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Westpac delivers solid full year 2015 result


Westpac Group today announced statutory net profit for the 12 months to 30 September 2015 of $8,012 million, up 6% over the prior year. This result is unchanged from the Group's Preliminary Full Year 2015 Result released on 14 October to support its Share Entitlement Offer.

Highlights of the cash earnings result compared to the prior year included :

  • Cash earnings per share of 249.5 cents, up 2%
  • Cash return on equity (ROE) of 15.8%, down 57 basis points
  • Cash earnings of $7,820 million, up 3%
  • Final, fully franked dividend of 94 cents per share (cps), taking total dividends paid for the year to 187 cps, up 3%
  • Common equity tier 1 capital ratio of 9.5%
  • Sector leading expense to income ratio of 42.0%
  • Lending and customer deposit growth of 7% and 4% respectively
  • Awarded the Most Sustainable Bank Globally in the 2015 Dow Jones Sustainability Indices.

Westpac Chief Executive Officer, Mr Brian Hartzer, said that the result reflected the consistent execution of the Group's service-led strategy.

"Australian retail and business banking has been the key driver of performance, with Westpac RBB increasing cash earnings by 8% and St. George up by 7%.  The New Zealand division also reported a 6% increase in cash earnings (in NZ$).

"All divisions continued to grow their businesses and are in good shape.  However, some market headwinds contributed to a softer performance in our wealth and institutional businesses. 

"We have a high quality, well-performing franchise.  Our balance sheet is strong, we have significantly increased capital levels, and our asset quality is sector-leading.

"Importantly, our sustainability work over many years continues to drive how we do business and we are pleased to be once again recognised as the Most Sustainable Bank Globally in the 2015 Dow Jones Sustainability Indices," Mr Hartzer said.


In September 2015 Westpac outlined its strategy and announced it was accelerating plans to build one of the world's great service companies. This included increasing its annual investment to around $1.3 billion, directed towards growth, service and efficiency initiatives.

It also announced additional performance measures, including targeting a ROE of above 15%, adding more than one million new customers to the bank, a rise in products per customer, and an expense to income ratio of below 40% within three years.

Mr Hartzer said he was pleased with the progress of initiatives underway to support the strategy including:

  • 36% of branches converted to new smaller, more interactive formats;
  • 99% of Westpac branches have installed Connect Now, delivering immediate video access to business specialists;
  • Completed migration of Westpac Retail & Business Banking customers to 'Westpac Live'-our new online/mobile platform-which was rated the number 1 online/mobile platform in Australia and number 2 in the world2;
  • Launched Live Online Lending Application ('LOLA'), with over $30 billion of limits conditionally pre-approved for existing business customers;
  • Launched 'Wonder', a new online system to help Westpac home loan customers understand and better use the value in their home; and
  • Launched 'Westpac One', a new online/mobile platform in New Zealand.


Mr Hartzer said allowing for the approximately $3.5 billion of ordinary equity expected to be raised through its recent renounceable entitlement offer, Westpac will be well within the top quartile of banks globally with a CET1 ratio of over 14% on an internationally comparable measure3.

This follows $2.5 billion in capital raised earlier in the year through the partial underwrite of the 2015 interim dividend and the sale of part of the Group's shareholding in BTIM.

"The capital raised responds to regulatory changes that increase the amount of capital needed to be held against mortgages by more than 50%.
"Our capital raising allows us to meet regulatory requirements while continuing to support growth in the Australian economy," Mr Hartzer said.

The Board has increased the final dividend by 1 cps to 94 cps (compared to the interim 2015 dividend).  This takes the total dividends for the year to 187cps, up 3% and represents a payout ratio of 75% of cash earnings.

The Group will issue shares to satisfy the DRP for the final dividend, with no discount applied.


Key financial aspects of the FY15 result4,5, compared to FY14:

  • Net interest income of $14,239 million, up 6%, with net interest margin unchanged;
  • Non-interest income of $6,301 million, with volume growth offset by higher general insurance claims and lower trading income following changes made to derivative valuation methodologies6
  • Total lending rose 7% over the year.  Australian housing loans increased 7%, personal lending rose by 5%, and business lending increased by 6%.  New Zealand lending increased 7% in NZ$.  Customer deposits increased $17.9 billion, up 4%, with similar growth across Australia and New Zealand; 
  • A sector leading expense to income ratio of 42.0%; and 
  • Asset quality improved over the year with stressed exposures to total committed exposures falling 25bps to 0.99%.  While impairment charges rose 16%, at 12 basis points of average loans they remain at very low levels.



