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Bank Performance Essay

Introduction

This article examines and compares bank performances by Australia’s oldest banks; Westpac Banking Corporation and the Commonwealth Bank. Westpac’s history dates back to 1817 when it was established as the Bank of New South Wales with one office in Sydney. The bank’s major breakthrough came in 1851 when it set up gold buying agents as a result of the needs of miners and businessmen, a venture which saw Westpac open up to 37 branches by 1861.

Westpac acquired Commercial Bank of Australia in 1982 changing its name to Westpac Banking Corporation. Today, Westpac has branches across Australia as well as major cities in the world including London, Hong Kong, New York and Singapore and is rated among top five in market capitalization by Australian Securities Exchange Limited, with over half a million institutions and individual shareholders within Australia and overseas. Westpac (online)

Forty years down the line under The Commonwealth act 1911, Commonwealth Bank was formed with the responsibility of conducting both savings and general banking businesses in Australia. In 19th Century, many Australian state owned banks were merged under Commonwealth Bank.

Commonwealth was a major financial contributor during World War 1 providing war loans and banking services to service men among other things. Today, Commonwealth boasts of 700,000 shareholders and wide foreign exchange dealings extending outside Australian borders and overseas. The bank also acquired 75% shares of the New Zealand ASB Bank expanding to 100% in the year 2000. Commonwealth was converted to a public company from a statutory authority through The Commonwealth Banks Restructuring Act of 1990 and was subsequently privatized in 1996.Commonwealth Bank (online)

Geographical Activities

Westpac is among the leading banks Australia and the entire New Zealand region with branches throughout New Zealand and the Pacific region with offices in major cities in the world such as Hong Kong, London, New York and Singapore. Westpac has an organizational structure including St. George which is responsible for marketing and customer service in Australia under the brand of St George. Others include BT Financial Group Australia (BTFG) Westpac Institution Bank (WIB) and New Zealand Banking (NZ) amongst others.

The bank has 1089 branches in Australia, Pacific Islands and the New Zealand. Westpac carries out its banking activities in New Zealand through Westpac New Zealand Limited and Westpac banking corporation. Westpac Banking Corporation (NZ Division) is a branch of Banking Corporation integrated in Australia and a member of Westpac International Bank. New Zealand Banking is charged with the responsibility of offering banking and insurance services for small and medium business customers in New Zealand.

Customers around South Pacific Island nations like Papua, New Guinea, Cook Islands, Samoa and Vanuatu are served through internet and telephone banking.

Pacific services include personal and business lending and savings and investment services. The manager of the Pacific banking reports to the Chief Executive Officer of Wespac International Banking.

Westpac widened its business base having completed a $12 billion merger with St. George investing other brands like St George, BankSA, BT financial group as well as well as Asgard a move that saw it serve customer needs better.

Meanwhile Commonwealth has branches in Singapore, Indonasia, Japan, Hong Kong and Vietnam offering financial services to businessmen in Australia and Asia. Established in 1986, The Hong Kong branch offers financial solutions to multinational businessmen in Asia.  Mumbai branch on the other side offers loans, money transfers, savings accounts and money transfer services.

The Indonesia branch of the Commonwealth Bank offers term deposits, savings, current accounts as well as loans, foreign exchange and mutual funds. The branch has been in existence for 14 years and has grown to 75 branches with 90 ATMS in Indonesia. It has a client base of 84,000 customers. With all these branches and long history serving foreign needs, Commonwealth Bank is more popular compared to Westpac.

Westpac employs professionals in the in transaction banking, margin lending, alternative investments solutions and financial debt and capital markets. Some of the lending services offered by Westpac include, home loans and personal loans. According to the 2009 financial report by Westpac, housing lending increased by 19% as the government’s first home buyer grant provided energy to the market. The company also offers business lending. The report indicates that business lending in Australia reduced by 5% however, there was a net growth in borrowings by 7% in Australia.

In the year ending 2009, Westpac Banking Corporation made $ 300,249.00 from loans for consumer purposes. In the same financial year, the bank made $163,210.00 from loans given for business purposes making a total of $ 463,459 from loans. According to Commonwealth’s annual financial statement for the year 2009, the bank made $ 466, 631 from loans, $ 3,382 above Westpac Banking Corporation.

Westpac made $ 221,902.00 from housing loans in the financial year 2009 whereas Commonwealth made $ 261,504 from the same. In the same financial year, Westpac made $ 5,468 from finance leases whereas Commonwealth made $4,572 from the same.

Summary

In the financial year 2009, Commonwealth Bank made $ 10,186 (Millions) net interest income against Westpac’s $ 11, 646 million. Westpac made $ 1, 460 (Millions) more than Commonwealth. In 2007 and 2008, Commonwealth had net interest income of $ 7,036 (Millions) and $ 7,907 subsequently. In the same period, Westpac had net interest income of $ 6,313 (Millions) and $ 7,222 (Millions) subsequently indicating Westpac’s improvement in interest income to overtake Commonwealth Bank.

Despite this rise, Commonwealth still has a total asset value of 620,372 against Westpac’s 589,587 as per 2009 financial year. These factors aside, it is quite unclear which of the two banks is performing better than the other.  However, Westpac has demonstrated a promising improvement in its performance indicating with better income and a steady improvement towards Commonwealth Bank.

References

Commonwealth Bank Online. Retrieved on March 15,2010 from http://www.commbank.com.au/ 

Commonwealth 2009 annual report. Retrieved on March 17,2010 from http://cba.republicast.com/ar2009/

Westpac Online. Retrieved on March 15,2010 from http://www.westpac.com.au/

Westpac 2009 annual report. Retrieved on March 15,2010 from http://www.westpac.com.au/docs/pdf/aw/ic/annualreport-2009.pdf 

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