Westpac Banking Cp Ord

Well good morning everyone and welcome to Westpac's first half 2021 results. My name is Andrew Bowden and I'm Head of Investor Relations. I'd like to acknowledge the traditional owners and custodians of the land on which we meet, the Gadigal people of the Eora Nation and pay my respects to Elders past, present and future. Joining me today are our CEO Peter King and our CFO Michael Rowland. I'll start proceedings off and then we'll open up to Q&A. Without further ado, let me pass off to Peter.

Well, thanks, Andrew, and good morning and thanks for joining us. With 2020 being such a challenging year, it's great to present a stronger first half result and an improved economic outlook. The rebound in the economy has been good for the community, for customers and for Westpac. Governments, health services, central banks and businesses have to date successfully managed through COVID. In short, it has been a real team effort. I'm pleased with the role Westpac and particularly our people have played in helping customers and each other. The strength of our balance sheet allowed us to support over 200,000 customers and while challenges will continue for some, the vast majority are now back on full repayment. So today I'll present our results and progress on strategic priorities before handing over to Michael for the financials. And turning to our first half performance, it's been a period of clear progress on a number of fronts. Cash earnings improved significantly to $3.5 billion. And this reflected the first impairment benefit that I can recall and much more lower notable items. As I look at the first half, I was particularly pleased with getting mortgages back on track. We also manage margins well and strengthen the balance sheet across capital and credit quality. Our plan to simplify our business is underway, announcing three investments and progressing our Asian consolidation. While I'm happy with our progress, we still have areas requiring significant work. In the core franchise, we will restore growth in business lending and improve response times, particularly in mortgages. We're investing in risk management through our core program with a specific focus on culture change. Finally, our costs are too high and today we're outlining our cost reset, including clear targets and accountability. On the result, both cash earnings and reported net profit were up significantly on the last two halves. There's two main drivers, the 1.3 billion turnaround in impairments and a $938 million reduction in notable items. Earnings per share and return on equity rebounded with return on equity just above 10%. The bottom table excludes notable items. On this basis, core earnings was flat on the prior half as the impact of low rates was offset by a rise in non-interest income. Expenses remain elevated as we continue to invest in our fixed priority. but were lower over the half. Excluding notable items, cash earnings rose 35% reflecting the impairment outcome. Over the past 12 months we have undergone some major changes in board and management. We have refreshed the ET with Chris, Anthony and Scott joining us over the past six months. On the right is our operating model which is a big change from how the bank has been run in the past. We are now making decisions through our lines of business. This has started with clear accountability and better end-to-end process management. Continuing to simplify the process is important as we digitise and automate. Our mortgage line of business is leading this change and the turnaround shows what can be achieved when authority and accountability are aligned. While we still have a lot to do, the way forward is clear and we are executing well on our plans. Last year we refreshed our purpose and values along with our strategic priorities of Fix, Simplify and Perform. I've been using these to drive the company forward and we've made good progress on each. Quickly touching on New Zealand, we are assessing whether a demerger can create value for shareholders. This is not about New Zealand's performance. It's been a solid contributor again this half. The catalyst of the review is the changing nature of banking, both in New Zealand and globally. Increasingly, banking is a local game, and with the BS11 requirements in New Zealand, there is limited opportunity for Australia and New Zealand to share capability and scale. There is more to do, and we will provide updates as necessary. If I start with six, we're fundamentally changing and strengthening our risk frameworks, controls and monitoring to deliver better outcomes for all stakeholders. Much of the change is being led by our expanded core program with 19 work streams comprising over 300 programs of work. Importantly, a group executive is accountable for each work stream. The program is also subject to quarterly assurance from Promitree. which we will release every six months with results. In financial crime we've made significant progress in fixing our issues and we're now focusing more on prevention and detection. Across both risk and financial crime we've increased resources significantly and we now have the capability and capacity required to deliver on our plans. Our simplified priority is about streamlining our portfolio of businesses, reducing offshore locations and making it easier for customers to do business with us. Jason and his team have worked hard and we've announced the sale of three of our specialist businesses. We're expecting these to settle in the second half of the year. We have good interest in the remaining assets and expect more announcements in the second half. Geographically, we're consolidating our Asian operations into Singapore. Jakarta and Mumbai are now closed and we expect to exit Beijing, Shanghai and Hong Kong next year. The impact of these changes is evident in our balance sheet with the fall in offshore lending and deposits. And we're also simplifying our banking business. Over the past six months, we've reduced a number of fees and charges, simplified processes and improved our digital capability, including the new Westpac app that is helping customers do more online. The decision to combine the leadership of consumer and business banking in Australia was consistent with this priority, reducing the duplication of overhead support and allowing us to push more responsibility into the lines of business. Turning to perform, mortgages has been a major priority and we've grown in the half. With the mortgage line of business now having accountability for their end-to-end process, we've identified where we need to improve, reduce unnecessary work and streamline activities across the brands and channels. This work can be summarised across three areas. Processes have been simplified including reducing hand-offs and removing duplication. We've made over 60 policy and process changes and reduced the number of customer documents and forms. The end result sees 68% of applications auto-decisioned. Finally, we're also rolling out our digital mortgage application process across all brands and this is helping customers through the process and to accept documents digitally. With a steady improvement in applications, mortgages have returned to growth and we're on the track to match major bank system in the second half. As I said earlier, we need a competitive cost base and today we have outlined our three-year plan. We are targeting an $8 billion cost base by 2024, which will require investment of around $3.5 billion to $4 billion over the three years. Michael will take you through the outline of the program in detail, but obviously this is a big change for Westpac as we have not historically set absolute targets. At a high level, there are four main drivers. First, we will improve our processes and risk management to reduce the notable items of recent years. The significant remediation costs have been disappointing and they must reduce as we improve our controlled environment. Second is the exit of specialist businesses, while our simplification initiatives are the third source of saving. Finally, we will have a smaller head office consistent with the smaller business we will become. While becoming leaner, we are retaining our investment spend of around 1.3 billion per year to accelerate the change. This will see us spend around 3.5 to 4 billion over the three years. Under our lines of business approach, we are renovating our end-to-end processes and policies and using technology to digitise them. We've prioritised mortgages, business lending, payments, digital channels, and GTS, and work is underway on each. While most of this investment is directed to our front-end capability, we're also focused on the quality of our data and our data infrastructure. This is particularly important to improve reporting and customer outcomes. We're also changing the way we operate, shifting from large multi-year programs to smaller, more discreet projects. This new cadence will accelerate change and delivery of more regular outcomes. Scott's been working on the roadmaps since he joined in November and we will outline more detail later this year. While there is a lot to do, the team and I are absolutely committed to deliver the plan. With improved earnings and stronger capital, we've had a good look at both the dividend and our dividend policy. The principles of our approach remain the same and we will look to target a long-term sustainable payout ratio around 60% to 65%. This is down from a few years ago as low interest rates have reduced returns and we see slightly higher asset growth. This half, we've determined a 58 cent dividend representing a payout ratio of 60%. with the improved conditions and capital when neutralising the DRP with no discount on the market price. We now have excess capital however we need clarity on the final capital rules before we consider returning capital. Thank you and I'll now hand over to Michael to take you through the numbers.

