Westpac Banking : Capital Notes 4 Investor Presentation

PowerPoint Presentation WESTPAC CAPITAL NOTES 4

Investor Presentation

THIS PRESENTATION IS NOT FOR DISTRIBUTION TO ANY US PERSON OR ADDRESS IN THE UNITED STATES. YOU SHOULD CONSIDER AND READ THE PROSPECTUS IN FULL BEFORE DECIDING WHETHER TO INVEST IN WESTPAC CAPITAL NOTES 4.

This presentation has been prepared and authorised by Westpac Banking Corporation (ABN 33 007 457 141, AFSL 233714) ("Westpac") in connection with a proposed offer ("Offer") of Westpac Capital Notes 4 ("Notes"). The Offer is being made under a Prospectus which was lodged with the Australian Securities and Investments Commission ("ASIC") on 17 May 2016 and a replacement Prospectus, which will include the Margin and Broker Firm Application Form, expected to be lodged with ASIC on or about 26 May 2016.

Westpac Institutional Bank, ANZ Securities Limited, Commonwealth Bank of Australia, Morgan Stanley Australia Securities Limited, Morgans Financial Limited, National Australia Bank Limited and UBS AG, Australia Branch are the Joint Lead Managers to the Offer ("Joint Lead Managers").

The information in this presentation is an indicative overview and does not contain all information necessary to make an investment decision in relation to Westpac Capital Notes 4. It is intended to constitute a summary of certain information relating to Westpac and the Offer and does not purport to be a complete description of Westpac or the Offer. This presentation also includes information derived from publicly available sources that has not been independently verified.

The information in this presentation is subject to change without notice and Westpac is not obliged to update or correct it. Certain statements contained in this presentation contain language such as 'will', 'may', 'expect', 'indicative', 'intent', 'seek', 'would', 'should', 'could', 'continue', 'plan', 'probability', 'risk', 'forecast', 'likely', 'estimate', 'anticipate' or 'believe' and may constitute statements about "future matters" for the purposes of section 728(2) of the Corporations Act 2001 (Cth). 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, including, without limitation, future loan loss provisions, indicative drivers and performance metric outcomes. 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 us. 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. All statements as to future matters are not guaranteed to be accurate and any statements as to past performance do not represent future performance.

Nothing in this presentation constitutes investment, legal, tax, financial product or other advice. The information in this presentation is not intended to create any legal or fiduciary relationship and does not take into account your investment objectives, financial situation or particular needs, so you should consider its appropriateness having regard to these factors before acting upon it. This presentation is not intended as an offer, invitation, solicitation or recommendation with respect to the purchase or sale of any security. In making an investment decision, investors must rely on their own examination of Westpac and the Offer including the merits and risks involved. Investors should consult with their own legal, tax, business and/or financial advisers in connection with any acquisition of securities.

No representation or warranty, express or implied, is made as to the accuracy, adequacy, currency, completeness or reliability of any statements, estimates or opinions or other information contained in this presentation. To the maximum extent permitted by law, Westpac, the Joint Lead Managers and their related bodies corporate, affiliates and each of their respective directors, officers, employees and agents ("Affiliates") disclaim all liability and responsibility (including without limitation any liability arising from fault or negligence on the part of Westpac, the Joint Lead Managers and their related bodies corporate, affiliates and each of their respective directors, officers, employees and agents) for any direct or indirect loss or damage which may be suffered by any recipient through use of or reliance on anything contained in or omitted from this presentation. If any law prohibits the exclusion of such liability, Westpac's liability, to the maximum extent permitted by law, is limited to the re-supply of the information in this presentation to the extent which is fair and reasonable.

Westpac Capital Notes 4 are not deposit liabilities or protected accounts of Westpac for the purposes of the Banking Act 1959 (Cth) or the Financial Claims Scheme and are not subject to the depositor protection provisions of Australian banking legislation (including the Australian Government guarantee of certain bank deposits). Westpac Capital Notes 4 are not guaranteed or insured by any government agency, by any member of the Westpac Group or any other person.

A copy of the Prospectus is available at www.westpac.com.au/westpaccapnotes4. Applications for Westpac Capital Notes 4 may only be made during the Offer Period by completing and returning an Application Form attached to or accompanying the Prospectus or online at www.westpac.com.au/westpaccapnotes4. Neither the Joint Lead Managers nor their respective affiliates have authorised or issued the Prospectus and do not make, or purport to make, any statement that is included in the Prospectus and there is no statement included in the Prospectus which is based on any statement made by them. To the maximum extent permitted by law, the Joint Lead Managers and their respective affiliates expressly disclaim and take no responsibility for the contents of the Prospectus, Westpac Capital Notes 4 or the Offer.

Westpac RE Limited (ABN 80 000 742 478) ("WREL") has not authorised or caused the issue of the Prospectus or the making of the Offer, and has not been involved in the preparation of any part of the Prospectus (other than those parts relating specifically to the redemption of Westpac TPS) or this presentation. WREL has not made any statement or purported to make any statement in the Prospectus or this presentation or any statement on which a statement in the Prospectus or this presentation is based.

This presentation is not a prospectus or an offer of securities for subscription or sale in any jurisdiction. The distribution of this presentation or the Prospectus in jurisdictions outside of Australia may be restricted by law. Any person who comes into possession of this presentation or the Prospectus in jurisdictions outside Australia should seek advice on and observe any such restrictions. Nothing in this presentation is to be construed as authorising the distribution, or the offer or sale of Westpac Capital Notes 4 in any jurisdiction other than Australia, and Westpac and the Joint Lead Managers do not accept any liability in this regard. Failure to comply with these restrictions may constitute a violation of applicable securities laws. In particular, Westpac Capital Notes 4 have not been, and will not be, registered under the United States Securities Act of 1933, as amended, ("US Securities Act") and may not be offered, sold, delivered or transferred within the United States or to, or for the account or benefit of, US Persons (as defined in Regulation S under the US Securities Act).

