Westpac To Shun Cheap Credit Cards
The Age
Friday July 22, 2005
WESTPAC has accused its competitors of irrational pricing in the credit card market, warning that there is little money to be made from people who chase zero per cent interest rates on their balance transfers.
The bank also told investors at its annual strategy briefing that it had turned around the performance of its mortgage business, picking up market share over the past three months, and it was looking at opening a representative office in India as well as building its presence in China. Westpac's head of business and consumer banking, Mike Pratt, said credit cards that offered borrowers a zero per cent rate for the first six months and then reverted to a "go to" rate of about 10 per cent were "a pretty tough way to make money". He said they attracted customers known as "BT (balance transfer) chasers," a market Westpac was keen to avoid. However, Mr Pratt said the bank needed to stay competitive. Its Virgin card, which has a 5.65 per cent rate for the first six months reverting to an ongoing rate of 12.65 per cent, has built up balances of more than $900 million in the past two years. And it has sold 3000 of its new bank-branded low rate card, which was launched six weeks ago. Mr Pratt has been under pressure over the past year as Westpac consistently lost market share to its peers in the home lending market. But yesterday he said the bank had tackled poor sales performance and put in place new teams to boost retention of customers. Mortgage lending grew by 12 per cent in the three months to June, up from 6 per cent in the first half, and the growth was not at the expense of margins. "We won't be volume junkies," Mr Pratt said, easing analyst concerns that some lenders were boosting market share at the expense of margins. Chief financial officer Phil Chronican said the bank had refocused its Asian strategy, pulling out of its direct operations in Bangkok and Tokyo and looking to expand into China and India. But unlike its peers Commonwealth Bank and ANZ Bank, Westpac is not looking to make acquisitions. Instead, it will focus on companies in Asia that want to do business in Australia, as well as rich expatriates. Westpac has about 100 people based in Asia, most of them in Hong Kong and Singapore. It has appointed Yogan Rasanayakam, former head of its mergers and acquisitions team, as general manager of the region. Chief executive David Morgan reiterated the bank's commitment to an organic growth strategy. In response to a question about whether Westpac would buy a general insurer, he said the synergies appeared "too slight to repay the control premium you would need to pay".KEY POINTS ? Westpac says there is no money in customers who are "balance transfer chasers".? Expansion into China and India is high on the bank's agenda, but not through acquisitions.
© 2005 The Age
