Catherine McGrath: Westpac NZ CEO on the competitiveness of the banking sector, 10% increase in net profit

The boss of Westpac's New Zealand arm insists our banking market is competitive. 

Westpac is reporting a 10% increase in net profit in New Zealand while being hit by "intense market competition" in Australia. 

It comes as the bank bosses are being hauled before a banking inquiry at Parliament. 

Catherine McGrath told Mike Hosking the bank is positioned to support Kiwis as the economy starts to grow. 

She says as the smallest of the big four banks, Westpac believes any way to make competition easy is a good thing. 

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Episode Transcript

Speaker 1 (00:00):
We're in for a week of profit announcements from the banks.
First cab op the rank is Westpac, who in Australia
made seven billion dollars which was down a little bit,
but here they made a bit over a billion dollars
which was up some ten percent. Banks of course affront
and center these days in the halls of Wellington. CEO
Katherine McGrath's with us. Catherine, Morning to you, m I Mike,
A quick number crunch if we could. Impairment charges are down.
That shows a robust sign and the economy people, despite

(00:22):
the difficult times, have soaked it up. Is that fair?

Speaker 2 (00:27):
Yes, Our underlying profits are flat and it's solid results
because we've worked really hard to support deries in tough
times and they've been more resilient as the economy has
been tough for them. But we're really happy that we're
well positioned to support them as the economy should start
to grow.

Speaker 1 (00:43):
Home and business lending is up a little bit. Is
that a sign of the economy in green shoots and
all of that or.

Speaker 2 (00:48):
Not, it's a couple of things. The housing market has
definitely started to pick up, and for us, we've taken
market share on business lending from other banks, which I'm
delighted about and look forward to doing more of that
in the year to come.

Speaker 1 (01:02):
Okay, the margin in Australia is one point ninety five.
It's two point one point seven here, and that's where
the government comes in. How do you explain it?

Speaker 2 (01:12):
So, firstly, you've got to compare apples with apples, and
the AUSSI business has a large international franchise which we
don't have here. So if I look at their business
and consumer and wealth business versus ours, actually our margin
or net interest margin is smaller than in Australia.

Speaker 1 (01:28):
Right, So if we accept that as a reasonable explanation,
how come the government don't get that? How come there's
an inquiry? How come they're out to get you guys?

Speaker 2 (01:37):
Well, I think that's for the government to comment on,
and I'm looking forward to the Select Committee hearings because
it's a great opportunity to be incredibly transparent and talk
about all the great market that the Westpac team does
supporting New zeal Own communities.

Speaker 1 (01:51):
And Tony at another bank the other day gave what
I thought, and I assume you followed it was a
fairly cogent old line. Is your line similar to hers.
In other words, the banks speak is one.

Speaker 2 (02:03):
So I think the way I look at it is
banks have really large balance sheets, and we have large
balance sheets so that we can help an economy to
grow and we fund things like infrastructure. We've put up
a one billion dollar fund of our balance sheet to
help fund affordable housing. And so when you've got a
big balance sheet, your profits are large. And if I
look at our return on tangible equity, it's about midpoint

(02:25):
of the end at X fifty.

Speaker 1 (02:26):
Yeah, that's pretty much what she said. Once again, I
ask you how come they don't get it? If what
you say is right.

Speaker 2 (02:34):
I can't possibly comment on why the government have a
view like that, but our job is to help them
to understand and to turn up and answer all their
questions to the best of our ability.

Speaker 1 (02:44):
Do you feel like you're being your head against the
brick wall.

Speaker 2 (02:49):
I'm a returning key we so I absolutely love being
at home and my job is to help Westpac growth
in New Zealand economy. So no, I'm not bending my
head against the wall, and I'm loving helping the economy
to grow.

Speaker 1 (03:00):
What about the ki the Kiwi bank scenario would something
big in that department change the market in your view.

Speaker 2 (03:11):
So I think the market here is very competitive anyway,
and any growth out of Kiwi Bank is absolutely fantastic.
We're the smallest as the big four banks in New Zealand,
so any remedies that the ComCom or the government want
to put in place to make competition easy is great
from my perspective.

Speaker 1 (03:28):
Okay, So the other thing that you talk about the
green shoots, what you read on the economy as we
end the year and enter the next is their hope
was survived to twenty five reel.

Speaker 2 (03:39):
So we're very hopeful about the economy in the year ahead.
I think the key thing to watch is unemployment, and
we expect that we'll peak halfway through the year. But
we do think that twenty twenty five is going to
be a better year for the New Zealand economy than
we've seen over the past couple of years.

Speaker 1 (03:54):
Somebody said, I can't remember it was, might have an
asp said six percent. Do you see it peaking at
six percent?

Speaker 2 (04:00):
We see unemployment peaking at five point seven.

Speaker 1 (04:02):
Yeah, exactly. Well, a good time, good time to fix
your mortgage. There's the other thing I'm reading at the moment,
You've all anticipated, you guys, that Adrian's going to do
what Adrian's going to do. So the money market's about
where we need to be should we fix long term.

Speaker 2 (04:17):
So what we've seen customers do is some of them
are going on to the variable rate just to wait
to see what happens. People are tending to fix a
bit shorter than they have done before. But we've reduced
our interest rates eight times since July, so it's definitely
a watching brief. And the other piece that's pretty exciting
is about a quarter of our customers have already rolled

(04:37):
on to lower rates by the end of this year,
and it will be more than three quarters of them
will be on lower rates in twelve months time. So
good to see that cost of borrowing coming down.

Speaker 1 (04:46):
And that is when the money starts to flow. Appreciate it.
Katherine Catherine mcguer, who's the CEO of Westpac.

Speaker 2 (04:51):
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