#1Westpac New Zealand Limited European Investor Roadshow Jason Clifton - Chief Financial Officer Jim Reardon - Treasurer March 2017 W#2Disclaimer The material contained in this presentation is intended to be general background information on Westpac Securities NZ Limited, Westpac NZ Covered Bond Limited and Westpac New Zealand Limited and their activities. It should not be reproduced, distributed or transmitted to any person without consent of Westpac New Zealand Limited and is not intended for distribution in any jurisdiction in which such distribution would be contrary to local law or regulation. The information is supplied in summary form and is therefore not necessarily complete. It does not constitute a prospectus, offering memorandum or other offering document or an offer of securities. Also, it is not intended that it be relied upon as advice to investors or potential investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial situation or particular needs. The material contained in this presentation may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. This presentation is directed only at persons who (i) have professional experience in matters relating to investments; or (ii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (as amended); or (iii) are outside the United Kingdom (all such persons together being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. This presentation contains statements that constitute "forward-looking statements" within the meaning of section 21E of the United States Securities Exchange Act 1934. Forward-looking statements are statements about matters that are not historical facts. The forward-looking statements include statements regarding our intent, belief or current expectations with respect to our business and operations, market conditions, results of operations and financial condition. We use words such as 'will', 'may', 'expect', 'indicative', 'intend', 'seek', 'would', 'should', 'could', 'continue', 'plan', 'probability', 'risk', 'forecast', 'likely', 'estimate', 'anticipate', 'believe', or other similar words to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond our control and have been made based upon management's expectations and beliefs concerning future developments and their potential effect upon Westpac Securities NZ Limited, Westpac NZ Covered Bond Limited and/or Westpac New Zealand Limited. Should one or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from the expectations described in this presentation. Factors that may impact on the forward-looking statements made include those described in the section entitled "Risk factors" in the Management Report in the Westpac Securities NZ Limited Financial Statements for the year ended 30 September 2016. When relying on forward-looking statements to make decisions with respect to Westpac Securities NZ Limited and/or Westpac New Zealand Limited, investors and others should carefully consider such factors and other uncertainties and events. We are under no obligation, and do not intend, to update any forward-looking statements contained in this presentation. All amounts are in New Zealand dollars unless otherwise indicated. All financial data in this presentation is as at 31 December 2016 unless otherwise stated. 2#3Agenda Westpac New Zealand Limited (WNZL) Overview New Zealand Economy Wholesale Funding and Liquid Assets NZ Agriculture and Dairy Portfolio New Zealand Mortgage Portfolio Commercial Property Portfolio WNZL Covered Bond Programme Appendix 4 9 17 24 26 32 34 39#4Financial Performance#5An important part of the Westpac Group Westpac Group New Zealand Australia Westpac bank SA st.george W BT Financial Group RAMS Bank of Melbourne Westpac New Zealand Limited (WNZL) Westpac Securities NZ Limited (WSNZL) BT Funds Management (NZ) Westpac Life New Zealand Locally incorporated Bank, wholly owned but not guaranteed by Westpac Banking Corporation Comprises Westpac's consumer, business and institutional banking operations in NZ Rated AA- / Aa3 / AA- Financial performance disclosed via quarterly WNZL Disclosure Statement (DS) Guarantor for WSNZL funding programmes A wholly owned subsidiary of WNZL Unconditional and irrevocable guarantees of funding programmes from WNZL Provides offshore wholesale funding for WNZL through its London branch 5#6WNZL - Key Performance Metrics Strength 30-Sep-15 31-Dec-16 Return 31-Dec-15 31-Dec-16 Deposit to Loans (%) 75.1% 77.5% Net Interest Margin (%) 2.29% 2.05% Provision Gross 0.60% 0.52% Core Earnings ($m) 1,281 1,224 Loans Advanced (%) Total Capital 13.1% 12.5% NPAT ($m) 911 868 Strength Return Productivity Growth Productivity 31-Dec-15 31-Dec-16 Growth 30-Sep-15 31-Dec-16 Cost to Income (%) 1 41.2% 42.9% Housing Market Share (%) 20.2% 19.7% Online Users (#000's) 711 745 Agri Market Share (%) 12.3% 12.9% Deposits via Smart Total Retail Deposits 210 224 20.6% 20.5% ATMs (# 000's) Market Share (%) 6#7WNZL-Profit & Loss (extract) (NZ$m) Net interest income Non interest income 12 months to 12 months to 31-Dec-15 vs. PCP ($) vs. PCP (%) 31-Dec-16 1,791 1,741 (50) (3%) 387 403 16 4% Net operating income 2,178 2,144 (34) (2%) Operating expenses (897) (920) (23) 3% Core earnings 1,281 1,224 (57) (4%) Impairment (charges) / recoveries (27) (23) 4 (15%) Income tax expense (343) (333) 10 (3%) Profit after income tax expense 911 868 (43) (5%) 7#8WNZL - Balance Sheet (extract) (NZ$m) Assets 30-Sep-15 31-Dec-16 vs. PCP ($) vs. PCP (%) Net loans 69,155 75,756 6,601 10% Funded Liquids 7,870 11,283 3,413 43% Other assets 2,900 3,342 442 15% Total assets 79,925 90,381 10,456 13% Liabilities Customer deposits 51,916 58,727 6,811 13% Wholesale funding 15,755 19,165 3,410 22% Intra-company borrowings 2,100 1,310 (790) (38%) Other liabilities 3,763 4,341 578 15% Total liabilities 73,534 83,543 10,009 14% 8#9New Zealand Economic Outlook#10New Zealand Economy · • • • • • • • WNZL economic forecast growth above 3% GDP over next 2 years Economy experiencing growth on back of . . • Construction activity associated with growing population Price recovery for key NZ exports including Dairy Tourism now NZ's major export earner Strong employment outlook Well managed fiscal position Interest rate outlook flat Currency outlook flat High household debt but manageable serviceability Housing shortage expected to prevail for some time 10#11New Zealand Economy NZD/USD, NZD/AUD and TWI Key economic statistics FY16 FY17f FY18f 1.00 GDP annual average growth 3.0% 3.4% 3.1% 0.90 Inflation rate 0.4% 1.6% 1.8% 0.80 0.70 Official cash rate (OCR) 1.75% 1.75% 1.75% 0.60 Unemployment rate 4.9% 4.2% 4.1% 0.50 0.40 Dairy payout (ex dividend) 1,2 $5.90 $6.10 2005 90 Mort 85 80 - NZD/USD Forecast 55 - NZD/AUD -TWI (right axis) bཪྻབྱསྒ99| 75 70 65 60 50 45 40 2008 2011 2014 2017 GDP growth (%) Source: RBNZ, Westpac Economics New Zealand unemployment rate (%) 8 8 % Qtr % chg Annual average % change Westpac Forecast 6 6 27 110 12 11 4 4 % 12 Westpac Forecast 11 10 9 9 8 2 2 וויי 7 0 0 6 LO 5 -2 -2 4 -4 -4 8 16 7 543 3 2000 2002 2004 2006 2008 2010 2012 2014 2016 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Source: Statistics NZ, Westpac Economics 1 Westpac NZ Economics forecast (ex dividend), Fonterra forecast is $6.00/kg 2 Seasons ended May. Source: Statistics NZ, Westpac Economics 11#12Composition of the New Zealand economy Composition of GDP Social services Public Administration and Safety 5% (incl. health). 15% Financial and professional services 32% Source: Statistics NZ Dairy 2.5% Other primary industries 6% Electricity, Gas, and Water 3% Construction 7% Transport 5% Food Manufacturing 4% Manufacturing (excluding Food Manufacturing) 8% GDP growth trends 2016 Q3 GDP, annual growth by sector Construction Retail & accommodation Forestry & fishing Other manufacturing Business services Transport Finance & insurance Public admin & safety Personal & other services Communications Wholesale trade Utilities Food manufacturing Agriculture Wholesale, retail and accomodation 13% Source: Statistics NZ. Westpac Mining -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% Construction and services have been key contributors to growth in recent years. Construction has been driven by earthquake- related rebuilding in Canterbury and residential building to cater for the rising population. Services across the spectrum have performed well, with particularly strong growth in professional and financial services, health and tourism. ■ Tourism is now our largest export earner and has seen strong growth in arrivals from many regions, including China and the United States. Demand has been boosted by the expansion of airline capacity/routes as oil prices fell and New Zealand's reputation as a safe haven destination. Dairy farm production directly accounts for around 2.5% of NZ GDP (4.5% including upstream/ downstream impacts and 7% if including dairy manufacturing) 12#13Solid growth outlook, low interest rates a key support While inflation has picked up, imported inflation remains low. To ensure overall inflation returns to the 2% target mid-point, the RBNZ needs the