Westpac Banking Corporation (NYSE:WBK), (ASX:WBC):
COVID-19 DEFERRAL SUPPORT3
- Statutory net profit $2,290m, down 66%
- Cash earnings $2,608m, down 62%
- Cash EPS 72.5c, down 63%
- NIM 2.08%, down 4 bps
- ROE 3.83%
- CET1 capital ratio 11.13%
- Excluding notable items2, cash earnings, $5,227m, down 34%
- Excluding notable items2, ROE 7.69%
- Fully franked final dividend, 31cps
- $16.6bn in Australian home loans in deferral (41,000 mortgage
- Reduced from $54.7bn provided (146,000 mortgage accounts)
- $1.0bn4 in Australian small business loans in deferral (4,300
small business customers)
- Reduced from $10.1bn provided (32,900 small business
Westpac Group CEO, Peter King, said: “2020 has been a
particularly challenging year and our financial result is
disappointing. Our earnings have been significantly impacted by
higher impairment charges, increased notable items and the sharp
decline in economic activity. At the same time, we have incurred
higher expenses due to increased resourcing to handle unprecedented
COVID-19 demands and fixing our compliance issues.
“We have, however, continued to maintain the strength of
Westpac’s balance sheet. Our Common Equity Tier 1 capital ratio is
at 11.13%. Customer deposits were up 6% over the year, with the
deposit to loan ratio now more than 80%.
“While stressed exposures as a percentage of total committed
exposures are higher at 1.91%, up 71 basis points compared to 2019,
prudence has been maintained with impairment provisions boosted by
$2.2 billion to $6.2 billion.
“Excluding notable items, expenses were up 6% this year. This
reflected our focus on fixing risk and compliance issues and
responding to COVID-19, which involved higher call and processing
centre volumes, returning activities to Australia and increased
employee and customer safety measures. The increase in expenses was
partly offset by productivity savings of more than $400
1 Full Year 2020 compared to Full Year 2019. Reported on a cash
earnings basis unless otherwise stated. For a reconciliation of
cash earnings to reported results, refer to Section 5, Note 8 of
Westpac Group 2020 Full Year Results Announcement. For an
explanation of cash earnings, refer to Section 1.3.3. 2 References
to notable items in this release include (after tax) provisions and
costs for the AUSTRAC proceedings; provisions for estimated
refunds, payments, costs and litigation; write-down of intangible
items; and asset sales and revaluations. 3 Figures current as at 28
October 2020. 4 Business packages outstanding represents customers
on deferral who are yet to end their 6-month deferral package of
the original $10.1bn provided. Check-ins on business customers
granted packages are underway.
FIX. SIMPLIFY. PERFORM.
Mr King said this year Westpac had made significant progress on
becoming a simpler, stronger bank.
“While this year has had its challenges, we have made important
changes to the business, including introducing a new operating
model, progressing the exit of several businesses, adding more than
400 people to our risk, compliance and financial crime team, and
completing the appointments in my executive team.
“Our three key priorities – fix, simplify, perform – recognise
our immediate need to address our shortcomings, reshape the
business to concentrate on our core businesses and markets, and
improve performance,” he said.
“AUSTRAC’s proceedings had a major impact this year and the
agreement to pay a $1.3 billion penalty to settle the matter is an
important step forward,” Mr King said.
“We have taken accountability for our mistakes and commenced a
process of fundamental change, which has included refreshing the
Board and management and elevating oversight of financial crime,
compliance and conduct.
“We have started a comprehensive, multi-year program to
strengthen our risk culture and how we manage risk across the
Group. This includes a significant investment in training, through
our Customer Outcomes and Risk Excellence program, to support our
people to speak up and respond quickly to emerging risks.
“We are also focused on reducing customer pain points,
completing customer remediation as quickly as possible and reducing
IT complexity. While we have made progress in these areas, there is
more to be done.”
During the year Westpac made $280 million in payments to
customers as part of its customer remediation program.
Mr King said reducing our portfolio of businesses was the driver
of many of the changes.
“We are moving back to core banking with a sharper focus on
Australia and New Zealand,” he said.
“We have enhanced our operating model to align our businesses to
our major customer offerings, such as mortgages, everyday banking
and business lending. This new model will improve decision making
and accountability, with one individual now responsible for the
financial performance, risk management and customer outcomes for
each line of business.
