Westpac chairman John McFarlane said the “hard yards” of the past few years had created a strong foundation for the bank’s future performance.
“I think the best is yet to come, so I'm very optimistic about this year and beyond,” he told Westpac Wire in an interview ahead of the bank’s annual general meeting.
Since Mr McFarlane was appointed chairman in 2020, the bank has been tracking to its ‘Fix, Simplify and Perform’ plan, which was formed with a view to improving the bank’s performance as it emerged from what he described at the time as one of the most challenging periods in its history.
“We’ve been dealing with past issues, efficiency levels have gone up considerably… and therefore we’re performing better,” Mr McFarlane said.
In addition to significant cost reduction, the plan has seen the bank exit non-core businesses, undertake comprehensive risk reduction and product and process simplification.
“We're not quite performing where we want to be, but what we do now have is the foundation for that performance, notwithstanding this environment – with a slight benefit from rising rates, and a disadvantage with a decline in the economy.”
He said the bank’s focus in the coming year was on continuing the momentum of the past 12 months in returning to growth in the markets where the bank had “natural strengths”, such as mortgages, business and institutional lending, and to achieve more efficiency gains to bring the bank back to a competitive level.
“We're getting there – we had a big improvement in the last 12 months and of course the journey will continue because we're not quite at the level we want to be,” he said.
“Nevertheless, it should still be a good period for us, and therefore that's something the shareholders can look forward to.”
Mr McFarlane also announced today his intention to retire at the conclusion of the 2023 AGM in December next year and said the process of identifying a new Chair had commenced.
"This delivers on my commitment to shareholders when I first took on the role in 2020 to create a leaner, more agile, and better performing company," he said.
"It also ensures the Board has time to appoint a new Chair in an orderly way... In the meantime, there remains much to be done and I can assure shareholders of my commitment to see the job through this year, and to support the company in what will invariably be a challenging year."
On the economy more broadly, Mr McFarlane indicated that although the Reserve Bank of Australia’s “medicine” to reign in rising inflation by increasing cash rates looked to be taking effect, the bank was well prepared to weather a slowing economy.
“Whereas (the markets) were predicting 4 per cent cash rates, they are presenting much lower numbers now, so the market’s saying this hasn't got a long way to go, and that's a good thing,” he said.
“So maybe the medicine slows down, and that will mean the constraint on the economy will be lifted to some extent, so we might actually be facing slightly better circumstances earlier than perhaps we (expected).
“However, if you're running a bank, you've got to plan for the worst and hope for better.”