domestic economy to continue growing at solid pace. Consequently, we expect the RBNZ to hold the OCR at its current low level for an extended period. Annual net immigration rose to a record level of 70,000 over the past year, boosting annual population growth to over 2%. Combined with low interest rates, this is providing a strong boost to spending. There is a very strong outlook for residential construction centred on Auckland, and a large pipeline of non-residential construction work, including infrastructure spending. Spending on the Canterbury rebuild (equal to around 15% of annual GDP) is around 60% complete and has started to gradually wind down. Reconstruction following recent earthquakes near Kaikoura will add to construction activity, but has not materially changed the outlook. Inflation % 6 5 сл 4 3 2 1 0 2007 2009 2011 % CO 6 CPI inflation Forecast 5 сл CPI excluding petrol 4 3 2 1 0 2013 2015 2017 Construction spending (annual) $bn 40 33225050 15 10 ■Kaikoura earthquake costs ■Canterbury rebuild ■Construction (excl. quake costs) Source: Statistics NZ, Westpac economics Net migration (annual) $bn 000s 40 Forecast OGGNN GE 75 35 30 - 25 25 25 20 0 15 50 50 10 -25 000s Total 75 55 New Zealanders 50 Other 50 25 0 -25 Forecast -50 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: Statistics NZ, Westpac economics -50 2005 2008 2011 2014 2017 2020 2023 Source: Statistics NZ, Westpac economics 13#14Conditions are improving for the dairy sector • Global dairy prices recovered sharply through H2 2016, and in January were 50% higher than in the middle of last year. Fundamentals have shifted in favour of dairy producers. The previous period of low prices has led to milk supply contracting in key dairy export regions, including Europe, New Zealand and Australia. Demand, especially from China, has also improved. Westpac Economics has upgraded our forecast for New Zealand's farm gate milk price to $6.20 for the current season. However, while this is a significant improvement, it will take some time for farmers to repair their balance sheets following two seasons of very low prices. NZ export commodity price index (NZD) Dairy payout and dividend Kg Ms $10 $9 $8 ■Dividend $7 ■Milk price $6 $5 $4 SSSSSSSS Kg Ms $10 Westpac forecast $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 ❁�8⌘¢#ཕ ྂ 2015/16 2016/17 2017/18 2010/11 2011/12 2012/13 2013/14 2014/15 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 Source: Westpac Economics Break-even dairy payout Break Even Effective Payout (including dividends) Indexed to Kg Ms 100 Jan 2000 250 $10 $9 200 $8 $7 150 $6 $5 100 $4 $3 50 $2 Dairy Products Seafood $1 0 $0 Jan-09 Jan-12 Jan-15 Indexed to 400 100 Jan 2000 350 300 250 200 150 100 50 Meat, Skins and Wool Horticultural Products 0 Jan-00 Jan-03 Jan-06 Source: ANZ, Westpac Kg Ms $10 Fonterra payout including dividend Forecast EA EA LA ES LA EA ES LA ES E $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 2002/03 2004/05 2006/07 2008/09 2010/11 2012/13 2014/15 2016/17 Source: RBNZ, DairyNZ, Westpac, Fonterra 14#15Index = 100 in 2007 House sales have slowed, stability concerns persist ◉ ☐ House prices rose rapidly in 2016. While the Auckland market lost some momentum, strong demand and tight supply provided a floor for prices in the region. Other regions such as the upper North Island and in Queenstown, are now seeing strong increases. Rising house prices and household debt prompted the RBNZ to tighten loan-to-value ratio restrictions in July. Since that time, sales have fallen by 9%. However, previous changes in lending restrictions had only a temporary impact on housing market activity. Mortgage rates have risen in response to increases in wholesale interest rates and an emerging gap between lending and deposit growth. We expect this to have a marked dampening impact on the housing market, which would reduce the need for lending restrictions (such as limits on lending based on borrowers' income which the RBNZ has been looking into). New Zealand house prices by region (index) Household debt statistics % 20 15 10 % 175 150 125 5 100 0 1999 Source: RBNZ 2002 2005 Debt servicing costs, share of disposable income (left axis) Household debt levels compared to disposable income (%) 2008 75 15 2011 2014 House sales (monthly) 220 sales sales 9,000 9,000 200 180 憂 160 140 120 Index 100 in 2007 8,000 8,000 7,000 +1.00 $7,000 6,000 6,000 5,000 5,000 100 4,000 4,000 80 3,000 3,000 Jan-11 Jan-13 Jan-15 Jan-17 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: REINZ 220 Canterbury 200 Rest