Westpac Banking Corporation Analysis

Overview

Westpac has been a proud part of New Zealand history and community since 1861. Beginning life as The Bank of New South Wales, WBC changed their name to Westpac in 1982. Over time the bank has grown stronger with the addition of the Commercial Bank of Australia and TrustBank. After 145 years in New Zealand, the Bank's local identity was formally strengthened by the launch of Westpac New Zealand Limited in 2006.

Today, Westpac has over 1.3 million customers. Westpac operates two banks in New Zealand: Westpac New Zealand Limited, a New Zealand subsidiary, and Westpac Banking Corporation (NZ Division), a branch of Westpac Banking Corporation.

Westpac New Zealand Limited provides a full range of financial services for retail and business banking, including home and business lending. Westpac has over 5,500 staff, 196 branches and nearly 500 ATMs nationwide, as well as phone assist call centres and 24-hour phone banking services. The Online Banking service was launched in April 2000 and now has over 566,000 registered users (September 2006).

Westpac is also an award winning provider of banking services to small to medium business and is the banker of the New Zealand government.

Westpac completed its merger with St.George Bank by way of scheme of arrangement. The merger, was approved by holders of St.George ordinary shares on 13 November 2008 and subsequently approved by the Federal Court of Australia on 17 November 2008. On 1 March 2010 Westpac and St.George commenced operating as a single authorised deposit-taking institution. In conjunction, the legal entity, St.George Bank Limited was deregistered and Westpac became its successor in law.

The 5 key divisions of Westpac including: Consumer Bank, Business Bank, BT Financial Group, Westpac Institutional Bank and Westpac New Zealand. Through these 5 divisions the company serve over 13 million customers.

Performance

The following information was extracted from Westpac Banking Corporation Limited's annual report released on 4 November 2024:

This year our disciplined performance has set Westpac up for continued growth and success. We delivered a sound financial result while navigating a competitive market, along with high inflation and below trend real GDP growth.

Our focus was on supporting customers, growing in all our key markets and disciplined margin management. While we reported a modest increase in stress, credit quality outcomes were better than expected. We delivered a return on tangible equity above 11%.

Net profit of $6,990 million for full year 2024 was down 3% on the prior year. Operating income was little changed with solid loan growth constrained by a modest decline in margins and lower non-interest income, mostly reflecting the impact of businesses we sold in 2023. The rise in operating expenses reflected higher technology costs and inflationary pressures, while the low level of impairment charges reflected our prudent lending practices and customer resilience across both households and businesses.

We maintained a strong financial position with capital, funding and liquidity all above regulatory minimums. Westpac’s capital position is one of the strongest I’ve seen, allowing us to further increase the share buyback program by $1 billion. Fully franked ordinary dividends increased by 6% this year to 151 cents per share, including a final dividend of 76 cents per share. That equates to a full year ordinary dividend payout ratio of 73% of net profit ex notable items, towards the upper end of our preferred payout range.

Improving customer service has been a key focus. By streamlining our home loan services through technology, we’ve seen substantive improvements in response times. Our average loan decision times have improved to approximately five days.

Westpac has the best banking app in Australia for the second year in a row and we’ve made substantial progress bolstering safety and security for customers. This includes Australian-first scam measures which have helped bring customer scam losses down by 29%.

We reached a milestone this year with the completion of our Customer Outcomes and Risk Excellence program. We are now embedding the changes and APRA has reduced our operational risk capital overlay by $500 million. UNITE, our business and technology simplification program, is advancing well with 39 out of 61 initiatives commenced.