WBC – NZ Banking Group Disclosure Statement – 30 Sept 2018

Disclosure Statement
Westpac Banking
Corporation –
New Zealand
Banking Group
For the year ended 30 September 2018

Contents
General information 1
Directors’ and the Chief Executive Officer,
NZ Branch’s statement 7
Income statement 8
Statement of comprehensive income 8
Balance sheet 9
Statement of changes in equity 10
Statement of cash flows 11
Note 1 Financial statement preparation 12
Note 2 Net interest income 16
Note 3 Non-interest income 17
Note 4 Operating expenses 18
Note 5 Auditor’s remuneration 18
Note 6 Impairment charges/(benefits) 19
Note 7 Income tax expense 20
Note 8 Imputation credit account 20
Note 9 Receivables due from other
financial institutions 20
Note 10 Other assets 21
Note 11 Trading securities and financial assets
designated at fair value 21
Note 12 Available-for-sale securities 21
Note 13 Loans 22
Note 14 Asset quality 22
Note 15 Deferred tax assets 24
Note 16 Intangible assets 25
Note 17 Financial assets pledged as collateral 26
Note 18 Payables due to other financial institutions 26
Note 19 Other liabilities 26
Note 20 Deposits and other borrowings 27
Note 21 Other financial liabilities at fair value
through income statement 27
Note 22 Debt issues 28
Note 23 Provisions 29
Note 24 Loan capital 29
Note 25 Related entities 31
Note 26 Derivative financial instruments 34
Note 27 Fair value of financial assets and
financial liabilities 37
Note 28 Offsetting financial assets and
financial liabilities 41
Note 29 Operating lease commitments 43
Note 30 Credit related commitments, contingent
assets and contingent liabilities 43
Note 31 Segment reporting 44
Note 32 Securitisation, covered bonds and other
transferred assets 45
Note 33 Structured entities 46
Note 34 Insurance business 48
Note 35 Capital adequacy 49
Note 36 Risk management 50
Note 37 Concentration of funding 67
Note 38 Concentration of credit exposures 68
Note 39 Other information on the
Overseas Banking Group 69
Note 40 Notes to the statement of cash flows 69
Note 41 Subsequent events 70
Conditions of registration 71
Independent auditor’s report 73

Westpac Banking Corporation - New Zealand Banking Group
1
General information
Certain information contained in this Disclosure Statement is required by the Registered Bank Disclosure Statements (Overseas Incorporated Registered
Banks) Order 2014 (as amended) (‘Order’).
In this Disclosure Statement, reference is made to five main reporting groups:
–Westpac Banking Corporation (otherwise referred to as the ‘Overseas Bank’) – refers to the worldwide business of Westpac Banking Corporation
excluding its controlled entities;
–Westpac Banking Corporation Group (otherwise referred to as the ‘Overseas Banking Group’) – refers to the total worldwide business of Westpac
Banking Corporation including its controlled entities;
–Westpac Banking Corporation New Zealand Branch (otherwise referred to as the ‘NZ Branch’) – refers to the New Zealand Branch of Westpac
Banking Corporation (trading as Westpac);
–Westpac New Zealand Limited (otherwise referred to as ‘Westpac New Zealand’) – refers to a locally incorporated subsidiary of the Overseas Bank
(carrying on the Overseas Bank’s New Zealand consumer, business and institutional banking operations); and
–Westpac Banking Corporation - New Zealand Banking Group (otherwise referred to as the ‘NZ Banking Group’) – refers to the New Zealand
operations of Westpac Banking Corporation Group including those entities whose business is required to be reported in the financial statements
of the Overseas Banking Group’s New Zealand business. Controlled entities of the NZ Banking Group as at 30 September 2018 are set out in Note 25
Related entities.
Words and phrases not defined in this Disclosure Statement, but defined by the Order, have the meaning given by the Order when used in this Disclosure
Statement.
Corporate information
The Overseas Bank is entered on the register maintained under the Reserve Bank of New Zealand Act 1989 (‘Reserve Bank Act’). The NZ Branch’s head
office is situated at Westpac on Takutai Square, 16 Takutai Square, Auckland 1010, New Zealand and the address for service of process on the NZ Branch
is Westpac on Takutai Square, 53 Galway Street, Auckland, New Zealand.
Overseas Bank
The Overseas Bank was founded in 1817 and was incorporated in 1850 pursuant to the Bank of New South Wales Act 1850. In 1982 the Overseas Bank
acquired The Commercial Bank of Australia Limited and the Overseas Bank changed its name to Westpac Banking Corporation. On 23 August 2002,
the Overseas Bank registered as a public company limited by shares under the Australian Corporations Act 2001 and as of that date the Bank of New
South Wales Act 1850 ceased to apply. The Overseas Bank provides a broad range of banking and financial services, including consumer, business and
institutional banking and wealth management services.
The Overseas Bank’s principal office and address for service of process is Level 18 Westpac Place, 275 Kent Street, Sydney, New South Wales 2000,
Australia.
Limits on material financial support by the ultimate parent bank
On 19 November 2015, the Australian Prudential Regulation Authority (‘APRA’) informed the Overseas Bank that its Extended Licensed Entity (‘ELE’)
non-equity exposures to New Zealand banking subsidiaries is to transition to be below a limit of 5% of the Overseas Bank’s Level 1 Tier 1 capital, as part
of an initiative to reduce Australian bank non-equity exposure to their respective New Zealand banking subsidiaries and branches.
The ELE consists of the Overseas Bank and its subsidiary entities that have been approved by APRA to be included in the ELE for the purposes of
measuring capital adequacy.
APRA has allowed a period of five years commencing on 1 January 2016 to transition to be less than the 5% limit. Exposures for the purposes of this limit
include all committed, non-intraday, non-equity exposures including derivatives and off-balance sheet exposures. For the purposes of assessing this
exposure, the 5% limit excludes equity investments and holdings of capital instruments in New Zealand banking subsidiaries.
While the limit and associated conditions do not apply to the ELE’s non-equity exposures to the NZ Branch (which is within the ELE), the limit and
associated conditions do apply to the NZ Branch’s non-equity exposures to the rest of the NZ Banking Group other than Westpac New Zealand Group
Limited. As at 30 September 2018, the ELE’s non-equity exposures to New Zealand banking subsidiaries affected by the limit were below 5% of Level 1
Tier 1 capital of the Overseas Bank.
APRA has also confirmed the terms on which the Overseas Bank ‘may provide contingent funding support to a New Zealand banking subsidiary during
times of financial stress’. APRA has confirmed that, at this time, only covered bonds meet its criteria for contingent funding arrangements.
Registered bank: Directorate
Directors
The Directors of the Overseas Bank (‘Board’) at the time this Disclosure Statement was signed were:
Name: Lindsay Philip Maxsted, DipBus (Gordon), FCA, FAICD
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes
Independent Director: Yes
External Directorships: Chairman of Transurban Holdings Limited, Transurban
Infrastructure Management Limited and Transurban International Limited. Managing
Director of Align Capital Pty Ltd. Director of BHP Billiton Limited, BHP Billiton plc, Align
Investments Pty Ltd, Baker Heart and Diabetes Institute, Belmont Pty Ltd, Centip Pty
Ltd, Continuum Investments Pty Ltd, Jacobite Investments Pty Ltd and 139 Pty Ltd.
Member of the Coolmore Australia Advisory Board.

Westpac Banking Corporation - New Zealand Banking Group2
Name: Brian Charles Hartzer, BA, CFA
Non-executive: No
Country of Residence: Australia
Primary Occupation: Managing Director & Chief Executive Officer,
Westpac Banking Corporation
Secondary Occupations: None
Board Audit Committee Member: No
Independent Director: No
External Directorships: Director of Australian Banking Association Incorporated,
The Financial Markets Foundation for Children, Neville Street Pty Ltd and Springfield
2012 Pty Ltd. Chairman of The Australian National University Business and Industry
Advisory Board.
Name: Nerida Frances Caesar, BCom, MBA, GAICD
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: No
Independent Director: Yes
External Directorships: Director of TNCJ Pty Limited and C A J Caesar Pty Ltd.
Member of the Australian Government’s FinTech Advisory Group and the Advisory
Board of IXUP Limited. Advisor to Equifax Australia and New Zealand.
Name: Ewen Graham Wolseley Crouch AM, BEc (Hons.), LLB, FAICD
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: No
Independent Director: Yes
External Directorships: Director of BlueScope Steel Limited, Sydney Symphony
Orchestra Holdings Pty Limited, Sydney Symphony Limited, Jawun, NCNC Funds
Limited, Wersley Investments Pty Limited, Wersley Pty Limited, G.J. Crouch Properties
Pty. Limited, Grajon Investments Pty. Limited and Maharg Pty. Ltd. Member of the
Law Committee of the Australian Institute of Company Directors, the Corporations
Committee of the Law Council of Australia, the Commonwealth Remuneration Tribunal
and ASIC’s Director Advisory Panel.
Name: Catriona Alison Deans, BA, MBA, GAICD
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: No
Independent Director: Yes
External Directorships: Director of Cochlear Limited, Ramsay Health Care Limited,
The Observership Program Limited, SCEGGS Darlinghurst Limited, The SCEGGS
Endowment Fund Limited, The SCEGGS Overseas Aid Fund Limited, Chessholme Pty
Ltd and Ascog Pty Ltd. Investment Committee member of the CSIRO Innovation Fund
(Main Sequence Ventures) and Senior Advisor to McKinsey & Company.
Name: Craig William Dunn, BCom, FCA
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: No
Independent Director: Yes
External Directorships: Chairman of Stone and Chalk Limited (retires 27 November
2018), The Australian Ballet and the International Standards Technical Committee
on Blockchain and Distributed Ledger Technologies (ISO/TC 307). Co-Chair of the
Australian Government’s Fintech Advisory Group. Director of Telstra Corporation
Limited, Amiala Pty Ltd and Carringbush Consulting Services Pty Ltd. Board Member
of Jobs for New South Wales. Member of the Australian Securities and Investments
Commission’s External Advisory Panel, the New South Wales Government’s Quantum
Computing Fund Advisory Panel and the Sydney Technology & Innovation Precinct
Panel. Consultant to King & Wood Mallesons.
Name: Yuen Mei Anita Fung, BSocSc, MAppFin
Non-executive: Yes
Country of Residence: Hong Kong
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: No
Independent Director: Yes
External Directorships: Director of Hong Kong Exchanges and Clearing Limited,
China Construction Bank Corporation and Hang Lung Properties Limited. Board
Member of Airport Authority Hong Kong. Member of Hong Kong Museum Advisory
Committee.
Name: Peter John Oswin Hawkins, BCA (Hons.), SF Fin, ACA (NZ), FAICD
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes
Independent Director: Yes
External Directorships: Director of Mirvac Funds Limited, Mirvac Limited, Liberty
Financial Ltd, Liberty Financial Pty Ltd, Liberty Financial Group Pty Ltd, Liberty
Fiduciary Ltd, Crestone Holdings Limited, Joshawk Investments Pty Ltd, Lynter
Investments Pty Ltd, LFI Group Pty Ltd, and Petlyn Holdings Pty Ltd.
Name: Peter Ralph Marriott, BEc (Hons.), FCA
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes, Chairman
Independent Director: Yes
External Directorships: Director of Austraclear Limited. Director of ASX Limited,
ASX Settlement Corporation Limited, ASX Clear (Futures) Pty Limited, ASX Clear Pty
Limited, ASX Clearing Corporation Limited, ASX Settlement Pty Limited, P. & E. Marriott
Investments Pty Ltd, P. & E. Marriott Holdings Pty Ltd and P. & E. Marriott Pty Ltd.
Member of the Review Panel & Policy Council of the Banking & Finance Oath.
Name: Peter Stanley Nash, BCom, FCA, F Fin
Non-executive: Yes
Country of Residence: Australia
Primary Occupation: Director
Secondary Occupations: None
Board Audit Committee Member: Yes
Independent Director: Yes
External Directorships: Chairman of Johns Lyng Group Limited. Director of Mirvac
Funds Limited, Mirvac Limited, Reconciliation Australia Limited, Golf Victoria Limited,
Peter Nash Pty Ltd and Nash Family Pty Ltd. Board Member of Koorie Heritage Trust
and Migration Council Australia. Advisory Board Member of University of Melbourne
Centre for Chinese Contemporary Studies.
General information (continued)

Westpac Banking Corporation - New Zealand Banking Group
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General information (continued)
Changes to Directorate
Robert George Elstone ceased to be a director on 8 December 2017. Peter Stanley Nash was appointed as a director effective 7 March 2018. Yuen Mei
Anita Fung was appointed as a director effective 1 October 2018. There have been no other changes in the composition of the Overseas Bank’s Board
since 30 September 2017.
Chief Executive Officer, NZ Branch
Name: Karen Lee Silk, B.Com
Country of Residence: New Zealand
Primary Occupation: Chief Executive Officer, NZ Branch
Secondary Occupations: General Manager, Commercial Corporate and Institutional, Westpac New Zealand
External Directorships: Director of Waianiwa Pastoral Limited, Payments NZ Limited (alternate Director), Sustainable Business Council
Responsible person
All the current Directors named above have authorised in writing David Alexander McLean, Chief Executive, Westpac New Zealand to sign this Disclosure
Statement on the Directors’ behalf in accordance with section 82 of the Reserve Bank Act.
Name: David Alexander McLean, LLB (Hons.)
Country of Residence: New Zealand
Primary Occupation: Chief Executive, Westpac New Zealand
Secondary Occupations: None
Address for communications
All communications may be sent to the Directors, the Chief Executive Officer, NZ Branch and the Responsible Person at the head office of the NZ Branch
at Westpac on Takutai Square, 16 Takutai Square, Auckland 1010, New Zealand.
Conflicts of interest policy
The Board follows a procedure to ensure that conflicts and potential conflicts of interest between the Directors’ duty to the Overseas Bank and their
personal, professional or business interests are avoided or dealt with. Accordingly, each Director must:
i. give notice to the Board of any direct or indirect interest in any contract, proposed contract or other matter with the Overseas Bank as soon as
practicable after the relevant facts have come to that Director’s knowledge. Alternatively, a Director may give to the Board a general notice to the
effect that the Director is to be regarded as interested in any present or prospective contract or other matter between the Overseas Bank and a
person or persons specified in that notice; and
ii. in relation to any matter that is to be considered at a Directors’ meeting in which that Director has a material personal interest, not vote on the matter
nor be present while the matter is being considered at the meeting (unless the remaining Directors have previously resolved to the contrary).
Interested transactions
There have been no transactions entered into by any Director, the Chief Executive Officer, NZ Branch, or any immediate relative or close business
associate of any Director or the Chief Executive Officer, NZ Branch, with the Overseas Bank, or any member of the NZ Banking Group:
a. on terms other than on those that would, in the ordinary course of business of the Overseas Bank or any member of the NZ Banking Group, be given
to any other person of like circumstances and means; or
b. which could be reasonably likely to influence materially the exercise of the Directors’, or the Chief Executive Officer, NZ Branch’s duties.
Credit ratings
The Overseas Bank has the following credit ratings with respect to its long-term senior unsecured obligations, including obligations payable in
New Zealand in New Zealand dollars, as at the date the Directors signed this Disclosure Statement:
Rating Agency Current Credit Rating Rating Outlook
Fitch Ratings AA- Stable
Moody’s Investors Service (‘Moody’s’) Aa3 Stable
S&P Global Ratings (‘S&P’) AA- Negative
On 19 June 2017, Moody’s downgraded the Overseas Bank’s credit rating to Aa3. The downgrade followed Moody’s revision of the Australian Macro
Profile to “Strong +” from “Very Strong -”. At the same time, Moody’s revised the outlook to ‘stable’ from ‘negative’.

Westpac Banking Corporation - New Zealand Banking Group4
General information (continued)
Descriptions of credit rating scales
1
Fitch RatingsMoody’sS&P
The following grades display investment grade characteristics:
Capacity to meet financial commitments is extremely strong. This is the highest issuer credit rating.AAAAaaAAA
Very strong capacity to meet financial commitments.AAAaAA
Strong capacity to meet financial commitments although somewhat susceptible to adverse
changes in economic, business or financial conditions.
AAA
Adequate capacity to meet financial commitments, but adverse business or economic conditions
are more likely to impair this capacity.
BBBBaaBBB
The following grades have predominantly speculative characteristics:
Significant ongoing uncertainties exist which could affect the capacity to meet financial
commitments on a timely basis.
BBBaBB
Greater vulnerability and therefore greater likelihood of default.BBB
Likelihood of default now considered a real possibility. Capacity to meet financial commitments is
dependent on favourable business, economic and financial conditions.
CCCCaaCCC
Highest risk of default.CC to C CaCC
Obligations currently in default.RD to DCSD to D
1
This is a general description of the rating categories based on information published by Fitch Ratings, Moody’s and S&P.
Credit ratings by Fitch Ratings and S&P may be modified by a plus (higher end) or minus (lower end) sign to show relative standing within the major
categories. Moody’s apply numeric modifiers 1 (higher end), 2 or 3 (lower end) to ratings from Aa to Caa to show relative standing within the major
categories.
The Overseas Bank’s current position is at the lower end of the credit rating scale indicated in bold.
Disclosure statements of the NZ Banking Group and the financial statements of the Overseas Bank and the Overseas
Banking Group
Disclosure Statements of the NZ Banking Group for the last five years are available, free of charge, at the internet address www.westpac.co.nz. A printed
copy will also be made available, free of charge, upon request and will be dispatched by the end of the second working day after the day on which the
request is made.
The most recently published financial statements of the Overseas Bank and the Overseas Banking Group are for the year ended 30 September 2018 and
can be accessed at the internet address www.westpac.com.au.

Westpac Banking Corporation - New Zealand Banking Group
5
Historical summary of financial statements
NZ BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Year Ended
30-Sep-16
Year Ended
30-Sep-15
Year Ended
30-Sep-14
Income statement
Interest income 4,067 3,981 4,172 4,451 4,037
Interest expense (2,155) (2,193) (2,398) (2,670) (2,447)
Net interest income 1,912 1,788 1,774 1,781 1,590
Non-interest income 602 625 588 590 678
Net operating income before operating expenses and
impairment charges
2,514 2,413 2,362 2,371 2,268
Operating expenses (969) (1,006) (953) (943) (868)
Impairment (charges)/benefits 3 76 (73) (47) (26)
Profit before income tax 1,548 1,483 1,336 1,381 1,374
Income tax expense (431) (424) (373) (375) (355)
Net profit for the year 1,117 1,059 963 1,006 1,019
Net profit for the year attributable to:
Head office account and owners of the NZ Banking Group 1,117 1,059 963 1,003 1,016
Non-controlling interests - - - 3 3
1,117 1,059 963 1,006 1,019
Dividends paid on ordinary share capital (572) (316) (111) (159) (251)
Balance sheet
Total assets 96,656 95,666 93,358 88,861 81,678
Total individually impaired assets 145 173 222 282 346
Total liabilities 88,273 8 7,8 3 5 86,321 82,668 76,179
Total head office account 2,169 2,040 1,913 1,824 1,750
Total equity 8,383 7,831 7,0 3 7 6,193 5,499
The amounts for the years ended 30 September have been extracted from the audited financial statements of the NZ Banking Group.
Guarantee arrangements
No material obligations of the Overseas Bank that relate to the NZ Branch are guaranteed as at the date the Directors and the Chief Executive Officer,
NZ Branch signed this Disclosure Statement.
Auditor
PricewaterhouseCoopers
PricewaterhouseCoopers Tower
188 Quay Street
Auckland
New Zealand
General information (continued)

Westpac Banking Corporation - New Zealand Banking Group6
Ranking of local creditors in liquidation
There are material legislative restrictions in Australia (being the Overseas Bank’s country of incorporation) which subordinate the claims of certain
classes of unsecured creditors of the NZ Branch on the assets of the Overseas Bank (including a claim made or proved in an insolvent winding-up or
liquidation of the Overseas Bank) to those of other classes of unsecured creditors of the Overseas Bank.
The legislation described below is relevant to limitations on possible claims made by unsecured creditors of the NZ Branch (together with all other
senior unsecured creditors of the Overseas Bank) and New Zealand depositors on the assets of the Overseas Bank (including a claim made or proved
in an insolvent winding-up or liquidation of the Overseas Bank) relative to those of certain other classes of unsecured creditors of the Overseas Bank.
Section 13A(3) of the Banking Act 1959 of Australia (‘Australian Banking Act’) provides that if an authorised deposit-taking institution (‘ADI’) becomes
unable to meet its obligations or suspends payment, the assets of the ADI in Australia are to be available to satisfy the liabilities of the ADI in the
following order:
–first, certain obligations of the ADI to APRA (if any) arising under Division 2AA of Part II of the Australian Banking Act in respect of amounts payable by
APRA to holders of ‘protected accounts’ (as defined in the Australian Banking Act) as part of the Financial Claims Scheme (‘FCS’) for the Australian
government guarantee of ‘protected accounts’ (including most deposits) up to A$250,000 in the winding-up of the ADI;
–second, APRA’s costs (if any) in exercising its powers and performing its functions relating to the ADI in connection with the FCS;
–third, the ADI’s liabilities (if any) in Australia in relation to ‘protected accounts’ that account-holders keep with the ADI;
–fourth, the ADI’s debts (if any) to the Reserve Bank of Australia;
–fifth, the ADI’s liabilities (if any) under an emergency financial ‘industry support contract’ that is certified by APRA in accordance with the Australian
Banking Act; and
–sixth, the ADI’s other liabilities (if any) in the order of their priority apart from the above.
Section 13A(3) of the Australian Banking Act affects all unsecured liabilities of the NZ Branch, which, as at 30 September 2018, amounted to $9,911
million (30 September 2017: $11,494 million).
Section 13A(4) of the Australian Banking Act also provides that it is an offence for an ADI not to hold assets (other than goodwill and any assets or other
amount excluded by the prudential standards) in Australia of a value that is equal to or greater than the total amount of its deposit liabilities in Australia,
unless APRA has authorised the ADI to hold assets of a lesser value. During the year ended 30 September 2018, the Overseas Bank has at all times held
assets (other than goodwill) in Australia of not less than the value of the Overseas Bank’s total deposit liabilities in Australia.
Under section 16 of the Australian Banking Act, on the winding-up of an ADI, APRA’s cost of being in control of an ADI’s business, or having an administrator
in control of an ADI’s business, is a debt due to APRA. Debts due to APRA shall have, subject to section 13A(3) of the Australian Banking Act, priority over
all other unsecured debts of that ADI.
The requirements of the above provisions have the potential to impact on the management of the liquidity of the NZ Banking Group.
Other material matters
Certain matters relating to the business or affairs of the Overseas Bank and the NZ Banking Group have been disclosed on the New Zealand and/or
Australian stock exchanges.
In May 2018, the Financial Markets Authority (‘FMA’) and Reserve Bank commenced thematic reviews into the conduct and culture at New Zealand’s retail
banks and life insurers. These reviews were established to assess whether misconduct of the type highlighted by the Australian Royal Commission into
Misconduct in the Banking, Superannuation and Financial Services Industry may be taking place in New Zealand. The thematic review report concerning
the retail banks review was released on 5 November 2018. That report identifies no widespread instances of misconduct and notes that each bank will be
required to provide the regulators with a plan by March 2019 to address the issues identified in the report and in individualised letters due to be received
by the banks in late 2018. The thematic review report in respect of the life insurers is currently due to be released in late January 2019. In addition to these
broader conduct and culture thematic reviews, the FMA issued its industry findings from a separate, but related, thematic review concerning retail bank
incentives on 15 November 2018. Each of these reports may lead to further scrutiny of the financial services industry in New Zealand.
There are no other matters relating to the business or affairs of the Overseas Bank and the NZ Banking Group which are not contained elsewhere in the
Disclosure Statement and which would, if disclosed, materially affect the decision of a person to subscribe for debt securities of which the Overseas
Bank or any member of the NZ Banking Group is the issuer.
General information (continued)

Westpac Banking Corporation - New Zealand Banking Group
7
Directors’ and the Chief Executive Officer,
NZ Branch’s statement
Each Director of the Overseas Bank and the Chief Executive Officer, NZ Branch, believe, after due enquiry, that, as at the date on which this Disclosure
Statement is signed, the Disclosure Statement:
(a) contains all the information that is required by the Order; and
(b) is not false or misleading.
Each Director of the Overseas Bank and the Chief Executive Officer, NZ Branch, believe, after due enquiry, that, over the year ended 30 September 2018:
(a) the Overseas Bank has complied with all conditions of registration imposed on it pursuant to section 74 of the Reserve Bank Act; and
(b) the NZ Branch and other members of the NZ Banking Group had systems in place to monitor and control adequately the material risks
of relevant members of the NZ Banking Group, including credit risk, concentration of credit risk, interest rate risk, currency risk, equity
risk, liquidity risk and other business risks, and that those systems were being properly applied. For this purpose, a relevant member
of the NZ Banking Group means a member of the NZ Banking Group that is not a member of Westpac New Zealand’s banking group.
Refer to Note 36 of the financial statements for further detail regarding the entities which had systems in place to monitor and control the material
risks of relevant members of NZ Banking Group.
The Disclosure Statement has been signed on behalf of all of the Directors by David Alexander McLean, Chief Executive, Westpac New Zealand, and by
Karen Lee Silk as Chief Executive Officer, NZ Branch.
DA McLean
KL Silk
Dated this 26th day of November 2018

Westpac Banking Corporation - New Zealand Banking Group8
Income statement for the years ended 30 September
NZ BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Interest income2 4,067 3,981
Interest expense2 (2,155) (2,193)
Net interest income 1,912 1,788
Non-interest income3 602 625
Net operating income before operating expenses and impairment charges 2,514 2,413
Operating expenses4 (969) (1,006)
Impairment (charges)/benefits6 3 76
Profit before income tax 1,548 1,483
Income tax expense7 (431) (424)
Net profit attributable to the owners of the NZ Banking Group 1,117 1,059
The above income statement should be read in conjunction with the accompanying notes.
Statement of comprehensive income for the years ended 30 September
NZ BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Net profit attributable to the owners of the NZ Banking Group 1,117 1,059
Other comprehensive income
Items that may be reclassified subsequently to profit and loss
Gains/(losses) on available-for-sale securities:
Recognised in equity - 11
Gains/(losses) on cash flow hedging instruments:
Recognised in equity (34) (58)
Transferred to income statement 46 104
Income tax on items taken to or transferred from equity:
Available-for-sale securities reserve - (3)
Cash flow hedge reserve (3) (13)
Items that will not be reclassified subsequently to profit or loss
Remeasurement of defined benefit obligation recognised in equity (net of tax) (2) 10
Other comprehensive income for the year (net of tax) 7 51
Total comprehensive income attributable to the owners of the NZ Banking Group 1,124 1,110
The above statement of comprehensive income should be read in conjunction with the accompanying notes.

