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Westpac New Zealand Limited Year Ended 30 September 2013 Investor update
January 2014
: 2
The material contained in this presentation is intended to be general background information on Westpac Securities NZ Limited and
Westpac New Zealand Limited and their activities. It should not be reproduced, distributed or transmitted to any person without consent of
Westpac New Zealand Limited and is not intended for distribution in any jurisdiction in which such distribution would be contrary to local
law or regulation.
The information is supplied in summary form and is therefore not necessarily complete. It does not constitute a prospectus, offering
memorandum or other offering document or an offer of securities. Also, 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 New Zealand dollars unless otherwise indicated. All financial data in this presentation is as at 30 September
2013 unless otherwise stated.
This presentation contains statements that constitute “forward-looking statements” within the meaning of section 21E of the United States
Securities Exchange Act 1934. Forward-looking statements are statements about matters that are not historical facts. The forward-looking
statements include statements regarding our intent, belief or current expectations with respect to our business and operations, market
conditions, results of operations and financial condition.
We use words such as ‘will’, ‘may’, ‘expect’, 'indicative', ‘intend’, ‘seek’, ‘would’, ‘should’, ‘could’, ‘continue’, ‘plan’, ‘probability’, ‘risk’,
‘forecast’, ‘likely’, ‘estimate’, ‘anticipate’, ‘believe’, or other similar words to identify forward-looking statements. These 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 Westpac Securities NZ Limited and/or Westpac New Zealand Limited. Should one or more of the risks or
uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from the expectations
described in this presentation. Factors that may impact on the forward-looking statements made include those described in the section
entitled “Principal risks and uncertainties” in the Management Report in the Westpac Securities NZ Limited Financial Statements for the
year ended 30 September 2013. When relying on forward-looking statements to make decisions with respect to Westpac Securities NZ
Limited and/or Westpac New Zealand Limited, investors and others should carefully consider such factors and other uncertainties and
events. We are under no obligation, and do not intend, to update any forward-looking statements contained in this presentation.
: 3
Franchise and Strategy
Financial Results and Trends
Capital Structure
Wholesale Funding
NZ Economic Outlook
NZ Housing Portfolio
: 4
: 5
Award winning
Key Financial Data Year ended
30 Sept 2013
Change
2013 - 2012
Net profit after tax $714m 16%
Cost to income ratio 42.5% 100bps
Impairment charges $107m 44%
Total gross loans $62b $2b
Total deposits $47b $4b
Common equity Tier 1 ratio 12.3% n/a
Kanga News – New Zealand Domestic Issuer of the
Year 2013
The Asian Banker – Strongest Bank Balance Sheet New
Zealand
Credit Ratings (Short term / Long term / Outlook)
Standard and Poor’s A-1+ / AA- / Stable
Moody’s Investor Services P-1 / Aa3 / Stable
Fitch Ratings F1+ / AA- / Stable
Market share1 As at 30 Sept 2013
Consumer lending 20%
Retail deposits 21%
WNZL at a glance
• One of new Zealand’s largest banking organisations
• Regulated by the Reserve Bank of New Zealand (RBNZ)
• A wholly owned subsidiary of Westpac Banking Corporation,
operating Westpac’s consumer, business and institutional
banking operations in New Zealand
• Strategy focused on organic growth within New Zealand
• Strong franchise with over 200 branches nationwide and
1.3m customers
1.Source: RBNZ
:
Westpac Group
Westpac Life New Zealand
BT New Zealand
Westpac Securities NZ Limited
(WSNZL)
New Zealand Australia
Westpac New Zealand
Limited (WNZL)
Locally incorporated Bank, wholly owned but not guaranteed by Westpac Banking Corporation
Comprises Westpac’s consumer, business and institutional banking operations in NZ
Financial performance disclosed via quarterly WNZL Disclosure Statement (DS)
Guarantor for WSNZL funding programmes
