In stark contrast to the farce at AMP, Westpac boss Peter King will tell anyone who will listen that he’s not going anywhere. Not only that, he’s enjoying himself.
King’s comments come amid suggestions his job is on the line. Not surprisingly that is something he rejects.
AMP, by contrast, on Thursday let media reports of its chief executive’s impending departure sit for hours without comment, underlining the cultural black hole in the company. One suggestion was that Francesco De Ferrari wants out but that there is an impasse in the departure terms, so it was leaked to bring the matter to a head.
A note to AMP staff on Thursday night said he was staying and implored staff to get on with their jobs which is difficult in the present environment. AMP’s “he is still CEO’ message was repeated on Friday, although a leadership review is under way.
King is heading towards Westpac’s crucial half-year results release in May, when he will have to lay down his cost-cutting plan and direction against a background of an economy on the mend.
The market has backed his plans to exit New Zealand, in cost-control terms.
Jefferies figures show New Zealand accounts for 20 per cent of Westpac earnings compared to ANZ at 35.5 per cent and the Commonwealth Bank at 12.2 per cent.
This means that while conceptually King is doing the right thing getting back to core earnings, Westpac will be hit by cuts to his Pacific and Kiwi franchises.
The good news is that Westpac appears to be recovering momentum in housing as the market heats up and business lending is also picking up.
Better-than-expected economic momentum is a boon for the banks.
King is keeping cost-cutting plans to himself but one obvious job for new technology chief Scott Carey is to finally integrate the bank’s two operating systems, with St George, Bank of Melbourne and Bank SA on a different system to Westpac.
The multibrand strategy will stay but bank offices are being combined.
Westpac was hit with a string of problems from regulator Austrac over other risk management issues, and an overly cautious approach to lending in the wake of the responsible lending moves by ASIC.
Pandemic habits like a fortnightly chat with all staff by phone have been continued in an attempt to lift internal morale. King opens the call with whatever is on his mind and is then open to questions.
Each Friday afternoon he has a chat with his chairman John McFarlane, to run through issues.
Jefferies analyst Brian Johnson has raised concerns about McFarlane’s direct involvement with other executives, but King is relaxed.
Johnson is tipping earnings per share this year of $1.63, up from $1.45 last year, but well below the $2.31 reported in 2019. Next year is tipped to be no better.
The bank is selling on a price earnings ratio of 15 times after a stunning fightback, outperforming the market by 22 per cent in the last 12 months.
Over the period it has reported total returns of 71 per cent, against 58.6 per cent for Commonwealth Bank.
CBA still presents as the benchmark for Westpac and other banks to beat and King is working quietly to get close to and then beat “magic” Matt Comyn.
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