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Balance sheet as at 30 September
NZ BANKING GROUP
$ millionsNote20182017
Assets
Cash and balances with central banks40 1,472 1,761
Receivables due from other financial institutions9 237 471
Other assets10 465 423
Trading securities and financial assets designated at fair value11 3,016 3,949
Derivative financial instruments26 3,509 3,420
Available-for-sale securities12 3,810 4,087
Loans13, 14 80,860 77,681
Life insurance assets 310 304
Due from related entities25 2,023 2,623
Property and equipment 144 146
Deferred tax assets15 127 136
Intangible assets16 683 665
Total assets 96,656 95,666
Liabilities
Payables due to other financial institutions18 1,253 1,043
Other liabilities19 861 635
Deposits and other borrowings20 63,105 58,998
Other financial liabilities at fair value through income statement21 223 302
Derivative financial instruments 26 3,569 3,475
Due to related entities25 2,440 3,646
Debt issues22 13,725 16,729
Current tax liabilities 111 88
Provisions23 120 97
Loan capital24 2,866 2,822
Total liabilities 88,273 8 7,8 3 5
Net assets 8,383 7,831
Head office account
Branch capital 1,300 1,300
Retained profits 869 740
Total head office account 2,169 2,040
NZ Banking Group equity
Share capital 143 143
Reserves (55) (64)
Retained profits 6,126 5,712
Total NZ Banking Group equity 6,214 5,791
Total equity attributable to the owners of the NZ Banking Group 8,383 7,831
Interest earning and discount bearing assets 91,003 90,225
Interest and discount bearing liabilities 76,948 7 7,6 1 1
The above balance sheet should be read in conjunction with the accompanying notes.
Signed on behalf of the Board of Directors.
Director Director
26 November 2018 26 November 2018

Westpac Banking Corporation - New Zealand Banking Group10
Statement of changes in equity for the years ended 30 September
NZ BANKING GROUP
NZ BRANCHOTHER MEMBERS OF THE NZ BANKING GROUP
Head Office AccountReserves
$ millions
Branch
Capital
Retained
Profits
Share
Capital
Available-
for-sale
Securities
Reserve
Cash Flow
Hedge
Reserve
Retained
Profits
Total
Equity
As at 1 October 20161,300 613 143 1 (106) 5,086 7,0 3 7
Year ended 30 September 2017
Net profit attributable to the owners of the NZ
Banking Group
- 127- - - 932 1,059
Net gains/(losses) from changes in fair value - - - 11 (58) - (47)
Income tax effect - - - (3)16 - 13
Transferred to income statement - - - - 104 - 104
Income tax effect - - - - (29) - (29)
Remeasurement of defined benefit obligations - - - - - 14 14
Income tax effect - - - - - (4) (4)
Total comprehensive income for the year
ended 30 September 2017
- 127 - 8339421,110
Transactions with owners:
Dividends paid on ordinary shares
(refer to Note 25)
- - - - - (316) (316)
As at 30 September 20171,300 740143 9(73) 5,712 7,831
Year ended 30 September 2018
Net profit attributable to the owners of the NZ
Banking Group
- 129 - - - 988 1,117
Net gains/(losses) from changes in fair value - - - - (34) - (34)
Income tax effect - - - - 10 - 10
Transferred to income statement - - - - 46 - 46
Income tax effect - - - - (13) - (13)
Remeasurement of defined benefit obligations - - - - - (3) (3)
Income tax effect - - - - - 1 1
Total comprehensive income for the year
ended 30 September 2018
- 129 - - 9 986 1,124
Transactions with owners:
Dividends paid on ordinary shares
(refer to Note 25)
- - - - - (572) (572)
As at 30 September 2018 1,300 869 143 9 (64) 6,126 8,383
The above statement of changes in equity should be read in conjunction with the accompanying notes.

Westpac Banking Corporation - New Zealand Banking Group
11
Statement of cash flows for the years ended 30 September
NZ BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Cash flows from operating activities
Interest received 4,062 3,968
Interest paid (2,175) (2,182)
Non-interest income received514 641
Operating expenses paid (867) (887)
Income tax paid (402) (397)
Cash flows from operating activities before changes in operating assets and liabilities 1,132 1,143
Net (increase)/decrease in:
Receivables due from other financial institutions 251 355
Other assets(7) (17)
Trading securities and financial assets designated at fair value 1,052 11
Loans (3,172) (2,090)
Due from related entities 643 (1,689)
Net increase/(decrease) in:
Payables due to other financial institutions 210 427
Other liabilities 98 7
Deposits and other borrowings 4,107 207
Other financial liabilities at fair value through income statement (79) (274)
Due to related entities (880) 849
Net movement in external and related entity derivative financial instruments1,143 (902)
Net cash provided by/(used in) operating activities40 4,498 (1,973)
Cash flows from investing activities
Purchase of available-for-sale securities (268) (533)
Proceeds from available-for-sale securities 499 162
Net movement in life insurance assets (6) (35)
Purchase of capitalised computer software (64) (64)
Purchase of property and equipment (44) (31)
Net cash provided by/(used in) investing activities 117 (501)
Cash flows from financing activities
Net movement in due to related entities (401) (437)
Proceeds from debt issues22 550 7,490
Repayments of debt issues22 (4,464) (5,698)
Issue of loan capital (net of transaction fees) - 1,706
Dividends paid to ordinary shareholders25 (572) (316)
Net cash provided by/(used in) financing activities (4,887) 2,745
Net increase/(decrease) in cash and cash equivalents (272) 271
Cash and cash equivalents at beginning of the year 1,801 1,530
Cash and cash equivalents at end of the year40 1,529 1,801
The above statement of cash flows should be read in conjunction with the accompanying notes. Details of the reconciliation of net cash provided by/
(used in) operating activities to net profit are provided in Note 40.

Westpac Banking Corporation - New Zealand Banking Group12
Notes to the financial statements
Note 1 Financial statement preparation
In these financial statements, reference is made to:
–Westpac Banking Corporation (otherwise referred to as the ‘Overseas
Bank’) – refers to the worldwide business of Westpac Banking
Corporation excluding its controlled entities;
–Westpac Banking Corporation Group (otherwise referred to as the
‘Overseas Banking Group’) – refers to the total worldwide business
of Westpac Banking Corporation including its controlled entities;
–Westpac Banking Corporation New Zealand Branch (otherwise referred
to as the ‘NZ Branch’) – refers to the New Zealand Branch of Westpac
Banking Corporation (trading as Westpac);
–Westpac New Zealand Limited (otherwise referred to as ‘Westpac
New Zealand’) – refers to a locally incorporated subsidiary of
the Overseas Bank (carrying on the Overseas Bank’s New Zealand
consumer, business and institutional banking operations); and
–Westpac Banking Corporation - New Zealand Banking Group (otherwise
referred to as the ‘NZ Banking Group’) – refers to the New Zealand
operations of Westpac Banking Corporation Group including those
entities whose business is required to be reported in the financial
statements of the Overseas Banking Group’s New Zealand business.
These financial statements are for the NZ Banking Group.
These financial statements were authorised for issue by the Overseas
Bank’s Board of Directors (the ‘Board’) on 26 November 2018. The
Board has the power to amend the financial statements after they are
authorised for issue.
The principal accounting policies are set out below and in the relevant
notes to the financial statements. These policies have been consistently
applied to all the years presented, unless otherwise stated.
a. Basis of preparation
i. Basis of accounting
These financial statements are general purpose financial statements
prepared in accordance with:
–the requirements of the Financial Markets Conduct Act 2013; and
–the Registered Bank Disclosure Statements (Overseas Incorporated
Registered Banks) Order 2014 (as amended) (‘Order’).
These financial statements comply with Generally Accepted Accounting
Practice, applicable New Zealand equivalents to International
Financial Reporting Standards (‘NZ IFRS’) and other authoritative
pronouncements of the External Reporting Board, as appropriate for for-
profit entities. These financial statements also comply with International
Financial Reporting Standards, as issued by the International Accounting
Standards Board (‘IASB’).
All amounts in these financial statements have been rounded to the
nearest million dollars unless otherwise stated.
ii. Historical cost convention
These financial statements have been prepared under the historical cost
convention, as modified by applying fair value accounting to available-
for-sale securities and financial assets and liabilities (including derivative
instruments) measured at fair value through income statement or in other
comprehensive income. The going concern concept has been applied.
iii. Comparative revisions
Comparative information has been revised where appropriate to
conform to changes in presentation in the current year and to enhance
comparability. Where there has been a material restatement of
comparative information the nature of, and the reason for, the restatement
is disclosed in the relevant note.
iv. Changes in accounting standards
The NZ Banking Group adopted the requirements of Disclosure Initiative:
Amendments to NZ IAS 7 Statement of Cash Flows which require additional
disclosures regarding both cash and non-cash changes in liabilities
arising from financing activities. These disclosures have been made in
Note 22 and Note 24. As permitted by the standard, comparatives are not
required on first application.
No other new accounting standards have been adopted for the year
ended 30 September 2018.
b. Basis of aggregation
The NZ Banking Group as at 30 September 2018 has been aggregated
by combining the sum of the capital and reserves of the NZ Branch, and
the consolidated capital and reserves of Westpac New Zealand Group
Limited, BT Financial Group (NZ) Limited, Westpac Financial Services
Group-NZ-Limited, Westpac Group Investment-NZ-Limited, Capital
Finance New Zealand Limited and their subsidiaries (including structured
entities). For New Zealand entities acquired by the Overseas Banking
Group, capital and reserves at acquisition are netted and recognised as
capital contributed to the NZ Banking Group.
Subsidiaries (including structured entities) are those entities over which
the members of the NZ Banking Group have control. Control exists when it
is exposed to, or has rights to, variable returns from the subsidiaries, and
has the ability to affect those returns through its power over the entities. All
transactions between entities within the NZ Banking Group are eliminated.
Subsidiaries are fully consolidated from the date on which control
commences and are de-consolidated from the date that control ceases.
i. Business combinations
Business combinations are accounted for using the acquisition method
of accounting. Acquisition cost is measured as the aggregate of the fair
value at the date of acquisition of the assets given, equity instruments
issued or liabilities incurred or assumed. Acquisition-related costs are
expensed as incurred (except for those costs arising on the issue of equity
instruments which are recognised directly in equity).
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured at fair value on the
acquisition date. Goodwill is measured as the excess of the acquisition
cost, the amount of any non-controlling interest and the fair value of any
previous NZ Banking Group’s equity interest in the acquiree, over the fair
value of the identifiable net assets acquired.
ii. Foreign currency translation
Functional and presentational currency
The consolidated financial statements are presented in New Zealand
dollars which is the NZ Banking Group’s functional and presentation
currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year end exchange rates
of monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement, except when deferred in other
comprehensive income for qualifying cash flow hedges.
Notes to the financial statements

13
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
iii. Head office account, share capital and reserves
Head office account - Branch capital
Branch capital comprises funds provided by the Overseas Bank. It is non-
interest bearing and there is no fixed date for repatriation.
Ordinary shares
Ordinary shares are recognised at the amount paid up per ordinary share,
net of directly attributable issue costs.
Available-for-sale securities reserve
This comprises the changes in the fair value of available-for-sale securities,
net of tax. These changes are transferred to non-interest income in the
income statement when the asset is either disposed of or impaired.
Cash flow hedge reserve
This comprises the fair value gains and losses associated with the
effective portion of designated cash flow hedging instruments, net of tax.
c. Financial assets and financial liabilities
i. Recognition
Purchases and sales of regular way financial assets, except for loans
and receivables, are recognised on trade-date; the date on which the
NZ Banking Group commits to purchase or sell the asset. Loans and
receivables are recognised on settlement date, when cash is advanced
to the borrowers.
Financial liabilities are recognised when an obligation arises.
ii. Classification and measurement
The NZ Banking Group classifies its significant financial assets in the
following categories: cash and balances with central banks, receivables
due from other financial institutions, trading securities and financial assets
designated at fair value, derivative financial instruments, available-for-
sale securities, loans, life insurance assets and due from related entities.
The NZ Banking Group has not classified any of its financial assets as held-
to-maturity investments.
The NZ Banking Group classifies its significant financial liabilities in the
following categories: payables due to other financial institutions, deposits
and other borrowings, other financial liabilities at fair value through
income statement, derivative financial instruments, due to related
entities, debt issues and loan capital.
Financial assets and financial liabilities measured at fair value through
income statement are recognised initially at fair value. All other financial
assets and financial liabilities are recognised initially at fair value plus
directly attributable transaction costs.
The accounting policy for each category of financial asset or financial
liability mentioned above is set out in the note for the relevant item.
The NZ Banking Group’s policies for determining the fair value of financial
assets and financial liabilities are set out in Note 27.
iii. Derecognition
Financial assets are derecognised when the rights to receive cash flows
from the asset have expired, or when the NZ Banking Group has either
transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full under a ‘pass through’
arrangement and transferred substantially all the risks and rewards of
ownership.
There may be situations where the NZ Banking Group has partially
transferred the risks and rewards of ownership but has neither transferred
nor retained substantially all the risks and rewards of ownership. In such
situations, the asset continues to be recognised on the balance sheet to
the extent of the NZ Banking Group’s continuing involvement in the asset.
Financial liabilities are derecognised when the obligation is discharged,
cancelled or expires. Where an existing financial liability is replaced by
another from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, the exchange or
modification is treated as a derecognition of the original liability and the
recognition of a new liability, with the difference in the respective carrying
amounts recognised in the income statement.
d. Critical accounting assumptions and estimates
Applying the NZ Banking Group’s accounting policies requires the use
of judgment, assumptions and estimates which impact the financial
information. The significant assumptions and estimates used are
discussed in the relevant notes below.
–Note 7 Income tax expense
–Note 14 Asset quality
–Note 15 Deferred tax assets
–Note 16 Intangible assets
–Note 27 Fair value of financial assets and financial liabilities
–Note 34 Insurance business
e. Future developments in accounting standards
The following new standards and interpretations which may have a
material impact on the NZ Banking Group have been issued but are not
yet effective, and unless otherwise stated, have not been early adopted
by the NZ Banking Group:
NZ IFRS 9 Financial Instruments (September 2014) (‘NZ IFRS 9’) will
replace NZ IAS 39 Financial Instruments: Recognition and Measurement
(‘NZ IAS 39’). It includes a forward looking ‘expected credit loss’
impairment model, revised classification and measurement model and
modifies the approach to hedge accounting. The standard is effective
from 1 October 2018.
The adoption of NZ IFRS 9 is expected to reduce retained profits at 1
October 2018 by approximately $27 million (net of tax) primarily due
to the increase in impairment provisions under the new standard. The
NZ Banking Group continues to assess and refine certain aspects of
our impairment provisioning process and the opening adjustment may
change. There is no significant impact to our regulatory capital. These
estimates are based on accounting policies, assumptions, judgements
and estimation techniques that remain subject to change until the NZ
Banking Group finalises its financial statements for the year ending 30
September 2019.
The major changes under the standard and details of the implementation
project are outlined below.
Impairment
NZ IFRS 9 introduces a revised impairment model which requires entities
to recognise expected credit losses based on unbiased forward looking
information, replacing the existing incurred loss model in NZ IAS 39 which
only recognises impairment if there is objective evidence that a loss has
been incurred. This will result in the earlier recognition of impairment
provisions. The revised impairment model applies to all financial assets at
amortised cost, lease receivables, debt securities measured at fair value
through other comprehensive income, loan commitments and financial
guarantee contracts.
Note 1 Financial statement preparation (continued)

Westpac Banking Corporation - New Zealand Banking Group14
Notes to the financial statements
Key elements of the new impairment model are:
–earlier recognition of expected credit losses using a three stage
approach. For financial assets where there has been no significant
increase in credit risk since origination, a provision for 12 months
expected credit losses is required (stage 1). For financial assets where
there has been a significant increase in credit risk or where the asset is
credit impaired, a provision for full lifetime expected losses is required
(stages 2 and 3 respectively);
–expected credit losses are probability-weighted amounts determined
by evaluating a range of possible outcomes and taking into account the
time value of money, past events, current conditions and forecasts of
future economic conditions. This will involve a greater use of judgment
than the existing impairment model; and
–interest is calculated on the gross carrying amount of a financial asset,
except where the asset is credit impaired (stage 3). This will result in
an increase in interest income and impairment charges as currently
interest is calculated on the net carrying value for all loans.
Implementation
Measurement
Models have been developed, tested and approved while certain aspects
of the impairment provisioning process continue to be assessed and
refined. These models use three main components (as well as the time
value of money) being:
–Probability of default (‘PD’): the probability that a counterparty will
default;
–Loss given default (‘LGD’): the loss that is expected to arise in the event
of a default; and
–Exposure at default (‘EAD’): the estimated outstanding amount of
credit exposure at the time of the default.
The models use a 12 month timeframe for expected losses in stage 1 and
a lifetime timeframe for expected losses in stages 2 and 3. The models
incorporate past experience, current conditions and multiple probability-
weighted macroeconomic scenarios for reasonably supportable future
economic conditions. Where appropriate, adjustments will be made to
modelled outcomes to reflect reasonable and supportable information
not already incorporated in the models.
Significant increase in credit risk and movement between stages
An asset will move from stage 1 to stage 2 if there has been a significant
increase in credit risk.
The judgment to determine this will be primarily based on changes in
internal customer risk grades since origination of the facility. The NZ
Banking Group does not intend to rebut the presumption that instruments
that are 30 days past due have experienced a significant increase in risk
but this will be used as a backstop rather than the primary indicator.
The NZ Banking Group will not be applying the low credit risk exemption
which assumes investment grade facilities do not have a significant
increase in credit risk.
The movement between stages 2 and 3 will be based on whether financial
assets are credit-impaired at the reporting date which is expected to be
similar to the individual assessment of impairment for financial assets
under the current NZ IAS 39.
Assets may move in both directions through the stages of the impairment
model. Assets previously in stage 2 may move back to stage 1 if it is no
longer considered that there has been a significant deterioration of credit
risk. Similarly, assets in stage 3 may move back to stage 2 if they are no
longer assessed to be credit-impaired.
Forward looking information
The estimation of forward looking information is a key area requiring
judgement. The NZ Banking Group intends to consider a minimum of
three future macroeconomic scenarios. These will include a base case
scenario along with upside and downside scenarios. The macroeconomic
variables used in these scenarios, based on current economic forecasts,
include (but are not limited to) unemployment rates, gross domestic
product growth rates and residential and commercial property price
indices. The macroeconomic variables and probability weightings of the
three scenarios will be subject to the approval of the NZ Banking Group’s
Chief Financial Officer and the Chief Risk Officer with oversight from the
Board of Directors (and its Committees).
Governance
The NZ Banking Group has established a governance framework and
has implemented controls to address disclosure of the impact of the
new requirements of NZ IFRS 9 including key areas of judgment such as
the determination of a significant increase in credit risk and the use of
forward looking information in future economic scenarios along with the
controls addressing credit data and systems and the expected credit
loss models.
The NZ IFRS 9 provision calculation models have been independently
reviewed in accordance with the NZ Banking Group’s model risk policies
and approved by the Credit Risk Estimates Committee. The key judgments
in relation to the new provisioning methodology have been discussed and
agreed with the Board Risk and Compliance Committee (‘BRCC’) and the
Board Audit Committee (‘BAC’).
Models and credit risk processes have been tested in parallel run since
May 2018 to provide a better understanding of the implications of the
new impairment requirements. This included an evaluation of the effect
on the NZ Banking Group’s results as well as ongoing validation of the
controls and effectiveness of the governance and operational processes.
The control environment will continue to evolve as the NZ Banking Group
embeds processes and controls during the financial year ending 30
September 2019.
Classification and measurement
NZ IFRS 9 replaces the classification and measurement model in NZ IAS
39 with a new model that categorises financial assets based on a) the
business model within which the assets are managed, and b) whether
the contractual cash flows under the instrument solely represent the
payment of principal and interest. Financial assets will be measured at:
–amortised cost where the business model is to hold the financial
assets in order to collect contractual cash flows and those cash flows
represent solely payments of principal and interest;
–fair value through other comprehensive income where the business
model is to both collect contractual cash flows and sell financial assets
and the cash flows represent solely payments of principal and interest.
Non-traded equity instruments can also be measured at fair value
through other comprehensive income; or
–fair value through profit or loss if they are held for trading or if the cash
flows on the asset do not solely represent payments of principal and
interest. An entity can also elect to measure a financial asset at fair
value through profit or loss if it eliminates or reduces an accounting
mismatch.
The accounting for financial liabilities is largely unchanged.
Implementation
The NZ Banking Group’s classification and measurement implementation
project has identified no material reclassifications of financial assets
required under NZ IFRS 9.
Note 1 Financial statement preparation (continued)

