After years of chasing national growth, Bankwest finds itself at home in a strong economy.
JON Sutton should be more comfortable than his predecessor in his office, mid-way up the CBD building that bear’s his bank’s name.
The Bankwest managing director’s job is markedly different than that of Simon Walsh, the last person to hold that title before Commonwealth Bank bought the Perth-based institution at the height of the global financial crisis in late 2008.
The 12 months Mr Walsh was nominally in charge, the Western Australian leadership role had taken a backseat under then owner UK-based HBOS, which had used Bankwest as a vehicle to grow on the eastern seaboard.
In the glory days of cheap debt, HBOS took the relatively small WA market for granted in search of greater glory on the national stage, where the UK bank sought to become a major alternative force in retail and corporate banking.
One measure of this neglect was the WA Business News annual branding survey in which Bankwest slipped down the rankings year after year as the pundits of the advertising and marketing world highlighted the underinvestment in the local market.
Commentary from the group was more likely to come from HBOS Australia chief David Willis or any number of that entity’s divisional CEOs than from Mr Walsh, who quietly slipped into the shoes of another low-key Bankwest managing director, Rodger McArthur, in late 2007.
But since HBOS slowly imploded in 2008, culminating in the fire sale of assets such as Bankwest amid the market savagery of October that year, a realignment of strategy and assets has taken place. It could even be called a reversal.
Mr Sutton is seeking to refocus the bank’s resources on the local market that he can actually see from his upper-storey window – although he is adamant Bankwest will also remain a brand in the east.
Parachuted in to take command of the WA bank in late 2008, Mr Sutton said the past lack of investment in WA was obvious.
“I picked up quickly when I got here that the brand had not had enough attention,” he said.
“We will invest more in the brand, it is unequivocally here to stay.
“If you look at the mergers and acquisitions of the past 30 years, the ones that have destroyed most value are the ones that tampered with the brand.”
While Mr Sutton must, like his predecessor, answer to a distant parent, the post-GFC language shows how the landscape has changed.
WA is now attractive as the best growth market in the nation, and a standout globally, although Bankwest will remain operating in eastern markets.
“WA is a high beta economy,” Mr Sutton said, pointing out the higher economic growth expected here as resources demand remains resilient due to the strength of China.
“WA’s population growth will be almost 100 per cent higher than the national average.”
Mr Sutton said the bank was ensuring it was well placed in the right urban growth corridors, and he expected credit demand from successful small-to-medium enterprises to rise as big resources projects take off and the work trickled down.
The bank wants to employ 50 additional business bankers over the next 12 months to meet that demand.
The Bankwest chief said the bank would lend to the commercial property sector despite the difficulties created by the GFC, which did catch the Perth-based bank out on the east coast. He said the bank had long-standing relationships with property developers it wanted to maintain but that the terms had changed in the past 18 months.
The latest Bankwest annual report shows it had a loan book of $60.2 billion for the six months ending June 30 2009. About $36 billion is to individuals in the retail market, $12.3 billion is in construction and property, and $4.9 billion is to hotels, restaurants, wholesale and retail trade.
New impairments recorded for the six months ending December 31 were $313 million, according to the Commonwealth Bank. A significant proportion of the bank’s impaired portfolio is linked to commercial property lending, particularly on the east coast.
“We are open for business for well-thought out projects,” Mr Sutton said. “It is on a case-by-case basis, its location of the deal, the amout of equity in the deal and the amount of presales.”
“Anyone would be deluding themselves thinking that property development deals would have the same covenants and pricing as they did pre-GFC because that is not going to happen anymore.”
Mr Sutton said the property market had made a solid recovery Australia wide, including WA, where the Perth market has similar land availability constraints to other more developed cities such as Sydney and Melbourne.
Speaking in forthright language that hasn’t been heard from a local Bankwest chief for some time, Mr Sutton warned there was some danger in this.
“What is bad for any economy is to have inflation manifesting itself in booms and bust,” he said.
