BankWest, HBOS’s Australian
subsidiary, is in the ascendancy, announcing plans for more
branches and hitting the Australian market with a headline-grabbing
8 percent direct account. BankWest says it is already the
sixth-largest player in the country – and has plans to break the
Big Four. Truong Mellor reports.
BankWest, the wholly owned subsidiary
of the UK’s third-largest banking group, HBOS, has made two
decisive moves in its Australian market over the past two months,
announcing an ambitious branch expansion plan and launching a
direct savings account paying a headline-grabbing rate of interest
of 8 percent. The BankWest Regular Saver Account carries no charges
and customers must deposit between A$50 ($40.3) and A$500 a month,
make no withdrawals over the course of the month and link the
account to another eligible BankWest account.
“BankWest is reinvigorating this space,” said Paul Vivian,
BankWest’s head of deposits, in an interview with RBI. “A
Newspoll survey commissioned by BankWest found that better interest
rates and convenience were the main reasons for Australians to
switch from one bank to another. Nearly 70 percent of Australians
regard better interest rates and more competitive products as being
the main switching driver. We are providing Australians with our
market-leading products, something that has been missing from the
Australian banking landscape.”
The savings account is the first of several new products to be
unveiled in conjunction with the bank’s branch expansion programme.
Other products such as credit cards and mortgages – part of its
better deal and hero marketing campaigns – will follow later this
year, accompanied by a marketing blitz.
“Our hero products are aimed at giving customers a better deal than
is currently on offer in the marketplace,” added Vivian.
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Challenging market dominance
In mid-July, BankWest, the sixth-largest retail bank in Australia,
announced plans to open more than 160 new branches across key
Australian markets in an effort to break the dominance of
Australia’s Big Four banks. The programme involves opening more
than 125 retail banking branches and 35 branches focused on
business customers, and up to 3,000 new jobs will be created to
support the expansion, increasing the bank’s existing work force by
60 percent. During 2007 and 2008, A$380 million will be spent on
The new branches, which will operate extended opening hours and
over weekends, will be situated in major east coast shopping
centres and commercial districts, bringing the bank to over 10
million potential new customers. The initiative will be led by
newly appointed BankWest retail chief executive Ian Corfield, who
led a similar project for HBOS in Ireland.
“We would love to take customers and money off the Big Four banks,”
added Vivian. “There’s some very lazy money currently in products
with the Big Four. It’s time for customers to have a look at what
their earnings on their term deposits are… we are confident we
can offer better returns.”
Underlying profit before tax for HBOS’s Australian operations
increased by 16 percent to A$368 million over the first half of
2007. Retail lending was up an annualised 33 percent and deposits
up an annualised 21 percent. Mortgage growth outstripped market
growth, said HBOS, with a resulting gain in market share to over 3
percent. The percentage of BankWest’s lending portfolio on
mortgages rose from 38 to 39 percent (other personal lending
remained static at 4 percent).
A clear strategy of being an attacker
BankWest’s recent developments indicate a serious challenge to the
long-standing dominance of Australia’s Big Four banks –
Commonwealth Bank of Australia, NAB, ANZ and Westpac – which
currently have a combined 70 percent share of the market.
In a research note published in August, investment bank Keefe,
Bruyette & Woods wrote of HBOS: “The international division
remains a modest part of HBOS, but it is an area of very heavy
investment. In both Australia (1H07 profits £144 million,
accounting for 5 percent group total) and Ireland, HBOS has a clear
strategy of being an attacker. Despite extra expenditure, profits
continue to grow.”
Commentators have said that BankWest’s strategy will affect the
Australian market, perhaps acting as a catalyst for change in a
retail banking market long seen as static and largely
under-competitive. At a recent presentation in Australia, outgoing
Westpac chief David Morgan said that BankWest’s expansion “needs to
be taken seriously and I think they will in time take some share”.
In a research note, the investment banking arm of Citigroup said
that “while [BankWest’s] expansion won’t happen overnight, it is
now in motion, and the industry dynamic will be changed as a
Investment in expanding branches
Novel product launches from other major Australian banks have been
few and far between in 2007. One of the biggest areas of investment
has been expanding branches. St George, Australia’s fifth-largest
bank, has announced plans to expand into Western Australia (WA)
with the opening of a new branch in the town of Fremantle. The
opening of the branch is the first of five new WA branches planned
for August alone.
On 8 August, Commonwealth Bank of Australia, the country’s largest
retail bank, unveiled the first of its new branches designed under
its Branch Experience Program. The branch, at The Gap Shopping
Centre in the major city of Brisbane, is the first of 70 similar
branches to open across the country over the next 12 months.
The new branches include a concierge service in which branch staff
greet customers at the door before taking them to a new, open-plan
teller area. A dedicated refreshment area offers customers
complimentary tea and coffee. Phone banking access and internet
banking terminals are also available. Other service options include
private sales offices, self-service change counting machines and
rows of ATMs.