Westpac Banking Cp Ord

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

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

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

The Australian economy is showing signs of improvement following a sustained period of below trend growth. Household purchasing power is rising as real disposable incomes grow. Businesses are emerging from a period of subdued activity, partially supported by lower rates, easing input costs and some productivity gains. Westpac Data X insights highlight an improvement in card spend growth at 6.5%, the strongest we've seen since April 2023. For business, commercial customers are faring better, but it's still challenging for our SME customers. However, we've just started to see an improvement in cash flows off the back of firmer household spending. Underlying inflation is at the top of the RBA's target range. This will put pressure on the RBA to hold rates tomorrow. We are starting to see more growth driven by private rather than public investment. However, this transition has been slower than anyone expected. A smarter balance calls for bold, coordinated action across government, regulators and the private sector. It has been pleasing to see the focus on the productivity agenda in the national debate. Targeted action is key to unlocking Australia's long-term prosperity and resilience. An area we're focused on is addressing the housing affordability challenge. We need to tackle the structural undersupply of housing and efficiently deliver more houses in the $500,000 price range. More broadly, the global outlook is not without risk, with ongoing trade and geopolitical tensions a constant threat. Our strong financial position helps us navigate that uncertainty while being there to support our customers. It's pleasing to see business credit is expected to grow 7% driving private investment. We're building on the strong foundations and it is all now about execution. We have 13 million customers. However, to realise the advantage of that scale, we must drive more efficiency, we must complete our transformation agenda and we must enhance our service proposition. Each business has a clear direction, has the right leadership team in place and must now deliver. I'm pleased with our progress and energised by the opportunities ahead. With disciplined execution driving momentum, we're deepening customer relationships and investing in our businesses to support sustainable returns for shareholders. Thank you.

Thanks, Anthony. We'll move to Q&A now. If you'd like to ask a question, the dialing details will be provided in the invitation. And as a reminder, please press star one. Our first question comes from Tom Strong from City. Tom?

Thanks, Justin. Good morning, Anthony and Nathan. Just a question around the productivity benefits into 26. I mean, you took 400-odd in this year and you've guided to 526, but you've got the benefit of, I guess, incrementally $270 million from the fit for growth, which you took the restructuring charge for. So is that $500 million conservative, you think, in terms of the FY26 opportunity?

Yeah, why don't I start? Yeah, so thanks for that. I think you've sort of read it the right way. That's a line item in terms of just showing on a consistent basis where we think the benefits of the restructuring charge and then in the future as Unite becomes a more material piece of it, we'll continue to show our productivity benefits on a like-for-like basis through that line. As it relates to the greater than 500, you know, I think that's the guidance that we've given. The benefits from the 273 million, we have actually had a little bit in this year. So there's probably about, we had 402 productivity for FY25. There's about 40 million of that will be benefits from the restructuring charge this year. And I think when we made the pre-release, we just made comments that we thought the rest of that will be phased reasonably evenly during FY25. FY26, and then there'll be a little bit of benefit to flow into FY27. So, yeah, look, we're expecting to do 500 mil. We've got to wake up every day and strive to do better than that, but, you know, our guidance today is, you know, in excess of 500.

OK, thanks for that. That's very clear. And just a second question around Unite. It was 35% to 40% of the investment envelope, and you've clarified that today at 40%. You have kept the $2 billion per annum consistent over the next few years. Just given the reallocation towards United and I guess the decline in purchasing power over that time, do you think that $2 billion per annum is still appropriate as a view out to FY28, FY29?

Look I mean that's a very good question and you're right we'll continue to ask ourselves have we got that right. I mean in framing up two billion dollars per year it's really anchored around what can we do effectively and deliver if you will cost effectively and substantively. So it's really about the capacity of the company to deliver the change we need to undertake. If it's the case that we can prove, certainly in what we deliver over the next 12 months, that we can do more, then we'll remain open-minded about that. But at the same time, it's about balancing the capacity of the company to execute the change at cost effectively and also balancing, you know, making sure we deliver a return to shareholders. So it's a balance that we'll have to navigate over the next 36 months.

And thanks Tom for limiting to two. I didn't mention that. So if everyone else can respect that, that would be appreciated. Next question comes from Andrew Lyons from Jefferies. Andrew.

Thanks Justin. Good morning. Good morning everyone. But Nathan, a question for you. I just want to try and flesh out how everything you've mentioned on expenses will ultimately impact growth in FY26. Perhaps just referencing the various FY26 considerations that you have provided us, can you perhaps talk in a bit more detail as to how you expect this to translate to the various moving parts that you have in your expense waterfall slide on slide 27 please?

Yeah, thanks, Andrew. Good to hear from you. I guess I'm just going to try and find the slide. Just give me two seconds. It's up on the screen now. So I guess, you know, I did walk through these and maybe just happy just to go through them again and try and give a little bit more flavour as we go. I think we've looked at it on a – the first thing is just to sort of look at it on an annual basis, Andrew, and that's what we've tried to do. I think on people costs, we do continue to think that that will be an increase in expenses next year. We probably expect, if you break that down a little bit, we've got some pull-through of things like the investment in bankers that we had this year. There's a pull-through of the superannuation guarantee coming through, so there's a few of those things. We probably expect that we'll have lower absolute wage growth. You know, the EBA is into its second year, so it's a lower number year on year, but we do expect to continue to invest in bankers. So I think that number will continue to be a big feature as we look at FY26. On tech, you know, I guess my comment was just similar, you know, that we continue to think that that will be a headwind. And then on volume and other, maybe just to break that one down a little bit and try and give a little flavour, we did probably the one thing that's a little bit of feature of FY25 was a reasonably material investment in the brand, which we're really pleased about and is important in investing in the business. That was about $60 million in the year, $45 million in the half. So we'll have some of that flow through into next year, but maybe not as much. We gave the disclosure on Unite that clearly that investment bucket is just going to be determined by how much skews towards Unite and then its expense at a higher ratio than the other. So we tried to give a bit of guidance there. And then amortisation was about $100 million for the year and we expect that to be a significantly lower number. And then we've had the conversation about productivity. So they're the moving parts. Andrew, I'm happy to try and sort of be helpful or answer a follow-up on any one of those, but hopefully in sort of laying it out that way you get a picture of the moving buckets.

