| Credit risk management | Note 11. Credit risk management Note Index Note name number Credit risk Credit risk management framework 11.1 The risk of financial loss where a customer or counterparty fails to meet their financial obligations to Westpac. Credit risk ratings system 11.2 Credit risk concentrations and maximum exposure to credit risk 11.3 Credit quality of financial assets 11.4 Credit risk mitigation, collateral and other credit enhancements 11.5 11.1 . Credit risk management framework Please refer to Note 21.1 for details of Westpac’s overall risk management framework. ● Westpac maintains a Credit Risk Management Framework, a Credit Risk Management Strategy, and a Credit Risk Appetite Statement, and a number of supporting policies and appetite statements that define roles and responsibilities, acceptable practices, limits and key controls. ● The Credit Risk Management Framework describes the principles, methodologies, systems, roles and responsibilities, reports and key controls for managing credit risk. ● The BRiskC, Westpac Group Executive Risk Committee (RISKCO) and Westpac Group Credit Risk Committee (CREDCO) monitor the risk profile, performance and management of Westpac’s credit portfolio and the development and review of key credit risk policies. ● The Credit Risk Rating System Policy describes the credit risk rating system philosophy, design, key features and uses of rating outcomes. ● All models materially impacting the risk rating process are periodically reviewed in accordance with Westpac’s model risk policies. ● An annual review is performed of the Credit Risk Rating System by the BRiskC and CREDCO. ● Specific credit risk estimates (including PD, LGD and EAD levels) are overseen and reviewed annually in line with Westpac’s Credit Model Risk Policy. Models are approved under delegated authority from the Chief Risk Officer. Model Risk is overseen by Westpac’s Model Risk Committee. ● In determining the provision for ECL, the forward-looking economic inputs and the probability weightings of the forward-looking scenarios as well as any adjustments made to the modelled outcomes are subject to the approval of the Chief Financial Officer and the Chief Risk Officer with oversight from the Board of Directors (and its Committees). ● Policies for the delegation of credit approval authorities and formal limits for the extension of credit are established throughout Westpac. ● Credit manuals are established and maintained throughout Westpac including policies governing the origination, evaluation, approval, documentation, settlement and ongoing management of credit risks. ● Climate change related credit risks are considered in line with our Climate Change Position Statement and Action Plan. Climate change risks are managed in accordance with Westpac’s risk framework which is supported by the Sustainability Risk Management Framework (SRMF), Group Environmental, Social and Governance (ESG) Credit Risk Policy and Board Risk Appetite Statements (RAS). The Climate Change Credit Risk Committee oversees work to identify and manage the potential impact on credit exposures from climate change-related transition and physical risks across Westpac and reports to CREDCO. ● Westpac’s ESG Credit Risk Policy details Westpac’s overall approach to managing ESG risks in the credit risk process for applicable transactions. ● Sector policies guide credit extension where industry-specific guidelines are considered necessary (e.g. acceptable financial ratios or permitted collateral). Note 11. Credit risk management (Continued) 11.2. Credit risk ratings system The principal objective of the credit risk rating system is to assess the credit risk to which Westpac is exposed. Westpac has two main approaches to this assessment. Transaction-managed customers Transaction managed customers are generally customers with business lending exposures. They are individually assigned a Customer Risk Grade (CRG), corresponding to their expected PD. Each facility is assigned an LGD. Westpac’s risk rating system has a tiered scale of risk grades for both non-defaulted customers and defaulted customers. Non-defaulted CRGs are mapped to Moody’s and S&P Global Ratings (S&P) external senior unsecured ratings. The table below shows