Greg Woodlock, sheep farmer and Westpac customer

Strength. Service. Trust?

Proudly Supporting Australia

2018 Westpac Group Annual Review & Sustainability Report

2018 Highlights

Supporting shareholders

Returning value to Westpac's 620,000 shareholders, most are Australian individuals and super funds.

Cash Earnings cents per share
Cash Earnings cents per share
236.2¢
down 1%
Cash return on equity
Cash return on equity
13%1
within range seeking to achieve 13-14%
Paid in dividends
Paid in dividends
$6.4bn
188 cents per share
Expense to income ratio
Expense to income ratio
43.7%1
down 143bps
Net tangible assets
Net tangible assets
$15.39
per share, up 5%

Westpac’s cash earnings for the year were supported by sound underlying growth with lending up 4%, customer deposits up 6% and average funds 4% higher. These gains were offset by provisions for customer payments and refunds, costs of the Bank Levy and a weaker markets contribution. Reported profit for the year was up 1% for the year. While earnings were relatively flat, the balance sheet has continued to strengthen across all dimensions. This has included a 6% rise in average ordinary equity an “unquestionably strong” capital ratio and a further improvement in funding and liquidity metrics. At the same time, credit quality has remained strong.

  1. All figures are on a cash earnings basis and are for the 12 months ended 30 September 2018 unless otherwise indicated. All comaprisons are against results for the 12 months ended 30 September 2017 unless otherwise indicated. All dollar amounts are in Australia dollars otherwise unless indicated. For an explanation of cash earnings and reconciliation to reported results, refer to pages 4-6 and 125-128 of the Group's 2018 Full Year Financial Results Announcement.

Supporting customers and businesses in Australia and New Zealand.

Helping
Helping
14.2 million
CUSTOMERS, UP 2%
Drought assistance
Drought assistance
$100m
LENDING FOR AFFECTED CUSTOMERS
Customer deposits
Customer deposits
$518bn
UP 6%
Business lending1
Business lending
$154bn
australia UP 3%
$30bn2
NEW ZEALAND, UP 4%
Home lending1
Home lending
$445bn
Australia up 4%
$49bn2
NEW ZEALAND, UP 4%
  1. Total lending.
  2. $NZ.

Building a future-ready workforce with a culture focused on service and doing the right thing.

Total employees
Total employees
35,029 FTE1
38,000+ Individuals
Gender balance
Gender balance
50%
WOMEN IN LEADERSHIP ROLES2
Paid to employees
Paid to employees
$4.9bn
Employee
sentiment3
Employee<br>sentiment<sup>3</sup>
73%
six month Rolling average, stable
New enterprise agreement
New enterprise agreement
90%
employee endorsement4
  1. Full time equivalent. 38,522 individuals.
  2. Proportion of women (permanent and maximum term) in leadership roles across the Group, including the 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 Manager, and Bank and Assistant Bank Managers.
  3. Monthly sentiment survey. Employee engagement is surveyed every two years. In 2017, it was 79%.
  4. New agreement effective 1 January 2019.

Helping to create a prosperous nation for the benefit of all.

Community contributions
Community contributions
$131m
in total
Community Grants
Community Grants
$2m
for 200 not-for-profit organisations
Total tax
expense
Total tax expense
$3.6bn TAX
+
$378m BANK LEVY
Climate change
Climate change
$9.1bn
COMMITTED EXPOSURE TO CLIMATE CHANGE SOLUTIONS
Social & affordable housing
Social & affordable housing
$1.36bn
Committed exposure to social and affordable housing

CEO’s Letter

Brian Hartzer - Westpac Group CEO
Brian Hartzer - Westpac Group CEO
Brian Hartzer - Westpac Group CEO

Dear fellow shareholders,
The 2018 financial year has been exceptionally difficult for the banking industry, and for Westpac. It has also been a disappointing year for our shareholders, both in terms of the reduction in our share price and the uncertainty that has been introduced as a result of various regulatory actions and the Royal Commission.

I therefore wanted to start my letter this year by acknowledging the effect these factors have had on you, and by thanking you for your continued support for Westpac. My management team and I are incredibly conscious of the trust that you place in us through your investment in our shares, and we do not take that trust for granted. I also want to reassure you that we are fully committed to resolving the current issues we face, creating better outcomes for customers and to delivering on our strategy to grow the sustainable value of your company.

