Well, good morning, and welcome to Westpac's first half 2022 results presentation. Thanks for joining us. My name is Andrew Bowden, and I'm head of Westpac's Investor Relations. I would like to begin by acknowledging the traditional owners and custodians of the land on which we stand today, the Gadigal people of the Eora Nation, and pay my respects to elders past and present. I extend that respect to all Aboriginal and Torres Strait Islander peoples with us today or online. Presenting this morning is Peter King, our CEO, and Michael Rowland, our CFO, and after their words, I'll invite some questions. With that, let me pass to Peter. Well, thanks, Andrew, and good morning, everyone. Just over 18 months ago, we reset the strategy to turn the company around to make Westpac a simpler, stronger bank. In addition to changing our purpose, we made specific commitments under the three priorities of fix, simplify, and perform. We're working through these plans, and we're realizing the benefits. Under the fix priority, we're one year into our three years of the CORE program, and we're on track. We also closed seven significant regulatory matters and completed a further three major customer remediations. Under simplify, we're getting back to banking in Australia and New Zealand. We've now sold six businesses, with two sales completed this half, and the process to sell Super and Platforms is well advanced. Adopting digital is the other critical part of simplify, and this half we completed the rollout of our new app, which is faster, more intuitive, and has more features. On perform, we had better growth in business and institutional lending, and we grew in owner-occupied mortgages, but unfortunately, investor lending declined, dragging on overall mortgage growth. We are working hard on costs, and the 10% reduction underpinned the stable ROE this half. Finally, our balance sheet's in great shape, allowing us to return AUD 5.5 billion to shareholders through both the dividend and the buyback. In summary, we're delivering on fix and simplify, and this creates the capacity to increase our focus on perform. If we turn to the numbers, this half reported profit and cash earnings were up significantly, and the big driver was the large fall in notables from AUD 1.3 billion to AUD 6 million. If we strip out notables, core earnings rose 6%, and I was particularly pleased as the 10% lower costs more than covered the decline in revenue. Revenue was lower as we navigated low interest rates and the competitive market, but NIM pressure eased through the half. In contrast, cash earnings was little changed as we absorbed a turnaround in impairments, and that included adding just under AUD 500 million to economic overlays. Our return on equity was maintained with average equity 1% lower following the buyback, and that reduced shares on issue by 4.6%. Turning to our businesses, and this slide has core earnings excluding notables, and this gives you a better picture of underlying performance. In consumer, core earnings were down 7%, mostly from lower net interest margins. We did increase lending, we grew fees, and we reduced costs, although this was not enough to offset lower mortgage spreads. In business, core earnings were up 36%, driven by the 15% reduction in costs and revenue is a little lower as competition reduced. We've had a solid half with changes made to the business now taking effect. We had good growth in loans while markets income also improved as more customers were active in the hedging markets. In New Zealand, revenue is unchanged, and with costs down 2%, core earnings rose modestly. Following business sales and lower life insurance income, the contribution from specialist businesses was down, but not unexpected. Finally, the group businesses were up following a standout treasury contribution. I already mentioned our progress in transforming our management of risk and culture through our CORE program. In this half, we largely completed the design phase, which is our first major milestone. We're also a long way through the implementation activities and expect to complete most of this phase by the end of this calendar year, and this is the second major milestone. We'll then shift to the embed phase, where we have to demonstrate the sustainability of the changes we're making. We'll also soon release Promontory's latest reports, which point out the substantial work already completed, and they reinforce the activity and commitment that's ahead of us. Importantly, they also confirm the program is on track. Let's turn to our segments, starting with consumer. This is our biggest business reflecting its significant market share in mortgages. While we've been particularly challenged by low rates and competition, we are more positive on the future. We're making progress on improving service, and that's starting to be reflected in our franchise metrics. In this mass market business, digital is vital, and we're building capability into our existing apps. As an example, our new deposit onboarding process, where customers can join Westpac and open a functioning deposit account in a matter of minutes. The number of accounts originated increased by 1/3 over the half using this new capability. We have made progress in mortgage processing, including the expansion of digital applications. However, there is more to do as we complete the rollout of our new system to third-party brokers. These changes and the new app are being reflected in higher NPS and MFI scores. We are heading in the right direction, and as new bankers come up to speed and we add digital functionality, we expect this trend to continue. We've made good early progress in turning around the business bank. Freeing up banker time has been the focus, and we achieve this through simplifying credit assessments and year reviews and from digitizing the application process. On average, this has given bankers one extra day per week to spend with customers. These changes are feeding into higher settlements and the portfolio growth you can see on the slide. As I look forward, we have a significant opportunity in business. Given our large customer base, it's a business we plan to grow. WIB has undergone significant change over the past 18 months. Having refocused the business and refreshed the leadership team, we're now well-placed. Markets income improved as volatility in rates and FX saw more hedging of risks, and this, combined with the growth in lending, contributed to a much improved result. We've also strengthened our sustainability position with a new carbon trading desk, and we're currently engaging with customers on transition pathways. The team was particularly active with 39 sustainability transactions, which was a rise of 50% over the half. We are bringing sustainability-linked loans and deposits to a range of customers, which is providing further options for growth. The improved performance has delivered better returns, and overall, I'm happy with the progress of the new WIB leadership team. Westpac New Zealand made sound progress with growth in lending and deposits, a flatter margin, and lower costs. While the results were better, there is much more we need to do to improve customer metrics and achieve more balanced growth across consumer and business. We have captured nearly 1/3 of sustainable transactions in New Zealand and continue to pick up share in agri, but part of the challenge in New Zealand has been our significant fix agenda, which has absorbed a lot of resource. We are working closely with the Reserve Bank of New Zealand on several issues and making