Westpac Banking Corporation Analysis

This assignment focuses on analyzing Westpac Banking Corporation. It requires students to delve into various aspects of the bank, including its financial reports, market position, regulatory environment, and customer offerings. Students need to utilize provided sources such as news articles, annual reports, and legal documents to conduct a comprehensive analysis of Westpac's strengths, weaknesses, opportunities, and threats (SWOT).

Running Head: INTRODUCTION TO MANAGEMENT
Introduction to management
Name of the Student
Name of the University
Author note

1INTRODUCTION TO MANAGEMENT
Executive summary
The report deals with the organisation Westpac Banking Corporation. The purpose of the
report is to analyse the organisation using relevant literature. The financial services of the sector
are highly diversified. In addition to high reputation in Australia, the bank has gained immense
popularity in New Zealand. It has secured high position in foreign exchange services. Corporate
strategy used by the organisation for its development and growth are expansion strategy and
strategy of innovation, customer satisfaction and team work during organisation’s functions.
Two criticism pursued by Westpac are manipulation of the Australian benchmark rates of
interest, and borrowing of billions of dollars, from the US Federal Reserve. As per the
environmental analysis, the strengths of the company such as high capital levels and others were
highlighted. The weaknesses such as economic slowdown, segment wise performance analysis
were focused. The opportunities of the organisation with respect to technology and others can be
exploited in favourable conditions. Change in banking regulations may be major threats. It can
be concluded from the PESTEL analysis that the major political factor of concern is focus on the
budget repair. From economic perspective, there is chance of tightened monetary policy that may
be of disadvantage. However, the digitisation of services improved the customer’s banking style.
The company’s inclusive culture and corporate social responsibility has led to overall customer
preference. It can sustain its position by focusing more on product differentiation, market
penetration strategy and segment wise performance analysis.

2INTRODUCTION TO MANAGEMENT
Table of Contents
Introduction..........................................................................................................................3
Development and growth of the organization.....................................................................3
Criticisms and outcomes......................................................................................................4
Environmental analysis........................................................................................................4
Organisational culture..........................................................................................................8
Conclusion...........................................................................................................................8
References............................................................................................................................9

3INTRODUCTION TO MANAGEMENT
Introduction
The report deals with an Australian organisation Westpac Banking Corporation. It is the
provider of the financial services. It is one of the big four banks in Australia (Westpac.com.au,
2018). The purpose of the report is to analyse the organisation using accepted management
theory. Relevant literature is used to support analysis. The report starts with the brief trace of the
development and growth of the organisation from its beginning to its present. Corporate
strategies that were applied by the organisation are discussed. Next to it the report discusses the
criticisms pursued over the years by the banks. The outcomes of two of the practices are
discussed. The report than performs the environmental analysis for the involvement of the
organisation in the context of the industry that it operates in. The main opportunities and threats
for Westpac in this context are also highlighted. Further, the report discuses the organisational
culture or the leadership style within the organisation. The rationale for this report is to develop
the research and the analytical skills, applying the subject theory relating to the organisational
processes and technologies. The report is developed to explain how and why the real world
problem is managed. The report also explains how the organisations respond to the changes in
the environment.
Development and growth of the organization
Westpac was founded in 1817. It belongs to banking and financial services. In Australia it
is the second largest bank as per the market capitalisation. It is headquartered at Sydney and the
total strength of the employees currently, is 13.1 millions. The financial services of the sector are
highly diversified. These services are diversified into two segments which are institution oriented
and consumer oriented. Other areas that are part of the diversified product portfolio are advisory
services and wealth management. Its customer centered divisions are St.George Banking Group,
Westpac New Zealand, Westpac Institutional Bank, and Westpac Retail and Business Banking.
In addition to high reputation in Australia, the bank has gained immense popularity in New
Zealand. It is in collaboration with various foreign banks owing to its membership with GAA
(Global ATM Alliance). It has secured high position in foreign exchange services (Vincent,
2016).
The mission statement of the bank is to help members of society in increasing their
wealth. It has received top rank by “Institutional Relationship Banking Survey Australia” for
providing best wealth solutions. In context of its vision, that is being global leadership in the
financial sector, Westpac focused on expansion strategy. Presently, the organisation serves huge
mass of Australia and New Zealand by providing financial services. It has now 1429 branches in
comparison to 10 branches in 19 and 20th century. . It also serves in Pacific areas but needs to
focus more on expansion strategy to spread in other global regions. The company is yet to
expand in European nations and US both at consumer and institutional level (Westpac.com.au,
2018). The development of the company so far is because it did not compromise on its
stakeholder’s satisfaction. Eventually it delightful customers had turned to loyal customers.
Westpac employs strategy of customer satisfaction and team work during organisation’s
functions. It is also evident from the positive approach of the organisation towards corporate
social responsibility and ethical activities. The organisation believes in change and efficiently
handles change management process. It is evident from the innovative ideas in developing

