New-look bank takes local approach
BUILDING a bank largely from the ground up had its challenges, says Bank of Melbourne chief Scott Tanner. None more so than a rapidly slowing banking market.
A year on from Westpac's high-stakes launch of the regional bank, Tanner says the business is delivering in a tough market. ''It's certainly a different environment than we anticipated that we'd be operating in from when we first started out,'' Tanner says.
''It was pretty clear that we needed to adjust the settings for the new environment.''
Even so, Tanner remains committed to building a 100-strong branch network within the first five years. ''We're happy with how things have turned out over the last 12 months. I might say better than expected - but the expectations were pretty high - so I'm happy to be meeting those expectations.''
Still, there is no right time to launch a bank, particularly one that is unabashedly attempting to carve out a local market. This means the promise of a new bank needs to be more than a branding exercise with a smart name.
The bank, which he also labels as a ''disruptive competitor'', has to back its brand with top service and technology.
Bank of Melbourne remains Westpac's high-stakes bet that it can grow its market share using a range of brands compared with using just its flagship Westpac brand.
Dubbed by Westpac executives as a multi-branding strategy, this sees the lender operate a range of retail franchises in different markets such as Bank SA in South Australia and the St George brand in New South Wales and other parts of the country.
Indeed, like St George, Bank of Melbourne is hoping to appeal to customers, including small and mid-sized businesses, that prefer banking with a local or regional bank, rather than a broader national brand with millions of customers.
Rather than becoming another division of a big bank, Tanner points to Bank of Melbourne being built from the ground up on the St George platform - a business that has regional banking ingrained in its business - even after being acquired by Westpac three years ago. At the same time, Bank of Melbourne has its own locally based management board and infrastructure.
The local model also translates to satisfied customers, with Bank of Melbourne substantially outrating the flagship Westpac business in the closely watched customer-satisfaction rankings.
Some investors are not so convinced. They see the multi-brands as building too much complexity into a bank. At the same time, many fear it comes with additional costs, particularly as the retail banking market is slowing. Westpac has never disclosed the figure, but the lender is expected to spend in excess of $500 million over five years building out the Melbourne business.
Still, supporters of the multi-brand strategy point out that Bank of Melbourne has notched up a substantially faster rate of growth than had the business continued to operate under its previous St George banner in Victoria. This is particularly noticeable in much sought-after deposits that are growing at more than three times the broader market.
Bank of Melbourne's customer numbers are growing at nearly 14 per cent, translating to 50,000 additional accounts over the past year. ''After 12 months we've proven that the multi-brand model, the idea of Bank of Melbourne works. It's now a matter of consolidating that,'' Tanner says. ''Then it's a marathon, not a sprint.''
Despite the broader slowdown in the banking market, Bank of Melbourne has been pushing ahead with its branch rollout. It is expected to have 60 by the end of December. This is nearly double the 34 it inherited from St George.
Tanner says the target of 100 branches remains firmly in place as well as expanding the number of ATMs to about 300. This includes a recent deal to install Bank of Melbourne ATMs at the MCG.
Following an acquisition of listed Bank of Melbourne in 1997, Westpac continued to used the regional brand in Victoria, until mid last decade mostly as the investment was focused on the national Westpac brand.
The St George acquisition in 2009 then gave Westpac a chance to revive the local bank strategy.
Tanner says the notion of Bank of Melbourne still resonates with customers. The original business - which used actor Jack Thompson for much of its advertising - struck a chord in its heyday for product innovation and customer focus.
Moves such as weekend banking came when the bigger banks were shutting branches and services.
Like any business, Bank of Melbourne has its pressures, but Tanner says he has the advantage of fine-tuning his investment to suit the environment - this ranges from where to put the new branches and the type of staff he recruits.
''Where many of the incumbent banks they had already invested in the old environment and as a result the change for them was probably a lot greater,'' he said.
More partnerships are looming, but Tanner declined to elaborate.