KEY POINTS:
Westpac New Zealand has turned around its financial performance but new chief executive Brad Cooper says he won't be claiming the credit.
Cooper joined New Zealand's second largest bank this year after former head Ann Sherry resigned following a restructure of her role in March.
His appointment coincided with the company's second half of its annual results - a period in which net profit after tax was up 10 per cent pushing the total year's net profit into positive growth.
The annual result for the year ending September 30 was up 2 per cent to $465 million compared to last year's net profits which fell by 3.5 per cent.
Cooper said it was the result of work which had taken place before he joined Westpac and was a combination of improved productivity and processes.
"There has been a lot of discipline around pricing, margin management and cost control. Costs were flat over the second half of the year. We had a better operating rhythm."
A change of guard had also been a factor, Cooper said, with eight of the 10 management positions changing hands.
"The underlying performance of the bank in key areas was strong and we have started the new financial year with encouraging momentum," he said.
The bank saw increases in its deposits, which were up 15 per cent to $25 billion, and net loans increased 17 per cent to $43.9 billion.
Cooper said a slowdown in loans during the second half was a reflection of the mortgage market following interest rate rises this year.
"The impact of continuous increases in the official cash rate is starting to have an effect. In September and October it has slowed down even more"
Cooper said this meant competition in the mortgage market would be even tougher with the same number of providers competing for less money.
He said Westpac would respond to this by focusing on retention of its existing customers.
"Around 85 per cent are on a fixed term loan. We know when they are going to expire so it's a matter of staying close to those customers and retaining them on our books. It's all about 100 per cent customer retention," he said.
The bank's provision for unpaid loans also increased by about $50 million in 2007 after a particularly low year in 2006 . Cooper said this was an expected response to the credit crunch and the bank's credit quality remained strong.
He said Westpac had seen a moderate increase in delinquency , mainly on the consumer side of the market but its loan defaults - those not paid within 90 days of being due - remained low although they had increased from 0.12 per cent to 0.20 per cent of all loans. The significant increase in deposits had probably been supported by a flight to quality from investors moving away from the troubled finance company sector, but Cooper said he expected deposits to continue to be a growth area.
"I still think we will get some growth from the mortgage and loan market but rather than 14 or 15 per cent it is likely to be in the high single digits. The main area of growth for us is likely to be deposits." Strong growth is also expected to come from its KiwiSaver products where Westpac has already captured one in five of every new investor despite missing out on becoming a default provider.
Cooper said Westpac had taken a share from its competitors snapping up 20,000 extra customers in the second half and he expected competition to heat up in 2008 as other banks moved to take back what they had lost.
"We don't think they are going to take that lying down - they are going to respond. We have to work for it."
Cooper said the key to the bank's defence would be further investment in its products and people.
Westpac has already spent $20 million on developing a new loan origination system and it is also in the trial stage of a new customer training programme. Westpac's share price was up 89c to close on $37.40 yesterday.
