Westpac Banking Corporation (WBC) Earnings Call Transcript & Summary

Good morning. We are delighted to introduce Wurundjeri man, Thane Garvey, to officially welcome us to country.

Good morning, everyone. First of all, I'd just like to say [Foreign Language], which means welcome in my native Woiwurrung language. My name is Thane Garvey, and I've worked for Wurundjeri Tribe Land Corporation now for about 12 years. Started off doing a bit of cultural heritage work and then moved on to deal with land management conservation, education and many things like that. So that's just a bit of background on myself. I'd just like to start off by paying respects to my ancestors and my elders past, present and emerging. But I would also like to pay respects to any indigenous and nonindigenous people here today. I'd also like to pay respects to the 5 tribes that made up the Kulin nations. We have the Wathaurong to the West, the Girai wurrung to the Northwest, the Taungurung to the Northeast and the Boonwurrung to the South. The Wurundjeri tribe was the fifth tribe within the Kulin nations, and we were based right in the center of these 4 amazing tribes inside. Our boundary stretch from the Werribee River up to Mount Baw Baw across the Great Dividing Ranges then back down to Mordialloc Creek on the other side. Our almighty creator in totem is Bunjil, the wedge-tailed eagle. So Bunjil is the creator spirit of the Kulin nations and Kulin means man. One day, I'd like to watch over my people with Bunjil and my ancestors when our spirits cross over from one life form to another. It's important is the people that walk on this land to look after this land. Indigenous people all over Australia have lived here sustainably for hundreds, maybe thousands of generations, and we're able to do so because we cared for the land in the same way that we cared for a family member, same way we cared for a son, a daughter, a mother or a father. And in return, the land gave us a beautiful life, a life of piece, a life where everything was as equally as important, and nothing was ever exploited. We've always liked to refer to that as a life of dreamtime. I personally love doing all the work that I've done to engage with community and culture and making sure that we get the recognition that we deserve on our land because no matter how dark our recent history is here in Australia for indigenous people, there is no limit to how far reconciliation can go, there's no limit to how kind or how much love you can show to someone. I do believe that this will become a better country and a safer country for us all as we start to embrace our different cultures, any differences in general. And with that being said, I'd like to conclude this welcome in my native Woiwurrung language [Foreign Language] which means you're most welcome to Wurundjeri people today, and thank you for having me.

Thank you, Wurundjeri man, Thane Garvey for your welcome to country. Good morning, ladies and gentlemen, and welcome to the 2022 Annual General Meeting of Westpac Banking Corporation. My name is Tim Hartin, and I am Westpac's Company Secretary. I'd like to begin by acknowledging the traditional owners of Naarm for where I speak today, the Wurundjeri people of the Kulin nation and pay my respects to their elders past and present. This AGM is being conducted as a hybrid meeting. This means shareholders may participate in person through the AGM online platform and by telephone. Before I introduce your Chairman, I'll run through a few procedural matters. For each item of business, we will first address questions from the room, followed by the online platform and then the telephone. We'll then come back to remaining questions in the room. If you're here in person today, you'll have been given a card at registration. If you hold a red voting card, you may speak and vote at the meeting. However, if you hold shares jointly with another person, only one of you can vote. Holders of blue cards may speak at the meeting, but cannot vote. And if you are a visitor, you would have been given a yellow card. You're welcome to observe today's meeting, but you're not eligible to speak or to vote. [Operator Instructions] All resolutions today will be decided by a poll. And for those in the room today, you may vote by marking your voting card in the manner you wish to vote for each resolution. Link Market Services is the returning officer for this meeting with responsibility for overseeing the voting process and is available to assist with questions. Completed voting cards must be placed in one of the ballot boxes under the supervision of the returning officer. You can do this at any time after the Chairman opens the polls and up to 15 minutes after the close of the meeting. I will now outline the process for those shareholders participating online or by the telephone. And for those in the room, I do appreciate your patience while I do so. Our online AGM guide provides information on how to vote, ask questions on the online platform and will help you with any technical difficulties. This guide is located on our AGM website and our webcast page. [Operator Instructions] If you're a shareholder or proxy holder participating online and would like to ask a question, comment or vote, you will need to register on the online platform, access from the information tab located below the webcast. And to ask a question, click on the ask a question button. We do request you please submit one question at a time. Your voting card will appear at the bottom left of the screen, and you can edit your voting card at any time during the meeting, but please note that you cannot vote over the phone. [Operator Instructions] I will now hand over to your Chairman, John McFarlane.

Well, thank you, Tim. I've been advised that a quorum is present and I declare open the 2022 Annual General Meeting of Westpac Banking Corporation. I also formally declare the polls open. I'd like to welcome everyone joining today, whether it be in person, online or on the phone. All of your Board are also with me, and I also welcome Westpac's auditor, Colin Heath of PwC. If you have any questions on the audit, I will ask Colin to respond. Before we move to the matters in the Notice of Meeting, both the CEO and I would like to address the meeting. Now I'm delighted that our 2022 AGM is being held in my home city of Melbourne. And it's good to see so many people that I know in the audience. Also, it's a first for Westpac to hold the meeting in hybrid format, allowing shareholders to participate in person or online. This year, I have one main message for you, following 2.5 years of repositioning and restructuring, Westpac is now in good strategic and financial shape for the future. Going forward, these stronger foundations should enable us to perform well for shareholders. Considerable progress has also been made in the simplification of the group in lowering the cost base and in addressing risk and cultural issues. We've successfully strategically repositioned the company to focus on our natural strengths in commercial banking, focused on Australia and New Zealand. We've announced the exit of 9 out of 11 businesses and completed the sale of 7. Work continues on the exit of the 2 remaining businesses. We also streamlined our international network into 4 locations: New York, London, Singapore and soon to be opened Frankfurt. Over a number of years, Westpac had lost market position across our portfolio of businesses, particularly institutional business and consumer banking. Now I'm pleased to say now that this has stabilized, and we're now operating broadly in line with our major competitors. Our New Zealand business also continued to perform well and is working to resolve errors of the past. We've also made significant progress on the journey to create a digital bank for consumers and small businesses. This included completing the rollout of our new Westpac consumer app and launching a digital mortgage. At the same time, we're building our data capability, which is helping us to improve product personalization for customers as well as reducing risk. Now shareholders are well aware of our multi-brand presence as well as the lack of integration, following their acquisition some years ago. I'm pleased to say our brands are now more aligned, including in the origination and servicing of mortgages and by co-locating selected branches that are in close proximity to each other. We're also working to enable customers from any brand to transact in any of our Australian branches. Solid progress was therefore made on costs that had built up over time. The results saw the statutory expense-to-income ratio reduce from 63% to 55%. And we're focused on lowering this to the mid-40s or below in the coming years. The group remains well capitalized and is in a solid dividend-paying position. Dividends for the year rose to $1.25 per share, fully franked, an increase of 6% and representing a dividend yield of 6%, excluding franking, based on the closing share price on the 30th September, 2022. Westpac, however, still lags peers in several areas, and we're committed to rectifying these. Shareholders understand the regulatory and operational risk and cultural failings of the group, particularly during the past few years. We've responded by changing management, instituting the Customer Outcomes and Risk Excellence or CORE program, and implementing a comprehensive cultural change initiative across the company. These are well advanced and on track with no material new operational risk issues surfacing. Nonetheless, we recognize there's more to do to ensure the improvements are embedded. The externally comparable Organizational Health Index survey, which is how we measure the progress in culture rose during the year to 75, taking Westpac just below the top quartile globally. We've had an improved year, but we know that performance is not yet where it needs to be, and this was reflected in remuneration outcomes for the management team. Now today, I do have a specific announcement I'd like to make on my own position. Given the progress in turning around your company, I have advised the Board that I intend to retire at the conclusion of the 2023 AGM in December next year. This delivers on my commitment to shareholders when I first took on the role in 2020 to create a leaner, more agile, and better performing company. It also ensures the Board has time to appoint a new Chair in an orderly way. And we have started the process of identifying a new Chair and in looking for new Directors that will bring additional skills to the Board. But in the meantime, there remains much to be done and I can assure shareholders of my commitment to see the job through this year, and to support the company in what will invariably be a challenging year. Now turning to the Board more generally, in the year, we took direct action to contribute to the Simplify and Perform priorities by reducing the cost of the Board without detracting from its effectiveness. The size of the Board was reduced, the committee structure was streamlined and the number of Directors on each committee lowered. Non-Executive Director and committee fees, including mine, were cut to bring them more in line with our relative performance. The membership of the Board has also seen significant change. During my tenure, 3 Directors have retired, and 4 have been appointed to the Board. Female representation is now 40%, meeting our commitment to shareholders. With considerable regret, my friend, Peter Marriott retires from the Board at this AGM having completed the maximum 3 terms. Peter has been an outstanding Director, and I would like to take this opportunity to thank him for his long service to the company. Now, turning to the AGM itself, the items of business are the financial reports, the remuneration report, the granting of equity to the Chief Executive Officer, 1 director reelection and 2 climate-related resolutions proposed by some shareholders. Peter Nash will seek reelection today. Peter is the Chair of the Board Audit Committee and has extensive financial services and audit experience and has worked in geographically-diverse and complex operating environments. He also has extensive listed company experience which makes him an excellent Director and shareholder representative. The Board recommends Peter unanimously for reelection. Now last year, just over 30% of votes cast were against our remuneration report, and we thereby incurred a First Strike. We have taken this occurrence very seriously and anticipate broad shareholder support for this year's remuneration report given the improved situation of the group. Turning to the shareholder resolutions related to climate change reporting. The first seeks to amend our constitution to allow advisory resolutions, while the second, which relies on the first being supported, seeks disclosure on how our financing will not be used for new or expanded fossil fuel projects. We're confident in the quality and breadth of our climate change position, action plan and disclosures, and do not recommend these resolutions to shareholders. Now we are aware that climate change is important for shareholders. It is an issue that the Board and management discuss at length. Westpac is committed to reducing emissions from our own operations as well as in our customer financing, particularly related to fossil fuels. This has been an area of focus for some time, and it should be no surprise that of the major banks in Australia, Westpac has the greatest exposure to greenfield renewables and a low exposure to fossil fuel extraction. This year we updated our climate change policy, we joined the Net-Zero Banking Alliance, and released 2030 targets for 5 emissions-intensive sectors in our lending portfolio. Now while some, including those here, would have exit high emitting sectors immediately, we believe that we have a role to support the country and customers in a just transition to a renewable future. The Board strongly supports Westpac's approach to climate change which has been based on scientific and comprehensive feedback from experts, including many shareholders. We publicly disclose our commitments and action on climate change, and we update our progress regularly. Further work is also underway to develop Paris-aligned sector financing strategies and portfolio targets for other emissions-intensive sectors. Together with the targets already set over the year, this will represent most of our emissions. We ask that you judge us on our actions going forward. We're committed to exiting lending to thermal coal mining by 2030. We have also set a new upstream oil and gas emissions reduction lending target, and any related corporate lending must have credible transition plans in place by 2025. Of our lending to power generation, almost 80% is to renewables, and we set our emissions intensity lending target for power generation for 2030. Apart from our own progress, we are working to be the bank that helps customers in their transition, supporting Australia to reach net-zero by 2050. So in closing, I would like to thank the Board for their hard work and dedication. I'd also like to thank the management team and staff colleagues for their hard work and contribution. Now fortunately for shareholders, given the foundation we now have, I genuinely believe for Westpac, the best is yet to come. And as I enter my final year as Chairman, I want to thank shareholders for your confidence in our turnaround and your commitment in this great company. Now let me hand over to our Chief Executive Officer, Peter King. Thank you.

Well, thank you, Chairman, and good morning, shareholders, and it is great to be in person again. As the Chairman indicated, 2022 was an important year for Westpac. The changes we're making as part of our strategic program have placed us on a much stronger footing across all dimensions. Our financial performance over the year was solid. We improved our franchise, reduced costs, strengthened the balance sheet and continued to transform the company. Statutory profit was up 4% over the year to $5.7 billion. However, the result was held back by large notable items, mainly the $1.1 billion loss on the sale of the Australian Life Insurance business. Importantly, a higher contribution from our core businesses more than offset the earnings loss from the businesses we sold. And while we delivered better loan growth through the year, it was behind our plan. However, in the second half, we tracked at or above major bank system across our key segments. Our net interest margin was lower compared to 2021, particularly weighed down by the impact of ultra-low interest rates. However, margins increased in the second half benefiting from the impact of higher interest rates. Costs were down 7%, excluding notable items as we reduced third-party spend, continued to consolidate our property footprint and further simplified our business. The trends of better growth, higher margins and improved efficiency, position us well for the period ahead. Credit quality was a key positive with key credit metrics improving. Nevertheless, we are carefully watching the impacts of higher interest rates on customers. There is no doubt that tighter monetary policy and slowing economic growth will impact some customers in the year ahead. We are prepared for this cycle given the quality of the loan portfolio and the strength of our balance sheet and provisioning. We made good headway on our Fix, Simplify, and Perform strategic priorities, which are delivering a simpler and stronger bank. Since announcing the changes in strategy 2 years ago, we have resolved most historical issues, strengthened our management of risk, reset our culture and simplified the bank through divestments and geographic consolidation. I am particularly pleased with the progress in lifting our management of risk and risk culture. And these changes are being driven by our CORE program, which is tracking well. We've completed more than 3/4 of the 350 activities. And while there is still work ahead, our path is clear and we are embedding the changes in our business. A few of the highlights for the year included completing the exit of insurance underwriting; finalizing the roll-out of our Westpac app to 2.7 million users; improving our merchant capability by installing over 18,000 new terminals; and expanding our digital experience, including the digitization of over 400 physical forms. Hand-in-hand with the investment in digital is the need to help protect customers' money and information. And we have invested heavily in cyber controls for many years by upgrading systems, strengthening capabilities and building expertise. We have also worked hard to increase customer awareness of scams. We've have increased security for debit and credit cards. And this includes an electronic card where the 3-digit code changes every 24 hours, which is more secure. Pleasingly, by using this new feature, fraud losses are 80% lower than when a physical card is used. And I encourage everyone to use it when shopping online. Our team are available outside, if you would like to understand more. We have also introduced proactive transaction blocks of suspect online retailers as well as restricting over 94,000 phone numbers from being used by scammers to impersonate Westpac. While investment in digital is vital for efficiency and improving shareholder returns, we also recognize the importance of physical presence. Our branches handle around 5% of transactions and that is why we are working to improve the productivity of the network through co-located branches and multi-brand branch access. We have also extended our partnership with Australia Post for a further 10 years, giving customers access to 3,500 locations. Where we are closing a branch, there is an Australia Post outlet to support the transition. And we continue to focus on customer service, and while service levels improved this year, particularly in loan processing times, they did not reach the targets we set ourselves. I am confident that the work we're doing will improve the customer experience over time. Having made substantial inroads on our Fix and Simplify agendas, we are changing gears to focus more on customers and driving performance. This will be a key priority in 2023 as we transition to the next phase of our strategy. Climate change is one of the most pressing issues of our time. As a bank, we recognize the significant role we play in helping customers transition to a low carbon future and in reducing our own emissions. Over the year, we refreshed our climate change action plan and joined the Net-Zero Banking Alliance, or NZBA, which continues our work to align our operations and lending portfolio with net-zero by 2050. In our operations, over half of our electricity is now from renewables. There will be a chance for questions and comments in a second. So we won't be -- we're too long and we do respect everyone's right to ask questions in a constructive way, hopefully. In our operations, over half of our electricity is now from renewables and we are committed to sourcing the equivalent of 100% of electricity consumption from renewables by 2025. As part of our NZBA commitments, we are engaging with institutional clients on their plans for climate change, which in turn will help meet our net-zero targets. The effects of climate change are already being felt by customers and the recent floods across eastern Australia are a real example. We supported customers through the year with over 1,600 disaster relief packages, $2 million in emergency grants and by deploying the bank in a box to Lismore. Turning to the outlook, we expect the combination of rising interest rates and the increase in cost of living to be felt more fully by consumers and businesses after Christmas. As I indicated earlier, we're well placed to support customers through what will be a tougher period. 2023 heralds a new phase for Westpac. And our efforts over the past few years have made us a simpler and stronger bank. With our strong balance sheet, sharper strategy and committed team, we are focused on strengthening the franchise and accelerating performance. We enter the year with optimism and a commitment to improving customer experience as well as continuing to build the long-term value of Westpac. And I would like to take this opportunity to thank our people for their commitment to customers and our company. I continue to be humbled by the way that our people put customers first, particularly in the face of adversity. Finally, on behalf of the Westpac team, I would like to thank shareholders for your support. Thank you for listening.

