Westpac Banking Corporation

Good morning and welcome to Westpac's full year 2025 results briefing. I'm Justin McCarthy, the General Manager of Investor Relations. Before we commence, I acknowledge the traditional custodians of the land in which we meet today. For us in Barangaroo, that's the Gadigal people of the Eora Nation. I pay my respects to Elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people. I'm pleased today to be joined by our CEO, Anthony Miller, and CFO, Nathan Goonan. After the presentation, we'll move to Q&A. There's details of the number attached to your invitation and to log a question, please press star one. With that, over to you, Anthony.

Thanks, Justin, and good morning, everyone. I'm pleased to present Westpac's four-year results to outline the value we're creating for customers, shareholders and the communities we serve. We began the year with a robust balance sheet and capital position. This provided us the capacity and flexibility to pursue our growth and transformation agendas. We are driving operational and business momentum supported by five priorities. To ensure we are there for our customers at the time and place that suits them, we've adopted a whole of bank to customer approach. Our refreshed leadership team is guiding our 35,000 people who are energised, engaged and turning our priorities into outcomes. It's not just what we deliver, but how, and that is why our focus on execution is key for Westpac. Disciplined execution is how we will achieve our goals. As Australia's first bank, we recognise the vital role we play in supporting economic prosperity. We're proud of our contribution as Australia's sixth largest taxpayer, helping to fund essential services and improve people's lives. Our employees bring this to life by volunteering their time and making pre-tax donations to more than 500 charities. Through our rugby league and cricket partnerships, we promote sport participation from grassroots clubs, including programs for schools, women and First Nations talent, through to elite competition. We also offer free financial literacy programs across Australia, New Zealand and the Pacific to help educate thousands of people and small business owners every year. We're improving banking access in regional areas and investing in ag scholarships and technology to drive innovation. These initiatives create more prosperous communities while fostering trust and brand advocacy. Turning to financial performance, the result reflects our strategy of balancing growth with returns while making necessary investments in people, innovation and transformation to support our future. Net profit excluding notables decreased 2% to $7 billion. Statutory net profit fell 1% to $6.9 billion. This led to a slight contraction in our key return metric, return on tangible equity. The impact was cushioned by the reduction in share count through the buyback. As we execute our transformation agenda, expenses are higher, lifting our cost of income to 53%. We're addressing the cost structure through our Fit for Growth program, which will help offset expense growth in FY26. Our performance reinforces the need for us to focus on execution while managing ROTI and CTI. The steady financial performance and strong capital position saw the board declare a second half dividend of 77 cents equating to a full year dividend of 153 cents per share fully franked. This equates to a payout ratio of 75% of profit after tax excluding notable items. This is the slide I used to track our progress against our FY29 targets. We put customers at the centre of everything we do. To be Australia's best bank, more work is needed to lift customer and brand advocacy. In the past two years, we've gradually improved consumer MPS. We're currently ranked equal second and the gap to first place has narrowed. In business, we have established clear leadership in SME and commercial. However, our overall position shows work is needed to lift small business. For institutional customers, we aim to be number one in our target markets by investing in our people's expertise and building stronger customer relationships. We're now executing Unite. We will be open and transparent as we drive to complete this program. On performance, our decisions and approach are guided by delivering improvements to cost income and ROTI. Our strategy supports our ambition to be our customers' number one bank and partner through life. For our customers, we aim to win the whole relationship by delivering the whole bank. To meet more customer needs, we're offering the full range of products and services we have in a more timely and personalised way. For our people, we are investing in their development and leader capability while driving a high performance culture where employees can perform at their best. On risk, we have completed the final transition of the Customer Outcomes and Risk Excellence Program, known as CORE. In response, APRA released the remaining $500 million of operational risk capital overlay, marking five years of meaningful change. Our commitment to ongoing risk improvements will continue and our priorities for risk management to be recognised as our differentiator. Our transformation agenda is focused on delivering Unite and two flagship digital innovations, BizEdge and Westpac One. Ultimately, our performance will be reflected in how we execute on these priorities. Our service proposition is foundational to earning trust and becoming the bank of choice for our customers. Despite economic uncertainty in recent years, our customers remain resilient. We supported customers with 46,000 hardship packages, with three quarters of them back on their feet. Service quality is improving. For example, our financial market clients' time to trade in the commercial division is down by 30%. Our new brand positioning, It Takes a Little Westpac, along with our award-winning banking app and rewards program, is strengthening engagement and loyalty. For businesses, we doubled our women in business commitment to $1 billion. We are growing our