George mortgage top–up documents •Improved time to cash for unsecured personal loans from 8.5 days, with 45% of customers experiencing same-day settlement •Roll out of the new digital cheque imaging technology, across all branches in Australia, scanning over 45,000 items daily. Digital cheque imaging reduces courier costs and results in faster and more efficient processing •Introduced two-way SMS capability that enables St.George customers to request an instant status update for their credit card or personal loan application and confirm any missing information required to assess their application $2.1bn saved from efficiency programs since FY09 ($m) 2622,090 FY09 - FY17 annual2631,828 productivity savings239 219 225 238 289 212 143 FY09FY10FY11FY12FY13FY14FY15FY16FY09-FY16FY17Cumulative cumulative

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Lower 2H17 impairment charge reflects improving asset quality Asset Quality 63 525 484 471 443 418 364 256 246 (48) (86) (110) 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 100400 80 300 60 200 40 20100 00 200720082009201020112012201320141H152H151H162H161H172H17 Impairment charge to average loans annualised (lhs) Stressed exposures to TCE (rhs) 105bps 11bps Impairment charges ($m) Individually assessedCollectively assessed New IAPsWrite-backs & recoveriesWrite-offs directOther movements in CAPTotal Lower due to absence ofHigher due to unsecuredReflects improved large single namesconsumer hardship write-offsasset quality667 457493 360 (174) (173) (228) (228)(183) 1H16 2H16 1H17 2H171H16 2H16 1H17 2H171H16 2H16 1H17 2H171H16 2H16 1H17 2H171H16 2H16 1H17 2H17

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200 years proudly supporting Australia Asset Quality

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High quality portfolio with bias to secured consumer lending Asset quality 65 1 Derivative financial instruments (3%) 1 2 17 68 81 Institutional Other consumer 10 11 4 1 Risk grade equivalent. 2 Exposure by booking office. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Exposure by risk grade as at 30 September 2017 ($m) Standard and Poor’s Risk Grade1AustraliaNZ / PacificAsiaAmericasEuropeGroup% of Total AAA to AA-95,1089,3418117,837575113,67211% A+ to A-31,9185,4196,1984,8642,81551,2145% BBB+ to BBB-59,18910,3678,0252,1331,58281,2968% BB+ to BB73,36810,7871,63832152686,6409% BB-to B+59,4169,3979678568,9927% <B+5,0732,79828-187,9171% Secured consumer493,32251,949447--545,71854% Unsecured consumer45,1755,258---50,4335% Total committed exposures (TCE)862,569105,31617,24315,2335,5211,005,882 Exposure by region2 (%)86%10%2%2%<1%100% Asset composition as at 30 September 2017 (%) Loans (81%)Total assets ($852bn)Total loans ($685bn) Trading securities, financial assets at fair value and available-for-sale securities (10%) 1 Cash and balances with central banks (2%)1Housing Life insurance assets (1%)Business Goodwill (1%) Receivables due from other financial institutions (1%) Other assets (1%)

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A well diversified loan portfolio Asset quality 66 Exposure at default1 by sector ($bn) Finance & insurance 2 1.9 represents less than 0.2% of TCE Property 3 Government admin. & defence 1.1 1.0 Wholesale & retail trade Manufacturing Services Property services & business services Transport & storage Agriculture, forestry & fishing Utilities Construction 4 Accommodation, cafes & restaurants Mining Other 0 20 40 60 80 100 1 Exposure at default is an estimate of the committed exposure expected to be drawn by a customer at the time of default. Excludes consumer lending. 2 Finance and insurance includes banks, non-banks, insurance companies and other firms providing services to the finance and insurance sectors. 3 Property includes both residential and non-residential property investors and developers, and excludes real estate agents. 4 Construction includes building and non-building construction, and industries serving the construction sector. 5 NBFI is non-bank financial institutions. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack S&P rating or equivalent Top 10 exposures to corporations & NBFIs5 at 30 September 2017 ($m) BBB-A BBB BBB A A-BBB+ BBB+ BBB+ A+ 03006009001,2001,5001,8002,100 Sep-17 Mar-17 Sep-16 Top 10 exposures to corporations and NBFIs5 as a % of TCE (%) Largest corporation/NBFI single name exposure 1.11.21.11.2 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 1.41.31.3

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Well provisioned, asset quality improved Asset quality 67 Collectively assessed provisions 49 48 46 46 45 43 41 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Impaired asset provisions to impaired assets (%) FY161H17FY17 52 36353638 WestpacPeer 1Peer 2Peer 3 Total provisions ($m) Economic overlay Individually assessed provisions 5,061 mainly due to work out of 4,241 3,332 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Mar-17 Sep-17 453 Lower total provisions 4,414exposures in WIB 2,986 346 363 3,949 2,607 3,513 389 3,4813,602 2,408 2,196 389 378 3,119 389 388 2,344 2,348 323 2,225 2,275 2,316 1,622 1,461 1,470 1,364 869 867 787 669 480 Provisions Sep-16Mar-17Sep-17 Total provisions to gross loans (bps)545245 Impaired asset provisions to impaired assets (%)495246 Collectively assessed provisions to credit RWA (bps)767776 Economic overlay ($m)389378323

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Stressed exposures lower Asset quality 68 1,194 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 2H10 Sep-16 1H11 Impaired 2H11 90+ dpd not impaired 1H12 2H12 Substandard 1H13 Watchlist 2H13 1H14 Mar-17 2H14 Impaired 1H15 90+ dpd not impaired 2H15 1H16 Substandard 2H16 Watchlist 1H17 Sep-17 2H17 New and increased gross impaired assets ($m) 1,748 1,343 1,060997 9581,078 477440 1,519 589 708 609 607 633 Stressed exposures as a % of TCE Watchlist & substandard 90+ day past due (dpd) and not impaired 3.20Impaired improved outlook for some 2.07 2.48Lower stress reflects 1.45 refinance and work-out of 2.17institutional facilities and an 1.24 NZ dairy exposures 1.60 0.85 1.241.20 0.71 0.99 0.65 1.05 0.46 0.41 0.56 0.54 0.35 0.31 0.67 0.62 0.58 0.26 0.33 0.34 0.25 0.44 0.27 0.22 0.20 0.15 Movement in stressed exposure categories (bps to TCE) 120(2)2(2)(4) 114(5)(1)0(3) Mainly due to work-out of WIB exposures 105

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Provision cover by portfolio category Asset quality 69 Provisioning to TCE (%) Mar-16 Sep-16 Mar-17 Sep-17 Fully performing portfolio •Small cover as low probability of default (PD) •Includes economic overlay 0.22 0.22 0.21 0.20 portfolio Watchlist & substandard •Still performing but higher cover reflects elevated PD 4.89 4.51 4.52 4.76 90+ day past due and not impaired •In default but strong security 4.99 4.57 5.04 5.08 due and not Impaired assets •In default. High provision cover reflects expected recovery 47.65 49.44 52.07 46.30 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Impaired asset provisions Collective provisions Exposures as a % of TCE Fully performing Watchlist & substandard 90+ day past impaired Impaired Mar-16Sep-16Mar-17Sep-17 0.26 0.22 0.20 0.15 0.34 0.35 0.33 0.28 0.56 0.49 0.59 0.65 98.95 98.97 98.86 98.80

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Stressed exposures lower across industries Asset quality 70 1 Includes Finance & insurance, Utilities, Government admin. & defence. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Agriculture, forestry & fishing Wholesale & retail trade Property Transport & storage Manufacturing Services Property services & business services Construction Accommodation, cafes & restaurants Other 1 Mining Corporate and business portfolio stressed exposures by industry ($bn) 2.5 2.0 1.5 1.0 0.5 0.0 Sep-16Mar-17Sep-17 Includes New Zealand dairy 2 larger names in watchlist

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Areas of interest: Commercial property Asset quality 71 9 & diversified groups 16 16 Vic Qld SA & NT 21 44 Retail Investors >$10m 27 5 11 Groups and Property 9 1 Includes impaired exposures. 2 Percentage of commercial property portfolio TCE. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 Commercial property portfolio composition (%) Region (%)Borrower type (%)Sector (%) NSW & ACTExposures <$10mCommercial offices Developers >$10mResidential 114443 9WA29 6NZ & PacificDiversified PropertyIndustrial InstitutionalTrusts >$10m (diversified) Commercial property portfolio Mar-17Sep-17 Total committed exposures (TCE)$65.5bn$65.2bn Lending$49.7bn$49.6bn Commercial property as a % of Group TCE6.656.48 Median risk gradeBB equivalentBB equivalent % of portfolio graded as stressed1,21.391.27 % of portfolio in impaired20.460.38 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)

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Areas of interest: Inner city apartments Asset quality 72 3.2 2.8 2.7 4.1% >$20m in major markets, shown below age LVR (%) security is within an inner city Mar-17 Sep-17 50.5 48.3 $13.5bn $14.1bn 1 Percentage of commercial property TCE. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Consumer mortgages Consumer mortgages where residential apartment development Total consumer mortgage loans for inner city apartments Average LVR at origination71%70% Average dynamic LVR53%53% Dynamic LVR >90%2.0%1.94% 90+ day delinquencies37bps36bps Residential apartment development >$20m weighted aver Expected Completion Year 53.9 Average portfolio LVR 50% No major developments yet for completion in 2021 45.0 2017201820192020 Commercial property portfolio TCE ($bn) Sep-16Mar-17Sep-17TCE %1 Residential apartment development >$20m5.14.14.26.4% •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 markets1.21.31.52.3%•2H17 new lending LVR 42% Inner Melbourne1.41.00.71.1%•2H17 new lending LVR 44% Inner Brisbane0.40.20.40.6%•Exposure low, new lending at 47% LVR Perth metro0.20.20.00.0%•Exposure low and falling Adelaide CBD0.10.10.10.2%•One project

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Asset quality areas of interest Asset quality 73 17 n n 55 02 34 1 6 14 1 Includes impaired exposures. 2 Percentage of portfolio TCE. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack NZ dairy portfolio (TCE) by security (%) 23 76 Fully secured Partially secured Unsecured Mining portfolio (TCE) by sector (%) 8 13 39 20 Oil and gasIron ore Other metal oreCoal Mining servicesOther Retail portfolio (TCE) by sector (%) 26 41 33 Food Retailing Motor Vehicle Retailing and Services Personal and Household Good Retailing New Zealand dairy portfolio Mar-17Sep-Total committed exposure (TCE)NZ$5.9bn NZ$6.0b LendingNZ$5.6bn NZ$5.8b % of Group TCE0.550. % of portfolio graded as stressed1,221.7017. % of portfolio in impaired20.340. Mining (inc. oil and gas) portfolio Mar-17Sep-17 Total committed exposures (TCE)$10.4bn$9.7bn Lending$6.0bn$5.1bn % of Group TCE1.050.96 % of portfolio graded as stressed1,22.902.33 % of portfolio in impaired21.150.44 Retail trade portfolio Mar-17Sep-17 Total committed exposures (TCE)$15.3bn$15.4bn Lending$11.3bn$11.5bn % of Group TCE1.551.53 % of portfolio graded as stressed1,22.513.02 % of portfolio in impaired20.400.31

