Westpac - the next growth phaseMar-01 Sep-01 Sep-02 Sep-03 Consumer advisers Priority advisers &...
Transcript of Westpac - the next growth phaseMar-01 Sep-01 Sep-02 Sep-03 Consumer advisers Priority advisers &...
Deutsche B
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Deutsche B
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Westpac - the nextWestpac - the nextgrowth phasegrowth phaseDr David Morgan,Chief Executive Officer
Deutsche BankAsia Pacific Financial Institutions Conference,London, 9-10 July 2001
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DisclaimerDisclaimer
The material contained in the following presentation isintended to be general background information on WestpacBanking Corporation and its activities as at 9 July 2001.
The information is supplied in summary form and is thereforenot necessarily complete. Also, it is not intended that it berelied upon as advice to investors or potential investors, whoshould consider seeking independent professional advicedepending upon their specific investment objectives, financialsituation or particular needs.
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• Growth momentum review
• Strategic focus
- Organic growth
- Wealth management
- Internet based distribution
- Our people & social responsibility• Strategic options
• Outlook & summary
The next growth phaseThe next growth phase
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Growth momentum clearly wellGrowth momentum clearly wellestablishedestablished
• First half NPAT up 13% to $924 million
• Strong revenue momentum
• Tight expense management
• Continued sound asset quality
• Continues growth trend of previous threehalves
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Consistent earnings growth...Consistent earnings growth...
653 666 676701
755
924897
818
500
600
700
800
900
1,000
2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H01
30
35
40
45
50
55
NPAT pre abn EPS pre abn
Net profit after tax +13%Earnings per Share +19% cents$m
NPATCAGR
4%
14%
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…and increasing shareholder…and increasing shareholderreturns...returns...
362386
308
397
493
565 584
272
100
200
300
400
500
600
2H97 1H98 2H98 1H99 2H99 1H00 2H00 1H0114.0
16.0
18.0
20.0
22.0
EP ROE
Economic Profit: +18%ROE: +303bps to 20.9%
%$m
# Would have been $451m if dividend had been fully franked.
#
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%
* Excludes goodwill
50
52
54
56
58
60
62
1H98 2H98 1H99 2H99 1H00 2H00 1H0128,000
30,000
32,000
34,000
36,000
Expense/income Staff numbers (FTE - implied)
FTECost to income ratio* and
Staff numbers
...while delivering productivity...while delivering productivityenhancements...enhancements...
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…through a range of efficiency…through a range of efficiencyinitiatives...initiatives...
Productsolutions
Servicing &processing
• Branch network redesign
• Business Banking process re-engineering
• CRM - including training, simplified sales processes, improvedsales management
• Migration to lower cost channels & extend capability - egbroker channel / Internet
• Product & process simplification
• Innovative products - eg RapidRepayPac, Investor Options A/c
• Insourcing / aggregating products & services
• Outsourcing, eg. IT & Telecommunications, printing &distribution
• E-enabling & straight through processing
• Shared services, Trans Tasman initiatives
Sales &marketing
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…combined with …combined with outsourcingoutsourcing of ofservicing & processingservicing & processing• Outsourcing partnerships
• IBM GSA - core IT operations• Telstra - telecommunications services• Investa - property services• Unisys - voucher processing• Palms Consortium - printing & logistics
• Recruitment resourcing• TMP Worldwide and seven specialist providers
• Investigating mortgage processing outsourcing• Due diligence with EDS & Unisys
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Overall we are well placed on peerOverall we are well placed on peerrankingsrankings
Revenue Growth*Rank: 1
Return on Equity(reported) Rank: 1
Cost to Income Ratio(reported) Rank: 2
10.39.5
6.3
3.6
0
5
10
15
WBC ANZ NAB # CBA
%
* Adjusted for acquisitions, divestments, one-offs and non-cash items.# Revenue growth for NAB for traditional banking business only.
