Westpac’s $10 billion U-turn on New Zealand

Indeed there would be nothing simple about separating its business in New Zealand from Australia in a regulatory sense.

Loading

Westpac has been the performance laggard among the big four Australian banks – having lost market share over the past year in mortgage and business lending.

It also settled a dispute with AUSTRAC to pay a record breaking $1.3 billion fine and more recently has been hit by insider trading action brought by the Australian Securities and Investments Commission.

Indeed Westpac has been struggling to restore its mojo since late 2019, when its then-chief executive Brian Hartzer resigned in wake of the AUSTRAC money laundering scandal and the chairman Lindsay Maxsted announced he was retiring early.

There are plenty of tasks on the relatively new chief executive Peter King’s to-do list that rank ahead of a mammoth task of splitting with New Zealand.

The company is in the early stages of redressing a decline in market share in mortgages and business lending, is in the middle of a cost cutting exercise and is selling numerous businesses, having recently jettisoned its life insurance business. It is expected to soon ink a deal to offload its auto finance business.

Westpac’s decision to abandon the plan does appear like something of an embarrassing backdown.

But these businesses are far smaller. Westpac’s New Zealand operations account for about 15 per cent of group profit and have been valued at $NZ11 billion ($10.2 billion).

The bank also faces the task of overhauling its complex IT infrastructure.

And now that Westpac New Zealand has the confirmed status of being a core asset, it will be the subject of something of a business renovation.

This process will need to begin with the appointment of a new chief executive for the NZ bank to replace David McLean who is scheduled to leave later this week. It is telling that Westpac has not yet found someone to fill the position and has announced an interim replacement.

The lender will clearly also need to attend to regulatory shortcomings including its risk governance practices.

“Our review identified opportunities to improve service for customers and value across the WNZL [Westpac New Zealand Limited] business and we will progress these with the WNZL board and management team,” Peter King said on Thursday.

“WNZL is a strong business that has been serving New Zealand for 160 years. We remain committed to delivering for customers and fulfilling our purpose of helping Australians and New Zealanders succeed,” he added.