Westpac Banking Cp Ord

Good morning, everyone. Welcome to Westpac's 2024 interim results. My name is Justin McCarthy, General Manager of Investor Relations. Before we begin today, I acknowledge the Gadigal people of the Eora Nation as the traditional custodians of the country we are meeting on today. I pay my respects to Elders past and present and extend that respect to all First Nations people present today. The results will be presented by our CEO, Peter King, and CFO, Michael Rowland. At the end of the presentation, you'll have an opportunity to ask questions. To ask questions, please press star one. With that, over to you, Peter.

Well, thank you, Justin, and good morning, everyone. I summarise this as a good result as we've navigated below-trend economic growth in a competitive banking sector. We've been disciplined, balancing growth and margins well, and over the year we've grown in all key segments with mortgages up 5%, while business loans and consumer deposits both grew 9%. Growth has been off the back of customer service improving. In consumer, the service focus sees the Westpac app rated number one, mortgage approval times being cut in half and MPS up. In business, time to decision for loans is down 19% and we improved our merchant offerings through the launch of new terminal and digital capabilities. While in WIB, we have improved our rankings in key financial market surveys. From a balance sheet perspective, we're in great shape. In particular, the strong capital position allows us to return $1.5 billion in surplus capital via a special dividend and a further share buyback. In risk management, it was a big half as we completed the critical milestone in the core program, being the completion of the integrated plan. While the work on risk management is ongoing, the simplification of the business portfolio and core uplift sees us in a significantly improved position compared to three years ago. It is exciting that we're now focused on growing in a disciplined way while simplifying our technology stack to making banking easier and lower cost. Turning to financial performance, our result was solid with profit up 5% this half, Return on tangible equity, one of our key financial metrics, rose by 44 basis points to 10.5%. Excluding notables, this half profit was down 1%. Pre-provision profit was flat. And the key to this result was disciplined management of growth and margins. In particular, core margin was 1.8%. which is unchanged from the September 2023 exit margin. Mortgage competition was less intense than it's been, and this was a key reason for how we held margins through the half. Revenue rose 1% as lending was up in all key segments with growth in housing, business and institutional. Expenses were up 3%. and technology costs had been a headwind, reflecting additional software amortisation from prior investments, along with higher vendor costs. We are working hard on productivity, delivering a 5% reduction in average FTE this half. On impairment charges, they rose off a low base to nine basis points of loans. The impact of higher interest rates and inflation is evident in the credit quality metrics. However, we are well provisioned and hold $1.4 billion above the base case. Last half, I noted our capital position is the strongest I've ever seen. This half, it's even stronger with a common equity tier one ratio of 12.5%. Combined with our solid financial performance and resilient economy, it has supported further capital management. As at today, we've completed 59% of the $1.5 billion buyback we announced in November, and today we've increased the buyback by a further $1 billion to a total of $2.5 billion. In addition, recognising the franking credits that we have, shareholders will also receive a special dividend of $0.15 per share which returns approximately $500 million to shareholders. Our interim dividend of $0.75 is up 4% on the last half and the payout ratio of 74% is at the upper end of our medium term range of 65% to 75%. On a pro forma basis, that's post the buyback and the special dividend, the common equity tier one ratio remains above 12%. And we believe this level is sufficient to support both growth and investment. And that brings me to strategy. The group ended this year with renewed focus on our strategy for growth and return. We measure this through market position and return on tangible equity. The improvements in everyday banking offers through the app and digitisation have supported a buff system household deposit growth. And this has delivered a one percentage point increase in deposit market share to 21% over the past 12 months. Improvement in mortgage service has stabilised mortgage market share, which is also at 21%. And our mortgage NPS is now equal first of the majors. In WIB, we're focused on deepening client relationships and improving service. As I mentioned earlier, the progress made is evident in our improved rankings across key financial markets industry surveys, particularly fixed income. We are making good progress with the next step, the Unite program, which is critical to simplifying the business for bankers and customers. And driving a sharper customer focus is a key priority for me. This has involved asking all our people to make sure that everything starts with the customer, every decision, every action, no matter the role. To drive the uplift, we've made two important changes. Every employee has an external MPS goal and we've relaunched a customer service promise with three simple steps, care, listen and act. While there's always more to do, our focus on better customer experience is delivering results. Time to decision for both mortgage and business loans has improved. Enhancing safety features to keep customers safe from scammers has been a big priority. In an Australian first, Westpac Safer Pay alerts customers to likely scams where we detect high scam risk. If customer response suggests the payment is highly likely to be a scam, we stop the payment. Safer Pay is powered by AI and integrated into our fraud detection systems. Over the last six months, we've prevented over $120 million from being lost to scammers. More broadly, we continue to support the Australian economy through a period of below-trend activity. While households have displayed resilience, we know some customers are doing it tough. We now have 18,000 assistance packages in place, and this is up from pre-COVID levels of 11,000. We're also supporting business customers as they transition to net zero. Our team completed 33 sustainable finance transactions this half. We're also progressing our NZBA commitments. Twelve targets are in place and we're working through our last sector target for aluminium. Moving to our consumer division, we've managed through a very competitive banking environment which has had a large impact on the margin in consumer activity. The trends in financial performance are stabilising, with revenue down 2% and expenses up 1% in the first half. Margin contraction slowed significantly when compared to the second half of 2023, and this has seen the return on tangible equity at 9% this half. From a service perspective, consumer MPS has increased for seven consecutive months. We've made significant improvements to our physical, digital and virtual banking offers so customers can bank with us 24-7. The key driver of the improvement is the digital channel. We continue to upgrade services, improve navigation and enhance budgeting tools. We're also consolidating our branch network and now have 100 co-located branches. We have plans to increase co-locations by about a third over the next three years. Everyday banking is at the heart of customer relationships and this half we grew household deposits above system. The value of our deposit products was recognised in the 2024 CanStar Awards, where we won awards for outstanding value transaction accounts and outstanding value junior and youth banking. In mortgages, the market is competitive. However, it has eased this half, helping us to temper the decline in mortgage profitability. Looking closer at mortgages, this chart shows our progress over the past three years. The chart plots the customer roommate for new owner-occupied loans and growth relative to system. Following further improvement in service, we've sustainably grown around system for the past 18 months, while pricing slightly above peers recently. We've also included what we consider our key service metrics, time to decision and the percentage of loans processed through the mortgage platform. and the combination of these pricing decisions and our service offering ultimately led to the system outcomes you can see on the chart. We are targeting growth around system, subject to competitive intensity, and we're also removing cashbacks by the 30th of June this year. In business, we're investing to improve service, payments capabilities and redirecting staff to customer-facing roles. The financials reflect a disciplined performance. For the half, revenue was up 1%. Costs were flat with return on tangible equity of 20%. Business lending rose 3% this half and 7% over the year. And by sector, growth was broad-based with segment growth skewed to commercial. The simplification and digitisation of the lending platform and processes over the next few years will improve our lending offer further. In line with rising rates, there has been a mixed shift in deposits away from that call to term deposits, with term deposits now comprising over a third of total business deposits. Softer economic and trading conditions have also contributed to lower working capital balances, which are evident in the transaction balances. Payment innovation remains a focus in business. FPOS Air, which turns your phone into a merchant terminal, has been rolled out to larger customers, and the acquisition of HealthPoint this half adds to our health sector offer through providing real-time private health care claiming. We also launched F Plus Flex, a cost-effective merchant terminal that integrates to over 500 point of sale systems, including self-service kiosks and checkouts. Turning to WIB, an unrelenting client focus is the key to reclaiming our position as the leading domestic bank. Revenue was up across all three businesses, CIB, FM and GTS. WIB's return on tangible equity was 14%. Growth in average interest earning assets of 12% reflects higher lending and higher trading assets that facilitate client activity. In CIB, lending was up 10% over the year, mostly to existing customers. We saw growth across the property, non-bank financials, energy and infrastructure sectors. We are a market leader in renewables, supporting customers across 33 sustainable finance transactions. And in transaction banking, Pay2 is the latest project to be delivered. It offers a smarter alternative to direct debit by allowing customers to set up a digital payment agreement which they can manage and view in the Westpac app. Pay2 is now available to corporate institutional customers with rollout to smaller businesses expected later this year. We're also applying a client-led approach to grow in financial markets. This half debt and capital markets volumes were strong for us. The improvement is being recognised with the team receiving nine Kanga News Awards, including the number one bond house in Australia for the first time in more than a decade. Today, Westpac is a simpler, stronger bank after three years of hard work to simplify our business portfolio and deliver the core program. Our independent review of Promontory has deemed the core integrated plan complete. This is reflected in their final report, which we also released today. The report describes our progress as a major achievement, noting the significant improvements made through the program. The changes have improved the way we think about and manage risk. They've strengthened risk capability, processes, frameworks and governance practices across the group. This is helping us to identify and respond to risks faster and more effectively. We're currently in the transition phase under which we're demonstrating the sustainability and effectiveness of the changes we have made. Risk management foundations are now in much better shape and remain an ongoing focus. The next phase of our simplification is technology. Our Unite program is a business-led, technology-enabled simplification and it's underway. It has three objectives. A better experience for customers, particularly the speed of service. Making systems easier for bankers. And faster service means less jumping between systems and more time with customers. And finally, increased shareholder return. Unite will reduce our complexity, meaning lower run and change costs. And we're not starting from scratch. It's about accelerating the level and pace of simplification for a program of coordinated initiatives. In 2024, we're focused on planning, ramping up resourcing and commencing the first phase of projects. To bring this to life, we're underway in consolidating the number of identity verification systems from 22 to one. We're also moving to a single customer file, migrating all customer records into one common API accessible platform. Ultimately, this will see us move from three customer masters to one. And finally, the consolidation of our collections platforms has begun. We expect the program to help narrow our cost to income ratio gap compared to peers. Let me now hand to Michael to take you through the performance in more detail. Michael.