Yeah, no, that's great advice. X rams was 0.8 times system over the year and you put that down to being a function of just focusing more on returns. To be honest, when we continue to speak to mortgage brokers and the like, we do still hear that even though the gap between the two bookends have closed, Westpac is still pretty aggressive on front book discounting. to sort of understand how you recognise those or reconcile those two opposing views around pricing for growth versus still being pretty competitive from the perspective of brokerage.

So Andrew, it's Anthony here. Definitely we have to be competitive and this product that is a mortgage today is a highly commoditised and very price sensitive offering. So we just need to acknowledge that. The second thing is, yes, in certain areas where we felt it made real sense for us and the returns were right and reflected the customer base we have and want to get more of, such as investor loans, we were sharp on price. We deliberately were because we saw the return and we felt it aligned with what we wanted to achieve. In terms of other parts of the portfolio, we were above market. And I know there's always lots of observations and commentary from participants outside the bank. Those were the two disciplines we set ourselves, which is we wanted to be sharp, we wanted to be very price competitive in investor, and then a couple other segments that we were keen. And we were very happy to be above market on owner occupied, just given the shape of our book and the returns that we're going after.

Thanks, Andrew. And next question comes from Ed Henning from CLSA. Ed?

Thank you. Thank you for taking my questions. I just want to go back to Project Unite and just dig into that a little bit more. You've told us today that you're investing more in 26 than you've previously announced and also the program's going to go longer. So the investment you're spending is more than you've previously flagged. Can you just give us a little bit more on what it's going to deliver in terms of financial outcomes and the timing of that? How much is actually during the program and then how much is beyond the program? Or are you planning to give that at a later date?

Well, certainly what we'll be doing each year in March is giving you a comprehensive update on Unite and giving you an opportunity to work and go through the detailed work streams with our team. So we'll definitely continue to provide that detail and that access to you. I mean, in terms of the investment next year or this financial year of $850, $950, it's a deliberate range because it will be, if we can invest that and deliver the outcomes we need to deliver, then we'll take that opportunity, point number one. The second is, in the concept of doing all of the planning that we've done and landing on the decision to go with one ledger, That necessitated us changing some of the investment profile of the program and so therefore we had to bring a bit more investment forward which is why next year is a bit lumpier than we might otherwise have planned because with the decision to go to one ledger we had to do more work up front to be able to facilitate that migration in 24 months time. And so that's the reason why it's a little bit lumpy thereafter. The second is that we are keeping that investment envelope in as disciplined ways at $2 billion because as I described earlier to the previous question, it's about the capacity of the company to execute and if we can deliver value and if we can in fact do more then we will be open minded to doing more. The other thing I would say is that in terms of the project itself being longer, I just sort of want to put some context in that for you. When we spoke to the market six months ago, we were completing and finalising the investment and plan for a one ledger. We landed at the one ledger decision and we had to re-plan accordingly. Previously we had 30 September 2028 as the finish date, and that was just arbitrary, that we wanted to have this program completed by the end of financial year 28. Now as a result of that re-planning, reflecting the decision to go to one ledger, it's just worked out that we won't have all of the benefits accruing by 30 September 2028. It's likely to be a few months into financial year 29. So that's why there's a bit of an extension. There's just more accuracy that we can provide as a result of the planning we've undertaken. And the last thing I'd sort of say to the spot on question you've raised, which is yes, the nature of the program is that much more of the benefits do accrue later in the program, but there's nevertheless still, if you will, benefits being realised now, whether it be, for example, the small movement and consolidation into one private bank, that's already delivering us some cost savings. There's a number of other initiatives where we're already seeing benefits accrue. But the nature of this program is that what we're doing is we're taking all of these customers onto other tech systems and platforms and migrating them onto one tech platform And only when you switch those two off and you eliminate all the products and processes that, if you will, have to be executed on those two platforms, do you start to fully realise the benefits, the cost to run that follows from that, the cost to change that follows from that. So it is tapered to the back end in terms of the benefits that will be realised. And the premise that we have with Unite, its key feature is that it helps set us up in a way that we are structurally lowered our cost base so we can really start to achieve our aspiration, which is a cost-to-income ratio that's better than the average of our peers.

Thank you for that. And just following on from that, you know, in March coming up next year, are we going to be able to get, at that point, what you think the savings will be through the period and at the end of the period? Or are you not... or are you not ready to tell us that?

Look, we have absolutely clear in our mind as to what we want to achieve as a result of the investment we're undertaking, which represents Unite. But what I'd rather do is make sure we're delivering and we're executing before we start talking about outcomes. But rest assured, the whole focus here about Unite is if we can consolidate the myriad of bank processes and systems onto one bank process on one system, then we would expect that that sets us up to be able to drive to a cost to income ratio that's very competitive as compared to our peer.

And maybe I'll just add one thing, Ed. I think it may be different than some other programs, but I don't think it's necessarily a program where you take total spend and total benefit sort of narrowed in on just the Unite benefits and sort of try and make sense of it that way. You know, this is sort of large structural opportunity for us to then get our cost to income ratio much better than where it is today. And so, you know, I think... In some ways it's a critical enabler of what we've got to do on productivity but it cannot be the only thing and so what we're committing to do is just try in a transparent way as we go through the program, highlight the benefits that we've got from our spend as we go and then you'll also hear us continuing to talk about that productivity bar that I've already had one question on because we want to be held accountable for making the organisation more efficient as we go significantly enabled by Unite. So it's going to be more than just the Unite productivity that you'll hear from us.

