Westpac's Brian Hartzer is planning to invest an extra A$200 million ($225 million) a year in digital initiatives to boost the bank's customer numbers, as well as drive down costs. Westpac has more branches than any other bank because it has a stable of smaller banks including St George, Bank of Melbourne and Bank SA, and they're expensive to run, but Hartzer has resisted calls by sharemarket analysts to slash branch numbers.
This is to his credit. A less confident CEO might have been tempted to announce wholesale branch closures, to the rapturous cheering of investors and analysts.
While there will inevitably be some branch closures, Hartzer's main strategy is to make branches 25 to 30 per cent smaller, employing fewer staff. Internet banking, iPad applications and video transactions will reduce the need for back office staff — the people who do the paperwork — in branches.
At the same time, the bank wants to add more than a million customers to take its total to 11 million over the next couple of years. Hartzer isn't just putting technology at the heart of the bank's strategy, he is putting the customer there as well.
This will be the hardest part of the strategy to realise. After all, which business doesn't claim to put the customer first? Westpac, which also owns the New Zealand bank of the same name, will be competing against the other three big banks who will all be trying to improve their own customer service offerings. Hartzer told analysts he wants Westpac to become the Amazon, Disney or Ritz-Carlton of financial services. It involves building a customer service hub, which will allow customer-facing staff to get a single view of their customers instead of the disparate view — transaction accounts, mortgage, investments, small business — that they have now.
This in turn will help the bank pursue a relationship management model for dealing with its customers instead of just focusing on sales.
The strategy will also make it easier for customers to combine products such as wealth with their everyday banking.
That's the theory anyway.
Westpac is Australia's oldest company — it will celebrate its 200th anniversary in 2017 - so there is some irony that Hartzer is banking on technology to secure its future. He is a technology buff and believes that banks are facing the biggest change in 30 years, but has been at pains to tell his staff not to focus solely on the technology and not to lose sight of the customer.
Hartzer took over from the well-regarded Gail Kelly in February and his tenure started at a difficult time for the banks. Westpac shares have fallen by 25 per cent since then and the banks are under pressure over rising capital costs and signs of softer returns. There's no guarantee that Hartzer's strategy will work, but at least he's having a go.
The housing crisis
We keep hearing that Australia is suffering from a severe housing shortage but recent data on rental growth suggests otherwise, or at least that the crisis is abating.
Rental growth — the speed at which rents increase — has slowed to its lowest level in 20 years as the residential construction boom adds new supply and population growth slows. Average rents across Australia's capital cities actually fell slightly by 0.4 per cent last month — hardly a sign that there is a shortage of accommodation.
It's true that there remains a shortage of available property for purchasers and, for anyone trying to get a toehold in the property sectors, Saturdays will remain a depressing day as they trudge from open home to open home, all of them out of their price range. But these figures give a glimmer of hope.
Rental yields in Sydney and Melbourne are at record lows of about 3 per cent, barely enough to meet expenses. It means that property investors are expecting house prices to keep rising. That can't happen forever and as more investors find they're getting sub-par returns, they'll exit the market, making space for homeowners.