“We have also made progress in our review of specialist
businesses. We have entered into an agreement to sell our vendor
finance business and are consolidating our international operations
into London, New York and Singapore,” he said.
“Modernising and simplifying our technology and using digital to
create better customer experiences remains a priority. We have
rolled out our new mobile banking app to 240,000 customers and it
will be further enhanced before being rolled out to our entire
“In addition, our Customer Service Hub continues to simplify,
standardise and digitise the way we connect with our customers as
one bank with multiple brands.”
“We are addressing the issues that have impacted performance in
our mortgage book and expect to see improvement start to flow in
2021,” Mr King said.
“The simplification of our business will support improved
returns and help pave the way for a re-set of our cost base.”
Mr King said a critical part of performing was supporting
customers in need.
“We are continuing to assist customers affected by COVID-19. It
has been pleasing to see a reduction in the number of our customers
on loan deferral packages. More than two thirds of Westpac’s
mortgage customers who deferred repayments have now re-commenced
“We do recognise, though, that for some customers the pandemic
will have a longer-term effect on their circumstances, and we are
committed to supporting them as much as possible,” he said.
The Board has determined a final, fully franked dividend of 31
cents per share to be paid on 18 December 2020.
Total dividends for 2020 were 31 cents per share representing a
49% payout of our full year statutory result, which is the maximum
dividend Westpac could pay under current APRA guidance.
FY20 cash earnings
% change FY20-FY19
% change 2H20-1H20
Cash earnings were 12% lower from higher
impairment charges, higher expenses and lower non-interest income.
Mortgage lending was down 2%, while deposits increased 6%.
Cash earnings were 62% lower mostly from
an increase in impairment charges and a decline in net interest
margin. Deposits were 7% higher with a 33% rise in transaction
balances and 20% increase in savings and online balances.
Westpac Institutional Bank
Cash earnings were 64% lower primarily
driven by higher impairment charges and a 26% decline in core
earnings. Expenses were higher from a rise in risk management and
compliance costs, including in relation to financial crime.
Westpac New Zealand (NZ$)
Cash earnings were 38% lower primarily
driven by higher impairment charges. Core earnings were 14% lower
mostly from a 24% decline in non-interest income and a 7% increase
The division recorded a cash earnings loss
of $506 million compared to a profit of $712 million in Full Year
2019. During Full Year 2020 the business incurred $922 million
(after tax) of notable items, compared to $47 million (after tax)
in Full Year 2019.
Mr King said that COVID-19 was a once in a 100-year health and
economic crisis and the near-term economic outlook would remain
“The impacts are profound across communities, workplaces and on
individuals. Westpac fully supports the range of initiatives
undertaken by the Federal Government to protect Australians from
both the virus and the economic fall-out.
“I am very proud of how our people stepped up to support
customers in a year which has seen not only the pandemic, but also
bushfires and floods. We worked hard to support customers through
this time, changing our operations to remain open, diverting
resources to areas of most need and providing a range of tailored
“For customers, we have provided certain special interest rates,
fee waivers and temporary loans, while supporting around 215,000
consumer and business customers across Australia and New Zealand
with repayment deferrals.
“While there were a few issues through the year, such as
increased wait times and delays to loan processing, we have – and
will continue to – support customers through this uncertain time,”
Mr King said that while Westpac expected economic growth to
improve through 2021 and 2022, unemployment would remain elevated
for some time.
“We remain in an uncertain economic environment, however the
recent budget has provided significant stimulus to businesses and
households. Our economists expect at least half the personal tax
cuts will be spent and businesses will respond to the generous
Mr King said that despite the tough operating environment,
Westpac remained well capitalised with a strong balance sheet and
ample liquidity to continue to support its customers.
“Importantly, while economic conditions will still be
challenging, Westpac is well placed to continue to support
customers through this difficult time.
“With our three priorities of fix, simplify and perform, we are
becoming a simpler and stronger bank with a renewed focus on a
culture to execute and improve performance,” Mr King said.
Video interviews with Mr King and Chief Financial Officer,
Michael Rowland, on FY20 results, are available on the Westpac Wire
website – www.westpacwire.com.au
version on businesswire.com: https://www.businesswire.com/news/home/20201102006071/en/
David Lording Head of Media Relations M. 0419 683
Andrew Bowden Head of Investor Relations T. 02
8253 4008 M. 0438 284 863