A wholly owned subsidiary of WNZL
Unconditional and irrevocable guarantees of funding programmes from WNZL
Provides offshore wholesale funding for WNZL through its London branch
6
: 7
:
Higher growth in target segments,
including Agri, SME, MyBank
Targeted growth to
optimise the portfolio
Continued
strengthening of
balance sheet
Continued activity in the
wholesale market
Maintain strong ROE with a focus
on margin management
Efficient use of capital
Disciplined cost
management
Reshaping the
distribution channels
for business efficiency
8
Strength
A strong
company
Growth
Various
drivers
Productivity
Continued
improvement
Return
Maintain
discipline
: 9
R
G
S
Improved core earnings and reduced impairment charges leading to improved cash earnings
NIM broadly maintained during FY13 despite competitive pressures
Expense to income ratio reduced to 42.48% at 30 September 2013 from 43.50% at 30 September 2012
Reduced FTE’s from 4,691 to 4,481 at 30 September 2013
Improved deposit to loan (D2L) ratio to 75.6% from 70.6% at 30 September 2012
Asset quality improving with a reduction in Business stressed exposures and housing delinquencies
Deposit growth funded loan growth as well as wholesale debt and intra-group debt reductions
Targeted mortgage (below 80% LVR) growth with business lending growth in line with system
P
: 10
: 11
1. Source: WNZL Disclosure Statements
2. FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 excludes the institutional business.
11
(NZ$m) 1 FY11 FY12 2 FY13
Variance
($)
Variance
(%)
Net interest income 1,316 1,499 1,536 37 2%
Non interest income 308 356 371 15 4%
Net operating income 1,624 1,855 1,907 52 3%
Operating expenses (771) (807) (810) (3) (0%)
Underlying profit
/ core earnings853 1,048 1,097 49 5%
Impairment charges (224) (190) (107) 83 44%
Income tax expense (196) (245) (276) (31) (13%)
Profit after income tax expense
/ cash earnings433 613 714 101 16%
Net interest margin 2.41% 2.31% 2.29% (2 bps) N/A
ROE 10.1% 11.8% 11.5% (30 bps) N/A
Deposit to Loan Ratio 65.0% 70.6% 75.6% 500 bps N/A
Funding position 18,493 18,060 15,489 2,571 14%
: 12 12
1. Source: WNZL Disclosure Statements
2. FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 excludes the institutional business.
3. Funded Liquids exclude inter entity cash balance between WNZL and NZ Branch, which is included in Due from related entities ($467m)
4. Excluding Registered Certificates of Deposit which are included in wholesale funding
(NZ$m) 1 FY11 FY12 2 FY13
Variance
($)
Variance
(%)
Assets
Net loans 51,250 59,422 61,585 2,163 4%
Funded Liquids 3 6,693 6,651 6,270 (381) (6%)
Due from related entities 1,565 1,575 1,424 (151) (10%)
Other assets 1,148 1,174 1,233 59 5%
Total assets 60,656 68,822 70,512 1,690 2%
Liabilities
Customer deposits 4 33,330 41,967 46,648 4,681 11%
Wholesale funding 19,186 14,337 13,179 (1,158) (8%)
Intra-company borrowings 970 4,070 2,100 (1,970) (48%)
Other due to related entities 1,806 1,579 1,097 (482) (31%)
Other liabilities 868 1,073 922 (151) (14%)
Total liabilities 56,160 63,026 63,946 920 1%
: 13
Historically… …And throughout FY13
2.33%
2.26%
2.00%
2.13%
2.25%
2.38%
2.50%
4Q12 1Q13 2Q13 3Q13 4Q13
WNZL NIM
Net interest margin (%)
Disciplined margin management
Impairment charges ($m)
Improved asset quality
Expense to income ratio (%)
Improvements in efficiency Cash earnings ($m)
Strong all round performance
Net interest margin (%)
Disciplined margin management
Impairment charges ($m)
Improved asset quality
Expense to income ratio (%)
Improvements in efficiency Cash earnings ($m)
Consistent performance uplift
59 36
21 28 22 0
20
40
60
80
4Q12 1Q13 2Q13 3Q13 4Q13
107 2.53%
2.29%
2.00%
2.20%
2.40%
2.60%
FY09 FY10 FY11 FY12 FY13
WNZL NIM
620
334 224 190 107
0
165
330
495
660
FY09 FY10 FY11 FY12 FY13
248 286 433
613 714
100
275
450
625
800
FY09 FY10 FY11 FY12 FY13
148 159 185 178 192
50
100
150
200
250
4Q12 1Q13 2Q13 3Q13 4Q13
714
42.2% 48.4% 47.5% 43.5% 42.5%
0.0%
12.5%
25.0%
37.5%
50.0%
FY09 FY10 FY11 FY12 FY13
42.5% 46.1% 41.4% 42.3% 40.1%
0.0%
12.5%
25.0%
37.5%
50.0%
4Q12 1Q13 2Q13 3Q13 4Q13
FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 and prior excludes the institutional business.
