Westpac chief Peter King said it had been another challenging year for the bank,but it was making progress in simplifying the business,and credit quality had been “remarkably good.”Credit:Jessica Hromas
Westpac’s shares were punished,dropping 7.4 per cent to $23.78,as the market reacted savagely to a 9 per cent jump in expenses and a dramatic decline in the bank’s net interest margin.
The bank has been in a period of change after being rocked by a money laundering compliance scandal in 2019,which sparked a strategic overhaul including major plan to slash costs. But Mr King,who conceded it had been a “challenging” year,on Monday faced repeated questions from analysts about the bank’s expenses,which jumped 9 per cent in the second half,excluding notable items.
He maintained the bank could still meet its ambitious target to slash its cost base to $8 billion by 2024,pointing to planned divestments,cuts to head office staff and rationalisation of its office usage.
“For us,it’s a very broad transformation program where we’re slimming down the business portfolio,we’re fixing our risk management,we want to get some performance as well. We’re choosing to get after it as quick as we can,” Mr King said.
“Yes it did involve extra costs this year,but the sooner we can get through it,the faster those costs drop away.”
Mr King also defended the bank’s move to compete more aggressively on price in mortgages to maintain its market share,despite this crunching profit margins. Net interest margins (NIM),which reflect funding costs compared with what banks charge for loans,plunged 10 basis points in the second half compared with first half.
Jefferies analyst Brian Johnson predicted “substantial earnings downgrades” among brokers following Westpac’s results,pointing to a disappointing performance on costs,margins,and a smaller buyback than some expected.