WESTPAC BANKING CORPORATION ii WESTPAC GROUP 2024 INTERIM FINANCIAL RESULTS
RESULTS ANNOUNCEMENT TO THE MARKET
ASX Appendix 4D
Results for announcement to the market1
Report for the half year ended 31 March 20242
Revenue from ordinary activitiesa,b ($m) | down | 4% | to | $10,590 |
Profitfrom ordinary activities after tax attributable to equity holdersb ($m) | down | 16% | to | $3,342 |
Net profitfor the period attributable to equity holdersb ($m) | down | 16% | to | $3,342 |
- Comprises reported interest income, interest expense and non-interest income.
- Above comparisons are to the reported results for the six months ended 31 March 2023.
Dividend distributions (cents per ordinary share) | Amount per security | Franked amount per security |
Interim dividend | 75 | 75 |
Special dividend | 15 | 15 |
Record date for determining entitlements to the interim and special dividend | 10 May 2024 | |
- This document comprises the Westpac Group 2024 Interim Financial Results Announcement, including the 2024 Interim Financial Reportand is provided to the Australian Securities Exchange under Listing Rule 4.2A.
- This Interim Financial Results Announcement should be read in conjunction with the 2023 Westpac Group Annual Report and any public announcements made in the period by the Westpac Group in accordance with the continuous disclosure requirements of the Corporations Act 2001 and ASX Listing Rules.
iii
RESULTS ANNOUNCEMENT TO THE MARKET
Introduction
Our interim period refers to the six months ended 31 March 2024 (First Half 2024). Throughout this Interim Financial Results Announcement (Results Announcement), we also refer to the six months ended 31 March 2023 (First Half 2023, or prior corresponding period), and the six months ended 30 September 2023 (Second Half 2023, or prior period).
The selected financial information for First Half 2024, First Half 2023 and Second Half 2023 contained in this Results Announcement is based on the financial statements contained in the unaudited consolidated Interim Financial Report for Westpac Banking Corporation (Westpac) and its controlled entities (collectively referred to as 'the Group') for the six months ended 31 March 2024. The Interim Financial Report has been prepared and presented in accordance with Australian Accounting Standards (AAS) as they relate to interim financial reports. The Interim Financial Report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as they relate to interim financial reports.
This Results Announcement contains certain statements that constitute 'forward-looking statements'. For an explanation of forward-looking statements and the risks, uncertainties and assumptions to which they are subject, see Section 3.1. Please consider those important disclaimers when reading the forward-looking statements in this Results Announcement.
In this Results 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. Percentage (%) movements are shown as % unless otherwise stated. This applies to all the tables in this Results Announcement. Unless otherwise stated, average balances represents a daily average over the relevant half year.
All dollar values in this Results Announcement are in Australian dollars unless otherwise noted. References to 'dollars', 'dollar amounts', '$', 'AUD' or 'A$' are to Australian dollars, references to 'US$', 'USD' or 'US dollars' are to United States dollars, references to 'NZ$', 'NZD' or 'NZ dollars' are to New Zealand dollars and references to 'GBP' are to British Pound Sterling. Refer to Section 3.7for information regarding the rates of exchange between the Australian dollar and the US dollar applied by the Group as part of its operating activities for First Half 2024, Second Half 2023 and First Half 2023.
Information on terms, acronyms and calculations used in this Results Announcement are provided in the Glossaryof the document.
Non-AAS financial measures
The Group's statutory results are prepared in accordance with AAS and are also compliant with IFRS.
In assessing the Group's performance and that of our operating segments, we use certain financial measures, including amounts, measures and ratios that are presented on a non-AAS basis, as described below.
Non-AAS financial measures and ratios do not have standardised meanings under AAS. As such they are unlikely to be directly comparable to similar measures presented by other companies and should not be viewed in isolation from, or as a substitute for, the AAS results.
- WESTPAC GROUP 2024 INTERIM FINANCIAL RESULTS
RESULTS ANNOUNCEMENT TO THE MARKET
Our non-AAS measures fall within the following categories:
Further | ||
Measure/ratio | Description | information |
Performance measures excluding the impact of Notable Items and businesses sold
The net interest income, non-interest income, operating expenses and | Sections 1.2, |
segment reporting sections of this Results Announcement include | 1.4,1.5.1, 1.5.6, |
performance measures that exclude Notable Items, businesses sold | 1.5.8and 2 |
and/or held-for-sale.