progress. On dividends, the growth in earnings and the strength of the balance sheet enabled us to lift the dividend per share to AUD 0.61. Our approach remains the same, with us targeting a medium-term payout ratio between 60%-75%. In this half, we landed at 69% for the payout ratio, and we'll also be neutralizing the DRP by buying shares on market. Let me now hand to Michael, who will take you through the numbers in detail. Thanks, Peter, and good morning, everyone. Looking at the results, I'd make three points. First, core earnings, excluding notable items, were up 6%. Margins stabilized through the half and loans and deposits are growing. Treasury's performance was particularly pleasing. Second, progress on cost reset was a standout, with costs reducing 10%. Our work to simplify and be more efficient is well underway, and this was the driver of the result. Third, our balance sheet and capital are well-positioned for a changing outlook. Most of our credit metrics are back to pre-COVID levels, and we've actively managed funding with much higher deposits and early access to markets. Our capital ratios remain strong after returning AUD 5.5 billion to shareholders this half. Now turning to the detail. Let's begin with notable items. In aggregate, the impact of notables was small at AUD 6 million with AUD 1.3 billion lower than last half. Gains on the sale of businesses largely offset the intangible writedowns in our super business and a top-up of remediation provisions. The exit of non-core businesses added to capital but reduces earnings. More details are included in our results documents. Cash earnings were up over the half. Although stripping out notables, they were 1% lower. Core earnings were up 6% with the reduction in expenses more than covering lower net and non-interest income. Excluding notable items, net interest income was down 2% with competition for new lending compressing margins while loan growth was impacted by lower Australian investor lending. The fall in non-interest income was mostly from the exit of insurance and the revaluation of life policyholder liabilities. Expenses were down 10% from reduced headcount, less third-party spend, and lower property costs. More of our staff also took a well-deserved break, reducing leave provisions. Impairment charges were four basis points of gross loans. Given uncertainty in the outlook, we added to economic overlays, and that was the main reason for the turnaround in the credit impairment charge. Tax was lower, with an effective tax rate slightly above the statutory rate at 30.4%. Total lending was up just over 1%. The main feature this half was the growth in business and institutional. In mortgages, we had good growth in owner-occupier, partly offset by a contraction in investor lending. Business lending grew in the property and agri sectors, while WIB supported a lift in M&A activity and existing customer growth. Lending was higher in New Zealand, although FX movements saw a contraction in Australian dollar terms. The 2% rise in New Zealand lending was all in mortgages, and while growth was sound, it slowed through the half following implementation of new consumer law and as interest rates rose. Personal lending was stable as the economy opened up and credit card spend increased. Finally, specialist business did a good job of running down the consumer order book and sold the wholesale dealer book during the half. Looking at Australian mortgages in more detail, we had solid growth in owner-occupied, but investor continued to contract. There are a few factors driving the investor lending outcome. First, outflows have been elevated from our decision to run down lending to self-managed super funds and to foreign buyers. We also experienced higher runoff for certain interest-only lending. Second, we have been out of the market on investor lending policies. This is being addressed and is yet to be reflected in new flows. Finally, our processes need to improve. While we prioritize owner-occupied mortgages when rolling out our new platform, we must improve our service to businesses. We've expanded the number and focus of lenders and are simplifying these processes. We expect to have most of these issues resolved by the end of the year. That should translate to growth in 2023. On portfolio mix, fixed rate lending continued to be popular but has now eased. Fixed was around 39% of the flow for the half, reducing to 24% in March. This mix change has impacted margins, so let's turn to that. Over the half, margins fell 14 basis points. Most of the margin fall was in the first quarter, with liquidity half of the fall, while there was a small increase in the second quarter. Turning to the components, lending spreads were the big driver, down 15 basis points. Most of this was from the intense mortgage competition we flagged last year and from mix changes. We grew fixed rate mortgage lending while higher margin investor lending contracted. Competition has been intense in business, which has also seen reduced spreads. There was a mixed impact as most growth was in lower spread products. Deposit pricing was a benefit as we repriced deposits in the second quarter. Funding provided a slight benefits to margins as average wholesale funding costs were lower. Earnings on hedged balances had a broadly neutral impact in this half. You can see in the tractor chart, we expect this to shift to a benefit in the second half. Treasury's contribution rose 4 basis points. This was mostly due to a strong outcome in the first quarter as the team managed volatility and liquidity well. We've largely completed our liquidity build for the phase-out of the CLF, and this drove the 7 basis point drag from liquidity in the half. The March exit margin, excluding treasury and markets, was 1.68%. As we think about drivers of our margin, we've provided our insights on this slide given there are so many factors at play. First, we are in a rising rate environment with significant market rate increases already this year. We expect the cash rate to rise to 1.75% by year-end and to 2.25% in 2023. The rising rates will benefit earnings on capital and non- and low-rate sensitive deposits. We have provided the tractor profile to show you the impact on capital and hedged deposits and the profile of our Australian deposit book. Looking at lending, the pressure from fixed-rate home lending has slowed as we have repriced and seen a move in flow back to variable-rate mortgages. There will be some impact of lower fixed-rate margins in the second half, but we expect competition to shift to variable-rate mortgages and remain competitive in New Zealand and business. We are largely finished with our liquidity build. All in all, while there are a number of factors that will impact margins going forward, on balance, we are positive on the trajectory in the second half. Turning to non-interest income. Excluding notable items, non-interest income was down 8%, mainly from the exit of our general and lender's mortgage insurance businesses. Excluding divestments, the fall was 1%. Fee income rose 4% as customer spending increased as we emerged from COVID lockdowns and as local and international borders opened. These gains were partly offset by simplification that reduced fees. Wealth and insurance income was down 29% or AUD 185 million, with 70% of that fall from exited businesses. Adjusting for this, wealth and insurance income fell 13% from revaluation losses on life insurance liabilities, margin compression as customers migrated to the Panorama platform, and from lower KiwiSaver fees. Turning to trading