Crikey’s Sydney AGM man, Neal “Crullers” Woolrich recovered from wrist surgery to give Westpac a good spanking on Thursday at their AGM.
Westpac recorded its 9th consecutive profit increase, it increased its dividend payout to customers and was generally in good financial health on all the key signposts. So the only real gripes shareholders might have had were the old favourites of “social responsibility” and the options package to be awarded to Dr David Morgan, also known to Crikey readers as Mr Ros Kelly. (I wonder if David objects to being called “Mr Ros Kelly” just like it got Fonzie’s goat when a pesky journo asked him in an episode of Happy Days whether he was looking forward to being “Mr Pinky Tuscadero”? Heyyyyy.)
Chairman Leon Davis’ first address to shareholders was as uncontroversial as you would expect given Westpac’s relatively strong financial performance, noting in particular the bank’s strong concern for its social obligations.
CEO David Morgan addressed shareholders for a tick under 20 minutes, a good 15 minutes of which was devoted to addressing these so-called “social responsibilities”. Now this correspondent was a little cranky after being held up by the quack for more than an hour before the Westpac AGM and he’s still in a bit of discomfort with the arm in a sling, so I’ll admit to probably not being as attentive as usual.
But I’ll be jiggered if I heard anything that would ameliorate any customer concerns about the reviled banking sector.
To this observer it’s clear what the banks need to do to get the punters back on side open branches rather than close them, and stop charging fees for doing bugger all.
We heard plenty of waffle from the CEO and saw plenty of pretty pictures in the annual report about what the bank was doing, but this to my mind was just papering over the cracks.
Certainly some of the CEO’s points were more than justified for instance, closing country branches and conducting bank services through the local newsagent or post office when dwindling rural populations simply won’t support a bank in each town.
But the simple fact is that if you walk into a branch and at any time of the day are confronted with a queue 12 deep and at least a 5-minute wait, there are too few branches. That’s certainly been this punter’s experience on his quarterly visits to the branch.
Our old friend Jack Tilburn was up first at question time, and one could be forgiven at this time of the year for getting a little misty eyed at the twilight of the AGM season when viewing one of Jack’s last appearances for the year. Jack had once again brought along his Christmas Carolers, who groaned on cue in ten-part harmony when the venerable Corporate Terminator was introduced to the meeting.
Perhaps Santa has delivered a healthy slice of Christmas pudding early, for our old mate was more subdued than ever and was unusually complimentary by his standards. Or more to the point, he was far less derogatory than we’ve become accustomed to in these cyber pages.
But his five questions (yes, only five!) did drag on for more than ten minutes and chairman Leon Davis’ response was even longer. The points he raised included the $40 million the bank pissed up against the wall with AGC, why their dividend payout ratio (60%) was so low, why auditors’ remuneration was so high and why the bank’s new “Altitude” frequent flyer scheme was so dog-gone hard to understand.
Davis complimented Jack on his “interesting and pertinent points” which I immediately thought rendered as utterly meaningless any other compliment that the chairman might offer. On reflection, Jack’s questions were more thoughtful and less hell-fire-and-brimstone hot gospelling than usual, and in particular I was most interested in the chairman’s response to the AGC issue.
The annual report was particularly helpful in illuminating shareholders that the $40 million AGC write off relates to “collections systems issues”. The chairman’s report indicated that “appropriate action” had been taken to ensure this doesn’t happen again.
Chairman Davis expanded that the loss related to “software problems” (got that?) and assured Jack that heads will roll and carcasses will be uncovered.
Given that the company has just committed $4 billion to IBM and Telstra for a ten year IT outsourcing agreement and a five-year communications outsourcing agreement respectively, let’s hope these “software problems” don’t pop up in the future.
I had about a dozen questions lined up for the board, but stupidly offered to ask half now and the rest later after other shareholders had their turn. This completely blew up in my face, as a combination of microphone attendant incompetence and undue haste on the part of the chairman to wind up question time left me unable to sink the slipper into the second tranche of questions.
Some selected tidbits from my questioning:
1. Internet banking
Given that the bank had “more than doubled our online customers to over one million” according to the CEO’s report, I asked what was the bank doing as far as ameliorating online security concerns and concerns about stuff-ups which Crikey readers are all too familiar with at other banks’ websites.
I also asked what was the bank doing to overcome difficulties with getting help internet banking is supposedly “24 and 7” yet human help is only available during normal business hours.
I’m pretty sure I’ve overcome the lingering effect of the general anaesthetic I had before surgery last Friday, but I could swear I heard David Morgan say that Westpac was concerned with its online banking helpdesk and would be bumping up staff numbers.
What, a bank increasing staff? I must have been delusional!
