Westpac recommits to $8 billion in cost cuts

Westpac is holding fast to its target of a total cost base reduction of $8 billion, while investing in its consumer experience, digital skills and capabilities.

Westpac CEO Peter King
Westpac Wire

The bank first announced its digital ‘reset’ plan in 2021, targeting savings through digitisation to simplify its operation and cut unneeded spend.

As part of this, Westpac has been working towards its multi-year customer outcomes and risk excellence (CORE) program, which falls under its ‘Fix, Simplify, Perform’ strategy, implemented after APRA’s risk governance review.

In the bank's first half year results for 2022 Westpac CEO Peter King said “under the three priorities … we're working through these plans, and we're realising the benefits.”

King said adopting digital plays “a critical part of ‘simplify’” under its CORE program, “and this half we completed the rollout of our new app which is faster, more intuitive and has more features.”

The Westpac app initially launched in late last year, featuring over 200 capabilities, with a roll out to business customers planned later in 2022.

The app will include capabilities from Westpac’s latest acquisition, MoneyBrilliant from AMP, with more features expected to be in the version available by the end of 2022.

King also pointed to Westpac’s deposit onboarding process, which allows customers to join in minutes, and saw the number of accounts created increased by one third over the half.

“We have made progress in mortgage processing including the expansion of digital applications.

“However, there is more to do as we complete the rollout of a new system to third party brokers.

“We are heading in the right direction and as new bankers come up to speed and we add digital functionality we expect this trend to continue,” King said.

The bank reported costs were down by 27 percent, or 10 percent excluding "notable items", in comparison to the second half of 2021, from $7.3 billion down to $5.4 billion.

As well as shedding 4000 jobs, the bank said the falling costs reflected lower expenses in its simplification initiatives, lower third party spend, and the completion of some programs.

King told iTnews “two thirds of that reduction was actually in partners” and “a lot of contingent workforce” as the bank wrapped up its remediation programs “and seeing the resources no longer required.”

Its investment spend for the half reached $947 million, with $653 million spent on Westpac’s ‘fix’ strategy, $153 million on ‘simply’ and a further $141 million on ‘perform’.

King said the bank is “on track” to deliver the three program and completed its “first major milestone” by largely finalising the design phase.  

King added the bank will “shift to the ‘embed phase’ where we have to demonstrate the sustainability of the changes we're making.”

Other highlights

Westpac also reported its customers applied gambling stops on over 21,000 credit and debit cards in in the half. The bank extended its real-time digital gambling block to St.George, BankSA and Bank of Melbourne subsidiaries in October last year.

Over 25,000 payments with abusive messages stopped over the half and managed to block potential scams using real-time safety measures, saving $6 million for around 69,000 customer since January this year.

By the end of 2022 Westpac plans to digitise a further 400 manual processes to enable customers to do more online.

Its banking-as-a-service platform found itself a CEO and the bank's work was recognised as a 2022 Finalist in the iTnews Benchmark Awards.

Westpac reported a statutory net profit $3.280 billion, up 63 percent compared to the second half of 2021, while its cash earnings $3.095 billion rose 71 percent compared to the same this last year.