Thank you, Peter. We'll wait a few moments while the photographers and those with recording devices leave the room. A number of shareholders submitted questions ahead of the meeting. Peter and I have dealt with some of the themes from those questions in our addresses already. So we request that questions asked today are relevant to the items of business and to shareholders as a whole. Questions on customer or personal matters may not be put to the meeting. Where appropriate, you may be contacted by one of our customer representatives. Senior management and Adrian Ahern, Westpac's Customer Advocate are also available to meet shareholders in the adjacent room after the AGM. We kindly request that those attending in person ask no more than 2 questions at a time to allow shareholders as a whole, the opportunity to participate. The Notice of Meeting has been distributed, and I'll take that as read. We can now move to the matters in the notice of meeting. I'll introduce each item of business separately and then respond to questions for that item. Voting closes 15 minutes after the completion of the business of the meeting. The results of the polls will be advised to the Australian Stock Exchange and available on the Westpac website. Now turning to the first item of business. And I've taken the unusual step here given the obvious interest of bringing the climate change issue upfront on the AGM because it's such an important matter for the company. And as I've indicated, in our addresses, we've made significant progress this year in developing our plans, establishing targets and helping customers transition to a lower carbon future. Now we've seen and we know that shareholders have strong views as well, and I expect there will be questions on this topic. Given the importance of climate change, we'll start with the climate-related resolutions put forward by a group of shareholders. I ask shareholders that have questions regarding Westpac's climate change approach and commitments to ask those questions during this item of business. Once we complete the discussion on Item 1, we will move to questions on the financial reports and each of the other items of business. This is intended to make a better experience for all shareholders. Now Resolution 1A is required to be passed as a special resolution. And Item 1b is conditional on Item 1A passing. Resolution 1B requests that Westpac disclose in future annual reporting information demonstrating how Westpac's financing will not be used for new fossil fuel projects. Under the Corporations Act, shareholders can propose to move a resolution at a general meeting. In this instance, market forces and Australian Ethical Investments Limited, put forward the resolutions in Item 1 with more than 100 signatories. The Notice of Meeting contains an explanation on why the resolutions are being put forward, along with the Board's view. These resolutions, however, are not recommended by the Board. Nevertheless, we respect the right of shareholders to make such resolutions. And I'd now like to invite Mr. Kyle Robertson from Market Forces to speak to the meeting on resolutions 1A and 1B. Kyle?

Yes. All right. That might be better. Thank you, Chairman and the Board and greetings to my fellow shareholders. This resolution was filed on behalf of hundreds of shareholders concerned for the security, not just of their investment in our bank, but far more importantly, the security of the world we inhabit. All this resolution asks is that the bank demonstrates how it is not making the crisis of climate change any worse by financing additional and expansionary fossil fuel projects. In 2021, the International Energy Agency made it clear that we have a slim, but still possible chance of limiting warming to 1.5 degrees and achieving net 0 emissions globally by 2050. And the mandate was clear, no fossil fuel expansions. And the IEA has reaffirmed these findings just a few months ago in its world energy outlook even amidst the global energy crisis. But even with that slim possibility, the fossil fuel industry is doing everything it can to expand aggressively and blow out any chance of a safe climate. At COP27, independent analysis founded the scale of expansion currently being planned by the global oil and gas sector alone would result in the equivalent of Australia's annual emissions being released since the atmosphere 217x over. And our company is enabling it, violating the IEA's conclusions as well as our company's own climate commitments. A case in point, earlier this year, Westpac to have pardoned a $4.6 billion loan to Global Infrastructure Partners, a loan that would be used to develop the Pluto 2 LNG train. Pluto 2 will process gas from Woodside Scarborough gas field and emit almost 1.4 billion tonnes of CO2 over its lifetime. Independent analysis concluded that this project represents a bet against the world implementing the Paris Agreement. But this example is just one of many. Over the 7 years since the Paris Agreement was signed, the bank has loaned over $1 billion for new or expanded coal, oil and gas projects. Over their lifetime, these projects are estimated to enable 3.7 billion tonnes of CO2 equivalent to 7x Australia's 2020 annual greenhouse emissions. Our bank remains a global laggard when it comes to climate lending policies. Our policies failed to unequivocally rule out finance to all new fossil fuel projects and even allow the world's most polluting companies 3 more years before they need to produce transition plans. Some of Westpac's biggest fossil fuel clients want to lock in new fossil fuel projects in the next few years, which, if successful, would send the climate into chaos. As climate change impacts worsen, this will impact and arguably already is our balance sheet. As an institution exposed across virtually the entire Australian economy, Westpac should be extremely concerned about the financial impacts of physical, transitional, legal and reputational climate risks, which inevitably will be borne by shareholders. The Australian Bureau of Agricultural and Resource Economics found that agricultural productivity in Australia has decreased on average by 23% since 2000 due to global warming. And under our best case, 1.5-degree scenario, the frequency of drought will still double. That's our best case scenario. Our May 2022 Climate Council study found 1 in 25 Australian homes would be uninsurable by 2030. And Westpac itself has drawn attention to that issue. The home loan portfolio of Westpac is assessed at being of risk of 3.6% of its mortgages under the IPCC's best case scenario. Combined, these 3 sectors make up 2/3 of our lending portfolio and for a company so widely exposed to physical and transitional risks to be willing to worsen the problem by enabling fossil fuel expansion amounts to our company shooting itself in the foot. The climate is already in classes and the clock is ticking. So why on earth would this company do anything to exacerbate this problem any further? Thank you.

Well, thank you, Mr. Robertson for articulating that clearly. But I now invite questions in relation to Resolutions 1A and 1B, and I'll take them in the room first, please. Can I have the first question please?

Mr. Chairman, I would like to introduce Mr. Craig Caulfield. The question has been retracted. Mr. Chairman, I would like to introduce Michael Sanderson.

I didn't come here to talk about climate change, but I will make a comment. I think the worst thing this climate change is to monetize it. Once you get the money mean involved, everything goes sideways. As far as the greens are concerned, I empathize with the philosophy. However, I believe they do shoot themselves in the foot because they're unable to broaden their scope to other forms of low-carbon energy, i.e., nuclear as does our government. Take Jeremy's case in point that disabling their nuclear and their carbon footprint is going up, renewables won't cut it. That's all I'd like to say. As I said, I didn't come here for this.

Thank you very much Mr. Sanderson for your comment. Can I have the next question, please?

Mr. Chairman, I would like to introduce Mr. Schott.

Mr. Chairman, this is Schott. I support Resolution 1A, I think it's much more important than Resolution 1B. An advisory and where the resolution is written, it's got more caveats on it about the Board not having to do something, which I agree with. I don't think the Board ought to be absolutely directed. The Board governance must have a discretion. And if you misuse the discretion, we, the shareholders, should take action against the Board by removing you. And if you don't do something about being the leader of a bank, 1 of our 4 banks on climate change, then in the next year or so, we should get the industry funds, the super funds and everybody else together to vote the Board out and put a new Board in that will treat seriously the issue that's facing us over climate change. I agree with the remark you said in your opening remarks, Mr. Chairman, about seriously the banks taking it. I cannot see any reason why a group of shareholders, and you may wish to put more than just 50 names, you might want to say it's 3% of the total shareholders have to -- who hold shares have to sign the resolution. But there's nothing wrong with it coming to the floor of the AGM, the 1 time for 2 hours every year where the shareholders get a chance to hold the Board to account and the senior executive. So I think that -- I haven't seen the vote, but I presume you've rounded up all the usual suspects to vote it down to quote Casablanca movie, et cetera. But if you keep knocking it back in the end, the Board will pay the penalty by being voted out. You've only got to get the industry funds, of which overwhelmingly 15 million Australians are now involved in to decide you've got to go and then nothing will save you. I therefore support the resolution, 1A, I don't think 1B is as important as 1A. The last thing I would say, you are a public listed company. I think it's time, and I have to admit the conflict of interest, I am a member of the Australian Labor Party and I've been a previous senator in the Parliament of Australia. I think it's time for the Australian government to put on yes on the all public listed companies, a resolution like that to deal with issues about the fundamental issue of climate change, that you can't ignore it. To pick 1 or 2 major companies like this, I think, is the inappropriate way to go. I presume the NAB AGM in Friday, which I'll go to, there may be a similar resolution. But across the board, public-listed companies ought to have an advisory process. So if something is serious, climate change is taking place good. The last thing the people have interjected earlier unnecessary, and I have to say, they turn up usually 3 years ago at this AGM, we sat here after the greatest financial, some ethical scandal, any bank suffered, the scandal of 23 million breaches of the AUSTRAC blows. 23 million -- there is -- and we are all shareholders. We own the company that's the biggest law breaker in Australian history. I don't like being a shareholder of a company that enabled for several years, [ terroristic launder ] money through our bank that may kill people elsewhere in the world or above all, send money to evil people in the Philippines so they can sexually abuse underage children. We are shareholders, we are owners of a company that allowed that to happen. That to me is the ethical issue that we've got -- that we should be dealing with. And I wish those people who came along quite rightly raised that issue. The meeting in 2019, I and one other, were the only 2 from the floor who raised the issue that we were among -- we were an overwhelming law breaker. And I understand what do we get the fine, $1.5 billion...

$1.3 billion.

$1.6 billion?

$1.3 billion.

$1.3 billion.

$1.6 billion?

Yes.

Well, I would have rather had that paid as a dividend, by the way than paid to the Australian government because we were a habitual law breaker. So I just want to say, later on, we'll have other chance in the annual report to this. But Mr. Chairman, I think you've probably got the numbers lined up from the usual suspect to vote this down. But that's not the end of it. It's just the beginning. And I urge you to have consultation with the Australian government to see whether such a resolution should be put on all publicly-listed companies. Therefore, on that basis, to keep the debate going, I support 1A, but I wouldn't be voting for 1B.

Thank you, Mr. Schott. I mean I actually have a lot of sympathy with what you just said personally. And in fact, I'll answer the question that you didn't ask, and that is that we thought very seriously about putting our own resolution to this AGM. But the amount of work that we had to do in order for that to happen was enormous. And so we will consider putting it up next year ourselves.

In a similar form, but may be different because...

We're doing the work now, but we're serious about it. And in fact, I would have preferred if we could have put it up this year, ourselves instead of having it by shareholders. But we weren't able to do so, which is unfortunate. But I don't think there's a good chance that we'll solve this problem and bring it ourselves. Now if government decides then so be it. But I think we'd like to do that.

Coming to here. The other point would you respond? You might not want to go near federal government at any time, seeing as they are the -- all the regulators. But I want you to consider that if the Board approach -- made an approach on what you're now doing over the next 12 months to talk to the federal government, about the federal government doing something under the law to make it compulsory for all public listed companies to have a similar clause in their constitution. And I think if the Australian government did it, we'd all be a lot better off.

Thank you very much. We'll certainly take that up. I appreciate it. Can I have the next question, please?

Mr. Chairman, I'd like to introduce you to Joanna Richardson.

Can you lower the microphone for Ms. Richardson, please?

Sometimes I wind up planning questions and then something comes up that helps answer it. My question was if the Board don't like Resolution 1a, has the Board -- because this is going to the banks that I'm aware of and I'm a tiny direct shareholder, but I also hold indirect shares through listed investment companies on [ Supo ] and I'm fully supportive of the people who think that net 0 by 2050 is not good enough. So knowing -- I would encourage this Board and other company and bank boards to, if they don't like this, come up with something better. So looks like instead of saying well, why can't you is when will we get to hear more of it and how soon can we have it? Because I fully support the statement that investing in new fossil fuel is -- I know it's a contributor to my anxiety attacks.

Well, I'm sorry to hear that. But I think let's hear from the Chief Executive on that.

One of the developments actually that the treasurer of the country announced is a push for disclosure. So one of the areas here that will help will be companies consistently disclosing on their exposures and their plans and that's what the Chairman was referring to that we put our plan for our response up to shareholders for feedback next year. And so that point is very important. It's also as financiers obviously, we have a big role to play in solving this for the economy and the world, but also to the company. So the companies will need to put their plans to their shareholders as well. So I think we will see it through the financial services system including this bank and we will see it directly as shareholders in the companies involved particularly in fossil fuels.

I mean we're not being forced to take action here, we're taking action voluntarily ourselves. We've radically reduced our exposure to fossil fuels and coal in particular and oil and gas. We've radically increased our exposure to renewables and that wasn't forced upon us. We took that action ourselves. The problem we've got is the demand for electricity keeps rising, particularly with electric vehicles, and we end up between a rock and a hard place with the country needing that electricity because renewables are not available to the extent they're required and therefore, gas and other forms of electricity generation are being used. And of course we are a financier and therefore, we do have existing commitments that we're unable to break with customers and so it's very difficult for us. And a good point was made about government. I mean the government hasn't yet created an environment for us to move forward faster and that would be welcome. So look, we are genuinely trying to do the right thing here to support the countries, to support our customers, but also to get to the end that you're looking for. So let's see what progress we make. And as I say, we'll bring this item forward next year probably ourselves and that will open up the discussion further. Can I have another question, please?

Mr. Chairman, I would like to introduce [ Lee Norton ].

Thank you, Mr. Chairman and Board, for allowing these items to be first dealt with thoroughly. It's greatly appreciated. My question goes to the issue of in particular Resolution 1b and the potential reputational risk to the bank and therefore to our shareholder value. And it especially relates to the sort of actions that are being taken by activist groups against banks, including what we've seen this morning. So our competitor at NAB is the target of one of these groups, the Move Beyond Coal campaign, over its lending for Whitehaven Coal. And Whitehaven is, as we know, a highly controversial and a diversified pure coal company planning 3 new coal projects. And over the last 6 months, the Move Beyond Coal people have engaged with bank staff and customers at NAB, held hundreds of branch and headquarter actions and showed up in an event the NAB CEO was presenting at. I note that we in Westpac are also a part of Whitehaven's banking syndicate and that 6 weeks ago at the Whitehaven AGM, their CEO, Paul Flynn, said that the company was in preliminary negotiations with its bankers and I think this means that after NAB, Westpac may be the focus of the Move Beyond Coal campaign, which is a concern. So my question to you is will you, Mr. Chairman and Board, save us potentially shareholder value by way of the headache and reputational damage that may follow if we choose to continue financing Whitehaven or could you choose or will you continue to choose coal over climate changes represented in this resolution and so potentially invite the ire of grassroots campaigns and the consequent reputational damage?

We certainly won't put coal ahead of anything and in fact I won't mention individual companies, which we can't for privacy reasons. But we are not doing any additional exposures to coal and in fact we've got existing commitments that are legally binding on us and so that's where we are. But it is our intention that for those to cease by 2030 and then we'll be out. So I think we're doing the right thing here for all circumstances. So can I have the next question, please?

Mr. Chairman, I would like to introduce Mr. [ Donald Wout ].

The question is in support of 1b. My question is in September 2020 the Science Based Targets Network issued interim science based targets for nature including 0 and 0 conversion of all natural habitats from 2020 as the first step towards nature positive targets. Given the agricultural sector's contribution to Westpac's Scope 3 emissions and the pressure that land clearing associated with pasture expansion places on our environment, has Westpac implemented conditions within a loan agreement to prevent deforestation or sustainability linked loans to promote nature positivity?

Thank you very much for your question. I think I'll maybe ask the Chief Executive to make a comment.

I think the first thing is this is for the benefit of all shareholders. This is very much a focus and emerging area in terms of natural habitats and how we manage those better. And Westpac has joined the TNFD Forum on this matter. So we're involved in the policy piece. In relation to your specific question about do we consider it when we lend, we do and sometimes we will lend, other times we will need conditions. It's something that we would do on an individual basis as opposed to having it as a standard contract at the moment.

That sounds positive. But please do more because we all know there's a climate emergency and as well the habitats even of the koala and 100 native species facing extinction risk. So thank you for this action. Please double up your efforts for all our sake.

Can I have the next question, please?

Mr. Chairman, I would like to introduce [ Millie Hasbro ].

This question is to the CEO and the Board. My name is Millie. I'm 17 years old and I strike from school for the climate because I'm terrified of both the impact of climate change on my future and the impacts that I'm already seeing in the world around me. Unless you've been living under a fireproof, flood proof, air conditioned and heated rock; you should understand the severity of what I'm talking about. Earlier this year I met with Peter King to discuss Westpac's ongoing relationship with fossil fuel companies, including Santos and Whitehaven Coal, that are expanding their productions despite the warnings that we must stop all new fossil fuels immediately to have a chance of a liveable future. Since this meeting, it doesn't appear that Westpac has taken any steps to stop further investment in new fossil fuel projects. We know Whitehaven is going to or has already approached you to relend the company money. This is a company that plans to double its coal production by 2030. Continuing as you are sends a clear message to young people across the country that you would rather prioritize your profits over our futures. My question is will Westpac rule out any further involvement with climate wrecking companies that are building new coal, oil and gas projects? And if not, can you explain why it is that your profits are more important than my generation's futures?

