Westpac Banking : Issue of Tier 2 capital - cleansing notice

16 August 2017

Market Announcements Office ASX Limited

20 Bridge Street

Sydney NSW 2000 By e-lodgement

ASX Code: WBC

Dear Sir / Madam

ASIC Corporations (Regulatory Capital Securities) Instrument 2016/71 ("Instrument")

1. Westpac will issue the Tier 2 Subordinated Instruments today. Offers of the Tier 2 Subordinated Instruments do not require disclosure to investors under Part 6D.2 of the Act.

2. The terms and conditions of the Tier 2 Subordinated Instruments ("Conditions") are set out on pages 47 to 109 of the Information Memorandum relating to Westpac's U.S.$70,000,000,000 Programme for the Issuance of Debt Instruments dated 23 June 2017 ("Information Memorandum"), as supplemented by the Pricing Supplement dated 14 August 2017, the form of which is attached to this notice as Annex A ("Pricing Supplement"). The Information Memorandum was released to the Australian Securities Exchange ("ASX") on 26 June 2017 and may be viewed on www.asx.com.au.

3. The Tier 2 Subordinated Instruments will be treated as Tier 2 regulatory capital under the Basel III capital adequacy framework as implemented in Australia by the Australian Prudential Regulation Authority ("APRA").

4. If APRA determines that Westpac is or would become non-viable, the Tier 2 Subordinated Instruments may be:

5. Converted into fully paid ordinary shares in the capital of Westpac; or

6. immediately and irrevocably Written-off (and rights attaching to the Tier 2 Subordinated Instruments terminated) if for any reason Conversion does not occur within five ASX Business Days of APRA notifying Westpac of the determination,

   in accordance with the Conditions.

7. In order to enable ordinary shares in the capital of Westpac issued on Conversion to be sold without disclosure under Chapter 6D of the Act, Westpac has elected to give this notice under section 708A(12H)(e) of the Act as inserted by the Instrument. The Conditions and the information in the attached Schedule are included in, and form part of, this notice.1

   1 Westpac notes that, at its request, the Australian Securities and Investments Commission ("ASIC") made a further modification (under ASIC Instrument 16-1092) to the definition of "technical relief instrument" in section 9 of the Act as modified by ASIC Corporations (Disregarding Technical Relief) Instrument 2016/73, which ensures that Westpac is able to satisfy the definition of "continuously quoted securities" in section 9 of the Act for the purposes of the Instrument.

8. Westpac confirms that:

9. the information in this notice remains current as at today's date;

10. this notice complies with section 708A of the Act, as notionally modified by the Instrument; and

11. this notice complies with the content requirements of section 708A(12I) of the Act as inserted by the Instrument.

12. Unless otherwise defined, capitalised expressions used in this notice have the meanings given to them in the Information Memorandum or Pricing Supplement.

13. Yours faithfully

    Timothy Hartin Company Secretary

    Westpac Banking Corporation NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES

    This market announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from registration.

    SCHEDULE
14. Effect on Westpac of the offer of the Tier 2 Subordinated Instruments

    The issuance of the Tier 2 Subordinated Instruments raises Tier 2 regulatory capital to satisfy Westpac's regulatory requirements and maintain the diversity of Westpac's sources and types of capital funding.

    The proceeds from the issue of the Tier 2 Subordinated Instruments will be used for general business purposes. Those proceeds, less the costs of the issue, will be classified as loan capital in the financial statements of Westpac. The issue of the Tier 2 Subordinated Instruments will not have a material impact on Westpac's financial position.

    The proceeds of the issue, less the costs of the issue, will increase Westpac's total capital ratio on a Level 2 basis by less than 0.1%.

15. Rights and liabilities attaching to the Tier 2 Subordinated Instruments

    The rights and liabilities attaching to the Tier 2 Subordinated Instruments are set out in the Conditions as supplemented by the Pricing Supplement.

16. Effect on Westpac of the issue of the ordinary shares if the Tier 2 Subordinated Instruments are required to be Converted2

    ‑

    A key feature of APRA's requirements for Tier 2 regulatory capital instruments is that they absorb losses at the point of non-viability of the issuer. The Conditions include provisions that require the Tier 2 Subordinated Instruments to be Converted into ordinary shares in the capital of Westpac or Written-off on the occurrence of a Non-Viability Trigger Event. A Non-Viability Trigger Event will occur when APRA notifies Westpac in writing that it believes that relevant non-viability circumstances (as described in the definition of "Non-Viability Trigger Event" in the Conditions) subsist, which could occur at any time.