15
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Hedging
NZ IFRS 9 will change hedge accounting by increasing the eligibility of
both hedged items and hedging instruments and introducing a more
principles-based approach to assessing hedge effectiveness. Adoption of
the new hedge accounting model is optional until the IASB completes its
accounting for dynamic risk management project. Until this time, current
hedge accounting under NZ IAS 39 can continue to be applied.
Implementation
The NZ Banking Group will apply the option to continue hedge accounting
under NZ IAS 39, however will implement the amended NZ IFRS 7 hedge
accounting disclosures as required.
Transition
The impairment and classification and measurement requirements
of NZ IFRS 9 will be applied retrospectively by adjusting the opening
balance sheet at the date of initial application, 1 October 2018, with no
restatement of comparatives as permitted by the standard. However,
detailed transitional disclosures will be provided in accordance with the
amended requirements of NZ IFRS 7.
NZ IFRS 15 Revenue from Contracts with Customers (‘NZ IFRS 15’) was
issued on 3 July 2014 and will be effective from 1 October 2018. The
standard replaces NZ IAS 18 Revenue and related interpretations,
and applies to all contracts with customers, except leases, financial
instruments and insurance contracts. The standard provides a
systematic approach to revenue recognition by introducing a five-step
model governing revenue measurement and recognition. This includes
(1) identifying the contract with customer, (2) identifying each of the
performance obligations included in the contract, (3) determining the
amount of consideration in the contract, (4) allocating the consideration
to each of the identified performance obligations and (5) recognising
revenue as each performance obligation is satisfied.
The NZ Banking Group will elect to apply NZ IFRS 15 retrospectively by
adjusting the opening balance of retained earnings at the date of initial
application, 1 October 2018, with no comparatives restatement.
The NZ Banking Group has assessed the revenue streams existing at
transition. Based on this assessment, the primary impacts from the
adoption of NZ IFRS 15 are expected to be a grossing up of some income
and expenses which are currently reported on a net basis. In addition,
certain facility fees will be reclassified from non-interest income to
interest income. These presentation changes will not have a material
impact on the Group’s net profit, retained earnings or capital position.
NZ IFRS 16 Leases (‘NZ IFRS 16’) was issued on 11 February 2016 and will
be effective for the 30 September 2020 financial year. The standard will
not result in significant changes for lessor accounting. The main changes
under the standard are:
–all operating leases of greater than 12 months duration will be required
to be presented on balance sheet by the lessee as a right-of-use asset
and lease liability. The asset and liability will initially be measured at the
present value of non-cancellable lease payments and payments to be
made in optional periods where it is reasonably certain that the option
will be exercised. Details of the Banking Group’s lease obligations are
included in Note 29 ; and
–all leases on balance sheet will give rise to a combination of
interest expense on the lease liability and depreciation of the right-
of-use asset.
Alternative methods of calculating the right-of-use asset are allowed
under NZ IFRS 16 which impact the size of the transition adjustment. The
NZ Banking Group is still evaluating which transition method to apply.
Current project implementation efforts are focused on the review and
evaluation of contracts within scope of the standard.
NZ IFRS 17 Insurance Contracts was issued on 10 August 2017 and will be
effective for the 30 September 2022 year end unless early adopted. This
will replace NZ IFRS 4 Insurance Contracts. The main changes under the
standard are:
–the scope of the standard may result in some contracts that are
currently “unbundled”, i.e. accounted for separately as insurance and
investment contracts being required to be “bundled” and accounted
for as an insurance contract;
–portfolios of contracts (with similar risks which are managed together)
will be required to be disaggregated to a more granular level by both
the age of a contract and the likelihood of the contract being onerous
in order to determine the recognition of profit over the contract period
(i.e. the contractual service margin). The contractual service margin
uses a different basis to recognise profit to the current Margin on
Services approach for life insurance and therefore the pattern of profit
recognition is likely to differ;
–risk adjustments, which reflect uncertainties in the amount and timing
of future cash flows, are required for both general and life insurance
contracts rather than just general insurance contracts under the
current accounting standards;
–the contract boundary, which is the period over which profit is
recognised, differs and is determined based on the ability to compel
the policyholder to pay premiums or the substantive obligation to
provide coverage/services. For some general insurance contracts
(e.g. some lender mortgage insurance and reinsurance contracts) this
may result in the contract boundary being longer. For life insurance,
in particular term renewable contracts, the contract boundary is
expected to be shorter. Both will be impacted by different patterns of
profit recognition compared to the current standards;
–a narrower definition of what acquisition costs may be deferred;
–an election to recognise changes in assumptions regarding discount
rate in other comprehensive income rather than in profit and loss;
–an election to recognise changes in the fair value of assets supporting
policy liabilities in other comprehensive income rather than through
profit and loss;
–reinsurance contracts and the associated liability is to be determined
separately to the gross contract liability and may have different
contract boundaries; and
–additional disclosure requirements.
The standard is expected to result in a reduction in the level of deferred
acquisition costs, however the quantum of this and the profit and loss
impacts to the NZ Banking Group are not yet practicable to determine.
Note 1 Financial statement preparation (continued)

Westpac Banking Corporation - New Zealand Banking Group16
Notes to the financial statements
Note 2 Net interest income
Accounting policy
Interest income and expense for all interest earning financial assets and interest bearing financial liabilities, detailed within the table below, are
recognised using the effective interest rate method. Net income from treasury’s interest rate and liquidity management activities is included in net
interest income.
The effective interest rate method calculates the amortised cost of a financial instrument by discounting the financial instrument’s estimated future
cash receipts or payments to their present value and allocates the interest income or interest expense, including any fees, costs, premiums or
discounts integral to the instrument, over its expected life.
NZ BANKING GROUP
$ millionsNote
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Interest income
Cash and balances with central banks 31 32
Trading securities and financial assets designated at fair value 87 102
Available-for-sale securities 148 157
Loans 3,774 3,677
Due from related entities 25 27 13
Total interest income 4,067 3,981
Interest expense
Deposits and other borrowings 1,303 1,250
Due to related entities25 53 75
Debt issues 317 314
Loan capital 146 55
Other
1
336 499
Total interest expense 2,155 2,193
Net interest income 1,912 1,788
1
Includes the net impact of treasury’s interest rate and liquidity management activities.
Of the amounts noted in total interest income and total interest expense, the amounts related to financial instruments not measured at fair value
through income statement were as follows:
NZ BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Interest income 3,974 3,872
Interest expense 2,118 2 ,127

17
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Note 3 Non-interest income
Accounting policy
Fees and commissions
Fees and commission income are recognised as follows:
–Transaction fees are earned for facilitating transactions and are recognised once the transaction is executed;
–Lending fees are primarily earned for the provision of credit and other facilities to customers and are recognised as the services are provided;
–Other non-risk fee income includes advisory and underwriting fees which are recognised when the related service is completed.
Income which forms an integral part of the effective interest rate of a financial instrument is recognised using the effective interest method and
recorded in interest income (for example, loan origination fees).
Fees from trust and other fiduciary activities
Net funds management fees earned for the ongoing management of customer funds and investments are recognised over the period of management.
Net life insurance income and change in policy liabilities
Net insurance policy assets relating to life insurance contracts are calculated by using the margin on service methodology in accordance with New
Zealand Society of Actuaries Professional Standard 3 Determination of Life Insurance Policy Liabilities. Under this methodology, planned profit
margins and an estimate of future liabilities are calculated separately for each major product line using applied assumptions at each reporting date.
Profit margins are released in line with the service that has been provided.
Premium income
Life insurance premiums with a regular due date are recognised as revenue on an accrual basis. Premiums with no due date are recognised on a
cash received basis.
Claims expense
Life insurance contract claims are recognised as an expense when the liability has been established.
Trading income
–Realised and unrealised gains or losses from changes in the fair value of trading assets, liabilities and derivatives are recognised in the period in
which they arise (except day one profits or losses which are deferred, refer to Note 27).
–Net income related to Treasury’s interest rate and liquidity management activities is included in net interest income.
NZ BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Fees and commissions
Transaction fees and commissions 187 218
Lending fees 61 61
Other non-risk fee income 49 51
Total fees and commissions 297 330
Wealth management and insurance income
Fees from trust and other fiduciary activities 55 47
Net life insurance income and change in policy liabilities 97 83
Total wealth management and insurance income 152 130
Trading income 139 158
Net ineffectiveness on qualifying hedges 4 (10)
Other non-interest income
Share of associate's net profit 5 5
Other 5 12
Total other non-interest income 10 17
Total non-interest income 602 625

Westpac Banking Corporation - New Zealand Banking Group18
Notes to the financial statements
Note 4 Operating Expenses
NZ BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Staff expenses 484 482
Operating lease rentals 63 67
Depreciation 44 46
Technology services and telecommunications 100 104
Purchased services 129 166
Software amortisation costs 46 49
Related entities - management fees (refer to Note 25) 7 7
Other 96 85
Total operating expenses 969 1,006
Note 5 Auditor’s remuneration
NZ BANKING GROUP
$’000s
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Audit and audit related services
Audit and review of financial statements
1
2,674 2,249
Other audit related services
2
63 57
Total remuneration for audit and other audit related services 2,737 2,306
Other services
3
129 134
Total remuneration for non-audit services 129 134
Total remuneration for audit, other audit related services and non-audit services 2,866 2,440
1
Fees for the annual audit of the financial statements including audit procedures in relation to the transition impact of new accounting standards, the review or other
procedures performed on the interim financial statements and Sarbanes-Oxley reporting undertaken in the role of auditor.
2
Primarily assurance provided on certain financial information performed in the role of auditor, including the issue of comfort letters in relation to debt issuance
programmes.
3
Assurance and agreed procedures relating to other regulatory and compliance matters.
It is the NZ Banking Group’s policy to engage the external auditor on assignments additional to their statutory audit duties only if their independence is
not either impaired or seen to be impaired, and where their expertise and experience with the NZ Banking Group is important.
The external auditor also provides audit and non-audit services to non-consolidated entities, including non-consolidated trusts of which a member
of the NZ Banking Group is manager or responsible entity and non-consolidated superannuation funds or pension funds. During the year ended 30
September 2018, the fees in respect of these services were approximately $483,425 (30 September 2017: $562,100).

19
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Note 6 Impairment charges/(benefits)
Accounting policy
At each balance sheet date, the NZ Banking Group assesses whether there is any objective evidence of impairment of its loan portfolio. An impairment
charge is recognised if there is objective evidence that principal or interest repayments may not be recoverable and when the financial impact of the
non-recoverable loan can be reliably measured.
Objective evidence of impairment could include a breach of contract with the NZ Banking Group such as a default on interest or principal payments,
a borrower experiencing significant financial difficulties or observable economic conditions that correlate to defaults on a group of loans.
The impairment charge is measured as the difference between the loan’s current carrying amount and the present value of its estimated future cash
flows. The estimated future cash flows exclude any expected future credit losses which have not yet occurred and are discounted to their present
value using the loan’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment is the
current effective interest rate.
The impairment charge is recognised in the income statement with a corresponding reduction of the carrying value of the loan through an offsetting
provision account (refer to Note 14).
In subsequent periods, objective evidence may indicate that an impairment charge should be reversed. Objective evidence could include a
borrower’s credit rating or financial circumstances improving. The impairment charge is reversed in the income statement of that future period and
the related provision for impairment is reduced.
Uncollectable loans
A loan may become uncollectable in full or part if, after following the NZ Banking Group’s loan recovery procedures, the NZ Banking Group remains
unable to collect that loan’s contractual repayments. Uncollectable amounts are written off against their related provision for impairment, after all
possible repayments have been received.
The NZ Banking Group may subsequently be able to recover cash flows from loans written off. In the period which these recoveries are made, they
are recognised in the income statement.
Critical accounting assumptions and estimates relating to impairment charges are included in Note 14.
NZ BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Individually assessed provisions raised 28 18
Reversal of previously recognised impairment charges (18) (67)
Collectively assessed provisions released (34) (56)
Bad debts written-off directly to the income statement 21 29
Total impairment charges/(benefits) (3) (76)
Refer to Note 14 for further details on provisions for impairment charges.

Westpac Banking Corporation - New Zealand Banking Group20
Notes to the financial statements
Note 7 Income tax expense
Accounting policy
The income tax expense for the year comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it
relates to items recognised directly in other comprehensive income, in which case it is recognised in the statement of comprehensive income.
Current tax is the tax payable for the year using enacted or substantively enacted tax rates and laws. Current tax also includes adjustments to tax
payable for previous years.
Goods and services tax (‘GST’)
Revenue, expenses and assets are recognised net of GST except to the extent that GST is not recoverable from the Inland Revenue. In these
circumstances, GST is recognised as part of the expense or the cost of the asset.
Critical accounting assumptions and estimates
Significant judgment is required in determining the current tax liability. There may be transactions with uncertain tax outcomes and provisions are
held to reflect these tax uncertainties where appropriate.
NZ BANKING GROUP
$ millions
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Income tax expense
Current tax:
Current year 424 405
Prior year adjustments - 6
Deferred tax (refer to Note 15):
Current year 10 16
Prior year adjustments (3) (3)
Total income tax expense 431 424
Profit before income tax 1,548 1,483
Tax calculated at tax rate of 28% 433 415
Income not subject to tax - (1)
Expenses not deductible for tax purposes 2 2
Prior year adjustments (3) 3
Other items (1) 5
Total income tax expense 431 424
The effective tax rate for the year ended 30 September 2018 was 27.8% (30 September 2017: 28.6%).
Note 8 Imputation credit account
NZ BANKING GROUP
$ millions20182017
Imputation credits available for use in subsequent reporting periods 1,072 1,118
Note 9 Receivables due from other financial institutions
Accounting policy
Receivables due from other financial institutions are recognised initially at fair value and subsequently at amortised cost using the effective interest
rate method.
NZ BANKING GROUP
$ millionsNote20182017
Cash collateral 17 180 431
Receivables due from other financial institutions classified as cash and cash equivalents 40 57 40
Total receivables due from other financial institutions 237 471

21
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Note 10 Other assets
NZ BANKING GROUP
$ millions20182017
Accrued interest receivable 160 149
Securities sold not yet delivered 159 143
Trade debtors and prepayments 50 41
Other 96 90
Total other assets 465 423
Note 11 Trading securities and financial assets designated at fair value
Accounting policy
Trading securities include actively traded debt (government, semi-government and other) and those acquired for sale in the near term and are held
at fair value.
Gains and losses on trading securities are recognised in the income statement. Interest received from government and other debt securities is
recognised in net interest income (refer to Note 2).
Securities purchased under agreements to resell (‘reverse repos’)
Reverse repos are not recognised on the balance sheet as the NZ Banking Group has not obtained the risks and rewards of ownership. The cash
consideration paid is recognised as an asset. Reverse repos which are part of a trading portfolio are designated at fair value. Gains and losses on
these financial assets are recognised in non-interest income. Interest received under these agreements is recognised in interest income.
NZ BANKING GROUP
$ millions20182017
Government and semi-government securities 1,143 1,027
Other debt securities 1,657 2,165
Securities purchased under agreement to resell 216 757
Total trading securities and financial assets designated at fair value 3,016 3,949
Note 12 Available-for-sale securities
Accounting policy
Available-for-sale debt (government, semi-government and other) securities are held at fair value with gains and losses recognised in other
comprehensive income except for the following amounts, which are recognised in the income statement:
–Interest on debt securities; and
–Impairment charges.
The cumulative gain or loss recognised in other comprehensive income is subsequently recognised in the income statement when the instrument
is disposed.
At each reporting date, the NZ Banking Group assesses whether any available-for-sale securities are impaired. Impairment exists if one or more
events have occurred which have a negative impact on the security’s estimated cash flows.
Evidence of impairment includes significant financial difficulties or adverse changes in the payment status of an issuer. If impairment exists, the
cumulative loss is removed from other comprehensive income and recognised in the income statement. Any subsequent reversals of impairment
on debt securities are also recognised in the income statement.
NZ BANKING GROUP
$ millions20182017
Government and semi-government securities 2,155 2,467
Other debt securities 1,655 1,620
Total available-for-sale securities 3,810 4,087

Westpac Banking Corporation - New Zealand Banking Group22
Notes to the financial statements
Note 13 Loans
Accounting policy
Loans are financial assets initially recognised at fair value plus directly attributable transaction costs. Loans are subsequently measured at amortised
cost using the effective interest rate method and are presented net of any provisions for impairment.
Loan products that have both mortgage and deposit facilities are presented gross on the balance sheet, segregating the asset and liability component,
because they do not meet the criteria to be offset. Interest earned on these products is presented on a net basis in the income statement as this
reflects how the customer is charged.
The following table shows loans disaggregated by type of product.
NZ BANKING GROUP
$ millions20182017
Overdrafts 1,117 1,296
Credit card outstandings 1,499 1,518
Money market loans 1,361 1,250
Term loans:
Housing 48,893 46,943
Non-housing 27,031 25,780
Other 1,283 1,244
Total gross loans 81,184 78,031
Provisions for impairment charges on loans (324) (350)
Total net loans 80,860 77,681
Movements in impaired assets and provisions for impairment charges on loans are outlined in Note 14.
Note 14 Asset quality
Accounting policy
The NZ Banking Group recognises two types of impairment provisions for its loans, being provisions for loans which are:
–individually assessed for impairment; and
–collectively assessed for impairment.
Note 6 explains how impairment charges are determined. The NZ Banking Group assesses impairment as follows:
–individually for loans that exceed specified thresholds. Where there is objective evidence of impairment, individually assessed provisions will be
recognised; and
–collectively for loans below the specified thresholds noted above or if there is no objective evidence of impairment. These loans are included in
a group of loans with similar risk characteristics and collectively assessed for impairment. If there is objective evidence that the group of loans is
collectively impaired, collectively assessed provisions will be recognised.
Critical accounting assumptions and estimates
The methodology and assumptions used for estimating future cash flows are reviewed regularly by the NZ Banking Group to reduce differences
between impairment provisions and actual loss experience.
Individual component
Key judgments include the business prospects for the customer, the realisable value of collateral, the NZ Banking Group’s position relative to other
claimants, the reliability of customer information and the likely cost and duration of recovering the loan.
Judgments can change with time as new information becomes available or as loan recovery strategies evolve, which may result in revisions to the
impairment provision.
Collective component
Collective provisions are established on a portfolio basis taking into account the level of arrears, collateral and security, past loss experience,
current economic conditions, expected default and timing of recovery based on portfolio trends.
Key judgments include estimated loss rates and their related emergence periods. The emergence period for each loan type is determined through
studies of loss emergence patterns. Loan files are reviewed to identify the average time period between observable loss indicator events and the
loss becoming identifiable.
Actual credit losses may differ materially from reported loan impairment provisions due to uncertainties including interest rates and their effect on
consumer spending, unemployment levels, payment behaviour and bankruptcy rates.

23
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
NZ BANKING GROUP
2018
NZ BANKING GROUP
2017
$ millions
Residential
Mortgages
Other
RetailCorporate OtherTotal
Residential
Mortgages
Other
RetailCorporate OtherTot a l
Neither past due nor impaired 47,974 3,726 27,775 278 79,753 46,019 3,767 26,613 225 76,624
Past due but not impaired assets
Less than 30 days past due 739 143 162 - 1,044 752 132 107 - 991
At least 30 days but less than 60 days past
due
80 25 6 - 111 67 22 10 - 99
At least 60 days but less than 90 days past
due
33 10 2 - 45 27 13 24 - 64
At least 90 days past due 43 18 25 - 86 46 19 15 - 80
Total past due assets not impaired 895 196 195 - 1,286 892 186 156 - 1,234
Individually impaired assets
1
Balance at beginning of the period 32 5 136 - 173 25 4 193 - 222
Additions 31 8 40 - 79 40 5 39 - 84
Amounts written off (6) (2) (14) - (22) (4) (1) (3) - (8)
Returned to performing or repaid (33) (5) (47) - (85) (29) (3) (93) - (125)
Balance at end of the period 24 6 115 - 145 32 5 136 - 173
Total gross loans
2
48,893 3,928 28,085 278 81,184 46,943 3,958 26,905 225 78,031
Individually assessed provisions
Balance at beginning of the period 7 5 36 - 48 7 3 95 - 105
Impairment charges/(benefits):
New provisions 9 2 17 - 28 8 4 6 - 18
Reversal of previously recognised
impairment charges
(3) (2) (13) - (18) (4) (1) (62) - (67)
Amounts written off (6) (2) (14) - (22) (4) (1) (3) - (8)
Balance at end of the year 7 3 26 - 36 7 5 36 - 48
Collectively assessed provisions
Balance at beginning of the year 54 97 181 - 332 46 95 220 - 361
Impairment charges/(benefits) (2) (10) (22) - (34) 5 (10) (51) - (56)
Interest adjustments 2 12 10 - 24 3 12 12 - 27
Balance at end of the year 54 99 169 - 322 54 97 181 - 332
Total provisions for impairment charges
on loans and credit commitments
61 102 195 - 358 61 102 217 - 380
Provision for credit commitments
(refer to Note 23)
- (4) (30) - (34) - (4) (26) - (30)
Total provisions for impairment charges
on loans
61 98 165 - 324 61 98 191 - 350
Total net loans 48,832 3,830 27,920 27880,860 46,882 3,860 26,714 225 77,681
1
The NZ Banking Group had undrawn commitments of $4 million (30 September 2017: $4 million) to counterparties for whom drawn balances are classified as individually
impaired assets under corporate loans as at 30 September 2018.
2
The NZ Banking Group does not have other assets under administration as at 30 September 2018.
Note 14 Asset quality (continued)

Westpac Banking Corporation - New Zealand Banking Group24
Notes to the financial statements
Note 15 Deferred tax assets
Accounting policy
Deferred tax accounts for temporary differences between the carrying amounts of assets and liabilities in the financial statements and their values
for taxation purposes.
Deferred tax is determined using the enacted or substantively enacted tax rates and laws which are expected to apply when the assets will be
realised or the liabilities settled.
Deferred tax assets and liabilities have been offset where they relate to the same taxable entity or group and where there is a legal right and intention
to settle on a net basis.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available to utilise the assets.
Deferred tax is not recognised for the following temporary differences:
–the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither the accounting nor taxable
profit or loss; and
–the initial recognition of goodwill in a business combination.
Critical accounting assumptions and estimates
On a similar basis to that described in Note 7, determining deferred tax assets and liabilities is considered one of the NZ Banking Group’s critical
accounting assumptions and estimates.
NZ BANKING GROUP
$ millions 2018 2017
Deferred tax assets/(liabilities) comprise the following temporary differences:
Provision for impairment charges on loans 94 101
Cash flow hedges 26 29
Provision for employee entitlements 16 13
Software, property and equipment 10 9
Life insurance policy liabilities (35) (33)
Financial instruments 4 6
Other temporary differences 12 11
Net deferred tax assets 127 136
The deferred tax (charge)/credit in income tax expense comprises the following temporary differences:
Provision for impairment charges on loans (7) (24)
Provision for employee entitlements 2 (1)
Software, property and equipment 1 -
Life insurance policy liabilities (2) 1
Financial instruments (2) 6
Other temporary differences 1 5
Total deferred tax charge in income tax expense (7) (13)
The deferred tax (charge)/credit in other comprehensive income comprises the following
temporary differences:
Cash flow hedges (3) (13)
Provision for employee entitlements 1 (4)
Total deferred tax charge in other comprehensive income (2) (17)

25
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Note 16 Intangible assets
Accounting policy
Indefinite life intangible assets
Goodwill
Goodwill acquired in a business combination is initially measured at cost, generally being the excess of:
i. the consideration paid; over
ii. the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.
Subsequently, goodwill is not amortised but rather tested for impairment. Impairment is tested at least annually or whenever there is an indication of
impairment. An impairment charge is recognised when a cash generating unit’s (CGU) carrying value exceeds its recoverable amount. Recoverable
amount means the higher of the CGU’s fair value less costs to sell and its value-in-use.
Finite life intangible assets
Finite life intangibles include computer software which are recognised initially at cost and subsequently at amortised cost less any impairment.
IntangibleUseful lifeDepreciation method
GoodwillIndefiniteNot applicable
Computer software3 to 8 yearsStraight-line or diminishing balance method (using the Sum of the Years Digits)
Critical accounting assumptions and estimates
Judgment is required in determining the fair value of assets and liabilities acquired in a business combination. A different assessment of fair values
would have resulted in a different goodwill balance and different post-acquisition performance of the acquired entity.
When assessing impairment of intangible assets, significant judgment is needed to determine the appropriate cash flows and discount rates to be
applied to the calculations. The significant assumptions applied to the value-in-use calculations are outlined below.
NZ BANKING GROUP
$ millions20182017
Goodwill 525 525
Computer software 158 140
Total intangible assets 683 665
Significant assumptions used in recoverable amount calculations
Assumptions are used to determine the CGU’s recoverable amount for goodwill, which is based on value-in-use calculations. Value-in-use refers to the
present value of expected cash flows under its current use. The NZ Banking Group discounts the projected cash flows by its adjusted pre-tax equity rate.
–NZ Banking Group’s equity rate was 11.0% (2017: 11.0%)
–NZ Banking Group’s adjusted pre-tax equity rate was 15.3% (2017: 15.3%)
For the purpose of goodwill impairment testing, the assumptions in the following table are made for each significant CGU. The forecasts applied by
management are not reliant on any one particular assumption.
AssumptionBased on:
Cash flowsZero growth rate beyond 2 year forecast
Economic market conditionsCurrent market expectations
Business performanceObservable historical information and current market expectations of the future
There are no reasonably possible changes in assumptions for any significant CGU that would result in an indication of impairment or have a material
impact on the NZ Banking Group’s reported results.
Goodwill has been allocated to the following CGUs:
NZ BANKING GROUP
$ millions20182017
Consumer Banking and Wealth 512 512
BT New Zealand
1
13 13
Net carrying amount of goodwill 525 525
1
BT New Zealand forms part of the Investments and Insurance operating segment, as described in Note 31.