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Changes in the treatment of hardship now flowing through other consumer delinquencies Asset quality 74 APRA is standardising the industry treatment of delinquency classification 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 maintained for 6 months (‘serviceability period’)2 •Hardship plus serviceability period averages 10 and has now fully Accounts in serviceability period 90+ day delinquencies excl. hardship changes •Increased mortgage 0.7 0.01 weighted assets 0.5 1 For consumer unsecured portfolios when an account reaches 180 days past due, in line with portfolio practices, it is written off. 2 For consumer unsecured portfolios any payments received after write-off and until the serviceability period has expired and if the account returns to performing are recorded as recoveries. Impact on mortgages - completed •Implemented in 1H16Australian mortgage delinquencies (bps) flowed throughAccounts in hardship increase 90+ day delinquencies by 18bps, with 4bps0.6 attributed to hardship facilities for Cyclone0.5 Debbie.0.4 0.3 0.2 0.12 0.01 0.12 0.01 0.16 0.54 0.03 0.01 0.53 0.51 0.49 0.45 Sep-15Mar-16Sep-16Mar-17Sep-17 Impact on unsecured consumer lending •Implemented forAustralian unsecured consumer delinquencies (bps) credit cards, personalAccounts in serviceability period loans and auto in 2H16Accounts in hardship increase and 1H1790+ day delinquencies excl. hardship changes •Impact on 90+ day2.0 delinquencies in FY17 was 56bps. 1.5 •Is resulting in higher write-offs1 and higher recoveries2 1.0 •The change has yet to flow through to risk 0.12 0.37 1.49 0.16 1.35 0.19 1.16 1.10 1.11 Sep-15Mar-16Sep-16Mar-17Sep-17 Current Westpac approach •An account in hardship continues to migrate •Accounts reported as delinquent1 until repayments •Average hardship period granted is 3-4 months months •Changes have no impact on Westpac’s risk profile Prior Westpac approach •When a mortgage 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) •When an unsecured account entered hardship its delinquency status was treated as performing whilst under the hardship arrangement 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 absolute 90+ day delinquencies across the industry more difficult

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Australian consumer unsecured lending, 3% of Group loans Asset quality 75 3.00 • • APRA hardship policy adopted across Australian unsecured portfolios in FY17 September 2017 unsecured consumer delinquencies, excluding hardship reporting changes are 6bps lower than September 2016 3.00 8 8 7 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Australian unsecured portfolio ($bn) Sep-16Mar-17Sep-17 23 23 22 10 10 10 555 Credit cardsPersonal Auto loansTotal loans(consumer)consumer unsecured 90+ day delinquencies (%) Personal loansAuto loans Personal loansAuto loans ex-hardshipex-hardship 2.00 1.00 - 90+ day delinquencies (%) Total unsecuredCredit cards consumer lending Total ex-hardshipCredit cards 3.00ex-hardship 2.00 1.00 - 90+ day delinquencies (%) - By State NSW/ACTVIC/TASQLDWASA/NT 2.00 1.00 - Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17Sep-17 Australian consumer unsecured lending portfolio Sep-16Mar-17Sep-17 30+ day delinquencies (%)2.953.993.60 90+ day delinquencies (%)1.171.631.66 Estimated impact of changes to hardship treatment for 90+ day delinquencies (bps)1bp28bps56ps

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Australian mortgage portfolio continues to perform well, higher stress in regions impacted by mining slowdown Asset quality 76 Australian mortgage delinquencies and properties in possession (PIPs) Australian mortgage portfolio delinquencies Sep-16 Mar-17 Sep-17 90+ day past due total 90+ day past due investor 30+ day delinquencies (bps) 130 139 130 3.0 90+ day delinquencies (bps) (includes impaired mortgages) 66 67 67 2.0 Estimated cumulative impact of changes to hardship treatment (bps) 13 13 18 1.0 Consumer PIPs 262 382 437 Increase in both 1H17 and 2H17 mainly due to rise in WA and Qld reflecting weaker economic conditions in those states 0.0 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 45 41 9 7 7 6 6 1 Source ABA Cannex August 2017. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Housing lending portfolio by State (%) Australian banking system1 Westpac Group portfolio FY17 Westpac Group drawdowns 28 26 27 36 18 17 16 12 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-17Sep-17 NSW/ACTVIC/TASQLD WASA/NTALL Introduced new hardship treatment 30+ day past due totalLoss rates Introduced new hardship treatment

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Australian mortgage portfolio well collateralised Asset quality 77 Sep-16 balance Mar-17 balance Sep-17 balance 2H17 flow1 Australian mortgage portfolio Australian housing loan-to-value ratios (LVRs) (%) 100 Total portfolio ($bn) 404.2 413.9 427.2 40.3 FY17 drawdowns LVR at origination Owner occupied (%) 55.0 55.3 55.5 52.5 Portfolio LVR at origination Investment property loans (%) 39.3 39.5 39.8 46.8 Portfolio dynamic LVR Portfolio loan/line of credit (%) 5.7 5.3 4.8 0.7 Variable rate / Fixed rate (%) 83 / 17 82 / 18 79 / 21 64 / 36 51.0 50.1 45.5 34.2 Interest only (%) 2.4 2.2 2.0 0.4 Low doc (%) 57.9 57.7 57.3 54.1 Proprietary channel (%) 18 17 8.6 8.4 8.1 6.5 First home buyer (%) 14 13 18.4 18.1 17.5 14.1 Mortgage insured (%) 2 2 1 Sep-16 Mar-17 Sep-17 0 Average loan size2 ($’000’s) 254 259 264 Customers ahead on repayments including offset account balances3,5 (%) 72 71 70 Actual mortgage losses net of insurance4 ($m) 31 36 48 Actual mortgage loss rate annualised (bps) 2 2 2 1 Flow is all new mortgages settled during the 6 month period ended 30 September 2017 and includes RAMS. 2 Includes amortisation. 3 Customer loans ahead on payments exclude equity/line of credit products as there are no scheduled principal payments. 4 Mortgage insurance claims 2H17 $9m (1H17 $3m, 2H16 $7m). 5 Excludes RAMS. 6 LVR calculated as simple average by balances. 7 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. 8 Average LVR of new loans is on rolling 6 month window. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 5 90 80 70 60 50 40 30 20 10 61 50 48 15 12 11 16 56 54 0<=6060<=7070<=8080<=9090<=9595+ Sep-16Mar-17Sep-17 Australian mortgage portfolio LVRsbalancebalancebalance Average LVR at origination5,6 (%)707070 Average dynamic LVR5,6,7 (%)434242 Average LVR of new loans5,6,8 (%)706867

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Interest only now 46% of mortgage portfolio Asset quality 78 9.8% 43 4.4% •80% maximum LVR for all new interest only loans extension and switches) with limited exceptions 4.44 interest only since June 2017 interest only 1 Flow is based on APRA definition. 2 I/O is interest only mortgage lending. P&I is principal and interest mortgage lending. 3 Investor is as per APRA extended definition used for reporting against the 10% cap. 4 Interest rates as at 20 September 2017 for Westpac Rocket Repay Home Loan inclusive of Premier Advantage Package discount assuming loan amount $250,000 - $499,999. 5 Product maximum term for Interest only is 5 years for owner occupied and 10 years for investor loans. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Key changes to interest only mortgage settings •Pricing – differential pricing for investor propertyCurrent variable mortgage interest rate4 (%) lending, interest only and SMSF lending Owner occupiedInvestor (includes limit increases, interest only term5.034.995.50 •No switch fee for customers switching to P&I from •No longer accepting external refinances (from other financial institutions) for owner-occupied P&II/OP&II/O Interest only flow definition •The 30% interest only cap incorporates all new interest only loans including bridging facilities, construction loans and limit increases on existing loans •The interest only cap excludes flows from switching between repayment types, such as interest only to P&I or from P&I to interest only and also excludes term extensions of interest only terms within product maximums5 •Any request to extend term beyond the product maximum is considered a new loan, and hence is included in the cap Mortgage lending growth (%) Investor lending3 growth remaining <10% Investor (APRA Extended definition) Owner occupied 5.9% 5.4% Switching from I/O to P&I2 ($m) Customers switching to P&I Reached end of I/O periodCustomer initiated 2,368 1Q172Q173Q174Q17 7,913 4,261 2,604 3,447 3,004 2,592 2,554 Flow of interest only1 (% of total limits) New interest only flows now <30% ApplicationsSettlements 46 4945 50 1Q172Q173Q174Q17 35 23 26

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Performance of interest only mortgages remains sound Asset quality 79 amortising term. I/O loans are full recourse (7.25%) and a requirement to be in surplus1 origination2,3 loans represent 62% of offset account balances 36 35 33 of 67bps) 15 13 1 A surplus requirement measures the extent to which a borrower’s income exceeds loan repayments, expenses and other commitments, as assessed. 2 Excludes RAMS. 3 LVR calculated as simple average by balances. 4 Customer loans ahead on payments exclude equity/line of credit products as there are no scheduled principal payments. 5 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. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Interest only lending •Interest only (I/O) loans assessed on a principal and interest basis, from 2015 over the residual •Serviceability assessments include an interest rate buffer (at least 2.25%), minimum assessment rate I/O portfolio statistics as at 30 September 2017 •67% average LVR of interest only loans at •65% of customers ahead of repayments (including offset accounts)2,4 •Offset account balances attached to interest only I/O portfolio performance as at 30 September 2017 •90+ day delinquencies 52bps (compared to portfolio •Annualised loss rate 2bp (net of insurance claims) Interest only lending by dynamic LVR2,5 and income band (%) Applicant gross income bands 59<$100k$100k - $250k>$250k <=60%60%<=80%>80% Chart may not add due to roundingDynamic LVR bands (%) Westpac A.ustralian offset account balances2 ($bn) Offset account balances attached to P&I mortgages Offset account balances attached to I/O mortgages 38 31 27 2124 1618 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 14 33 31 7 8 2 2 18 15 8 5

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Investor property lending (IPL) portfolio: sound underwriting Asset quality 80 Investment property lending portfolio Sep-16 Mar-17 Sep-17 Average LVR of IPL loans at origination1,2 (%) 72 72 72 Average LVR of new IPL loans in the period1,2,3 (%) 66 65 66 Average dynamic LVR1,2,4 of IPL loans (%) 48 47 47 Average loan size5 ($’000) 305 309 313 Customers ahead on repayments including offset accounts1,6 (%) 62 61 59 90+ day delinquencies (bps) 48 47 49 Annualised loss rate (net of insurance claims) (bps) 2 2 3 1 Excludes RAMS. 2 LVR calculated as simple average by balances. 3 Average LVR of new loans is on rolling 6 month window. 4 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. 5 Includes amortisation. 6 Customer loans ahead on payments exclude equity/line of credit products as there are no scheduled principal payments. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack <=50 50<=75 75<=100 100<=125 125<=150 150<=200 200<=500 500<=1m 1m+ Investment property portfolio by number of properties per customer (%) 1 11 7 22 3 264 625 6+ Applicants by gross income band (%) 30Owner occupiedIPL 25 20 15 10 5 0 LVR at origination1 (%) 50Owner occupiedIPL 40 30 20 10 0 0<=60 60<=70 70<=75 75<=80 80<=85 85<=90 90<=95 95<=9797+