4INTRODUCTION TO MANAGEMENT
wealth solutions and its overcome of $1.6 billion loss in two decade ago, and lawsuits filed
against it in last five years. Over years it has helped has helped Westpac in earning high
investment returns, and improve work efficiency. In 2015 the revenue of the company was
$21.642 billion. It can be attributed to improvement in areas such as operating ratio, liquidity,
asset quality and others. This development can be attributed to balance of capital efficiency and
capital sufficiency, adequacy and flexibility (Littrell, 2015).
Criticisms and outcomes
Since 2008, the company has gone through many controversies. In 2016, a lawsuit was
mentioned against Westpac by “Australian Securities and Investments Commission”. Such
market manipulation was considered an unconscionable conduct. This was due to manipulation
of the Australian benchmark rates of interest. Banks have been charged billions of dollars for the
manipulation. The chief financial officer denies the allegations put by the “Australian
Securities and Investments Commission (ASIC)”, the Australia’s financial
regulator. The Australian hearing still continues. This was a black spot on the good will of the
Westpac. It was unethical and practice against the company’s vision and mission (Mckenna,
2018).
In 2010 the documents by Central Bank highlighted borrowing of billions of dollars by
the Westpac in emergency funds at the height of financial crisis, from the US Federal Reserve.
Most of the funds were released at the peak of crisis when it was difficult for the banks to
manage the day-today funding. It was clearly misuse of the funding window opened by the
Federal Reserve. It defeated the attempt to stabilise the financial market. Westpac owned a
New York based entity which borrowed $US1 billion from Federal Reserve. It can be interpreted
that the Westpac’s borrowing was unusual as it barely has the North American presence. It may
have been done to manage the cash flow. This has hit the stakeholder’s expectations to some
extent as it was considered that the bank was on verge of bankruptcy. This led to a negative
image (Johnston, 2018).
Environmental analysis
Any organisation is influenced by different environmental factors. It can be categorised
as the internal and external factors. Internal factors directly influence the organisation and its
different operations. The internal analysis is the scrutiny of the strengths and weakness of the
organisation focussing on the internal factors. It will help to know the opportunities and
overcome threats. The internal and external environmental analysis is known as SWOT analysis.
This tool helps in strategic planning, appropriate decision making and its implementation. The
external factors exist outside the organisation and their influence on the organisation is regarded
as uncontrollable. The Micro environment consists of suppliers, competitors and marketing
intermediaries. The Macro environment consists of economic, social, political, technological,
environmental and legal forces. PESTEL analysis is the tool for detailed environmental analysis
of any organisation (Shabanova, Ismagilova, Salimov and Akhmadeev, 2015).
The SWOT analysis of Westpac is as follows-
Strength Weakness
 Strong capital level and asset quality  Westpac had to deal with the legal

5INTRODUCTION TO MANAGEMENT
issues
 Strong operating performance  It did not meet the profit expectation of
the Stakeholders (Allen and Powell,
2012)
 High workforce diversity and customer
growth
 In 2014 Westpac was recognised as
“Global 100 most sustainable
corporation at Davos” (Littrell, 2015)
Internal analysis- strength and weakness
According to Littrell (2015), Westpac has strong asset quality with decreased loans under
stress, and mortgages. In 2014, there was decrease by 1.2% in the ratio of stressed assets to total
committed exposures. In 2014 there was also increase in cash earnings by 8% and decrease by
23% in impairment charges. It’s recognition as sustainable corporation attributes to these
achievements. Other factors that add to its strengths are excellent operating performance across
all divisions. In last five years there is 5% increase in revenue and its income ratio was recorded
in 2014 as 41.6%. Its strong capital levels and operating performance comes from acquisition of
$8 billion portfolio Lloyds Australia. With the help of the Reconciliation action plan, Westpac
has been supporting increased percentage of women, aged workers (above 50 years), diverse
communities and employees. It can be interpreted as cause of workforce diversity. There is 14%
increase in the new customers in last three years owing to its lead in domestic bank and number 1