Westpac Banking Corporation - New Zealand Banking Group26
Notes to the financial statements
Note 17 Financial assets pledged as collateral
Accounting policy
Security repurchase agreements
Where securities are sold subject to an agreement to repurchase at a predetermined price, they remain recognised on the balance sheet in their
original category (i.e. trading securities and financial assets designated at fair value or available-for-sale securities).
The cash consideration received is recognised as a liability (‘security repurchase agreements’). Security repurchase agreements are designated at
fair value and recognised as part of other financial liabilities at fair value through income statement (refer to Note 21), where they are managed as
part of a trading portfolio.
The NZ Banking Group is required to provide collateral to other financial institutions, as part of standard terms, to secure liabilities. In addition to assets
supporting Westpac New Zealand’s Global Covered Bond Programme (‘CB Programme’) disclosed in Note 32, the carrying value of these financial
assets pledged as collateral is:
NZ BANKING GROUP
$ millions20182017
Cash
1
180 430
Securities pledged under repurchase agreements:
Available-for-sale securities - 19
Trading securities and financial assets designated at fair value 41 216
Total amount pledged to secure liabilities (excluding CB Programme)221 665
1
Comprises receivables due from other financial institutions.
Note 18 Payables due to other financial institutions
Accounting policy
Payables due to other financial institutions are recognised initially at fair value and subsequently at amortised cost using the effective interest
rate method.
NZ BANKING GROUP
$ millions20182017
Interest bearing interbank deposits 1,183 1,026
Non-interest bearing, repayable at call 70 17
Total payables due to other financial institutions 1,253 1,043
Note 19 Other liabilities
NZ BANKING GROUP
$ millions20182017
Accrued interest payable 361 331
Securities purchased but not yet delivered 184 89
Retirement benefit obligations 18 14
Trade creditors and other accrued expenses 75 79
Other 223 122
Total other liabilities 861 635

27
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Note 20 Deposits and other borrowings
Accounting policy
Deposits and other borrowings are initially recognised at fair value and subsequently measured at either amortised cost using the effective interest
rate method or at fair value.
Deposits and other borrowings are designated at fair value if they are managed on a fair value basis, reduce or eliminate an accounting mismatch or
contain an embedded derivative.
Where they are measured at fair value, any changes in fair value (except those due to changes in credit risk) are recognised as non-interest income.
The change in the fair value that is due to changes in credit risk is recognised in other comprehensive income except where it would create an
accounting mismatch, in which case it is also recognised in the income statement.
Interest expense incurred is recognised in net interest income using the effective interest rate method.
NZ BANKING GROUP
$ millions20182017
Certificates of deposit 1,218 593
Non-interest bearing, repayable at call 5,903 5,274
Other interest bearing:
At call 23,335 23,117
Term 32,649 30,014
Total deposits and other borrowings 63,105 58,998
Deposits at fair value 1,221 593
Deposits at amortised cost 61,884 58,405
Total deposits and other borrowings 63,105 58,998
The NZ Branch held $3 million retail deposits and other borrowings from individuals as at 30 September 2018 (30 September 2017: nil).
Note 21 Other financial liabilities at fair value through income statement
Accounting policy
Other financial liabilities at fair value through income statement include trading securities sold short and security repurchase agreements which
have been designated at fair value at initial recognition. The accounting policy for security repurchase agreements is consistent with that detailed
in Note 17.
Securities sold short reflect the obligation to deliver securities to a buyer for the sale of securities the NZ Banking Group does not own at the time
of sale but that are promised to be delivered to the buyer. Securities delivered to the buyer are usually borrowed and/or subsequently purchased.
Subsequent to initial recognition, these liabilities are measured at fair value with changes in fair value (except credit risk) recognised through the
income statement as they arise. The change in fair value that is attributable to credit risk is recognised in other comprehensive income except where
it would create an accounting mismatch, in which case it is recognised through the income statement.
Interest expense is recognised in net interest income using the effective interest rate method.
NZ BANKING GROUP
$ millions20182017
Securities sold short 182 67
Security repurchase agreements 41 235
Total other financial liabilities at fair value through income statement 223 302

Westpac Banking Corporation - New Zealand Banking Group28
Notes to the financial statements
Note 22 Debt issues
Accounting policy
Debt issues are bonds, notes and commercial paper that have been issued by the NZ Banking Group.
Debt issues are initially measured at fair value and subsequently either measured at amortised cost using the effective interest rate method or at fair value.
Debt issues are designated at fair value if they reduce or eliminate an accounting mismatch.
They are measured at fair value with changes in fair value (except those due to changes in credit risk) recognised as non-interest income.
The change in the fair value that is due to credit risk is recognised in other comprehensive income except where it would create an accounting
mismatch, in which case it is also recognised in the income statement.
Interest expense incurred is recognised within net interest income using the effective interest rate method.
In the following table, the distinction between short-term (12 months or less) and long-term (greater than 12 months) debt is based on the maturity of
the underlying security at origination.
NZ BANKING GROUP
$ millions20182017
Short-term debt
Commercial paper - 1,642
Total short-term debt - 1,642
Long-term debt
Non-domestic medium-term notes 6,100 6,628
Covered bonds 5,640 5,236
Domestic medium-term notes 1,985 3,223
Total long-term debt 13,725 15,087
Total debt issues 13,725 16,729
Debt issues at fair value - 1,642
Debt issues at amortised cost 13,725 15,087
Total debt issues 13,725 16,729
NZ BANKING GROUP
$ millions2018
Movement reconciliation
Balance as at 1 October 2017 16,729
Issuances 550
Maturities, repayments, buy backs and reductions (4,464)
Total cash movements (3,914)
Foreign exchange translation impact 933
Fair value adjustments (1)
Fair value hedge accounting adjustments (27)
Other
1
5
Total non-cash movements 910
Balance as at 30 September 2018 13,725
1
Includes items such as amortisation of issue costs.

29
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Note 23 Provisions
Accounting policy
Provisions are recognised for present obligations arising from past events where a payment (or other economic transfer) is likely to be necessary to
settle the obligation and can be reliably estimated.
Employee benefits – annual leave and other employee benefits
The provision for annual leave and other employee benefits (including long service leave, wages and salaries, inclusive of non-monetary benefits,
and any associated on-costs (e.g. payroll tax)) is calculated based on expected payments.
Provision for impairment on credit commitments
The NZ Banking Group is committed to provide facilities and guarantees as explained in Note 30. If it is probable that a facility will be drawn and the
resulting asset will be less than the drawn amount then a provision for impairment is recognised. The provision for impairment is calculated using
the same methodology as the provision for impairment charges on loans (refer to Note 6).
NZ BANKING GROUP
$ millions20182017
Annual leave and other employee benefits 66 66
Provision for impairment on credit commitments 34 30
Other 20 1
Total provisions 120 97
Note 24 Loan Capital
Accounting policy
Loan capital are instruments which qualify for inclusion as regulatory capital under either the Reserve Bank of New Zealand (‘Reserve Bank’)
Capital Adequacy Framework or, in relation to the Overseas Bank, the Australian Prudential Regulation Authority (‘APRA’) Prudential Standards.
Loan capital is initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method. Interest
expense incurred is recognised in net interest income.
NZ BANKING GROUP
$ millionsNote20182017
Additional Tier 1 loan capital - USD AT1 securities
1
1,731 1,691
Tier 2 loan capital - Convertible subordinated notes
1
251,135 1,131
Total loan capital 2,866 2,822
1
Net of capitalised transaction costs.
NZ BANKING GROUP
$ millions
2018
Movement reconciliation
Balance as at 1 October 2017 2,822
Total cash movements -
Foreign exchange translation impact 163
Fair value hedge accounting adjustments (120)
Other
1
1
Total non-cash movements 44
Balance as at 30 September 2018 2,866
1
Includes items such as amortisation of issue costs.

Westpac Banking Corporation - New Zealand Banking Group30
Notes to the financial statements
Additional Tier 1 loan capital
A summary of the key terms and features of the Additional Tier 1 loan capital (‘USD AT1 securities’) is provided below.
$Issue date Interest rate Optional redemption date
US$1,250 million securities
1
21 September 2017 5.00% p.a.
2
21 September 2027 and every fifth anniversary thereafter
1
The USD AT1 securities are issued by the Overseas Bank acting through its NZ Branch.
2
Fixed interest rate of 5.00% p.a., until, but excluding 21 September 2027 (the ‘first reset date’). Every fifth anniversary thereafter is a reset date. If the USD AT1 securities
are not redeemed, converted or written-off by the first reset date, the interest rate from, and including, each reset date thereafter to, but excluding the next succeeding
reset date, will be a fixed rate per annum equal to the prevailing 5-year USD mid-market swap rate plus 2.888% per annum.
Interest payable
Semi-annual interest payments on the USD AT1 securities are at the absolute discretion of the Overseas Bank and will only be paid if the payment
conditions are satisfied, including that the payment will not result in a breach of the Overseas Bank’s capital requirements under APRA’s prudential
standards; not result in the Overseas Bank becoming, or being likely to become, insolvent; and if APRA does not object to the payment.
Broadly, if for any reason an interest payment has not been paid in full on the relevant payment date, the Overseas Bank must not determine or pay any
dividends on Overseas Bank ordinary shares or undertake a discretionary buy back or capital reduction of Overseas Bank ordinary shares, unless the
unpaid interest is paid in full within 20 business days of the relevant payment date or in certain other circumstances.
Redemption
The Overseas Bank may redeem all (but not some) USD AT1 securities on 21 September 2027 and every fifth anniversary thereafter, or for certain
taxation or regulatory reasons, subject to APRA’s prior written approval.
Conversion
If a capital trigger event or non-viability trigger event occurs, the Overseas Bank must convert some or all of the USD AT1 securities into a variable
number of Overseas Bank ordinary shares calculated using the formula described in the terms of the USD AT1 securities but subject to a maximum
conversion number. The conversion number of the Overseas Bank’s ordinary shares will be calculated using the outstanding principal amount of each
USD AT1 security translated into Australian dollars and the Overseas Bank ordinary share price determined over the five business day period prior to
the capital trigger event date or non-viability trigger event date and includes a 1% discount. The maximum conversion number is calculated using the
outstanding principal amount of each USD AT1 security translated into Australian dollars at the time of issue and the Overseas Bank share price which
is broadly equivalent to 20% of the Overseas Bank ordinary share price at the time of issue of the USD AT1 securities.
A capital trigger event occurs when the Overseas Bank determines, or APRA notifies the Overseas Bank in writing that it believes, the Overseas Bank’s
Common Equity Tier 1 Capital ratio is equal to or less than 5.125% (on a level 1 or level 2 basis). A non-viability trigger event will occur when APRA notifies
the Overseas Bank in writing that it believes conversion of all or some USD AT1 securities (or conversion or write-down of relevant capital instruments
of the Overseas Banking Group), or public sector injection of capital (or equivalent support), in each case is necessary because without it, the Overseas
Bank would become non-viable. No conversion conditions apply in these circumstances.
If conversion of the USD AT1 securities does not occur within five business days, holders’ rights in relation to the USD AT1 securities will be immediately
and irrevocably terminated.
Tier 2 loan capital
A summary of the key terms and features of the Tier 2 loan capital (‘Tier 2 notes’) is provided below.
$Issue date Counterparty Interest rate Maturity date Optional redemption date
AU$1,040
million notes
8 September
2015
London Branch of the
Overseas Bank
Australian 90 day bank
bill rate + 2.87% p.a.
22 March 2026
22 March 2021 and every interest
payment date thereafter
Interest payable
Interest payments on the Tier 2 notes are subject to Westpac New Zealand being solvent at the time of, and immediately following the interest
payment. Refer to Note 25.
Early redemption
Westpac New Zealand may elect to redeem all or some of the Tier 2 notes for their face value together with accrued interest (if any) on 22 March 2021
or any interest payment date thereafter, subject to the Reserve Bank’s prior written approval. Early redemption of all of the Tier 2 notes for certain tax
or regulatory reasons is permitted on an interest payment date subject to the Reserve Bank’s prior written approval.
Conversion
If a non-viability trigger event occurs, Westpac New Zealand must convert such number of the Tier 2 notes into a variable number of ordinary shares
issued by Westpac New Zealand (calculated with reference to the net assets of Westpac New Zealand and the total number of ordinary shares on
issue on the conversion date) that is sufficient to satisfy the direction of the Reserve Bank or the decision of the statutory manager. A non-viability
trigger event occurs when the Reserve Bank or the statutory manager (appointed pursuant to section 117 of the Reserve Bank Act) directs Westpac
New Zealand to convert or write off all or some of Westpac New Zealand’s Tier 2 notes. If conversion of the Tier 2 notes fails to take effect within five
business days, holders’ rights in relation to the Tier 2 notes will be immediately and irrevocably terminated.
Note 24 Loan Capital (continued)

31
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Note 25 Related entities
Related entities
The NZ Banking Group’s related parties are those it controls or can exert significant influence over. Examples include subsidiaries, associates, joint
ventures and superannuation plans as well as key management personnel and their related parties.
NZ Banking Group
The NZ Banking Group consists of the New Zealand operations of the Overseas Banking Group including the NZ Branch and the following controlled entities
as at 30 September 2018 whose business is required to be reported in the financial statements of the Overseas Banking Group’s New Zealand business:
Name of EntityPrincipal ActivityNotes
BT Financial Group (NZ) Limited (‘BTFGNZL’)Holding company
BT Funds Management (NZ) Limited (‘BTNZ’)Funds management company
Capital Finance New Zealand LimitedFinance company
Sie-Lease (New Zealand) Pty LimitedLeasing company
Westpac Financial Services Group-NZ-Limited (‘WFSGNZL’)Holding company
Westpac Life-NZ-Limited (‘Westpac Life’)Life insurance company
Westpac Nominees -NZ-Limited (‘WNNZL’)Nominee company
Westpac Superannuation Nominees-NZ-Limited (‘WSNNZL’)Nominee company
Westpac Group Investment-NZ-Limited (‘WGINZL’)Holding company
Westpac Holdings-NZ-Limited (‘WHNZL’)Holding company
Westpac Capital-NZ-Limited (‘WCNZL’)Finance company
Westpac Equity Investments NZ LimitedNon-active company
Westpac New Zealand Group Limited (‘WNZGL’)Holding company
Westpac New Zealand LimitedRegistered bank
Westpac NZ Operations Limited (‘WNZOL’)
1
Holding company
Aotearoa Financial Services LimitedNon-active company
Number 120 LimitedFinance company
The Home Mortgage Company LimitedResidential mortgage company
Westpac New Zealand Staff Superannuation Scheme
Trustee Limited (‘WNZSSSTL’)
Trustee companyEstablished on 30 June 2016
Westpac (NZ) Investments Limited (‘WNZIL’)Property company
Westpac Securities NZ Limited (‘WSNZL’)Funding company
Westpac NZ Covered Bond Holdings Limited (‘WNZCBHL’)Holding company19% owned
2
Westpac NZ Covered Bond Limited (‘WNZCBL’)Guarantor19% owned
2
Westpac NZ Securitisation Holdings Limited (‘WNZSHL’)Holding company19% owned
3
Westpac NZ Securitisation Limited (‘WNZSL’)Funding company19% owned
3
Westpac NZ Securitisation No.2 Limited (‘WNZSL2’)Non-active company19% owned
3
Westpac Cash PIE FundPortfolio investment entityNot owned
4
Westpac Notice Saver PIE FundPortfolio investment entityNot owned
4
Westpac Term PIE FundPortfolio investment entityNot owned
4
1
As at 30 September 2018, WNZOL held 25% equity in Paymark Limited, an associate, which is not a controlled entity. See Note 41 Subsequent events.
2
The NZ Banking Group, through WNZOL (9.5%) and WHNZL (9.5%), has a total qualifying interest of 19% in WNZCBHL and its wholly-owned subsidiary company,
WNZCBL. Westpac New Zealand is considered to control both WNZCBHL and WNZCBL based on contractual arrangements in place, and as such both WNZCBHL and
WNZCBL are consolidated within the financial statements of the NZ Banking Group.
3
The NZ Banking Group, through WNZOL (9.5%) and WHNZL (9.5%), has a total qualifying interest of 19% in WNZSHL and its wholly-owned subsidiaries, WNZSL and
WNZSL2. Westpac New Zealand is considered to control WNZSHL, WNZSL and WNZSL2 based on contractual arrangements in place, and as such WNZSHL, WNZSL and
WNZSL2 are consolidated within the financial statements of the NZ Banking Group.
4
Westpac Term PIE Fund, Westpac Cash PIE Fund and Westpac Notice Saver PIE Fund (collectively referred to as the ‘PIE Funds’) were established as unit trusts. The
PIE Funds are Portfolio Investment Entities (‘PIE’), where BTNZ is the manager and issuer. The manager has appointed Westpac New Zealand to perform all customer
management and account administration for the PIE Funds. Westpac New Zealand is the PIE Funds’ registrar and administration manager. Westpac New Zealand does
not hold any units in the PIE Funds however is considered to control them based on contractual arrangements put in place, and as such the PIE Funds are consolidated
in the financial statements of the NZ Banking Group.

Westpac Banking Corporation - New Zealand Banking Group32
Notes to the financial statements
Hastings Forestry Investments Limited was removed from the Companies Office register on 2 August 2018.
There have been no changes in the ownership percentages since 30 September 2017.
All entities in the NZ Banking Group are 100% owned unless otherwise stated. All the entities within the NZ Banking Group have a balance date of 30
September and are incorporated in New Zealand except the PIE Funds and WNZSSSTL which have a balance date of 31 March and 30 June respectively.
Other significant related entities of the NZ Banking Group include branches of the Overseas Bank based in London, Sydney and New York.
The total liabilities of the NZ Branch, net of amounts due to related entities as at 30 September 2018, amounted to $6,311 million (30 September 2017:
$5,981 million).
Nature of transactions
The NZ Banking Group has transactions with members of the Overseas Banking Group on commercial terms, including the provision of management,
distribution and administrative services and data processing facilities.
Loan finance and current account banking facilities are provided by the NZ Branch and the Overseas Bank to members of the NZ Banking Group on
normal commercial terms. The interest earned on these loans and the interest paid on deposits are at market rates.
The NZ Banking Group enters into derivative transactions with the Overseas Bank (refer to Note 26). They are accounted for as trading derivatives except
for cross currency swaps in place with the Overseas Bank, which are designated in a cash flow hedge relationship to hedge the currency risk exposure
of funding from the London Branch and Tier 2 notes issued to the London Branch (refer to Note 24).
Transactions with related entities
NZ BANKING GROUP
$ millionsNote20182017
Overseas Bank
Interest income2 27 13
Interest expense:
Loan capital
1
55 52
Other
2
2 53 75
Operating expenses - management fees 7 7
Funding repaid 400 421
Other controlled entities of the Overseas Bank
Non interest income:
Investment management fees paid
3
- 7
WGINZL dividend paid to Westpac Overseas Holdings Pty Limited and
Westpac Custodian Nominees Pty Limited
4 4
WFSGNZL dividend paid to Westpac Equity Holdings Pty Limited (‘WEHPL’) 58 16
BTFGNZL dividend paid to WEHPL 10 16
WNZGL dividend paid to Westpac Overseas Holdings No. 2 Pty Limited 500 280
1
Interest expense paid on the Tier 2 notes issued by the NZ Banking Group and held by related parties.
2
Includes interest expense incurred on funding from the Overseas Banking Group.
3
Non-interest income contains management fee income which is presented net of investment management fees paid to related parties.
Note 25 Related entities (continued)

33
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Due from and to related entities
NZ BANKING GROUP
$ millions20182017
Due from related entities
Overseas Bank 2,017 2,622
Other controlled entities of the Overseas Banking Group 6 1
Total due from related entities 2,023 2,623
Due from related entities at fair value
1
459 410
Due from related entities at amortised cost 1,564 2,213
Total due from related entities 2,023 2,623
Due to related entities
Overseas Bank 2,436 3,642
Other controlled entities of the Overseas Banking Group 4 4
Total due to related entities 2,440 3,646
Due to related entities at fair value 644 575
Due to related entities at amortised cost 1,796 3,071
Total due to related entities 2,440 3,646
1
Includes derivative and debt issues.
Key management personnel compensation
Key management personnel are those who, directly or indirectly, have authority and responsibility for planning, directing and controlling the activities
of NZ Banking Group. This includes all Executive and Non-Executive Directors.
NZ BANKING GROUP
$’000s
Year Ended
30-Sep-18
Year Ended
30-Sep-17
Salaries and other short-term benefits8,441 8,527
Post-employment benefits653 492
Other termination benefits615-
Share-based payments2,711 2,779
Total key management personnel compensation12,420 11,798
Loans to key management personnel22,349 22,769
Deposits from key management personnel6,006 1,229
Interest income on amounts due from key management personnel819 842
Interest expense on amounts due to key management personnel107 19
Where the Directors of the Overseas Bank have received remuneration from the NZ Banking Group, the amounts are included above. Details of Directors’
remuneration are disclosed in the Overseas Banking Group’s 30 September 2018 Annual Financial Report.
Loans and deposits with key management personnel
All loans and deposits are made in the ordinary course of business of the NZ Banking Group, on an arm’s length basis and on normal commercial terms
and conditions. Loans are on terms that range between variable, fixed rate up to five years and interest only loans, all of which are in accordance with
the NZ Banking Group’s lending policies.
As at 30 September 2018, no individual provision has been recognised in respect of loans given to key management personnel and their related parties
(30 September 2017: nil). These individual loans have been included within the loan portfolio when determining collectively assessed provisions.
Other key management personnel transactions
All other transactions with key management personnel, their related entities and other related parties are conducted on an arm’s length basis
in the normal course of business and on commercial terms and conditions. These transactions principally involve the provision of financial and
investment services.
Note 25 Related entities (continued)

