After the Hayne inquiry criticised banks for being greedy, Mr Maxsted said the categorisation didn’t apply to Westpac. “We are not an organisation based on ‘greed’ or on short‐term profit,” he said. Rather, the bank consistently makes decisions focused on the long-term sustainability of the bank and for customers.
Much of the conduct uncovered by the royal commission had been “historical, has been previously self‐reported to regulators, and in many instances, has been resolved or is being addressed”, he said.
Mr Maxsted also pushed back on suggestions Westpac was lending in an irresponsible manner, after the royal commission and regulators raised questions about its processes.
“Unfortunately, recent market commentary continues to imply that banks are lax in their standards, lend irresponsibly and processes are prone to systemic fraud. For Westpac, this is just not true.
“We have no interest in lending to individuals or companies who cannot repay their loans.”
‘Genuine demand for housing’
A representative of the Australian Shareholders’ Association questioned the chairman about credit quality in the context of falling house prices.
“We don’t see a major deterioration [in credit quality] over the next 12 months which is underpinned by the strength of the economy. Our assumptions are no marked increases in credit losses over the next 12 months,” Mr Maxsted said.
“We don’t think there is a housing bubble, we think there is a genuine demand for housing. Investor demand has come off because of the macroprudential policies. But for owner occupiers, there are still many people wishing to buy houses.”
Shareholders and proxy advisers railed against the payouts at the AGM and the vote could have been even larger given the large number of shareholders who abstained from voting.
“This is a very big strike that sends a very loud message that pay practices need to change,” said Louise Davidson, chief executive of the Australian Council of Superannuation Investors.
“There’s a personal message for Westpac here, they are not being tarred by the brush of the sector. This is investors’ reflection on the misjudgment of the board in making those awards,” said Ownership Matters co-founder Dean Paatsch.
Mr Maxsted told the meeting: “We get the point that others say we we should have cut harder given the issues your bank has had. We looked at them, we thought we got the right balance in how much the pay should be reduced and we certainly didn’t take into account other banks’ problems when we were trying to reward the executives trying to do the work for you as Westpac shareholders.
“Much of the community expectations being deflated, and the loss of trust, relates to many, many activities outside the world of Westpac – it is in our sector, but it is not our issue.”
Mr Maxsted said the huge vote against the remuneration report had sent a “strong message” and he pledged to “review our reward frameworks, with particular consideration of the concerns raised”.
“We are disappointed with the result, unequivocally,” he said after the meeting.
Ms Davidson said the 25 per cent cut to short-term bonuses was a “hollow gesture” and that investors “are disappointed about the lack of accountability on display”. The Westpac board could have avoided the strike by reducing the short-term incentives to zero, like Commonwealth Bank had this year. “There needs to be a rethink about this notion that short-term incentives are automatically paid,” she said.
Westpac announced a surprise $235 million hit to its full-year profit due to overcharging financial advice customers in September, and Mr Hartzer told the royal commission last month its records were so poor it didn’t know the total amount of fee refunds.
Westpac director Craig Dunn was also hit with a humiliating protest vote against his re-election to the board, with 35.6 per cent of shareholders against it. Without the support of International Shareholders Services, he may have lost his place on the board, as shareholders lashed out at his tenure as CEO of the now disgraced AMP between 2008 and 2013.
National Australia Bank and ANZ Banking Group also face big protest votes at their annual meetings on Wednesday next week. Westpac’s strike on Wednesday is the second time a major bank has received a first strike, after Commonwealth Bank’s remuneration report was voted down in 2016.
After all of the major banks have been peppered by questions on lending to coal projects at AGMs over recent years, more than half a dozen shareholder questions at the Perth meeting related to climate change issues.
Westpac believes in net zero emissions by the middle of the century “but at the same time we also believe there needs to be an ordered way in which we get there”, Mr Maxsted said.
He said new projects in fossil fuels still could come on board as Australia moves towards clean energy future. “Over time, fossil fuel must, must be a lower part of the energy equation, but that doesn’t mean all fossil fuel projects need to cease as of today.
“There is a real basis for energy minerals, particularly fossil fuels, for a period of time until they can be replaced by other energy sources. It is a difficult trade-off but we don’t think the two are mutually exclusive.
“It’s not taking an each way bet: it’s saying we believe in the science [of climate change], but we also believe in the security of energy as well, and we understand full access to cheap energy – which is often the fossil fuels rather than other sources – is really important for people around the world.”
Conflicts of interest
With some analysts expecting the royal commission to call for the structural separation of bank wealth business, which would hurt Westpac the most given its commitment to BT while the other major banks exit wealth operations, Mr Maxsted said “our view is it is not the ownership structure that gives rise to the conflict of interest, it is the behaviour of the … financial planners”.
But he suggested Westpac would consider offloading parts of the wealth operations if the tide turned against vertical integration. “We are endeavouring as best as we can to preserve our wealth businesses. That is not to say that we don’t constantly look to see has the world changed in term of the external environment to such an extent that some part of our wealth business might be better off in the ownership of some other people.
“That is an open question. But overall we think there is definitely a place for a large bank to be providing wealth solutions to customers.”
There was also a question from Leon Ashby, an adviser to Senator Fraser Anning, who said he is working for 80 bank victims, who asked whether Westpac would block access documents and continue to fight many customers in court.
Customers should expect their complaints to be dealt with and “if we are at fault then certainly we will make information and people available, and we are certainly not in the realm of hiding behind court processes for people to prove their point”, Mr Maxsted said.
During his address to the meeting, Mr Hartzer apologised “without reserve to any customer who has been let down by our mistakes”.
The election of new directors Peter Nash and Anita Fung was overwhelmingly supported, while Peter Hawkins has retired from the board. Two new non‐executive directors will be announced in the first half of calendar 2019.