Thank you for having the courage to stand up. Now since you've met Mr. King, I think I'll have him answer your question.

In relation to specific companies, you would understand that I can't speak about where we're at and whatnot with specific companies due to privacy reasons. But in terms of our policies, we've been very clear on thermal coal that we will be out by 2030 at the latest. In oil and gas we've announced a new policy this year, which is no new oil and gas facilities unless they are required for national energy security. So we've tightened up in those 2 areas. But more broadly, I think what I would say to you is this Board spends significant time on this issue. We think about this as transition. So we have to reduce the impact on the climate. We also have to make sure that the country can still operate in terms of energy so that's why we think about it through transition. But I appreciate your comments and your passions today as I heard previously this year as well and thank you for coming along.

Okay. I'll just add another point. While we've reserved the capacity for new exposures, it doesn't necessarily mean to say that we will do so because we just can't predict the future so easily. But we're very conscious of the resolution here. Can I have the next question, please?

Mr. Chairman, I would like to introduce [ Jolene Albert ].

My question relates also to the reputational risk posed on our company by nature related financial disclosures. So my question is the UN high level expert groups report on net 0 commitments by non-state actors has stated that in order for financial institutions net 0 commitments to be credible, they need to include a commitment not to finance deforestation. Australia is the only developed country in the world that is classified as a deforestation hot spot. In 2018-'19, 680,000 hectares were cleared in Queensland alone mostly for cattle. In light of this new global standard, do you consider that the integrity of Westpac's net 0 commitment could be called into question unless the bank undertakes due diligence to ensure that it will not finance deforestation? And what work has been done to assess the bank's exposure to nature related risks, including deforestation, within our lending portfolio?

Mr. King will perhaps say something.

Well, I think you're right in terms of that issue. It is an issue and, as I said before, we are doing the work on all of the nature related areas, including deforestation. But when we do individual loans at the moment, that is something that we consider so that's where we're at. It's another one where I think we need a standard policy applying to not only the finance sector, but companies as well so we get the disclosure which I think we will because we're on the path now. In relation to the work that we've done, we've disclosed in the accounts the impact of transition of physical risk. It doesn't go down to the level of deforestation. So that will be something we would look at in the future.

The second part of my question is what work the bank's done to assess the exposure that the bank has to nature related risks?

And that's why I said we've done the work on transition of physical risk and then we're doing the work now as part of looking at our policies and frameworks for all the nature related areas including deforestation.

Do we know when the bank plans to report on this?

As soon as we can.

You can safely assume we're spending an awful lot of money on this subject because we are serious about it. Can I have the next question, please?

Mr. Chairman, I would like to introduce [ Austin Katano ].

This question is to the CEO and the Board. My name is Austin Katano and I'm 15 years old and I strike for the climate -- strike from school for the climate. As young people, we are acutely aware of the future we're looking down the barrel of with bush fires, floods and droughts becoming worse every year; but we're terrified at the thought of it getting worse. Earlier this year I met with Peter King to discuss Westpac's ongoing relationship with fossil fuel companies, including Santos and Whitehaven coal, that are expanding their production despite the warnings that we must all stop new fossil fuels. So will Peter King meet with School Strike for Climate again to discuss these ongoing relationships and how Westpac plans to end finance for destructive fossil fuel companies that are putting our futures at risk?

Well, you're on the spot here, Peter.

What I would say is I meet with a lot of people, engage with a lot of people and at the appropriate time, I would be very happy to meet again. But I will work out when that appropriate time is.

Mr. Chairman, I would like to introduce Kyle Robertson.

As you can probably guess, my question relates to Resolution 1b, but it's a bit more specific part of 1b, which is something that gets caught in the crosshairs of new fossil fuel projects all too often and it relates to the principles of free prior and informed consent. We understand that in August this year Westpac was again involved in a $1 billion loan to Santos. And if you've been following the news recently, you'll know that in September the Federal Court ordered Santos to pause work on its massive Barossa LNG project after finding out the regulator could not be assured that the company had properly consulted the Tiwi Island traditional owners. And then Santos appealed this in the Federal Court with its lawyers arguing the traditional owners connection to the land was akin to a personal interest in the sense of a past time or a hobby verbatim and that doesn't constitute a genuine legal interest. Thankfully, the Federal Court slapped down Santos' appeal and upheld its original decision. So my question is was the bank aware of the Federal Court proceedings filed in early June and the allegations by Tiwi islanders that Santos had not consulted them before starting the Barossa gas project.

Mr. King won't answer a specific company, but he might make a general comment.

Yes. I can't comment on the individual company, but I would say we would expect our clients to meet the law and so that's how we would think about that issue. And we have actually chosen free prior and informed consent as a topic of development of strategy in our reconciliation plan. So we will be doing more work in that area to uplift our standards. But as I said, we expect our clients to meet the law.

My question wasn't what you're doing in your reconciliation plan. It's did you know about the legal proceedings that were going on before you financed this loan? Because this was happening in June and you financed the loan in August. So did you not know or did you know?

We're not commenting on individual customers. We can't do that.

Kyle, you know we can answer that question.

I'm not asking about individual. I'm just asking did you know about the proceedings?

It is specific and therefore you know we can't answer it. So nice try.

Okay. I'll try again. So in light of the court's ruling that the regulator couldn't approve the project because of consultation issues and the deplorable arguments put forward by Santos in that case and as spokesperson of the [indiscernible] of the Tiwi Islanders saying that their people don't want any fossil fuel activities off the coast of the Tiwi Islands. Will Westpac roll out any further finance to facilitate that Barossa gas project, including Santos' proposed Darwin LNG extension?

You know the answer to that question. So thank you again for your comment.

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

I totally respect the views of our younger shareholders in this audience. I have children and grandchildren and I hope that they grow up with their morals and intelligence in this area. But what really disturbs me is that when you look at say the world at the present time, the world is going through a rather difficult process in coming to climate change and we've had endless conferences in Paris and Egypt and Glasgow and it is very hard to come to any sort of consensus that actually delivers any action. When you think about it, this is all aimed at the fossil fuel companies. At the present time, we are transitioning and a lot of the fossil fuel companies are trying to transition out of the fossil fuels from my observation. I'm no scientist and I'm no economist on this. But one of our largest gas companies is either the largest polluter or the largest renewable energy generator. I totally believe in climate change and I'm totally believing of renewable energy because I put money where my mouth is. There are broader consequences of not only fossil fuels in this. Does the bank turn around and says okay if Santos or whoever -- whatever company I don't care that you're lending money for, are you people then going to turn around and then reassess their employees when they go for a bank loan or a credit card because they're working for these companies? We've got the insurance industry going through massive dilemmas because they're either going to charge the customers a fortune for flood insurance or for being in a bush fire prone area here in Australia. And I totally believe that the government should be taking the responsibility for those sort of insurance risks not the general industry take responsibility for that. I'm from New South Wales and it was very hard and our government reneged on making everyone responsible for a fire levy going into what is local council rates instead of on the insurance premiums. It is very, very difficult. And also we've got broader questions. Do you sort of turn around say to packaging companies that use fossil fuel related products like plastics? I want to know the bank's position on the broader range of the economy in this and basically the government needs to make a common position because every corporation has got to meet these challenges. So I'd like the bank's view on will it lobby government? Will it use its influence by Anna Bligh in the Bankers Association because she would have very good contacts now with the present government and get something happening. These young people are crying out. Okay. These people are using the blah-blah too. Yes, it is a lot of blah, blah but nothing's happening and decisions have got to be made at the base level because we put in say 50 or 60 years ago a lot of fossil fuel electricity generators so that people could turn on their televisions to get information, kids could get an education so they can do their homework in the night time and the lights have still got to be turned on. Now I'm a believer in renewable energy and the governments need to really sort of -- the present government's put in a lot of piecemeal in the next 12 months, but we don't know what's going to happen after that. I'd like the bank's views on those questions apart from these nebulous resolutions that I may not be alive and with respect neither the people on the Board may not be alive in 2050 to see the outcomes of these resolutions.

I think progress has been made. There is no debate about whether climate change is real and yet if you go back in time, that was part of the debate. It's accepted, it's real. And therefore, we've got a chicken and egg problem now about how do we get to a situation where we're not emitting and we're all struggling with that. It's a really difficult problem. I mean the easy decision for a bank is just to shut up shop on the things that we know are emitting and just stop it right now, sell the assets. The problem with that is unfortunately baseload power is still needed and renewables are not available to the extent required. And so we've got this dilemma about how do we help in getting from where we are now to somewhere more intelligent, which we call transitioning. And so we're honestly doing our best here because it doesn't matter what we do here, we can't win. We're going to be wrong either way here. But I genuinely think we debate this really strongly, we put in a lot of investment in this, spending a lot of money on trying to work out how do we go forward here and I actually think we're doing our best. But I don't know if Peter wants to say anything.

Fantastic question. And if I look at we're hearing about the need to go, the trend is clear, the speed is the question is sort of the way I would frame the issue. And we now have a government that says emissions have got to go down so a tick. It's expressed a target. But to me what we need now is a plan which will unlock investment. We need a plan for where will we build electricity generation, how will we move it and then how do we store it? And if you look at the rough numbers that we need 3x the generation capacity of electricity of what we have today and that solves a lot of our pathways. It solves how we move people, it solves how we heat people, how we keep the lights on. But it's got to be a country priority. It's got to be a priority. We've got to get the materials. We've got to get the labor to build it. We've got to get the planning approvals done. So the thing that worries me is we don't spend enough time on the logistics, the plans, where do you put it, how do you move it because unless we solve those, the transition period will be longer. And so that's to your question are we engaging with government and the opposition on these matters? We are. And for us it's about the logistics, where, how that will unlock investment, that will increase the speed. Development approval times worry me if I'm frank. But we need to move from a target to a plan now as a country and that will bring transition periods down. It also means that our electricity becomes green. We haven't solved the firming issue completely so we probably need to rely on gas more than what we like, but that's where we're at. So hopefully, you get a sense from that answer. I'm a bit passionate about it. We are engaging at a level other than targets about how you get it done. But this is a logistics issue. It needs to be a top priority for the country in terms of labor, materials, planning and that will unlock investment.

Yes. And remember, Peter is also a Chairman of the Bankers Association in Australia so he and Anna Bligh do pick this up. And as you know, I'm a former Chairman of one of the largest insurance companies in the world so I'm very familiar with the comments you've made.

Okay. Just a final comment. I think we're all passionate about it, but let's sort of be human beings and these people that protested earlier on when you made comments really don't get the essence of why we are here today is that you people up there are the guardians of making us money, protecting our money and making us more money, right? But we've got to do it in a common sense and a human manner.

Indeed and not losing it as well is a big priority. Can I have the next question, please?

Mr. Chairman, I would like to introduce [ Audrey Werner Warden ].

My question is in again relation to nature risk. So it's been found that nearly half of Australia's economy has a moderate or high dependence on nature yet a report last year from 38 scientists from 29 universities and government agencies found that 19 of the 20 Australian ecosystem studied, including the Murray-Darling basin and the Great Barrier Reef, are experiencing potentially irreversible changes that could lead to ecosystem collapse. Now Mr. King, you've indicated that the bank is doing work in regards to nature related risk. But I would like to know specifically when the bank plans to conduct a sector or a location-based materiality assessment of its exposures to nature related risks through its lending investments and when does the bank plan to set and report on nature related targets?

I understand you want that. But as I said, we're doing the work and we've got to do the work properly is my priority. As soon as we believe that we've done it to the standard we need, we're happy to share it. But I want the team to do the work and do it well. I agree with the intent of your question that it has got to be a priority for us and it is a priority and work is underway.

Okay. I urge the bank to take this seriously in 2023.

Can I just make a procedural point here? Can people on this subject ask questions that haven't been asked before and I'll tell you why. A number of our shareholders are leaving the meeting and we've got the business of the meeting to be conducted here, which is really important for our shareholders and I wanted to give them a chance to hear the items that are following this. So can we draw a line at some point on this subject because the messages have been made, the answers have been given and at some point soon I'd really like to draw a line on it for the benefit of other shareholders. But let me take the next question on this subject.

Mr. Chairman, I'd like to reintroduce Joanna Richardson.

The reason I'm coming back is that there's this assumption that electricity use will have to continue and the bank said that the bank is doing lots of work on computer things, apps, Internet banking; and these of course require more electricity. So it's not as though these things are off in one corner, they all interact. So it's not how does air conditioning -- we need to as well looking at how we generate electricity, look at using it more efficiency at a time when there are greater and greater demand to use electricity for this, that and the other. So it's just sort of a please comment question.

Look, I will take it as a comment, Ms. Richardson. And can I take the next question, please?

Mr. Chairman, I would like to introduce Howard Pascal.

Chairman and the Board, CEO, congratulations having your Annual General Meeting in Victoria. I warmly welcome you into this wonderful capital city of Melbourne. It's wonderful of such an historic bank. I think you're the oldest bank by far. You've got beautiful historic Bank of New South Wales buildings in a lot of towns and also in New Zealand. Wonderful to see you here. We love you dearly. And what's important, 3 of our big 4 banks are having their annual general meetings in Melbourne, including your fellow head office in Sydney the Commonwealth Bank had their AGM at the MCG. Wonderful to see. I have shareholder friends of mine in New South Wales and Sydney and they're depressed because not 1 major bank has had their AGM in Sydney this year. So once again welcome to Melbourne. Welcome to Victoria.

All right. We came for the weather actually. So questions from online.

Mr. Chairman, we have a question online from Ben Gallen. Westpac Group employees are required to work an unreasonable number of unpaid additional hours to complete workloads. The fair workers comp identified under payments across the group resulting in compensation to employees. The FSU requested data from Westpac on the number of weekly hours worked by employees over the prior 12 months. Westpac said that it does not have this information. As unreasonable additional hours poses significant compliance risk to Westpac employees and the institution, can you confirm that Westpac does not record the number of hours your employees work? In the absence of these records, how has Westpac met its obligations to complete regular assessments as to whether your employees are paid more than their reward through their enterprise agreement and therefore, mitigated the risk of past and future under payments? And similarly, how does Westpac ensure it has addressed workplace health and safety risks when it comes to additional hours of work?

Well, this is a question related to future items. We will answer it. I actually personally don't know the answer to that so I'll ask Peter if he's got any observation. I will make the point though that the morale inside the company is incredibly high and is rising. As I said earlier, we're now at nearly the upper quartile globally for the positivity of the culture inside the organization. So I can't imagine this is a big issue. But Peter?

Well, firstly, thank you for the question. The principle is we're committed to paying people fairly so that's how we think about it. And what I would say is that we don't ask people to do unreasonable hours. But if there's specifics, I would encourage write to me or write to the team leaders. But I'd just make one other contextual point. It's been a hard year with COVID. We have had a lot of absenteeisms, we've had challenges in recruiting people because of the demand in the workforce. And that's why I thanked our teams upfront in my speech because I think it just has been an amazing year. But we want to pay people. If there's a specific case, then I'm very happy to get the right people to look at it and please write to me.

And a lot of our colleagues are still working from home because of the COVID situation. So again not everybody is in. Now can I please take the next question on this subject and hopefully a new question? We're still on climate change.

Mr. Chairman, we have a question from Christopher Ball. Whilst that laughter was over the top, John McFarlane, do you really think it was appropriate to speak to a shareholder in the manner you did? Do you think you were disrespectful? As the Chairman, you should have applied the should we test do better?

Well, I'll take that as a comment.

Mr. Chairman, we have a question from Elizabeth Anne O'Hara. Westpac says it takes into account environmental and social risks when lending to a company. For 10 years now my small rural community has struggled with a mining company that has an appalling track record of noncompliance, incurring fines of over $1.49 million. The most serious offense was surely stealing 1 billion liters of water without a license during the worst drought on record. Others include polluting waterways, breaching noise constraints, clearing illegally and serious workplace health and safety failures. The community is totally exhausted by their loss of amenity, the noise and light 24/7 and by the need for continual vigilance, monitoring and reporting. The company is trying to refinance its syndicated loan, which matures next year and of which your bank is a part. Before Westpac makes a decision to refinance its loan to a company that carries such clear environmental and social risks, will the bank commit to listening to my community's concerns about Whitehaven?

Well, thank you for your advice and we'll take that as advice because we can't comment on individual companies. Can I have the next question, please?

Mr. Chairman, we have a question from Margaret McArthur. Is the company aware that EU nations are withdrawing from the Energy Charter; France, Netherlands, Sweden and Germany. The recent floods are similar to those of us who are growing up in the 1950s. My husband and myself attended a lecture in NZ in 2006 at the Franz Josef Glacier, which we were told that although the glacier was receding at that point, we were actually heading for another ice age. This has been supported by recent core samples on Greenland going back 10,000 by scientists from Denmark. It included the ice age 500 years ago.