Westpac Banking Corporation - New Zealand Banking Group34
Notes to the financial statements
Note 26 Derivative financial instruments
Accounting policy
Derivative financial instruments are instruments whose values derive from the value of an underlying asset, reference rate or index and include
forwards, futures, swaps and options.
All derivatives are held at fair value. Changes in fair value are recognised in the income statement, unless designated in a cash flow hedge relationship.
Derivatives are presented as an asset where they have a positive fair value at balance date or as a liability where the fair value at balance date is
negative. Derivatives with related parties are included in due from/due to related entities.
The NZ Banking Group uses derivative instruments for trading and also as part of its asset and liability risk management activities, which are discussed
in Note 36. Derivatives used for risk management activities include designating derivatives into one of two types of hedge accounting relationships:
fair value hedge or cash flow hedge, where permitted under NZ IAS 39. These hedge designations and associated accounting treatment are as follows:
Fair value hedges
Fair value hedges hedge the exposure to changes in the fair value of an asset or liability.
–Changes in the fair value of derivatives and the changes in the fair value of the hedged asset or liability in fair value hedges attributable to the
hedged risk are recognised in non-interest income. The carrying value of the hedged asset or liability is adjusted for the changes in fair value
related to the hedged risk.
–If a hedge is discontinued, any fair value adjustments to the carrying value of the asset or liability are amortised to net interest income over the
period to maturity. If the asset or liability is sold, any unamortised adjustment is immediately recognised in the income statement.
Cash flow hedges
Cash flow hedges hedge the exposure to variability of cash flows attributable to an asset, liability or future forecast transaction.
–For effective hedges, changes in the fair value of derivatives are recognised in the cash flow hedge reserve through other comprehensive income
and subsequently recognised in net interest income when the asset or liability that was hedged impacts the income statement.
For hedges with some ineffectiveness, the changes in the fair value of the derivatives relating to the ineffective portion are immediately recognised
in the income statement.
–If a hedge is discontinued, any cumulative gain or loss remains in other comprehensive income. It is amortised to net interest income over the
period which the asset or liability that was hedged also impacts the income statement.
–If a hedge of a forecast transaction is no longer expected to occur, any cumulative gain or loss in other comprehensive income is immediately
recognised in the income statement.
Derivatives of the NZ Banking Group are mainly held either in the NZ Branch or Westpac New Zealand.
Trading
As a trader, the NZ Branch’s primary objective is to derive income from the sale of derivatives to meet the NZ Banking Group’s customers’ needs. In
addition to the sale of derivatives to customers, the NZ Branch also undertakes market making and risk management activities. Market making involves
providing quotes to other dealers, who reciprocate by providing the NZ Branch with their own quotes. This process provides liquidity in the key markets
in which the NZ Branch operates.
Fair value hedges
The NZ Banking Group hedges a proportion of its interest rate risk and foreign exchange interest rate risk from debt issuances and fixed interest rate
assets with single currency and cross currency swaps.
NZ BANKING GROUP
$ millions20182017
Change in fair value of hedging instruments 6 10
Change in fair value of hedged items attributed to hedged risk (6) (16)
Ineffectiveness in non-interest income - (6)

35
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Cash flow hedges
Exposure to the volatility of interest cash flows from customer deposits and loans is hedged with interest rate derivatives. Exposure to foreign currency
principal and interest cash flows from floating rate debt issuances is hedged through the use of cross currency derivatives.
Gross cash inflows and outflows on derivatives designated in cash flow hedges are, as a proportion of total gross cash flows, expected to occur in the
following periods:
NZ BANKING GROUP
2018
Less Than
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
2 Years
2 Years to
3 Years
3 Years to
4 Years
4 Years to
5 Years
Over
5 Years
Cash inflows0%0%19%18%24%22%3%14%
Cash outflows1%1%18%19%24%20%3%14%
NZ BANKING GROUP
2017
Less Than
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
2 Years
2 Years to
3 Years
3 Years to
4 Years
4 Years to
5 Years
Over
5 Years
Cash inflows
11%1%5%19%7%23%20%14%
Cash outflows11%1%6%18%8%23%19%14%
NZ BANKING GROUP
$ millions20182017
Cash flow hedge ineffectiveness4 (4)
Dual fair value and cash flow hedges
Fixed rate foreign currency denominated debt is hedged using cross currency interest rate derivatives, designated as fair value hedges of foreign
interest rates and cash flow hedges of foreign exchange rates.
The notional amount and fair value of derivative instruments held for trading and designated in hedge relationships are set out in the following tables:
Derivatives held with external counterparties
NZ BANKING GROUP
2018
$ millions
Notional
Amount
FAIR VALUE
Trading
Hedging
Total
Fair ValueFair ValueCash Flow
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Futures contracts
1
10,467 - - - - - - - -
Swap agreements 310,702 2,988 (2,708) 18 (365) 36 (115) 3,042 (3,188)
Options 105 1 (1) - - - - 1 (1)
Total interest rate contracts 321,274 2,989 (2,709) 18 (365) 36 (115) 3,043 (3,189)
Foreign exchange contracts
Spot and forward contracts 16,501 156 (145) - - - - 156 (145)
Cross currency swap agreements 70,842 796 (1,226) 25 (7) 543 (56) 1,364 (1,289)
Total foreign exchange contracts 87,343 952 (1,371) 25 (7) 543 (56) 1,520 (1,434)
Total of gross derivatives 408,617 3,941 (4,080) 43 (372) 579 (171) 4,563 (4,623)
Impact of netting arrangements
2
- (1,054) 1,054 - - - - (1,054) 1,054
Total of net derivatives 408,617 2,887 (3,026) 43 (372) 579 (171) 3,509 (3,569)
1
The fair value differential of futures contracts are settled daily with the exchange. The notional balance represents open contracts as at 30 September.
2
Amounts offset against derivatives consist of NZ Branch derivative trades settled directly with a central clearing counterparty. Refer to Note 28.
Note 26 Derivative financial instruments (continued)

Westpac Banking Corporation - New Zealand Banking Group36
Notes to the financial statements
NZ BANKING GROUP
2017
$ millions
Notional
Amount
FAIR VALUE
Trading
Hedging
Tot a l
Fair ValueFair ValueCash Flow
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Futures contracts
1
14,827 - - - - - - - -
Swap agreements 241,031 2,860 (2,507) 21 (296) 36 (129) 2,917 (2,932)
Options 193 - - - - - - - -
Total interest rate contracts 256,051 2,860 (2,507) 21 (296) 36 (129) 2,917 (2,932)
Foreign exchange contracts
Spot and forward contracts 13,255 92 (112) - - - - 92 (112)
Cross currency swap agreements 64,821 920 (821) 31 (5) 170 (315) 1,121 (1,141)
Total foreign exchange contracts 78,076 1,012 (933) 31 (5) 170 (315) 1,213 (1,253)
Total of gross derivatives 334,127 3,872 (3,440) 52 (301) 206 (444) 4,130 (4,185)
Impact of netting arrangements
2
- (710) 710 - - - - (710) 710
Total of net derivatives 334,127 3,162 (2,730) 52 (301) 206 (444) 3,420 (3,475)
1
The fair value differential of futures contracts are settled daily with the exchange. The notional balance represents open contracts as at 30 September.
2
Amounts offset against derivatives consist of NZ Branch derivative trades settled directly with a central clearing counterparty. Refer to Note 28.
Derivatives held with related parties
NZ BANKING GROUP
2018
$ millions
Notional
Amount
FAIR VALUE
Trading
Hedging
Total
Fair ValueFair ValueCash Flow
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Swap agreements 23,914 131 (281) - - - - 131 (281)
Options 83 - - - - - - - -
Total interest rate contracts 23,997 131 (281) - - - - 131 (281)
Foreign exchange contracts
Spot and forward contracts 17,359 135 (146) - - - - 135 (146)
Cross currency swap agreements 18,439 187 (164) - - - (53) 187 (217)
Total foreign exchange contracts 35,798 322 (310) - - - (53) 322 (363)
Total of gross derivatives 59,795 453 (591) - - - (53) 453 (644)
Impact of netting arrangements - - - - - - - - -
Total of net derivatives 59,795 453 (591) - - - (53) 453 (644)
Note 26 Derivative financial instruments (continued)

37
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
NZ BANKING GROUP
2017
$ millions
Notional
Amount
FAIR VALUE
Trading
Hedging
Tot a l
Fair ValueFair ValueCash Flow
AssetsLiabilitiesAssetsLiabilitiesAssetsLiabilitiesAssetsLiabilities
Interest rate contracts
Swap agreements 18,605 137 (235) - - - - 137 (235)
Options 108 - - - - - - - -
Total interest rate contracts 18,713 137 (235) - - - - 137 (235)
Foreign exchange contracts
Spot and forward contracts 15,345 133 (103) - - - - 133 (103)
Cross currency swap agreements 15,472 140 (175) - - - (62) 140 (237)
Total foreign exchange contracts 30,817 273 (278) - - - (62) 273 (340)
Total of gross derivatives 49,530 410 (513) - - - (62) 410 (575)
Impact of netting arrangements - - - - - - - - -
Total of net derivatives 49,530 410 (513) - - - (62) 410 (575)
Note 27 Fair value of financial assets and financial liabilities
Accounting policy
The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
On initial recognition, the transaction price generally represents the fair value of the financial instrument unless there is observable information from
an active market to the contrary. Where unobservable information is used, the difference between the transaction price and the fair value (day one
profit or loss) is recognised in the income statement over the life of the instrument when the inputs become observable.
Critical accounting assumptions and estimates
The majority of valuation models used by the NZ Banking Group employ only observable market data as inputs. However, for certain financial
instruments, data may be employed which is not readily observable in current markets.
The availability of observable inputs is influenced by factors such as:
–product type;
–depth of market activity;
–maturity of market models; and
–complexity of the transaction.
Where unobservable market data is used, more judgment is required to determine fair value. The significance of these judgments depends on the
significance of the unobservable input to the overall valuation. Unobservable inputs are generally derived from other relevant market data and
adjusted against:
–standard industry practice;
–economic models; and
–observed transaction prices.
In order to determine a reliable fair value for a financial instrument, management may apply adjustments to the techniques previously described.
These adjustments reflect the NZ Banking Group’s assessment of factors that market participants would consider in setting the fair value.
These adjustments incorporate bid/offer spreads, credit valuation adjustments and funding valuation adjustments.
Note 26 Derivative financial instruments (continued)

Westpac Banking Corporation - New Zealand Banking Group38
Notes to the financial statements
Fair Valuation Control Framework
The NZ Banking Group uses a Fair Valuation Control Framework where the fair value is either determined or validated by a function independent of the
transaction. This framework formalises the policies and procedures used to achieve compliance with relevant accounting, industry and regulatory
standards. The framework includes specific controls relating to:
–the revaluation of financial instruments;
–independent price verification;
–fair value adjustments; and
–financial reporting.
A key element of the Framework is the Revaluation Committee, comprising senior valuation specialists from within the Overseas Banking Group. The
Revaluation Committee reviews the application of the agreed policies and procedures to assess that a fair value measurement basis has been applied.
The method of determining fair value differs depending on the information available.
Fair value hierarchy
A financial instrument’s categorisation within the valuation hierarchy is based on the lowest level input that is significant to the fair value measurement.
The NZ Banking Group categorises all fair value instruments according to the hierarchy described below.
Valuation techniques
The NZ Banking Group applies market accepted valuation techniques in determining the fair valuation of Over the Counter derivatives. This includes
credit valuation adjustments and funding valuation adjustments, which incorporates credit risk and funding costs and benefits that arise in relation to
uncollateralised derivative positions, respectively.
The specific valuation techniques, the observability of the inputs used in valuation models and the subsequent classification for each significant product
category are outlined below:
Financial instruments measured at fair value
Level 1 instruments
The fair value of financial instruments traded in active markets based on recent unadjusted quoted prices. These prices are based on actual arm’s
length basis transactions.
The valuations of Level 1 instruments require little or no management judgment.
InstrumentBalance sheet categoryIncludes:Valuation technique
Exchange traded
products
Derivative financial
instruments
Exchange traded
interest rate futures
- derivative financial
instruments
These instruments are traded in liquid, active markets
where prices are readily observable. No modelling or
assumptions are used in the valuation.
Due from related entities
Due to related entities
Foreign exchange
products
Derivative financial
instruments
FX spot contracts
Non-asset backed
debt instruments
Trading securities and
financial assets designated at
fair value
New Zealand
Government bonds
Available-for-sale securities
Other financial liabilities at
fair value through income
statement
Level 2 instruments
The fair value for financial instruments that are not actively traded are determined using valuation techniques which maximise the use of observable
market prices. Valuation techniques include:
–the use of market standard discounting methodologies;
–option pricing models; and
–other valuation techniques widely used and accepted by market participants.
Note 27 Fair value of financial assets and financial liabilities (continued)

39
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
InstrumentBalance sheet categoryIncludes:Valuation technique
Interest rate
products
Derivative financial
instruments
Interest rate swaps and
options - derivative financial
instruments
Industry standard valuation models are used to
calculate the expected future value of payments by
product, which is discounted back to a present value.
The model’s interest rate inputs are benchmark
interest rates and active broker quoted interest rates
in the swap, bond and futures markets. Interest rate
volatilities are sourced from brokers and consensus
data providers.
Due from related entities
Due to related entities
Foreign exchange
products
Derivative financial
instruments
FX swaps and FX forward
contracts - derivative financial
instruments
Derived from market observable inputs or
consensus pricing providers using industry standard
models.
Due from related entities
Due to related entities
Asset backed debt
instruments
Trading securities and
financial assets designated at
fair value
Asset backed securities
Valued using an industry approach to value floating
rate debt with prepayment features. The main
inputs to the model are the trading margin and
the weighted average life of the security. These
inputs are sourced from a consensus data provider.
If consensus prices are not available these are
classified as Level 3 instruments.
Available-for-sale securities
Non-asset backed
debt instruments
Trading securities and
financial assets designated at
fair value
Local authority and NZ
public securities, other bank
issued certificates of deposit,
commercial paper, other
government securities, off-shore
securities and corporate bonds
Valued using observable market prices which are
sourced from consensus pricing services, broker
quotes or inter-dealer prices.
Available-for-sale securities
Other financial liabilities at
fair value through income
statement
Security repurchase agreements
and reverse repurchase
agreements over non-asset
backed debt securities
Deposits and
other borrowings
at fair value
Deposits and other
borrowings
Certificates of deposit
Discounted cash flow using market rates offered for
deposits of similar remaining maturities.
Debt issues at fair
value
Debt issuesCommercial paper
Discounted cash flows, using a discount rate which
reflects the terms of the instrument and the timing
of cash flows adjusted for market observable
changes in the applicable credit rating of Westpac
New Zealand.
Life insurance
assets
Life insurance assets
Local authority securities,
investment grade corporate
bonds, life insurance contract
liabilities and units in unlisted
unit trusts
Valued using observable market prices or other
widely used and accepted valuation techniques
utilising observable market inputs.
Level 3 instruments
Financial instruments valued where at least one input that could have a significant effect on the instrument’s valuation is not based on observable
market data due to illiquidity or complexity of the product. These inputs are generally derived and extrapolated from other relevant market data and
calibrated against current market trends and historical transactions.
These valuations are calculated using a high degree of management judgment.
InstrumentBalance sheet categoryIncludes:Valuation technique
Asset backed debt
instruments
Trading securities and
financial assets designated at
fair value
Residential mortgage-
backed securities
(‘RMBS’) and certain
other asset backed
securities
RMBS are classified as Level 3 as consensus prices are
not available as valuation inputs. Quotes by a third party
broker or lead manager are used to derive the fair value for
these instruments.
Interest rate
derivatives
Derivative financial
instruments
Non-vanilla interest
rate (inflation indexed)
derivatives and long-
dated NZD caps
Valued using industry standard valuation models
utilising observable market inputs which are determined
separately for each parameter. Where unobservable,
inputs will be set with reference to an observable proxy.
Note 27 Fair value of financial assets and financial liabilities (continued)

Westpac Banking Corporation - New Zealand Banking Group40
Notes to the financial statements
The table below summarises the attribution of financial instruments measured at fair value on a recurring basis to the fair value hierarchy:
NZ BANKING GROUP
20182017
$ millionsLevel 1Level 2Level 3
1
Total Level 1Level 2Level 3
1
Tot a l
Financial assets measured at fair value
Trading securities and financial assets designated at fair value 159 2,857 - 3,016 91 3,800 58 3,949
Derivative financial instruments - 3,509 - 3,509 1 3,419 - 3,420
Available-for-sale securities 1,167 2,643 - 3,810 1,556 2,531 - 4,087
Life insurance assets - 310 - 310 - 304 - 304
Due from related entities 1 458 - 459 1 409 - 410
Total financial assets measured at fair value 1,327 9,777 - 11,104 1,649 10,463 58 12,170
Financial liabilities measured at fair value
Deposits and other borrowings at fair value - 1,221 - 1,221 - 593 - 593
Other financial liabilities at fair value through income statement 145 78 - 223 39 263 - 302
Derivative financial instruments - 3,569 - 3,569 - 3,475 - 3,475
Due to related entities 2 642 - 644 1 574 - 575
Debt issues at fair value - - - - - 1,642 - 1,642
Total financial liabilities measured at fair value 147 5,510 - 5,657 40 6,547 - 6,587
1
Balances within this category of the fair value hierarchy are not considered material to the total trading securities and financial assets designated at fair value and
derivative financial instrument balances.
There were no material amounts of changes in fair value estimated using a valuation technique incorporating significant non-observable inputs that
were recognised in the income statement or the statement of comprehensive income of the NZ Banking Group during the year ended 30 September
2018 (30 September 2017: no material changes in fair value).
Analysis of movements between fair value hierarchy levels
During the year there were no material transfers between levels of the fair value hierarchy (30 September 2017: nil).
Financial instruments not measured at fair value
For financial instruments not measured at fair value on a recurring basis, fair value has been derived as follows:
InstrumentValuation technique
Loans
Where available, the fair value of loans is based on observable market transactions; otherwise fair value is estimated
using discounted cash flow models. For variable rate loans, the discount rate used is the current effective interest
rate. The discount rate applied for fixed rate loans reflects the market rate for the maturity of the loan and the credit
worthiness of the borrower.
Deposits and other
borrowings
Fair values of deposit liabilities payable on demand (interest free, interest bearing and savings deposits) approximate
their carrying value. Fair values for term deposits are estimated using discounted cash flows, applying market rates
offered for deposits of similar remaining maturities.
Debt issues and loan
capital
Fair values are calculated using a discounted cash flow model. The discount rates applied reflect the terms of the
instruments, the timing of the estimated cash flows and are adjusted for any changes in the applicable credit spreads.
Due to related
entities
Fair values are calculated in respect of long-term debt using a discounted cash flow model. The discount rate applied
reflects the terms of the loan and the timing of the estimated cash flows. The carrying value of all other balances due to
related entities approximates the fair value. These items are either short-term in nature or re-price frequently.
All other financial
assets and financial
liabilities
For all other financial assets and financial liabilities, the carrying value approximates the fair value. These items are
either short-term in nature or re-price frequently, and are of a high credit rating.
Note 27 Fair value of financial assets and financial liabilities (continued)

41
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
The following table summarises the estimated fair value of the NZ Banking Group’s financial instruments not measured at fair value:
NZ BANKING GROUP
2018
$ millions
Carrying
Amount
Fair Value
Level 1Level 2Level 3 Total
Financial assets not measured at fair value
Cash and balances with central banks 1,472 1,472 - - 1,472
Receivables due from other financial institutions 237 18057 - 237
Other assets 411 - - 411 411
Loans 80,860 - - 80,989 80,989
Due from related entities 1,564 - 1,558 6 1,564
Total financial assets not measured at fair value 84,544 1,652 1,615 81,406 84,673
Financial liabilities not measured at fair value
Payables due to other financial institutions 1,253 592 661 - 1,253
Other liabilities 737 - 737 - 737
Deposits and other borrowings 61,884 - 61,276 647 61,923
Due to related entities 1,796 - 1,806 - 1,806
Debt issues 13,725 - 13,845 - 13,845
Loan capital 2,866 - 1,692 1,180 2,872
Total financial liabilities not measured at fair value 82,261 592 80,017 1,827 82,436
NZ BANKING GROUP
2017
$ millions
Carrying
Amount
Fair Value
Level 1Level 2Level 3 Tot a l
Financial assets not measured at fair value
Cash and balances with central banks 1,761 1,761 - - 1,761
Receivables due from other financial institutions 471 431 40 - 471
Other assets 378 - - 378 378
Loans 77,681 - - 7 7,7 1 7 7 7,7 1 7
Due from related entities 2,213 - 2,212 1 2,213
Total financial assets not measured at fair value 82,504 2,192 2,252 78,096 82,540
Financial liabilities not measured at fair value
Payables due to other financial institutions 1,043 210 833 - 1,043
Other liabilities 521 - 521 - 521
Deposits and other borrowings 58,405 - 57,849 601 58,450
Due to related entities 3,071 - 3,084 - 3,084
Debt issues 15,087 - 15,259 - 15,259
Loan capital 2,822 - 1,733 1,188 2,921
Total financial liabilities not measured at fair value 80,949 210 79,279 1,789 81,278
Note 28 Offsetting financial assets and financial liabilities
Accounting policy
Financial assets and liabilities are presented net on the balance sheet when the NZ Banking Group has a legally enforceable right to offset them in all
circumstances and there is an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
The gross assets and liabilities behind the net amounts reported on the balance sheet are disclosed in the table below.
Some of the NZ Banking Group’s offsetting arrangements are not enforceable in all circumstances. The assets and liabilities under such agreements
are also disclosed in the table below, to illustrate the net balance sheet amount if these future events should occur. The amounts in the tables below
may not tie back to the balance sheet if there are balances which are not subject to offsetting arrangements. The amounts presented in this note do not
represent the credit risk exposure of the NZ Banking Group. Refer to Note 36.2 for information on credit risk management. The offsetting and collateral
arrangements and other credit risk mitigation strategies used by the NZ Banking Group are further explained in the ‘Management of risk mitigation’
section under Note 36.2.
Note 27 Fair value of financial assets and financial liabilities (continued)

