Westpac Banking Aktie

Good morning, and welcome to Westpac's Third Quarter FY '26 update. I'm Justin McCarthy, General Manager of Investor Relations. Joining me today is Nathan Goonan, our CFO.

Before we commence, I acknowledge the traditional custodians of the land in which we meet. For us in Barangaroo, that's the Gadigal people of the Eora Nation. I pay my respects to elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander people.

Nathan will provide a brief overview of our quarterly performance and then take questions. In the interest of time, we'll take one question per person. Nathan?

Thanks, Justin, and good morning, everyone. The third quarter reflected continued operational and balance sheet momentum, underpinned by disciplined execution of our strategy. While the external environment remains uncertain, we are well positioned with a strong balance sheet, disciplined risk settings and a clear strategic agenda. That agenda is centered on improving service and deepening customer relationships, with an emphasis on the proprietary channel in both consumer and business. We are focused on simplifying our business and increasing productivity. UNITE is progressing well, and we are implementing a revised operating model catalyst to further improve our execution.

Net profit, excluding notable items, increased 2% compared to the first half '26 average. Revenue was up 1%, with growth of between 2% and 4% in our Australian divisions. This was partially offset by a 7% decline in New Zealand or 3% in constant currency terms. Net interest income increased 2%, which more than offset a 3% decline in noninterest income due to timing and one-off items. Volatile items related to geopolitical uncertainty and the associated increase in market volatility were only a slight drag, following a $271 million reduction in the first half. Operating expenses were up 1%. These revenue and expense outcomes resulted in pre-provision profit growth of 1%.

Sustainably growing customer deposits underpins our ambition to improve returns. The growth of 2% in the quarter highlights this priority. Consistent with seasonal patterns, transaction balances grew strongly. Business and wealth and institutional increased by 4% and 10%, respectively, while household transaction balances were stable. The notable mix shift in the deposit portfolio was a slowing in consumer saving balances and an increase in term deposits, with advertised term deposit rates above the saving rates for the first time since December 2023. We expect system deposit growth to remain solid during the fourth quarter, supported by a seasonal increase in household balances and a likely reduction in institutional deposits.

Loans increased 2%, with growth across all customer segments. Australian mortgages, excluding RAMS, grew by 2%, slightly above system. The proportion of proprietary flow rose to 36%, reflecting progress in executing our mortgage strategy. We expect mortgage system growth to moderate in the fourth quarter in response to a higher rate environment and the recent federal government policy changes. In the near term, our growth is likely to be below system, given our initial cautious response to heightened competition. Compared with the second quarter, mortgage applications declined 11% in the third quarter and have declined 20% since the budget. Based on our analysis of credit checks, system-wide applications have fallen by slightly less than these amounts. These trends remain broadly consistent with our economics team housing credit growth forecast of 6.8% in FY '26 and 4.7% in FY '27. Institutional lending and Australian business lending grew by 3% and 4%, respectively, as we continue to increase market share. The RAMS transaction settled on the 1st of August, resulting in a $15.4 billion reduction in mortgages.

Net interest margin was stable at 1.89%. Core NIM of 1.78% was flat compared with the first half '26, although it was up 1 basis point in the quarter. As foreshadowed, the nonrepeat of timing differences following the RBA rate changes in the first half added 1 basis point. Lending margins were lower, the rate of compression moderated in institutional and business lending, while mortgage margin compression in Australia and New Zealand was more pronounced. The contraction in Australia reflected a modest increase in both new fixed rate lending and switching and the runoff in higher-margin accounts, while competition intensified in New Zealand as fixed rate lending increased.

Deposit margins improved, reflecting benefits from the replicating portfolio and the higher interest rates on unhedged deposits. More customers qualifying for the bonus rate and a mix shift to higher-yielding products partially offset these benefits. Liquid assets provided a modest benefit, reflecting favorable mix, as liquid assets rose by less than average lending assets. The impact was slightly lower than previously expected, reflecting stronger-than-anticipated institutional deposit growth. The treasury and markets contribution of 11 basis points was stable.

For the second half, we continue to expect a replicating portfolio tailwind of 2 basis points. While immaterial to revenue, the impact of liquids is now expected to be neutral or a slight drag, reflecting ongoing deposit growth. Lending margins are likely to contract given heightened mortgage competition in both Australia and New Zealand, and the benefit of higher rates on deposit margins is expected to be offset by a combination of both rate and mix impacts, including higher qualifying on savings balances.

Expenses were well managed, with the 1% increase reflecting the averaging impact from higher salary and wages and our continued investment in our business. We remain on track for structural productivity savings of more than $550 million in FY '26. Total investment spend is expected to be approximately $2 billion. Within that, there has been a slight acceleration in UNITE, which is now expected to be modestly above the top end of the previously guided range of $850 million to $900 million. We now expect amortization to decline in the second half, reflecting timing of the completion of non-UNITE projects.

Consistent with trends we outlined at the first half, businesses continue to show resilience. And while consumer spend has slowed marginally, it remains at reasonable rate of growth by historical standards. Credit quality metrics remain sound. Stressed exposures to total committed exposures increased 3 basis points. This reflects a modest increase in watch list and substandard exposures in property, utility and manufacturing sectors.

Our non-retail portfolio continues to be well diversified across sectors and geographies. Households have been resilient in the face of higher interest rates and cost of living pressures. Mortgage delinquencies edged up 1 basis point to 58 basis points and hardship balances rose 5 basis points. Credit impairment charges were stable at 10 basis points of average gross loans. Total credit provisions rose marginally and at $5.3 billion and now $2 billion above our base case. Collectively assessed provisions to credit risk-weighted assets decreased 2 basis points to 1.27%, while total provisions to gross loans were stable at 58 points. Modeled collective assessed provisions were slightly higher. Revised economic forecast provided a modest release. This was more than offset by management judgments, including updates to the downside severity methodology and increases in overlays.

The CET1 capital ratio remained strong at 12.1%. The reduction in CET1 reflects a payment of the half year '26 dividend and an increase in risk-weighted assets, more than offsetting earnings for the quarter. Various movements in risk-weighted assets are outlined in the materials. We received a 23 basis point benefit from the completion of the RAMS portfolio sale on 1 August.

To conclude, the performance for this quarter demonstrates solid progress against our plans in a competitive environment. Disciplined execution is driving our momentum. We're striving to be more efficient while investing in our business.

And with that, I'll hand back to Justin for questions.

Thanks, Nathan. And just to restate, we've got a dozen of you in the queue. So if you could limit your questions to one, that would be helpful for us to get through.

Our first question comes from Richard Wiles from Morgan Stanley. Richard?

You mentioned that your mortgage application run rate post budget was 26,000. That's down about 20% on the March quarter and maybe 25% on the December quarter. Nathan, can you tell us how far investor applications have fallen since the budget?

Yes. Thanks, Richard. It's a good question actually because I think it's worth just reflecting on the number of factors that are creating some uncertainty in that market and in particular, around rates and budget changes. So owner-occupiers down 18% and invested down 26%, which I guess we probably draw some conclusion from that, that the rate impact is probably equal or potentially a bigger impact than anything that happened in the budget.

And that 18% and 26%, what number are you comparing it with, Nathan? Is that...

Comparing it to the 20% since the budget, Richard, yes, on a like-for-like basis, yes.

One other way to look at it, Richard, is just to say, if you did look at the period from the budget to now and you picked up the 5-year average of our applications, we're down about 11% from that 5-year average.

That's total mortgages?

Yes.

Our next question comes from Matthew Wilson from Jarden. Matthew.

Matt Wilson, Jarden. Just following on Richard's question on Slide 2, you say average monthly mortgage volumes. What are actual monthly mortgage volumes doing? Because that would imply that the endpoint is much worse than the start point. It's a nuance, but could you articulate that?

Yes. Thanks, Matt. We probably have had a little bit more in June where it's been a bit more compressed. But I would say, I think sometimes the seasonality month-to-month is quite predictable, and you can have in June, a fair bit of tax structuring and different things that happen around that. So I would be cautious about -- the reason we've done the quarterlies is we think that's a more reflective trend.

And I would say, overall, Matt, on this housing point, our fundamental point today will be to say, I think we do need to let this play out a little bit. The trends that we're seeing, we still believe are very consistent with the economics forecast of 4.7% growth in '27, 6.8% in FY '26. So we'd be cautious about drawing too many conclusions on 1 month of data, but you'd be right to say June was lower than the prior 2 months.

And July would follow, I imagine.

Yes. There's a little bit of -- you're getting into the real micro now, Matt, but I did see in our weeklies that applications were up last week relative to where they've been. So let's see how it plays out. We're looking forward to being on our feet in November and have a bigger sample set to be able to really talk through it.

And one thing, as I said to -- in Richard's comments, I think we do know that rate volatility is the biggest determining factor of uncertainty in the mortgage market. And we've gone from a period, even if you just took our economic forecast where we're expecting 2 rate rises and now we're potentially suggesting the next rate move is down, and that type of uncertainty does particularly put the mortgage market into a bit of a suspended animation.

Thanks, Matt. Our next question comes from Andrew Lyons from Jefferies. Andrew?

Nathan, you've highlighted good momentum in the franchise with both loans and deposits growing by 7% on the PCP. However, when we look at our quarterly revenues on a PCP basis, they're actually down slightly. Now I recognize there can be a lot of noise in these quarterly results. But can you perhaps just talk to this trend? And obviously, with the replicating portfolio easing from a tailwind perspective, just the extent to which we could see this sort of revenue -- year-over-year revenue trend improve going forward?

Yes. Thanks, Andrew. And I think in the preprepared, I did call out -- and I think I'm very conscious about sort of explaining things a way where we say like this is good and this is good and then it gets offset by that. But I do think, if you look at some of the underlying revenue in the quarter, revenue was up 4% in our institutional business, NII in our institutional business up 6%. In business and wealth, we had revenue in the quarter up 3%. And in our consumer bank, NII up 3% and revenue up 2%.

So we have -- we do feel like we've got that underlying revenue growth in the franchise, Andrew. Unfortunately, we had a 3% decline in sort of noninterest income that I can talk to. Treasury has stabilized in the quarter, but was still down on the first half average. And then obviously, New Zealand has been -- had a little bit of a challenging period. So I guess I don't want to get into the games of like if you look over here, it's all good. And if you exclude these things, it's all good. But I do think, underlying, we've got that momentum in the franchise. And I think that is giving us the opportunity to get that earnings growth over time. And I think underlying, we're seeing it, which gives us some confidence in that.

Thank you, Andrew. Our next question comes from Jonathan Mott from Barrenjoey. Jonathan?

If I could just ask a question on the margin. And specifically, you called out competition and the change in the savings -- percentage of people getting the bonus rate. If we actually look in the last couple of weeks, it appears that competition is intensifying. CBA started cutting their mortgage rates. Everyone else has had to follow. And then we're seeing some savings rates. So ING, I think, is now offering up to 6%. So would you be expecting into this next sort of 3 to 6 months, the impact of competition to be intensifying? And also that bonus rate comment, what percentage of customers are now qualifying for the bonus rate?

Yes. Thanks, John. Maybe I'll just answer the point question at the end first. I'd say we've had about a percentage point uptick in the quarter on the qualifying on the bonus rate. So we'd be sort of now at the 86. I think there is some sort of upward pressure on that, John. It's -- one of the things that we're deliberately doing is just trying to stimulate a little bit more in that regard. We did have, as I said in my preprepared, an interesting quarter in consumer deposits, where probably for the first time in a number of periods, we had our savings product sort of stable, marginally down, a little bit of that seasonality, but we did have some growth in TDs, which is probably the first time we've had term deposits in our consumer book growing by more than our savings product certainly since about 2023. So margins are still better on those savings products, and we're making some changes there just to stimulate a little bit more qualification, which we think overall, will give a better margin outcome than the TDs.

Your broader point on -- and sorry, I should just say that will probably lead to even a little bit more increase in that qualification rate. Your broader point on competition, I think, is well noted. The impact of that increased mortgage competition is not necessarily evident in our third quarter margin outcomes. But I do think the -- we're probably expecting now that we're growing at a subsystem level as we were a little bit cautious when that competition came in. We're probably back participating a little bit more in that, but I'd still expect us to be subsystem, and I'd still expect us to be talking about mortgage competition as being a more pronounced part of our margin outcomes in the -- when we get to the full year results.

Our next question comes from Ed Henning from CLSA. Ed?

All right. Can I just have one on expenses? Can you just talk about any seasonality running into the fourth quarter? You talked about the amortization decline coming through. So does that see the expense growth soften in the fourth quarter just given the amort declines? Or how should we think about that?

Yes. Thanks, Ed. No, you should expect that we'll still have some seasonal uptick of expenses in the fourth quarter. I think -- as you know, Ed, I do prefer to look at expenses on an annual basis. And then even in -- within -- when we're talking about the halves, I think we have a lot of seasonality. So when you're talking about the quarters, it's particularly pointed that you can get some seasonality.

I would say there's probably nothing different -- materially different in the quarter relative to our positioning that we would have given you at the half, except for the mix shift in investment spend. So a bit more of a tilt towards UNITE that's had -- will now be slightly above that top end of the range we've previously given. And then given UNITE has squeezed out a bit of other spend, some of the programs that would have started amortizing or we expect it to start amortizing won't kick in yet. So amortization likely to be a bit of a tailwind.

If I step back from the quarter, I think we've had another good quarter on expenses. And I think -- if you think about the annual plans that we set ourselves, I think we continue to track a little bit better than where we expected. We're very focused on productivity. And so we think that we're doing a good job on the $550 million. And it's clearly just such a critical focus for us alongside UNITE to make this organization more efficient. All that said, I think we are executing well, but we would expect fourth quarter will be seasonally higher than where we've been.

Thanks, Ed. Our next question comes from Brian Johnson from MST. Brian?

Nathan, I'm just intrigued, could you run us through a little bit more detail on what happened to the noninterest revenues in this quarter, not just the quantum of it, which I think we can all work out. But you spoke about timing and one-off items. Can you just give us a little bit more clarity on that? What's the outlook for that in the fourth quarter?

Yes. Thanks, Brian. And unfortunately, it's -- the thing with the quarterlies around these -- the fees and [ OOI ]. If I just -- maybe I'll just make some comments, ex markets and treasury, and then I'll make some markets and treasury comments, Brian, if that's helpful. I would expect -- we had a one-off in the second quarter that was -- went in our favor, and then we've had some remediation and some other things come through in the third quarter that went against us. So it's particularly lumpy where you're getting sort of both sides of that trade moving against you when you look at a quarter-on-quarter trend. I would say we still expect modest growth for the second half on our noninterest income line.

If I just talked about treasury and markets for a minute, I think treasury, while the majority of that is going through NII, the third quarter was much more back to normal levels. I think at the half, we spoke about our performance relative to 5-year averages. We're still a little bit below that, but much more in line with it now. So a much more normal quarter. And you'll remember, we had a very strong first quarter, a very weak second quarter. So on treasury, we're sort of 6% down on the first half average, but we'd be up about 60% on a quarter-on-quarter basis. And then in markets, we were flat on the quarter, but up 3% on the first half average. So some DVA favorability in that, that we were up 3% on the first half average in market. So I would say overall, a lot of that will normalize out. And I would expect, as I said, noninterest income to be sort of modestly up for the half.

Thanks, Brian. Our next question comes from Andrew Triggs from JPMorgan. Andrew?

Maybe just a follow-up on Andrew's question around the revenue side of things. Obviously, just a percent growth, which, in the quarter, which will mostly be, let's say, account related. If we look forward into Q4, there seems to be a lot of sort of emerging headwinds on the margin around the basis risk, which we haven't talked about this morning, TD mix deterioration. The last rate hike was in May, so it's mostly in the base. Mortgage competition is picking up, deposit competition is picking up, replicating portfolio is slowing. It doesn't sound like any of that's particularly positive. I mean what confidence, I guess, do you have that you'll be able to deploy what is a very healthy capital surplus and actually drive profitable growth with that?

Yes. Thanks, Andrew. Maybe I'll -- if you -- if this is helpful, I'll just maybe give it as a -- take it as a margin question and just a little bit on outlook there. And then if that doesn't help, circle back and let me know.

I think you've touched on probably all of the moving parts. I'd say no change to our guidance around replicating portfolio or timing benefit of the rate lag. So I think they still remain as they were at the half. Liquids is neutral to revenue, but we're obviously flagging today that, that could flip from being a benefit to a slight drag, given where our liquid levels are as we come into the fourth quarter.

On lending, I think we are -- we've got a couple of things offsetting here, but we were clearly always flagging that we would get continued lending margin compression. As we said, it's a bit more spiked in Australian mortgages and New Zealand and a little bit less in institutional and business. And I think the reasons for that probably change in the fourth quarter. But as I've said in the previous questions, I'd expect that mortgage margin will be a feature of our conversations when we get to the full year results, and you called out that we've most recently had a little bit of a spike in bills [indiscernible] which is not going to help.

And then I think it all swings on deposits, Andrew. And so you've flagged it well. The benefits from the rate rise will still have some benefit, but the majority of that is flowing through. TD margins were much better at the start of the quarter than they were at the end. And so that is going to be a drag as we go in. And then as I said, to John's question, we're likely to see higher qualifying on savings rates that we expect to bounce back. So I think there's -- it's hard to paint a picture that it's going up in margins, Andrew. I think a lot will depend on how the deposits play out and all the different moving parts there.

Maybe just make one comment on your macro thing. I think what have we got to do to continue to be able to drive earnings growth. And it's the things that we're intensely focused on, which is we need to do -- keep the momentum in the balance sheet. We need to do a good job on delivering the whole of bank to the whole of customers so that we get our diversified revenues. And I think we have got some green shoots of underlying revenue growth in our customer franchise. And then we've got to be very good on expenses, which we're very focused on.

Thanks, Andrew. Our next question comes from Tom Strong from Citi. Tom?

Great. I just had a question on provisioning. I mean you've topped up the provisions in this quarter, and conditions still remain relatively benign. I just have a query around the property price assumptions, I mean you now expect resi property down 1% in '26. Some of your peers are a bit more bearish than that. Can you just talk about how sensitive the ECL is to that resi property price? Or is it more sensitive, I guess, to the PD, just given the book overall is still well collateralized?

Yes, it's a good question, Tom. I -- why don't we pick it up and we'll give a more fulsome explanation at the full year. We do expect that Luci will revise her forecast after the RBA rate -- the RBA meeting this week. So I would expect we'll have some movement there. And then as we do, we will flow that through our base case. So that will be a direct impact into the models, and then we can talk about the sensitivities then.

What we've been doing, though, Tom, is given -- we actually had favorability from putting Lucy's revised forecast through this quarter. And so then we've made a number of sort of management judgments around the methodology for the downside severity and then the overlays. In particular, on that downside severity methodology, there's some flex there as some of that economic data flows through that we can continue to look at that and make sure we get the right balance.

Thanks, Tom. Our next question comes from Carlos Cacho from Macquarie. Carlos?

Thanks, Justin. Nathan, thanks for the detail around application volumes. I was wondering I'll ask some of those earlier questions in a slightly different way. If you can give us any color around what the mix of that 20% is between refis and purchases. Presumably, purchases are down a bit more than refinancing activity?

Yes. Thanks, Carlos. I don't actually have that split on me, Carlos, so I'd be happy to follow up on it. But your assumption is right. We've had a little bit more refi and that was what we're expecting coming in. So more refi and more -- less new home purchase. It would be -- that would be true of the applications. It wouldn't necessarily be true of, obviously, the third quarter settlement.

Thanks, Carlos. Our next question comes from Matt Dunger from Bank of America Merrill Lynch. Matt?

Yes. I just wondered if I could follow up on the increase in overlays. You talked about the management judgment there, Nathan, is that on specific sectors as that appears in terms of the corporate and business stress, the only areas that are really increasing the transport and storage and maybe a slight uptick in manufacturing. I'm just wondering if you can talk more specifically about what you're seeing to put some of these overlays on at the quarter?

Yes. Thanks, Matt. And maybe I'll just cover it quickly. We did see, as you called out, a slight uptick in stress in manufacturing, transport, utilities. I'd say utilities was effectively one single name, transport and manufacturing was probably a little bit broader. So what we did in the overlays, to answer the point question, we included manufacturing in our energy-intensive sectors. So we had an overlay there. We just expanded that to pick up manufacturing, and we did raise a new overlay for discretionary spend. And I think we included in the materials, some detail around the -- what we were seeing both for our -- in our business accounts and then in our consumer spending and the knock-on impact of the consumer that's making adjustments to the way they're living is, we've just thought it was prudent to put in something around discretionary spend.

Thanks, Matt. Our next question comes from Brendan Sproules from Goldman Sachs.

Brendan from Goldman Sachs. Just a quick question on your business lending momentum across both the institutional and business and wealth. Obviously, you've got some pressures coming on the NIMs. But in terms of the pipeline and the ability to continue to grow the balance sheet, what were you seeing towards the end of the quarter?

Yes. Thanks, Brendan. I think very similar to what we would have been speaking about at the half year. I think business credit is still looking quite good at the top end. So we've got business lending credit forecast of something like 8% and a little bit for '26, and I think we have it above 6% for FY '27. We would say, within that, it's very mixed. So small is much tougher. SME is a little bit better than small, but the top end of town in our corporate sector, in particular, there's quite strong growth. And then when you get into institutional, you do get into more of those macro themes.

In terms of pipelines and growth, I think that we would be very confident that we can continue at trends that are pretty similar to what you've seen this quarter, certainly for the fourth quarter, and I would say that would be a trend that we would expect would continue into the first bit of '27.

Thanks, Brendan. Our final question comes from John Storey from UBS. John?

I just wanted to ask you about the retention of the book rate. So it comes back to Slide 9. Just kind of any behavioral changes that you're seeing in your client base? It definitely looks like there's a little bit of a trend in terms of percentage of IPL and P&I that's moving into [ I/O ]. Maybe you could just speak to your attention and duration of the book?

Yes, thanks I'm just pulling up this slide -- or Justin...

Yes, I've got that. Sorry.

Yes. Thank you. Yes, John, look, I think that it's probably a [ proposed ] earlier conversations and Richard's questions. I think the things that we know is you've got a mortgage market that has got a period of real dislocation, whether it be through the budget changes and then through rates. And I think what -- the reason we're quite cautious about drawing too many definitive conclusions is the budget happens in May, you've got rates that are looking like they're moving up and then they're moving down. And then we think that a lot of people need to get themselves through their tax year. So they want to get through June, they want to spend time with their accountant, spend time with their financial adviser and then work out their next move.

So we are seeing signs of different behavior, and we've called out some of those trends that we're seeing. We are seeing investor down more than owner-occupied. We haven't necessarily seen first home buyers pick up the slack yet, but I think we would be cautious about drawing too many conclusions at this point in the cycle, and we're really looking forward to being on our feet in November, where we'll have a bigger data set, hopefully, a little bit more certainty on rates, and then we have more constructive conversation about what do we think is actually driving what.

All we can say is, I think we would be more cautiously optimistic than maybe some of the narrative, John, in particular, everything that we're seeing here would be quite consistent with our economic forecast of about 4.7% mortgage growth in '27, which -- and we knew that we were going to have periods of dislocation as you try and work through that. But medium-term structural challenges in the housing market still persist. And we think that, that will ultimately prevail when you get a little bit further down the track.

Thanks, John, and that brings us to time. So we're available today if you'd like to come through with any further questions. Thank you very much.

Yes. Thank you.

Good morning, everyone, and welcome to Westpac's First Half '26 Results Briefing. I'm Justin McCarthy, Head of Investor Relations. Before we commence today, I acknowledge the traditional custodians of the land on which we meet. For us here in Barangaroo, that's the Gadigal people of the Eora Nation. I pay my respects to elders past and present. -- and extend that respect to all aboriginal and Torres Strait Islander people. Pleased today to be joined by our CEO, Anthony Miller; and CFO, Nathan Gunnar. And after the presentation, we'll have time for Q&A. With that, over to you, Anthony.

Thanks, Justin, and good morning, everyone. I'm pleased with your progress -- with our progress this half, and we're starting to see operating momentum build across the bank. This was reflected across a range of metrics. Lending and deposits grew, operating expenses were lower, while asset quality improved. In Consumer and Business, we delivered double-digit growth in transaction account sales. better service quality and productivity have helped to shift more new lending towards proprietary channels. In institutional, we've continued to build deeper relationships with clients and support their growth. We maintained our robust balance sheet and capital position, providing stability to help support our customers, our people and the broader economy. This strength gives us the flexibility to navigate uncertainty and keep investing to execute our strategy. With a clear strategy, we're working to accelerate the speed at which we deliver. We are simplifying the bank, improving productivity and reducing complexity. While momentum this half is encouraging, consistency in service and performance is critical to achieve our goals. Conflict in the Middle East is having a broad economic impact that will test the resilience of economies, businesses and households. We are now expecting a more pronounced slowdown in the Australian economy this year as energy supply pressures flow through to higher and more persistent inflation. Fuel supply constraints have begun to drive higher input costs for businesses and weigh on real household disposable income. This will create a more challenging environment for some customers, which is reflected in our base case provision scenario and a new portfolio overlay for energy-intensive sectors. In times like this, customers look to their bank for confidence. Supporting our 13 million customers through the cycle is a responsibility we take seriously, and we're ready to provide practical solutions to suit their needs.

As a strong and stable bank, we are well placed to support the economy as conditions evolve. Recent events have shown that while we cannot control global shocks, we can influence how sharply they land here at home. Australia is an attractive destination for capital and talent, but there is more we can do to improve competitiveness and living standards. Addressing domestic challenges and unlocking productivity requires bold coordinated action across government, regulators and the private sector. Areas we believe require greater emphasis and investment are energy security and the climate transition, housing affordability and regional prosperity.

We are ready to direct capital to sectors and projects that strengthen the country's global competitiveness and protect national interests.

Turning to customers' financial position. Last year, we saw economic growth strengthening as inflation return to target range and interest rates began to ease. Household disposable incomes were higher, supported by tax cuts, moderating inflation and lower interest rates. Corporates were also in a position of strength with leverage close to 2 decade lows. Overall, our data highlights the resilience of our customers, and this is reflected across our book. The proportion of customers ahead of mortgage repayments has risen to 85%, including offsets. While in business, we've seen materially stronger cash flow conditions with balance sheet buffers approximately 20% above pre-COVID levels. Looking at the current environment, we've seen only a modest decline in operating conditions. Since the start of the conflict, the average income to expense ratio for business customers has edged lower and overdraft utilization is up just 2 percentage points. Conversations with customers indicate an ability for businesses to pass on higher input costs.

For example, I was speaking to a major fuel distribution customer who has adapted by adjusting pricing and other conditions in their customer contracts to manage cost pressures and keep supply moving. The consequence to this is that more of the burden, at least initially, looks set to be borne by households. Our card data shows consumers brought forward spending amidst supply concerns. An additional 200,000 cardholders purchased fuel in March who had not done so in February. Not surprisingly, overall consumer spending has slowed since the conflict began, reflecting pressure from higher interest rates and the expiry of electricity rebates. This is still a reasonable rate of growth by historical standards. We've had a more pronounced slowing in home lending, our most interest rate-sensitive portfolio. Mortgage applications have eased in April following a strong start to the year. High chip applications and personal loan inquiries have increased modestly. This was anticipated following earlier rate rises and remains consistent with seasonal patterns. Voice analytics using AI show customer mentions of interest rates and geopolitical events remain limited for now and are concentrated in regional and out of growth corridors with high commuting needs. We will continue to monitor these developments closely and provide help to customers who need support. Our success is closely linked to the prosperity of our customers, our communities and the broader economy. During the half, we provided an additional $68 billion in home lending, helping more Australians into their homes. Banks pay an important role in strengthening financial inclusion. We're directing investment towards initiatives that will have a lasting impact.

Across regional Australia, we are increasing access to banking services while investing in agricultural scholarships and technology to support innovation, resilience and prosperity. We're backing more female entrepreneurs to start and grow their businesses with $974 million in lending since mid-2023 and closing in on our $1 billion commitment.

Education is now the central focus of the charitable Westpac Foundation, particularly to strengthen national literacy and uneasy -- this builds on our $100 million commitment to education through the Westpac Scholars Trust, and we're pleased with the reach and impact of our sponsorships promoting participation in sport from grassroots through to the elite. Together, these actions create more resilient communities.

First half performance compared to the prior corresponding period reflected our strategy of balancing growth with return while making investments in people, innovation and transformation. Net profit, excluding notable items, increased 1% to $3.5 billion. Our key financial measure return on tangible equity was steady at 11%. Pre-provision profit growth of 3% was driven by slightly higher revenue than expense growth. Consequently, cost income edged lower to 51.7%. Momentum in the key operating metrics of deposits and loans were solid with both growing by 7%. This reinforces the need to stay focused on outcomes that drive a sustainable improvement in RoTE and CTI. A steady financial performance and strong capital position saw the Board declared a first half shareholder dividend of $0.77 fully franked. This equates to a payout ratio of 75.6% of profit after tax, excluding notable items. Improving service is central to building trust and deeper relationships. Customer measures such as MPS suggest we are heading in the right direction, although there is a lot more for us to do. We want to be the primary bank for our customers by providing consistent service excellence when and how our customers want to be served, whether that's on the app, phone and in person. We are making practical changes while also integrating data and AI to anticipate customer needs and deliver safer, more personalized service. Our award-winning app remains our customers' preferred banking channel with 6.8 million daily logins and significant improvements in digital sales in both consumer and business. Protecting customers remains a priority as fraud, scams and financial crime continue to look for ways to evade detection. We strengthened our defenses using AI to detect unusual activity, helping to prevent $181 million in potential customer scan losses. For customers new to Westpac, we've halved the average time to open a new choice account. We also introduced digital ID verification for customers integrating from New Zealand, India and China, streamlining onboarding for priority migrant segments and improving account conversion. For business overdrafts, time to cash has significantly reduced, and there having some decisions being made within ours. -- for large clients operating across markets, we have new digital solutions that make foreign exchange and international payments faster and more transparent. This is just a snapshot of our progress. We aim to be Australia's best workplace with the right culture, capabilities and environment to help our people perform at their best. In the past year, we've been building a stronger employee value proposition to attract and retain great people while supporting their development, health and well-being. We've also expanded career development opportunities, including recently rolling out LinkedIn Learning with access to 20,000 courses. Uptake has been strong with more than 12,000 people already using the platform to build skills for career progression with AI courses the most popular. We're tracking progress through employee engagement which is an indicator of productivity, customer outcomes and retention. Our score continues to sit in the top quartile globally with the survey providing timely insights and practical actions.

Deposit growth was solid across all 3 segments. Consumer was up 8% and business grew by 5%. In institutional, growth in accounts from the superannuation and resources sectors provided additional tailwinds and Transaction accounts represent almost half of total balances. They also anchor the relationship, providing richer insights and opportunities to bring more of the bank to the customer. Business transaction account sales were particularly strong. growing 34%, while balances grew 8%. Enhancements to our digital propositions and onboarding capability supported targeted growth in consumer.

The depth of our customer relationships and improved service are reflected in market share gains across both business and institutional. In Business Banking, lending grew 13%. Target sectors such as agriculture, health and professional services all performed well, delivering double-digit growth. We're also improving the mix with business proprietary lending accounting for almost 60% of new originations this half. These outcomes reflect focused execution and deeper engagement with our customers.

Meanwhile, business is at the larger end of town are investing for the future, and we are backing them to pursue growth opportunities. Balance sheet growth across institutional was 23% across a well-diversified portfolio. We have seen particularly strong activity amongst customers involved in the energy transition, infrastructure, critical minerals and data centers. Also, will remain the country's biggest blended to renewables with balances increasing 16%. We have been disciplined in the growth we have pursued with around 70% of new lending to existing customers. In mortgages, we saw a clear improvement in performance through the year. Balances grew 7%, excluding Rams, tracking around system on average. Importantly, we returned Westpac first-party lending to growth. This reflects deliberate work to get the first-party proposition right. The improvement has been driven by addressing the basics which have made it easier for our people to serve our customers well. For example, Booker Banca has been rolled out nationally which allows customers to make a home loan appointment online with the banker of their choice. We have invested in productivity and capacity onboarding more than 60 new lenders. We made targeted policy enhancements for investors and the self-employed. We have focused on improving customer advocacy, while maintaining a time to decision of under 4 days.

Together, our strategic priorities are shaping the company we want to be. They keep us aligned on what matters and move us closer to our ambition to be Australia's #1 bank and our customers' partners through life. We're making progress and determined to keep lifting standards through a relentless focus on execution day in, day out. Service quality and Net Promoter Scores continue to improve. We've simplified and strengthened the franchise. Risk management is more deeply embedded, and we're well into the delivery of our multiyear transformation agenda. While we have the right people and capability, performance has been constrained by complexity and legacy systems. To sustain improved performance, we need a simpler operating environment that delivers greater efficiency and consistency in service. We are building on the foundations established for the delivery of Unite by adopting a more disciplined approach to implementing change in the bank. We are moving to a new end-to-end operating model we refer to as catalyst. This is aligned to our priorities, shifting from hundreds of annual projects [ to 20 ] delivery units that bring teams quite to customers with clear accountability for multiyear outcomes. The benefit of this model is persistent funding and capacity, giving teams the certainty and confidence to deliver. It will also reduce handoffs and bring our people and expertise together. This combined with simpler governance will help improve speed to market and to better serve our customers. This will support strong risk management and a low cost-to-income ratio in time. United is the cornerstone of our transformation agenda, helping to deliver 1 best way to serve customers and run the bank. We continue to make progress with the most initiatives on track and rated green. At the annual Unite market update in March, we reaffirmed the program's overall scope, time line and budget. We also shared 2 recent major milestones: the migration of customers to 1 wealth platform on BT Panorama. I'm pleased to report we've had no disruptions on the subsequent round of monthly reporting. We also announced the creation of 1 commercial bank to give more businesses access to Westpac's digital capabilities and a broader range of products and services. Customer feedback has been positive and we'll begin migrating customers alongside their bankers prior to the originally planned start date in July. Our strategic investment in our new business lending origination platform has dramatically improved how we lend to businesses. Biz Edge has processed more than $10 billion in new lending with time for decision improving by 49% and Recent releases have added automated pathway selection. So deals flow through the best decisioning pathway. We've also increased TCEs from $10 million to $20 million. The platform is reducing rework, so our bankers can spend more time with our customers.

Westpac One will be a clear point of differentiation in our support for corporate, large commercial and institutional clients. This platform will bring together real-time treasury management, FX, trade and lending with richer data insights. The first customer pilot is already underway with advanced transaction banking capabilities to be introduced progressively over the coming periods, including corporate liquidity management and multi-currency cross-border functionality. Once complete, the platform will provide end-to-end liquidity and cash management helping clients run and fund their businesses more efficiently. Technology, data and AI are vital to how we deliver outcomes across the bank. Our approach has evolved in recent months where we have moved beyond stand-alone experimentation to scaling and embedding AI as an enterprise-wide capability. We're focused on practical use cases that accelerate delivery drive efficiency and improve customer outcomes. Deploying AI responsibly is critical. We have embedded a company-wide responsible AI and risk management framework with clear governance and safety guardrails that are built into how AI is designed, tested and used. For customers and frontline teams, AI agents help our people find the right information more quickly. Other agents are helping to verify pay steps for loan applications and support mortgage and consumer finance processing. We're also using coal, complaints and social media analytics to identify emerging issues earlier and reduce customer friction. Underpinning all this is the Westpac intelligence layer, which brings together data and AI across the bank to support faster, safer and more proactive decision-making. It is too early to extrapolate all the financial benefits of AI. But as our approach matures, we intend to capture measurable and sustainable benefits from our investment. Nathan will now take us through performance in more detail.

Thanks, Anthony, and good morning, everyone. Starting with the financial performance for the half. My remarks will refer to the results excluding notable items, which relate to hedging and costs associated with the sale of RAMs. Net profit was down 1% with lower operating income and higher credit impairment charges more than offsetting lower expenses. The 2% decline in revenue includes previously announced market volatility related impacts. Excluding these impacts, revenue rose 1%. Operating expenses were 6% lower or 2% lower excluding the second half 2025 restructuring charge. These revenue and expense outcomes resulted in a 4% increase in pre-provision profit or a 1% decline excluding the prior period restructuring charge. Credit impairment charges increased to 10 basis points of average gross loans compared to 4 basis points in the prior period. Sustained growth in customer deposits underpinned our ambition to be our customers' main financial institution. The growth of 3% in the half highlights the inherent strength and diversity of our franchise, with all 4 segments growing. Transaction balances grew strongly across business and wealth and institutional, while household savings and mortgage offset balance growth continued in consumer. .

Deposits grew 3% in New Zealand, slightly ahead of system across both transaction and term deposits. Our economic team continues to expect strong deposit growth for the remainder of 2026. The higher interest rate environment is likely to result in a mix shift towards higher-yielding products. Lending momentum has continued with growth of 4%. Australian mortgages grew slightly above system at 4%. This reflected progress in executing our mortgage strategy and a strong spring campaign with an increase in the proportion of proprietary fly. We continue to target consistent performance broadly in line with system. Australian business lending continues to show good momentum, growing at 4%. The larger commercial segment generated most of the growth, while SME performed well relative to system, albeit off a considerably smaller base. proprietary flow across commercial and SME continue to improve. Institutional lending grew by 12% and was well diversified. Growth moderated in the second quarter after a very strong first quarter. Lending grew 3% in New Zealand, where demand for credit improved, notwithstanding a challenging economic environment. Strategically, we continue to focus on doing more with SME and small business customers However, we expect business credit growth to remain skewed to larger businesses. This will suit our existing book mix, and we plan to maintain our growth posture and support our existing customers. Operating income declined 2%, including the impact of prerelease volatile items. Excluding these items, revenue grew 1% as strong balance sheet growth more than offset core NIM decline of $105 million. The prerelease volatile items covered movements in treasury and markets, timing differences associated with the RBA rate changes and the depreciation of the New Zealand dollar. These items subtracted $271 million from net interest income. Noninterest income decreased 3% for the half after rising 10% in the prior period. Fee income was down $23 million, reflecting lower card fees and decreases in undrawn line fees in institutional. Markets and other income decreased $23 million with tightening funding spreads impacting DVA to 31 March. This was partially offset by an increase in wealth income with higher funds under administration.

It's important that I review the components of net interest margin in detail. Core net interest margin decreased 4 basis points to 1.78. Timing differences following RBA rate changes detracted 2 basis points and a transient in nature. This reflects both the larger proportion of loans relative to deposits in the consumer bank and the associated revenue mismatch as mortgage customers paid their new rates after 14 days, while deposit holders received their new rates after 10 days. The timing impact was larger this period given it covered 4 RBA rate changes. The non-repeat of the benefit from 2 rate cuts in the second half of '25 and the drag of 2 rate rises in the first half of '26.

Excluding this impact, core net interest margin decreased 2 basis points in the half and was flat in the second quarter. Lending margin shows trends consistent with expectations and were lower as competitive pressures persisted. The rate of compression was stable in mortgage and business and was more pronounced in institutional this period. Deposits were stable as the benefit of replicating portfolio was offset by a number of customers qualifying for the bonus rate. Other impacts, including mix, pricing and the impact of a lower rate environment during the half were all modest and netted to 0. Liquid assets contributed 2 basis points, reflecting mix benefits as liquid assets rose by less than the average lending assets. capital and other detracted 1 basis point, reflecting lower capital balances and a remediation provision. The treasury and markets contribution of 11 basis points was down from 13 basis points. An elevated 15 basis points in the first quarter was followed by a weaker than usual second quarter of 7 basis points. The second quarter reflected less income from balance sheet positioning through a challenging rate environment. Fewer realized gains as we derisked the liquids portfolio and the timing of accruals that will unwind over time.

Looking ahead to the second half, the timing differences related to the 21st half '26 rate rises will unwind and be a 1 basis point benefit. The replicating portfolio is expected to be a net benefit of 2 basis points at current swap rates.

Liquid assets are expected to continue to provide a similar mix benefit as they rise by less than the average lending assets. Customer lending and deposit margins will be shaped by the competitive environment. We expect overall lending margins to continue to edge lower. Deposit spreads will benefit from the averaging impact of prior rate rises and stabilization in the qualification for the bonus rate. But will be adversely impacted by expected growth in higher rate products and mix impacts following strong TD growth at the end of first half of '26. We have also provided sensitivities to help understand the potential impact of future rate rises. The recent alignment of pass-through for mortgage and deposit customers will approximately halve the negative timing impact. a 25 basis point rate hike leads to an approximate 1 basis point expansion over the first 12 months, reflecting the impact on unhedged deposits and capital.

Operating expenses, excluding the second half '25 restructuring charge, declined 2% to $5.8 billion. Employee costs increased $103 million, reflecting annual wage increases and more bankers across business, web and consumer. This was partially offset by higher leave utilization. The increase in technology cost was modest, fewer contract renewals and supplier rebates masked ongoing cost increases. Volume in others rose $31 million drivers include higher operations related expenses to support customers. This was lower than anticipated with the teams able to absorb higher volumes and achieve sizable unit cost savings. We generated $258 million of structural productivity savings. This includes the benefit of a simpler operating model, more automation, reductions in brand space and the initial benefits of Unite.

Investments declined marginally with the lower cash spend largely offset by lower capitalization rates. Lower capitalization was a result of the higher proportion of Unite investment and a number of smaller projects that were fully expensed is they did not meet the threshold to be capitalized under our policy. There was a modest increase in amortization and no software impairments. Overall, we are managing costs well -- the underlying cost trajectory is improving, and we are pleased with the execution against our full year plan. This will set us up well for subsequent periods.

Looking to the second half, costs are seasonally higher, and there are several items to consider. The extra day count will impact most categories. Staff costs will rise as lead utilization decrease, the average impact of higher wages blows through, and we continue to invest in bankers. Technology expenses are expected to be a headwind as vendor inflation persists and activity continues to rise. Volume and other is expected to be a headwind as branded marketing spend increases, property costs rise, and we expect customer activity to increase in a rate-rising environment. Investment cash spend will be higher and lower capitalization rates are expected to persist. Amortization expense will also be a modest headwind as the capitalized software balance continues to decrease. We have revised up our FY '26 structural productivity estimate by $50 million to at least $550 million. Productivity and efficiency are key strategic focus areas for the management team as we reposition the business to compete more effectively.

