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Opportunities in wealthmanagement

David ClarkeGroup Executive28 September 2001

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DisclaimerDisclaimer

The material contained in the following presentation isintended to be general background information on WestpacBanking Corporation and its activities as at 29 September2001.

The information is supplied in summary form and is thereforenot necessarily complete. Also, it is not intended that it berelied upon as advice to investors or potential investors, whoshould consider seeking independent professional advicedepending upon their specific investment objectives, financialsituation or particular needs.

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•• Trends and opportunitiesTrends and opportunities•• Current positionCurrent position•• Westpac’s strategy to capitaliseWestpac’s strategy to capitalise

on these - across the value chainon these - across the value chain•• Sales & distribution Sales & distribution•• Product Product•• Investment management Investment management

•• SummarySummary

AgendaAgenda

3

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TrendsTrends

• Demographic - aging population

• Mandatory retirement saving

• Investment risk sits with the individual

• Many people currently under-funded for

retirement

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Trends (Trends (contcontinuedinued))

• Industry consolidation

• Have entered period where lower

returns are likely

• Increased requirement for responsible

investments

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0

10

20

30

20-39 40-59 60-70 79+

2001 2021

Wealth management opportunitiesWealth management opportunitiesare driven by demographic forcesare driven by demographic forces

810

13

19

0

10

20

Bank d

epos

its

Loan

& ad

vanc

es

Supe

r fund

s

Unit tru

sts

Financial assets & liabilitiesCAGR 1991 to 2001

%

Source: ABS & RBA

Population Demographic Trend

%

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18-249%

25-3425%

50-6422%

65+2%

40-4929%

35-3913%

Affluent Mass MassAffluent Market

% Population 4.4% 22.5% 58.0%

% Investment 14.6% 69.1% 13.7% Wallet

The target audience -The target audience -mass affluentmass affluentWho

Source : Roy Morgan - Single Source - Finance Monitor, 2001

• Personal Income $50k-$90kor

• Household income $70k-$120kor

• Investments >$100k

• Primary Age 35-49

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Which will lead to opportunitiesWhich will lead to opportunities

• Continuing market growth

• Increased demand for retirement incomeproducts

• Earlier interest in retirement saving

• Continuing high demand for advice,but more transparent, differentiated

• Development of low cost, or nicheproducts e.g ecofund

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•• Trends and opportunitiesTrends and opportunities•• Current positionCurrent position•• Westpac’s strategy to capitaliseWestpac’s strategy to capitalise

on these - across the value chainon these - across the value chain•• Sales & distribution Sales & distribution•• Product Product•• Investment management Investment management

•• SummarySummary

9

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• Large existing customer base

• Well placed to facilitate consolidation of

financial needs

• Position of trust

• Extensive distribution coverage - range

of channels

• Knowledge of customer base

Advantages of being a bankAdvantages of being a bank

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What our customers say –What our customers say –““I choose to invest with WestpacI choose to invest with Westpacbecause it is…because it is…””

• Safe, sound and stable.

• Reassuring and conservative.

• In the ideal position to understandcustomers' needs and provideappropriate solutions for all Australians

Source -Dangar Research Westpac Financial Services Positioning Study, August 2001

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“Overall the need in the marketis for advice

andadvice from someone I can trust.

Banks are uniquely placed tobenefit from this need and

fulfil customer needs.”

Source -Dangar Research Westpac Financial Services Positioning Study, August 2001

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Current situationCurrent situation

Source : Westpac data and analysis, June 2001

• 16% of Westpac customers have an investment product(which is no different from the general population - 15%).

• The issue is the number of those Westpac customers thathold investment products with other institutions.

Of our customerswho have a

mortgage, 75%have it with us

Of our customerswho have

investments, 80%have it elsewhere

• This is a result of the cultural perceptions of Westpac“bank” rather than a specialised “investment provider”.

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Westpac Financial ServicesWestpac Financial Servicespenetrationpenetration

• There are currently 575,760 WFS customers against a 5.2mWestpac retail customer base, generating a 12% customerpenetration.

