Kelly's Razor May Give Westpac $100m Bonus

The Age

Saturday February 2, 2008

Danny John, Sydney

NEW Westpac chief executive Gail Kelly is expected to start shaving costs from key retail bank operations that could add $100 million to net profit in the next two years.

Mrs Kelly started work yesterday as the first female head of one of the country's four largest banks.

But she was reluctant to discuss her initial plans to build on the legacy of predecessor David Morgan.

Dr Morgan finished at Westpac on Wednesday after nine years in the top post.

Saying her first priority was to meet as many of her staff and customers as she could, the former chief executive of St George Bank seemed relieved that her almost six-month-long enforced break between jobs was over.

"I'm delighted to be here," the 51-year-old banking specialist said as she arrived soon after 7am at Westpac's Kent Street headquarters in Sydney.

Mrs Kelly was appointed in August. She is unlikely to be distracted by moves by rivals ANZ, National Australia Bank and Commonwealth Bank to look overseas to fuel growth.

During her five years at St George, she targeted the Big Four aggressively.

At Westpac, she is likely to focus on cutting costs.

The bank's consumer financial division, which includes its 800 branches, has the highest cost-to-income ratio of the banks at 54.6%, compared with Commonwealth and St George at 42.5%. ABN Amro says that bringing Westpac into line with St George could produce savings of as much as $108 million by 2010.

This would translate into 2% of the division's annual earnings, which over the past year helped drive the bank's overall profit up by 12% to a record $3.45 billion.

But Mrs Kelly's first priority will be to find a new boss to head the consumer financial division after Mike Pratt, the previous head appointed by Dr Morgan, quit just before Christmas.

It is believed that among her first decisions yesterday was to ask leading headhunters Egon Zender to do a global search for Mr Pratt's successor.

Mrs Kelly is also expected to spend her first year looking to reduce costs by moving more back-office work overseas and through greater use of technology.

Her arrival yesterday helped increase Westpac's shares 87? to $26.45.