Moving to investment. We spent approximately $900 million in the half with United accounting for 44% of spend. As foreshadowed, the proportion of non-Unite investment reduced. The proportion of investment spend that was expensed increased to 69%, with Unite the main driver, expensed at 75%. Our FY '26 guidance still holds. Total investment spend is expected to be approximately $2 billion, and we have narrowed our guidance range for Unite. Overall, credit quality metrics remain sound with consumer and business portfolios improving. Stressed exposures to total committed exposures decreased 12 basis points. We have seen continued improvement in 90-day plus mortgage arrears. These have reduced to 57 basis points. In New Zealand, mortgage arrears increased by 4 basis points to 50 basis points reflecting cost of living pressures and some seasonality. Business customers are managing conditions well with stress rates reduced across most sectors. We are cautious in the ongoing Middle East conflict the energy-intensive sectors of transport and storage, construction and agriculture are being monitored closely. Notwithstanding improved credit quality in the half, credit provisions are up $212 million to almost $5.2 billion. As a result, overall collective provisions to credit risk-weighted asset coverage increased by 4 basis points with total provisions now $1.9 billion above our base case. Provisions to gross loans were flat at 58 basis points. The increase in collective provision was a combination of modeled outcomes and management judgment, both the result of the anticipated impacts of conflict in the Middle East. The moving parts include updated economic forecast in the base case scenario, incorporating higher interest rates and unemployment and a lower GDP and new overlays of approximately $100 million, largely related to energy-intensive sectors, although net overlays were up by just under half this amount. These increases were partially offset by improvements in underlying credit metrics Individual provisions increased $71 million and collective provisions rose $141 million. New and increased impaired assets were $495 million. The uptick was idiosyncratic and largely combined to single names in transport and utilities prior to the impact of the conflict. A strong balance sheet is a critical enabler of our strategy and an ongoing feature of this bank. Our liquidity and funding structure has us well placed most long-term funding was undertaken early in the half when spreads were more attractive. A total of $24 billion provides flexibility on the timing of issuance in the second half. We were more active in short-term markets and institutional term deposits increased, both form part of our strategy to provide additional liquidity in response to the increase in geopolitical uncertainty and flexibility ahead of the expected $16 billion reduction in mortgages post the settlement of the Rams portfolio sale. The stronger lending and deposit growth resulted in a modest widening of our funding gap, with the deposit to loan ratio down 1 percentage point to 84%. Our liquidity and funding metrics are above our normal operating ranges, which we believe is appropriate given the market backdrop. Our capital position provides us with flexibility and opportunities over the medium term. The CET1 capital ratio ended the half at 12.4%, and Net profit added 74 basis points, while the payment of the full year dividend reduced capital by 57 basis points. Risk-weighted assets detracted 21 basis points with higher lending balances more than offsetting data refinement and improvement in delinquencies. IRRBB detracted 27 basis points with higher embedded losses and an increase in hedge deposits more than offsetting the benefits of standard changes. Its increase means that capital for is not currently binding. The removal of the operational risk overlay added 17 basis points.

Looking to the second half of '26, there are several considerations. We are anticipating a 22 basis point benefit from the completion of rams. The completion of the share buyback would subtract 22 basis points. The material IRRBB risk-weighted asset increases are unlikely to repeat. The 31 March position reflects the forward interest rate curve, which included 60 basis points of anticipated rate rises.

Slide 79 of the IDP has been provided to assist with scenario analysis. Risk-weighted assets are $1.8 billion above the standardized floor. Standardized risk-weighted optimization initiatives and regulatory changes are expected to provide benefits over the medium term. However, movements in the IRRBB will also impact whether the floor becomes binding. To provide a sense of the potential asset quality impacts that could arise, the sensitivity to a 1 notch downgrade to exposures in energy-intensive sectors is an increase in risk-weighted assets of approximately $4 billion. which is equivalent to 11 basis point impact in the CET1 ratio. We have not changed any of our capital management settings this half. We've summarized the capital management principles that have been agreed with our Board to provide insight into capital management decisions. Our priority is to maintain a strong balance sheet, which allows us to support customers through ongoing uncertainty and cushion against potential macroeconomic shocks. Alongside this, we will invest to grow the business profitably. Paying fully franked dividend sustainably is an important anchor to our approach. This approach of cascading priorities balances our strong financial position and capital position and maintains flexibility. When considering capital returns, we will weigh up both market conditions and our strong franking balance of $3.7 billion alongside value creation for all shareholders. In this context, we have approximately $2.7 billion of capital above the CET1 target adjusted for the declared dividend of $0.77 per share. The payout ratio, excluding notable items, was 75.6%, which is slightly above the top of our target range of 65% to 75%. We have $1 billion of the previously announced buyback outstanding we see value in the flexibility provided by this form of capital management. With that, I'll hand back to Anthony.

Thanks, Nathan. We track progress against our FY '29 targets with our continued focus on making improvements every day. On service excellence, we're making steady progress. Consumer NPS continues to improve and we are ranked equal second with the gap to first narrowing. In business, we have moved into first place overall. However, we are realistic about the work ahead to improve customer service.

In Institutional, we've moved into equal third position in the last annual RSI survey. We aim to accelerate the pace of delivering our transformation agenda by moving to a new operating model from FY '27. We'll also continue to methodically work through Unite. These will support a structurally lower cost base. On performance, our ambition is to outperform peers over time. Cost to income is currently 4.5 percentage points above peers and return on tangible equity is 1.8 points below, with our decisions guided by improving efficiency, returns and discipline. Overall, our operating momentum and financial position are sound, giving us a strong platform to deliver sustainable returns and build a bank for the future. Thank you.

Thanks, Anthony. We'll move to Q&A now. In the interest of time, given we've got plenty of people on the line, if you could limit your questions to one, that would be appreciated.

Our first question comes from Ed Henning from CLSA.

Just if you can just run through you're thinking about yourself versus peers on the replicating portfolio benefit. You've got less than peers coming through. How should we think about you competing against peers? Are you going to be selective in targeting niches? Or are you happy to take a little bit of volume for margin trade-off there, please? .

Ed, why don't I start and Anthony might add. I think -- we've called it out, Ed, and we intend just to be as transparent as we can about where the replicating portfolio benefits are. And clearly, sort of decisions over time have meant that we've had more of the replicating benefits earlier than some of our peers. And so in the outlook will be a little bit less. We said in the second half, we'll get 2 basis point benefit from a vacating portfolio. And as we go into 2027, we expect that to be something like 3 basis points in 2027 for the full year. As it relates to then how that impacts competitive pressure, Ed, I guess we're competing in the market with everyone every day, and we've got to make sure that in particular on deposit pricing that we're competitive, that we've got our prices there with an offer and a service that our customers appreciate. But -- we've got to make sure that price is not a determining factor in them going from 1 come into another. So we expect that we'll have to continue to compete there. whether that means that we have a little bit more margin degradation than others who have got the benefit of the replicating portfolio that may well be math. The important thing for us is just to continue to improve the service at the front end. And and you alluded to it a little bit. I think there are pockets where service really does matter where our digital offering can improve, where we can make it easier for for customers on things like rollovers and those other important points. And so we've got to continue to make sure we're really focused on those points that really matter.

Yes. I think that's completely gotten I think we have made progress, though, on our deposit franchise and in particular, the capacity now to originate and do so inside 7 minutes with actually 50% of all the customers originated that now inside 5 minutes. So I feel like we're making the right allocation of our resource and our priority that will allow us to balance that challenge you've called out it in driving our deposit franchise. .

Thanks, Ed. Our next question comes from Andrew Lyons from Jefferies.

Nathan, maybe a question for you just around your capital sensitivity. You've obviously provided what it looks like in relation to energy-intensive sectors in a one-notch downgrade. But -- would it be at all possible to marry up what that capital sensitivity looks like in relation to your economic scenarios that you've used around your provisioning modeling. I guess if we see your base case assumptions play out, for example, would that, in your view, be equivalent to a 1 notch downgrade? And perhaps if I can extend it to sort of maybe help us understand what would the downside scenario look like from a from a capital perspective.

Yes. Thanks, Andrew. Yes, we've been really just trying to Think about this a little bit, Andrew, and try and be helpful in terms of making sure that people could understand the sensitivity here in the procyclicality in the risk weights. And so I appreciate that other banks looked at it on the ECL basis, we thought it was a little bit more intuitive just to think about those energy-intensive sectors that we took the overlay for and think about that 1 notch, which we said was $4 billion -- it's a little bit of a coincidence that if you do run it through the base case of the ECL, we get a very similar number. I think it's about $3.8 billion for the first 6 months or for the next 6 months if we ran through the base case. And I think that's pretty consistent with peers. I think there's probably a couple of other ways to think about this, Andrew, and we're certainly keen for people to sort of understand the sensitivity in the capital base here. So open to all ideas that are sort of helpful for people. If you go back a little bit over time, Andrew, we've had about $10 billion of risk-weighted asset benefit from asset quality over the last 12 months. The majority of that has come through our mortgage book. And so another way to think about that is if you sort of unwound those asset quality benefits, so days arrears are probably down 20, 25 basis points over those 12 months. You could see a scenario where you unwind back to that, and that would be that sort of $10 billion of risk weights in that scenario. So there's sort of lots of ways to sort of think about it, but there's just a few ways to try and triangulate around that sensitivity and hopefully, that's helpful.

Thanks, Andrew. Our next question comes from Jonathan Mott from Barrenjoey

I've got a question about the institutional bank, if I could. And I'd note there was a big growth coming through in that first quarter. But if you look over the last half and also the year, you can see the loan book in the institutional business is up 23% and 12% in the last half. And then if you look at the margin excluding market, it's fallen from down to $184 in over the last year, so down 19 basis points in the year, 14 basis points. And also, you're seeing a huge increase in the amount of allocated capital going over $1 billion I wanted to sort of get your feeling on why our lending so aggressively into this sector because the returns don't appear to be coming through are you covering your cost of capital on the new activity, the marginal activity? I know you mentioned some sectors and some brain sectors in there. Are you covering your returns on this? Or are you planning on selling down just given the massive growth that you're seeing in the institutional business. .

I'll make a few comments and Nathan just jump in. I mean it's very deliberately anchored around the customers we have and the sectors where we if you well positioned at the moment. And so that growth isn't, if you will, last just choosing to grow, Jonathan and just chase growth. It's been anchored around the fate that stack of our customers in sectors such as infrastructure, energy generation, mining, resources, data centers, et cetera, all growing rapidly. And so we've just been banking them. And so about 70% plus of all of what we've done is just with the existing customers. So point of one. Absolutely, the priorities when we deploy that capital in those loans that we are aiming to get to the return target we have for shareholder. And I can confidently say that we are delivering on that in terms of the loans that are being originated I do acknowledge also that 1 of the interesting aspects of what we're doing here is many of these customers are really highly rated. And so hence, the margin is a little narrower just because they are very, very strong investment grade, and they are very high-quality risk classes. Then the other thing I'd just call out is that what you see in the institutional business is sort of that feature where markets moving, you're supporting your existing customers. There's a lot of growth in a very concentrated period banking certain themes and then it dissipates and it slows. And so it's important that we do follow our customers in that setting. The other thing I'd say is given the ratings and the position of many of these customers, they'll end up taking a lot of that debt down in the form of going to capital markets. And then we'd obviously anticipate given that support we provided that, that gives us opportunities in the capital markets, debt capital markets, risk management opportunities. And so I do feel like it's aligned with how we want to support our customers and how we bring the bank to bear for those customers given what we're doing for them at the moment.

Thanks, Jonathan. Our next question comes from Tom Strong from Citi.

To ask a question, Nate, I just wanted to ask about your comments. I mean, you noted that the funding gap has widened modestly in the half, and we're almost at the point of realizing the Rams funding with that deal closing. How do you sort of think about funding your growth from here? And will we see the above system growth be sustained across mortgages business and institutional? Or will the growth be a bit more targeted going forward on the asset side?

Yes. Thanks, Tom, for the question. I think I don't -- we've been deliberate and I made some comments just about how we're structuring the balance sheet in the lead up to Ramsthat -- we've probably done about $15 billion of short-term funding, and then we were quite deliberate with some institutional TDs just to give us a little bit of flexibility around the settlement date there's some learnings from sort of how we manage things around the TFF that we're sort of applying there. When that washes through, we'll obviously be back to sort of a more normal deposit loan ratio in the bank and then sort of expect that, that will continue to sort of grow proportionally. As it relates to our posture in terms of growth more medium term or over the second half, I think we've tried to be a bit clear as we go through the preprepared remarks. I think Anthony has covered institutional well be some long-term macroeconomics here that are -- or macro trends that are really driving credit appetite and investment. And so we continue to want to participate in that. growth moderated in institutional in the second quarter off a really strong first quarter, but we would continue to expect to support customers to the extent they want to participate in those macro themes.

In business, we've still got some appetite to take share, and we would expect to continue to do that. And in mortgages, we've been pretty consistent. And I think consistent with the word we'd like to stress here. We want to be at or around system in those books, and we think we can continue to do that. If that means sort of 0.8 or 1.1%, we'd call that in the margin of error on those books, Tom. So that's what you should expect from us going forward, and that's what we've been able to do with the balance sheet we've got post brands.

Thanks, Tom. Our next question comes from Andrew Triggs from JPMorgan. Andrew.

Just a follow-up on margin growth balance. I mean ensure you're getting the balance right there, the NIM fell quite appreciably in every division and connected to the question, what's the sort of decision tree you have on reengaging with the buyback or paying a special dividend rather than persisting with above system growth? And maybe if I could just push my like, to be really strong offset balance growth across the industry which is weighing on average balances in the average interesting assets and average balance sheet. Could you sort of set out whether that should be expected to continue at current levels, please? .

That's three. So maybe I could start and Anthony to sort of jump in. And maybe I think the essence of the first part of the question, Andrew, was really around sort of how we're going on lending margin. And I think that you'll do the work on that, but I suspect the 3 basis points in the half was pretty much as we expected. So we came into that period thinking that we had a much more moderate compression in lending margins and what we've seen in prior years in particular. And we were expecting sort of a gradual decline there. We probably had -- we've had 3 basis points over the half. It was 2% in the first quarter, and it was in the second quarter. So it's a little bit of a moderating trend mortgages has been pretty consistent and business has been pretty consistent, just edging lower, and then we had a little bit more in institutional. So I think I don't see anything that's sort of out of the ordinary in terms of the lending compression that we're having there relative to peers. And I think it's consistent with this participating in the market, as you're seeing. And as I said, with that posture that we've got around system in mortgages, we want to take -- continue to take a little bit of share in business bank, but with a bigger push into -- more in proprietary. And then in insto, we're really just following some of those macro themes. And I think 3 basis points was pretty much as we expected for the half.

The only thing I'd just add, I mean, the quality of the cohort that we've been particularly active in institutional and business bank is very high quality. So as you'd expect, lower margin. I think the other thing -- and this is what we are working on, and we must get better at is. We need to do more in SME small business where there's clearly a better margin. We're just not where we want to be there, but we're making progress. And I think also there's a few product components that we really haven't got right, and we've only now got the means to do that injury. So for example, working capital and invoice financing and the margins there, we're now got the best, what we think is 1 of the best platform capabilities in the market. And that's been growing nicely, but we're just very small at the moment in that. And so we've got some way to go I just feel like that will, in time, help balance any idea or risk or worry that we're not getting the margin right in terms of the growth we're pursuing.

And then Andrew, maybe the second question, I think, Andrew, was just around like capital management and how we think about that relative to growth. And I think we've tried to lay out here some sort of cascading principles that we would think about. And as you know, we've put investing profitably in the business is important to us. And so we start by wanting to make sure that we've got a strong balance sheet that can be there to withstand the shocks that we might have. And answered Andrew's question to try and give some of the sensitivity as to where asset quality could go on risk weight. So we obviously carefully watch things like that. we want to be able to support the growth in the business. Anthony has spoken about that, and we've talked about that. And then when we get down to what we do when we balance out capital returns, it will be only after we're really comfortable that that we've got those first to right and that we're -- that's the best use of capital in our belief that investment in the franchise.

Yes. I want to just add 1 sort of emphasis there. It's not just picking growth and just trying to grow the sheet as -- and as was flagged in my comments and previous question, we're supporting our existing customers, and they're just a very active moment in the institutional at the moment. So we just got to be there. And so that is the right way to deploy our capital in terms of supporting our existing customers, and we are generating the right return on that capital, and that's how we think about it as opposed to just some optic focus on growth

Thanks, Andrew. Our next question comes from John Storey from UBS. John.

I guess, quite deep into the call, I don't really been much poking about in terms of asset quality and to switch gears and get your views. I mean, Westpac definitely got 1 of the more bearish views on the underlying economy in terms of your forecast. How do you guys think about growing at the rate that you are into what -- on your expectations is going to be quite a steep kind of deterioration in terms of the economic outlook? And then how do you square that off with a through-the-cycle credit charge just given the change in your business mix at the moment?

Do you want to Well, look, I think first and foremost, John and this point, I'll continue to emphasize, there's a moment at the moment, the institutional space where those customers are pursuing those macro themes that are very attractive and very much on strategy. And so it's just critical that we support our customers. Likewise, when I look at Business Bank and the growth we've had, it's all been at the larger or the larger end of the business book and particularly ag with the theme there, health care and professional services. So we feel like supporting those existing customers in those particular areas has been, first of all, the right thing to do for the customers. And secondly, the right risk orientation because there's obviously very strong underlying thematics that support those growth opportunities. And so that's what's driving the way we're going after growth. I do think, though, with the environment we're in with the Middle East conflicts and some uncertainty that you're likely to see some areas pull back. And so there will be less growth just because customers are just going to sit by and sort of wait until that uncertainty clears. And so I don't think we'll see a sort of a headlong rush of ongoing growth into particular challenges because already people are just pausing and tempering what they might do, what might be their investment plan. And so as a result, I think our growth will reflect that. The only area that I'd say is an exception to that is, I think the institutional business, particularly with the large corporates who are very focused on, for example, infrastructure power generation, transmission, renewable power generation, transmission, that investment thematic underpinned by the government is 1 that I think will continue. And we'll obviously look to make sure we do that thoughtfully and as we have been doing over the last 24 months.

I just maybe just 1 point to add, but just as a reemphasize, I think it's unlikely, John, that you get all of those things happening at the -- at the same time. So I think if we walk into an environment where the base case scenario plays out, you are going to have lower growth in credit and that will just be a reality. And we're seeing that Andrew made -- Anthony made the comment in his preprepared. We're seeing that a little bit in mortgages our growth in applications in April relative to the second quarter was down quite a bit. The last time it was down or comparably down like that was in 2023, where we had the rate -- the last rate tightening cycle. So we're seeing the early signs of that. In business credit, we probably came into the year thinking business credit might grow at something like 7 got to the first quarter, we thought that it would be -- felt like it was growing at something like 10. And we would expect now even though pipelines are really high, pricing inquiries are really high. So it feels like there's good activity there, that could easily be something like 5 or 6 now. So we're expecting that slowdown as that base case, story.

Thanks, John. Our next question comes from Matthew Wilson from Jarden. Matt.

Yes. Thanks, Justin. Wilson Jarden. The opportunities from IT innovation appear exciting. And when we look at your net interest income around 20% of your net interest income or 30 basis points of your margin comes from customers lending new money for free. -- in the context of digitization, AI and other innovations, how sustainable is that business model. You've got new competitors, new technology changing the fundamental nature about banking.

0Yes. So Matt, thanks for the question. I agree. The -- I think banking is changing. I think new competitors, new ways of competing will put pressure on those ways that we have or those ways we've assumed and those approaches we've adopted in the past. So definitely ignore that. I think a couple of truth, though, that are foundational, which is a deposit is a very, very privileged thing to provide and obviously, to receive. And so therefore, an institution, which is very well capitalized bill rated and highly trusted is sort of foundational to how we want to position ourselves in the marketplace with deposits. And then things like the digital offering and then other forms of value stores such as digital assets are all of what we must improve on and are planning to deliver on over the course of the next 2 or 3 years to ensure that we can compete and definitely offer the customers what they want, where and how they want it. I do acknowledge that also the introduction of AI and Agentic programs mean customers will likely have the means to move and identify best pricing all the time real time, and we understand that emerging challenge and are definitely working to make sure we can meet that challenge. And I think it's something that in a funny old way is already in place. If you think about our institutional business, we take deposits from our customers there, we're still able to generate a good return for shareholders, a good margin for that business. by dealing with very sophisticated customers who can move their deposits and check price, check at all times. I think that's likely the future for banking at some point more broadly. And so therefore, we've just got to make sure we've got the offer the means and the tools to be able to provide that to our customers and serve them the right way and meet that competitive challenge head on.

Thanks, Matt. Our next question comes from Matt Dunger from Bank of America.

Anthony, if I could please just follow up on the questions about balance sheet led growth. You've previously talked to the market share opportunity at Westpac on the noninterest income side from deepening customer relationships, but the growth in markets income doesn't appear to have matched the volumes. You've called out the product capabilities in -- when should we expect to see this opportunity converted to market share gains across noninterest income? .

Thanks for the question, Matt, and spot on. We definitely have seen some real progress in our noninterest income, and I think about over the last 12 months. But there is so much more for us to do, and it all comes back to where we are as a bank and what we've got to do, which is to continue to lift and get that service offering and get that if your execution of how you're going to bank day in, day out, right? And so 1 of the things I'd call out is that we do feel like, for example, our FX offering in consumer is starting to improve, but there's so much more for us to go there. We definitely feel very underweight in what we're doing from, for example, an FX perspective in the business bank. And so there's more for us to do on that front. We're equally cognizant that we're not doing anywhere near enough trade finance, invoice financing, working capital style solutions in the business bank which will all contribute to noninterest income opportunities for us. And so just acknowledge that we're working with what we've got now. We're executing well with what we've got -- what we need to do is and what we have done is start to invest in and expand and make sure that we're prioritizing so that we do grow that noninterest income. It is the case that I think the growth in deposits and lending as it sits here today, at least that's the cornerstone of that relationship with our customers and then how do we graduate and provide much more to our customers over time. That's very much how we're going after it.

Maybe just 1 quick just Matt, just I think all the points, Anthony said spot on. There is a little bit of volatility half-on-half. So I'd just be a little bit wary of that, like in terms of our credit trading business and in DVA. I think just -- I think some of the underlyings might be a little bit better than that, but not taking away from where Anthony was going that the opportunity ahead of us is material.

Thanks, Matt. Our next question comes from Carlos Cetra from Macquarie. Carlos.

Just -- you had the slide where you discussed kind of the AI opportunity ahead of you. You've had obviously quite a bit of change in the leadership of around AI in the bank over the last year or so. I was just wondering if you've had any changes in the approach there? And what, if any, additional investment in infrastructure you think are required to really leverage that. And we've seen from some global peers is investing in large orchestration layers that can be used across the group. -- and really handle a lot of the admin, if there's something like that ahead of you or if it's a bit more pace mail or if you already have the infrastructure in place that you think you made.

So great question, and 1 we could wax litigal on for hours, Cosan maybe we should at your conference tomorrow. But definitely, first things first on AI. The focus for us is to get the right people in the right seats. While it is a wonderful technology, a wonderful tool, ultimately, it's only as good as the people we've got using it. And so we've been very focused over the last 9, 12 months to really get the right people, and I think we put the best team on the street together, and we're up and running. The second news is then making sure that it is adopted by everyone in the company, and that's what we've done. I think we're 1 of the first ever say, let's have every single employee, no matter what role access to CoPilot, so that they can -- if you will start to immerse themselves in it. Because the real unlock for us, the real opportunity for us with AI is that it challenges you to be far more open-minded about how you do things and ask you to think about doing things in a different way with far more productivity, far more speed, far more consistency and far more service consequence for whoever you're working with as a result. And so it does require a bit of a mindset shift, Coles, and that's what we're really focused on. And I think that's what we've now got. And I feel like we've got enough momentum in the company to now go after it. And then what we're doing, and we're under Andrew McMullen's leadership. And we're going to do a day on this later in the year where you can really see how we're doing this. We are building those capabilities, which allow people to utilize those AI engines, those AI tools to do things faster and more efficiently than they ever have done. And then more importantly, we intend to provide more of that capability to our customer-facing roles and then in time to our customers so that they have full access to what we represent and what we want to represent from an AI perspective. So Yes, we're up and running on it. I think we've got the right people in the right seats. I think we've got the right embedment program in the company. And I think more importantly, we're now starting to see tangible outcomes but it's all about how do I have everybody using it, how do I have everybody ambitiously using it in a way to reinvent and refresh how they do their job and deliver better outcomes internally and for our customers.

Thanks, Carlos. Our next question comes from Brendan Sproules from Goldman Sachs.

Brendan from Goldman Sachs. Nathan, I just have a question on the impact of higher cost deposits on your NIM in the second half. I noticed in the business division and in institutional, you've seen a big pickup of fastest growth of customer deposits has come in TVs. Also noticed that you pricing TD is a lot higher across retail and business bank over 5% now on the 12-month special rates. -- what extent is this going to impact NIMs in the second half? And is this a function of this really strong credit growth that you're seeing across business and institutional that you're having to lean on these more expensive sources of funding?

Yes. Thanks, Brendan. I think if I just isolate sort of outlooks on margins for deposits in the second half. I guess, -- it's probably 1 of the line items when you walk across the NIM bar that's got a few moving parts in it. So we will get the benefits of the higher cash rate. So they'll flow through -- we have had qualification rates in our savings product, which has been a really strong growth product for us in consumer. They've been ticking up. And in this half, we had some impacts from higher qualification rates. I think we spoke about that at the quarter and at the full year where we've gone from sort of 84% of our customers qualifying to that's actually plateaued this half. So I don't expect that, that will be a continuing headwind on deposits going forward. And then as you said, we've had a higher growth in TDs at the back end of the half, which which will be a NIM drag as we go into the second half. And then that will -- when you put all that together, you've got a couple of benefits, and then you've got the replicating portfolio coming through, and then you've got some of those higher-priced deposits coming through. I also expect that we'll have more growth in those higher rate sensitive deposits. It's just when you go back in history, Brendan, which I'm sure you've done when you think about rate cycling, rate tightening cycles, you do get more growth in those more rate-sensitive products. And we certainly saw that in the business bank. I think in institutional, we were a little bit more deliberate is much more about -- we've had very steady sort of TD growth in institutional, not particularly strong growth at all -- and then we were very deliberate just towards the end of the period, just to grab a little bit of that, as we said, there's more of funding trade into Ram. So I don't expect that continues, but we would expect that we'll continue to see growth in the higher-yielding products in business and in consumer as customer preferences push that way.

That's really detailed. I could just ask a second question. I just want to clarify your comments on business lending growth. I mean it's been very strong in the period. You said it could drop down to sort of 5% to 6% given what you're seeing in your pipelines now, I mean, how realistic is that going to happen in the short term? Are we still going to see this macro wave flow through? And then maybe into '27, you see a slowdown.

Yes. Maybe I'll just start with a couple of comments, and Anthony, I'll have a good sense to market with his conversations with customers. I think there's -- there's 1 thing I think, Brent, it's just worth calling out is we've already seen a real bifurcation in the system here in business lending. So even to date with the strong growth we've seen, it's been really pushed towards the top end. So you haven't had huge amounts of growth in SME and small, but you've had very significant growth in the larger corporate sector, which is in our business bank and then in the domestic corporates and institutional. So -- we've seen that skew and we -- so the first point is we think that SKU continues. And so that will suit our existing book mix. And as Anthony said, we're largely lending to existing customers here. In terms of pipeline and things like there's lots of stats I could throw at you, Brendan, that would tell you that it's not going to slow down. So pipelines have been building in the second quarter. They are stronger than they were 12 months ago. They've really really rebuilt over the last little while. We were talking to the pricing deck yesterday, we've got pricing inquiries this week, which are above the 12-week average. So there's lots of front-of-funnel activity that we could tell you looks like it's going to continue. -- but we just also know that in our conversations that when you've got this rate increasing cycle and the level of uncertainty that we've got, we're just expecting that, that will take longer to pull through, and we're going to have some slowing of that. So our judgment on this, as I said, was -- we came in thinking we could have 7% business credit growth. We certainly are in a period in the first quarter where we felt like we were tracking much higher than that -- we're just -- we have to be in a environment now where we think that slows and that is not going to straw dramatically. 5% business credit growth would still be a very healthy number. I don't know if Anthony has a.

Look, I think that bifurcation is the key point. I think the small business, SME and was coming into this year, navigating things. They were not sort of if you were a robust disposition around what they're going to do and how they're going to grow. But -- and so that was active, but I think that's the 1 that will slow and maybe AB is already slowing a little bit now. But the larger and is very clear and I think very much of the view at the moment, notwithstanding the uncertainty they can see our way through it. They feel they can absorb and/or pass on the price or other disruptions that are following from the Middle East. And so there, if you will, pretty robustly going after it. I think the 1 to keep an eye on for all of us is just simply those knock-on effects of a disrupted supply chain and a whole list of impact that, that will have on broader economic activity. We just got to keep it closer on that over the next 3 months.

Thanks, Brendan. [Operator Instructions] We've still got quite a few questions to get through. So just a reminder, if you can limit it to one, we appreciate it. Thank you very much -- our next question comes from Richard Wiles from Morgan Stanley.

Anthony. I think in your overlays, you addressed energy-intensive sectors. I'm not sure you included agriculture in that overlay. Could you explain why you didn't? It's a very intensive sector. It also has a high reliance on fertilizers. So I'd just like to get your thoughts on the outlook for that sector, please. .

Yes. I'll just give some comments on what we did, Richard, and then maybe offer an opportunity for Anthony. I think -- what we did here in terms of the overlays, Richard, is probably as you would expect, but there's a little bit of top down. There's a little bit of bottom up here. And so I think as it relates to the overlays, we've certainly been working in the business, looking at all our sectors. And so ended up with overlays on a small number of sectors that got identified through that work. But rest assured, you sort of look at the -- you start with the whole portfolio, you start to look at where we've got higher proportions of energy imports. And so that will be more subject to it. And then you sort of narrow down as to where do we then think that we've got the potential for losses. And so we narrowed in on the industries that we've that we've landed on. So I guess, the point being rest assured, we looked at Agri. But us and where our current book is and what we're expecting to flow through there, what the teams when they did that bottom-up detailed work came up with is that's not 1 where we expect losses in our portfolio -- that's not to say that we don't expect that that's an industry that's going to have some challenges with higher input costs and all the other things that will flow through there. It's just for us when we did the work, -- it wasn't 1 where we thought that, that would translate into needing a specific overlay over and above what we're holding.

Yes. I mean, Richard, the agricultural sector, the pharma, the cattle Calene, the best risk managers by none. I mean I've had a few conversations and I don't know anecdotes getting way of evidence, but they -- they're well ahead in terms of organizing themselves on diesel reserves. -- and storage well ahead on fertilizer. I've got some farmers saying, maybe I might start selling some of this diesel just to capture the price opportunity at the moment. So I don't want to be flippant about it, but it's remarkable their ability and where they're at. And so we're very -- we feel very confident about the position of our book. That doesn't mean that there won't be some challenges there, but certainly, as we sit here today and with the -- what we can see and working on with them over the next 6 months, so many of what we're working with in a position where they'll find a way through. And I would also just -- it is the case that I think the government has done a very good job on this front, which is making sure the diesel is prioritized in the right way that ensures the Australian economy keeps ticking over and that rural Australia continues to have what it needs -- and likewise, has also done an excellent job on that fertilizer and the prioritization of that acquisition and bringing into the Australian marketplace. So I do think, while Agri is 1 we're very focused on. It does feel like at this point, it's in a case point.

I probably should have just said 1 thing, sorry, Richard, to just jump back in. I just say also been a sector where we've seen utilization rates are down. So we have seen them come into this particular little bit of shock with with pretty low utilization rates. So that's a little bit seasonal, but that's also played into some of the thinking.

Thanks, Richard. Our next question comes from Brian Johnson from MST. Brian?

Just a question. The only thing that really matters from an asset quality perspective really in a crisis is housing -- if I have a look at Slide 68, I can see that overall, the housing actual loss rate is up a little 9 basis points, whereas the other banks are saying -- when I have a look at Slide 74, the investor, I can see it gapping up quite markedly to 1.8 basis points. Both of those numbers are after basically the lenders mortgage insurance. Is there something I'm missing here? Why is Westpac's housing loss rate higher? And can we just get some comments basically on the outlook for that going forward given that we've got higher rates and you've got this kind of sharply worse outlook going forward under the base case.

Yes. Thanks, Brian, and it might be 1 I can -- we can pick up online and just go through -- I must admit I haven't looked at where peers reported this over the last couple of days. So we can have a look at that and where the trends might be slightly different. I think you -- where we would look at in terms of the outlook for housing credit is back to the basics. And so it is all about unemployment. And then when you have the unemployment, it's all about the -- where the asset prices are. And so we do come into this even with the economic forecast that we that Lucy is put through, which 1 of the other questions was it did feel like it was a bit more severe than where others were, we saw unemployment ticking up to just under 5%, which is in historical levels still really low. So I think when you think about that asset quality outlook for housing, it is going to be all about that. And then where we should be concerned is sort of the obvious spot. So we know that to lose money in mortgages, it's in the tails and that will be people who are earlier into their home buying journey, they haven't had the opportunity to build up the buffers and then they have a life event, whether that be unemployment and illness or something like that, and that's when they get into trouble. And so it is all going to be about that unemployment number really as you think about the outlook.

Thanks, Brian. We've got some questions from the media ready to go. So Stephen Johnson from Seven West Media. Stephen?

Yes. I'm from the nightly which is part of even West Media and the West Australia. Lucy Ellis, your chief economists are seeing 3 more interest rate rises are taking it to an 18-year high of 4.85% per cash rate. Anthony, how concerned are you about surging mortgage stress and the prospect of a recession in Australia. .

So Lucy's forecast here. So we're certainly forecasting rate rise in May today and then 1 in June and likely 1 in August. I think the rate rise, if it was the case today, would then return as to where we were about 18 months ago. And so moving beyond this. I think the next 2 rate rises take us into tertiary we haven't been in for a period of time. The other thing I'd sort of want to sort of acknowledge is that while we have the employment levels that we have and even with a higher unemployment level from here, there is still so much more capacity and ability for the economies to absorb any potential future rate rises and, therefore, potential impact on our mortgage book, for example. I think the -- at the moment, we don't forecast recession. But people who talk with absolute certainty today in this environment, I think, misinformed because it's an unusual environment in which we're in -- and there's no doubt that -- there's a lot of competing forces here. On the 1 hand, increasing interest rates, looking to slow the economy down. You also have actually increased input costs, increase pressures coming through to the consumer with the Middle East conflict, et cetera, which also could have a dampening effect on demand and may therefore facilitate or help in the slowdown that the Reserve Bank is looking for and thus, maybe the future rate rises don't need to be as much as it has been called or suggested. So we've got to watch and see how that plays out. I do think the uncertainty is the bigger issue here because the thing that I'm more worried about, I think we are more worried about is that businesses and investment decisions are put on hold. -- or it's impossible to make an investment decision that you will build or you will invest in or you will construct something and you want staff for 6 to 9 months, you just can't make that decision at the moment because of the uncertainty. And so the risk is that no decision today or a delayed decision today is an effect of no investment opportunity. And as a result, activity will fall off in that forward setting of 3, 6, 12 months out. And so -- that's the thing that we just want to stay focused on is that investment decision and activity is still, if you will, able to think about future investment, future plans, which ensure that the activity levels, which are helping us through at the moment will sustain and thus, I think that's the worry in the context of potential recession. Having said that, we remain at this point with our forecast. I think there's a way through this, and it will obviously also be dependent upon another import of uncertainty, which is the federal budget next week and its role and contribution to both helping the Australians through particularly interesting times and also potentially what it will do for future economic activity. It will be something that we'll work out over the course of the next few weeks.

Thanks, Stephen. Our next question comes from James is from the AFR James.

And just to the last 2 questions. You called out some softening activity in the mortgage market in April. -- and also hardship sort of applications increasing modestly. Can you just talk a little bit more about that, please, Anthony? Like if we do get these 3 rate rises coming through or even just 1 today, do you expect these conditions that you saw in April in the mortgage market extending through to May and June?

Yes. Look, I think what we saw in April was something that was anticipated. It wasn't more dramatic than was otherwise to be expected as a result of the 2 previous rate rises. And frankly, they're signaling both from government, from regulators, from Reserve Bank about a need to slow down and the idea that we may increase interest rates further. I don't think we sort of can also tie any of what we saw in April necessarily back to Middle East conflict, et cetera. We definitely have seen a couple of things, which I think we just need to be cognizant of is consumer sentiment has really fallen off. And so the drop in consumer sentiment is an important indicator -- and alongside that, the -- it's only 1 month sort of, if you will, result, but the drop in business confidence is just another indicator that things are slowing. And so -- those are the things that we're currently cognizant of. We also noticed that auction clearance rates are a little bit lower. We've also noticed that people's expectation of price is being a little bit more tempered. We also noticed that turnover is slowing. So things are slowing. And in many ways, James, that's exactly what the Reserve Bank was looking for, which is to see things slow and moderate and bring, if you will, activity to a point where we get inflation back into that target band. So hopefully, I've given you some reflections and some inputs there that you're looking for. But -- we do also feel that it's a little early to be calling things and talking with absolute certainty because the other thing that we just need to keep in mind is with employment levels as they are and even if there's an increase in unemployment, as I say, there's still plenty of capacity there in terms of what it provides for the economy. And also notice that when the constrained consumer arrived into 2026, the prepayment levels, the buffer levels on the mortgage book are at 85%, where people are at least 1 month or more ahead in their payments. And so there is quite a bit of buffer in the economy as we sit here today.

Thanks, James. Look, we've still got quite a few callers online, but we are out of time, unfortunately. So we'll be available over the course of the day to take your questions. Thank you very much for dialing in.

Good morning, everyone. Good morning, and welcome to Westpac's UNITE Market Update. I'm Justin McCarthy, General Manager of Investor Relations.

Before we commence, I acknowledge the traditional custodians of the land on which we meet today. For us in Kent Street here, that's the Gadigal people of the Eora Nation. I would like to pay my respects to elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people.

Joining me today is Westpac's CEO, Anthony Miller; and Chief Transformation Officer, Peter Herbert. After the presentation, we'll have time for Q&A. And then we'll also -- for those people online, there's an opportunity to ask questions via the vevox you will have the instructions in your invitation.

With that, over to you, Anthony.

Thank you. Good morning, and thanks for being here. It's been a year since I set out my priorities as CEO and our plan to deliver UNITE. Today, these priorities across customer, people, risk, transformation and performance are embedded across Westpac, and they underpin our ambition to be our customers' #1 bank and partner through life.

UNITE is a cornerstone program of our transformation agenda, and we're well into its execution. The program is being delivered to benefit customers, our employees and shareholders. While it is designed to generate efficiencies in its own right, sustainable performance depends on disciplined execution and consistent delivery every day. Much of the work that's underway on UNITE is happening in the background as we prepare for larger scale migrations.

From an external perspective, changes will be most visible this year across business and wealth. We recently completed the migration to deliver One Wealth platform and today announced we're moving to one commercial bank. These initiatives are helping to reshape and improve our operating model. UNITE is an important investment in Westpac's future, it will reset how Westpac operates across products, services, processes and systems through implementing One Best Way across the entire bank.

This will further strengthen both our foundations and how we deliver for customers, our people and shareholders. As we've said before, while we have robust and capable technology assets, we have too many. Simplifying our technology and how we operate supports us in becoming a more efficient, resilient and customer-focused bank. For customers, this means delivering service excellence consistently, earning their trust to become their #1 bank.

For our people, simpler processes allow more time to be spent with customers, supporting a more engaged workforce. And for our shareholders, UNITE is an enabler, reducing the cost of run and change, helping to close the cost-to-income gap to our peers. We are making good progress on UNITE. There have been no overall changes to the program's scope, time line or budget since our full year results presentation last November. Minor modifications have been made and are likely to continue to be made given the nature of the project.

We've completed the first large-scale migration, and we're getting through foundational work, including building test environments and data optimization for future migrations. UNITE is being delivered through a central team of almost 1,800 people who draw on expertise across business and technology. This is supported by a strong governance framework. This framework provides clear and ongoing oversight and accountability from management through to the Board.

The data, digital and AI team supports the central team, and we are developing a set of practical AI solutions for UNITE. Impact assessments and testing are 2 areas where AI is contributing and can be scaled across multiple initiatives. Impact assessments are a key dependency for the majority of the UNITE initiatives. AI supports these by reducing the time it takes our teams to identify data lineage and assess downstream impacts.

It has delivered more than a 50% improvement in efficiency, reducing impact assessment completion times from approximately 10 days to fewer than 4 days. A separate AI capability supports us with testing. Testing also sits on the critical path for many UNITE initiatives and is a key factor in delivery time lines. A suite of AI testing tools, agents and agents are being used by our teams to lift productivity for a smoother transition into delivery, and we're seeing pleasing results.

While this progress is encouraging, it is too early to extrapolate. AI is demonstrating positive early signs, and we'll continue to mature and scale how we use it right across UNITE. Activities are underway across consumer, business and wealth and the Institutional Bank, and we're seeing how improvements are creating more connected banking experiences for our customers. We are using digital banker to serve retail and business customers. It provides a single, consistent way to capture customer interactions and understand their needs.

With customer information in one place, our bankers are better equipped to have more informed conversations and deliver consistent service. The rollout of the front-end platform to our bankers is now complete, and we'll continue adding more servicing capabilities this year. [ Secure ] Live chat is now available in the Westpac app, giving customers a simpler and more connected chat experience.

We've consolidated 2 platforms into one, allowing customers to enjoy secure conversations with bankers via the Westpac app. Last year, we shared how we are simplifying mortgages end-to-end across product, process and applications. This represents a significant body of work within UNITE, improving both customer and employee experiences. The sale of the RAMS mortgage portfolio contributes to the streamlining of our operations. It has also taken some pressure off UNITE since these customers no longer need to be migrated to the Target Westpac platform.

In Business Banking, the controlled moneys initiative has delivered practical improvements for professional service companies. It digitizes processes for customers across legal, accounting and real estate firms who hold client funds on trust. Last weekend, we completed our first large-scale migration under UNITE, moving 60,000 Asgard customers onto our wealth management platform, Panorama. We now have more than 300,000 accounts with funds in excess of $150 billion on Panorama. This was a complex migration that we executed safely and as we planned.

Customers now have access to a more sophisticated and award-winning app experience with stronger security and broader investment choices in one place. Employees are working in a simplified structure with fewer processes and far less risk. A single wealth platform reduces complexity and cost, allowing us to compete more effectively. The One Wealth platform initiative cost approximately $17 million, most of which has now been incurred. The savings are anticipated to be fully realized after decommissioning of the legacy Asgard platform.

Today marks an important milestone for Westpac with the announcement of One commercial bank. This will simplify our banking technology and is a crucial step towards decommissioning Commercial Hogan and other legacy systems. As part of this migration, commercial business banking customers and employees from St. George, Bank SA and Bank of Melbourne will transition to a consistent banking experience and single brand under Westpac.

These businesses will have access to better digital capabilities and a broader range of products and services, including real-time payments, flexible merchant solutions and our market-leading banking app. The migration has been carefully planned and will be managed closely through disciplined execution. We have also applied learnings from earlier migrations, including One private bank in which 99% of customers were retained and wealth platform.

To support our execution, we've designed One commercial bank to be a digitally enabled migration, which is relationship-led. This reflects the importance of continuity in customer banker relationships. I saw this firsthand when I was in and leading business and wealth. Strong relationships built over time help customers navigate change and gives them confidence to grow their business. For this migration, commercial customers will remain supported by their current relationship managers and local banking teams from start to finish.

This means bankers will also move with their customers to Westpac and remain embedded in their communities after the migration to provide a seamless service experience. Understandably, this was a big change for our bankers to initially digest. Once we talked through what it meant for them and their customers, their response was very positive. With simpler systems and technology to use, they can spend more time serving customers while offering them a broader range of banking products and services.

Our aim is to consistently be #1 in NPS. We intend to start the migration of 75,000 commercial business accounts onto the target ledgers in the coming months. For this migration, continuity of customers' banking arrangements is paramount. We have completed foundational work to align policies and procedures so we can provide unilateral variation for 95% of customer accounts. This involves directly transferring our customers to like-for-like products, delivering a digital experience without the need for reidentification or any additional product application forms. SME and small business customers are not impacted by the changes announced today. The capability developed through the initiative positions us well to support future migrations as we continue to simplify the company.

In summary, UNITE's progress is on track with no changes to overall scope, time line or budget. We've completed a major migration, moving Asgard customers to Panorama to give customers a better overall experience and operate on One Wealth platform. And next half, we'll commence our first large-scale banking migration as we create One commercial bank. There remains lots to do, and we are ready for the challenges ahead.