Thanks Peter and good morning everyone. As is evidenced by our first half results, the economy remains resilient, unemployment is low and mortgage pressures are showing signs of easing. However, The impact of inflation, higher taxes and interest rates, as well as competition for lending and deposits, continue to influence our operating environment. Reflecting on this, I'd make four observations on our first half result. One, our capital position is strong. It supports today's announcement of a further return of capital through a $1 billion on-market share buyback and a $500 million special dividend. This is in addition to the buyback already underway. The interim dividend is also at the top of our payout range. Two, we manage margins well. While the core margin contracted by three basis points, it was the same as the September exit rate. Thirdly, inflation, technology costs and software amortisation drove expenses higher. Our cost reset program reduced the overall impact and constraining expense growth to 3%. And finally, credit quality is sound. While we've seen some deterioration, it's broadly as expected, and we are well provisioned for this stage of the cycle. With this context, net profit in the half was up 5% to $3.3 billion. Excluding notable items, net profit was down 1%. The cost-to-income ratio was 50%, and our key return metric was Return on tangible equity was 11%, above our cost of capital. I'm pleased to report that notable items relate solely to hedge accounting items, which peers disclose as cash earnings adjustments. Hedge items reduced net profit by $164 million compared to a $52 million benefit in the second half of 2023. These items unwind to zero over time. As we completed our portfolio simplification in 2023, businesses sold didn't have any impact in the half, but continue to impact prior period comparisons. They're highlighted on the slide. Moving to the components of net profit excluding notable items. The 1% decline in net profit reflects the growth in net interest income and a lower tax rate being slightly outweighed by both higher expenses and impairment charges and a modest drag from businesses sold. Net interest income was up $139 million from a strong Treasury and markets performance. Core net interest income was flat with average interest earning asset growth of 2% offset by a three basis point contraction in the core net interest margin. Non-interest income was flat, with growth in fee and trading income, offset by declines in wealth management and other income. Expenses were up $123 million. I'll cover this in more detail in the expense commentary shortly. Combined, these components led to a modest increase in pre-provision profit, excluding both notable items and businesses sold. Credit impairments detracted $104 million, reflecting a small number of single-name IAPs during the half. The effective tax rate was 30.9%. While slightly above the statutory rate of 30%, it was below the prior half. The impact from businesses sold reduced profit by $20 million. Turning to lending. Total lending increased 1% with growth in all four of our business segments, consumer, business, institutional and New Zealand. Australian mortgages grew by 2%. More consistent service, better time to decision and proactive customer retention contributed to the growth. While we passed the peak of fixed rate mortgage expiries in 2023, $37 billion of fixed rate loans expired this half. We are particularly pleased that proactive strategies saw retention of approximately 90%. Portfolio composition has shifted with 99% of new mortgage flow into variable rates in the half. The portfolio is now at 85% variable rate, up from the COVID low of 60%. Australian business lending grew 3% with solid growth in commercial. By sector, health, utilities and entertainment delivered the strongest growth. Institutional lending grew by 1% as we continued to deepen relationships with existing customers. Lending increased by 2% in New Zealand against a backdrop of subdued credit growth. Mortgages grew at 2% in the half, supported by an improvement in our product offering, while business and other lending was little changed. Personal lending was flat and the planned runoff of the auto finance portfolio continued. We are pleased with the momentum in deposits, which grew by 2% in the half. Our deposit to loan ratio remains at historically high levels of around 83%. Consumer deposits increased by $13 billion as we grew our share of household deposits at 1.1 times system and attracted new customers. An increase in the savings accounts more than offset a decline in transaction account balances. There was also a small amount of switching into term deposits, but less than expected. Mortgage offset balances increased by $3 billion. As we saw in the prior half, customers who shifted from fixed to variable rate loans brought other savings with them. Business deposits were stable, reflecting a weaker system and softer economic conditions. Customers continue to switch into term deposits from transaction accounts. WIB deposits contracted slightly, mostly in term deposits, reflecting our strategy of balancing growth with value. New Zealand deposits contracted by $1 billion in New Zealand dollar terms with reductions in term deposits and transaction accounts. The decline in these accounts reflected the broader challenging economic environment. Core net interest margin declined three basis points over the half to 1.8%. This compares to a decline of six basis points in the prior half. The trajectory of the core interest margin stabilised. It was 1.8% at both Q1 and Q2 2024, as well as at September 2023. We continue to be disciplined in how we balance the margin on loans and deposits at a time when competitive pressures have eased slightly. We also benefited from higher earnings on hedge capital and deposits. Moving to the drivers for the half. Loan spreads, notably in mortgages, subtracted four basis points. Customer retention, along with the average impact of prior period competition, had the largest impact during the half. This was notably less than in the prior period as the front to back book gap narrowed by the end of the half. Business lending spreads tightened further. Customer deposits detracted two basis points. A mixed shift from at-call deposits to lower spread term and savings accounts outweighed higher returns on hedge deposits. Wholesale funding costs were slightly higher and we continued to replace the term funding facility. We had $8 billion remaining, which will roll off in the second half. We timed our funding well and took advantage of favourable credit markets, raising $20 billion of new long-term wholesale funding in the period. Higher earnings on capital contributed four basis points, reflecting the step up in the tractor rate. Treasury and markets added three basis points to the margin, with the contribution rising from 11 basis points to an above-average contribution of 14 basis points. Notable items subtracted five basis points from the margin, with no impact in the second half 2023, moving to a negative five basis points in the period. Moving to non-interest income. Excluding the impact of notable items, Non-interest income was stable on the prior period. Fee income was up 3%, with higher underwriting activity for institutional customers, the largest contributor. Wealth income declined by 3%, with higher funds under administration, more than offset by the lower platform margin. Trading income was 7% higher, with stronger customer-driven foreign exchange activity, boosting income. However, it was largely offset by a decline in other incomes. Turning to expenses. Expenses were up by 3% in the half. We absorbed much of the higher technology operating expenses and software amortisation, which saw total technology expenses rise by 13%. We worked hard to offset these cost headwinds, delivering $233 million in savings through cost reset. Business simplification, including changes to the operating model, generated further savings with FTE down 2%. Businesses sold provide a $28 million benefit in the prior half due to the reimbursement of costs of businesses sold. Underlying expenses, excluding the impact of businesses sold, rose by 2%. We remain committed to the cost reset program and our objective to close the cost-to-income ratio gap to peers over the medium term. Moving to investment spend. As outlined in our March technology update, we expect our investment spend to be approximately $1.8 billion in 2024. Risk and regulatory programs will remain around 60% of spend, with 40% on growth and productivity, including our technology simplification program, Unite. Initial planning for Unite continues, with spend expected to accelerate during the half. Given the planning stage for Unite and the completion of several large programs in 2023, our total investment spend decreased 15% compared to the prior corresponding period. The comparison is with the prior corresponding period, given spend is historically weighted towards the second half. Growth and productivity initiatives included our ongoing investment in digital, particularly the Westpac app, and the continued development of the cash management platform in institutional. Risk and regulatory spend was 8% lower following the completion of the Basel III program and BS11 in New Zealand. The proportion of investment as expensed continued to rise. It rose from 33% in first half 2023 to 56% in first half 2024 as the investment profile changed. As a result... The average amortisation period declined from a peak of 4.5 years in first half 2023 to 3.2 years in first half 2024. We expect the higher expensing trend to continue given the Unite program will be largely expensed. Turning to credit quality. Stressed exposures as a percentage of total committed exposures increased 10 basis points to 1.36%. This reflects the lift in mortgage arrears and a small increase in stress among business customers. While customers face higher interest rates and inflationary pressures, we know that these are not being felt evenly. Most of our customers have been able to adjust to higher repayments and many have also maintained buffers above their scheduled payments. However, some found this more difficult with 90 plus days arrears in Australian mortgages increasing to 1.06%. Customers with fixed rate expiries in the half rolled off an average interest rate of 3% onto variable rates that were approximately 6%. Looking to the second half, the amount of fixed rate expiries will fall by $6 billion to $31 billion. While arrears are likely to rise further, we expect the mortgage portfolio credit metrics to remain resilient. Unsecured lending deteriorated slightly, driven by the cards and personal loans portfolios. The increase in stress across business customers was most pronounced in wholesale and retail trade, driven by a single name exposure. Turning to credit provisions. We are well provisioned for the projected economic environment. Our coverage remains appropriate for the risks we see in our portfolio with total impairment provisions $1.4 billion above our base case scenario for expected credit losses. Collectively assessed provisions to credit risk-weighted assets increased three basis points to 1.38% with provisions up 4%. As you can see from our result, the composition has shifted in the half. Overlays were lower. We partly released overlays across Australian and New Zealand mortgages and some business portfolios as these risks are now captured in modelled outcomes. The increase in the Stage 3 cap reflects the higher mortgage and personal unsecured delinquencies I discussed on the previous slide. Stage 2 cap increased due to revised economic assumptions, largely reflecting downgrades to the commercial property price forecasts for both 2024 and 2025 and changes to the interest rate forecast. There was some offset in Stage 2 following changes to our scenario weights. The weighting to the downside was reduced by 2.5 percentage points to 42.5%, with the base case rising by the same amount to 52.5%. The changes reflect a modest reduction in economic uncertainty as we move through the cycle. For context, the downside weighting was 27.5% prior to COVID. To reiterate, credit quality remains sound. Impairment charges of $362 million were nine basis points of average loans, up from seven basis points in the prior period. This remains below the long-run average. The IAP charge comprised new IAPs of $213 million. The increase relates to a small number of exposures, including only one single name in excess of $50 million. And write-backs and recoveries were in line with the second half. The cap charge of $269 million comprised other changes in cap of $58 million and write-offs of $211 million. The other changes in cap charge were a function of the movements in the collective provisions outlined on the previous slide. Moving to capital. The level 2 CT1 capital ratio ended the half at 12.5%, well above the top end of our target operating range. Net profit added 75 basis points, while the payment of the final 2023 dividend reduced capital by 57 basis points. Risk-weighted assets added 17 basis points, entirely driven by non-credit risk-weighted assets. Interest rate risk in the banking book risk-weighted assets declined from a lower regulatory embedded loss. Credit risk-weighted assets were flat, with further benefits from data refinements offset by lending growth and a modest deterioration in credit quality. The $1.5 billion share buyback announced at the full year 2023 reduced capital by 19 basis points. With this result, we also announced an additional $1 billion on market share buyback and a $500 million fully franked special dividend to return surplus capital to shareholders. These, along with the $700 million remaining from the prior buyback, will reduce capital by 49 basis points, taking our pro forma CT1 capital ratio to 12.06%, still above the top end of our target operating range. Our strong financial position allows us to navigate ongoing economic and geopolitical uncertainty. On revenue, we expect credit growth to be positive with mortgages growth at similar levels to the first half. Our business and institutional lending pipelines are strong and we expect good growth in the second half. We continue to target growth in lending and deposits in line with system. We also anticipate margin trends to be similar to the first half. Lending remains competitive, although mortgage competition is easing somewhat. Deposit competition has picked up, while the mixed shift to lower spread accounts is slowing. Return on hedge deposits and capital will continue to rise in line with the tractor rate. We expect similar expense growth in the second half, with cost reset partially offsetting inflation and wage pressures, and higher investment spend. Investment in the second half will include the ramp up on Unite and will be mainly expensed. While software amortisation remains a headwind, it will slow. Credit quality remains sound with some further deterioration likely. In summary, our balance sheet is strong, we have operating momentum and with continuing discipline management, we are well positioned to support customers, growth and the Unite investment. With that, let me hand back to Peter.