regional presence through new service centres. Our first location in Moree was well received by the community. Our latest Australian First Innovations Westpac Safe Call and Safe Block supported a further 21% decline in reported customer scam losses. This is just a snapshot of the ways we're improving our service proposition to become number one. With a refreshed executive leadership team, we're placing a stronger focus on how we lead and support our people to perform at their best. Professional development programs, including the Business Performance Academy, as well as skills training in data and AI, are just some of the ways we are investing in our people. We've strengthened our employee value proposition to attract, retain and develop top talent while expanding benefits. We're also building the presence of our bankers where it matters most for our customers. Employee engagement remains strong and we continue to invest to improve. Pleasingly, our consumer deposits grew by 10%, including offsets. This is a testament to the quality of our business and our customer base. It also reflects the effectiveness of our award-winning banking app and the competitive product suite which we have, which provide reliable, everyday banking solutions. We have expanded our capability in migrant banking. Prospective customers from several key markets can now apply for a transaction account before arriving in Australia. Our recent sponsorship of Cricket Australia will also present new opportunities in this target segment. Transaction banking is at the heart of our business strategy. New account openings of 130,000 supported transaction account growth of 13% this year. We also launched a new online payment solution, Online Pay. With simple onboarding, it has attracted 1,000 customers within three months of launch. In institutional banking, we continue to maintain our lead in public sector deposits with growth of 11%. Financial institutions is also a target area where we are now seeing real momentum. Our goal of deepening relationships and supporting more customer needs is reflected in loan growth across business and institutional. where existing customers make up approximately three quarters of new lending. Business lending increased by 15%, with even stronger growth across target sectors of health, professional services and agriculture. Institutional lending grew by 17%. The portfolio is diversified and will remain the country's largest lender to renewables. Growth in both areas has been accretive to ROTI. I'm very pleased that the average risk rates across the business and institutional lending books have remained stable while absorbing this attractive level of growth. Looking more closely at mortgages, our focus has been on getting the service proposition right, making it consistent, attractive and most importantly easy for our customers. We've made progress. Time to decision has improved with most proprietary home loans now processed in under five days. In a highly competitive environment, we must get the service proposition right and then balance growth with return. Overall, I think we've managed this well. Returns have improved, supported by operating efficiency and disciplined execution. We've been more efficient in how we deploy capital, with balances up and RWA down. Today's announced sale of the Rams portfolio will further improve the operating efficiency of our mortgage business. We've targeted high returning segments, including investors, where flows increased by around 4 percentage points to just under 40%. This was a deliberate move with our pricing competitive. In contrast, we positioned ourselves above market in owner occupied. Momentum in early FY26 has picked up and is tracking slightly above system. Looking further out, we see a clear opportunity to improve proprietary lending, which currently makes up just under one third of new flow. We know what to do. However, progress will take time. It will be measured in years, not months. To support this, we're adding more home finance managers. We're enhancing banker incentives and we're investing in the brand. Additionally, we're capturing insights and generating leads and opportunities by leveraging data, analytics and AI across the company to drive proprietary lending. Unite is up and running. We've finalised the scope, we have a plan and we are now into execution. Some initiatives are progressing faster than expected, which is encouraging, while others are proving more challenging. This is typical for a project of this scale. Moving to a single deposit ledger meant we had to revisit about a third of the initiatives to make sure we addressed all impacts and all interdependencies. This additional planning delayed our timeline. We expect completion where we are accruing all target benefits to extend from the end of FY28 into FY29. To drive execution, we formed a centralised delivery team of 1,600 people focused solely on Unite. We've also grouped the initiatives into 10 work packages to ensure we manage interdependencies and challenges effectively. In FY26, we expect to invest between $850 and $950 million in Unite as we go flat out on execution. The program is expected to account for approximately 40% of annual investment spend in FY27 and 28 before reducing in FY29. Our progress is starting to deliver improvements that are making banking simpler and more connected for our employees and our customers. We've put some of those outcomes in front of you. Two things I want to call out. Westpac home loan customers can now set up multiple offset accounts with no additional fee. This is a key feature requested by our customers. Since February, we've opened more than 35,000 additional accounts. We've also completed the migration of private bank customers to Westpac with minimal attrition. The validation that we've done this well is shown in recent positive brand MPS. We've completed eight initiatives and 51 are now underway. Most initiatives are green, a few are red, and we're prioritising getting those back on track. We will provide updates on