Well, again thank you very much for your input here. I personally wasn't aware of it. I don't know if Peter knows the comment. Okay. Can I have the next question, please?

Mr. Chairman, we have a question from Elizabeth Anne O'Hara. Whitehaven Coal is looking to refinance its syndicate loan of which your bank is part when it matures next year. Whitehaven Coal consistently overestimates the quality of coal it expects to produce. It has an appalling track record of noncompliance. It is destroying yet more of the Leard State Forest, Vickery Extension coal mine poses an appalling threat to climate and groundwater. Can Westpac assure us that it will not contribute to refinancing Whitehaven Coal?

Well, we've answered that question a number of times now and therefore I'm not going to say any more. I'm not going to take any more questions on Whitehaven Coal. Questions on the telephone, please?

Mr. Chairman, we have a question on the phone from [ Vishal Sharma ].

I have 2 questions. First one [indiscernible].

Vishal, we can't hear you.

Do you want to dial in again?

Are you going to enable Global Infrastructure Partners 49% acquisition of the [Technical Difficulty].

I'm afraid we couldn't hear that, but I think it was a specific question on an individual situation, which of course I've said we can't answer. But if you want to dial in again because there was so much distortion on your line. I'll take the next question in the meantime.

Mr. Chairman, we have a question on the phone from Stuart William Palmer.

I'm the Head of Australian Ethical Investment. We are holders of 4 million shares in Westpac.

Go ahead. I think we're having technical problems on the telephone.

I want to clarify that the resolution does not ask Westpac to immediately exit higher [ bidding ] sectors. We do recognize the constructive role that banks have the potential to play in supporting the transition of those important sectors. Our concern is the expansion that we're seeing in some higher bidding sectors without regard for the just transition needed to a renewable and a net 0 future. And with the shareholder resolutions because companies being financed by Westpac are proceeding today with fossil fuel expansion projects. These are projects which aren't going to do anything to address the energy price challenges the world is currently dealing with because of the war in Ukraine, they're not going to help workers and communities through a transition to a renewables energy system. Unfortunately, what these projects will do is obstruct the energy transition that we need to limit warming to 2 degrees and to 1.5 degrees. I think the CEO has referenced some restrictions that the bank does have today on project finance to new fossil fuel projects. But our concern is that the latest fossil fuel lending criteria, which the bank has published, still do allow the bank until 2025 to continue to renew loans, to make new loans to expansionary fossil fuel companies, companies who are actively planning and developing new fossil fuel projects. So my question is how this can be consistent with Westpac's commitment to align its lending portfolio with net 0 emissions by 2050 consistent with a 1.5 degree pathway. With local and global regulators looking very closely at net 0 claims and commitments, is Westpac exposing itself for liability for climate greenwash?

We're well aware of your support for both these resolutions. We haven't said we will finance new projects. We said that we've reserved the right to as a contingency. Part of the issue that we've seen in other countries and I've just come back from the United Kingdom where the United Kingdom is in danger of every day having electricity switched off for 3 hours because of lack of contingency on electricity production. Now I don't think Australia is going to get to that point, but we just can't predict the future and we can't get to renewable electricity for the full baseload power in Australia. So we think we've done the right thing here to reserve that capacity, but I know you disagree with it, but it is what we think we should do. Peter?

I'd just say I think you're also referring to corporate lending to the top of the companies not to particular expansions. And yes, you're right, we have said that we want companies to have a transition plan by 2025 and that gives some time to do that. We will be actively engaging with customers in those 2 years. And of course we would want a transition plan also public, have targets aligned to net 0 and that's some of the criteria that we'll be looking at. But you're right, this is an area that needs to be watched closely and we will watch it closely.

The good news is there are 2 more questions on the phone. Can we have them, please?

Mr. Chairman, we have a question from [ Sue Patton ].

I'm a music teacher and the flood survivor from the Hornsby region in New South Wales and this year on 6th of March a whole pool water just smashed our homes like a wrecking ball with an unprecedented set of circumstances for us and others living in our area. I can't begin to tell you today the levels of grief that I felt as I walked into what was once my home. My mom had died only 6 months earlier and I had kept a lock of hair in a small box. Of course this was gone along with just about everything else I owned. And my partner and I frantically searched around in the mud hoping that, that little box would somehow magically turn up. I was just numb with the grief of it all and through the tears for wreckage of our home, I did feel my mum with me. I'd lost both my pianos that morning and countless other things, but nothing meant as much as that lock of my mum's hair. We still haven't been able to move back into our home. It's just too dangerous. And so I'm aware Westpac recently established $2 million fund to help small businesses impacted by floods in Queensland and New South Wales and this is of course a good thing. But $2 million is about what Westpac will have collected in fees alone from just 2 fossil fuel loans to Woodside Energy and the Pluto 2 LNG project and we all know that these projects will only exacerbate climate change and its impacts like the devastating floods that my community and so many others have suffered and are still suffering. I was really heartened in 2017 when Westpac stopped funding the Adani coal mine. That was a line in the sand that was drawn. And the only decent thing now for you guys to do is to draw another line and say you'll stop financing fossil fuel companies and projects altogether. But my question to the Board today is this if you won't support Resolution 1 and if you're going to persist with funding fossil fuels, will you at least commit to donating every single dollar earned from fossil fuel communities like mine which are impacted by climate change.

Firstly, I'm terribly sorry to hear of your circumstances. You'd be surprised to know that it's not a big amount of money. Our exposure to fossil fuels is very, very small and a tiny percentage of the company. But Peter, I don't know if there's anything?

I think it's an interesting suggestion. Do I want to make a call right now? No. But I'll take it away and think about it.

Yes. It's a surprisingly small amount of money here that we're talking about. So again I really am sorry to hear of your grief. Can I have the next question, please?

Peter Star. Now I also met with Mr. King. But when I met Mr. King back in March, it was to do with serious and systemic issues in the bank. We've spent nearly 2 hours debarking about this coal and what's going on. I'm surprised Tim Flannery is not there to tell us that we'll never have any more rain and everything else. Please, Mr. Chairman, we need to move on. There are a lot of other issues that need to be discussed and there are serious and systemic issues to do with the bank and to do with financing customers and everything else.

I think we are pretty much there to be honest. So can I see if there are any final question on this subject because we have answered it comprehensively?

Mr. Chairman, we have a question from Stuart William Palmer.

I'll just quickly make a couple of comments just to clarify on your and Peter's responses to my earlier questions and indeed the most recent question. So you say a tiny amount of funding, I guess tiny is relative. You've reported over $8 billion of exposure to the fossil fuel value chain and obviously taken together with other banks who proportionately have low levels of exposure to the fossil fuel sector taken together, it's the aggregate capital that they're providing that will or will not fund new projects which will obstruct the transition. So your earlier comment that energy security is important is obviously something I agree with. The cost rate we're at though is we can go 2 ways in terms of spending capital to deliver that energy security, decades long fossil fuel projects are not the way. The IEA has made that clear. The IEA, International Energy Agency, is deeply concerned about energy security alongside greenhouse gas emissions. So I think that's the concern we have with your current lending criteria that they continue to allow lending for the next 3 years to companies who are expanding their fossil fuel activities who are getting a signal from you and the other banks that that's okay so long as they in 2025 say here's our plan to reduce our emissions. So they can spend the next 2 years building up their emissions and then give you a plan. We think that time frame is not appropriate given the conversations we and others and the world and scientists have been having about the urgent action needed to reduce emissions.

I'll leave you with the final word there. Now I'm actually going to move on to another item of business if that's okay. And so that concludes the discussion on this item of business. The direct votes cast and the position of proxy votes received on Item 1a prior to this meeting will now appear on the screen. These votes do not include those already submitted on the platform today. And I'll now formally propose Resolution 1a as a special resolution. The text of the resolution is now displayed on the screen. If you've not completed your voting card for this resolution or voted on the online platform, please do so now. And as the direct votes cast and the position of the proxy votes received on the proposed amendment to the Westpac constitution has shown an against vote of significantly more than 25% and this will not be materially impacted by votes received today, it means that shareholders have voted against the proposed amendments to the constitution. As Item 1a will not be passed, Resolution 1b will not be put to the meeting for a vote. While this vote is not required, the direct votes cast and the position of proxy votes received on Item 1b prior to the meeting will now appear on the screen. Now the next item concerns the receipt and consideration of the financial report, the directors report, the auditor's report of Westpac Banking Corporation for the year ended the 30th of September 2022. [Operator Instructions] And so we'll now move to questions on the financial reports. Can I have the next question, please?

My name is [ Mike Robey ] and I'm a volunteer company monitor for the not-for-profit Australian Shareholders' Association. So first, may I thank you for taking the time in advance of this meeting to discuss matters with my colleagues, which we did recently. Today I hold about 7.5 million proxies, which is about $175 million and makes us the 13th largest direct shareholder of Westpac. When you consider that most of our members will probably also have equity in funds which also contain, then we have a significant interest in Westpac. Now I have a few questions and I appreciate you have a 2 question limit. Would you like me to...

No, no, just keep going.

All right. So first of all, we're very pleased about the consolidation and cost reduction in the Board committees not because we're mean and like to see you poorer, but because it reflects on a fair process of evaluation. We actually usually see the opposite, people put their prices up after review. So well done on that. However, you've got significant other major cost reductions going on in the business and you did mention divestments. But apart from those, I'd be interested to hear what the key ones are, the nondivestment cost reductions? That's the first question.

Why don't we take that because I'm going to pass it to the Chief Executive? But one of the issues with Westpac, if you go back in time and let's start around 2014, Westpac's costs have gone up and the cost to income ratio has correspondingly gone up because the revenues actually didn't keep pace with that. And so we ended up in a pretty inefficient position in the high 60s. We're sitting officially at the mid-50s. Now it's still relative to an efficient bank still high and therefore, cost reduction -- to take cost to income ratio, you have to either grow revenues or reduce costs or both. And so given that, cost reduction has to play a part in the future because of our efficiency levels. But Peter, I don't know if you want to...

I'll just add a couple of points. So firstly, we are investing heavily in lifting our risk management capability and resolving past issues. So we heard about the financial crime issues so we've got a project to lift that capability as well as the core program under the APRA EU. So there's still elevated investment in some of those projects so that will come down over time. Flip side is also that we've been sorting out historical issues and that has seen provisions and payments. Again as risk management capability lifts, there'll be less of those. And then being more efficient in the bank including a lot more use of technology and digital capabilities to digitize our processes. They are the 3 big ones.

Thank you, both. We look forward to that having a reflection on the share price.

We are still investing though in the future.

So 2 of my other questions are related to that actually so perhaps we could jump to those. And they are that you're in the University of New South Wales consortium looking at ethical AI in some of your business processes. And we'd be quite interested as shareholders of what particular areas of operation that might be the first to actually see AI or the automation process. And in particular how do you test the ethical component of these and how do you ensure against robodebt-like failures, which very topical at the moment? Remembering that these accounted $1.8 billion of cost and significant political fallout. So the question really is what are the first areas of operation that the bank is going to use AI for and what are the protections that you've got to make sure that the customers and so on don't suffer from it?

Funny enough, we did have a very comprehensive discussion at the Board and the presentation on responsible AI and we actually visited the centers where AI is used ourselves. Now with the digitization of banking, there is no choice actually. We actually have to use AI, but we're committed to that being responsible. Only AI within the company is -- has human oversight. It's not just automatic. And we're extending our frameworks in this respect to make sure that that's the case. And we've got no really intent to use robodebt.

The second one is also about future opportunities I think for revenue increase and cost reduction. And that's that you have a venture capital arm called Reinventure. And I did check your background track record, and I'd have to say that your timing is excellent. You had investments in the Zip Company, which is a buy now pay later company. And you also had investments in a coin-based crypto exchange, both of which you sold out at the peak before the crunch happened in both of them. So whoever is running that business, they need a bonus, I suspect, and we'll be watching what their future elections will be. But that's my question. What are the other things in that portfolio that we can look forward to getting some money in the [ plateau ]?

Peter will make a comment. It's not a big fund. It's about $150 million, our exposure to it. We're not really in those businesses sometimes. What we prefer to do is have activities in there that are congruent with the business we're actually in. So they're synergistic, so that we can use the services provided by these enterprises rather than them being simple investments at arms length, because I can't make any sense of that. It's got to be related to the business we are in. So Peter, I don't know if there's anything.

I'd just add. We use it to get exposure to new businesses and new technology. And if it works, hopefully, it would introduce a new capability into the bank for customers. That's the strategy, and it's hit and miss. We've had a couple of good ones there, but we had some others that haven't worked as well. And that's why we kept it at a small level in terms of the size of the funds.

So 2 very quick ones. You have an accounting provision of about, I think, as I understand it, $82 million for litigation impact, some of which might be class actions and other forms of litigation. Given the sort of pain that shareholders have suffered over the last few years, is that enough? Have you got enough in your books to -- or are there more class actions sort of waiting behind the curtains?

You're right, it's not a big number. But there are 2 class actions that we've settled subject to court approval, but we've already provided for those. So that's a good news there. We're currently defending 2 class actions. Now there's 1 AUSTRAC-related -- relating to market disclosure, which commenced in 2019. The payment of flex commissions to auto dealers commenced in 2020, but we've not raised any provisions for those because we're still defending those there. And we've not received any new class actions in 2022. Now we are aware from public material that at least one other class action is being considered. But again, I think we are sort of -- because of the history of the organization, these things arose. But we're not getting those issues arising to the extent we've had them before. And therefore, the probability of this, hopefully, is reducing. So I think we're broadly okay here and hopefully not a lot to worry about.

We'll watch the number.

Indeed.

Look, my last question, and I don't want to incur the wrath of other shareholders that I'm sure have lots of interesting questions for you. But mortgage...

These are real questions.

Are you seeing any signs of mortgage stress? I mean, the reserve bank has been ratcheting up the bank rate.

Unbelievable no. But Peter?

Right now, the answer is no. And the reason for that is not all interest rates have been reflected in changes to mortgage repayments. I spoke in my speech about post-Christmas being very important. It will be post-Christmas I think. And so we'll deal with it then.

And personally, it's suffering a little stress because we've cut my fees and my wife isn't reducing her spending. So can I have the next question, please?

Mr. Chairman, I would like to reintroduce Mr. Chris Schott.

