As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

11/01/07  Westpac Banking Corp              6-K        11/01/07    3:982                                    Merrill Corp-MD/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 6-K         Report of a Foreign Private Issuer                  HTML     17K 
 2: EX-1        Underwriting Agreement                              HTML     32K 
 3: EX-2        Plan of Acquisition, Reorganization, Arrangement,   HTML  4,406K 
                          Liquidation or Succession                              

 

 

RESULTS FOR ANNOUNCEMENT TO THE MARKET

Year End Profit Announcement 2007

 

Revenues from ordinary activities(1),(2)		up		10.4	%	to		$	10,173m
Profit from ordinary activities after tax attributable to equity holders(2)		up		12.4	%	to		$	3,451m
Net profit for the period attributable to equity holders(2)		up		12.4	%	to		$	3,451m

 

				Franked amount per
Dividend Distributions (cents per share)		Amount per security		security
Final Dividend		68		68
Interim Dividend		63		63

 

Record date for determining entitlements to the dividend		13 November 2007 (Sydney)
		12 November 2007 (New York)

 

(1) Comprises interest income, interest expense and non-interest income.

(2) All comparisons with the year ended 30 September 2006.

 

 

1.   SUMMARY AND OUTLOOK

 

1    PRESS RELEASE AND OUTLOOK

 

1 November 2007

 

WESTPAC REPORTS RECORD FULL YEAR PROFIT

 

2007 Highlights: (All comparisons are with 2006 full year result)

 

•     Record cash earnings of $3,507 million, up 14%

•     Record net profit of $3,451 million, up 12%

•     Cash earnings per share of 189.4 cents, up 13%

•     Full year dividend of 131 cents, fully franked, up 13%

•     Return on equity (cash basis) 24%

•     Record revenue growth (cash basis) of 11%; 5 percentage points above expense growth of 6%

•     Expense to income ratio (cash basis), down 220 basis points to 45%

 

2nd Half 2007 Highlights: (All comparisons are with 2007 interim result)

 

•     Cash earnings of $1,829 million, up 9%

•     Net profit of $1,810 million, up 10%

•     Expense to income ratio (cash basis) of 44.3%, down 160 basis points

 

Year End Profit Result

 

Westpac Banking Corporation today announced record cash earnings of $3,507 million for the 12 months ended 30 September 2007, up 14 per cent. Cash earnings per share was up 13 per cent to 189.4 cents.

 

Net profit was up 12 per cent to a record $3,451 million.

 

Westpac also announced a final dividend of 68 cents fully franked, up 13 per cent on the prior corresponding period. This takes the full year dividend to a record $1.31.

 

Westpac Chief Executive Officer, David Morgan, said Westpac had delivered a strong and sustainable result.

 

“This is a high quality result, led by revenue increasing 11 per cent, the highest for many years. We have achieved strong double digit earnings growth of 14 per cent without compromising new business margins or risk settings. Importantly, our return on equity of 24 per cent is the highest in Westpac’s recent history.

 

“We have enhanced the franchise health across all of our business units. This has us well positioned in terms of market share, volume growth, productivity and brand strength and with strong, broad based momentum going into 2008,” Dr Morgan said.

 

“Most pleasing was the 5 percentage point gap between revenue and expense growth which delivered particularly strong operating leverage.”

 

As a result, Westpac’s cost to income ratio fell by over two percentage points to a record low of 45 per cent while underlying margins fell eight basis points, in line with medium term expectations.

 

“Momentum continued into the second half, built on strong customer activity especially in our Funds Management and Institutional banking businesses. We also saw a pleasing improvement in the contribution from New Zealand,” Dr Morgan said.

 

“While recent global capital market conditions have posed challenges, our strong funding and capital position has us well placed to respond to global economic developments. Importantly, Westpac has no direct subprime exposure and our credit quality remains sound, although delinquency levels are moving up from historically low levels.

 

“Over almost nine years we have built a resilient bank that continues to deliver over the long-term to shareholders.

 

“Westpac is now well positioned to maintain this strong performance as we continue to make disciplined investments for higher growth,” he said.

 

1

 

2.     RESULTS AT A GLANCE

 

2.1   REPORTED RESULTS

 

Reported net profit attributable to equity holders of Westpac Banking Corporation (WBC) is prepared in accordance with the requirements of A–IFRS and regulations applicable to authorised deposit taking institutions (ADI).

