Westpac: all banks facing headwinds
(24 August 2010 – Australia) Westpac’s top boss Gail Kelly has said that the Australian Banking Sector will face significant ‘revenue headwinds’ that will have the potential to slow earnings growth.
Earlier this week Westpac polished of the earning season for the big banks, announcing a A$1.4 billion underlying cash profit.
The 27 percent increase was driven by a decrease in the bank’s provisions, from A$865 million last year to A$300 million.
Despite the strong earning the lender has followed in the footsteps of its big four rivals, reporting its net interest margins and revenue are under increasing pressures.
Margins for the bank were out by two basis points due to volatility in the bank’s treasury and markets trading businesses.
Higher funding costs also impacted the bank’s margins.
Gail Kelly, chief executive officer, Westpac, said that she was happy with the way the bank was dealing with the challenging environment.
Mrs Kelly said that all of her big four competitors were facing revenue pressures relating due to competition in the sector and higher funding costs.
We have had a few revenue headwinds -- the whole sector has seen some of them flow through, Mrs Kelly said.
The first one was the reduction in exception fees, but that was a headwind dealt with at the start of 2010. But there are going to be further revenue headwinds as the average cost of funds goes up -- there's a number of moving parts, Mrs Kelly added.
Mrs Kelly said the revenue declines could exacerbate the lower lending and credit growth outlook.
It's a slowing growth environment over the course of the next year, Mrs Kelly said.
Mrs Kelly was confident that the bank had put in place a very strong franchise that would allow them to ‘punch above our weight’.
The 27 percent increase was driven by a decrease in the bank’s provisions, from A$865 million last year to A$300 million.
Despite the strong earning the lender has followed in the footsteps of its big four rivals, reporting its net interest margins and revenue are under increasing pressures.
Margins for the bank were out by two basis points due to volatility in the bank’s treasury and markets trading businesses.
Higher funding costs also impacted the bank’s margins.
Gail Kelly, chief executive officer, Westpac, said that she was happy with the way the bank was dealing with the challenging environment.
Mrs Kelly said that all of her big four competitors were facing revenue pressures relating due to competition in the sector and higher funding costs.
We have had a few revenue headwinds -- the whole sector has seen some of them flow through, Mrs Kelly said.
The first one was the reduction in exception fees, but that was a headwind dealt with at the start of 2010. But there are going to be further revenue headwinds as the average cost of funds goes up -- there's a number of moving parts, Mrs Kelly added.
Mrs Kelly said the revenue declines could exacerbate the lower lending and credit growth outlook.
It's a slowing growth environment over the course of the next year, Mrs Kelly said.
Mrs Kelly was confident that the bank had put in place a very strong franchise that would allow them to ‘punch above our weight’.
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