• This provides significant opportunity to grow the WealthManagement business through our existing Westpaccustomer base.

Source : Westpac data and analysis, June 2001

8%

28%

18%

10% 9%12% 12%

0%

5%

10%

15%

20%

25%

30%

PrivateBank

PriorityBankingCentre

Priority Personal SmallBusiness

MiddleBusiness

Total

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46.332.6 26.7

16.6 14.4

CB

A(C

olo

nia

l)

NA

B(M

LC

)

AM

P BT

Wes

tpac

Westpac current marketWestpac current marketpositionposition

$bn $bn

Source: ASSIRT June 2001

98.9

75.1

51.436.6 35.6

22.6

CBA

(Colo

nia

l)

AM

P

NA

B

(MLC

)

DB BT

Wes

tpac

Total Funds Under Management Retail Funds Under Management

1. 2. 3. 4. 5. 10. 1. 2. 3. 4. 5.

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Good growth in retail FUMGood growth in retail FUM

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

25,000

27,000

Jun1999

Sep1999

Dec1999

Mar2000

Jun2000

Sep2000

Dec2000

Mar2001

Jun2001

+14%

+3%

CAGR

ISPTWestpac Property

Trust

Total Funds Under Management

Retail Funds Under Management

$m

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

25,000

27,000

Jun1999

Sep1999

Dec1999

Mar2000

Jun2000

Sep2000

Dec2000

Mar2001

Jun2001

+14%

+3%

CAGR

ISPTWestpac Property

Trust

Total Funds Under Management

Retail Funds Under Management

$m

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Quarterly Retail Inflow Trend

Retail inflows improving stronglyRetail inflows improving strongly

Mar`99 Jun`99 Sep`99 Dec`99 Mar`00 Jun`00 Sep`00 Dec`00 Mar`01 Jun`01

$m

0

100

200

300

400

500

600

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•• Trends and opportunitiesTrends and opportunities•• Current positionCurrent position•• Westpac’s strategy to capitaliseWestpac’s strategy to capitalise

on these - across the value chainon these - across the value chain•• Sales & distributionSales & distribution•• ProductProduct•• Investment management Investment management

•• SummarySummary

18

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Our strategy to capitalise onOur strategy to capitalise onopportunities across the value chainopportunities across the value chain

AdviceDistribution

/ RetailService

InvestmentManagement

Administration

Proportion ofProfit Pool(Australia)

17% 29% 34% 20%

RequiredCapabilities

• Scale

• Processefficiency

• Systemexcellence

• Scale

• Marketingand support

• Performancehistory

• Performancebrand

• Scale

• Marketingand support

• Processefficiency

• Systemexcellence

• (Perceived)independence

• Serviceexcellence

• Processefficiency(compliance)

Source: Accenture Analysis, ASSIRT, Rainmaker MER data

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Current Westpac distributionCurrent Westpac distribution

Institutions

Middle Market

Small Business

Private

Priority

Personal

InstitutionalSales

Westpac BFAs

WestpacAdvisors

WestpacPlanners

Product/Service Distribution Segment

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Distribution opportunitiesDistribution opportunities

InstitutionalSales

Westpac BFAs

WestpacAdvisors

WestpacPlanners

Product/Service Distribution Segment

IFAs

HPJDV

Institutions

Middle Market

Small Business

Private

Priority

Personal

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Distribution InitiativesDistribution Initiatives

• CRM

• Propensity modelling

• Leads management

• systems

• qualification process

• therefore, conversion rates

• Front end software

• Retention programmes

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Adviser network growth continuesAdviser network growth continues

Planner/Adviser Numbers

0

200

400

600

800

1000

1200

1995 1996 1997 1998 1999 2000 Mar-01 Jun-01 Sep-01 2002 2003

Actual Target

CAGR = 18%

0

200

400

600

800

1000

1200

1995 1996 1997 1998 1999 2000 Mar-01 Jun-01 Sep-01 2002 2003

Actual Target

CAGR = 18%CAGR = 18%

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Adviser productivity improvingAdviser productivity improving

