Westpac chairman John McFarlane says he will retire at next year’s annual meeting of the bank and in his second last speech to the bank’s AGM yesterday made it clear who has been driving the change at Australia’s oldest bank for the past couple of years.
In his chairman’s address to the meeting in Melbourne on Wednesday, Mr McFarlane – a former CEO of the ANZ and chair of Barclays in the UK – said, “Westpac is now in good strategic and financial shape for the future”, after two and a half years of repositioning and restructuring and was once again catching competitors.
He made it clear that he was confident Westpac had made good progress on its transformation agenda as it has shaken off the AUSTRAC money laundering scandal, dud managers and board members and an unwieldy set of high-cost assets that has now been significantly reduced.
The management team, led by CEO Peter King, has done the implementing of the cost cutting, asset sales and other changes (such as 23 branches closed earlier this year) but the approach has all the hallmarks of McFarlane’s hard-nosed, unsentimental approach at Barclays and UK insurer Aviva, as well as when he was at the ANZ before the GFC.
“This year I have one main message for you. Following two and a half years of repositioning and restructuring, Westpac is now in good strategic and financial shape for the future,” Mr McFarlane told shareholders..
“Going forward, these stronger foundations should enable us to perform well for shareholders. Considerable progress has also been made in the simplification of the Group, in lowering the cost base, and in addressing risk and cultural issues.
“We have successfully strategically repositioned the Company to focus on our natural strengths in commercial banking, focused on Australia and New Zealand. We have announced the exit of nine out of eleven businesses and completed the sale of seven.
“Work continues on the exit of the two remaining businesses. We also streamlined our international network into four locations – New York, London, Singapore and, soon to open, Frankfurt.
“Over a number of years, Westpac had lost market position across our portfolio of businesses, particularly institutional, business, and consumer banking. I’m pleased to say that this has stabilised, and we’re now operating broadly in line with major bank competitors.
“Our New Zealand business also continued to perform well and is working to resolve errors of the past.
Solid progress was therefore made on costs that had built up over time. The result saw the statutory expense to income ratio reduce from 63% to 55%, and we are focused on lowering this to the mid-40s or below in the coming years.
“We’ve had an improved year, but we know that performance is not yet where it needs to be, and this was reflected in remuneration outcomes for the management team.
“This delivers on my commitment to shareholders when I first took on the role in 2020 to create a leaner, more agile, and better performing Company. It also ensures the Board has time to appoint a new Chair in an orderly way.
We have started the process of identifying a new Chair and in looking for new Directors that will bring additional skills to the Board,” Mr McFarlane told shareholders.
Last year, just over 30% of votes cast were against Westpac’s Remuneration Report, and it incurred a “First Strike”. Yesterday there was no repeat and only 6.5% of shareholders voted against accepting the report, with more than 93% voting in favour.
Looking to 2023, CEO Peter King told the meeting Westpac expects “the combination of rising interest rates and the increase in cost of living to be felt more fully by consumers and businesses after Christmas.”
As I indicated earlier, we’re well placed to support customers through what will be a tougher period.
“2023 heralds a new phase for Westpac. Our efforts over the past few years have made us a simpler and stronger bank.
“With our strong balance sheet, sharper strategy and committed team, we are focused on strengthening the franchise and accelerating performance. We enter the year with optimism and a commitment to improving customer experience and, as a result, continuing to build the long-term value of Westpac.”
Westpac shares eased 0.4% to $23.57.
