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Michael HawkerMichael HawkerGroup Executive

Australian Business &Personal Banking

March 2000

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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 17 March 2000.

The information is supplied in summary form and istherefore not necessarily complete. Also, it is not intendedthat it be relied upon as advice to investors or potentialinvestors, who should consider seeking independentprofessional advice depending upon their specificinvestment objectives, financial situation or particular needs.

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AGENDAAGENDA

• Operating environment

• Strategy

• 5 Point strategic plan

• Financial performance

• Outlook

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OPERATING ENVIRONMENTOPERATING ENVIRONMENT

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Economic outlookEconomic outlook

• Growth to hold around 4% in 2000• Housing strong momentum to slow in

second half - GST effect• Credit growth to stay around 10%• Core inflation to increase to around 3%

by end 2000• Interest rate up further 0.5% mid-year• AUD weak - recovery to around US 0.65

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Information and Technology

Economic and RegulatoryEnvironments

DEM

AN

D S

IDE SU

PPLY SIDE

• Direct economic andregulatory impacts

• Financial deepening andsophistication

• Changing productdemands

• Increasing technologypenetration

• Buyer behaviour

• Emerging valuepropositions

• Broadening of the financialservices market place

• Changing market structure

• Price and cost pressure

• Consolidation &globalisation

• Value chain unbundling

• Strategic alliances andrelationships

ChangingCustomerDemands

ChangingNature of

Competition

Rapid change in external environmentRapid change in external environment

• Processing & storage• Electronification• Communication• Systems & platforms

Capacity/cost/access:

• Technical standards

• Economic cycle & monetary policy• Supervision & prudential regulation• Fiscal policy & tax regime• Consumer protection• Industry standards• Direct market intervention

FinancialServices

Marketplace

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e-Business environmente-Business environment

• Increasing rate of technology change• Real-time, 7 by 24, frictionless economy• Branding is critical• Rapid execution of new business models• Co-ventures and alliances with content

providers & specialised aggregators• Consumers want multi-channel

relationship

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Banks well positionedBanks well positioned

• Established customer base

• Customer data rich

• Deal directly with their customers

• Multi-channel platform

• Banking & finance products generallyideal for electronic delivery

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STRATEGYSTRATEGY

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StrategyStrategy

Capture the significant valueembedded in our franchise through:

- a customer centric focus,

- delivering individualised financialsolutions,

- via a fully e-enabled, multi-channelplatform.

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5 POINT STRATEGIC PLAN5 POINT STRATEGIC PLAN

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1 Organise around where & how we createvalue

2 Optimise the ‘old’ production functions

3 Extend the enterprise and create newbusinesses

4 Deepen & broaden customer relationships

5 Build the capabilities & culture to succeed

5-POINT STRATEGIC PLAN5-POINT STRATEGIC PLAN

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•Customerservice

•Transactionprocessing

•Delivery

•Productmanagement,development &sourcing

•Riskmanagement

•Sales & marketing•Customerinformation & needsmanagement

•Brand management

Sales &Marketing

ProductSolutions

Servicing &ProcessingCustomer

Step 1. Step 1. Organise around where &Organise around where &how we create valuehow we create value

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New organisational modelNew organisational model

ProductSolutions

Servicing& Processing

Sales &Marketing

Shared Services (Cost-effective, client driven services)

Corporate Core (Strategy & oversight)

• AustralianBusiness &Personal Banking

• InstitutionalBanking

• WestpacTrust NZ

• Banking &Financial ServicesSolutions

• Technology &Operations

Request Service

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Strategic playsStrategic playsCustomer Focus

Product Focus

Man

ufa

ctu

rin

g F

ocu

s

Retailin

g F

ocu

sAggregator

Broker

Specialist

Manufacturer

• Superior customer understanding and information management

• Acts as trusted objective advisor, proactively sourcing andintegrating a broad array of best available products & services tomeet customer needs

• Emphasis in product management shifts from development anddesign to sourcing and alliance management

• Acts as a single point of contact, acting on behalf of customers forpost sale service

• Outsources non core/non customer critical operations

• Targets profitable market/customer segment niches

• Specialises in a narrow range of innovative products, providingflexibility via multiple derivations

• Largely automated delivery via screening criteria

• Requires different point of contact for each product (pooledservice resources)

• May outsource manufacturing and processing

• Uses search/compare engines to match customers to products

• Acts as a broker, reacting to current customer needs andsourcing ‘off the shelf’ products from multiple manufacturers

