In Peter King Westpac has a “real banker” in charge, and at just the right time, which explains why his appointment has met with universal acclaim.
The shire boy from Sydney’s southern suburbs started with Westpac 25 years ago, coming from Deloitte at a time when the bank was recovering from its commercial property banking binge which nearly sunk it.
Today he says the environment, in banking terms is similar, because “this is a credit event” of major proportions.
Granted it was not a great time to be hiring someone from outside the bank but King’s appointment from new chair John McFarlane was still inspired.
King’s appointment comes as the Reserve Bank of New Zealand has closed a potential loophole by banning the big Australian banks from taking dividends from their New Zealand subsidiaries.
RBNZ had earlier relaxed planned capital restrictions so the banks could support the economy amid the coronavirus and the last thing it wanted was for the banks to be shifting spare cash back to head office.
Westpac chair McFarlane has also adjusted his board committees to better suit the new environment.
The old Westpac board was run with the entire board on the risk committee, for the obvious reason that risk was a key issue. But clearly something went wrong with that concept.
McFarlane now has a risk committee and a separate committee looking after legal, remediation and regulators.
He set out his terms for King, saying there would be “no tolerance for controllable major negative surprises”.
Of the coronavirus pandemic, King said: “This is a credit event and how we manage that will determine our progress.”
He supports government policy aimed at ensuring a quick bounce from the crisis, whenever it ends.
This is an environment which suits King, because his training, from day one in the then Bob Joss-run bank, has prepared him for it.
The market knows and likes King, so he ticks that requirement big time. Internally, the finance team clearly like him, because unlike some other bank bosses he actually understands how the balance sheet works.
Meanwhile King has placed the myriad of legal challenges facing Westpac, including Austrac, at the doorstep of Rebecca Lim.
King’s initial contract only runs for two years, after which time the economy will hopefully be recovering and the board can test its appointment.
But right now Westpac has a very safe pair of hands. Last year, as CFO King announced his retirement but this was inspired in part by some personality differences with then boss Brian Hartzer. When the latter left in the wake of the Austrac snafu, King was happy to serve as interim boss at the board’s discretion.
With fixed pay at $2.6 million, Hartzer was the highest paid banker in Australia and King at $2.4 million will be second only to NAB’s Ross McEwan who has $2.5 million in fixed pay, compared with Matt Comyn at CBA on $2.3 million and Shayne Elliott at ANZ on $2.1 million.
King celebrated his 50th birthday with his family last Friday, with Italian takeaway from a local restaurant. When life is more normal and sport can once again be played, he’s a St George dragons tragic and supports the Sydney Swans.
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