Westpac’s high level CRGs for transaction-managed portfolios mapped to Westpac’s credit quality disclosure categories and to their corresponding external rating. Transaction-managed Financial statement disclosure Westpac CRG Moody’s Rating S&P Rating Strong A Aaa – Aa3 AAA – AA– B A1 – A3 A+ – A– C Baa1 – Baa3 BBB+ – BBB– Good/satisfactory D Ba1 – B1 BB+ – B+ Westpac Rating Weak E Watchlist F Special Mention G Substandard/Default H Doubtful/Default Program-managed portfolio The program-managed portfolio generally includes retail products such as mortgages, personal lending (including credit cards) as well as certain small to medium sized enterprise lending. These credit exposures are grouped into pools of similar risk based on the analysis of characteristics that have historically predicted the likelihood of default, and a PD is assigned relative to the credit exposure’s pool. The exposure is then assigned to strong, satisfactory or weak by benchmarking that PD against transaction-managed exposures, which are in turn mapped to external ratings per the above table. In addition, any program-managed exposures that are one or more days past due are classified as weak. 11.3. Credit risk concentrations and maximum exposure to credit risk Credit risk concentrations Credit risk is concentrated when a number of counterparties are engaged in similar activities, have similar economic characteristics and thus may be similarly affected by changes in economic or other conditions. Westpac monitors its credit portfolio to manage risk concentrations and rebalance the portfolio. Individual customers or groups of related customers Westpac has large exposure limits governing the aggregate size of credit exposure normally acceptable to individual customers and groups of related customers. These limits are tiered by customer risk grade. Specific industries Exposures to businesses, governments and other financial institutions are classified into a number of industry clusters based on related Australian and New Zealand Standard Industrial Classification (ANZSIC) codes and are monitored against Westpac’s industry risk appetite limits. Individual countries Westpac has limits governing risks related to individual countries, such as political situations, government policies and economic conditions that may adversely affect either a customer’s ability to meet its obligations to Westpac, or Westpac’s ability to realise its assets in a particular country. Note 11. Credit risk management (Continued) Maximum exposure to credit risk The maximum exposure to credit risk (excluding collateral received) is represented by the carrying amount of on-balance sheet financial assets (which comprise cash and balances with central banks, collateral paid, trading securities and financial assets measured at FVIS, derivative financial instruments, investment securities, loans, other financial assets and certain balances included in assets held for sale) and undrawn credit commitments. The following tables set out the credit risk concentrations to which Westpac and the Parent Entity are exposed for on-balance sheet financial assets and for undrawn credit commitments. The balances for trading securities and financial assets measured at FVIS and investment securities exclude equity securities as the primary financial risk is not credit risk. The credit concentrations for each significant class of financial asset are: Trading securities and financial assets measured at FVIS ( Note 16 ) ● 47% (2023: 58% ) were issued by financial institutions for Westpac; 48% (2023: 59% ) for the Parent Entity. ● 50% (2023: 37% ) were issued by government or semi-government authorities for Westpac; 49% (2023: 37% ) for the Parent Entity. ● 82% (2023: 76% ) were held in Australia by Westpac; 86% (2023: 83% ) by the Parent Entity. Investment securities (Note 17) ● 17% (2023: 21% ) were issued by financial institutions for Westpac; 17% (2023: 22% ) for the Parent Entity. ● 82% (2023: 79% ) were issued by government or semi-government authorities for Westpac; 83% (2023: 78% ) for the Parent Entity. ● 91% (2023: 89% ) were held in Australia by Westpac; 99% (2023: 99% ) by the Parent Entity. Loans ( Note 9 ) The following tables provides a detailed breakdown of loans by