Peter will now provide you with a more detailed update on UNITE's progress.

Thanks, Anthony, and good morning, everyone. Across Westpac, we're progressing a broad transformation agenda driven by both enterprise initiatives and UNITE. Since finalizing the scope for UNITE last year, we've spent the past 6 months focused on delivery. We're making good progress and have achieved all major milestones for this stage of the program. Clear alignment, openness and accountability are helping our teams collaborate effectively and stay focused on what matters most, delivering for our customers, our people and our shareholders.

As an ambitious multiyear program, UNITE relies on disciplined and steady execution. To support its delivery, we establish clear responsibilities and governance from the outset. UNITE is business-led and tech-enabled. In practice, business-led means that each segment, namely consumer, business and web, are responsible for the outcome of their initiatives. Group executives are accountable to and supported by a monthly executive steering committee. Reporting directly to me are experienced transformation leaders and the UNITE Chief Information Officer.

Collectively, they manage a centralized delivery team of approximately 1,800 people. Dedicated resourcing from the technology, data, digital and AI teams provide the core technical capabilities needed for the program. This team structure supports an enterprise-wide approach to completing initiatives rather than by business-by-business execution. With the governance structure in place and the project scope set, we retested the optimal delivery approach. This allowed us to take a step back and consider all downstream impacts for each of the 57 initiatives. As a result, we grouped the initiatives into 10 work packages for more effective execution with end-to-end accountability.

It has also provided a clearer basis for sequencing work and allocating resources. Of the 10 work packages, the first 7 are domain-based, reflecting the area of the bank where the change is happening, for example, in mortgages or business banking. They focus on simplification activities with an emphasis on process and product readiness. The remaining 3 work packages cover the common elements required to complete the domain-based work.

I'm pleased the overall scope, budget and time line remain in line with that already disclosed. We invested $195 million in the first quarter as the program accelerates towards a steady operating rhythm. This puts us on track for spend within our previously disclosed FY '26 guidance of $850 million to $950 million. We expect UNITE to represent approximately 40% of annual investment spend in FY '27, '28 before stepping down in FY '29. The 10 work packages contain a total of 57 individual initiatives. Across the program, 8 initiatives are complete. That leaves 49 still to be delivered, of which 3 are yet to commence.

We're tracking the progress of the 46 in-flight initiatives against the traffic light framework. As at today, 38 initiatives are rated green, 7 are rated amber and 1 is rated red. Overall, this represents an improvement since our last update with more initiatives rated green or amber. The initiative in red is the debit card simplification project. We faced some unforeseen challenges and with this and have clear actions to get its progress back on track.

The status of initiatives will move throughout the program. For instance, the one commercial bank initiative recently moved from red to amber. This initiative was in its early stages, and we took additional time to confirm readiness and planning maturity before proceeding. We closed these gaps by running a proof-of-concept pilot, which showed the migration tools and processes we design worked in practice.

Insights from this informed a detailed and integrated delivery plan, which has now been agreed across all work streams. As a result, the initiative has moved to amber as we get ready for migration. During the past year, we've deepened our experience through the private wealth migration, recent Asgard to Panorama migration and invoice financing, which is set to complete this month.

To support future migrations, we're also undertaking preparation work such as our channel simplification, for example, the rollout of digital banker and the consolidation of 2 chat platforms to 1, a new capability to archive customer data, helping to manage historic records and the future decommissioning of legacy applications and the development and deployment of new AI tools to automate assessments of downstream impacts and testing.

UNITE comprises 4 stages with the first stage discovery completed last year. The program delivery encompasses the work underway across the remaining 3 stages of the project. The second and third stages of UNITE are simplify and implement. We revised our progress is measured across these stages. Previously, progress was based on the number of initiatives completed, which we presented in March and September. Given the variation in size and complexity across the initiatives, we believe measuring progress against key milestones offers a more accurate representation of the work completed and the activity remaining.

Prior periods have been restated on a like-for-like milestone basis. For decommission, there is no change, and we continue to measure the percentage of plans applications we have retired, which lines up with the bulk of the cost savings. We don't expect further modifications to the measurement of progress. We're committed to transparency, and we'll continue to provide regular updates on our progress each reporting period.

Moving to progress on the delivery stages. Simplify involves leveraging the strength of our existing products, processes and systems to adopt our One Best way. This has progressed from 29% to 44% complete. Implement will address the complexity of our multibank systems. This is where a significant share of the test and migration readiness work is concentrated. It has progressed from 13% to 19% complete. And finally, decommission in line with our plan remains in the early stages at 10% complete.

One of the major objectives of UNITE is the move to a single deposit ledger. The decommission of Commercial Hogan is the first step, reducing deposit ledgers from 3 to 2. Commercial Hogan currently supports 40,000 customer accounts across wealth, commercial banking and other business deposit products. The migration of these accounts to Westpac's core ledger trading bank will help us run more efficiently, innovate faster and realize economies of scale.

Decommissioning the ledger involves 3 separate migrations. Each accounting for between 25% and 40% of the total accounts required to transition to Trading Bank. As part of the One Wealth platform initiative, 10,000 cash management accounts were migrated to Trading Bank. The second migration involves moving commercial customer deposit accounts to Trading Bank. Importantly, we have planned this to minimize disruption to customers and make it as seamless as possible.

Anthony mentioned that to maintain customers' banking continuity, we're primarily using unilateral variation. Payment continuity is also critical. The majority of customer payments will be automatically routed to the new accounts with no customer action required. This particular migration will be undertaken in controlled stages with close banker engagement consistent with the principles we have applied across other migrations. However, the full financial benefits are expected to be realized post decommissioning, including the avoidance of a significant systems upgrade and lower operational complexity and therefore, reduced risk.

Finally, turning to our major focus areas for the second half, which includes commencing the significant One commercial bank migration. Mortgage simplification is one of the largest collections of initiatives within UNITE. The work will reduce complexity by halving the number of mortgage products and systems and streamlining end-to-end processes. This year, our priority is the get ready activities within the simplify stage. Implementation and decommissioning will follow in the coming years.

So far, we've completed the multi-offset initiative and harmonize mortgage products for consistency across elements such as terms and conditions. In the second half, we'll get through more foundational work. This includes building the more complex mortgage structures into the target state master and migrating data for a single consistent view of property security. Given the scale and sequencing dependencies, the mortgages stream continues right through to the end of the program. We've rolled out the front end of digital banker, a one-stop platform now used by 6,000 bankers to serve our customers. It gives our bankers a complete single view of customer needs and interactions with no more jumping between screens and systems.

Our focus for the next 6 months is transitioning the first service requests on to digital banker, strengthening customer authentication and controls and expanding its sales capability for better customer interactions. For collections, we're moving consumer products from 7 platforms to 1 called Assist Now. This aims to provide faster and more flexible service to home loan and personal finance customers who need extra support.

We've completed 2 migrations to Assist Now and plan to expand this to personal loans and regional brand credit cards during the second half of this year. Debit card simplification, as pointed out earlier, will address our complex set of debit card products and supporting platforms. We're simplifying this landscape by reducing the number of debit card products and consolidating card management into a single platform. Our focus for the next 6 months is completing the migration of Handycard to Debit Mastercard to enable the decommissioning of One legacy platform.

The target state is a simpler product offer for customers, reduced operational complexity and lower technology risk while improving our ability to manage and scale the platform over time. The common theme here is that we're now well into execution and developing repeatable capabilities. We'll be clear on the milestones that matter, readiness, migration waves and the decommissioning pathway that follows. As we build further momentum, you can expect to see more evidence of delivery, completed migrations, reduced complexity, measurable improvements in stability and change capacity.

I'm pleased with the progress we've made to date. UNITE is well structured, well governed and progressing in line with our plans. We're confident in our ability to deliver the remaining stages and the benefits they support. Thank you for your time.

Thanks, Peter. Don't worry about clapping. We're only halfway.

So we'll move to questions now. Anthony and Peter, if you just join us up here on stage, while we've got plenty of time for questions [Operator Instructions]

So we might start at the front here. And if you can state your name and affiliation, especially for the benefit of those online, please.

Andrew Triggs, JPMorgan. Anthony, you talked about AI in the context of impact assessment. Just interested to sort of flesh out just the use of AI and data cleaning and migration processes and particularly the attitude, I guess, of the various regulators that you deal with around potential failure if Westpac takes a sort of AI-led best efforts, but cost-efficient process. What -- how does that sort of work with respect to regulatory?

I'd like Peter to make a few comments on how we're actually day-to-day using it. But I think people need to take a step back. AI is a tool. And what we're doing is setting up with everyone in the company to use this tool, and we're finding that it could be particularly helpful tool to the way we execute UNITE. There's no abrogation of ownership or responsibility for the outcomes that we need in delivering Unite.

AI is a tool that could help us do it faster. It could help us do it in a more efficient and we think a safer way. But we have got to establish and prove that, a, to ourselves, b, to the governance that we have at Westpac and then clearly to the regulator. And so that's why to sit here today and say we think it is actually really powerful and really effective and efficient.

But to then make a representation that we can pull everything forward and we can change everything that we do is not the right way to approach it. And as I said, we've just simply got to use this tool, and we've got to demonstrate the outcomes, and we've got to bring everyone along in how we use that tool and the outcomes we're delivering.

So long answer to the question, which is we are using it. Yes, we think it's really impactful. And yes, we think it's going to have a lot of -- a big contribution to make, but we do have to bring the regulator along. We do have to bring our governance team along. We do have to bring the whole bank along on this one. And so it's -- that's the answer.

Just a follow-up. The second half '26 milestones that were listed, there's a long list there, but I think noted most of foundational in nature. Are any sort of individually or collectively material to the 2027 cost outlook?

So we've got our cost plans for '27. There's definitely some contribution that will come to what we are aspiring to achieve in '27 that comes from UNITE. But the broader benefits from UNITE and its capacity to help us drive a lower cost to run and change of the bank, it starts to be really realized, frankly, at the second half of '28 going into '29. So yes, there's some contribution, but candidly, it's much more back ended than that.

We'll go -- is that fair?

Matt Dunger from Bank of America. If I could just ask about some of these dates you've given following up on Andrew's question there. The expected completion of the One commercial bank in December 2027. What sort of time frame before we see the cost benefits from the decommissioning? How long does that take?

Yes. So as I said before, between the Asgard Panorama migration and one commercial bank, that will take 65% of the accounts on CHS.

Sorry, I don't know where you're located around. So apologies.

So we won't -- we'll see more of the benefits again back into '28 once we are able to migrate the residual 35% off, which we're in the process of planning to and then fully decommissioned CHS.

That's Hogan, by the way.

That's right. And what's important to realize is that the decommissioning is where we start to really see the value. But you've got to get everyone off the particular system. And we think we'll get many, many of very, very quickly because of the attraction of being on the Westpac stack and the offering we have.

But there will always be 1 or 2 cohorts that actually it's going to take a lot longer. And so we've just got that in our plan, but that's why it's just important that the benefits are realized when the decommissioning is complete, and it's back-ended, therefore, in its nature.

The one supplement to that, sorry, which obviously isn't in the numbers that we do reference in the slide was in order to continue to support commercial Hogan, it would require a really significant update -- upgrade, sorry, to the tune of about $400 million. And so obviously, that's avoided but not within the numbers. So there wasn't a kind of do nothing option here.

Matthew Wilson, Jarden. Just to be clear on the targets, the CTI target, the language seems to have changed from lower than peer average to close to or close the gap. And the ROTE target doesn't appear in the presentation.

So the goal is lower than peer average. So language bringing that discipline to it, Matt. But no, absolutely, the focus is lower than peer average.

And then just a follow-up to the migration of the One commercial bank. As you move from Bank SA, Bank of Melbourne, St. George, does my BSB and account number change?

Yes, it does. And -- but more importantly, the way we've designed it, and Peter, you're allowed to, of course, correct me on this. But the way we've designed it is that the customer does not have to do anything as a result.

And so therefore, it's -- and hence, the work and hence, the preparation, which is to make sure that the customer does not go through any -- or is not impeded nor is challenged to do more than what they should otherwise have to in migrating across from this platform to this platform. So same products, same range of services they get. We'd like to think actually that when they're on the target stack, there's even more we can do for them. And so that's the design, and that's the outcome.

Leave the mic there, Brian, and maybe just play parcel, please.

Brian Johnson, MST. I'd just note that, that thing about the account number and the BSB, that's different to what we said historically. But that said, if we look at it, you're talking a lot about consolidating the tech and consolidating the products.

I'd just be interested, what does that mean for product flexibility? And also, what does it mean do you actually need to have this multitude of brands? So product flexibility and what ultimately happens to the brands. And I'm not just in retail banking, but in business banking.

Yes. In terms of just -- I want to answer the brands, the whole program of UNITE is reduce the multitude of bank systems, consolidate onto one so that we can realize the benefits of our scale in the marketplace by just doing things One way. And we can and will have a multi-brand framework. But it's all about how do I get everything done one way so that last I have some, if you will, some benefit from the scale that we have in the marketplace. In terms of product flexibility, I suppose there's 2 things to that.

And Peter, again, please correct me if you disagree. But we certainly have a proliferation of products across multiple bank systems. So we want to get everything done one way on one system. And so we're making sure that we, therefore, have the right product range to accommodate all of the current customers we have.

Does that then mean we don't introduce new products because new product is needed for new market opportunity? Well, the answer is we are always and willing to look at those opportunities as we go forward. But it has to be done on the One target ledger that we've agreed, and it has to be done following certain one-way disciplines we've agreed for the company. So we don't have the mistakes of the past, a proliferation of products and processes, which just add complexity and risk into the whole bank.

Anthony -- sorry, could I just add to that? One of the problems at Westpac has been the fundamental conflict between some of the brands. For example, if you have a look on business banking, at one point, St. George bankers in business banking had higher limits than Westpac, higher risk tolerance.

How do you ensure -- like this is about cleaning up the back, kind of getting the brands. But how do we ensure or can you make a commitment that we won't see Westpac competing against itself? Like St. George customers competing against Westpac business customers. That's one of the big problems that Westpac has had.

Yes. Well, so thanks for that challenge for that question. That is absolutely what we're going after, Brian, which is we do things one way, that we don't have a multitude of banks within the group, led by executives who may choose their own adventure. This is one way of doing things on the one target tech stack, and it is about then delivering the scale and the benefit of that.

And more importantly, it's not just the run and change costs that we do. It's just a safer bank to run if we do things one way. So that's the mantra that underpins one way, and it's one policy. It's one product. It's one technology. It's one process by which we follow. That's the discipline we're trying to drive through the entire company.

If I can just comment on the product piece. So we've done a couple of things. So the first one was then to complete product and service mapping from the regional stack into the Westpac stack. And as an example, we found that the controlled moneys was a superior product on the regional stack.

So we've deliberately uplifted -- we think that, that 41 product offering is the right set of offering. The challenge we had with the 81 was there was about 414 variants underneath that, and that's a huge amount of complexity. So part of this is what's the right on-sale product set? Does it meet or beat the market and then removing all that variation, which drives all the operational complexity.

John Mott from Barrenjoey. I've got a question on the traffic light system. And if you look from what was happening back in November to what's happening today.

So in November, you had 5 initiatives in red, it's now 1, amber 13 to 7 and green has gone from 20 to 38. So it looks like all of a sudden, the projects and the initiatives are going much, much better than you'd anticipated. Now I understand you're marking your own homework here, and there is some element of that. But can you comment on why you've all of a sudden seen such a massive improvement on the only thing that we can actually measure on how you're performing?

Yes. So let me just -- I'll comment on the marking our own homework. So it's fairly well governed. We've shared the governance process, but there's obviously Board below that a subgroup of the Board, the exact piece. We obviously have our second-line teams nested. We also have independent oversight from McKinsey. They have close sessions with the Board every quarter. So I think we're incredibly well governed, and I certainly don't feel like I'm marking my own homework.

In terms of the transition, I think a couple of things. The first one was it was absolutely right that we had a federated approach to how we plan the initiatives on an end-to-end basis. As we transition to execution and we centralized the teams and repackage that, we've been able to resynthesize and reorder the work, and we have a much clearer longer-term plan. And I think that's what you're seeing play through.

So does it mean it's going better than you thought it was 3 months ago?

No. It doesn't mean it's going better. I think we have a much clearer view, and we've got a better execution cadence. What I would say is this is, as I said when I spoke, I fully expect that this will have ups and downs as we go through the program. It's really confident.

It will go up and down. And John, I'll just say my anxiety levels are not any lower than they were 3, 6, 9, 12 months ago. And maybe I might even venture the fact that there's a bit more green means I am more anxious because you're right. We've got to make sure that we don't trip here and we don't kid ourselves of where we're at.

But with all of the rigor we've put in place, with all the governance we've put in place, this has been what has emerged. But equally, I'm not forecasting this, but I can expect and I am anticipating that there'll be more red and yellow as we go through the next 12 months because it's -- we're into it now. And as we execute, things change, things revolve.

Victor?

Victor German from Macquarie. Anthony, I just wanted to follow up -- I'm just down here. I wanted to follow up on the earlier question related to AI, you're 18 months and 2 years into the project. And I think initially, people, including myself, were worried that these projects take longer and cost more.

Now having kind of gone through to where you are now with potential AI benefits, I understand it's early days. Do you think we should think of this as potential upside risk? Or should we think of it as a minimizing downside risk?

Yes. Please, Peter, you're allowed to take. And then I invite you to speak to Andrew McMullan afterwards, our Head of Digital Data AI across the bank. But I'd hate to tell you what to think -- and so what it is, though, it is showing us that there are things that we may be able to do faster, and we've certainly been able to prove to ourselves we can do things more consistently. And so there's a value in that.

But just what really important for me, what is really important for the executive team in Westpac is that we don't talk about these things. We don't talk about what we're going to do, that we get them done, and we will then highlight to you what we've achieved. And so I'd ask you to be patient with me on that. We would love to bring the project forward. We'd love to achieve a lot more. But most importantly, we just got to get it done.

And then the second stage is, can I get it done more cost effectively? Can I get it done a little bit faster? That is the exam question we're going after every day. And we think AI, one of the tools that we have is going to potentially contribute to that. But until we're doing it, until we've done it, I don't really want to talk about it.

Maybe I'll put it another way. Assuming AI benefits do not come through. So all of the early test cases, just -- let's say they don't work, do you still think you're able to get to the end of the project in time yet?

No, no. So let's be clear. We -- that is the thing that we will not let go of is we must deliver this project. We must deliver it on time. We must deliver it on scope, and we must deliver it on budget. That is the rule. And so everything is informed by that. And if we can go faster, then wonderful.

Andrew?

Andrew Lyons from Jefferies. Anthony, today, you've reiterated the CTI target, as was noted earlier. Can you maybe just talk to what extent is that objective driven entirely by the UNITE program versus the need for broader productivity initiatives such for the Fit for Growth program that was announced at the last result? And maybe what costs should we expect like incremental restructuring costs that might be needed for some of those broader productivity initiatives?

So there's no way we can get to where we need to get to on the cost-income ratio without UNITE because it's not just a causal contribution to a lower cost of the company, it's an enabler. And unless we're doing everything one way on one target technology stack following one process using one policy, there's just no way we can get the cost to where we need to get to.

So it's both causal contribution to reduction in cost, it is an enabler, but it also doesn't aggregate the fact that we still have to do other things and are doing other things, and that's something that particularly with Nathan's partnership and leadership, we're very focused on is making sure that all of the other things we should be doing to get this company's cost to run to where we aim to is on track.

And so Fit for Growth, we're pleased with what we've set out to do, and we're delivering what we set out to do. The question for us is, can we do more as a company outside United. And that is what we're currently working through as to whether we can do more because I think we have to be honest with ourselves. We need to be relentlessly going after more always and everywhere, and that's what we're trying to do with the company.

Just a reminder to those online, if you would like to ask a question, we haven't got any online at the moment. So Richard has got the mic.

Richard Wiles, Morgan Stanley. Anthony, you said a few moments ago that most of the material benefits will emerge in the second half of '28 and into FY '29.

Your comments during the presentation suggests that those material benefits are driven by system decommissioning. That's the big sources of cost savings. And I think you also said that you're about 13% of the way through the decommissioning milestones. Is that a fair conclusion about how we should think of the realization of cost savings from Unite?

So 2 aspects. Absolutely, in terms of Unite's causal contribution, literally the switching off things, yes, it's much more back ended. And then the fact that we're doing things one way on one technology stack is the unlock that allows us to go harder on other costs. And then, of course, we've got the other programs that we're going after across the group in terms of how do we run this company more efficiently -- safely and more efficiently.

Brendan Sproules from Goldman Sachs. Just a couple of questions on the retail migrations. Obviously, not a lot of detail here today. Would it be fair to say that mortgages and retail deposits are really scheduled around that FY '28 year, and that drives the peak of the investment in that project? And then I have a second question.

Yes. So it doesn't drive the peak. What's driving -- if you look at what our spend for this year, next year and into '28, it's really around the harmonization, some of the integration and the scaling of our target platforms. And that's why you see that come off in '29 as decommissioning is a relatively small amount. You're right to say that the deposit and mortgages are scheduled towards the back end of '28, but the spend here is to get the systems ready.

And just my second question is just on the complexity of the implement phase. I mean a number of the ones that you've implemented to date are actually a relatively low number of customers in the tens of thousands. Obviously, when you get to these large retail integration, you're talking about millions of customers. How more complex is the number of customers in this sort of process?

Do you want to have a...

It's the right observation. But that's why we've very deliberately approached it the way we have. So we're starting with private wealth, where we've built repeatable process. We have built the teams to support it. We understand the way the migration patterns need to be built so that you build up to these things, not start the other way. And we -- that's a really sensible controlled way to approach this so that we've got the muscle and we're sort of match fit for it.

Yes, that's certainly -- we learned a lot with the private bank. We've brought all that to bear in the context of one commercial bank. In preparing for one commercial bank, we learned so much, which is now being, if you will, built and invested in the context of making sure that when we do the larger migrations, we capture all those learnings.

And on the one hand, the complexity of the commercial customers and the private bank customers with all of the different ways in which they deposit, whether it be through trust, whether it be corporate entities individually, et cetera, there's a huge amount of complexity there. But clearly, it will be a simpler customer complex, be just a lot more accounts. And so on either version, it's complex on either version, it's simpler. And so that's the -- but we are absolutely layering into the company what you need to do to be able to do this migration, this set of migrations safely.

Can we get the mic maybe into John there? Hand up first sorry, along the -- thanks, Andrew.

John Storey from UBS. Just wanted to check a few of the numbers with you this morning. Just in terms of the upfront costs related to the one commercial bank, the $230 million of annual savings that you're calling out and then the $40 million per annum, how does that back into the upgrade costs avoided of $400 million? That's the first question.

And then I guess just related to that, the $3 billion number that you provided, why does that not reduce effectively by the $400 million? And then I think, Anthony, to what you were just talking about now, obviously, as you've kind of gone through the private bank migration and you're obviously going through the commercial bank migration now. Do you think there will be an opportunity potentially to also avoid some of the costs in the retail side of the business, right? I'm thinking about some of the smaller brands that you have. Obviously, the big one is obviously St. George, integrating those 2 businesses. But do you think you could find a similar type of opportunity to what you found in the commercial bank, right, in terms of cost saves?

Well, do you want to?

Yes, let me start. So the cost is $230 million, the benefits at $40 million. And really, the $230 million is partly obviously the cost to deliver that program, but also a lot of the repeatable processes and tooling, et cetera, built for future migrations.

We haven't -- the $400 million cost avoidance isn't within the $3.5 billion, and it's not captured in the benefit. But it's a real number. We've chosen not to put those sort of cost avoidance numbers within the broader numbers that we communicate.

In terms of -- John, I hope I'm answering your question accurately. And if not, I'll have you discuss afterwards. But in terms of the way to think about that question around, is there more savings to be made by other brands? The brands aren't the cost. It's the bank systems, the multitude of bank systems, that is the cost and the complexity introduces.

So getting everything done one way on that target stack is the unlock. Whether you have all brands or more brands or less brands is somewhat secondary in terms of thinking because that's not the cost here. That's not the complexity. It's a multitude of systems and processes and technology and different policies. And we're just getting all of that done one way. And then, of course, we have that scale. And then you can think more selectively around the true value and how that brand positions you in segment, region, et cetera.

Ed, I think you've got a mic there.

Ed Henning from CLSA. Just going on to a bigger question. If you look at Slide 32, you've got all your major projects there and the direct savings. Can you just clarify for us that the biggest effect is the cost savings from those direct projects? Or is there more beyond this that will come from Unite? Or is it really just the savings you talked about before where Unite is enabling you to get other savings that come through the direct -- the cost line at the bottom?

So I'll make a comment, but please, Peter has done the work, okay. Point is this sort of draws out the direct causal reduction in cost as a result. The fact that we then have other things that are enabled because we're doing things one way is outside of that.

And then, of course, we have other initiatives on cost with all of that coming together to allow us to target that below peer average cost-income ratio. The point being is we can still do what we've been doing, which is, call it Fit for Growth initiatives. We'll always be going after that. That should be a never-ending relentless exercise. But we can't really break the back of getting the cost to run down until we get UNITE done, both quarterly and because of what it enables. That's the way to think about it.

Yes. And just to supplement, so the -- we've deliberately put in here just the direct benefits -- but Unite does enable the opportunity for further reduction in terms of operational complexity. Again, by reducing 70% of the products through the harmonization and standardization work that obviously then provides the opportunity for business simplification, operational simplification, buys down risk, et cetera, et cetera. So it's an enabler. I think Anthony framed it well. We have to do UNITE to enable those other activities to happen.

Yes. And that goes to the question before about AI about either doing it cheaper or hopefully doing it faster is you need to do this. So hopefully, AI makes you go faster as opposed to significantly cheaper and over the same time frame.

Yes, whether it's AI or other things, how do I go faster. And hence, decisions around RAMS that makes sense in the context of this group that has enabled us to get a bit more done or reduce the drain on getting things done in UNITE. So that's helpful. And so those are the decisions we're just going to grind through as we move forward.

We've got a couple of questions online. We might take those before we circle back to other questions. So first question online, [ Midang ]. Thank you for organizing this update. Pleasure [ meet ]. As UNITE is rather a large project, are there any initiatives or goals prior to Project UNITE that have had to be put on hold due to capacity?

Well, there's definitely lots of things we want to do. And my job is to prioritize what needs to be done. And with the leadership team I've got, make those choices. There is definitely things that we will do once Unite is complete. Equally, there's so many things we cannot do unless UNITE is complete.

And so -- but we're also -- and I know people worry about this, but we are also advancing the company and making investment, for example, in Westpac One, Biz Edge. These are really transformational uplift programs that really put us in a really privileged position in those 2 businesses. And so UNITE, however, is a critical priority for us to be able to be the company we want to be in 3 to 5 years' time.

The only other thing I'd add is UNITE -- as part of that consolidation, I talked about whether it's multi- offset for mortgages or controlled moneys, the uplift. So their investment in a better set of products. We've talked about digital banker. That's a better front end for our staff to use. So there's also upside investment.

Our next online question is from Ravi [indiscernible]. Where do you anticipate the most customer friction as part of UNITE platform consolidations?

I think -- so I think if we take one commercial bank, I mean, we've got -- obviously, we banker led work with the customers. We expect -- and we sort of learned through the private wealth migration. We need to work really closely with our customers around some of the new tools and capabilities that we're delivering to them.

They think they're very intuitive, but they are a change. So while it's a better -- we think it's a better proposition, a better set of services, helping our customers use those to their full potential, I think there's some work we've got to do.

Look, the way I draw this one out, and it's sort of universal across all of what we're doing, customers don't want to have to do something different and don't want to have to do something extra. And so all the work we're doing is to make sure they don't have to do something different or extra.

And if we do ask them to do something extra that we make sure it is a really superb and very, very easily navigated request. And so where do I anticipate the most customer friction as part of UNITE platform conversations is making sure the customer doesn't have to do something different or extra. And if we ever do that, that is so easily done, so intuitive, so natural, actually, they don't feel like there's been an impost upon them. And that's why it's hard work, and that's why we're investing as we are, and that's why it is one of just -- let's just get this right progressively through time rather than sort of a mad rush to do it.

We've got 5 minutes left, so we can circle back, Matt? -- row is popular again.

Matt Wilson, Jarden. Just to follow up on John Storey's question. When this project -- when you embarked on this project, it was $3 billion. We thought it was $3.3 billion. And then Peter has just answered a question and said it's $3.5 billion.

Is that true? And if we continue that run rate, we're looking at $4 billion to $5 billion probably at the end. How are you thinking about inflation? And is $3.5 billion the correct number?

So $3.5 billion has been what we've had in front of people for a while now. So...

Maybe I'll take that on disclosure. Yes. So the maths have been pretty clear. We can take that offline, Matt, but it has not changed for at least 9 months in terms of that part. there will be some flex on that FY '29, but it certainly hasn't changed in that period. The initial estimate when we're very early in the project was rougher and that number was lower.

Yes. And the inflation element? You've caught on nominal numbers before.

Yes. So I mean, absolutely, and that's sort of part of why we think there's lots of things that are helping us do it faster, more efficiently. But let's also recognize that we'll find things that are harder. We'll find services a bit more expensive. And so until we've done, we should not be representing or positioning.

And so I just -- hence, the sort of caution we just got to execute this. We're very clear on what we need is the outcomes. We're very clear on the financial discipline we've set ourselves in how we execute this. And there are things where we've gone better than we thought and there's things where we haven't gone as well as we'd hoped, and that's squaring out. And that's why we're here today to say we're on time, we're on budget and we're on scope. And we just continue to maintain that discipline. And even though there's lots of things where we might see unlocks or opportunities coming our way, we just simply have to stay the course.

Brian, you've got a mic.

Brian Johnson, MST. Just on Slide 10, just to clarify something. So this is the slide that shows the investment spend over time gapping up. And we know that 75% of it is expensed. But what I'd like to clarify is that if you look at that slide, you can see in the smallest font imaginable, which I've noticed is an Australian bank unique thing. The important stuff is always in the smallest font.

But if you have a look at the total investment spend, $2 billion per annum, 40% of it going into this, that figure -- that implies that it goes to $800 million, and there's probably a little stub after that of about, I don't know, $400 million to get to the $3.5 billion bill. I just want to clarify that when we get to '27, we get a declining investment spend of which 75% is expensed. So expenses go down in absolute dollars probably by about $100 million, but that is over and above the sequencing of the savings coming through. So in '27, is there a cost out mechanical cost-out dynamic from this?

Maybe while you're thinking of that, Anthony, your math is pretty good, Brian. your math works on that.

Yes.

Well, it's your slide, Justin. So my math works and your slide between us, that's a very powerful argument. There is actually a cost-out dynamic in '27.

And we have to deliver.

But there is -- can I just go back to the question? Is there a cost-out dynamic in '27?

So that -- well, that's what the numbers put out. you're looking for something here, which is, yes, the intention is that there will be cost savings, okay? And we will have cost out. what I need to deliver is a total cost out across the whole company. Now whether it's in Unite or other parts of the company is sort of like the next order question, but we need to make sure we hit our cost targets and deliver the outcomes for -- well, deliver on what we've set ourselves. So yes, your math spills out, then that's exactly what we have to deliver through the course of '23.

Anthony, this is a really important point. That's over and above whether it works or not. That's correct.

But bear in mind, the overall investment envelope is roughly $2 billion. So it's -- that's implying non-UNITE spend is going up.

Yes. But just mechanically, Project UNITE, I just -- it's really an important point. And I think Nathan is saying yes. So just to clarify, there is a cost-out argument in '27 just from the declining investment spend. And then if we have a look at Slide 32, all the incremental cost outs from that, it gets bigger again. Is that correct?

5

Yes. And so it's Nathan Goonan, CFO. The way I would think about this is, Brian, we're not saying precisely where we land in FY '26 here for UNITE. So there's a $100 million range here between where we will.

What I would expect to happen in '27 is that we will have reasonably consistent investment spend in totality and reasonably steady-state UNITE spend from where we land in '26. Depending on where we land in '26, between the $100 million range, you could see a slight step-up of that. And we'd have more to say about that as we get through the year. But I think the important fact that we don't have is just let's see where we land in '26 and then we can have a conversation about '27. I'd expect UNITE to be relatively steady into '27 and total investment spend to be pretty steady in '27 as well.

We've got another online question. Phil [indiscernible] .

Can you give us some extra details on what has driven the small cost increase in the mortgage simplification program, and that's shown on Slide 32, please.

Yes, absolutely. So obviously, the initiatives has come down with the removal of the RAMS business, and then we've had some additional work around both data and the collateral management.

Thanks, Peter. We'll probably have time for one more before we switch off. John, you've got the mic there.

Yes. John Mott from Barrenjoey again. Just another question on this monitoring process. So you've gone from a number of initiatives down to milestones, and it looks like you're flying through it. So just over the last couple of months, you've gone -- implement gone from 13 to 19. But you've also said all the big projects haven't really started, especially in the retail bank. If you actually weighted it and said, okay, let's wait it based on the benefit or even the spend, where would you be?

In terms of how far...

Because you're basically saying, look, we looked at the initiatives, but let's go away. We're now at milestones, like what's the milestone mean, especially when some of them are very big and you haven't even started a lot of these things. So if you think about it from the actual benefit that you're getting, is there a different way of measuring it where we can actually look at it and say, we can get it and then we can hold Nathan to account in a couple of months and years on how it's actually coming through rather than just tick a box on an initiative.

Yes. I think, as I said, if we were to look at the 57 individuals and just report to you sort of here's where we think they are in terms of RAG. I think that's one way of doing it. That's certainly the way we previously looked at it. We don't think it provides as much transparency as saying here's the total number of milestones broken down in those individual initiatives and here's how far through we are of each of those. So I mean, happy to post us have a conversation if you think there's a better way we should be demonstrating that. But...

How many milestones are there? Like is the thousands of them, like...

Approximately 2,074. No milestones will change. Some will come in, some will go out, some will be consolidated, but broadly, that's what we like.

Guys, it's a very large project with a whole layer of complexity. And as you execute, things will change. And so it's -- and happen though, but -- and would appreciate any thoughts on further granularity, but it's also a project and things will move around.

What we wanted to make sure is we're very honest with you about are we getting to where we've set ourselves as a goal to get to. And so we are making progress. I mean I would like it to be a bit more than that. But we are making the progress, and we feel we're on time, on budget and on track to deliver.

But the discovery donut, there's a lot less spend there than, say, implement, which would be the largest spend bucket. Richard, you look really keen. So maybe we'll finish with you on the question, making a good one.

Richard Wiles, Morgan Stanley. Can you give us a list of the 57 initiatives so we actually know what the whole program involves?

Yes. We'll take that on notice and work with Justin.

Yes. Thank you. Great question.

Thanks for joining everyone online and come through with any further questions. Thank you very much.

Good morning and welcome to Westpac's Q1 FY '26 Update. I'm Justin McCarthy, GM, Investor Relations. Joining me today is Nathan Goonan, our CFO.

Before we commence, I acknowledge the traditional custodians of the land on which we meet. For us in Barangaroo, that's the Gadigal people of the Eora Nation. I pay my respects to Elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people.

This is an inaugural quarterly call designed to enhance transparency and disclosure. We hope this refinement is helpful and welcome your feedback. Nathan will provide a brief overview of our quarterly performance and then take questions. In the interests of time, we'll take one question per person.

With that, Nathan.

Thanks, Justin, and good morning everyone. Thank you for joining. As we start the financial year, we're continuing to drive operational momentum across the group and our quarterly performance reflects a disciplined execution of our 5 strategic priorities.

Net profit excluding notable items increased 5% compared to the second half '25 average. Revenue was up 1%, comprising a 2% increase in net interest income driven by an increase in average interest-earning assets and a stronger Treasury performance, and a 4% decrease in noninterest income driven by lower markets revenue due to unfavorable DVA.

Operating expenses ex the second half '25 restructuring charge were stable. Including the restructuring charge, expenses were 5% lower. These revenue and expense outcomes resulted in an increase in pre-provision profit of 6% or 2% ex-restructuring.

Sustainably growing customer deposits underpins our ambition to be our customers' main financial institution. The growth of $12 billion in the quarter highlights the inherent strength of our franchise, with household deposit growth of 3% and business transactional deposits up 4%. We expect deposit growth to remain strong through FY '26.

Loans increased $22 billion with growth across all customer segments. Institutional lending grew by 7% and was well diversified. We continue to see good opportunities in this part of the market, although we expect the rate of growth to moderate over the remainder of FY '26.

Australian mortgages excluding RAMS grew by 3%. This reflected progress in executing our mortgage strategy with the proportion of proprietary flow rising to 35% in the quarter. This positioned us above system for the quarter. We're targeting consistent performance broadly in line with system from here.

Australian business lending maintained momentum, growing at 3%. More bankers on the ground is improving proprietary flow. The stronger lending than deposit growth resulted in a modest widening of our funding gap, with the deposit to loan ratio down 1 percentage point to 84%. We remain on track to settle the RAMS transaction by mid-year and have intentionally positioned the balance sheet to accommodate the expected $16 billion reduction in mortgages.

Funding markets have been supported and we have issued $18 billion in long-term wholesale funding since October '25.

Net interest margin decreased 1 basis point to 1.94%. Consistent with expectations set out at FY '25 results, core NIM of 1.79% declined by 3 basis points compared to second half '25, with the decline moderating to 1 basis point on a quarterly basis. Lending margins edged lower as competitive pressures persisted. The rate of compression was stable in mortgages, has moderated in business, and was more pronounced in institutional this quarter.

The nonrepeat benefit related to interest rate reductions in prior period was a net drag in the quarter, with the lending reduction more than offsetting a deposit benefit. Prior period rate lag impacts have now flowed through our numbers.

Overall deposits were stable. Compositionally growth in higher rate savings balance continues to be a drag, while liquid assets provided a slight benefit. The Treasury and Markets contribution of 15 basis points was up from 13 basis points, reflecting favorable interest rate positioning by Treasury in a more volatile market environment.

To provide further earnings stability through the cycle, the deposit hedge was increased by $15 billion to $92 billion, $7 billion of which was flagged at the full year results. This had no material impact on NIM in the quarter.

In terms of considerations for the first half, we continue to expect the net replicating portfolio benefit to be approximately 1 basis point, and our sensitivity to a 25 basis point rate rise is a benefit of approximately 1 basis point over a 12-month period. However, the recent RBA rate rise will be a slight headwind in the second quarter due to the timing of passing through the rate rise to customers.

Operating expenses excluding the second half restructuring charge were stable at $3 billion. We report to the nearest $100 million with expenses rounded up in the quarter. We remain confident our FY '26 expense growth will be largely offset by productivity savings, which include ongoing benefits from the restructuring charge taken in the second half of '25. Considerations provided at the full year results in relation to investment spend and operating expenses more broadly remain current.

Credit quality metrics improved over the quarter. Stressed exposures to total committed exposures decreased 11 basis points. This reflects a decline in Australian mortgage arrears and reduced stress rates across most industry sectors. Our portfolio remains well diversified across sectors and geographies.

Total credit provisions rose marginally and at $5 billion were $2.1 billion above our base case. Coverage was stable at 125 basis points. While modeled collective assessed provisions were stable, reductions from improvements in underlying credit metrics were offset by model adjustments related to the severity of the downside scenario. Credit impairment charges remained low at 6 basis points of average gross loans.

The CET1 capital ratio remains strong at 12.3%. The reduction in CET1 reflects the payment of the full year 2025 dividend, which more than offset earnings for the quarter. There were also several items that moved in both directions and summed to a reduction of 5 basis points. These movements, many of which are one-off in nature, include: a benefit from the removal of the operational risk overlay; higher lending balances which were partly offset by credit quality improvements and data refinements; IRRBB was a modest drag with embedded losses and an increase in hedge deposits more than offsetting the benefit of standard changes; and the capital floor drove a marginal reduction.

In second half '26, we expect a 22 basis point benefit from the completion of the sale of our RAMS portfolio.

To conclude, the performance for this quarter demonstrates solid progress against our plans. Discipline execution is driving our momentum, we're deepening customer relationships and investing in our business. We're optimistic on the outlook for the economy and expect demand for both business and household credit to remain resilient.

With that, I'll hand back to Justin for questions.

[Operator Instructions] Our first question comes from Matthew Wilson from Jarden. Matthew?

Pretty clear result. Therefore, perhaps can we ask a question -- obviously, you've had 2 senior leaders in the IT area depart in recent weeks, which coincides with an important part of the UNITE project. I understand Peter Herbert is running it, but obviously IT is important. Could you add some color to the outlook for that?

Yes. Thanks, Matt. We've obviously got an update on UNITE in the diary for I think the 26th of March where we'll do a fulsome update on that. I think obviously Anthony and Scott has announced his retirement and so he and Anthony have been working through that over a period of time to work out when's the best time for that to happen. Scott's remaining with us until the end of the year as we find a replacement for him.

But as you said, Peter Herbert runs the UNITE program. We have a dedicated CIO who works for Scott who's been embedded in that program alongside Peter Herbert running it. So don't read anything into that. It's no material impact on UNITE and you'll get a fulsome update on the 26th of March. And you could almost read it the other way, Matt. This is a retirement for Scott that Anthony and Scott have been working through when's the best time to do that.

What about David Walker? He seems more hands-on and obviously has fantastic experience with his time at DBS.

I think David Walker again, these are great executives who have done good things for Westpac over a period of time and come to the end of their time here. I think we've also been bringing in talent into the tech team and again there's a dedicated CIO who isn't David Walker or Scott Collary who's been working on the UNITE program.

The next question comes from John Storey from UBS. John?

Happy Friday. Yes. I guess the question that I would have, Nathan, is just around your hedge, right, and obviously the decision to increase the size of the hedge into a rate hiking cycle. I mean obviously in the short-term, maybe not ideal, but maybe you could just give a little bit of context around how tactical you can actually be on the hedge itself and then maybe the 50 basis points let's say of potential interest rate increases during the course of this year. What would be the impact actually on NIM from increasing the size of the hedge?

Thanks, John. Happy Friday to you as well. On the hedge, I probably came into the role, John, thinking that one of the things we needed to do was just increase the proportion of our non-rate sensitive deposits that were hedged. And I think really what we're trying to do here is provide medium-term earnings stability through the cycle. And so while yes, you can be tactical and when you put it on, I think the main point here is to try and give that earnings stability so that it's better for us when we're planning to run the bank and we think it's a more predictable earnings profile for the market.

The timing of these two was -- and I think now just to say, John, I think we're now proportionally up there with some of our peers in terms of eligible deposits that we could hedge. The timing of the two that we put on, so we did 2 $7 billion broadly. The first was in October, that went on probably slightly below cash. So what you're doing here as you know is effectively taking earnings that might be earning the overnight cash rate and investing across the 5-year curve. So the October one was slightly below, so we took a little bit of near-term earnings hit on that one to give us the earnings stability over time.

And then actually the December one was just slightly before Christmas and we actually were able to invest that pretty much at the cash rate. So there's no near-term earnings impact from that one. And as I said, take that all in aggregate, we expect a one basis point benefit from the hedge when we get to the first half.

Our next question comes from Andrew Triggs from JPMorgan. Andrew?

Nathan, can I just ask on the momentum in the core NIM in the quarter, please? Just the 1 basis point decline. Just a bit more in terms of the drivers of that, what were you seeing with respect to mix shifts especially on deposits? You mentioned perhaps there was a little bit of a headwind from your change to the hedge there. What are the other sort of drivers you can call out for us please?