 

						% Mov’t						% Mov’t
		Half Year		Half Year		Mar 07-		Full Year		Full Year		Sept 06-
$m		Sept 07		March 07		Sept 07		Sept 07		Sept 06		Sept 07
Net interest income		3,224		3,089		4		6,313		5,642		12
Non-interest income		2,040		1,820		12		3,860		3,575		8
Net operating income		5,264		4,909		7		10,173		9,217		10
Operating expenses		(2,314	)	(2,229	)	(4	)	(4,543	)	(4,295	)	(6	)
Core earnings		2,950		2,680		10		5,630		4,922		14
Impairment charges		(250	)	(232	)	(8	)	(482	)	(375	)	(29	)
Profit from ordinary activities before income tax		2,700		2,448		10		5,148		4,547		13
Income tax expense		(857	)	(773	)	(11	)	(1,630	)	(1,422	)	(15	)
Net profit		1,843		1,675		10		3,518		3,125		13
Net profit attributable to minority interests		(33	)	(34	)	3		(67	)	(54	)	(24	)
Net profit attributable to equity holders of WBC		1,810		1,641		10		3,451		3,071		12
Treasury shares(1)		14		15		(7	)	29		9		large
TPS revaluations(1)		20		18		11		38		30		27
Unrealised NZ Retail earnings hedges(1)		(15	)	4		large		(11	)	—		large
Sale of sub-custody business(1)		—		—		—		—		(72	)	100
Deferred tax asset write-off(1)		—		—		—		—		41		(100	)
Cash earnings		1,829		1,678		9		3,507		3,079		14

 

2.1.1   Cash Earnings

 

Reported results are adjusted for material items to ensure they appropriately reflect cash flows normally available to ordinary shareholders.

 

The impact of these cash earnings adjustments(1) and some accounting classifications(2) are significant when analysing the composition of the reported financial results. Our approach is to adjust for these items when evaluating inter-period movements of the components of the results.

 

Throughout this profit announcement, reporting of financial performance will refer to “cash earnings” unless otherwise noted.

 

Analysis of cash earnings by key line item

 

						% Mov’t						% Mov’t
		Half Year		Half Year		Mar 07-		Full Year		Full Year		Sept 06-
$m		Sept 07		March 07		Sept 07		Sept 07		Sept 06		Sept 07
Net interest income		3,224		3,089		4		6,313		5,642		12
Non-interest income		2,002		1,771		13		3,773		3,456		9
Net operating income		5,226		4,860		8		10,086		9,098		11
Operating expenses		(2,314	)	(2,229	)	(4	)	(4,543	)	(4,295	)	(6	)
Core earnings		2,912		2,631		11		5,543		4,803		15
Impairment charges		(250	)	(232	)	(8	)	(482	)	(375	)	(29	)
Operating profit before tax		2,662		2,399		11		5,061		4,428		14
Income tax expense		(800	)	(687	)	(16	)	(1,487	)	(1,295	)	(15	)
Net profit		1,862		1,712		9		3,574		3,133		14
Net profit attributable to minority interests		(33	)	(34	)	3		(67	)	(54	)	(24	)
Cash earnings		1,829		1,678		9		3,507		3,079		14
Effective tax rate		30.1	%	28.6	%	(150bps	)	29.4	%	29.2	%	(20bps	)

 

Notes explained on page 7.

 

3

 

2.2   SUMMARY BALANCE SHEET

 

								% Mov’t		% Mov’t
		30 Sept		31 March		30 Sept		Mar 07-		Sept 06-
$m		2007		2007		2006		Sept 07		Sept 07
Assets
Cash		2,243		3,548		3,132		(37	)	(28	)
Due from other financial institutions		28,379		11,903		12,211		138		132
Trading assets, financial assets and available-for-sale securities		24,505		21,802		17,811		12		38
Derivative financial instruments		24,308		14,355		10,311		69		136
Loans		272,545		253,238		234,484		8		16
Life insurance assets		15,456		15,390		14,281		—		8
Other assets		7,385		7,964		7,348		(7	)	1
Total assets		374,821		328,200		299,578		14		25
Liabilities
Due to other financial institutions		9,133		14,710		12,051		(38	)	(24	)
Deposits		199,222		177,715		167,741		12		19
Trading liabilities and other financial liabilities		8,223		3,784		2,893		117		184
Derivative financial instruments		25,192		14,880		9,342		69		170
Debt issues		87,126		73,122		66,080		19		32
Life insurance liabilities		14,392		14,290		13,476		1		7
Loan capital		7,704		7,089		5,957		9		29
Other liabilities		5,998		5,786		5,940		4		1
Total liabilities		356,990		311,376		283,480		15		26
Equity
Equity attributable to equity holders of WBC		15,919		14,913		14,186		7		12
Minority interests		1,912		1,911		1,912		—		—
Total equity		17,831		16,824		16,098		6		11

