CEO Peter King bundles problem units in Westpac ‘simplification’ push

New Westpac chief Peter King’s strategy aims at fixing compliance failures and freeing the bank of businesses that chew up capital.

New Westpac CEO Peter King wants to simplify the bank. (Picture: AFP)

Newly installed Westpac chief Peter King’s strategy aims at fixing compliance failures of the past, and freeing the bank of businesses that chew up as much as $4bn in capital.

Mr King outlined the key tenants of his simplification strategy on Monday, underscored by the potential sale of businesses including wealth platforms, superannuation and retirement products, investments, general and life insurance, auto finance and its Pacific division.

Those businesses — which were bundled into a newly created division — account for about 10 per cent of Westpac’s full-year revenue and $4bn in regulatory capital.

“What business you’re in is a big part of strategy and you’ve seen our thinking,” Mr King told The Australian.

“We effectively have (set up) a division that manages those businesses and that allows the consumer, business divisions, the institutional bank, in particular, to focus on the banking businesses.”

The new specialist business division will be led by former Westpac executive Jason Yetton, who will play a role in assessing whether the bank is the appropriate owner of its parts.

Mr Yetton rejoins Westpac after several years away running SocietyOne and then Commonwealth Bank’s mortgage broking and wealth businesses, which it has flagged for divestment.

The Australian last year revealed Westpac had tapped JPMorgan to consider a sale of its life insurance division.

“We have several businesses where we don’t have sufficient scale or where the returns are insufficient for the risk,” Mr King said, also signalling he wanted to beef up compliance functions that were shown to be lacking in the Hayne royal commission and last year when Austrac launched a legal case against the bank.  “We’ve got to sort out our compliance issues — it’s something Westpac has to deal with,” Mr King added.

The Austrac legal case, which alleged 23 million breaches of anti-money laundering laws and links to financing child exploitation, has progressed to mediation. An abridged agreed statement of facts is due to be lodged with the Federal Court on Friday, as the parties continue to disagree on several points.

An accountability review over the scandal is also pending.

Westpac closed up 43c at $15.77

Westpac’s interim results presentation showed it spent an additional $98m during the period on bolstering risk management and compliance, as it works through a plan to fix systems and processes.

Mr King is also prioritising rectifying processing problems and delays in Westpac’s mortgage arm and then lifting service levels and digitisation across the bank.

“The next part of the strategy is how do we really improve service in banking,” he said, noting the bank’s branch network would also be continually reviewed given the COVID-19 shifts in usage.

During the economic turbulence, Mr King has drawn on the experience of new chairman John McFarlane. He formally ran ANZ and had stints as chairman of Barclays and Aviva in the United Kingdom.

“John is very experienced, so the counsel and guidance that he gives me is very valuable,” Mr King said.

“Obviously he has very good contacts overseas from his time overseas, but also in Australia. In these times experience is massively valuable.”

In the medium term, Mr King is focused on bedding down his executive team and securing a permanent chief financial officer.

“Stability is really important in the team at the moment. We’ve got a lot on our agenda through navigating COVID, the lines of business, the risk management uplift,” he said.

“But over time I do need to fill the CFO role and we will do that, but in a measured way.”

Operating chief Gary Thursby has been acting in the CFO role, while Westpac considers candidates.