Yes. Thanks, Andrew. And I think, maybe I'll answer this one a bit fulsome and then hopefully it helps others on the call as well. I guess the trends that we're seeing in the quarter, Andrew, are very consistent with what we were talking to you about at the full year. And I think they're obviously going to be the things that we'll be talking about when we get to the half as well. It is a more stable environment for margins and you're right to call that out. And as you said, we've sort of seen moderating trends. While there are consistent trends, they're moderated. We had sort of 3 basis point decline in margins when you compare to the second half and then 1 basis point when you isolate it to the quarter. And I think if you back out the net negative from the rate lag, the prior period rate lag when rates were declining, it is relatively stable.

That said, the underlying trends are sort of as I outlined at the full year. On lending, we're seeing that gradual decline in lending margins across the books. So mortgages was relatively stable for the quarter, but remains competitive. Business lending, the compression was much more moderate in this quarter than it's been in prior periods for us. And then maybe Institutional is a little bit more this quarter than it's been, although we've seen a little bit of margin compression coming in there sort of last quarter of '25 and into this quarter.

And on the deposit side, while relatively stable overall, the thing that's hurting margins there a little bit, and again it's a gradual decline, has just been the real success of that savings product. So at a macro level, deposits mix has been improving, proportion of TDs is continuing to decline. The bonus saver product, the life product, continues to be a great product for our customers and so that might have been $5 billion of growth in the fourth quarter last year was another $4 billion of growth this year. And one of the factors there is consistent with our peers. We're just seeing a slight tick up in the people who are qualifying for the bonus rate. So I mentioned that at the full year, the fourth quarter was about a percentage higher than what it had been for the average of that year, and that's continued into this quarter. So they're the sort of trends.

If I thought about the considerations going forward just to be fulsome in the answer, Andrew, I think you continue to see those underlying trends flow through into the second quarter. The replicating portfolio wasn't much of a benefit in the quarter, we expect it to be one basis point in the half. Liquids I think remain a benefit for us in the second quarter. And then just to call out the rate, the benefit from the 25 basis point hike that we've had, albeit a 1 basis point benefit over a 12-month period, it's likely to be a slight drag in the second quarter just given the timing difference between when we pass on to deposit holders relative to lenders.

The next question comes from Jonathan Mott from Barrenjoey. Jonathan?

Just a quick question if I could on the deposits. You said there was really good growth and success that you've had in the savings product, and that's, I think, you just mentioned $4 billion. Have you seen any growth in non-interest bearing deposits which was a real tailwind for CBA when they just reported?

Yes, we have seen growth in those, Jon. Yes, we have seen growth in those transaction deposits. In particular, I called out in the speaking notes. I think Paul and the team are doing a really neat job in business there, Jon. We had sort of 4% growth in the quarter of transaction accounts in Business Bank. That's sort of $2.8 billion growth there. And then overall we're seeing growth in transaction accounts in consumer as well. So it has been outpaced by growth in offsets and growth in savings, so hence calling out that mix shift with the higher proportion of growth coming in those higher rate products. But we are seeing that underlying quality growth as well.

Next question comes from Carlos Cacho from Macquarie. Carlos?

I'm just wondering if you can give us any detail about the proprietary broker split in mortgages. It looks like from your portfolio side you've continued to lose a bit of proprietary share, but on the flow side have you seen any stabilization or improvement there given the renewed focus on the proprietary channel?

Yes, thanks, Carlos. Yes, we have. In from a flow sense -- and you're right to say it's a big ship and I think Anthony's mentioned at the full year, we're going to measure this in sort of halves and years, not in quarters. But for the quarter, we have had that improve for 2 quarters in a row now and on a flow basis it was 35%, which is up from where it had been. Actually, interestingly, if you're sort of looking for a stat or you want to be a believer in this space, which we certainly are, we've had first party growth of $3 billion in the first quarter. If you compare that to the fourth quarter last year, that was a reduction in that first party or proprietary book and it grew by about $100 million in the prior period. So it's sort of grown by $3 billion, prior period it grew by about $100 million. So we are seeing green shoots there. It's going to be a journey for us as we continue to push on that and the team are doing a good job executing against a multi-year plan that we expect to just continue to improve and improve as we go through that.

Our next question comes from Brendan Sproules from Goldman Sachs. Brendan?

Just a quick question on the contribution to NIMs from Treasury this quarter. Is that a little bit circumstantial to the conditions that you faced during December? And how do you sort of see the contribution to NIM on a more sustainable basis from this part of the business?

Yes, thanks Brendan. It's a good question. I think it's clearly been a bit of an outlier in this quarter. So I would expect it to moderate. And I'd expect it to moderate even into the half, Brendan. So I think long run of that has been more like in the 12. Some people tell me it's sort of almost been in the down around 10. I think we've clearly had a good quarter where the contribution's been significant. I'd expect it moderates. And so don't expect that to be 15 when we get to the half.

Our next question comes from Tom Strong from Citi. Tom?

Nathan, you mentioned the funding gap in the quarter which meant that you haven't got the same portfolio mix that your peers have seen. I mean how should we think about the funding of growth into the next couple of quarters given your loan growth is quite strong? How should we think about how you're going to fund this? Do you have to get potentially a bit more competitive in deposit pricing to pick up that deposit growth?

Yes, thanks, Tom. I think we're doing a neat job on deposits. So I think the major thing just to call out as you think about the outlook is just the RAMS sales. So we've got $16 billion of mortgages that we expect to drop off the sheet when we get to completion of that, which we're expecting by mid-year. And so what we've been able to do a little bit if you think about that is just pre-position the balance sheet for that eventuation. We've sort of been doing that a little bit on both sides, I guess. So that has given us the confidence to be lending a little bit more on the asset side.

And we've also structured up some of our liability side a little bit for that eventuation. So for the real studies out there, you'll see we've been increasing short-term funding a little bit with for that eventuation. And we've been able to sort of structure up for that. So that's the big thing that we've got going on as we think about the outlook for funding the balance sheet for the rest of the year.

I think on deposits, look, it's a competitive market. We're doing well. We feel good about that. And we've been sort of taking a slight amount of share in household deposits or being just slightly above system. We want to continue to do well there. Business transaction growth has been good and the team are executing really well there. So we want to continue to be focused on deposits and make sure we're getting our share or slightly above, but we don't think we have to do anything crazy on price to be able to do that.

Our next question comes from Brian Johnson from MST. Brian?

Nathan, I'd just be intrigued -- I know Carlos kind of answered this, but I'd love if I could get some more detail. We've seen the flow go from like 33% through the prop channel up to 35%. But the flip side is that we've actually seen the percentage of the book decline from 45% to 44.4% on Slide 8. Could you just explain to us the increased flow versus the declining book? Is there something weird that's happened in the life of the book between the two?

Yes, thanks, Brian. I think it is just going to be a sort of a what proportion is running off relative to the flow that we're putting on. And so I can take it away and come back to you and just sort of outline how the maths would work on that, Brian. But I think my comments really go to the bit that we're most focused on had been that flow number in terms of improving how we're going to market and making sure that our application front of funnel was most focused on improving that first party mix relative to third party. Clearly there's just maths in the back about how the back book is behaving relative to that flow that causes the dynamic that you're seeing on the page there.

And that would it be incorrect, so it's hard not to conclude that the prop book is running off faster than the broker book. Is that a fair conclusion?

Yes, I think it has to be the maths of it. So the absolute prop flow was sort of up in the year, but up in the quarter as I said we had sort of $3 billion of prop flow. But then to get the dynamic that you've got there in the stock, you have your prop book is running off faster than your broker book.

And also consider that the flow is still below 50 from proprietary. So we're still getting more flow from broker. Our next question comes from Ed Henning from CLSA. Ed?

Sorry, there might be a bit of background noise. Can I just ask a question on capital? Obviously capital position looks pretty strong. You got the RAMS sale coming through. Can you just talk about more optimization opportunities coming through in the next half and the next year? And also potential impact of the RBNZ changes as well coming through.

Yes, thanks, Ed. We can hear you fine so. Just sort of take those in turn. I think inside the quarter on refinement, we've -- basically, we've had a track record here of about $10 billion of sort of optimization in the risk weights every year. And I think the team have been executing really well against that for a number of years. It's been a pretty consistent number. You'll see in the pack when you get the opportunity, it's been -- that was $2.3 billion of risk weight optimization in the quarter.

I do expect, and I think I said at the full year that, that run rate is unlikely to repeat for the full year. So I don't expect we're going to be at $10 billion this year. I expect that will be a much more moderate number. If we got that somewhere near the sort of $7 billion or $8 billion, I think, it would be a good effort based on the pipeline of opportunities we've got ahead of us. So we continue to see opportunities. Maybe they're moderating a little bit from where they've been.

The other thing that's, sort of, offsetting some of the strong credit risk weighted asset growth has been credit quality. So when you get the opportunity to go through the pack, you'll see that was a $3 billion RWA benefit from improvements in underlying credit quality. That was about $3 billion in the fourth quarter last year. So that's a pretty consistent trend now. And if we continue to see those asset quality improvements flow through the book, you could expect that that continues to be a benefit for us. And then I think lastly on -- and offsetting that, we've obviously got strong credit growth. So that's the most important thing that's offsetting that there.

As it relates to New Zealand, that's still early days in terms of those things haven't been finalized, but they do look positive. So we have -- that would mean that we're pretty much at the capitalization rate of 12.5 set one in New Zealand that we need to be at. So there will be some opportunities there. I don't think it's particularly material for us, but net-net that'll be a positive for us as well.

Our next question comes from Richard Wiles from Morgan Stanley. Richard?

So I just wanted to follow-up on the questions around Treasury. I think you said that Treasury had a good quarter, boosted the margin, but markets was negatively impacted by DVA. If we put it all together, Treasury and Markets, it looks like the margin benefit might have been greater than the drag on other income. Although you haven't split it out. Last year or last half the Treasury and Markets was about $1.1 billion. So the quarterly average is around $550 million. Could you tell us what it was in the quarter and how much it -- so whether that margin boost has been fully offset by a reduction in other income?

Yes, thanks Richard. And obviously we'll sort of do that fulsome disclosure when we get to the half. In terms of just to give a high level sense, I think you're reading it right, they've probably offset each other, but I think we can give more fulsome disclosure on that when we get to the half. But proportionally I think you're getting that pretty right.

Next question comes from Matt Dunger from Bank of America Merrill Lynch. Matt?

Could I just revert to the capital position? Just I know you said the 5 basis point net impact of the one-offs, but just wondering how the embedded losses unwind. You've got the RAMS sales. So just wondering how you thinking about potential for capital returns coming in into the half given strong capital generation expected?

Yes, thanks, Matt. Just specifically on the on the embedded losses there, I think IRRBB was a net drag of 4 basis points. There's sort of 3 component parts here. So we had the benefit of the standard changes, I think we flagged that at the full year. It's about 40 basis points or 39 to be precise. And then sort of offsetting that there's 2 points: the deposit hedge, so we obviously have increased that by 15 $billion, there's 27 basis points consumed there for that. And then as you rightly call out, we had embedded gains swing to embedded losses and so there's sort of 16 basis point drag from that in the quarter.

In terms of the look forward on that, obviously the embedded loss or gain is really all rate dependent. So that is quite hard to predict. And so it's like the unwind of that is obviously a possibility -- there's obviously a possibility that that goes the other way as well. So that's a little bit of a one to watch in terms of where things go from here. I think our movement there just looking at the other results this week looks very consistent with what other people have seen.

On the go forward, as you rightly call out, I think a number of the movements in this quarter are a little bit one-off in nature. So operational risk overlay removal is one-off in nature. The impact of the standard change is one-off in nature. The additional deposit hedge, while we'll continue to have rebalancing while we've got strong growth there, I think we're now proportionally in and amongst our peer and I wouldn't expect material movements in that in the second quarter. And then it just all comes down to sort of earnings, credit, risk weighted asset growth through credit, what happens in asset quality, what happens in the embedded loss. So there's a few moving parts on that and look forward to discussing it more with you at the half.

That was our last question. We certainly thought this morning was valuable. Hopefully you did as well. We welcome your feedback and thank you for being succinct with your questions because we're just on 8:30 now. Come through with anything else we can help with throughout the course of the day. Thank you, Nathan.

Thanks very much.

Well, good morning, everyone, and welcome to the 2025 Annual General Meeting of Westpac Banking Corporation. My name is Tim Hartin, and I am Westpac's Company Secretary.

On behalf of Westpac, I'd like to acknowledge the [ Gadigal ] people of the [ Eora ] Nation. We pay our respects to their elders, both past and present. We also acknowledge the traditional owners of the lands from which those joining us on the webcast are located today.

Westpac has been helping Australians across our nation for more than 200 years, and we're proud of our long-standing commitment to reconciliation and are working towards our vision of an Australia where [ Aboriginal ] and [ Torres Strait ] Islander people enjoy equitable opportunities.

Before I introduce your Chairman, I'll run through a few procedural matters. This year, we're taking a different approach to the agenda of the meeting. You'll hear first from your Chairman and CEO. The items of business will then be displayed on the screen, followed by the presentation of the proxy and direct voting results. Your directors seeking reelection and election will then address the meeting, followed by Mr. Kyle Robertson, who represents shareholders who are proposing resolutions 5a and 5b. Your Chairman will then invite shareholders to ask questions on all resolutions together, which is intended to provide an enhanced meeting experience. We'll take questions from the people joining us here in the room first, then we'll move to the questions submitted by those who are watching our live webcast.

If you're here in person, you should have received a colored card at registration. A red voting card allows you to speak and to vote. Blue cardholders can speak but cannot vote. And yellow cards are for visitors who can observe today's meeting but cannot speak or vote. If you do wish to ask a question, please approach a microphone attendant and show them your red or blue card. If you have a mobility restriction, please raise your hand and a microphone attendant will come to you.

For those watching the webcast today, we ask that you please submit one question at a time, and we may aggregate questions if we receive multiple questions on the same topic.

All resolutions today will be decided by a poll, so please mark your voting card to cast your vote for each resolution. MUFG Corporate Markets is the returning officer responsible for overseeing the voting process for this meeting and can assist you with any questions. Completed voting cards must be placed in one of the ballot boxes, and you can do this at any time after the Chairman opens the polls. And voting will close 15 minutes after the meeting has concluded, and the results of the polls will be advised to the ASX and available on Westpac's website. As set out in the notice of meeting, online voting is not available at today's meeting. If you do have any issues viewing the webcast or asking a question online, please call MUFG on 1-800-090363. I'll now hand over to your Chairman, Steven Gregg.

Thank you, Tim. I've been advised that a quorum is present, and I therefore declare the 2025 Annual General Meeting of Westpac Banking Corporation open. I also declare the polls open. Please cast your votes at any time. I would like to extend a warm welcome to everybody joining today. I would now like to introduce my fellow directors. On my left is Margie Seale, Peter Nash, Michael Ullmer, Andy McGuire, Pip Greenwood and David Cohen. And on my right is -- next to Tim is Anthony Miller, our Chief Executive; Nerida Caesar, Tim Burrows and Deborah Hazelton. Westpac's auditor, Kim Lawrie of KPMG is seated in the front row with our executive team. If you have any questions in relation to the conduct of the audit, I will ask Kim to respond.

Before we move to matters in the Notice of Meeting, both the CEO and I would like to address the meeting. This will include responding to the most commonly raised matters by shareholders prior to the AGM.

Ladies and gentlemen, 2025 has been a seminal year for Westpac. With renewed leadership, we have set a bold agenda to transform the organization and to position it for long-term success. Our focus is to strengthen the foundations and accelerate changes that will achieve greater operational efficiency and better customer experiences, all of which will help to deliver stronger, sustainable returns for our shareholders.

The completion of the 5-year CORE program responding to the enforceable undertaking was a significant milestone for Westpac. It sets a new benchmark for risk management and governance and accountability across Westpac, a standard we will continue to embed and strengthen. APRA removed the remaining $500 million risk capital overlay in October, which has further strengthened our capital base. Our capital position remains unquestionably strong, supported by disciplined financial management and a robust balance sheet. Our CET1 capital ratio of 12.5% reinforces our standing amongst the world's strongest banks and is market-leading within the Australian banking system.

On sustainability, we reinforced our position as Australia's largest lender to the renewable energy sector. This reflects our support for the nation's transition while balancing energy reliability, security and affordability. Importantly, we are committed to partnering with institutional customers to help them reduce their emissions intensity across their operations.

Financial performance in 2025 reflected our strategy of balancing growth and return while making the necessary investments in people, innovation and transformation to support Westpac's future. Net profit, excluding notable items, was marginally down at AUD 7 billion. Return on tangible equity remained well above our cost of capital at 11%, excluding notable items, despite higher transformation costs. Pleasingly, we experienced strong deposit growth of 7%, slightly ahead of our loan growth at 6%, lifting the deposit-to-loan ratio to 85%, which has strengthened our funding.

Margins were stable despite competitive pressures, reflecting a disciplined management effort. Total expenses increased by 9% this year due to strategic and structural decisions. These include investment in transformation and bankers, along with higher amortization and employee costs. We expect the restructuring charge to provide productivity benefits in the years ahead. A major focus going forward will be to reduce our cost base to align with our peers.

Earnings per ordinary share were $0.019 with share buybacks contributing $0.03. Your Board declared a final dividend of $0.77 per share, which is up $0.02 on '24, taking the full year ordinary dividends to $1.53 per share fully franked. In an uncertain operating environment, the Board determined it was prudent to carry surplus capital to prioritize your bank's financial strength. This enables us to balance the investment required for ongoing transformation and business growth while maintaining the flexibility to return surplus capital to shareholders when appropriate.

Total shareholder return for the year '25 was 29%, ranking Westpac the first amongst Australian banks across 1-, 2- and 3-year periods. This is a significant improvement on prior years. In his first year as your CEO, Anthony Miller has brought new energy, focus and momentum to Westpac's strategy. He has commenced his journey as the CEO incredibly well. He is driving an important cultural shift to make Westpac more agile and focus on execution and delivering a better outcome for all our customers. We are pleased to see our people embracing this change and new direction.

Employee engagement remains in the top quartile globally, which is a testament to their dedication and commitment. Your Board stays connected with the teams across the bank and continues to champion diversity and inclusion alongside professional development to ensure Westpac attracts and retains top bankers and talent. In this regard, we have attracted some exceptional leaders to the company this year and are delighted that the capable leadership team is guiding the next chapter for Westpac.

This year, we advanced our transformation agenda, which is critical to achieving our growth ambitions. Through UNITE, we are building a more efficient, future-ready bank by consolidating technology platforms, streamlining processes and simplifying our product and system landscape. These changes will help strengthen our foundations and should reduce both risk and cost to support sustainable returns and improve service.

The Board monitors progress through a directors UNITE oversight group, providing additional governance and strategic guidance. Alongside UNITE, we are making strides in digital innovation with Biz Edge, our new business lending platform and Westpac One, a new banking platform for institutional banking customers.

Sustainability is another area which supports our ability to create long-term value for our shareholders. We have evolved our practices and disclosures, releasing a new sustainability strategy, climate change, climate transition plan and reconciliation plan this year. We manage all our material sustainability topics, including nature and human rights.

However, today, I will focus on climate as this was the most prominent theme raised in shareholders' questions. we appreciate our shareholders hold diverse views on this matter. As an organization, we aim to be a net zero climate resilient bank by reducing our emissions and supporting customers with their decarbonization plans. 89% of our Australian and New Zealand generation lending was to renewables such as wind, solar and hydropower at the end of September. And as mentioned, Westpac is the largest lender in the country to renewables. Our exposure to the fossil fuel sector across the entire value chain represents a very small percentage of our total committed exposure at just 0.61%. To put this in context, in year '25, we had $39 billion in total sustainable finance lending. This is almost 5x larger than our lending to the fossil fuel value chain.

Overall exposure to the sector is marginally increased this year to a slight increased exposure to downstream activities such as distribution and retail. Importantly, however, our exposure to upstream oil and gas extraction has fallen 10% and now represents 0.1% -- 0.1%, I should say, of Westpac's total exposure. We also have no corporate lending to thermal coal mining customers.

In response to shareholder feedback this year, we updated lending requirements for customers in carbon-intensive sectors. This included expanding the scope of sectors required to have climate transition plans from oil and gas extraction to metallurgical coal mining and coal-fired power generation. We provided more detail on our customer climate transition plan evaluation criteria and ratings, which apply to a small number of customers we have operating in these sectors.

To be eligible for new and renewed corporate lending and bond facilitation from 2026, our customers must have interim Scope 1 and 2 targets aligned to well below 2 degrees Paris Agreement goal. We also consider customers Scope 3 emissions in our evaluation, including the net zero ambitions and reduction plans. Our commitment to reducing emissions across our value chain is endorsed by the Board and management and is led by our Chief Sustainability Officer, who reports directly to the CEO.

We welcomed several new directors this year, strengthening the Board's collective skills, diversity and experience. Our composition represents a balance between continuity and renewal, blending the experience of long-serving directors with fresh perspectives from new directors. Your Board of Directors has a significant level of financial services and banking experience, which I believe is fundamental in providing good governance and oversight.

The new directors who are seeking election this year are Deborah Hazelton, who joined the Board in March and serves on the Board Remuneration Committee. She has more than 30 years of global financial services experience. David Cohen, who joined the Board in April and serves on the Board Risk Committee. He has more than 2 decades of experience in financial services, including serving as the Deputy CEO of the Commonwealth Bank of Australia. And Pip Greenwood, who joined in August. Pip is an experienced Non-Executive Director with financial services experience and currently chairs both Westpac New Zealand and the A2 Milk Company.

Board Director, Peter Nash, is also seeking reelection, and we acknowledge the voting on this item of business. However, the Board unanimously supports Peter's nomination, recognizing his contribution over the past 7 years and the expertise he brings to the Board. Since joining Westpac during the Royal Commission, Peter has played a key role in our remediation efforts in completing the CORE program, helping to restore confidence amongst investors and regulators. As the Audit Committee Chair and a long-serving director, he has also been instrumental in resetting the executive team and shaping Westpac's strategy. His continuity provides an important bridge from past challenges to future opportunities.

Additionally, Margie Seale is stepping down as the Chair of the Remuneration Committee, although remains a committee member. And I'd like to thank Margie for her commitment and wise counsel as Chair of that committee. I'm delighted that Deborah Hazel will also assume this role at the conclusion of today's meeting. Looking ahead, challenges are expected, including ongoing geopolitical and trade tensions, the rise of private and nonregulated credit and elevated global debt levels. Notwithstanding these headwinds, prospects for the Australian and New Zealand economies remain positive. Recent interest rate relief has supported a modest recovery in activity, though we recognize that some businesses and households continue to face pressures such as labor, energy and insurance costs.

At Westpac, we are well positioned to deliver on our strategy and create lasting economic and social and environmental value for our customers and the communities we serve. And I extend my gratitude to shareholders, customers, our people and the community for their continued support as we focus on investing for growth and delivering sustainable shareholder returns. Now I'm very pleased to welcome your CEO, Anthony Miller. Thank you.

Thank you, Chairman. Good morning, and welcome to all our shareholders. It's a privilege to be here today to share how we're building a stronger, more sustainable Westpac. A key focus in my first year as CEO has been ensuring we have the right structures and people in place to lead Westpac towards becoming a more resilient customer-focused bank. We're shaping a culture that moves faster with a relentless focus on execution and customer service. Delivering for customers is critical to our success. By improving our standard of service and then delivering that standard consistently, we build trust and earn customer loyalty. If we do this well, we will achieve our ambition to be our customers' #1 bank and partners through life and thus grow the business and returns for our shareholders.

In addition to lifting and sustaining service levels to our customers, we are pursuing a growth and transformation agenda, enabled by a robust balance sheet and a strong capital position. We want to be the #1 bank in the marketplace. And as we go after this, we are guided by five priorities. Getting to #1 will take some time, but if we stay focused and deliver on these priorities, we will get there. We're committed to relentless execution and are holding ourselves accountable with clear targets and transparent reporting. And we'll keep being honest with each of you about where we stand, the challenges we face and the progress we're making.

Turning to this year's performance. This has been a solid year at Westpac. We have a very strong balance sheet and saw great momentum in our target segments. Net profit was $7 billion, representing a return on tangible equity of 11%, excluding notable items. This reflects the balance we've struck between delivering returns while investing for the future.

Our revenue grew 4%, and this was supported by solid lending and deposit growth. Some of the highlights included 10% growth in our Consumer and Institutional division deposits, reflecting the quality of our consumer business and customer base, a 15% increase in business lending with solid growth in health, professional services and agriculture and institutional lending growth of 17%.

Looking at costs, we know managing this effectively is essential. The 9% rise in expenses this year was driven by higher staff and technology costs as well as the UNITE program and the decision we made to invest in more bankers and additional growth projects. It also included a restructuring charge to help support productivity. We are reducing expenses by structurally lowering the cost of running the bank through UNITE. We're targeting by FY '29 a cost-to-income ratio below the peer average and a return on tangible equity above the peer average. We acknowledge there's a lot of work ahead of us to achieve these objectives.

Our service proposition is at the heart of what we do. Our approach is to bring the whole bank to our 13 million customers, meeting and serving them where and how they want. We strive to earn their trust and to look after their entire banking needs. We are here to support our customers through the cycle. We provided 46,000 hardship packages this year to those experiencing financial challenges. Pleasingly, 3/4 of these customers needed only short-term support for up to 3 months.

Building trust and supporting our customers is -- also means tackling issues affecting our customers and Australians more broadly. This includes scams, which are a national challenge and require all parts of the ecosystem to play their part. Over the past 5 years, we have spent more than $500 million to combat scams and fraud, including investing in new detection and prevention measures to protect our customers. This includes recent innovations such as Safe Call, Safe Block and confirmation of PE, which have all contributed to a 21% decline in scam losses this year and helped to save our customers from losing over $360 million to scammers.

What's clear to me is that Westpac and the other banks can't solve the scam scourge alone. As I mentioned, to help keep Australians safe, we need more action from other players in the ecosystem, including social media companies like Meta.

In addition to adding new innovative scam defenses, we're also lifting engagement and loyalty through our award-winning banking app, refreshed brand positioning and community partnerships. Service quality in critical customer moments is improving. Our mortgage processing times have halved with most home loan application decisions made within 5 days. We're also processing business lines faster through our new digital lending platform, Biz Edge, which has already handled $5 billion in applications while continuing to expand our banker presence. We've doubled our women in business commitment to $1 billion, which has supported more than 1,800 entrepreneurial women-founded businesses since inception.

For institutional clients, we're investing in the best bankers to be #1 in our target markets. This week, we commenced our pilot for Westpac One, our cloud-based digital platform that will transform how institutional customers manage their liquidity, payments and FX. We plan to progressively roll out the capabilities within the platform over the next 36 months.

Finally, to our customers here today, who we engaged to support this year's AGM, MUFG, bread and butter project and [ Indigo ]. Thank you for being customers of Westpac. We really appreciate our partnership with you. We are investing in technology programs, AI and the workforce of the future. However, this is a people business, and our priority is to have the best team giving their best every day. We aim to be the #1 place to work and to attract and retain the best bankers and talent.

Despite significant change this year, employee engagement remains in the top quartile globally. Our latest survey confirms this with more than 70,000 comments captured from our people. This is feedback that helps us keep improving. Flexible working is a big part of that. We're committed to helping people work in ways that enables them to perform at their best. We are focused on outcomes and the right level of team connections to deliver for our customers. We've enhanced our employee proposition with 4 well-being days and a wide range of leave options to support every stage of life. Our people are engaged, working to lift our customer service and challenging us to deliver UNITE and set the bank up for the future.

Risk management underpins resilience and long-term shareholder value. This year, we have continued to embed improvements in governance, culture and accountability. The completion of the core transition and response from APRA is recognition of the progress that we've made. While we are a simpler and stronger bank than 5 years ago, the lessons of the past must stay front of mind, and we must remain resolute in ensuring past mistakes are not repeated. Strong risk management is not a destination. It's a discipline. We're focused on making it our competitive advantage and our differentiator.

The cornerstone of our transformation agenda is UNITE, which addresses legacy issues and complexity. We've finalized the program scope. We have a dedicated team and a group initiatives into 10 work packages as we make progress towards our FY '29 targets. UNITE is starting to deliver improvements that are making banking simpler and more connected for our customers. Eight initiatives are complete, 51 are underway and the majority are on track. Where challenges arise, we act quickly to get back on course. We'll continue to provide regular updates.

Alongside UNITE, we are implementing AI tools and AI agentic programs right across the business. These are not stand-alone tech initiatives, but are strategic enablers led by our businesses. Some examples of their use include strengthening defenses against fraud and scams and supporting faster approvals for mortgages and business loans. When used well, it helps us serve customers better, make smarter decisions, deliver consistently and unlock productivity. Currently, more than 15,000 of our people are using AI to support work as we go after our goal of AI for everyone. The key is making sure we find proven tangible use cases and that we use AI tools responsibly.

Looking ahead, AI will be critical to how we personalize experiences and drive efficiency at scale. But AI technology isn't enough. Like any tool, AI is only as good as the people who use it. So we're also investing in our people, and this includes the appointment of our Chief Data, Digital and AI Officer reporting to me.

As one of Australia's largest companies and employees, we play a vital role in supporting economic prosperity. A key challenge for the Australian economy is productivity. Without improvement, we cannot lift living standards or remain competitive globally. It is encouraging to see productivity at the center of the national debate. Addressing this challenge requires a coordinated response, and we're contributing to this in a number of ways. One way in which we do this is through our sustainability strategy. The Chairman addressed our first focus area, climate change. We are supporting our customers in the transition. The transition represents a significant investment opportunity for Australia. The prosperity of regional communities is another critical area where we're supporting our sustainability strategy. It drives 30% of GDP and is home to 1/3 of our population.

To maximize output from the regions, they need to have access to the banking services they need to thrive. Our commitment to regional Australia is demonstrated by our expanded presence and commitments, including the extension of our regional branch closure moratorium through to 2030, a new pilot for community banking hubs in New South Wales towns, Dungog, Manila and Bulahdelah with the view to expanding this nationally next year and new service centers in Moree with two more opening next year in Leongatha in Victoria and Smithton in Tasmania.

Through engagement with our agri customers and industry stakeholders, we have listened to feedback on our no deforestation policy, which was set back in 2023. Customer feedback has been clear. They need more help in navigating existing regulations and demands rather than dealing with additional bank requirements. In response, we removed the no deforestation commitment and we'll focus on providing practical support to help our customers manage their risks and contribute to industry-led solutions. We continue to expect all our customers to comply with vegetation laws and remain committed to our finance emissions targets for this sector. Our final sustainability focus area is housing affordability. The root cause of this problem is supply. What will make a difference is increasing the supply of quality housing at a more affordable price point. We are committed to playing our part in a coordinated approach to help more Australians achieve homeownership.

Generally, the Australian economy is in good position, and we're optimistic about the outlook. The rate relief over the past year has been welcomed by many customers, and we're starting to see this flow through to spending and consumer confidence, though this is finally balanced as we head into 2026. Our stable political and regulatory environment continues to be a differentiator, providing confidence in the nation's resilience and growth potential. However, we must continue to challenge for effective, reliable and transparent regulation. I think it is appropriate to acknowledge the commendable stewardship of monetary policy by the Reserve Bank as an important contributor.

While risks persist, including lingering inflation and geopolitical uncertainty, there are more opportunities than threats. For Westpac, I'm pleased with our progress. I'm energized by the opportunities we have ahead. I'm grateful to our shareholders, customers and employees for their continued support as we shape Westpac's future. With the right team, the right plan and disciplined execution, we will continue to build a stronger, more sustainable company, one that delivers for our customers and creates long-term value for our shareholders. Thank you.

Thank you, Anthony. Well spoken. We'll just wait a few minutes if we could folks for the media to leave the room.

Ladies and gentlemen, we'll now move to the matters in the notice of the meeting. The items of business are now shown on the screen.

Item 1 concerns the receipt and consideration of the financial report, the directors' report and the auditor's report of Westpac Banking Corporation for the year ended 30th September 2025. This item does not require a resolution to be put to the meeting.

Item 2 concerns the reelection of Peter Nash and the election of David Cohen, Pip Greenwood and Deborah Hazelton as directors.

Item 3 concerns the adoption of the remuneration report for the year ended 30th of September 2025. As stated in the Notice of Meeting, this resolution is advisory only and is nonbinding. However, the Board will take the outcome of the vote and any discussion on this item into consideration when reviewing the remuneration framework for directors and senior executives.

Item 4 is to approve the grant of equity to the Managing Director and CEO, Anthony Miller, for the 2026 financial year.

And Item 5, which includes two resolutions requisitioned by a group of shareholders. Item 5a requests that an amendment to the constitution and then Item 5B requests further disclosure on Westpac's customer transition plan approach and the climate commitments.

Under the Corporations Act, shareholders can propose to move a resolution at a general meeting. In this instance, a group of shareholders with at least 100 signatories put forward the resolution in Item 5.

The Notice of Meeting contains an explanation on why the resolutions are being put forward, along with the Board's view. Resolution 5A is required to be passed as a special resolution and Item 5B is conditional on Item 5a being passed.

The Board recommends that shareholders vote in favor of Resolutions 2A, 2B, 2C, 2D, 3 and 4 and against the requisition resolutions 5A and 5B. The direct votes cast and the position of proxy votes received on all items of business prior to this meeting are now displayed on the screen for your information. The direct and proxy votes received show an against vote for Item 5A, which will not be materially impacted by votes received today as a resolution 5a will not be passed by a special majority. Resolution 5B will not be put to a vote at the meeting, therefore.

I would now like to invite the directors who are seeking reelection and election today to address the meeting. In accordance with Westpac's constitution, Peter Nash is retiring by rotation at this meeting and being eligible, is offering himself for reelection. David Cohen was appointed on the 1st of April 2025, Pip Greenwood on 1st of August 2025 and Deborah Hazelton on the 4th of March 2025 and are all seeking election at this meeting.

The Board, other than directors concerned in each case, has considered the performance of each director standing for reelection and election today. Following this review, the Board recommends that shareholders vote in favor of Peter Nash, David Cohen, Pip Greenwood and Deborah Hazelton being reelected or elected to your Board. I have personally enjoyed working with each of these directors and support their election. Detailed biographies for each of the directors are set out in the notice of meeting.

As I referred to in my opening address, ladies and gentlemen, there have been shareholders who have expressed concerns with Peter's reelection, primarily because of his prior role at another organization. In unanimously supporting Peter's reelection to you, the Board determined that he has been an exceptional director for shareholders and has made a significant contribution to Westpac. I'm very supportive of this. Peter, I now invite you to address the meeting, please.

Thank you, Chairman, and good morning, shareholders. I'm grateful for the opportunity to see reelection, and I do so with a deep sense of responsibility and commitment to Westpac. For the past 7 years, I've been proud to serve on your Board, helping to guide the company through significant challenges and necessary change. Since joining in 2018 during the Hayne Royal Commission, I've directed much of my time towards remediation and strengthening risk management, which supported the successful completion of the 5-year CORE program this year. This has required a sustained focus on resetting the company's -- sorry, this has required a sustained focus on resetting the company's risk standards, culture and governance to restore confidence among our customers, shareholders and regulators.

We've learned a lot from this period, and these lessons remain embedded in how we operate. As one of the longest-serving directors, I've sought to bring a steady hand and corporate memory as we focus on the future. My areas of expertise are financial and sustainability reporting, strategy, internal controls and governance, which I apply diligently in my responsibilities as Chair of the Audit Committee and as a member of the Risk Committee as well as the Board Nominations and Governance Committee. This expertise comes from decades of experience in banking and finance, audit and governance, garnered mainly through my time as a partner and then Chairman of KPMG in Australia.

An executive career at KPMG instilled in me a strong belief that auditor independence is fundamental. In this regard, I would wish to note for shareholders that I formally recuse myself from the recent auditor selection process that Westpac conducted. Beyond Westpac, my experiences across ASX-listed companies, which have included companies that have faced challenging transformation projects has strengthened my capability as a director, and I'm now applying these lessons as a member of the Board, including in my role as a member of the oversight group for UNITE.

I'm proud of the contribution that the Audit Committee has made and what we've achieved in recent years. We have overseen an improvement in the quality of earnings disclosure and reporting. More broadly, Westpac has been through significant change, and this has positioned us for sustainable growth. Leadership has been reset, operations simplified and risk management has been strengthened. I'm grateful for the support I've received from my fellow directors, the executive team, our people and our shareholders during this time. Should I be reelected, I would be honored to continue to represent shareholders as management delivers our strategy and the Board maintains strong oversight at a pivotal time for Westpac. Thank you.

Well spoken. David, if I may invite you to speak, please.

Thank you, Chairman, and good morning, shareholders. I'm very grateful for the opportunity to seek your support for my election to the Board. My decision to join Westpac reflects both my confidence in the company's direction and my eagerness to be part of its journey. After a period of necessary introspection, Westpac has an energized management team, stronger risk foundations, clear strategic direction and an organizational mindset focused on transformation and progress. These provide a solid platform for continuous improvement and sustainable growth.

To support this next chapter, I bring more than 20 years' experience in Australia and overseas in financial services, offering informed perspective and sound judgment to help drive performance and uphold the interest of all shareholders. During my career, I served as Deputy Chief Executive Officer of the Commonwealth Bank of Australia. After earlier roles as that Bank's Group General Counsel, Group Executive for Human Resources and Corporate Affairs and then Chief Risk Officer, including during the Hayne Royal Commission. Prior to my time at Commonwealth Bank, I was General Counsel of AMP and a partner at law firm, [ Allens Arthur Robinson ].

Since joining the Westpac Board in April, I've served on the Board Risk Committee. Alongside this, I chair TAL Australia Limited, Australia's leading life insurer, and I serve on the Board of the Paul Ramsay Foundation and a member of the [ Adara ] Partners panel. If elected today, I look forward to working closely with my fellow directors and management to support the successful delivery of Westpac's strategy, building resilience and driving change to create lasting shareholder value for you. Thank you.

Thank you, David. Again, well spoken. Pip, if I may turn to you, please, for your address.

Thank you, Chairman. Good morning, shareholders. I'm honored to stand for election today, having joined the Westpac Board in August this year. I also have the privilege of serving as Chair of Westpac New Zealand since 2021. This has deepened my understanding of banking and financial services and Westpac's opportunities and challenges.

In the past 4 years, we've made meaningful change in New Zealand from strengthening the Board and appointing a new CEO to navigating regulatory reform, cultural renewal and technology transformation. This progress is also reflected in our improved financial performance. Serving on both Boards reflects the significant contribution Westpac New Zealand makes to the Westpac Group and the importance of New Zealand as one of our core markets.

Outside the banking sector, I am Chair of the A2 Milk Company, and I previously served as a Director of [ Fisher & Paykel ] Healthcare, Spark New Zealand and Vulcan Steel. These roles have enhanced my commercial and legal judgment and my focus on building capable high-performing boards. My career began in Law, and I have 25 years' experience in financial services, capital markets, mergers and acquisitions and governance. As a senior partner of a leading New Zealand law firm, [ Russell McVay ], I advised on many of New Zealand's most significant transactions and later served on the firm's Board, including terms as Board Chair and Interim CEO. I also have regulatory experience from my tenure on the New Zealand Takeovers Panel, where my primary responsibility was safeguarding shareholders' interest.

I believe governance is a team effort, and I will work hard to ensure the Boards I serve on are connected, collaborative and accountable. My legal background also facilitates open debate, encourages diverse perspectives and supports rigorous governance standards. Should I be elected today, I will work alongside my fellow directors to lead with clarity and ambition to drive long-term value for our customers and sustainable returns for shareholders. Thank you very much.

Thank you, Pip, well spoken. Deborah, if I may ask you, please, to address that.

Thank you, Chairman, and good morning, everyone. It's been a privilege to join the Westpac Board as a Non-Executive Director. And today, I seek your support for my election to the Board. Since joining Westpac in March, it's become clear that the organization has entered an exciting new phase of transformation and growth. Leveraging a strong financial foundation and robust risk culture, your Board and management are driving change for better customer outcomes and improved long-term performance.

I'm very pleased to have the opportunity to support Westpac's strategic direction by bringing more than 30 years of global financial services experience and proven governance expertise across both public and private companies -- company boards. My executive career included CEO roles in Japan and Australia, alongside senior roles in corporate and project finance, capital markets, treasury and organizational culture.

In my current capacity as Chair of Export Finance Australia, I work closely with Australian and international governments to provide strategic finance to help secure the economic resilience and security of Australia. This experience has deepened my understanding of risk management, regulatory engagement and strategic capital allocation. These are all capabilities which are relevant to a bank operating in a complex highly regulated and globally connected environment.

I also serve on the Australia-Japan Business Corporation Committee and hold nonexecutive director positions at [ Persol ] Holdings Company Limited and Australia Post. During my tenure as Chair of [ AMP ] Limited and [ AMP ] Bank, I led governance improvement during a period of complex transformation.

As the Chairman mentioned earlier, subject to my election today, the Board intends to appoint me Chair of the Remuneration Committee at the conclusion of today's AGM. My focus will remain on keeping remuneration aligned with performance outcomes and strategic priorities, supported by strong governance and accountability. I will also work closely with my fellow directors to apply disciplined oversight that safeguards Westpac's stability through this period of transformation while driving sustained and sustainable growth and long-term value for our shareholders. Thank you for your consideration and support.

Thank you, Deborah. Well spoken. And I must say thank you to all the directors who spoke, all high-quality people, and I am delighted as the rest of the Board that these directors are on your company's Board of Directors.

Ladies and gentlemen, I would now like to invite Mr. Kyle Robertson from Market Forces to speak to the meeting on resolution in Item 5. And I would just like to note that Kyle has been kind enough to come into Westpac and talk with our people, particularly [ Fiona Wild ]. And I must say they have been very constructive discussion. So thank you, Kyle. But if I can hand it over to you, please, before we go to questions to the general audience.

Thank you, Chair and the Board, and greetings to shareholders present in this room and online. I'm speaking on the resolution at Item 5B, customer transition plan approach and climate commitments. Westpac proudly claims to be the first Australian bank to have committed to managing its business in line with the goals of the Paris Agreement. For years, the science and what is required to achieve the Paris goals has been clear. The world needs to rapidly reduce fossil fuel production, the single largest source of greenhouse gas emissions. For a financial institution like Westpac, the implication of this has also been clear for some time. It is essential to stop funding companies increasing their fossil fuel production.

3.5 years ago, Westpac announced that from 2025, it would no longer provide finance to upstream oil and gas companies without credible transition plans aligned with the goals of the Paris Agreement. Current CEO, Anthony Miller, said at the time that if a company lacked a plan to transition its business, adjust its model or exit what it was doing to ensure that we get to net zero, it would not be provided with any type of financial support. It was a critically important policy for Westpac to deliver on its climate commitments and perhaps more importantly, a clear signal to the fossil fuel industry that business as usual would result in a loss of financial support from one of the world's major commercial banks.

Yet here we are at the end of 2025. And rather than delivering on this critically important commitment, Westpac has instead opted to put itself in a position to continue funding companies expanding fossil fuels indefinitely. How did this happen? Well, just months before this long-standing policy was due to come into effect, Westpac took the opportunity to weaken its transition plan requirements in a clear effort to accommodate clients, which have absolutely no intention of transitioning away from coal, oil and gas. Upstream fossil fuel clients are now no longer required to have plans to reduce Scope 3 emissions in line with the goals of Paris despite it accounting for up to 90% of their emissions profile. The vast majority of these emissions come from the coal, oil and gas these companies sell to their customers. In essence, Westpac has changed its policy to make it possible to continue financing companies expanding coal, oil and gas in a climate crisis.