Notable Items are items that management believes are not reflective of the Group's ongoing business performance. Details of Notable Items are included in Section 1.4.
Businesses sold reflect the contribution to the Group's results in the period prior to their sale. It also includes any gains/losses related to their sale but excludes items that have been identified as Notable Items.
Performance measures which are adjusted for one or more of these items include:
• | Net interest income | ||
• Non-interest income (including net fee income, net wealth management | |||
income, trading income and other income) | |||
• Operating expenses (including staff expenses, occupancy expenses, | |||
technology expenses and other expenses) | |||
• Pre-provision profit | |||
• | Net profit | ||
• Net profitattributable to owners of WBC | |||
• Return on average ordinary equity | |||
• Return on average tangible equity | |||
Management considers this information useful as these measures provide a | |||
view that reflects the Group's ongoing business performance. | |||
Pre-provision profit | Pre-provision profitis net profit/(loss)excluding credit impairment | Section 1.2, 2 | |
(charges)/benefitsand income tax (expense)/benefit. | and 3.9 | ||
This is calculated as net interest income plus non-interest income less | |||
operating expenses. This includes (charges)/benefitsrelating to provisions | |||
and impairment other than from expected credit losses. | |||
Management considers this information useful as this measure provides | |||
readers with a view of the operating performance of the Group. | |||
Basic earnings per | Basic earnings per share (excluding Notable Items) is calculated as | Sections 1.3 | |
share (excluding | net profitattributable to owners of WBC (adjusted for RSP dividends) | and 3.9 | |
Notable Items) and | excluding Notable items divided by the weighted average number of | ||
Diluted earnings per | ordinary shares on issue during the period, adjusted for treasury shares. | ||
share (excluding |
Notable Items) | Diluted earnings per share is calculated by adjusting the basic earnings per |
share (excluding Notable Items) by assuming all dilutive potential ordinary | |
shares are converted. | |
Management considers this information useful as these measures provide | |
a view of the basic and diluted earnings per share based on the ongoing | |
operating performance of the Group. |
Core net interest income and Core net interest margin (NIM)
Core net interest income is calculated as net interest income excluding | Sections 1.3, |
Notable Items, and Treasury and Markets income. | 1.5.1, and 1.5.2 |
Core NIM is calculated as Core net interest income (annualised where | |
applicable) divided by average interest earning assets. | |
Management considers this information useful as these measures provide a | |
view of the underlying performance of the Group's net interest income and | |
margin, for lending, deposit and wholesale funding. |
v
RESULTS ANNOUNCEMENT TO THE MARKET
Further | ||
Measure/ratio | Description | information |
Dividend payout | Calculated as ordinary dividend paid/declared on issued shares (net of | Section 1.1 |
ratio (excluding | Treasury shares) divided by the net profitattributable to owners of WBC | and 1.3 |
Notable Items) | (adjusted for RSP dividends) excluding Notable Items. | |
Management considers this information useful as it provides a view of the | ||
dividend payout ratio based on the ongoing operating performance of | ||
the Group. |
Expense to income ratio (excluding Notable Items)
Calculated as operating expenses excluding Notable Items divided by net | Sections 1.3 |
operating income excluding Notable Items. | and 3.9 |
Management considers this information useful as this measure provides a | |
view of the efficiencyof the ongoing operating performance of the Group. |
Average tangible ordinary equity and Return on average tangible ordinary equity (ROTE)
Average tangible ordinary equity is calculated as average ordinary | Sections 1.3 |
equity less average goodwill and other intangible assets (excluding | and 3.9 |
capitalised software). | |
Return on average tangible ordinary equity is calculated as net profit | |
attributable to owners of WBC adjusted for RSP dividends (annualised | |
where applicable) divided by average tangible ordinary equity. | |
Management considers this information useful as these measures are | |
commonly used as a performance measure by WBC, investors, analysts and | |
others in assessing the Group's application of equity. |
Presentation changes
In First Half 2024, we have made changes to both the composition of our segments and the measurement of segment performance. Comparatives have been restated to align to the current period presentation. Refer to Section 2 for further details.
Certain comparative information has also been revised where appropriate to conform to changes in presentation in the current period to enhance comparability.