and other income. Excluding the impact of revaluation gains, the total was up 2%. This increase was mostly due to markets income growth, and this next slide looks at that in a bit more detail. We had a pleasing result in treasury from outright interest rate risk and basis risk positioning in the first quarter. Customer flow increase across FX and fixed income. The team has also stepped up their customer focus and delivered better solutions on derivatives, which is building on the momentum we have seen in the half. However, recent volatility created headwinds, and while the result was up, we see further opportunity. Non-customer income remains below historical levels, and the team is working to drive growth in the second half. Overall, we are in a much stronger position in our markets business. Turning now to expenses. We are delivering on our cost reset with a 10% expense reduction ex-notables this half. Looking across the chart, BAU fell AUD 170 million, mostly reflecting the success of our simplification to date. We were able to deliver these cost savings while absorbing salary and CPI increases and the full period impact of super changes. Headcount was down by more than 4,000, and we materially reduced our reliance on third parties. The improvement also included the benefit of higher utilization of leave balances that built up over COVID. Investment spend was lower as we completed phases of major projects and the normal seasonality in our investment cycle. Fixed one-off costs reduced as we progressed through the design phase of core and completed some cornerstone projects that will improve our management of risk. Overall, investment spend remains weighted to fix and is expected to rise slightly in the second half as we continue to invest. We remain committed to our AUD 8 billion dollar cost target, and expenses in 2022 are on track to be materially lower than 2021. It's important to recognize that our costs remain higher than peers, and higher than where we need to be in order to be competitive. The structural changes necessary to achieve our target are underway, and we got ahead of the 2022 outcomes in the half with more than two-thirds of people exits completed. Each leader has committed plans and targets for what needs to be achieved. Therefore, over the second half, we expect to hold the gains made, but are not expecting another step down. In total, costs excluding notables will be around 2% lower and 7% lower for the year. The drivers of that trajectory are on the right. We will benefit from productivity measures already taken, although we will invest more, particularly in completing fixed initiatives in New Zealand. While we recognize the impacts of higher inflation, along with the timing and nature of our final divestments, we remain committed to the AUD 8 billion target for our core businesses. We've updated the metrics we're using to track our progress towards the 2024 target. On this slide, you can see we are implementing our digital-first approach with a larger proportion of our mortgages shifting to digital processes. This momentum will accelerate in future halves. I'm also pleased with the work we are doing to shift decision-making closer to customers. This will allow us to further simplify decision making, streamline our head office, and reduce bureaucracy. Moving to credit quality. In the half, unemployment was at generational lows, savings continued to rise, and economic growth remained robust. It's not a surprise that almost every credit metric improved. On the left, you can see that stress has reduced with lower watch list and substandard exposures as corporates were upgraded. Impaired assets were also lower, with very low levels of new impaired assets and most of the Forum Finance exposure being written off. On the top right, 30-day mortgage delinquencies have continued to trend down as we've ceased COVID deferral packages and many customers return to health. 90-day delinquencies also continued their downward trend and are approaching pre-COVID levels. Unsecured lending delinquencies have also trended lower despite the contraction in the portfolio, and so the underlying performance has continued to improve. In aggregate, provisions were down 6% over the half, and while credit quality is back near pre-COVID levels, our provisioning is 20% higher than September 2019. The AUD 325 million reduction in total provisions was mostly due to lower impaired stage 3 provisions, mainly from the partial write-off of Forum Finance. Collective provisions in aggregate were little changed, although the mix shifted to a higher proportion of overlays. Applying our models, the improvement in credit quality metrics and better unemployment led to lower collective provisions. Given current uncertainties, we increased the weight applied to our downside economic scenario from 40% to 45% with a corresponding reduction in the weight applied to the base case. Overlays were increased to reflect the impact of higher inflation, rising interest rates, and supply chain disruptions. We also added an overlay for the floods in northern New South Wales and Queensland based on the most recent customer data. In aggregate, we increased overlays by AUD 489 million. This chart shows how our provision decisions played out on the impairment charge. New IAPs were lower, reflecting the better environment, few new impaired assets, and no large new names. Write-backs and recoveries fell slightly from a reduction in New Zealand. Write-offs direct were down, consistent with the decline in unsecured lending and lower delinquencies in the consumer and auto portfolios. Model collective provisions decreased, offset by higher overlays. CET1 capital was at 11.33%. Allowing for announced divestments, that arises to 11.5%. There were large movements in the half, so let's look at that. We returned AUD 5.5 billion to shareholders with our final dividend and our off-market buyback. There was an AUD 23 billion or 70 basis points impact for increased risk-weighted assets. Non-credit risk-weighted assets accounted for AUD 21 billion of the increase, with market risk rising almost AUD 3 billion. The early adoption of the new operating risk standard added a further AUD 2 billion. The remainder of the increase was from an AUD 16 billion rise in interest rate risk in the banking book risk-weighted assets. That increase was mostly due to the regulatory-embedded loss on our hedged capital due to the sell-off in the yield curve. This increase should reduce as interest rates reach neutral levels over the next 12-24 months. It has been pleasing to see we've got clarity on APRA's revised Basel III standards. While we await final approval of our models and delivery of our data requirements, we are expecting total risk-weighted assets to be largely unaffected. With the rules finalized, we've now updated our CET1 capital operating range. The top of the CET1 capital stack for regulatory purposes will be 10.25% from January 1, 2023. Applying a management buffer, and with guidance from APRA, we will operate in the range of 11%-11.5% from the start of 2023. Looking forward, there are several dynamics that will impact the result in the second half. While the mortgage market remains competitive, we expect growth in mortgages based on the activity we're seeing. As mentioned, we have work to do on investor mortgages, and we are focused on this. Business and institutional lending have performed well, and we are looking forward to maintaining this momentum throughout the year. Competition in all our lending sectors means margins continue to remain under