Westpac Banking Corporation (ASX: WBC) announced financial results for FY15 which showed an increase in cash earnings by 3%.
Westpac Experiences Single-Digit Growth
Westpac reported 6% higher statutory net profits than pcp and an expense to income ratio of 42% which the bank calls sector leading. Westpac posted total revenues of $21.6 billion, which is a 9% increase on pcp. The bank was also awarded the ‘Most Sustainable Bank Globally’ in the 2015 Dow Jones Sustainability Indices. The bank’s lending growth was reported at 7% and deposits increased by 4%.
According to the CEO, Mr. Brian Hartzer, the bank’s strong financial results were due to its commitment to the Group’s ‘service-led strategy’. The key drivers were the Australian Retail and Banking Businesses (RBB), with Westpac RBB cash earnings 8% higher than pcp, St. George RBB increasing 7%. The bank’s Australian housing loans increased by 7%, personal lending rose 5% and business lending was up 6%. The New Zealand division reported 6% increase in cash earnings.
Westpac is Implementing Strategic Changes
The bank announced during September 2015 that it will increase its investments by $1.3 billion to focus on growth, service and efficiency initiatives for the next three years. The group has since taken a number of steps to support the initiatives. It has decreased the size of its branches by 36%, to make the design look more customer friendly and interactive. The bank has also installed immediate video access to business specialists in 99% of its branches. Westpac has launched an online and mobile platform – ‘Westpac Live’ - for its RBB customers. It has also launched a ‘Live Online Lending Application’ with over $30 billion of limits for its existing business customers.
Westpac’s FY16 Outlook
According to Mr Hartzer, “While consumers remain cautious, there are signs of improvement in non-mining related investment as the economy shifts to being more service sector-driven. At the same time, with better world economic growth we expect some stability in Australia’s terms of trade and stronger income growth over the medium term.” He also mentioned that the outlook for Australian banks is that they will function in a ‘lower-for-longer’ trend, showing modest credit growth, followed by intense competition and ongoing regulatory uncertainty. The CEO remains optimistic on the housing credit growth, wealth and insurance markets.
Author: Imran Valibhoy
Nov 02, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.