6INTRODUCTION TO MANAGEMENT
position in foreign exchange market among other Australian banks (Cummings and
Durrani, 2016).
Despite being in lead for 11 years in domestic banking it has several drawbacks. The
criticisms due to manipulation of bench mark interests, US Federal Reserve borrowings and
funding of coal mining in New Zealand, has added a black spot to Westpac. It failed to meet the
stakeholder’s expectation against its value statement. The bank needs to develop dividend
reinvestment program and increase return on loans. It must avoid legal issues and rescue
customers from late credit card fees that worth million dollars. It must overcome its weakness
due to insufficient funds for transactions, late credit card payments, and exceeding credit card
limits (Allen and Powell, 2012).
Opportunities (Allen and Powell, 2012) Threats (Allen and Powell, 2012)
 Westpac can expand its customer base
by market penetration strategy
 Westpac may be influenced by the ups
and downs in the financial sector.
 It can improve on its technological
development
 Westpac will be affected by the
changes in the Australian banking
regulations and economy of any other
country having tie ups with Australia
 Business expansion will lead to low
operational cost, high profitability and
human resource development at low
rates
 There may be threats from the
competitors during economic
slowdown.
 Reduce complexity of the products and
services, product differentiation
 Risk management
External analysis- opportunities and threats
Westpac can leverage its strengths to expand across different geographies and provide the
financial services. It is currently flourishing in Australia, New Zealand, US, UK, Asia, and some
pacific Islands. According to NewsComAu (2018) technology improvements can enhance the
opportunities of banking sector. With service digitisation Westpac can be available 24/7. Other
new services include smart ATMs, improved retail banking with the new digital platform, and
business division. The use of apps will help increase the flexibility of finance management by the
customers. Westpac has higher penetration in wealth management sector (20.12%).
Consequently it is occupying top position in the market. In this segment the bank can further its
activities. Moreover, investment in Quintessence Labs has increased the capability of Westpac in
technology security area for data protection (Westpac.com.au, 2018). It can increase returns and
consumer growth as for any bank encryption of data is of vital importance. Westpac has divided
its business into the commercial and business bank and the consumer bank. It has reduced the
complexity of the products such as consumer banking products. It can be expected that using the
customer focused strategy Westpac can better fulfil its responsibility towards commercial and
agricultural business, SMEs, assets and financial equipments. Accountability can be enhanced by
hiring one executive for each segment of business. In customer centric growth strategy, it is the
new opportunity due to dedicated marketing capabilities of Westpac and its product (Westpac,
2018).