pressure, although the flow-through of higher rates to the tractor and other tailwinds are positive for margins. Non-interest income will continue to benefit from higher economic activity. While markets income is difficult to predict, our business is much better placed than twelve months ago. The loss of income from divestments will continue to drag. We have flagged a AUD 1 billion notable loss in the second half on the sale of our life insurance business. Costs excluding notables are expected to be around 2% lower on the first half. Credit metrics are in good shape, and the economic outlook is positive. Finally, we are well-placed to implement APRA's updated capital rules. With that, let me hand back to Peter. Well, before we turn to Q&A, I'd like to cover our progress on climate and the outlook. On climate, we are committed to achieving net zero in our operations and financing activities. On our footprint, we're on track to reduce both Scope 1 and 2 emissions by 65% this year and Scope 3 emissions by 35% by 2030. While getting our operations to neutral is important, our biggest impact will be helping customers respond to climate change. We're doing this by carefully analyzing our portfolio across industries and segments to understand what it is that is needed. We'll then set targets and work with customers to get there. We have begun to take our larger customers through some of our thinking and the changes required, and we'll capture their feedback as we build our pathways. We do expect to provide an update on our plans in the middle of this year. Moving to the economic outlook. Looking at the big picture, the economy has strong foundations. Unemployment's low, household balance sheets are in good shape, and borrowers have the capacity to absorb higher interest rates. However, we are entering an interesting period with rising inflation, supply chain challenges, and increasing interest rates, and these dynamics will need to be managed carefully. As this rate cycle progresses, we expect a moderation in GDP growth, a pullback in housing prices, but that's after what has been an extraordinary increase. As growth slows, it will take pressure off inflation and help the economy return to more normal settings. As always, changes in cycles impact customers differently, and it is inevitable that we'll see some rise in stress. As we assess our portfolio, any rise in stress is not expected to be significant. We continue to expect the environment to be supportive. For wrap-up, we are delivering on our commitments and this will continue. The CORE program remains a priority, and we won't let up our effort. We're determined to simplify our business and are well progressed on the Super and Platforms sales. On performance, we'll build on our gains in business and wealth, address the bottlenecks, investor and mortgage, and our cost reset program is critical to supporting returns. Finally, while there is still a lot to do, I'm pleased with the delivery of our commitments, and I'm positive on our future. Let me hand back to Andrew for Q&A. Thanks, Peter. Can I ask everyone to remind people, just press star one on the phone for those of you there for a question, 'cause I don't have any at the moment. I'll ask, this is a combined media and market conference today. We'll first take questions from the market, and then we'll take them from the media. I'll introduce the speaker first and before we open up the line. For the benefit of all, we'll keep that to one question. It looks like I'm having some technical issues at the moment with my system. We'll just hang on for a second while we get those questions up. I will take a question now from Brendan Sproules, please, if he's there. Hang on. No? I'll take one from Andrew Lyons. Thanks. We got that line open, guys? Andrew, can you hear us? We can't hear you at this point. All right. I'll move on to the next person. Can I take a question from Ed Henning, please? Ed, I think your line's open. Andrew? Yep, we can hear you now. Thanks. Perfect. Thank you. Look, just I guess if I got one question, I just wanna start with your costs, I guess. You've called out inflation here at 5.6% and 2.6% for the next two years. In your cost guidance, you're talking about 2.5% inflation in your forecast for your AUD 8 billion target. Can you just run through, you know, if you did put in your updated forecasts, you know, what target would you'd be looking at? Or how do you think about that? You know, do you think about, do we need to get to that AUD 8 billion? Do we need to offset it by doing something else there? Or, you know, how do you think about the trade-off with growth? You talked about, obviously, wanting to grow in business and other areas and thinking about that in regards to, you know, just targeting costs. Thanks, Ed. I think the first thing is context. Our cost base is still over AUD 10 billion if you annualize the result, Ed. We're starting from a different position, say, to some of the peers. We need to get our cost base down. If I think about how we do that, it's the plan abut the SBD exits. It's the plan about resolving our risk management and sorting out issues, and then we need to be more productive. If I look at inflation and certainly the last read of inflation, if you unpack it, obviously there was a lot of energy costs in there, oil, you know, price of petrol and whatnot, and construction of housing was a big part of it. They don't really flow through into our business, not being a big user of those pieces. Obviously, they will flow through to customers, though. The real question becomes, what does wage growth become? That's the most important piece for us. In terms of inflation, we set out in the document what the AUD 8 billion was based on, 'cause we knew we were gonna get lots of questions on it, and we just had it out there. It's probably gonna be wage growth will be a little bit higher than that. How much, we'll work through over time. But we still believe that AUD 8 billion is the right number for this bank when we put it all together, and we have a plan to deliver it. Okay. Thank you. I'll take a question from John Storey, please. One's through. I think your line should be open, John. I'm told it is. Okay. I might have to flick to the next one. I'll take a question from Victor German, please. Clearly, this is not working very well. I'm just checking with my technical team as we speak. My apologies for the delay. Could I have a question from Victor German, please? Hello, can you hear me? We can now. Thanks, Victor. Yeah. Oh, you can? Great. Thank you. Yeah, I was hoping to actually follow up on the previous question on costs, and also ask a question on interest rates. So on costs, I'd be interested, Peter or Michael, if you can maybe holistically sort of help us out with respect to your cost number. If I look at certainly rebased expectations for consensus across peers. All of them are now looking for costs closest to AUD 9-10 billion. Given your multi-brand strategy, arguably your costs should be higher, not lower. Can you maybe give us a sense for sort of structurally where you think or why you think your costs are likely to be lower than your peers? The second question on interest rates, thank you for that disclosure around replicating portfolio. You've also provided us that bucket of deposits that are less than 25 basis points. Is there any chance you can maybe give us a little bit more help with that particular bucket in terms of proportion of those deposits that you don't think are gonna be rate sensitive in the rising rate environment? Thank you. Well, Victor, let