Brian Hartzer Signature

Brian Hartzer

Download CEO’s Letter 801KB

Funding and Liquidity

– TERM DEPOSITS– SAVINGSCUSTOMER DEPOSITS$518bnSHAREHOLDERS EQUITY$65bn2WHOLESALE FUNDING– SHORT TERM– LONG TERM– SECURISATION$238bn2018FUNDING $821bn1$710bnTOTAL LOANS$445bnAUSTRALIANHOME LOANS$154bnAUSTRALIANBUSINESS LOANS$21bnAUSTRALIAN PERSONAL LOANS$74bn*NEW ZEALANDLOANS$16bnOTHER OVERSEASLOANS
$710bnTOTAL LOANS$445bnAUSTRALIANHOME LOANS$154bnAUSTRALIANBUSINESS LOANS$21bnAUSTRALIAN PERSONAL LOANS$74bn*NEW ZEALANDLOANS$16bnOTHER OVERSEASLOANS2018FUNDING $821bn1WHOLESALE FUNDING– SHORT TERM– LONG TERM– SECURISATION$238bn– TERM DEPOSITS– SAVINGSCUSTOMER DEPOSITS$518bnSHAREHOLDERS EQUITY$65bn2
  • $A
  1. Funding mostly for loans and liquidity.
  2. Excludes some reserves.

Chairman’s Letter

Lindsay Maxstead – Westpac Group Chairman
Lindsay Maxstead – Westpac Group Chairman
Lindsay Maxstead – Westpac Group Chairman

This year has been particularly challenging for financial services entities, including for Westpac. The sector has been the subject of intense scrutiny and interrogation from Government, regulators, the media, and the community generally.

However, far and away the greatest impact on public sentiment has been generated by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Lindsay Maxstead Signature

Lindsay Maxsted

Download Chairman’s Letter 398KB

Performance Metrics CASH EARNINGS BASIS

Earnings

CASH EARNINGS PER ORDINARY SHARE (CENTS)

ASSET QUALITY

STRESSED ASSETS TO total committed exposures (%)

CAPITAL

Common Equity Tier 1 CAPITAL RATIO (%)

DIVIDENDS

(CENTS PER SHARE) *special dividends

Sustainability

We have a long history in sustainability, recognised as a global banking leader in the Dow Jones Sustainability Indices (DJSI) for 17 years in a row - this year ranking 17th.

Issues that
matter

Sustainability is about constantly challenging ourselves on ways to create the most meaningful economic, social and environmental impact in the areas that matter most to our stakeholders.

In a challenging time for the industry, our 2018 Sustainability Performance Report explores how we’re responding to the most pressing opportunities and challenges including:

Governance, conduct and trustDigital innovationWorkforce of the futurePositive societal impactValue chain riskService leadership
Governance, conduct and trustService leadershipDigital innovationWorkforce of the futurePositive societal impactValue chain risk

Our 2018-2020 Sustainability Strategy - It’s about all of us - outlines our approach to building a sustainable future by taking action in the areas where we believe we can have the greatest impact.

Sustainable Development Goals logo
CULTURE FUNDAMENTALS AT THE HEART OF OUR STRATEGY IS OUR COMMITMENT TO DO THE RIGHT THING BY THE CUSTOMERS AND COMMUNITIES WE SERVE, HELPING THEM THROUGH MOMENTS OF CHANGE, AND BUILDING A CULTURE THAT’S CARING, INCLUSIVE AND INNOVATIVE HELPING PEOPLE MAKE BETTER FINANCIAL DECISIONS HELPING PEOPLE BY BEING THERE WHEN IT MATTERS MOST TO THEM HELPING PEOPLE CREATE A PROSPEROUS NATION
HELPING PEOPLE MAKE BETTER FINANCIALDECISIONS HELPING PEOPLE BY BEING THERE WHEN IT MATTERSMOST TO THEM HELPING PEOPLE CREATE A PROSPEROUSNATION CULTUREFUNDAMENTALSAT THE HEART OF ALL THAT WE DO IS OUR COMMITMENT TO DO THE RIGHT THING BY THE CUSTOMERS AND COMMUNITIES WE SERVE, HELPING THEM THROUGH MOMENTS OF CHANGE, AND BUILDING A CULTURE THAT’S CARING, INCLUSIVE AND INNOVATIVE

First year progress highlights on our 2018-2020 Sustainability Strategy include:

Drought
Drought
$100m
DROUGHT ASSISTANCE PACKAGE
CUSTOMER HARDSHIP
CUSTOMER HARDSHIP
37,000+
FINANCIAL ASSISTANCE PACKAGES
CLIMATE CHANGE SOLUTIONS
CLIMATE CHANGE SOLUTIONS
$9.1bn
LENT
COMMUNITY GRANTS
COMMUNITY GRANTS
200
NOT-FOR-PROFITS SUPPORTED BY WESTPAC FOUNDATION
Partnering for impact
Partnering for impact
One of 28 banks globally to come together to draft the UNEP FI1 Principles for Responsible Banking
  1. United Nations Environment Programme Finance Initiative (UNEP FI)

A decade since we first set out our climate change agenda, we made substantial progress against the targets set out in our 2020 Climate Change Action Plan.