Thanks, Ed. Our next question comes from Matthew Wilson from Jarden. Matthew?

Yeah, thanks, Justin. Good morning, team. Matt Wilson, Jarden. Two questions, if I may. Firstly, we've seen a nice pick-up in your business banking volumes, your winning share there, which has been really good. However, it's taken 50 basis points also off the net risk margin. Obviously, there's some reclasses in there. How should we think about how you'll manage the volume margin trade off in that business back now. Are we at a base that we can grow within without, you know, impacting the margin too much, or should we expect further?

Why don't I invite Nathan to take first swing at that, and then I'll add some comments on top.

Yeah, thanks, Matt. And I think it is a good question, and clearly, you know, when you get into the divisional disclosures, it is a number that stands out. I think it's just important, I think, when we're thinking about margins, just to make sure we sort of... sort of go back up to the top of the house if you like and just think about what are the movements in the margin that are happening at the group level and then the divisional is really a proportional impact of those. So we've made the comment that when you look at business lending margin at a group level that contributed less than a basis point, I appreciate some of that is just the math of materiality relative to the mortgage book. But more importantly, when you look at the business lending – business margin at a division, you've got pretty significant impacts from the deposit side of the book. So I think, you know, the right way to look at that is sort of just the business lending, which is where your comment was going. Business lending revenue was actually up 7%. So, you know, I don't – you know, the margin point around the lending is not as material as the overall divisional thing, just given the impact of the deposits. I'd probably say just a couple more points and then I'll let Anthony come in. I think, you know, the lending margin was more stable in business lending in the second half than it was in the first. And I sort of continue to sort of expect trends into the first half are going to be a little bit more like they were in the second half than what they were in the first. So we don't see that accelerating. I think that's really driven, you know, front book, back book. in our business lending books are much closer together now. One of the features I think of this book maybe relative to peers is when you've been out of the market for a little while and then you do re-enter the market and accelerate, you can have a bit more of a pronounced cycling from back book margins on the front book margins and so we might have seen in any given period a little bit more here than others but I think we're now at that spot where that's much more in equilibrium and we should move more in line with peers. And then I'll just say sort of two more points. Looking forward, I think mix of this book will be almost more important than pricing. So, you know, there is a significant difference in margins between the sub-segments, whether it be the size, so corporate versus SME versus small. There's a significant difference between sort of working capital solutions and term lending. So, you know, getting that mix right will probably be a bigger determinant than pricing itself. And then just last point on pricing, Matt, you know, not to labor the point, but I guess, you know, I've come in and met with the team and spent a lot of time with them on this particular point. And, you know, there's probably nothing that I'm seeing in the pricing here that is that different to what I would have expected or seen elsewhere, I think. the team are putting their firepower around retaining their existing customers and so you see pretty good levels or high levels of retention of existing customers when they go to market and that's good business and we continue to encourage that. And then where they're trying to be a little bit more disciplined on price is just on the new to bank and so we're probably seeing new to bank win ratios drift down a little bit in the last six months but the business is still growing well and we expect it to continue to take share next year.

You hit all the points and thanks for doing that. I mean we'll just say that you know the growth that we've seen over the last 12 months Matt was in call it the higher grade part of the book and so you know margins there as you would expect slightly tighter but the return on tangible equity was very attractive. The other thing that you know we were pleased about was that that growth as well as the existing customers and those sort of retention rates in the sort of high 90s. And then win rates in the context of new to bank were in sort of much, much, much lower than that. So we're really, really thoughtful about where we deployed and where we grew. And we knew that there would be, if you will, some consequence to margin, but it was the right way to go after the opportunity in front of us. The only other sort of additional point to make about, you know, business bank, with that growth in the loan book being sort of three quarters existing customers, only a quarter new customers, What was really pleasing is that we saw a 13% growth in the transactional account, which we think is a really important sort of opportunity and capability we have at the bank. That 13% growth, what was very pleasing was that sort of about 53%, 54% of that growth was new to bank. So we're bringing new customers in on a product suite that's a really attractive, A, return, but B, also a risk profile for us as a company. So we quite like the way Paul and the team are driving the shape of that growth in that division.

Matt, hopefully your second question doesn't require such a comprehensive answer.

Hopefully not. Just with respect to your target, so six months or so ago, you decided to set relative cost of income and ROE targets. In the interim, one of your key peers has sort of changed that line in the sand by producing some absolute targets. How have you responded to that? Because it makes your task a lot harder at face value.

Look, I expected this question and in fact I think I expected it from you Matt, so thanks for playing consistently. Look, you know, I respect Nuno immensely and what ANZ has done and he's put a marker down and I wish him well and we'll watch that process develop from here. We've spent a lot of time and effort to get a plan together and we had that plan in front of us and so I think our ambition which is to be very focused on how do I structurally reset this company with Unite, how do we then go after the productivity equation year in year out over the next 36 months. bringing those together, we can see where we can get our cost to income ratio at a point which is better than our peer average. And we've got clear goals, clear targets that we need to deliver, Matt. I'd just much rather, if you will, deliver and be dropping outcomes along the way rather than sort of putting some bold number in front of you. I think it's fair to say as a company we probably haven't had the right to do that. We put a number in front of you four or five years ago and we didn't get to it and so frankly what we need to do is deliver and then talk about bold numbers and outcomes.

Thanks Matt. The next question comes from John Story from UBS. John?

Thanks very much, Justin. Good morning, Anthony, Nathan. Firstly, obviously on the consumer division, you've seen quite a big improvement half on half. And just, you know, just looking at some of the diagnostics on the actual consumer division reported, customer surveys, NPS scores are pretty stable, Anthony, as you called out. But one thing that is pretty evident is your MFI number has dropped quite a bit. Maybe if you could give a little bit more details around that. And then just Secondly, on the consumer division, maybe just around the start of the financial year, if you could provide a little bit more color on how the division has been performing, particularly with regards to new business volumes and then also just channels in terms of where mortgages are coming through. Thanks. Yeah.