me start with costs, and Michael can come back on margins. When we've thought about where we're heading in terms of the shape of the company in a couple of years' time, we've thought it through from a physical distribution perspective. We've thought it through from a digital perspective. We've thought about the size of the head office, the corporate footprint that we need, what type of people we need to have employed by the company versus partners. We've got plans in all those. We've then rolled it down into our operating model for our general managers. The big belief under there is that digital will be a big driver of the shape of the company in a few years' time. We are working very quickly and methodically through customer journeys, digitization, the size of the physical footprint, and the shape of the workforce that we need in a digital world. That's also critical for risk management, 'cause in that type of world, a lot of our risk management is automated as well. Can't comment on peers, obviously, but we just believe we need a step change in the cost base, but more importantly through digital. Michael, do you wanna pick up interest? Sorry, yes. On interest rates, as you point out, we've shown some more disclosure on our hedged balances, both capital and non-rate sensitive, and that large bucket of deposits of less than 25 basis points. Look, it's hard to articulate clearly what the behavioral aspects of those as interest rates rise. We would say about a third of those balances are at zero rates, but that doesn't necessarily mean they'll stay zero rates as rates rise. Okay, I'll take a question. I'll try again with Andrew Lyons, please. Thanks. Andrew, can you Yep, we can. Thank you. Andrew, we can hear you. Flow, in fixed over the half. Just with this in mind, can you perhaps talk to some of the offsets that you saw to those NIM pressures in the second quarter, and particularly how much of the deposit repricing in the second quarter will flow into the second half? Andrew, apolo gies, but we heard you from about halfway through the question. Could you repeat it, please? I'll go again. Sure. Thank you. I'm sorry about this. Peter, just on the NIM pressure, you noted that it did ease over the half. However, I do note that in the second quarter, we did see a pretty big run-up in swap rates, and you still had 40% of your mortgage flow into fixed over the half. Just with that in mind, can you perhaps talk to some of the offsets to those NIM pressures in the second quarter, and particularly how much of the deposit repricing that you noted you did in the second quarter will flow through into the second half? That one. Just on deposit pricing. Yes, we did have that impact in the second quarter, and we called out four basis points in the presentation. That will flow in to the second half. We also indicated that most of the liquids build occurred in the first quarter, the seven basis points adverse impact to margin, so that won't flow through 'cause we're pretty much done on that. And as you point out, as interest rate rises occur over the half, over the remainder of the half, we will get a benefit on our hedge balances. That's probably the way to look at it. The only other thing I'd add, Andrew, is in terms of the flow of fixed rates in March, they were a little bit over 20% as a proportion of total flow. That's, you know, we before these record low interest rates, we had a profile that was 80/20, 80% variable, 20% fixed. The flow is back to where it was. There has been material upward repricing in fixed rates in the market, and we'll just have to see whether the three-year swap settles. It's a pretty, you know, it's been pretty volatile over the period. Appreciate that. Thank you. Take a question from Andrew Triggs, please. Can you hear me okay? Andrew, can you hear me okay? Yes, we can. We've got you, Andrew. Excellent. Thank you. Okay, great. Look, just a first, really quick point for clarification again. Just on the inflation number you're talking to, the 2.5% you've baked into your AUD 8 billion target. Can I just clarify that that's general inflation in the cost base, not wage inflation specifically? Noting that staff expense is about 60% or just under 60% of your overall expense base. And then perhaps if I could just ask on treasury income. I appreciate it's a really hard one to define normal, but what perhaps is your thinking into the sort of the near term on treasury income? Well, just on, maybe I'll just answer how did markets volatility impact the result. As I think about it, we had a very good outcome in treasury, but I'd average it. You know, just average. Look at the averages. That was above normal. Very good result from the team. The other thing that we had an impact from in a negative sense was the DVA /CVA revaluation. That was about AUD 73 million down, I think. The other big impact was in our life insurance business with the higher rate impacting valuations, and I think that's about AUD 50 million. You sort of get a big up in treasury and a down on life insurance and a down on DVA /CVA. I'd think about that as the bucket of market volatility, not just the treasury result. Did you wanna answer the 2.5%? Yeah. On cost, as you point out, the 2.5% is across the cost base. 60% of our costs are in people. Depending on how that plays out, we'll have to see how that has an impact. As Peter said, we're committed to the AUD 8 billion, and we've got the plans in place to do that. Clearly, if underlying inflation is greater and it has a greater impact on our cost base, it creates more of a challenge. We are committed to getting to that point in 2024. Okay, thank you. I'll take a question from Brian Johnson, please. Hi. Thank you for the opportunity to ask a question. I just wanna check, when you're talking about, and you used the word APRA quite a few times, when you're talking about the core equity T1 target, 11%-11.5%, I'm assuming the 11% is ex-div. You're saying there's no impact on the RWA at this point. Basically, you've lifted the target, the bottom end of the target from 10.75% to 11%, which I think is telling us the capital intensity has basically, is set to rise. Am I missing something there? No, I think that's the right way. We never said we didn't reset our preferred range for Basel III until this period, Brian. If you go back and look at the APRA release, it certainly talked about 11%. What we've adopted today is exactly as you said. Post-dividend, you wanna be around 11% pre-dividend. March and September reporting, we wanna be 11.5%. But it does mean that capital intensity in the industry is probably a bit higher than what some people in the market were thinking about, 'cause I think a lot of people had that 10.75% as the bottom in their mind. Peter, the way to think about it is you're neutralizing the DRP, which is, I don't know, 45, 50 basis points. You're right in line with the range rather than having a surplus. Would you dissuade me from thinking that's right? Yeah. Pro forma for the asset sales we're 11.5%, which is right on the top of the range. Sorry, the other point I should've said, it's effective from the first of January, obviously with the new rules. You know, what is different, it's a 75 basis point management operating buffer above the 10.25%. That's the main thing to take away from what we've outlined today. Sorry, Peter, can I just clarify though? It's 11.5% is the cum dividend number. 