Westpac says it’s not the “Jetstar of banking” on mortgage rates

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Australia Anticipates Up To One Percent Interest Rate Cut

Westpac Banking Corporation Ltd chief executive Gail Kelly has elevated two members of her senior management team, which signals the start of a new phase of the bank’s transformation program.

Mrs Kelly was also unapologetic about the bank’s controversial rate hike last week that drew criticism from consumer groups and the federal Treasurer Wayne Swan.

Mrs Kelly also claimed Westpac had not lost a single customer since taking over St George Bank last year.

As part of its transformation process, BT Financial Group chief executive Rob Coombe on Monday replaced Peter Hanlon as group executive for Westpac’s retail and business banking.

BT Financial Group is Westpac’s wholly owned wealth management arm.

Mr Hanlon is to lead the bank’s transformation program, becoming group executive for people and transformation, responsible for modernising the system and processes in place to serve customers.

Mr Hanlon was in charge of the bank’s retail division at Westpac when it increased its variable home loan rate by almost double the central bank’s rate increase last week.

On Monday Mr Hanlon said Westpac was not the “Jetstar of banking”, referring to the standard variable mortgage rates it charged customers.

“We don’t have a price leading strategy,” he told analysts and media at a strategy presentation on Monday.

“We’re not the Jetstar of banking.”

Mrs Kelly said the bank was still competitive on price and had not lost a single customer from its transformational merger with St George Bank.

The first phase of the five-year transformational strategy has now been delivered with “a huge benefit” to the bottom line, she said, after announcing a management shuffle ahead of phase two.

Brad Cooper, who led the St George integration, will replace Mr Coombe as chief executive of BT Financial Group.

Mrs Kelly and Mr Hanlon were speaking six days after Westpac’s decision to hike its standard variable mortgage rate by 45 basis points to 6.76 per cent, with the bank blaming the move on the cost of securing term funding from offshore wholesale markets.

Commonwealth Bank of Australia and ANZ Banking Group (ANZ) raised their standard variable rates by 37 basis points and 35 basis points respectively.

National Australia Bank’s rate rise matched the RBA, at 25 basis points.

Mrs Kelly said federal politicians need to understand the bank’s need to pass on rate rises due to higher wholesale funding costs.

“I think the politicians really do understand this new environment,” she told analysts and reporters.

“They see first hand the increase in the cost of deposit taking. They want us to be here for the long run.”

Mrs Kelly described the new lending environment as “the new normal” and said all customers would pay more to borrow.

Her comments were at odds with Mr Swan who on Sunday said “any bank that used the RBA’s official rate rise as an excuse to take families for a ride this Christmas is letting down their customers and their country.”

On Monday Mrs Kelly declined to reply.

Mr Hanlon said Westpac had grown its customer numbers and increased market share at twice the average rate of its competitors over the past 12 months despite having an standard variable rate that was around 17 basis points higher than its big four rivals.

“Seventy per cent of customers buy on service and only 30 per cent buy on price,” he said.

Westpac closed down 15 cents at $23.89

AAP

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5 COMMENTS

  1. Hanlon,
    We can now see your new marketing strategy “Jetstar Service at Qantas Pricing $$$”

    Sounds about right to me!

  2. Two interesting items from this article:
    1. Mrs Kelly says they have not lost 1 single customer from the St. George merger.
    2. Mr Hanlon says 70% of people buy on service, not price.
    Westpac is growing because there are no other reasonable alternatives, which goes back to not enough competition in the market.
    We need smart government regulation to protect consumers and better transparency with the Big 4 (or Big 2 now as CBA and Westpac own the biggest chuck of the resi market).
    As anyone familiar with free market economics knows, the more competition, the leaner (eg. better terms and conditions for their customers) they are. The flip side is what we are seeing happen today.
    If I was Westpac or any other of the majors, I would do the same and maximise my bottom line too. After all it’s not costing me anything and my business is still growing due to lack of healthy competition or government regulations.
    How many times do we have to repeat ourselves before the government steps in and does something positively constructive?

  3. The reason politicians now “understand” this new environment, is due to the power that the big 4 banks have over our politicians. Not only do the big 4 continue to “cry poor”, but I would also suggest that they contribute substantial amounts of money to both sides of politics.

    Anybody can show statistics that will support an argument. Who will challenge those statistics? And, if they did, it would also be easy to discredit them.

    Whilst our big 4 continue to cry poor, they increase their rates to provide profit margins that have not been seen by the big 4 for many years.

    And the reason why they haven’t seen these margins is simple. COMPETITION.

    I have heard from good sources recently that many small building societies and credit unions are “simply not lending” because they don’t have access to funds.

    Westpac is now buying funds for Westpac & St George. (Economy of scale). And they have access to a great deal of money from BT Financial, who are happy to give Westpac money that is accumulating at a rate of knots through “compulsory super contributions”

    The current economic situation is an absolute “boon” for our big 4 banks. They are buying their major competition, they have access to ample funds and still crying poor to our politicians.

    If you all think $4 billion is a huge profit. Watch what WBC & CBA announce as profit next “reporting season”. They have written off all their “bad debts” (which may not be as bad as everyone expects) and they are increasing their profit margins to record levels.

    And on top of this, Mrs Kelly gives herself a $2,600,000 bonus.

    Let me assure you folks, our Big 4 banks “DO NOT HAVE A MORAL CONSCIENCE”. And our pollies either don’t care or don’t want to stop them.

    And I am happy to accuse Mrs Kelly of “lacking in any form of MORALITY” in this forum.

    Cheers
    Keith

  4. No Westpac is NOT like the Jetstar of banking, but it’s more like the Ned Kelly of lending…..coincidence you think?

  5. Put simply dont put any more loans through these greedy bastards. There are other lenders out there, but brokers still seem to feed these two ( Westpac & CBA) with record numbers of loans. The sooner the broker industry stops supporting these the better.

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