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Key points
- Westpac shares traded higher today following the release of the bank's first quarter results
- The bank is making additional changes to its organisational structure
- More than 1,100 employees were cut in the last quarter
The Westpac Banking Corp (ASX: WBC) share price stood its ground today after the company revealed its first-quarter results this morning.
At the closing bell, shares in the third-largest of the big four banks were swapping hands at $21.07 apiece, up 2.28%. It appears the market is not too worried about Westpac missing estimates. While Bell Potter had expected more, the bank delivered $1.58 billion in cash earnings.
Meanwhile, investors might have been preoccupied with another announcement from the major bank today. In a separate release, Westpac announced further steps in its simplification journey.
But, will these changes be enough to get Westpac back on track?
Competition comes with corporate cuts
ASX investors watched Westpac shake up its c-suite today, with a series of announcements that could have implications for the bank's future.
According to the release, Westpac will see the departure of two executives — group chief risk officer David Stephen and group executive, financial crime, compliance, and conduct Les Vance.
In addition, the bank has combined both roles under the single 'group chief risk officer' banner. This position will be filled by former Fannie Mae executive vice president and chief risk officer, Ryan Zanin.
Commenting on this appointment, Westpac CEO Peter King said:
Ryan Zanin will build on the work underway, as we continue to drive our risk transformation. I'm pleased we will have someone of Ryan's calibre joining Westpac. Ryan is a proven risk leader with extensive risk management experience, having held senior risk roles at some of the world's largest financial services companies, including Fannie Mae, GE Capital, and Wells Fargo.
The changes are consistent with the bank's 3-year cost reduction plan laid out in 2021. Ambitiously, the roadmap defined a path to an $8 billion cost base by 2024.
Today's announced changes are in line with ASX-listed Westpac's goal of "creating a smaller, more focused head office", removing around 20% of corporate functions in the process.
As part of the goal, more than 1,100 contractors and staff were cut during the last quarter.
Will it bring Westpac in line with other ASX banks?
A leaner Westpac on the ASX could be exactly what shareholders are hoping for. On the bottom line, Westpac exhibited a slimmer profit margin than the other major banks in the last round of earnings. For reference, the margins for each of the big four were:
- Commonwealth Bank of Australia (ASX: CBA): 36.9%
- National Australia Bank Ltd (ASX: NAB): 38.1%
- Westpac Banking Corp: 25%
- Australia and New Zealand Banking Group Ltd (ASX: ANZ): 34.4%
Westpac's current operating expenses for the trailing 12-months is $10.52 billion. If Westpac can reduce its expenses down to $8 billion, this would be similar to ANZ. However, Westpac has pulled in around $3.8 billion more revenue than ANZ in the last year.
This would suggest, potentially, ASX-listed Westpac could achieve profit margin parity with its peers if it can reach the $8 billion cost base.