7INTRODUCTION TO MANAGEMENT
Central bank may tighten the monetary policy in Australia owing to economic slowdown
as per Abbott, Wu and Wang (2013). If the requirements for the capital reserve ratios are
increased by APRA, then the bank would be restricted in paying their dividends. It would reduce
the returns and lead to dissatisfaction among shareholders, institutions and households. In
addition, Westpac is competing with different investment banks, brokerage firms, insurance
companies, management companies as well as competitors from other sectors. There is high
competition for deposits in Australia. In comparison to the last two decades, there is decease in
credit growth, which increases the competition in the lending sector. It is argued by Strong,
Cater-Steel and Lane (2014), that there may be continuous growth in the price competitions for
mortgages and their market capitalisation. It may be less likely to reduce in future. There may be
risks associated with the banking operations. It may be caused by adverse capital market state,
foreign government default, loss of good will and reputation, and due to poor strategic decisions.
If these risks are not managed properly, it could adversely influence the financial performance,
business, and deteriorate the position of Westpac.
PESTEL analysis of Westpac
The political factors influencing Westpac are focus on the budget repair, foreign
investment policy, and four pillar policies. There is an estimation of decline in the Australian
economic growth. There are chances of prudent budgetary allocations. Such decision by the
government may affect the bank funding. The foreign policy allows the foreign banks the right
to acquisition of stake, which if found to be more than 15% for a financial sector company, and
then it should be approved by the Treasurer. This is in accordance with the Financial sector Act
1998. The four pillar policy by the Australian government mandates atleast four banks to
maintain the competition. This also increases competition from other banks (Evans, 2014). The
Economic factors that are influencing the banking industry in Australia is tightened monetary
policy. A lowered GDP, moderate employment, and controlled inflation would help maintain
cash rate at 2.5% by the Central Bank. With the increase in the Australia’s firm domestic
demand, and trade activities, there will be an increase in the international market. There is
chance of gradually tightening of monetary policy. There is chance of growth in the business
activity with increased deposits and investments. It can be attributed to the non-mining business
environment owing to the resource exports and stronger household demands (Gitman, Juchau,
and Flanagan, 2015).
The banking sector in Australia is highly influenced by the culturally diverse populations
and increasing needs of aging population. However, the bank has managed to arrange for Self
managed super funds. It has also initiated online digital platform to open accounts prior to
relocation and dedicated team to serve the Indigenous customers, as well as online advisory
board. However, the drawbacks come from the increasing unemployment rate. This social
factor will highly impact the customer deposit, and subsequently the bank’s earnings (Deegan
and Shelly, 2014). In terms of technology, the digitisation of services has improved the
customer’s banking style. It has increased the availability of the services along with innovation.
Westpac has also started its Touch ID that is fingerprint sensor to allow signing in digital
platform via I-Pad. This strategy was welcomed as it improved convenience and increased
security. It increases the opportunities to strengthen the customer base and higher returns
(Clemes, Gan and Du, 2012). Westpac must overcome the legal issues it is faced with specially
the ongoing case for high exception fees and manipulation of benchmark rates to avoid the

8INTRODUCTION TO MANAGEMENT
goodwill risks. Lack of sustainable economy may lead to disturbed banking operations. It is in
turn dependent on the sustainability of the environment. Westpac taking actions to reduce the
environmental footprints such as green bond an offering of $8 billion to the environmental
service sector gives it a positive image as a part of the corporate social responsibility
(Westpac.com.au, 2018).
Organisational culture
Westpac is practicing inclusive culture, where people work without discriminating in
regards to gender, age, identity, culture, disability, work style, insights, sexual preferences,
experiences, capabilities, and perspectives. This provides a very learning environment with
opportunities for cross-cultural communications. The strategic approach of Westpac in
supporting communities and women empowerment in business model has become an integral
part of its culture. Currently, 50% of the leadership positions in bank are hold by women. The
bank focuses on female leadership parity. The organisation has the culture of giving through
number of initiatives such as “Jawun Indigenous Corporate Secondments” and “Matching Gifts:
doubling employees' charitable donations”. The later is the scheme where every dollar given by
the employee to the Australian charity groups is matched by the Westpac, by picking up one
charity for support and matching donations. This resembles the philanthropic contributions
(Brown, 2015).
Conclusion
In the above report, the development and growth of Westpac with strategy of innovation,
expansion and customer satisfaction has been discussed. As per the strategic analysis, the
company ranks second in the Australian banking sector. Using the environmental analysis, the
various areas such as human resources, banking, operation, marketing, CSR and others have
been analysed. As per SWOT analysis the strengths of the company such as good will, high
capital levels and others were highlighted. The weaknesses such as economic slowdown,
segment wise performance analysis were focused. The opportunities with respect to technology
and others can be exploited by Westpac in favourable conditions. Westpac can take advantage of
emerging economies for globalisation. It can focus on cost and efficiency. Change in banking
regulations may be major threats. Despite the dominating position in the market the company is
affected by the legal issues. It can be concluded from the PESTEL analysis that the major
political factor of concern is focus on the budget repair. From economic perspective, there is
chance of tightened monetary policy that may be of disadvantage. However, innovative
technological aspects tend to balances the negative forces. It includes the digitisation of services
which improved the customer’s banking style. The company’s inclusive culture and corporate
social responsibility has led to overall customer preference. It sustains its position among top
four banks despite the lawsuits against it. The company was successful in protecting its good will
and high returns. It can sustain its position by focusing more on product differentiation, market
penetration strategy and segment wise performance analysis.

