House price falls and rising mortgage rates prompts Westpac to open doors for longer

Westpac chief executive Catherine McGrath says the bank plans to extend branch opening hours as customers face a tough year of high inflation, rising interest rates, and falling house prices.

She also hopes the plan will turn around the bank’s languishing net promoter score (NPS) among retail customers, which is the lowest of the big five banks.

“We can see customers are looking ahead into what looks like a quite challenging year with inflation and interest rates going up,” she said

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“In the next month, we are going to move to extended opening hours for 74 of our 114 branches. That means the doors will be open for 300 hours more per week across the network,” she said.

NPS measures the net likelihood of customers recommending an organisation to other people, and is calculated by subtracting the proportion of customers who are “detractors” who score it 0-6 on a scale of 0-10, from the proportion of customers who are “promoters” and score it 9 to 10.

Westpac’s was just 10 in March, compared to 23, 27, 31 and 38 at the other big banks, according to a report released by the bank on the Australian ASX sharemarket.

McGrath said increased face-to-face banking had seen Westpac’s NPS increase in the agricultural and institutional lending sectors.

“What we are hearing from them is they want to spend more time in conversations with great people who can help,” she said.

Westpac announced a 9% increase in cash profit of $635 million for the six months ended March 31, but a 5% drop in after-tax profit of $497m, which was a result of the bank having reversed provisions on loans it no longer expected to make losses on in the previous six-month period.

McGrath said its customers were resilient despite a changing economic outlook.

“Six months ago the housing market was still reaching its peak, the Omicron variant hadn’t emerged and there was peace in Europe. We’ve seen a real shift in trends since then, including significant growth in inflation,” she said.

“Most of our customers are adjusting well to the changing outlook and the economy remains strong,” she said.

“But some households and businesses will be feeling the pinch from rising costs, especially those that have already had their incomes disrupted by Covid-19 during the past two years.”

Home loan lending increased 7% and deposits 6% compared to the same time a year earlier.

“House prices have started to come off their peak and our economists expect them to fall further before flattening,” McGrath said.

“Generally speaking, this trend shouldn’t worry recent home buyers who are in it for the long haul, and will give breathing space to first-home buyers who are exploring their options.”

McGrath said the sale of Westpac Life had given the bank a one-off $126m boost.

But a significant write-back in impairments that had boosted the result in the prior comparative period – when the bank reported a 98% profit increase – had not been repeated.

Funds under management in Westpac’s KiwiSaver scheme lifted 8% year-on-year, to $9.3 billion.

But its average balance decreased by 1% to $22,069.

McGrath said that was driven partly by an influx of new members who were transferred over when Westpac became a default scheme.

Following criticism from the Reserve Bank of New Zealand Te Pūtea Mataua, Westpac overhauled its board, and tightened risk management processes.

“We have put a lot of focus and resources into risk, technology and regulatory compliance,” McGrath said.

“We commissioned independent reviews of our liquidity risk management and risk governance, as required by the Reserve Bank of New Zealand and are progressing well on fixing issues in these areas.

“At the same time, we have a number of new faces on our refreshed board and executive, and it’s exciting gaining those new perspectives as we look to the future.”