Jefferies analyst Matt Wilson attended Westpac Institutional Bank’s showcase on Thursday and let’s just say, he wasn’t blown away. In a research note, the long-time banking analyst described the franchise as a “shadow of its former self” and threw out some unflattering numbers.
“At its zenith, it drove ~20 per cent of WBC revenue and ~25 per cent of NPAT with leadership across transactional banking, debt markets, FX & commodities and infrastructure,” he said.
“It boasted double-digit returns and attracted some of Australia’s leading bankers. Its fall from grace over the last 10 years, now a mere ~8 per cent of NPAT.”
Wilson put the problem down to underinvestment.
Reading between the lines, we reckon he’s taking aim at Westpac’s eagerness to pay out dividends rather than invest in the business. Its ongoing AUSTRAC anti-money laundering issues have also distracted.
To return it to its former glory, Wilson says Westpac will need to invest significantly in the business – people, systems, tech etc. What does significant mean?
For comparison, ANZ has invested more than $1.2 billion over seven years in technology and payment systems to aid institutional customers, propelling it to the leading payments/transactional bank in Australia and New Zealand.
He’d also like to see some more data points from Westpac, branding Thursday’s presentation as “light on detail/numbers and long on motherhood and aspiration”.
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