progress and continue to refine our disclosure to improve transparency. We invested $660 million in Unite during FY25, and this was slightly above our guidance. This was because we saw an opportunity to get additional work done now, and so we prioritised the resources to make that happen. Alongside Unite, we're also modernising technology through capabilities like Westpac One and Biz Edge for better customer and employee experiences. Bizedge is our new lending origination platform, accelerating digital capabilities for bankers with AI-powered tools that support faster, more confident decision-making. This is dramatically improving how we lend to businesses by guiding applicants and bankers through the best pathway. Since launching in March, Bizedge has processed nearly $5 billion in business lending applications. So far, time to decision has improved by 45%. More benefits are on the way for customers and bankers. For institutional clients, Westpac One will be the new platform that brings together real-time treasury management, FX, trade and lending with powerful data insights. In December, we'll pilot the first Westpac One initiative with real-time transaction banking and a new modern digital experience for corporate clients. Advanced transaction banking capabilities like liquidity management, including multi-currency and cross-border capabilities, will be progressively dropped over the next 36 months. Once complete, the platform will deliver end-to-end liquidity and cash management, helping clients run and fund their businesses more efficiently. This capability will be market-leading and a differentiator in supporting our corporate, large commercial and institutional clients. AI represents a significant opportunity to improve the way our people work, as well as the quality of their work, to help us provide better, more consistent service to our customers. We're embracing new gen and agentic AI capabilities, while also continuing to use traditional AI tools like machine learning and advanced analytics. These are helping us automate tasks and modernise our technology. It's also giving our people more time back and providing bankers with more insights to serve customers better. The key is making sure we scale proven solutions. Examples with tangible benefits include strengthening defences against fraud and scams, supporting faster approvals for mortgages and business loans, helping employees quickly answer process and policy questions, and automating coding and testing. However, To realise its full potential, we must approach AI with an enterprise-wide mindset. We've appointed a global leader reporting directly to me to drive this across the entire company. We're moving at pace and recently launched the Westpac Intelligence Layer, which draws on the enormous data and insights across the company to drive faster, safer and more proactive decisions. We have prioritised using the layer in consumer to support our focus on growing proprietary lending. It is already giving our home finance managers better insights to deliver faster, more personalised service. I'm really excited about what we will achieve as we broaden this intelligence layer and roll it out across the bank in the next 12 months. Nathan will now take us through the performance in more detail.

Thanks Anthony and good morning everyone. It's a privilege to present my first result for Westpac. I recently took over from Michael as CFO and I want to begin by acknowledging Michael's contribution over the past five years and wish him all the best for the future. I'm excited to be joining Westpac at an important time in the company's history. I look forward to doing my best to help our people deliver consistently for our customers. As foreshadowed, we've adjusted our disclosures to make peer comparison easier. now reporting net profit excluding notable items as an equivalent measure to cash earnings among peers. Starting with the financial performance over the year before talking in detail about the half year trends. Excluding notable items which related solely to hedging items, net profit was down 2% with higher expenses more than offsetting growth in operating income and lower credit impairment charges. EPS was flat, reflecting reduced share count from the on-market share buyback. Revenue was up 3%, comprising a 3% increase in net interest income, driven by an increase in average interest earning assets and a one basis point decline in net interest margin, and a 5% increase in non-interest income. Operating expenses were 9% higher, including the restructuring charge of $273 million. Excluding the charge, expenses rose 6%. These revenue and expense outcomes resulted in a decline in pre-provision profit of 3%. Credit impairment charges remained low at five basis points of average gross loans compared with seven basis points the prior year. Half on half, we saw improving underlying trends offset by increased investment. Pleasingly, pre-provision profit increased in institutional, New Zealand and consumer, while business and wealth held flat. Net profit was up 2% in the half and comprised of the following. Net interest income rose $335 million. Core net interest income was up 3%, a two basis point increase in core net interest margin and a 1% growth in average interest earning assets. Non-interest income was up $143 million, mainly reflecting an increase in markets income, a combination of both client activity and market conditions. Expenses were up 9% or $520 million, including the restructuring charge. Overall pre-provision profit was down 1%. Excluding the restructuring charge, pre-provision profit increased 4%. Asset quality metrics continued to improve, resulting in lower credit impairment charges. The charge of four basis points to average loans was down from six basis points in the prior period. The effective tax rate was 30.6%, down from 31.3%. As Anthony outlined, sustainably growing customer deposits over time underpins our ambition to improve returns. The growth of 4% in the half was pleasing and highlights the inherent