Chief Executive Officer's Report

Gail Kelly Chief Executive Officer, The Westpac Group

As the Chairman has outlined, the external environment changed significantly over the 2009 financial year. The Global Financial Crisis escalated early in the year, creating a period of significant uncertainty and extreme volatility in global capital and credit markets, the failure of a number of financial institutions globally, and many economies falling into recession.

Widespread Government intervention has contributed to the more recent stabilisation of markets and early signs of economic recovery, including improving consumer and business confidence.

In this context, our major priorities for the year were to successfully navigate our way through the Global Financial Crisis (GFC), to continue to implement our customer- focused strategy and to execute the merger with St.George, using the merger to facilitate our overall Transformation. I am pleased to report that we have made very good progress against these objectives. In terms of managing through the GFC, we supported our customers right through the crisis and delivered a healthy financial performance. We have successfully completed the merger with St.George, with excellent customer retention, improved business momentum and high staff engagement. We also made strong progress on our transformation agenda, investing more in building a stronger distribution capability. We finished the year very well placed, with a set of powerful, iconic brands, a much larger customer base and stronger distribution network, and with the most improved customer advocacy of our peers.

I would like to share with you my thoughts on our performance in each of these key areas.

Impact of the Global Financial Crisis

The 2009 financial year has been one of the most extreme in the history of financial markets. This environment impacted our funding, increased market volatility, reduced asset values, weakened operating conditions and caused increased company stress and associated impairments. In the second half, while operating conditions improved, they remain materially different from those experienced prior to the crisis and we do not expect a return to pre-crisis conditions.

In particular, in addition to raising capital and reducing the dividend, we have actively repositioned our funding profile and continued to carry a much higher level of liquidity as a buffer for unexpected shocks. These actions have strengthened the Group’s balance sheet and assisted us remain just one of ten banks globally retaining a rating of ‘AA’ or better. Such a strong rating benefits us in terms of access to, and the cost of funding, and has enabled us to continue to meet our customers’ needs and indeed grow market share.