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Mortgage serviceability assessment settings Asset quality 81 Income contractor applicants rental income/bonuses/dividends size, income level and geography) Bureau amortising term Interest only 27 29 30 24 23 23 24 25 Behind On Time < 1 Month < 1 Year < 2 Years > 2 Years 1 HEM is the Household Expenditure Measure, produced by the University of Melbourne. 2 SVR is the Standard Variable Rate for owner-occupied Westpac Rocket Repay Home Loan inclusive of Premier Advantage Package discount. 3 Customer loans ahead on payments exclude equity/line of credit products as there are no scheduled principal payments. ‘Behind’ is more than 30 days past due. ‘On time’ includes up to 30 days past due. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Australian home loan customers ahead on repayments3 (%) Sep-16Mar-17Sep-17 26 20 15 10 5 0 25 25 1 1 1 17 17 18 7 7 6 Westpac’s key serviceability requirements and controls •Income and employment is verified •Separate guidelines in place to assess self employed and •Discounts of 20% apply to less certain income sources such as Expenses•Higher of declared expenses or HEM1 (HEM varies by family Other loans•Verified using payments data, bank statements and/or Credit •New loans assessed at principal & interest over the residual loans•Max LVR 80% (with limited exceptions) and max interest only term 5 years (owner occupied) / 10 years (investment) Interest rate•Higher of customer rate plus 2.25% or the minimum assessment buffer(‘floor’) rate of 7.25% applied •Conservative bank valuation methodologies Security•Maximum LVR limits •Minimum property size and location restrictions apply •LVR restrictions apply to single-industry towns, high-density apartments in defined areas Restrictions•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) Mortgage interest rate buffers (%) 2 Westpac owner occupied SVR inc package discount 9Westpac minimum assessment ('floor') rate 5 7 54.44 3 Mar-14Sep-14Mar-15Sep-15Mar-16Sep-16Mar-17Sep-17 7.2

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Australian mortgage deep dive Asset quality 82 LVR2 and income (%) 1 5.24 6.89 – 5.70 7.86 (excl. discounts) 1 Portfolio comprised of residential mortgages, excluding RAMS, and business mortgages originated via a separate platform such as construction loans and loans to SMSFs. 2 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. 3 Based on a specific Rocket Repay rate offered during the period. Westpac Rocket Repay Home Loan exclusive of discounts assuming loan amount $250,000 - $499,999. 4 Source, Westpac Economics, CoreLogic. All dwellings Australia - average 8 major capital cities. Prices to Sept 17. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Australian mortgage lending1 by origination date, dynamic Gross income2015+ bands >$250k $100k - $250k <$100k4643 2011-14<2011 78 69 7 24 3 12 16 33 36 11 2 8 10 38 25 22 7 1 2 13 21 6 2 7 1 13 11 6 3 8 7 Dynamic LVR bands (%)>8060-80<=60>8060-80<=60>8060<=80<=60 % of portfolio413326 Westpac SVR3 (%) Westpac interest rate buffer (%)2.251.801.80 Westpac interest rate floor (%)7.256.806.80 House price changes4 0 – 23%40% – 23%At least 40% 4

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Lenders mortgage insurance arrangements Asset Quality 83 100% of risk subsequently transferred to Arch Reinsurance Limited 1 From 18 May 2015 WLMI underwrites all mortgage insurance, where required, on Westpac originated Mortgages. The in-force portfolio of loans includes mortgage insurance provided by external providers. 2 Prudential Capital Requirement (PCR) calculated in accordance with APRA standards. 3 Insured coverage is net of quota share. 4 Loss ratio is claims over the total earned premium plus reinsurance plus exchange commission. 5 LMI gross written premium includes loans >90% LVR reinsured with Arch Reinsurance Limited. 2H17 gross written premium includes $73m from the arrangement (1H17: $107m, 2H16: $125m). Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Lenders mortgage insurance arrangements LVR BandInsurance • LVR <80%Not required • Low doc LVR <60% • LVR >80% to < 90%•Where insurance required, insured through captive insurer, WLMI • Low doc•LMI not required for certain borrower groups LVR >60% to < 80%•Reinsurance arrangements: - 40% risk retained by WLMI - 60% risk transferred through quota share arrangements with Arch Reinsurance Limited, Tokio Millennium Re, Endurance Re, Everest Re, Trans Re and AWAC • LVR >90%•100% reinsurance through Arch Reinsurance Limited - Reinsurance arrangements see loans with LVR >90% insured through WLMI with Insurance statistics 2H161H172H17 Insurance claims ($m)739 WLMI loss ratio4 (%)17727 WLMI gross written premiums5 ($m)154141109 Lenders mortgage insurance •Where mortgage insurance is required, mortgages are insured through Westpac’s captive mortgage insurer, Westpac Lenders Mortgage Insurance1 (WLMI), and reinsured 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 ratio of 1.2x PCR2 and has 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 $117m net of re-insurance recoveries (1H17: $130m) Australian mortgage portfolio (%) 83Not insured Insured by third parties 3 Insured by WLMI 710

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Mortgage portfolio stress testing outcomes Asset quality 84 - (13.0) (22.4) (26.2) (% change cumulative) 1 Assumes 30% of LMI claims will be rejected in a stressed scenario. 2 Stressed loss rates are calculated as a percentage of mortgage exposure at default. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Australian mortgage portfolio stres as at 30 September 2017 Key assumptionsCurrent s testing Stressed scenario Year 1Year 2Year 3 Portfolio size ($bn)426411403400 Unemployment rate (%)5.611.810.89.5 Interest rates (cash rate, %)1.500.500.500.50 House prices Annual GDP growth (%)1.8(4.8)(1.1)0.8 Stressed loss outcomes (net of LMI recoveries)1 $ million851,0331,622527 Basis points22223512 •Westpac regularly conducts a range of portfolio stress tests as part of its regulatory and risk management activities •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 six consecutive quarters of negative GDP growth. This results in a 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 $2.9bn over three years for the uninsured portfolio (FY16: $2.9bn) - Cumulative claims on LMI, both WLMI and external insurers, of $762m over the three years (FY16: $856m) - Cumulative loss rates are unchanged (69bps compared to 69bps at FY16) - WLMI separately conducts stress testing to test the sufficiency of its capital position to cover mortgage claims arising from a stressed mortgage environment •Capital targets incorporate buffers at the Westpac Group level that also consider the combined impact on the mortgage portfolio and WLMI of severe stress scenarios

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200 years proudly supporting Australia Capital, Funding and Liquidity

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Well positioned for “Unquestionably strong” Capital, Funding and Liquidity 86 Highlights (APRA basis) 10.6% CET1 Westpac CET1 capital ratio (rhs, %) guidelines >10.5% 55 12.0 10.0 strong • Well placed to respond to final APRA 45 Impact of APRA’s 40 • Total RWA flat over the half 30 RWA from disciplined RWA management and 4.0 25 • Life insurance statutory fund 1 Domestic systemically important bank. 2 APRA’s revision to the calculation of RWA for Australian residential mortgages, which came into effect on 1 July 2016. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 CET1 capital ratio (%) and CET1 capital ($bn) Westpac CET1 capital (lhs, $bn) • 108bps increase over the yearAPRA industry capital ratio• 59bps increase from March 2017unquestionably $bnstrong% Building for 1% 10.6 Above APRA’s• APRA’s unquestionably strong industry5010.0 10.0 unquestionablybenchmark is 10.5% benchmarkrequirements8.0 changes to 356.0 Disciplined• Credit risk RWA 1.0% lower over the half managementimprovement in asset quality 2.0 20 • 1.5% discount on 1H17 DRP150.0 Capital built• Further sell down of BTIM consolidation DSIB1 10.2 10.5 10.1 9.59.5 9.3 9.08.8 9.0 8.38.4 43 40 41 39 38 38 37 mortgage RWA2 37 34 32 30 30 29 27

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CET1 ratio, top quartile globally Capital, Funding and Liquidity 87 BIS 75th percentile2 16.2 14.8 10.6 regulatory regulatory forma internationally comparable: 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 91. 2 Group 1 banks BIS 75th percentile fully phased-in Basel III capital ratios from BIS monitoring report released 12 September 2017. 3 Includes transitional capital instruments eligible as Additional Tier 1 and Tier 2 capital under APRA Basel III rules. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Capital ratiosKey capital ratios (%) APRA basisInternationally comparable1 basis 21.1 18.6 12.7 CET1Tier 1TotalCET1Tier 1Total capitalcapital • Internationally comparable ratios exclude Basel III transitional instruments, which are included in the APRA capital ratios on a transitional basis • Westpac is seeking to replace Basel III transitional instruments with Basel III fully compliant instruments. Should Westpac do this, pro - Tier 1 capital ratio would be 19.0%3 (up from 18.6%) - Total regulatory capital ratio would be 21.9%3 (up from 21.1%) - CET1 capital ratio would be unchanged Sep-16Mar-17Sep-17 CET1 capital ratio9.510.010.6 Additional Tier 1 capital1.71.72.1 Tier 1 capital ratio11.211.712.7 Tier 2 capital1.92.32.1 Total regulatory capital ratio13.114.014.8 Risk weighted assets (RWA) ($bn)410404404 Leverage ratio5.25.35.7 Internationally comparable ratios1 Leverage ratio (internationally comparable)5.96.06.3 CET1 ratio (internationally comparable)14.415.316.2

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Strong capital generation supported by disciplined loan growth Capital, Funding and Liquidity 88 9.48 1 1 Internationally comparable methodology aligns with the APRA study titled ‘International Capital Comparison Study’ dated 13 July 2015. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack CET1 capital ratio (% and bps) 1H17 DRP A reduction in credit risk has Capitalised expenses16.20 participation ratebeen offset by movements inand other small equity 35.6%non-credit riskinvestments 10.56 9.97 Organic +39bpsOther +20bps Up 59 basis points Sep-16Mar-17Cash earningsInterimOrdinaryOtherSell down of Life insuranceRegulatoryFX translationDefinedSep-17Sep-17 APRAAPRAdividendRWAmovementsBTIMstatutory fundmodellingimpactbenefit impactAPRAInt. Comp. (net of DRP)growth consolidation change 1064(2)2 100(50) (4)(7)

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Disciplined management and improved asset quality reduce RWA Capital, Funding and Liquidity 89 3.9 (1.8) (4.6) 352.7 349.3 (0.9) Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Movement in credit risk weighted assets ($bn) 358.8 Sep-16Mar-17Business growthRegulatory modellingCredit quality andMark-to-marketSep-17 changesportfolio mix Updates to credit modelsImproved asset quality Down $3.4bn or 1.0% Movement in risk weighted assets ($bn) 410.1404.4(3.4)0.6(0.4)3.0404.2 rate exposureand repricing and yield curve risk Sep-16Mar-17Credit riskMarketOperationalIRRBBSep-17 riskrisk See belowHigher interestSpread risk on the liquids portfolio Down $0.2bn

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Well placed on internationally comparable CET1 and leverage ratios Capital, Funding and Liquidity 90 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 30 June 2017, except for Westpac, ANZ and NAB, which are at 30 Sep 2017, while Scotiabank, Bank of Montreal, Royal Bank of Canada and Toronto Dominion are at 31 July 2017. For CET1, assumes Basel III capital reforms fully implemented. Leverage ratio is on a transitional basis. 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 Full Year Results Presentation & Investor Discussion Pack ICBC Nordea China Construction Bank Norinchukin Bank Intesa Sanpaolo Westpac ANZ Bank of China CBA BBVA ING Bank of Communications HSBC Westpac RBS ANZ Rabobank Agricultural Bank of China BPCE HSBC NAB Standard Chartered Deutsche Bank NAB Standard Chartered Lloyds Norinchukin Bank Commerzbank China Merchants Bank Intesa Sanpaolo CBA Credit Suisse RBS Barclays Credit Suisse Citigroup Unicredit Unicredit Lloyds Credit Agricole SA Commerzbank JPMorgan Chase BPCE China Construction Bank ICBC Rabobank Sumitomo Mitsui Barclays China Merchants Bank Santander BNP Paribas Mitsubishi UFG Societe Generale Credit Agricole SA Mitsubishi UFG Sumitomo Mitsui Wells Fargo ING Mizuho FG Nordea Bank of America Scotiabank Scotiabank Natixis Royal Bank of Canada Bank of Montreal Bank of Montreal BBVA Societe Generale Toronto Dominion Bank BNP Paribas Bank of China Deutsche Bank Royal Bank of Canada Toronto Dominion Bank Santander Mizuho FG Bank of Communications Natixis Agricultural Bank of China Leverage ratio (%) 8% 6.33% 6% 4% 2% 0% Common equity Tier 1 ratio (%) 25% 20%16.20% 15% 10% 5% 0%

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Internationally comparable capital ratio reconciliation Capital, Funding and Liquidity 91 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) 10.6 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 0.4 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 1.8 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 0.8 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 16.2 Internationally comparable Tier 1 capital ratio 18.6 Internationally comparable total regulatory capital ratio 21.1 1 Methodology aligns with the APRA study titled “International capital comparison study", dated 13 July 2015.