Look, thanks for that question, John. And so, Nathan, you're welcome to jump in as you see fit. Look, you're absolutely spot on. We have an aspiration to lift our MFI ranking from where it is. And if there was one aspect of the performance in consumer which has done some great work over the last 12 months, there's one area where we're disappointed and we're actively engaging on is the MFI outcome in consumer. The irony is that the MFI score has come down a little bit yet deposits have grown at a very attractive level of 10%. And we've done more work and as we've unpacked that, we've noticed that actually it's much more in the context of what we call the regional brands, you know, St George, Bank SA, Bank of Melbourne, and part of that is connected to the fact that we were less aggressive in how we were pricing our mortgage book in that area, and as a result we saw some attrition in the transactional account, the MFI accounts that we really want. And so that was a really humble reminder to us that about not just looking at products like mortgages in a standalone only return setting but to really think about the whole of customer and are we getting the balance right and we've recognised that in that area in particular we weren't getting the balance right and we've addressed that accordingly and are much more focused on how we grow and support those customers and obviously graduate the MFI. As it relates to the Westpac offering, the MFI there has started to improve and we're certainly pleased with the outlook and the momentum that we've got in that. I would say that the others, if I think about it, also MFI, in the space of 12 months in business banking, they've been lifted by well over a percentage point. So it does highlight that we do have the offering, we do have the product, we've just simply got to make sure it's a priority across the organisation, which it now is.

Maybe I could just add a little bit on the current flows, John, just to take your second question. I would say that we've, and Anthony mentioned this in his pre-prepared remarks, we've probably seen, well, one, I think the market is, in particular, your question goes to home lending, then I think that mortgage market has been accelerating and I think that's been sort of well covered in the market and you can see it in in the system stats, we're certainly feeling that or seeing that. So we've had increases in pretty much every channel and we're seeing increased applications. And so front of funnel activity, as Anthony said in his pre-prepares, is probably a little bit higher than where we've been trending on a market share basis over over the second half so we're probably you know at or around system wouldn't surprise us if our front and final actually meant that we had a couple of months here where we're a little bit above system that has been you know growth in in all channels I think pleasingly we think you know October we're going to see a little bit of that volume growth in proprietary I think the team are very cautious when we talk about green shoots there and Anthony said it's sort of years not months but I think as we've seen proportional increases in applications, the proprietary channel has been performing better than it was in prior periods in that period on a proportional basis. So that continues to be good. And maybe the other thing just to add that may be of interest, John, The first home buyers guarantee scheme has certainly stimulated some interest whether it was some pent up demand there but we saw sort of applications in the first couple of weeks when the changes were made almost went to two and a half times what they were for the first home buyers guaranteed. It's moderated a little bit. I think last week it was about two times what they were so it's still double. So how much of that pulls through? So we're seeing a lot of that volume. I think how much of that actually fulfils is a bit of a wait and see, but it's certainly still a small portion of the bank, but it's certainly stimulated some demand.

Thanks, Sean. Our next question comes from Brian Johnson from MST. Brian?

Thank you very much for the opportunity to ask a question, and welcome, Nathan. Yeah, hi, Brian. I had two questions, if I may. The first one is I'd just like to understand, you've got a bucket load of surplus capital. Yeah. You're trading at, I don't know, about 1.8 times book. I just want to understand the strategic rationale behind selling RAMs when a buyback, for example, is not as accretive? And also, if we could understand any kind of litigation risk or warranties that you've made to the buyers in respect of this business? And then I have another question, if I may.

Okay, why don't I... I'll just start on a couple of the specifics and then Anthony can jump in. I think one of the important features of the transaction, Brian, is that it's an asset sale. So, you know, just by virtue of that structure means that we're retaining the entities. and then the assets, it's a loan sale so effectively the assets transfer to the buyer. As part of that we've given sort of customary reps and warrants and other protections for the buyer so that they know that the asset they're buying is effectively going to perform in a way that it says on the tin. So that's things like title and the enforceability of title and things like that. So all customary things. In particular, as it relates to things like indemnities, you just don't need to, given the structure of the sale, that all just stays with the existing entity that we retain. Maybe just to give a little bit of a picture as to the financial impact of it, Brian, because I think prima facie, I would agree, it does sort of, you know, every day we wake up and compete really hard on household mortgages and so it's a core product of the bank and so, you know, prima facie, you've got to scratch your head a little bit when you're then willing to sell a portfolio of home lending. There's a couple of important points here. It is on a completely standalone set of technology. So it's a business that runs, you know, almost independently from the rest of the business. And so, you know, you've got a cost base here that by the time that we get to completion will be almost equal its revenue base. So, and it doesn't necessarily give you the type of scale that you might intuitively think in your mortgage business is sort of, you know, one of the key features of this relative to say just seeding a little bit of share. And maybe, Anthony, you can touch on it. The other key point is, you know, we've made quite a few statements today just about the inherent strength of the deposit franchise, the ability for us to go after transaction accounts in terms of being, you know, a strategic advantage for us as we think about our balance sheet structure and, you know, this is a business that has, you know, if not zero, very close to zero crossover in terms of deposits into the mothership. Yeah.

I'll just develop a little bit more one point which is our current mortgage book, Ryan, is let's call it 21% market share. But essentially we've got three different systems upon which it's spread. So in effect I've got three small banks, three small bank cost challenges, three small bank compliance, three small bank risk challenges in managing the mortgage book. And so Unite was about moving all of those onto one way of doing things on one target tech stack. And so we were always going to have to spend quite a lot of money and we were going to have to spend a lot of effort and consume a lot of resource to move the RAMS mortgages onto the target tech stack. And so therefore if there was an opportunity to do that much faster and more efficiently, which this asset sale represents, then we were open-minded to it because essentially I have one percentage point less market share but now instead of it being spread across three regional bank cost bases, it's spread across two and we're on our way to getting one. And importantly, if we complete this as we target in 2026, I'm accruing that run cost saving, operational complexity reduction, risk reduction, two years earlier than was otherwise planned and so therefore that's an attractive outcome for the bank. And as I say, 21% or 20%, my scale is wasted on three systems and so I've got to get to the one system to really enjoy the benefits of that scale. So that's why this opportunity made sense and that's why when we found the right who would be the right owners of these assets. It just made a lot of sense for us to get after it.