Cash earnings ($million)  FY15  2H15  1H15   % increase FY15-FY14   % increase 2H15-1H15
Westpac Retail & Business Banking  2,788  1,438  1,350  8  7
St.George Banking Group  1,688  851  837  7  2
BT Financial Group  904  453  451  0  0
Westpac Institutional Bank  1,286  662  624  (12)  6
New Zealand (NZ$)  916  475  441  6  8


Westpac RBB's focus on service and having Australia's leading mobile/online capability for customers helped deliver both core and cash earnings growth of 8%. Record customer growth of over 191,000 helped drive loan and deposit growth up 6% and 7% respectively.

St.George Banking Group's brands, St.George, BankSA, Bank of Melbourne and RAMS contributed to the 7% increase in cash earnings, with core earnings rising 8%. The Bank of Melbourne opened its 100th branch during the year and was voted best regional bank in Australia for the second time8. Revenue increased 7% with net interest income up 7% due to 8% growth in lending and a 3% rise in deposits.

BT Financial Group continues to be the leading wealth provider in Australia, ranking number 1 on all Platforms, with Funds under Administration (FUA) share of 19.9%. BTFG delivered flat cash earnings over the year with the result impacted by the partial sale of BTIM, lower performance fees, and higher insurance claims.

Westpac Institutional Bank is the number one institutional banking franchise in Australia. Financial conditions have been challenging, with margins 15 basis points lower in line with global capital market conditions.  This contributed to a 12% reduction in cash earnings to $1,286 million. The decline was also due to methodology changes to derivative valuations (which reduced revenue by $122 million) and a lower impairment benefit. The business continued to achieve good underlying growth, with lending up 12% and customer revenue up 2%.

Westpac New Zealand delivered another solid result with a 7% increase in core earnings and a 6% increase in cash earnings (9% and 8% respectively in A$). The result was supported by revenue growth of 7% and good balance sheet growth, with a 7% rise in lending and a 5% increase in deposits.


Mr Hartzer said despite mixed global economic conditions he remained positive about the growth outlook for the Australian economy, which was supported by low interest rates and a low Australian dollar.  Overall the economic transition from resource-dominated growth to a broader service-based economy is showing promising signs, particularly in the export sector.

"While consumers remain cautious, there are signs of improvement in non-mining related investment as the economy shifts to being more service sector-driven. 

"At the same time, with better world economic growth we expect some stability in Australia's terms of trade and stronger income growth over the medium term.

"For Australian banks, this means we continue to operate in a 'lower-for-longer' environment with modest credit growth, intense competition, and some ongoing regulatory uncertainty. However, housing credit growth is expected to ease, business is picking up, and we are continuing to grow in the wealth and insurance markets.

"We are positive about the future.  We're strongly positioned with a number 1 or 2 position in all of our key markets; we have a distinct portfolio of brands, a market-leading online and mobile platform, and a high quality management team," Mr Hartzer said.


1. Reported on a cash earnings basis unless otherwise stated.  For an explanation of cash earnings and reconciliation to reported results refer to pages 4,5 and 116-119 of the Group's 2015 Full Year Results announcement.

2. June 2015 Australian Mobile Banking Functionality Benchmark and July 2015 Global Mobile Banking Functionality Benchmark from Forrester Research.

3. The basis of the internationally comparable CET1 capital ratio aligns with the APRA study titled "International capital comparison study" dated 13 July 2015.

4. Cash earning basis.

5.All comparisons in the commentary are to the prior corresponding period unless otherwise stated.

6. This includes the first time adoption of a Funding Valuation Adjustment (FVA) to the fair value of derivatives in First Half 2015.

7. These are businesses as reported under the old structure. Reporting under the new structure will commence in FY16.

8. Financial Review Smart Investor Blue Ribbon Awards 2015.