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Optimising returns by actively managing capital Capital, Funding and Liquidity 92 1.1 0.9 59.3 0.3 58.1 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Capital allocated to divisions (average, $bn) Division2H161H172H17 Total Group (including intangibles)56.657.759.4 Consumer Bank and Business Bank23.724.423.7 BTFG3.33.43.4 WIB9.69.48.9 Westpac NZ (A$)4.44.64.4 Excess capital held in Group Businesses1.71.83.8 Return on equity (%) DivisionFY16FY172H17 Total Group14.013.813.6 Consumer Bank and Business Bank16.617.017.6 BTFG15.614.013.6 WIB10.613.412.7 Westpac NZ (A$)17.218.319.4 Ordinary equity (spot and includes reserves) ($bn) 0.961.3 Sep-16DRPOtherMar-17DRPOtherSep-17 Actively managing returns • All divisions with a full year ROE > 13% • Divisional capital allocation model to be refined in 2018 (post APRA clarification) • $3.8bn of capital still to be allocated • Group ROE is lower from higher levels of capital held; average equity up 5%, cash earnings up 3% over FY17 • Leverage ratio improved from the increased average ordinary equity (AOE)

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New term issuance well diversified Capital, Funding and Liquidity 93 5 1 2 8 12 8 30 Senior Unsecured Covered Bonds Asia Australia & NZ AUD GBP USD Other EUR 1 Year 4 Years 2 Years 5 Years 3 Years >5 years Subordinated Debt UK Other Charts may not add to 100 due to rounding. Term debt issuance and maturity profile1,3,5 ($bn) Senior/Securitisation 1 Based on residual maturity and FX spot currency translation. Includes all debt issuance with contractual maturity greater than 370 days excluding US Commercial Paper and Yankee Certificates of Deposit. 2 Westpac public benchmark transactions only. 3 Contractual maturity date for hybrids and callable subordinated instruments is the first scheduled conversion date or call date for the purposes of this disclosure. 4 Tenor excludes RMBS and ABS. 5 Perpetual sub-debt has been included in >FY22 maturity bucket. Maturities exclude securitisation amortisation. 6 Sources: Westpac, APRA Banking Statistics September 2017. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Issuance 42 37 MaturitiesSub Debt Hybrid Covered Bond 27272626 333331 22 2021 FY12FY13FY14FY15FY16FY17 FY18FY19FY20FY21FY22>FY22 Australian covered bond issuance6 ($bn) OutstandingRemaining capacity (8% cap & over-collateralisation) Peer 1Peer 2Peer 3Westpac 34 31 31 27 25 23 20 14 FY17 new term issuance composition1 (%) By typeBy investor location2By currencyBy tenor3,4 183022343 94 4 66284921 1917 0.3 SecuritisationHybridEuropeNorth America

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Well positioned for NSFR on 1 January 2018 Capital, Funding and Liquidity 94 other Institutional 108% 109% 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 NSFR is estimated based on current APRA guidelines. NSFR will commence in Australia on 1 January 2018. 8 Other includes derivatives and other assets. 9 Other loans includes off balance sheet exposures and residential mortgages >35% risk weight. 10 Equity excludes FX translation, Available-for-Sale securities and Cash Flow Hedging Reserves. 11 Tenor excludes RMBS and ABS. 12 Contractual maturity date for hybrids and callable subordinated instruments is the first scheduled conversion date or call date for the purposes of this disclosure. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Total funding composition (%) By residual maturity Wholesale Onshore <1yr Wholesale Offshore <1yr 11 1 11 Wholesale Onshore >1yr 1Wholesale Offshore >1yr Securitisation Equity10 Customer deposits 8 8 61 62 10 1 44 Sep-08Sep-16Sep-17 16 20 6 8 7 8 Net stable funding ratio (NSFR, $bn) 566 quids 8 Corporate & deposits deposits mortgages Available StableRequired Stable FundingFunding Mar-17Sep-17 Estimated NSFR7 W’sale funding & other liabilities 521 Li and Other loans9 Retail & SME Residential <35% Capital New term issuance by tenor11,12 (%) 4.7yrs4.9yrs5.4yrs5.8yrsWAM11 4 28 43 >5years 5 years 4 years 3 years 2 years 1 years 45 30 25 17 8 FY14FY15FY16FY17 25 40 30 18 44 25 7 Liquidity coverage ratio (%) Committed Liquidity Facility ($bn) HQLA ($bn) LCR (%) 127134125124 49.1 Mar-16Sep-16Mar-17Sep-17 58.6 58.6 49.1 73.6 69.4 71.9 66.2 Liquidity coverage ratio ($bn and %) Sep-16 Mar-17 Sep-17 HQLA169.473.671.9 CLF258.649.149.1 Total LCR Liquid assets128.0122.7121.0 Customer deposits63.565.965.6 Wholesale funding13.113.212.2 Other flows319.219.120.1 Total cash outflows95.898.298.0 LCR4134%125%124% Unencumbered liquid assets ($bn) Self securitisation Private securities5 and deposits with other banks Cash, government and semi-government bonds 144139138 56 47 48 111 21 16 18 75 68 72 Sep-16 Mar-17 Sep-17 Total short term wholesale debt6 outstanding at 30 Sep 17

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200 years proudly supporting Australia Divisional results

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Consumer Bank – growing the franchise Consumer 96 loans and the impact of the Bank Levy (3bps) (79) 1,593 1 Refer slide 136 for metric definition and details of provider. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 2H16 1H17 Net interest income Non-interest income Operating expenses Impairment charges Tax and NCI 2H17 Key operating metrics Change on 2H161H172H171H17 Total customers (#m)8.88.99.12% Active digital customers (#m)3.63.84.05% Total branches (#)1,0851,0591,046(13) Customer satisfaction1 (%)81.381.681.930bps Net promoter score (NPS)1 6mma4th 4th 1st +4.9 Service quality – complaints (#‘000)13.111.812.78% Cash earnings ($m) AIEA up 3%, margin up 7bps, repricing of mortgages partly offset by some switching, customer preference for fixed rate home 247(46) (7)(33) Lower cards fees increases partly and payments 1,5391,511 Investments, product development and regulatory and and provision forcompliance cost customer refundsoffset by productivity Up $82m or 5% Key financial metrics Change on 2H161H172H171H17 Revenue ($m)4,0534,0554,2565% Net interest margin (%)2.342.282.357bps Expense to income (%)40.340.240.1(4bps) Customer deposit to loan ratio (%)52.452.852.913bps Stressed assets to TCE (%)0.610.640.62(2bps)

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A disciplined 2H17 performance Consumer 97 1,539 1,511 41.2 1 Following an update to the Group’s capital allocation framework, numbers prior to 1H17 have been restated to ensure comparability to 1H17 and 2H17. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Revenue per FTE1 ($’000’s) 417 1H152H151H162H161H172H17 393398396 360 324 Expense to income ratio1 (%) 43.1 41.8 40.340.240.1 1H152H151H162H161H172H17 Loans ($bn) & deposit to loan ratio (%) LoansCustomer deposit to loan ratio 51.752.452.152.452.852.9 362 352 345 334 321 311 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Core earnings1 ($m) 2,548 1H152H151H162H161H172H17 2,4202,426 2,335 2,201 2,029 Revenue1 ($m) 4,256 1H152H151H162H161H172H17 4,0534,055 3,972 3,779 3,564 Cash earnings1 ($m) 1,593 1,382 1H152H151H162H161H172H17 1,445 1,243

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Improving the customer experience through digital and new products Consumer 98 by category and sub-category 1 Everyday accounts are consumer transaction accounts. 2 Eligible children must be born in 2017, have a permanent Australian residential address and have the Bump Savings account opened in their name by 31 May 2018. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Westpac Life •Westpac Life is a new savings product designed to help customers save on a regular basis by rewarding savings behaviour (1.5% plus 0.8% bonus if balance is higher at month end) •Since the August launch, over 25,000 accounts have been opened, with an average balance of $32k •37% of these accounts are for customers who have not had a savings account with Westpac Bump •Bump Savings account introduced in April. Designed to encourage children (and their parents) to develop saving habits •The account has no fees, a competitive base interest rate (1.5%) and the opportunity to earn a bonus interest rate (plus 0.8%) •For eligible children2, Westpac will deposit $200 into their account •Since launch, around 33,000 accounts have been opened, with an average balance of $1,400. 25% are new to bank customers Westpac Lite •Launched in June, Westpac Lite is a basic credit card with a low interest rate (9.90%) and low fees •No fees for foreign transactions or late payments •Low credit limit, between $500 and $4,000 •Over 1,600 cards activated since launch Categorisation of spend •Enables St.George customers to obtain insight into their spending patterns •Automatically groups credit card, everyday1 and savings account transactions into categories •Monthly spend is categorised SmartPlan •Launched in May 2017, SmartPlan is a structured repayment plan that helps customers manage their credit card balance by breaking it down into a number of regular monthly instalments – all within their existing credit limit •Supported with SMS alerts to assist customers to make their payments on time •Over 3,700 SmartPlans have been established Banker in Pocket – all brands •Enables customers to ring the contact centre directly from mobile app with no need to verify with security questions •Saves ~60-90 seconds per call •Before connecting to the contact centre, customers directed to a targeted self-serve option, with around 50% of customers taking up the self-serve option

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Business Bank delivers another solid result Business 99 repricing, partially offset by increase in regulatory and 1,091 75 1 Refer slide 136 for metric definition and details of provider. 2 Represents the % of sales of products that are available via digital. 3 Loans via LOLA in 2H16 includes both loans completed on the platform and conditional limits. From 1H17 this metric no longer includes conditional limits. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 2H16 1H17 Net interest income Non-interest income Operating expenses Impairment charges Tax and NCI 2H17 Key operating metrics Change on 2H161H172H171H17 Total business customers (‘000’s)1,1701,1831,2072% Customer satisfaction1 (rank)#1=#1#1-Customer satisfaction - SME1 (rank)#1#2#1+ 1 place Digital sales (%)291012+ 2ppt Loans via LOLA ($m)37291,2361,2441% Cash earnings ($m) AIEA up 2%, margin up 4bps from assetIncreased technology, funding costs and the Bank Levyinvestment costs 43(37) 19(17) transaction fees 9991,008 Higher line fees andLower stressed assets Up $83m or 8% Key financial metrics Change on 2H161H172H171H17 Revenue ($m)2,5342,5572,6514% Net interest margin (%)2.722.702.744bps Expense to income (%)35.535.635.0(62bps) Customer deposit to loan ratio (%)72.172.673.262bps Stressed assets to TCE (%)2.242.322.16(16bps)

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A disciplined 2H17 performance Business 100 976 951 35.6 35.5 1 Following an update to the Group’s capital allocation framework, numbers prior to 1H17 have been restated to ensure comparability to 1H17 and 2H17. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Revenue per FTE1 ($’000) 843 1H152H151H162H161H172H17 818811811 787 721 Expense to income ratio1 (%) 36.3 35.8 35.9 35.0 1H152H151H162H161H172H17 Loans ($bn) & deposit to loan ratio (%) LoansCustomer deposit to loan ratio 72.572.673.2 69.571.272.1 153154157 141146149 Mar-15Sep-15Mar-16Sep-16Mar-17Sep-17 Core earnings1 ($m) 1,723 1,525 1H152H151H162H161H172H17 1,6341,646 1,599 1,547 Revenue1 ($m) 2,651 1H152H151H162H161H172H17 2,557 2,534 2,495 2,427 2,376 Cash earnings1 ($m) 1,091 1,0069991,008 1H152H151H162H161H172H17

