he profit jump looks impressive, but growth comes with pain in margins. Three factors will challenge Peter King’s goal of making the bank number two again.
At first glance, the headline numbers from Westpac’s 2023 full-year results portray a bank that finally has its groove back.
But that performance wasn’t without pain. Net profit crashed 23 per cent in the second half, as the unit’s NIM fell from 2.18 per cent to 1.94 per cent and its cost to income ratio surged 46.1 per cent to 54.2 per cent. King is right – that’s exactly where Westpac should be, and needs to be. But it’s equally clear that the challenges for the banking sector are not getting easier. Three stand out.
He argues four forces – immigration, the housing crisis, a big infrastructure build-out and the energy transition – will combine to keep demand in the economy strong. And while he won’t be drawn on Tuesday’s Reserve Bank’s rate decision, he says that “interest rates are probably going to settle higher than what we thought.”
But this business remains extraordinarily competitive and has been increasingly commoditised by the shift to mortgage brokers, who sell more than 70 per cent of all home loans in this country. King says the bank has greatly reduced cashback offers and has pulled back on discounting more recently; the disparity between rates for new loans and what existing customers are paying is as low as he’s seen it for years.But with ANZ particularly aggressive in the market at present, King will have to compete hard to meet his goal of delivering at-system growth.Monday’s result demonstrates why Westpac abandoned his plan to cut costs to $8.6 billion by the end of 2024; costs hit $10.
Australia Latest News, Australia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
WBC ASX: Wesptac announces $1.5bn buyback, 72¢ per share dividend as profits jumpWestpac has posted an after-tax profit of $7.2 billion for the 2023 financial year.
Read more »
ASX 200: ASX open flat as traders cautiously await Tuesday’s Cup Day decisionSharemarket poised for a subdued opening ahead of RBA’s cash decision on Cup Day. The Australian dollar rallies as the greenback weakens. Follow here for more.
Read more »
LTR ASX: Liontown short sellers cash in after Gina Rinehart wins takeover warThe mining billionaire’s successful raid on the company sent short positions up to record highs. But as the dust settles, it seems some hedge funds may not be done with the lithium hopeful.
Read more »
ASX to rise after interest rate hopes boost US sharesThe sharemarket is set to open higher on Monday, after Wall Street bounced last week amid hopes the US Federal Reserve will keep interest rates on hold.
Read more »
ASX to rise after interest rate hopes boost US sharesThe sharemarket is set to open higher on Monday, after Wall Street bounced last week amid hopes the US Federal Reserve will keep interest rates on hold.
Read more »
ANZ ASX: Under-fire ANZ kicks back against the criticismANZ finds itself battling on a range of fronts, from the aggressive pricing of its home loans to the performance of its ANZ Plus platform. It stares down its critics.
Read more »