Has Australia's second largest retail bank just declared war on the sector? Westpac Banking Corp's (ASX: WBC) new chief outlined his vision for the bank this morning and he is aiming to bring a million new customers through its door over the next two years.
Brian Hartzer is going to throw $1.3 billion a year towards achieving this goal, which would represent a 20% increase in investment spend, to lift customer numbers by around 8%.
The targeted increase in market share will have to come from somewhere and could end the uneasy truce between the big banks after National Australia Bank Ltd. (ASX: NAB) eased off its campaign to paint itself as the "fairer" bank in terms of fees and charges.
While I am not necessarily predicting a price war between banks, to gain that many new customers Westpac will probably have to compete on price, and Hartzer's other goal of transforming Westpac into one of the world's lowest cost banks puts it in an enviable position to aggressively pursue growth.
The bank is looking to drive its expenses to income ratio below 40% within three years from its current level of 42.5%. This compares with Commonwealth Bank of Australia's (ASX:CBA) 42.8% ratio and Australia and New Zealand Banking Group's (ASX: ANZ) and NAB's ratio that stand at over 45% each.
What's more, it is looking to target expense growth of two percent to three percent a year and increase its productivity savings by 20% to $270 million annually.
Hartzer's market share expansion and cost reduction plan is probably worrying other bank chief executives, although Westpac is defying analysts' calls to close branches and consolidate brands (such as St George) to drive efficiency gains.
Instead, Westpac's branches of the future will be leaner with fewer staff as the bank leverages on information technology to create a Customer Service Hub.
According to Hartzer, the Customer Service Hub will provide "one view of the customer and the ability to look at their needs and opportunities across the entire banking and wealth spectrum."
Westpac has reported that its leaner "new look" branches would account for 55 per cent of the branch network within three years and shareholders will be happy to hear that the bank is reaffirming a target return on equity (ROE) above 15 percent.
But the market isn't enthusiastic about Hartzer's grand plans with the stock falling 1.4 percent at $29.51 in a weak market, even though I suspect we could see some analysts upgrade their forecast for the bank given that consensus forecasts are only penciling in a 3% increase in earnings per share and a 6% uplift in sales for 2015-16.
I think there's more to like than dislike from Westpac's strategy day as Hartzer has read the mood of the market well and is positioning himself as the CEO that will do more for less.
In this age of austerity and weak growth, no one can fault him for that.