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Transforming Business Bank Business 101 continues to deliver reduced processing times and faster LOLA in FY17 Optimist reduced manual processing and saved time by simplifying established over the phone in 10 mins, without the need to merchant reporting (such as shift totals, tips, transaction listings) •Over 2017, merchant numbers are up 4% capabilities onboarding transaction products 1 For existing customers with credit limits. 2 Represents the % of sales of products that are available via digital. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Payment solutions Enhanced•Including Union Pay card acceptance, surcharge configuration and improved terminal •Rationalising deposit products to a core set providing greater clarity to customers Productand improving efficiency through streamlining processes and systems rationalisation•To date, 30 products have been closed or grandfathered with 110,000 customers migrated Simplified•For Westpac Commercial customers, reducing 25 forms to 1 single application for process Digital for bankers LOLA, the division’s simplified loan origination platform credit decisions to customers. $2.5bn loans processed via Enhancements to the credit risk management system have credit risk reviews, serviceability assessments and automated covenant monitoring St.GeorgeNew businesses to the St.George brands can be “Walk-out-working” visit a branch for verification. Includes account opening, ordering a new debit card and the set up of internet banking Digital for customers • Providing more digital self service options, including new deposit account opening and instant decisions on Westpacoverdrafts1 Live• Digital sales accounted for 11% of sales in FY17 (8% in FY16)2 eStatements• Converted over 300,000 accounts to eStatements

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BT continued business growth offset by industry headwinds BT Financial Group 102 16%, total FUM/FUA up Higher insurance $83m ($58m after tax) for FUM/FUA margin Life in-force2: up 10% $32m ($24m after tax) Deposits ($bn) (spot) 30 868 (10) 858 (6) (82) 21 20 21 1ppt (inc. Corp Super) (%) 1 Includes income ($10 million) on invested capital balances required to held for regulatory purpose primarily in relation to Life Insurance entities. 2 Excluding one-off increase of $32 million for methodology change in the calculation of premium discounts, in-force premium growth on Full Year 2016 is 6%. 3 Refer slide 136 for details of metric and metric provider 4 Strategic Insight, All Master Funds Admin as at June 2017 (for 2H17), as at December 2016 (for 1H17), as at June 2016 (for 2H16) and represents the BT Wealth business market share at these times. 5 Strategic Insight (Individual Risk) rolling 12 month average. New sales includes sales, premium re-rates, age and CPI indexation June 2017. 6 Internally calculated from APRA quarterly general insurance performance statistics, June 2017. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack FY16 Income loss from partial sale BTIM FY16 Funds Management Insurance and Capital 1 Productivity benefits Regulatory and compliance Higher insurance claims Tax and NCI Infrequent items (after tax) FY17 Key operating metrics ($m) Change 2H161H172H17on 1H17 Customers with a wealth product3 (%)191918(1ppt) Planners (salaried & aligned) (#) (spot)1,1341,0941,011(83) Platform FUA market share4 (inc. Corp Super) (%)191919(10bps) Platform gross flows market share4 Life Insurance market share5 (%)11121210bps Life Insurance in-force premiums ($m)9731,0301,0684% H&C insurance market share6 (%)666-General Insurance gross written premiums ($m)2582502583% Cash earnings ($m) Loans up 8%; deposits upInfrequent items includes 7%. Partly offset bypremiumscustomer payments compressionGeneral GWP: up 1%revaluation of investment in boutique funds 2412(28)(37) 771 Steady underlying performance Down $97m or 11% Key financial metrics Change FY15FY16FY17on FY16 Revenue ($m)2,6262,3942,281(5%) Expense to income (%)49.048.551.6large FUM and FUA ($bn) (spot)168.2179.2191.47% Loans ($bn) (spot)17.218.620.18% 23.425.529.716%

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Funds management: Growth in Private Wealth and Platforms offset by margin compression and lower Advice income BT Financial Group 103 (8) (15) 520 517 (82) (10) 510 130.8 3.5 123.3 121.9 4.0 19.3 48.4 2.9 46.3 46.4 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 1 Includes $4bn increase due to MySuper migrations which occurred in late 1H17. 2 $2.9bn redemption of BTNZ FUM which is now being managed through BTNZ. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack FY16 BTIM earnings FY16 Private Wealth FUM FUA volume FUM/FUA margin Advice Expenses Tax and NCI FY17 Infrequent Items FY17 FUM ($bn) AdvanceRetail Super/otherBTNZ FUM 55.153.1 2.62.72.9 12 19.1 19.9 18.3 18.3 17.8 33.2 33.1 Up 10% 27.2 25.4 25.9 Industry recognition "Best Private Bank in Australia" Global Private Banking Awards 2017 for consecutive third year. “Best Fund Insurance” 2017 Chant West Best Funds: Insurance “Australia’s Top 50 Financial Advisers” Eight BT employed advisers, and eight core clients of BT Group Licensees named in Barrons Inaugural publication of the Top 50 Advisers “Best Adviser Investment Platform” CoreData SMSF Awards Cash earnings movement ($m) 5835(30)(33) Core franchise up $7m or 1% 435 FUA ($bn) BT Wrap/Asgard/PanoramaCorporate superOther Up 6% 136.4138.3 3.9 Sep-15Mar-16Sep-16Mar-17Sep-17 21.4 21.7 20.5 3.8 19.6 3.6 113.1 111.0 106.5 98.7 100.1

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Sound insurance fundamentals BT Financial Group 104 973 927 892 1 Strategic Insight June 2017. Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Life Insurance individual new sales market share1 (%) WBCPeer 1Peer 2Avg next top 4 Jun-13Jun-14Jun-15Jun-16Jun-17 Life Insurance lapse rates1 (%) WBCPeer 1Peer 2Market Avg Jun-13Jun-14Jun-15Jun-16Jun-17 Insurance premiums ($m) General Insurance gross written premiumsLife in-force premiums 1,0301,068 2H151H162H161H172H17 Up 3 Up 4% 258 250 258 246 245 % Insurance claims rates (%) General InsuranceLife Insurance 71 2H151H162H161H172H17 515049 383535 33 34 38

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Panorama: a market leading wealth management system for customers and advisors BT Financial Group 105 Panorama’s integration with investors A direct investment offer, Personal Super for Westpac Group 2017 Interim Results Presentation & Investor Discussion Pack Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Sep-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 SMSF Funds on Panorama (#) 4,305 2,173 Up 98% Advisers using Panorama (#) 1,355 834 Up 62% One coreOne of the first platforms to operatingsupport complex account types systemonline, such as SMSFs OneBuilding on our direct customer system forinvestment offers by leveraging & advisorsWestpac’s banking systems Investments integrated with Westpac Live SMSFsUnique end-to-end solution from establishment, administration to reporting Super advised and direct customers InsuranceInvestment, superannuation and pension with integrated insurance Investors on Panorama (#) 11,778 4,274 Up 176% FUA on Panorama ($m) 6,713 2,719 Up 147%

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WIB 2H17 result reflects lower markets income after a strong 1H17 Westpac Institutional Bank and significantly lower impairment charges 106 quality 1 WIB customer revenue is lending revenue, deposit revenue, sales and fee income. Excludes trading, derivative valuation adjustments and Hastings. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 2H16 1H17 Net interest income Non-interest income Operating expenses Impairment charges Tax and NCI 2H17 Key operating metrics Change on 2H161H172H171H17 Customer revenue1 / total revenue (%)827785large Trading revenue / total revenue (%)6145(large) Revenue per FTE ($’000)555631564(11%) Deposits ($bn)88.493.889.4(5%) Cash earnings ($m) Higher margins, Lower customer and risk balance sheetmanagement income after a discipline maintainedstrong 1H17 70021(208)Improved asset (9) 585 28604 72 Down $96m or 14% Key financial metrics Change on 2H161H172H171H17 Revenue ($m)1,5051,7001,513(11%) Net interest margin (%)1.761.771.858bps Expense to income ratio (%)45.038.644.0large Customer deposit to loan ratio (%)119.8131.2120.8large Stressed assets to TCE (%)0.880.590.55(4bps)

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Disciplined performance, focus on returns Westpac Institutional Bank 107 93.8 the roll-off of some towards the end of 2H17 Sep-16 Mar-17 Sep-17 warehouse facilities 4.6 well, with very low Watchlist & substandard 0.07%, down 11bps to impaired assets 0.9 0.9 0.8 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Portfolio stress remains at historically low levels •Portfolio performingStressed e. xposures as a % of TCE stress levels •Impaired assets to TCE •Impairment provisions 2H17 46.5% (1H17: 66.6%) 0.6 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 90+ days past due and not impaired Impaired 2.6 2.1 1.2 Disciplined balance sheet management WIB deposits ($bn)Deposits •Deposits 5% lower reflecting 88.489.4government deposits •Average balances up 4% Net loans •3% increase in loans primarily reflects an increase in the use of mortgage following a decline in 1H17 WIB net loans and RWA ($bn) Margin Net loansRWA •Margin up 8 basis points to 87.31.85% reflecting continued 81.778.2discipline on lending 74.0spreads and an improved funding mix, with higher average deposit balances over the half ROE •Discipline reflected in FY17 return on average equity Sep-16Mar-17Sep-1713.4% (2H17: 12.7%) 73.8 71.5 Expense control •Expense growth 1%WIB expenses ($m) supported by productivity initiatives, including refinement of the offshore678657666 operating model Sep-16Mar-17Sep-17

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Delivering for customers with leading industry expertise and capabilities Westpac Institutional Bank 108 • • • • 864 transactional banking relationships 99% transactional banking retention rate1 94% of the ASX100 bank with Westpac Institutional Bank Main transaction banker to 4 of the 8 State and Territory governments and several Commonwealth Government agencies Strong and enduring customer franchise • • 7 out of 10 major infrastructure deals won in FY17; >$45bn total infrastructure project value Provided >$2.4bn of new committed funding in support of Australian and NZ infrastructure sector in FY17 Provided funding commitments to support over 2,100MW of Renewable Energy projects, enough to power over 1.1 million homes when complete Industry expertise and capability • • Continuing the landmark successes for Ausgrid, WIB acted as joint lead placement agent for the largest ever Australian corporate international USPP for Ausgrid, raising USD$1.88 billion (AUD$2.4 billion) alongside alliance partner, BAML Building on success with QuickSuper’s digital superannuation payments solutions, WIB is working with the Digital Business Council on developing eInvoicing standards Well positioned for opportunities as they arise • • First to market with online Corporate Loan Portal - Over 40 customers currently being onboarded, with several already live on the portal LitePay enables low value international payments from online and mobile banking, offering a low cost, fast and transparent service for sending funds overseas - Available in 4 currencies including EUR, GBP, INR and PHP to 22 countries Investing in innovative customer solutions • 1 Transactional banking relationships retention rate defined as the percentage of transactional relationships at the start of FY17 that were retained through to the end of FY17. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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NZ delivered improved 2H17 from margin management New Zealand 109 quality particularly in mortgages and business lending, 11 59 (6) 1 Refer slide 136 for metric definition. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 2H16 1H17 Net interest income Non-interest income Operating expenses Impairment charges Tax and NCI 2H17 Key operating metrics Change on 2H161H172H171H17 Customers (#m)1.351.361.35-Branches189170169(1) Customers with a wealth product1 (%)28.428.629.036bps FUM and FUA (NZ$bn) (spot)9.59.710.14% Service quality - complaints (000’s)13.211.49.6(16%) Cash earnings (NZ$m) Disciplined growth and repricing ofImproved asset partly offset by lower deposit spreadsdairy 4(22) 508 462Productivity benefits from 434 increased customer self-service and business restructure were partly offset by costs associated with the transformation program Up $46m or 10% Key financial metrics Change on 2H161H172H171H17 Revenue (NZ$m)1,1321,0971,1505% Net interest margin (%)2.131.962.0812bps Expense to income (%)42.344.441.4(300bps) Customer deposit to loan ratio (%)76.674.275.5130bps Stressed assets to TCE (%)2.542.412.06(35bps)