:
65.8 66.0
67.8
70.6
75.2 75.6
64.0
67.0
70.0
73.0
76.0
1H11 2H11 1H12 2H12 1H13 2H13
%
42.0
46.6
1.7
2.9
40.0
42.0
44.0
46.0
48.0
4Q12 Term Call 4Q13
Deposit to loan ratio (%)
14
500bps improvement
10.95% growth
Deposits FY13 ($bn) Historical trend in deposits and mix ($bn)
19.2
23.1 24.9
14.1 18.9 21.8
-
12.5
25.0
37.5
50.0
FY11 FY12 FY13
Term Call
Customers with a Wealth product (000)
219
297 324
341
150
205
260
315
370
1H12 2H12 1H13 2H13
'000s
Call 42% Term 58%
Call 45% Term 55%
Call 47% Term 53%
$46.6bn $33.3bn $42.0bn
FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 and prior excludes the institutional business.
:
5,869 5,7876,006 6,048 6,067
4,200
4,700
5,200
5,700
6,200
4Q12 1Q13 2Q13 3Q13 4Q13
19,769 19,79819,954 20,021
20,515
19,000
19,500
20,000
20,500
21,000
4Q12 1Q13 2Q13 3Q13 4Q13
35,986 35,97836,542
37,06237,594
30,000
32,000
34,000
36,000
38,000
4Q12 1Q13 2Q13 3Q13 4Q13
59,422 59,19159,915 60,453
61,585
52,000
54,500
57,000
59,500
62,000
4Q12 1Q13 2Q13 3Q13 4Q13
15
Total net lending ($m) Gross Housing lending ($m)
Gross Agri lending ($m) Gross Business lending ($m)
3.6% growth
3.4% growth
3.8% growth
4.5% growth
+$1,670m, 2.8%
+$1,052m, 2.9%
+$561m, 2.8%
+$61m, 1.0%
:
287 299 336 358
-
100
200
300
400
FY10 FY11 FY12 FY13
382 382 384 386 384
89 95 87 94 95
0
125
250
375
500
4Q12 1Q13 2Q13 3Q13 4Q13
Non II Net II
1,164 1,316
1,499 1,536
291 308
356 371
-
500
1,000
1,500
2,000
FY10 FY11 FY12 FY13
Non II Net II
16
Operating income trends ($m) Operating income ($m)
Fee and commission income ($m) Fee and commission income trend ($m)
31% growth
3.4% growth 25% growth
$1,907m
$1,624m
$1,855m
$1,455m
85 86 84
91
97
80
85
90
95
100
4Q12 1Q13 2Q13 3Q13 4Q13
FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 and prior excludes the institutional business.
:
4555
74
101
0
20
40
60
80
100
120
FY10 FY11 FY12 FY13
Spe
nd
($m
)
FY10 FY11 FY12 FY13
4698 4,660 4,691 4,481
0
1250
2500
3750
5000
FY10 FY11 FY12 FY13
704 771 807 810
-
210
420
630
840
FY10 FY11 FY12 FY13
17
Operating Expenses ($m) FY13 Expense to income ratio vs peers
Investment and compliance spend ($m) FTE (000)
41.06%
43.86% 44.25%
42.48%
38%
40%
42%
44%
46%
Peer Peer Peer Westpac
FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 and prior excludes the institutional business.
