Westpac counts the cost of Austrac brawl

Westpac CEO Peter King. Picture: Jane Dempster

Westpac chief executive Peter King’s new senior management team will finally be in place by the end of this month, with the addition of expatriate banker Chris de Bruin as head of the consumer bank.

It won’t be a day too soon, as the lender suffers franchise damage from unresolved mortgage processing issues and its debilitating encounter with financial crime agency Austrac.

It’s not as though the consumer bank has been directionless under its acting CEO Richard Burton.

Burton is well-regarded internally and seen to have made the right moves since he was pitched into the acting role in June, after David Lindberg succumbed to the lure of Royal Bank of Scotland

However, there is no substitute for stability, and excuses will start to wear thin if King’s chosen team is unable to deliver the expected turnaround.

De Bruin, who is finishing off a period of hotel quarantine, was previously CEO of Dubai-based Deem, one of the largest non-bank financial institutions in the Middle East with 230,000 customers and an AED2bn loan book ($750m).

Before that, he spent 13 years at Standard Chartered, most recently as head of global retail products and digital banking with responsibility for deposit, lending and payment products.

While rejuvenation of the retail bank will make a huge contribution to King’s turnaround ambition, there are deep-seated problems across the group contributing to its malaise.

A note on Tuesday by UBS analyst Jon Mott highlighted the scale of the challenge by comparing the post-Austrac performance of Westpac to the agency’s other high-profile casualty, Commonwealth Bank.

Mott found CBA managed to return to level-pegging with Westpac in only 12 months.

Westpac, on the other hand, has now underperformed CBA by 30 per cent since its anti-money laundering woes began in November 2019.

As a result, while CBA’s market value of $151bn is almost double that of Westpac at $78bn, its capital base is roughly the same as its Sydney rival.

The direct impact of the AML breaches was manageable for both banks.

For Westpac, however, the indirect consequence was a massive increase in risk and compliance expenditure, coinciding with a significant tightening in mortgage verification.

Westpac’s financial performance suffered a big hit, with CBA’s underlying business left “relatively unscathed” by its AML transgressions in 2017, according to Mott.

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