Asiamoney best bank awards 2018: Australia
Best domestic bank: Westpac
It seems perverse to hand out a best bank award down under given that a public inquiry into financial-sector misconduct has exposed widespread wrongdoing and poor governance.
Maybe the award should have gone instead to the Reserve Bank of Australia, where no such shenanigans have come to light. Thanks to some canny trading of the Australian dollar, the central bank turned from an A$900 million ($647 million) loss in the year ending June 30, 2017 to an A$3.8 billion profit in the following year – which is roughly half the average profit made at each of the commercial big four banks (Westpac, CommBank, ANZ and NAB) and with a fraction of the overheads.
But commercial business must go on, so this gong, awarded to Brian Hartzer’s Westpac, honours the best of a bad bunch during an embarrassing year for Australian banking’s collective reputation. Indeed, Hartzer can take credit for a simple but enlightened act of leadership during the brutal royal commission hearings.
Three years after the American took over from Gail Kelly as Westpac boss, his moment of national note came in November when the chief executives of Australia’s big financial institutions were summoned to appear before the commission. During the hearing, commissioner Kenneth Hayne had excoriated bank executives for their “pursuit of short-term profit at the expense of basic standards of honesty”.
Hartzer’s fellow bank bosses skulked in and out of the hearing as if they were doing the notorious perp walk, brushing away the media. But Hartzer did the smart thing, fronting up to face the public head on and appearing contrite. Hartzer said he welcomed his chance to speak to the commission, praised its work and committed Westpac to correcting “where we haven’t got things right for the customer.”
It was a lesson in crisis management that was missed by his peers.
Only a few days earlier, Westpac had announced an A$8.095 billion net profit for the year ending September 30, 2018, up 1% from the previous year. No sooner had Hartzer unveiled the numbers than the shares were savaged for results that were below expectations, partly because of higher regulatory and compliance costs. Hartzer got his pay docked 10% too, and warned that this may be as good as it gets for a while for the big Australian banks, as the stricter regulatory regime inevitably arising from the commission kicks in and pinches earnings.
Best corporate and investment bank: Macquarie
An era ended at the so-called millionaires’ factory when legendary boss Nicholas Moore retired in November after more than a decade at the helm and 33 years at the bank. Moore has delivered an unbroken profit record at Macquarie, which has built up an infrastructure portfolio encompassing US tollways and European airports and utilities. His final months at the top were no exception: Moore announced net profit of A$1.31 billion ($942 million) for the first half of the financial year, which ends on September 30, up 5% higher from a year ago.
Assets under Macquarie management as of September 30 were A$551 billion, up 11% from A$496.7 billion at the end of March 2018. International income accounts for 67% of Macquarie’s total.
On the investment banking side, Macquarie says it advised on 228 transactions, worth a collective A$267 billion, with a roster of big deals: it was joint financial adviser to the Sydney Transport Partners consortium on its acquisition of a 51% interest in WestConnex from the New South Wales government for A$9.3 billion; joint lead manager, bookrunner and underwriter to Transurban Group on its A$4.2 billion share offer, the largest M&A fund-raising by an ASX-listed company in the last decade.
Macquarie’s two capital markets-facing divisions – Commodities and Global Markets and Macquarie Capital – delivered a combined profit contribution of A$1.1 billion for the September 2018 half, almost double the March 2018 number.
Moore departs Macquarie worth close to A$500 million, having famously never sold a Macquarie share of the 3.3 million he has collected along the way. His successor, Shemara Wikramanayake, 56, has quite an act to follow.
Best international bank: UBS
UBS is regarded as a yardstick for foreign banks in Australia, and this year simply confirmed it. Local chief executive Matthew Grounds’ team ended the review period top of the league table for mergers and acquisitions, as well as in equity capital markets.
UBS announced 28 deals this year, 15 less than ubiquitous home-grown rival Macquarie, but A$10 billion bigger ($7.2 billion) in overall wallet size.
That’s because UBS played a central role in the largest M&A deal ever involving an Australian company, the A$33 billion acquisition of shopping centre giant Westfield by France’s Unibail-Rodamco.