industry and geographic classification. Derivative financial instruments (Note 20) ● 81% (2023: 80% ) were issued by financial institutions for both Westpac and the Parent Entity. ● 90% (2023: 75% ) were held in Australia by Westpac; 91% (2023: 76% ) by the Parent Entity. Note 11. Credit risk management (Continued) 2024 2023 a Total all Undrawn Total all Undrawn other on credit other on credit Consolidated balance commit- balance commit- $m Loans sheet ments Total Loans sheet ments Total Australia Accommodation, cafes and restaurants 9,810 26 1,637 11,473 8,818 22 1,619 10,459 Agriculture, forestry and fishing 13,733 40 2,713 16,486 11,894 52 2,695 14,641 Construction 7,900 33 4,623 12,556 7,140 37 4,496 11,673 Finance and insurance 29,484 112,860 13,801 156,145 28,162 131,658 13,718 173,538 Government, administration and defence 811 99,830 1,558 102,199 1,030 62,231 1,414 64,675 Manufacturing 9,997 499 8,361 18,857 9,721 824 7,489 18,034 Mining 2,865 415 3,038 6,318 2,506 520 3,364 6,390 Property 60,767 546 13,771 75,084 55,970 668 13,342 69,980 Property services and business services 14,321 149 7,921 22,391 13,468 207 6,542 20,217 Services 13,015 108 8,369 21,492 13,464 86 8,546 22,096 Trade 15,159 366 9,933 25,458 14,101 452 9,457 24,010 Transport and storage 10,289 681 6,313 17,283 8,862 668 5,440 14,970 Utilities 8,175 983 8,373 17,531 7,306 924 5,879 14,109 Retail lending 511,025 1,056 84,006 596,087 494,306 936 85,644 580,886 Other 1,577 592 1,781 3,950 1,524 576 1,545 3,645 Total Australia 708,928 218,184 176,198 1,103,310 678,272 199,861 171,190 1,049,323 New Zealand Accommodation, cafes and restaurants 313 3 32 348 318 1 33 352 Agriculture, forestry and fishing 8,352 41 573 8,966 8,826 62 627 9,515 Construction 385 1 566 952 408 2 460 870 Finance and insurance 4,757 11,364 1,838 17,959 4,440 13,347 2,414 20,201 Government, administration and defence 210 8,820 812 9,842 183 7,598 809 8,590 Manufacturing 1,785 58 1,444 3,287 2,142 33 1,378 3,553 Mining 151 2 125 278 156 4 72 232 Property 7,604 649 1,080 9,333 7,011 618 1,291 8,920 Property services and business services 962 121 357 1,440 996 111 418 1,525 Services 1,961 45 823 2,829 1,621 26 1,106 2,753 Trade 2,164 32 1,154 3,350 2,409 25 1,118 3,552 Transport and storage 661 105 362 1,128 763 115 404 1,282 Utilities 1,621 557 1,340 3,518 1,566 606 1,488 3,660 Retail lending 63,563 117 14,221 77,901 62,339 92 13,960 76,391 Other 108 77 123 308 148 81 161 390 Total New Zealand 94,597 21,992 24,850 141,439 93,326 22,721 25,739 141,786 Other overseas Accommodation, cafes and restaurants 85 - 11 96 107 - 10 117 Agriculture, forestry and fishing 2 - 1 3 3 - 1 4 Construction 34 - 73 107 60 - 127 187 Finance and insurance 3,656 9,447 4,964 18,067 2,414 14,091 4,417 20,922 Government, administration and defence - 4,389 - 4,389 - 3,218 - 3,218 Manufacturing 958 3 1,500 2,461 212 1 1,639 1,852 Mining 28 - 931 959 33 - 666 699 Property 472 2 37 511 466 1 43 510 Property services and business services 503 35 797 1,335 543 22 400 965 Services 36 - 629 665 196 2 335 533 Trade 909 3 1,813 2,725 999 3 1,359 2,361 Transport and storage 527 15 108 650 438 6 132 576 Utilities 232 1 139 372 233 1 39 273 Retail lending 328 - 13 341 347 3 14 364 Other 40 97 47 184 38 75 40 153 Total other overseas 7,810 13,992 11,063 32,865 6,089 17,423 9,222 32,734 Total gross credit risk 811,335 254,168 212,111 1,277,614 777,687 240,005 206,151 1,223,843 a. In 2024, the Group revised the attribution of certain exposures between industry categories to better align with their presentation for regulatory reporting. Certain LCH cleared derivative exposures were also reclassified between locations to better reflect the location of the underlying risk. Comparatives have been revised to align with current period presentation. Note 11. Credit risk management (Continued) 2024 2023 a Total all Undrawn Total all Undrawn other on credit other on credit Parent Entity balance commit- balance commit- $m Loans sheet ments Total Loans sheet ments Total Australia Accommodation, cafes and restaurants 9,777 26 1,637 11,440 8,784 22 1,619 10,425 Agriculture, forestry and fishing 13,659 40 2,713 16,412 11,828 52 2,695 14,575 Construction 7,188 31 4,623 11,842 6,540 36 4,496 11,072 Finance and insurance 