of NZ 180 Auckland 160 140 120 100 80 Jan-07 Jan-09 Source: REINZ, Westpac Economics 15#16Auckland home construction Strong population growth and low building in previous years has left Auckland with an under-build of around 33,000 homes. Population growth in Auckland is expected to remain strong, with around 250,000 people expected to settle in the region over the coming decade (equivalent to around 15% of the current population). Auckland currently needs to build around 11,000 homes a year, and this number will rise over time as the population increases. That implies a very high level of home building, which will need to be sustained for around a decade to keep up with population growth and gradually eliminate the existing shortfall. In 2016, just under 10,000 homes were consented. The latter part of 2016 saw consent issuance easing off. We expect this to be a temporary slowdown associated with the introduction of a new regulatory framework for building (i.e. The Unitary Plan). Housing shortfall 000 50 Stock shortfall 40 40 Home building 000 50 Westpac forecasts 50 Increase in housing demand due to 30 population growth 20 20 10 0 40 40 30 50 20 20 10 10 -10 -10 Mar-06 Mar-10 Mar-14 Mar-18 Mar-22 Source: Westpac Economics 16#17Funding, Liquidity and Capital Management#18WNZL Funding and Liquidity Positions Remain Strong Funding overview WNZL's customer deposit to loan ratio was 77.5% at 31 December 2016. Both BS13 and APS210 lenses are applied to the deposit book - active effort to attract deposits that represent stable long term funding under both prudential standards. WNZL issued NZD3.5bn term wholesale funding FY17 to date. Core Funding Ratio (CFR) was 83.0% at 31 December 2016. Future plans Maintain limited call on short term wholesale markets. Wholesale funding strategy remains that of consistent issuance into established markets with diversification within current geographies. 18#19Targeting a sustainable wholesale funding profile Funding composition (%) Term maturities by financial year ($bn) 6639 24 8858 4 4 5839 7 8 11 3 3 3 23 ■Wholesale Offshore <1Yr Wholesale Onshore <1Yr Wholesale Offshore >1Yr Wholesale Onshore >1Yr Intercompany Debt 62 64 67 69 68 70 68 ■ Equity Customer Deposits FY12 FY13 FY14 FY15 FY16 1Q17 Core funding ratio (%) Core Funding Ratio RBNZ Core Funding Limit 90.0% 80.0% 70.0% 60.0% FY11 FY12 FY13 FY14 FY15 FY16 1Q17 4.5 DMTN EMTN Covered NZD equivalent ($bn) 3.0 1.5 0.0 2017 2018 2019 2020 2021 2022+ Commentary Reduced reliance on short term funding driven by strong deposit growth ➤ Term maturities well spread for manageable annual refinancing task Core Funding Ratio comfortably above the RBNZ minimum of 75% 19#20Well balanced and diversified funding Wholesale funding (%) Wholesale funding by currency (%) 15 21 19 37 NZD USD EUR CHF 31 GBP Domestic Medium Term Notes 11 4 24 ■NZ Certificates of Deposit 7 Euro Medium Term Notes 30 30 Funding mix (%) 5 ∞ 18 69 69 US Commercial Paper Covered Bonds Customer Deposits Equity I Wholesale Onshore Wholesale Offshore Commentary Funding composition well balanced between domestic and offshore wholesale programmes ➤ Lower reliance on US Commercial Paper Focus for wholesale funding will be consistent issuance into established markets with diversification within current geographies 20#21Stable and high quality liquid assets Liquid assets ($bn) 16.0 Liquid assets as % short term funding (%) 240 HQLA RMBS 4.0 12.0 160 4.0 4.0 4.0 4.0 4.0 4.0 8.0 193 209 11.3 187 80 157 140 136 146 4.0 7.1 7.2 7.9 6.9 6.8 7.7 0.0 FY11 FY12 FY13 FY14 FY15 FY16 1Q17 Liquid assets composition (%) Due from other financial institutions ■NZ Government Securities ■NZ Local securities Supranational securities ■NZ Corporate & Bank securities RMBS FY11 FY12 FY13 FY14 FY15 FY16 1Q17 Commentary High quality, diversified portfolio of RBNZ repo eligible liquid assets ➤ The core liquid asset portfolio has remained relatively stable in recent years Liquid asset coverage of short term wholesale maturities includes term scroll for March 2017 Senior Unsecured Bond maturities (NZD2.4bn) ➤ Liquid assets provide 36 months coverage of maturing offshore debt Cash 4 12 26 12 12 8 6 28 21#22Strong capital position Capital adequacy ratios (RBNZ basis) Sep-16 Regulatory minimum Headroom to regulatory minimum CET1 Capital (incl. Capital Conservation Buffer (CCB)) 10.5% 7.0% 3.5% Tier One Capital (incl. CCB) 10.5% 8.5% 2.0% Total Regulatory Capital (incl. CCB) 12.5% 10.5% 2.0% Buffer Ratio WNZL capital ($m) as at 30 September 2016 $6,560m $6,718m Tier 2 $1,092m