Anthony, just as a subset of that, can I just clarify, there was a story in one of the media reports talking about ASIC and AUSTRAC talking about this. I think subsequently we've seen a very, very small ASIC find. Can I just confirm that as far as you're aware, within the RAMS business that you're effectively retaining the risk

Correct. So to the extent that we've engaged with the regulators and it's well documented on a whole range of issues and concerns they had with the way the RAMS businesses were led, managed and prosecuted. We've now, obviously, we've retained that. We've just simply sold the assets and, more importantly, it allows us, as I say, to switch off or get off one of those bank systems. So nothing's changed in terms of the risk profile we had as a result of the ownership of that business. It's just simply much cheaper to run from here.

Thanks, Bron. There is no AUSTRAC issue.

Nothing that has been brought to my attention, Brian. Nothing has been brought to my attention. You'll have to send me the article or reference and sort of what context in which it sits, but in the context of AUSTRAC matters vis-à-vis RAMS, I don't have anything in front of me on that front. And I'm looking across at my general counsel and my chief risk officer and they equally are acknowledging that we have no such issues at this point.

Thanks, Brian. Our next question comes from Jonathan Mott from Barron Joey. Jonathan?

Thank you. Just a question on Unite. Back to the topic we've been talking about before. You give us a kind of a traffic lights scheme on how the business is going, but there's been a bit of a change in the disclosure. In the first half, you had sort of the green, amber, red, and now you've got in Scopes. I'm just going to look at slide 15 here. You've got another classification in Scopes. And then you've had an increase in the number of amber and a small change in red. Can you give us an update on what that means, why you're now saying this is, you know, scope confirmed? And, you know, if you're looking at 18 of the 38 are actually already in the amber and red.

Yeah, so thanks for the question, Jonathan. And I just sort of, let me break it down for you. As a result of all of the planning undertaken, we now have a plan in front of us and we know what we need to do in what sequence we have to do it. Those 13 scopes confirmed are essentially 13 initiatives that we now have a plan for and at some point over the course of the next 36 months those, if you will, initiatives will have to be worked on. So at the moment not all of those 13 have commenced and so therefore to characterise it as green, red or amber is slightly redundant. And so therefore the others which we're now moving on, because it's a real program of sequence, it's about what we do and how we follow up on each particular completion of work. And so these 13 initiatives will be done and to the extent once they start work on them, we'll then obviously recognise whether they're meeting the standards we've set, meeting the timeline we've set, meeting the cost we've set, and that'll then determine whether they're characterised as green, amber or red. And when we were talking back in May results, we had seven of the initiatives at that point were red, and it's now down to five. What's happened is four of those seven have now moved into amber green. One, in fact, has been completed or effectively exited, and so that's behind us. But we've also had two initiatives being re-characterised as red, so that's why there's that change from seven to five over the course of the last six months. What we'll keep doing, Jonathan, is to the extent that there's some confusion there, we'll get sharper in how we set it out for you because I do want everyone at all times to see that this is a large, this is a challenging, complex program of work. We're absolutely committed to it. Most importantly, committed to making sure that there is no surprises as we go through it. And so if we can do better in sharing with you where we're at, we will look to tidy that up as we go forward.

Thank you. Second question, if I could. If you're looking, I'm looking at slide around 22, 23, I think it is, which just shows the growth in deposits and consumer pretty strong at $15 billion and then 12 in mortgages if you exclude Rams. But including in that number is very strong growth again in offset accounts. I think it was up another $5 billion. We've now got $73 billion in offset accounts. So two things about that. Firstly, are you comfortable with the growth in net of offset accounts? Because It really is lagging the system. And I know you said you want to get your service proposition right, but are you comfortable with that? And also, given the offset accounts are nearly all against owner-occupied property, it actually means your investor book as a percentage of the total excluding offsets, which is a religious deposit sitting there, is a lot larger. So can you answer sort of that?

I'll make a couple of comments and invite Nathan to jump in. I mean certainly you're right to call out that the deposit agenda, the idea that we grow deposits and more importantly get the shape of that right, John, is absolutely not where we want it to be, albeit we're really pleased with the progress we've made, but we would like a lot more in terms of the shape of deposits. And we were disappointed and acknowledged that, that we didn't catch what was happening in the regional brands as fast as we perhaps should have, and that's on myself. We're very much focused on now addressing that and I think we've got that properly, if you will, tackled and it's just about how we get after that over the next 12 months. I'm just really pleased though that the Westpac side of the portfolio is continuing to improve and is obviously a really critical part of our portfolio there on transactional and savings accounts. There's definitely, there's things that if I think about our service proposition, one of the areas that I reflect on is making sure that transactional accounts deposit services and servicing on that front is front and centre for every banker in the company and we've done a lot of work to recalibrate for example scorecards, and incentives to make sure that all of our bankers in consumer, in business bank, understand the priority we attach to that. And then, pleasingly, you know, we've got a good enough product suite, which means we can be very competitive and I do feel like we're after that in the right way. Yeah. Was the second part of the question?

