Westpac cuts jobs as mortgage demand falls and won’t commit to passing on rate cuts

Westpac says expectations of lower mortgage growth and the need to remove duplicate back-office roles as part of phase two of its post-St George merger are the reasons for its decision to axe about 560 jobs.

Peter Hanlon, Westpac financial services executive, says the job cuts will mostly be in mortgage processing and head office roles.

“We don’t see in the near to medium term a pick-up in housing or business credit growth,” he said following the announcement.

Hanlon estimates about one-third of those axed will be transferred to other roles, with up to 400 staff made redundant.

The move to cut jobs has been slammed by the Finance Sector Union, which has urged the government to intervene and stop the cuts. 

“Westpac can afford to keep every single one of these workers in their jobs and continue to make a multi-billion-dollar profit,” says FSU secretary Leon Carter.

In an interview on ABC radio today, Westpac CEO Gail Kelly refused to rule out further job cuts and would also not say how much of an expected February rate cut the bank would pass on to borrowers.

Her comments on higher funding costs suggest borrowers should brace themselves for the banking not matching any RBA move.

“These are complex matters and we won’t foreshadow and decision ahead of the time,” Kelly said, adding that the linkage between interest rate decisions and the cash rate had weakened.

However, she said the actions of the European Central Bank (ECB) in December that injected significant liquidity into the banking system had taken “the cataclysmic risk of the eurozone collapsing off the table”.

“[The actions of the ECB] have underpinned the banking system and the eurozone overall,” Kelly said.

However, she said hopes voiced a year ago that funding costs would be on the decline and returning to more normal levels had not happened,

“The troubles in the Eurozone means they have remained elevated. If anything they are higher now then they were at any times during the entirety of GFC and its more expensive to raise deposits,” she said.

Kelly said the bank had to safeguard net interest margins on its loans or else face the risk of potentially reducing the level of credit provided and “potentially landing up in a credit crunch”.

“We’re into a very much more slowing growth world – you only have to look at Europe to see that we are into several more years of much slower growth.

“This changed world brings with it higher levels of funding costs and changing consumer patterns and as banks we do need to adjust.”

She also defended the jobs cuts and said they were part of plans to simplify banking systems.

“This is the largest announcement we are likely to make this year …you can expect us to have a lower number of employees at the end of the year than we had at the beginning,” she said.

Kelly pointed out the bank was adding new roles at the same time as sacking staff, adding about 200 staff to its Bank of Melbourne operations, 50 new roles in financial advice, 50 new roles in institutional banking and has recently recruited 83 graduates.

The Property Council of Australian office report forecasts 7,000 financial services jobs to go in 2012.

ANZ axed about 130 positions earlier this month while the Royal Bank of Scotland plans to cut 170 jobs in Australia.