9INTRODUCTION TO MANAGEMENT
References
Abbott, M., Wu, S. and Wang, W.C., 2013. The productivity and performance of Australia’s
major banks since deregulation. Journal of economics and finance, 37(1), pp.122-135.
Allen, D.E. and Powell, R., 2012. The fluctuating default risk of Australian banks. Australian
Journal of Management, 37(2), pp.297-325.
Brown, A., 2015. ASIC: Capability and culture. Australian Insolvency Journal, 27(3), p.45.
Clemes, M.D., Gan, C. and Du, J., 2012. The factors impacting on customers’ decisions to adopt
Internet banking. Banks and bank systems, 7(3), pp.33-50.
Cummings, J.R. and Durrani, K.J., 2016. Regulatory Capital and Internal Capital Targets: An
Examination of the Australian Banking Industry.
Deegan, C. and Shelly, M., 2014. Corporate social responsibilities: Alternative perspectives
about the need to legislate. Journal of Business Ethics, 121(4), pp.499-526.
Evans, R., 2014. Westpac still backs reef destruction. Green Left Weekly, (1033), p.11.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Johnston, E., 2018. NAB, Westpac tapped into US Fed's emergency funds. [online] The Sydney
Morning Herald. Available at: <http://www.smh.com.au/business/nab-westpac-tapped-into-us-
feds-emergency-funds-20101202-18i89.html> [Accessed 13 Jan. 2018].
Littrell, C., 2015. Balancing safety, stability, efficiency and competition: Finding the balance for
Australia's major banks. JASSA, (3), p.44.
Littrell, C., 2015. Balancing safety, stability, efficiency and competition: Finding the balance for
Australia's major banks. JASSA, (3), p.44.
Mckenna, G., 2018. ASIC is now chasing Westpac for 'market manipulation' of benchmark
interest rates. [online] Business Insider Australia. Available at:
<https://www.businessinsider.com.au/asic-is-now-chasing-westpac-for-unconscionable-conduct-
and-market-manipulation-of-benchmark-interest-rates-2016-4> [Accessed 13 Jan. 2018].
NewsComAu, 2018. Lender enjoys big profit. [online] NewsComAu. Available at:
<http://www.news.com.au/finance/business/banking/westpac-has-lifted-fullyear-profit-three-per-
cent-to-8062-billion/news-story/64b65b1cb0387ee00833b98542e72e9e> [Accessed 13 Jan.
2018].
Shabanova, L.B., Ismagilova, G.N., Salimov, L.N. and Akhmadeev, M.G., 2015. PEST-Analysis
and SWOT-Analysis as the most important tools to strengthen the competitive advantages of
commercial enterprises. Mediterranean Journal of Social Sciences, 6(3), p.705.
Strong, B., Cater-Steel, A. and Lane, M., 2014. Prudential regulatory risk governance of IT
multi-sourcing strategies within the Australian banking sector. ACIS.

10INTRODUCTION TO MANAGEMENT
Vincent, J., 2016. Westpac Banking Corporation v Wittenberg (2016) 330 ALR
476. Brief, 43(11), p.21.
Westpac Banking Corporation, 2018. Auditors’ report on the financial statements of Westpac
Banking Corporation – Mumbai Branch under Section 30 of the Banking Regulation Act,.
[online] Westpac.in. Available at:
<https://www.westpac.in/media/12728/financial_statements_2014.pdf> [Accessed 13 Jan. 2018].
Westpac, 2018. Credit Card Balance Transfer. [online] Westpac.com.au. Available at:
<https://www.westpac.com.au/personal-banking/credit-cards/balance-transfer/?fid=baltrs
%3A1712%3Atile2%3Ahmpg> [Accessed 13 Jan. 2018].
Westpac.com.au, 2018. Moving to Australia - Banking | Westpac. [online] Westpac.com.au.
Available at: <https://www.westpac.com.au/personal-banking/bank-accounts/moving-to-
australia/?layout=full&cid=wc:mg:q3-
bau_1706:sem:goog:&utm_source=goog&utm_medium=sem&utm_campaign=q3-
bau_1706&param=westpac&param=e> [Accessed 13 Jan. 2018].
Westpac.com.au, 2018. Westpac Group Annual Report, 2014. [online] Westpac.com.au.
Available at:
<https://www.westpac.com.au/docs/pdf/aw/ic/2014WestpacGroupAnnualReport.pdf> [Accessed
13 Jan. 2018].