“The real priority over the next couple of years is to perform,” an embattled Westpac chair, John McFarlane, said yesterday.
“Our number one priority is to rebase our financial performance and, therefore, get our shareholder value back up,” McFarlane said in an interview with the bank’s in-house news service Westpac Wire.
Asked about market cynicism around the bank’s aggressive cost reduction targets spelled out at the full-year financial result last month, McFarlane said “essentially what we’re trying to do is get the value of the enterprise up. That’s a function of growth in returns and the level of returns.
“Revenue’s quite important here. Making sure that losses are managed here; particularly non-financial and credit losses. And costs are also an important part of the equation, but also capital return.
“So we’re trying to optimise all of those.”
In his address to yesterday’s annual meeting McFarlane said “Overall, the result was disappointing, leading to a drop in our market value for which I apologise unreservedly on behalf of the Board.”
McFarlane set out to pacify what turned into an aggravating meeting – which resulted in a “first strike” vote in the vote on the remuneration report – with an appraisal of the bank’s strategic reset.
“At the end of 2020, we announced a strategy to return to core banking and to focus on our home markets of Australia and New Zealand. We designated nine main businesses for exit, and this has been particularly successful, and faster than we expected.
“We have sold three, announced the sale of three, and are working to announce the sale of the remaining three, hopefully in 2022.
“We had also been trailing the market in main bank relationships and mortgage market share over recent years but we reversed this in 2021. However, this higher growth was at the cost of a decline in margins.
“While mortgage margin pressure is an ongoing sector issue, it affected us disproportionately, given our large mortgage portfolio and strong demand for fixed rate mortgages.
“We were also slower to grow business lending, which is higher margin and I’m pleased to say this trend is now reversing.”
This is not the case in the mortgage market, Peter King, Westpac’s CEO intimated.
“Low interest rates and intense competition will continue to impact sector margins,” King told the AGM.
In an expression of shareholder sentiment that will disturb but not surprise the board, there was a 30.2 per cent vote against the remuneration report.
To compound the message, there was a vote of 21 per cent against the re-election of Nerida Cesar as a director of the group.