We are on track to meet our lending target to climate change solutions.We were the largest financier to greenfield renewable energy projects in Australia over the year.And we continued our work to understand climate risk for our customers, communities and business.$9.1bncommitted to climatechange solutions $10bnby 202071%Renewables grew to over 71% of our lending to the electricity generation sector.Conducted new climate change scenario analysis in our Australia and New Zealand businesses, including an assessment of physical risks in our Australian mortgage book for the first time.
We are on track to meet our lending target to climate change solutions.$9.1bncommitted to climatechange solutions $10bnby 2020We were the largest financier to greenfield renewable energy projects in Australia over the year.71%Renewables grew to over 71% of our lending to the electricity generation sector.And we continued our work to understand climate risk for our customers, communities and business.Conducted new climate change scenario analysis in our Australia and New Zealand businesses, including an assessment of physical risks in our Australian mortgage book for the first time.
Download 2018 Sustainability Performance Report 7.5MB

Case Studies

Remuneration

Our Approach

Westpac’s remuneration strategy is designed to attract and retain talented employees. Remuneration outcomes reflect performance for the year and the creation of long term value for customers and shareholders, while adhering to sound management and governance principles and reflecting accountability.

Download full Remuneration Report in Westpac's 2018 Annual Report 9.9MB

2018 Executive Team Outcomes

In the Board’s assessment of Westpac’s performance, earnings were below expectations while the balance sheet was stronger across capital, liquidity and credit quality. The Group made good strategic progress with its service strategy and has continued to build the quality and diversity of its workforce.

In aggregate, the Group’s balanced scorecard outcome was below target. Further, to reflect executive accountability for risk and reputation matters, the Board has applied discretion to further reduce short term variable reward outcomes.

As a result, short term variable reward outcomes for the CEO and Group Executives in Australia are on average 25% lower than 2017 levels. At the same time, the performance hurdles for the 2015 Long Term Variable Reward plan were not met and, as a result, the awards were forfeited in full for the third consecutive year.

Download 2018 Board and Executive Remuneration 46KB

Board and Executive

Board of Directors
Lindsay Maxsted

Lindsay Maxsted

Director since March 2008 and Chairman since December 2011
Brian Hartzer

Brian Hartzer

Managing Director & Chief Executive Officer since February 2015
Nerida Caesar

Nerida Caesar

Director since September 2017
Ewen Crouch AM

Ewen Crouch AM

Director since February 2013
Alison Deans

Alison Deans

Director since April 2014
Craig Dunn

Craig Dunn

Director since June 2015
Anita Fung

Anita Fung

Director since October 2018
Peter Hawkins

Peter Hawkins

Director since December 2008
Peter Marriott

Peter Marriott

Director since June 2013
Peter Nash

Peter Nash

Director since March 2018
View more information about The Board of Directors
Brian Hartzer

Brian Hartzer

Managing Director & Chief Executive Officer
Lyn Cobley

Lyn Cobley

Chief Executive, Westpac Institutional Bank
Brad Cooper

Brad Cooper

Chief Executive Officer, BT Financial Group
Dave Curran

Dave Curran

Chief Information Officer
George Frazis

George Frazis

Chief Executive, Consumer Bank
Peter King

Peter King

Acting Chief Risk Officer
David Lees

David Lees

Acting Chief Financial Officer
Rebecca Lim

Rebecca Lim

Group Executive, Compliance, Legal & Secretariat
David Lindberg

David Lindberg

Chief Executive, Business Bank
Carolyn McCann

Carolyn McCann

Group Executive, Customer & Corporate Relations
David McLean

David McLean

Chief Executive Officer, Westpac New Zealand Limited
Christine Parker

Christine Parker

Group Executive, Human Resources
Gary Thursby

Gary Thursby

Chief Executive, Strategy & Enterprise Services
View more information about the Executive Team

Annual General Meeting

The Westpac Annual General Meeting (AGM) will be held on Wednesday, 12 December 2018 at the Perth Convention and Exhibition Centre, commencing at 10:00am (Perth time). The AGM will be webcast live on the Westpac website.

Perth Convention and Exhibition Centre
BelleVue Ballroom
21 Mounts Bay Road
Perth Western Australia 6000

More InformationNotice of Meeting (PDF - 263KB)

Contact

Head Office

275 Kent Street
Sydney NSW 2000
Australia

Tel: +61 2 9155 7713
Fax: +61 2 8253 4128

From outside Australia:
+61 2 9155 7700

Share Registrar

Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Australia

Mail: Locked Bag A6015 Sydney South NSW 1235
Tel: +61 1800 804 255
Fax: +61 2 9287 0303

Email: westpac@linkmarketservices.com.au
www.linkmarketservices.com.au

Westpac Group Sustainability

Email: sustainability@westpac.com.au

Tel: 1300 130 964

From outside Australia: +61 2 9767 0064

For further information on Westpac Group’s sustainability approach, policies and performance, please visit www.westpac.com.au/sustainability.