No, I think... I think you've covered it well. Maybe, John, just to add two points, I think that you're right to call it out. There's about, as you said, 7% growth in offsets in the half, but importantly, 6% in savings as well. So we have seen strong growth in both those items. And you're right to call it out in the way you did. The growth in savings accounts is about attracting customers on the liability side and the offset is much more about the business that you do on the asset side. And there is a strong customer preference towards those. They've been growing, as you know, quite strongly as you move from a fixed rate portfolio into a variable rate portfolio and we're pretty much exclusively there now. As we grow that side of the book, we'll continue to see growth in the offsets. Whether you're trying to target a certain amount of offsets or whether you're happy with it or not, I think it's a key feature of the mortgage product and there is a strong customer appetite for it.

Probably the other point you did raise was about investor loans and we're very keen to continue to be competitive in the investor loan segment. That demographic, that audience is an attractive customer base for us and we see a real value in being very supportive there on investor loans and more importantly then converting and making sure it's a whole of bank, whole of customer relationship that follows from that.

Thanks, John, and thanks, everyone, for bearing with us. We've still got a few to get through, so we might be going for a record today, but we'll keep pushing through. Sharpen it up. Our next question comes from Carlos Cacho from Macquarie. Carlos?

Thanks, Justin. First, I just want to ask you about on your margins, your replicated portfolio benefit is expected to diminish from three bits to one bit, right? I was just wondering if there's any other potential tailwinds that are worth calling out as you head into FY26, because mostly negatives that you mentioned as you walked through the waterfall, Nathan.

Yeah, hey, Carlos, and Justin is giving me the signal for one-word answers, so maybe I'll jump straight into it. I think we did just try and lay out, you know, as helpful as we can, Carlos, and happy to sort of pick it up later in the afternoon to the extent helpful, but... I guess the other point that we made, if you narrow in on things where we could get a tailwind, I think term wholesale funding markets have been better, so we do expect a tailwind there. We do expect to continue to get some replicating portfolio benefits. We called out a basis point there, which is sort of net. net across the replicating portfolio and then the unhedged deposit. So there's a little bit of support there. And then, you know, I think maybe the other one is just to say on liquids, I think that has been a bit of a volatile item for us quarter on quarter. We did expect to sort of increase in investment securities at the third quarter that maybe didn't flow through to the same extent we thought. I do suspect as we go forward into the into the first half you know just where the customer balance sheets are up to and how growth is going we probably expect liquids to be down a little bit in that in the first half and so you know while neutral to earnings there may be a little bit of a benefit that flows through there.

Thank you and then just secondly you know you've spoken about you know wanting to do better at proprietary mortgages and obviously the long term strategy but where are you expecting to win or where are you seeing wins come from like presumably it's either going to be a new new customer who's a first home buyer or they're coming from other banks where they're proprietary or they're coming from brokers like do you track that is there the particular targets you're hoping to do better in

Oh look, I mean, good question. I mean, what we've got to do is just get the basics right in terms of how we go after proprietary. So we've got to get the service proposition right, we've made real progress, we've got to get the product right and we've seen improvement in product NPS, timed the decision down inside five days, you know, we're operating and executing mortgages more efficiently than we have in the past. Our hygiene and data is in a much better place, so the returns are much more, if you will, better reflected in that. And then I think the things for us, though, is we've just got to get, for example, more bankers. We lost too many home finance managers, so we're catching up on that. That takes six to 12 months for a good home finance manager to really get into their straps, and so we've started to get that resource allocation right. We've certainly got to get a better compensation and incentive arrangement around for our home finance managers, and we've now got that right. We've got their scorecards right. We're also at last really taking the full power of the company in terms of the range of data and if you will insights that come from all of what we have across the entire company to help get behind the home finance managers and give them real leads which represent real insights and allow us to be much more proactive. Nate can talk about investing in the brand. We spent a lot more money to get the brand profile up. So we're just putting in place all of the basics to really get after this area. And I'll be very candid with you. There's nothing more dramatic than just getting all those basics in place to allow us to get after it. It took us a number of years to get to this point. It's going to take a little bit of time to get out of this particular position, but I think we've got what we need to execute. And I was really pleased with some of the actions we took in private wealth last year, which we've already seen a really improved turnaround in first party and private wealth, which tells us that if we get after this as we have in private wealth and consumer, we can deliver that same turnaround. It'll just be, I think, a reasonable period of time and effort to get there.

Thanks, Carlos. Our next question comes from Andrew Triggs from JP Morgan. Andrew?

Thank you. Good morning. I want to ask one question. Deposit makes a shift. Should we expect that to slow significantly next year? And maybe, Nathan, if you could break that down, please, between the percentage of deposits in behavioural savings versus the percentage of those products themselves, some of the customers that are qualifying for the bonus rate?

Yeah. Yeah, hey Andrew, how are you? Yeah, I think on the deposit mixed spreads you've probably rightfully called it out. It's probably just really a story for us around the growth that we've seen in that consumer savings product. I think, you know, at an overall book level we've had, you know, decreases in proportion to term lending. So I think the bigger determinant of going forward margins, which is really where you're going, is going to be on the savings product. And I would say, you know, a couple of things here. I think certainly this is one of the areas where fourth quarter was a little bit... showed a few different signs in the third quarter. So we saw, you know, I think the savings balances in the fourth quarter grew $5 billion. They grew $2 billion in the third quarter. We've said there that we've got... About 84%, I think we've given you an annual number there, that are the people that are qualifying or achieving the bonus rate. That was actually probably a little bit lower through a couple of months in the middle of the year and then picked up a little bit in the fourth quarter. So I think those two main things are things that I'm expecting will flow through into the quarter. into the first half, it's probably not so much a mix shift into these products, Andrew. It's much more that's where we're seeing the growth.

Thanks, Andrew. Our next question comes from Richard Wiles from Morgan Stanley. Richard.

Good morning. I'll just ask one question too. It's following on from Matt Wilson's question around the business bank margin. In your business and wealth update a few months ago, slide 17 showed the composition of the underlying margin decline. It was 22 basis points and it was split across portfolio, mixed deposits and lending. The decline in this half Nathan was 18 basis points. So actually pretty similar to the first half in terms of underlying trends. Could you give us some commentary around the mix between portfolio deposits and lending? Were the trends pretty similar or did they start to skew?

