$6.9 billion full-year profit, RAMS home loans sold
Westpac chief executive Anthony Miller said although the sale would reduce the bank’s market share, offloading the $21.4bn RAMS mortgage portfolio would help the bank’s long-term plan to streamline its technology and cut costs.
While Westpac recorded a 1 per cent drop in full-year profit on Monday, it also announced it would sell its RAMS mortgage portfolio to a consortium; This is a move that will result in Westpac losing a large part of the mortgage market.
Westpac currently has around 21 per cent of the mortgage market, but its loans are spread across three different banking systems: one for Westpac-branded loans, one for regional brands such as St George and Bank of Melbourne, and another for RAMS.
“Essentially, I have three small banks, three small banks cost challenges, three small banks compliance, three small banks risk challenges in managing the mortgage book,” Miller said.
The bank is undergoing a major technology project that will result in the migration of all its loans to a single system, and this has required significant spending on the RAMS loan book. Selling RAMS allows the bank to achieve its goals faster and more efficiently, Miller said.
“I actually have 1 percentage point less market share, but now instead of being spread across three regional bank cost bases, it’s spread across two, and we’re on track to get one,” Miller said.
Westpac is selling RAMS for an undisclosed sum to a consortium including non-bank lender Pepper Money, private equity giant KKR and money manager PIMCO. Westpac closed its RAMS business to new customers last year after it faced legal action from the corporate watchdog.
The deal was announced after Westpac said it made a profit of $6.9bn last year, helped by widening margins in the second half, while also profiting from lower bad debt charges.
Westpac CEO Anthony Miller said he was optimistic about the outlook for the Australian economy.Credit: Oscar Colman
On Monday, Westpac, the country’s second-largest mortgage lender, reported that its net profit after tax fell 1 percent from September to $6.9 billion, while it increased its final dividend by 1 cent to 77 cents.