Other* $2,810m 4.5% 2.5% WNZL Regulatory capital ratios (%) 2.0% CET1 capital Tier Two capital 15.0% 13.4% 13.1% 12.5% 11.9% 11.6% 2.3% 2.3% 2.0% 10.0% CET1/Tier 1 $5,626m Share Capital $3,750m 5.0% Shareholders' equity WNZL actual regulatory capital 11.1% 10.8% 10.5% 0.0% FY14 1H15 FY15 1H16 FY16 *Other: Retained profits of $2,886m, AFS reserve of $1m and Cash Flow Hedge reserve of ($77m) 22 22#23Capital Strategy and Dividends WNZL's Capital Management Strategy Maintain strong capital position capacity to absorb unexpected losses, remain solvent and meet minimum capital requirements (even under stress), whilst earning a sustainable long term return on shareholders' equity Focussed on stand-alone requirements - RBNZ COR, WNZL Risk Appetite and WNZL Regulatory Capital Management Policy Cognisant of WBC Group capital strategy and capital requirements - critical for efficient and effective management of WBC Group Capital Developments WNZL monitors its capital structure on an ongoing basis and the efficiency of the capital structure is under constant consideration 23#24New Zealand Agribusiness and Dairy Portfolio#25Agribusiness overview Agribusiness portfolio TCE by sector (%) 19 32 69 69 Dairy cattle Grain, sheep & beef Horticulture and fruit Fishing Agribusiness portfolio Stressed Assets Mar-16 Sep-16 Dec-16 Agribusiness Portfolio TCE 8.1 8.6 8.5 Agriculture as a % of total TCE 7.9 8.1 7.8 % of portfolio graded as 'stressed' 7.81 18.61 17.19 % of portfolio in impaired 0.32 0.42 0.44 Millions Agribusiness portfolio by Booking Office $2,500.00 $2,000.00 $1,500.00 $1,000.00 $500.00 $0.00 .... Central North Eastern North Lower South Island Island Island Northland Upper South Island Western Local North Island Agribusiness Managers ■Dairy Cattle Farming. Grain, Sheep and Beef Cattle Farming Other - Agri Horticulture and Fruit Growing • • Challenging dairy industry conditions saw a rise in stressed assets in 2016 but outlook is improving. WNZL is underweight with Agri market share (12.8%), and the portfolio is being closely monitored Fonterra has increased its forecast payout to $6.00 per kg of milk solids (from $4.25 in June), lifting sentiment and outlook for the dairy sector. The portfolio risk profile is improving in response to strengthening financial profiles. Impairments and provisions have remained stable. 25#26New Zealand Mortgage Portfolio#27Residential lending is well managed 12% 10% 8% % LVR Lending Commitment Volumes by Segment 6% 86 4% 2% 0% 90 May-16 Jun-16 ■AINV >70% LVR (After Exclusions) Jul-16 Aug-16 AOO >80% LVR (After Exclusions) Sep-16 OTHER >80% LVR (After Exclusions) LVR Speed Limits implemented (step-up focus on residential investors) - November 2015 Off-shore borrower lending restrictions implemented - June 2016 Home Loan delinquencies at record low indicative of improvement in consumer credit quality on the back of strong external factors such as low interest rates and buoyant housing market RBNZ has signalled an appetite to add a form of Debt to Income ratio to its range of macro- prudential tools but does not yet have the mandate to do so. LVR Risk Appetite Tolerances: Auckland investor (AINV) > 70% - 4.5% Auckland Owner Occupier (AOO) > 80% - 9.0% All Other > 80% 14.0% 27#28Home Loan portfolio composition Regional profile (%) 30+ and 90+ delinquencies (%) -90+ dpd -30+ dpd 1.50% Auckland 1.25% ■Wellington 39 1.00% 45 Christchurch 0.75% 00 8 1 Other 0.50% Investor vs owner occupied (%) of new flows 100 41 44 75 44 50 59 61 56 25 0 FY14 FY15 FY16 2 Investor 39 2 Owner occupied 0.25% 0.00% FY 06 FY 07 270 FY 08 FY 09 99 FY 10 FY 11 FY 12 FY 13 FY 14 Aug-15 FY 15 1Q 16 1H 16 BQ 16 Jul-16 Aug-16 FY 16 Portfolio LVR distribution (%)³ 3.7 100 10.5 1.1 6.0 Greater than 90% 75 Between 80 - 90% 60 50 92.9 85.8 Less than 80% 25 0 Total Portfolio FY16 YTD flows 1.'Other' includes revolving credit loans (variable rate loans that allow the borrower to withdraw funds up to a limit) and capped loans (fixed interest rate for 1 year, changing to a floating rate if it drops below the fixed rate). 2. 'Investor' lending provided for the purchase of, and/or secured by, residential investment property. Residential investment property is property that is not owner-occupied, or for the owners' exclusive use (such as a holiday house). 'Owner Occupied' includes all other residentially secured lending not classified as an Investment Property Lending. 