Commonwealth Bank of Australia Ltd (CBA) chief executive Ralph Norris’ cast iron commitment to preserve BankWest jobs evaporated on Monday after the wholly-owned subsidiary cut 400 jobs due to the economic downturn.
Five months after CBA acquired BankWest together with St Andrew’s Australia for a total $2.1 billion, BankWest said around 250 Perth-based employees in back-office roles will be notified of redundancy in coming weeks.
Another 150 employees across Sydney, Melbourne and Brisbane will also lose their jobs, capping the end of four years of rapid expansion by BankWest that promised to bring fresh competition to retail banking on the eastern seaboard.
The decision contrasts with comments made by Mr Norris on October 8 last year that CBA remained committed to BankWest’s West Australian network and jobs.
CBA snapped up BankWest and St Andrews after their UK parent, HBOS plc, was rescued for STG12.2 billion ($A28.06 billion) from a mortgage funding shortfall by Lloyds TSB.
BankWest managing director Jon Sutton, who took on the role in late 2008, said on Monday he had believed there would be no job losses in 2009.
But a rapidly deteriorating economy meant Perth-based Bankwest had to adjust to remain an efficient and viable business.
“The deteriorating national and Western Australian economies and a high cost base mean Bankwest has no choice but to cut costs to remain competitive,” he said in a statement.
CBA’s first half results, released in February, showed a 15 per cent jump in group income, a three per cent drop in costs and climbing net interest margins.
The result also showed respectable growth rates achieved by BankWest for mortgages and credit cards in the six months to the end of December 2008.
Only 20 months ago BankWest embarked on an ambitious retail network expansion across the eastern states, spending over $1 billion to June 2008 to create new jobs and open 160 new branches designed specifically to challenge the dominance of the Big Four retail banks.
Its nationwide workforce grew from 3,340 to 5,100, making BankWest a major employer in Perth and building strong brand loyalty.
At a trading update in November, CBA noted the fast-growing WA market and the compelling growth opportunity presented by the BankWest acquisition.
CBA’s fiscal 2009 annual results, due later this year, will include a full year contribution from BankWest for the first time.
CBA confirmed its director on the BankWest board had been part of the decision to cut jobs ahead of Mr Sutton informing the Finance Sector Union on Monday.
Union national secretary Leon Carter said the workforce had reacted with “complete and utter dismay” because Mr Norris and Mr Sutton had given “an iron-clad guarantee that there would be no compulsory job losses in WA”.
According to Mr Carter, the guarantee was also given to Treasurer Wayne Swan, who approved CBA’s acquisition of Bankwest in December.
“They are unable to point to any deterioration in their performance on any of the measures,” he said, adding that CBA’s cost to income ratio had not changed since the BankWest acquisition.
None of BankWest’s 131 branches will close, indicating workloads had not declined, Mr Carter said.
Mr Sutton said no retail customer facing roles will be lost, and BankWest will continue to be run as an independent bank headquartered in Perth.