Westpac seeks multi-brand growth
With credit growth slowing, Westpac's strategy of promoting a large number of brands has attracted criticism from some analysts, who say it risks being inefficient and expensive. The strategy is also opposed by credit unions, which argue that it hurts competition.
But the head of the Australian Financial Services division, Brian Hartzer, defended the "multi-brand" approach, saying it was a key plank of its plan to extract growth in a slower environment.
In his first analyst briefing since starting at the bank last year, Mr Hartzer said its stable of brands, including St George, Bank SA, Bank of Melbourne, and RAMS, played a key role in the bank's response to a "challenging" external market.
"We know from research that there's a good chunk of the population that for whatever reason doesn't want to bank with a big bank," he said on Tuesday.
"Our view is by having alternate brands available to us we're able to put an offer in front of a bigger portion of the potential profit pool than we would if we were limited to just the one brand."
Mr Hartzer, a former head of ANZ's retail bank who has been tipped as a likely successor to chief executive Gail Kelly, said the bank was defining each of its brands so they did not compete with other Westpac offerings.
"The trick is to make sure that as much as possible those brands are complementing each other rather than just competing head to head with each other," he said.
Mr Hartzer argued that Bank of Melbourne, which Westpac has launched in an attempt to expand its presence in Victoria, was proof the strategy was paying off.
In the year to December he said Bank of Melbourne's deposits had grown at more than four times the pace of the market, while credit had grown at twice the industry pace.
The St George franchise is also targeting business lending, where it has a market share of just 8 per cent, compared with a consumer market share of 12 per cent.
A report by Nomura analyst Victor German last year found relatively few banks in Australia or overseas used multi-brand strategies. It said consumers tended to be more concerned with price than brand when buying financial services.
Credit unions and mutual banks have also called for tougher disclosure rules in response to multi-branding strategies. They argue the practice hurts competition, because customers are unaware they are using a big bank.
Mr Hartzer also said the bank would continue to chase customer deposits aggressively.
Elizabeth Knight— Page 34
Frequently Asked Questions about this Article…
Westpac's multi-brand strategy uses a stable of separate brands (for example St George, Bank SA, Bank of Melbourne and RAMS) to target customers who prefer not to bank with a major. Westpac says the approach helps it reach a bigger portion of the potential profit pool and extract growth in a slower credit environment, which is directly relevant to investors watching revenue and market-share trends.
The article names several of Westpac's brands: St George, Bank SA, Bank of Melbourne and RAMS. Bank of Melbourne was highlighted as a recent launch to expand Westpac's presence in Victoria.
Yes — Westpac executives pointed to Bank of Melbourne as evidence the strategy is working: in the year to December its deposits grew at more than four times the pace of the market and its credit grew at twice the industry pace. The St George franchise is also being used to target growth in business lending.
Critics say multi-branding can be inefficient and expensive. Credit unions and mutual banks argue it can hurt competition because customers may not realise they are dealing with a major bank, and they have called for tougher disclosure rules in response.
Westpac's Australian Financial Services head Brian Hartzer said the bank is defining each brand so they complement one another rather than compete head-to-head. The stated aim is to position alternate brands to reach different customer segments without internal overlap.
A Nomura report by analyst Victor German noted relatively few banks in Australia or overseas use multi-brand strategies and found consumers often prioritise price over brand when choosing financial services — a cautionary point for multi-brand approaches.
St George is being targeted to grow business lending. The article notes St George has about an 8% market share in business lending versus a 12% share in the consumer market, indicating scope for growth in the business segment.
Investors should monitor deposit and credit growth across the named brands (for example Bank of Melbourne and St George), any regulatory or disclosure developments prompted by credit unions, and whether the bank can sustain efficient, complementary positioning of brands — all factors that will affect profitability and competitive dynamics.
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