29,430 160,947 13,801 204,178 28,098 178,999 13,718 220,815 Government, administration and defence 809 99,831 1,558 102,198 1,028 62,231 1,414 64,673 Manufacturing 9,811 496 8,361 18,668 9,544 824 7,489 17,857 Mining 2,816 415 3,038 6,269 2,464 520 3,364 6,348 Property 60,743 548 13,771 75,062 55,934 668 13,341 69,943 Property services and business services 14,013 151 7,921 22,085 13,147 207 6,542 19,896 Services 12,802 107 8,369 21,278 13,258 86 8,546 21,890 Trade 14,962 365 9,933 25,260 13,924 452 9,457 23,833 Transport and storage 9,978 682 6,313 16,973 8,593 668 5,440 14,701 Utilities 8,145 983 8,373 17,501 7,280 924 5,879 14,083 Retail lending 511,023 1,056 84,006 596,085 494,297 934 85,644 580,875 Other 1,330 521 1,781 3,632 1,276 474 1,545 3,295 Total Australia 706,486 266,199 176,198 1,148,883 675,995 247,097 171,189 1,094,281 New Zealand Accommodation, cafes and restaurants - 2 - 2 - - - - Agriculture, forestry and fishing - 11 4 15 - 29 4 33 Construction 2 - 78 80 4 - 52 56 Finance and insurance - 5,969 112 6,081 - 7,484 112 7,596 Government, administration and defence - 2,087 2 2,089 - 1,761 2 1,763 Manufacturing 35 55 82 172 43 26 85 154 Mining - 1 61 62 - 3 - 3 Property - 141 - 141 - 138 1 139 Property services and business services 2 21 13 36 5 19 13 37 Services - 39 6 45 - 20 7 27 Trade 266 28 223 517 316 20 254 590 Transport and storage 1 76 32 109 1 15 20 36 Utilities - 327 94 421 - 311 77 388 Retail lending - - - - - - - - Other - - 1 1 - 2 1 3 Total New Zealand 306 8,757 708 9,771 369 9,828 628 10,825 Other overseas Accommodation, cafes and restaurants 74 - 11 85 75 - 10 85 Agriculture, forestry and fishing 1 - 1 2 2 - 1 3 Construction 24 - 66 90 53 - 109 162 Finance and insurance 3,648 9,047 4,957 17,652 2,408 14,196 4,409 21,013 Government, administration and defence - 3,288 - 3,288 - 1,831 - 1,831 Manufacturing 895 4 1,498 2,397 195 1 1,637 1,833 Mining 2 - 928 930 6 - 663 669 Property 241 1 16 258 235 1 20 256 Property services and business services 480 35 794 1,309 521 22 395 938 Services 17 - 626 643 173 1 332 506 Trade 768 3 1,787 2,558 868 3 1,243 2,114 Transport and storage 499 15 103 617 410 6 128 544 Utilities 228 1 139 368 207 1 18 226 Retail lending 282 - 10 292 290 - 11 301 Other 30 94 20 144 27 75 20 122 Total other overseas 7,189 12,488 10,956 30,633 5,470 16,137 8,996 30,603 Total gross credit risk 713,981 287,444 187,862 1,189,287 681,834 273,062 180,813 1,135,709 a. In 2024, the Group revised the attribution of certain exposures between industry categories to better align with their presentation for regulatory reporting. Certain LCH cleared derivative exposures were also reclassified between locations to better reflect the location of the underlying risk. Comparatives have been revised to align with current period presentation. Note 11. Credit risk management (Continued) 11.4. Credit quality of financial assets Credit quality disclosures The following tables show the credit quality of gross credit risk exposures measured at amortised cost or at FVOCI to which the impairment requirements apply. The credit quality is determined by reference to the credit risk ratings system (refer to Note 11.2) and expectations of future economic conditions under multiple scenarios. Consolidated 2024 2023 a $m Stage 1 Stage 2 Stage 3 Total b Stage 1 Stage 2 Stage 3 Total b Loans - housing Strong 311,054 24,975 - 336,029 291,914 27,447 - 319,361 Good/satisfactory 159,016 45,242 - 204,258 156,836 48,929 - 205,765 Weak 2,512 16,389 6,893 25,794 2,533 14,178 5,237 21,948 Total loans - housing 472,582 86,606 6,893 566,081 451,283 90,554 5,237 547,074 Loans - personal Strong 4,104 104 - 4,208 4,318 95 - 4,413 Good/satisfactory 5,254 825 - 6,079 6,097 802 - 6,899 Weak 191 570 190 951 252 623 192 1,067 Total loans - personal 9,549 1,499 190 11,238 10,667 1,520 192 12,379 Loans - business Strong 81,696 19,387 - 101,083 80,177 13,564 - 93,741 Good/satisfactory 75,873 47,282 - 123,155 63,434 52,477 - 115,911 Weak 200 6,347 3,231 9,778 200 5,468 2,914 8,582 Total loans - business 157,769 73,016 3,231 234,016 143,811 71,509 2,914 218,234 Investment securities Strong 102,721 - - 102,721 73,963 - - 73,963 Good/satisfactory - 71 - 71 - 51 - 51 Weak - 649 - 649 - 876 - 876 Total investment