I think some of the issues we now have in the financial report are much more [indiscernible] to the future of the bank and for shareholders. And I shipped your report from you and the CEO that there has been significant improvement, not dramatic improvement in percentage increases of 4%, inflation this year will be 5% or 6%. So it's just teetering on the edge of kicking a point rather than a goal. But one of the things that struck me in the financial report that I wanted to raise was the impact of the share buyback earlier this year. In the report, it says that we completed a $3.5 billion off-market share buyback in February of this year with approximately 167 million shares equating to approximately 4.6% of the total shares held in the company. I looked at them, only 4% of the total shareholders took advantage, 95% of us didn't take advantage of the buyback. Now one of the figures I'd like to see published is how many of those shareholders are actually in the 160 million? Are they big institutional other shareholders who for a tax purpose or whatever reason might have taken it up? How many of us small shareholders, retail shareholders, took it up in some way? Now I don't expect you to have the figure on your fingertips, Mr. Chairman or Mr. King, but I do think it should be published because this lead me to the next thing. In the report, you said, last year we paid a dividend for 12 months of $1.25 per share and that cost the company $3.2 billion. When I've worked out, we spent more money on the buyback than we spent as dividends to all of us, and that went only to 5% of the shareholders of the shares. I just think I would have much rather as a small shareholder, and I emphasize very small, have had -- we could have almost doubled the dividend if we had spent the $3.2 billion at end of the dividend payment, we would have gone to $2.50 a share to all of us, the 100%. I think these buybacks are a rod. I didn't really understand them many years ago when I was even in parliament and I didn't understand for quite a while. Now I am strongly opposed to them as a policy because all they do is benefit a small number of very big shareholders who do it for a tax purpose at the expense of overwhelmingly us in the room or the small retail shareholders. So I want the board to take onboard. I don't want to see another one of these happening because it's an inequitable distribution of the bank's assets to 4%. When I picture the 4%, there are probably half a dozen big investors got most of it at the expense of all of us. This is something I think is really important about the governance of the company. Now I might have got these figures wrong, but I'd like you to explain to me why you went ahead with this buyback? And what advantage does it to the bank? It certainly wasn't advantage to me as a shareholder. I kept my shares. I didn't want to take -- even though they've got at a cheaper price than the market. Now you will -- you might say, Mr. Chairman, the buyback reduces the number of shares in the market. Therefore, the price of the remaining shares will go up. But we didn't buy back 50%. We bought back 4%. It's a negligible figure. Whereas if you had doubled -- nearly doubled the dividend, I bet you the share price would have gone up a lot more than what the buyback did. So I think we're being -- I think on this, this is something I would expect, if not now, a better explanation of why we fell for this buyback. While I'm on my feet because on the buyback, I was going to raise this in the remuneration report. Trying to read the 20 page of the remuneration report, not even bloody Einstein could get through it backwards upside down of how you justify the bonuses to the senior executive. It's the same in all major companies. It is written in our cane obtuse language. But one of the things I want to find, do we give a measure to the bonus to the senior executives based on the value of the shares going up because of the buyback? The buyback should not be included in any equation to put up the bonuses to any of the staff, senior staff of the bank. They should only get a bonus if we create a new business, new business, not a device to sell some tax arrangement for a very few big companies who are investors. So I want an answer later on. And I may unfortunately have to go before you get to it, but I'd like an answer. Do we include in the calculation of the bonuses to the senior executives and the impact on the price, whatever it is, of the buyback? It shouldn't be included ever because it's a simple thing to do. Meet the board, we're going to buy back a number of shares, put aside a few billion dollars, and that's not hard work in my view. It's not like creating new business. So Mr. Chairman, when I -- in other places, I'm starting to argue, that buyback should be banned as it is in many other Western democracy. Not in America, but in other Western European countries, it is banned. I think we should move that in Australia. Finally, I want to ask a question on finance about short selling. It took me a while to work out how these characters run short selling to destroy companies to make an advantage. I want to know that we -- I hope we do not lend money to people who short sell, who go, we give them -- we lend them $50 million or $10 million. They then go and buy the shares for 3 months or lease them, borrow them for 3 months at that price, immediately sell them at that price, then spend 3 months publicly leaking against the company to reduce the price of the shares. So when they have to return them to the person they've borrowed them from, instead of having to pay $10, they only got to pay $8. They make a $2 profit. I hope we do not lend money to those people, because 1 day, they may do it to short sell Westpac. That will be ironic, wouldn't it? If we lent the money to go and borrow the shares of somebody, a lot of shares, then immediately sell them, then spent 3 months leaking stuff to the press, going public about how bad the board is and how bad the performance, force the share price down, we all suffer because the share price has gone down, and then they make their profit and walk away. We might get -- we'd get our money back, that's true. But in the meantime, the share price has gone down. And as my shareholders, if this had happened, we pay the price. I think short selling like that ought to be much more restricted, and in particular, protect ourselves by not lending these characters the money. And I'll finish on that remuneration report, et cetera. Mr. Chairman, on the matter of the board, you indicated very well that you're leaving. I congratulate you on the 3 years. You've got the shortest drawer in history to become Chairman of this bank after the scandals of 2018, '19, and you're leaving, et cetera, but you did say your discussion about your successor and other changes on the board. I'm pleased to hear that. I have to say, without any way, I look at the board, who's been on the board. I think overwhelmingly now the board is made up of people who weren't here when those terrible scandals took place that we got hit for $1.3 billion for $23 million breaches of the law. As I understand it, if somebody is still there responsible for that, you should ask them to quietly leave and do something else in their life because we've all been staying by it. Thank you very much for the Chairman. Next year, have a good retirement.

You don't often get thanked as the Chairman of a bank. I was thinking about that the other day. And the last time -- thank you for thanking me because it's -- I'm not sure how to handle it. But the last time I was thinking about when was I ever thanked. And actually, I'll tell you, I was thanked by Frank Lowy, about 15 years ago, who thanked me for joining his board. And the time before I was thanked was 1988 where I was thanked. And again, it's not been a common experience and I really don't know how to handle it. But thank you for doing it. Now I will answer your question quickly that we didn't specifically reward management because of the buyback. So that -- just in case you're leaving at, I'll give you the answers. And remember, you've got to take all of this in the round as well. Now the short selling, we -- what happens with short selling is they effectively borrow the shares from another investor. So it's the shares they're borrowing rather than the money. So again, that's not an issue principally for us. Now -- but you did ask a very serious question about the dividend, the buyback, et cetera. And believe me, I'm going to disagree with you finally enough. In that -- yes, you got the 4% increase, but you got a 6% dividend yield plus franking. So if you add that up, it's not too bad a return. Secondly, the buyback increases the earnings per share for the future. So in other words, that baseline goes up. So you should be benefiting in terms of earnings per share going forward because of the buyback. Now I realize that ideally you want to buy back the shares when they're really cheap. And therefore, that's a function of the excess capital we're holding. We took the view that a dividend was a one-off, whereas the buyback did significantly reduced the share count. Now we don't have excess capital on an ongoing basis. So the probability is not necessarily as high. But -- so we took the view that in the round it was better to pay the dividend because the dividend yield is pretty high and it's fully franked. We took -- it was better -- sum of the 2 was better than just the one-off and increasing the dividend.

I understand your explanation about the share value. I understand your comment about share value, about the baseline and all of that. Albeit I came for most of our simple people, but I understand the argument you're putting. But it doesn't overcome the fact that you spent more money in the last 12 months on the buyback for 4% of our shareholders than you did on the dividend for the 100% of us.

No, no, I've got that. And look, we're dealing with a historical issue here, which we didn't create that because of share issues in the past by our predecessors and because of acquisitions where shares were issued for those acquisitions, we've ended up with the 4 banks with the highest shares on issue of the 4 banks. In fact, one of our competitors has half the number of shares in issue than we have. And against one of our competitors, we've got 500 million extra shares. And against the other, we've got 300 million extra shares. So we've actually got a legacy of a problem that is an issue for us that ideally over time we need to fix. So it's unfortunate, but we've got that problem.

Well, Mr. Chairman, there are 3.5 billion shares issued in the bank, about 3.5 billion. If you think we've got too many shares issued, without having the buyback to 5% of the shareholders, why don't you just reduce the number of shares? So instead of having 3.5 billion, you've got 1,500 million shares and that will certainly put the share price up and we'll make it. And I think over a period of time, we will get value from that. I just can't see how you can justify giving more money to 4% of the shareholders than you've given to 95% of us.

I'm going to pass it to Peter. But meet me outside and I'll explain to you why that doesn't work.

So just 4.6% was the number of shares we bought back. And the offer was made to all shareholders and a lot of small shareholders took part.

Can you please take on notice as we say in another forum. Actually, without naming people, of course, sometimes there will be companies and sometimes there will be trust funds, but just list the 4%. How much of the $160 million was $100 million by 10 biggest shareholders by number or how many of the millions of small shareholders, how many did we take up? And I think that's a very useful piece of information that you should keep in mind that any particular proposal, and Mr. Chairman, you're saying you're leaving before we look at another buyback. But I think the board has got to have that balance. Otherwise, it looks quite inequitable in my narrow simple mind.

Yes. No, we got it.

And Mr. Chairman, you've entered short selling, I'm pleased to hear about that. As far as when you -- I've mentioned about the board, I hope that in the next 12 months, looking at the range of the skill on the board, I agree with you, you've reduced the size of the board. We look like bigger than a couple of rugby sides a couple of years ago. But I do think you've got to make a real effort that the board does not look like White Anglo Saxon Australia sitting in the 1950s. You're not the only one facing this problem, many other public-listed companies. And just remember, in politics, if someone had told me even 5 years ago that electrics that used to elect the Prime Minister of Australia like Bob Menzies, John Garton and several others would now be held by the labor party, the greens or independent, I would have said to quite somebody else, tell them they're dreaming. The change is going on. Again, there's some turn be reflected of how companies respond by electing appropriate boards.

Well, thank you, noted. And you'll note in the U.K., the Prime Minister actually has changed. The Prime Minister of the United Kingdom was born in India.

Yes, I know he was born in India. His big advantage was he's worth $3 billion. So the local Tory party, the local [indiscernible] said, he's the [ Blake ] we want, he's got plenty of money.

Actually, it's his wife, just as a matter of interest. But now -- and one point on your buyback, roughly half the value of the shares are held by individuals. Okay. Next question, please.

Mr. Chairman, I'd like to reintroduce Michael Sanderson.

I have something completely different. This goes to branch closures. You make the statement. It's not possible to digitize a personal interaction, reflected in a file or do it remotely. Since the peak in 1975, Westpac has slashed 75% of non-metropolitan branches, leaving it with 194 from its original 777. Since the start of 2021, Westpac has closed 47 Westpac branches. These closures Westpac has -- from these closures, Westpac has left 13 towns with no banking services. They are Yankalilla, Mannum, [indiscernible] Kapunda, Peterborough, Hamilton Island, [indiscernible] Terrigal, Laura, Tom Price, Wongan Hills, Coober Pedy and Carnamah. My question is, do you claim that the branches Westpac has closed are unprofitable? If so, will you submit this claim to an independent audit? And how do Westpac branch closures comply with the mandatory and contractual warranty of the banking code of practice at states? We are committed to providing banking services which are inclusive of all people, including, a, older people; b, people with disability; c, indigenous Australians, including in remote locations; and d, people with limited English?

That's a question for the management.

So in relation to branches, yes, the numbers are going down. And as I said in my remarks upfront, 7% of transactions are now handled through our branches. And our approach there is that where we are closing a branch there will be an Australia Post operation there. And so we will be working with Australia Post to lift its service in relation to those. And we will also be introducing more virtual capabilities. So we've got the digital capability in the phone and virtual bankers. In relation to your specific question on why, because we're seeing the foot traffic go down. We're also seeing the ability to staff them be difficult. A couple of the other things that we're doing is co-locating branches, so multiple brands being under 1 roof. And we're working towards Westpac branches being able to serve all brands as well.

Just a question that relates to that. Between 1991 and 1996, the Keating Labor Government sold out working Australians by fully privatizing the Commonwealth Bank. My questions are, would Westpac support the re-establishment of a publicly-owned bank to offer all Australian bread and butter banking irrespective of location and circumstances? And would Westpac support the re-introduction of modern Glass-Steagall regulation that separates bread and butter banking from risky speculative banking?

I'll answer the second one that we are not in the Glass-Steagall issue because on securities materially. We do issue debt securities, but we're not in equities and we're not a big investment bank. And so -- and I think that's the case for all the Australian banks. So I don't think a Glass-Steagall rule will achieve very much in Australia because the banks tend to be commercial banks. But Peter?

On the other point about government bank, I think that's for the government, but we support it. We're doing everything we can to provide services around Australia. For us, what's happening is the economy is becoming digital and things are moving online and we need to help position customers not only for banking services, but all services to be online.

It was interesting. In New Zealand, Kiwibank was formed, to your other point. So it was an interesting idea.

Yes, it's working in New Zealand and I lived there for 10 years. But to my original point, if you withdraw a service and force people to go digital, they don't have to go there. That doesn't answer the question of removing a physical bank. I look at my personal situation. I bank with NAB, I've never banked with Westpac. But I put my success down to my personal interaction with my banking manager. Without that, what happens if you deal with somebody remotely? Another situation was with the Bank of Queensland. I ended up dealing with a went behind the ears, [ Bank Johnny ], didn't know who I was, didn't know my business, never visited me and he was making fundamental decisions from a distance. Now on one hand, I've got NAB, on one business supporting me because he knew me. On the other hand, I've got the Bank of Queensland with the wet behind the ears Bank Johnny that doesn't know me that eventually sold my farm despite never missing a payment. So as I said, if you withdraw a service, people are forced to go down that track. You're suggesting that they're doing it voluntarily.

No, I'm suggesting that we're replacing the service with Australia Post when we talk about branches. And in relation to business bankers, because a lot of our bankers are based in regional areas and they get in the road, they get in their cars and they get out and meet customers. So it's not a one-size-fits-all approach to service. But a lot of the transaction services are going online in the sense of moving money, paying money, receiving money and changing details is actually being happening through the app now. That's where we see people going.

Where does the business in Coober Pedy Bank?

In Australia Post. They're still -- Australia Post provides a service there to I think it's 80 available banks.

So you wouldn't be in partial with Australia Post becoming a similar model to Kiwibank?

That's their choice. They might or they may -- they may or may not choose to go there. But we have an important 10-year relationship with Australia Post, which provides access to 3,500 points of presence for Australia.

New competition is healthy. Another question, please.

Mr. Chairman, I would like to introduce Mr. Craig Courville.

The Reserve Bank's 8th consecutive interest rate increases is going to impact Westpac's borrowers, and Mr. King referred to that in his opening remarks. Combined rising food prices, rising fuel prices, energy costs and we've got $200 billion of loans from the Reserve Bank. A lot of it was fixed to 2%. And that's coming off now and those people, those borrowers are facing into a variable rate, perhaps around 6%. So we're talking about a tripling of the interest rate fee on billions of dollars of loans, this is a tidal wave of 200% rate increases. Many customers, Westpac's and other banks', they're worried and they're anxious of how they're going to cope with financial hardship. Combine that with the uncertainty of COVID, we're going to see some severe mental health impacts and this is going to extend to depression and potentially suicide. These tragic impacts go beyond the industry's moniker of financial hardship. I would say that it morphs into psychological hardship. Some customers can draw on lines of credit or credit cards. They can sell off household effects. Mr. King mentioned that you're not seeing signs of stress yet. But I would say that a lot of the loans are set-up whether we want it or not with credit cards and lines of credit. And people have had greater rates of savings during COVID. So the savings will be used. The credit cards might be used to sell off the boat in the backyard before we default on a loan. So I think that's ahead of us. During on my own experiences of CBA's behavior, where my request for financial hardship were refused, I know how deep the emotional and psychological impacts cut. Confidence, I think -- and post the Christmas spending, I think it will subside and these rising costs will take their toll. My 2 questions are; what systems, policies and processes does Westpac now have in place, specifically to address emotional and psychological hardship above and beyond financial hardship? And do you or should you have behavioral scientists and psychologists addressing this?

Interesting. I'll ask Peter to deal with that, but I might just step back a little bit. It's been unfortunate in one sense that we've had zero or negative interest rates globally for a very, very long time. It's a situation that's hard to come out of. And at the same time, of course, we've allowed them to a full set of satisfaction in Australia where we've had over 30 years without a cyclical recession. And so people have gotten used to those very low interest rates and it's affected their behavior. You can see the debt levels that have risen as a consequence. So I think it's been -- it's fortunate that we've had that over 30 years, but it's unfortunate that that was accompanied by these artificially low interest rates that at some point in time have got to normalize and that's what's happening. So Peter?

So a couple of points. Firstly, one of the points I've been making where I can is encouraging customers to call us early. And they may or may not do that, but I think there is a sense that call to the bank is not the right thing to do. We need to change that view. So that's the first thing we're seeking to do. And then there are all the standard options that we have financially and I won't go through those. But we do train our people and the teams on how to identify and work with customers that Christine Park has introduced the Chief Medical Officer role. I don't know the exact term of it. But we actually have someone employed by the bank who helps us as management with our own team, the colleagues that work with us, but is available also to work on customer matters. So that would be the expertise that we've had now for a couple of years I think. Yes, we've had it for a couple of years internally and we are building that capability. But I think you're right, it is going to be a hard year next year. I do encourage customers if they are worried to call us early. And we are thinking about the -- not just the financial side of what goes on, but also the human side and how we can help our people deal better with customers.

And we've got to be careful not to stray into the medical territory at all because we're just not qualified, but there are things we can do.

Well, thank you for at least having that in consideration. Just in terms of the channels of people calling in, you're right, some people will call, some people will e-mail, some people will use an app. Just keep as many different channels open as possible. I can recall receiving leases from 2 different banks. And the letter from -- it was ANZ at the time was, I'm in default, but we're here to help. And the letter from CBA was you're in default and our rights under the law are and we can repossess your property. Well, I avoided contacting CBA and I contacted ANZ. And CBA took action in the court to repossess and ANZ despite my loan being in default, I've caught up. I caught up all the areas and it's in good standing now. And I go back and reflect upon the letters that I had at the time. So I would like you to look at things like just the letters going out, how they're worded and all the different channels.

Well, as a former CEO of ANZ, I'm good to hear that story. Next question, please.

Mr. Chairman, I would like to introduce Rita Mazalevskis.

Firstly, I'd just like to thank you for having a hybrid meeting and making it available to people that can't get here for whatever reason because of COVID, they don't have a job, can't afford it and it just allows a lot more people to attend remotely. So thank you for that. Something that's come up I just want to mention whilst listening to everyone. In 2018 in June, I walked into my local bank and asked for a meeting and the person over the account wouldn't meet with me. So I asked to meet with the bank manager and I was refused a meeting and I continue to contact Westpac and was refused meetings. So I started contacting Mr. Hartzer. I was also refused meetings, and I've been refused meetings ever since. But this morning, I'm hearing all these people have met with Mr. King or you or -- and I would like to raise this again and request if I can have a meeting with yourself and Mr. King or either, whether it's after this event or in Sydney. So I would just like to put that on the table, please.

Do you live here?

No, I live in Perth.

You live in Perth, okay.

So I've come over just for the AGM.

You'll more likely be in Perth than I am.