Thanks Peter and good morning everyone. As I reflect on the result I feel we've navigated a challenging environment well and while it's had an impact I'm pleased with the result, particularly with the higher return and better dividend. When I look at the half, I'd make three points. First, performance was better than we expected, particularly from stronger margins and a turnaround in impairments. Second, while our spend on the fixed agenda remains elevated, we have seen good outcomes on credit quality and provisions. And finally, our line of business model is driving a better performance culture. Today I will provide more colour on the numbers before discussing our cost reset and considerations for the rest of the year. So let's turn to the detail. This chart sums up the result with the increase in cash earnings driven by the impairment benefit and lower notable items. Looking at cash earnings before notable items, net interest income was down slightly with higher margins offset by lower lending. Non-interest income increased as activity recovered and some of the COVID impacts receded. Expenses were down a little from the timing of project spend, lower restructuring costs and reduction in our branch network. These declines more than offset the additional staff for our fixed agenda. Tax was higher, as expected, with an effective tax rate slightly above the Australian corporate tax rate, reflecting hybrid distributions not being tax deductible. Given the impact of notable items, I would like to explain these in more detail. Notables had a $282 million impact on cash earnings this half and we disclosed these last week. Remediation and litigation costs were $276 million as we increased provisions for known matters and for program costs as we completed further reviews. This category also included the cost of ending our agreement with IOOF and litigation costs mostly from previously disclosed settlements. We wrote off the goodwill associated with lenders' mortgage insurance as we agreed to sell the business to Arch Capital in the half. We also wrote off some capitalised software for systems being replaced or no longer in use. Asset sales and revaluations were a $193 million benefit. As we announced last week, we booked a gain from the revaluation of Coinbase and the sale of our holding in Zip. The earn-out payments from the sale of our vendor finance business were also high. Partly offsetting these gains were losses on the sale of Westpac Pacific and from divestment costs. The sale of our specialist businesses underpin our simplification plans but do impact future earnings. In the investor pack in our results document, We have more detail on their contribution to help understand the impact when we exit. As Peter mentioned, in addition to specialist businesses, simplification also includes other activities we are exiting or streamlining. Each of these impact earnings and at the same time reduce risk and complexity. We have disclosed the impact of these on the bottom of this slide. This includes reducing our correspondent banking relationships consolidating our Asian operations and our product and fee simplification program. We exited energy trading last year, and while it has not had much of an impact in the last two halves, it contributed around $40 million to earnings in the first half of last year. Turning to lending. Starting at the top, there were different drivers across the book this half. In mortgages, we saw strong owner-occupied growth, partly offset by lower investor lending. Business and institutional lending both fell. The former was due to modest demand across most sectors, with larger declines in property, agri and professional services. Institutional lending was lower, mostly from the exit of our Asian offices and as we prioritised return over growth. New Zealand continued to grow with all the growth in housing. Other lending declined as customers paid down their unsecured credit and business lending contracted, mostly from larger New Zealand corporates. Mortgage growth has been an issue. We've not kept up with the market and have lost share. We restored growth through the half but acknowledge we have more to do on service and response times. Looking at the detail, growth was concentrated in new owner-occupied P&I lending. First-home buyers represented around 13% of flows up on the recent levels of recent years. Our better performance was due to improved processes, better customer responsiveness and sharper and more targeted pricing. This helped offset increased property sales as the housing market rebounded. While applications have risen about 40% this half, We must maintain these levels and see a sustained improvement before we declare victory. I would add that while we have made good progress with over 60 policy and process improvements, there is more opportunity, particularly as we move to origination on a common platform for the Westpac and St George brands by the end of this year. The mortgage book has reshaped over the last 12 months. Interest-only lending has fallen, with balances down a further $10 billion in the half. The portion of our Australian book on interest-only is now down to 18%. Low rates have driven demand for fixed-rate loans, which have risen to 32% of the book, up from 23% from this time last year. Investor demand has been relatively muted. This change in composition has impacted margins, so let's turn to that. Excluding notables, margins were up three basis points over the prior half. There are a number of factors driving this good outcome and I'll walk through the key items. The four basis point decrease from loans was mainly due to housing, from both front book, back book pressure and the growth in lower spread fixed rate lending. Mixed has also had an impact with a decline in personal lending as customers continued to move away from this form of finance. These impacts were partly offset by lower funding costs. We have continued to manage deposits well, supporting a six basis point benefit to margin in the half. There are a few points to this. The bottom left chart shows how TD spreads have improved as rates declined and the book has repriced. There was also a mixed effect as customers shifted from TDs to at-core products, particularly transaction accounts. As rates have reduced, more deposits are priced close to zero. Around 60% of our Australian deposits are now priced at or below 25 basis points. Funding and liquidity added to margins as we improved our liquids management and from the drawdown of the TFF. Treasury's contribution was unchanged, continuing to perform well over recent halves. The tractor continued to drag on margins with a three basis point impact spread across deposits and capital. There has been no benefit from the increase in rates at the longer end of the curve given our three and one year horizon for hedging deposits and capital respectively. The impact of the tractor will bottom out over the next 18 months. Excluding notable items, non-interest income was up 3%, as some of the economic recovery has begun to flow through. Fee income was up 3%, with a rebound in cars-related income from both increased flows and because some of the COVID waivers have now ceased, particularly with merchant fees. Other fee income was lower, mostly from the elimination of fees from our simplification initiatives. Wealth and insurance income was little changed over the half, but was up over the year. Insurance was lower, consistent with the normal seasonality of severe weather claims, partly offset by a higher contribution from LMI. The LMI contribution reflects the stronger mortgage market and less claims. Funds income was up modestly with higher fund balances offsetting continued margin pressure. The increase in the other wealth category reflects a revaluation benefit on life insurance liabilities. In trading, revenue was lower across both customer and non-customer segments and across most products. Turning to expenses, notable items continue to have an impact. This half, notable items related to our costs of remediation programs, write-downs of goodwill, performance fees and losses on sale. Excluding these, costs were broadly flat. Moving across the buckets left to right, ongoing expenses were down as restructuring charges were lower and leave provisions were used as we emerged from COVID. This was partly offset by additional staff to handle higher mortgage volumes. Investment spending was flat on the previous half as some projects began to wind down and we reviewed prioritisations. We have continued to strengthen our risk management and compliance with costs up a