Westpac Banking Corporation - New Zealand Banking Group42
Notes to the financial statements
NZ BANKING GROUP
2018
Effects of Offsetting on Balance SheetAmounts Subject to Enforceable
Netting Arrangements But Not Offset
$ millions
Gross
Amounts
Amounts
Offset
Net Amounts
Reported on
the Balance
Sheet
Other
Recognised
Financial
Instruments
Cash
Collateral
Financial
Instrument
Collateral Net amount
Assets
Securities purchased under
agreement to resell
1
216 - 216 - - (216) -
Derivative financial instruments 4,563 (1,054) 3,509 (1,598) (495) - 1,416
Due from related entities - derivative
financial instruments
2
453 - 453 (453) - - -
Total assets 5,232 (1,054) 4,178 (2,051) (495) (216) 1,416
Liabilities
Security repurchase agreements
3
41 - 41 - - (41) -
Derivative financial instruments 4,623 (1,054) 3,569 (1,598) (71) - 1,900
Due to related entities - derivative
financial instruments
4
644 - 644 (453) - - 191
Total liabilities 5,308 (1,054) 4,254 (2,051) (71) (41) 2,091
NZ BANKING GROUP
2017
Effects of Offsetting on Balance SheetAmounts Subject to Enforceable
Netting Arrangements But Not Offset
$ millions
Gross
Amounts
Amounts
Offset
Net Amounts
Reported on the
Balance Sheet
Other
Recognised
Financial
Instruments
Cash
Collateral
Financial
Instrument
Collateral Net amount
Assets
Securities purchased under
agreement to resell
1
757 - 757 - - (754) 3
Derivative financial instruments 4,130 (710) 3,420 (1,731) (58) - 1,631
Due from related entities - derivative
financial instruments
2
410 - 410 (410) - - -
Total assets 5,297 (710) 4,587 (2,141) (58) (754) 1,634
Liabilities
Security repurchase agreements
3
235 - 235 - - (235) -
Derivative financial instruments 4,185 (710) 3,475 (1,731) (332) - 1,412
Due to related entities - derivative
financial instruments
4
575 - 575 (410) - - 165
Total liabilities 4,995 (710) 4,285 (2,141) (332) (235) 1,577
1
Forms part of trading securities and financial assets designated at fair value on the balance sheet (refer to Note 11).
2
Forms part of due from related entities on the balance sheet (refer to Note 25).
3
Forms part of other financial liabilities at fair value through income statement on the balance sheet (refer to Note 21).
4
Forms part of due to related entities on the balance sheet (refer to Note 25).
Other recognised financial instruments
These financial assets and liabilities are subject to master netting agreements which are not enforceable in all circumstances, so they are recognised
gross on the balance sheet. The offsetting rights of the master netting arrangements can only be enforced if a predetermined event occurs in the future,
such as a counterparty defaulting.
Cash collateral and financial instrument collateral
These amounts are received or pledged under master netting arrangements against the gross amounts of assets and liabilities. Financial instrument
collateral typically comprises securities which can be readily liquidated in the event of counterparty default. The offsetting rights of the master netting
arrangement can only be enforced if a predetermined event occurs in the future, such as a counterparty defaulting.
Note 28 Offsetting financial assets and financial liabilities (continued)

43
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Note 29 Operating lease commitments
The NZ Banking Group leases various commercial and retail premises and related plant and equipment. The lease commitments at 30 September are
as follows:
NZ BANKING GROUP
$ millions20182017
Due within one year 55 55
Due after one year but not later than five years 147 141
Due after five years 197 159
Total lease commitments 399 355
Operating leases are entered into to meet the business needs of entities in the NZ Banking Group. Lease rentals are determined in accordance with
market conditions when leases are entered into or on rental review dates.
Note 30 Credit related commitments, contingent assets and contingent liabilities
Accounting policy
Undrawn credit commitments
The NZ Banking Group enters into various arrangements with customers which are only recognised in the balance sheet when called upon. These
arrangements include commitments to extend credit, bill endorsements, financial guarantees, standby letters of credit and underwriting facilities.
Contingent assets
Contingent assets are possible assets whose existence will be confirmed only by uncertain future events. Contingent assets are not recognised on
the balance sheet but are disclosed if an inflow of economic benefits is probable.
Contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events, and present obligations where the
transfer of economic resources is not probable or cannot be reliably measured. Contingent liabilities are not recognised on the balance sheet but
are disclosed unless the outflow of economic resources is remote.
Undrawn credit commitments
The NZ Banking Group enters into various arrangements with customers which are only recognised on the balance sheet when called upon. These
arrangements include commitments to extend credit, bill endorsements, financial guarantees, standby letters of credit and underwriting facilities.
They expose the NZ Banking Group to liquidity risk when called upon and also to credit risk if the customer fails to repay the amounts owed at the due
date. The maximum exposure to credit loss is the contractual or notional amount of the instruments disclosed below. Some of the arrangements can
be cancelled by the NZ Banking Group at any time and a significant portion is expected to expire without being drawn. The actual required liquidity
and credit risk exposure is therefore less than the amounts disclosed. The NZ Banking Group uses the same credit policies when entering into these
arrangements as it does for on-balance sheet instruments. Refer to Note 36 for further details on liquidity risk and credit risk management.
Westpac New Zealand is obliged to repurchase any loan sold to and held by:
a. WNZSL (pursuant to its securitisation programme) where the loan does not meet certain terms and conditions of the WNZSL securitisation
programme;
b. WNZCBL (pursuant to the CB Programme) where:
i. it is discovered that there has been a material breach of a sale warranty (or any such sale warranty is materially untrue);
ii. the loan becomes materially impaired or is enforced prior to the second monthly covered bond payment date falling after the assignment of the
loan; or
iii. at the cut-off date relating to the loan, there were arrears of interest and that loan subsequently becomes a delinquent loan prior to the second
monthly covered bond payment date falling after the assignment of the loan.
It is not envisaged that any liability resulting in material loss to the NZ Banking Group will arise from these obligations.
NZ BANKING GROUP
$ millions20182017
Letters of credit and guarantees
1
1,104 1,041
Commitments to extend credit
2
24,722 25,111
Other 60 10
Total undrawn credit commitments 25,886 26,162
1
Letters of credit and guarantees are undertakings to pay, against presentation documents, an obligation in the event of a default by a customer. Guarantees are
unconditional undertakings given to support the obligations of a customer to third parties. The NZ Banking Group may hold cash as collateral for certain guarantees issued.
2
Commitments to extend credit include all obligations on the part of the NZ Banking Group to provide credit facilities. As facilities may expire without being drawn upon,
the notional amounts do not necessarily reflect future cash requirements.

Westpac Banking Corporation - New Zealand Banking Group44
Notes to the financial statements
Contingent assets
The credit commitments shown in the table above also constitute contingent assets. These commitments would be classified as loans on the balance
sheet on the contingent event occurring.
Contingent liabilities
The NZ Banking Group has contingent liabilities in respect of actual and potential claims and proceedings. An assessment of the NZ Banking Group’s likely
loss in respect of these matters has been made on a case-by-case basis and provision has been made in these financial statements where appropriate.
Additional information relating to any provision or contingent liability has not been provided where disclosure of such information might be expected to
seriously prejudice the position of the NZ Banking Group.
WNZIL, a subsidiary of Westpac New Zealand, leases the majority of the properties occupied by the NZ Banking Group. Westpac New Zealand guarantees
a significant portion of lease obligations. As is normal practice, the lease agreements contain ‘make good’ provisions which require WNZIL, upon
termination of the lease, to return the premises to the lessor in the original condition. The maximum amount payable by WNZIL upon vacation of all leased
premises subject to these provisions as at 30 September 2018 was estimated to be $30 million (30 September 2017: $30 million).
No amount has been recognised for the $30 million in estimated maximum vacation payments as the NZ Banking Group believes it is highly unlikely that
WNZIL would incur a material operating loss as a result of such ‘make good’ provisions in the normal course of its business operations.
Note 31 Segment reporting
Accounting policy
Operating segments are presented on a basis that is consistent with information provided internally to the NZ Banking Group’s chief operating
decision-makers and reflects the management of the business, rather than the legal structure of the NZ Banking Group. The chief operating decision-
maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The NZ Banking
Group has determined that the NZ Banking Group executive team is its chief operating decision-maker.
All transactions between business segments are conducted on an arm’s length basis, with inter-segment revenue and costs being eliminated at
head office. Income and expenses directly associated with each segment are included in determining business segment performance.
The NZ Banking Group operates predominantly in the consumer banking and wealth, commercial, corporate and institutional banking, and investments
and insurance sectors within New Zealand. On this basis, no geographical segment reporting is provided.
The operating segment results have been presented on a management reporting basis and consequently internal charges and transfer pricing
adjustments have been reflected in the performance of each operating segment. Intersegment pricing is determined on a cost recovery basis.
The NZ Banking Group does not rely on any single major customer for its revenue base.
Comparative information for the year ended 30 September 2017 has been restated following changes to the allocation of costs and the Overseas Bank
updating its capital allocation framework. Comparative information has been restated to ensure consistent presentation with the current reporting
period. The revised presentation has no impact on total profit before income tax expense for the year ended 30 September 2017.
The NZ Banking Group’s operating segments are defined by the customers they serve and the services they provide. The NZ Banking Group has identified
the following main operating segments:
–Consumer Banking and Wealth provides financial services predominantly for individuals;
–Commercial, Corporate and Institutional Banking provides a broad range of financial services for commercial, corporate, property finance,
agricultural, institutional and government customers, and the supply of derivatives and risk management products to the entire Westpac customer
base in New Zealand; and
–Investments and Insurance provides funds management and insurance services.
Reconciling items primarily represent:
–business units that do not meet the definition of operating segments under NZ IFRS 8 Operating Segments;
–elimination entries on consolidation/aggregation of the results, assets and liabilities of the NZ Banking Group’s controlled entities in the preparation of
the aggregated financial statements of the NZ Banking Group; and
–results of certain business units excluded for management reporting purposes, but included within the aggregated financial statements of the NZ
Banking Group for statutory financial reporting purposes.
Note 30 Credit related commitments, contingent assets and contingent liabilities (continued)

45
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
NZ BANKING GROUP
$ millions
Consumer
Banking and
Wealth
Commercial,
Corporate and
Institutional
Investments
and
Insurance
Reconciling
ItemsTotal
Year ended 30 September 2018
Net interest income1,145 737 1 29 1,912
Non-interest income177 263 138 24 602
Net operating income before operating expenses and
impairment charges
1,322 1,000 139 53 2,514
Operating expenses(679)(247)(32)(11)(969)
Impairment (charges)/benefits(33)14 - 22 3
Profit before income tax610 767 107 64 1,548
Total gross loans46,605 34,550 - 29 81,184
Total deposits and other borrowings36,147 25,737 - 1,221 63,105
Year ended 30 September 2017 (restated)
Net interest income1,053 717 1 17 1,788
Non-interest income219 288 131 (13)625
Net operating income before operating expenses and
impairment charges
1,272 1,005 132 4 2,413
Operating expenses(708)(250)(29)(19)(1,006)
Impairment (charges)/benefits(34)97 - 13 76
Profit before income tax530 852 103 (2)1,483
Total gross loans44,707 33,294 - 30 78,031
Total deposits and other borrowings34,044 24,361 - 593 58,998
Note 32 Securitisation, covered bonds and other transferred assets
The NZ Banking Group enters into transactions in the normal course of business by which financial assets are transferred to counterparties or
structured entities. Depending on the circumstances, these transfers may result in derecognition of the assets in their entirety, partial derecognition or
no derecognition of the assets subject to the transfer. For the NZ Banking Group’s accounting policy on derecognition of financial assets, refer to Note 1.
Securitisation
Securitisation is the transferring of assets (or an interest in either the assets or the cash flows arising from the assets) to a structured entity which then
issues interest bearing debt securities to third party investors.
Own assets securitised
Securitisation of its own assets is used by the NZ Banking Group as a funding and liquidity tool.
For securitisation structured entities which the NZ Banking Group controls, as defined in Note 33, the structured entities are classified as subsidiaries
and consolidated. When assessing whether the NZ Banking Group controls a structured entity, it considers its exposure to and ability to affect variable
returns. The NZ Banking Group may have variable returns from a structured entity through ongoing exposures to the risks and rewards associated with
the assets, the provision of derivatives, liquidity facilities, trust management and operational services.
In October 2008, WNZSL was set up as part of Westpac New Zealand’s internal residential mortgage-backed securitisation programme. Under this
programme Westpac New Zealand sold the rights (but not the obligations) of a pool of housing loans to WNZSL. The purchase was funded by WNZSL’s
issuance of residential mortgage-backed securities (‘RMBS’). The RMBS and an equivalent liability in the form of a deemed loan from Westpac New
Zealand to WNZSL are fully eliminated in the NZ Banking Group’s financial statements. Refer to Note 30 for a description of the NZ Banking Group’s
obligation to repurchase certain housing loans sold to WNZSL.
Covered bonds
The NZ Banking Group has a covered bond programme whereby selected pools of housing loans it originates are assigned to a bankruptcy remote
structured entity. WNZCBL is a special purpose entity established to purchase from time to time, and hold the rights, but not the obligations, of a pool
of housing loans (‘cover pool’) and to provide a financial guarantee (in addition to that of Westpac New Zealand) in respect of obligations under the
covered bonds issued from time to time by WSNZL under the CB Programme. That financial guarantee is supported by WNZCBL granting security in
favour of the covered bondholders over the cover pool.
The intercompany loan made by Westpac New Zealand to WNZCBL to fund the initial purchase (and subsequent further purchases which increased
the cover pool) and the liability representing the deemed loan from WNZCBL to Westpac New Zealand are fully eliminated in the NZ Banking Group’s
financial statements. Refer to Note 30 for a description of the NZ Banking Group’s obligation to repurchase certain housing loans sold to WNZCBL.
Note 31 Segment reporting (continued)

Westpac Banking Corporation - New Zealand Banking Group46
Notes to the financial statements
Security repurchase agreements
Where securities are sold subject to an agreement to repurchase at a predetermined price, they remain recognised on the balance sheet in their original
category (i.e. trading securities or available-for-sale securities).
The cash consideration received is recognised as a liability (security repurchase agreements). Refer to Notes 17 and 21 for further details.
The following table presents the NZ Banking Group’s assets transferred and their associated liabilities:
NZ BANKING GROUP
For those liabilities that only have recourse
to the transferred assets:
$ millions
Carrying
amount of
transferred
assets
Carrying
amount of
associated
liabilities
Fair value of
transferred
assets
Fair value of
associated
liabilities
Net fair value
position
2018
Securitisation - own assets
1
5,033 5,015 5,021 5,015 6
Covered bonds
2
7,533 5,656 n/a n/a n/a
Security repurchase agreements 41 41 n/a n/a n/a
Total 12,607 10,712 5,021 5,015 6
2017
Securitisation - own assets
1
5,034 5,013 5,018 5,013 5
Covered bonds
2
7,535 5,246 n/a n/a n/a
Security repurchase agreements 235 235 n/a n/a n/a
Total 12,804 10,494 5,018 5,013 5
1
The most senior rated securities at 30 September 2018 of $4,700 million (30 September 2017: $4,700 million) qualify as eligible collateral for repurchase agreements
with the Reserve Bank. Westpac New Zealand takes advantage of the Reserve Bank’s guidelines for its overnight reverse repo facility and open market operations, which
allows banks in New Zealand to offer RMBS as collateral for the Reserve Bank’s repurchase agreements.
2
The difference between the carrying values of the covered bonds and the assets pledged allows for the immediate issuance of additional covered bonds if required.
These additional assets can be repurchased by Westpac New Zealand at its discretion, subject to the conditions set out in the transaction documents. The cover pool is
comprised of housing loans up to a value of $7,500 million as at 30 September 2018 (30 September 2017: $7,500 million). Over time, the composition of the cover pool will
include, in addition to housing loans, accrued interest (representing accrued and unpaid interest on the outstanding housing loans) and cash (representing collections
of principal and interest from the underlying housing loans).
Note 33 Structured entities
Accounting policy
Structured entities are generally created to achieve a specific, defined objective and their operations are restricted such as only purchasing specific
assets. Structured entities are commonly financed by debt or equity securities that are collateralised by and/or indexed to their underlying assets.
The debt and equity securities issued by structured entities may include tranches with varying levels of subordination.
Structured entities are classified as subsidiaries and consolidated if they meet the definition in Note 1. If the NZ Banking Group does not control a
structured entity then it will not be consolidated.
The NZ Banking Group engages in various transactions with both consolidated and unconsolidated structured entities that are mainly involved in
securitisations, asset backed structures and managed funds.
Consolidated structured entities
Securitisation and covered bonds
The NZ Banking Group uses structured entities to securitise its financial assets through the CB Programme and the Bank’s internal residential mortgage-
backed securitisation programme. Refer to Note 32 for further details.
NZ Banking Group managed funds
As disclosed in Note 25 and the ‘Funds management and other fiduciary activities’ section below, the PIE Funds are consolidated within the financial
statements of the NZ Banking Group.
Non-contractual financial support
The NZ Banking Group does not provide non-contractual financial support to these consolidated structured entities.
Note 32 Securitisation, covered bonds and other transferred assets (continued)

47
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Unconsolidated structured entities
The NZ Banking Group has interests in various unconsolidated structured entities including debt instruments, guarantees, liquidity arrangements,
lending, loan commitments, certain derivatives and investment management agreements.
Interests exclude non-complex derivatives (e.g. interest rate swap agreements) and lending to a structured entity with recourse to a wider operating
entity, not just the structured entity.
The NZ Banking Group’s main interests in unconsolidated structured entities, which arise in the normal course of business, are:
Trading securities
and financial assets
designated at fair
value
The NZ Banking Group actively trades interests in structured entities and normally has no other involvement with the
structured entity. This includes RMBS or other asset-backed securities. These assets are highly rated, investment grade and
eligible for repurchase agreements with the RBNZ or another central bank. The NZ Banking Group earns interest income on
these securities and also recognises fair value changes through trading income in non-interest income.
Loans and other
credit commitments
The NZ Banking Group lends to unconsolidated structured entities, subject to the NZ Banking Group’s collateral and credit
approval processes, in order to earn interest and fee income. The structured entities are mainly securitisation entities.
Investment
management
agreements
The NZ Banking Group manages funds that provide customers with investment opportunities. The NZ Banking Group also
manages superannuation funds for its employees. The NZ Banking Group earns management and performance fee income
which is recognised in non-interest income.
The NZ Banking Group may also retain units in these investment management funds, primarily through its consolidated life
insurance entity. The NZ Banking Group earns fund distribution income and recognises fair value movements through non-
interest income.
The following table shows the NZ Banking Group’s interests in unconsolidated structured entities and its maximum exposure to loss in relation to those
interests. The maximum exposure does not take into account any collateral or hedges that will reduce the risk of loss.
–For on-balance sheet instruments, including debt instruments in and loans to unconsolidated structured entities, the maximum exposure to loss is
the carrying value; and
–For off-balance sheet instruments, including liquidity facilities, loan and other credit commitments and guarantees, the maximum exposure to loss
is the notional amounts.
NZ BANKING GROUP
20182017
$ millions
Investment in Third
Party Mortgage and
other Asset- Backed
Securities
1
Financing to
Securitisation
Vehicles
Group
Managed
Funds Total
Investment in Third
Party Mortgage and
other Asset- Backed
Securities
1
Financing to
Securitisation
Vehicles
Group
Managed
Funds Tot a l
Assets
Trading securities and financial
assets designated at fair value
50 - - 50 78 - - 78
Loans - 2,632 - 2,632 - 2,297 - 2,297
Life insurance assets - - 191 191 - - 196 196
Total on-balance sheet
exposures
50 2,632 191 2,873 78 2,297 196 2,571
Total notional amounts of
off-balance sheet exposures
- 765 87 852 - 1,052 65 1,117
Maximum exposure to loss 50 3,397 278 3,725 78 3,349 261 3,688
Size of structured entities
2
813 3,397 10,219 14,429 820 3,349 9,109 13,278
1
The NZ Banking Group’s interests in third party mortgage and other asset-backed securities are senior tranches of notes and are investment grade rated.
2
Represented by the total assets or market capitalisation of the entity, or if not available, the NZ Banking Group’s total committed exposure (for lending arrangements and
external debt holdings), funds under management (for Group managed funds) or the total value of notes on issue (for investments in third-party asset-backed securities).
Non-contractual financial support
The NZ Banking Group does not provide non-contractual financial support to these unconsolidated structured entities.
Funds management and other fiduciary activities
The NZ Banking Group conducts investment and other fiduciary activities that result in the holding or placing of assets on behalf of individuals, trusts,
retirement benefit plans and other institutions. These assets are not the property of the NZ Banking Group and accordingly are not included in these
financial statements, with the exception of the PIE Funds which are treated as controlled entities of Westpac New Zealand (refer to Note 25 for further
details) and life insurance assets owned by Westpac Life which are included in wholesale client portfolios. Where controlled entities incur certain liabilities
in respect of these activities, a right of indemnity exists against the assets of the applicable trusts. As these assets are sufficient to cover liabilities, and it
is not probable that the controlled entities will be required to settle them, the liabilities are not included in the consolidated financial statements.
The PIE Funds are managed by a member of the NZ Banking Group (refer to Note 25 for further details) and invest in deposits with Westpac New Zealand.
Westpac New Zealand is considered to control the PIE Funds, and as such they are consolidated within the financial statements of the NZ Banking Group.
Note 33 Structured entities (continued)

Westpac Banking Corporation - New Zealand Banking Group48
Notes to the financial statements
The value of assets subject to funds management and other fiduciary activities as at the reporting date were as follows:
$ millions20182017
Private and priority 637 627
Retirement plans 6,312 5,418
Retail unit trusts 2,546 2,365
Wholesale client portfolios 724 699
Term PIE 2,031 1,746
Cash PIE 762 815
Notice Saver PIE 456 309
Total funds under management 13,468 11,979
Marketing and distribution of insurance products
The NZ Banking Group markets and distributes both life and general insurance products. The life insurance products are underwritten by Westpac Life
and by external third party insurance companies. The general insurance products are fully underwritten by external third party insurance companies.
Disclosures are made in marketing material that the products are underwritten by those companies. Where the products are underwritten by Westpac
Life, the disclosures state that other members of the Overseas Banking Group do not guarantee the obligations of, or any products issued by, Westpac
Life. Where the products are underwritten by third parties, the disclosures state that Westpac New Zealand does not guarantee the obligations of, or
any products issued by, those companies.
Risk management
The NZ Banking Group’s risk management strategy (refer to Note 36) will help minimise the possibility that any difficulties arising from the above
activities would adversely impact the NZ Banking Group.
Note 34 Insurance business
Accounting policy
The NZ Banking Group conducts insurance business through one of its controlled entities, Westpac Life, which is licensed under the Insurance
(Prudential Supervision) Act 2010 (‘IPSA’).
Life insurance assets include investments held by the NZ Banking Group’s life insurance company and net insurance policy assets relating to life
insurance contracts.
Assets held by the NZ Banking Group’s life insurance company, including investments in funds managed by the NZ Banking Group, are designated at
fair value through profit or loss. Changes in fair value are recognised in non-interest income.
It is a requirement of the IPSA that a life insurance company must have at least one statutory fund in respect of its life insurance business. A statutory
fund was established by Westpac Life on 1 October 2012. The statutory fund is subject to restrictions imposed under IPSA. The main restrictions are:
–that the assets in the statutory fund are only available to meet the liabilities and expenses of the life insurance business and cannot be used to
support any other business of the life insurance company; and
–distribution of the retained profits of a statutory fund may only be made when certain solvency and other requirements are met.
Refer to Note 3 for details on the accounting policy related to net life insurance income and change in policy liabilities.
Critical accounting assumptions and estimates
The key factors that affect the estimation of net insurance policy assets are:
–the cost of providing benefits and administrating contracts;
–mortality and morbidity experience which includes policyholder benefit enhancements;
–discontinuance rates, which affects the NZ Banking Group’s ability to recover the cost of acquiring new business over the life of the contracts;
and
–the discount rate of projected future cash flows.
Regulation, competition, interest rates, taxes, securities market conditions and general economic conditions also affect the estimation of net
insurance policy assets.
Westpac Life’s primary insurance activities are the development, underwriting and management of products under life insurance legislation which
provide insurance cover against the risks of death, disability, redundancy and bankruptcy. Westpac Life also manages insurance agency arrangements
whereby general insurance and life insurance products are made available to NZ Banking Group customers. The insurance business of Westpac Life
comprises less than one percent of the total assets of the NZ Banking Group.
Note 33 Structured entities (continued)