Yes.

Okay, done.

Now in your annual report under risks relating to our business, it says, we have suffered and could in the future suffer information security risks, including cyberattacks. Cyberattacks, espionage and other areas are happening at an unprecedented pace, scale and reach. While we have systems in place to protect against detect, contain and respond to cyberattacks and information security threats, these systems have not always been and may not always be effective. It also states our operations rely on the secure processing storage and transmission of information on our computer systems and networks and the systems and networks of external suppliers. Although we implement measures to protect the confidentiality, availability and integrity of our information, there is a risk that our information assets, including the computer system software and networks on which we or our customers, shareholders, employees, suppliers, counterparties or others rely may be subject to security breaches, unauthorized access, malicious software, external attacks or internal breaches that could have an adverse impact on our and their confidential information. And then it also says a range of potential consequences could arise from a successful cyberattack or information security breach, whether targeting Westpac or third-parties such as fraud. So given that the board has assumed responsibility for technology and as the board considers technology to be core to strategy, how does the board handle fraud matters and cybercrimes on the business against their customers? Do these get reported within board reports? And are they discussed at board meetings.

Thank you for the opportunity of having Mr. Marriott talk before he finally returns at the end of the meeting. So Peter?

I assure you that cyber matters receive considerable attention to the board and the Board Risk Committee. We all read in the media the various stories around cyber. It's a major risk for the economy globally. And then it's a bit of an arms battle. So you constantly have to improve your controls and we are constantly reviewing our control practices, strengthening our control practices, having external reviews done, regularly reassessing our controls to make sure that they provide better protection. But as set out in that note, you can never provide absolute assurance. But we're constantly striving to improve the controls and it's a matter that receive considerable attention at both board and within management.

Just in relation to that, I have a second question I'll ask later, but there was something else I was going to raise which ties in here if you don't mind me just bringing it at.

Why don't you just ask it.

So under the risk identification, there are 11 major risk categories, including financial crime and cyber risk, and that the board establishes a risk appetite for each major risk category, which is included in the board risk appetite statement, which lists the measures and tolerances used to monitor these risks. Now then under the board skills, there is -- sorry, within the annual report, there is a table with 10 categories for skills and experience, which one is technology, digital and data. These are rated as red being an expert or gray having a general working experience and knowledge and white being limited working experience and knowledge. This table shows the board member being an expert. One board member being an expert and 9 in gray having general working experience and knowledge. And then under the committee structures, it mentions that the board is assisted by 4 board committees and that in financial year '22, we made 2 changes in our committees that the Board Legal, Regulatory and Compliance Committee was recombined with the Board Risk Committee and the Board Technology Committee was dissolved with its responsibilities assumed by the board and/or the Board Risk Committee. So my question is, given that cybercrimes and technology are very big hitters in your annual report and mentioned within a lot of the content and there isn't much strength on the board in regards to these issues, and this has actually been the case for a couple of years. And I'm assuming maybe or actually maybe not, are you the expert, Peter, on the board?

No, he's -- Peter will answer this question, but I would make a couple of comments. One is, we were pretty black and white about that color. And I think there are 2 or 3 people on the board who've got really good technology skills. I mean, remember, I've been in banking for 47 years. And so -- and the bank is fundamentally a technology company that has money. So I think it's a bit stark that there. Now the other point I would make is the best experts are not necessarily directors. We've got superb people in management and technology that have come from the best in the world to the bank, plus we have access to the best advisers in technology globally. And therefore, that probably is better in a sense than having a director on the board. But we need adequate oversight on the board for technology, but it doesn't actually equate to getting the best possible global advice because that's really important. Now Peter, I don't know if there's anything you want to say.

This is a board skills one. So I think this is -- that's the right way. We rely on management, but you also get expertise in global expertise in. So yes, you're right to highlight that we haven't got global expertise on the board. But the good thing is we've recognized it when we supplement it by getting it in, in other ways.

Yes, but it's also -- we've escalated it as a more important item for the board. It's not -- we've not reduced our focus on it. We've increased our focus on technology.

So does that mean the technology committee that's been dissolved and now sits with the board, you rely more on external consulting?

No, the board has that item as if it were in that committee and nothing's changed.

Mr. Chairman, I'd like to reintroduce Robert Catterson.

I'm just a bit confused with your mathematics when you tell me that the dividend has increased. Well, I used to remember the dividend within the last 5 years was $0.94. I don't think you can sort of say that $0.94 versus $0.63 is an increase. In saying that, also, I go back to year 2020 when you announced a deferred dividend that year. Your other peer bank did the same thing and paid that dividend in October of that year of $0.31. Part of this question is, I'm one of the retail shareholders like a lot of other people in this room. And when you talk to the institutions, they have a lot of other retail people like people that have superannuation accounts and they rely on the wisdom and judgment of the board and senior management in this bank to make them money, not lose the money. Now in conjunction with this, you had the money laundering fine that was imposed by the government or an informal pay-off is to have another form of tax. Now other people that get involved in these sort of crimes and also the crimes that this money laundering helped to propagate, those people don't pay a fine, they go to jail, right? Now we as new mortal shareholders should not have paid a fine. Customers should not have been suffering as well by the effects of that fine and the staff. Now -- and also, I saw in your presentation that you make generous sponsorships to sport. And that's what those sports are also interconnected with gambling houses and the effects of these gambling houses have on household budgets and the fraud that is committed every day with families misappropriating their money in further in gambling. Now my questions are, in terms of the money laundering and the deferred dividend, how much was that deferred dividend worth because I was not advised of it? And why has that deferred dividend not being paid? And with the money laundering, how many cents would that dividend be worth? And also the effects of teaming up with sports at further gambling addiction?

No, I'm going to pass it to the Chief Executive. But to your first point on the size of the dividend, the company was performing better. If you go back to 2013, 2014, and therefore, was able to pay higher dividends because they had higher returns in those days. And from 2014 onwards, the performance of the firm declined, and therefore, was less able to pay dividends. More recently, though, it's been better. I mean, not that we want to claim any credit, but if you just look at the period that we can control because I wasn't here then. But since Peter and I were appointed, your share price has gone up just about 50%. And you've also had a very significant dividend that would put the total return of that period well over 60%. If you just take the last time I spoke to you last year and look at that number, including dividends, you're talking about in the mid-20% return. So I think we -- with what we've been able to do, we've done our best. But of course, we can't wind the clock back to the days that were much better. But hopefully, if they will arise again, and therefore, if we make the money, we'll pay a very significant portion out in dividend because we've got massive amounts of franking credits that we -- that ideally, we want to max up the dividend to the extent possible. But Peter, can you answer the technical question, which I don't know the answer to.

Depending on the share count, it would have been $0.35 to $0.40 a share, the fine. So that gives you the...

That's a lot of money, sir.

It is. No, $1.3 billion is a lot of money.

I like it in my pocket and everyone else's pocket too.

Yes, and it went to the government's pocket. So that's the answer to the question. In relation to dividends, as the Chairman said, it's about profit. At the moment, we are paying out 77% of our cash earnings as dividends. And so that we will seek to grow that over time. Obviously, you've got to earn money. And as I said before, the -- we've got elevated investment in risk management at the moment. So we want to get that down over time. Your question on gambling is an interesting one. It's a sector that we are cautious on. We have a policy on gambling and watch it very closely. In relation to the sponsorship of sport, we think about that as how do we get customers in to bank with us. Obviously, your point is well made about you can't have other societal issues in those type of arrangements, but we focus more on gambling within the bank. We have gambling blocks in our apps to stop people. It is a complex issue.

The question wasn't really answered about the 2020 interim dividend.

Sorry. That was COVID-related. So the banking regulator wouldn't allow us to pay the dividend effectively through the dividends we paid and the buyback we have returned the capital to shareholders.

Well, I'd just like to mirror one of the other speakers that buybacks, I would rather get a better -- a special dividend than go for a buyback because I want to keep my shares. I want to keep my skin in the game, right? I don't want to sell the shares back and have less shares and with the vagaries of the market that you're dealing with, maybe have less dividend into the future.

We didn't get to this point before, but the government has made changes to buyback laws that probably incent dividends more than buybacks in the future.

Yes, going forward. And on your AUSTRAC point, look, and this is not an excuse, but it wasn't deliberate malfeasance by individuals. There's an unusual thing in Australia which is that all international transactions are required to be reported to the regulator, whereas in a lot of other places, only suspicious transactions are required to be reported. And the reason they weren't reported was actually a software coding issue that was done badly such that these transactions which should have been reported weren't reported. So it was actually fundamentally a technology issue. No excuse for that. This should have been reported, et cetera. But it wasn't deliberate malfeasance by individuals. The millions of transactions were just an accumulation of things that should have been reported weren't reported because of a technical issue largely. Now there were other parts that were more severe, like money going to the Philippines, et cetera, which I do take on the chin. But I do think that there was -- because it was highly technical, it just wasn't noticed for a long period of time.

So we've got the safeguards in place because I spoke with -- at another Annual General meeting like the Conwell, where I say, in their case, people were just filling up ATM machines to -- but there was no human involved in monitoring transactions like that. And I'd like to know that we take surveillance of those sort of issues seriously.

We do. And in fact, we constrain the amount of money you can take out of ATMs for that reason. But on the international transactions, there's -- we actually have stopped sending amounts of money below a certain level to a number of Asian countries because of these issues so that we can guarantee not to control it. The problem, of course, is that we're no longer making those payments for our customers. But -- so we've taken that trade-off and we think we've done the right thing. And therefore, the probability of it arising going forward is less likely. Next question, please.

Mr. Chairman, I'd like to introduce Mr. Allan Jane.

I noticed that Mr. King in his speech was talking about strengthening the franchise, and I am particularly concerned with the reduction in branches. We're down 21.5% since 2020 of branches in Australia, 23.5% from 1,399 to 1,071 ATMs in Australia. And my question was also, this week, we're losing 3 more branches. And last week, we lost 4 branches. So I've got a list of 7 branches here that I can read, but I won't -- shouldn't do that. It's just a fact. My question is, we talk about climate change and net zero, I'm curious as to when we're going to be hitting net zero in branches? This is I see as an existential threat to this organization. That's question one. And question 2 is, I agree with the previous speaker regarding the annual report. I note that CBA has 4 experts in regard to IT and I think we may need to make sure that that's well looked after. And final thing is on Page 73 of the annual report restructuring the risk division. Mr. Ryan Zanin has a package of around about $5 million, a fixed pay of 1.68. But the thing that concerned me was that you got relocation benefits of $250,000. I did a little bit of research and to go from the U.K., the average house is $50,000, from the U.S., it's less. So I'm curious as to where he came from and what he had to move?

Peter, do you want to pick up the branch?

So branches won't go to zero. We will always have branches. As I said before, it will be a blend of the branches we own and Australia Post and we still have the second largest branch network in Australia. And so the challenge I think you're rightly pointing to is digital and the different cohorts of customers. So certainly -- and this is -- I apologize for generalization. But a lot of customers don't go into branches, they tend to just use digital. There are a lot of people that prefer branches and we've got to manage that well. But as I also said, every company I talk to is going digital. So we've got to get people into the digital economy as well. So branches won't go to zero, they will have a role. They will -- the role will change. There will be less service transactions, cash, changing your details more about advice and there will be a bigger role for video as well in the future.

Please don't think that the Australia Post branches are a branch. I mean it's sort of a Clayton's branch, isn't it?

It does service.

Well, it's service in service.

I'm going to pass to the internal Remuneration Committee, Nora, just a general question about remuneration. Mr. Zanin came from the U.S. Just to make the general point that the head of risk in a bank is often highest paid individual, and in some cases, as much as the Chief Executive. So it is a scarce and very highly paid. And remuneration in the U.S. is significantly higher than it is in Australia. But Nora?

So really just to endorsing those comments, the CRO position is vital in banking today. So when we did bring in fact the financial crime back into the risk function, it was very important for us to get the best person available globally. And we identified Mr. Zanin. He was working in the U.S. He was prepared to come out to take on the role. We thought that his talent and the experience that he brought was valuable to the bank. He's come on at a package that is lower than the prior incumbent, but it's a very competitive market. And we consider ourselves fortunate being able to secure his services.

And given our history, we expect a lot of him for that money.

It doesn't explain the $250,000 to move him over here, though, it seems a bit excessive.

Well, it is what it is. Next question, please.

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

John and Peter King, I've got a new foundry spec for you after listening to everything you've gone through this morning. My concern, and I've flown in from Brisbane to voice these concerns, is that the bank's margin of lending has been dropping. I looked at the ANZ, which has been capitalized at $74 billion compared to Westpac at $83 billion and the dividend that we receive is $0.20 less than what the ANZ is doing. Now the ANZ has sacrificed its volume in order to maintain its profitability. We've gone the other way. We've gone for the lowest price on the market and our profits have been reflected because of that. Also, looking at the fact that what used to take 2 days to get an approval from the bank is now taking 2 weeks. And I'm wondering whether too much emphasis has been placed on computerization, because I've been into the Commonwealth Bank and I applied there for a loan at one stage and I got declined because they assessed my income at $50,000. And I said to the Commonwealth Bank at the time, but my dividend from you alone is $67,000, and that excludes what I get from the ANZ, Westpac, NAB and MyState Financial. So it turns out that the bank are assessing income, not on actual returns, but as a percentage of your shareholding. And I would hope that this bank isn't doing the same. And I have great concerns because I own my own home. I have over 2 million in super. We have 2 investment properties, and I went into the Westpac branch, and I applied to refinance one of those investment properties that pays its own way, and I was refused. Now you've got to wonder why when I had 900,000 sitting in Westpac and the NAB, how can this happen? So I have great concerns for the fundamentals of what this bank is doing. And I know that you're being caught up in all the other waffle that's going on this morning, but we're in the business of making money. And it's important that we get back to the basics and it's not rocket science lending, it's ability to pay, stability, previous credit and equity. Now those are the 4 fundamentals of every loan, no matter how big or small they are. A person has got to have the ability to repay. They've got to be stable. Their previous credit has got to be good. And what's the hurt money? How much are they putting into it? And this bank failed me at that stage, and I'm hoping that by coming down here and taking the time that the bank will take into consideration the lending processes. Now we're not just out of it. One of the fundamentals when you look on the -- if you're doing an online application in this bank, and ask you what your gross income is. It's irrelevant to somebody whose income comes from superannuation. You should be asking me what my net income is, because if you look at the gross income and then somebody up there who is a computer expert starts calculating the tax on that, you're going to get it all wrong. So there are lessons to be learnt. And I hope that by coming down here and voicing my concerns, that the bank will take this into consideration. But [indiscernible] after this morning listening to the waffle what you guys have got to go through, I really have a newfound appreciation for what you're doing, and I hope that you have a look at the fundamentals within the bank, restore our margins and look for the profitable business, not just trying to get to the bottom of the pile.

Okay. I'll ask Peter to talk to, I'll make a couple of general points. If you adjust the shares on issue and that dividend, it washes out. The second point is, I'm in the same position as you are. Whereas -- because my income isn't so high. So I fully appreciate what you've said. Now Peter, that there are a number of questions there. Do you want to…

There's a bit of. I'm going to do a simple thing. Mr. de Bruin is down in the front here, who runs our Consumer & Business Bank. If you're around after the meeting, we'd love to have a chat. So that will be the -- and we'll go through that. We'd love you to join us actually and bring your business here. On the technicalities of mortgage borrowing capacity, they are more complex now post court cases and regulatory changes. They don't always make sense, but we're balancing meeting the law with banking common sense, and we'll see whether we've got that balance right after the meeting. On the margin, you're right, our margin did go down over the year, and that reflected the ultra-low interest rates. So fixed rate, we heard about the fixed rate mortgages at 2%. That really pulled our margins down. The impact on some of what we call free funds from low interest rates was rather large, but it has reversed. So in the second half, our margin went up quite materially and has continued to go up post the end of the year. So that's a positive thing for us. But let's see if we can catch you after the meeting, we'd love to speak to you.

I just want say our share has gone back to $39.

So do I.

There me too. Rita.

Let me introduce Rita Mazalevskis.

Thank you.

