Westpac was late for the home loan party, and now it’s paying the price
For lenders, the end of the house price growth party inevitably means that accompanying credit growth will also subside.
And even if the market doesn’t cool naturally, the financial regulator APRA stands ready to intervene by pouring the cold water of further macroprudential measures over it.
King is a risk averse executive – which is hardly surprising when you consider that he was installed on the hot seat to clean up the chaos of previous Westpac regimes
Westpac CEO Peter King disagrees that his bank, which only recently boosted mortgage share growth, was slow benefiting from the real estate boom.
Mortgage processing issues impacted Westpac’s ability to approve loans and it appears that pricing policies and loan size have been less aggressive.
Last year it had increased its lending in favor of the owner-occupier market with lower margins and reduced its share of the riskier but more lucrative investor and interest loans.
It seems that Westpac has been less inclined than others (or at least another major bank) to sacrifice its standards in measuring borrowers’ spending.
King is a risk averse executive – which is hardly surprising when you consider he was put in the hot seat to clean up the risk-based mess of previous Westpac regimes, including AUSTRAC issues and the myriad of problems raised by the royal commission for Financial services emerged.
It was a costly business for the bank. For example, in fiscal 2021, the bank paid a staggering $ 1 billion in customer clearance payments. Last year it paid out US $ 1.3 billion to the financial crime regulator AUSTRAC to regulate penalties to combat money laundering and terrorist financing.
However, King also acknowledges that there may be a greater risk of being left on the sidelines and competitors limiting Westpac’s market share in mortgages.
Thus, this bank, which has traditionally sacrificed market share in favor of profit margins, has turned around, realizing that a mortgage product is the path to a customer’s most important financial institution.
But Westpac also has to make up ground in business banking – both with small and large customers.
Under King, Westpac has reduced its geographic presence and concentrated its activities on Australia and New Zealand.
On the big business side, King is putting much of its growth efforts on lending for the decarbonization trade.
Like other lenders, King recognizes that green is growth.
But erecting the Westpac ship, tackling legacy issues, and setting stances on growth – all at a time of intense competition and historically low interest rates – seems like a very difficult juggling process.
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