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metrics1 New Zealand key New Zealand 110 653 651 434 2.13 2.08 72 69 67 1 All figures in NZ$ unless otherwise indicated. 2 Following an update to the Group’s capital allocation framework, numbers prior to 1H17 have been restated to ensure comparability to 1H17 and 2H17. 3 Revenue and expense to income ratios prior to 2H17 have been restated to reflect the accounting change to the Westpac New Zealand credit card rewards scheme. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Net interest margin2 (%) 2.282.312.18 1.96 1H152H151H162H161H172H17 Expense to income ratio2,3 (%) 44.4 42.3 1H152H151H162H161H172H17 42.8 41.4 40.640.8 Loans ($bn) & deposit to loan ratio (%) LoansCustomer deposit to loan ratio 77.375.276.676.674.275.5 757777 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Core earnings2 ($m) 675674 635 610 1H152H151H162H161H172H17 Revenue2,3 ($m) 1,1411,1321,150 1,1101,097 1H152H151H162H161H172H17 1,095 Cash earnings2 ($m) 508 452462 1H152H151H162H161H172H17 480 449

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Improving the digital customer experience New Zealand 111 52 18 17 Up 10ppts Up 12ppts Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Digital sales (% of total sales) 27 19 1H162H161H172H17 Digitally active customers (#’000’s) 772 758 736 Up 5% 723 1H162H161H172H17 SmartATM deposits (% of total) 54 3942 1H162H161H172H17 CashNav •Integrated app to track finances and deliver spending insights •Market first and leading - Canstar Innovation Excellence Award 2017 •Over 96,000 registrations to date since launched in September 2016 Westpac One •Market leading online platform. Canstar Best Online Bank in New Zealand 2017, 2016, 2015 •Around 36% of all applications are online, with over 58% of all card applications •772k active digital customers up 14% since launch in April 2015 •Active digital customers 57% of total 2017 Canstar Best Online Bank in New Zealand Transforming the network •Further enhancing 24/7 capability •175 SmartATM’s across the country •Market first with Reo Māori and Reo Waikato language options on ATMs and ATM coin dispenser •Over 750k paper statements have migrated to e-Statements •Over 700k transactions migrated to self-serve in the half

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Stressed exposures lower as dairy portfolio improves New Zealand 112 4.4 2.4 59 0.1 1 1 Sep-121 Sep-10 Sep-11 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Westpac $8 $6 $3 2013/14 2014/15 2015/16 2016/17 2017/18 1 Large reduction in stressed exposures from Sep 2011 to Sep 2012 due primarily to transfer of WIB assets during 2012. 2 Includes impaired exposures. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Milk price & Fonterra dividend (NZ$) Kg Ms $10DividendMilk priceforecast $9 $7 $5 $4 $2 $1 $0 Summary • Dairy portfolio’s risk grade profile is improving following favourable milk price movements • Focus remains on supporting existing dairy customers with proven long-term financial viability • Expect portfolio to continue improving as high milk price translates to cash flow Agribusiness portfolio Sep-16Mar-17Sep-17 TCE (NZ$bn)8.68.68.9 Agriculture as a % of total TCE8.18.08.2 % of portfolio graded as ‘stressed’218.616.913.5 % of portfolio in impaired0.420.440.41 Business stressed exposures as a % of New Zealand business TCE Property Manufacturing 14 Agriculture, forestry & fishing Wholesale trade Construction Other 15.6Impaired90+ day past due not impairedWatchlist & substandard 12 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 0.3 2.9 2.3 0.2 2.9 0.00. 0.20.1 0.1 2.3 0.1 2.2 2.6 1.5 0.8 0.9 0.8 1.1 4.0 4.8 5.0

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Consumer asset quality in good shape New Zealand 113 0.5 1 LVR based on current loan and property value at latest credit event. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 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 Sep-17 Sep-10 2H10 Mar-11 1H11 Sep-11 2H11 Mar-12 1H12 Sep-12 2H12 Mar-13 1H13 Sep-13 2H13 Mar-14 1H14 Sep-14 2H14 Mar-15 1H15 Sep-15 2H15 Mar-16 1H16 Sep-16 2H16 1H17 Mar-17 2H17 Sep-17 Mortgage portfolio LVR1 (%) of portfolio 92% of mortgage portfolio less than 80% LVR 44% 23%25% 5%3% 0<=6060<=7070<=8080<=9090+ Mortgage loss rates each half (%) 0.25 0.20 0.15 0.10 0.05 01 0.00 0. Mortgage 90+ day delinquencies (%) 1.0 0.5 0.12 0.0 Unsecured consumer 90+ day delinquencies (%) 1.5 1.0 0.57 0.0

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200 years proudly supporting Australia Economics

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Australian economic snapshot Economics 115 Australian economy key statistics (latest available as at October 2017) 60 GDP Westpac Economics Forecast (end calendar 2018) 1.8% Coking coal (Qld HCC spot) 260 2.5% Unemployment Rate Westpac Economics Forecast (end calendar 2018) 5.5% 40 PMI 6.1% Sources: Reuters, Westpac Economics Sources: Westpac Economics, Bloomberg Inflation Westpac Economics Forecast (end calendar 2018) 1.8% 2.5% 800 Cash Rate Westpac Economics Forecast (end calendar 2018) 1.50% 1.50% Construction 200 AUD/USD Westpac Economics Forecast (end calendar 2018) US$0.78 Goods US$0.70 Sources: ABS, Westpac Economics. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Jobs growth (‘000)Australian Employment since 2009 (# ’000)Household 900services 700 600 500 400Business 300services 100Mining 0distribution -100Manufacturing -200 Jun-09Jun-10Jun-11Jun-12Jun-13Jun-14Jun-15Jun-16Jun-17 Global conditions have improved Index 55 50 45 bal 35obal 30 Sep-97 Sep-01 Sep-05 Sep-09 Sep-13 Sep-17 Westpac glo trade PMI JPMorgan gl manufacturing Continued strength in commodity prices USD/tIron ore (TSI 62% fines benchmark) 340 300Westpac f/c’s to Mar 2019 220 180 140 100 60 20 Oct-11Oct-13Oct-15Oct-17

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Australian economic outlook Economics 116 Consumer¹ Mining²Non-mining Public Net exports GDP Sources: ABS, Westpac Economics. Sources: NAB survey, Westpac Economics. 10 Sources: ABS, Westpac Economics. 1 Incl. housing. 2 Mining investment. Sources: RBA, Westpac Economics. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Consumer spending constrained by slow income growth Australian consumer spending (% ann) vs labour income (% ann) % ann Labour incomeReal 8 6yr 4 2 0 -2 -4 Sep-97Sep-01Sep-05Sep-09Sep-13Sep-17 Consumption Consumption long run avg: 3 .3% Australian private sector credit growth (% ann) ann%HousingTotal creditBusiness 25Forecasts 20 15 10 5 0 -5 -10 Sep-93Sep-97Sep-01Sep-05Sep-09Sep-13Sep-17 end 2018 Australian growth mix points to moderation in 2018 pptsContributions to GDP growth (ppts)ppts 33 22 11 00 -1-1 -2-2 investment 2014201520162017f2018f Positive business conditions Net bal.Australian business conditions (net balance) 30Goods related 20 10 0 -10vg. -20g. -30 Sep-05Sep-07Sep-09Sep-11Sep-13Sep-15Sep-17 Consumer sectors Business services 3 month moving a deviation from av

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Conditions continue to diverge across States Economics 117 Sources: ABS, Westpac Economics 40 ced Sources: ABS, Westpac Economics 1 GSP is Gross State Product. 2 Real, financial years, experimental estimates. Sources: ABS, Westpac Economics Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Activity picking up in NSW and Victoria2 Population growth strongest in NSW and Victoria $bnNon-mining Business investment ($bn)ann%Population growth (% ann) 604.0 503.5 3.06mths 2.5 302.0 201.5 1.0 100.5 00.0 1992199620002004200820122016Mar-87 Mar-91 Mar-95 Mar-99 Mar-03 Mar-07 Mar-11 Mar-15 NSW-ACTVic-SA-TasQld-WA-NT Last announ NSWQldVicWA NSW and Victoria 57% of population, 58% of employment Relative size of States (Share of Australia, 2015/16, %) GSP1PopulationEmploymentExports38 22 2221 NSWVicQldWASATas 32 32 32 6775 25 26 19 20 20 20 21 15 12 11 11

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Jobs are being created, although wage growth remains low Economics 118 Index Index 52% Manufacturing 4 11 7 Transport, Utilities 10 9 6 8 Education & Health 10 13 Property, Business services Sources: ABS, Westpac Economics. 8 Construction 9 4 14 Health, Social Assistance Sources: ABS, Westpac Economics. 1 Excludes ownership of dwellings and taxes less subsidies. Sources: ABS, Westpac Economics. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Australian wage inflation (r%em, ayirn)s low %yrAustralian wage inflation (%, yr) 7 6 5 3 2 1 0 Sep-99 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17 Last 6mths annualised Aus private sector wages Mining industry wages Services employ a large part of the Australian workforce Sector contribution to GDP (%)1 ServicesMining 13Construction Wholesale, Retail Rural Household services Government 6 2Finance Communications Australian employment by sector 2015/16 (%) ServicesMining 59% 1527Manufacturing Transport, Utilities 66Wholesale, Retail Agriculture 8Household services Education 133Public Administration 13 Finance Business services Jobs growth across all states State jobs market (Index: Dec 2011 = 100. % is share of total employment) 114114 110110 106106 102102 9898 9494 Sep-11Sep-13Sep-15Sep-17 Sep-11Sep-13Sep-15Sep-17 Vic (26%) NSW (32%) Tas (2%) WA (11%) Qld (20%) SA (7%)

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A closer look: State employment by sector Economics 119 NSW backdrop of robust economic activity supportive NSW: Employment by sector (annual change in employment, ‘000) Victorian job gains widespread across industries Victoria: Employment by sector (annual change in employment, ‘000) Business services Wholesale & transp. Health & education Manufacturing Mining Construction Government Retail Utilities Agriculture Leisure & hospitality Finance & real estate Health & education Leisure & hospitality Retail Construction Government Manufacturing Agriculture Finance & real estate Mining Wholesale & transp. Business services Utilities 3 '16 3 '17 3 '16 3 '17 -30 Sources: ABS, Westpac Economics. -20 -10 0 10 20 30 40 -10 Sources: ABS, Westpac Economics. 0 10 20 30 40 50 Queensland mining downtrend has ceased Queensland: Employment by sector (annual change in employment, ‘000) Western Australian employment conditions improving WA: Employment by sector (annual change in employment, ‘000) Health & education Construction Leisure & hospitality Mining Government Manufacturing Finance & real estate Agriculture Utilities Wholesale & transp. Retail Business services Health & education Construction Wholesale & transp. Leisure & hospitality Finance & real estate Agriculture Government Business services Utilities Manufacturing Retail Mining Q3 16 16 Q3 17 17 -20 Sources: ABS, Westpac Economics. -10 0 10 20 30 -30 -25 -20 -15 -10 Sources: ABS, Westpac Economics. -5 0 5 10 15 20 25 Charts represents 6 month average level compared to 6 month average level a year ago Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Q2, Q2, ' ' Q2, Q3 ' Q2, Q3 ' Q2, Q Q2, Q Q2, Q Q2, Q