further $119 million. This included expanding the core program and the lift in our financial crime and risk capability. We have largely completed the increase in resources, although the full period effects will flow through in the second half. COVID-related costs were lower as some one-off costs fell away as restrictions unwound. Moving to credit quality. Credit quality has been positive this half with almost every metric improving. On the left you can see that stress has improved with lower new impaired assets, lower delinquencies and more companies being upgraded. As Peter indicated, stimulus and support measures have been very effective in producing better than expected economic outcomes and we are now seeing the benefits. Spending is increasing. Unemployment is down and property prices are rising. All good for credit quality. Mortgage delinquencies have fallen as customers who exited hardship last year completed their six-month serviceability period. The chart on the top right highlights this relationship. This chart also shows a small increase in hardship as some customers were not able to return to repayment when their deferral period ended. This rise in hardship will flow through to delinquencies in the second half of the year. Moving to corporate and business stress. The book has performed well with declines across most sectors. This continues the trend we highlighted at the first quarter with the unwind of COVID restrictions supporting a stronger economy. Only three sectors saw a rise in stress over the past half with the increases due to a small number of names rather than any widespread deterioration. Commercial property saw an increase, and most of that can be traced back to the office and retail sectors. The improvement in credit quality metrics has been reflected in provisioning, so let's turn to that. This chart shows the composition of the provision charge. What is clear is that all elements have improved. On the far left, new IAPs were lower than last half, with new impaireds much lower, and no large exposures emerging. Write-backs and recoveries were also better as a small number of impaired exposures were refinanced. Write-offs direct were down, consistent with the decline in lending and lower delinquencies in unsecured consumer and auto. Model collective provisions reduced this half in line with improved credit quality and the better economic outlook. This was partly offset by higher overlays. Let's look at the provisioning in a bit more detail. We previously discussed how provisioning comprises both modelled outcomes and judgment. And this chart explains some of those movements. In aggregate, provisions were down 11% over the half, although the level is still around 40% higher than pre-COVID. Our models included changes in the economic outlook with better growth, lower unemployment and a stronger house price outlook. Those changes are in the table on the bottom right. These model changes flowed through to a stage one, two and three cap provisions that were all lower. The individually assessed provisions were also lower as the impaired book declined. Despite the improved outlook, some uncertainty remains, particularly as government stimulus ceases and deferrals are no longer available. And so we apply judgment, retaining our economic scenario weights including the 40% probability of downside. We also increased our overlays by $250 million to reflect the potential for stress as stimulus measures are removed. At the same time, we retained overlays for customers that have yet to return to payments after exiting deferral arrangements. So in aggregate, despite the better outlook, we have remained prudent through our scenario weights and use of overlays. As a result, Our total provisions to credit risk-weighted assets was 159 basis points. Capital has remained a strength with the CET1 ratio increasing more than 1.2 percentage points over the half. Cash earnings was the biggest contributor and the underwrite of the 2020 dividend meant that there was no impact from the dividend payment. Deductions were lower from our write-down of goodwill and from lower deferred tax assets consistent with the reduction in provisions. Risk-weighted assets fell over the half, contributing 20 basis points to capital. The chart on the bottom highlights the moving parts. The reduction was mostly due to credit risk-weighted assets from lower corporate and business stress, along with lower lending. On the right is the pipeline of capital benefit to come as asset sales progress to completion. Sales yet to complete take our pro forma CET1 ratio above 12.5%. This includes Coinbase, which we've now sold down. We expect the proceeds from the sale to be upstream to the group in the second half. At our last results, we committed to providing a three-year cost plan. This is now in place and work is underway. We've typically focused on a cost-to-income ratio target but we've taken a harder line to materially shift our cost base and drive accountability. The $8 billion target is reflected across the company, with all our leaders accountable for delivery. The decreasing costs will come from three areas. The first is from the divestment of specialist businesses, which currently account for around $750 million of our cost base. The businesses where we've announced exits account for around 12% of that total, on an X-notable basis. The digitise and streamline bucket recognises the growing customer preference for digital. In response, we will have fewer better branches that provide a differentiated service through our people and the quality of our branch environment. This will be accompanied by a further upgrade in our online capability to meet our digital-first approach. This trend is evident in our new app, but there is more to do to digitise the customer experience. At the same time, we are removing legacy products and streamlining some of our fees, making us a simpler bank to manage. Finally, a more focused organisation needs a smaller head office. We are taking a zero-based design approach to align our resources to the simpler bank we are creating and have identified what that looks like. In the short term though, our priority is about fixing our issues and that will see costs a little higher this year. It's also why you have not seen an increased restructuring charge as we begin this change. I know that large cost plans are easy to announce but hard to judge. So we are putting down markers so you can assess our progress over the next three years. To hold us to account, we've outlined metrics to track our progress. We will update these over the next three years and we've provided definitions in the pack. There are further metrics underpinning these indicators which every executive and general manager in the organisation has accountability for. But I personally have responsibility for the whole program. We will get it done. Finally, I want to outline some of the things to watch in the next half. The outlook for lending has improved both across mortgages and business, and we can see that in our pipelines. In mortgages, we have momentum, and we will build on that in the second half, to grow in line with major bank systems. In business lending, we have lagged in the past, but we are starting to apply the same rigour we've brought to mortgages. This will help us convert our current pipeline to growth. We had a good start to the year with margins, but some of the tar winds have now faded. In particular, with more deposits on rates less than 25 basis points, there is less flexibility to repeat those benefits. Mortgage competition remains intense, and as we grow, there will be a greater impact on spreads. The impact of low rates on the tractor will continue to flow through on our capital and hedge deposit balances. Non-interest income should continue to benefit from improved economic activity, although there will be a full period effect from fee simplification. On costs, our fixed spend will increase over the remainder of the year and we will experience the full period impact of additional FTE. Investment spend is expected to be higher in the second half as major projects gain traction. We will partly offset these increases as our simplification plans progress. Finally, while I'm comfortable with the strength of our portfolio and balance sheet, there is still some uncertainty which will be reflected in provisioning. We expect some pockets of stress to emerge particularly in the retail and hospitality sectors, as the stimulus unwinds, but we will continue to support our customers through this time. With that, let me hand back to Peter.