200

300

400

500

600

700

800

900

0ct 9

9

Dec-99

Feb-0

0

Apr-00

Jun-0

0

Aug-00

Oct-00

Dec-00

Feb-0

1

Apr-01

Jun-0

1

Advised Sales per FTEA

dvi

sed

Sal

es p

er F

TE

/Mo

nth

($0

00s)

200

300

400

500

600

700

800

900

0ct 9

9

Dec-99

Feb-0

0

Apr-00

Jun-0

0

Aug-00

Oct-00

Dec-00

Feb-0

1

Apr-01

Jun-0

1

Advised Sales per FTEA

dvi

sed

Sal

es p

er F

TE

/Mo

nth

($0

00s)

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Adviser productivity is top tierAdviser productivity is top tier

Planner productivity ($m per planner)

$m

Source: Plan For Life & Salomon Smith Barney estimates

0

1

2

3

4

5

6

WBC CBA AMP ANZ NAB AXA

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Products - Focus on ‘wrappedProducts - Focus on ‘wrappedofferings’offerings’

Institutions

Middle Market

Small Business

Private

Priority

Personal

DiscreteMandate

BusinessSuper

RetailProduct

MasterTrust

MarginLending

Custody

PooledFunds

Product/Service Distribution Segment

Indiv. Mgd Portfolio

InstitutionalSales

Westpac BFAs

WestpacAdvisors

WestpacPlanners

IFAs

HPJDV

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27Source Morningstar, Open Funds >$10m

Sound retail funds performanceSound retail funds performance% of Funds Meeting or Exceeding Peer Group Median

0%

20%

40%

60%

80%

100%

Aug-99 Nov-99 Feb-00 May-00 Aug-00 Nov-00 Feb-01 May-01 Aug-01

55%Equal

4th

0%

20%

40%

60%

80%

100%

Aug-99 Nov-99 Feb-00 May-00 Aug-00 Nov-00 Feb-01 May-01 Aug-01

55%Equal

4th

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Looking closer...Looking closer...

1 year 3 years Trend% %

ING 79 60First State 68 78AXA 56 0Westpac 55 38CBA 55 70AMP 44 61NAB/MLC 42 50ANZ 38 50

Source Morningstar, Open Funds >$10m, June 2001

% of Funds Meeting or Exceeding Peer Group Median

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Westpac Investment ManagementWestpac Investment Management

• Focused on core competencies:

• Australian shares

• Australian fixed interest

• Tactical asset allocation

• Low cost, scalable operation

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Growth initiativesGrowth initiatives

• Maintain superior fund performance

• Source best of breed products

• Create alternative distribution models

• CRM/Leads management

• Grow sales force & upgrade skills

• Upgrade software tools

• Upgrade Master Trust platform

Servicing &Processing

InvestmentManagement &

Products

Distribution/Retail Service

Advice

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•• The changing landscapeThe changing landscape•• Banks’ positioningBanks’ positioning•• Wealth management value chainWealth management value chain

•• Sales & distribution Sales & distribution•• Product Product•• Investment management Investment management

•• SummarySummary

31

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AcquisitionsAcquisitions

• Not interested in profitless growth

• Must add shareholder value

• Watching brief

• Our strategy is not dependent onacquisitions

• Could accelerate achievement ofthe strategy

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Our wealth management strategyOur wealth management strategy

• Leveraging our comparative advantage

– large customer base, warm leads andreduced search costs

• Expanding distribution size andcapability

• Accessing & integrating ‘best of breed’products

• Balancing growth and profitable returns

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… and we have in place a high… and we have in place a highgrowth and high return wealthgrowth and high return wealthmanagement businessmanagement business

Source: Westpac Financial Services Group Statutory Accounts

90 101

254

149148

1997 1998 1999 2000 1H 2001

NPAT $m

29% CAGR* 195

Embedded value uplift * Excluding accounting impacts

90 101

254

149148

1997 1998 1999 2000 1H 2001

NPAT $m

29% CAGR* 195

Embedded value upliftEmbedded value uplift * Excluding accounting impacts

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