In ECM, UBS was in the middle of the five biggest deals of the year; two for infrastructure operator Transurban totalling more than A$6 billion, the A$2.65 billion IPO of oil refiner VIVA Energy, an A$3.5 billion sale of Royal Dutch Shell’s stake in Woodside Petroleum and, soon after, raising A$2.5 billion for Woodside.
Best private bank: Credit Suisse
Yet again, Credit Suisse has shown that its name is synonymous with high-end private banking.
In the year to September 2018, revenues grew 29%, assets under management rose 23% and profit increased 24%. Credit Suisse’s head of private banking in Australia, Michael Marr, says the bank’s diligent focus on costs and on leveraging the bank’s global reach were key to the growth. It clearly helps Marr, a former officer in the Scots Guard, that Australian households were ranked in 2018 as the world’s wealthiest, with an average household wealth of $191,000 in a study by, yes, Credit Suisse.
The bank deems about 6% to 7% of Australia’s population of 25 million to be millionaires. With Australia now approaching its 28th year of interrupted economic growth, Marr looks set to continue his nice set of numbers for some time to come yet.
Best digital bank: Westpac
Best bank for SMEs: Westpac
We’ve taken these two awards together this year, thanks in large part to an obvious idea Westpac introduced to make life easier for its army of small and medium-sized enterprise clients. Westpac positions itself as Australia’s bank for business. It claims to have banking relationships with more than a million business customers, or half of all Australian businesses, and is the primary banker for about 25% of that million; it holds A$111 billion ($79.8 billion) of their deposits while lending them a collective A$150 billion.
The bank’s new ‘Biz Invoice’ tool allows Westpac’s 550,000-plus SME clients to run their back end from anywhere, with an integrated invoice payment platform that lets them create and send invoices directly through the Westpac app at any time. The app was launched in time for the Christmas rush and is part of chief executive Brian Hartzer’s A$1 billion push into digital that he flagged soon after joining in 2015. And it seems like a no-brainer. Westpac’s general manager of SME banking, Ganesh Chandrasekkar, reckons Biz Invoice could save clients as much as a work day a week that would ordinarily be spent doing invoices and basic administration. He says Biz Invoice also enables businesses to get a better grip on their cash flow during the festive season and beyond.
Westpac is also focused on smoothing regulatory compliance hurdles for its customers, no small matter in the wake of the banking royal commission in Australia. Westpac and Deloitte, in a piece of joint research, estimated that the annual cost of regulation in Australia is about A$100 billion, that small businesses spend an average of 12 hours a week completing paperwork to comply with government regulations, and eight hours a week chasing up invoices.
Chandrasekkar says Biz Invoice has given Westpac a head start before Canberra’s official standardization of e-invoicing in 2019. The joint study predicts that with the embrace of e-invoicing, Australia’s businesses could reap benefits of up to A$28 billion over the coming decade.
Best bank for CSR: Bendigo and Adelaide Bank
Bendigo and Adelaide gets our award largely because in a year when Australian banks got a roasting from the royal commission, the nation’s fifth-biggest bank, Bendigo came off relatively well compared to the big four of Westpac, ANZ, CommBank and NAB.
That’s not to say Bendigo was blameless. The commission found that Bendigo had mishandled a fraud case, charged wrong fees and had sometimes underpaid interest due to depositors, errors that the local business media hastened to claim were every bit as disturbing as those made by the big four, but in our minds that is a stretch.
Bendigo and Adelaide’s new chief executive, Marnie Baker, seized on that virtue to pitch her bank as the moral alternative to the venal quartet.
“We just want people to give us a try,” Baker pleaded.
Bendigo’s net profit for the year ending June 30 came in at A$434.5 million ($312 million), up 1.1%. That meant that Bendigo could return more money to support the mostly rural communities that are the bank’s core franchise. Bendigo and Adelaide does CSR differently to others.
As Baker’s predecessor Mike Hirst told Asiamoney: “The reason why we exist as a community bank is CSR, except we don’t call it that. We just show up for work and do our job.”