Latest / Best of Business / Catherine McGrath: Westpac CEO on the bank bracing for a tougher economic climate

Transcript

Catherine McGrath: Westpac CEO on the bank bracing for a tougher economic climate · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from news Talk ZEDB. Follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: Westpac says the Iran conflict is already affecting our spending.
• 0:20
  Speaker 2: The bank's net profit for the six months to March
• 0:22
  Speaker 2: is down nineteen percent on the previous six months. Katherine
• 0:25
  Speaker 2: McGrath is the Westpac end Z's CEO.
• 0:27
  Speaker 3: Hi Catherine, Hi, Heather, thanks for having me on.
• 0:30
  Speaker 2: You're more than welcome. What are you seeing in terms
• 0:32
  Speaker 2: of spending read the Iran war.
• 0:35
  Speaker 3: So what we're seeing is consumers are starting to make
• 0:38
  Speaker 3: quite sensible decisions and when they're seeing that their fuel
• 0:41
  Speaker 3: prices are going up, they're just slightly adjusting their spending
• 0:45
  Speaker 3: in other areas. So we're just making those typical key,
• 0:48
  Speaker 3: we small adjustments to help us to be resilient for
• 0:51
  Speaker 3: uncertain times ahead. In what way, So there's a little
• 0:56
  Speaker 3: bit of less money being spent on things like hospitality
• 1:00
  Speaker 3: and retail spend With businesses, some of them are pausing
• 1:04
  Speaker 3: a bit on whether they want to do their expansion plans,
• 1:07
  Speaker 3: but others who an opportunity at the moment, they are
• 1:10
  Speaker 3: keen to continue forging ahead. So a different mix depending
• 1:14
  Speaker 3: on how impacted you are.
• 1:15
  Speaker 2: Right, So people are managing their way through it. But
• 1:17
  Speaker 2: are you seeing any people who are already in big trouble.
• 1:23
  Speaker 3: No, we're not seeing that coming through in our numbers. Yet.
• 1:29
  Speaker 3: We can see that the economic forecasts are starting to
• 1:31
  Speaker 3: soften in terms of the New Zealand economy, and that
• 1:34
  Speaker 3: will get tougher the longer that this goes on. But
• 1:38
  Speaker 3: particularly with our business customers, they've had to deal with
• 1:41
  Speaker 3: a lot, particularly with tariffs over the last year or so,
• 1:44
  Speaker 3: and so they've got really good at looking at what
• 1:46
  Speaker 3: are the things that they can control and what are
• 1:48
  Speaker 3: the sensible adjustments that they can make.
• 1:51
  Speaker 2: Okay, on your profit, how do you explain the nineteen
• 1:54
  Speaker 2: percent dropping the net profit.
• 1:57
  Speaker 3: So there's a couple of things that's driven that over
• 2:00
  Speaker 3: the past six months. One is we've increased our provisions
• 2:05
  Speaker 3: taking into account that deterioration and the economic forecasts moving forward.
• 2:10
  Speaker 3: And then the other thing that's had a bit of
• 2:11
  Speaker 3: an impact that there's been good stiff competition in the
• 2:15
  Speaker 3: New Zealand market, so our margins are down a bit
• 2:18
  Speaker 3: and also as the interest rates went down, that means
• 2:21
  Speaker 3: more of our deposits we don't pass. We don't pass
• 2:24
  Speaker 3: all of that through.
• 2:25
  Speaker 2: I see, okay, I see that. You guys say that
• 2:27
  Speaker 2: you're grown faster than the market and some of the
• 2:29
  Speaker 2: SME lending. Why is that?
• 2:32
  Speaker 3: So? It's been great to outperform the market and SME
• 2:35
  Speaker 3: and medium sized business lending, and that's been because our
• 2:39
  Speaker 3: bankers have been out talking to their customers. That's been
• 2:41
  Speaker 3: up more than twenty five percent versus the period before,
• 2:45
  Speaker 3: and that's been all about talking to them to understand
• 2:47
  Speaker 3: how we can best help and support them.
• 2:50
  Speaker 2: Now, what do you expect is going to happen with
• 2:52
  Speaker 2: the economy if you're looking at the situation right now,
• 2:54
  Speaker 2: we've got around firing things at the UAE, got Trump
• 2:57
  Speaker 2: with all of his bluster. What do you think? What
• 3:00
  Speaker 2: are you guys predicting for the economy for New Zealand.
• 3:04
  Speaker 3: So leave the particular predictions for our chief economists to
• 3:08
  Speaker 3: come out within a couple of weeks because he's far
• 3:10
  Speaker 3: more skilled at that than I am. And I think
• 3:12
  Speaker 3: what's tricky for all of us is that almost day
• 3:16
  Speaker 3: by day, your expectation of what might happen changes, and
• 3:19
  Speaker 3: you can feel optimistic one day and they're not so optimistic.
• 3:23
  Speaker 3: The next day. But we do think it will have
• 3:25
  Speaker 3: a more prolonged impact on the economy the longer that
• 3:29
  Speaker 3: it goes on. But what was great we were seeing
• 3:32
  Speaker 3: that recovery before the war happened, and so hopefully once
• 3:36
  Speaker 3: we get through this, we'll see the economy start to
• 3:38
  Speaker 3: pick up again.
• 3:39
  Speaker 2: And Tony remain Ed was on the other day with us,
• 3:41
  Speaker 2: and she said she thinks this is more of a
• 3:43
  Speaker 2: twenty seven growth story than any time this year, given
• 3:45
  Speaker 2: that we've only got about seven or eight months in
• 3:47
  Speaker 2: the year left. What do you think.
• 3:50
  Speaker 3: I think that's pretty fair because the longer this goes on,
• 3:53
  Speaker 3: the more likely it is to impact this financial year.
• 3:58
  Speaker 3: But you know, who knows. We could get good news
• 4:01
  Speaker 3: at some point, but I think it's very hard to call.
• 4:05
  Speaker 2: And are you picking the first o CR hike in September.
• 4:08
  Speaker 3: Then yes, the economist team, our economists are currently saying
• 4:13
  Speaker 3: that we'll get three between September and December. But again
• 4:17
  Speaker 3: back too hard to call things and they'll be putting
• 4:20
  Speaker 3: more forecasts out in a couple of weeks.
• 4:23
  Speaker 2: Okay, Catherine, thank you as always for your time. That's
• 4:25
  Speaker 2: Katherine McGrath, Westpac end said.
• 4:27
  Speaker 1: CEO for more from News Talk sed B. Listen live
• 4:30
  Speaker 1: on air or online, and keep our shows with you
• 4:33
  Speaker 1: wherever you go with our podcasts on iHeartRadio