• Compiles delivery information to meet manufacturers’requirements

• Mass market focus

• Standard commodity products, with ability to mass customise

• Use simple criteria to automate delivery

• Requires different point of contact for each product (pooledservice resources)

• Leverages scale in processing

ProductSolutions

Servicing& Processing

Sales &Marketing

Major value chain focus

ProductSolutions

Servicing& Processing

Sales &Marketing

ProductSolutions

Servicing& Processing

Sales &Marketing

ProductSolutions

Servicing& Processing

Sales &Marketing

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Evolutionary shift in ourEvolutionary shift in ourstrategic modelstrategic model

Fully IntegratedManufacturer/Distributor

• Products mainly manufactured in-house

• Relatively narrow product range andmass market orientation (limitedcustomisation

• Individual product view of eachcustomer fragmented across multiplecontact points

• Resource intensive around in-housemarketing, operations & servicing

Trusted aggregator of financialsolutions

• Matching customer needs with bestavailable offering in the market

• Broad product range aggregatedacross suppliers to create individualfinancial solutions

• Integrated customer understandingindependent of contact point

• Focus on sales and service (productprocessing performed externally)

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IT E

nabl

edTr

ansf

orm

atio

nStep 2. Optimise the ‘old’ Step 2. Optimise the ‘old’

production functionsproduction functions

Extend theEnterprise

Create aNew Business

•Web enablement•Out & in-sourcing, JVs etc.•Supply chain

Low

Low

High

High

Potential for new customersand

Likelihood of alliances

EnhanceBusinessExecution

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ADSH

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Management

CorporateCore

Technology

StrategicSourcing

CallCentres

BankingOperations

NetworkDevelopment

RegionalInfrastructure

NewZealand

Creditcosts &

processes

TransTasman

General &admin. expense

reductions

FinanceRe-eng / SS

HR Re-eng /Shared

services

estpacPerformanceEnhancement

Program

IT Out-sourcing

ITEfficiencies

Operationscentres

Performance Enhancement ProgramPerformance Enhancement Program

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IT E

nabl

edTr

ansf

orm

atio

nStep 3. Step 3. Extend the enterprise andExtend the enterprise and

create new businessescreate new businesses

EnhanceBusinessExecution

Extend theEnterprise

CreateNew Business

• Web enablement

•Out & in-sourcing, JVs etc.

•Supply chain

• Increase business scope

• Reconfigured businessnetworks

• New - networks - value propositions - business models

Low

Low

High

High

Potential for new customersand

Likelihood of alliances

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e-Business - integrated acrosse-Business - integrated acrossthe Westpac Groupthe Westpac Group

Westpace-Business

Advisory Council

e-BusinessCentre of Excellence

ITPlatform

NewZealand

InstitutionalBank

Businessand

Personal

Strategyand

Alliances

• Run e-Businessas a business

• Integrated

• Consistent

• Optimise value

• Set charter

• Coordinatemessage

• Prioritise

• Define & monitor

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eBusinesseBusiness progress progress• F2 ‘Domain’ alliance• Discount share broking• eMarket - secure on-line payments for merchants• eBonds - bond distribution platform• Extranets

- Healthpay- IntroducerNet- PlannerWeb- DeskBank Extranet for Governments

• IMPEX - on-line Trade Finance platform

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200

400

600

800

1000

1200

1400

1998 1999E 2000E 2001E 2002E 2003E

b2c CAGR 68%b2b CAGR 99%

The b2b explosionThe b2b explosion

US$b

Source: Forrester Research

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eBusinesseBusiness - the next 12 months - the next 12 months

• eProcurement

• b2b tradingcommunities

EnhanceBusinessExecution

Extend theEnterprise

Create aNew Business

• Electronic bill presentment

• Online financial centre

• Additional extranets• Wireless Internet Access (WAP) rollout

• Real time decisioning (mortgages)

• Business online applications

• Bandwidth expansion

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• ‘Front end’ Customer RelationshipManagement (CRM) applications providing- message-enablement- workflow capability

• Specialised CRM training utilising EnActfrom Customer Analytics

• Leading edge data mining & marketanalysis technologies

Step 4. Deepen & broaden customer relationships

Step 4. Step 4. Deepen & broaden Deepen & broaden customer relationshipscustomer relationships

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Consumer customer value byConsumer customer value bysegmentsegment

0

5

10

15

20

25

Customer Value Segments

% in Segment $ Value per customerLow High

%

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Customer value and channel migrationCustomer value and channel migrationstrategies are deliveringstrategies are delivering