Thanks, Michael. If I turn to the economic outlook, we are seeing the economy as resilient. The lagged impact of interest rate increases and inflation will drive a rise in unemployment, but we expect it to be below pre-COVID levels. Our economics team is forecasting increased activity in 2024 and 2025, with the low point having been the second half of 2023. However, we're aware that the impact of inflation and higher interest rates has not evenly spread, and we have seen this dynamic in our hardship packages, which have increased. Our data analytics team, Westpac DataX, provide valuable insights into how consumer groups are impacted, and you can see this on the chart with the trends evident in customer spend patterns highlight the disproportionate effects by age, income and wealth. Given this, we support targeted budget relief, including the redesign of the Stage 3 tax cuts, as appropriate to support those more impacted. From a Westpac perspective, the strength of our balance sheet prepares us to support customers facing challenges or customers looking to take advantage of growth opportunities. In conclusion, we delivered a disciplined financial performance with less headwinds in the mortgage market, Our focus on enhancing customer service is delivering growth and improved customer outcomes in our segments. The strong capital position has supported an additional $1.5 billion capital return, and we reached a major milestone with the completion of the integrated plan under core. We are accelerating technology transformation, which is critical to achieving our strategy. So Westpac is well positioned to navigate the prevailing environment, support customers that are facing challenges or looking to grow. Thanks for listening. And Michael and I will be pleased to take your questions. Justin.