3. LVR based on balance and assessment of property value at origination 28#29Mortgage portfolio composition Mortgage portfolio – Original loan amount (%) 220 10 Mortgage portfolio - LVR profile (%) 50 40 SA 30 44 20 50 Average LVR 63% 40 Average loan $237k 30 20 34 23 18 11 2 2 4 4 10 $0 - $150k $150k - $250k - $500k - $750k - $1m+ 0<=60 60<=70 70<=80 80<=90 90<95 95+ $250k $500k $750k $1m 24 10 23 Mortgage portfolio – Regional profile (%) Auckland Wellington 39 44 Christchurch 8 9 Other Mortgage portfolio – Seasoning profile (%) 7 27 10 13 Less than 1 year 23 23 ■1 to 2 years 2 to 3 years 19 3 to 4 years 4 to 5 years ■5+years 29#30Mortgage portfolio delinquencies remain low - Key statistics – as at 31 December 2016 Mortgage portfolio 30+ and 90+ delinquencies (%) Number of home loan customers 358k 1.75% 1.50% Total Home Loan Portfolio $45.3bn 1.259 1.009 YTD mortgage growth rate annualised 3.97% 0.759% 0.50% Portfolio > 80% LVR 13.2% 0.25% 0.00% Average loan size $127k Mortgage portfolio loss rates (%) Home Loan Loss Rate Sep09 Mar10 Sep10 Mar11 Sep11. Mar12 Sep12 Mar13 Sep13 Mar14 Se p14 Mar15 Sep15 Mar16 Sep-1 % 30 plus dpd or Written Off FY06 FY07 FY08 FY09 FY11 FY12 FY13 -90+ dpd Home Loan Delinquencies FY14 Mortgages 30+ delinquencies and written off (%, yearly averages) 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Age Of Account 2006 2011 2007 -2012 2008 2009 2010 2013 2014 2015 30 -- FY 15 1016 91 HD 30+ dpd FY16 1Q17 0.37% 0.11%#31RBNZ speed limits remain in place NZ regional house prices (2007 peak = 100) RBNZ LVR speed limit Index = 100 in 2007 220 -- Auckland 200 Wellington Index = 100 in 2007 220 120 200 >80% LVR flows Value of Commitments for > 80% LVR 100 80 Christchurch 180 180 Value ($m) 60 Rest of North Island 40 20 160 Rest of South Island 160 0 140 120 140 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Det-16 120 RBNZ LVR restrictions remain in place Investors in the Auckland Council area require a deposit of at least 30% 100 100 Source: REINZ, Westpac Loans to owner-occupiers in Auckland >80% LVR limited to 10% 80 80 Loans >80% LVR outside of Auckland limited to 15% 2007 2009 2011 2013 2015 2017 31#32New Zealand Commercial Property Portfolio#33Commercial Property portfolio " The Dec 16 portfolio total committed exposure (TCE) has shown minor growth of 0.67% since FY16 and represents 6.67% ($7.3b) of Total TCE Independent registered panel valuations are obtained on drawdown, and every 3 years thereafter (or earlier if market conditions dictate). Internal specialist property valuation input is also obtained for new lending > $10m Property development exposure of $1435m as at 31 Dec 16 represents 1.31% of total TCE. Development / investment ratio has shifted from 19.65%/80.35% in FY16 to 19.57%/80.43% as at 31 Dec 16 Development underwriting standards restrict the max loan amount to the lower of: 75% (loan to development cost ratio), or 65% (loan to value ratio on completion). No exposure to Auckland CBD apartment developments as at 31 Dec 16 Market segment splits are consistent with population demographic. Retail sector concentration is via Listed Property Trusts and exposure to large shopping precincts WNZL is not currently experiencing any delay or settlement defaults by purchasers of apartments/residential houses Commercial Property by Market Segment Retail, 19.0% Residential, 18.0% Other, 4.5% Industrial, 12.3% Commercial, 46.3% Commercial Property by Booking office South Island Wellington , 8.7% , 13.4% Auckland ,77.9% 33#34Covered Bond Programme#35WNZL Covered Bond Programme - Overview Issuer Group Guarantor Group Guarantor Rating Format Covered Bond Rating Programme Size Maturity Options Covered Bond Guarantor Covered Bond Guarantee LVR Cap in Asset Coverage Test Asset Percentage Collateral Programme Listing Westpac Securities NZ Limited, London Branch Westpac New Zealand Limited AA-/Aa3/AA- by S&P / Moody's / Fitch Legislative Covered Bond Aaa/AAA by Moody's / Fitch €5 billion Soft and Hard Bullet Westpac NZ Covered Bond Limited, a special purpose vehicle (SPV) Covered Bond Guarantor has guaranteed payments of interest and principal under the Covered Bonds secured over the Mortgage Loans and its other assets (Limited in recourse to its assets) 75% Subject to rating agency requirements, Programme maximum 90% New Zealand prime, first ranking residential mortgages London Stock Exchange Covered Bond Guarantor Governing Law New Zealand 35#36Covered Bond Pool - Overview Covered Bond Pool eligibility criteria • • • • . • • • First ranking mortgage registered under the New Zealand Real Property Legislation All loans are secured by a mortgage over land and a completed residential