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The major bank’s chief executive has stated that the banking sector is currently witnessing the highest level of competition in the past three decades.
Speaking to the House of Representatives standing committee on economics for its review of Australia’s four major banks on Thursday (13 July), Westpac Group CEO Peter King said while higher costs of living are creating a “real challenge” for Australians, with savings running down and mortgage costs going up, the number of people in hardship has not yet increased.
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“And at this stage, the majority of customers contacting us are wanting to understand the options available to them,” Mr King said.
“In terms of the market more broadly, we’ve seen a significant increase in competition.”
Mr King explained that the residential mortgage market had seen its highest level of refinancing activity in 20 years.
He also highlighted that 17 per cent of Australians had switched banks in the previous year.
In fact, Mr King noted that the mortgage market was “the most competitive I’ve seen banking in my 30 years".
According to recent data from the Australian Bureau of Statistics, external refinancing for owner-occupier housing hit a new record in May 2023, with over 30,000 loans refinanced in a single month.
Mr King further revealed that the major banks had lost 3.8 per cent of market share in the mortgage sector over the past four years.
This intense competition has led to a gradual decline in net interest margin and return on equity for Westpac, he said.
Despite the challenges, Westpac wrote nearly $50 billion in new home loans in the first half of 2023.
The bank’s Australian mortgage book grew to $472.7 billion, representing a 3 per cent increase compared to the first half of 2022. However, the new lending figure was slightly lower than the same period last year, which witnessed a booming property market.
Mr King explained that part of this increased competition is due to the rapid adoption of digital banking, which makes it easier for customers to bank with any provider at any time.
“To give some context to this digital evolution, around 96 per cent of Westpac Banking transactions are carried out digitally,” he said.
‘Co-locating’ bank branches
Regarding the future of bank branches, the CEO explained that Westpac is in the process of co-locating its branches.
This means that a single location would house branches of Westpac, St.George, Bank of Melbourne, or BankSA.
“We are going through a program of co-locating several branches,” he said.
He acknowledged that the banking sector has undergone a transition since the COVID-19 pandemic, with many branches closing and customers shifting to online banking.
However, the Westpac CEO acknowledged the importance of cash for small businesses and mentioned that Westpac is partnering with Australia Post to improve cash services for such businesses.
[Related: Westpac settles $50bn in six months]
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