11% is the ex-dividend number. It's right in line with the range rather than having a surplus or a deficiency. Does that sound right? Yeah. At this point, if you just go, we're 11.5% against the top of a range of 11.5%. Fantastic. Thanks, mate. Well, I'm just gonna remind. There's obviously. We're having a couple of difficulties here. If those who we didn't get to, I'd mentioned with a question before, but just try the star one again. Some of them have dropped off, so I hope I can see a couple of them coming back again. I will take a question from Carlos Cacho, please. I just have a question around the mortgage book. You noted that investor lending had been falling, but you've taken steps to address that and get policies back in market. Can you give us some detail in terms of, I guess, what those steps have been? And then, just secondly, you know, on the owner-occupied side, we've seen that running about 4.4x system recently. Are there any plans to try and get that back towards system? Or are you walking away from the target of system growth there or thereabout? Yeah, thank you for that. On mortgages, we've got a number of initiatives in place. Firstly, we've got more bankers. Over the 12 months, we've put on 200 more bankers. We're increasing the distribution force in terms of mortgages. The second thing is we're delegating more of the responsibility for verification to lenders. That speeds up the process in terms of the speed. The third piece is also improving the process around it. We've got the customer service hub, which is being used in the Westpac brand. It's about three-quarters through the St. George brand in terms of flow. We've got about half of brokers and 20% of flow being used on that new process. This half we're gonna roll it out. You know, one of the challenges we'll have in that business is we do need to refresh the HEM tables quickly for inflation. There might be some puts and takes in terms of industry and when everyone does it, in terms of that. More distribution, a better process. The business channel's the other one that we particularly need to improve. We haven't been great in mortgages through our business channel, and that's a big impact on investor. In terms of sort of what do we wanna do in the second half, we wanna balance pricing and volume. We haven't been slavish to the market share outcome. We wanna leave ourselves really focused on service as the way to get back to high growth. Great. Thank you very much. I'll take a question from Brendan Sproules, please. Good morning, team. I just got a follow-up question on your AUD 8 billion cost target. I just want to refer you to slide 61, where you show us your investment spend, and particularly, you show us the mix. I was wondering, once you get out to 2024, what does the mix of investment spend look like? Particularly, Peter, you made mention of, you know, investing in digital, to get to that AUD 8 billion cost base. But sort of ex FX, it looks like you're only, you know, running at around AUD 600 million of investment spend. Brendan, I think I'll make a sort of overarching point and then let Michael also comment. The old way that a team give them multi-year funding and deliver an outcome. We are still doing that, but increasingly, what we are doing is hiring digital engineers, experts in customer journeys, data experts, and aligning them to businesses, and they deliver change each quarter in small drops. One of the challenges is that I think everyone's looks at the old 1.2, looks at what we disclosed today. That's appropriate, but actually, there's a lot more of what I would say BAU operating capability that's changing the company. A big part of what we need to do is, over time, have more data engineers, more digital experts, and we'll have less operational people because that work will be digitized. That doesn't come through in the investment numbers as a so what of sorts at that point. It's sitting in our operating FTE. Michael. I just add to what Peter said. The way to think about this slide is that it's total change spend in the bank. That's whether it's capitalized or expensed, as Peter said. We're managing the total change effort under our new transformation approach. That's why we're doing it this way, and we're giving you that transparency. That's the first point. Second point is that as we indicated, the majority of our investment spend at the moment is on our fixed priority. That's on CORE. It's on our other critical risk priorities, because we know we have to get those right as the foundation for how we wanna take the bank forward. It is skewed 68% or whatever the number is, close enough, to the spend is on fixed. We will see that decline over the next two years as we complete those projects. As CORE goes through the implement and embed phase, that the spend on fixed will decline. We still expect total spend to be, you know, sort of not run-rate at AUD 200, but probably slightly down below that by 2024, and the mix to be much more direct to simplify and perform. Thank you. Take a question from Jonathan Mott, please. Can you hear me? Can you hear me, guys? We can, John. Great. Thank you. Got a question on mortgage flows and just going back to the results six months ago and a few comments that were made then and where we are today. Six months ago, we talked about really needing to reengage with the brokers and the sharp increase in flow that came through, and that was pretty much correlated with a rapid decline in the NIM that came through. Now we're seeing the margin stabilize in the second quarter, but if you look at the flow of new lending that you're seeing, proprietary flow is down 7%, the brokers are down 25% during the half. And credit growth is now stagnant in the second quarter, in the March quarter, I should say. There's a lot of talk about approval times. Your approval times look like they're back where their peers are. It would suggest that, as you've eased off the discounting, your broker flow has fallen 25% and your credit growth's gone back to a stagnant level. Do you think it's again balancing this volume versus price? And how do you do that through the broker channel? Because it seems to be, you have to pull the price lever, you get the brokers coming back in, volumes pick up, but your margin falls. Then you hit the brakes, your margin stabilizes, but your volumes go back to zero. I know you've gone through a lot of intricacies about X and Y, but if you stand back, that's what it looks like is happening. John, how I think about it is the margin impact in particular was massive movements in fixed rates through this low period. We made the decision to follow others in terms of those fixed rate reductions and to be part of the market. That was by far the biggest impact on margins. Obviously, it did see higher flows through third parties given that dynamic. Now, we sit here today, fixed rates have gone up materially, probably, I think they're in the, can't remember exactly, but the 3%-4% range for the three-year rate compared to, you know, 2s before. That to me was the biggest change in margins. I just encourage you to have a look at Michael's slide on mortgage growth, and it sort of breaks it out into the components. The big change was actually in the net refinance buckets, about a AUD 10 billion change. We were pretty square on refinancing in and out. That's where a lot of the change in flow has happened. The new lending's about the same, the payments are about the same, the pay downs are about the same. It's in that net refinance, and I think you're right, that's price-based. We have seen that come off, as we haven't competed as hard. Does that mean you need to compete again on price to get that AUD 10 billion flow back, which is 2% credit growth? Yeah. Perhaps. We'll