Thanks, Peter. And as a reminder for those that are registered, if you'd like to ask a question, please press star one. Operator, we're ready when you are. Thank you. Sorry. Andrew, you can go ahead.

Hi, can you hear me?

We can.

Yeah, thanks. Just a question on expenses. You provided a bit more detail around the trajectory of costs into the second half 24, but can I just ask how you're thinking about costs into 25? At the recent technology day, you did imply you would likely see some step up into FY25, just given costs to support the Unite program. and that we might also get some detail around that at the results. Can you perhaps therefore just talk to how you're thinking about the step-up in costs into FY25 or do you think that's largely captured in what you've spoken today about costs into the second half of this year? I've then got a second question.

Hi, Andrew. Michael here. Yeah, look, as I indicated in the presentation, we expect costs in the second half to be impacted by a step up in United Investment, and that will flow into 25. But as I indicated, we have our cost reset program, so we're continuing to be committed to reduce our operating costs across other segments. So while we expect some step up in both the second half and into 25, we think that that's at a manageable level.

Okay, thanks. And then just a question, a second question maybe for Peter just on capital and dividends. In the first half, you've just done a nine basis point bad debt charge and in the face of this, your ordinary DPS represented 75% of X notable earnings. I guess to the extent that we saw any normalisation in bad debts into the second half or into 25, even just into the mid-teens, can I just ask how you think the board would likely respond from a DPS perspective? I guess would the preference be to hold the absolute dividend or stay true to the 65% to 75% target range?

Yeah, I think we have for a long time thought about the payout range as a medium term. So we really look at what's happening, both growth for us, the Unite investment, also credit quality. So we use it as a guide over the medium term. Andrew, the other thing that we're very conscious of is obviously we've got plenty of franking credits and we've held a little bit of powder dry in terms of the capital ratio, so a 12.06 from a pro forma basis after taking account of the special dividend and the buyback assuming they're done. So it's a guide, it's a medium term guide and we'll look at it through those lenses over the medium term.

Thank you. The next question comes from Ed Henning. Ed?

Thank you for taking my questions. Just firstly a follow-up on Andrew on the cost. If you look at the investment spend, you'll be right around $2 billion in the second half and you're talking about a step up into $25 billion but you've called out that $2 billion investment spend in $25 billion. Does that just say you have less offsets in $25 billion and just further that on the costs, your staff or the temp staff fell a lot in the half. Can you just talk about the timing of that as well within the costs as a first question?

Yeah, so just a point of clarification, we've indicated that investment spend in the second half of 24 will be $1.8 billion, and stepping up to around two from 25 onwards, mainly to fund additional investment in Unite. So just to clarify that, so we confirm a previous discussion on that point. On headcount and temporary, so look, as we've indicated over the last number of years, our cost reset focus has been on reducing non-customer facing roles through digitisation, automation and the resetting of our operating model. So that's been the big driver of the reduction in headcount, particularly in the second half of 2023. So that was the main driver of that reduction that you mentioned.

Thanks, Michael. But just to clarify that, the run rate in the second half will be about $1 billion of investment spend. So therefore, stepping into 25, there doesn't seem a step up. If you think about half on half, but you've talked about a step up in cost. So is that just saying you've got less offsets in 25 to see a bit more of a cost headwind?

Yes, you're right. You know, the step up in United Investment, we'll see that in the second half, and that'll play through on a similar basis into 25. Look, you know, we still expect inflation to be there and wage growth, although it is softening. So there will be some step up, but as I said, the offset will be through the cost reset program to offset effectively that run increase that we'll see.

Okay, thank you. And then just a second question. You kindly gave us the exit margins in September and then in March. If you think about your exit margin from September was at $180 and you were flat over the period, can you just talk about the movements from the exit margin, you know, on the loans and the deposit side would be helpful, please?

Oh, and I think, so as we indicated, you know, the... Trends that we saw in the prior half, that is a drag from lending, particularly mortgages, and slightly from a mixed shift and move to term deposits in consumer and business, were really offset by higher earnings on capital and hedge deposits. And we'd see those trends continuing into the second half.

Okay, but there was not, like, if you think about the average and then the spot at September, did a lot of that average come through on the loan side early? So there was less on the loan side or less on the deposit side, if you think from the exit... And it's all been in mortgages.

It's all been in mortgages. The slowdown in impact on margins has mostly been in mortgages.

Yeah, the drag on deposits was similar in both halves. Yeah, as Pete said, it was a second half 23 particular drag on the mortgage side.

Okay, thank you.

Our next question comes from Carlos Castro.

