Westpac 2021 Full Year Result

Westpac Banking Corporation (NYSE:WBK), (ASX:WBC):

THE RESULT

Westpac Group CEO, Peter King, said: "2021 has been another challenging year, with a focus on continuing to support customers and employees through the pandemic, while implementing our Fix, Simplify and Perform strategic priorities.

"Cash earnings rose, the balance sheet remains strong, and I am pleased with the progress we are making to transform Westpac into a simpler, stronger bank. Credit quality has remained remarkably good with stressed exposures continuing to decline off last year's peak, while mortgage 90+ day delinquencies were also significantly lower.

"A turnaround in impairment charges and lower notable items were the main drivers of our improved earnings, while we also restored growth in mortgages and have begun to see better momentum in our institutional and business portfolios. While notable items were lower, they remain elevated as we continue to work on fixing our issues and simplifying our business," he said.

"We grew our Australian mortgage portfolio 3 per cent or $14.7 billion over the year, a significantly better performance than 2020. Owner occupied lending increased 9 per cent. Consistent with increased liquidity in the market, total customer deposits were up 4 per cent, or $24.9 billion.

"Margins were down in a competitive, low-rate environment, and as we foreshadowed, costs were much higher in FY21. This was mainly due to an increase in our workforce to improve risk management and support higher business volumes, including COVID related assistance, as well as returning more than 1,000 jobs back to Australia," Mr King said.

"Our underlying results are not where we want them to be, and we recognise we have more to do to become the high-performing company we aspire to be.

"However, we are making progress in changing how the bank is run, including improving our culture and risk management systems, streamlining decision-making processes through lines of business, and streamlining our processes through digitisation," he said.

FIX. SIMPLIFY. PERFORM.

Mr King said this year Westpac made significant progress on becoming a simpler, stronger bank.

Fix

"We are one year into our Customer Outcomes and Risk Excellence (CORE) Program, which comprises more than 300 activities to strengthen risk governance, accountability and culture across the organisation," Mr King said.

"In addition, we have strengthened our financial crime practices with a rebuild of our processes and systems.

"We are also progressing customer remediation with 2021 seeing us substantially complete the two largest legacy advice programs."

In 2021 Westpac paid or offered more than $1 billion to approximately 1 million customers as part of customer remediation.

Simplify

Mr King said Westpac was well progressed in simplifying its portfolio.

"We have completed the sale of four businesses and announced a further three asset sales, with these due for completion in 2022.

"We have also made progress on consolidating our international footprint, closing our offices in Mumbai and Jakarta, and we expect three more international offices to close by the end of 2022," he said.

"We continued our focus on digital this year, launching a new Westpac mobile banking app to iPhone customers, with 1.7 million users.

"In mortgages, we have further digitised processes and introduced more than 70 policy and process improvements, which contributed to faster approval times. Our digital mortgage origination platform peaked at 810 applications per week, and we have started rolling out this platform to mortgage brokers," Mr King said.

"We also implemented more than 100 policy and process improvements in business lending and increased automated credit decisioning, leading to faster decisions for customers."

Perform

"Our improved growth in mortgages was concentrated in owner occupied lending which was up 9 per cent. We saw a significant change in mix with fixed rate lending making up 52 per cent of new lending and now comprising 38 per cent of the portfolio.

"In addition, we regained momentum in business lending, with our Australian business loan book growing four per cent in the Second Half," he said.

"We announced our cost reset program this year – targeting an $8 billion cost base by FY24 – and this is underway, led initially by divestments and simplification of our operations.

"We expect our costs to begin reducing in the year ahead from our simplification and the completion of key programs in our Fix priority," Mr King said.

DIVIDENDS

The Board has determined a final, fully franked dividend of 60 cents per share to be paid on 21 December 2021.

Total dividends for 2021 were 118 cents per share representing a 62 per cent payout of cash earnings excluding notable items.

OUTLOOK

Mr King said that despite a challenging 2021, he was confident the Australian economy will rebound over the next 12 months.

"The recent lockdowns in NSW, Victoria and the ACT have been difficult for many businesses, and while uncertainty in the outlook remains, I am confident most industries will begin to recover as Australia's two biggest states re-open.

"Consumer spending will likely increase significantly as states re-open and pent-up demand is released, particularly supported by consumer optimism and sizeable savings.

"We expect the Australian economy to expand by 7.4 per cent in 2022, with credit growth expanding 6.8 per cent. Demand for housing is likely to remain elevated but home price increases should moderate to 8 per cent next year," he said.

Mr King said while there was more work to do, Westpac continued to make progress on its Fix, Simplify and Perform strategic priorities.

"Next year we expect to reduce our cost base as we head towards our $8 billion cost target from completion of programs under our Fix priority and realise the benefits from divestments.

"We have made considerable progress in improving our mortgage and business banking performance, driven by streamlining of lending processes to create a better customer experience. This sets us up to maintain momentum in the year ahead.

"For our business, loan growth is expected to be sound as the economy rebounds, although net interest margins will remain under pressure from low interest rates and competition.

"We are also committed to resolving a number of outstanding regulatory issues where our actions were not good enough.

"We are making progress in strengthening risk management, growing our core franchise, and simplifying the bank, which provides a strong platform to deliver a better service to customers, as well as returns for shareholders," Mr King said.

A video interview with Mr King, and Chief Financial Officer, Michael Rowland, is available on the Westpac Wire website – www.westpacwire.com.au

View source version on businesswire.com: https://www.businesswire.com/news/home/20211101005366/en/