20.919.5 18.9
12.6
0
5
10
15
20
25
WBC ANZ NAB CBA
52.2
49.4
53.1
56.3
40
45
50
55
60
WBC ANZ NAB CBA
%
%
NPAT Growth*Rank: 1
14
10
43
0
5
10
15
WBC ANZ NAB CBA
%
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Sound credit quality...Sound credit quality...
5.0
2.8
1.41.0 0.8 0.6 0.5 0.6
0
1
2
3
4
5
6
Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Mar-01
Total impaired assets tototal loans & acceptances
%
Total bad debt expense toavg. total loans & acceptances
90
43
148
16 16 1727
0
20
40
60
80
100
Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Mar-01
Basispoints
Peer average:0.8%
Peer average:32 bps
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…and rank well on actual…and rank well on actualwrite-offs & provisioning cover...write-offs & provisioning cover...
151
324343
377
0
50
100
150
200
250
300
350
400
Westpac CBA* NAB ANZ
$m
* CBA results for half-year to 31 December 2000.
182
154
184
154
100
120
140
160
180
200
Westpac CBA* NAB ANZ
%
Total provisions toGross Impaired Assets
Actual bad debt write-offs
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…with stable delinquency trends…with stable delinquency trends
Mass market/personal - Group *
%
0.44 0.47
0.45
0.440.33
0.34
0.33
0.0
0.3
0.6
0.9
1.2
1.5
Sep-98
Mar-99
Sep-99
Mar-00
Sep-0
0
Mar-01
* > 90 day delinquencies for all secured and unsecured personal products.
1.91
1.49
1.511.72
1.53 1.471.22
0.0
0.5
1.0
1.5
2.0
2.5
Sep-98
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
Business banking - Australia
%
May-01
May-01
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Sound capital positionSound capital position
7.1
6.3
5.7
7.26.6
6.1
4.0
5.0
6.0
7.0
8.0
TOE / RAA Tier 1 ratio
1H00 2H00 1H01
%
* Target range
6.5 - 6.0% *
5.8% -5.6% *
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• Growth momentum review
• Strategic focus
- Organic growth
- Wealth management
- Internet based distribution
- Our people & social responsibility• Strategic options
• Outlook & summary
The next growth phaseThe next growth phase
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Organic strategyOrganic strategy
SuperiorCustomer
Experience
SustainableBusinessPractices
HighPerformance
Ethic
WealthManagement
OperationalExcellence
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Strategic intentStrategic intent
• Focus efforts on the key opportunities
• Help our customers achieve greater financialwell being through providing simple, practicaland ethical solutions
• Meet our wider corporate socialresponsibilities
• While delivering continued double digitearnings growth
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Delivering through a highlyDelivering through a highlyfocused business modelfocused business model
A sales driven solutions aggregator,integrating across all delivery channels
Servicing & Processing
Product Solutions
Sales & Marketing
• ~20%costs outsourced
• access to global scale
• e-enabled organisation
• solutions aggregator
• functional teams
• product & process simplification
• whole of customer sales model
• segmented by value
• CRM tools
• relationship driven
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Organic growth strategy is workingOrganic growth strategy is working& represents highest potential& represents highest potential
• Customer base increased by 2.2 million or 40% to 7.8million between 1995 & 1998 through acquisitions
- Average products per customer acquired was, however, around10% less than in the existing customer base
• Priority customers in Australia up 28% in last 12 months
- however, this represents only 24% of our retail customer base
• Credit cards outstandings grew by 33%and market shareby 1.4% to 20.3%
- yet only 24% of our Australian customers hold a card with us
• In two years the proportion of Australian retail customerscreating value has moved from approx 60% to 72%
- 28%, however, are still value diluting
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0
5
10
15
20
25
Customer Value Segments
% in segment July 1999 % in segment May 2001
Achieving a positive shift inAchieving a positive shift incustomer value...customer value...
Low High
%
Per
cen
tag
e in
Seg
men
t
Value Shift
Value diluting Value creating
Australian personal and business customers
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300
500
700
900
1100
1300
Sep-97
Mar-98
Sep-98
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
000’s
Nu
mb
er o
f C
ust
om
ers
* Priority customers are those with whom we have significant,typically multi-product, relationships.