: 18
Stress assets to TCE (%) Continued improvement in the quality of assets
5.24% 4.32%
3.35% 2.30%
0.0%
2.0%
4.0%
6.0%
8.0%
FY10 FY11 FY12 FY13
Impairment charges to gross loans (%)
Strengthening of lending book
0.10% 0.07%
0.18% 0.17%
Peer Peer Peer Westpac
0.09% 0.22%
0.10%
0.32%
Peer Peer Peer Westpac
+15bps -8bps +15bps -1bps FY13
FY12
>80% LVR as % of housing book against peers Continued improvement in the quality of housing assets
Mortgage delinquency trend (%)
Continued improvement in the quality of housing assets
23.10%22.13%
15.36%
18.65%
22.13%
21.74%20.91%
20.49%
12%
15%
18%
21%
24%
Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13Peers Westpac
0.75
0.29
0.40
0.250.29
0.12
0
0.2
0.4
0.6
0.8
Sep-10 Sep-11 Sep-12 Sep-13
90+ days 30-60 days 60-90 days
FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 and prior excludes the institutional business.
: 19
:
34,379
36,130
42,567
44,893
30,000
34,000
38,000
42,000
46,000
FY10 FY11 FY12 FY13
20
FY13 Total capital ratios (%)
Capital levels well funded
Source: Company Annual reports and 30 September 2013 Disclosure statements or equivalents
10.40% 10.40% 8.87%
12.30%
Peer Peer Peer WestpacCET1 T1 T2
12.61% 12.30% 12.40% 11.90%
Tier 1 capital ratio (%)
Continued re-investment in capital
9.5% 9.9% 10.5% 12.0% 12.3%
0.0%
3.5%
7.0%
10.5%
14.0%
FY09 FY10 FY11 FY12 FY13
Basel III Basel II
Risk weighted assets trend (%)
Improving asset quality
Return on equity (%)
Strong return with reinvestment of profits
7.30%
10.10% 11.80% 11.50%
0.0%
3.0%
6.0%
9.0%
12.0%
FY10 FY11 FY12 FY13
FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 and prior excludes the institutional business.
:
11.9 12.1 12.3
10.5 12.0 11.7
11.9 12.1 12.3
13.0
14.1
13.1 13.0 12.1 12.3
0
5
10
15
20
Sep-11 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13
Total common equity Tier 1 Total Capital
WNZL regulatory capital ratios (%) FY13 capital ratios Basel III (%)
Basel III Basel II
3,470 4,600 4,600 4,600 4,600 4,600
967
1,079 1,237 1,425 1,602 1,818
970
970 500 500
1,000
2,500
4,000
5,500
7,000
Sep-11 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13
Equity Retained earnings Subordinated debt
WNZL equity composition ($m)
21
Capital adequacy ratios
Common Equity Tier One Capital ratio 12.3
Tier One Capital ratio 12.3
Total Capital ratio 12.3
Reserve Bank minimum ratios
Common Equity Tier One Capital ratio 4.5
Tier One Capital ratio1 6.0
Total Capital ratio 8.0
Buffer ratios
Buffer ratio2 4.3
Buffer ratio requirement2 2.5
1. Prior to a change in the Conditions of registration that took effect on 1 January 2013, locally incorporated registered banks having the benefit of the Wholesale Funding Guarantee Facility were required to maintain an additional 2% Tier One Capital ratio buffer above the then 4% regulatory minimum. Following the change, all locally incorporated registered banks are required to hold a minimum Tier One Capital ratio of 6%. 2. As at 30 September 2013, there was no prescribed minimum regulatory buffer. A prescribed minimum regulatory ratio of 2.5% came into effect from 1 January 2014.