strength of our customer segments. Mix improved, with the reliance on term deposit decreasing from 29% to 27% of the book, while savings and transaction balances grew. We expect strong deposit growth to continue in FY26, with our economics team forecasting system growth of 7%, reflecting continued improvement in household conditions. Strong deposit growth has supported lending growth in chosen segments. Gross loans increased 3%, with growth across all customer segments. Australian mortgages, excluding rams, grew by 3%, slightly below system as we balanced growth and return in a competitive market. Australian business lending continues to show good momentum, growing at 8%. The larger commercial sub-segment performed well, and we also saw growth in both SME and small business, which grew 9% and 5% respectively. Prior to this half, small business had contracted or been flat in the preceding four halves. Institutional lending grew by 10%. The portfolio is well diversified with infrastructure, renewable energy and industrials underpinning growth. Lending grew 3% in New Zealand, where demand for credit remains subdued in a more challenging economic environment. The RAMS portfolio continued to run off. The balance at 30 September was $22 billion. The sale announced today is expected to complete in the second half of 2026. Until completion, these balances will continue to run off. Please bear with me as I spend a bit of time talking to net interest margin, given the importance and likely focus. Core net interest margin increased two basis points to 182. This follows a decline of three basis points in the prior half. We've seen a reduction in the amplitude of the components of NIM with all drivers having a modest impact. The lending margin was stable, with an improvement in New Zealand due to fixed rate repricing, offset by a decline from auto finance, which was sold in March. Lending margins in business contributed less than one basis point. In mortgages, the market remains competitive, but relatively stable, and we saw several factors play out. The cumulative impact of these was less than one basis point. These include the benefits from the initial timing impact from rate cuts. Deposits were also stable as benefits from the replicating portfolio and the repricing of the behavioural savings product was offset by the initial impact of rate cuts, customers switching to higher yielding accounts and more behavioural saving customers qualifying for the bonus rate, as well as the compression and TD spreads from prior period. Liquid assets contributed three basis points reflecting reductions in trading securities. Whilst a positive to NIM, this is neutral to earnings. Lower earnings on capital detracted one basis point. The benefit from the higher replicating portfolio rate was more than offset by the impact of lower rates on unhedged largely surplus capital and the averaging impact of the share buyback. The contribution from Treasury and markets rose from 12 to 13 basis points. Looking to first half 2026, we've included some key trends we expect to impact margin. We expect lending margins excluding the timing impacts from rate cuts to edge lower. Pressure on deposit spreads from the averaging impact of rate cuts and prior period switching to saving products is likely to continue. The replicating portfolio is expected to be a net benefit of one basis point. This includes a four basis point benefit from the total replicating portfolio offset by a three basis point reduction in unhedged deposits. This reflects the decision to increase the deposit hedge by $10 billion. This was executed in September and October to provide further earning stability through the cycle. The benefit from improved term wholesale funding markets is expected to be a slight tailwind While mortgage margins appear relatively stable, lending competition remains difficult to predict, along with short-term funding costs and RBA rate cuts. To this end, we've provided two sensitivities to help understand the potential impact. The next 25 basis point rate cut, RBA rate cut, leads to an approximate one basis point contraction over the first 12 months, reflecting the impact on unhedged deposits and capital. Based on September balances, a five basis point move in the three months Billzoys spread equates to approximately one basis point of NIM. Quickly touching on non-interest income, which increased 10% for the half. Fee income was up 5%, higher card fees reflected increased spending and fee changes which are being phased in. Business and institutional lending fees increased due to strong balance sheet growth. Wealth income was up 3% with higher funds under administration. Trading and other income increased 27% from higher sales and risk management income, including foreign rates and foreign exchange and favourable DVA. Moving to investment spend, which increased 9% over the year. Unite investment was $660 million as the project continued to step up through the period. The proportion of investment spend that was expensed increased to 60%. Unite was the main driver, with this work expensed at 74%. Notwithstanding the acceleration of Unite, spend on growth and productivity initiatives was in line with that of FY24. This includes Biz Edge and Westpac One. Risk and regulatory spend declined substantially after the completion of several projects, including the core program. Into FY26, investment spend is expected to be approximately $2 billion, with Unite accounting for just under half the total spend at $850 to $950 million. This is in line with the fourth quarter run rate where Unite's spend was $225 million. Both risk and regulatory and growth and productivity investment will decline to allow the Unite investment to accelerate within the expected $2 billion total investment spend. Moving to expenses. This slide has changed in presentation to better reflect the underlying drivers. My comments relate to movements over the year, which we believe provides a better guide to key trends. Staff costs increased $397 million as the new EBA