Westpac 'not happy' customers rate it lowest of big banks

Monday, 2 November 2020

Westpac is working on becoming a bank whose customers love it.

Westpac has revealed it is the least-loved of the big banks.

The bank’s New Zealand profit after tax took a 38 per cent hit from Covid, down to $649 million in the year to September 30, the Australian ASX sharemarket-listed bank revealed.

That was a steeper decline than the 27 per cent fall was revealed by ANZ last week, and reflected rising provisions for bad debts.

But Westpac in its “investor discussion pack” Westpac revealed it had a Net Promoter Score (NPS) of 14, which was the lowest of the big banks, and chief executive David McLean said he was not happy with that.

Westpac New Zealand CEO David McLean at the Westpac head offices in downtown Auckland.

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Westpac’s big four rivals had NPS of 28, 32, 39, and 42, although Westpac did not reveal which score related to ANZ, ASB, BNZ or Kiwibank, referring to them only as “peers”.

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 has the lowest net promoter score of any of the big banks, its investor discussion pack showed.

McLean said: “If you sat around the internal staff presentations, that would be one of the big call-outs for us all. You want to be loved by your customers.

”In some sectors we are quite strong. In agri-business we are number two among farmers,” he said.

”In the consumer sector, where we are fifth out of five, the gap is not huge, but obviously we are not happy with that.”

Westpac NZ has focused strongly on gender equality, but still has a significant gender pay gap, RNZ's podcast The Detail reports. (First published in October 2019)

”Part of it is how much do you spend on advertising, and what people think about your brand, which is intangible, but a lot of it is experiences people have with the bank,” McLean said.

”Do we make it unnecessarily difficult for people to bank with us? Are our processes a bit clunky? Sometimes our systems might be down. That just means we have more work to do on those things to improve it.”

Simplifying systems and processes was part of Westpac’s work in that area.

Westpac’s profit drop was a sign of the times, McLean said.

“Banks act as a bit of a shock absorber for the economy. When the economy hits a road bump, our job is to take the impact of that through our profit and loss account, and that’s what’s happened.

Westpac, like the other banks, had also done deals with many borrowers to allows them to defer or reduce loan repayments if they were struggling as a result of the impact of the pandemic on the economy.

Since the start of the pandemic’s economic impact in New Zealand, Westpac had agreed 29,100 mortgage deferral arrangements with homeowners, it revealed, which equated to 8 per cent of its entire home loan customer base.

That equated to $6.5 billion of loans, but many households had since returned to more stable financial footings.

There were $2.4b of mortgage deferral arrangements still in place on October 19, representing 9400 separate loans, Westpac’s figures shows.

McLean had been amazed, and pleased by the rapid reduction in people needing loan deferral arrangements.

”So many people were relatively early on saying, ‘No, I don’t really need this any more. I’d like to get back on to payments,’” he said.

The number of people needing hardship help was very small at this stage, McLean said.

“That’s indicative that the New Zealand economy has held up incredibly well, far better than any of us could possibly have expected,” he said.

There was a similar picture in the business lending part of Westpac’s business.

Since the Covid pandemic struck, 7300 Westpac business loans were granted deferral arrangements comprising some $2b of lending in total.

That had dropped to 600 businesses owing a combined $100m on October 19.

Westpac’s forecasts indicated the New Zealand economy would fare better than the Australian economy in the coming 12 months, and McLean acknowledged it would probably be easier to be heading a New Zealand bank, than an Australian bank in the coming year.

Rapidly-rising house prices concerned McLean, but he said: “At the moment when we are in Covid, and we are trying to keep this economy above water, the fact that house prices are going up means people who own houses feel more confident about their financial position, and are more likely to go and spend, which will be good for the economy in the short term.”

But, he said: “If you lift your eyes to the horizon and look to the medium to long-term, New Zealand’s house prices are already high, and are at the top end of the range on income relativity. That’s not healthy.”

It exacerbated inequality, and starved the productive sector of capital, McLean said.

“It’s something the Reserve Bank would be wrestling with,” he said.

He would not be surprised to see the Reserve Bank bring back loan to value restrictions, though Westpac had not loosened its lending after the LVRs were lifted earlier this year.

But McLean said: “There’s only one thing worse than rapidly-rising house prices, that’s rapidly-falling ones.”