see. We'll get our service up. We probably do need to be a little bit competitive while we're getting that service up to the broker channel, but I'm confident that the changes we've got in train, you know, will get there to make us competitive from a service perspective in the channel. Thank you. Can I take a question from Richard Wiles, please? Good morning, everyone. I just wanted to ask you about your thoughts on deposits. If we go back to 2019, term deposit rates were roughly 100 basis points higher than the rates on a lot of at-call accounts. At the time, term deposits were more than 30% of your Australian deposit portfolio. They're now less than 20%. For all of 2021, there was basically very little incentive for depositors to take term deposits because the rates were so low. But that's clearly now shifting. We've seen Macquarie offer some very attractive rates, and now, CommBank, some of their longer term dated deposits have been lifted. Do you think there's any reason why term deposit prices and term deposit mix won't go back to where they were in 2019? Is there any reason why this term deposit benefit for margins won't fully reverse over the next year or so as rates go back to the level that you and many are expecting them to? I think. Well, I obviously can't comment on where prices might go in the future. If I step back, customers are very smart, and they will take what they perceive as the best value between the short-term rates and the fixed rates. I think the answer to that question actually becomes what's the difference between the cash rate and, say, a 18-month TD rate, and that'll drive the shape of the book. I think it's, it'll be more about relative curves will drive the shape of the book, and customers are pretty intuitive and normally move from cash to term, depending on what they're trying to achieve, Richard. Obviously I can't comment on where rates might go in the future, but that's what I've seen in the past. Can you comment on mix, Peter? Well, if you go, I think if you model out the cash rate against the 18-month rate, that'll give you the mix, is what I'm saying. We'll probably see some people going into you know assuming rates increase on savings accounts, you'll see more people in there versus term, but it'll just be a relative game depending on the two rates. Okay. Thanks, Peter. Okay, I'll take a question now from Peter Ryan from the ABC. Yes, hi there. Thanks for the question. Look, I just wanted to, Peter, to gauge the, obviously, about rates going up or the cash rate going up. What, if anything, have you been hearing from residential or, investor borrowers who might be, worried about the impact of rising rates, not just now, but, you know, further down the track, given the projections for the cash rate? Would you be factoring in potential for greater loan impairments if rates go beyond what you might be expecting? Well, Peter, our economics team is forecasting the cash rate to be at 1.75% at the end of the calendar year, and to increase again to 2.25% in the middle of 2023. That gives you a bit of a sense of what our economics team is thinking. When we assessed mortgages, we had a higher interest rate than what the customer was paying. That's most recently been a 3% add on. It was 2.5% before then. With that type of outcome in the cash rate, that's broadly been what we assumed in our mortgage application. Of course, what is important for impairments is unemployment. Unemployment's at record lows, and there's still a lot of demand, so it's probably gonna go lower. We'll just have to wait to see. We've got expenses going up, but how much wage inflation FTE is triggered by the higher inflation. We step back and we go, we were assessing mortgages on a much higher rate. Obviously, customers will need to think about how they reshape it. We haven't had a lot of calls from customers right now and following that first rate change. If I could just get a quick follow-up. I mean, from the bank's point of view, as a result of rising rates, will you, as a result, you know, see or impose greater restrictions on what borrowers can expect to get from banks, you know? Will you be having to manage expectations there, given the amount of money that's been going out the door from banks over the last year? The short answer is no, 'cause we've already factored in higher interest rates into the assessment process. We're as I said before in an answer to a question, we'll probably have to push up expenses in our mortgage calculations a little bit quicker, given inflation, and whatnot. That may impact borrowing capacity, but I don't think it'll be material in the sense of it. I think, you know, people are now. If I look at the sentiment survey for time to buy a house, it's pretty low. You know, it's dropped pretty low. People are already adjusting. We're seeing turnover drop in the housing market. We're seeing clearance rates lower. I think the market is adjusting. Okay, thanks, Peter. Okay, I'll take a question from Clancy Yeates, please. Hi, can you hear me? Yes, Clancy. Yeah. Good day. You've increased overlays in provisions for a bunch of issues, supply chain issues, inflation, and expectations of higher interest rates. Could you just clarify how much of that is related to the mortgage portfolio? Mark? Yeah. As you point out, we did increase overlays. The underlying credit metrics in the portfolio continues to be very strong, and when we looked at what's not factored into the portfolio, we did take a view that what we're seeing on supply chain, on interest rates, and also in the floods in New South Wales and Queensland may have an impact. That's mainly on the business portfolio, not so much the mortgages or the consumer portfolio. Okay. Sure. Just on the interest rate outlook, Peter, what sort of you spoke about expecting the cash rate to hit 2.5%. I guess as interest rates rise, would you expect more borrowers are gonna seek to refinance and get a better deal, which would keep the competition pretty intense out there? Yeah, James, it was 2.25%, not 2.5%. Yeah, we're already seeing customers refinance, so there is a lot of activity. It's a competitive market. There's lots of choice, and we are already seeing it, so I don't think it's gonna be a change. It's just part of being in banking now that people are looking for a better deal, and we're providing better deals. Thanks. Okay, I'll take a question from James Ellis, please. Thanks, guys. Peter, it's just a follow-up to Richard Wiles' question. Relating to savers, I understand you can't discuss future interest rate moves. We saw Westpac last week, sort of the first bank to respond on the deposit products. I think I'm right in saying CBA sort of still hasn't moved on the at-call rate. Do you sort of sense much political pressure coming through, even post-election on looking after savers, so to speak? I just sort of wondered, is it possible perhaps we will see more of the pass-through come through at the TDs rather than on the transaction accounts as the cycle progresses? Well, the first thing is, interest rates have been at record lows. You know, a cash rate of 10 basis points, who would've thought we'd get there? The impact on savers in the economy has been pretty dramatic. They've been pretty low rates. We thought it was appropriate for this time that savers had an increase, you know, at-call savers had an increase in the rate. That's why we moved it. That's 1.3 million accounts are in those products that we moved the rate. You know, there's more savers than borrowers in numbers and so we believe that was the right thing to