Westpac chairman, John McFarlane, has apologised to shareholders, vowing to “reduce costs materially” over the next three years without jeopardising revenue opportunities.
Speaking at the big four’s annual general meeting, Mr McFarlane assured remedial action had been instituted by the board and management to improve performance going forward.
Westpac’s share price plunged last month after the bank confirmed a surge in cash earnings to $5.4 billion and the launch of a $3.5 billion share buyback. However, the market was not pleased with the results giving rise to questions surrounding the bank’s future.
To restore confidence, the bank has now set some fairly ambitious cost cutting targets. Addressing these on Wednesday, Mr McFarlane apologised to shareholders and assured them that Westpac would still slash its cost base to $8 billion by 2024.
“Overall, the result was disappointing, leading to a drop in our market value for which I apologise unreservedly on behalf of the board,” Mr McFarlane said of the bank's full-year result.
“Be assured, remedial action has been instituted by the board and management to improve performance going forward, including a plan to reduce costs materially over the next three years without jeopardising investment in infrastructure and revenue opportunities,” he added.
Acknowledging sceptics, Mr McFarlane said “the board is nevertheless confident that we will be able to execute this, and we fully expect costs to be down in 2022”.
He highlighted that the prior year’s total expenses of $13.3 billion included costs related to businesses that are in the process of being sold.
“To achieve the $8 billion target in 2024 requires a net reduction in costs of 11 per cent. We believe this is possible given the approved plans now in place.
“It should also give shareholders some comfort that action is being taken to stabilise margins and lift growth in some of the higher margin parts of our portfolio – particularly business banking,” the chairman said.
Mr McFarlane also reflected on the past, noting that Westpac was “operating businesses than no longer made strategic sense”.
“Our financial returns and market share had been weakened over recent years, caused by bureaucratic management processes, alongside operational and technological complexity,” he said.
In a separate address, chief executive Peter King acknowledged the bank’s shifting focus and added: “We are committed to rebuilding Westpac’s long-term value and improving returns.”
“While we have much to do, the changes made over the last 18 months have made Westpac simpler and stronger. They have set us up to manage through this period, to compete and to grow.”
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
