The changing of the guard at the top of Westpac (WBC) (which won’t happen until February next year), isn’t as big a deal as this morning’s media and yesterday’s share price reaction would have us believe.
The method of the retirement of CEO, Gail Kelly and the announcement of her replacement, Brian Hartzer, means the country’s second biggest bank won’t be changing strategy.
The orderly succession is a big plus for Ms Kelly and the board and the continuity shouldn’t have an impact on earnings or growth, at least for the next couple of years.
In fact the current interim profit announcement next May (for the six months to March 30) will be Ms Kelly’s swansong.
Like the rest of the banking industry, Westpac will be hostage to the performance of the Australian economy, and especially the housing market.
So for that reason, the 1.1% fall in the share price yesterday in the wake of Ms Kelly’s announcement was a kneejerk reaction and no indication of problems.
The fall could have been as much to do with the weakness in markets on the day as it was a reaction to Ms Kelly’s announcement.
WBC YTD – Orderly transition at Westpac
His ability to maintain profit growth will have to start depending on revenue growth rather than cutting bad debt provisions, which aided Ms Kelly’s performance in the past two years (as it did the rest of the industry, courtesy of lower interest rates and rising property prices, especially in Sydney and Melbourne).
In interviews, Mr Hartzer told Fairfax Media he would “maintain strong shareholder returns by focusing on technology and lifting efficiency at Australia’s second-largest bank.”
Fairfax reported that he vowed to deliver more strong performances to shareholders.
"Key priorities included using technology to improve customer service, while also becoming more efficient at a time when banks face growing competition and tougher regulations.
"I’m very proud to say that I’ve played a role in developing that strategy and so we’ll continue to deliver the strong performances we have, we’ll continue to focus on serving our customers well," he said.
"It’s a time of great change and that’s a time of change that creates opportunity for our customers, opportunity for the country and opportunity for us internally, to run ourselves more effectively, more efficiently," he said.
But one thing we can expect not to see and that’s a clean up of Westpac in the wake of Ms Kelly’s retirement, as we see at the National Australia Bank from new CEO, Andrew Thorburn.
