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SYDNEY - The economic turmoil caused by the US sub-prime mortgage crisis will be to the advantage of big banks, newly appointed Westpac chief executive Gail Kelly says.
Kelly, who has been appointed to run Westpac after six successful years at the helm of St George Bank, said there would be a "flight to quality" as consumers lost confidence in non-bank lenders.
The US crisis has been caused by the risky practices of sub-prime lenders, who have channelled money to borrowers with poor credit histories and suffered a rise in defaults.
The crisis has already impacted on one Australian non-bank lender, Rams Home Loans, which on Wednesday said exposure to volatile international credit markets would affect its financial performance in 2008.
The company's share price plummeted as a result.
Speaking to Australia's Sky News, Kelly said the Australian banking sector was very strong and was unlikely to be affected by the sub-prime woes.
"So the Australian banks and the large banks and St George in particular are in excellent shape - very strong retail franchises, diversified sources of funding ... the quality of the underlying assets is really excellent," Kelly said.
"So I think what you are going to see is an increasing flight to quality, and increasing differentiation of those organisations that are conservatively positioned, and have really excellent retail franchises, and run good businesses."
The sub-prime fallout provided an opportunity for the major banks to market those strengths, Kelly said.
"It's an opportunity for the big banks to clearly show their strengths and their underlying quality that lies within their businesses, and the quality of their customer franchises," she said.
"Certainly for customers there is an element of security and comfort in being a customer of one of the larger banks."
The 51-year-old Kelly is the first woman to be appointed to the helm of an Australian top-10 company and will begin her new job at Westpac in February.
Kelly said St George, Australia's fifth largest bank, was "well positioned for the future".
-AAP
