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Westpac SWOT & PESTLE Analysis

ID : 52195053 | Mar 2018

COMPANY PROFILE - Westpac

Business Sector : Banking and Financial Services

Operating Geography : Australia and New Zealand

About Westpac : Westpac is as one of the four “Big Banks” of Australia and was founded in the year 1817 completing its 2007 years in 2017. It is Australia’s first bank and oldest company among the country’s four major banking organisations. Headquartered Westpac Place, Sydney, it offers a large portfolio of banking and financial services to its customers. Westpac employs 35,096 people as of 2017. Westpac is working towards transforming its service strategy to achieve its vision “To be one of the world’s great service companies, helping our customers, communities, and people to prosper and grow”.

Westpac Revenue : A $21.8 billion as of 2016.

Competitive Analysis of Westpac

The SWOT Analysis for Westpac is given below:
Strengths
Weaknesses
1. 200 year old brand with a broad portfolio of financial services
2. Strong level of capital structure placing Westpac in top quartile of global banks
3. Strong customer franchise with consistent growth
4. Impressive ratings and citations on global indices
1. Embroiled in legal issues
2. Poor environmental record
Opportunities
Threats
1. Opportunities in the digital future
2. Investments in new technology businesses to enable access to emerging fintech business models
1. Introduction of bank levy to impact stakeholders
2. Consumer-centric rise of fintech a threat to traditional banking players
3. Increasing digital technology adoption leading to threat from cyber security

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Detailed SWOT Analysis of Westpac

 

Strength

1. 200 year old brand with a broad portfolio of financial services: Westpac is a 200 year old brand with operations focused on its coremarkets in Australia and New Zealand with over 13 million customers. It is one of the “Big 4” banking players in Australia with total assets of $852 billion as of September 2017. It is also present across other major global markets in Asia and the United Kingdom.Westpachas a broad portfolio of financial services brands which enables it to reach to a diverse range of customers. The bank thrives on its clear strategic position of service differentiation, being No. 1 or 2 position across key markets and leveraging comparative advantage in wealth platforms.

2. Strong level of capital structure placing Westpac in top quartile of global banks: Westpac in 2017 has achieved an ‘unquestionably strong’ level of capital according to the Australian Prudential Regulation Authority (APRA). Westpac’s common equity tier 1 capital stands at 10.6% as of FY17 which was achieved after a 10 year process. This places Westpac comparatively in top quartile of banks globally. APRA has set standards for banks which are ahead of global regulations and this has paved the way for the introduction of Liquidity Coverage Ratio and Net Stable FundingRatio. Westpac has ratios of 124% and 109% respectively which is comfortably ahead of the 100% benchmarks set by APRA.

3. Strong customer franchise with consistent growth: Westpac is acclaimed as lead in Domestic Bank for Transactional Banking for eleventh year and it is ranked as No. 1 as compared to other Australian banks for foreign exchange market share globally. The Retail and Banking division as well as St. George have emerged as top rankers in Business and consumer banking. Westpac has strong customer franchise which continues to grow and is well positioned to leverage the opportunities created by a digital world.

4. Impressive ratings and citations on global indices: Westpac business and sustainability strength is demonstrated through its impressive ratings and citations on global benchmarks. Some of the sustainability citations include being reconfirmed inEthibel Sustainability Index Excellence Global in March 2018 and Global 100 Most Sustainable Corporations in the World. Westpac has also been ranked as global bank industry leader in 2017 Dow Jones Sustainability Indices (DJSI) Review and has been named sector leader 10 times, including 2014, 2015, 2016and 2017.

Weakness

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Opportunity

1. Opportunities in the digital future: The impact of digital advancements on banking has been profound and Westpac is preparing itself to leverage on the same. Westpac is integrating changes and adapting the same into its customer service and the underlying technology to make sure it stays nimble and competitive. The bank can also digitization to enable significant momentum in Customer Service Hub. The bank is targeting to improve the home loan customer experience by digitising the end-to-end home loan origination experience by 2020. Westpac’s72% of digitally active customers use mobile and its app has also been improved by the introduction of a new on-boardingexperience presents itscapabilities upfrontand helps customerssign on and use themquickly

2. Investments in new technology businesses to enable access to emerging fintech business models: Emerging fintech startups are coming out with innovations in the financial services industry in areas such as in data analysis, payments, and digitallending. Westpac through its early-stage investments of $100m to Reinventure an independently run venture capital fund has gained access to around 15 fintech startupsthus gaining avaluable exposure to trends in technology and innovative business models. This has also allowed the bank to set up a strong platform to expand its services along the digital lines.

Threat

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The PESTLE Analysis for Westpac is presented below:
Political
Economical
1. Policy changes such as introduction of bank levy1. Stable Australian and global economic outlook over 2018
2. Chinese investments driving up Australian property prices
Social
Technological
1. Increasing ageing and culturally diverse customers to require specific product and services
2. Demand for affordable housing and services
1. Digital product and service transformation
Legal
Environmental
1. Challenging regulatory environment impacting business
2. Class action suit for high fees
1. Environmental criticism leading to change in business practices
2. Investments in projects which facilitate climate change solutions
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Detailed PESTLE Analysis of Westpac

 

Political

1. Policy changes such as introduction of bank levy: Regulations and policy changes at times have an adverse impact on the industry. The Australian parliament passed the Major Bank Levy Bill 2017 which mandates a 0.06 levy on banks with over $100 billion in total liabilities. Westpac is one amongst the five Australian banks which fall under the mandate. The government’s purpose is reducing the budget deficit in the short-term and strengthen the structural fiscal position. This can also be seen as an insurance premium where the government would bailout the banks if they got into distress to prevent contagion effects in the overall industry.However the immediate impact of this will be on the consumers and shareholders of the banks such as Westpac in form of higher consumer costs and reduced shareholder returns.

Economic

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Social

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Technological

1. Digital product and service transformation: Digitization is offering opportunities to improve efficiency and deliver services in new ways across industries. New fintech business models are being adopted by the players across the financial services industry to better meet changing customer expectations. Westpac is readying itself for the digital journey and has undertaken multiple initiatives in this regard. It introduced 160 new features and enhancements across digital banking platforms such as customer transactions, payments, loan applications, etc. It has also expanded its partnerships with fintech start-ups to strengthen its expertise in digital technologies.

Legal

1. Challenging regulatory environment impacting business: Implementation of stringent regulations by authorities has led to a challenging environment impacting the business. Australian Security and Investments Commission (ASIC) has launched an investigation into Westpac’s lending practices in 2017.Westpac had to implement new range of policies to tighten lending by increasing scrutiny of borrowers financial details. Regulations also increased costs for BT Financial Group (BTFG), Westpac’s wealth management arm impacting its 2017 results.

2. Class action suit for high fees: There was a class action suit against Westpac for charging heavy penalties to household consumers for late credit card payments, or exceeding credit card limits or making transactions with insufficient funds in the account in 2015. The charged amount is said to be unfair by the firm, Maurice Blackburn. Such activities should be put to check which may otherwise lead to reputation or goodwill risk for the bank.

Environmental

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Westpac SWOT and PESTLE analysis has been conducted by and reviewed by senior analysts from Barakaat Consulting.

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