So the other question that I had was about risk to the bank. This one is risk and risk management within the bank, and it's included in the annual report. The report discusses conduct risk could occur through the provision of products and services to customers that do not meet their needs or do not meet the expectations of the market, as well as the poor conduct of our employees, contractors, agents, authorized representatives and external service providers. This could occur through a failure to meet professional obligations to specific clients, including fiduciary and suitability requirements, weakness in risk culture, corporate governance or organizational culture, poor product design and implementation, failure to adequately consider customer needs, or selling products and services outside of customer target markets. This could include deliberate, reckless or negligent actions by such individuals that could result in the circumvention of our controls, processes and procedures, and we depend on our people to do the right thing to meet our compliance obligations and abide by our code of conduct and exercise inappropriate or poor conduct by individuals such as not following a policy or engaging in misconduct has resulted and could result in poor customer outcomes and failure by the Group to meet our compliance obligations. Then within the strengthening risk under management, it says a focus of our fixed strategic priority is improving the Group's risk management and culture. This involves avoiding mistakes, minimizing customer remediation, and improving the way we address issues and manage complaints and that changes are being driven through our customer outcomes, risk excellence program. So just quickly, thinking about the new CRO, Ryan Zanin, the report does say that his role has combined the CRO and Group Executive Financial Crime Compliance and Conduct, so he covers the whole lot. You might recall last year, I asked about a question where -- what happens when Westpac gives the client or a customer an unsuitable or incorrect loan, and the significance it has to borrowers and the losses in harm that it causes them. And Peter -- Mr. King actually mentioned that it sounds like an issue in the past. Well, it's not an issue of mine, but I'm aware of some customers who have this issue. It's not an issue of the past. And I'm just concerned about Mr. Zanin's role, if he's the CRO, which incorporates the compliance and crime issues, is that not a conflict to -- given that these issues for your current customers haven't been addressed and the bank is not helping these customers where they've been given wrong products. And the products that are put in place, they can't do anything about it. It's up to the bank to rectify the -- what they've done. Doesn't it cause a severe conflict of interest to have someone in a role that combines those 2 significant positions together when there are outstanding, now in issues within the bank.

Okay. I'm going to pass this to the Chairman of the Risk Committee and the Chief Executive, but I'll make 2 points. One is the primary responsibility for handling those matters of the executives in the front line. Mr. Zanin is the Head of the second line to make sure these things are controlled. And therefore, there isn't a conflict of interest there. Secondly, those roles are normally combined, if you look at the banks globally. So there's nothing unusual about the way we've structured it. But let me pass it to…

I'd just say on the 2 customers or a couple of customers already, you have my email address, so send me the details and I'll get someone to review the cases. And the only other point I would add to the Chairman's point is it's not unusual for the CROs in large financial institutions to look across those roles given the second-line nature of the role independent -- not independent, but separate to the businesses.

The conflict of interest would arise if he was the first line and the second line, that would be a serious problem.

Or maybe he doesn't know about the issue because the people -- the next level down, haven't passed it through to him.

He's pretty smart. He's got a lots of information.

He would hope so.

Yes, Indeed, he is married.

If we paid that relocation, and he's on a good salary.

He is worth it. Peter Marriott?

Thank you, Chair. I don't think anything is much more needed to add, but the -- this bank did have instances in the years gone past, and we've paid over $2 billion of remediation to customers where the product governance processes didn't work. And so that's why we've been putting a big focus on making sure the controls are stronger. And for a while there, we had 2 executives running risk, because of the major problems we had to sort out. And now we've combined because we've got back to a more stable platform where we have more confidence in the controls we have in place, but it remains a key focus, because making sure we deliver for our customers, what we promise to our customers is very critical.

Okay, thank you.

Thank you. I mean, I've now lost my back because it's over 3 hours. But can I take the next question, if there is one, please. Thank you.

Mr. Chairman, I would like to introduce [ Mr. Don Walker ].

Mr. Chairman, $0.94, yes, someone said that before.

Correct.

It was $0.94 a share, it has gone backwards. You make enough profit in terms of the Bank's outside Chair, so about 1.2% on the savings accounts you pay. 5% to 6% on loans and the next few months, it's going to go up further. So you're going to increase by profit. I'd like to see that go back to $0.94, please, and not keep it away, but the more you're going to get on the lounge, the more profit the banks are going to make and the more profit you're going to make. And please get that profit and give it to us, because we're investing the money, we all are, and some people are investing millions and I've invested a lot of money too. So please to the Board, give back that in full. $23.40 is the share price today, $23.40, we needed that $30. We wanted the $30 at why isn't it that $30, yes, a previous speaker said, there's too many shares, too many shares, with these number of shares, I don't have buybacks. And you have buybacks, well, it's not going to do us any good. I'd like the Board to consider that please, because we want -- we're shareholders. We pay you out of our money, where you have to go to work. Yes, we will have worked and we pay you the money from our savings accounts and how we've got it. And I'd like to see the Board get the share price to $30 and get the dividend up to $0.94, thank you.

I agree with you. But look, we can get it to $30 if we make enough money, where it's valued at $30 until we do that, it's not going to happen, okay? Hopefully, it will happen. And hopefully, we're not restricted to $0.94 or half either. I mean, so -- but the trouble is, we've got to do a lot of things right before we can get that done. Now we can double the share price by having the number of shares, but you still own the same percentage of the bank. So it won't make any difference. So we've got to earn the money in order to get the earnings up, we get the dividend up, we're going to turn up and then the share price will go up and the dividend will go up. So it's an upward spiral, and that's what we're working on. So we're doing our best to try and do that, and it is what it is at the moment, unfortunately. We are where we are, and fortunately you've made a bit of money recently, which is good. Hopefully, we can make more. The other problem that you're not aware of maybe is the required capital that we need to hold from a regulatory standpoint has gone up. It's actually gone up more than double since I was an executive in a bank and as a percentage. And so as a consequence, we've got to hold much more capital so that when we end the excess return, part of that is retained as capital because of the regulatory requirement. And so when we were considering dividends, we've got to meet that capital requirement and in order to make sure that, that is there before we pay the dividend. So there are a couple of constraints here. One is we got to make more money. And the second is we got to hold more because the capital requirements have gone up. But it is what it is, and we're doing our best, seriously. And hopefully, we get to what you want. I might not be here, but we'll hopefully get to what you want. Next question.

Mr. Chairman, I'd like to reintroduce Michael Sanderson.

This goes to interest rate increases. Matt Comyn, CEO of the CBA at the recent AGM confirmed "we also create deposits in the system. We expand money supply when we lend money." Banks effectively have got a magic money trading.

That's true.

Please consider the following scenario. Fred Nerk purchased a half from Joe Bloggs, both banked with Westpac, it was an in-house transaction. There was no overnight money market involved. Westpac extended a mortgage secured by the house and Fred Nerk's personal guarantee. Westpac created a deposit and in doing so expanded money supply in order to facilitate the loan to Fred Nerk. Ceteris paribus, that is all the other things being equal, my questions are, how does Westpac and by extension, other banks justify increasing the interest rate on Fred Nerk's and other mortgage or loans in line with the cash rate when the cost of funds were 0. This is profit gouging, perhaps it's subsidizing other products where the magic Moneytree can't be used or both.

I'm not sure technically you're correct, but I'm going to ask Peter to answer the question.

It's a hypothetical Mr. Sanderson, it's interesting, but from our perspective, what we're doing at the moment is reflecting the cost of the RBA increases in rates in mortgage rates.

That's exactly right, but the cost of funds is 0. The cost perception is that you lend the positive funds or you borrow on the money market.

Correct.

In this scenario, which is common with lending, you are increasing the money supply to facilitate the loan. How can a bank justify increasing the interest rate on that loan with the cost of funds at 0, in line with the cash rate.

So the cost of funds at the moment is not 0. On a deposit rate at the moment, we're paying 3.5% for the Westpac Live, including the behavior benefit.

You're not lending those funds. You've created.

Yes, we are. That's why I said, it's a hypothetical. If I look at the bank, the bank -- the cost of funds are not 0 at the moment.

So you were saying that Matt comment is wrong?

No, I don't know what Matt was referring to, and I'm not going to…

Matt was referring to increasing the money supply to facilitate lending. This is horizontal money. Banks create horizontal money, the government produces vertical money.

It's not technically correct. I mean the business we're in is taking deposits and/or money from the market and lending it at a higher rate, and the difference minus our costs, minus the losses gives us the return on the capital that's invested, and we've got to generate a minimum return of 9%. So that number has to be higher than this number for that equation to work. And that is the nature of banking, as well as providing other services that produce the returns. So it is -- I'm sure you want us to make the money in order to produce the return, in order to pay the dividends.

What I'm really trying to understand, how a loan works? As I say, we get a lot of side sticking and what have you. But as I said, I've attempted to produce a scenario that's simple to take out the complexity based on what another CEO has said. But anyhow, we'll leave at that.

Yes, the only way we create the money is to borrow it from somewhere and then leverage it out. But the deposit funds alone and an asset and liability, that said…

Let me put it another way. So what you're saying is everything that Westpac lends comes from depositors deposit or money that is borrowed on the market.

No, it comes from capital, plus deposits, plus borrowings.

So Westpac does not create or increase the money supply in the process of lending under any circumstances. Is that correct?

Well, here we start with an asset…

No, no, no.

And then the question is you've got to finance it, okay? We finance it by raising equity from you?

No, you're missing the point. All I'm asking -- and the answer may be, yes, that's what we do. Does Westpac increase the money supply in the process of lending. Does -- is there any scenario or…

Well, it's the multiplier effect where you do. As house prices go up and we lend against the house prices, effectively the value of money, if you want to call it, that goes up in the economy. So that's one way. But I just think a hypothetical example like that is so -- is not as complex as the bank.

But credit increases the money supply, if you're looking for that answer, of course, it does.

So what's the cost of that credit?

Well, M3 includes credit.

We're not going or I'll analyze the answer. I have a request. This is a bit odd. But it was as reported by the ABC and the heading was power prices surged by 18.3%, as the energy market turmoil flows on through the households, which is equivalent to about $250 per year for the average residential electricity bill. Now tomorrow Parliament has been recalled to address that issue. In a vain attempt to control cost push inflation, the federal government's bank, is not independent RBA, increases cash rate -- the cash rate by 3%, which is equivalent to $15,000 a year or $300 a week on the average, $0.5 million residential mortgage or business line. This is a 6,000% increase, but there has been no parliamentary recall on this issue. I just find a little bit for this. The RBA was established by the Reserve Bank Act 1959. Therefore, any independent or autonomy is and has always been at the pleasure of the federal government. It has the power to reverse the recent interest rate increases. For contrast, Japan's cash rate is minus 0.1%. Inflation is only 3%, and total fiscal spending is 266% of GDP. Australia's cash rate currently is 3.1% with inflation in excess of 7%. Our total fiscal spending is a mere 36% of GDP. This enacts an pointless interest rate austerity, transfers real assets from real workers, that labor claims to represent to the already wealthy. My request is, based on the recent 24-hour back fleet $1 million fines for bankers, it would seem the federal government will bend the knee instantly to instructions from the Australian Bankers Association. And for that matter, its predecessor by establishing a Clayton's Banking Royal Commission when instructed by the big 4. I asked that Westpac in conjunction with the other big 4 requests that [ anybody ] on behalf of all mortgage holders instruct the Federal Treasurer to stop and reverse, but not independent RBA's the net interest rate austerity and be more like Japan.

I'll ask the Chairman of the Bankers Association to answer that.

Well, it's a big question. In the end, the reserve bank is responsible for inflation and interest rates and having them together and is independent. I know you don't agree with that of the government. Certainly, I think if you think that is the right policy, I would write to the Treasurer, I don't think it's appropriate that the banks will be doing that.

Rest assured I have. And well, as I say, I've given you an example of the power of the banks, they can influence government like that, as I say. Yes, now I have got 2 other questions.

Can I -- I've got somebody waiting on the phone, if I can take a telephone question, please.

Mr. Chairman, we have a question on the phone from Geoff Wilson, representing WAM Leaders.

Hi John. You said earlier that the company has got massive franking credits.

Yes.

On my calculations, you've got about 7. -- you can pay about $7.7 billion fully franked dividend, you have $2.20 a share. Under the government's proposed legislative changes re-franking distributions and off-market buybacks. How will you pay that out? That's the first part of my question. And the second part is probably more important. It's APRA's Chairman, Wayne Byres said at the start of COVID in early 2020 that the banks can pay dividends, but it should be offset by capital raising. Now under the proposed government legislation. And that's the one that's proposed, which is franking dividends and capital raisings, these dividends will not be franked. And that obviously will significantly increase the cost of capital for you and for all banks. And how will this proposed legislation affect Westpac, and also affect Westpac's profitability?

Yes. Indeed, it's a general question for banking. So I'll pass it to Peter.

I think Geoff, thank you. So, we generate about 90% of our earnings in Australia, and we're paying out less than out in dividends. So we will have excess trading credits. And to distribute those, we need to have excess capital. We don't at the moment. Hopefully, we will in the future. So it's more a structural issue for this bank in the way that we earn most of our income in Australia. I think you've raised a good point on what happens in a stressed event APRA did ask that if we paid a dividend, we raised the capital, that may not be possible under the rules that the government have proposed. So I think that is something we'll have to work through and clarify with the government.

But if we do have excess capital, we can do on market buybacks going forward. Of course, that's a bit slower process. But nevertheless, we don't want to hold too much excess capital because the returns fall has a consequence. Next question from the room.

Mr. Chairman, I would like to reintroduce [Mr. Craig Corfield].

Thank you, Mr. Chairman. Let me be the second person at this meeting to thank you that you can go home and tell your wife, you've been thanked twice within 8 hours after waiting how many years. I appreciate the way that you are very open to a whole range of questions and debating them. This is -- it's only once a year, so it's a good time to do that.

Yes, it's very interesting, actually. Thank you.

Yes, I can see that you are. Thank you. 2 items. APRA has the enforceable undertaking with several banks, but including Westpac. Of course, you have your own core programs and that you're progressing through. But what's your communication with APRA regarding that? Do you have regular interventions with APRA and discussions? Or are you simply waiting until the talk complete before APRA processes?

No, I'm going to pass it to the Chairman of the Risk Committee, Peter Marriott. We all have interactions with APRA in clearing, including myself, the Chief Executive, Head of Risk and the Chairman of the Risk Committee, Chairman of the Audit Committee. Peter?

Thank you Craig, thank you Mr. Corfield. In addition to that, APRA has appointed a consulting firm known as [ perometry ] to do their quarterly reports on the progress of the core program. So they are constantly monitoring how we're going in that program and how we're progressing towards satisfying the requirements under the EU and we regularly meet both the management and the Board level on how that and other aspects of the program are going. So there's a lot of interaction with APRA as appropriate, because they're our principal banking regulator.

And when do you think that money is coming back?

Well, that's a decision for APRA. We have to complete the program and then they need to satisfy themselves that the program has been satisfactorily completed. And then we would expect to see return of capital, but that's their decision. Peter?

I was just going to say that the [ perometry ] reports are available on our website, so shareholders can see those. And in relation to the $1 billion capital overlay that you're referring to that we need to successfully complete that program. Hopefully, it will be in the next 18 months, but it's got to stick, so we'll do it well.

My experience with regulators is look at your calendar, not your watch.

Take that onboard. And a further question, National Farm Debt Mediation Commissioner Hayne recommended that out of the Royal Commission. I note that the Australian Bankers Association and Westpac advocated for National Farm Debt Mediation prior to the Royal Commission. Nothing's happened. I've watched it across all of the banks. Can Westpac -- is Westpac and can Westpac advocate for a National Standard Farm Debt Mediation and let's get it in soon. It's just dragged on year after year after year.

Go ahead, Peter.

We'll pick it up. Can we advocate? Yes. Will that make a difference? I don't know, but we'll give it a go again.

It's worth trying. And just a question on valuations. Can you confirm that -- and I'm mindful of a year from now, if there is more people in trouble, if their property is being sold and you engage valuers. If the valuation is charged to the client, will you proactively provide a copy of that valuation and the instructions to the client?

I think I might need to check this answer, but I'm fairly sure we do that now, but I want to check that.

Okay, Thank you.

But I'll pick that up.

Now I'm advised there are no more questions on this item. So thank you. That concludes the discussion on this item of business. The third item of business is the reelection of Peter Nash. If you'd like to ask a question in the room, online or on the phone, please proceed to do so now. Peter Nash is retiring and seeking reelection in accordance with the constitution. Peter was first appointed in March 2018, and his election was supported by shareholders at both the 2018 and the 2020 Annual General Meetings. I'd like to advise that the Board has considered the performance of Peter under this item. And with Peter abstaining, unanimously recommends that he is reelected. Now as is traditional in Australia, I will now ask Peter to address the meeting.