Well, thanks, Michael, and let me sum up. The outlook for the economy is positive, with GDP expected to grow by 4.5% this year. Credit growth, particularly mortgages, is expected to follow this improvement, being supported by low rates. While I'm pleased with our progress this half, there is more to do on our fixed, simplify and perform priorities, but we have a clear plan. Our priorities for the next six months are on this slide. On mortgages, while we grew in the first half, we need to sustain that improvement in the second half. In business lending, we're applying what we've learnt in mortgages to grow that book. The specialist businesses has a big half ahead. This includes completing the Panorama migrations, which should lift funds on the platform towards $90 billion, as well as making further progress on portfolio simplification. With the core program up and running, we've now turned to implementation, but we must deliver to fulfil our fixed agenda. And finally, we will progress our cost reset. Thank you, and let me hand to Andrew for Q&A.

Thanks, Peter. Today is a combined media and analyst presentation. So I'll take some questions from the analysts first before we go to the media. I'll introduce each speaker and then we'll open up the line for you to speak. And of course, if you'd appreciate it, we respect the time of everyone else and just keep it to sort of one or two questions to start off with. So I might take a question from Andrew Lyons, please.

Thanks Andrew and good morning everyone. Just a question firstly, can you perhaps talk about the drivers of your 60% to 65% medium term payout ratio target in a bit more detail, particularly ROE, risk weighted asset growth in the DRP. I guess on ROE you've just delivered a 10% ROE but that was on a very low, a bad debt contribution but against that you do have the cost program to come through. So does it still look like an ROE sort of around 9% to 10%? And then on the risk-weighted asset growth, with that, the 60% to 65% target on the payout ratio appears to imply close to mid-single-digit growth in RWAs and probably ongoing neutralizations of the DRP. Can you maybe just talk about each of those in a bit more detail, please?

Yeah, Andrew, when we looked at the payout ratio, we really look at it through a medium term lens as the first point. So this half, obviously, with an impairment benefit was the first I'd seen in my career from all I can reflect. But I can't think that we're going to repeat that. So I think that point that you made is right. Growth, if I think about the outlook in the slide we just went through, mortgages at 6%, business at three to four, that says on our portfolio mix, I should be thinking about four to five percent loan growth. And so that's really the thinking that's gone into that medium term payout ratio return. Obviously a little bit higher this year, but as you said, we've got things coming through. And so that's how we've thought about the 60 to 65. Of course, if growth's a bit lower, then the sustainable payout ratio would be higher.

And, Peter, you've neutralised the DRP this half. Would you expect that to be an ongoing feature in the medium term?

Generally, yes. I think we'd be thinking about the DRP as a top-up mechanism, is how we think about it, as opposed to something that we'd rely on.

And thanks. And just a second question around... You spoke to the surplus capital that you have in the business, but you're wanting to retain that until... see what the final capital rules look like. Can you perhaps provide any sort of an update on how you think the new credit risk weighted asset rules will impact your capital position?

Well I think the challenge for me at the moment is it's unclear because we're still in negotiation with APRA but I think it's obvious for us it's the mortgage portfolio and interest only is a particular focus so what we've really done over the last few years is shrink that portfolio. So it was at 50% some years ago and as Michael said, it's now at 18% and probably going lower given the flow. So we've been influencing the mix of the book. It's been the big thing for us. I would like to think that we'll get some clarity this year on the capital rules.

Thanks so much. Take a question from Jared Martin, please.

In terms of NIM expectations, in the last couple of periods, you have highlighted an expectation that margins will go down and then margins have actually performed to the upside. And in this presentation, while you highlighted low rates, et cetera, there is still 40% of your deposit book that you said was above the 25 basis points. So just to the extent to which There is more deposit repricing and switching from different types of products that may actually counter some of the headwinds that you naturally have highlighted and I have another question as well.

I might lead off Jared. So Jared, I think one of the things about this result and probably the last couple is that I do think we've managed margins well as you said and we probably have delivered a better performance than what our outlook looked like and It's not without chance that we can do that, but I think as we usually do, we highlight that at some point low interest rates will bite.

But Michael, why don't you just... Yeah, as I said, we are pleased with the result on margins for the half. But as we indicated, while there is some room to move on deposits, we think that's limited. It won't have the same benefit in the second half that it did have in the first half. And remembering the pressure from front book, back book and on asset competition still reigns in the market. So we see that as quite a headwind coming into the second half.

Okay. And then just secondly, on the New Zealand review, and I think you've got a slide in the pack, you talk about demerger. Is there any other options that potentially... are on the table, such as capital markets options, such as an IPO, similar to what you did with BTIM years back, or a sale, or is it just a demerger that you're looking at?

Well, Joe, we're looking at what the best way to own New Zealand is, and the reason that's on the table is just the changing nature of banking globally. At this point, we're focused on a demerger but if other options come up through the review which is moving along now but we haven't reached a decision we'd consider them but we can't see other options at the moment.

Expected timeframe on decision?

This half.

Okay, thanks.

I'll take a question from Richard Wiles please.

Good morning everyone. I've got a couple of questions on the mortgages. You've mentioned that you think you'll grow in line with the major bank system. NAB and ANZ are both growing below system at the moment, so I'm wondering exactly what that means. Could you also provide an update on your mortgage approval times for the Westpac brand? Could you comment on whether you think investor lending will continue to shrink and broadly can you comment on why you're confident you'll grow in line with Tustam in the second half?

So there's a few in there and I'll give it a go and if I miss one just pick me up Richard but first thing on mortgages, I think our line of business approach is really working. We're getting end-to-end management and we're starting to see it through. In fact, on approval times, if I look at the most used sort of external source, the Westpac brand for third party origination, we were pretty much in line with all the majors. So if you go back six months ago, we were behind. And then in the first party channel, the way we think about that is actually there's two real customer needs. Those who need a very quick turnaround, normally because they're a simple loan and we want to do those within and I think it was a bit over 10% that fell into that category. And then for the other ones, they tend to be a little bit more complex. Given we're a full-service bank, the averages actually hide some of the issues. So we look at it through both those lenses in first party. And as Michael said, come the end of the year, the customer service hub will be rolled out across first party, third party, Westpac and St George brands. So that gives us a process all the way from digital application, decisioning and following on. So there's a lot going in there and that's why we recognise we need to do better on service but we're confident that we can. On the investor market, I think that market has sort of fallen back. It's definitely a priority for us in the second half. We can see some more activity in that market and we'll face into that. Was there another one?