This Results Announcement is unaudited
PricewaterhouseCoopers has reviewed the financial statements and accompanying notes contained within the 2024 Interim Financial Reportin this Results Announcement and has issued an unmodified review report. All other sections in this Results Announcement including the Directors' Report, have not been subject to review
by PricewaterhouseCoopers. The financial information contained in this Results Announcement includes information extracted from the reviewed financial statements together with information that has not been reviewed.
- WESTPAC GROUP 2024 INTERIM FINANCIAL RESULTS
This page has been intentionally left blank.
2024 INTERIM | 1 | |||
PERFORMANCE REVIEW | DIRECTORS' REPORT | FINANCIAL REPORT | OTHER INFORMATION | |
Acknowledgment of Indigenous Peoples
Westpac acknowledges the First Peoples of Australia and recognises their ongoing role as Traditional Owners of the land and waters of this country, and we pay respect to Elders past and present. We extend that respect to Westpac's Aboriginal and Torres Strait Islander employees, partners and stakeholders, and to the Indigenous Peoples in the other locations where we operate.
In Aotearoa (New Zealand) we also acknowledge tangata whenua and the unique relationship that Indigenous Peoples share with all New Zealanders as partners and custodians of their natural ecosystems under Te Tiriti o Waitangi.
Contents
PERFORMANCE REVIEW | 2 |
1. Group performance | 3 |
2. Segment reporting | 38 |
DIRECTORS' REPORT | 56 |
Directors' Report | 57 |
2024 INTERIM FINANCIAL REPORT | 76 |
Notes to the consolidated financial statements | 82 |
Statutory statements | 114 |
OTHER INFORMATION | 117 |
3. Other information | 118 |
Glossary | 129 |
Any discrepancies between totals and sums of components in tables contained in this Results Announcement are due to rounding.
Westpac Banking Corporation ABN 33 007 457 141
2 WESTPAC GROUP 2024 INTERIM FINANCIAL RESULTS
PERFORMANCE REVIEW
- GROUP PERFORMANCE
- Performance overview
- Performance summary
- Key financial information
- Impact of Notable Items
- Review of earnings
- Credit quality
- Balance sheet and funding
- Capital and dividends
- Sustainability performance summary
- SEGMENT REPORTING
- Consumer
- Business and Wealth
- Westpac Institutional Bank
- Westpac New Zealand
- Group Businesses
PERFORMANCE REVIEW | 2024 INTERIM | 3 | ||
DIRECTORS' REPORT | FINANCIAL REPORT | OTHER INFORMATION | ||
1. GROUP PERFORMANCE | ||||
1.1. Performance overview1 | ||||
Financial highlights |
$3,342m | 9.3% | 75cents |
Net profit, | ROE, | Interim ordinary dividend per |
up 5% on 2H23 | up 40bps on 2H23 | share, fully franked, up 4% on 2H23 |
$3,506m | 10.5% | 12.5% |
Net profitex Notable Items, | ROTE, | CET1 capital ratio, |
down 1% on 2H23 | up 44bps on 2H23 | up 17bps on Sep-23 |
1H24 results overview
In First Half 2024 we have managed growth and margins in a disciplined way while improving service for customers and strengthening our capital position.
Net profitof $3,342 million increased 5% on the prior period. Excluding Notable Items2, net profitdecreased 1% to $3,506 million. The result reflects modest balance sheet growth, effective management of the net interest margin with less margin contraction than prior periods and the impact of ongoing, although easing, inflationary pressures on expenses. ROTE increased 44 basis points to 10.5%.
The interim ordinary dividend of 75 cents per share was up 4%. The payout ratio of 74%3 was at the upper end of our sustainable payout ratio range of 65% to 75%. Shareholders will also receive a special dividend of 15 cents per share, reflecting the strong capital position and franking credit balance. In addition, the previously announced $1.5 billion share buyback has been increased by a further $1.0 billion.
We continue to strengthen the Westpac franchise through an emphasis on consistent service and improving the customer experience across each of the segments.
Improved servicing capability, enhanced products and a leading mobile banking app4 were reflected in the Consumer net promoter score that consistently trended higher throughout the half. We achieved system growth in Australian housing loans against the backdrop of some easing of competition in the mortgage market. The increased simplicity of everyday banking offers, supported by our mobile banking app, continued to generate above system household deposit growth.
The Institutional bank continues to focus on deepening customer relationships, improving service and enhancing our product offering. Growth of 12% in average interest earning asset balances and improved survey rankings across a range of Financial Market industry surveys are testament to enhancements to both product and service.
