Brian Hartzer’s first day in Westpac’s chief executive role doesn’t have quite the 'big bang’ aspect to it that characterised his National Australia Bank rival Andrew Thorburn’s start to his CEO career. But then, it didn’t need to.
Indeed, had there been the same kind of wholesale changes to Westpac’s superstructure that marked Thorburn’s first day, it would have been either an admission of personal failure or a criticism of his much-respected predecessor, Gail Kelly, given that Hartzer had spent the past three years being responsible for about 70 per cent of the group’s operations.
In fact, with his elevation came the only significant change to the organisational design, with Hartzer abolishing the Australian Financial Services division that Kelly had created specifically for him to give him the best chance of proving himself as her prospective successor. Which he did.
Getting rid of that role -- signalling there would be no 'first among equals' among his direct reports -- was a sensible way to level the playing field for the next tier of Westpac executives, who will now report directly to him.
The only other change to Westpac’s structure, apart from the confirmation of Westpac New Zealand’s acting CEO David McLean in that role, is for the group’s technology function to report directly to Hartzer rather than to the chief operating officer. This is an indication of the priority Hartzer has placed on technology as banks face up to the threat of new technology-based competitors.
There were no expectations of the kind of senior management upheaval that Thorburn unveiled on his first day in the job because, unlike NAB, Westpac didn’t need that level of change. Thorburn needed to make a statement; Hartzer didn’t.
Kelly, with some help from Hartzer in the past few years, left the group in terrific shape, with sector-leading capital and productivity ratios, vastly-improved customer satisfaction levels and an embedded strong and positive culture.
That doesn’t mean, however, that Hartzer won’t face challenges. The continuously evolving international regulatory environment for banks and the prospective impact of the recommendations of the local Murray inquiry into the financial system mean that the context in which banks operate is constantly shifting against them.
For Westpac (and, for that matter, Commonwealth Bank) the big tilt within its balance sheet towards mortgage lending that has served it well in the post-crisis period may create some new challenges, given that the likely changes to the risk-weightings for mortgages and an overall increase in the capital requirements the four major banks will have to conform to.
There are already signs of a subtle shift in strategy to pre-empt those changes and to take advantage of the shifting patterns of activity within the domestic system.
With the appeal of residential mortgage lending relative to business lending weakening slightly, and against the backdrop of stronger growth in business credit, Westpac has in recent months been growing its business loan book at levels about twice that of the system’s growth rate while being prepared to surrender some market share in mortgage lending.
Business lending may be the new post-Murray battleground for the majors, given both the prospective changes to the capital adequacy regime, the heightened concern the Australian Prudential Regulation Authority has been demonstrating in relation to the housing market and Thorburn’s stated desire to protect and enhance NAB’s traditional leadership in the sector.
It's a contest in which the majors have a significant advantage over smaller banks, non-banks and technology-based lenders because of their ubiquitous presence, their multi-layered relationships with businesses, their experience and their systems. Westpac is entering the contest with some momentum.
Kelly may have handed over a group that is in near-pristine shape to Hartzer, but the nature of banking in the post-GFC environment is that there are accelerating changes occurring and new threats emerging.
Hartzer may have started his new role quietly -- it has been a near-seamless and perfectly-executed transition -- but he would know all too well that there will be challenges ahead.