The other one, Peter, was around the growth in line with the major bank system. In the last three months, ANZ's grown at one, NAB's grown at three. So are you benchmarking yourself against two other players who are growing pretty comfortably below system at the moment, or are you hoping to be in line with that sort of 6.5% run rate that you're talking about, that your economists are talking about?

Well, it's more about we said last half that we would deliver major bank system, and we did that in the last couple of months of this half. You know, there's a chance I'll exceed that, because as you say, it's a dynamic market. Not everyone is at the same point, but in the end, we will look to grow our financial system would be what we aspire to.

Thanks, Peter.

Okay, take a question from Victor German, please.

I have two questions as well, if possible. The first one on deposits, if I could just follow up on some of the previous discussion. If I look on your slide 17, at TD for solid cost or the benchmark is still sitting at around that 50 basis point level. When we look at the market rates, I mean, it looks like the cost of current TDs that we can at least observe is closer to zero. That suggests that there's still quite a lot of upside or perhaps there's other deposits in your book that are not repricing. So just be interested to hear kind of how you're reconciling your comments with margins with respect to this chart, if possible. And the second question...

I understand the question on where pricing is going, but of course we can't comment on future pricing intentions. So just before I hand that to Michael, I'll do that usual caveat about can't comment on future pricing.

As I indicated previously, our ability to reprice deposits is more limited in the second half. We will continue to be competitive, but we're conscious also that customers have a need for interest on their deposits. So it's a trade-off that we have to make between managing the margin and providing a good customer proposition. So what we're just highlighting is that the size of the benefit in the first half is unlikely to be matched in the second half. We will continue to manage it as effectively as we can, as Peter indicated, but that's the message we really want to get across.

No, that's helpful. Thank you. And second question, just on cost. Obviously, very aggressive targets. And I'd just be interested in just a couple of clarifications. The first one is on investment spend. You've provided a number there. Obviously, every bank is reporting slightly different basis. I'd just be interested to hear kind of how you're thinking about your investment spend relative to peers. peers are sort of saying that they're targeting kind of $1.5 billion per year. Sort of what's your target in that sort of realm? And also, I think you've mentioned, Michael, that it was too early to take kind of restructuring or announce restructuring charges. Does that sort of suggest that restructuring charges are still coming and kind of what sort of size do you think that might come? Thank you.

Victor, on the investment spend, I think you're exactly right. Everyone does count it differently. So that's why... When we spoke about it, we spoke about the trend at Westpac is the way I think about it. So really we said we're going to hold around that $1.3 billion, but as the company is smaller, effectively it's an increased investment, particularly in the outer years. So I'd suggest that's the best way to look at it. That's how we're thinking about it and look at the trend in the investment for Westpac as opposed to Peers.

I was just going to say, in the past, if I look at the last three, four years, you've averaged almost kind of one and a half billion, 1.4, 1.5 billion. And I'm assuming your target is the next three years. So that suggests to me that investment is declining, not going up. Am I getting it wrong?

No, we've had a little... Well, there's been increased fixed investment more recently, actually. More of that's actually in OPEX at the moment. That's why I think... have a look at the total picture, the cost base and the investment is what we're saying. We've had more of our fixed, which is you could, other banks might describe as project, actually in our OPEX. Did you want to do that?

Yes, I just thought on that. I'd say the way to think about it is that we will maintain the level of investment spend in the next three years that we've had in the past. And as you point out, banks account for it different ways. That's how we're looking at it. So that's the first point. The second point on the restructuring provision, as we indicated and you've seen in the pack, the cost reset will be delivered through three core areas. The first one obviously being the divestment of the businesses in the specialist business division and that will be sales and that will take out about $750 million of our cost base. We don't need a restructuring charge for that as such. So that's the first point. Second point, the streamline and digitisation work that is underway. Again, that's improving the way we provide service and product today. That of itself won't need a restructuring provision. But the smaller organisation that we're seeking to achieve may need a restructuring provision going forward. But it's too early to say that because what we will do, as Peter indicated, attrition will help deliver some of that. And also the point that we make is that we have a significant number of third parties, consultants, contractors, et cetera, supporting us through the fixed agenda, which when we get through that, we won't need that support going forward. So that of itself won't need a restructuring charge. So we're not saying we won't need one, but we don't see at this point that it needs to be significant.

Thank you, Peter. Michael?

I'll take a question from Brian Johnson, please.

Thank you very much and congratulations on the results of the share price reaction. Two questions, if I may. Just on the timing of future capital management, we know that we kind of expect new files to apply from the beginning of the 2023 year. I am intrigued to hear that you're saying you're negotiating it. Can we get a little bit more details on the timeline on that? And then I have a second question.

Well, the timeline is actually in APRA's hands, Brian. So I don't know if I used negotiation, but it was probably the wrong word if I did. We're waiting for the usual process of they put out a proposal, we consult, provide feedback, and then we wait for the final version. So it's in APRA's hands, the timing. I can't be clearer than that.

Peter, just on slide 24, you talk about housing which waits for 23.8%. What's that?

The September ratio. It's held flat at the September ratio.

And what's this housing order? Because you guys consistently have had declining housing risk weight.

If we had let the modelled outcome come through this half, Brian, the RWA sort of percentage would have been much lower than that, probably about, I think it was 23.2, correct me if I'm wrong.

So this is a voluntary? This is a voluntary thing that Westpac have applied.

It is a voluntary thing we have applied.

Not in the direction of APRA?

No.

Okay. Just a second one, if I may. The net remote scores on slide 39 look pretty bad. And we do know that historically banks that restructure get the cost out, but it can't. It just disrupts your business. Can you just run us through what's going on there, please? And what is the risk on the revenue side?

Two things. So it's something I look at with the team every month. Two things. We've broken out the brands. So you see Westpac and St George, and that's the way I'm running the company internally. So we stare into what's going on by brand, not averages. And we're really saying that service is hurting us, particularly in the Westpac brand in mortgages. So that's one that's impacting the MPS and one that we're very focused on. Some of the historical issues that we have are still in the NPS results, so the AusTrack and whatnot, but generally I'd just say service is where it's at and we're after it.

But that is the focus.

Okay, I'll take a question from Brendan Sprouse please.

I have a couple of questions on the cost out program. Your risk and compliance spend has obviously increased significantly over the last two or three years. You've spent the run rating at about $2 billion a year. So in terms of the $8 billion cost-based target at the end of 2024, what sort of reduction are you expecting in that risk and compliance cost? I have a second question just on your digitising streamline initiative. You talked about branch transactions hopefully being 40% lower, would that imply that your physical locations would also be 40% lower by the end of 2024?

