Banker cautions a steady step is needed

IN SEPTEMBER banking journeyman Rob Whitfield and more than a dozen of his Westpac staff and customers started out on a 96-kilometre trek that ranks as one of the toughest in the world.

Through the highlands of Papua New Guinea, the Kokoda Track, often described by climbers as a muddy, hilly hell.

One of the top executives working alongside Gail Kelly in steering the nation's second-biggest bank, Whitfield oversees Westpac's vast institutional banking business, which lends to big business and steers through complicated trade deals.

In its own right Whitfield's business would be the equivalent of a top-10 Australian company. Last financial year it managed nearly $100 billion of assets and generated a profit of $1.47 billion.

In the months before the trek, to help train for it, Whitfield would sometimes strap on a backpack and climb the 30-odd flights of stairs at the bank's Kent Street, Sydney, headquarters.

"I don't know if intimidated is the right word," Whitfield said about taking on the track. "But I was certainly nervous about the stories about people who have found it an incredibly difficult physical and mental challenge."

The track itself was a "tough, physical walk". However, he was to find his concerns were to be centred on his staff and others.

Among the clients who joined his team were the McDonald's Australia chief executive, Catriona Noble, and the iiNet boss, Michael Malone. The Greenhill Caliburn banker Jamie Garis and the Allens chairman, Ewen Crouch, also took part. The motivation was a charity walk, which ended up raising $380,000 for Mission Australia and Save the Children's PNG program.

Kokoda offered deep contrasts.

"The terrain is a pristine, beautiful PNG jungle, but it's just so difficult," Whitfield says.

The group had to deal with tropical downpours and sickly humidity, all the while negotiating steep climbs and mud.

"We were spread out along the length of the trail," he says. "I'd walk up and down with different people and I was so worried about them ... I got to the end and I had this huge sense of relief that we all made it safely. It is very rare to get all 16 people to be able to complete."

He says he learnt much about leadership. "There was no step that I took that I found difficult or thought, 'What the hell am I doing here?' I think that's because I felt the responsibility of leadership and I was so worried about everyone else being OK . . . It was a good reminder about the power of thinking about others rather than yourself".

With nearly three decades at Westpac, including a stint as its chief risk officer, Whitfield is widely known in banking circles and and broader Australian markets for his financial insights. His counsel is often sought by corporate heavyweights, including chairmen.

Given he has one of the best lines into corporate Australia, Whitfield's take on the economic landscape has some serious grounding.

Any given week he speaks to dozens of directors and the chief executives of the nation's biggest companies. They range from miners to retailers, manufacturers to even other bankers, both in Australia and from further afield.

It's Whitfield's job to know the financial health of his corporate customer base and anticipate any shocks they might present.

While Europe and the US still have serious structural economic challenges to tackle, by comparison Australia is in for a brighter outlook. That said, Whitfield cautions the Australian economy will experience slow growth for some years yet.

"It's going to be a slow grind to operate in," he says.

The global economy is facing a critical period with Europe and the US running out of time to deal with their deeper structural issues.

Whitfield was speaking as global markets had another tough week. US stocks were pummelled amid uncertainty over whether the looming "fiscal cliff" will be avoided. Europe again entered a technical recession after notching up two quarters of consecutive negative economic growth.

Europe is particularly vulnerable, he says, because short term, cyclical solutions are being applied to deeper structural issues.

"Everyone talks about kicking the can down the road," he says. "But it's just short-term solutions."

A critical marker for Europe will be any spread of the social unrest that has flared in Spain and Greece. This could represent the tipping point at which politicians and regulators lose the fight to control the European project.

The global financial crisis was the test the Australian economy needed. It triggered a shift in householders' behaviour, prompting more of us to plough more into savings.

As the crisis began, Australian corporate balance sheets were in excellent shape and the sovereign balance sheet was in excellent shape. Even those corporate groups not in good shape were able to raise equity, even if it was at a discount.

"So the sector most at risk going into the GFC was the consumer," Whitfield says. "It was over-leveraged . . . that was the weakest part of our balance sheet as a nation. Consumers started to pay down debt and that was absolutely the rational thing."

Even now in most households every spare dollar is being used to pay down the mortgage or credit cards.

After the global financial crisis, some changes are still playing out through the Australian economy and these will continue to test corporates. The higher Australian dollar and subdued consumer spending are here to stay for the medium term, and more pain is expected.

"This is a period where management teams in corporate Australia are differentiating themselves through . . . a preparedness to recognise the problem and a preparedness to respond to it," Whitfield says. "Some, unfortunately, haven't responded fully and they're the ones that are getting exposed.

"In every industry strong players are able to survive and take advantage of this more difficult environment, and the weaker business models and the weaker management teams are getting exposed."