securities c 102,721 720 - 103,441 73,963 927 - 74,890 All other financial assets Strong 76,264 - - 76,264 112,482 - - 112,482 Good/satisfactory 899 - - 899 597 - - 597 Weak 229 - - 229 197 - - 197 Total all other financial assets 77,392 - - 77,392 113,276 - - 113,276 Undrawn credit commitments Strong 140,786 14,341 - 155,127 137,275 11,169 - 148,444 Good/satisfactory 40,271 14,186 - 54,457 40,482 15,142 - 55,624 Weak 218 1,868 441 2,527 214 1,503 366 2,083 Total undrawn credit commitments 181,275 30,395 441 212,111 177,971 27,814 366 206,151 Total strong 716,625 58,807 - 775,432 700,129 52,275 - 752,404 Total good/satisfactory 281,313 107,606 - 388,919 267,446 117,401 - 384,847 Total weak 3,350 25,823 10,755 39,928 3,396 22,648 8,709 34,753 Total on and off-balance sheet 1,001,288 192,236 10,755 1,204,279 970,971 192,324 8,709 1,172,004 a In 2024, the Group revised the methodology that it uses to classify program - managed exposures as strong, satisfactory, or weak in order to better align the mapping of program - managed exposures to transaction - managed exposures. This is a change in disclosure methodology only and does not represent a change in underlying credit quality of the Group’s credit exposures, or a change in ECL. Comparatives have been revised to align with current period presentation. b. This credit quality disclosure differs to that of credit risk concentration as it relates only to financial assets measured at amortised cost or at FVOCI and therefore excludes trading securities and financial assets measured at FVIS, and derivative financial instruments. c. Excludes equity instruments. Includes $1,172 million (2023: $1,438 million) at amortised cost. $452 million (2023: $511 million) of these are classified as strong, $71 million (2023: $51 million) are classified as good/satisfactory and $649 million (2023: $876 million) are classified as weak. Details of collateral held in support of these balances are provided in Note 11.5. Note 11. Credit risk management (Continued) Parent Entity 2024 2023 a $m Stage 1 Stage 2 Stage 3 Total b Stage 1 Stage 2 Stage 3 Total b Loans - housing Strong 304,169 24,829 - 328,998 285,019 27,316 - 312,335 Good/satisfactory 117,339 33,284 - 150,623 117,007 36,087 - 153,094 Weak 2,233 15,471 6,235 23,939 2,255 13,342 4,754 20,351 Total loans - housing 423,741 73,584 6,235 503,560 404,281 76,745 4,754 485,780 Loans - personal Strong 3,721 92 - 3,813 3,917 82 - 3,999 Good/satisfactory 4,849 647 - 5,496 5,692 625 - 6,317 Weak 178 512 180 870 236 561 180 977 Total loans - personal 8,748 1,251 180 10,179 9,845 1,268 180 11,293 Loans - business Strong 70,448 18,047 - 88,495 68,229 12,647 - 80,876 Good/satisfactory 61,784 42,132 - 103,916 50,967 46,127 - 97,094 Weak 123 4,814 2,894 7,831 124 4,086 2,581 6,791 Total loans - business 132,355 64,993 2,894 200,242 119,320 62,860 2,581 184,761 Investment securities Strong 95,346 - - 95,346 67,257 - - 67,257 Good/satisfactory - 71 - 71 - 51 - 51 Weak - - - - - - - - Total investment securities c 95,346 71 - 95,417 67,257 51 - 67,308 All other financial assets Strong 119,265 - - 119,265 155,014 - - 155,014 Good/satisfactory 731 - - 731 515 - - 515 Weak 71 - - 71 50 - - 50 Total all other financial assets 120,067 - - 120,067 155,579 - - 155,579 Undrawn credit commitments Strong 129,379 13,659 - 143,038 124,609 10,412 - 135,021 Good/satisfactory 30,827 11,667 - 42,494 31,265 12,655 - 43,920 Weak 212 1,707 411 2,330 206 1,323 343 1,872 Total undrawn credit commitments 160,418 27,033 411 187,862 156,080 24,390 343 180,813 Total strong 722,328 56,627 - 778,955 704,045 50,457 - 754,502 Total good/satisfactory 215,530 87,801 - 303,331 205,446 95,545 - 300,991 Total weak 2,817 22,504 9,720 35,041 2,871 19,312 7,858 30,041 Total on and off-balance sheet 940,675 166,932 9,720 1,117,327 912,362 165,314 7,858 1,085,534 a. In 2024, the Group revised the methodology that it uses to classify program - managed exposures as strong, satisfactory, or weak in order to better align the mapping of program - managed exposures to transaction - managed exposures. This is a change in disclosure methodology only and does not represent a change in underlying credit quality of the Group’s credit exposures, or a change in ECL. Comparatives have been