Yeah, thanks Richard. Yeah, I think my comments earlier to Matt, and sorry if that was confusing, was just really around the business lending part of that equation. So I think in the second half or in the more current period, we've seen a more moderation of the impact on the lending side and you would have seen, you know, for all the reasons we've been speaking about on the deposit side, you would have seen a bigger, you know, a proportionally higher impact in the more recent period from deposits.

Okay, so lending was seven in the first half and deposits was nine. Lending went down and deposits went up as a headwind for margin.

As headwinds, yes.

Okay, thank you.

Thanks, Richard. Our next question comes from Brendan Spruill from Goldman. Brendan?

Yeah, good morning. I just have a couple of questions. Firstly, on the markets and treasury contribution for this half, it looks like it's running at a run rate of... sort of that $2.2 billion. Can you maybe talk about some of the benefits that were achieved this half and will those sort of repeat into 2026 and how does the $2.2 relate to what you would think is a normalised level of earnings from these two divisions?

Yeah, maybe we can break it down a little bit, Brendan, and then, you know, Anthony knows that business well. I think, you know, it is very challenging in these business to grab one quarter and annualise that and sort of expect that that's where your run rating, well, sorry, it is where your run rating, but to expect that that sustains over four quarters. I think with these, certainly the markets business is a pretty mature business now. It's got a really strong FX, fixed income capability and it's a pretty mature business now that would be, should all market conditions being equal, just growing more in line with the underlying activity of our clients and the loan book growth. And then, you know, Nell and the team have got ambition and are doing things to grow out a few more strategies that can build income, you know, sustainably in that franchise over time. But I think I would just think about that as more, you know, it should be producing pretty stable performance on the FX and the fixed income, and it'll be more determined by underlying activity. In Treasury, I think similar, you know, we've got good disclosure on that over a long period of time, I think. You know, that number in and around a billion for the Treasury has been a pretty consistent number. I think a couple of years ago we might have had a 600, but I think, you know, in and around that area is about right. We're probably issuing a bit less wholesale funding, which gives them a few less opportunities. And, you know, even with the RAM sale, we expect to do a little bit less in that space, so maybe it comes off a little bit. But there's a few comments there, Anthony.

Yeah, look, I mean, definitely the financial markets business, you know, it's... I think the leading franchise in the market now. A couple of just extra comments. I think there's real upside for us in the FX product suite and the penetration into consumer and business bank at Westpac is less than what it should be, given the quality of the FX franchise we have. So there's real upside there in servicing our existing customers in consumer and business bank. Likewise, I think we're underweight in a few aspects like commodities and... aspects of that business which we see as a real positive for us. Perhaps a real sort of interesting jewel in the crown in FM is just the credit business, the credit trading, the credit market making. Now that Australia with its savings pool is actually a genuine capital exporter and we have a lot of kangaroo bond issuance into this market. The franchise that we have there in terms of credit, market making, origination and, if you will, distribution into this capital market is pretty impressive. It's the best in the street. So we're quite excited about how much more we'll see in that business as Australia's position with the superannuation funds makes it a real destination for people to raise capital.

Thank you. That's very helpful. My second question is just on slide 29 around the impairment provisions. I mean, in this presentation, you've talked, Anthony, about the improving operating environment for the bank. You've also showed some lead indicators on asset quality where you're seeing impaired assets, for example, fall. I'm just wondering what the thought process was around increasing the overlays and specifically the downside scenario weight and actually growing your excess assets provisions above base case in this period?

I'll just let Nathan make a comment but it was a robust process and because clearly the settings and outlook has continued to be surprisingly benign but you know we need to be constantly vigilant and if you will balanced about what is going on and what may come our way and so That's been a very contested and well-developed discussion inside the company with Nathan and I about what's the right outcome here.

Probably just to add, Brendan, I think just take it as an indicator that we put a high value on medium-term earning stability and so I think when we think about this, You know, it's similar to, you know, increases in hedge balances and then the management judgements around that. We've tried to just err on the side of a little bit more stability over time.

Okay, thank you.

Thanks, Brendan. Our next question comes from Samantha Kontrabaski from Hester. Sam?

Good morning. Thank you for taking my question. I'll just keep it to one. So you've recently appointed a Chief Data, Digital and AI Officer, which is a new step for the business. As you bring these areas together, how do you see this changing how Westpac competes? Is it mainly about efficiency and cost or could it fundamentally reshape the customer experience and growth?

Thanks for the question, and that is what I work on every day in terms of how do we get that right. There's no doubt that there's a lot of hype and a lot of, if you will, excitement around the AI revolution or evolution, depending on who you speak to. We certainly think that its capacity to help us be more efficient help our employees get their job done better, safer, more consistent is a really big and important opportunity that comes from having the right AI program. And so that was one of the key sort of drivers was to get a global thought leader working for and with me in terms of how do we look at the way we do things in the company and how can we do things better. It's a wonderful tool in the hands of employees but you need to therefore invest in your employees and make sure they understand how to use this tool and how they can make it it can help them be more efficient. So that's definitely one emphasis and there is definitely really interesting ways in which it will help us serve customers and provide a more attractive service proposition to our customers and we're sort of already taking some of the model capability with this Westpac Intelligence layer, taking all of the data and all the signals that are coming into this company and using that to make better, faster decisions which allow us to get back in front of our customer more proactively. We're seeing it, Samantha, also help us in terms of being really good with our customers with the view that that obviously drives engagement, connection and revenue ultimately.

Thanks, Sam. We'll move to some questions now from the media. So our first question comes from Luca Itamani from The Guardian. Luca?

Hi, Ed. Hi, Tim. Sorry, can you hear me all right? We've got you, Luca. We've got you perfectly. I just wanted to check. So in the wake of the Fair Work Commission decision, do you intend to change your work from home policies at all? Have you seen more applications or requests from staff for new or more flexible work from home requests?