do. In relation to where we end up, that will. As I said before, customers are pretty intuitive. They'll pick the best rate between term deposits and savings rates, and we'll just see how the shape of the curve looks over time. We felt that it was appropriate to increase deposit rates with that first move from the Reserve Bank. You don't really feel the political pressure at all on this issue? Well, I haven't had any calls from anyone on that matter. Okay. Thanks, Peter. Okay, I'll take a question from Eric Johnston, please. Peter, look, I just wonder if you could just put in some more color around this carbon trading desk. When did it start? What's the intention and basically what's it gonna be doing? Well, it's, you know, we know that as the energy system transforms, there will be a lot of need for risk management. You know, you think about derivatives and interest rates or FX, we can see a market for derivatives in carbon trading, and we've created that desk. You know, the carbon units, sorry, I think is the right term, are already traded in Australia and New Zealand. We're a big part of the market in New Zealand, and we wanna be a bigger part in Australia. Think about it as hedging any risk like interest rates or FX, but there will be some carbon offsets, if you like, is the other way to think about it. We see that as a growth opportunity. Will you be putting some of this onto your balance sheet as well? Certainly we, you know, when there are offers of carbon offset units, we buy them, and then we'll sell them at certain points. I don't think it'll be a you know, a big part of the balance sheet, 'cause we've got a big balance sheet. Certainly we would buy them and use them for risk management purposes. All right. Just final one from me. You mentioned to Peter Ryan, you changed the rate buffer from 2.5-3. How recent ago was that changed, and is that something that you'd be looking at reviewing again? I think it was the end of last year. The answer is probably not, because customer rates are starting to move up, so we wouldn't wanna have customer rates go up plus a bigger buffer, 'cause that, it's sort of you look at both the interest rate buffer plus the actual customer rate, and with customer rates moving up, you don't wanna double count them, if you like. Yep. Okay, thanks. I'll take a question from Kate Weber, please. Thanks for taking my call. I saw in the report the bank reduced group headcount by 4,000. I was just wondering, roughly how much of this stems from the bank's IT and tech teams, or what areas of the bank these cuts were made? Well, in fact, we wanna invest, as I said before, increase our resources in digital data and tech. Where we saw two-thirds of that reduction was actually in partners. We had a lot of contingent workforce come into the company to help us out with different projects and remediations. Two-thirds of that was of that 4,000 number was reduced. The other piece was really around us finishing some of our remediation programs and seeing the resources no longer required. In fact, we wanna increase in digital and data. It's not an area that we want to reduce. Do you know how much over the next half you might actually increase, the digital and data in terms of tech jobs? We'll give you an update, yeah. No, we haven't disclosed that today. We don't go to that level of detail, but happy to give you an update next half. All right. Thank you. We have a question from Adrian Lowe, please. Good morning. Thank you for taking my question. Peter, I was interested, earlier you were talking about potential on wages driving inflation, et cetera. You know, obviously, as the inflation outlook continues upwards in the short term, what's your view on wages, I guess, for your staff? I mean, do you see that there's scope there for them to, you know, for pay rises for staff, and also, I guess, generally in the community? I mean, how do you see wages, sort of, wages growth playing in the future? Yeah. Well, in fact, in this result, we absorbed the full impact of the increase in superannuation. Or put another way, it was effectively, you know, an increase in benefits for our team, 'cause we didn't reduce the take-home pay, if you like. We've already absorbed that. In terms of our enterprise agreement, it's sort of tiered, but at the less than 90,000 tier for the last couple of years, we've been paying 3.25%. That's been ahead of inflation. Obviously, we'll have to sit down with the team and work through with the union what's appropriate for the next couple of years, and we're in the process of that. The next tier was 2.25. There we've already been matching market. It's a very competitive market, particularly for some areas. We do pay above that, but we wanna be competitive, and we'll see where we get to on the enterprise agreement negotiations. Okay. Thank you. More broadly, I mean, do you see any sort of factoring in of inflation and wages growth? I mean, the Reserve Bank commentary on Friday was interesting, given that I think real pay is probably gonna decline before it goes on the increase. I mean, do you see that factoring into things like, you know, mortgages, et cetera, and the broader economy? Well, I think the read-through will be more of people's income will be spent on housing, whether that's rental or mortgages. Depending on what type of rate cycle we'll see, there may be less income available for other discretionary spending. I'd encourage you just to think about it from that perspective. You know, the new home loans are a bit over AUD half a million dollars, AUD 500,000, sorry, in size. If we talk about a 2% increase in rates from here, that's AUD 10,000 a year in after-tax income. That's what people have gotta be thinking about. They've gotta be getting prepared for it. It's probably gonna be the way that money is spent that will change in the broader economy. Thanks very much. Okay, I'll take a final question from Sam Nichols, please. Can you hear me okay? Yes, Sam. Hi. This is for Peter and Michael, but you report that both owner-occupied mortgages and business lending increased over half. Can you provide any comment on the influence, if any, that brokers had on this growth? Whether you can comment on if there was any influence of this growth on reduced mortgage time to reprice? Thanks. Well, I think owner-occupied grew and the half investor didn't. Brokers are an important channel for us, so we wanna grow both through our first party and our third party. As I said, we've added distribution capability into our first party, and we wanna provide really good service to both channels. I wouldn't put it down to brokers driving one or the other. I just think, you know, we wanna be excellent in both channels. Mortgages are a very good business for us, very big. We've done okay in owner-occupied and a bit more work to do in investor. Can you provide any comment on, like, I guess whether there was any influence on the brokers, I guess if there was any change in broker activity related to the reduced mortgage time to reprice? Oh, certainly it helps in competitiveness, but I don't. You know, they always look at price, speed, the amount of money you're prepared to lend, so there's a number of factors to go through, which is really what the customer looks, and the brokers are obviously an intermediary. Nothing specific. Okay, great. Thank you, Dan. Well, thank you all for your patience today, and apologies again for some of those technical issues. There's a few calls we'll need to follow up later on this morning, but the team will be around. Thank you very much again, and good morning.