1H24 Financial Results

Provisioning through the cycle Forward-looking approach - customer, macroeconomic and sectoral considerations Forward- looking components Late expansion Economic cycle GDP Contraction Early expansion Higher Lower Lower CP - Base Higher CP - FLAS Higher Lower CP - MES IAPS² Likely lower¹ Higher Total provisions³ Higher Likely lower • AASB 9 requires a forward-looking approach to loan loss provisioning to dampen • • pro-cyclical provisioning behaviour through forward-looking adjustments (FLAs) and multiple economic scenarios (MES) in determining collective provisions (CP). Total provisions will likely be lower following an economic contraction (despite higher base provisions) as we adopt a forward-looking view of an economic expansion. Sectoral considerations (last 6 months): - - - - Consumer: little change to modelled provisions as actual customer losses remained well below long-run averages. Slight increase in FLAs for higher risk occupations (exposed to slower discretionary spending) and home loan customers under the greatest cost of living pressure. Construction: slight reduction in FLAs for sub-segments related to non-building, site preparation and trade services. Number of dwellings under construction is high, but new commencements are low, pointing to constrained future activity. Retail trade: non-material change in provisioning coverage. Anticipated slowdown in discretionary spending per capita due to cost of living pressures is materialising, though non-discretionary spending remains resilient. Entertainment, leisure and tourism: increased FLAs, driven by higher cost of living impacts on discretionary spending. Cafes and restaurants remain sub-sector of greatest concern. Commercial property: non-material change in provisioning coverage. Sales remain low, though prices starting to reflect impact of higher rates and vacancies. Agriculture: increased FLAs for potential impacts of climate-related events. Livestock prices improving from recent lows and a solid harvest expected across most crops from higher than average rainfall. 1. If economic conditions are expected to recover following a recession, then the MES overlay would reduce as economic variables improve and/or the probability weighting towards more benign scenarios increases. This may not be the case where further deterioration in economic conditions is expected (e.g. a double-dip recession). 2. Individually assessed provisions (IAPS) are raised for non-performing exposures. 3. This refers to expectations before and after an economic slowdown. How total provisions change during a contraction is uncertain: If FLAs and MES under-predict actual losses, then total provisions will increase. If they over-predict losses (as was the case during the early stages of the COVID-19 pandemic) then total provisions will decrease. 34

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