Westpac boss Peter King pulls focus on bank’s traditional lending arm

Westpac CEO Peter King. Picture: Nikki Short

Westpac has created a new good bank-bad bank structure as chief Peter King attempts to put more focus on the bank’s traditional lending arm.

Overwhelmingly, that means home lending, which accounts for 72 per cent of the bank’s lending.

There is a commonality to the big banks which now all work under the mantra of simplifying and focus, which comes down to old-style banking before the then-CBA boss David Murray took the industry headlong into wealth management in the late 1990s.

That experiment failed and it’s back to the old days, again.

King has rehired former retail boss Jason Yetton to what you could call the bad bank, or in Westpac language “specialist businesses”, which includes insurance, wealth platforms and superannuation.

Some of these were already on the market, but Yetton’s job is to ready them for sale and ensure the bank gets the best from them before they go.

As bank capital is under pressure in a weak economy, asset sales are a great way of avoiding an equity raising, which is what Rob Scott at Wesfarmers did by selling 10 per cent of Coles to raise $2bn.

Three of the big four reported a 42.6 per cent fall in profits to $8.3bn with operating income down three per cent to $39.9bn.

King’s decision to defer a dividend was no surprise given APRA virtually told all the banks to be cautious on paying out money to shareholders.

Unlike ANZ, Westpac was less definitive on the potential time for any revised dividend decision.

The banks have started checking with those people who deferred their mortgage repayments to see how they are going and whether they are in a position to resume payments.

By October, they will know exactly where they will stand because by then the government handouts will have finished.

If, as Westpac’s King is hoping, and this quarter is the worst with a bounce back in the December quarter, it might not all be as bad as feared.