We are now 10 years on from Paris. Emissions from fossil fuels have continued to reach all-time highs consistently over the last decade with a new record due to be set in 2025. This has been allowed to occur in no small part due to the enormous amounts of debt provided to the fossil fuel industry by the world's major commercial banks over the last decade. By continuing to finance fossil fuel expansion, banks like Westpac are enabling a handful of companies to trigger catastrophic and irreversible climate collapse. Westpac would know what its clients are doing and continues to support them anyway.

Earlier this year, Westpac took part in a $12.9 billion loan to [ BP ]. Around the same time, the company announced that it was abandoning its renewables diversification strategy and pursuing up to 20 oil and gas expansion projects by 2030. In June, Westpac loaned over $85 million to [ Woodside ], a company which just 2 months earlier, sanctioned one of its biggest ever LNG projects, the Louisiana LNG development in the United States. This decade alone, [ Woodside ] will be spending almost USD 30 billion on new oil and gas projects. Apparently, this hasn't been enough to make Westpac reconsider its support.

Finally, in November, just a month after its requirement for transition plans came into effect, Westpac acted as a co-manager on a $1.5 billion bond for [ Santos ], a company pursuing up to 3 oil and gas expansion projects and just announced plans to begin drilling in one of Australia's biggest gas fracking developments, the [ Beetaloo ] subbasin.

Last month, the UN warned that the world is heading for warming of up to 2.8 degrees based on planned levels of fossil fuel production. It's worth dwelling on what such catastrophically high levels of warming will look like. We will see more extreme climate events like bushfires, floods, droughts and longer-term chronic issues like coastal erosion and sea level rise. Australians would be all too familiar with the events like black summer bushfires and the 2022 flooding events on the Eastern Seaboard, which will become more common and more severe if the world warms to the levels it's projected to. It's not clear why our bank continues to jump through hoops for a miniscule portion of customers that represent less than 1% of our lending portfolio, yet whose expansion plan so blatantly puts into jeopardy the stability and security of the other 99% of our clients. This waiting of support for irresponsible and reckless fossil fuel clients is not in shareholders' best interest. If Westpac is committed to the goals of the Paris Agreement as it says it is, it should be withdrawing financial support to clients that fail to present a credible transition plan, just like it said it would over 3 years ago. We strongly urge all shareholders to vote in favor of this resolution, not only for a better planet but for a better future for our bank. Thank you.

Okay. Thank you, Mr. Robertson. Points taken. I'll now take questions on all items of business. We request that shareholders -- questions that are asked today are relevant to the items of business at hand or the management of Westpac. Questions on customers or personal matters will not be addressed during this meeting. Where you have a banking question, one of our customer representatives will contact you separately. Senior management and [ Evan Halls ], Westpac's customer advocate are also available to meet shareholders outside in the foyer after the AGM.

If you wish to ask a question, please respect that we want to allow as many shareholders as possible the opportunity to participate today. And I'll accept up to two consecutive questions or comments from each shareholder before moving to a question from the next shareholder. All questions, ladies and gentlemen, should be directed to me in the first instance I may refer the question to another person for response, if appropriate. If you'd like to ask a question in the room, please move to one of the microphones or request a roving microphone if you are joining via the webcast. Please submit your questions now. Can I take the first question, please?

Mr. Chairman, I would like to introduce Mr. [ Michael Sanderson ].

I suppose one thing that Westpac can take from today is you're not [ ANZ ] having the Westpac moment this year. I put you on warning. I've got four questions for general business and for each of the other items. I'll stick to the protocols.

Safer Pay, Safe call, Safe Block and in-app scam reporting are described in the annual report as digital innovations that, and I quote, help to further reduce reported customer losses by 21% and prevented $360 million in potential losses. Yet nowhere does Westpac disclose the base number for those figures relate to. If 21% reduction is worth $360 million, my back of the envelope calculation suggests scam exposure of around $1.7 billion with customers losing roughly $1.35 billion. Are those ballpark figures wrong? Will you disclose the total amount of that customers actually lost in digital scams? How much was lost for digital scams versus nondigital scams? Would it be true to say the scam is not digital, rather digital banking is the scam?

Mr. Sanderson, as Anthony mentioned in his report, this is a very important part of our business. We spent over $500 million on scan prevention through various things, and we see ourselves as the market leader in this. As to the exact numbers, we don't disclose those for privacy reasons. But Anthony, any observations on that, please?

Well, I acknowledge that in this digital age, the format in which people are prosecuting scans against customers of the bank are via that digital channel. And what that highlights is that actually we have a role to play in helping protect our customers. But more importantly, an entire ecosystem needs to work collectively to deal with it. And so therefore, the telcos who obviously facilitate the communication by digital channels, and likewise, the social media platforms, which are really important contributors to where scams are coming from, all have a role to play in helping us mitigate and minimize scam. So you've called it out. digital has facilitated a lot of scams. The industry is working very hard, but it's an ecosystem defense if we're going to succeed here.

I'll take that. My second question. Westpac told the recent [ HEC ] committee that many customers still have to present concession cards or attend a branch. Westpac closed more than 400 branches since 2015, including at least 100 regional branches. Westpac only recently paused further regional closures while promoting digital transformation and committing to regional prosperity and digital inclusion in your 2025 reports. How many concession and other vulnerable customers now cannot reasonably provide physical evidence because their local branch has been closed or is hours away. What are the concrete non-in-person verification methods beyond the vague claim that we can identify payments is Westpac using to prove eligibility without traveling or posting documents?

Mr. [ Sands ], the whole branch discussion is an interesting one, and we are, in fact, opening branches at the moment as well as closing ones that are not economic. As of today, we have 620 branches. We have 3,000 outposts in -- with our bank post relationship, and we have 6,500 ATMs where people can access Westpac services. [indiscernible] regional branch closures until 2030 and we're seeing the benefit of having some of those reopen in certain country towns. So I'm going to have Andrew talk about exactly how it's working with people with some concession cards.

I just want to acknowledge that's a very good question and here's the challenge that's in front of us. 96% of what people are doing with the bank is digital is online. So everyone is pretty much moving in that direction. And so therefore, the challenge for us is how do I provide the service that customers need where and how they need to be served, whether that be in person, on phone or digitally. And so that's the work we're doing.

In terms of processes by which we tech check a concession card, I'll have to take that one on notice in terms of just where our work program is on that. But the idea and the work we're doing in terms of regional Australia is trying to make sure through a combination of the branches we have, the partnership we have with bank at Post, the ideas that we're now introducing, which is to have bankers visit towns and be available in that town to help customers in these particular situations is all part of the work we're doing to say, how do we find a better solution for the customers of Westpac so that they get served where and how they want to be served. And so that's work that's underway. We're experimenting, as I said, with bankers in towns, we're reopening service centers in [indiscernible] and other towns. And to the extent that those propositions work, we will continue to expand and go after that throughout Australia.

Great. Thank you. We have a question over here, please. Thank you.

Mr. Chairman, I would like to introduce Mr. [indiscernible].

Thank you , Mr. Chairman and Board. Good to see you again, Steven. I've got a couple of questions, which I'll get now, and I'll come back to others later. As far as your unite -- one best way philosophy technology-driven program, I just want a bit of clarification. I think that -- I understand that you, along with [ four ] of the other banks are looking to simplify services and you're getting rid off or updating legacy systems. The concern is that with AI-driven technologies, it probably tends to be a move to pigeonhole customers and not all customers are necessarily going to fit into that. I don't know whether you have voice recognition technology, but obviously, people from non-English-speaking backgrounds or other things like speech impediments have trouble with those technologies. So I know you did say that you do have that sort of human element where the people are behind it. That's still going to be there, but the -- that part of it, I think we just need clarification and assurance that all the customers' needs are going to be catered for.

Other similar points, you've got your different banks, Westpac, St. George banks, South Australia and Bank of Melbourne, are we going to lose the differences between those banks and putting everything together under Unite or how we're going to distinguish and use for marketing the individual characteristics of those other brands?

[indiscernible], I'll have a go at this, and again, I'll ask Anthony to pipe in. Unite is a very major project for this organization. It's going to take another 3, 3.5 years to complete. And it is essentially a simplification program, where we are taking out too much -- we've got a lot of good systems in Westpac, but we've got too many systems. So we're going to simplify it down to a more manageable number, is going to reduce the risk in the system and improve the quality of service we can provide. Amongst all of that, we've got to look into the AI revolution as well to see how that fits into a more simplified and better quality proposition for our clients in our bank. All of this is in discussion at the moment within the bank. So it's live and current as we say. And yes, we're looking to voice recognition and is where AI is particularly -- voice recognition to serve a broad range of communities. Those who are not English speaking as well as obviously those that are. So we take that point on notice.

Look, it's an excellent question. There's a lot in that question. I would just say the whole focus on Unite is as the Chairman has identified, which is to consolidate the way we do things into one way on one digital or one technology stack. But the whole purpose of it is, therefore, to ensure that we can serve our customers better and more efficiently and more consistently. And then tools like AI are tools that we intend to use for the very challenging to set out, which is that there may be someone with lean wage issues or inability to connect with the company, how does the AI to help us deliver on that.

So you're trying to challenge out, which is what we're working on, and which is why it's going to take us 3 years to consolidate everything onto one system is to make sure that we do it in a way where all the customers we have are served where and how they want to be served, whether that be digitally, whether that be in person or whether that be virtually. And that's the work, and that's why it's 36 more months from here before we get there.

And with regard to the branch discussion or the brand discussion, I should say -- we have some wonderful brands within Westpac. And we've just got to look at the brand equity, what it means to our clients and how it fits in the great tech system before we make any decisions. But we'll look at that over the next 2 or 3 years.

Okay. The other question consumes trading with China as you appreciate that China is a major customer of Australia. From what I understand is that the Chinese government or Chinese companies are pushing for payments in Chinese RMB rather than other currencies like U.S. dollars. What steps or preparations are being made at Westpac to allow overseas transactions to be settled in Chinese Yuan.

Do you want to go then?

Yes. So a really good question. Maybe one of the more important topics that we as an executive team are working on, which is the way payments are made, whether it be domestically and now in particular, how they're made internationally is rapidly evolving and all of a sudden alternative currencies where classically, the international exchange rate is really effective through the U.S. dollar. There's increasingly situations where customers may need to pay or receive in change, renminbi or in other currencies. And so the challenge or the work we're undertaking is how do we make sure that we support our customers such that they can receive and pay in the currency that they want. And you heard me speak about Westpac One, which we're just piloting now. Its capability is such that it allows us to provide that solution to our customers as we deliver that over the next 36 months.

Mr. Chairman, I'd like to introduce Mr. [ Brendan Hyde ].

Thank you. I'm hoping this is not too trivial. I'm a customer of St. George and with respect of course, I'd like to comment the really personal attention that you do get when you go to one of the banks -- you've banked at other banks, and it's just in personal, I always feel they're very helpful and personal. I wanted to make that comment. It's a recommendation.

And I'd also like to -- I'm of another generation. I think they call us dinosaurs. I like to have everything in a [indiscernible] if there's a hard copy. And I wanted to comment. I hope that checks still keep going for as long as you can. They are very useful when you've got to transfer over 100,000 for real estate or buying shares. And I know they're going to end soon, but it's very useful to be able to have checks just for that.

Look, I'd like to comment on a little glitch that's been going on for two years with a major count of mind with the term deposit. Just trying to get a hard copy of it. Unfortunately, it was opened up by mail, the system. The bank has continually tried to help me. I've had continual applications with -- into the very helpful staff. They all said, "Don't worry, we've all fixed it. We've turned it off. You'll get a hard copy." but you never do. It's been going on for two years. Even this morning, I got an email saying, we're not going to send you a hard copy on your renewal term deposits. So I just wanted to bring your attention there is some little computer glitch that needs to be fixed.

Thank you, Mr. [ Hyde ]. Two good questions. And I'm learning on being a dinosaur myself, so I do associate with that. Not quite there. With regard to checks, I'm sorry to say it's probably a dying breed unfortunately. And like you, I have checkbooks, but I think we'll find over the next few years, it will be legislated out of existence in this country. So I think you got to use it while you can because probably the next 5 or so years, it might not be there.

With regard to your glitch on your statements, I'm sorry about that. Let's see if we can fix that. And I might ask [indiscernible] to see if she can chat with you after this event. So you can get some action there. So thank you for that.

And thanks customer of both St. George and Westpac, that's [indiscernible]. So thank you.

Mr. Chairman, I'd like to introduce [ Robert Catterson].

Thank you for listening to me. My question is at the present time, Westpac sponsors two major sports in this country at the present time. One being the NRL and one being cricket. The question I have with the NRL sponsorship, do you actually look at, say, the State of Origin Jersey where our logo is presented next door to a gambling organization and an alcohol organization? Do we have in place the same amount of financial sponsorship to domestic violence, charities or assistance groups, gambling awareness groups and in these sort of groups? Because I believe that the NRL is quite well served, not just by Westpac, but a lot of other gambling organizations that influenced the game in a negative manner. We've seen a lot of media and I'm not sort of quoting, that's now in the public domain now, things like money laundering, game fixing, players that misbehave all the time. And I don't think our logo, our very respected logo should be next door or presented next door to a lot of these gambling organizations. I believe it's time that -- our governments failed because they've been influenced by these gambling organizations and the hotel industry, to a large extent, and we need a lot of corporate support to look after our community.

Now it's useless giving hardship support to families that have been affected by gambling. Some without the hole. And we see a lot of domestic violence happen because people have over gambled, same with alcohol, and we need to desperately do something to change this culture.

My second question is with respect to the dividend performance of this company. Now I've been here, this would be my fourth meeting asking the same question, what happened to the 2020, and I know there's a couple of directors here, of our interim dividend. Westpac, along with ANZ in the same year, deferred that dividend, my understanding of deferment means there is a dividend there and you're going to pay it. And in the same year, ANZ paid that dividend in October at [ 0.30-odd cents ] now I've yet to receive any notification of where that dividend was canceled. And when you look at this bank's performance in terms of its other bank, it's other peers such as NIB and ANZ, they've raised their dividends, and we've had -- with respect to Anthony Miller, my mind is quite open to his performance with the previous two CEOs have not performed and brought the dividend standard up to what [indiscernible] did. Westpac's dividends were above $0.90 a share. The other banks have bought their dividends up to pre-COVID levels. This bank hasn't. And I noticed on the big screen there that we had a 1% increase in the dividend. Well, that is not good enough. Can I have answers to all my questions, please?

Sure, [indiscernible]. Let me have a go at the NRL to start with. And I'm in support of the NRL in a number of my capacities and it's, I think, a wonderful organization. But like all organizations, it has to do with these sort of issues. None of us like to see hardship that emanates from anything, be it gambling or alcohol. They are acutely aware of that, and they are on to it. But it's a legal form of, I guess, recreation activity in this country, and we aren't going to, I guess, go against that. We are aware of it though. But I think as an organization that's worth supporting and is close to our customer base in the states that we operate in predominantly is an extremely good avenue for us to sponsor. So I'm very aware of your comments, and I respect those. And I now just want to see how would you like that. But I think the NRL is up to speed on dealing with it.

With regard to the dividends, if I just make a couple of comments. I'll look into that for you, if I may. This year, we're paying $0.77 share, $1.53 for the full year. That's a 75% payout. It is the top -- close to the top end of our range. And I think right at the moment, the most -- my #1 priority and the Board's #1 priority is the safety of this organization. And that's why the dividends are where they are. They're full, but they're not as high as you may like them, but our aim at the moment is to keep this organization safe and secure to the level of capital we have, particularly in the context of a big expenditure program coming on board for the next 2 or 3 years. When we get through that, the aim is to have a much more efficient organization, which can then lean back more heavily into paying higher dividends. So I hear you, which regard the [ 2020 ] dividend that was found deferred. Let me look into that as to what we actually said there and what it means. But I do thank you for your conversation and your questions.

It [ won't help ] previously, I don't know whether you're still doing it, but share buybacks don't really help either.

No, I understand that. I understand the value of [indiscernible] because...

[indiscernible] because I don't want to sell my shares. So I just want the shares to perform a lot better. Thank you.

Mr. Chairman, I'd like to introduce Ms. Carol Limmer.

Thank you. Carol Limmer from the Australian Shareholders' Association. And I hold 786 proxies which is about 4.5 million open votes, which is quite a bit -- quite a high Westpac shareholder. First half, I've got a couple of compliments on a positive note. The annual report and notice of meeting explanatory notes considered very comprehensive. Thank you.

Also, I mentioned that I attended the recent sustainability market update and there was plenty of opportunity for people present to ask questions and the answers given to attendees by various executives were good. So thank you for that.

But on a negative note, the changed arrangements with the hybrid meeting where non attending shareholders cannot vote at the AGM, makes it more difficult for retail shareholders to participate fully in their company's AGM. They lose the ability to listen to the meeting, decide an issue and then vote. They've got to vote beforehand. Could you speak about the reasoning behind that decision? And specifically, what is the benefit to the company that justifies the detriment to shareholders?

Thanks for the question, Carol. Yes, we have changed it this year. And the reason is one of both cost and efficiency, but also in our experience over the last few years, there's been minimal online voting, almost none and no telephone questions in the recent years. So it was a facility we provided, but no one was taking it up on it. So we just thought it would be best for efficiency's sake to change the style of the meeting. No more than that. And thank you for your kind words, too. I'd imagine are very good in these presentations.

Mr. Chairman, I'd like to introduce Mr. Louis [indiscernible].

Thank you, Mr. Chairman, and good morning. directors and shareholders. I appreciate, and I think we all appreciate that Westpac is finally dealing with its technology upgrade. This has been a long-standing issue. We've been waiting years for action. We're pleased that it's finally happening through the Unite program. And you -- I think it was the CEO mentioned in his speech this morning, 8 initiatives completed and 51 across the 4 businesses and a promise to keep us informed as to progress.

I'd like to know what the expected cost of this program is overall and how long it will take to implement. Now I think you answered that question in relation to Natasha's question, you said 3.5 years. When I looked at the annual report, Page 17, it advises the total investment spend, and I'm assuming it was for FY '25 was $1.9 billion, of which 34% was on Unite, into Unite expenditure roughly $650 million for FY '25 if I've interpreted correctly. So I'm not sure whether we multiply $650 million by 3.5x for 3.5 years or quite what the number is. But can you give us an indication as to what the total cost will be? And I think with your regular reporting, which we're keen to understand just how that will take place?

I think it's really important that we, as shareholders, have confidence that this program is working, that it will deliver because as you would know, we've seen other banks promising to significantly upgrade their systems, and it just hasn't worked. It's been too complicated. So Mr. Chairman, either the three of you or the CEO, if you can give us some assurance about the overall spend and your confidence in actually delivering on your promises.

Sure. It's a very good question. Thank you for that. Now you can't quite extrapolate the first year for the 3.5 years. And I'll get an answer, I'll talk to the exact numbers in a minute, but it's more like $3.5 billion over the 3.5 to 4 years period. Unite is a very important project for us. And like most people, I'm acutely aware that all of these projects often run over time and over budget. So we're working very hard to ensure that it doesn't happen. We have Accenture advising the team on the project. We have a McKinsey providing assurance on the delivery of the project. And we have a Board subgroup, which is comprised of [ Andy McGuire ], [indiscernible] and [ Peter Nash ], who is still on your Board, overseeing that as a Board representatives. So we take it very seriously. Anthony will speak in a minute to just how we're progressing with that and the rigor that we are undertaking it.

Yes. No, it's a great question. And this is the challenge and opportunity that sits in front of myself and the leadership team. Yes, it has to be done. We're very clear about the outcomes that we need to deliver as a result of Unite. And so -- and I just want to sort of emphasize on what Unite is about is we have some very good technology in Westpac, but we have a duplicative set of technology and systems and processes. So what we're doing is identifying the one best way of doing mortgages, deposits, other processes for our customers and making sure we do that one way on the one target technology stack that we have inside the company. And then as a result of that, that means we can shut down and remove duplicative systems, products, processes, and that will help us reduce the costs to run and further reduce the cost and how we change and manage the company going forward. So that's -- we've got those outcomes very clear in front of us.

With the plan that we have in front of us, we think we will expand approximately 40% of our annual investment budget will be allocated to getting Unit done. And with our current work plan and some really good progress, we think that we'll be delivering the outcomes and completing the program in FY '29. And my goal would be that it's in the first quarter of calendar year 2029 that you will see us advising that the project is broadly completed. All those duplicate systems are shut down, and we start to enjoy the benefits of a simpler, faster and easier companies run with costs and outcomes for customers.

Mr. Chairman, I'd like to introduce Mr. Paul [ Fanning ].

Thank you, Anthony, and welcome to the Board and thank you also, Steven, for both of your addresses today. I really have a bit more than two questions. I might jam a third one in. Who ever writes the financial highlights from the market release, paragraph three, it's ambiguous. Now I would like to think that probably someone in Investor Relations is exactly writing this, but there's -- it's clouded with ambiguity. Now clearly, this is not good. On the first page of your financial highlights for your FY '25 release, it's not really very good at all. That's -- this page here if you want to see it. So you probably don't have that document with you. There's basically a confusion against really what the level increases of deposits and loans are across the different banking divisions. I would like to think that when these reports get written, some are naturally verified and then that really thinks, well, it's just logical doesn't really makes sense. I've been to many AGMs in the past, and I've raised [indiscernible] which are right to the core of the business. So I think someone [indiscernible] into that and perhaps do a little bit more backing when you put these -- this is probably more a small investor release and try and get it fixed for the future. I'm happy to discuss in detail anything with you or Steven after the meeting because we really need to cut the chase.

Well, thanks for the question and I appreciate you taking the time to read the materials published in detail. So thank you. I'm lucky that we've hired the best CFO in the industry, who now works as Westpac. He's here today, Nathan Goonan and so what I will do is invite you after this morning's session to sit down with Nathan because any feedback in relation to how we disclose to our shareholders what we're doing and how we're going about it, if you're not happy with it, we're pretty candid to hear that feedback.

Well can I have a talk to both of you later also? Perhaps the three of you? I think we really need to get the messaging out much clearer.

That's very fair...

Okay. Other things. One is Page 52 of the annual corporate governance. I'm known to go to different AGMs, [ VA banks ] or elsewhere, and the board skills metric, I would like to see it actually defined by the particular director. Now what I do depict is under the guise of technology, digital and data, the skill matrix seems to be a bit [ light on ]. From what I see, financial and strategy is good, which it should be. But we're moving in the technology paradise and we have so many scams and the bank is working hard on their technology. But really, if the Board directors don't really have a clear understanding of technology data and digital concept, which is what's this table suggesting, I would like to say, well, who do we have? And perhaps like other companies are emerging, we need to define them by name director.

Yes. Well, my view on that, Lou, is we can probably give a bit more detail as to the number of directors and how it transpires into their -- I guess, their expertise. But I don't think it's helpful to name directors in that because I don't think it's -- so is any purpose for you to look down and appoint individual directors. I think you need to know that there's the quality on the table for each of those skills, but naming directors, I don't think serves a purpose is my view. But I hear you. Thank you.

And I'll throw a third question. In regard to board election, [ Pip Greenwood ] and Pip might like to respond to this directly through the chair. Pip, I noticed that you're currently a chair of Westpac New Zealand and you're about to be appointed to the Westpac parent board. Is this normal corporate governance to have a director of a subsidiary company also as a director on the parent company?

Yes. I'll take that one, Paul. Yes, it is. Over the last 20 years, I mean, Westpac has previously had the Chairman of the Westpac New Zealand business on our Board, main Board. I think you'll find two or three of these [indiscernible] being for have the Chair of their New Zealand operation on their main board. So it's a very common practice.

Mr. Chairman, I have another question from Mr. Kyle Robertson.

Good morning again. My question is for Anthony Miller. So in 2022, Anthony, as Head of Westpac's Institutional Bank, you introduced a new policy, which stated that Westpac would only finance upstream oil and gas companies with credible transition plans in place by 2025. A credible transition plan was defined as one aligned with the 1.5 degree goal of the Paris agreement included the clients Scope 1, 2 and 3 emissions and was based on the best available signs. Quote attributed to you at the time, stated that oil and gas are at the epicenter of what we need to solve to reduce our use of fossil fuels.

Another quote regarding the policy said that Westpac was publicly putting down a stake in support of global efforts to get to net zero with this policy. The article is still up on Westpac's website today.

Another quote attributed to you stated that if you don't have a plan that stacks up, that's credible and scientifically backed to transition your business to adjust your model or exit what you're doing to ensure we get to net zero, then you will not be supported, whether that be debt or equity or banking. But here we are in 2025, you are now the CEO of the bank, and within months of assuming this role and just a few months before this policy requirement was due to come into effect, it was dramatically watered down. What Westpac has in place now is not even close to the science-based and Paris lined commitments that the bank introduced back in 2022. So my question is, given that you made these public statements and enthusiastically introduced this policy 3 years ago, why was it watered down before it even came into effect?

Kyle, why don't I take that first, and I'll ask Anthony to comment in a minute, if we could. I think you'll find that the level of disclosure we have, the way we're looking at our client base at the moment is a material improvement on how it was then. We are more open about what we're doing. As you are aware, we are the largest financier to renewables in this country by far. We have zero lending to thermal coal. Sustainable financing is up 37% just on this year alone. And we as a bank have reduced our scope 1 emissions by 89% in the last 4 years. I think you'll find that when you go through and look at our plan for how we define whether our companies and our clients to be supported or not is very rigorous. There are 4 terms for it. There's targets, strategy, capital outlay and governance, and we require all the companies in this country that we bank to fulfill that. They have to have a plan that leads to a well under [ Paris lines 2 degrees ] by 2050. You know that. So we've gone through this in some detail. One of the things we won't do as a company is abandon our clients though. And as you also were less than 0.1% of our total exposure is to upstream oil and gas companies. As a company, I am very comfortable where we're at and how we're approaching it and the rigor that we have in looking at our companies. We also ask all our companies that -- our clients to look at their Scope 3 through as well, and they have a credible plan there. They need to have something where it is disclosed how they're looking at it. their ambition and their plan to get there. We can't do much more than that. And what we are simply not going to do is debank clients that we believe are fulfilling those requirements. And in the current paradigm, where gas particularly is a as an energy source that not only governed but [indiscernible] as of yesterday has discussed that this country and the world needs to transition to debank clients [indiscernible] you're talking about, I don't think makes a huge amount of sense. So I'm terribly sympathetic to what you're saying, but I think the practical nature of how we're looking at it, I think, is how we ought to look at it.

And before you answer, Anthony, any observations for you?

Look, thanks, Chair, but I think you've addressed most of the points I've emphasized. But since we announced that target we've set ourselves in 2022. The exposure to oil and gas extraction is down 55%. It's less than 0.1% of the entire exposure the company has. So we're working really hard at it. But I think everyone needs to understand the transition is hard. The transition is going to be more complicated than simply putting a target on a page and then feeling really good about yourself. The simple fact is that we've got to work with the community, and we've got to work with the country. And as energy demand has gone up, unfortunately, the amount of renewable capacity in the system has not kept up with the increase in energy demand. And so therefore, as a result, more gas is needed. And so as Australia's oldest Bank, our job is to support the country, and we're supporting the country in terms of the transition. And as we continue with that effort, things will continue to evolve and change, but it's all about doing the right thing by the community, the right thing by our customers and the right thing by the country.

Can I just go back to a point that you said, Steven, in particular, which I think is actually pretty interesting admission. You said that we won't debank our clients. So that's what you said you would do 3 years ago. It sounds like there isn't a threshold that a company could reach for Westpac to [indiscernible].

No, Kyle, what I said was we won't debank our clients, if they meet the criteria that we are asking them to meet.

Which is a less rigorous criteria than was set in 2022?

Well, I think you'll find that it's actually more rigorous in terms of what we require them to undertake. I'm just listed that out.

I'm curious as to how it's more rigorous when the current requirement is for Scope 1 and 2, which is 10% of their emissions profile. You've now omitted the previous requirement for Scope 3, which is 90%. So how can you possibly sit here today and say that it is more rigorous than what it was in 2022. 2022 was a very, very clear definition of what a credible transition plan was and it was very clear that it had to be aligned with the goals of Paris Agreement.

I would just indicate on one point which is we do require these customers to have a scope 3 plan. We require them to set out clearly for us what they intend to do on Scope 3. They need to disclose it to us. They need to have an ambition. And we appraise and assess that in determining whether they are genuine in what they need to do and how they can contribute to the transition everyone needs to undertake take. So we do include Scope 3.

Okay. Do you accept that if a company is expanding fossil fuels, it doesn't have a credible transition plan?

What is unfortunately the fact, and I know it's difficult in terms of because people want otherwise. But energy demand has continued to increase. The capacity to solve that energy line with more renewable power generation, it just simply hasn't grown as fast.

Now just for the record, 89% of what we lend is to renewables. We're very committed and now the largest lender of renewable financing -- large provider renewable financing in the country. But the fact is the demand of energy has grown. It's grown faster than what renewable energy has been able to do in sold for that. And as a result, in the context of the transition, the best alternative is gas, and that is why the gas equation is still a very important one for Australia. And I know back in 2022, the goals were a structural reduction in gas demand over time. Guess what? It's a structural increase in demand for gas over time because energy demand has increased and the amount of renewables is not meeting that demand, and we just need to keep working hard at it.

Final point I'll make is when you talk about the transition, it sounds like you're very much referencing an Australian context, when a lot of your clients, the vast majority of gas projects they want to develop are for export, where they will be exported to economies in Asia, where the goal is to lock in baseload gas power aligned with catastrophic levels of warming. It is not, for the most part, related to the energy transition in Australia.

I think you'll find gas is a transitional power throughout the world, Kyle. It's not just Australia and countries that is exported too, we'll use it as well for that purpose. If you go to Singapore, for example, a question was asked of one of the very big sovereign funds there. What is your view on the gas and they look at us like we're idiots . And we said, well, why you asked that question, without gas [indiscernible] does not exist. So you'll find that gas is a transitionary energy source in a lot of the parts of the world, not just Australia.

Mr. Chairman, I would like to introduce Morgan Pickett.

I'll keep this short and sweet because I think you've spoken a lot to these points with Kyle, but I just wanted to clarify. So if Westpac does approve a customer's climate transition plan and issues finance to that customer from October 1, does this mean that the bank has determined that customer to be aligned with the goals of the Paris Agreement?

Yes, probably it does.

Broadly? Or yes, it does? yes or no.

Well, the Paris agreement, as you know, is not just one thing. It's a whole range of targets. But what we are saying they have to align with the Paris agreement to be well under 2 degrees reduction. And yes, that is what they have to have a plan to achieve.

And that includes the scope 3 emissions?

Scope 3 emissions are a different thing altogether, as you know, even by the Paris agreement.

Well, that's right. Let me quote the UN Secretary General, [ Antonio Guiterrez ], who said last year, net zero plans that exclude Scope 3 emissions, those from burning fossil fuels are incomplete. Now is the time to fast track, not backtrack, the time for ambition and transparency, not greenwashing. I don't think you wrote this specifically for Westpac, but it's almost as if it did. Scope 3 emissions do typically represent 90% of an oil and gas companies or produces total emissions.

Well, as we've said, we've asked all these clients we are lending to have to, on the Scope 3 bases have a plan of action that is satisfactory to us. And I think it's naive to think that they're going to be able to change in a short period of time or we're going to get out of their business altogether and that we're going to influence that. But they've got to for us, have disclosures. They're going to have an ambition to reduce this, and they've got a plan that we can look at. And so we did take it very seriously.

[indiscernible] Anthony Miller just said that it's one thing to have an ambition written on paper, that's not the reality. So ambition is such an empty word. I can have an ambition to stop smoking by 2050, that smoke -- an enormous amount of cigarettes before that time, and you're going to continue to support that. But I guess do you have any climate science that's advising you on the change in this policy?

Could -- Chairman we've actually been lucky to hire the #1 sustainability officer in the country, [indiscernible]. She's got a PhD in climate change, Morgan. So if you want to discuss climate change, speak to my [indiscernible] she's got a Ph.D. in...

She's out here in the front.

She's exceptional and she'll bring [indiscernible] to the discussion. So you have no other scientists advising on your policy out of the...

We don't. What we have, the best of the country, and you might as well go speak to her.

Mr. Chairman, I would like to introduce Ms. Megan Ivory.

Hello and thank you. I'm here and I'm a bit nervous, so I apologize in you advance. My -- I'm here because my grandfather was the CEO of St. George when he retired. So I'm a St. George customer and a Westpac shareholder, thanks to his work. And I don't really have a question because I don't know how to phrase this in a way that would be meaningful. But everything that's been said about climate change, i can't sleep worrying about this planet. And I appreciate the work that has been done by Westpac on renewables. I don't appreciate being groaned out and sighed out by a bunch of people who don't have as long to live with the legacy of the decisions we make now. You are doing great work in renewables but if you cannot defund companies that are putting carbon into the atmosphere, then you cannot be saying that you are living up to your Paris commitments. I lose sleep constantly over these issues because I have lost friends in bushfires. I have watched houses been lost to floods. And just because you don't care doesn't change the reality of the world that we live in. And I am devastated and I don't want a response because I don't want to be patronized, and I don't want some kind of obfuscation. I want it noted that you right now have a chance to change the world for the better, and I would love to see that happen.

Ladies and gentlemen, thank you for your comments and we'll take those onboard. Thank you, and glad you've got a long history with the company, too. I appreciate that.

Mr. Chairman, I would like to introduce Mr. Robert [ Kanelly ].

Thank you very much, Mr. Chairman. Thank you for the meeting. One wonders whether we might have done climate change to death. But I would like you to have the last word, Mr. Chairman. Why has the Board decided not to support 5A. And if you answered that question with previous questions, I accept that. But is there any part of 5a, which you haven't covered yet, which you found, as a board, is unsatisfactory despite many of your shareholders putting it forward?

I have one other question Mr. Chairman.

Well, let me answer that one first. We are very clear the constitution of Westpac enables us to manage the company in the way it should be managed. We don't need to change the constitution to address all the issues that have been raised today or that we have to deal with every day of the year. You'll note that last year when this resolution was put up, it had a 34% or 35% vote for it. This year, it's at 14%. I think you'll find that the reason for that is a lot of the shareholders in your company, both institutional and retail, recognize two things. One is that we're managing the company well given the constitution that we operate under. And secondly, the changes we've have made to our climate transition plans, in fact, address a lot of the issues that have been raised. So we're very proud of what [ Fiona's ] enabled us to do in terms of making it much more granular, specific and I think practical in how we deal with it. So I'm very comfortable with not supporting it. And I think you'll find most of your shareholders are supporting that view.

Thank you, Mr. Chairman. My last question is some -- I don't know how relevant it is, I ask you to explain how relevant it is, a notice of formal demand. Do you have one copy available to you, Mr. Chairman, I'm happy to give you this one.

I can't say I have one right here now.

Well, I will bring it up. My question, Mr. Chairman, is, to what extent is this document are relevant to shareholders.

Perhaps I can read it, if you don't mind, in the spirit of getting the meeting to move along to talk to you after it because I haven't read it yet. So how about we deal with it afterwards. Thank you.

Mr. Chairman, I'd like to introduce [indiscernible].

Good morning, everyone here. I'll be very brief. I'm not going to read reports on the pages and pages of the things which are very insignificant to the bank. But my question is I heard from a number of people that the hard-working Westpac employees are not given any pay raises this year by most of the people whereas we have about CPI of a 3% to 4% official, but additionally, the price rises are much higher , [ cash ]. So will this not demotivate the hard-working employees? And will this not drive out the talented employees to our competitors. In this way, are we not at a disadvantage as a brand?

Yes. Thank you [indiscernible] I must say, I was struggling to hear, my hearing is not particularly good. Did you get?

Yes. So first of all, thanks for the question. You're right. This isn't a people business that we're in. And so having employees who feel supported, feel well managed, we feel encouraged to be their best and do their best every day is really important if we're going to be the company we want to be.

I would flag that there is, as part of the enterprise bargaining agreement that we have in place with our workforce a pay rise issue and there's a pay rise next year and there's a pay rise thereafter as a result of that agreement. So there is pay rises in the company. It's really important that actually, from where I sit and where our leadership team sits that we continue to improve the performance of the company so we can do two things. We can reward our employees for that performance and we can also reward our shareholders with increased dividends and I know that was a question from earlier. But I do acknowledge that employees are the key, and we are looking to make sure we do go forward.

Mr. Chairman, I would like to introduce Mr. Jonathan [indiscernible]

Thank you, Chair, and Thank you, CEO for your presentations earlier today. Mr. Miller, you mentioned in your opening address that Westpac was removing its requirement for no deforestation. And we understand from positive engagements with your team that the bank is now moving to a risk management approach. Could you explain what risks deforestation poses to Westpac's customers and to the bank?

Thanks for the question. So the removal of the no deforestation approach was because our customers and the entire ecosystem in which they operate, made very clear to us that this was of no value. This was not adding value, it wasn't helping them in any way. And when we speak to our customers, and they're all exceptional on how they go about it, managing their land really well and making sure they're properly finding property is sustainable and is constantly being improved is foundational to however on their properties. And importantly, for a lot of the industry, the target markets in which they want to sell their produce does require really high-quality land management practices. Equally, there's a whole host of legislation and regulation in the country already, which prescribe what you can and cannot do with your land. So when we went through all of that and spent two years talking to everyone who's involved in that it was clear that the deforestation approach that we suggested didn't add value. And so therefore, we listen to the customers and we pulled it back. But as we think about how we finance and support people, we do need to be confident that they're thinking about this risk that they understand that it's in vital that you manage your land appropriately. More importantly, your end customer who wants to buy your projects needs to be confident you're managing the land appropriately. And so we feel that through the risk lens. This is how it's being addressed.

That was helpful. And just to understand the risk management process a little bit further. So here's an example, imagine we've had recently some very positive changes that have come through under federal environmental law clarifying when and where deforestation can occur. I would absolutely agree with you that the vast majority of producers in Australia are already deforestation-free for their own reasons, for their own interests. The scale of the problem that's caused by really a minority of the book would introduce the risk management process. So if there was, for example, an instance where someone was going to clear and danger [indiscernible] woodlands and lead to potential downstream flooding risk that could potentially impact on the value residential mortgage-backed securities, whether our unmitigated climate risks, for example, and potentially even trigger us at a federal level that could lead to compliance risks and so on. If after the process of engaging with that customer through your risk management process, you determined that the customer is going to continue clearing that ecosystem regardless. What would be the bank's calculus on what to do next [indiscernible]?

So there's a lot in what you've just said out. But when we look at a customer and we decide will we lend money to this customer, we do want to understand are they complying with the law. Are they developing and growing a produce that is salable into the marketplace. And so it comes back to something very fundamental. Is this good risk that we should deploy the shareholders' capital into is this is a question that sits in front of us. So if we go through a process, and it's clear that they are clearing land in a way that's inconsistent with the [ lore ] that suggests that their properties and developing product that can be sold to markets that they want to access, then that means they're probably not the risk that we would like to partner with. Now it's a question of reviewing with them, going through with them what they're doing. But something as fundamental as you need to comply with the law would obviously indicate to you that we'd have to think seriously about them from a risk perspective.

Mr. Chairman, I would like to introduce Mr. [ Ben Gallen ].

Thank you. Welcome, [ Mr. Gallen ].

Thank you, Chair. Yes, my name is [ Ben Gallen ]. I'm here today representing our finance sector union members across the Westpac Group. At a recent House of Representative Economics Committee, you responded, Mr. Miller, to questions about the impact of Artificial Intelligence. You said that AI may replace some roles, but the workforce would evolve as we have seen with digitalization program. You said that how Westpac equips, invests and trains its people will be a profound element in how we adapt to this change.

I also acknowledge the comments you made this morning regarding the important role of Westpac Bankers in the future work of the organization. Loyal and experienced Westpac employees continuously tell us that they themselves want to be part of Westpac's response to a changing industry. However, recent digitalization changes in retail banking and implementation of the UNITE program have seen hundreds of experienced employees made redundant rather than retrained and upskilled. How do you reconcile this with the public sentiment to invest in your existing workforce? And what assurance can you give that future change of any type will not default to job cuts over upskilling?

Thanks for the question. And look, thanks working at Westpac. I appreciate that the company's prosperity is anchored around having the best people. So I just want to acknowledge that. It's too easy to try and sort of distill this down to a simple point. No, AI will take jobs. As you would expect, as industry and markets evolve, the kind of jobs that we need evolve. And so therefore, there will be jobs that will no longer be required in the company. But more importantly, there will be new jobs created in the company.

And just to give the facts put the facts in the room, we have approximately 35,000 people at Westpac. 5,200 people came into the company last year and 5,600 people left the company as a result of different skills and different roles that we need. And so AI both complements that change, challenges us on that change, but I think also will be a really positive additive to the company because it should be -- when we use it properly, when we train everyone to use it properly, it should make their jobs easier. It should make their jobs more satisfying. It should mean that they're not worried about mundane tasks. They're able to do more enjoyable invigorating tasks.

So I think it's a positive for the company. And to the extent that roles that you called out are no longer necessary, contemporaneous with the announcement of those roles changing, we also flagged that 200 new roles have been created and we've had a number of those people repositioned and retrained. And that's the big challenge for us as a company and for the country is how do we constantly invest in people and train them and upskill them so that the next opportunities in the company or outside the company, they're ready for. And so I accept your challenge that that's what we've got to solve at Westpac.

Thank you for that. And yes, to follow up with that, I think that's the point that we would want to continue to discuss with Westpac, and that is to move away from any sense of replacing roles to actually investing in those current people.

And that's a real focus for us, which is to invest in our people and obviously get the outcomes we should get from investing in our people, getting those new skills, new roles role-ready roles in place.

Mr. Chairman, I'd like to introduce [ Ms. Isabelle Fish ].

Thank you. Welcome, [ Isabelle ].

Thank you. Thank you, Anthony, Board and fellow shareholders for once again having the opportunity to attend our great company's AGM. And as a proud Westpac employee and union member of 13 years, share the experience of the workers who generate our profits.

Anthony, when you took over leadership, union meetings and chats were buzzing with colleagues sharing wonderful stories of their experiences with you. I'd like to note that we liked and appreciated Pete, and we were excited to have you as our leader. Over the last 12 months under your leadership, we've been told to take action now as we strive to become #1. We started the year off strong with a pretty unfortunate #1, finally beating CBA and becoming #1 of the big 4 with the largest gender pay gap. A data released in February of this year shows the finance industry continues to trend downwards with an industry-wide gap now 22%. CBA, ANZ and NAB have all reduced their gender pay gap, while we have increased ours to 29.3%. We have increased ours by not taking action now and no indication of that changing.

We want to be an employer of choice, but I'm left wondering, is this a strategy just for the boys? How do we, as women of Westpac who have a 29.3% gender pay gap, look at Westpac as an employer of choice. In an e-mail received by all employees on the 3rd of September, Anthony, you told us you were committed to building a great place to work. You're committed to backing us with real opportunities to grow, succeed and own our future in the 3 key areas of career growth, finances and well-being. So we might have the best rate of the majors across all Westpac products and a market-leading LMI waiver. But how do women who work for this organization afford to buy a house when they make $0.70 to the male dollar?

What we want is real opportunities to succeed in our careers and our lives to have the same promotional opportunities that are afforded to the men who work here. So we might not be able to change the cultural norms where women are still more likely to be in part-time roles as they take on the bulk of the caring duties, but we can make it easier for them to succeed at work. So men make up 76% of the top quartile of earners at Westpac, even though women make up 55% of our workforce. So I ask, will you commit to setting a target for the number of part-time jobs available at the highest level at Westpac?