All amounts are in Australian dollars unless otherwise indicated.

Certain financial information in this presentation is presented on a cash earnings basis. Cash earnings is a non-IFRS measure. Refer to Westpac's 2016 Interim Financial Results (incorporating the requirements of Appendix 4D) for the half year ended 31 March 2016 available at www.westpac.com.au/investorcentre for details of the basis of preparation of cash earnings.

Capitalised terms used in this presentation but not otherwise defined have the meanings given in the Prospectus.

Highlights for investors Highlights forWestpac

• A new investment in Westpac Banking Corporation, including a priority reinvestment offer for Eligible Westpac TPS Holders

• Non-cumulative, floating rate Distributions, payable quarterly and expected to be fully franked1

• Distribution Rate = (90 day Bank Bill Rate + Margin) x (1 - Tax Rate)

• Margin range 4.90% - 5.10% per annum. The Margin will be determined at the end of the Bookbuild

• Perpetual (no fixed maturity)

• Westpac option to Convert into Ordinary Shares, Redeem2 or Transfer on 20 December 2021

• A new Basel III compliant security that will qualify as Additional Tier 1 Capital

• Offer size approximately A$750 million, with the ability to raise more or less

• Supports capital management strategy of maintaining an appropriate mix of capital

  Westpac's Total Regulatory Capital (Level 2 basis) (%)

  CET1 Additional Tier 1 Tier 2

  14.0

  13.3

• Scheduled Conversion into Ordinary Shares occurs on 20 December 2023 subject to the conversion conditions

• Conversion into Ordinary Shares must occur following a Capital Trigger Event or Non-Viability Trigger Event

• In a Winding Up, Westpac Capital Notes 4 will rank ahead of

  Ordinary Shares, equally with other existing Additional Tier 1

  12.1

  1.8

  1.5

  1.9

  1.9

  1.9

  1.6

  4

  Capital securities and behind Senior Creditors3. The ranking of the investment will be adversely affected if a Capital Trigger Event or a Non-Viability Trigger Event occurs

• Expected to be quoted on ASX under code WBCPG

8.8 9.510.5

Mar-15 Sep-15 Mar-16

1 Distributions are payable subject to the satisfaction of the Distribution Payment Conditions, including that they are at the absolute discretion of Westpac. 2 Redemption is subject to APRA's prior written approval. There can be no certainty that APRA will provide such approval. 3 Seniors Creditors include depositors of Westpac, holders of Westpac's senior debt and holders of Westpac's less subordinated debt. 4 Adjusting for the increase in risk weighted assets for Australian residential mortgages related to a revised correlation factor (effective 1 July 2016) and Westpac's initial estimated impact of modelling updates to reflect changes in the reporting of mortgage hardship would reduce Westpac's Level 2 Common Equity Tier 1 Capital Ratio by an estimated 1.3%. The impact on risk weighted assets of the mortgage hardship changes is subject to ongoing consultation with and approval by APRA.

10.5% Level 2 CET1

(APRA Basel III basis)

• Materially higher - $6.0 billion in CET1 capital raised in calendar year 2015

  Westpac key balance sheet ratios as at 31 March 2016 (%)

  Includes equity,

• 14.7% CET1 capital ratio on an internationally comparable1 basis

• Places Westpac comfortably within the top quartile of banks globally

  securitisation and

  wholesale funding

  > 1 year

  $27bn liquidity buffer

  127 14.7

  83% Stable Funding Ratio

• In excess of 75% internal target

• Stable funding includes:

  • Customer deposits (60% of funding)

  • Equity 8%

  • Securitisation and wholesale funding

    >1 year 16%

• Short term funding 17% - more than halved since 2008

  127% LCR

• Comfortably above 100% regulatory minimum

• Fully compliant since 1 January 2015

  5.0% Leverage Ratio

• Basel III minimum 3% leverage ratio from

  Customer deposits

  83

  >75

  23

  60

  100 10.52

  8.0

  3.5

  CCB

  4.5

  Reg min.

  5.0 5.8

  January 2018 (APRA yet to set minimum)

• 5.8% leverage ratio on an internationally comparable1 basis

Stable Funding Ratio

Target (internal) LCR Regulatory minimum

Level 2 CET1 capital ratio (APRA

Basel III)

Regulatory minimum + regulatory capital

buffers 3

Level 2 CET1 (Internationally comparable)1

Leverage ratio (APRA)

Leverage ratio (Internationally comparable)1

1 Methodology aligns with the APRA study titled 'International Capital Comparison Study' dated 13 July 2015. 2 Adjusting for the increase in risk weighted assets for Australian residential mortgages related to a revised correlation factor (effective 1 July 2016) and Westpac's initial estimated impact of modelling updates to reflect changes in the reporting of mortgage hardship would reduce Westpac's Level 2 Common Equity Tier 1 Capital Ratio by an estimated 1.3%. The impact on risk weighted assets of the mortgage hardship changes is subject to ongoing consultation with and approval by APRA. 3 Comprises capital conservation buffer (CCB) of 2.5%, Westpac's domestically systemically important bank (D-SIB) surcharge of 1% and any countercyclical buffer (CCyB) requirement.