Mr Packer's abrupt departure threw Australian financial markets into turmoil as they sought to analyse the impact on Westpac, which has gone through a period of unprecedented instability over the past six months. The bank's share price dropped 14 cents in the wake of his resignation to close yesterday at Adollars 2.91.
Last November, Mr Packer bought a strategic stake of 10 per cent in Westpac through a subsidiary of his Sydney-based flagship company, Consolidated Press Holdings (CPH). As a result, both Mr Packer and Al Dunlap, the American chief executive of CPH, were invited to join the Westpac board. Yesterday, Mr Dunlap followed his boss by resigning from the board.
The market welcomed the arrival of the two men because of their reputation for astute, tough management. Westpac's vigorous expansion during the 1980s had ended in a series of disasters. The bank announced a net loss of Adollars 1.5bn ( pounds 670m) for the year to last September. Since October, its managing director and five other directors have resigned.
Mr Packer bought his stake in Westpac when the share price was near an eight-year low. As a board member, he was to take part in a programme of severe cost-cutting and rationalisation designed to return the bank to stability and to restore investor confidence. The precise reason for his sudden resignation yesterday was not disclosed by either Westpac or Mr Packer, but it seems clear that it followed a dispute over the pace of change.
Both he and Mr Dunlap were known to want a faster programme of cost cuts and staff redundancies than that favoured by other board members.
In a brief statement, Westpac said the resignations stemmed from a 'disagreement about the framework for management of the bank's recovery programme'. That programme, outlined last November, called for the achievement by September of Adollars 300m of annualised cost and revenue improvements, and set a target of 1995 for an Adollars 10bn reduction in corporate lending risk.
The bank also announced yesterday that between 4,000 and 8,000 staff jobs will be abolished over the next two to three years, on top of more than 3,000 that have already gone since 1991.
Rumours swept the market yesterday that Mr Packer may be planning to dump his Westpac shares rather than stay on as a passive investor. He holds about 170 million shares, including 80 million under option. Whether or not he takes up these options will be an indication of his future commitment to Westpac.Reuse content