450

500

550

600

650

700

J-99 F-99 M-99 A-99 M-99 J-99 J-99 A-99 S-99 O-99 N-99 D-99

Consumer - PriorityCustomers

1500

1600

1700

1800

1900

2000

2100

2200

J-99 F-99 M-99 A-99 M-99 J-99 J-99 A-99 S-99 O-99 N-99 D-99

Consumer - Low valuecustomers

1.95

1.96

1.97

1.98

1.99

2

2.01

2.02

2.03

2.04

2.05

J-99 F-99 M-99 A-99 M-99 J-99 J-99 A-99 S-99 O-99 N-99 D-99

Consumer - Products percustomer (total base)

M-99 A-99 M-99 J-99 J-99 A-99 S-99 O-99 N-99 D-99

Consumer - Value percustomer

(000

s)

(000

s)

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Step 5. Step 5. Build the capabilities & Build the capabilities & culture to succeedculture to succeed

• Increasingly about intellectual capital• Strategic & executional skills critical

- not primarily technological• A performance culture built on

- strategic insights- speed & responsiveness- flexibility & adaptability

• Everyone becoming eBusiness savvy

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FINANCIAL PERFORMANCEFINANCIAL PERFORMANCE

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• Sustained returns on economiccapital well in excess of the cost ofcapital

• EPS growth consistently exceedingunderlying growth in the economy

• Flat expense line through to FY2001(adjusted for one-off accountingimpacts)

Financial performance targetsFinancial performance targets

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INVESTOR ROADSHOW INVESTOR ROADSHOWFinancial perform

ance

1995

1996

1997

1998

1999

70.1

70.0

58.9

53.51995

1996

1997

1998

1999

1342

1291

1132

10151995

1996

1997

1998

1999

Profit*R

OO

E*

$1,456m16.8%

EPS* 77.0¢47¢

15.5

14.6

13.91995

1996

1997

1998

1999

*All figures stated pre abnormals

Dividends

28

33

39

43

17.0

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Shareholder Value ScorecardShareholder Value ScorecardMeasure Target Progress

EPS growth Above peer avg. 9.6% - 2H99

Return on Capital At least 5% > CofC 17.2% - 2H99

TSR (rolling 3 yr) Top (1st)quartile 2nd quartile

Efficiency At least peer avg 57.1% - 2H99

Risk Profile AA- rating Maintained

Capital Tier 1 - 6.5% 7.0% - Sep 99

Loan Growth At least system avg12 mos to 12/99 = 14.3%

14.7%

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1999 - a tale of two halves1999 - a tale of two halves

Westpac Peer Average

Peer Rank

Net profit (pre abs) 6.6% 2.8% 1

Underlying profit 5.6% 0.4% 1EPS diluted (pre abs) 9.6% 2.7% 1ROOE 94bp 12bp 1Non-interest income 6.1% 3.5% 1Operating expenses -0.8% 2.7% 1

Note 1: Peer group - WBC, CBA, ANZ & NAB (all FY 1999 results).

Growth / change (H199 to H299)

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EPS growthEPS growth

2.0

4.5

8.1

0123456789

2H98-1H98 1H99-2H98 2H99-1H99

%

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Strong volume growthStrong volume growth

1998 1999 Growth Australia $bn $bn %

Housing 35.4 40.5 14.6

Credit cards 3.0 3.8 27.0

Non-housing loans 19.9 22.5 13.1

At call deposits 25.6 28.2 10.2

Funds under manag’t 20.2 23.8 17.6

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eBusinesseBusiness performance performance

• 200,000 on-line banking customers ( 4% of consumer base)

• Value transfers running at over$3 billion p.a.

• Rapid growth in on-line origination• High levels of customer satisfaction

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45

50

55

60

65

1996 1997 1998 1999 2H99WBC Peer Average

Expense to income*%

* Excludes goodwill

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Asset quality and provisionsAsset quality and provisionsAsset quality and provisions

0

2

4

6

8

10

1996 1997 1998 1999

WBC Peer Average

Net impaired assets to equity &general provision

%

0

50

100

150

200

250

1996 1997 1998 1999

WBC Peer average

%Total provisions to total

impaired assets

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Capital & risk profileCapital & risk profile

Capital Ratios

-2

2

6

10

14

1994 1995 1996 1997 1998 1999

%

Tier 1 Tier 2

A2/A+

A1/A+

1996199519941993 1997 1998 1999

Aa3/AA-

External Debt Ratings

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OUTLOOKOUTLOOK

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OutlookOutlook

• Financial performance remainson plan

• Positive outlook for meetingfinancial performance targets

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