Well, anyway, I know you work in the [ SME ] section. So thank you. Small business is key for us. So keep going, please. Look, it's really important that we are a place where people want to come and work and that they can be their best and they feel supported. And so I accept your frustration and challenge. I would just flag a couple of things, 29.3% is now 28.1%. So we have made progress. But that's not really worth celebrating in the sense that we -- at least we're moving, okay? We understand we need to go after it.

The second thing is 50% of the leadership team is women. 3 of the 4 revenue divisions in the bank are led by fabulous women. And so we're actually changing the company top to bottom. And so you're right, we need more women in senior roles, which would then just simply solve that mathematical equation that you pointed to, which is that pay gap. Equally, what I need to do is also work out how we can bring more -- create more roles for women in areas where it's heavily male and that skews that calculation you just described, which is technology.

And then the final, I think I do acknowledge is creating an environment where the simple fact is that because of the nature of the responsibility, most women are the caregivers at home, the part-time roles that we have at the bank makes a lot of sense for them, adds a lot of value to their life. So I don't want to just change that so that I can change the score, and we can all feel good that I've got a lower gap than what you see. So I hear your challenge. I accept the challenge. We're underway. We're doing what we think makes sense, and it will time to progressively change. But the very fact that the ET is configured as it is, the fact that the executive leadership group is 49% women highlights to you that I'm very serious about how we go after this.

Thank you. Thank you also for doing your research on me, it feels good. In 13 years of this company, I know one thing is true. If it's important, it's measured. We set targets and attract around the things that we value, the things that we think are important and the things that we think are going to make this organization grow and succeed. We're measured against these targets. We're held accountable to achieve these targets. Without targets, without reporting, we just don't exist.

So if this company sees reducing the gender pay gap is important, we'll have targets in place. And when I addressed the Board at last year's AGM, Anthony, Pete did throw you onto the bus and said that you were working on targets for the coming year. These targets should form talking points of our leadership meeting and they should be held accountable for achieving them. So what target did you set for the February 2026 WGEA data release?

So I will have to talk to you about that outside the room.

When we move into...

Because what we've set targets is a 5-year plan. It's not possible to simply quickly and boldly change that outcome. And so we have got a progressive plan of how do we, over the next 5 years, deliver a significant reduction in that pay gap as identified by the [ WGEA ] calculation.

And so -- but first things first, in what I can do immediately and what we have been able to do immediately is make sure the construct of our executive team is reflective of that, which is 50% women. That's what we're doing as we go about our senior leadership group and we're building that team and building that team out, we're making sure that it has that 49% women. So we have got clear goals, and we have got a clear incremental plan that we are going after to deliver a much lower gender pay gap calculation using the [ WGEA ] formula within 5 years.

So just to clarify, last year, when I asked Pete what our gap would be by 2030, you said we can't look 5 years out, but you're saying we are now looking 5 years out?

No. So what Pete said, we can't wait 5 years out. We have a plan for where we get to in 5 years, and I need to deliver and we have an ambition of how we deliver that each year progressively to get to where we need to get to in 5 years' time.

If you want to get your people to contact my people, we can chat about that. Thank you.

Mr. Chairman, I would like to introduce [ Amanda Richman ].

[ Amanda Richman ], Australian Ethical. Australian Ethical holds around 5.5 million Westpac shares as of the end of November in addition to holding Westpac funds.

In the paper this morning, Westpac has quoted as saying gas has an important but decreasing role as we transition. If Westpac accepts that to be the case, will Westpac assess whether its fossil fuel clients projects are consistent with that decreasing role? Because right now, it seems that your lending criteria doesn't necessarily distinguish between a company developing gas for needed energy security and affordability and one developing gas based on demand forecasts that are well in excess of what transition scenarios require.

So it seems that when it comes to determining who gets financed and on what terms, you'd be treating them identically. If you're genuinely committed to managing the incredibly difficult challenge of balancing between decarbonizing and energy affordability, would Westpac consider introducing a determinative lending criterion that assesses alignment of clients' fossil fuel production plans with the bank's commitment to an orderly and sensible transition pathway?

So we have a target that we've set ourselves a number of years ago in terms of where we will be in oil and gas by 2030. We're on track with that. We've had a 55% reduction in our exposure to oil and gas extraction over the last 3 years. So we are methodically working through our plan to deliver that target we've set ourselves. And so -- but what you -- I think they need to continue to grapple with, and I'm glad you use the words difficult transition is making sure that the transition is fair and equitable and it isn't the case that people unfairly pay higher prices for energy when there is a rational, reasonable way to ensure we still get to where we need to get to, but it does include the use of gas over the next 5, 10, 15 years to deliver that. So...

Just to reiterate or explain the finance emission cap, well and good, but that doesn't answer the question of who you're financing within that cap. So I'm asking, would Westpac consider a determinative lending criterion that distinguishes between an oil and gas company that is producing gas that provides that energy security versus an oil and gas company that is engaging in projects that are only feasible if you're assuming a level of demand well in excess of that transition pathway?

Let's -- if you don't mind, let's take this on notice. As it stands at the moment, we don't lend to new greenfield gas projects. But we are lending to companies that have existing projects and are expanding. As the definition of where that gas is going and how it's been used, we don't look at that so specifically. But why don't we take it on board and come back to you on that if we could.

Thank you, Chair. May I just ask a question on deforestation as well. Chair, in -- Anthony, in your address, you said that while Westpac has abandoned its deforestation commitment, you might not have used those words, the bank is still committed to its sector targets. Does Westpac account for land use change emissions when assessing emissions exposure to this sector?

That's a really good question. I'm going to have to take a moment to check with my Chief Sustainability Officer on that because the answer is, I believe we do, but you're asking about a highly specialized, highly scientifically orientated calculation that we're working with. So I'd rather take that on notice and have you speak to my Chief Sustainability Officer on that.

May I just ask an easy question on deforestation. What due diligence processes and capabilities do you have in place to identify land clearing events so that you can then assess whether a client is engaging in a legal deforestation or forgive me for being a bit cheeky, are you just hoping they'll tell you?

So we enter into a range of due diligence and engagement with our customers to understand what they're doing. It's not a hope matter. We have -- and we've developed a geo-spatial tool, which allows us to examine clearing that has or hasn't occurred on property. And so -- but we work with our customers because it's no good us just policing with something like that. We've got to work in partnership with them. And importantly, good customers understand their obligations. And so the regulations, the law that requires deforestation is very clear. And so good customers solve for that as well.

Mr. Chairman, I would like to introduce [ Lachlan Wells ].

Hello, everybody.

Welcome...

Thank you, Mr. Gregg. Before my question, I just want to address a comment that was made earlier by Mr. Anthony Miller regarding -- sorry. I just want to address a comment that was made earlier by Mr. Anthony Miller about gas being a transition fuel. This is exactly the argument that I would make if I was investing in a gas business. But I would strongly encourage you, Mr. Miller, to take note of the advice of the International Energy Agency. You can read the World Energy Outlook, and you can ask ChatGPT to summarize it for you.

They are forecasting a significant glut of LNG supply in the coming years. And the indication is that if Australia doesn't export gas to our partners in Asia, then they are able to source that gas from the United States and from Qatar who can deliver gas at significantly cheaper prices than Australia. So it just doesn't seem like this argument really holds up given the advice from this objective third party. So I'd really encourage you to take that into consideration. Thank you for just taking the advice what the gas companies are saying.

So my question is -- yes, to Mr. Steven Gregg, Chairman. Regarding Scope 3 emissions, previously, in your plan, you said that these would be -- these must go down in a must be Paris aligned. The transition, there must be a Paris-aligned transition plan for Scope 3 emissions. But in the latest plan, clients just have to have a plan to reduce Scope 3 in general. And another change from last year to this year is that previously, customers' transition plans had to be aligned to the 1.5-degree goal of the Paris Agreement. And now it's the 2-degree goal of the Paris Agreement. So earlier, you said that you believe it's a material improvement on last year. I'm just wondering how is it a material improvement in these 2 respects?

Scope 1 and 2, if we could, please, just to start with. I think the words we're using is well below the 2%, and this is something that's been currently put out globally, and we are really just trying to match with what is being required globally. You probably ought to be aware that the vast majority of those clients that are into heavily carbon-based industries, we require and look for 1.5%. But just as a general overview, we're saying well below 2%.

With regard to Scope 3, it's much more complicated, as you know, in terms of how they can control it versus how they control Scope 1 and 2. And what we're simply asking on Scope 3, and we take this into account in terms of how we rate them in terms of how we bank them, that we ask them to make disclosures on it, have an ambition that is sensible on how they're going to reduce it and a plan that we can demonstrate that. That's what we're asking of our clients at the moment. If they haven't got that, then we'll work with them to get that. But that's how we're approaching it.

I'm just wondering why you made that -- you asked for that requirement in the first place then.

Sorry, I didn't...

No, I'm just wondering why previously, you required Scope 3 emissions to be Paris aligned.

Well, I may have misspoken in terms of Paris aligned. It certainly Scopes 1 and 2 is Paris aligned. Scope 3 is more of a reduction plan we're looking at.

Okay. I mean, yes, it does seem to me that it is a water down plan from what it was last year. I don't see evidence that it's a more rigorous requirement that you're asking your customers.

Well, we think it is. And we think working with the clients to ensure that they are moving along that way is the way to go rather than just debanking people or saying you're not meeting with anything. Therefore, we're not going to finance you.

Okay. I'll ask one short brief question on this to wrap up. If you are confident about this, then why not join the science-based targets initiative?

So join the science-based...

Join the science-based targets initiative, so you can actually demonstrate this to climate-focused investors like myself.

I think we're as open as any bank is in this country about how we disclose things and the criteria. Clearly, we're not going to disclose information about individual companies. That's a privacy issue and a confidentiality issue. But in terms of how we review it, I think it's pretty open.

I'm just asking why Westpac itself isn't [indiscernible] to the SBTi because other banks are. A great tool that you could use to demonstrate to investors that you are willing to -- that you are...

Why don't we take that on board if we could. So it's a good point. Why don't we take it on board. I'll speak to Anthony and [ Fiona ] about it and see what our view might be and come back on that if we could.

Mr. Chairman, I'd like to introduce Carol Limmer.

Thank you. Thank you, Carol.

Thank you. Mr. Chairman, I've got 2 topics on which I would like to ask questions. The first one is the Panorama platform. We note Westpac's intention to now retain the Panorama platform and to invest further capital to upgrade its capabilities. Given the dated legacy of Panorama and the rapid growth of new platforms developed by nonbank companies, such as [ HUB24 ] and [ Netwealth ], can Westpac catch up with the new entrants? And will the cost and effort required be worth the investment? I've got a couple of other questions, but perhaps that one first.

Sure. Thank you. Look, I think we can. We've just undertaken a large migration from one system to the other system, which is more current. The guys are doing a wonderful job at improving performance of it. It's a very large business. And I think it's a business that's very core to what Westpac does. So yes, we would hope it does catch up with the other players in the market.

What is the estimated cost of upgrading Panorama and over what time frame?

I'm sorry, I'll defer to Anthony on that one.

In terms of what Panorama does today, it's a very capable platform, and it has a very large market share and is delivering a really effective service for all the advisers that use that platform. What we need to do in relation to that platform is invest in adding some new capabilities. And what we -- and we have a plan over the next 2 to 3 years to do that.

In terms of costing, one of the things we're doing first is to make sure that all of the other platforms that we have within our portfolio are consolidated onto the Panorama platform, which we'll have completed over the course of the next 6 months. And then we have an investment program over the next 2 years thereafter to uplift Panorama to offer those extra capabilities that ensure we can really compete aggressively with those 2 entities you named.

On Page 115 of the annual report, it gives some net wealth management income of $476 million, up 10% on FY '24. There's no indication of margin or profit for wealth management. Another one, what measures does Westpac take to ensure it avoids accepting flawed plot products such as we have recently seen with [ First Guardian and Shield ]?

So certainly, the work that the team does in BT that operates the Panorama platform is around making sure that investment propositions meet a certain standard in terms of their performance and that they deliver what they say they meant to deliver. And so the process is one where we want to see those investment products that we do, if you will, facilitate on the platform, they need to have some form of track record. We need to make sure that a number of the agencies that assess and appraise whether that investment product is performing have provided their assessment.

And so there is quite a bit of due diligence undertaken and discipline set around what products will be allowable on the platform. And so I think we've got that pretty right, albeit the lessons of the last 12 months tell you that you can't work hard enough, and there's always more to do, and we continue to challenge ourselves about what we can do to make sure that we protect users of Panorama from products that we've seen working -- haven't been working over the last 12 months.

The other topic I've got a question in relation to is Q3 segment performance. Note on Page 21 of the annual report that each of Consumer, Institutional and New Zealand increased net profit over FY '25 by 7% to 15%. However, Business and Wealth net profit decreased by 7% due to increased operating expenses and impairment charges and lower NIM. Given Westpac's aspiration to grow Business and Wealth at greater than system rates, what is the outlook for future profits from this business sector?

I'll have a go at this one very quickly, and I'll pass it to Anthony who's a bit closer to it than me. It's going very well, Carol. Business and Wealth is one of the great prospects for Westpac. And under new leadership, it's showing great signs of growth. Part of the reason that NIM declined marginally was that our business writing was higher than our deposit taking, which means that there's a bit of a margin contraction, but it's a good sign in a way that people are buying our product and growing very strongly. A lot of the cost of UNITE is going into business and wealth. So the cost base is going up a little bit, but it's for the future. But I'm very positive about that segment of our business is a growth area and under great leadership now. And so I've got a lot of confidence that we'll get there on that.

Yes. I think the Chairman nailed it. And what happened in the last 12 months is we simply did a lot more investment in Business and Wealth to set that division up for the next 24, 36 months. And so costs were up because we were investing in the business because it is a great business that deserves that investment and will deliver the right uplift in return for shareholders over the next 2 or 3 years.

Mr. Chairman, I would like to introduce Ms. [indiscernible] for a second question.

Thank you. It's previously partially been picked up by a previous speaker, but whilst your nominations are all well-qualified people, I note that on the skills matrix, as previously said, only 2 directors were highly skilled in technology, digital and data, but also only 2 were experienced in social -- environment and social matters.

I'm not sure that whilst you have fairly good female representation, I'm not sure that you're really capturing the sort of skills and diversity which are needed for the Board and in particular, other forms of diversity where you're not really reflective of the Australian community and possibly life experiences on that. So whilst you will defend your selection for nominees, I think this is probably more of a comment. But do you have anything you want to add on that?

Sure. Let me answer, if I may. I'm very proud of this Board [indiscernible] and that it's, I believe, got the most banking experience on the Board of any of the big Australian banks. And just about everybody on this Board has had very significant financial services experience. And as a bank, that's vital.

I think in terms of some of the criteria, be it sustainability, environmental or IT, there's actually a lot of experience on the Board. I think the guys are being a bit tough on themselves when they mark themselves down because they weren't necessarily from a tech background. But most Board members at Westpac have been through multiple tech reinstation reorganizations as -- so they've got a lot to lean into on your night, for example. In terms of a broader view on the Australian society, we're always open to thinking about that and talking to you about that because you make a good point on that one.

Okay. I just I wanted to emphasize that and make sure that the Board is mindful in the [indiscernible]. As far as remuneration, whilst the CEO was awarded some 83% on short-term variables. I do feel that that's a little bit generous given that a number of targets were missed. And I think that it's sort of -- you might say it's only missed slightly, but to my thinking that the overall result, and I have read the report and sort of -- I understand the process, but I don't agree with the logic that the rating was a bit higher than what I think is justified by the result.

Yes.

And if I could ask a question about -- whilst it's great that you've increased -- you've doubled the commitment to supporting women in business, and this has gone to $1 billion. What particular criteria are you looking at? Are we looking at micro lending as you're probably aware that in general, women are better at managing businesses on the financial side of things, if I may say so myself. But is this the full range of businesses that women are involved in? Or is it a particular segment or each markets?

There's 2 elements to your question. I'll deal with the first one first, which is the remuneration levels, and then I'll get Anthony go at the second one. it's a very rigorous process at Westpac in terms of how the scorecards are put together, the criteria and how people get measured. And I think for the first time in many years, Westpac has been fairly honest and a little bit tough on itself in terms of how they were remunerated for the performance they generated. And most people were given a bit of a wake-up call and things are marked down a little bit here and there to demonstrate that we are really demanding performance from our top team, which will filter through the bank.

So Anthony, for example, was marked down because of costs were higher than we thought. I think perhaps a little bit unfairly given the fine work he's done. But nevertheless, we had to be honest with ourselves in how we looked at that. So any scorecard, I think, is a fairly blunt instrument and that it's a very binary sort of outcome depending on targets. The Board has to show judgment on how we look at that, which we do, around the edges of what we've agreed with the market that we'll do. So as time goes on, these things evolve. But I think to date, I'm very happy with where that score has landed for the top team.

With regard to the second part of your question, you might have a go one now.

Certainly, we've been delighted with the outcomes in terms of that financing of those entrepreneurial women. They're both start-ups and scale-up businesses. So -- and the performance has been exceptional. And as you rightly say, women tend to be exceptional managers and very disciplined. And so we do like the returns that are being generated there. And so we're very pleased with it, and we're going to do more, and we'll continue to expand that offering as fast as we can because it's certainly high-quality business, and they're high-quality customers, and we're looking forward to growing with them.

Mr. Chairman, I would like to introduce Mr. Stephen Mayne.

Thank you. Welcome, Stephen. I haven't seen you for a while.

I've only been here for the last hour, so I was [indiscernible] meeting. Apart from mentioning the 14% vote on 5B, have you disclosed the proxies on any other items today thus far at the meeting or anywhere else?

I was on 5A, and we put up a slide that had all the voting on all resolutions upfront. And to be honest, we took a lead from your request that we do that.

Right. Okay. And has there been any online questions because I've been here for now and there's been.

There will be a few online questions. We're getting through the room first, and there were a few online questions.

Now Anthony mentioned that we've hired the best CFO in the country, and we've got the best Sustainability Officer in the country. And I'd just like to make the comment that you're certainly not running the best AGM from a process point of view. So you may need to hire someone with a PhD on AGM process and transparency because you should have disclosed the proxies to the ASX, not just flash them up once to have more timely disclosure. You shouldn't have banned online voting today at the meeting. You shouldn't have abandoned the agenda. You don't do that at Board meetings. You don't walk into a Board meeting and say, there's 9 items on the agenda here. Has anyone got a question on anything because that's what you've done today.

So it's co-mingled, a whole bunch of important issues. There should be general business in the accounts at the start. There should be a section on the directors. There should be a section on remuneration, and then there should be the climate debate. But you've deliberately chosen not to do that and you cause angst in the room because climate questions have been co-mingled with others. You've reduced focus on RAM and directors.

So I'd ask you next year just to follow the agenda, reintroduce online voting because participation rates have crashed to below 2% since the move away from paper. And if you -- you should also be disclosing the headcount data, [ Myer ] did that this morning with the proxies. 1,100 shareholders voted, you can see the [indiscernible] and against. So are you going to disclose the headcount data? Voluntarily, like many other companies do, ASX, [ Qantas ], you name it, many of them do it. I've also requested that, but you haven't done that before.

And then I guess my main complaint is actually the fact that you're running a premature AGM. So nominations closed, I think, on October 23 for the Board, but you didn't release the results until November, what the 11th or something. So how is it good practice to close off Board nominations before the existing directors have even revealed how they've performed for the year. So I've asked you, this is the equivalent of a June 30 company having their AGM on September 11. That's what we are so premature. That's the equivalent. Now most companies are so disorganized that on Friday, September 28, the last possible day because companies have 5 months to have that AGM, there were more than 200 listed companies that waited until the last possible day because there's a whole lot of things to organize and you've got to get the process right, the sequencing right about revealing your performance and then calling for nominations. So you've got until the end of February to have your AGM.

So I'm specifically asking you to delay next year's AGM. Ideally have it in Melbourne during the Australian open, but just tick that box of not closing off nominations before you revealed how you've performed. Will you commit to follow the agenda next year? And probably 2 very specific questions. Will you put up your own climate transition plan resolution next year because there's a lot of interest in the debate. And so don't just sit back and wait for shareholders to put it on the agenda. You put it on the agenda as many companies do and then treat it with respect by allowing a discrete debate when we get to that item and follow the agenda like you do in Board meetings.

And I guess last couple of points is, has [ David Cohen ], one of our newest directors, sold all of his Commonwealth Bank shares? And what was it that caused the material protest vote, I think, against Peter Nash. So did which of the proxy advisers recommended against? And what were the issues that caused that particular protest vote or any other protest votes? I wasn't here when you flashed it up. You haven't disclosed the proxies to the ASX. The AGM is at its heart, the AGM is an election results announcement event, where you reveal the results because 99% of the votes are cast 48 hours before the meeting. And then we get together and have a discussion on what it means. What was the problem with Mr. Nash? Why was there [ 14% ] against the climate? But you haven't made that particularly helpful.

And so I think next year, you've got a long way to go to be best in Australia, like your best in Australia on the sustainability recruitment and your CFO. So which of those best practice reforms will you embrace? And I look forward to your answers on those specific questions, particularly about the climate transition vote next year put up by you [ Mr. Cohen's ] CBA shareholding and the reasons behind the protest voting against Mr. Nash.

Okay. Thank you for all of that. Let me just start by saying it's a shame you weren't here at the beginning of the meeting, Mr. Mayne, because you would have got a better handle on exactly what we're doing and why, where and how. I think this is actually the right way we're doing this event, and I'll explain why. On online voting is almost miniscule now. It doesn't serve a purpose. So we do want to streamline the event this year, enable people who wanted to come and want to vote and participate to do so. People can ring in, they can ask questions, they can vote in many different ways. Secondly, it is not our climate plan we're putting up. It is actually [ Market Force's ] climate plan they're putting up, and we have engaged with them during the year. We quite enjoy the discussion. And it's a at times robust, but a very constructive way of going forward to things.

With regard to the voting, we're actually taking a leaf from your book. And we actually put all the proxy votes and all the votes upfront, so people can see them. You weren't here. If you were here, you would have seen them. And we had a great discussion about that. As to the unhappiness in the room because the discussion was mingled, that's simply not true. You weren't here. And it was a discussion, I think it was very broad-based and very fair. So we will continue doing this if I think it makes sense. Everybody can ask a question in this room. Nobody is going to be stopped. Everybody is going to be given a full answer. Everybody can have a discussion afterwards. We think it's extremely well run.

With regard to the various voting, if you were here, you would have seen that we got 99% of just about everything. With regard to Peter, who I must say is a valued colleague and performs extremely well on this Board, there was a view because of what happened at another organization that there will be a protest vote. I can't look at other organizations as I look at this Board and how we give support to directors who are actually performing incredibly well. If you want to ask a question at that time, you could have. You still can. So we're not open -- we're not closing off any of the discussions on that.

With regard to the timing of the AGM, I think having an AGM halfway through the year in February is not appropriate. We'll have it as we always have at this time of the year where we can get people to come along before Christmas. They can have a good discussion. Nothing is being hidden, questions can be asked and they will be answered. I'm just going to try to remember what else you had to say there. With regard to David's CBA shares, I honestly don't know whether he sold any or not. David, have you sold your CBA shares or you still hold them?

I'm happy to talk to that. Stephen, no, I have not sold all of them. Under the long-term incentive plans at CBA, I'm still getting some shares. I sell them as I get them.

That's fine.

Mr. Chairman, I'd like to introduce [ Mr. Paul Fetting ].

Paul, thank you again.

Stephen, back to financial metrics of the company, 3 points I want to raise now. Franking income pool, NIM and cost-income ratio. I'll deal with franking income first. Franking income pool is running down. It seemed to be well hidden in the annual report. And I think the CFO would probably know exactly where it is, but I couldn't find it.

One of the sell-side analysts has reported that maybe Westpac does not have sufficient franking credits to provide full franking on future dividends in the next 6 months or 12 months. And we need to know what that pool is, i.e., ANZ only partially franked dividends. Now we have a New Zealand division of Westpac that's doing reasonably well. So I can understand there'd be non-franked income coming in from New Zealand.

Okay. Now net interest margin. I wonder where you really want to get net interest margin down to. Anthony, you did sort of speak about this before, but I think really, you probably want to come up with a better number. Can you see like 2.0% plus for net interest margin? Admittedly, it would be across all business units.

Three, your cost-to-income ratio, 53.04% and on FY '24, pretty small increase, I would have thought. And again, you've been hammered with this from the analysts, and I'm hammering it again now for the benefit of retail shareholders in this room. Now we need to know -- can you get it down -- can you get cost-to-income ratio down to, say, 47%, i.e., Commonwealth Bank, for example. We had one of a very loyal staff member saying that we want to be the top bank get up where CBA is, one of your own staff members just before. So they are my 3 questions, very much on financial metrics, but if you can please give responses.

Let me try the franking credits one first, if I may. I mean, Westpac actually, believe or not, has around $3 billion of franking credit available on the pool, give or take. And it's by far the most -- of the largest balance of all the Australian banks. So when we look at dividend policy, it will always -- as far as I can see, have a franking credit element to it. We won't be partially franking our dividends. The issue is more how do we get those dividend -- franked dividends back to you or franking credits back to you as a shareholder because they're worth more in your hand than in the bank's hand.

With regard to NIM, NIM has held up pretty well this year. And it's a function of a whole range of things that go into margin, but it's generally held up about where we thought it would. And it's a whole range of issues, including the interest rate cycle, the cost-income ratio, as you rightly point out, a whole range of issues that deposit growth, deposit lending versus -- or deposit growth versus lending growth, they all contribute to NIM. So at this stage, it is pretty decent. Our idea is to hold it there or improve on it. It's a function of how well the company does.

With regard to expenses, I'll let Anthony tackle that because there's no question that our expense ratio is not as good as it should be. And a large amount of the focus of the company in the next 3 to 5 years is going to be on getting that down.

Yes. I mean -- so we're very much -- as I said out in my opening remarks, it's about investing to set the company up for the future. And so our costs were up. They were up 9%. And you're right to say, gee, that's an increase that's unsustainable and unacceptable. That's the right challenge. But those costs are up because we're investing in UNITE, and we're expensing Unite at approximately 75%.

Secondly, we're adding bankers because we need to have more people in the role of meeting customers, doing more for customers, delivering services and obviously generating income and outcomes with customers. We also had a stack of extra costs we decided to bring forward, which is the restructuring charge that we took. And again, we expensed that. And so that was all about just being honest with the fact that we needed to make some changes to ensure that we have a run cost that should improve over time.

The final thing I would say is that the purpose of UNITE is to set us up such that we can lower the structural run cost of the company so we can have a cost-to-income ratio and our aspiration is better than the average of our peers. And so that's why we're going after it.

Supplement point on your response to cost to income. Where would you really like to see the cost-to-income ratio? Would you like to see it 45%, 46%...

Where would I like to see it? We've got an aspiration to get it below the average of our peers.

Yes, that's a bit arbitry, isn't it?

No, it's -- This requires a substantial amount of work, a substantial amount of investment, and it's going to be a challenge to get there, but that's what we've set ourselves to go after. And it's the goal is we're delivering that by approximately 2029.

I can guarantee you these sort of questions probably for me will be here next year, too.

No, that's entirely appropriate.

Can I take the next question maybe online if we have no more questions in the room.

Mr. Chairman, we have an online question from John [indiscernible]. Is there a reason why Westpac has elected to disenfranchise those attending online when compared to those attending in person by not providing online voting when this facility is available.

Thank you for the question. I think we have actually covered that one 2 or 3 times already. It's not about disenfranchising shareholders at all. It's just that we felt that there was so little interest in it in times gone by that it didn't have a real value this time. But we can have a look at that if need be. Any other questions there?

Mr. Chairman, we have another question from John [indiscernible]. You've indicated that McKinsey and [ Accenture ] are involved in oversight and advice on the UNITE program in February 2021. McKinsey settled with 47 U.S. states, 5 territories and the District of Columbia, paying USD 573 million to resolve investigations into its role in the opioid crisis. In December 2024, the U.S. Department of Justice announced a 5-year deferred prosecution agreement under which McKinsey agreed to pay USD 650 million to resolve criminal charges over its role in the turbocharging [ OxyContin ] sales.

I guess that's a statement rather than a question. The role that McKinsey plays is one of assurance on this UNITE program, nothing to do with what happens in the States, nothing to do with the opioid crisis. They are a very fine firm, and we use the best people we can for that process.

Mr. Chairman, we have an online question from [indiscernible]. [ WBC ] EPS and ROE for the current and last year are noted as follows: current EPS, $2.04; current ROE, 9.5%. Question, can you share with us what the estimated EPS and ROE would be when the enhancement projects are completed in 2029?

I'm going to let Anthony answer that in a second, but we can't predict what that will be. So that's not in our position to make forward statements on that sort of thing. Hopefully, it will be a great success. But Anthony?

Yes. Look, the goal is that we improve the return on tangible equity, so ROTE. We've got a very clear goal where we want to be by the end of 2029. We also have a very clear goal around what we want to achieve from a cost-to-income ratio, which I've outlined is ahead of our peer group average. The outcome from that is that I'd like to see earnings per share improve. ROE is a slightly different construct, which we don't need to go into. But I think the right metric is we're going to improve return on tangible equity and the outcome of getting the cost income where we want to get it to is that we should be able to improve earnings per share.

Mr. Chairman, we have an online question from [ Lynette McCurdy ]. It's reported that Westpac is to provide a 1.54 million bond for Santos. Is this correct? If so, why is this happening when you claim to support climate action and the Paris Agreement? Fossil fuel expansion is increasing Australia's worsening bushfires, floods and heat waves. Just last weekend, the fires in New South Wales and Tasmania have burned many homes and a firefighter has died. It's time to stop funding fossil fuel companies like other banks are doing.

Thank you for the question. I think we have actually covered the answer to this 2 or 3 times now, so I won't provide a lot of detail, except to say that it's a company that we have financed before. It is all part of their program for expanding their gas supply, and that is all part of what's within the agreement of the arrangement we have with them.

Mr. Chairman, we have an online question from [ Craig Caulfield ]. How is AI uncovering fraud in loan applications? And does staff get rewarded for finding and filtering out loans with incorrect inputs that would otherwise be approved? ANZ confirmed at an earlier AGM that some 2,000 loan applications were identified with incorrect data. How does Westpac compare to ANZ?

So thank you for the question, and it's a good one. Yes, the way we are working on and what we're seeing in terms of success from AI is around its ability to help us move through enormous amounts of data and identify patterns or exceptions to patents we would otherwise like to see, which then indicates actually further inquiries needed. Then the human steps in and does the extra work needed to determine if something mischievous such as a fraud or otherwise is ongoing.

So I don't have the exact number of what we are identifying, but we certainly recognize AI is helping our people do a better job, a faster job and a more consistent job at identifying fraud and scams and that's something that we're very focused on.

Mr. Chairman, we have another question online from [ Craig Caulfield ]. 7 years on from the Banking Royal Commission, a key recommendation from Commissioner [ Hayne ] has not been enacted. A national scheme for farm debt mediation would be a win-win for both banks and farmers simplifying money and complex laws differing between states. Will the Chair and the CEO lobby to undertake to genuinely introduce a national farm debt mediation scheme via the ABA? Do you agree our farmers need to be respected and form a growth opportunity for Westpac to pick up some turf from NAB and BA?

Yes, I certainly agree with you that the agricultural sector, the farm community is a tremendous opportunity, and we are looking to grow. I think our growth in the loan book in the agriculture sector last year was an [ old ] 22%. So we're very focused on what we can do there.

In terms of that legacy outcome from the Home [ roll ] Commission, I will take that on notice. What we're very focused on is making sure that we partner really well with the farming customers that we have and working with them to make sure that their financing structure is such that it's sustainable through the cycle and through particular challenges like route and other that gets in the way.

So I think we've got that right. And I think what you're seeing in the marketplace in terms of how active and competitive it is in that cultural sector that actually it is right, and we are getting the balance right as an industry, but I will take a notice that question around farm debt mediation and where we are as an industry places the rural commission.

I think it's important to note that you rightly say it should be done via the ABA. So why don't you touch base through that perform.

Mr. Chairman, we have another online question from Craig Corfield.

Deep banking experience is to dilute in many bank boards today. I applaud the selection committee on Mr. [ Karen's ] appointment given no other potential director has the deep experience he brings to us back from his years at CBA. [ ANZ's ] loss is Westpac's game. I'm interested to know whether ANZ approached you, Mr. Colin to take on the CEO role when Shane Elliott left.

I think there are a few presumptions in that question, and I'm not quite sure it's appropriate that we answer them here. So how about we just park that, if you don't mind? And if you feel strongly about, I'll be very happy to have that conversation offline.

Mr. Chairman, we have an online question from Rita [ Mazalevskis ]. The annual report, Page 44, material risk categories. Number nine, financial crime risk. For the '24, '25 financial year, what was the risk appetite measure and percentage and final risk rating for the volume of higher to very high financial crime risk ratings across Westpac's business?

And for #10, Cyber risk, the risk appetite measure for risk for Westpac's or its third-party data or technology where inappropriately accessed, manipulated or damage what measure for the '24, '25 financial year was there for control effectiveness and supplier security?

Excellent questions. I have very detailed questions. I'll vitally have to come back to you on that. We do have a detailed medication of control systems and what we look forward in financial crime and cyber, but they are very specific questions, and I'll have to come back to you with the specifics on that.

Ladies and gentlemen, we have another online question from [ Rama ]. For transparency and customer assurance for Westpac's end-to-end process for handling customer reports or financial statement fraud, please clarify who within Westpac assesses and escalates the matter who the reviewing authority is, what investigative actions are undertaken and what Westpac's standard approach to communicating the findings back to the customers?

We look at a lot in that question, and I think I reflect on perhaps some experience or history you have in relation to that. Again, I'll come back and set that all out for you. And so I believe we have your contact details, and I'll come back to you with the answers to those very specific questions.

Mr. Chairman, we have another online question from [ Radulski ]. Page 3 of the risk factors our operations depend on the secure processing storage and transmission of information on our systems and those of external suppliers and our assets may face security breaches such as unauthorized access and employee is conduct and external and internal threats, which can also impact customers. What is Westpac's process, if fails to measure its regulatory and legal obligations with these actions for?

Again, I note that you're coming at this with some specificity reflecting perhaps previous connection with the company. We're very focused on actually data storage of data, the use of data, and then when we move data around in the company, across systems, how we do that in a way that's safe, the obligations we have to people in terms of protecting that data and ensuring privacy is maintained as one that was a very, very serious obligation. And we do take it such that we have the right resources and the right systems around it.

Again, it's the case that we haven't met the standard we've set ourselves, and there are often obligations on us to report that to both the regulator and to the customer. And that's what we do. And so in relation to any and all breaches, we have a framework around what we need to do in response to that breach.

Mr. Chairman, we have another online question from [ Radom Moseley ] Chair, could you please confirm what investigatiory powers Westpac has to investigate internal and external for?

Again, a question which goes to an area where we do have the resources. And we importantly have the skill and team in place to undertake those investigations as needed. We do it in a way where we must follow a framework, which protects internally, people protects data and then also, most importantly, protects our customers and their data as we hold it inside the company. So we do have those investigatory powers but we have to follow those by making sure we maintain a discipline around the data that our customers have with us and respecting that.

Okay. May make a suggestion that we go to questions in the room for a while and give online and come back in a few minutes. Any other questions in the room that people would like to ask?

Mr. Chairman, I have another question from Mr. Michael Sanderson.

It's rather than manage out I just got an observation. Dinosaurs if predicted, the climate goes away it is, I suggest we, as a species or all dinosaurs irrespective of age.

My question, Westpac announced the moratorium on or on regional branch closures until 2030. And is now piloting a new community banking service where mobile bankers periodically occupy council buildings in towns like [ Don gold ]. Rule of dealing, let me hit around that one. And Manila rather than opening four branches.

Westpac closure of Cooper PD, [ Compose ] and Carmele these towns with no bank exposing their customers for round trips of [ 1,080 ] 560 and 240 kilometers, respectively. Your new proposed [ fee ] branches and resale service centers are in locations that already have bank branches. Why hasn't Westpac established fleet branches in Cooper PD, [ comprise ]? Kanama, Wogan Hills, [ Manon ], Japan Diller, Talon Ben and Kapanga where Westpac has left those towns completely tankless.

Will you admit that these fake branches are more about political optics rather than restoring real banking service. And just a related observation, you readily debank [ Cuper PD ], but you're resident about debanking a fossil fuel company.

Outtake branches, the way the banking industry is evolving is the way customers want to interact with us is constantly evolving there is now at a point where 96% of what they do is online.

And so therefore, we just got to keep working out what's that balance between online, in person to person and virtual. And so those areas where we're reopening are designed to make sure we get that balance right. And we got it wrong in the context of closing more and thus, we've reopened. And we're now continuing to do the work to look at where we are across regional Australia to address concerns where people feel they don't have access as a customer of Westpac to a Westpac service, whether that's online, in a branch or a version of physical connection or online. So we're just working through that.

And to the extent that we identify as we do that work, there's more we can do and that there's places we can go back to and it makes sense to go back, then we will do it. And so then, of course, we're also undertaking work such as putting mobile bankers into towns to help address that need for some customers rightly who need human-to-human person-to-person connection and service. We're working to try and sell. But it's about ongoing work to try and get that balance right.

Why didn't you put the fake branches in towns where you've debanked? Why have you put them in towns and already have banking facilities?

I've laid out for you what we're doing, which is methodically working through where we can provide the service that our customers want. And if it's the case, that a town where we've exited, it makes sense for us to have a point of presence that serves the community there in the way that makes sense, we'll do it.

Okay. We don't accept the explanation, but we'll leave it that. I'm going to skip to my question on CEO equity grant [indiscernible] attention. The -- sorry, Chair, the -- this item asks us to approve 3.5 million equity grant to the CEO. At the recent Health Economics Committee, Mr. Miller said Westpac was willing to take on more exposure to gas. He described critical minerals and gas as a major part of transition.

Peer Review research, I have provided to Westpac shows that guests has a 25% to 275% higher life cycle emissions than coal. Why should shareholders trust the CEO to graph climate change science and risk? Is he just echoing the political narrative on gas? Will he with how -- or will you -- I'm talking about was here, withhold this equity grant until Mr. Miller corrects the parliamentary record on gas and the rules about financing gas expansion? Will Westpac acknowledge on the record that recent peer review research finds exported LNG to have between 25% and 275% higher life cycle emissions than coal? Will Westpac correct the record to state that we do not need more gas, we need fewer exports?

The whole range of questions in that one.

If I could just answer it maybe this way. Our view on gas as a transition fuel is echoed by the current government and by the EMA, which is independent authority as to -- a very valid and the most efficient form of transitionary energy fuel. On that basis and with that background and really advice we're getting from our various fees like [indiscernible], it is something that we will continue to fund in reasonable levels.

How Anthony's long-term equity plan is a function of that is not really that current. It gets paid for running a great company and its long-term plan is a function of how the company performs over a longer period of time. They aren't linked. So a whole range of questions there. So that's how we look at it.

You're not prepared to correct the parliamentary record?

I wasn't there. I didn't hear that. First of all, I will ask you to speak to my Chief Sustainability Officer because I think what you've posited is not necessarily what I've been briefed on by a range of science and other experts. Secondly, I'm relying upon AMO, I'm replying on the Australian Government also relying upon a whole host of other work that gas is the most efficient of the fossil fuels in terms of carbon emissions relative to coal relative to oil.

And so therefore, I think I'd like to understand the size you're drawing on to make that representation. And I'll wait for advice from [indiscernible] as to whether I don't need to correct anything I may have said.

Mr. Chairman, I have another question from Mr. Stephen Mayne.

Would you be able to put the property slide back up, if that's possible? Someone came as before and said it was flexed up, but you didn't see the biggest either.

Yes, I think we can. Let's try and do it right.

Anyway, a couple of other things. I was at the Myer AGM this morning, early disclosure of the proxies. Visitors could come in bags weren't confiscated. I was sitting 6 stores down from the billion [indiscernible]. It was a good friendly AGM. And I came here to hand in the bag. I have to get security checked. I mean, there are no bank robbers here. You don't need to double up with both taking bags and then doing security.

So -- and what -- and you've banned visitors. So I don't understand why you banned visitors. So you seem to be a little bit, I don't know, paranoid or defensive on security. So, just a couple of responses to what you said earlier. So it wasn't 99% on all resolutions. It was -- there was a 14% protest vote against the Board's recommendation on [indiscernible] as you can see.

As I said, you just correctly pleased for you. It's 97% to 99% of everything except for that one resolution, which was put up by market forces.

So this 40% against Peter Nash?

And Peter Nash, right.

So don't just say I understand there was an issue with another organization. Could Peter please explain the situation to the shareholders. Could you also tell us which of the proxy advisers recommended against. Because that's one of the biggest ever votes against an independent director of an Australian bank. I don't think it should be glossed over with dismissive sort of 99% except. That's an enormous process.

Where you here when Peter gave his talk? I can't remember, you here in the room -- and Peter. No. Well, so I hear what you're saying I have a lot of respect for your observations. But I think it might be helpful, if you don't mind me saying that you come to all the meeting, so you can see how all meeting transpires, including switches by Peter and myself, in the various talks that we gave about safe in businesses. By the way, I'm very happy that Peter talks to you now about it. If you like.

There's a lot of -- I'll talk to you after the meeting going on today. That's a common fab of tactic. When you just sort of dismissively said something to do with another organization. That's code for CVs don't matter for directors. See these do matter for directors under our compulsory super system, every work in Australian is forced to be exposed to the performance. of our professional director class.

And if something happens at one company, and it causes people to vote against at another company, it should be explained. I don't know which company it is. Is [indiscernible]? The company should be named and Peter should speak because you've been quite dominating in handling all of the questions. Peter should speak as to what the issue is, did he speak the proxy advisers? Did you try and persuade institutions? Have you disclosed anything like what's the issue here?

And just finally, where is next year's AGM? Do you know that? Is that already organized?

Yes. We do tend to try and rotate it. And -- but for cost reasons and to try and show shareholders that we are looking into the cost of running AGM we held at [indiscernible] this year. It was going to be in Adelaide this year, but we're here. We'll see how it goes for next year.

So you haven't organized next year? So you could do what ASX did. So I raised with ASX though having a premature AGM, and they delayed it from September to October to satisfy that criteria about not prematurely closing of domination. So if you haven't booked a venue, I'd ask you to do that.

And just finally, in relation to the question of the disenfranchisement of the online voting, and you said it -- it's not taken up very much. I think the best way, we need some data, you're very data-driven. So if you just tell us how many of our shareholders have voted for and against, and we can see how well you've done in getting out the vote.

At Quantas, it's less than 1%. We wouldn't cut that in federal elections. We're at 93%. So how hard have you tried to get shareholders to vote? I would say not very given that you've done online voting today. So give yourself a target of 3% turn out next year?

And I guess the final question, which I've asked a few AGMs is could Anthony provide a brief summary of how busy and what he does straight after the 2 half year results? Broker launches, institutions, fund managers, analysts often it's a week-long festival of talking to the big end of town. And how does that compare with the amount of time and effort you put into your retail shareholders because, frankly, banning online voting, banning visitors not disclosing how many of us both for and against.

So our sentiment can be made public, not disclosing vote before the AGM, although that's not particularly related. I think there's a fair contrast between the time and effort into the big end of town and how you're looking up to retail, and there's a few specific things that you can do. And if you did an aim in Melbourne during the Australian open, I guarantee you probably get twice as many shareholders there.