28% growth betweenMar 2000 & Mar 2001
Priority Customers *
…and deepening valuable…and deepening valuablecustomer relationships...customer relationships...
May01
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Mortgage Lending*
25
30
35
40
Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Apr-010
5
10
15
20
25
Outstandings (LHS) Market share (RHS)
Credit Card Outstandings*
0
1
2
3
4
5
Mar-99 Jun-99 Sep-99
Dec-99
Mar-00Jun-00 Sep-00
Dec-00
Mar-01Apr-0110
12
14
16
18
20
22
Outstandings (LHS) Market share (RHS)
$b %$b %
Business Lending*
20
25
30
35
40
Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Apr-015
10
15
20
25
Outstandings (LHS) Market share (RHS)
$b %
…and is resulting in solid market…and is resulting in solid marketshare trendsshare trends
Principal Corporate Bank Share*
22.6 23.124.5
15.0
20.0
25.0
30.0
Sep-99 Apr-00 Dec-00
East & Partners Surveys
* Australia
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CRM remains a key enablerCRM remains a key enabler
• Focus on high value segments completed:
- Private banking- Priority banking, and
- Business direct
• Next stages include:
- Priority business banking, and
- Financial planners & advisers
• Results include improved customer retention and
increased cross selling opportunities
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• Growth momentum review
• Strategic focus
- Organic growth
- Wealth management
- Internet based distribution
- Our people & social responsibility• Strategic options
• Outlook & summary
The next growth phaseThe next growth phase
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0
10
20
30
20-39 40-59 60-70 79+
2001 2021
Wealth management opportunityWealth management opportunitydriven by demographic forcesdriven by demographic forces
9 911
18
25
0
10
20
30
Retail d
epos
its
Bank d
epos
its
Loan
& adva
nces
Supe
r fund
s
Unit tru
sts
Financial assets & liabilitiesCAGR 1986 to 2000
%
Source: ABS & APRA
Population Demographic Trend
%
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Value is shifting to distribution andValue is shifting to distribution andadvice in wealth managementadvice in wealth management
AdministrationInvestment
ManagementDistribution/
Retail Service Advice
Proportionof Profit *
17% 29% 34% 20%
ExpectedMarginTrend
Stable Stable
OrganicGrowthInitiatives
• Maintain superior fund performance
• Source best of breed products
• Grow sales force
• Create alternative distribution models
• Grow sales force & upgrade skills
• Upgrade software tools
* Westpac estimates based upon external data
• Upgrade Master Trust platform
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Growth of our adviser network is keyGrowth of our adviser network is key
0
200
400
600
800
1000
1200
Sep-95
Sep-96
Sep-97
Sep-98
Sep-99
Sep-00
Mar-01
Sep-01
Sep-02
Sep-03
Consumer advisers
Priority advisers & financial planners
Business advisers
Plan
-100
0
100
200
300
400
Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-010
3
6
9
12
15
Net inflows (excluding annuities) Annuity net inflows Market share (RHS)
Rank: 3rd 5th 13th 13th 6th 9th 8th 8th
Source: Assirt Market Share Report & Westpac accounts* Excludes Cash Management Account balances
$m %
Net Monthly RetailFunds Inflow*
Planner/Adviser Numbers
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• Growth momentum review
• Strategic focus
- Organic growth
- Wealth management
- Internet based distribution
- Our people & social responsibility• Strategic options
• Outlook & summary
The next growth phaseThe next growth phase
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With on-line experienceWith on-line experienceexpanding rapidly...expanding rapidly...
