Westpac Banking Corporation (ASX:WBC) Managing Director and CEO Brian Hartzer discusses the bank's latest financial results and future outlook.Well over the last year we delivered 3% growth in cash earnings. We increased the dividend by 1 cent over the same period last year, and our real focus was strengthening our balance sheet. We increased our equity levels by over $6 billion which is about a 15 per cent increase, and puts us in a very strong position on a global basis.
We had a number of challenges on the corporate credit side, and in particular we had a few large credits that flowed through into our impairment line. We also saw that financial markets were fairly volatile and that made it difficult to generate the same level of normal non-interest income that we would like in our institutional banking business. We saw challenges on margins in institutional banking and on the Wealth side, the more difficult equity markets were a drag on income there as well as were some insurance claims that were a challenge for the BT business.
Our core businesses performed really well our Consumer and Business banking businesses were all up strongly, that’s about 60 per cent of our earnings. We’re very happy with how they were going. If we look at the institutional bank, that was more challenging. There’s a lot of liquidity in the world and that’s putting a lot of pressure on large corporate lending margins. Our Wealth Management business has continued to perform well from an activity point of view; from a revenue point of view it’s more challenging when equity markets are down.
Westpac’s strategy is all about service and by that I don’t mean the basics; I mean our genuine devotion to helping our customers achieve what’s important to them. We deliver that by having a great culture, great strong brands, great people who are extremely well trained at what they do and complimenting that with technology to create a great service experience. So, we’re really focussed on helping people buy homes not just buying a mortgage, for example. And we think that the technology, and developments in the technology, the way customers are adopting technology means we can deliver that service in ways that in the past, we couldn’t even imagine. We’re seeing that starting to play out in the offers we can put in the market, so if I take mobile banking which is now probably our most popular channel; we were just awarded the best mobile banking app in the world by Forrester Research, who is the expert on these things. It’s an indication of the progress we’re making and the things that we will do in the future.
Well banking is evolving, we’re seeing changes in the structure of the economy which means different kinds of companies are needing support in different ways. We’re seeing changes in the way customers interact with their bank, the way they want to be served, and we’re seeing changes in the way technology allows banks to deliver that service. So, we think it’s very positive, it’s an exciting time of change, it means we can deliver a great new service experience for customers and we can operate in a more cost-efficient manner which is of course great for our shareholders as well.
The focus for the next six months is in a sense what it always is; growing the value of the company over the long term while delivering an acceptable result along the way. The external market has gotten more challenging; we’re seeing pressures on interest rates, we’re seeing lots of competition, volatility in global markets. We need to navigate that and deliver decent results so that we maintain the confidence of our investors. But our primary focus, the focus of the management team, is how we grow the value of this franchise over the long term, and that’s about looking after customers, growing the size of the customer base, making sure we have strong relationships that last over a long period of time, and that we become increasingly productive, so that we can translate those relationships into strong profitability and value for customers and for our shareholders.