: 22
:
Commentary
Core Funding
Funding composition
23
Core Funding comfortable above RBNZ minimum.
Term maturities well spread for manageable annual refinancing task
On going reduction on reliance on offshore funding markets (27% FY10 to 12% FY13).
Term maturities
50%
60%
70%
80%
90%
100%
2H10 1H11 2H11 1H12 2H12 1H13 2H13
WNZL Core Funding Ratio RBNZ Min Core Funding Ratio
: 24
Source: Company Annual reports and 30 September 2013 Disclosure statements or equivalents
28.40%
20.70% 22.60%
20.60%
15.0%
18.0%
21.0%
24.0%
27.0%
30.0%
Peer Peer Peer Westpac
2,776 , 21%
1,534 , 12%
8,869 , 67%
CP RCDS Term debt issues
$13b
Total funding composition (%)
57 57 63 68
34 34 23 205 3
9 9 10 9
FY10 FY11 FY12 FY13
Deposits Wholesale Funding Intercompany Debt Equity
Wholesale funding (%) Wholesale funding by currency (%)
FY13 wholesale funding to total liabilities (%)
Active management of wholesale debt
28%
23%21%
16%
12% Domestic Medium Term Notes
Euro Medium Term Notes
US Commercial Paper
Covered Bonds
Certificates of Deposit
39%
31%
23%
6%
1%
NZD
USD
EUR
CHF
Other
FY12 includes 11 months of the institutional business which vested on 1 November 2011. FY11 and prior excludes the institutional business.
:
5.57.1 7.2 6.9
4.0
4.0 4.0 4.0
0.0
3.0
6.0
9.0
12.0
FY10 FY11 FY12 FY13
Funded Unfunded
17%
4%
4%
22%
4%12%
37%
Cash
Due from other financialinstitutions
Supranational securities
NZ Government securities
NZ Local Authoritysecurities
NZ Corporate securities
RMBS
Commentary
Liquid assets ($bn)
Liquid assets composition
25
Funded liquid assets have remained relatively stable over last 3 years.
Liquid asset coverage of wholesale funding maturities continues to strengthen.
Periodic changes in liquid assets reflects liquidity management activities undertaken in response to wholesale maturities to maintain compliance with internal and regulatory requirements.
Asset portfolio diversified
Liquid assets as % short term funding
: 26
:
Region Population
Northland 158,400
Auckland 1,507,600
Waikato 416,200
Bay of Plenty 277,300
Gisborne 46,800
Hawke's Bay 155,000
Taranaki 110,100
Manawatu-Wanganui 232,500
Wellington 490,100
Tasman 48,400
Nelson 46,600
Marlborough 45,700
West Coast 32,900
Canterbury 558,800
Otago 211,200
Southland 94,900
Statistics NZ Estimate as at June 2012 4,432,500
Northern (53% of population)
Central (24% of population)
South (23% of population)
Source: Statistics NZ, 2006 Census
27
:
Westpac forecast a strong NZ economy through 2014, following on from a robust Q3 in 2013, highlighted by a 1.4% rise in GDP.
September’s GDP highlights the robust recovery to farm production following the drought earlier in the year, along with the continued positive impact of the Christchurch rebuild as this continues to gain momentum.
Westpac expects the construction sector to accelerate further, providing the main source of economic growth over the next couple of years, driven by Christchurch, and Auckland, where net migration feeds an already tight property market.
Post-earthquake building in Canterbury is expected to ramp up further . Latest official estimates of the total cost of reconstruction in Canterbury are NZ$40bn, or about 20% of annual GDP. This activity – largely funded by global reinsurance payouts – is expected to be spread over a decade or more, but to peak in 2015.
Higher house prices are also expected to encourage greater construction activity in Auckland. A housing shortage in Auckland developed after the 2008/2009 recession as a result of strong population growth and a construction downturn.
House prices are expected to continue rising throughout 2014 and 2015, albeit at a slower rate as interest rates rise. Recently introduced restrictions on mortgage lending to low-deposit borrowers are also expected to slow the market, albeit modestly.