revised to align with current period presentation. b. This credit quality disclosure differs to that of credit risk concentration as it relates only to financial assets measured at amortised cost or at FVOCI and therefore excludes trading securities and financial assets measured at FVIS, and derivative financial instruments. c. Excludes equity instruments. Includes $71 million (2023: $51 million) at amortised cost which are all classified as good/satisfactory. Details of collateral held in support of these balances are provided in Note 11.5. Note 11. Credit risk management (Continued) 11.5. Credit risk mitigation, collateral and other credit enhancements Westpac uses a variety of techniques to reduce the credit risk arising from its lending activities. This includes Westpac establishing that it has direct, irrevocable and unconditional recourse to collateral and other credit enhancements through obtaining legally enforceable documentation. Collateral The table below describes the nature of collateral or security held for each relevant class of financial asset. Loans – housing and personal a Housing loans are secured by a mortgage over property and additional security may take the form of guarantees and deposits. Personal lending (including credit cards and overdrafts) is predominantly unsecured. Where security is taken, it is restricted to eligible motor vehicles, caravans, campers, motor homes and boats. Personal lending also includes margin lending which is secured primarily by shares or managed funds. Loans – business Business loans may be secured, partially secured or unsecured. Security is typically taken by way of a mortgage over property and/or a general security agreement over business assets or other assets. Other security such as guarantees, standby letters of credit or derivative protection may also be taken as collateral, if appropriate. Trading securities, financial assets measured at FVIS and derivatives These exposures are carried at fair value which reflects the credit risk. For trading securities, no collateral is sought directly from the issuer or counterparty; however this may be implicit in the terms of the instrument (such as an asset-backed security). The terms of debt securities may include collateralisation. For derivatives, master netting agreements are typically used to enable the effects of derivative assets and liabilities with the same counterparty to be offset when measuring these exposures. Additionally, collateralisation agreements are also typically entered into with major institutional counterparties to avoid the potential build-up of excessive mark-to-market positions. Derivative transactions are increasingly being cleared through central clearers. a. This includes collateral held in relation to associated credit commitments. Management or risk mitigation Westpac mitigates credit risk through controls covering: Collateral and valuation management The estimated realisable value of collateral held in support of loans is based on a combination of: ● Formal valuations currently held for such collateral; and ● Management’s assessment of the estimated realisable value of all collateral held. This analysis also takes into consideration any other relevant knowledge available to management at the time. Updated valuations are obtained when appropriate. Westpac revalues collateral related to financial markets positions on a daily basis and has formal processes in place to promptly call for collateral top-ups, if required. These processes include margining for non-centrally cleared customer derivatives as regulated by Australian Prudential Standard CPS226. The collateralisation arrangements are documented via the Credit Support Annex of the ISDA dealing agreements and Global Master Repurchase Agreements (GMRA) for repurchase transactions. In relation to financial markets positions, Westpac only recognises collateral which is: ● Cash, primarily in Australian dollars (AUD), New Zealand dollars (NZD), US dollars (USD), Canadian dollars (CAD), British pounds (GBP) or European Union euro (EUR); ● Bonds issued by Australian Commonwealth, State and Territory governments or their Public Sector Enterprises, provided these attract a zero risk-weighting under Australian Prudential