Westpac confirms sale of RAMS $21.4 billion loan book two weeks after Federal Court fine

Westpac has sold its troubled RAMS mortgage business little more than a week after it was fined for widespread compliance failures, including unlicensed referrers.

The sale of $21.4 billion in home loans to ASX-listed Pepper Money and its American private equity majority owner, KKR, and US investment firm PIMCO was confirmed on Monday as Westpac announced a dip in full-year profits, without a sale price being disclosed.

The Federal Court fined RAMS $20 million for compliance failures, including dealing with unlicensed referrers, two weeks ago.

Westpac chief executive Anthony Miller said the sale of RAMS, which was closed to new business in August last year, would streamline the bank’s operations.

“This transaction will significantly streamline Westpac’s mortgage operations, reduce run costs across the business and provide further strategic flexibility,” he said.

Mr Miller, who replaced Peter King as CEO in December last year, said he was unaware of any further legal problems with RAMS, which Westpac bought in November, 2007, ahead of the Global Financial Crisis.

“Nothing that has been brought to my attention,” he said. “We’ve engaged with the regulators and it’s well documented on a whole range of issues and concerns they had with the way the RAMS businesses were led, managed and prosecuted. We’ve just simply sold the asset and more importantly, it allows us to get off one of those bank systems.”

Pepper Money’s share price rose by 6.7 per cent on Monday to $2.38 while Westpac climbed 2.79 per cent to $39.82 on the Australian Securities Exchange after announcing a full-year dividend of $1.53 per share fully franked, up from $1.51.

Westpac, Australia’s third biggest bank, on Monday revealed a net cash profit of $6.972 billion for the 12 months ended September 30, a 2 per cent decline from $7.113 billion during the previous financial year when notable items were excluded.

Mr Miller said Reserve Bank of Australia rate cuts in February, May and August had helped home borrowers, but noted small business customers were struggling.

“The majority of our customers have welcomed interest rate relief over the past year and this is helping fuel a modest recovery in private demand,” he said.

“For businesses, we’ve seen improving conditions but continue to observe challenges for small business across materials, labour and energy costs.

“Notwithstanding the relief from interest rates, challenges remain with inflation and unemployment increasing in recent months. This will be a delicate balance for the RBA to manage.”

Mr Miller also flagged changes to working from home policy after Westpac mortgage processor Karlene Chandler successfully challenged the bank’s decision to make staff work from a corporate office two days a week.

“We’re also reflecting what we might do in response that recent work-from-home decision by the Fair Work Commission and we’ll land on a decision as to what we’ll do later this week,” he said.

Westpac reported a 7 per cent rise in customer deposits to $723 billion and a 6 per cent increase in loans to $851.9 billion during the year, with Mr Miller confirming the bank was going after property market investors.

“In terms of the investor segment, yeah, it is an attractive segment from a credit risk perspective. We see it as a real opportunity for us,” he said. “We’ve just got to go about it thoughtfully and be careful about the outlook and the risks that come from, sort of, going too far, too fast in a particular segment.”

Overall business lending saw an even bigger 15 per cent increase while the agribusiness portfolio saw a 22 per cent gain, mainly from existing customers.

Westpac in April announced it would establish three regional service centres at Moree in northern NSW, Leongatha in Victoria’s Gippsland region and Smithton in north-west Tasmania.

The institutional lending division, providing finance to corporations and governments, had the biggest net profit increase of 15 per cent, to $1.575 billion.

But the business and wealth division suffered a 7 per cent profit slump to $2.186 billion.

Westpac also invested $660 million in the UNITE technology platform during the financial year, which was more than double the $147 million investment for the year to September 2024.