Government austerity is expected to continue to constrain growth in government-related industries, and the high exchange rate will remain a considerable challenge for the export and import-competing sectors.
Overall, we expect a further steady improvement in economic growth, with GDP reaching 3.7% by early 2015.
28
:
Unemployment Rate
29
Net Immigration (’000s)
World Prices for NZ commodities GDP Growth – Annual change
-4
-2
0
2
4
6
8
-4
-2
0
2
4
6
8
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
% %
Source:
Forecast
50
100
150
200
250
300
350
50
100
150
200
250
300
350
1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016
Index Index
3
4
5
6
7
8
9
10
11
12
3
4
5
6
7
8
9
10
11
12
1990 1993 1996 1999 2002 2005 2008 2011 2014
% %
Forecast
Forecast
-40
-30
-20
-10
0
10
20
30
40
50
60
-100
-50
0
50
100
150
1992 1995 1998 2001 2004 2007 2010 2013 2016
Net (right axis) Arrivals Forecast
:
House prices by region
30
Average Prices
House prices inflation Christchurch rebuild
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2011 2013 2015 2017 2019 2021
$bn $bn
Residential
Commercial
Infrastructure
Estimate Forecast
-15
-10
-5
0
5
10
15
20
25
30
-15
-10
-5
0
5
10
15
20
25
30
2000 2002 2004 2006 2008 2010 2012 2014 2016
% %
Forecast
75
80
85
90
95
100
105
110
115
120
125
130
75
80
85
90
95
100
105
110
115
120
125
130
2006 2007 2008 2009 2010 2011 2012 2013
2007 peak = 100
2007 peak = 100 Auckland
Wellington
Christchurch
Rest of North Island
Rest of South Island
Nov-13 Nov-12 Change
New Zealand $460,067 $421,497 9.2%
Auckland Area $685,350 $594,856 15.2%
Wellington Area $448,325 $435,468 3.0%
Christchurch City $450,049 $400,496 12.4%
Hamilton City $356,829 $338,384 5.5%
Tauranga City $438,540 $423,865 3.5%
Queenstown-Lakes District $638,630 $614,249 4.0%
:
Rental vacancy rates
31
Commentary
House affordability Leverage and Servicing
0
2
4
6
8
10
12
14
16
0
20
40
60
80
100
120
140
160
180
1991 1994 1997 2000 2003 2006 2009 2012
% %
Household debt as % nominal disposableincome
Servicing as % nominal disposable income
0
5
10
15
20
25
0
1
2
3
4
5
6
1990 1992 1994 1997 1999 2001 2004 2006 2008 2011
Ratio Ratio
House price-to-income ratio (left axis)
Lower quartile house price-to-median rent (rightaxis)
• House leverage at historically high levels
• Mortgage servicing aided by historically low
rates
• Rental vacancy rate low driven by general
housing shortage.
:
NZ interest rate markets
32
Commentary
90 day rate projections 90 day interest rates
• NZ bill rates have been stable at historical lows
for 4 years
• The broader market consensus is that rates
will begin to rise in Q1 2014
• Rates rises over next 2 years around 2.5%
• Swap rates reflect expectations
0
2
4
6
8
10
12
14
16
0
2
4
6
8
10
12
14
16
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
% %
Forecast
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Nov-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16
% % RBNZ projection (SepMPS)Swap market pricing
Westpac Economicsforecast
: 33
: 34
40%
10%8%
42%
Home loan Portfolio - Regional Profile
Auckland Wellington Christchurch Rest
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0<=60 60<=70 70<=80 80<=90 90<=95 95+
Home Loan Portfolio - LVR Profile
• Mortgage portfolio of $37.5bn.
• Geographic profile consistent with
population concentrations of New Zealand.
• Well secured book with low LVR profile.
• Growth in above 80% LVR lower than peers.