began, superannuation rates increased and we invested in more bankers in business, WIB and consumer. Technology costs increased $146 million reflecting vendor inflation, increased demand to support growth and more cyber protection. Volume and other rose $199 million. Drivers include the important investment in our brand and marketing and higher operations related expenses to support customers and prevent fraud and scams. This was offset by $402 million of structural productivity savings. This included the benefit of a simpler operating model, more automation and reductions in branch space. The ramp up in Unite added $399 million over the year. Looking to FY26, staff costs will rise as we continue to invest in bankers and eligible employees receive a 3% to 4% pay rise under the EBA. The averaging impact of bankers hired from this year and higher superannuation rates will also flow through. Technology expenses are expected to remain a headwind. The expense contribution from investments will be driven by the mixed shift towards Unite, with the increased cash spend expensed at approximately 75%. Assuming the midpoint of our guidance, this will translate to 190 million increase in operating expenses. This will be partially offset by the decrease in other investment. Amortisation expense will continue to be a headwind in FY26, although to a much lower extent. We remain focused on closing the cost-to-income ratio gap to peers over the medium term and we need to structurally lower our expense base. Total productivity is expected to be at least $500 million in FY26. This revised view of productivity will give us a consistent way to demonstrate the benefits from both Unite and Fit for Growth initiatives. Overall, credit quality remains sound and with consumers and business portfolios performing well. Stressed exposures to total committed exposures decreased 8 basis points. This reflects a decline in mortgage arrears and reduced stress across most of our business segments. This half we've continued to see improvement in 90 day plus Australian mortgage arrears. These have reduced from a peak of 112 basis points in September last year to 73 basis points, reflecting a combination of customer resilience and an adjustment to the reporting of loans when customers complete their hardship period. In New Zealand, mortgage arrears fell by 8 basis points to 46 basis points, as rate relief began to feed through to customers, rolling off higher rate fixed mortgages. We have provided the chart by industry for our non-retail portfolio. As you can see, business customers are managing conditions well, with stress reducing across most sectors. Our portfolio remains well diversified across sectors and geographies. Looking forward, the two key drivers of asset quality outcomes are likely to remain the unemployment rate and asset prices. Total credit provisions were 2% lower at almost $5 billion. This reflects a $72 million decrease in individually assessed provisions and a reduction in model collectively assessed provisions driven by improvements in underlying credit metrics and the economic outlook. Offsetting the model-driven outcomes were two main items of management judgement. The weighting to the downside scenario was increased by 2.5 percentage points to 47.5 at the third quarter. The base case reduced by the same amount. In addition, we increased overlays by 108 million, with overlays as a percentage of total provisions increasing from 3% to 5% in the period. As a result, overall coverage reduced by one basis point, with total provisions now $1.9 billion above our base case. An improvement in the composition and funding and liquidity adds to our competitive positioning and helps provide medium-term earning stability. The deposit to loan ratio has reached an all-time high of just under 85%. A more stable source of funds from household and business transaction accounts has reduced the reliance on term funding, with issuance in FY25 the lowest in 10 years. Our liquidity and funding metrics are above our normal operating ranges, which we believe is appropriate given the market backdrop. The strength of the capital position is a key feature of this result and provides us with flexibility and opportunities over the medium term. The set one capital ratio ended the half at 12.5%. Net profit added 80 basis points while the payment of the half year dividend reduced capital by 58 basis points. Risk weighted assets attracted seven basis points with higher lending balances more than offsetting data refinements, improvements in delinquencies and a reduction in IRRRBB risk weighted assets. Other movements added 16 basis points, largely reflecting lower capitalised software balances and movements in reserves. There are several adjustments to consider for first half 26. These include the removal of the $500 million operational risk overlay in October, add 17 basis points of SET1 capital. The new IRRBB standard came into effect on 1 October. and the extension of our non-rate sensitive deposit hedge has now been allowed for regulatory purposes. These two items add 39 basis points of capital. Offsetting this, the remaining $1 billion of the previously announced share buyback will reduce step 1 by 23 basis points. Following these adjustments, the standardised capital floor was met in October. Importantly, there are opportunities for us to manage the standardised floor and we expect the impact on the set one ratio at the half to be modest. We've implemented a new capital target of 11.25% following APRA's changes to AT1. We have approximately $3.1 billion of capital above the new target after the payment of the second half dividend. The payout ratio excluding notable items was 75%, which is at the top end of our target range of 65% to 75%. This balances our strong financial and capital position while maintaining capacity to both invest and support customers. We have $1 billion of the previously announced buyback outstanding. We see value in the flexibility provided by this form of capital management. With that, I'll hand back to Anthony.