Westpac has locked in Peter King as Chief Executive Officer in a move Chairman John McFarlane hailed as providing stability and strength amid the unprecedented COVID-19 crisis that is shaping up as the biggest shock to the economy in decades.
Four months since stepping in as acting CEO following the departure of Brian Hartzer, Mr King told Westpac Wire the overall “direction” of the company wouldn’t change, with his immediate focus being the bank’s response to COVID-19 and medium term priorities including continuing to improve risk management capability, further business simplification and sharper accountability.
A week after celebrating his 50th birthday, Mr King described the past few months as a “baptism of fire”, referring to AUSTRAC’s action against the bank, the devastating bushfires and the COVID-19 crisis, noting they were “three significant events that occurred very quickly which is unusual in a career”.
“You can never foresee what’s going to happen,” the 25-year Westpac veteran and former Chief Financial Officer said.
“But this isn’t just about the opportunity. The bank has been very loyal to me, they’ve developed me, I’ve had a good career and worked for good people. This is about the fact we’re at a point where I feel I can add a lot helping the team navigate what is a crisis impacting customers and credit losses.
“I know the group, I’ve been through a crisis before in the GFC, I actually joined just after 1992 which was a big commercial property bust…and what you need in these situations is the ability to see the bigger picture, provide clarity on priorities and the ability to back yourself to make the right judgements with incomplete information.”
Mr McFarlane, who today also flagged likely higher provisions due to COVID-19, said he’d built a strong relationship with Mr King and his understanding of the bank, plus support from management and the board, put him in poll position for the top job after a global search. Mr King, who has initially agreed to take on the CEO role for two years, added the pair “philosophically tend to think about banking in the same way”.
“I believe we need a Chief Executive in place now, not later, and with full, rather than acting authority,” said Mr McFarlane, who officially begun as Chairman yesterday after his January appointment.
“He and I are also completely aligned on what needs to be done. He is the right person to take the company forward at the present time, and now has the full authority to make change and to see it through.”
Mr King’s appointment comes after Mr Hartzer in November stepped down and Chairman Lindsay Maxsted brought forward his retirement following action brought by AUSTRAC. In a fresh update today, Mr McFarlane said the board fully supported the CEO’s recommendation that the CEO and Group Executive team’s short term annual incentives for 2020 be cancelled in further recognition of collective accountability for the financial crime outcomes in Westpac’s business which led to the action brought by AUSTRAC.
Mr King, who has worked in senior positions across the bank, said work was progressing to resolve the AUSTRAC matter and fix any shortcomings, while also assisting customers as shutdowns across the economy to restrict the spread of COVID-19 take a toll.
Yet some optimism emerged in recent days following the government’s historic $130 billion plan to subsidise impacted workers’ wages, with Westpac chief economist Bill Evans lowering his June unemployment forecast to 9 per cent, from 17 per cent, in the wake of the third stimulus package. Mr Evans expects unemployment to fall to 7 per cent by the end of the year as GDP growth bounces back following a likely unprecedented contraction this quarter as the full brunt of COVID-19 is felt.
Mr King said the lower unemployment forecast, should it eventuate, would be a “massive” positive for the community and the credit cycle, but warned it was inevitable not all businesses would survive through a “big period of change like we’re in”.
“Not everything will return to what it was. Some business models will be well set up for the future, others won’t. But our job at the moment is to give people the best chance to adapt and that’s why we’ve done what we have, particularly in relation to repayment holidays,” he said, adding the bank’s balance sheet had never been stronger to provide support.
Mr McFarlane, a former ANZ Bank CEO and Barclays Chairman, also noted Westpac’s “important role” in the community and that the coronavirus would likely lead to a “rise in our credit provisioning this year and probably beyond”, which will be accelerated by the new IFRS 9 accounting standards.
“We are currently working through this and will update shareholders in due course,” he said.
Separately, S&P analysts yesterday reiterated the Australia's major banks were well placed to weather tougher times, saying they retain “sizeable headroom within their earnings to absorb a multi-fold increase in credit losses in conjunction with a large contraction in interest spreads and fee income”.