Thank you very much for the opportunity to ask a question. First, I'm just wondering, wanting to ask about provisioning. You pertinently talked up your collective provisions, despite, as you noted, kind of a soft landing and pretty resilient outlook for the Australian economy. So what are you – have you talked to a bit, I guess, what you're looking for to give you some confidence in potentially beginning to release some of those? Obviously, we're not at that point yet, but is it about seeing rate cuts come through or is it just seeing getting more confidence in the economic outlook, given your provisioning is a fair bit above normal level still? Yeah.

Yeah, so the way we saw it in the first half was that the increase in the provisions was mainly from slight deterioration in mortgages and a bit of deterioration in some single names in business lending, and that was offset by a release of overlays and a resetting of the scenario weights. So that's how we saw it in the first half. And look, as you say, we'll reassess the position at the full year. Lots of moving parts involved. and we'll just have to see how both interest rates, inflation and delinquencies play out into the second half, but that is an assessment that we'll make at the end of the year.

Thank you. And then just secondly on the deposit front, I think looking at your deposit NIM drag versus peers, you've recently done better. I was wondering if you'd just give us any more colour in terms of the underlying trends you're seeing on the consumer side, clearly savings accounts have been where you've seen more growth there and they've taken more share, but is there any kind of particular product? Is it the gold versus the bonus saver type products? Is it the change in customers receiving the bonus rates or anything there that's worth noting?

Well, I think firstly on deposits, we're being consistent in our offers today in the market and the digital offering is now pretty good and that's allowing us to attract volume and right above system and particularly getting a little bit of growth in some of the younger segments. On the margin bit, I think the trends have generally been okay. If anything that's moving around, it's just the TD margin based on the swap rate. So that's the bit that's moving up and down, but we're broadly seeing good mix, and I think the team is managing the volume margin trade-off well there.

Great. Thank you very much.

Next question comes from Matthew Wilson.

Yeah, good morning, team. Matt Wilson, Jeffrey. Hopefully you can hear me okay. Yep. When we think about the core franchise and if we look at the net interest spread trends rather than the margin, you sort of get a very different picture. Your spread's down 24 basis points half on half. It's down 48 basis points year on year. It's falling at a pace well in excess of peers and now sits at 1.24%. It used to be at or above CBA. Today it's 18 basis points lower. And then when we look across the franchise, consumers down, New Zealand's down, Insto's down, it really seems that the team in Treasury is doing a far better job in carrying the burden, you know, from managing the balance sheet, you know, as opposed to how the underlying product franchise is performing. I wonder if you could talk to the spread and then I have a second question.

I'm not quite sure what numbers you're quoting there, but let me just talk about the different segments. So I think as we covered in the results, yes, there has been a large reduction in consumer margins, and that's really been about mortgages. From the data I see, it's pretty in line with the industry in terms of the RBA data that's published. So I think we're pretty in line with the industry. In the business book, We've certainly had flat margins and Anthony's dealing with the runoff of the auto finance portfolio there, which are higher margin products, so we're doing well. WIB's margin decline was really about increasing the trading books, so trading assets. So I think that is a It's a mixed issue more than anything else. The lending spreads are actually pretty good when you unpack it. So I feel good. I'm not quite sure what you're looking at, but I'm happy to have an offline conversation with you, Matt.

Yeah, thanks, Pete. No, it's just the net interest spread, so the performance of the margin pre the impact of free funds. But we'll take that up later. And then secondly, you referred to this on slide 62 in the last result today. It's on slide 58. The simple refinance assessment program that exists amongst the majors that reduces the serviceability buffers from 3% to 1%, can you sort of give us an indication of what percentage of refis are actually making it through that channel? And why does this scheme only apply to the major banks?

Well, I can't comment on your second question, but the flow is actually quite small. I think it's 3% is going through that process, and it's pretty tightly controlled. So I don't see it as a major driver in relation to why major banks. That's a question for others. No worries. Thank you.

Next question is from Andrew Tridge from JP Morgan.

Thanks, Justin. Morning, Peter. Can I just ask firstly, first question is just around, you mentioned the pro forma capital ratio leaves enough room for growth and investment. Annualised loan growth in the first half was around 3%. It was below market. Can you reflect, please, on the margin growth settings for the period ahead? And could we perhaps read into it that you're happy to grow below system for a little while while you have a pretty full investment slate under the Unite program?

Yeah, I think, interestingly, the biggest change in growth was actually in our institutional book. It had, I think it was about 10%, 9%, 10% over the year and relatively flat in the second half. But the reason actually was customers decided to use capital markets a lot more. So we did really well in helping customers go into capital markets. But as you know, with institutional books, markets can have a bit of a drive. So I'm not saying 10% is right, but I'm just saying it's probably a bit at the lower end. That's the biggest driver in terms of versus system. Business Bank did well when you strip out the auto finance book, but do note we've still got to run that down, so that's coming down. So I'd say around system is what we'd be planning for in the medium term, what system it's feeling like. mid-single digits in terms of line growth. And so that's what we're factoring in.

Okay, thank you. And second question, just two quick ones, really. Could you clarify, please, perhaps, Michael, the hedge deposit benefit that came through in the half? And if you combine that with the capital hedge, what is the combined benefit expected for second half? And also just a quick one, the basis risk sensitivity, do you have an update there, please?

So your first question, we showed the tractor rate in the IDP, so that should give you a good feel. So we expect that that benefit in the second half is similar to the first half. And sorry, I missed your second question.

Just before you get to that one, what was the benefit of the hedge deposits? I don't think that was called out in the slide.

It comes through in the capital line, which is pretty much volume and rate, so it's clear there. In the deposit line, you'll need to use the deposit volume that's in the margin slide, and maybe the IR team can give you the numbers on the spread.

Okay, thank you. And just a clarification around what the basis risk sensitivity is now for the group?

Oh, BBSW.

Dow Ice, BBSW spread. Look, again, it's similar to all the banks. I'm not sure it's particularly relevant for Westpac.

It'll be, because there's more variable rate mortgages now, we're back to 85%, but we've also got plenty of at-call deposits. It's smaller than it was. Sorry, I don't have it in my hand, but it's smaller than what it was, but it'd be a drag if cost of funds went up at the moment.

Peter, is that an expectation that will happen? Because it's been well below, it's been basically zero for a long time now. It used to be 20 basis points.

Very good question, Andrew. But with, you know, I think where we're at is the system, to me, looks like it's handling the TFF unwind pretty well. Most, certainly the major banks, I think, are refinancing it in the wholesale market. It's not putting pressure on deposits and we're not seeing pressure in liquidity. in the market. So you could mount a case that it won't move, but for those that have been around a while, you know that it can move. So the base case is it doesn't move, I think, but you've always got to watch it.

Thank you.

Our next question comes from Richard Wiles from Morgan Stanley.

Good morning. I've got a couple of questions. The first one is just on the margin. You've said the core exit margin was flat versus September. You've also said that in the period ahead you expect mortgage competition to moderate, deposit mix impacts to stabilise and the replicating portfolio benefits to continue. Does that mean you expect the margin to increase in the second half of the year and into FY25?