dwelling All residential mortgages are denominated and payable in New Zealand dollars Loans are originated by WNZL in the ordinary course of its business, subject to standard loan offer terms and conditions Outstanding Principal Balance owed by the borrower is not more than NZD1.5 million Borrower is a New Zealand resident Loans become amortising loans after any "interest only" period Loans are not governed or regulated by any rural, primary production, moratorium or mediation legislation other than Credit Contracts Act 1981 (NZ) or the Credit Contracts and Consumer Finance Act 2003 (NZ) Loans required to be repaid within 30 years of sale Loans are not delinquent more than 30 days or in default Cover Pool Loan Statistics as at 28 February 2017 Total Pool Loan Balance¹ Number of Loans Average Loan Size Max Loan Size Weighted Average Current LVR WA LVR (Indexed) 90 day + Arrears Weighted Average Seasoning Weighted Average Remaining Term to Maturity Max Remaining Term to Maturity Weighted Average Interest Rate Fixed/Floating Split NZ$6,942,881,201 49,114 NZ$141,363 NZ$1,451,347 56.68% 42.90% 0.00% 44 months 273 months 360 months 4.92% 85% / 15% 1 Pool loan balance excludes cash balances. Interest Only 16% 36#37WNZL Covered Bond - Structural overview Westpac New Zealand Westpac NZ Covered Bond 8 Limited (WNZL) Limited (CBG) Seller, Group Guarantor, & Interest Rate Swap Provider 2 Covered Bond Guarantor 7 3 Westpac Securities NZ Limited (WSNZL) Issuer 6 5 Covered Bond Investors 8 Westpac Banking Corporation (WBC) Covered Bond Swap Provider Key 1. Loans sold by WNZL to CBG 2. CBG pays WNZL, funded via Intercompany Loan from WNZL 3. WNZL issues guarantee to Bond Investors 4. CBG issues guarantee to Bond Investors 5. WSNZL (London branch) issues Covered Bonds to Bond Investors 6. Bond Investors pay WSNZL for Covered Bonds 7. WSNZL on-lends proceeds to WNZL 8. WNZL is the Interest Rate Swap Provider and WBC is the Covered Bond Swap Provider to CBG 37#38WNZL Covered Bond - Programme highlights Structure Security Covered Bonds are issued by Westpac Securities NZ Limited, and guaranteed by WNZL (AA-/Aa3/AA-), backed by an unconditional and irrevocable guarantee by the Covered Bond Guarantor (Westpac NZ Covered Bond Limited), which is limited in recourse to its assets Security comprises a high quality pool of first ranking, prime New Zealand residential mortgages which meet the eligibility criteria (the cover pool). Mortgages in the cover pool are sold to the Covered Bond Guarantor to ensure that covered bondholders have a priority claim over the cover pool in the event of issuer insolvency Overcollateralisation Asset Monitor Prior to service of a Notice to Pay on the Covered Bond Guarantor, an Asset Coverage Test is run monthly to ensure the Covered Bond Guarantor has sufficient assets to support the outstanding covered bonds, plus a level of overcollateralisation set by the ratings agencies. The Asset Percentage requirement is confirmed by the rating agencies quarterly and is subject to a maximum of 90%, which represents a minimum level of overcollateralisation of 11%. Following service of a Notice to Pay on the Covered Bond Guarantor, an Amortisation Test is run monthly to ensure the Covered Bond Guarantor has sufficient assets to meet the covered bond obligations PricewaterhouseCoopers has been appointed to monitor the calculation of the Asset Coverage Test and the Amortisation Test on at least an annual basis Hedging Regulatory Support The Interest Rate Swaps and Covered Bond Swaps are used to hedge any exposure of the Covered Bond Guarantor to interest rate and currency risks The RBNZ permits Covered Bonds as repo eligible instruments under Covered Bond legislation passed in December 2013. The RBNZ has set an initial limit of 10% of total assets of an issuing bank (calculated by reference to the value of assets encumbered for the benefit of covered bond holders) 38#39Appendix W#40New Zealand Economy - population distribution Region Population Northland 151,689 Northern Kaitaia Kaikohe WHANGAREI Dargaville Auckland 1,415,689 (53% of population) Warkworth Orewa Helensville AUCKLAND North Shore Papatoetoe Waikato 403,639 Bay of Plenty 267,741 Pukekohe HAMILTON Gisborne 46,653 Manurewa Papakura Thames TAURANGA Whakatane Tokoroa ROTORUA Te Kuiti Taupo Central Taumarunui NEW PLYMOUTH Hawke's Bay 151,179 (24% of population) Taranaki 109,608 Manawatu-Wanganui 222,689 Motueka Wellington 471,315 Westport Hawera WANGANUI Feilding PALMERSTON NORTH Levin Paraparaumu Masterton Porirua Upper Hutt Richmond