So let me, on the branches, that's what we're seeing customers doing in branches historically and what we expect going forward. On the branch network, we think there's opportunity in the metro areas in particular. and metro sites tend to be roughly double times the cost of regional sites. So that's really what we're focusing. The 40% is not flagging a 40% reduction in branch networks. But I would say that branches will be different. So they'll be smaller. In regional Australia we're doing things like co-locating the brands in certain premises. reducing the property cost, so even though we're represented in those regional areas, we're reducing property costs. So there's different things, but no, it's not a direct correlation, we just see that as the passage of time. On risk and compliance, I'll let Michael add in, but really the phases are, if you take the work we've done on financial crime, uplift and uplift quickly. get that then automated and then there's an efficiency phase. So we're really in financial crime in the back end of the first, starting on the second phase before we get to the optimised phase. But that's how to think about it. Did you want to make a comment?

Yes, I'll just add on that, that remembering that we've identified previously that we need to uplift permanently our risk and compliance capability. So that is in our run rate and will continue to be in our run rate. But at the same time, there is a significant portion, not quite the number, probably about 50% of the number that you mentioned, that we believe, as we progress the initiatives we have on board, will roll off over time, as Peter indicated. Okay.

I'll take a question from Matthew Wilson, please.

Hello. Can you hear me? Yep. Okay, I've got two questions. Thanks, guys. The cost out implies a large change in your branch footprint. How do you logistically service three brands in one branch with multiple core systems, and what does it entail for the value of the infrastructure that you've built up to support your multiple core systems, the customer service hubs, et cetera, going forward? And then secondly, as you highlighted in your presentation earlier, A lot of the investment is directed towards the front end. Why isn't there a need to sort of tackle the complexity and duplication that exists in your core infrastructure?

So Matt, I'll do the first one. So what we're saying is effectively the complexity is really multi-bank complexity as opposed to multi-brand. And so if you start with the policies being too complex and they need to be simplified, but also policy, process, renovate those and then use digital capability to automate. What that leaves the product ledger as really a record system that's pretty dumb. It doesn't have the smarts in it because they all sit outside the product ledger. And so that's the thinking on the timing that we focus on. effectively how to get to the product ledger as opposed to what's in the product ledger. The one exception to that is data. So data is something that we've brought forward in our agenda materially because if we can get the storage, transport and movement of data much simpler, then that fixes customer outcomes, reporting outcomes, and information requirements. So that's the one exception in the back end I think that's got to come forward and materialise and that's what we're doing. If you take a branch as an example, we've now rolled out service defined networks so they're not sort of physical networks. We control them. They can be used across model branches and the networks are pretty smart these days so that they can guide the user to the different back ends.

Okay, thank you.

I'll take a question from Ed Henning, please.

Thanks. A couple of questions from me. Firstly, on New Zealand, I just want to touch on, are you starting to see some repricing there with the increase in capital requirements? And then looking forward with BS11 and the capital requirements, do you still see New Zealand ROEs higher than those in Australia?

Probably hard for me to talk about ROA expectations because I've got to comment on pricing so I'll leave that for you. On margins in New Zealand I think it was predominantly deposits was the driver of the increase in the NIM in New Zealand. So it's more been on the deposit side of the sheet than the loan side of the sheet at this point.

At this point, okay. And secondly, just on the streamlining of fees that you talked about in your simplification, what's the delta in the second half you see coming through there?

Michael, do you want to? So we think that we see that there's a bigger impact in the second half. We haven't quantified that yet for you, but it will be bigger than the first half. Okay. Thank you.

Just a reminder, we've got a few media guys on the phone. If you want to log a question or Just star 1 on the phone would help for that. I'll take a question from Andrew Triggs please.

Just a question on the cost plan. Could you help perhaps with the sequencing of the cost base towards that FY24 target, a bit linear, a bit more back-ended towards FY24? And also just to clarify, are you assuming in that any write-down of capitalised software required and is the amortisation expense headwind as part of the pathway?

I'm sorry, I'm really struggling to hear what the question was. It's a great line.

Sorry, I've just taken the headphones off. So just the sequencing of the cost base towards FY24. So the question was whether it's more back-end weighted towards that final year in the program or is it more linear? And also just the clarification whether there's any write-down of capitalised software required to get there?

Yes. Just on response, so what I indicated is that we'll see a slight increase in costs this year to address our fixed agenda. Then we'll see a reduction in each year to FY24. It's not quite linear. We have detailed actions in place but it won't rely all on the back end. It will be a successive reduction over each year. On your second question on the write-down in capitalised software, so we did in this first half result take some write-down in capitalised software for assets that were either not in use or their use was impaired. So that was taken. We've also included a change in our capitalisation process or threshold from $1 million to $20 million. So that had an impact on expenses, but we don't see a further write-down at this point.

Can I ask a question on the business bank? As part of that NPS slide, it shows a deterioration in the NPS score in the business bank and loans did fall 67% across the product over the last 12 months. What needs to be done in the business bank to get back on a growth pathway and how will that be managed through the consolidation of the consumer business division?

Yeah, well, on the management, the line of business is business lending, so that's how we'll manage it. Two things I'd point to. We're probably a little bit conservative on our credit settings in the last 12 months, and we've reversed that. So that's something that the team has already put in place. And then likewise, service. So when we look at NPS and service, that's the piece that needs to improve in the NPS as well. It's probably particularly micro small business that we're after there.

Thank you. I'll take a question from Azib Khan please.

about consolidating your international operations. Does that have any implications for the mortgage processing centres you have in the Philippines and India? And is the current wave of COVID going through India again impeding your mortgage processing in any way?

Yeah, so, Azib, last year we announced that we're bringing 1,000 rolls back to Australia, particularly from India, and that was voice and critical mortgage processes. So we're about halfway through that. We're not all the way through it. So what's happening in India, which is pretty devastating... We think we've got a plan for, so it shouldn't have the impact that we had last year, but definitely a risk that we're alert to and managing.

Thanks. The question for Michael is by May. Michael, how much further is there to tap on the term funding facility and will you look to draw down on this entire remaining amount by 30 June?

We've got a bit more to go on the TFF, so we will look to draw that down over time.

Do you know the dollar amount remaining there?

$12 billion.

Okay, thanks. And just one final quick question. There's been plenty of questions about costs in your investment spend. Can you give us an idea of what sort of investment spend run rate you can sustain from FY24 onwards?