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Housing market fundamentals Economics 120 Dwelling prices cooling Change in Australian dwelling prices (annual %) Macro-prudential tightening Rate cuts ann% ann% 20 20 15 15 10 10 5 5 0 0 Sources: ABS, Westpac Economics. 1 Net of demolitions – implied by Census data. -5 -5 -10 -10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 % Sources: CoreLogic, Westpac Economics. Dwelling prices are all dwellings, 6mth annualised growth. House prices % Change YoY (Oct-17) Capital city % Change last 3mths (Oct-17) Avg since 2007 Pop’n Sydney 4.8m Down 0.6% Up 7.7% Up 6.4% Melbourne 4.5m Up 1.9% Up 11.0% Up 5.8% .9 Brisbane 2.3m Up 0.6% Up 2.7% Up 1.1% Perth 1.9m Down 0.7% Down 2.5% Down 0.6% Sources: REIA, Westpac Economics. Sources: ABS, CoreLogic, Westpac Economics. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Rental vacancy rates remain tight in Sydney and Melbourne Rental vacancy rates (%, quarterly, seasonally adjusted by Westpac) 8SydneyBrisbane 77 6 5 4 3.9 2.3 1 0 Jun-87Jun-92Jun-97Jun-02Jun-07Jun-12Jun-17 MelbournePerth6. National average since 1980 2 2 1 Aggregate supply/demand fundamentals remain positive Population versus dwelling stock (annual average change ‘000) PopulationDwelling stock¹371 1970s1980s1990s2000s2011-2017 320 157 236 137 187 196 128 134 114

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Impact of macro-prudential measures across Australian industry Economics 121 % 16 Total 12 Source: APRA, RBA, Westpac Economics Sources: RBA, Westpac Economics. % RA limit Sources: ABS, APRA, RBA, Westpac Economics. Sources: ABS, APRA, RBA, Westpac Economics Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Lower new flow of interest only loans Interest only housing loans 6030% interest only 50 40 30 20ective 10 0 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Outstanding loans10% investorlimit New loanscredit limitannounced AP eff Sep 17 Lower new flow of high LVR loans %High LVR housing loans 25 20 15 10 5 0 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 80-90%90%+ Change in composition of housing credit Australian housing credit growth (6mth % change annualised) 10% limit on investment growth30% limit on interest 8 4 0 Sep-11Sep-12Sep-13Sep-14Sep-15Sep-16Sep-17 Investorproperty annual portfolio Owner-occupieronly originations Introduction of differentiated mortgage pricing %Mortgage interest rates (major bank average) 7.5 7.0 6.5 6.0 5.5 5.0 Sep-12Sep-13Sep-14Sep-15Sep-16Sep-17 Own-occ. - principal and interest Own-occ. - interest only Investor - principal and interest Investor - interest only

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Australian household balance sheets Economics 122 200 % 40 30 25 age offset 20 1988 Jun-82 Jun-87 Jun-92 Jun-97 Jun-02 Jun-07 Jun-12 Jun-17 Sources: ABS, RBA, Westpac Economics Sources: RBA, Westpac Economics. Housing credit in 6 month % change annualised. ralian household net wealth has also increased % Annual household disposable income Total assets Total liabilities Since Jun-07 Jun-07 Total net worth 0 Sources: ABS, RBA, Westpac Economics. Sources: ABS, RBA, Westpac Economics. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Higher income households have increased borrowings %Australian household debt-to-income ratios by income quintile (%) 250 200 150 100 50 0 1st2nd3rd4th5th 2002200620102014 Aust % 1400 1200 1000 800 600 400 200 +101pts +72pts +29pts Jun-82Jun-87Jun-92Jun-97Jun-02Jun-07Jun-12Jun-17Jun-22 Affordability on repayment basis below 10 year average Housing affordability: all dwellings (% income required to service mortgage of 75% median dwelling, all regions) 35rate was 1% 10yr avg 20 15 10 DeteriorateIf mortgage higher Improve Long run avg Estimates based on capital cities prior to 1993 Australian households debt to income ratio (%) Total (gross) debt 180 160 140 120net of all 100deposits also 80funds held 60ounts 40ince peak 0 -20 -40 Sep-83 Sep-88 Sep-93 Sep-98 Sep-03 Sep-08 Sep-13 Sep-18 Total debt net of offset accounts Total debt net of all deposits* Trend since Jun-07 Debt excludes in mortg acc –20pts s * Westpac Economics estimates prior to

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A closer look: Debt servicing and arrears by State Economics 123 3.0 24 17 2.0 1.5 1.0 0.2 Sources: ABS, RBA, Standard & Poor's, Westpac Economics Sources: ABS, RBA, Standard & Poor's, Westpac Economics 2.5 22 2.0 2.0 12 8 Sources: ABS, RBA, Standard & Poor's, Westpac Economics Sources: ABS, RBA, Standard & Poor's, Westpac Economics 1. Debt servicing ratio is % mortgagors’ household income required to service existing mortgage debt, advanced 6mths. Arrears rate is % of securitised loans in arrears, by value, seasonally adjusted. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Qld: Higher arrears mainly in mining-related regions1 %Debt servicing ratio (rhs)Arrears rate (lhs)% 20 18 1.516 1.014 0.5 10 0.08 Jun-96Jun-99Jun-02Jun-05Jun-08Jun-11Jun-14Jun-17 WBC f/c to Dec-17 WA: Arrears reflect weak economic conditions1 %Debt servicing ratio (rhs)Arrears rate (lhs)% 2.518 16 14 1.5 12 1.0 10 0.5 0.06 Jun-96Jun-99Jun-02Jun-05Jun-08Jun-11Jun-14Jun-17 WBC f/c to Dec-17 NSW: Arrears near 13 year lows1 %Debt servicing ratio (rhs)Arrears rate (lhs)% 2.522 20 18 16 14 0.512 0.010 Jun-96Jun-99Jun-02Jun-05Jun-08Jun-11Jun-14Jun-17 WBC f/c to Dec-Victoria: Arrears low, debt burden around post GFC avg1 %% 2.0Debt servicing ratio (rhs)Arrears rate (lhs)22 1.8 20 1.6 1.418 1.216 1.0 0.814 0.612 0.410 0.08 Jun-96Jun-99Jun-02Jun-05Jun-08Jun-11Jun-14Jun-17 WBC f/c to Dec-17

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Australia’s high rise apartment market Economics 124 Population versus new dwelling stock (annual average change ‘000) Population New 'high rise' apartments^ Total new dwelling stock^ 35 35 400 400 350 350 Census data; 300 300 250 250 226 Sources: ABS, Westpac Economics 200 200 100 100 150 150 80 80 100 100 50 50 30 30 0 0 1950s 1960s 1970s 1980s 1990s 2000s last 6 yrs next 4yrs# Source: RBA, CoreLogic. Source: REIA, Westpac Economics. 1 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 Full Year Results Presentation & Investor Discussion Pack Dwelling construction: indicative completion times1 %% 9090 7070 6060 5050 4040 2020 1010 00 01224364860 Detached houses Low-mid rise High rise Average construction time for ‘high rise’ about 2-2½yrs 385 *Average annual change371 192 ^Net of demolitions – implied by ‘high rise’ is completions only;320 157 #Westpac Economics estimates 236 137 196 210 187 77 128 134 99 114 Projected dwelling completions, major metro areas Dwelling completions by capital city (‘000s, rolling 6mth totals) ‘000shigh rise top 5 areasother high risenon-high rise‘000s 3030 2525 2020 12% 1515 1010 55 00 Dec-05 Dec-11 Dec-17 Dec-05 Dec-11 Dec-17 Dec-05 Dec-11 Dec-17 SydneyMelbourneBrisbane/SEQ projected projected project-ed 12% 42% 13% 19% 68% 20% 68% 46%

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Investor property lending Economics 125 well above returns on term deposits behaviour. However, the latter does not appear to be a significant factor at the Sources: ABS, Westpac Economics. Australia NSW Vic Sources: CoreLogic, ABS, Westpac Economics 1 Quarterly, annualised; last 3mths are estimates based on partial data. Sources: CoreLogic, REIA, RBA, Westpac Economics. 2 Gross yield, median rent on 2bdrm unit as % of median unit price. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Dwelling turnover¹ (% total stock) % 9.0 8.0 7.0 6.0 5.0 4.0 3.0 Dec-96Dec-00Dec-04Dec-08Dec-12Dec-16 Investor housing yields vs shares, deposits (% p.a.) %Rental yield 2 10 8 6 4 2 0 Dec-96Dec-00Dec-04Dec-08Dec-12Dec-16 ASX 200 dividend yield 1yr term deposit Few signs of speculative behaviour in housing markets •Investor activity has been a key driver of Australia’s housing markets 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 and gross rental yields similar to the dividend yield on Australian shares and •Investor activity can also 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, even in the stronger Sydney and Melbourne markets Housing finance approvals: value of housing finance ($bn/mth) $bn/mth 16'Upgraders', ex-refinancing 14 12 10 8 6 4 2 0 Aug-97Aug-02Aug-07Aug-12Aug-17 Investor finance First home buyers

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New Zealand economic snapshot Economics 126 Key economic statistics FY17 FY18f Change % % GDP annual average growth1 2.5% 2.8% 30bps Inflation rate 1.9% 1.4% (50 bps) Official cash rate (OCR) 1.75% 1.75% - Unemployment rate 4.6% 4.6% - Dairy payout (ex dividend)2 $6.12 $6.50 $0.38 Source: RBNZ, Westpac Economics Source: Stats NZ, Westpac Economics 8 8 70 0.60 55 45 Source: Statistics NZ, Westpac Economics Source: Statistics NZ, Westpac Economics 1 For year to September. 2 Seasons ended May. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Labour market has firmed, spare capacity remains %Unemployment rate (%)% 66 44 22 00 20052007200920112013201520172019 Forecast Low rates keeping downward pressure on NZD NZD/USD, NZD/AUD and TWI Forecast 1.0090 85 0.9080 0.8075 0.7065 60 0.5050 0.4040 20052008201120142017 NZD/USD NZD/AUD TWI (right axis) Firm growth in recent years, pace to slow going forward GDP (%) 6Qtr % chgAnnual average % change6 44 22 00 -2-2 -4-4 20052007200920112013201520172019 Forecast

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New Zealand economy: growth to slow Economics 127 this slowdown nationwide. However, construction activity has flattened off at a high level due to Source: Westpac Economics estimates Source: Statistics NZ, Westpac Economics Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Migration cycle has started to turn down Net migration (annual ‘000s) 000sTotal000s 75New Zealanders75 5050 2525 00 -25-25 -50-50 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Forecast Other Drivers of GDP growth in recent years are dissipating •After expanding at a firm pace in recent years, New Zealand GDP growth is expected to soften over the next few years •Strong net migration has been a key driver of demand growth in recent years. Migration flows have now started to ease back, and net migration is set to fall sharply before the closer of the decade. Potential policy changes could reinforce •There is a large amount of residential and non-residential building work planned tighter credit conditions, constraints on access to skilled labour and the softening housing market. The level of activity is expected to remain elevated for an extended period •Post-earthquake reconstruction in the South Island is continuing. Spending is well advanced and has been gradually winding down •Housing market conditions have softened, and this is weighing on household spending •Export returns for our key commodities have improved over 2017, but prices are expected to soften over the coming year. Tourist inflows remain strong •The new coalition Government looks set to spend more than the previous one, with new spending weighted towards education and health. It will be partly funded by cancelling the income tax cuts that were legislated to take effect on April 1 and by introducing new taxes. The balance would be funded by an additional $7bn of net core Crown debt over the next four years. Proposed changes would not significantly affect the Governments financial position •Borrowing rates are expected to remain low for an extended period Large pipeline of construction work, increases to be gradual $bnConstruction spending (annual $bn)$bn 4040 3535 3030 2525 2020 1515 1010 55 00 2005200820112014201720202023 Construction (excl. quake costs) Canterbury rebuild Kaikoura earthquake costs Forecast

