Market driven by rapid tech transformation, Westpac boss says
Westpac Group CEO Peter King has told Parliament that the current mortgage market is the most competitive he has ever seen in his 30 years in banking.
The banking chief addressed the House of Representatives Standing Committee on Economics last Thursday, which put the spotlight on the big four banks – CBA, NAB, ANZ, and Westpac.
“In terms of the market more broadly, we’ve seen a significant increase in competition,” King (pictured above) said in Westpac’s opening statement. “A good example is the residential mortgage market where refinancing is at its highest level in 20 years. We also saw 17% of Australians switch banks last year. It’s the most competitive I’ve seen in my 30 years in banking.”
He clarified that refinancing “isn’t just moving from one major bank to another,” with major banks losing 3.8% of the market share in mortgages and 2.6% in household deposits in the last four years.
“This competition has contributed to a gradual decline in our net interest margin and return on equity,” King said.
King pointed to the accelerating digital transformation in banking as a driver of competition.
“Part of this increased competition is due to the rapid adoption of digital banking – making it easier for customers to bank with any provider, at any time,” he said. “To give some context to this digital evolution, around 96% of Westpac banking transactions are carried out digitally.
“Westpac continues to innovate and invest to meet customer demand. A large part of this is continuing to uplift the capability and security of our payments system.”
To that end, he said the government’s payments roadmap will help banks and the broader economy become more productive.
“This sequencing helps prioritise investment to deliver the best outcomes for consumers and stakeholders,” King said.
A natural extension of this work, he said, was an Australian version of the UK’s Regulatory Initiatives Grid, to ensure resources are allocated to projects that result in the most benefit for consumers.
During Westpac’s opening statement, King also said that despite a series of headwinds facing the Australian economy, the bank was well placed to deal with the challenges ahead.
“We reported a Common Equity Tier 1 ratio of 12.3% at our half year result, well above regulatory requirements. While our funding and liquidity ratios are also well above regulatory requirements,” he said.
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