Upon the release of its half year financial results yesterday, Westpac Group CEO Peter King outlined the bank’s “immediate priorities” moving forward and gave insight into its approach to lending in the COVID-19 environment.
Westpac reported a statutory net profit of $1.19bn, down 62% year on year, and cash earnings of $993m, down 70%.
“This is the most difficult result Westpac has seen in many years. It is significantly impacted by higher impairment charges due to COVID-19, as well as notable items including the AUSTRAC provision,” said King.
Moving forward, Westpac plans to simplify its organisation to focus on banking, having moved several of its specialist businesses like superannuation, retirement products and wealth platforms to a new, separate division headed by Jason Yetton as CEO.
Despite the lacklustre half year results, King emphasised that Westpac’s balance sheet “remains strong”, with customer deposits up $19bn over the half and loan growth of $5bn – resulting in a deposit to loan ratio of over 75%.
“We are continuing to lend to keep credit flowing in the economy and we have tailored relief packages to help consumers and businesses,” said King.
“It is vital that when we get to the recovery phase businesses are ready to re-open and support as many Australians back into work as possible.”
However, the CEO shared that April lending activity primarily consisted of customers restructuring or deferring their existing payments, rather than the writing of new loans.
Since announcing its COVID-19 support package, 105,000 of the bank's Australian mortgage accounts have been put on hold with a total loan value of $39bn. Additionally, 31,000 Australian business loans have been paused, totalling $8.2bn.
The bank will touch base with customers who have elected to pause their loan repayments at the three-month mark, to begin to glean more information about their positions come June and July rather than waiting the whole of the six month period.
“We’ll do a check-in at three months. I’m hopeful we’ll get some line of sight [for the outlook on loan demand] through those contact points,” said King.
“Our normal metrics of people missing repayments won’t work in the next six months, but I think there are other ways we can get a bit of a read of what’s going on.”
According to King, sorting out the bank’s mortgage processing issues is a high priority and will be addressed through a two-pronged approach.
“The way to fix it is more people – in the short-term. In the long-term, it’s automation,” he said.
“It’s one of our top priorities to get that back to service level. We’re probably a couple of weeks from getting there, but it’s a top priority.”