NELSON Lower Hutt WELLINGTON Blenheim Gisborne Wairoa NAPIER HASTINGS Dannevirke Tasman 47,157 Greymouth Hokitika Nelson 46,437 South Rangiora CHRISTCHURCH Marlborough Ashburton 43,416 (23% of population)... West Coast 32,148 Canterbury Waimate Queenstown Alexandra Oamaru Te Anau 539,433 CHATHAM ISLANDS Otago Gore DUNEDIN Balclutha 202,470 INVERCARGILL Southland 93,339 Total 4,244,602 Source: Statistics NZ, 2013 Census 40#41Enhancing our position in New Zealand Airpoints opportunity Welcome Aboard W A irports Significant opportunity to expand affluent customer base • 1ppt lift in market share to 24%¹ > 60,000 new credit card accounts to 31 Jan 2016, nearly 40% new to bank • Material rise in card applications initiated a move to - Online fulfilment Online activation Launched market-first Airpoints debit card Over 16,000 debit cards issued in 5 months NZ Government banker Retained banking relationship with the New Zealand Government and its 36 agencies Eight year contract Provides scale to deliver significant enhancements - - - Process engineering to automate payments/reconciliations New digital interfaces supporting self- serve and improved debt collection (ie. student loans) Mobile payment tools NZ Government is a substantial part of the New Zealand economy, making up around 20% of the total transactions in the New Zealand market • Re-positioned brand It's time. Enhancing Westpac NZ's brand is a significant opportunity Research indicated - Brand lacked meaning and consistency Now leveraging brand strengths ("trust”, “astute" and "strong") New brand proposition ("It's time") designed to build on brand strengths Staff engagement and participation has been a focus of the launch 1 RBNZ.as at 31 January 2016. • Early results positive 41#42Reshaping our network Westpac One CANSTAR Best Online Banking New Zealand Westpac One. It's easier, faster, smarter online banking. • • Market leading platform. 2015 Canstar Best Online Bank in New Zealand1 67% of customer access via mobile devices Since launch 34% of all applications are online² 7% increase in digital customers to 705k3 Active digital customers now 53%4 Optimising points of presence • Smaller/fewer branches Welcome Branch • Flexible layout • Digitally enabled • 24/7 self-service • Staff move from transactions to service/support hot cum Digital RIO Video chat Hang up D Changing how customers bank We do night shifts too • Further enhancing 24/7 capability • Largest NZ fleet of Smart ATM's with 161, in two thirds of branches Half of branches have 24/7 banking lobbies² Teller deposits fallen by 11% over the year % of deposits through Smart ATM's 33% 28% 34% 37% Westpac Up 4ppts ATM 2H14 1H15 2H15 1Q16 Rolling out next-generation ATMs • Increased security . Higher withdrawal limits • Cash recycling Pauline Smith . Cash cheques Contact Centre • Third party payments (Council rates/utilities) 1 Canstar April 2015. 2 Excludes Airpoint applications. 3 As at 30 September 2015. 4 As at 31 January 2016. 42#43Contact us For further information Jim Reardon Treasurer Westpac New Zealand Limited +64 9 367 3539 [email protected] Sophie Johnston Westpac Securities NZ Limited +44 20 7621 7540 [email protected] Corporate About us Fixed income investors Our strategy for stable and efficiently priced wholesale funding is twofold: build a strong and diverse funding profile and broaden the invector base, while applying prudent liquidity oversight Unsecured funding Debt programs for Westpac Banking Corporation (WBC), WBC (previously of St.George), Westpac Securities NZ Limited (WSNZL) and Westpac New Zealand Limited (WNZL). Find out more WNZL and WSNZL Funding and Securitisation Programmes WNZL Disclosure Statement WSNZL Financial Statements Please visit our investor website: http://www.westpac.com.au/about-westpac/ investor-centre/fixed-income-investors/ Click on "Westpac New Zealand" or "Westpac Securities NZ Limited" Secured funding Details of our covered bond programs for WBC and WSNZL and outstanding securitisation issuance. Find out more Credit ratings Details of Fitch, Moody's and Standard & Poor's short and long term ratings for Westpac Banking Corporation and Westpac New Zealand Ltd. Find out more Fixed income presentations Presentations for fixed income investors from Westpac and Westpac New Zealand Ltd (in PDF). Find out more Westpac Securities NZ Limited A dedicated entity providing offshore wholesale funding for Westpac New Zealand Limited. Includes key facts, financial statements, credit ratings for WNZL and other information. Find out more 43