    If a Non-Viability Trigger Event occurs and Westpac Converts the Tier 2 Subordinated Instruments and issues ordinary shares to Holders, the effect of Conversion on Westpac would be to reduce loan capital by the principal amount, less any unamortised costs of the issue, of the Tier 2 Subordinated Instruments being converted and increase Westpac's shareholders' equity (ordinary share capital) by a corresponding amount.

    APRA has indicated that at this time it will not provide guidance as to how it would determine non

    viability.

    Non-viability could be expected to include serious impairment of Westpac's financial position, concerns about its capital, funding or liquidity levels and/or insolvency.

    The number of ordinary shares issued on Conversion is variable, but is limited to the Maximum Conversion Number. Limiting the number of ordinary shares which may be issued to the Maximum Conversion Number means that it is likely that Holders will receive a number of ordinary shares that have a market value that is significantly less than the outstanding principal amount of the Tier 2 Subordinated Instruments.

    The Maximum Conversion Number is calculated based on a VWAP set to reflect 20% of the Issue Date VWAP. The Maximum Conversion Number may be adjusted to reflect a consolidation, division or reclassification or pro rata bonus issue, of ordinary shares. However, no adjustment will be made to it on account of other transactions which may affect the price of ordinary shares, including for example, rights issues, returns of capital, buy-backs or special dividends.

    The Maximum Conversion Number is 312.0125 Westpac ordinary shares per Tier 2 Subordinated Instrument (with a nominal value of AUD2,000), based on the Issue Date VWAP of AUD32.05. If Conversion of any Tier 2 Subordinated Instruments does not occur for any reason within five ASX Business Days after the occurrence of the Non-Viability Trigger Event, the Tier 2 Subordinated Instruments will be Written-off, and all corresponding rights and claims of Holders under the Conditions (including to payments of interest, the repayment of principal and upon Conversion, the receipt of ordinary shares) will be immediately and irrevocably written-off and terminated, with effect on and from the Non-Viability Trigger Event Date and investors will lose all or some of their investment.

    2 If, in accordance with the Conditions, Westpac is replaced by an Approved Successor as debtor of the Tier 2 Subordinated Instruments and the issuer of ordinary shares, Tier 2 Subordinated Instruments may be converted into fully paid ordinary shares in the capital of an Approved Successor in accordance with the Conditions. This notice also enables ordinary shares in the capital of an Approved Successor which is a NOHC for the purposes of the Banking Act 1959 (Cth) issued on Conversion to be sold without disclosure under Chapter 6D of the Act. Refer to the Conditions and the Instrument for further information.

17. Rights and liabilities attaching to the ordinary shares in the capital of Westpac

    Westpac was registered on 23 August 2002 as a public company limited by shares under the Act. Westpac's constitution was most recently amended at the general meeting held on 13 December 2012 ("Constitution", as amended from time to time). The ordinary shares in the capital of Westpac are admitted to trading on ASX. The rights attaching to the ordinary shares in the capital of Westpac are set out in the Act and the Constitution.

    In addition, the rights and liabilities attaching to the ordinary shares in the capital of Westpac are described on pages 262 to 263 of the 2016 Westpac Group Annual Report and pages 149 to 152 of the Information

    Memorandum3. The Annual Report was released to ASX on 9 November 2016 and may be viewed at www.asx.com.au, and is also available on the Westpac website at www.westpac.com.au/investorcentre.

18. Additional information

Information about the Tier 2 Subordinated Instruments is contained in the Information Memorandum and the Pricing Supplement.

Westpac is a disclosing entity for the purposes of the Act and, as a result, is subject to regular reporting and disclosure obligations under the Act and the ASX Listing Rules. In addition, Westpac must notify ASX immediately (subject to certain exceptions) if it becomes aware of information about Westpac that a reasonable person would expect to have a material effect on the price or value of its listed securities, including ordinary shares in the capital of Westpac.

Copies of documents lodged with the Australian Securities and Investments Commission ("ASIC") can be obtained from, or inspected at, an ASIC office and Westpac's ASX announcements may be viewed on www.asx.com.au.

Any person has the right to obtain copies of:

• Westpac's half-yearly and annual financial reports; and

• any continuous disclosure notices given by Westpac after the lodgement of the 2016 Westpac Group Annual Report, but before the date of this notice,

from www.westpac.com.au/investorcentre, or by request made in writing to Westpac at: Westpac Group Secretariat

Level 20 Westpac Place 275 Kent Street

Sydney NSW 2000.

3 If, in accordance with the Conditions, Westpac is replaced by an Approved Successor as debtor of the Tier 2 Subordinated Instruments and the issuer of ordinary shares, then on Conversion Holders will be issued with fully paid ordinary shares in the capital of the Approved Successor.