Westpac has flagged further possible job cuts after unveiling a record profit of almost $7 billion that eclipsed those of its rivals.
Australia’s second biggest lender posted a 10 per cent jump in net profit to $6.99 billion for the 12 months to September 30.
This overtook the Commonwealth Bank’s (CBA) net profit by $600 million, thanks to $718 million in significant items.
Cash profit increased seven per cent to $6.301 billion, around $500 million lower than CBA’s, as bad debt charges fell by 32 per cent to $993 million from a year earlier.
Weaker treasury and markets income crimped cash earnings by five per cent as volatility financial markets in recent months took their toll.
The result was largely in line with market expectations although analysts pointed to a flat earnings as a source of disappointment.
Westpac’s shares were down 42 cents, or 1.91 per cent, at $21.52 on Wednesday, amid weakness across the broader market.
Shareholders will pocket a record full year dividend of 156 cents per share.
The outlook for Westpac’s employees may be less rosy after chief executive Gail Kelly committed to delivering phase two of the bank’s strategy that will dominate its operations for the next three years.
Three years after merging with St George Bank, Westpac will now seek more productivity gains, scale and flexibility from a new business model dubbed “best-sourcing” by the bank.
The bank will review its business functions to determine if external suppliers or partners could better manage them, Mrs Kelly told reporters.
“It’s a sourcing approach to say `where does work best get done?’,” Mrs Kelly told reporters.
“Sometimes it’s best done internally, sometimes it’s best done with a partner locally, sometimes it’s best done with a partner offshore.
“There’s no way we could do the very strong agenda of work we’ve got on our plate … unless we leveraged a model like this.”
Westpac left the new strategy unquantified, saying cost estimates would be known in six months, and the impact on jobs is unknown as jobs are added in some areas and cut in others.
Westpac cut 767 jobs in fiscal 2011 and now has over 37,000 employees.
“Overall we’d expect staff numbers to continue to trend downwards,” Mrs Kelly said, adding that Westpac did not expect a backlash from the strategy.
Finance Sector Union acting national secretary Chris Gambian said the union has not been consulted over the changes and called on Westpac to specify which operational areas would be subjected to outsourcing and which jobs would be targeted.
Westpac’s retail and business banking cash earnings were $1.95 billion in the year to September, up 11 per cent from a year earlier.
Total deposits rose by 10 per cent to $370.2 billion, while loans totalled $496.6 billion, up four per cent.
Mortgages made up the majority of loan growth, up six per cent, while business lending was down one per cent.
Mrs Kelly told analysts the bank expects overall credit growth to be five per cent next year, with mortgage lending growth at six per cent and business lending growth increasing to about four per cent.
Westpac’s credit growth forecasts are optimistic, Bell Potter analyst TS Lim said.
He forecast overall credit growth to be three per cent in 2012.
Westpac’s wholesale funding costs will continue rising in fiscal 2012 and the group will manage margins “very tightly” in 2012 as it looks to grow its retail deposit base further.
The group is still re-pricing parts of its loan book and Mrs Kelly declined to give guidance on the bank’s net interest margin.