10%
15%
20%
25%
30%
Ma
r-1
1
Ma
y-1
1
Jul-
11
Se
p-1
1
No
v-1
1
Jan
-12
Ma
r-1
2
Ma
y-1
2
Jul-
12
Se
p-1
2
No
v-1
2
Jan
-13
Ma
r-1
3
Ma
y-1
3Home Loan Portfolio - Above 80% LVR Proportions
WNZL Peer 1 Peer 2 Peer 3 Peer 4
: 35
22%
16%
9%9%7%
37%
Home loan Portfolio - Maturation Profile
Less than 1 year 1 to 2 years 2 to 3 years
3 to 4 years 4 to 5 years 5 + years
0%
5%
10%
15%
20%
25%
30%
35%
40%
$0
-$
150
k
$1
50k
-$
250
k
$2
50k
-$
500
k
$5
00k
-$
750
k
$7
50k
-$
1m
$1
m +
Home Loan Portfolio - Original Loan Amount
• Majority of lending concentrated in lower loan amounts (less than $500k).
• Less than 3% of the portfolio are large loan sizes above $1m. Limits exposure to higher value market segments that are typically more volatile in a downturn.
• Well seasoned book with 37% of the portfolio past 5+ years maturation. This provides significant equity buffers from home price appreciation and loan schedule reduction.
• 52% of the portfolio is already past peak delinquency development (3+ years vintage maturation).
: 36
• Delinquency rates continue to improve for both 30+ and 90+ day arrears.
• Driven by improved underwriting standards and strengthening New Zealand housing market and economy.
• Loss rates stable and continue to run at less than 1% annualised.
• More recent vintages performing strongly.
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
Oct
-11
No
v-1
1
De
c-11
Jan
-12
Feb
-12
Ma
r-12
Ap
r-1
2
Ma
y-1
2
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
No
v-1
2
De
c-12
Jan
-13
Feb
-13
Ma
r-13
Ap
r-1
3
Ma
y-1
3
Jun
-13
Jul-
13
Au
g-1
3
Sep
-13
Mortgage Portfolio - Delinquency Rates
90+ Days Delinquent 30+ Days Delinquent
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37
Home loan Portfolio - 30+ Vintage Performance
2006 2007 2008 2009 2010 2011 2012
0.00
0.20
0.40
0.60
0.80
1.00
1H
09
2H
09
1H
10
2H
10
1H
11
2H
11
1H
12
2H
12
1H
13
2H
13
Home Loan Portfolio - Half Year Loss Rates
: 37
• Advance payments driven by customers maintaining scheduled payments at historical levels after rate falls.
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Housing Loans - Payments In Advance
% of Total Outstandings
30 to <60 days 60 to <90 days 90 days plus
: 38
:
1 - 10 days Payment retry
1 - 21 days Branch/Relationship contact
21 - 30 days Phone Call - Dialler
32 days Letter – penalty interest
39 - 45 days Phone Call - Dialler
46 days Letter – intention to list default
46 - 80 days Phone Call – Dialler and Manual
80 days Issue Demand
90 days Demand expires – transfer to Recoveries
90+ days Assess strategy – contact borrower – repayment arrangement agree/monitor Instruct Solicitors to issue Property Law Act Notice Instruct / obtain Registered Valuation to confirm ERV and assess provision
120+ days On expiry PLA, obtain two market appraisals and instruct mortgagee sale proceedings, marketing campaign usually four weeks
150+ days Day of auction set reserve price and if met, settlement four weeks later
180+ days Attend to settlement and assess any shortfall, any ongoing actions including Bankruptcy
39
:
For further information contact:
Jim Reardon
Treasurer
Westpac New Zealand Limited
+64 9 367 3539
John Toro
Westpac Securities NZ Limited
+44 20 7621 7540
For further information on WNZL and WSNZL:
Funding and Securitisation
Programmes
WNZL Disclosure Statement
WSNZL Financial Statements
Please visit our investor website:
www.westpac.com.au/investorcentre/fixed-income-
investors/ Click on “Westpac New Zealand” or
“Westpac Securities NZ Limited”
40