Process simplification in business lending reduced the time to make a credit decision to 7.7 days with solid lending growth across Health, Utilities and Entertainment sectors. We continue to upgrade our merchant payment services with the launch of EFTPOS Flex this half. The recent acquisition of HealthPoint expands our payments capability in a strategic sector.
Risk management remains a priority. Following the completion of all CORE Integrated Plan activities, we have commenced the transition phase which will continue throughout 2024. Our focus is to ensure the sustainability and effectiveness of changes we have made to strengthen risk management and risk culture across the Group.
We maintained a strong financial position with capital, funding and liquidity all above regulatory minimums. The common equity tier 1 (CET1) capital ratio of 12.5% compares to the target operating range of 11.0% to 11.5% equating to $4.7 billion of capital above the top end of the target range. Credit impairment provisions of $5.1 billion are $1.4 billion above the expected losses of our base case economic scenario.
- Unless otherwise stated, all figures relate to the half year ended 31 March 2024, and are compared to figures for the half year ended 30 September 2023.
- Notable Items are discussed further in Section 1.4.
- Excluding Notable Items.
- The Forrester Digital Experience Review: Australian Mobile Banking Apps, Q4 2023.
4 WESTPAC GROUP 2024 INTERIM FINANCIAL RESULTS
1. GROUP PERFORMANCE
1.1. Performance overview (Continued)
Solid financial performance
$5.2bn | $5.4bn | 1.89% | 1.80% |
Pre-provision profit, | Pre-provision profit | NIM, down 5bps on 2H23 | Core NIM, |
up 5% on 2H23 | ex Notable Items, | down 3bps on 2H23 | |
flat on 2H23 | |||
Pre-provision profitwas $5,195 million, an increase of 5% on the prior period. Excluding Notable Items, pre-provision profitwas flat at $5,421 million driven by a 1% increase in net operating income and a 3% increase in operating expenses.
-
Net interest income decreased 1% to $9,127 million. Excluding Notable Items, net interest income increased
2% to $9,351 million reflecting disciplined management of price, margin and volume. The slight contraction in net interest margin (NIM) was partly offset by the 2% increase in average interest-earning assets. Growth in average interest-earning assets was driven by increases in owner occupied mortgages, and loans to business and institutional customers. - NIM was 1.89% and comprised:
- Core NIM of 1.80%, which contracted by 3 basis points from tighter loan spreads due to lending competition and a narrowing of deposit spreads from both a mix shift towards lower spread savings and term deposits and price competition. Higher earnings on capital and hedged deposits were a benefit;
- Treasury and Markets income of 14 basis points, up 3 basis points; and
- Notable Items, related to accounting for hedges, which reduced NIM by 5 basis points.
- Non-interestincome of $1,463 million was 2% higher. Excluding Notable Items, non-interest income was flat at $1,465 million.
- Operating expenses of $5,395 million decreased 5% due to Notable Items in Second Half 2023. Excluding these items, operating expenses increased by 3% due to higher software amortisation expenses and higher technology operating and related third-party vendor costs. Cost Reset actions, particularly fewer non-customer facing roles and reduced property footprint, provided a partial offset.
Credit quality sound
We remain appropriately provisioned with credit impairment provisions of $5,135 million, $1.4 billion above the expected losses of our base case economic scenario.
- Credit impairment charges were $362 million or 9 basis points of average loans, compared to 7 basis points in the prior period. The charge reflects a rise in both Collectively Assessed Provisions (CAP) and Individually Assessed Provisions (IAP).
- Deterioration in credit quality metrics was due to individual customer circumstances and a tougher economic environment. Stressed exposures to total committed exposures were 1.36%, a rise of 10 basis points compared to 30 September 2023.
- Credit impairment provisions of $5,135 million were up 4% due to higher CAP and IAP. The increase in provisions from the deterioration in credit quality was partly offset by reductions in overlays and the downside scenario weighting. The ratio of CAP to credit RWA was 1.38%, an increase of 3 basis points compared to September 2023.
IMPAIRMENT CHARGES TO AVERAGE LOANS (BPS)
109
7
1H23 | 2H23 | 1H24 |
CAP TO CREDIT RWA (%)
1.33 1.35 1.38
Mar-23Sep-23Mar-24
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Westpac Banking Corporation published this content on 05 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 May 2024 22:02:09 UTC.