49
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
The following table presents the aggregate amount of the NZ Banking Group’s insurance business calculated in accordance with the Overseas Bank’s
conditions of registration as at the reporting date:
NZ BANKING GROUP
$ millions20182017
Total assets of insurance business 219 228
As a percentage of total consolidated assets of the NZ Banking Group0.23% 0.24%
The Overseas Bank does not conduct any insurance or non-financial activities in New Zealand outside of the NZ Banking Group.
Note 35 Capital adequacy
The table below represents the capital adequacy calculation for the Overseas Banking Group and Overseas Bank as at 30 September 2018 based on
APRA’s application of the Basel III capital adequacy framework.
%
2018
Unaudited
2017
Unaudited
Overseas Banking Group (excluding entities specifically excluded by APRA regulations)
1, 2
Common equity Tier 1 capital ratio 10.6 10.6
Additional Tier 1 capital ratio 2.2 2 .1
Tier 1 capital ratio 12.8 12.7
Tier 2 capital ratio 1.9 2 .1
Total regulatory capital ratio 14.7 14.8
Overseas Bank (Extended Licensed Entity)
1, 3
Common equity Tier 1 capital ratio 10.5 10.4
Additional Tier 1 capital ratio 2.3 2.2
Tier 1 capital ratio 12.8 12.6
Tier 2 capital ratio 2.0 2.4
Total regulatory capital ratio 14.8 15.0
1
The capital ratios represent information mandated by APRA. The capital ratios of the Overseas Banking Group are publicly available in the Overseas Banking Group’s Pillar
3 report. This information is made available to users via the Overseas Bank’s website (www.westpac.com.au).
2
Overseas Banking Group (excluding entities specifically excluded by APRA regulations) comprises the consolidation of the Overseas Bank and its subsidiary entities except
those entities specifically excluded by APRA regulations for the purposes of measuring capital adequacy (Level 2). The head of the Level 2 group is the Overseas Bank.
3
Overseas Bank (Extended Licensed Entity) comprises the Overseas Bank and its subsidiary entities that have been approved by APRA as being part of a single Extended
Licensed Entity for the purpose of measuring capital adequacy (Level 1).
Under APRA’s Prudential Standards, Australian authorised deposit-taking institutions (‘ADI’), including the Overseas Banking Group are required to
maintain minimum ratios of capital to risk-weighted assets (‘RWA’), as determined by APRA. For the calculation of RWAs, the Overseas Banking Group
is accredited by APRA to apply advanced models permitted by the Basel III global capital adequacy regime. The Overseas Banking Group uses the
Advanced Internal Ratings Based (‘Advanced IRB’) approach for credit risk, the Advanced Measurement Approach (‘AMA’) for operational risk and
the internal model approach for interest rate risk in the banking book for calculating regulatory capital. APRA’s prudential standards are generally
consistent with the International Regulatory Framework for Banks, also known as Basel III, issued by the Basel Committee on Banking Supervision
(‘BCBS’), except where APRA has exercised certain discretions.
The Overseas Banking Group is required to disclose additional detailed information on its risk management practices and capital adequacy on a
quarterly basis. This information is made available to users via the Overseas Banking Group’s website (www.westpac.com.au).
The Overseas Banking Group (excluding entities specifically excluded by APRA regulations), and the Overseas Bank (Extended Licensed Entity as defined
by APRA), exceeded the minimum capital adequacy requirements as specified by APRA as at 30 September 2018.
The Overseas Banking Group’s approach seeks to balance the fact that capital is an expensive form of funding with the need to be adequately capitalised
as an ADI. The Overseas Banking Group considers the need to balance efficiency, flexibility and adequacy when determining sufficiency of capital and
when developing capital management plans.
The Overseas Banking Group evaluates these considerations through an Internal Capital Adequacy Assessment Process, the key features of which include:
–the development of a capital management strategy, including consideration of regulatory minimums, capital buffers and contingency plans;
–consideration of both economic and regulatory capital requirements;
–a stress testing framework that challenges the capital measures, coverage and requirements, including the impact of adverse economic scenarios; and
–consideration of the perspectives of external stakeholders including rating agencies and equity and debt investors.
Note 34 Insurance business (continued)

Westpac Banking Corporation - New Zealand Banking Group50
Notes to the financial statements
Note 36 Risk management
The NZ Banking Group regards the management of risk to be a fundamental management activity performed at all levels of its business. The NZ
Banking Group’s risk management strategy includes a sound risk culture and sets out minimum standards for risk management across all risk types
(‘Risk Management Strategy’). The NZ Banking Group adopts a ‘Three Lines of Defence’ approach to risk management which reflects our culture
of ‘risk is everyone’s business in which all employees are responsible for identifying and managing risk and operating within the NZ Banking Group’s
desired risk profile.
The 1st Line of Defence – Risk identification, risk management and self-assurance
Divisional business units are responsible for identifying, evaluating and managing the risks that they originate within approved risk appetite and policies.
They are required to establish and maintain appropriate risk management controls, resources and self-assurance processes.
The 2nd Line of Defence – Establishment of risk management frameworks and policies and risk management oversight
The 2nd Line of Defence comprises separate risk and compliance advisory, control, assurance and monitoring functions, which establish frameworks,
policies, limits and processes for the management, monitoring and reporting of risk. The 2nd Line of Defence may approve risks outside the authorities
granted to the 1st Line and also evaluate and opine on the adequacy and effectiveness of 1st Line controls and application of frameworks and policies
and, where necessary, require improvement and monitor the 1st Line’s progress toward remediation of identified deficiencies.
The 3rd Line of Defence – Independent assurance
The audit function independently evaluates the adequacy and effectiveness of the Group’s overall risk management framework and controls.
Financial instruments are fundamental to the NZ Banking Group’s business of providing banking and financial services. The associated financial risks
(including credit risk, funding and liquidity risk and market risk) are a significant proportion of the total risks faced by the NZ Banking Group.
This note details the risk management policies, practices and quantitative information of the NZ Banking Group’s principal risk exposures.
Principal risksNote name
Note
number
OverviewRisk management frameworks
Group audit
Reviews in respect of risk management systems
36.1.1
36.1.2
36.1.3
Credit risk
The risk of financial loss where a customer or counterparty fails to
meet their financial obligation to the NZ Banking Group.
Credit risk ratings system
Credit risk mitigation, collateral and other credit enhancements
Credit risk concentrations
Regulatory capital
Residential mortgages by loan-to-value ratio (‘LVR’)
Credit quality of financial assets
Collateral held
36.2.1
36.2.2
36.2.3
36.2.4
36.2.5
36.2.6
36.2.7
Operational risk and compliance risk
Operational risk is the risk of loss resulting from inadequate or failed
internal processes, people and systems, or from external events.
The definition is aligned to the regulatory (Basel II) definition, including
legal and regulatory risk but excluding strategic and reputation risk.
Compliance risk is the risk of legal or regulatory sanction, financial loss
or reputation loss arising from the NZ Banking Group’s failure to abide
by the compliance obligations required of the NZ Banking Group.
Operational risk and compliance risk36.3
Funding and liquidity risk
The risk that the NZ Banking Group will be unable to fund assets and
meet obligations as they become due.
Liquidity modelling
Sources of liquidity
Contractual maturity of financial instruments
Expected maturity
36.4.1
36.4.2
36.4.3
36.4.4
Market risk
The risk of an adverse impact on earnings resulting from changes
in market factors, such as foreign exchange rates, interest rates,
commodity prices and equity prices.
Value-at-Risk (‘VaR’)
Traded market risk
Non-traded market risk
Market risk notional capital charges
Interest rate sensitivity
36.5.1
36.5.2
36.5.3
36.5.4
36.5.5

51
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
36.1 Over view
36.1.1 Risk management frameworks
The Board is responsible for approving the Overseas Banking Group’s Risk Management Strategy and Overseas Banking Group’s Risk Appetite Statement
and monitoring the effectiveness of risk management by the Overseas Banking Group.
The Board has delegated to the Overseas Bank’s Board Risk and Compliance Committee (‘Group BRCC’) responsibility to:
–review and recommend the Overseas Banking Group’s Risk Management Strategy and Risk Appetite Statement to the Board for approval;
–set risk appetite consistent with the Overseas Banking Group’s Risk Appetite Statement;
–approve frameworks, policies and processes for managing risk (consistent with the Overseas Banking Group’s Risk Management Strategy and Risk
Appetite Statement); and
–review and, where appropriate, approve risks beyond the approval discretion provided to management.
The Board is also supported by the Overseas Bank’s Board Audit Committee (‘Group BAC’) which assists the Board in fulfilling its responsibilities in
relation to:
–oversight of financial reporting and compliance with prudential regulatory reporting. With reference to the Group BRCC, this includes an oversight of
regulatory and statutory reporting requirements;
–reviewing, discussing with management and the external auditor, and assessing the processes used to monitor and comply with laws, regulations
and other requirements relating to external reporting of financial and non-financial information;
–oversight of the external audit engagement, including the external auditor’s qualifications, performance, independence and fees; and
–oversight of the performance of the internal audit function.
Further to the Directors’ Statement on page 7:
–the Overseas Bank and Westpac New Zealand together had systems in place to monitor and control adequately the material risks of the following
relevant members of the NZ Banking Group:
–BTNZ;
–BTFGNZL;
–WFSGNZL;
–Westpac Life;
–WNNZL;
–WSNNZL;
–WGINZL;
–WHNZL;
–WCNZL; and
–WNZGL;
–the Overseas Bank and Westpac New Zealand together had systems in place to monitor and control adequately the material risks of the NZ
Branch;
–the Overseas Bank had systems in place to monitor and control adequately the material risks of Capital Finance New Zealand Limited and Sie-Lease
(New Zealand) Pty Limited; and
–the remaining relevant members of the NZ Banking Group are not considered to have material risks.
The NZ Banking Group has an Executive Risk Committee (‘ERC’) which meets quarterly, and which oversees the management of enterprise risks across
the New Zealand incorporated entities within the Overseas Banking Group of companies (excluding Westpac New Zealand and its subsidiaries which
are overseen by the Westpac New Zealand Executive Risk Committee (‘WNZL RISKCO’)). Enterprise risks include, but are not limited to, credit risk,
compliance risk, operational risk, funding and liquidity risk, market risk, conduct risk, business risk, sustainability risk, equity risk, insurance risk, related
entity (contagion) risk and reputation risk.
Westpac Life and BTNZ maintain separate Risk Management Frameworks. Both documents are approved by the respective Board of each entity and
are closely aligned to the Group and WNZL Risk Management Strategy whilst reflecting each entity’s specific regulatory and operating environment.
Westpac New Zealand, a member of the NZ Banking Group, is a locally incorporated registered bank. Westpac New Zealand’s Risk Management
Strategy is closely aligned with that of the Overseas Banking Group, and the Board of Westpac New Zealand is responsible for the risk management of
that bank and its subsidiaries.
The Boards of the other entities making up the NZ Banking Group have ultimate responsibility for overseeing the effective deployment of the Risk
Management Strategy for these entities.
Note 36 Risk management (continued)

Westpac Banking Corporation - New Zealand Banking Group52
Notes to the financial statements
For each of its primary risks, the NZ Banking Group maintains risk management frameworks and a number of supporting policies that define roles and
responsibilities, acceptable practices, limits and key controls:
RiskRisk management framework and controls
Credit risk
–The Overseas Bank’s Credit Risk Management Framework describes
the principles, methodologies, systems, roles and responsibilities,
reports and key controls for managing credit risk. Within the Credit
Risk Management Framework, the NZ Banking Group has its own
credit approval limits approved by Westpac New Zealand’s Board and
delegated by the Overseas Banking Group’s Chief Risk Officer.
–The Westpac New Zealand Board Risk and Compliance Committee
(‘WNZL BRCC’) and ERC monitor the risk profile, performance and
management of the NZ Banking Group’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 the NZ Banking Group’s
model risk policies.
–An annual review is performed of the Credit Risk Rating System by
the WNZL BRCC and ERC and is approved by the Group BRCC.
–Specific credit risk estimates (including PD, LGD and EAD levels)
are overseen, reviewed annually and supported by the Overseas
Bank’s Credit Risk Estimates Committee (a subcommittee of the
Group BRCC).
–Policies for the delegation of credit approval authorities and formal
limits for the extension of credit are established throughout the NZ
Banking Group including those for the approval and management of
all credit risk arising from other banks and related entities.
–Credit manuals are established throughout the NZ Banking
Group including policies governing the origination, evaluation,
approval, documentation, settlement and ongoing management
of credit risks.
–Sector policies guide credit extension where industry-specific
guidelines are considered necessary (e.g. acceptable financial ratios
or permitted collateral).
–The Related Entity Risk Management Framework and supporting
policies govern credit exposures to related entities to minimise the
spread of credit risk between Overseas Banking Group entities and to
comply with prudential requirements prescribed by APRA.
Operational
risk and
compliance
risk
–The NZ Banking Group has an Operational Risk Management
Framework (‘ORMF’) which outlines the business requirements
for managing operational risk with respect to governance, risk and
control assessments, incident management, and reporting and
monitoring. The ORMF is approved by the Group BRCC. Westpac
New Zealand has its own ORMF that is closely aligned with that of
the Overseas Bank. The Westpac New Zealand ORMF is approved
by the WNZL BRCC.
–The NZ Banking Group has a Compliance Risk Management Framework
and a dedicated compliance function to assist the business in
managing its compliance risks. The Framework is approved by the
Group BRCC. Westpac New Zealand operates its own Compliance
Risk Management Framework that is closely aligned with that of the
Overseas Bank. The Westpac New Zealand Framework is approved by
the WNZL BRCC.
Funding
and liquidity
risk
–The Liquidity Risk Management Framework sets out the liquidity
risk appetite, roles and responsibilities, tools for measuring and
managing liquidity risk, reporting procedures and supporting
policies. It also documents the limits and targets for cash flow
mismatch levels and wholesale funding and balance sheet ratios.
It is reviewed by the Overseas Banking Group’s Asset and Liability
Committee (‘Group ALCO’) prior to approval by the Group BRCC.
The WNZL BRCC has approved a Liquidity Risk Management
Framework for Westpac New Zealand’s balance sheet which is
consistent with the Overseas Banking Group framework but also
meets New Zealand specific requirements.
–The Overseas Banking Group’s Treasury function is responsible for
managing funding and liquidity including managing the balance
sheet against approved limits and targets and managing the NZ
Banking Group’s funding base so that it is appropriately maintained,
stable and diversified.
–Daily liquidity risk reports are reviewed by Treasury and the Liquidity
risk teams. Liquidity reports are presented to Group ALCO monthly
and to the Group BRCC quarterly.
–An annual funding strategy is established by the Overseas Banking
Group’s Treasury unit which includes consideration of trends in global
markets, peer analysis, wholesale funding capacity, expected funding
requirements and funding risk analysis. The strategy is regularly
reviewed to take into account current market conditions. In addition,
Westpac New Zealand’s Treasury unit undertakes an annual review of
Westpac New Zealand’s funding strategy.
–A contingency funding plan is also maintained, which details actions to
be taken in response to severe disruptions in the NZ Banking Group’s
ability to conduct its activities in a timely manner and at a reasonable
cost. The plan identifies the committee of senior executives to
manage any crisis and their responsibilities. The plan is aligned with
the Overseas Banking Group’s broader Liquidity Crisis Management
Policy. Additionally, Westpac New Zealand’s Treasury unit maintains a
contingency funding plan specific to Westpac New Zealand.
Market risk
–The Market Risk Framework describes the Overseas Banking Group’s
approach to managing traded and non-traded market risk and is
approved by the Group BRCC. Westpac New Zealand operates its
own Market Risk Management Framework that is closely aligned
with that of the Overseas Banking Group. The Westpac New Zealand
Framework is approved by the WNZL BRCC.
–Traded market risk includes interest rate, foreign exchange,
commodity, equity price, credit spread and volatility risks.
Non-traded market risk includes interest rate and foreign
exchange risks.
–Market risk is managed using VaR limits, Net interest income at
risk (‘NaR’) and structural risk limits (including credit spread and
interest rate basis point value limits) as well as scenario analysis
and stress testing.
–The Group BRCC approves the risk appetite for traded and non-traded
risks through the use of VaR, NaR and specific structural risk limits.
–The Overseas Banking Group’s RISKCO (‘Group RISKCO’) has
approved separate VaR sub-limits for the trading activities of the
Overseas Banking Group’s Financial Markets and Treasury units.
–Market risk limits are assigned to business managers based upon
business strategies, experience, and the consideration of market
liquidity and the concentration of risks.
–Market risk positions are managed by the trading desks and Asset
and Liability Management (‘ALM’) unit consistent with their delegated
authorities and the nature and scale of the market risks involved.
–Daily monitoring of current exposure and limit utilisation is conducted
independently by the Overseas Banking Group’s Market Risk
Management unit, which monitors market risk exposures against VaR
and structural risk limits. Oversight of risk specific to the NZ Banking
Group is monitored by the NZ Branch’s Trading Risk Management Unit.
Daily VaR position reports are produced by risk type, by product lines
and by geographic region. Quarterly reports are produced for the
Overseas Banking Group’s Market Risk Committee (‘Group MARCO’),
Group RISKCO and Group BRCC.
–Daily stress testing and backtesting of VaR results is performed
to support model integrity and to analyse extreme or unexpected
movements. A review of both the potential profit and loss outcomes is
also undertaken to monitor any skew created by the historical data.
–The Group BRCC has approved a framework for profit or loss escalation
which considers both single day and 20 day cumulative results.
–Treasury’s ALM unit is responsible for managing the non-traded
interest rate risk including risk mitigation through hedging using
derivatives. This is overseen by the market risk unit and reviewed by
the Group MARCO, Group RISKCO and Group BRCC.
Note 36 Risk management (continued)

53
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Other risk classes include:
–Conduct risk: the risk that the NZ Banking Group’s provision of services and products results in unsuitable or unfair outcomes for the NZ Banking
Group’s customers or undermines market integrity;
–Business risk: the risk associated with the vulnerability of a line of business to changes in the business environment;
–Equity risk: the potential for financial loss arising from movements in equity values. Equity risk may be direct, indirect or contingent;
–Insurance risk: the risk of mis-estimation of the expected cost of insured events, volatility in the number or severity of insured events, and mis-
estimation of the cost of incurred claims;
–Related entity (contagion) risk: the risk that problems arising in other members of the Overseas Banking Group may compromise the financial and
operational position of the authorised deposit-taking institutions in the NZ Banking Group;
–Reputation risk: the risk of the loss of reputation, stakeholder confidence, or public trust and standing; and
–Sustainability risk: the risk of reputation or financial loss due to failure to recognise or address material existing or emerging sustainability related
environmental, social or governance issues.
36.1.2 Group Audit
Group Audit for the Overseas Banking Group (‘Group Audit’) comprises the Group Audit and Credit Portfolio Review (including Model Risk) functions.
Group Audit provides an independent assessment of the adequacy and effectiveness of management’s controls over operational, market, liquidity
and compliance risks. Credit Portfolio Review provides an independent assessment of the effectiveness of the NZ Banking Group’s credit management
activities and the adequacy of credit provisioning, as well as an independent assessment over compliance with Group model risk policy. The New
Zealand Audit function comprises a New Zealand based Audit team, supported by the Overseas Banking Group’s Credit Portfolio Review (including
Model Risk) functions. Group Audit reports on a quarterly basis, or more often as deemed appropriate, to the Group BAC, to agree the budget and the
annual audit plan and to report its findings. In addition, the Group BAC has private sessions with the General Manager Group Audit. Furthermore, the
General Manager Group Audit reports to the Chair of the Group BAC, and for administrative purposes to the Overseas Bank’s Chief Financial Officer, a
member of the Overseas Bank’s Executive Team.
As independent functions, New Zealand Audit and Group Audit have no direct authority over the activities of management. They have unlimited access
to all of the NZ Banking Group’s activities, records, property and employees. The scope of responsibility of New Zealand Audit covers systems of
management control across all business activities and support functions at all levels of management within the NZ Banking Group. The level of risk
across all material risk classes determines the scope and frequency of individual audits. New Zealand Audit periodically reviews the adequacy and
effectiveness of management’s controls over market risk and liquidity risk.
36.1.3 Reviews in respect of risk management systems
Group Audit’s Credit Portfolio Review function has a rolling programme of credit and model risk reviews throughout the financial year. New Zealand
Audit, with support from Group Audit, also periodically reviews the NZ Banking Group’s Operational, Compliance, Market, Funding and Liquidity Risk
Frameworks.
The reviews discussed above in this section are not conducted by a party which is external to the NZ Banking Group or the Overseas Banking Group,
though they are independent and have no direct authority over the activities of management.
Various external reviews of the NZ Banking Group’s risk management system have been conducted during the year ended 30 September 2018 as part of
ongoing compliance with regulatory requirements.
36.2 Credit risk
36.2.1 Credit risk ratings system
The principal objective of the credit risk rating system is to reliably assess the credit risk to which the NZ Banking Group is exposed. The NZ Banking
Group has two main approaches to this assessment.
Transaction-managed customers
The NZ Banking Group assigns a Customer Risk Grade (‘CRG’) to each customer, corresponding to their expected PD. Each facility is assigned an LGD.
The NZ Banking Group’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 Investor Service (‘Moody’s’) and S&P Global Ratings (‘S&P’) external senior ranking unsecured ratings.
Program-managed portfolio
Customers that are not transaction-managed are grouped into pools of similar risk. Pools are created by analysing characteristics that have historically
predicted that an account is likely to go into default. Customers grouped according to these predictive characteristics are assigned a PD and LGD
relative to their pool.
Note 36 Risk management (continued)

Westpac Banking Corporation - New Zealand Banking Group54
Notes to the financial statements
Customer risk grades
The table below maps the NZ Banking Group’s high level CRGs to their corresponding external rating.
Financial Statement DisclosureNZ Banking Group’s CRGMoody’s RatingS&P Rating
StrongA
B
C
Aaa – Aa3
A1 – A3
Baa1 – Baa3
AAA – AA-
A+ – A-
BBB+ – BBB-
Good/satisfactoryDBa1 – B1BB+ – B+
WeakE
F
NZ Banking Group Rating
Watchlist
Special Mention
Weak/defaultG
H
Substandard/Default
Default
36.2.2 Credit risk mitigation, collateral and other credit enhancements
The NZ Banking Group uses a variety of techniques to reduce the credit risk arising from its lending activities.
This includes the NZ Banking Group 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:
Financial assetsNature of collateral
Loans – housing and
personal
1
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.
Loans – business
1
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 or standby letters of credit may also be taken as collateral, if appropriate.
Trading securities,
financial assets
designated at fair value
and derivative financial
instruments
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.
Master netting agreements are typically used to enable the effects of derivative assets and derivative 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.
1
This includes collateral held in relation to associated credit commitments.
Note 36 Risk management (continued)

55
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
Management of risk mitigation
The NZ Banking Group mitigates credit risk through controls covering:
Collateral and
valuation management
The Overseas Bank manages collateral under collateralisation agreements centrally for all branches of the Overseas Bank
and Westpac New Zealand.
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.
The NZ Banking Group 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 where required under APRA’s Prudential Standard CPS226. The collateralisation arrangements are
documented via the Credit Support Annex of the International Swaps and Derivatives Association dealing agreements.
Other credit
enhancements
The NZ Banking Group only recognises guarantees, standby letters of credit, or credit derivative protection from the
following entities (provided they are not related to the entity with which the NZ Banking Group has a credit exposure):
–Sovereign;
–Australia and New Zealand public sector;
–Authorised deposit-taking institutions and overseas banks with a minimum risk grade equivalent of A3 / A-; and
–Other entities with a minimum risk grade equivalent of A3 / A-.
OffsettingCreditworthy customers domiciled in New Zealand may enter into formal agreements with the NZ Banking Group,
permitting the NZ Banking Group 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 NZ Banking 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 28.
Central clearing
(ASX/LCH)
The NZ Banking Group increasingly 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.
36.2.3 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.
The NZ Banking Group monitors its credit portfolio to manage risk concentrations and rebalance the portfolio.
Individual customers or groups of related customers
The NZ Banking Group 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 the NZ Banking Group’s industry risk appetite limits.
Individual countries
The NZ Banking Group 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 the NZ Banking Group, or the NZ Banking Group’s ability to
realise its assets in a particular country.
Maximum exposure to credit risk
The carrying amount of on-balance sheet financial assets and undrawn credit commitments, represents the maximum exposure to credit risk (excluding
any collateral received) as set out in the following table. Life insurance assets held as an investment in unit trusts are excluded as the unit price is
affected by movements in equity prices which are a market risk.
Note 36 Risk management (continued)

