Westpac starts from behind in institutional bank rev up
Jefferies’ head of research Matthew Wilson does not mince words in his assessment of Westpac’s institutional bank.
It had once “boasted double-digit returns and attracted some of Australia’s leading bankers”, but the last decade is best described as a “fall from grace” typified by systemic underinvestment.
The division, which services only the biggest corporate and public sector clients locally and overseas, and its share of bottom-line profits, have fallen off a cliff since its heyday of 1995 to 2007. Westpac’s international footprint has also shrunk with the closure of its Hong Kong offices in June.
The company has long flagged its ambition to cut headcount by 20 per cent compared with 2020 levels by 2024 to get costs under control. Getty
For the year to September 2022, Westpac’s institutional bank posted a $687 million cash profit, menial growth compared to the $610 million generated in the 2007 period.
“More investment… is required to return to institutional [to] match fitness,” Mr Wilson says.
It was against this backdrop that Westpac held its first institutional strategy day for just over six years last week.
The 27-slide presentation, headlined by outgoing institutional boss Andrew Miller, who – with an eye to potentially taking on the CEO role in future – will soon move to take control of the business bank, as well as his replacement Nell Hutton, argued that the segment’s momentum, finally, was on the up.
Return on equity in the first half of the 2023 financial year had increased to 13.8 per cent against 8.8 per cent in 2022 on the annual measure. Operating income in the six months to March had soared $300 million higher to $1.4 billion, and its cost-to-income ratio fell about 9 percentage points to 43.6 per
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