Hi, Richard Michael. As you indicated, there's a lot of moving parts in all that. We saw the margin decline from mortgages decrease significantly into the first half, the deposit impact being basically the same, and as I indicated, the tractor rate impact on hedged capital and deposits will be about the same. So ups and downs, competition is always something that will impact. So we're not saying at this point that the margin will go up, but we say it will be similar, we think, to the first half.

Okay. And then my second question just relates to the special dividend. Given the size of your... ranking credits, a special dividend of $500 million or 15 cents per share, it's actually quite small. I acknowledge that you've also announced the additional billion dollars in the buyback but this is sort of relatively small special dividends, sort of indicate that you'll be in a position to pay more special dividends later this year and next year.

Well, we certainly haven't made any comments today about what we'll do in the future, Richard, and we'll make that decision at that point in time. You know, we're conscious of the franking credit balance, so in terms of mechanisms we would use, special would be something we would consider, but we haven't indicated what we'll do at the full year. We'll be considering that at that time with all the information that we have.

Well, Peter, maybe I could rephrase that further. Pro-forma ratio is 1205. Unless you get enormous volume growth or much stronger volume growth, you still got a lot of buffer there. Are you heading towards 11.5? Is that where you think you should settle? And therefore, does it mean you got a lot more, you got flexibility for a lot more capital management?

Well, as I said, they're all considerations that a board would look at. At the moment, we've made the decision what we have. I feel good about the capital level. It gives us flexibility. Globally, the world's a bit uncertain, so having a bit of capital up your sleeve is not a bad thing. And as you said, our preferred range is 11.5. We know we're above it, and we look at those type of decisions in six months based on everything at that point in time.

Okay. Thanks, Peter.

Next question comes from Jonathan Mott from Baron Joey.

Hi, two questions, if I could. The first one is on slide 41. If you look at that, you show the tractor rate in the bottom right quadrant, and you can see that the blended tractor rate's 265, which is rapidly catching up on the spot for the three years. So in the next six to 12 months, depending on where rates go, the benefit that you're going to get from capital and the deposit hedge is probably going to max out and no longer be a tailwind. So you called out that you're expecting the core NIM to remain around current levels, given that tailwind. Does that mean that once we get through this, you'd expect the core NIM to continue on its downward trajectory, assuming that rates don't move materially in either direction from here?

Thanks, John. Michael here. So, look, I think the way we look at it, as I said before, there are a lot of moving parts in NIM, as you'll appreciate. Clearly, the tractor rates had a positive impact on... on NIM and we expect it to be a positive impact for a while. What it would say, though, in a high interest rate environment, and you can see you're right, the average three-year swap's at 3.79, you would expect that to continue to rise and therefore you'd expect the impact on the tractor to continue to rise as well. But what I would just caution you is that there are lots of moving parts in the margin, and depending on what we see in interest rate movements in the future, in competition, that will have possibly as big an impact. So I just caution not just to look at that tractor rate, but that tractor rate will move over time.

Thank you. And Peter, a question to you if I could. You called out that the consumer ROT at the moment is at 9%, but We still have a front book, back book issue. It's closed somewhat, but it's still there. And deposits which are gathering are higher, more expensive than your back book. So what does that imply that the new business across both assets and liabilities, what's the ROE on that in the consumer book?

Yeah, so I think you're right. The consumer returns have come down quite a lot if you take a multi-year perspective. But if I think about where we're at in terms of front board in that whole thing. The mortgage front book back book gap for us is pretty close to the RBA or the APRA, sorry, the RBA data. So there is a little, there is still a little front book back book gap coming through, but nowhere near as steep as what we've seen in the past. And deposit costs, it really depends on the term deposit price and the swap rate is the bit that moves around a bit. But generally, they've been fairly stable. So the return in the consumer book sort of now, mark-to-market-wise, is not too far away from that 9%.

That also does include a very benign credit charge. So if you look all through this, the outlook's pretty tough for it. Are you comfortable writing business at these levels?

Well, as we said, if I think about where we are growing the most, it's actually in our business book, our institutional book. They're the high-returning books. In consumer, we're cautious on growth. We've said we want to be a round system, but there's also a big demand on that business to look at options to improve return. Thank you.

Next question comes from Victor German from Macquarie Bank.

I've got two questions, maybe one for Michael, one for Peter. Michael, if I could ask you first. Are you able to provide a little bit more breakdown of the two basis points disclosed margin impact from customer deposits? I think you have alluded to the earlier question that you have a reasonable tailwind from the replicating portfolio and a half. And I was wondering if you could provide some more color on the impact of pricing versus mix that resulted in that overall drag of two basis points and to the extent that you can. We'd be interested to hear your thoughts on the direction of some of those key drivers around mix and pricing for the second half.

So, Victor, I could probably bore you with all the ups and downs of all the various parts, but look, you know, what I'd say, and I indicated before, the total drag from deposits is about the same half on half. We had more drag from term deposits and the mix shift to higher rate accounts, but that was offset by higher earnings on deposits. So, I think net-net, you get to the same outcome, slightly higher deposits, on drag, slightly higher on hedged deposit returns. Maybe when I see you, I'll go through the detail, but probably not for now.

But it's probably fair to say. It's all coming through TDs, Victor, which can go up and down pretty quickly depending on the swap rates.

And in terms of mixed, do you think that it's likely to... I guess, from the trends that you're seeing currently, is it getting better or worse?

So both the switch to TDs or the growth in TDs and the switch to higher rates is getting better in the first half than it was in the second half last year. It's probably half the size of the compression.

And if I can just push my luck, somewhat unrelated to the deposit but still on margin, the impact of TFF roll-off now guided to one basis point in the second half. Do you have any residual impact from that?

The way we think about TFF, the roll-off is just part of our... annual wholesale funding program. We were at $8 billion at the half year, $6 billion today. It will roll off in the next quarter. We don't think it has much of an impact at all on our overall funding program as part of the overall program.

And Victor, we were one of the smallest TFFs, so we didn't use... That's why the maturities are a bit lower than everyone else. We didn't use a lot of the business scale-ups, so TFF hasn't been as big an issue for Westpac.

And we reduced it more in 23 than we've had to do in 24.

Makes sense. Thank you. And Peter, I guess a question for you. I understand the rationale for the special dividend given the amount of frank increase you have. But I'd be interested in your thoughts on the actual dividend, increasing by a couple of cents to 75 cents per share, and also around your thoughts on the payout ratio more in the medium term. You've got your settings, you've reported your return on tangible equity of 11%, and we're still seeing declining pre-provision profits. At the same time, when you set up your payoff ratio of that 65% to 75%, I think you alluded to earlier that mortgage profitability was much higher. If your economic forecasts are right around where interest rates are heading, do you think that over time the likely outcome on that payoff ratio is that we're going to be going lower rather than staying at that top end of the range?

