Westpac NZ turning around

John Kavanagh
Westpac's New Zealand chief executive, Brad Cooper, reported that the bank has started to see some results from its big investment program in what has been an underachieving business.

The New Zealand operation's results at the half year were disappointing. Net interest margin fell 25 basis points to 2.46 per cent, compared to the five basis point fall in Westpac's overall margin.

The bank's share of consumer banking customers in New Zealand fell to 21 per cent from 24 per cent the previous year. It was ranked number five in customer satisfaction ratings.

At the time, former Westpac NZ CEO Ann Sherry said the bank had not made as big an investment in its branch network as some of its rivals and, as a result, it was operating in too many low-growth regions serving low-income customers.

Cooper said the bank had completed its "business diagnostic" and was investing in new branches and refinements to products that would offer simplified features and fee structures.

Cooper said results were already coming through. The bank has increased retail customer numbers and improved home loan market share. Customer retention has improved.

New products, including Visa debit, an online savings account, the Green Home Loan and the KiwiSaver pension account, were bringing in business and new customers.

While the bank's numbers are improving the overall picture for New Zealand is not so bright. High interest rates are likely to slow demand for home loans and Cooper is expecting business lending growth to slow from 15 per cent in the current year to 8.5 per cent next year.

Cooper said the large number of finance company failures in New Zealand was helping the banks. People had become risk averse and were taking their savings out of finance company debentures and putting them into bank accounts.

Westpac has $381 million of loans to 12 finance companies. None of the loans are non-performing.