Standard (APS) 112; ● Securities issued by other sovereign governments and supranationals as approved by an authorised credit officer; or ● Protection bought via credit-linked notes (provided the proceeds are invested in cash or other eligible collateral). Other credit enhancements Westpac only recognises guarantees, standby letters of credit, or credit derivative protection from entities meeting minimum eligibility requirements (provided they are not related to the entity with which Westpac has a credit exposure) including but not limited to: ● Sovereign; ● Australia and New Zealand public sector; ● ADIs and overseas banks with a minimum risk grade equivalent of A3 / A–; and ● Others with a minimum risk grade equivalent of A3 / A–. Credit Portfolio Management (CPM) manages Westpac’s corporate, sovereign and bank credit portfolios through monitoring the exposure and any offsetting hedge positions. CPM purchases credit protection from entities that meet minimum eligibility requirements. Offsetting Creditworthy customers domiciled in Australia and New Zealand may enter into formal agreements with Westpac, permitting Westpac to set-off gross credit and debit balances in their nominated accounts. Cross-border set-offs are not permitted. Close-out netting is undertaken with counterparties with whom the Group has entered into a legally enforceable master netting agreement for their off-balance sheet financial market transactions in the event of default. Further details of offsetting are provided in Note 23. Central clearing Westpac executes derivative transactions through central clearing counterparties. Central clearing counterparties mitigate risk through stringent membership requirements, the collection of margin against all trades placed, the default fund, and an explicitly defined order of priority of payments in the event of default. Note 11. Credit risk management (Continued) Collateral held against loans Westpac analyses the coverage of the loan portfolio which is secured by the collateral that it holds. Coverage is measured as follows: Coverage Secured loan to collateral value ratio Fully secured Less than or equal to 100% Partially secured Greater than 100% but not more than 150% Unsecured Greater than 150%, or no security held (e.g. can include credit cards, personal loans, and exposure to highly rated corporate entities) Westpac and the Parent Entity’s loan portfolio have the following coverage from collateral held: 2024 2023 Housing Personal Business Housing Personal Business % loans a loans loans Total loans a loans loans Total Performing loans Consolidated Fully secured 100.0 9.7 68.1 89.6 100.0 10.0 66.1 89.1 Partially secured - 11.1 14.2 4.2 - 16.4 15.2 4.5 Unsecured - 79.2 17.7 6.2 - 73.6 18.7 6.4 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Parent Entity Fully secured 100.0 10.7 68.3 89.9 100.0 10.9 66.3 89.4 Partially secured - 12.2 14.1 4.1 - 18.0 15.3 4.5 Unsecured - 77.1 17.6 6.0 - 71.1 18.4 6.1 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Non-performing loans Consolidated Fully secured 91.5 - 56.7 79.0 93.9 - 55.3 78.2 Partially secured 8.5 23.2 23.4 13.4 6.1 33.9 23.9 13.0 Unsecured - 76.8 19.9 7.6 - 66.1 20.8 8.8 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Parent Entity Fully secured 91.8 - 59.7 80.0 93.9 - 56.8 78.9 Partially secured 8.2 24.4 21.7 12.7 6.1 35.6 23.3 12.7 Unsecured - 75.6 18.6 7.3 - 64.4 19.9 8.4 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 a. For the purpose of collateral classification, housing loans are classified as fully secured, unless they are non-performing in which case they may be classified as partially secured. Details of the carrying value and associated provision for ECL are disclosed in Note 9 and Note 10 respectively. The credit quality of loans is disclosed in Note 11.4. Collateral held against financial assets other than loans Consolidated Parent Entity $m 2024 2023 2024 2023 Cash, primarily for derivatives 3,079 3,526 2,936 3,244 Securities under reverse repurchase agreements a 17,950 11,862 17,950 11,821 Securities under derivatives a 112 53 112 53 Total other collateral held 21,141 15,441 20,998 15,118 a. Securities received as collateral are not recognised in the Group and Parent Entity’s balance sheet. |