I think given the franking credits that we have, and we're very conscious of feedback we've had from shareholders about recycling those to them because they have value in their hands, I think the medium-term payout ratio has got to be conscious of that. For me, it's always the balance of where's your balance sheet capital ratio gives you a little bit of flexibility. Where's your payout ratio? Obviously, earnings going forward. You guys all have models for that so you can work it through. But the point I just make is we look at it on a medium-term basis.

So kind of the way you would encourage us to think about it is, you know, potentially looking to stay at that sort of top end of the range and then trying to maintain dividends at elevated levels to reduce ranking balances.

That's probably the base case.

Okay. Thank you.

We'll continue to work through the analyst questions, but if there's any media on the line that would like to ask, please press star one and register your interest, please. Next question is from Brendan Sproles from Citi.

Good morning, team. My first question is I just want to clarify around your comments today on investment spending in the second half. You sort of talked to... Second half run rate investment spend of $1 to sort of $1.1 billion to get you to $1.8 for the year. And you said most of that's expense because of the nature of the Unite program. Would I be right in concluding that the mixture of expense versus capitalized is going to be around that 70% mark in the second half and then the same again in 2025? Yes.

Yeah, just to clarify that point, so I indicated that our spend would be up in the second half, correct? Not all of it's on Unite, so we typically have about 50% at the moment of our spend is capitalised. That will decline a little bit in the second half, but it won't be at that 33%. until Unite becomes the majority of our spend. And as we've indicated, in the outer years, we expect Unite to be about 30% of the total investment spend. So you'll never get to that, you know, 33%, if you like, of capitalised, but it will lower in the second half.

Okay, thanks. And Just on slide 23, ongoing expenses tile there, obviously it's around 7% in this period. I mean, we have seen quite sustained services inflation across the economy. Maybe you can give some comments around how you see the growth rate in ongoing expenses into the second half and then into 25, particularly around technology, but also even salary costs.

Yeah, and I think we've indicated previously, we've seen a big kick-up in vendor costs in technology. We're seeing that ameliorate somewhat into the second half, but it's still high. One of the biggest pick-ups in expenses in the first half was software amortisation, which we've called out. It will continue to be a headwind into the second half, but at a lower rate, so we'll get some relative benefit from lower software amortisation. And we did have a reasonable pickup in the second half, 23, and in the first half, 24, from an increase in average salary and wage costs. So that will come down a little bit, hopefully, albeit we are, as a lot of the other banks, negotiating a new EBA. But for this coming half, that level of average salary and wage costs will come down. So net-net, we think we're guiding to a relatively stable cost growth into the second half.

Okay, thank you.

Our next question comes from Brian Johnson from MST. Brian? Brian, can you hear us?

Brian, we can't hear you.

Sorry, can you hear me now?

That's better.

We can. Fantastic. I think one of the things that I'm certainly struggling with is when I go into the detailed profit announcements, I can see that the consumer margin in the second half of 23 was 1.76 down to 1.69. I can see the business margin went up from 5.3 to 5.34. I can see the Insto margin went down from 1.93 to 1.85. I can also see that the amount of mortgages distributed through the broker channel continues to decline down to some 39%. Can we just get a feeling on what happened kind of sequential month on month in the consumer business that drove it down? And is it right to pick up the fact that the entire uplift is actually in the business book?

Yeah, so you're right to look at each of the segments differently, Brian, but you're right. The biggest impact is the averaging impact in the consumer book from higher margin decline in the second half, and that's flowed through into the first half, so you're right on that. As we indicated, we are focused on growing in business and institutional because the returns are higher in those segments. and Treasury and markets had a good half, and that had a net positive impact on the overall margin, although for core margin, a lot of that comes out. So I agree with your analysis. I'm not sure what your specific question is.

Brian, I think we've been using exits and averages. If you look at the average for the second half of 23, the core margin was 1.83%. and it's now at 1.8. So that's down three. Treasury offset that. Treasury markets was up three. So that's why the margin itself was, excluding notables, was actually flat in the half, which was a good result. What drove that three? Mortgages. So we've had mortgage lending spreads down and then really been a little bit in deposits, and that's been offset by the free fund benefits and interest rates.

Peter, am I right in thinking, though, that the business book and the consumer business, those numbers that are disclosed in the detailed result, that's after allocating the replicating portfolio, and I suppose within the business book, the subset of that, there will be home loans in there. Is that where the margin has improved? Is it primarily in the business book?

No, business is just purely the business products. Home loans all sit in consumer. And remember with the business book, it's got a high deposit, over 100% deposit to loan ratio. And value is more reflected in the deposit side of the sheet at the moment.

So just going back on that, the decline in the consumer margin from 1.76% to 1.69%, that's after the uplift from the replicating portfolio has been allocated. It just seems it's different to the narrative.

No, we've been calling out mortgage margins come down a lot.

Okay. The second one, if I may, is just in the mortgage business, We can see that the home loan book is now 38.6% originated through the broker and it's declining. Westpac perhaps hasn't been match fit now for a number of years, but you're calling out that that is now better, which is great. Are you happy with that proportion through the lower margin broker channel?

Well, in terms of we would like more first-party flow, but it also requires more resources in there. The return between the two channels is slightly different. So I think we would preference the first party, but then you've got to look at cross-sell, the cross-sell between the two channels in terms of number of products and whatnot. So we look at it through both a product lens and a customer lens and a return lens, Brian.

And, Peter, just a final one. Just on the interest rate risk in the banking book, which is primarily driven by the embedded gain on the three-year bonds, since March we've had three-year bonds go from 3.6% through to 4.05%, which obviously increases the embedded loss. But we've also got the fact that you've still got quite a low core equity T1 ratio in New Zealand. It's 11.37% in the Pillar 3. Could you just walk us through the deltas on level two core equity that come from both the New Zealand capital requirement going up over time and that movement in the three-year bond rate on the interest rate risk in the banking book.

Yes, I think that... Everyone in the industry will have a higher risk weight from IRBB, so I think that's well understood. So that will actually depend on movements in interest rates over time. That's a good reason for keeping a little bit of capital up our sleeves. But on the build of capital in New Zealand, Michael?

Yeah, so the build of capital in New Zealand, most of that build, I'll just add to Pete, so actually the drag from interest rate risk in the Banking Book was lower in the... Brian's talking about April, not March. Yeah, but even so, so there are four components to interest rate risk in the banking book. You're right, the embedded gain and loss is one aspect, but there are a whole lot of other aspects too, which do move up and down. So I just encourage you not to just look at the embedded gain and loss. There are other elements which we disclose in the IDP. On New Zealand, New Zealand has a capital plan which achieves their required capital ratio by 2028, and they're on track to that. They'll mainly do that through earnings plans, rather than other areas, and that will flow through to the level run ratio. At the moment, the level one ratio is higher than the level two, but that will flow. We're relatively comfortable on how that flows through to the group capital over time.

So, Michael, just on that, historically Westpac had been upstreaming more dividends out of New Zealand than earnings. We should expect the reverse going forward? That's what you could expect going forward, yes. Thank you very much.