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New Zealand economic indicators Economics 128 % % Source: ANZ, Westpac Economics Source: Statistics NZ, Westpac Economics % % Forec 8 8 5 5 Source: Fonterra, Westpac Economics Source: RBNZ, Westpac Economics Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 RBNZ on hold, offshore factors pursuing rates higher Interest rates (%) 1090 day bank bill rate10 99 77 66 44 33 22 11 200120052009201320172021 2 year swap rate 5 year swap rate Forecast Milk price payout at average levels Dairy payout and dividend ($/Kg Ms) Kg Ms $10Milk priceDividend $8 $6 $4 $2 $0 ast Inflation off its lows, sustained return to target elusive Inflation (%) 66 55 44 33 22 11 00 2007200920112013201520172019 CPI inflation CPI excluding petrolForecast Commodity prices remain firm NZ export commodity price index (world prices) Index 500Meat skins & woolForestryDairy 450 400 350 300 250 200 150 100 50 2006200820102012201420162018 Forecast

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New Zealand housing market momentum has faded Economics 129 Source: REINZ Source: REINZ % Investors below 70% LVR Investors above 70% LVR Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Source: RBNZ Source: REINZ, RBNZ, Westpac Economics Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Index = 100 in 2008 Index = 100 in 2008 Macro-prudential policies have slowed the housing market... Investors’ share of new mortgage lending (%) 50 40 30 20 10 0 Tax, LVR changesLVR change …buts financial stability concerns persist %New Zealand house debt statistics (%)% 20175 15150 10125 5100 075 200020022004200620082010201220142016 Debt servicing costs (% of disposable income) (LHS) Household debt (% of disposable income) (RHS) Housing price inflation has flattened off New Zealand house prices by region (index) 220220 200200 180180 160160 140140 120120 100100 8080 Jan-08Jan-10Jan-12Jan-14Jan-16 Canterbury Wellington Auckland Sales volumes low SalesNew Zealand house sales (monthly sales)Sales 9,0009,000 8,0008,000 7,0007,000 6,0006,000 5,0005,000 4,0004,000 3,0003,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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Australian and New Zealand economic forecasts Economics 130 Source: Westpac Economics. 1 Year average growth rates. 2 Through the year growth rates. 3 Business investment adjusted to exclude the effect of public sector purchases of public assets. 4 NZ credit forecasts are for growth over the calendar year. Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Key economic indicators (%) as at October 2017 Calendar year 20162017F2018F WorldGDP13.23.63.6 AustraliaGDP22.43.02.5 Private consumption22.62.52.5 Business investment2,3-6.23.02.0 Unemployment – end period5.75.76.1 CPI headline – year end1.52.12.5 Interest rates – cash rate1.501.501.50 Credit growth, Total – year end5.65.04.0 Credit growth, Housing – year end6.36.35.0 Credit growth, Business – year end5.53.53.5 New ZealandGDP22.62.82.9 Unemployment – end period5.24.74.6 Consumer prices1.31.81.3 Interest rates – official cash rate1.751.751.75 Credit growth – Total47.56.34.8 Credit growth – Housing48.67.44.7 Credit growth – Business46.54.94.8

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200 years proudly supporting Australia Appendix and disclaimer

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Appendix 1: Cash earnings adjustments Appendix and Disclaimer 132 Cash earnings adjustment 2H16 $m 1H17 $m 2H17 $m Description Reported net profit 3,744 3,907 4,083 Net profit attributable to owners of Westpac Banking Corporation The merger with St.George and acquisition of select Lloyds’ Australian businesses resulted in the recognition of identifiable intangible assets. Notional identifiable intangible assets were also recognised within the carrying value of BTIM during the period this investment was equity accounted. 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. This amortisation (excluding capitalised software) is a cash earnings adjustment because it is a non-cash flow item and does not affect cash distributions available to shareholders Amortisation of intangible assets 79 73 64 Acquisition transaction and integration expenses Costs associated with the acquisition of select Lloyds’ Australian businesses were treated as a cash earnings adjustment as they do not reflect the earnings expected from the acquired businesses following the integration period 8 - - 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 difference on reported results but they do not affect the Group’s cash earnings over the life of the hedge Fair value (gain)/loss on economic hedges 120 7 62 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 (35) (4) 20 During Second Half 2017 the Group recognised a gain, net of costs, associated with the sale of shares in BTIM. Consistent with the treatment of prior gains from sale, this gain has been treated as a cash earnings adjustment given its size and that it does not reflect ongoing operations Sale of BTIM shares - - (171) 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 can not 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 transactions which are re-valued in determining Treasury shares 2 34 (13) income Cash earnings 3,918 4,017 4,045 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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Appendix 2: Definitions Appendix and Disclaimer 133 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 originator BTFG is the Australian wealth management and insurance arm of the 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 to manufacture certain general insurance products. In managing risk across all insurance classes the division reinsures certain risks using external providers. BTFG operates a range of wealth, funds management and financial advice brands and operates under the banking brands of Westpac, St.George, Bank of Melbourne and BankSA for Private Wealth and Insurance Consumer Bank BTFG Business Bank (BB) is responsible for sales and service to micro, SME and commercial business customers in Australia 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 borrowing, 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 originator Westpac NZ, 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. New Zealand also maintains its own infrastructure, including technology, operations and treasury Business Bank Westpac NZ 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 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, earnings and costs associated with the Group’s fintech investments and certain other head office items such as centrally raised provisions WIB Group Businesses or GBU Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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Appendix 2: Definitions Appendix and Disclaimer 134 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 off-balance sheet activities. 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 stated 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 Includes facilities where: Leverage ratio 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 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. Internationally comparable regulatory capital ratios are Westpac’s estimated ratios after adjusting the capital ratios determined under APRA Basel III regulations for various items. Analysis aligns with the APRA study titled “International capital comparison study” dated 13 July 2015 Internationally comparable ratios 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%, effective 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) Assets which meet APRA’s criteria for inclusion as HQLA in the numerator of the LCR 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 Full Year Results Presentation & Investor Discussion Pack

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Appendix 2: Definitions Appendix and Disclaimer 135 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 and includes: 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 Total committed exposures (TCE) 1. 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; 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 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 Average interest-earning assets (AIEA) 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 Impaired assets 2. Cash earnings per ordinary share Cash earnings divided by the weighted average ordinary shares (cash earnings basis) 3. 4. Core earnings Net operating income less operating expenses Full-time equivalent employees (FTE) A calculation based on the number of hours worked by full and part-time employees as part of their normal duties. The full-time equivalent of one FTE is 76 hours paid work per fortnight 5. 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 margin (NIM) 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 assets Stressed assets 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 Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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Appendix 2: Definitions Appendix and Disclaimer 136 Women in Leadership refers to the proportion of women (permanent and maximum term) in leadership roles across the Group. It includes CEO, Group Executives, General Managers, senior leaders with significant influence on business outcomes (direct reports to General Managers and their direct reports), large (3+) team people leaders, three levels below General Manger, and Bank and Assistant Bank Managers Source: Roy Morgan Research, September 2015 – September 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 Women in Leadership Customer satisfaction – overall consumer 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 St.George Brands: St.George Bank, Asgard, BankSA, Bank of Melbourne, RAMS Westpac: Westpac Australian customers with wealth products metrics provider Source: DBM Consultants Business Financial Services Monitor, September 2015 – September 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’) Westpac includes Westpac, BT, Challenge Bank, Rothschild, ASGARD, and Sealcorp. St.Georgebrands include St.George, Advance Bank, 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 Customer satisfaction – overall business Peers includes: ANZ Group, CBA Group and NAB Group Source: DBM Consultants Business Financial Services Monitor, September 2015 – September 2017, 6MMA. MFI customers, SME businesses. SME businesses are those organisations with annual turnover under $5 million (excluding Agribusinesses). 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’) 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 Customer satisfaction – SME Source: Roy Morgan Research, September 2016 – September 2017, 6MMA. Main Financial Institution (as defined by the customer). Net Promoter Score measures the net likelihood of recommendation to others of the customer’s main financial institution. Net Promoter ScoreSM is a trademark of Bain & Co Inc., Satmetrix Systems, Inc., and Mr Frederick Reichheld. Using a scale of 1 to 10 (1 means ‘very unlikely’ and 10 means ‘very likely’), the 1-6 raters (detractors) are deducted from the 9-10 raters (promoters) Net Promoter Score or NPS Westpac Group rank The ranking refers to Westpac Group’s position relative to the other three major Australian banking groups (ANZ Group, CBA Group and NAB Group) Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack

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Investor Relations Team Contact us 137 www.westpac.com.au/investorcentre Head of Investor Relations Director Westpac Group 2017 Full Year Results Presentation & Investor Discussion Pack Equity Investor Relations Andrew BowdenNicole MehalskiAnnual reports Presentations and webcasts +61 2 8253 4008+61 2 8253 16675 year financial summary andrewbowden@westpac.com.aunicole.mehalski@westpac.com.auPrior financial results Debt Investor Relations Jacqueline BoddyLouise Coughlan DirectorDirector (Rating Agencies) +61 2 8253 3133+61 2 8254 0549 jboddy@westpac.com.aulcoughlan@westpac.com.au Retail Shareholder Investor Relations Danielle StockJillian Maxwell Senior ManagerSenior Manager +61 2 8253 0922+61 2 8253 6556 danielle.stock@westpac.com.aujillian.maxwell@westpac.com.au Or email: investorrelations@westpac.com.au

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Disclaimer 138 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 Full Year Financial Results (incorporating the requirements of Appendix 4E) for the twelve months ended 30 September 2017 available at www.westpac.com.au for details of the basis of preparation of cash earnings. Refer to slides 33 for an explanation of cash earnings and Appendix 1 slide 132 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 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 2017 Full Year Financial Results for the twelve months ended 30 September 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 Full Year Results Presentation & Investor Discussion Pack

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a17-26037_1ex3.htm EX-3


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 November 6, 2017 Distribution Amount AUD 0.94000000 Ex Date Monday November 13, 2017 Record Date Tuesday November 14, 2017 Payment Date Friday December 22, 2017 DRP election date Wednesday November 15, 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 November 6, 2017 Notification of dividend / distribution 1 / 5 33007457141

 


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) Saturday September 30, 2017 2A.4 +Record Date Tuesday November 14, 2017 2A.5 Ex Date Monday November 13, 2017 2A.6 Payment Date Friday December 22, 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

 


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 Friday December 22, 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/ .

 


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 (%) 30.0000 % 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 Wednesday November 15, 2017 17:00:00 4A.4 Period of calculation of reinvestment price 4A.3 DRP discount rate 0.0000 % Start Date Friday November 17, 2017 4A.5 DRP price calculation methodology End Date Thursday November 30, 2017 4A.6 DRP Price (including any discount): AUD 4A.7 DRP +securities +issue date Friday December 22, 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 November 17 2017, with no discount. 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.

 

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0001104659-17-066431.txt   Complete submission text file   61677208

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