Creating an enhanced wealth management platform

23 April 2002

David Morgan Chief Executive OfficerDavid Clarke Group Executive, Business & Consumer BankingPhilip Chronican Chief Financial OfficerPeter Martin Chief Executive Officer, Rothschild Australia

Asset Management

Creating an enhanced wealth management platform

1.

Agenda

David Morgan– Strategic fit

David Clarke– Deal summary

– Business model

Peter Martin– Combined strengths

– Integration

Phil Chronican– Financial impact

2.

Wealth management strategy fit

• Builds on successful organic growth

• Expands distribution size and capability

• Strengthens the product platform, while accessing and integrating ‘best of breed’ products

• Achieves a balance between growth and profitable returns

3.

Agenda



– Business model


– Integration


4.

Deal Summary

• $323m purchase price for Rothschild Australia Asset Management and operations

• Establishing a new, separately branded and managed wealth management business

• Strong strategic fit

• Positions Westpac to leverage wealth management growth opportunities

• Transaction to be completed 31 May 2002

5.

Wealth Management Strategy

• Aggressively grow planner numbers

• Access independent planner force

• Enhance sales & service platform

Distribution

• Master trust

• Enhance bundling/ wrap capability

Bundling Platform

• Development & execution excellence

• Enhance product range

• Structured investments

Manufacture

• Scale

• Solid performance

• International alliances

• Fund ratings

Investment Mgt

Customers

• Increase customer share of wallet

• Access customers outside Westpac

6.

= Rothschild value added

Capabilities strengthened

• Increase customer share of wallet

• Access customers outside Westpac

• Master trust

• Enhance bundling/ wrap capability

• Development & execution excellence

• Enhance product range

• Structured investments

Distribution Bundling Platform

ManufactureCustomers

• Scale

• Solid performance

• International alliances

• Fund ratings

Investment Mgt

• Aggressively grow planner numbers

• Access independent planner force

• Enhance sales & service platform

7.

Business model

• New wealth management organisation – Combining strengths of Westpac

Investment Management and Rothschild– Capturing scale

• Development of a new and unique brand

• Preserving culture

8.

Agenda



– Business model


– Integration


9.

Rothschild overview

• $10.6bn funds under management (FUM)– 37% institutional– 35% master trust & wholesale wraps– 28% retail

• Market share 1.5% total FUM

• 174 employees

• Access to 1,000 premier financial planners and broader IFA network beyond

10.

A strong combination

WestpacFinancial Services

New Entity

11.

0

5

10

15

20

25

30

35

40

Market position – retail FUM

$bn

Source: ASSIRT December quarter 2001

Retail Funds Under Management

Westpac/Rothschild

$17.2bn

AMPNAB/MLC

WBCANZ/ING

CBA/CFS

RothschildBT MBL

12.

0

20

40

60

80

100

Market position – total FUM

$bn

Source: ASSIRT December quarter 2001

Total Funds Under Management

Westpac/Rothschild

$33.7bn

CFS/CBA

AMP NAB/MLC

MBL StateStreet

ANZ/ING

DBL/Zurich

WBC Rothschild

13.

What does Westpac bring?

• Strong balance sheet

• Strong risk management skills

• Network of 765 planners

• Complementary investment management process

• Priority access to 7 million Australian customers

14.

What does Rothschild bring?

• Highly regarded investment capability

• Strong researcher & consultant ratings

• Superior service model and culture

• ‘Best of breed’ international partners

• Independent distribution

• Access to 1,000 Premier advisers

15.

Leveraging our Service capability

• Core to our strategy• Understanding customer needs• Careful segmentation• Aligning the organisation

… but execution is critical

16.

Integration priorities

• Maintain researcher & consultant ratings and recommendations

• Brand and independence

• Organisational culture

• Retention of key people

• Optimise product offerings

• Maintain existing international alliances

17.

A strong combination

• Access to broad customer base• Comprehensive distribution• Enhanced service capability• Extensive product range• Multi-style investment capability• Platform for accelerated growth


18.

Agenda



– Business model


– Integration


19.

Acquisition criteria

• Aligned with group strategy

• Not unduly diverting

• Strict financial criteria

20.

Financial impact - Summary

• Price $323m - net asset value $16m

• Cash EPS positive from 2003

• Small balance sheet impact

• Paid for with less than 4 months of internally generated capital

• Acquired under life company

21.

Financial impact - valuation

• Comprehensive DCF analysis

• Key assumptions– Conservative 12% discount rate– Growth in FUM just above system (~12%)– Continued squeezing of industry margins– Over $15m per annum ongoing cost savings– Integration costs expensed in 2002

• Revenue enhancements not factored into valuation

• Price represents 80% of estimated full value, including synergies

22.

• Consolidation ofsystems andinvestment resources

• Premises

• Global overhead charges

Savings equal 20% p.a. of combined expense base1

by 2005

Synergies

1. Pro-forma total expense base ~ $80m

23.

Financial impact – profit after tax

Normalised NPAT1 $20.1m

Less opportunity cost of funding ($14.3m)

Earnings accretion $ 5.8m

Cash earnings per share 0.4 cents

Pro forma impact on 2003 Cash Earnings

1. Normalised for synergies, net changes to employee costs and overhead charges.

24.

Financial impact – multiplesPE1(x) % FUM

WBC/Rothschild2 24 x 3.0%

Principal/BT 27 x 5.5%

NAB/MLC 22 x 15.2%

ANZ/ING 20 x 11.2%

Average US transactions3 24 x 4.0%

Average UK transactions3 31 x 2.5%

1. JP Morgan analysis, based on historical or current year PEs.2. PE based on normalised 2002 profit after tax.

Based on normalised 2003 forecast, PE 16 x3. Based on asset management transactions since 1 Jan 2000

25.

Creating an enhanced wealth management

platform


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Creating an enhanced wealth management platform