Westpac CEO Hartzer Says Policy Mess Is Hitting Investment
(Bloomberg) -- Westpac Banking Corp. Chief Executive Officer Brian Hartzer said the outlook for the financial industry is becoming more challenging and called on the Australian government to fix a range of policy messes to boost growth.
“Many of our customers are holding back because of policy uncertainty,” Hartzer said after the bank Monday reported full-year cash profit that slightly missed estimates. “Whether it’s on energy policy, transport infrastructure, or fixing up the tax arrangements between the states, governments at all levels need to come together with business for a common purpose to provide the certainty that’s needed to drive confidence.”
Hartzer’s comments are a rare foray by an executive into criticizing Australia’s government. A decade of political dysfunction is dragging down the nation’s prospects as successive governments have failed to enact much-needed reform. The government is under fire for the botched rollout of a A$49 billion ($37 billion) national high-speed internet network, and energy-policy bungling that’s sent power bills soaring and triggered fears of blackouts this summer.
Australia’s big banks face a more difficult outlook as the property market slows, while competition and regulation increase. Heavily indebted households are also reining in spending, with retail sales suffering their weakest stretch in seven years. This year the government imposed a levy on the big banks, which Westpac said took a A$66 million bite out of its cash earnings. Rivals Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. are focusing on cutting costs and slimming down operations to maintain profitability.
The environment is “challenging,” Hartzer said. Westpac’s full-year earnings rose to a record as bad debt fell. However, revenue growth slowed and the bank’s net interest margin -- a key measure of lending profitability -- shrank.
Read more: Key figures from Westpac’s full-year earnings report
Westpac shares fell as much as 2.6 percent, the most intraday decline in almost five months, and were trading at A$32.46 at 11:46 a.m. in Sydney.
“It’s probably as good as it gets right now for Aussie banks,” said Sunny Bangia, deputy portfolio manager at Antipodes Partners Ltd. “Their problem now is they just can’t generate any earnings growth.”
Unaudited cash profit, which excludes one-time items, rose 3 percent to A$8.06 billion in the year ended Sept. 30, the Sydney-based lender said in a statement on Monday. That was slightly less than the average A$8.16 billion estimate of 15 analysts surveyed by Bloomberg.
Return-on-equity fell to 13.8 percent. The bank last year cut its targeted ROE from 15 percent to between 13 and 14 percent.
Westpac is currently fighting allegations that it rigged a benchmark Australian interest rate after the other two banks involved in the cases settled with the regulator.
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