Azib, we've given a pretty detailed three-year plan, so I'll leave it at that. I don't want to get out past 24 at this stage.

Thanks.

I'll take questions from Brett, the measurer, please.

Thank you very much, Andrew. If we go back a few years, back to 2018, before the serious dramas began, the cost-to-income ratio was 44%. Do you think with your FO24 target you'll be able to get to a number as low as that again?

Well, we'll see, but we've been deliberate today to talk about absolute costs, revenue We'll leave it to everyone to model and the impact of low rates as we said. But for us it's about being really clear on how we're running the company and this is a big change. So setting out an $8 billion cost plan for three years' time. Certainly how I think about cost of income is it has to be competitive and so that'll be the way I look at it but I don't want to get into guessing what it might be in 24.

Just going on to a more specific question about this most recent result, the average deposit cost was 37 basis points in Australia when I look at the average balance sheet in the deposits and other borrowings line, which was down from 63 basis points in the second half, 20, which implies that the 31 March point was probably materially lower than 37 basis points. Can you give me an idea as to what that number actually was?

Well that would be the average yield so that will be impacted by deposits and wholesale but what we have, we haven't given that number but what we have is the exit margin on Michael's side on margins and it pretty much showed that the margin was slightly, ex-notables, the margin was slightly higher than the half.

Okay, thank you. We'll take a question from Matt Ingram please.

Hi, thanks Andrew. Look I know we've focused on costs and I'm sorry I'm coming back to that one again. The history of these cross sales tends to suggest the branch and headcount is pretty sticky as a cost base so I just wonder If you could please talk us through what kind of proportion of that branch staff is going to be reallocated because that obviously needs to come out somehow in order to get the cost benefit. And the second one regarding the branches, those costs don't just disappear when you close them. So I wonder what the timeframe is for those either leases rolling off or reallocation of those assets because those are tricky costs to move. They don't just disappear. Thank you.

Just on branches, I think that there's probably too much focus on that. So the way I think about this organisation is customers and branches, distributions, call centres all have massively important roles to play and they all have big futures in this company. So branches, we may need less of them from a servicing perspective and what we're seeing is customers go going using digital. So it's a shift in the channel. The digital channel is cheaper. Go back to the three drivers that Michael and I outlined. One was reducing notable items and that's improving our risk management. There's probably about 1,000 people working on those type of initiatives at the moment. The specialist business divisions which we're selling, there's probably about 5,000 people working in there, many of which will go to the new owners. and then it's the corporate head offices. The smaller bank needs a smaller head office and that will include everything from property and CVDs to left people and CVDs.

I'll take a question from James from AFR please. You there James?

Oh, sorry, guys.

Oh, is that... Is that James there?

Yep. We can hear you, James.

Sorry for the delay. Just related to the digitisation thing, sort of pointing to targets of 41% of digital sales now sort of rising up to 70% by 2024. I just wondered if you could talk a little bit around, you know, your thinking on that. Is that mainly mortgages happening in the branches now sort of going... towards the sort of online end-to-end digital model? And I suppose a related question a little bit more broadly. You know, we've focused a lot on Westpac helping others with its banking as a service strategy over the last year. But, you know, what gives you confidence about the Westpac app itself? and your satellite brands, I suppose, is going to be able to compete with all these new payment apps, BNPL, mortgage brokers, non-banks, all coming in on sort of digital fulfilment and end-to-end processes. What's the strategy to really get the Westpac app front and centre in that new digital world?

Well, I think, James, I think what you're highlighting is it's a competitive market that we're in. We see service as very important in this company. and the digital landscape including the app needs to provide much easier and better service capability as well as sales because things that people can do at home rather than coming to a branch is good for both of us frankly and so we will still have a strong brand, we will still have a great customer offer, we'll have great people in in our call centres, in our branches, in our relationship management teams and we think a lot of customers will still choose to come to the bank directly. But we're also watching overseas trends and increasingly banking is being or partnering is happening for financial services with non-financial companies and that's where the banking as a service capability is a bit of a foothold in that capability. It may work, it may not. We've got some pretty good customers on there with Afterpay and SocietyOne and we'll see. The other part of banking and services, that technology platform is what we describe as cloud native ledger and there's not many of those in the world at the moment so it's truly built for the cloud and we see the optionality using that in our core franchise. So there's a couple of things we're thinking about there but we still think that The Westpac brand, the big national brand and our regional brands have big roles to play and many people will come directly to those brands.

We'll take a question from Peter Ryan from ABC, please.

Yes, good day, Peter. Thanks for the question. I just wanted to get your view on the economic outlook, given the very bullish numbers you've had really compared to this time last year. And how do you see things going, given the risk of slow vaccine rollouts and the ever-present risk of more snap lockdowns from some states?

I think if we look at this time last year, March last year, what we were discussing was will we have a vaccine? And so I sort of roll forward and think, gee, hasn't the world done a wonderful job in coming up with a number of vaccines? The logistics of rolling them out has probably been a bit harder than what we thought, but I'm confident we'll get on top of that. And so the recovery has really been a domestic recovery. It's been increased activity within Australia. and it's been good. I think you see it in the forecast, the fact that we're talking about unemployment or forecasting unemployment at 5% at the end of the year. That's because the domestic activity is back. You're right, there's always a risk of us needing to manage an outbreak, but it's gone pretty well so far in that the tracing's been broadly effective. So I think I'm probably more on the how do we How do we solve these challenges? How do we get the population vaccinated? And then that domestic activity gets shored up because we've got a lower chance of an outbreak. So that's where I am. The international borders is a much more complex picture because you're operating in a world where there's different levels of vaccination. And so that's probably going to be a bit longer than what we thought or hoped. But if we've got a domestic economy that is continuing to grow, continuing to employ people, I think that's really good for the country.

Okay, thanks, Peter.

Thanks, Peter. Thanks, Yates from the Sydney Morning Herald, please.

Hi, Peter. I know you've had a lot of questions on cost, but look, in three years' time, when you've completed the plan, if it all works out, you've disposed of those businesses, how many full-time equivalent staff do you expect Westpac will have?

Clancy, it's a cost plan, not an FTE plan is the first thing. So they'll be lower because they're a smaller business. We won't have the SBD. We won't have the remediation. More digital. But there's also the opportunity that we'll grow parts. So one of the big unknowns for us is how people buy financial services. The human part of that is still very important, whether it's our business bankers, our home finance managers, probably less in our service areas. But they'll be up, others will be down. There'll be increased need for technology and data. So that's a lot of moving pieces in there. What we've set out today is the plan on the cost base.

Okay, thanks.