Then here who wants a pre-Christmas AGM were all exhausted after the main AGM season. So we have a rest. And then all your banks rush them out before Christmas because you know people are too busy to come. That's one of the things you like about it. So shows the numbers on how many are here, how many voted and then take seriously the governance suggestion. And I would like to hear from Anthony and from Mr. Nash on those two specific points. Thank you.

And don't you just skew a very brief, I mean, very brief...

You forgive me, this is my first year in the role. So the way we went about this year was quite a few meetings after each set of results. share the workload in the first half with Michael when he was CFO and shared the worldwide with Nathan in the full year results.

And so we see a whole suite of investors and brokers through one-on-ones and group events. We do try to make sure so that we're actively involved in public events such as Chamber of Commerce gatherings and so we're very much putting ourselves into a market environment where people can ask questions. People can ask where the results are and we can talk about what we're doing and what we're not doing.

So -- but to the extent that you feel retail investors, there's more we can do in the context of post-result activity, [indiscernible] are always looking at what more we can do and how can we better communicate with our owners. Ultimately, we know we work for you as owners. And so therefore, we'll work on what we can do better.

Thanks. That's good. Wish we'll go to the online building. So what we'll do is come back to is actually how many people voted last year and used that facility to vote because I think it's a fair question. But as you know, everybody is welcome here. And as you're aware, because I'm sure you've been to a lot of big bank, AGMs. Often they are a bit robust in terms of how they are handled. So that's why there is security there, not to key people like you out. So you understand that. We don't need to go into that.

[indiscernible] to Peter's vote and how he's -- I'm happy he speaks now to the audience, if you like. All I would say is that -- and I -- yes, I'll be honest with you, I have spoken with a lot of the shareholders and a lot of the proxies about it. And I'm not really in a position and I don't think it's fair on Peter either to talk about what happened at that the organization because that's their business, not our business.

And the fact that they vote proxies some shareholders decided to vote against Peter, is there -- probably, it was entirely their view. Why they do it when actually they should be looking at how he performs on the Westpac Board and his tenure and contribution, I think, by fine confusing. But Pete, would you mind just give us a couple of minutes just on -- it was ASX, just to be clear. I know you went to that board that AGM.

Yes, I'm happy to make a few comments. Earlier on in the meeting, I did talk to the contribution that I have made over the years through Westpac. And the strong position Westpac finds itself in today as being the most important aspect of my performance in relation to Westpac. It's clear, and I would acknowledge that there has been concern from some investors around my time on the board of ASX, which has faced its challenges.

It would not be appropriate for me to engage in a discussion at this meeting about those challenges and how they've been addressed and what are I would say is that a number of shareholders reached out to have a discussion with me about various aspects of my nonexecutive roles and how they combine to enhance my experience at Westpac and they were discussions I had with any investor that reached out and they were valuable discussions and have contributed in part to where the vote has ended up today.

Good. I'll be very happy to have a discussion with you after [indiscernible] on all those issues you raised because I think that's some good points there. As I said without sound like a broken record, I'd love you to come to the entire meeting next time if that's possible.

Mr. Chairman, I have another question from Mr. Michael Sanderson.

I have a question for each of the directors are being elected or reelected. I'd like to get more much less than one go, if I could?

That's fine.

Mr. Chair. Westpac's own governance will say directors must be independent and free of any business or other relationship that could materially interfere with or could reasonably be perceived to interfere with their independent judgment. Mr. Nash, is a former National Chairman of KPMG, and now Chairs Westpac's Audit Committee. KPMG is now Westpac's external auditor for the 2025 financial year. Proxy advisers, ISS and CGI Glass Lewis, both have recommended voting against his reelection.

How can Mr. Nash credibly maintain that he is independent in these circumstances. Will West per commit that he either not be reelected or at a minimum, step down from the Audit Committee and from any oversight of KPMG audit? Does Mr. Nash represent transformation or more of the same?

Why don't I take that, if you don't mind, and I've got a fairly detailed answer for you. Peter is without question independent and absolutely expresses his independence and demonstrated every Board meeting. He was at KPMG 8 or 9 years, you look at 8 or 8 years ago. At what stage do you say to somebody, they are independent?

I would suggest he's well truly outside of KPMG and well truly independent. With regard to the appointment of KPMG as you order this year, it was after Pricewaterhouse were, I guess, retired from their role after 55 years as the auditor. And we just felt it was prudent to change auditor. In that regard, we put a subcommittee of the Board together to run a process to determine which orders should take over. Peter was not part of that process. He was not on that committee. He was recused from any involvement at all, not because he wasn't independent because I think the optics would suggest that people could take a view on that.

Michael Ullmer, who's a very fine director and a very experienced executive who was the Chair of that committee, which I sit on as well. And KPMG gave a very fine if you like, presentation, and they deserve a few on merits for no other reason. Peter is a very fine director, and we have absolutely no -- I have absolutely no hesitation in suggesting he stays on the board and performance is duty.

Furthermore, the tenure of Westpac's Board is very young. I think 2.5 to 3 years because of various changes and turnover. Peter's have been on the board for now 6 or 7 years. And that buys a lot of corporate knowledge and corporate history. And I think as a firm of this scale and size goes through its transformation, it needs to have people of that ilk on its board.

So Peter is a fine individual. He's incredibly well qualified. There aren't many people in this market, that'd be are qualified to be a Chairman of a bank audit committee, and he is one of them. So I'm very proud on the Board, and you as shareholders should be very, very grateful that he's serving on the Board.

Can you explain why [indiscernible] and CGI [ Glass ]

I can absolutely explain why they're saying, I just have to disagree with what they're saying, and I've had a discussion with ISS particularly on this. And -- it was a very unusual conversation. We tend to agree with me why they voted, it's their business.

Okay. Next one, Chair, Westpac is still rebuilding trust after a 23 million anti-money laundering breaches and a record of track penalty. You ask us to elect David Cohen Westpac Board Risk Committee. Mr. Cohen was CBA's Chief Risk Officer, when [indiscernible] hit that bank with its own record anti-money ordering penalty.

Mr. Cohen also admitted serious risk filings to the Royal Commission. How can you possibly claim he strengthens Westpac's risk government? Will you withdraw the Board's recommendation for his election or at least rule out his appointment to the Risk Committee and finish does Mr. Cohen represent the transformation or more of the same?

Well, firstly, I'm absolutely not going to withdraw his the recommendation for him to be on the board. He's a very -- again, a very experienced individual and a great contributor I think as life is, you want people who have seen it all, good, bad, [indiscernible], you don't want directors who have not seen anything.

Having someone of David's quality and background on this Board is invaluable, speaking with the regulators that oversee us and there's about three or four of them. They are all to a tea, delighted at the David is on our board. So there's absolutely no way that I'm going to suggest anything other than he stays on the board, that stayed on the risk committee as well and the learnings that he may have gleaned from his past lives and from the Westpac can only stand us in [indiscernible]

Chair, Westpac claims, Zero [indiscernible], the [indiscernible], discrimination and sexual harassment and sales leaders must create a safe and inclusive workplace. Yet you ask us to elect [ Pet ] Greenwood, who was a senior leader and Chair, so a Senior Leader and Interim CEO of [ Russell McVay ], when its toxic alcohol fuel culture and serious sexual harassment failures were exposed. How can you possibly reconcile Ms. Greenwood's leadership record with the values you say, Gavin Westpac, will you withdraw the Board's recommendation for her election? Or at least roll her out of any role overseeing people, risk culture or risk conduct, doesn't [indiscernible] represent transformation or more of the same?

Ms. Greenwood in my experience as an exemplary director also has exemplary experience in the New Zealand market, which is important to this Board. As to her oversight of her previous work, I'm not aware of that. I'd be very happy to look at that. But I just don't think it's relevant to how Westpac operates. We have a zero rated -- anyone having phone? No. And Peter is a fine director. And again, she shows nothing but purely ethical motors in every respect. So I find unusual you raise this. So we will be absolutely backing it [indiscernible] be honest Board.

Westpac is still rebuilding trust after a [ 23 ] million antimoney laundering breaches and a record of strip penalty. You now ask us to elect [ Debra Hazelton ] to the Board and for your Remuneration Committee. At AMP, she was on the Board that promoted [indiscernible] despite prior sexual harassment complaint and payout. As AMP Chair, she presided over turmoil, approaches vote against paying a major value destruction. How can you claim this track record will strengthen Westpac, governance and culture? Will you withdraw the recommendation for the election or at least [indiscernible] joining the Remuneration Committee?

Just to clarify, is Ms. [ Haestill ] on the Board of Australian [indiscernible]?

Yes.

It's just on the way to that trust you see any conflict where there's a proposal that Australia host a public bank. And is in contact with [ Anika Wells ] or [indiscernible] shareholders?

Let me answer that. The second question first. Whenever there's any discussion at the Westpac board that in MAU refers to or includes Australia post sea [indiscernible] herself and leaves the room. So there's no conflict there.

With regard to your first point, I think it's very interesting, having known that organization quite well over the years, a number of the directors on that Board and seeing the turmoil that AMP went through. I think one of Deborah's great strengths is its just bought in just sorted out. She's brought in on the board and promoted to the Chair of AMP and did an exemplary job at bringing a very ethical view on the people there and other practices there.

And I think when I looked at Deborah's background there and her ability to massage a difficult series of conflict issues there and difficult issues to get an outcome that was sensible for shareholders and sensible for the firm. It showed real skill and real leadership to have somebody on our board with that background and understands turmoil how to deal with it, calmly and thoughtfully is extremely valuable. So Deborah, like all the other [indiscernible] on this board has a huge amount to offer. So she is absolutely a valued member.

Okay. Well, I've got two more, but just in part in Stephen Mayne [indiscernible] good independent director?

He's got to tune the meetings first. Okay.

Mr. Chairman, I would like to introduce Mr. [ Freeman Sang ].

My wife and I customer and shareholders of Westpac for many years. I just have the question that might be important for the retiree like us that we would like to share our experience with you and hope that the bank can look at it and improve the performance.

The question is when we apply for credit cards with the bank, we do online nowadays. And when we put in the application, reject, and I just want to share with you that when we apply for the credit card, the question about retiree although we have the equity enough to the lift of rest of our life, and we do our good credit rating. But whenever we take retire, no payslip, we've been rejected straight away. Now is this a policy for the bank, not welcome retiree applying for credit card/ Yes or no?

So first of all, thank you for being a customer and a shareholder of the bank. I apologize for what you've just outlined. And I would invite you to connect with our Head of Consumer Bank whose [indiscernible] just sitting down there. You've really called out something that we acknowledge we need to get better at, which is the prescription of one type of policy to solve for what various customers need often doesn't work that well.

And so often when people apply for a credit card, it's very focused on income and salary, et cetera, but if someone's retired. And clearly, it's a different construct. And we haven't, if you will, got that balance right. And so I apologize for that. But we do definitely want your business. We definitely want you to stay a customer and shareholder bank. And I'd invite you to meet Carolyn after this meeting because we'd like to do better for you.

Because our experience is normally in the family, we have primary cardholder and secondary cardholders. Even my friends have experience his partner passed away. She is a primary card holder. Whenever they happened, his credit card has been discarded and he no longer can apply for credit card because he is retired. And as a result, a lot of things become very difficult for life, for him, although we have many investment, house and super all a good credit rating. But I think if the banking has looked at this kind of the -- particular online nowadays, whenever you tick the box, you in that category and that category could become discriminative against certain cars of people, although they are still able to pay the credit card easy monthly, but that become a hindrance for retiree.

No, it's very fair. As I said, customer matter, please see Carolyn, and we'll definitely look to address that.

Mr. Chairman, I'd like to introduce Dr. John Hill.

Thank you, Dr. Hill.

Mr. Chairman, you may be aware that our family holds a very substantial number of Westpac shares, possibly more than the whole Board put together. I have been concerned about the discussion about climate change, which is a sign [indiscernible]. The reason I say that, if you listen to any physicist or any scientists, it makes no sense. I can only make several small points as to what has happened to the earth climate over the last thousands of millions of years.

Now the first point is, the earth has been cooling for 4,000 or 5,000 years at least. Since the last second point is, since the last [indiscernible], which commenced about 10,000 years ago and reached a depth of about 3,000 years ago, and raised to a peak about 1,000 years ago when the temperature of the earth appeared to be significantly higher, and I'll repeat that significantly higher than it is today.

After that time, we went into a [indiscernible] and the temperature of the earth fell to about 1,300 or 1,400 so much so that the terms have frozen up and people could ski on the terms. I state on the terms. The earth has been rising interpeture ever since. Now the next observation is quite clearly, human activity has virtually nothing to do with the amount of carbon dioxide in the atmosphere.

And the last point I make is a fairly sophisticated physics points, and that is the earth gets heat from the sun, by radiation during the daytime, and loses heat during the night. And the amount of feet absorbed is the fourth power of the differential in absolute temperatures between the earth and the sun. And at night, it loses temperature at the fourth tower of the absolute temperature.

The difference of the fourth power of the earth and the absolute temperature, which is absolutely zero at night. To make a long story short, as the temperature rises, the amount of feet lost by the earth at night increases dramatically. And that's why the climate moves so slowly, and so silently that we should not be concerning itself completely with climate chain scares.

Thank you for your thoughts. Appreciate that. Thank you. One more question in the room. Thank you.

Mr. Chairman, we have a couple of more questions from Mr. Michael Sanderson.

[indiscernible] relates to the remuneration report Chair after Westpac paying [ $1.31 ] billion in penalties for anti-money laundering breaches. We pack admitted to 11 years of wage under payments to almost 47,000 staff and still remediating past misconduct. How can you ask us to endorse rising bonuses and long-term incentives for the new Chief Executive and his team in this remuneration report. Why should shareholders approve it before executive pay clearly reflects accountability for these failures?

Okay. Yes, we have had an underpayment issue, which dates back 6 years to actually 6 or 7 years from 2018, 2019, and we've been working through that remediation since then. I think it's very inappropriate and unfair to penalize management today who've been appointed today for that. It's their job to fix that and sort that out and to deal with the authorities to make sure we have a good outcome there. But I'm looking at performance today and the management team are all current, and we'll judge them on how they are acting and how they perform.

Okay. This is a bit long. I take question. And I'm not a very good read. Here we go. The Australian government guarantees, ordinary people bank deposits through deposit insurance, meaning it promises to protect depositors money if the bank gets into trouble.

It also sets and enforces its capital rules to ensure the bank holds enough high-quality assets to safely cover their deposits and other liabilities. So under this framework, the government guarantees deposits for the public, removing the need for them to ask for collateral. Certifies the bank as a safe and sound under its own capital rules.

However, at the same time, the RBA, which is part of the public sector requires Westpac to pose government securities as collateral when it lends to Westpac. Does the Board regard this structure as effectively saying, we trust we're expecting enough to guarantee the public deposits, but we don't trust Westpac enough for our own central bank to lend to Westpac without extra collateral.

Doesn't this collateral requirement then become redundant and potentially harmful, especially in a crisis when banks need rapid access to central bank funding but may lack the required collateral because the Board explain whether it regards this requirement as necessary and consistent with existing deposit guarantee and capital averse framework. And whether Westpac has raised any concerns with the RBA or the government that it may make the system less stable in times of stress?

Detailed technical question. I think the first couple of observations then I'm going to hand it to Anthony to take us through it. This is all part of a quite a sophisticated ecosystem between the government and the banks and the reserve bank, particularly and say, the before banks mainly to protect the economic system, the capital system of this country. It works in terms of borrowing, in terms of flows of cash and adequacy.

So it's also part of our four pillars process where the banks are giving post protections, they're going to deliver certain things. So to answer your question, yes, it does work. And no, it is not a comment on the adequacy of the banks. As we stated very early on, Westpac has the highest level of Tier 1 capital in this country, some of the highest in the world. and that's how I like to say it. It is safe and secure for the shareholders. And we have a very close relationship with the Reserve Bank, and it works well.

But [indiscernible], do you...

Liquidity rules are set by APRA, so not the reserve bank. The liquidity rules have said such that based on the number of deposits we have, there's certain liquidity requirements that we must have at all times. We also then have arrangements with the Central Bank, the Reserve Bank of Australia to ensure that in certain circumstances, if incremental liquidity is needed, we can go to the reserve bank hand over collateral in exchange for cash or liquidity.

And so the reserve bank mechanism is one which is universally used by all central banks around the world, which is a liquidity lender of last resort to the banking system. The standards of which we set up our liquidity profile, the amount of liquids we have, the range of sources of liquids that we have is prescribed by APRA. And so that's the framework we run to. We are fortunate and respect and appreciate very much the deposit guarantee scheme in this country. And also, I acknowledge that, that is a scheme that is used in many other jurisdictions around the world. So there's no unusualness to what we have in place here in Australia.

Do you think there's a case to sacrifice the runs around banking generally?

I would never dispute the idea that something can be made simple, but I do think that the system we have in place, particularly as it relates to the liquidity rules, as prescribed by APRA in Australia, and the way we interact and work with the lender last resort Reserve Bank are elegant and have been proved to be very, very effective.

You still favor the four major banks to their advantage into the dispense smaller be which you agree?

No, I don't agree with that, but that's a version of events.

Thank you for all your questions here. [indiscernible] if we have just a few more questions online. If we can please read those out.

Mr. Chairman, we have a question from Craig [ Corfield ]. I understand the orders have played a role in assessing whistleblower submissions. How many will lower cases the order to investigate this year? How do this year's numbers compare with recent years?

I just -- I will ask him to answer that, but they don't assess little below activity, but Kim?

Thank you, Chairman, and it's not in relation to the execution of the [indiscernible] data. So due to [indiscernible] protection, we can't disclose anything in relation to was overall complaints, but also we also were the incumbent order to last year. So also I don't have any comparative statistics this year.

Mr. Chairman, we have an online question from Kim Holman. If shareholders are able to vote at the meeting in person, why doesn't Westpac currently support online direct voting during the meeting. This would enable online shareholders an opportunity to have these discussions and presentations at the AGM before voting, therefore, supporting shareholders that live outside Sydney and a more informed decision process.

This is -- has been raised a number of times, and we will look into this for next year. We've only not gone through this year because of the cost and the lack of takeout, but we'll take on board.

Mr. Chairman, we have an online question from John Svenja. Accenture was involved with the recent technology upgrade at the Bureau Metrology. The original contract was for $31 million. Amendments pushed the contract value to around $78 million for Accenture's part. Are these the best two organizations to be involved in [indiscernible]?

Well, firstly, I really can't comment on what's going on the Bureau of Meteorology. It doesn't sound like it was well handled, but that's nothing to do with us. And I'm not really capable of commenting on that. All I can say is that they're playing a very fine role in our UI program, and that's all we can really comment on there.

Mr. Chairman, I have an online question from [indiscernible] to the CEO and CFO with regards to the standardization of platforms within Westpac, can you advise whether this will mean Westpac will standardize deposit pricing? At the moment, it appears the bank has no coherent deposit pricing policy with the Westpac WA Commercial Bank offering a 12-month turned rate of 4.85%, while the institutional bank is offering a 12-month rate of 4.64%. How does the bank expect to control NIM when customers can play off each section of the bank for the best deposit deal?

We have a coordinated approach to pricing deposits. What I would also acknowledge, however, there will be instances where different businesses or different sectors will be more attractive. And so therefore, there will be more competition, and you may have to pay more than you would otherwise pay in another sector for that particular deposit.

So we have and are very focused on a very coordinated very aligned price around deposits. But we need to recognize that we're in the competitive market where there's a lot of banks targeting different sectors different segments of the market. And so that you will see instances where pricing is a little bit different in that environment.

Thanks, [indiscernible] good answer to that one. Folks, that's the end of the online questions. If there are any other questions in the room or we -- we've done there. Okay. Ladies and gentlemen, that completes the business of the meeting. The polls will close in 15 minutes on all resolutions. The results will be available later today and can be obtained by visiting the ASX announcements platform on the Westpac website.

For your convenience, please remain seated until directed to vacate your seats. The MUFG staff will collect completed voting cards, which should be placed in one of the ballot boxes. I now declare the meeting closed, subject to the finalization of the polls.

Last comment. Firstly, thank you for coming along today. It's a big commitment of your time. It's important to us that you heard. And it's been a wonderful year for this bank, and you should be very proud of the achievements, and we wish to see you next year. So have a great Christmas and break. Thank you.

Good morning, and welcome to Westpac's Full Year 2025 Results Briefing. I'm Justin McCarthy, the General Manager of Investor Relations. Before we commence, I acknowledge the traditional custodians of the land in which we meet today. For us in Barangaroo, that's the Gadigal people of the Eora Nation. I pay my respects to elders past and present and extend that respect to all Aboriginal and Torres Strait Islander people.

I'm pleased today to be joined by our CEO, Anthony Miller; and CFO, Nathan Goonan. After the presentation, we'll move to Q&A. [Operator Instructions]

With that, over to you, Anthony.

Thanks, Justin, and good morning, everyone. I'm pleased to present Westpac's full year results to outline the value we're creating for customers, shareholders and the communities we serve. We began the year with a robust balance sheet and capital position. This provided us the capacity and flexibility to pursue our growth and transformation agendas. We are driving operational and business momentum supported by 5 priorities.

To ensure we are there for our customers at the time and place that suits them, we've adopted a whole of bank to customer approach. Our refreshed leadership team is guiding our 35,000 people who are energized, engaged and turning our priorities into outcomes. It's not just what we deliver, but how, and that is why our focus on execution is key for Westpac. Disciplined execution is how we will achieve our goals.

As Australia's first bank, we recognize the vital role we play in supporting economic prosperity. We're proud of our contribution as Australia's sixth largest taxpayer, helping to fund essential services and improve people's lives. Our employees bring this to life by volunteering their time and making pretax donations to more than 500 charities. Through our Rugby League and Cricket partnerships, we promote sport participation from grassroot clubs, including programs for schools, women and First Nations talent through to elite competition.

We also offer free financial literacy programs across Australia, New Zealand and the Pacific to help educate thousands of people and small business owners every year. We're improving banking access in regional areas and investing in ag scholarships and technology to drive innovation. These initiatives create more prosperous communities while fostering trust and brand advocacy.

Turning to financial performance. The result reflects our strategy of balancing growth with returns, while making necessary investments in people, innovation and transformation to support our future. Net profit, excluding notables, decreased 2% to $7 billion. Statutory net profit fell 1% to $6.9 billion. This led to a slight contraction in our key return metric, return on tangible equity. The impact was cushioned by the reduction in share count through the buyback. As we execute our transformation agenda, expenses are higher, lifting our cost to income to 53%.

We're addressing the cost structure through our Fit for Growth program, which will help offset expense growth in FY '26. Our performance reinforces the need for us to focus on execution while managing RoTE and CTI. The steady financial performance and strong capital position saw the Board declared a second half dividend of $0.77, equating to a full year dividend of $1.53 per share fully franked. This equates to a payout ratio of 75% of profit after tax, excluding notable items.

This is the slide I use to track our progress against our FY '29 targets. We put customers at the center of everything we do. To be Australia's best bank, more work is needed to lift customer and brand advocacy. In the past 2 years, we've gradually improved consumer NPS. We're currently ranked equal second and the gap to first place has narrowed. In business, we have established clear leadership in SME and commercial. However, our overall position shows work is needed to lift small business. For institutional customers, we aim to be #1 in our target markets by investing in our people's expertise and building stronger customer relationships.

We are now executing UNITE. We will be open and transparent as we drive to complete this program. On performance, our decisions and approach are guided by delivering improvements to cost to income and RoTE. Our strategy supports our ambition to be our customers' #1 bank and partner through life. For our customers, we aim to win the whole relationship by delivering the whole bank. To meet more customer needs, we're offering the full range of products and services we have in a more timely and personalized way. For our people, we are investing in their development and leader capability while driving a high-performance culture where employees can perform at their best.

On risk, we have completed the final transition of the customer outcomes and risk excellence program known as CORE. In response, APRA released the remaining $500 million of operational risk capital overlay, marking 5 years of meaningful change. Our commitment to ongoing risk improvements will continue, and our priorities for risk management to be recognized is our differentiator.

Our transformation agenda is focused on delivering UNITE and 2 flagship digital innovations, Biz Edge and Westpac One. Ultimately, our performance will be reflected in how we execute on these priorities. Our service proposition is foundational to earning trust and becoming the bank of choice for our customers. Despite economic uncertainty in recent years, our customers remain resilient. We supported customers with 46,000 hardship packages with 3/4 of them back on their feet. Service quality is improving. For example, our financial market clients time to trade in the Commercial division is down by 30%. Our new brand positioning, It Takes a Little Westpac, along with our award-winning banking app and rewards program is strengthening engagement and loyalty.

For businesses, we doubled our women in business commitment to $1 billion. We are growing our regional presence through new service centers. Our first location in Moree was well received by the community. Our latest Australian-first innovations, Westpac SafeCall and SafeBlock, supported a further 21% decline in reported customer scam losses. This is just a snapshot of the ways we're improving our service proposition to become #1.

With a refreshed executive leadership team, we're placing a stronger focus on how we lead and support our people to perform at their best. Professional development programs, including the Business Performance Academy as well as skills training in data and AI are just some of the ways we are investing in our people. We've strengthened our employee value proposition to attract, retain and develop top talent while expanding benefits. We're also building the presence of our bankers where it matters most for our customers. Employee engagement remains strong, and we continue to invest to improve.

Pleasingly, our consumer deposits grew by 10%, including offsets. This is a testament to the quality of our business and our customer base. It also reflects the effectiveness of our award-winning banking app and the competitive product suite, which we have, which provide reliable everyday banking solutions. We have expanded our capability in migrate banking. Prospective customers from several key markets can now apply for a transaction account before arriving in Australia.

Our recent sponsorship with Cricket Australia will also present new opportunities in this target segment. Transaction banking is at the heart of our business strategy. New account openings of 130,000, supported transaction account growth of 13% this year. We also launched a new online payment solution, OnlinePay. With simple onboarding, it has attracted 1,000 customers within 3 months of launch.

In Institutional Banking, we continue to maintain our lead in public sector deposits with growth of 11%. Financial institutions is also a target area where we are now seeing real momentum. Our goal of deepening relationships and supporting more customer needs is reflected in loan growth across business and institutional, where existing customers make up approximately 3/4 of new lending. Business lending increased by 15% with even stronger growth across target sectors of health, professional services and agriculture.

Institutional lending grew by 17%. The portfolio is diversified, and we remain the country's largest lender to renewables. Growth in both areas has been accretive to RoTE. I'm very pleased that the average risk grades across the business and institutional lending books have remained stable, while absorbing this attractive level of growth.

Looking more closely at mortgages. Our focus has been on getting the service proposition right, making it consistent, attractive and most importantly, easy for our customers. We've made progress. Time to decision has improved with most proprietary home loans now processed in under 5 days. In a highly competitive environment, we must get the service proposition right and then balance growth with return.

Overall, I think we've managed this well. Returns have improved, supported by operating efficiency and disciplined execution. We've been more efficient in how we deploy capital with balances up and RWA down. Today's announced sale of the RAMS portfolio will further improve the operating efficiency of our mortgage business. We've targeted high-returning segments, including investors, where flows increased by around 4 percentage points to just under 40%. This was a deliberate move with our pricing competitive. In contrast, we positioned ourselves above market in owner-occupied.

Momentum in early FY '26 has picked up and is tracking slightly above system. Looking further out, we see a clear opportunity to improve proprietary lending, which currently makes up just under 1/3 of new flow. We know what to do. However, progress will take time. It will be measured in years, not months. To support this, we're adding more home finance managers. We're enhancing banker incentives, and we're investing in the brand. Additionally, we're capturing insights and generating leads and opportunities by leveraging data, analytics and AI across the company to drive proprietary lending.

UNITE is up and running. We finalized the scope, we have a plan, and we are now into execution. Some initiatives are progressing faster than expected, which is encouraging, while others are proving more challenging. This is typical for a project of this scale. Moving to a single deposit ledger meant we had to revisit about 1/3 of the initiatives to make sure we addressed all impacts and all interdependencies. This additional planning delayed our time line. We expect completion where we are accruing all target benefits to extend from the end of FY '28 into FY '29. To drive execution, we formed a centralized delivery team of 1,600 people focused solely on UNITE. We've also grouped the initiatives into 10 work packages to ensure we manage interdependencies and challenges effectively.

In FY '26, we expect to invest between $850 million and $950 million in UNITE as we go flat out on execution. The program is expected to account for approximately 40% of annual investment spend in FY '27 and '28 before reducing in FY '29. Our progress is starting to deliver improvements that are making banking simpler and more connected for our employees and our customers. We've put some of those outcomes in front of you. Two things I want to call out. Westpac home loan customers can now set up multiple offset accounts with no additional fee. This is a key feature requested by our customers. Since February, we've opened more than 35,000 additional accounts.

We've also completed the migration of private bank customers to Westpac with minimal attrition. The validation that we've done this well is shown in recent positive brand NPS. We've completed 8 initiatives and 51 are now underway. Most initiatives are green, a few are red, and we're prioritizing getting those back on track. We will provide updates on progress and continue to refine our disclosure to improve transparency. We invested $660 million in UNITE during FY '25, and this was slightly above our guidance. This was because we saw an opportunity to get additional work done now, and so we prioritized the resources to make that happen.

Alongside UNITE, we're also modernizing technology through capabilities like Westpac One and Biz Edge for better customer and employee experiences. Biz Edge is our new lending origination platform, accelerating digital capabilities for bankers with AI-powered tools that support faster, more confident decision-making. This is dramatically improving how we lend to businesses by guiding applicants and bankers through the best pathway. Since launching in March, Biz Edge has processed nearly $5 billion in business lending applications. So far, time to decision has improved by 45%. More benefits are on the way for customers and bankers.

For Institutional clients, Westpac One will be the new platform that brings together real-time treasury management, FX, trade and lending with powerful data insights. In December, we'll pilot the first Westpac One initiative with real-time transaction banking and a new modern digital experience for corporate clients. Advanced transaction banking capabilities like liquidity management, including multicurrency and cross-border capabilities, will be progressively dropped over the next 36 months. Once complete, the platform will deliver end-to-end liquidity and cash management, helping clients run and fund their businesses more efficiently. This capability will be market-leading and a differentiator in supporting our corporate, large commercial and institutional clients.

AI represents a significant opportunity to improve the way our people work as well as the quality of their work to help us provide better, more consistent service to our customers. We're embracing new gen and agentic AI capabilities while also continuing to use traditional AI tools, like machine learning and advanced analytics. These are helping us automate tasks and modernize our technology. It's also giving our people more time back and providing bankers with more insights to serve customers better.

The key is making sure we scale proven solutions. Examples with tangible benefits include strengthening defenses against fraud and scams, supporting faster approvals for mortgages and business loans, helping employees quickly answer process and policy questions and automating coding and testing. However, to realize its full potential, we must approach AI with an enterprise-wide mindset. We've appointed a global leader reporting directly to me to drive this across the entire company.

We're moving at pace and recently launched the Westpac Intelligence layer, which draws on the enormous data and insights across the company to drive faster, safer and more proactive decisions. We have prioritized using the layer in consumer to support our focus on growing proprietary lending. It is already giving our home finance managers better insights to deliver faster, more personalized service. I'm really excited about what we will achieve as we broaden this intelligence layer and roll it out across the bank in the next 12 months.

Nathan will now take us through the performance in more detail.

Thanks, Anthony, and good morning, everyone. It's a privilege to present my first result for Westpac. I recently took over from Michael as CFO, and I want to begin by acknowledging Michael's contribution over the past 5 years and wish him all the best for the future. I'm excited to be joining Westpac at an important time in the company's history. I look forward to doing my best to help our people deliver consistently for our customers. As foreshadowed, we've adjusted our disclosures to make peer comparison easier, now reporting net profit, excluding notable items as an equivalent measure to cash earnings among peers.

Starting with the financial performance over the year before talking in detail about the half year trends. Excluding notable items, which related solely to hedging items, net profit was down 2% with higher expenses more than offsetting growth in operating income and lower credit impairment charges. EPS was flat, reflecting reduced share count from the on-market share buyback. Revenue was up 3%, comprising a 3% increase in net interest income, driven by an increase in average interest-earning assets and a 1 basis point decline in net interest margin and a 5% increase in noninterest income.

Operating expenses were 9% higher, including the restructuring charge of $273 million. Excluding the charge, expenses rose 6%. These revenue and expense outcomes resulted in a decline in pre-provision profit of 3%. Credit impairment charges remained low at 5 basis points of average gross loans compared with 7 basis points the prior year. Half-on-half, we saw improving underlying trends, offset by increased investment. Pleasingly, pre-provision profit increased in Institutional, New Zealand and Consumer, while business and wealth held flat.

Net profit was up 2% in the half and comprised of the following: Net interest income rose $335 million. Core net interest income was up 3%, a 2 basis point increase in core net interest margin and a 1% growth in average interest-earning assets. Noninterest income was up $143 million, mainly reflecting an increase in markets income, a combination of both client activity and market conditions. Expenses were up 9% or $520 million, including the restructuring charge. Overall, pre-provision profit was down 1%. Excluding the restructuring charge, pre-provision profit increased 4%.

Asset quality metrics continued to improve, resulting in lower credit impairment charges. The charge of 4 basis points to average loans was down from 6 basis points in the prior period. The effective tax rate was 30.6%, down from 31.3%.

As Anthony outlined, sustainably growing customer deposits over time underpins our ambition to improve returns. The growth of 4% in the half was pleasing and highlights the inherent strength of our customer segments. Mix improved with the reliance on term deposit decreasing from 29% to 27% of the book, while savings and transaction balances grew. We expect strong deposit growth to continue in FY '26 with our economics team forecasting system growth of 7%, reflecting continued improvement in household conditions. Strong deposit growth has supported lending growth in chosen segments. Gross loans increased 3% with growth across all customer segments.

Australian Mortgages, excluding RAMS, grew by 3%, slightly below system as we balance growth and return in a competitive market. Australian business lending continues to show good momentum, growing at 8%. The larger commercial subsegment performed well, and we also saw growth in both SME and small business, which grew 9% and 5%, respectively. Prior to this half, small business had contracted or been flat in the preceding 4 halves.

Institutional lending grew by 10%. The portfolio is well diversified with infrastructure, renewable energy and industrials underpinning growth. Lending grew 3% in New Zealand, where demand for credit remains subdued in a more challenging economic environment. The RAMS portfolio continued to run off. The balance at 30 September was $22 billion. The sale announced today is expected to complete in the second half of 2026. Until completion, these balances will continue to run off.

Please bear with me as I spend a bit of time talking to net interest margin given the importance and likely focus. Core net interest margin increased 2 basis points to 1.82%. This follows a decline of 3 basis points in the prior half. We've seen a reduction in the amplitude of the components of NIM with all drivers having a modest impact. The lending margin was stable with an improvement in New Zealand due to fixed rate repricing, offset by a decline from auto finance, which was sold in March. Lending margins in business contributed less than 1 basis point.

In Mortgages, the market remains competitive, but relatively stable, and we saw several factors play out. The cumulative impact of these was less than 1 basis point. These include the benefits from the initial timing impact from rate cuts. Deposits were also stable as benefits from the replicating portfolio and the repricing of the behavioral savings product was offset by the initial impact of rate cuts, customers switching to higher-yielding accounts and more behavioral saving customers qualifying for the bonus rate as well as the compression in TD spreads from prior period. Liquid assets contributed 3 basis points, reflecting reductions in trading securities. Whilst a positive to NIM, this is neutral to earnings.

Lower earnings on capital detracted 1 basis point. The benefit from the higher replicating portfolio rate was more than offset by the impact of lower rates on unhedged largely surplus capital and the averaging impact of the share buyback. The contribution from Treasury and Markets rose from 12 to 13 basis points.

Looking to first half 2026, we've included some key trends we expect to impact margin. We expect lending margins, excluding the timing impacts from rate cuts, to edge lower. Pressure on deposit spreads from the average impact of rate cuts and prior period switching to saving products is likely to continue. The replicating portfolio is expected to be a net benefit of 1 basis point. This includes a 4 basis point benefit from the total replicating portfolio, offset by a 3 basis point reduction in unhedged deposits.

This reflects the decision to increase the deposit hedge by $10 billion. This was executed in September and October to provide further earnings stability through the cycle. The benefit from improved term wholesale funding markets is expected to be a slight tailwind. While mortgage margins appear relatively stable, lending competition remains difficult to predict, along with short-term funding costs and RBA rate cuts.

To this end, we've provided 2 sensitivities to help understand the potential impact. The next 25 basis point rate cut, RBA rate cut, leads to an approximate 1 basis point contraction over the first 12 months, reflecting the impact on unhedged deposits and capital. Based on September balances, a 5 basis point move in the 3 months BBSW OIS spread equates to approximately 1 basis point of NIM.

Quickly touching on noninterest income, which increased 10% for the half. Fee income was up 5%. Higher card fees reflected increased spending and fee changes, which are being phased in. Business and institutional lending fees increased due to strong balance sheet growth. Wealth income was up 3% with higher funds under administration. Trading and other income increased 27% from higher sales and risk management income, including foreign rates and foreign exchange and favorable DVA.

Moving to investment spend, which increased 9% over the year. UNITE investment was $660 million as the project continued to step up through the period. The proportion of investment spend that was expensed increased to 60%. UNITE was the main driver with this work expensed at 74%. Notwithstanding the acceleration of UNITE, spend on growth and productivity initiatives was in line with that of FY '24. This includes Biz Edge and Westpac One.

Risk and regulatory spend declined substantially after the completion of several projects, including the CORE program. Into FY '26, investment spend is expected to be approximately $2 billion, with UNITE accounting for just under half the total spend at $850 million to $950 million. This is in line with the fourth quarter run rate where UNITE spend was $225 million. Both risk and regulatory and growth and productivity investment will decline to allow the UNITE investment to accelerate within the expected $2 billion total investment spend.

Moving to expenses. This slide is changed in presentation to better reflect the underlying drivers. My comments relate to movements over the year, which we believe provides a better guide to key trends. Staff costs increased $397 million as the new EBA began, superannuation rates increased, and we invested in more bankers in business, wealth and consumer. Technology costs increased $146 million, reflecting vendor inflation, increased demand to support growth and more cyber protection.

Volume and other rose $199 million. Drivers include the important investment in our brand and marketing and higher operations-related expenses to support customers and prevent fraud and scams. This was offset by $402 million of structural productivity savings. This included the benefit of a simpler operating model, more automation and reductions in branch space. The ramp-up in UNITE added $399 million over the year.

Looking to FY '26, staff costs will rise as we continue to invest in bankers and eligible employees receive a 3% to 4% pay rise under the EBA. The averaging impact of bankers hired from this year and higher superannuation rates will also flow through. Technology expenses are expected to remain a headwind. The expense contribution from investments will be driven by the mix shift towards UNITE with the increased cash spend expensed at approximately 75%. Assuming the midpoint of our guidance, this will translate to $190 million increase in operating expenses. This will be partially offset by the decrease in other investment. Amortization expense will continue to be a headwind in FY '26, although to a much lower extent.

We remain focused on closing the cost-to-income ratio gap to peers over the medium term, and we need to structurally lower our expense base. Total productivity is expected to be at least $500 million in FY '26. This revised view of productivity will give us a consistent way to demonstrate the benefits from both UNITE and Fit for Growth initiatives.

Overall, credit quality remains sound and with consumers and business portfolios performing well. Stressed exposures to total committed exposures decreased 8 basis points. This reflects a decline in mortgage arrears and reduced stress across most of our business segments. This half, we've continued to see improvement in 90-day plus Australian mortgage arrears. These have reduced from a peak of 112 basis points in September last year to 73 basis points, reflecting a combination of customer resilience and an adjustment to the reporting of loans when customers complete their hardship period.

In New Zealand, mortgage arrears fell by 8 basis points to 46 basis points as rate relief began to feed through to customers rolling off higher rate fixed mortgages. We have provided the chart by industry for our non-retail portfolio. As you can see, business customers are managing conditions well with stress reducing across most sectors. Our portfolio remains well diversified across sectors and geographies. Looking forward, the 2 key drivers of asset quality outcomes are likely to remain the unemployment rate and asset prices.

Total credit provisions were 2% lower at almost $5 billion. This reflects a $72 million decrease in individually assessed provisions and a reduction in model collectively assessed provisions driven by improvements in underlying credit metrics and the economic outlook. Offsetting the model-driven outcomes were 2 main items of management judgment. The weighting to the downside scenario was increased by 2.5 percentage points to 47.5% at the third quarter. The base case reduced by the same amount. In addition, we increased overlays by $108 million with overlays as a percentage of total provisions increasing from 3% to 5% in the period. As a result, overall coverage reduced by 1 basis point with total provisions now $1.9 billion above our base case.

An improvement in the composition and funding and liquidity adds to our competitive positioning and helps provide medium-term earnings stability. The deposit-to-loan ratio has reached an all-time high of just under 85%. A more stable source of funds from household and business transaction accounts has reduced the reliance on term funding with issuance in FY '25, the lowest in 10 years. Our liquidity and funding metrics are above our normal operating ranges, which we believe is appropriate given the market backdrop.

The strength of the capital position is a key feature of this result and provides us with flexibility and opportunities over the medium term. The CET1 capital ratio ended the half at 12.5%. Net profit added 80 basis points, while the payment of the half year dividend reduced capital by 58 basis points. Risk-weighted assets detracted 7 basis points with higher lending balances more than offsetting data refinements, improvements in delinquencies and a reduction in IRRBB risk-weighted assets. Other movements added 16 basis points, largely reflecting lower capitalized software balances and movements in reserves.

There are several adjustments to consider for first half '26. These include the removal of the $500 million operational risk overlay in October added 17 basis points of CET1 capital. The new IRRBB standard came into effect on 1 October, and the extension of our non-rate sensitive deposit hedge has now been allowed for regulatory purposes. These 2 items add 39 basis points of capital. Offsetting this, the remaining $1 billion of the previously announced share buyback will reduce CET1 by 23 basis points.

Following these adjustments, the standardized capital floor was met in October. Importantly, there are opportunities for us to manage the standardized floor, and we expect the impact on the CET1 ratio at the half to be modest. We've implemented a new capital target of 11.25% following APRA's changes to AT1. We have approximately $3.1 billion of capital above the new target after the payment of the second half dividend. The payout ratio, excluding notable items, was 75%, which is at the top end of our target range of 65% to 75%. This balances our strong financial and capital position while maintaining capacity to both invest and support customers. We have $1 billion of the previously announced buyback outstanding. We see value in the flexibility provided by this form of capital management.

With that, I'll hand back to Anthony.

The Australian economy is showing signs of improvement following a sustained period of below-trend growth. Household purchasing power is rising as real disposable incomes grow. Businesses are emerging from a period of subdued activity, partially supported by lower rates, easing input costs and some productivity gains. Westpac DataX Insights highlights an improvement in card spend growth at 6.5%, the strongest we've seen since April 2023.

For business, commercial customers are feeling better, but it's still challenging for our SME customers. However, we've just started to see an improvement in cash flows off the back of firmer household spending. Underlying inflation is at the top of the RBA's target range. This will put pressure on the RBA to hold rates tomorrow.

We are starting to see more growth driven by private rather than public investment. However, this transition has been slower than anyone expected. A smarter balance calls for bold, coordinated action across government, regulators and the private sector. It has been pleasing to see the focus on the productivity agenda in the national debate. Targeted action is key to unlocking Australia's long-term prosperity and resilience.

An area we are focused on is addressing the housing affordability challenge. We need to tackle the structural undersupply of housing and efficiently deliver more houses in the $500,000 price range. More broadly, the global outlook is not without risk, with ongoing trade and geopolitical tensions a constant threat. Our strong financial position helps us navigate that uncertainty while being there to support our customers.