Our next question comes from Matt Dunger from Bank of America, Merrill Lynch.

Yes, thank you very much. Just thank the gentleman for taking my question. Just noting the single name downgrade on wholesale and retail trade and the slowdown in discretionary spend that you've called out on slide 31, to what extent does provisioning reflect some of this borrower stress from lower discretionary spend and have you undertaken individual files or reviews of late?

Yeah, so the provisions reflect everything that we know today. So they do reflect the single name. They do reflect the impact on consumers of higher interest rates, higher taxes and those sorts of aspects that they're dealing with. So that's all in there. We do look at overlays to try and capture... risks that aren't in the model outcome, so we do as good a job as we can to forecast that. So as we sit here today, the provisions include everything that we can see and we forecast over the medium term.

Okay, thank you very much. And if I could just follow up with the liquid assets, there was no benefit on net interest margins, but we saw the LCR decline in the half. So just wondering why we saw a zero benefit on liquid assets through the net interest margin.

Yeah, the way to look at liquid assets is two components. There's high-quality liquid assets, which we need to maintain, and that goes into the LCR calculation. Now, that declined a little bit. You've got to remember that the regulatory minimum is 100%, so we're well above that. The high-quality liquid assets came down a little bit, but not a lot. But what happened, as Pete indicated... In our institutional portfolios, we're growing that business. We are holding more liquid assets to support customer flow, and that doesn't go into the LCR. It goes under the balance sheet for institutional. So there's a slight difference, but we're very comfortable with our holding of liquid assets and where our LCR is at the moment.

Thank you.

The next question comes from Azib Khan from Evans & Partners.

Thank you very much. First question is for Peter. On the Australian mortgage offerings, you've called out the improved mortgage NPS, which is now equal number one. You've called out more consistent service. You've called out improved time for decisioning. Does all of this mean that you no longer need to offer a slight discount to your major bank peers on pricing to keep your market share flat?

The slide you're referring to has also got our price, our historical pricing, and it's actually above major bank peers, peer averages, the ZIBs. So just that's the columns in that slide. So I think over time we have been able to improve our relative positioning. If you went back two years ago, what you said was right. The last... 18 months, we've been able to improve service, improve price, and that's all been off the back of getting onto the OneBank platform as we optimise it.

If I recall correctly, Peter, around six months ago, you were of the view you might have to offer a couple of BIPs discount just to hold that market share flat. Has that view changed?

We'll have a look at the – we've actually put the data in the slider, Zib, so you can see that we're broadly slightly better. We did have cash back in the regional brands, but as I said, we'll pull that out by the 30th of June this year.

And on that mortgage NPS, Peter, is that across all channels or just proprietary?

That was just broker.

Oh, that's just broker, is it? Just a second question. You've said that commentary have deemed the integrated plan complete. Does that mean we can expect APRA to remove the operational risk add-on of $1 billion by the end of this calendar year?

Yeah, so we've got the report as at the end of April, so it's a pretty freshly minted report. We will have a conversation with APRA about that, but in the end it's APRA's decision. So it's not going to be tomorrow, but hopefully we can see some release over the second half. But in the end, that's APRA's decision.

Thank you. So we'll move to questions now from the media. Our first question comes from Andrew Cornell of Capital Brief.

Thanks very much. You're rationalising the branches for your multi-brands. Unite is obviously bringing together a lot of the technology platforms. Does the multi-brand strategy still actually make sense? What benefit do you get out of it today as opposed to, say, 20 years ago?

Yeah, we still do see customers choosing brands, Andrew. But as you highlight, we are being more thoughtful about how we use the brands. So as an example, in our private banking business, our private wealth business, we are moving to Westpac. So we've moved to our single brand. In the branches, a lot of the activity can be done across brands. So we've got 100 co-locations out of 600, just so I mention it for you. And certainly reusing technology over time will provide efficiency as well. So we use brands where it makes sense and we're thoughtful about how we can reuse the assets of the bank to service all the brands.

Where do they make sense, the different brands?

Well, we see it from the consumer's perspective, particularly in, sorry, from the customer's perspective, particularly in consumer. You know, the different brands, if you talk to anyone in Bank SA, you know, they're pretty attracted to that brand as an example, Andrew.

Thanks for that.

Our next question comes from Cleona O'Dowd from the Australian Commission.

Thank you for taking my question. Just a quick one. Are you being proactive with under pressure customers rather than waiting for them to call you? Like what kind of checks and insights do you have on those customers before they become too stressed?

Yes, certainly. Well, the first thing is I encourage customers to call us if they need help. They often have a better picture of their finances than do because there's things that are happening outside the bank in particular we can't see. So that's the first thing. And we will use data to look at customers and encourage them to come and talk to us. There's lots of options available. Payment reposes, the ability to restructure debt are two examples that we use, but call us early would be my key message.

Okay, but what are you doing? Are you getting in touch with customers rather than waiting for them to call you?

A practical example is fixed rate lending. As the fixed rates rolled off very low rates to high rates, we were talking to customers, making sure that they were aware of them, and if they didn't, we were looking to see what we could do with them in terms of helping them.

Okay, thanks. And just a second one, if you don't mind. In response to a question earlier, you said in consumer you were cautious on growth, but that there was a big demand in that business to look at options to improve return. Wondering if you could expand on that for me, please.

In terms of the 9% returning consumer is a little bit low from our perspective, so we will look at all options available. I won't go into what they may be because there's a number of them, but productivity, how much capital we put into that segment are obviously two big ones that we will look at.

Okay, thank you.

And our final question comes from James Ayres of the AFR.

Thanks, Peter. I've just got a question on the outlook for interest rates and the cash rate. Your economists are pointing towards one cut in the fourth quarter of the calendar year, but just noting some of your commentary in the materials today on rates being higher for longer given the recent inflation prints, just wondering your thinking on the first cut possibly being pushed out to next calendar year or even a potential rate increase coming through. And Just referring to those numbers of customers hitting the assist, rising sort of from 11,000 to 18,000 now, I think you said at pre-COVID levels. Do you think higher for longer rates or even a rate rise is going to materially impact on that part of the customer base?

Yeah, certainly our economics team is forecasting a cut in the quarter at the fourth quarter. My personal view is I think that's a bit too early. I think the economy is going well at a macro level and there's certainly demand for infrastructure, housing, energy transition. So I think that's a bit early. I'm more in 2025. Whether or not we need a rate increase, I'm not sure. Reserve Bank will obviously decide that, but I'm not sure we need to. We can see some slowdown in spending in the economy. We can see... The impact on probably a little bit less employment, but probably not enough. We need a further slowdown there. So I'm not in the camp of more interest rates, but I just think they'll stay longer for hire is probably the key point, James.

Okay, thanks, Peter.

Cheers. Cheers.

Thanks, everyone. That brings us to the conclusion of our half-year results briefing. Please reach out over the course of the day with any further questions. Thank you.