Davis mentioned that 90% of the bank’s transactions were now conducted outside branches. Interestingly, Frank Cicutto wheeled out the same statistic at the NAB’s contemporaneous AGM a thousand kilometres away in Melbourne. And who says there is no differentiating between the banks?!
2. Risk management
I read from the chairman’s report, which said “, 05our active credit risk and capital management practices, now firmly embedded across our business, position us well to deal with these times of economic uncertainty. It is this approach to risk management, and what lies behind it, that augurs well for Westpac and its prospects for the coming years.”
Yet the “Statement of financial performance” showed that “Bad and doubtful debts” in 2001 was $433 million, more than double the 2000 figure of $202 million.
So much for risk management auguring well for the future!
Morgan, in responding to my query on what this said about the success of the bank’s risk management policies, started off by saying something like “you’re quite right in saying that our impaired asset ratio is around 32 basis points, 05”
Who mentioned anything about basis points, pal?! I certainly didn’t you wouldn’t hear this old schooler engage in such merchant spanker claptrap.
Anyway, Morgan noted that further increases in bad and doubtful debts are expected and this is normal for this stage of “the cycle”. Plain English translation the economy’s in the poo right now and even the banks aren’t immune from it.
Morgan re-iterated that their 32 basis point whatever-it-was ratio ranked it second amongst the banks for risk management.
3. Social obligations Every man and his dog had hectored the chairman about all this touchy feely “social responsibilities” stuff, but that didn’t stop Crikey’s correspondent throwing in his two bobs’ worth.
I particularly liked the CEO’s report, which stated “we are seeking to cut through the prejudice and resentment surrounding banks, 05” Dr Morgan obviously has a PhD in sublimely delicious irony!
I suggested that despite all the commendable noises Westpac was making, the solution to the community’s perceptions was simple start opening branches, stop slugging Joe and Josephine Public with fees for doing nothing, and reign in executive remuneration. I noted that it costs me $5 a pop to write out a cheque if they could show me the costings that justified that, well then in my humble opinion they are not running their bank efficiently. I also noted that David Morgan was lining the snout up to the trough again this year.
Chairman Davis corrected me it was the remuneration committee, in it’s infinite wisdom, who was offering Morgan his latest options package. The CEO wasn’t holding out the begging bowl just yet.
They once again prattled on about all their good work in giving low-cost accounts to the battlers yadda yadda yadda, but they just don’t get it.
Until the banks stop slugging the punters $5 to draw a cheque, anywhere from a buck to $2 to use an ATM and don’t make you wait more than 5 minutes to get served in their crowded branches, the banks will continue to be public enemy numero uno.
I cheekily suggested that I wouldn’t mind seeing a show of hands as to how many directors had actually been in a Westpac branch as a customer in the last week or two. Surprise, surprise, the chairman didn’t indulge my monkeyshine. Yes, a cheap stunt, but the shareholders I spoke to after the meeting enjoyed it!
Davis proudly referred to the bank’s second placing in the much-discredited Age / SMH “Good Reputation” index. Enjoy it while it lasts, Leon we’ll relish the back-peddle next year if you’re given a lowly ranking!
Handing the microphone to the union
The chairman took the unusual step of inviting an FSU representative to address the meeting, which he did quite eloquently and passionately. But it seemed that this was agreed to at the cost of any other questioning by the FSU at the meeting, so we didn’t have the situation as we did at the Commonwealth bank AGM where angry Trotsky’s hijacked a substantial portion of question time. Fine by this testy observer, whose patience two hours into the meeting was beginning to wane.
Davis and Morgan both proudly gloated how only 5% of the bank’s employees participated in the day’s strike, which did not result in a Westpac branch closure.
They also noted how happy their employees are, yet they still have not been able to conclude a new enterprise agreement almost 12 months after the expiry of the agreement which covered most of their employees.
When it came to voting on the various resolutions, chairman Davis provided a bit of variety by eschewing the usual show of hands and instead calling for all those in favour to say “booyakasha”. Or it might have been “aye” anyway, it was one of those expressions that Ali G uses.
Just to demonstrate what mindless creatures of habit some shareholders are, the silly duffers still waved their shareholder cards in the air a few times when the chairman had asked them to say “aye”. West Staines in da house.
The most contentious item of official business was of course CEO Morgan’s options package.
This observer was one of many to let rip with a hearty “nay”, so Davis called for a show of hands. It still got up, with at least three quarters at the meeting in favour and the proxies voting about 602 million in favour and 38 million against, a resounding majority of around 94%.
The more things change, the more they stay the same.
Just as sure as we will see another CEO’s options package up for dibs in a few years, we’ll also see the banks claiming year after year that they hear community concerns and they’re acting on them.
As Stan Zemanek says in his daytime tv ad for whatever bodgy wannabe-bank-but-don’t-call-us-the-“b”-word it is that he’s spruiking, “yeah right!”
Neal Woolrich can be reached at [email protected]