We'll take a question from James Thompson, please, from the AFR.

Thanks for taking the questions. Just quickly, again, on the costs, how big is the challenge in putting through another big program of change in a bank that's been through a lot in the last two years?

Well, if I step back, this is about simplifying the business for bankers and customers, better policy, better processes, more use of technology. The people are telling us that's what they want. So the employers are saying that's what we want. We want our life to be made easy. The outcome of that is a different cost base. But for me, if you get the strategy right, be clear on what business you are, be clear on how you want to compete and then get people organised and paint the picture for where we're going to be in three years, I think people will be up for it.

Great. Thank you. Joyce Malakis, News Corp, please.

for taking the question. I just noticed in your commentary that you did say that there's been an uptick in investor demand for home loans, albeit small, but can you just sort of characterise what your expectations are for that channel over the next 12 months? Is it likely to be sort of a muted recovery or a bit stronger than that given where rates are?

I think there's up recovery and it's sort of, it is definitely part of the mortgage housing, the home loan market growing from a 4% rate to a 6% rate, but it's contributing to that uplift as opposed to anything faster than that. So no, we're not seeing, if you go back to previous cycles, over 10% growth in investor, that's not the type of situation we're talking about. We're just saying investors are interested in coming back into the market.

Okay, thank you.

I'll take a question from Nabila Ahmed from Bloomberg News.

Hi, Peter. Thanks for taking my question. It was about your back-to-work policy. Could you talk a little bit about what level of employees you've got in the office and what you're aiming for and what does the future of work look like at Westpac?

Well, in relation to the offices, if you take our branch network, everyone's been coming in all the time and they've done a great job through COVID. If I look at our operations centres, again, the majority of people have been coming in CBD sites have been a little bit less but we're probably around 60% at the moment is where we're at. How we think about it is it will be very important for development, for training and education and for team and team alignment, particularly when we're changing things that we will have whole teams in the office to do that type of work. But certainly we're more flexible. We've learnt how to manage people in different locations. We closed branches during COVID and had other work done in them. We had a lot of people working from home. So time will tell where we settle, but it's probably going to be a little bit lower in the CVDs as an example.

Thank you. I'll take a question from Gerard Coburn from News Corp, please.

Hi, guys. Thank you for taking my question. I'm not sure if this line is good or bad, so please let me know if it is. I just kind of wanted to, on the point regarding kind of a smaller bank needs a smaller office size, will that be also in line with the company's ATM network moving forward? Will there be considerable reductions in its network size?

Well, ATMs, I think, are a different issue, a different side of the coin. So it's about, sorry to pun, but the usage of ATMs will drive the size. So we have a large, I think it's about 1,200 ATMs on site. We have another 700 plus with Procica. So we still have a large network, but we do find that with the uptake of digital wallets, electronic transactions are going up and cash is coming down a bit. So I think it'll follow what we're seeing in broader activity in cash in the economy.

Thank you for that.

Okay, I'll take a question from Paulina Duran, please, from Thomson Reuters.

Hi, and thank you for taking my question. I hope you can hear me okay. Apologies to push you a little bit more on branches, but are they taking the base now at 899 branches? If you cut that by 40%, it's about 355 branches that would be gone. You already said that that's not a direct comparison, but Can you guide us then a little bit of what is the right ballpark cost that you're thinking about?

I've said this before. We're not setting out a, you know, it's a cost plan. We're not saying FTAs. We're not saying branches. We're saying the direction of travel on branches usage is down. And where we see opportunities on branches is in the metro areas where there are a lot of branches. That's where we see it.

Right, thank you. And just following on Jared, I think there were reports of you guys sharing ATMs with Big Four. Can you tell us where that is at? Is that plan going to happen or was that wrong?

ATMs right now, and this has been the case, are pretty much fee-free for ATMs. banking customers to use around the country. So every customer can use every other bank's ATM fee-free. So that's where we're at at the moment.

Thanks. I'll take a question from Kate Webber please, from iTunes.

Will the shift to the simplification and a digital focus see Westpac employ more IT jobs and roles despite the goal of reducing costs?

I didn't quite get that question. I'm sorry. The lines a bit broke up at the wrong time then.

I'm sorry. Will the shift to simplification and a digital focus the Westpac employ more IT jobs and roles despite the reduction in cost?

Generally, the direction of travel is data architecture, data analysis, process engineers, technology. Generally, I would think we would have more demand for that area, particularly in the next couple of years.

I'm sorry, I didn't actually get that question at all then.

Okay, we might move on from there. It's a bit hard to hear. I'm going to do the last question now from James Frost from the Australian Financial Review.

I understand there are multiple reasons for the delays in mortgage approvals with the recent volume being really critical. Can you tell us a bit about what you're doing behind the scenes to improve that and have mortgage application volumes become a bit more manageable in recent weeks? And secondly, if I could ask, just the additional investment in digital and the likes, are there incentives there that you're using or additional ones that banks such as Westpac could really use in the future?

So on mortgages, you're right, the market's picked up again. So we are seeing more applications. What we're doing behind the scenes is, and I use this word, renovating our processes. So we're really looking end to end. We're re-sequencing the order. We're changing policies where they haven't made sense. Looking at how we had implemented responsible lending controls is a big piece and simplifying those. Also, the digital application is now available not only in the Westpac brand but the St George brands. So there's lots of, and we call them one percenters internally, but there's lots of little things that are adding up. So there's lots of one percenters. It's not like there's a magic bullet. We're just being disciplined, knowing the business, thinking about it and renovating our processes. Sorry, James, what was your second question?

We're just curious about spending on things like cloud and of that nature, and we're just wondering if banks such as Westpac could use additional incentives or support at the federal level?

Yeah, the benefit of cloud is not only you've variabilised the cost, but more the software that's built to run on the cloud is what's called evergreen, so it upgrades itself regularly. It's not the... You don't get these versions where you've got to hop between versions. And that's so much beneficial from changing our bank, improving it over time. It's also beneficial from a cybersecurity perspective because you're running on the latest patches and they're easy to upgrade. So cloud's got a massive role to play in the future. APIs, if you think about standard messaging and how we use it. Some of the things that we've built in Customer Service Hub, Decision engines, the way we bring customers into the bank, they can be used across our operations in our different brands. So I think a couple of questions on technology. We're going to need more skilled people. Our business people have got to be much higher skilled on digital and technology as well, and it's really interesting work to do.

Thank you. Well, thanks very much. I see we've got a few more questions from both the media and the analysts online but I'm going to call it a halt there and we'll get back to you during the day. Thank you very much and good morning.