Thank you Chair, and good morning shareholders. I appreciate the opportunity to speak to my reelection to Westpac's Board. I was appointed to the Board as a Nonexecutive Director in March 2018, not long before the company reached a significant inflection point following the emergence of the AUSTRAC matter. It was a major reckoning for the company. I've joined the Board on the understanding that change was needed to help restore the value and reputation of Australia's oldest company. Since then, Westpac has undergone important and significant transformation. The Board has overseen complex and significant program of change and helped to steer the company through difficult waters. As a member of the Board and in my role as Chair of the Board Audit Committee and the initial Chair of the Board, Legal, Regulatory and Compliance Committee, which is now recombined with the Risk Committee. We oversaw changes that have significantly lifted culture, governance and accountability. While there is still work ahead, I'm proud of the Westpac today. Your company has emerged simpler and stronger with a clearer focus on strategy and a stronger culture and approach to risk management. It is a privilege to be a part of Westpac's Board to work alongside fellow directors and an outstanding management team who bring the highest level of expertise, passion and dedication to your company. I believe my professional experience and knowledge equips me to continue to effectively contribute to the Board. In my executive career, I focus predominantly on financial services as an auditor and adviser at KPMG Australia, including as Chairman of the Australian partnership from 2011 to late 2017. With this experience, I understand banking, appreciate the sector's economic drivers and have a deep knowledge of what underpins a bank's financial statements, systems of internal control and risk management. I currently serve as a Non-executive Director of ASX Limited and Mirvac and is the Chair of the Johns Lyng Group. I also serve on the Boards of 2 not-for-profits that are close to my heart, the General Sir John Monash Foundation and the Koorie Heritage Trust. While my workload is full, these roles are complementary and I have always ensured that I have the capacity and the drive to work in your best interests. The groundwork to renew Westpac is well progressed, and we are focused on embedding the changes that have been made, as well as shifting the dial on growth and performance. I'm committed to seeing this change through to help drive long-term shareholder value. It has been a privilege to serve on the Westpac Board, and I will greatly appreciate your support to continue our work. Thank you.

Well, Thank you, Peter. I can vote for the fact that Peter has had full attendance of anything we've asked of him. And I'll now take any questions in relationship to that resolution.

Mr. Chairman, I would now like to introduce [ Rod Mackenzie ].

Thank you, Chairman.

Welcome.

My wife and I have been shareholders in Westpac for approximately 20 years now. During that time, but particularly in the last several years, we've seen multiple cases of mismanagement in this bank. There's been issues of poor financial advice relating to superannuation products and services offered by Westpac, dodging insurance products, and in some cases policyholders could never make a claim, and Westpac recently paid a $1.3 billion fine imposed by the courts relating to AUSTRAC and associated penalties with that. The Westpac share price has slumped from something almost $40 there at 1 stage. Now it's sort of hovering closer to $20. Dividends, as we've already heard today, were $0.94 for one of those 6-month periods, now it's closer to $0.60 for the current 6-month period. My question to Mr. Nash. Westpac Director since March 2018, I know a lot of these things were before your time, but now you're also Chair of Audit, Member of Board Risk and Member of Nominations and Governance. What is going on? Where is the problem back in behind all of that or if all those people since left, I don't know. I'd like to hear from you, because looking through the annual report, there's no blame. There was no thing, it's just we've done all of these wonderful things. Further, can you demonstrate that you've actually got the time to hold this role? And a reminder to the audience that you're also a Director of ASX Limited. They've had a few problems recently, a Director of Mirvac and Chairman of Johns Lyng Group. Why should we vote in favor of your election? And an additional question to the Chairman, how can you ensure that your directors are not becoming overloaded with other company Board and committee responsibilities. And a quick count of the Board roles held by the Westpac non-executive directors. There's something like 18 to 20 jobs that roles that these people are holding down. I think many of them are actually overloaded. Thank you.

Thank you. All the questions are for me actually. So -- but as Chairman of the Audit Committee, I'll ask Peter to talk about the technical issue you've raised. But I won't ask him to talk about his own candid to see if that's all right. I will talk to that. Look, we have an annual routine where we look at the responsibilities of directors and satisfy ourselves as to whether people are too busy elsewhere for our needs. It is discussed at the Board and at the Nominations Committee of the Board, where we satisfy ourselves that we are satisfied with the capacity of the director to operate. We have done that with respect to all of the directors on the Board and specifically with respect to Peter and are satisfied. We have criteria that we use and there are standard criteria used in Australia, and Peter meets those criteria. So he is not over-boarded and we're comfortable with it. And he's given me personal assurance that if I ever felt or the Board ever felt that he didn't have the capacity because of that, he would actually relinquish other activities rather than the Westpac role in order to bring that in line, which is not the case at the present time. And therefore, I'm satisfied by that. But if you want to talk about the technical issue, Peter, on the audit matter.

I'm not quite sure what that particular matter was. But in relation to the challenges that…

Is this harm to the people?

Yes. So in relation to what's happened, let's say, since 2018, there has been a very substantial change in systems and processes and myself and this board has spent a lot of time observing, promoting, being engaged in that change. So I think it has been very effective. There has been significant change in management across that period of time. And I think that accountability has been appropriately reflected at that point in time. So if you look back at 2018 and 2019 into the remuneration report, you'll find that the Board, in particular, remuneration committee oversaw appropriate levels of accountability.

Thank you. And I'm advised there are no more questions on this item, and therefore, that concludes the discussion on this item of business. The direct votes cast and the position of proxy votes received on item 3 prior to the meeting will now appear on the screen. And so I now formally propose Resolution 3. The text of the resolution is now displayed on the screen. If you haven't completed your voting card for this resolution or voted on the online platform, please do so now. And the next item of business is item 4, seeking shareholder approval for the grant of performance share of rights under the long-term variable reward plan for the 2023 financial year to the Managing Director and Chief Executive. If you'd like to ask a question in the room online or on the phone, please do so now. A summary of the terms of the Chief Executive's LTVR plan is in the Notice of Meeting with further detail in the 2022 remuneration report. The Board believes it's important for executives to receive a high portion of the remuneration as performance hurdled equity rather than cash and believe that aligns them with shareholders. It encourages long-term performance as well. The Board recommends you vote in favor of this resolution, and I will now take any questions on Resolution 4. Well, there appear to be no more questions on that. So thank you. That concludes the discussion on this item of business. The direct votes cast and the position of the proxy votes received on Item 4 prior to this meeting will now appear on the screen. So I now formally propose resolution 4. The text of the resolution is now displayed on the screen. And if you haven't completed your voting card for this resolution or voted on the online platform, please do so now. The fifth item of business is to adopt the remuneration report for the year ended the 30th of September 2022. If you'd like to ask a question in the room, online or on the phone, please proceed to do so now. The strike against the adoption of the 2021 remuneration report was a serious message for the board from shareholders. The Chair of the Remuneration Committee, and I have spoken to many shareholders and their advisers to understand their concerns and spend significant time addressing that feedback this year. This included further enhancing our disclosures, reducing board fees by over 10% and by strengthening our minimum shareholding requirements. While voting on this resolution is advisory, we take shareholder feedback very seriously, and we'll continue to engage with shareholders, particularly as we seek to make new regulatory requirements in the period ahead. And I'll now take questions on the 2022 remuneration report, in the room first, please. Rita?

Mr. Chairman, I'd like to reintroduce Rita again.

In the Director's report under reinforcing risk behaviors, there were -- it reports that there were 1,026 referable code of conduct breaches for employees based in Australian 2022 and which 158 employees exited the business. Where any executive remuneration adjusted to reflect these breaches?

Thank you. I'm going to pass that to the Chair of the Remuneration Committee. But remember, in the scale of this enterprise, these are very, very small numbers.

So all of those issues are looked at in detail and are either subject to normal performance management, and they would be reflected in the short-term variable component of people's remunerations and there'd be adjustments as to whether they had met the objectives that they were required to meet. That's right throughout the organization. At senior levels, again, each of our executives, starting with the CEO, has a short-term variable component of their package. So performance against those issues. So if there were a failure to meet certain requirements, et cetera, of targets that would be reflected. There were no serious material issues that needed to be dealt with the bank as a whole. With individual executives, there was one issue where there's a risk modifier, there was a sort of a captain of the ship type adjustment downwards because at the end, there was -- the buck stops at the top of a function. And so while there were issues somewhere within the function, it was decided there was some accountability that had to be reflected there.

Thank you. And there's a question online. Can I take that, please?

Mr. Chairman, we have a question online from [ Tracy Pills ].

I have only just joined the live stream and would like to inquire, if not already being asked, how can the exorbitant remuneration for CEO and upper levels of management be justified when the face-to-face staff in retail be denied a decent pay rise by only being paid 4%, which is half of the current CPI and the cost of living is escalating each week, particularly in rural and regional.

Thank you for your question. Again, I'll pass that to the Chairman of the Remuneration Committee.

So I think there are 2 separate sort of questions there. So the first is on our staff. As you probably know, we took a vote to our people directly on the recent enterprise bargaining agreement. We were pleased that we had quite a high level of participation and our employees voted in favor of that. And it was a total package. Part of it was financial and there, there's a 4% increase in the first year and then staged increases for the years after. And in addition, a $1,000 amount in recognition of cost of living increases. But also our employees valued, I think the flexibility that we offer at Westpac. And there are a number of initiatives that we've taken throughout the year that we are very proud to have initiated, including things like special leave for people who are on fertility treatments, for a loss of a child through miscarriage and another -- a number of other sort of aspects of the total package. So we think that for the past few years, we've paid consistently our people over and above inflation. And I think the vote that we had on the ABA was an indication that our people, in fact, supported the packages that we're offering. On the CEO's package, there are 3 components of that. There's a fixed remuneration component, which we benchmark against the market. Our CEO is paid absolutely online with the other CEOs of the other major banks who are our peers. The short-term variable reward is against a scorecard, which has both financial and non-financial metrics, and we paid at the bottom end of the target range for that. And then there's a long-term component, which for the seventh year did not vest. So the CEO got a 0 outcome on the long-term component, which can represent up to 40% of his package. So it's a very competitive market. We ensure that our executives are paid in accordance with market rates, but also reflecting their performance.

And the 2 general points I would make. One is there's a marketplace for Chief Executive just like there is for anything else. And Peter has given their relative performance being paid below that of the other banks, which is perfectly appropriate. Then hopefully, that won't be the case going forward, assuming our performance can come good. The second point is that if this was in another country, the numbers would be much bigger. So can I have a question online, please?

Mr. Chairman, we have a question from Stephan Walker. In the financial report, CEO, Peter King, in the annual CEO's report to shareholders states, digital is the main way customers and bankers access services with over 90% of transactions conducted online or over the phone. Given this statement, could the Chairman, Board members and executive team explain what measures Westpac has taken to increase the protections of customers' personal data and privacy while using Westpac's banking services and give personal assurances to both investors and customers alike to its continual commitment to ensuring the safety and protection of customers' personal data and privacy.

Well, thank you. It's not a question for the remuneration report, but I'll take it and ask Peter to comment.

We covered that before, including with the Chair of the Risk Committee's comments. But just to recap, it is one of our top risks. We do spend a lot of time on it and take it very seriously. And we have a detailed framework that looks through our cyber, our data protection and projects to uplift that piece. But I think, as John said, you can never be 100% guaranteed, but we're doing what everything we can to protect that risk.

We got a question on the telephone.

Mr. Chairman, we have a question on the phone from [ Peter Star].

John, back again, it's Peter. It's always a difficult issue when we're talking about remuneration to executives and things like that. I think that if you look at the 4 majors and what they get and where Peter's package says, I think it's a pretty fair thing. One thing I do want to say to you, John and direct to Peter is that, [indiscernible] when we had the meeting in March, I did raise a lot of serious and systemic issues, the bank was confronting and had to work through. And I'm pleased to hear that you're finally going to meet with readers. So I think that's a good thing. Thank you.

Well, thank you very much. And one thing about your fairness, it's actually well below historical levels in Australia they paid for the chief executives of the major banks. And so that's been realigned. But that concludes the discussion on this item of business. Direct votes already cast and the position of proxy votes received on Item 5 prior to the meeting will now appear on the screen. So I now formally propose Resolution 5. The text of the resolution is now displayed on the screen. And if you've completed your voting card for this resolution or not voted on the online platform, please do so now. So as the direct votes and position of the proxy votes on the remuneration report has shown, an against vote of less than 25%, and this will not be materially impacted by votes received today. The conditional spill resolution noted in Item 6 in the notice of meeting will not be put to the AGM. Before I formally close the meeting, I wanted to check if there were any further questions or comments that we've not yet had the opportunity to consider. One in the room.

Mr. Chairman, I'd like to reintroduce Michael Sanderson.

This goes to dispute resolution. I didn't know where this fitted in the -- is Westpac is a member of the company limited by Guaranty, the Australian Financial Complaints Authority, AFCA, aware that ASIC information sheet info to 15 states. One of the characteristics of a company limited by Guaranty is, and I quote "each member of the company has a single vote." Section 3 of the AFCA constitution breaches this by having nonvoting members. What is worth Section 10.7 states. And again, I quote, "on a poll, each voting member has one vote for each dollar paid by the member in respect to levies and case costs to the company." This effectively gives control of AFCA to the worst offenders. The criminals metaphorically control, have a controlling interest of the court. This is also a breach of information sheet Info 215. My question is, as a member of the Big 4 who collectively are the worst offenders can Westpac justify to consumers and nonvoting AFCA members how this is justifiable or fair?

Well, thank you, I mean it's actually not a matter for Westpac at all. It's a matter for AFCA. And therefore, we'll let them answer the question. Thank you.

You're a member of -- as I said, you have a disproportionate voting power there. I just want -- one more, and this is me. AFCA is perceived by bank consumers to be biased in favor of its members, yet banks claim that AFCA is independent and impartial, just some examples. The former AFCA case member will call [indiscernible], work for NAB for over 29 years before working for AFCA for just 2 years and then took up a position with Bankwest. Just prior to leaving AFCA also he found in favor of Bankwest as a case manager. Also Gerard Brody of the Consumer Action Law Center, CALC, found that of all home lending complaints made to AFCA in 2020, there were no determinations in favor of the consumer. Also, in March this year, an AFCA ruling was overturned by the New South Wales Supreme Court due to, and I quote "the absence of impartiality and independence." I personally know as a complainant and an ex-AFCA member, that AFCA is biased to the point of corruption. My question is because there is no meaningful AFCA merits review of Westpac cases outside the courts, is Westpac prepared to fund merits review of AFCA-Westpac cases in the federal court?

Well, I think there's a lot in that question. We need an independent -- it used to be the bank always fund, it's now AFCA, we got to get AFCA working, in terms of funding, cases we would do it on a very select basis, very select, not on a wholesale way. We got to get AFCA working is what we need to do. And I understand you don't think it is working.

I don't think I know it.

Fair enough and so we need to solve that issue.

Well, again, Peter, I've just spend the last week in Parliament, the last week of sittings. And I've been pushing the -- the issue as I see it, is there is no quality of arms within the legal system for consumers, be they right or be they wrong? I'm not suggesting that banks, they have a legitimate case in relation to some consumers. But when an impecunious consumer is faced with a court system, most have no idea what the real issues of the case are. I know when I first entered that forum some 9 years ago, I didn't know what affidavit was. I do now. We've been pushing the concept of a financial services law force, where when a bank takes a consume at the court, they're required to make a contribution to a central body, which is the law firms, equivalent to their internal and external legal costs. And that force will use the community legal centers the people on the ground to represent and do the, I suppose, the doggy work in relation to that case. We're of the opinion that, that sort of scenario would change internal dispute resolution, external dispute resolution, mediation, farm debt mediation and AFCA materially. And it also changed the attitude within the bank because they would no longer have the ability to act with impunity. They know at the end of the journey, there is this organization that will foot it with their corporate legal counsel and represent a consumer equitably. That's the way to fix that, that's the way to fix the idea. And the beauty of the system is, the banks always remain in control because they are the ones that decide to take legal action. They could choose to deal with consumers more equitably, further down the path. So that's my suggestion.

Well, thank you for your suggestion. It's always the last resort for us to take legal action. So we do try and settle things out of court to the extent possible. I respectfully disagree with that. But I think the power imbalance makes that impossible. Okay.

And thank you.

And the final question, I think, is from Mr. Star on the telephone.

Yes, Mr. Chairman, we have a question on the phone from [ Peter Star ].

Thanks again, John. I should off my apologies, John, because I planned to be there to both see you and Peter. And again, congratulations on you, John, and well done. And -- just the only question I have for you is that, when -- the question I have is that, when Westpac sold its life business to TAL and there was some remuneration and -- or rectification to clients. Didn't the bank do that and complete that before the selling process or not?

I can answer that. No, not all of it was done. So part of that would have gone to TAL. And there would be an indemnity in place between the bank and TAL on that matter as well.

Well, thank you. As there are no further questions, that completes the business of the meeting. The polls will close in 15 minutes on all resolutions. For your convenience, please remain seated until you're directed to vacate your seats. Not that there's a lot of people in the room. So returning officer staff will collect completed voting cards, so if you have not already done so, please place these in one of the ballot boxes. If you've not completed and submitted your voting card on the online platform, please do so now. I now declare the meeting closed, subject to the finalization of the poll. And if you'd like to stay for refreshments with the directors and the senior executives, please follow the directions of our staff in that direction there. So thank you for your attendance, and we wish you all a very safe and happy holiday period.