0
200,000
400,000
600,000
800,000
1,000,000
Oct-99
Jan-00
Apr-00
Jul-00
Oct-00
Jan-01
Apr-01
Australia New Zealand
On-line Banking
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Oct-99
Dec-99
Feb-00
Apr-00
Jun-00
Aug-00
Oct-00
Dec-00
Feb-01
Apr-01
On-line Broking - Australia
967,000* 82,000*
* 30 June 2001
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Share of Australian On-line Banking market
• Registered on-line banking customers
– Overall 25%
– Consumer 24%
– Business 32%
• Logons to on-line banking sites 26%
• On-line Funds transfers 25%
• On-line Bill Payments 26%
• On-line account history retrievals 41%
Source: Market Intelligence Strategy Centre Pty. Ltd. (MISC) Internet Banking Data Pooling Facility Report March Quarter 2001
…delivering superior market shares...…delivering superior market shares...
Above level ofOff-Line
Market Share
Significantly Abovelevel of Off-LineMarket Share
Disproportionatelyhigh activity levels
compared tomarket share
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…and solid growth in on-line…and solid growth in on-lineorigination.origination.
Online#
Proportion oftotal Westpac
sales
Credit card approvals 2,965 14.7%
Personal loans 1,116 9.8%
Savings accounts 800 2.7%
Transaction accts 495 2.4%
Home loans 128 Nom
(Actual for monthof May 2001)
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Deutsche B
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• Growth momentum review
• Strategic focus
- Organic growth
- Wealth management
- Internet based distribution
- Our people & social responsibility• Strategic options
• Outlook & summary
The next growth phaseThe next growth phase
33
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Deutsche B
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Staff continue to hold the keyStaff continue to hold the key
Alignedmeasurement
and rewardsystems
Productiveculture
World classmanagement
HighPerformance
Ethic
Sharedunderstanding
of vision
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Delivering on the socialDelivering on the socialresponsibility imperativesresponsibility imperatives
• Image & reputation fundamentally linked tosustainable shareholder value creation
• Multi-tiered strategy
• Sustainable & socially responsiblebusiness practices
• Social safety net and access initiatives
• Widespread community involvement
• Managing the risk of social regulation
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• Growth momentum review
• Strategic focus
- Organic growth
- Wealth management
- Internet based distribution
- Our people & social responsibility• Strategic options
• Outlook & summary
The next growth phaseThe next growth phase
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Deutsche B
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Strategic optionsStrategic options
Objectives: To enhance medium-term growthin shareholder value
What: - Customer acquisition
- Distribution capability / platforms
- Product capability
Discipline: Any acquisition must:
1. Be a good strategic fit
2. Satisfy strict valuation criteria
3. Not be unduly divertive
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Strategic opportunitiesStrategic opportunities
Banking consolidation: - few likely candidates- ACCC constraints- divertive impact of mergers
Wealth management: - few likely candidates- good growth prospects- risk of overpaying
Offshore: - few cross-border success stories- synergies difficult to extract- maybe over time
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Deutsche B
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• Growth momentum review
• Strategic focus
- Organic growth
- Wealth management
- Internet based distribution
- Our people & social responsibility• Strategic options
• Outlook & summary
The next growth phaseThe next growth phase
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Deutsche B
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Our aspirations: 2001-2003Our aspirations: 2001-2003Our organic strategy, assuming a stable economic
environment, can deliver:
� On average, double digit EPS growth,via:
- revenue growth equal to or better than peers
- declining expense to income ratio
- sound, through the cycle, bad debt experience
- benefit of declining tax rate in 2002 (34% to30%)
- management of surplus capital generated
� And ROE consistently in the range 18 to 22%
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Full year outlookFull year outlook
• Outlook remains positive for earnings growth
• Reflecting economic conditions, credit growth mayslow to high single digits
• GDP recovery in 01/02 to around 4.0%, up from 2.4%
• Interest rates are close to bottom
• Inflation should stay in the 2.5% to 3.5% range
• Expect to deliver broadly flat expenses this year
• Some rise in consumer credit charges, but well withinacceptable levels
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In summary, the next growthIn summary, the next growthphase is well foundedphase is well founded
• Consistent earnings momentum
• Sound credit quality and capital position
• Absolute focus on key differentiator - superiorcustomer experience
• Positive shift in customer value
• Investing in wealth management expansion
• Realising opportunities in existing customer base
• Continuing strong drive on enhancing productivity& efficiency
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