We have one of the most flexible work from home policies positions in the marketplace. So I think what we are going after, which is finding that balance for our people, I think we've got that right. So no, I don't need or feel a need to change that particular setting. We're also just reflecting on what we might do in response to that recent work from home decision by the Fair Work Commission and we'll land on a decision as to what we will do later this week. What I would also say is that we've got a tremendous level of engagement from our people and if I look at some of the OHI scores and other engagement measures, they're just highlighting people are really engaged and really excited about what we're trying to go after and what we're trying to achieve as a company in terms of for our customers and in terms of how we work together as a team. So I feel really encouraged by just where we're at and motivated to go further with what we've got.

Thanks, Luca. And next question comes from James Ayres from the AFR. James?

Hi, Anthony. You've spoken about this deliberate pricing to attract investors in the residential property market. And you can see on slide 66 that your investor loans and interest-only loans, sort of the second half flow there, is tracking well above the averages of the books. But there's sort of house price data out, you know, today showing house prices sort of growing at the fastest pace in a couple of years. And we saw that APRA data on Friday showing investor lending is pretty strong, like sort of 7% annualized, I think. You just said in response to John Mott's question, you know, it was an attractive customer base, but could you just talk a little bit more about that? Like, why are you targeting more investors? Are they sort of a better credit risk than owner-occupiers? Is there a cross-sell opportunity for you? And, you know, do you foresee a little bit of a squeeze on the first-time owner-buyers as a result of this investor growth that we're seeing come through? Yeah.

Well, I think we're seeing a squeeze on the entire market because of the demand, whether it's first-time buyer or investor, there's just a lot of demand and, you know, the key challenge of the day is we've got to get more houses built at the right price point, James. So, you know, every aspect of demand is being supported and is going fast, which is only driving the challenge and making it harder. In terms of... The investor segment, I mean yeah it's an attractive segment in terms of from a credit risk perspective and yes you're right in terms of, I don't like the term cross-sell but the idea that these are people who are investing in property who therefore may need an incremental services and support and how do we therefore bring this entire bank to them is something that I'm really drawn to and we see it as a real opportunity for us and we've just got to, I suppose, go about it thoughtfully and be careful about the outlook and the risks that come from sort of going too far too fast in a particular segment but we think we've got the balance right and it's interesting that we're forecasting a sort of almost 10% increase in residential house prices over the next 12 months. So it's certainly a positive outlook for people who can access the property market.

Just a really quick supplementary on that risk point, Anthony, that we saw John Lonsdale make some comments in on, you know, implementation aspects around macro-credential tools just to make sure that could be, you know, activated in a timely manner if needed. And, like, back in 2015, I think you sort of had the investor loan growth that's sort of going above 10% and brought back to that number, and then there was an interest-only element in 2017, you know, where they were sort of looking at that being about 30%. You're at 20% now, I think, so it's well under that. But how much sort of hotter do you think this investor lending growth trend sort of would need to get before you're in that territory again?

Oh, look, I don't have that answer, James, but, you know, we are very much or very cognisant of the balance we need to find. And, you know, we engage with the regulator up as a terrific partner. to us and we engage actively, often deeply with them about all of these particular issues and so we'll be making sure there is no risk or issue there vis-a-vis the regulator. Equally, it's an opportunity that we've been pursuing over the course of the last six months. and we will continue to pursue it, but it'll be balanced around the return, it'll be balanced around the risk, it'll be balanced around is it that we're converting these opportunities into broader, more substantive customer relationships and not just simply a lender loan.

Thank you.

Our last question comes from Stephen Johnson from Seven West Media. Stephen?

Good morning. Stephen Johnson here from the Nightly News website. Anthony, earlier in your presentation you said that you want to see more housing available for the $500,000 mark. Would you be able to explain why you want more housing available for $500,000 and what your typical debt-to-income ratio limit would be now considering the cash trades at 3.6%?

So the thesis around just sort of promoting the idea that $500,000 is the right price point is really sort of predicated on the following. Medium income in Australia is approximately $90,000. When we finance someone in the acquisition of a house, we'll lend in the order of five to six times their income subject to expense verification and the like. And so therefore, you know, you've got something anywhere between sort of $450,000 and $550,000 of mortgage capacity. And then, of course, just assume, say, a 10% deposit. And so all of a sudden, you can see medium, you know, $500,000 as a house, $500,000, $600,000 is just really critical if we're going to solve for, you know, call it average Australia or the median position in Australia. And the challenge is that properties are being built in major capital cities and the median house price of houses in capital cities in Australia is over $1 million. I am drawn to the fact that median house prices in regional Australia are close to sort of $500,000, $550,000 and so I feel like regional Australia is part of the solution potentially here. But I would say that the key is let's build more properties at the right price point to allow people to get access to the market and so when we talk about building more properties, it just can't be building more properties that doesn't solve the actual challenge. How do we ensure the average Australian gets a chance to buy a property and live in their home of their dream?

So basically it's also a social issue that There's too many houses that are at $1 million. The average full-time worker can't afford that. Are there going to be some societal challenges and maybe some aspects that would hurt Westpac Lending?

Well look I think our success as a company is inextricably linked to the success of this country and one of the challenges for this country is to get more housing, have more Australians being able to own their own property and so therefore I think it's really important. The challenge is that when you think about the cost to construct, you think about the time and cost and process for approval, All of those features contribute to it being very hard to be able to build a house at that price point and so therefore I think it's not sort of dependent upon developers and contractors but it's really important that the entire community, government, regulators and all of us work out how can we create an environment where it's cost effective, it's rational and it's reasonable that you can build a house for $500,000 to $600,000 in Australia. Right.

Thank you. Thank you, Stephen, and thanks, everyone, for dialling in. We'll be available over the course of the day. Thank you very much.