 

2.2.1   Key Financial Data – Balance Sheet

 

						% Mov’t						% Mov’t
		Half Year		Half Year		Mar 07-		Full Year		Full Year		Sept 06-
		Sept 07		March 07		Sept 07		Sept 07		Sept 06		Sept 07
Profitability and capital adequacy
Return on average ordinary equity		23.8	%	23.1	%	70bps		23.5	%	23.0	%	50bps
Cash earnings to average ordinary equity		24.2	%	23.6	%	60bps		23.8	%	23.0	%	80bps
Total capital ratio		9.5	%	9.4	%	10bps		9.5	%	9.6	%	(10bps	)
Tier 1 capital ratio		6.5	%	6.5	%	—		6.5	%	6.9	%	(40bps	)
Adjusted common equity to risk weighted assets		4.5	%	4.3	%	20bps		4.5	%	4.6	%	(10bps	)
Risk weighted assets ($m)		228,077		211,984		8		228,077		193,417		18
Total committed exposures ($m)		425,490		386,161		10		425,490		359,362		18
Average ordinary equity ($m)		15,142		14,271		6		14,708		13,369		10
Average total equity ($m)		17,055		16,180		5		16,619		14,842		12
Asset quality
Net impaired assets to equity and collectively assessed provisions		1.4	%	1.6	%	20bps		1.4	%	1.5	%	10bps
Total impairment provisions to total impaired assets		49.2	%	49.2	%	—		49.2	%	49.3	%	(10bps	)
Collectively assessed provisions(5) to risk weighted assets		67bps		68bps		(1bp	)	67bps		68bps		(1bp	)
Collectively assessed provisions(5) to non-housing loans		112bps		114bps		(2bps	)	112bps		113bps		(1bp	)
Total provisions(5) to risk weighted assets		74bps		76bps		(2bps	)	74bps		76bps		(2bps	)
Total provisions(5) to gross loans		62bps		63bps		(1bp	)	62bps		63bps		(1bp	)
Impairment charges to average loans annualised		19bps		19bps		—		19bps		17bps		(2bps	)
Net impairment charges written-off to average loans annualised		16bps		12bps		(4bps	)	14bps		12bps		(2bps	)

 

Notes explained on page 7.

 

5

 

2.3   EXTENDED PERFORMANCE SCORECARD(6) Human Capital

 

Strategic Objectives:

 

• Improve employee attraction;

• Improve retention and commitment; and

• Reduce workplace costs.

 

Indicator (%)		2007		2006		2005		2004		2003
Employee turnover (total)		17		17		16		17		16
Employee commitment(7)		71		68		69		68		65
(% employees reporting a positive score)
Lost Time Injury Frequency Rate		4		5		6		7		7
(Injuries per one million hours worked)

 

Service Capital

 

Strategic Objectives:

 

• Improve customer experience;

• Improve retention and loyalty; and

• Increase share of wallet.

 

Indicator (%)			2007		2006		2005		2004		2003
Customer satisfaction (Australia) – Consumer(8)			74		70		72		69		66
Source: Roy Morgan Research
Customer satisfaction (Australia) – Business(8)			72		66		67		64		60
Source: TNS
Complaints resolution rates (Australia) – Average			82		82		83		81		78
(% complaints resolved within 5 days)
Customer satisfaction (NZ) – Consumer(8)			59		58		58		55		53
Source: ACNielsen
Customer satisfaction (NZ) – Business(8)			56		61		57		51		Not
Source: TNS											available

 

Social & Environmental Capital

 

Strategic Objectives:

 

• Improve social licence to operate;

• Reduce regulatory and operational costs;

• Improve operational efficiency; and

• Improve reputational capital.

 

Indicator		2007		2006		2005		2004		2003
Community contributions – Australia (A$m)		52		47		44		42		37
Greenhouse gas emissions (Equivalent tonnes of		123,300	(9)	111,000	(10)	124,500		136,400		137,200
CO2 emissions)
Paper consumption (Sheets/person)		8,980		9,551		10,100		9,500		9,300

 

Notes explained on page 7.

 

6