Westpac, The Dud Among Australian Banks?

This story features WESTPAC BANKING CORPORATION. For more info SHARE ANALYSIS: WBC

This story was originally published by Banking Day on March 29, 2021 under the title “St George BOM breaks Westpac”. FNArena has permission to re-publish.

-Westpac labeled the ‘least competitive and most unstable’ of major banks in Australia
-bank has struggled with more operational, technical, oversight and strategic challenges than any of its peers
-Is Westpac preparing itself for a (possibly foreign) suitor?

By Ian Rogers, Banking Day

At John Macfarlane’s Westpac ((WBC)), the clearance sale seems to be on. But the real question is why the bank took 10 years to wake up to the twin follies of rebooting Bank of Melbourne in 2011, and even saving St George Bank to begin with in 2008.

The padlocking of the doors on another 48 Westpac group branches in Australia (disclosed on Friday) exposes more of the soft underbelly of the least competitive and most unstable of our major banks.

The gathering abandonment of everything Bank of Melbourne seems to point to bigger moves to come at Westpac.

We could be about to see one of our major Australian banks actively looking for a buyer – for the whole group. Or embarking on some form of reconstruction and sale of every Westpac business unit and client list for which Macquarie (Westpac’s adviser) can find buyers.

The Industrial and Commercial Bank of China, or one of the dozy twins, Commonwealth Bank and National Australia Bank, makes sense to us as new custodians of every stale, broken and unreliable piece of IT kit that are dragging Westpac down.

The investment thesis behind Westpac might as well be its all break-up value.

A return of capital to shareholders – maybe even 100 cents in the dollar – would amount to a well-deserved (if unexpectedly elegant) exit from the industry for the number one wreck in Australia’s frustrating banking industry.

Westpac has been beset by more operational, technical, oversight and strategic challenges than any of its peers, and the piecemeal approach by Peter King and John Macfarlane has shown unable, so far, to arrest systemic losses of market share on both sides of the balance sheet.

Banking Day is taking a bit of leap this morning: but four big banks turning into three, or two, or one day only one is where the financial services industry is headed.

The fact that Westpac, the most hapless member of the banking cartel is moving to create options for reform of industry structure only idealists write about is easily the most encouraging development in the finance sector in Australia in the 33 years Banking Day’s been specialising in business and finance.

At the very least, Westpac today is defined by an under-appreciated resolve on the part of John Macfarlane, his board and his less-sure CEO to reconfigure the bank and make it fit for some form of dramatic, commercial reset.

Not just Westpac New Zealand and the Jason Yetton junkyard – everything.

The Finance Sector Union, as is typical, took the responsibility for alerting the market, the FSU’s members and the bank’s customers to the latest in a long line of decisions by Westpac to reshape the legacy distribution network of the bank.

FSU National Secretary Julia Angrisano said this series of branch closures by Westpac Group “was the largest ever by a major bank.”

“The closures affect the jobs and livelihoods of 165 staff,” Angrisano said.

Over FY2020 Westpac cut 24 branches from its network and 57 were closed (though not all in one go) in FY2019.

In late 2016 Westpac kept the doors open on 1085 branches across its jumble of brands: Westpac, St George, BankSA and the bank’s 2011 folly; the reboot of the Bank of Melbourne.

Before the partly strategic, partly a rescue of St George Bank during the crisis year of 2008, Westpac had 1045 branches, all under the name chosen 40 years ago.

St George, with BankSA as the…