King: Priorities reset for challenging times

Westpac chief Peter King has fleshed out his key priorities in the wake of a “particularly challenging” year marred by COVID-19, bushfires and fines, eyeing improved performance in mortgages and higher returns overall in time. 

“Our financial result is disappointing,” Mr King said, as he handed down the 62 per cent fall in cash earnings to $2.6bn for the year to September 30, or 34 per cent to $5.2bn excluding notable items.   

Still, despite higher impairment charges and costs from the pandemic, and the $1.3bn AUSTRAC penalty, the board opted to resume payouts to shareholders after not paying one in the first half, declaring a fully franked final dividend of 31 cents per share. This equated to 49 per cent of full-year statutory profit, the maximum payable under the banking regulator’s current guidance.

Mr King said notwithstanding the challenges, the bank had made several important changes including introducing its new lines of business operating model, adding more than 400 people to its risk, compliance and financial crime team, and installing a new executive team. He also today unveiled three key priorities – fix, simplify, perform. 

Amid heightened focus on the toll on the industry from COVID-19, Mr King added more than two thirds of mortgage customers who took out repayment deferral packages had started making repayments again, with Australian home loans in deferral falling to $16.6bn as at October 28 out of $54.7bn provided. Business deferral packages outstanding have also dropped substantially to $1bn.   

Mr King said a critical part of better performance was supporting customers and the reduction in loan deferral packages was pleasing. 

“We do recognise, though, that for some customers the pandemic will have a longer-term effect on their circumstances, and we are committed to supporting them as much as possible,” he said. 

Six months since taking the CEO reins at a challenging time in the bank’s history, Mr King said his three priorities recognised the “immediate need to address our shortcomings, reshape the business to concentrate on our core businesses and markets, and improve performance”. A big focus would be driving a “culture to execute and improve performance”. 

“We are addressing the issues that have impacted performance in our mortgage book and expect to see improvement start to flow in 2021,” said Mr King, who last week confirmed his commitment to remain CEO beyond two years, as per his initial contract. “The simplification of our business will support improved returns and help pave the way for a re-set of our cost base.”

Amid improving signs as Victoria reopens, Mr King said the bank’s economists were expecting economic growth to improve through 2021 and 2022, but COVID-19 was clouding the near-term outlook and unemployment was expected to remain elevated for some time.

“We remain in an uncertain economic environment, however the recent budget has provided significant stimulus to businesses and households,” he said. “Importantly, while economic conditions will still be challenging, Westpac is well placed to continue to support customers through this difficult time.”