It's pleasing to see business credit is expected to grow 7%, driving private investment. We're building on the strong foundations, and it is all now about execution. We have 13 million customers. However, to realize the advantage of that scale, we must drive more efficiency. We must complete our transformation agenda, and we must enhance our service proposition. Each business has a clear direction, has the right leadership team in place and must now deliver. I'm pleased with our progress and energized by the opportunities ahead. With disciplined execution driving momentum, we're deepening customer relationships and investing in our businesses to support sustainable returns for shareholders.

Thank you.

Thanks, Anthony. We'll move to Q&A now. Our first question comes from Tom Strong from Citi.

Just first question around the productivity benefits into '26. I mean you took $400-odd million in this year, and you've guided to $500 million in '26, but you've got the benefit of, I guess, incrementally $270 million from the Fit for Growth, which you took the restructuring charge for. So is that $500 million conservative, you think, in terms of the FY '26 opportunity?

Yes, why don't I start. Thanks for that. I think you've sort of read it the right way. That's a line item in terms of just showing on a consistent basis where we think the benefits of the restructuring charge, and then in the future, as UNITE becomes a more material piece of it, we'll continue to show our productivity benefits on a like-for-like basis through that line.

As it relates to the greater than $500 million, I think that's the guidance that we've given. The benefits from the $273 million, we actually had a little bit in this year. So there's probably about -- we had $402 million productivity for FY '25. There's about $40 million of that will be benefits from the restructuring charge this year. And I think when we made the pre-release, we just made comments that we thought the rest of that will be phased reasonably evenly during FY '25 -- FY '26, and then there will be a little bit of benefit to flow into FY '27. So yes, look, we're expecting to do $500 million. We've got to wake up every day and strive to do better than that, but our guidance today is in excess of $500 million.

Okay. That's very clear. And just the second question around UNITE. It was 35% to 40% of the investment envelope and you've clarified that, say, at 40%. You have kept the $2 billion per annum consistent over the next few years. Just given the reallocation towards UNITE and I guess, the decline in purchasing power over that time, do you think that $2 billion per annum is still appropriate as a view out to FY '28, FY '29?

Look, I mean, that's a very good question. And you're right, we'll continue to ask ourselves, have we got that right. I mean in framing up $2 billion per year, it's really anchored around what can we do effectively and deliver, if you will, cost effectively and substantially. So it's really about the capacity of the company to deliver the change we need to undertake. If it's the case that we can prove certainly in what we deliver over the next 12 months that we can do more, then we'll remain open-minded about that. But at the same time, it's about balancing the capacity of the company to execute the change of cost effectively and also balancing -- making sure we deliver return to shareholders. So it's a balance that we'll have to navigate over the next 36 months.

Next question comes from Andrew Lyons from Jefferies.

Maybe Nathan, a question for you. I just want to try and flesh out how everything you've mentioned on expenses will ultimately impact growth in FY '26. So perhaps just referencing the various FY '26 considerations that you have provided us, can you perhaps talk in a bit more detail as to how you expect this to translate to the various moving parts that you have in your expense waterfall slide on Slide 27, please?

Thanks, Andrew. Good to hear from you. I guess I'm just going to try and find the slide, just give me 2 seconds. It's up on the screen now. So I guess a deep walk through these and maybe just happy just to go through them again and try and give a little bit more flavor as we go. I think we've looked at it on a -- the first thing is just to sort of look at it on an annual basis, Andrew, and that's what we've tried to do. I think on people costs, we do continue to think that, that will be an increase in expenses next year. We probably expect if you break that down a little bit, we've got some pull-through of things like the investment in bankers that we had this year.

There's a pull-through of the superannuation guarantee coming through. So there's a few of those things. We probably expect that we'll have lower absolute wage growth. The EBA is into its second year. So it's a lower number year-on-year. But we do expect to continue to invest in bankers. So I think that number will continue to be a big feature as we look at FY '26.

On tech, I guess my comment was just similar that we continue to think that, that will be a headwind. And then on volume and other, maybe just to break that one down a little bit and try and give a little flavor. Probably the one thing that's a little bit of feature of FY '25 was a reasonably material investment in the brand, which we're really pleased about and is important in investing in the business. And that was about $60 million in the year, $45 million in the half. So we'll have some of that flow through into next year, but maybe not as much.

We gave the disclosure on UNITE. Clearly, that investment bucket is just going to be determined by how much skews towards UNITE and then it's expensed at a higher ratio than the other. So we tried to give a bit of guidance there. And then amortization was about $100 million for the year, and we expect that to be a significantly lower number. And then we've had the conversation about productivity. So they're the moving parts, Andrew. Happy to try and sort of be helpful or answer a follow-up on any one of those. But hopefully, in sort of laying it out that way, you get a picture of the moving buckets.

No, that's great. I appreciate that detail. I might just move on to my second one, just around volumes. You mentioned that mortgage growth ex RAMS was 0.8x system over the year, and you put that down to being a function of just focusing more on returns. But like to be honest, when we continue to speak to mortgage brokers and the like, we do still hear that even though the gap between the 2 bookends have closed, Westpac is still pretty aggressive on front book discounting. So I'm just keen to sort of understand how you recognize those or reconcile those two opposing views around pricing for growth versus still being pretty competitive from the perspective of brokers.

Andrew, it's Anthony here. Definitely, we have to be competitive. And this product that is a mortgage today is a highly commoditized and very price-sensitive offering. So we just need to acknowledge that. The second thing is, yes, in certain areas where we felt it made real sense for us and the returns were right and reflected the customer base we have and want to get more of, such as investor loans, we were sharp on price. And we deliberately were because we saw the return and we felt it aligned with what we wanted to achieve.

In terms of other parts of the portfolio, we were above market. And I know there's always lots of observations and commentary from participants outside the bank. Those were the two disciplines we set ourselves, which is we wanted to be sharp, we wanted to be very price-competitive in investor and then a couple of other segments that we're keen. And we were very happy to be above market on owner-occupied just given the shape of our book and the returns that we're going after.

Thanks, Andrew. Our next question comes from Ed Henning from CLSA.

I just want to go back to project UNITE and just dig into that a little bit more. You've told us today that you're investing more in '26 than you've previously announced and also the program is going to go longer. So the investment you're spending is more than you've previously flagged. Can you just give us a little bit more on what it's going to deliver in terms of financial outcomes and the timing of that? How much is actually during the program? And then how much is beyond the program? Or are you planning to give that at a later date?

Well, certainly, what we'll be doing each year in March is giving you a comprehensive update on UNITE and giving you an opportunity to work and go through the detailed work streams with our team. So we'll definitely continue to provide that detail and that access to you. I mean in terms of the investment next year or this financial year of $850 million to $950 million, it's a deliberate range because it will be -- if we can invest that and deliver the outcomes we need to deliver, then we'll take that opportunity, point number one.

The second is, in the construct of doing all of the planning that we've done and landing on the decision to go with one ledger, that necessitated us changing some of the investment profile of the program. And so therefore, we had to bring a bit more investment forward, which is why next year is a bit lumpier than we might otherwise have planned because with the decision to go to one ledger, we had to do more work upfront to be able to facilitate that migration in 24 months' time. And so that's the reason why it's a little bit lumpy thereafter.

The second is that, we are keeping that investment envelope in a disciplined way at $2 billion because as I described earlier to the previous question, it's about the capacity of the company to execute and can we -- if we can deliver value and if we can, in fact, do more, then we will be open-minded to doing more.

The other thing I would say is that in terms of the project itself being longer, I just sort of want to put some context in that for you. When we spoke to the market 6 months ago, we were completing and finalizing the investment and plan for a one ledger. We landed at the one ledger decision, and we had to replan accordingly. Previously, we had -- we had 30 September 2028 as the finish date, and that was just arbitrary that we wanted to have this program completed by the end of financial year '28.

Now as a result of that replanning, reflecting the decision to go to one ledger, it's just worked out that we won't have all of the benefits accruing by 30 September 2028. It's likely to be a few months into financial year '29. So that's why there's a bit of an extension. There's just more accuracy that we can provide as a result of the planning we've undertaken.

And the last thing I'd sort of say to the spot-on question you've raised, which is, yes, the nature of the program is that much more of the benefits do accrue later in the program. But there's nevertheless still, if you will, benefits being realized now, whether it be, for example, the small movement and consolidation into one private bank, that's already delivering us some cost savings.

There's a number of other initiatives where we're already seeing benefits accrue. But the nature of this program is that what we're doing is we're taking all of these customers on two other tech systems and platforms and migrating them onto one tech platform. And only when you switch those two off and you eliminate all the products and processes that, if you will, have to be executed on those two platforms, do you start to fully realize the benefits, the cost to run that follows from that, the cost to change that follows from that.

So it is tapered to the back end in terms of the benefits that will be realized. And the premise that we have with UNITE, its key feature is that it helps set us up in a way that we have structurally lowered our cost base so we can really start to achieve our aspiration, which is a cost-to-income ratio that's better than the average of our peers.

And just following on from that, you know, in March coming up next year, are we going to be able to get at that point what you think the savings will be through the period and at the end of the period? Or are you not ready to tell us that?

Look, we have absolutely clear in our mind as to what we want to achieve as a result of the investment we're undertaking, which represents UNITE. But what I'd rather do is make sure we're delivering and we're executing before we start talking about outcomes. But rest assured, the whole focus here about UNITE is if we can consolidate the new-to-bank processes and systems onto one bank process on one system, then we would expect that, that sets us up to be able to drive to a cost-to-income ratio that's very competitive as compared to our peer.

And maybe I'd just add one thing, Ed. I think it may be different than some other programs, but I don't think it's necessarily a program where you take total spend and total benefit sort of narrowed in on just the UNITE benefits and sort of try and make sense of it that way. This is sort of large structural opportunity for us to then get our cost-to-income ratio much better than where it is today. And so I think in some ways, it's a critical enabler of what we've got to do on productivity, but it cannot be the only thing.

And so what we're committing to do is just try in a transparent way, as we go through the program, highlight the benefits that we've got from our spend as we go. And then you'll also hear us continuing to talk about that productivity bar that I've already had one question on because we want to be held accountable for making the organization more efficient as we go, significantly enabled by UNITE. So it's going to be more than just the UNITE productivity that you'll hear from us.

Our next question comes from Matthew Wilson from Jarden.

Two questions, if I may. Firstly, we've seen a nice pickup in your business banking volumes. You're winning share there, which has been really good. However, it's taken 50 basis points or so off the net interest margin. Obviously, there's some reclasses in there. How should we think about how you'll manage the volume margin trade-off in that business right now? Are we at a base that we can grow within without impacting the margin too much? Or should we expect further?

Why don't I invite Nathan to take first swing at that, and then I'll add some comments on top.

Thanks, Matt. And I think it is a good question. And clearly, when you get into the divisional disclosures, it is a number that stands out. I think it's just important, I think, when we're thinking about margins just to make sure we sort of go back up to the top of the house, if you like, and just think about what are the movements in the margin that are happening at the group level. And then the divisional is really a proportional impact of those. So we've made the comment that when you look at business lending margin at a group level, it contributed less than a basis point.

I appreciate some of that is just the math of materiality relative to the mortgage book. But more importantly, when you look at the business lending -- business margin at a division, you've got pretty significant impacts from the deposit side of the book. So I think the right way to look at that is sort of just the business lending, which is where your comment was going. Business lending revenue was actually up 7%. So the margin point around the lending is not as material as the overall divisional thing, just given the impact of the deposits.

I'd probably say just a couple more points, and then I'll let Anthony come in. I think the lending margin was more stable in business lending in the second half than it was in the first. And I sort of continue to sort of expect trends into the first half are going to be a little bit more like they were in the second half than what they were in the first. So we don't see that accelerating. I think that's really driven front book, back book in our business lending books are much closer together now.

One of the features, I think, of this book maybe relative to peers is when you've been out of the market for a little while and then you do reenter the market and accelerate, you can have a bit more of a pronounced cycling from back book margins on the front book margins. And so we might have seen in any given period a little bit more here than others. But I think we're now at that spot where that's much more in equilibrium, and we should move more in line with peers.

And then I'd just say sort of two more points. Looking forward, I think mix of this book will be almost more important than pricing. So there is a significant difference in margins between the subsegments, whether it be the size, so corporate versus SME versus small, there's a significant difference between sort of working capital solutions and term lending. So getting that mix right will probably be a bigger determinant than pricing itself.

And then just last point on pricing, Matt, not to labor the point. But I guess I've come in and met with the team and spent a lot of time with them on this particular point. And there's probably nothing that I'm seeing in the pricing here that is that different to what I would have expected or seen elsewhere. I think the team are putting their firepower around retaining their existing customers.

And so you see pretty good levels or high levels of retention of existing customers when they go to market, and that's good business, and we continue to encourage that. And then where they're trying to be a little bit more disciplined on price is just on the new-to-bank. And so we're probably seeing new-to-bank win ratios drift down a little bit in the last 6 months, but the business is still growing well, and we expect it to continue to take share next year, so a long answer.

No, no, you hit all the points, and thanks for doing that. I mean I would just say that the growth that we've seen over the last 12 months, Matt, was in, call it, the higher grade part of the book. And so margins there, as you would expect, slightly tighter, but the return on tangible equity was very attractive.

The other thing that we were pleased about was that, that growth with existing customers and those sort of retention rates in the sort of high 90s. And then win rates in the context of new to bank were in sort of much, much, much lower than that. So we're really, really thoughtful about where we deployed and where we grew. And we knew that there would be, if you will, some consequence to margin, but it was the right way to go after the opportunity in front of us.

The only other sort of additional point to make about business bank, with that growth in the loan book being sort of 3/4 existing customers, only 1/4 new customers, what was really pleasing is that we saw a 13% growth in the transactional account, which we think is a really important sort of opportunity and capability we have at the bank. That 13% growth, what was very pleasing was that sort of about 53%, 54% of that growth was with new-to-bank. So we're bringing new customers in on a product suite that's a really attractive, a, return; but b, also a risk profile for us as a company. So we quite like the way Paul and the team are driving the shape of that growth in that division.

Matt, hopefully, your second question doesn't require such a comprehensive answer.

Hopefully not. Just with respect to your targets, so 6 months or so ago, you decided to set relative cost to income and ROE targets. In the interim, one of your key peers has sort of changed that line in the sand by producing some absolute targets. How have you responded to that? Because it makes your task a lot harder at the current scenario?

Look, I expected this question. And in fact, I think I expected it from you, Matt. So thanks for playing consistently. Look, I respect Nuno immensely and what ANZ has done and he's put a marker down, and I wish him well, and we'll watch that process develop from here. We've spent a lot of time and effort to get a plan together, and we have that plan in front of us. And so I think our ambition, which is to be very focused on how do I structurally reset this company with UNITE, how do we then go after the productivity equation year-in, year-out over the next 36 months, bringing those together, we can see where we can get our cost-to-income ratio at a point which is better than our peer average.

And so that's -- we've got clear goals, clear targets that we need to deliver, Matt. I'd just much rather, if you will, deliver and be dropping outcomes along the way rather than sort of putting some bold number in front of you. I think it's fair to say, as a company, we probably haven't the right to do that. We put a number in front of you 4, 5 years ago, and we didn't get to it. And so frankly, what we need to do is deliver and then talk about bold numbers and outcomes.

The next question comes from John Storey from UBS.

Firstly, obviously, on the Consumer division, you've seen quite a big improvement half-on-half. And just looking at some of the diagnostics on the actual Consumer division, reported customer surveys, NPS scores are pretty stable, Anthony, as you called out. But one thing that is pretty evident is your MFI number has dropped quite a bit. Maybe if you could give a little bit more details around that?

And then just secondly, on the Consumer division, maybe just around the start of the financial year, if you could provide a little bit more color on how the division has been performing, particularly with regards to new business volumes and then also just channels in terms of where mortgages are coming through.

Look, thanks for that question, John. And so Nathan, you're welcome to jump in as you see fit. Look, you're absolutely spot on. We have an aspiration to lift our MFI ranking from where it is. And if there was one aspect of the performance in Consumer, which has done some great work over the last 12 months, there's one area where we're disappointed and we're actively engaging on is the MFI outcome in Consumer. The irony is that the MFI score has come down a little bit, yet deposits have grown at a very attractive level of 10%. And we've done more work.

And as we've unpacked that, we've noticed that actually it's much more in the context of what we call the regional brands, St. George, BankSA, Bank of Melbourne. And part of that is connected to the fact that we were less aggressive in how we were pricing our mortgage book in that area. And as a result, we saw some attrition in the transactional account, the MFI accounts that we really want. And so that was a really humble reminder to us that about not just looking at products like mortgages in a stand-alone only return setting, but to really think about the whole of customer and are we getting the balance right. And we've recognized that in that area, in particular, we weren't getting the balance right, and we've addressed that accordingly and are much more focused on how we grow and support those customers and obviously graduate the MFI.

Pleasingly, as it relates to the Westpac offering, the MFI there has started to improve, and we're certainly pleased with the outlook and the momentum that we've got in that. I would say that the others -- if I think about also MFI in the space of 12 months in business banking, they've been able to lift it by well over 1 percentage point. So it does highlight that we do have the offering. We do have the product. We just simply got to get -- make sure it's a priority across the organization, which it now is.

Maybe I could just add a little bit on the current flows, John, just to take your second question. I would say that we've -- and Anthony mentioned this in his preprepared remarks, we've probably seen, well, one, I think the market is, in particular, your question goes to home lending, then I think that mortgage market has been accelerating. And I think that's been sort of well covered in the market, and you can see it in the system stats. We're certainly feeling that or seeing that. So we've had increases in pretty much every channel, and we're seeing increased applications.

And so front-of-funnel activity, as Anthony said in his preprepared, is probably a little bit higher than where we've been trending on a market share basis over the second half. So we're probably at or around system wouldn't surprise us if our front-of-funnel actually meant that we had a couple of months here where we're a little bit above system. That has been growth in all channels.

I think pleasingly, we think October, we're going to see a little bit of volume growth in proprietary. I think the team are very cautious when we talk about green shoots there, and Anthony said it's sort of years, not months. But I think as we've seen proportional increases in applications, the proprietary channel has been performing better than it was in prior periods in that period on a proportional basis. So that continues to be good.

And maybe the other thing just to add that may be of interest, John, I think the first homebuyers guarantee scheme has certainly stimulated some interest, whether it was some pent-up demand there, but we saw sort of applications in the first couple of weeks when the changes were made almost went to 2.5x what they were for the first homebuyers guaranteed. It's moderated a little bit. I think last week, it was about 2x what they were. So it's still double. How much of that pulls through? So we're seeing a lot of that volume. I think how much of that actually fulfills is a bit of a wait and see, but it's certainly still a small portion of the bank, but it certainly stimulated some demand.

Our next question comes from Brian Johnson from MST.

Welcome, Nathan. I had 2 questions, if I may. The first one is, I'd just like to understand, you've got a bucket load of surplus capital. You're trading at, I don't know, about 1.8x book. I just want to understand the strategic rationale behind selling RAMS when a buyback, for example, is not as accretive. And also if we could understand any kind of litigation risk or warranties that you've made to the buyers in respect of this business? And then I had another question, if I may.

Okay. I'll just start on a couple of specifics, and then Anthony can jump in. I think one of the important features of the transaction, Brian, is that it's an asset sale. So just by virtue of that structure means that we're retaining the entities. And then the assets, it's a loan sale. So effectively, the asset is transferred to the buyer.

As part of that, we've given sort of customary reps and warrants and other protections for the buyer so that they know that the asset they're buying is effectively going to perform in a way that it says on the tin. So that's things like title and the enforceability of title and things like that. So all customary things. In particular, as it relates to things like indemnities, you just don't need to given the structure of the sale, that will just stays with the existing entity that we retain.

Maybe just to give a little bit of a picture as to the financial impact of it, Brian, because I think prima facie, I would agree, it does -- you sort of -- every day, we wake up and compete really hard on household mortgages. And so it's a core product of the bank. And so prime facie, you've got to scratch your head a little bit when you're then willing to sell a portfolio of home lending. But there's a couple of important points here.

It is on a completely stand-alone set of technology. So it's a business that runs almost independently from the rest of the business. And so you've got a cost base here that by the time that we get to completion will be almost equal its revenue base. And it doesn't necessarily give you the type of scale that you might intuitively think in your mortgage business, is sort of one of the key features of this relative to, say, just ceding a little bit of share.

And maybe, Anthony, you can touch on it. The other key point is we've made quite a few statements today just about the inherent strength of the deposit franchise, the ability for us to go after transaction accounts in terms of being a strategic advantage for us as we think about our balance sheet structure. And this is a business that has, if not 0, very close to 0 crossover in terms of deposits into the mothership.

I probably just develop a little bit more on one point, which is, our current mortgage book, Brian, is, let's call it, 21% market share. But essentially, we've got 3 different systems upon which it's spread. So in effect, I've got 3 small banks, 3 small bank cost challenges, 3 small bank compliance, 3 small bank risk challenges in managing the mortgage book. And so UNITE was about moving all of those onto one way of doing things on one target tech stack. And so we were always going to have to spend quite a lot of money, and we're going to have to spend a lot of effort and consume a lot of resource to move the RAMS mortgages onto the target tech stack.

And so therefore, if there was an opportunity to do that much faster and more efficiently, which this asset sale represents, then we were open-minded to it because essentially, I have 1 percentage point less market share. But now instead of it being spread across 3 regional bank cost basis, it's spread across 2, and we're on our way to getting one.

And importantly, if we complete this, as we target, in 2026, I'm accruing that run cost saving, operational complexity reduction, risk reduction 2 years earlier than was otherwise planned. And so therefore, that's an attractive outcome for the bank. And as I say, 21% or 20%, my scale is wasted on 3 systems. And so I've got to get to the one system to really enjoy the benefits of that scale. So that's why this opportunity made sense. And that's why when we found the right parties, who would be the right owners of these assets, it just made a lot of sense for us to get after it.

Anthony, just as a subset of that, can I just clarify, there was a story in one of the media reports talking about ASIC and AUSTRAC talking about this. I think subsequently, we've seen a very, very small ASIC fine. Can I just confirm that as far as you're aware, within the RAMS business that you're effectively retaining the risk?

Correct. So to the extent that we've engaged with the regulators, and it's well documented on a whole range of issues and concerns they had with the way the RAMS businesses were led, managed and prosecuted, we've now -- obviously, we retained that. We've just simply sold the assets. And more importantly, it allows us, as I say, to switch off or get off one of those bank systems. So nothing has changed in terms of the risk profile we had as a result of the ownership of that business. It's just simply much cheaper to run from here.

So can you address the question, though. There is no AUSTRAC issue?

Nothing that has been brought to my attention, Brian. Nothing has been brought to my attention. So I don't -- you'll have to send me the article or reference and sort of what context in which it sits. But in the context of AUSTRAC matters vis-a-vis RAMS, I don't have anything in front of me on that front. And I'm looking across at my General Counsel and my Chief Risk Officer, and they equally are acknowledging that we have no such issues at this point.

Thanks, Brian. Our next question comes from Jonathan Mott from Barrenjoey.

Just a question on UNITE, back to the topic that we talked a bit before. You give us a kind of a traffic light scheme on how the business is going, but there's been a bit of a change in the disclosure. At the first half, you had sort of the green amber red. And now you've got in scope. I'm just looking at Slide 16 here, you've got another classification in scope. And then you've had an increase in the number of amber and a small change in red. Can you give us an update on what that means? Why you're now saying this is scope confirmed? And if you're looking at 18 of the 38 are actually already in the amber and red.

So thanks for the question, Jonathan. And just sort of let me break it down for you. As a result of all of the planning undertaken, we now have a plan in front of us, and we know what we need to do, in what sequence we have to do it. Those 13 scopes confirmed are essentially 13 initiatives that we now have a plan for. And at some point, over the course of the next 36 months, those, if you will, initiatives will have to be worked on. And so at the moment, not all of those 13 have commenced. And so therefore, to characterize it as green, red or amber is slightly redundant.

And so therefore, the others, which we're now moving on because it's a real program of sequence. It's about what we do and how we follow up on each particular completion of work. And so these 13 initiatives will be done. And to the extent, once they start work on them, we'll then obviously recognize whether they're meeting the standards we set, meeting the time line we set, meeting the cost we set, and that will then determine whether they're characterized as green, amber or red.

And when we were talking back in May results, 7 of the initiatives at that point were red, and it's now down to 5. What's happened is 4 of those 7 have now moved into Amber Green. One, in fact, has been completed or effectively exited. And so that's behind us. But we've also had 2 new -- or 2 initiatives being recharacterized as red. So that's why there's that change from 7 to 5 over the course of the last 6 months.

What we'll keep doing, Jonathan, is to the extent that there's some confusion there, we will get sharper in how we set it out for you because I do want everyone at all times to see that this is a large -- this is a challenging complex program of work. We're absolutely committed to it and most importantly, committed to making sure that there is no surprises as we go through it. And so if we can do better in sharing with you where we're at, we will look to tidy that up as we go forward.

And second question, if I could. If you're looking -- I'm looking at Slide 22, 23, I think it is, which just shows the growth in deposits and consumer pretty strong at $15 billion and then $12 billion in mortgages if you exclude RAMS. But including in that number is very strong growth again in offset accounts. I think it was up another $5 billion. You've now got $73 billion in offset accounts.

So two things about that. Firstly, are you comfortable with the growth in net of offset accounts because it really is lagging the system? And I know you said you want to get your service proposition right, but are you comfortable with that? And also, given the offset accounts are nearly all against owner-occupied property, it actually means your investor book, as a percentage of the total, excluding offsets, which is just sort of a deposit sitting there, is a lot larger. So can you ask us sort of that considering this net of the offset accounts?

I'll make a couple of comments and invite Nathan to jump in. I mean, certainly, you're right to call out that the deposit agenda, the idea that we grow deposits and more importantly, get the shape of that right, John, is absolutely not where we want it to be, albeit we're really pleased with the progress we've made, but we would like a lot more in terms of the shape of deposits. And we were disappointed and acknowledge that, that we didn't catch what was happening in the regional brands as fast as we perhaps should have, and that's on myself.

We're very much focused on now addressing that. And I think we've got that properly, if you will, tackled, and it's just about how we get after that over the next 12 months. I'm just really pleased though that the Westpac side of the portfolio is continuing to improve and is, obviously, a really critical part of our portfolio there on transactional and savings accounts.

I suppose there's definitely -- there's things that if I think about our service proposition, one of the areas that I reflect on is making sure that transactional accounts, deposit services and servicing on that front is front and center for every banker in the company. And we've done a lot of work to recalibrate, for example, scorecards and incentives to make sure that all of our bankers in consumer and business bank understand the priority we attach to that. And pleasingly, we've got a good enough product suite, which means we can be very competitive. And I do feel like we're after that in the right way.

I missed the second part of the question?

No, I think you've covered it well. Maybe, John, just to add 2 points. I think that you're right to call it out. There's about, as you said, 7% growth in offsets in the half, but importantly, 6% in savings as well. So we have seen strong growth in both those items. I think -- and you're right to call it out in the way you did. The growth in savings accounts is about attracting customers on the liability side and the offset is much more about the business that you do on the asset side.

And there is a strong customer preference towards those. They've been growing, as you know, quite strongly as you move from a fixed rate portfolio into a variable rate portfolio, and we're pretty much exclusively there now. As we grow that side of the book, we'll continue to see growth in the offsets. Whether you're trying to target a certain amount of offsets or whether you're happy with it or not, I think it's a key feature of the mortgage product, and there is a strong customer appetite for it.

Probably the other point you did raise was about investor loans. And we're very keen to continue to be competitive in the investor loan segment. That demographic, that audience is an attractive customer base for us. And we see a real value in being very supportive there on investor loans and more importantly, then converting and making sure it's a whole of bank, whole of customer relationship that follows from that.

Our next question comes from Carlos Cacho from Macquarie. Carlos?

First, I just want to ask about on your margins, your replicating portfolio benefit is expected to diminish from 3 bps to 1 bp. I was just wondering if there's any other potential tailwinds that are worth calling out as you head into FY '26 because it's mostly negatives that you mentioned as you walk through the waterfall, Nathan.

Carlos, Justin has given me the signal for one word answer. So maybe I'll jump straight into it. I think we did just try and lay out as helpfully as we can, Carlos, and happy to sort of pick it up later in the afternoon to the extent helpful. But I guess the other point that we made, if you narrow in on things where we could get a tailwind, I think term wholesale funding markets have been better. So we do expect a tailwind there. We do expect to continue to get some replicating portfolio benefits.

We called out a basis point there, which is sort of net across the replicating portfolio and then the unhedged deposits. So there's a little bit of support there. And then I think maybe the other one is just to say on liquids. I think that has been a bit of a volatile item for us quarter-on-quarter. We did expect a sort of increase in investment securities at the third quarter that maybe didn't flow through to the same extent we thought. I do suspect as we go forward into the first half, just where the customer balance sheets are up to and how growth is going, we probably expect liquids to be down a little bit in the first half. And so while neutral to earnings, there might be a little bit of a benefit that flows through there.

And then just secondly, you've spoken about wanting to do better in proprietary mortgages. And obviously, it's a long-term strategy. But where are you expecting to win? Or where are you seeing wins come from? I presumably, it's either got to be a new customer who's a first home buyer or they're coming from other banks where they're proprietary or they're coming from brokers? Like do you track that? Is there particular targets you're hoping to do better in?

Look, I mean, good question. I mean what we've got to do is just get the basics right in terms of how we go after proprietary. So we've got to get the service proposition right. We've made real progress. We've got to get the product right, and we've seen improvement in product NPS, time to decision down inside 5 days. We're operating and executing mortgages more efficiently than we have in the past. Our hygiene and data is in a much better place. So the returns are much more, if you will, better reflected in that. And then I think the things for us, though, is we just got to get, for example, more bankers. We lost too many home finance managers. So we're catching up on that. That takes 6 to 12 months for a good home finance manager to really get into their straps.

And so we've started to get that resource allocation right. We certainly got to get a better compensation and incentive arrangement around for our home finance managers, and we've now got that right. We've got the scorecards right. We're also, at last, really taking the full power of the company in terms of the range of data and if you will, insights that come from all of what we have across the entire company to help get behind the home finance managers and give them real leads, which represent real insights and allow us to be much more proactive.

And then you heard Nathan talk about investing in the brand. We spend a lot more money to get the brand profile up. So we're just putting in place all of the basics to really get after this area. And I'll be very candid with you. There's nothing more dramatic than just getting all those basics in place to allow us to get after it. It took us a number of years to get to this point. It's going to take a little bit of time to get out of this particular position. But I think we've got what we need to execute. And I was really pleased with some of the actions we took in private wealth last year, which we've already seen a really improved turnaround in first-party in private wealth, which tells us that if we get after this as we have in private wealth and consumer, we can deliver that same turnaround. It will just be, I think, a reasonable period of time of effort to get there.

Our next question comes from Andrew Triggs from JPMorgan.

I might just ask one question. Deposit mix shift, should we expect that to slow significantly next year? And maybe, Nathan, if you could break that down, please, between the percentage of deposits in behavioral savings versus the percentage of those products themselves where the customers are qualifying for the bonus rate?

Yes, I think on the deposit mix spreads, you've probably rightfully called it out. It's probably just really a story for us around the growth that we've seen in that consumer savings product. I think at an overall book level, we've had decreases in proportion to term lending. So I think the bigger determinant of going forward margins, which is really where you're going, is going to be on the savings product.

And I would say a couple of things here. I think certainly, this is one of the areas where fourth quarter was a little bit -- showed a few different signs in the third quarter. So we saw, I think savings -- the savings balances in the fourth quarter grew $5 billion. They grew $2 billion in the third quarter. We've said there that we've got about 84%. I think we've given you an annual number there that are the people that are qualifying or achieving the bonus rate, that was actually probably a little bit lower through a couple of months in the middle of the year and then picked up a little bit in the fourth quarter.

So I think those 2 main things are things that I'm expecting will flow through into the second half. It's probably -- into the first half. It's probably not so much a mix shift into these products, Andrew. It's much more that's where we're seeing the growth.

Our next question comes from Richard Wiles from Morgan Stanley. Richard?

I'll just ask one question, too. It's following on from Matt Wilson's question around the business bank margin. In your business and wealth update a few months ago, Slide 17 showed the composition of the underlying margin decline. It was 22 basis points, and it was split across portfolio mix, deposits and lending. The decline in this half, Nathan, was 18 basis points. So actually pretty similar to the first half in terms of underlying trends. Could you give us some commentary around the mix between portfolio deposits and lending? Were the trends pretty similar? Or did they start to skew?

Yes. Thanks, Richard. Yes, I think my comments earlier to Matt, sorry if that was confusing was just really around the business lending part of that equation. So I think in the second half or in the more current period, we've seen a more moderation of the impact on the lending side. And you would have seen -- for all the reasons we've been speaking about on the deposit side, you would have seen a bigger -- a proportionately higher impact in the more recent period from deposits.

Okay. So lending was 7% in the first half and deposits was 9%. Lending went down, deposits went up as a headwind for margins?

As headwinds, yes.

Our next question comes from Brendan Sproules from Goldman.

I just have a couple of questions. Firstly, on the Markets and Treasury contribution for this half, it looks like it's running at a run rate of sort of about $2.2 billion. Can you maybe talk about some of the benefits that were achieved this half? And will those sort of repeat into 2026? And how does the $2.2 billion relate to what you would think is a normalized level of earnings from these 2 divisions?

Yes. Maybe we can break it down a little bit, Brendan, and then Anthony knows that business well. I think it is very challenging in these business to grab 1 quarter and annualize that and sort of expect that that's where you're run rating -- like -- well, sorry, it is where you're run rating, but to expect that, that sustains over 4 quarters.

So I think with these -- certainly, the markets business is a pretty mature business now. It's got a really strong FX, fixed income capability, and it's a pretty mature business now that would be -- should all market conditions being equal, just growing more in line with the underlying activity of our clients and the loan book growth. And then, Nell and the team have got ambition and are doing things to grow out a few more strategies that can build income sustainably in that franchise over time.

But I think I would just think about that as more -- it should be producing pretty stable performance on the FX and the fixed income, and it will be more determined by underlying activity. In treasury, I think similar, we've got good disclosure on that over a long period of time. I think that number in and around $1 billion for the treasury has been a pretty consistent number. I think a couple of years ago, we might have had a $600 million, but I think in and around that area is about right. We're probably issuing a bit less wholesale funding, which gives them a few less opportunities. And even with the RAM sale, we expect to do a little bit less in that space. So maybe it comes off a little bit. But there's a few comments, Anthony.

Yes. Look, I mean, definitely, the financial markets business, it's, I think, the leading franchise in the market now. A couple of just extra comments. I think there's real upside for us in the FX product suite and the penetration into consumer and business bank at Westpac is less than what it should be,, given the quality of the FX franchise we have. So there's real upside there in servicing our existing customers in consumer and business bank.

Likewise, I think we're underweight in a few aspects like commodities and aspects of that business, which we see as a real positive for us. Perhaps the real sort of interesting jewel in the crown in there is just the credit business, the credit trading, the credit market making. Now that Australia with its savings bill is actually a genuine capital exporter, and we have a lot of Kangaroo bond issuance into this market, the franchise that we have there in terms of credit market making, origination and, if you will, distribution into this capital market is pretty impressive. It's the best in the street. So we're quite excited about how much more we will see in that business as Australia's position with the superannuation funds makes it a real destination for people to raise capital.

That's very helpful. My second question is just on Slide 29 around the impairment provisions. I mean, in this presentation, you've talked, Anthony, about the improving operating environment for the bank. You've also showed some lead indicators on asset quality where you're seeing impaired assets, for example, fall. I was just wondering what the thought process was around increasing the overlays and specifically the downside scenario weight and actually growing your excess provisions above base case in this period.

I'll just let Nathan make a comment, but it was a robust process. And because clearly, the settings and outlook has continues to be surprisingly benign, but we need to be constantly vigilant and, if you will, balanced about what is going on and what may come our way. And so that's been a very congested and well-developed discussion inside the company with Nathan and I about what's the right outcome here. But Nathan...

Probably just to add, I think, Brendan, I think just take it as an indicator that we put a high value on medium-term earnings stability. And so I think when we think about this, it's similar to increases in hedge balances and then the management judgments around that. We've tried to just err on the side of a little bit more stability over time.

Our next question comes from Samantha Kontrobarsky from HESTA. Sam?

I'll just keep it to one. So you've recently appointed a Chief Data, Digital and AI Officer, which is a new step for the business. As you bring these areas together, how do you see this changing how Westpac competes? Is it mainly about efficiency and cost? Or could it fundamentally reshape the customer experience and growth?

Thanks for the question, and that is what I work on every day in terms of how do we get that right. There's no doubt that there's a lot of hype and a lot of, if you will, excitement around the AI revolution or evolution, depending on who you speak to. We certainly think that its capacity to help us be more efficient, help our employees get their job done better, safer, more consistent is a really big and important opportunity that comes from having the right AI program.

And so that was one of the key sort of drivers was to get a global thought leader working for and with me in terms of how do we look at the way we do things in the company and how can we do things better. It's a wonderful tool in the hands of employees, but you need to, therefore, invest in your employees and make sure they understand how to use this tool and how they can make it or can help them be more efficient.

So that's definitely one emphasis. And there is definitely really interesting ways in which it will help us serve customers and provide a more attractive service proposition to our customers. And we're sort of already taking some of the model capability with this Westpac Intelligence layer, taking all of the data and all the signals that are coming into this company and using that to make better, faster decisions, which allow us to get back in front of our customer more proactively. So we're seeing it, Samantha, also help us in terms of being really good with our customers with a view that, that obviously drives engagement, connection and revenue ultimately.

Thanks, Sam. We'll move to some questions now from the media. So our first question comes from Luca Ittimani from The Guardian.

Can you hear me right?

We got you perfectly.

I just wanted to check. So in the wake of the Fair Work Commission decision, do you intend to change your work-from-home policies at all? Have you seen more applications or requests from staff for new or more flexible work from home request?

Well, we have one of the most flexible work-from-home policies positions in the marketplace. So I think what we are going after, which is finding that balance for our people, I think we've got that right. So no, I don't need or feel a need to change that particular setting. We're also just reflecting on what we might do in response to that recent work-from-home decision by the Fair Work Commission, and we'll land on a decision as to what we will do later this week or the next.

What I would also say is that we've got a tremendous level of engagement from our people. And if I look at some of the OHI scores and other engagement measures, just highlighting people are really engaged and really excited about what we're trying to go after and what we're trying to achieve as a company in terms of for our customers and in terms of how we work together as a team. So I feel really encouraged by just where we're at and motivated to go further with what we've got.

Thanks. Our next question comes from James Eyers from the AFR.

Anthony, you've spoken about this deliberate pricing to attract investors in the residential property market. And you can see on Slide 66, your investor loans and interest-only loans, sort of the second half flow that is tracking well above the averages of the book. The sort of house price data out today showing house prices sort of growing at the fastest pace in a couple of years. And we saw that APRA data on Friday showing investor lending is pretty strong, like sort of 7% annualized, I think.

You just said in response to John Mott's question, it was an attractive customer base. But could you just talk a little bit more about that? Like why are you targeting more investors? Are they sort of a better credit risk than owner occupiers? Is there a cross-sell opportunity for you? And do you foresee a little bit of a squeeze on the first homeowner buyers as a result of this investor growth that we're seeing come through?

Well, I think we're seeing a squeeze on the entire market because of the demand, whether it's first-time buyer investor, there's just a lot of demand. And the key challenge of the day is we've got to get more houses built at the right price point, James. So every aspect of demand is being supported and is going fast, which is only driving the challenge and making it harder.

In terms of the investor segment, I mean, yes, it's an attractive segment in terms of from a credit risk perspective. And yes, you're right in terms of, I don't like the term, cross-sell, but the idea that these are people who are investing in property who, therefore, may need an incremental services and support and how do we, therefore, bring this entire bank to them is something that I'm really drawn to, and we see it as a real opportunity for us.

And we just got to, I suppose, go about it thoughtfully and be careful about the outlook and the risks that come from sort of going too far, too fast in a particular segment. But we think we've got the balance right. And it's interesting that we're forecasting a sort of 9%, almost 10% increase in residential house prices over the next 12 months. So it's certainly a positive outlook for people who can access the property market.

Just a really quick supplementary on that risk -- go on, sorry.

No, you're right, James. Keep going, sorry.

Just a really quick supplementary on that risk point, Anthony, we saw Lone Star make some comments in July that they begin sort of engaging with banks on implementation aspects around macro prudential tools just to make sure that could be activated in a timely manner if needed. And like back in 2015, I think you sort of had the investor loan growth sort of going above 10% and brought back to that number.

And then there was an interest-only element in 2017, where they were sort of looking at that being about 30%. You're at 20% now, I think. So it's well under that. But how much sort of hotter do you think this investor lending growth trend sort of would need to get before you're in that territory again?

Look, I don't have that answer, James, but we are very much or very cognizant of the balance we need to find. And we engage with the regulator. APRA is a terrific partner to us, and we engage actively often deeply with them about all of these particular issues. And so we'll be making sure there is no risk or issue there vis-a-vis the regulator. Equally, it's an opportunity that we've been pursuing over the course of the last 6 months, and we will continue to pursue it, but it will be balanced around the return. It will be balanced around the risk and it will be balanced around is it that we're converting these opportunities into broader, more substantive customer relationships and not just simply a lender loan.

Our last question comes from Steven Johnson from Seven West Media.

Steven Johnson here from The Nightly news website. Anthony, earlier in your presentation, you said that you want to see more housing around the -- available for the $500,000 mark. Would you be able to explain why you want more housing available for $500,000? And what your typical debt-to-income ratio limit would be now considering the cash trades at 3.6%?

So the thesis around just sort of promoting the idea that $500,000 is the right price point is really sort of predicated on the following: Median income in Australia is approximately $90,000. When we finance someone in the acquisition of a house, we will lend in the order of 5 to 6x their income subject to expense verification and the like. And so therefore, you've got something anywhere between sort of $450,000 and $550,000 of mortgage capacity.

And then, of course, just assume, say, a 10% deposit. And so all of a sudden, you can see median $500,000 as a house, $500,000, $600,000 is just really critical if we're going to solve for, call it, average Australia or the median position in Australia. And the challenge is that properties are being built in major capital cities and the median house price of houses in capital cities in Australia is over $1 million.

I am drawn to the fact that median house prices in regional Australia are closer to sort of $500,000, $550,000. And so I feel like Regional Australia is part of the solution potentially here. But I would say that the key is let's build more properties at the right price point to allow people to get access to the market. And so when we talk about building more properties, it just can't be building more properties that doesn't solve the actual challenge. How do we ensure the average Australian gets a chance to buy a property and live in their home of their dream.

So basically, it's also a social issue that there's too many houses are at $1 million, the average full-time worker can't afford that. Are there going to be some societal challenges, some aspects that would hurt Westpac lending.

Well, look, I think our success as a company is inextricably linked to the success of this country. And one of the challenges for this country is to get more housing, have more Australians being able to own their own property. And so therefore, I think it's really important. The challenge is that when you think about the cost to construct, you think about the time and cost and process for approval, all of those features contribute to it being very hard to be able to build a house at that price point.

And so therefore, I think it's not sort of dependent upon developers and contractors, but it's really important that the entire community, government, regulators and all of us work out how can we create an environment where it's cost effective, it's rational and it's reasonable to expect you build house for $500,000 to $600,000 in Australia.

Thank you, Steven, and thanks, everyone, for dialing in. We'll be available over the course of the day. Thank you very much.