Westpac Banking Corporation - New Zealand Banking Group56
Notes to the financial statements
NZ BANKING GROUP
$ millions20182017
Financial assests
Cash and balances with central banks 1,472 1,761
Receivables due from other financial institutions 237 471
Other assets 411 378
Trading securities and financial assets designated at fair value 3,016 3,949
Derivative financial instruments 3,509 3,420
Available-for-sale securities 3,810 4,087
Loans 80,860 77,681
Life insurance assets 9 9
Due from related entities 2,023 2,623
Total financial assets 95,347 94,379
Undrawn credit commitments
Letters of credit and guarantees 1,104 1,041
Commitments to extend credit24,722 25,111
Other commitments60 10
Total undrawn credit commitments 25,886 26,162
Total maximum credit risk exposure 121,233 120,541
36.2.4 Regulatory capital
The credit risk rating system is a key input to evaluate the level of capital to be held against loans for regulatory capital purposes.
Overview of the internal credit risk ratings process by portfolio
(a) Transaction-managed approach (including business lending, corporate, sovereign and bank)
The process for assignment and approval of individual PDs and LGDs involves business unit representatives recommending the CRGs and LGDs under
criteria guidelines. Credit Officers then independently evaluate the recommendations and approve the final outcomes. An expert judgment decision-
making process is employed to evaluate the CRG. The following represent the types of business lending, corporate, sovereign and banking exposures
included within the transaction-managed portfolio approach:
–direct lending exposures;
–contingent lending exposures;
–pre-settlement exposures;
–foreign exchange settlement exposures; and
–transaction exposures.
All of the above exposure categories also apply to Specialised Lending, which is a sub-asset class of Corporate and in the NZ Banking Group comprises
Property Finance and Project Finance. Regulatory risk-weights are also applied to Specialised Lending.
Definitions, methods and data for estimation and validation of PD, LGD and EAD
PD
The PD is a through-the-cycle assessment of the likelihood of a customer defaulting on its financial obligations within one year. The NZ Banking Group
reflects its PD estimate in a CRG.
LGD
The LGD represents an estimate of the expected severity of a loss to the NZ Banking Group should a customer default occur during an economic
downturn. The NZ Banking Group assigns an LGD to each credit facility, assuming an event of default has occurred, and taking into account a conservative
estimate of the net realisable value of assets to which the NZ Banking Group has recourse and over which it has security. LGDs also reflect the seniority
of exposures in the customer’s capital and debt structure.
LGD estimates are benchmarked against observed historical LGDs from internal and external data and are calibrated to reflect losses expected in an
economic downturn. The calculation of historical LGDs is based on an economic loss and includes allowances for workout costs and the discounting of
future cash flows to the date of default.
LGD values range from 5% to 100%. The range of LGD values ensures that the risk of loss is differentiated across many credit facilities extended to
customers.
Note 36 Risk management (continued)

57
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
EAD and Credit Conversion Factor (‘CCF’)
EAD represents an estimate of the amount of committed exposure expected to be drawn by the customer at the time of default. To calculate EAD,
historical data is analysed to determine what proportion of undrawn commitments are ultimately utilised by customers who end up in default. The
proportion of undrawn commitments ultimately utilised by customers is termed the CCF. EAD therefore consists of the initial outstanding balances plus
the CCF multiplied by undrawn commitments. For transaction-managed exposures CCF’s are all 100%.
(b) Retail (program-managed) asset class approach (including residential mortgages, small business and other retail)
Each customer is rated using details of their account performance or application details and segmented into pools of similar risk. These segments are
created by analysing characteristics that have historically proven predictive in determining if an account is likely to go into default. Customers are then
grouped according to these predictive characteristics of default. The retail (program-managed) portfolio is divided into a number of segments per
product with each segment assigned a quantified measurement of its PD, LGD and EAD.
Retail asset class exposures included in the retail (program-managed) portfolio approach are split into the following categories of products:
Asset sub-classesProduct categories
Residential mortgages –Mortgages
Small business –Equipment finance
–Business overdrafts
–Business term loans
–Business credit cards
Other retail –Credit cards
–Personal loans
–Overdrafts
PD
PDs are assigned at the retail segment level and reflect the likelihood of accounts within that segment to default. A long-run average is used to assign a
PD to each account in a segment based on the segment’s characteristics. The PD estimate for each segment is based on internal data.
Models are used to help determine or establish the appropriate internal rating for program-managed portfolios.
LGD
LGD measures the proportion of the exposure that will be lost if default occurs. LGD is measured as a percentage of EAD. The approach to LGD varies
depending on whether the retail product is secured or unsecured. A downturn period is used to reflect the effect on the collateral for secured products.
For unsecured products, a long-run estimate is used for LGD.
EAD
EAD represents an estimate of the amount of committed exposure expected to be drawn by the customer at the time of default. To calculate EAD,
historical data is analysed to determine what proportion of undrawn commitments are ultimately utilised by customers who end up in default.
36.2.5 Residential mortgages by LVR as at 30 September 2018 (Unaudited)
LVRs are calculated as the current exposure divided by the NZ Banking Group’s valuation of the residential security at origination.
For loans originated from 1 January 2008, the NZ Banking Group utilises data from its loan system. For loans originated prior to 1 January 2008, the
origination valuation is not separately recorded and is therefore not available for disclosure. For these loans, the NZ Banking Group utilises its dynamic
LVR process to estimate an origination valuation. Refer to the disclosures in relation to Westpac New Zealand’s conditions of registration on page 72.
Exposures for which no LVR is available have been included in the ‘Exceeds 90%’ category in accordance with the requirements of the Order.
NZ BANKING GROUP
2018
LVR range ($ millions)
Does not
exceed 60%
Exceeds 60%
and not 70%
Exceeds 70%
and not 80%
Exceeds 80%
and not 90% Exceeds 90% Total
On-balance sheet exposures 20,561 11,727 12,092 2,717 1,601 48,698
Undrawn commitments and other off-balance
sheet exposures
5,161 1,168 821 110 178 7,438
Value of exposures 25,722 12,895 12,913 2,827 1,779 56,136
Note 36 Risk management (continued)

Westpac Banking Corporation - New Zealand Banking Group58
Notes to the financial statements
Reconciliation of residential mortgage-related amounts
The table below provides the NZ Banking Group’s reconciliation between any amounts disclosed in this Disclosure Statement that relate to mortgages
on residential property.
NZ BANKING GROUP
$ millions2018
Term loans - Housing (Note 13) and Residential Mortgages (Note 14) 48,893
Reconciling items:
Unamortised deferred fees and expenses (166)
Fair value hedge adjustments (29)
Value of undrawn commitments and other off-balance sheet amounts relating to residential mortgages 9,983
Undrawn at default
1
(2,545)
Residential mortgages by LVR 56,136
1
Estimate of the amount of committed exposure not expected to be drawn by the customer at the time of default.
36.2.6 Credit quality of financial assets
An asset is considered to be past due when any payment under the contractual terms has been missed. The entire contractual balance is considered
to be past due, rather than only the overdue portion. Assets may be overdue for a number of reasons, including late payments or incomplete
documentation. Late payment may be influenced by the timing of weekends and holidays. This does not always align with the underlying basis by which
credit risk is managed.
All the financial assets of the NZ Banking Group as at 30 September 2018 and 2017, other than loans (as disclosed in Note 14), are neither past due nor
impaired.
The credit quality of financial assets of the NZ Banking Group that are neither past due nor impaired is determined by reference to the credit risk ratings
system (refer to Note 36.2.1). All the financial assets of the NZ Banking Group that are neither past due nor impaired fall into the ‘Strong’ category in their
entirety except those financial assets disclosed below:
NZ BANKING GROUP
20182017
$ millions Strong
Good/
Satisfactory Weak Total Strong
Good/
Satisfactory Weak Tot a l
Receivables due from other financial
institutions (refer to Note 9)
237 --237 465 6 - 471
Accrued interest receivable (refer to
Note 10)
70 87 3 160 63 82 4 149
Trading securities and financial assets
designated at fair value (refer to Note 11)
3,015 1-3,016 3,931 18 - 3,949
Derivative financial instruments
(refer to Note 26)
3,342 167-3,509 3,314 104 2 3,420
Loans (refer to Note 14) 35,119 43,202 1,432 79,753 32,167 42,586 1,871 76,624
36.2.7 Collateral held
Loans
The NZ Banking Group analyses the coverage of the loan portfolio which is secured by the collateral that it holds. Coverage is measured as follows:
CoverageSecured loan to collateral value ratio
Fully securedLess than or equal to 100%
Partially securedGreater than 100% but not more than 150%
UnsecuredGreater than 150%, or no security held (e.g. can include credit cards, personal loans, and exposure to highly rated corporate
entities)
Note 36 Risk management (continued)

59
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
The NZ Banking Group’s loan portfolio has the following coverage from collateral held:
NZ BANKING GROUP
%20182017
Fully secured78 77
Partially secured12 13
Unsecured10 10
Total net loans100 100
Collateral held against financial assets other than loans
NZ BANKING GROUP
$ millions20182017
Cash, primarily for derivatives591 191
Securities under reverse repurchase agreements
1
216 754
Total other collateral held807 945
1
Securities received as collateral are not recognised on the NZ Banking Group’s balance sheet.
36.3 Operational risk and compliance risk
Operational risk
Operational risk has the potential, as a result of the way business objectives are pursued, to negatively impact the NZ Banking Group’s financial
performance, customer service and/or reputation in the community or cause other damage to the business.
Westpac New Zealand has its own Operational Risk Management Framework that is closely aligned with that of the Overseas Bank. The Westpac New
Zealand Framework is approved by the WNZL BRCC.
Compliance risk
The NZ Banking Group is subject to regulation and regulatory oversight. Any significant regulatory developments could have an adverse effect on how
business is conducted and on the results of operations. Business and earnings are also affected by the fiscal or other policies that are adopted by various
regulatory authorities of the New Zealand Government, foreign governments and international agencies. The nature and impact of future changes in
such policies are not predictable and are beyond the NZ Banking Group’s control.
Effective compliance risk management enables the NZ Banking Group to identify emerging issues and, where necessary, put in place preventative
measures.
Westpac New Zealand operates its own Compliance Risk Management Framework that is closely aligned with that of the Overseas Bank. The Westpac
New Zealand Framework is approved by the WNZL BRCC.
36.4 Funding and liquidity risk
36.4.1 Liquidity modelling
Westpac New Zealand is subject to the conditions specified in the Reserve Bank document ‘Liquidity Policy’ (‘BS13’). The following metrics are calculated
and reported on a daily basis by Westpac New Zealand in accordance with BS13:
–the level of liquid assets held;
–the one-week mismatch ratio;
–the one-month mismatch ratio; and
–the one-year core funding ratio.
In addition, the NZ Banking Group calculates the following liquidity ratios in accordance with the Overseas Bank’s liquidity risk framework under APRA
Prudential Standard APS 210 Liquidity:
–liquidity coverage ratio; and
–net stable funding ratio.
Note 36 Risk management (continued)

Westpac Banking Corporation - New Zealand Banking Group60
Notes to the financial statements
36.4.2 Sources of liquidity
Sources of liquidity are regularly reviewed to maintain a wide diversification by currency, geography, product and term. Sources include, but are not
limited to:
–deposits;
–debt issues;
–proceeds from sale of marketable securities;
–repurchase agreements with central banks;
–principal repayments on loans;
–interest income; and
–fee income.
Liquid assets
The NZ Banking Group holds a portfolio of high-quality liquid assets as a buffer against unforeseen funding requirements. These assets are eligible for
repurchase agreements with the Reserve Bank and are held in cash, government, local government and highly rated investment grade securities. The
level of liquid asset holdings is reviewed frequently and is consistent with both the requirements of the balance sheet and market conditions.
The table below shows the NZ Banking Group‘s holding of liquid assets and represents the key liquidity information provided to management. Liquid
assets include high quality assets readily convertible to cash to meet the NZ Banking Group’s liquidity requirements. In management’s opinion, liquidity
is sufficient to meet the NZ Banking Group’s present requirements.
NZ BANKING GROUP
$ millions20182017
Cash and balances with central banks 1,472 1,761
Receivables due from other financial institutions 57 40
Supranational securities 1,502 1,484
NZ Government securities 1,322 2,372
NZ public securities 1,809 1,609
NZ corporate securities 1,522 2,073
Residential mortgage-backed securities 3,950 3,950
Total liquid assets 11,634 13,289
Note 36 Risk management (continued)

61
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
36.4.3 Contractual maturity of financial liabilities
The table below presents cash flows associated with financial liabilities, payable at the balance sheet date, by remaining contractual maturity. The
amounts disclosed in the table are the future contractual undiscounted cash flows, whereas the NZ Banking Group manages inherent liquidity risk
based on expected cash flows.
Cash flows associated with these financial liabilities include both principal payments as well as fixed or variable interest payments incorporated into
the relevant coupon period. Principal payments reflect the earliest contractual maturity date. Derivative liabilities designated for hedging purposes are
expected to be held for their remaining contractual lives, and reflect gross cash flows over the remaining contractual term.
Derivatives held for trading and certain liabilities classified in “Other financial liabilities at fair value through income statement” are not managed for
liquidity purposes on the basis of their contractual maturity, and accordingly these instruments are presented in either the on demand or up to 1 month
columns. Only the financial instruments that the NZ Banking Group manages based on their contractual maturity are presented on a contractual
undiscounted basis in the tables below.
NZ BANKING GROUP
2018
$ millions
On
Demand
Up to
1 Month
Over
1 Month
and Up to
3 Months
Over
3 Months
and Up to
1 Year
Over
1 Year
and Up to
5 Years
Over
5 Years Total
Financial liabilities
Payables due to other financial institutions 536 717 - - - - 1,253
Other liabilities - 376 - - - - 376
Deposits and other borrowings 28,083 6,488 12,166 14,759 2,363 - 63,859
Other financial liabilities at fair value through income statement 182 41 - - - - 223
Derivative financial instruments:
Held for trading 3,026 - - - - - 3,026
Held for hedging purposes (net settled) - 18 69 105 229 84 505
Held for hedging purposes (gross settled):
Cash outflow - 5 5 32 682 581 1,305
Cash inflow - - - (15) (529) (584) (1,128)
Due to related entities:
Non-derivative balances 1,475 - - 9 340 - 1,824
Derivative financial instruments:
Held for trading 591 - - - - - 591
Held for hedging purposes (gross settled):
Cash outflow - - 18 54 1,605 - 1,677
Cash inflow - - (17) (50) (1,551) - (1,618)
Debt issues - 10 52 1,772 11,595 1,017 14,446
Loan capital - - 14 41 232 3,174 3,461
Total undiscounted financial liabilities 33,893 7,655 12,307 16,707 14,966 4,272 89,800
Total contingent liabilities and commitments
Letters of credit and guarantees 1,104 - - - - - 1,104
Commitments to extend credit 24,722 - - - - - 24,722
Other commitments 60 - - - - - 60
Total undiscounted contingent liabilities and commitments 25,886 - - - - - 25,886
Note 36 Risk management (continued)

Westpac Banking Corporation - New Zealand Banking Group62
Notes to the financial statements
NZ BANKING GROUP
2017
$ millions
On
Demand
Up to
1 Month
Over
1 Month
and Up to
3 Months
Over
3 Months
and Up to
1 Year
Over
1 Year
and Up to
5 Years
Over
5 Years Tot a l
Financial liabilities
Payables due to other financial institutions 466 551 - 26 - - 1,043
Other liabilities - 190 - - - - 190
Deposits and other borrowings 28,455 4,456 12,404 12,205 2 ,158 - 59,678
Other financial liabilities at fair value through income statement 67 235 - - - - 302
Derivative financial instruments:
Held for trading 2,730 - - - - - 2,730
Held for hedging purposes (net settled) - 21 75 128 160 52 436
Held for hedging purposes (gross settled):
Cash outflow - 929 23 238 3,065 830 5,085
Cash inflow - (800) - (153) (2,453) (753) (4,159)
Due to related entities:
Non-derivative balances 2,761 - 3 9 343 - 3,116
Derivative financial instruments:
Held for trading 512 - - - - - 512
Held for hedging purposes (gross settled):
Cash outflow - - 18 54 1,699 - 1,771
Cash inflow - - (15) (48) (1,568) - (1,631)
Debt issues - 910 692 3,090 11,640 1,189 1 7, 5 2 1
Loan capital - - 13 40 244 3,084 3,381
Total undiscounted financial liabilities 34,991 6,492 13,213 15,589 15,288 4,402 89,975
Total contingent liabilities and commitments
Letters of credit and guarantees 1,041 - - - - - 1,041
Commitments to extend credit 25,111 - - - - - 25,111
Other commitments 10 - - - - - 10
Total undiscounted contingent liabilities and commitments 26,162 - - - - - 26,162
Note 36 Risk management (continued)

63
Notes to the financial statements
Westpac Banking Corporation - New Zealand Banking Group
36.4.4 Expected maturity
The table below presents a maturity analysis of assets and liabilities on the balance sheet which combine amounts expected to be realised or due to be
settled within one year and after more than one year. The balances in the table will not agree to the contractual maturity table due to the analysis below
being based on expected rather than contractual maturities, the impact of discounting and the exclusion of interest accruals.
NZ BANKING GROUP
20182017
$ millions
Due within
12 months
Greater than
12 months Total
Due within
12 months
Greater than
12 months Tot a l
Assets
Cash and balances with central banks 1,472 - 1,472 1,761 - 1,761
Receivables due from other financial institutions 237 - 237 471 - 471
Trading securities and financial assets designated at fair
value
2,506 510 3,016 3,590 359 3,949
Derivative financial instruments 2,771 738 3,509 2,703 717 3,420
Available-for-sale securities 1,386 2,424 3,810 511 3,576 4,087
Loans 11,467 69,393 80,860 10,393 67,288 77,681
Life insurance assets 201 109 310 204 100 304
Due from related entities 1,976 47 2,023 2,603 20 2,623
All other assets 576 843 1,419 542 828 1,370
Total assets22,59274,06496,65622,77872,88895,666
Liabilities
Payables due to other financial institutions 1,253 - 1,253 1,043 - 1,043
Deposits and other borrowings 60,881 2,224 63,105 56,965 2,033 58,998
Derivative financial instruments 2,715 854 3,569 2,573 902 3,475
Due to related entities 2,024 416 2,440 3,235 411 3,646
Debt issues 1,567 12,158 13,725 4,406 12,323 16,729
Loan capital - 2,866 2,866 - 2,822 2,822
All other liabilities 1,228 87 1,315 1,044 78 1,122
Total liabilities69,66818,60588,27369,26618,5698 7,8 3 5
36.5 Market risk
36.5.1 Value-at-Risk
The NZ Banking Group uses VaR as one of the mechanisms for controlling both traded and non-traded market risk.
VaR is a statistical estimate of the potential loss in earnings over a specified period of time and to a given level of confidence based on historical market
movements. The confidence level indicates the probability that the loss will not exceed the VaR estimate on any given day.
VaR seeks to take account of all material market variables that may cause a change in the value of the portfolio, including interest rates, foreign exchange
rates, price changes, volatility and the correlations between these variables. Daily monitoring of current exposure and limit utilisation is conducted
independently by the Market Risk unit which monitors market risk exposures against VaR and structural concentration limits. These are supplemented
by escalation triggers for material profits or losses and stress testing of risks beyond the 99% confidence level.
The key parameters of VaR are:
Holding period1 day
Confidence level99%
Period of historical data used1 year
Note 36 Risk management (continued)

Westpac Banking Corporation - New Zealand Banking Group64
Notes to the financial statements
36.5.2 Traded market risk
The NZ Banking Group’s exposure to traded market risk arises out of its Financial Markets (‘FM’) and Treasury trading activities. The FM trading book
activity represents dealings that encompass book running and distribution activity. The types of market risk arising from FM trading activity include
interest rate risk, foreign exchange risk, credit spread risk and volatility risk.
Treasury’s trading activity represents dealings that include the management of interest rate, foreign exchange and credit spread risks associated with
the wholesale funding task, liquid asset portfolios and foreign exchange repatriations.
The table below depicts the aggregate VaR, by risk type, for the year ended 30 September:
NZ BANKING GROUP
20182017
$ millionsAs at
Maximum
Exposure
Minimum
Exposure
Average
ExposureAs at
Maximum
Exposure
Minimum
Exposure
Average
Exposure
Interest rate risk 1.5 1.9 0.6 1.1 1.6 3.0 0.6 1.2
Foreign exchange risk 0.5 2.6 - 0.7 0.1 0.7 - 0.2
Price risk 0.3 0.6 0.1 0.2 0.1 0.2 - 0.1
Volatility risk - - - - - - - -
Net market risk 1.7 2.6 0.7 1.4 1.6 3.0 0.6 1.2
36.5.3 Non-traded market risk
Non-traded market risk includes interest rate risk in the banking book (‘IRRBB’) – the risk to interest income from a mismatch between the duration of
assets and liabilities that arises in the normal course of business activities.
Net interest income (‘NII’) sensitivity is managed in terms of the NaR. A simulation model is used to calculate the NZ Banking Group’s potential NaR. This
combines the underlying balance sheet data with assumptions about run off and new business, expected repricing behaviour and changes in wholesale
market interest rates.
Simulations using a range of interest rate scenarios are used to provide a series of potential future NII outcomes. The interest rate scenarios modelled,
over a three year time horizon using a 99% confidence interval, include those projected using historical market interest rate volatility as well as 100 and
200 basis point shifts up and down from the current market yield curves in Australia and New Zealand. Additional stressed interest rate scenarios are
also considered and modelled.
A comparison between the NII outcomes from these modelled scenarios indicates the sensitivity to interest rate changes.
Net interest income-at-risk (‘NaR’)
The table below depicts NaR assuming a 100 basis point shock (decrease) over the next 12 months as a percentage of reported net interest income:
NZ BANKING GROUP
20182017
%As at
Maximum
Exposure
Minimum
Exposure
Average
ExposureAs at
Maximum
Exposure
Minimum
Exposure
Average
Exposure
NaR 0.37 0.58 0.28 0.39 0.39 0.54 0.37 0.44
Value at Risk – IRRBB
1
The table below depicts VaR for IRRBB:
NZ BANKING GROUP
20182017
$ millionsAs at
Maximum
Exposure
Minimum
Exposure
Average
ExposureAs at
Maximum
Exposure
Minimum
Exposure
Average
Exposure
Interest rate risk 0.5 0.7 0.1 0.4 0.9 1.7 0.6 1.0
1
IRRBB VaR includes interest rate risk, credit spread risk on liquid assets and other basis risks used for internal management purposes.
Risk mitigation
IRRBB stems from the ordinary course of banking activities, including structural interest rate risk (the mismatch between the duration of assets and
liabilities) and capital management.
The NZ Banking Group hedges its exposure to such interest rate risk using derivatives. Details on the NZ Banking Group’s use of hedge accounting are
discussed in Note 26.
The same controls as used to monitor traded market risk allow management to continuously monitor and manage IRRBB.
Note 36 Risk management (continued)