Banks' profits inflame critics

The banking system in New Zealand became a political issue this week when the Green Party co-leader, Russel Norman, accused the "big four" of strip mining the economy. Business editor Dene Mackenzie investigates.

The ANZ result seemed to be the last straw for Green Party co-leader Russel Norman, coming so soon after the results from Westpac and BNZ which showed improved profits.

The record profits posted by ANZ bank highlighted the ongoing weakness of having 95% of New Zealand's banking industry owned by Australians, he said.

"Over the last five years, the big four Australian-owned banks have sent $8.9 billion out of the country in the form of dividend payments to their parent banks."

Only Kiwibank approached being anything like a suitable rival to the big four, but it controlled just 2.5% of New Zealand's total banking assets.

The Green Party would invest further in Kiwibank to bring it up to the point where it could compete effectively with the big four Australian-owned banks, Dr Norman said.

ANZ New Zealand announced on Thursday its statutory profit was $1.1 billion for the year ended September, up 25% on the previous year.

Westpac announced on Wednesday it recorded a 41% rise in profit to $454 million for the year.

BNZ reported a 16.8% lift in cash earnings to $612 million for the year.

ANZ New Zealand chief executive David Hisco said the New Zealand economy had continued to rebalance, with households and businesses repaying debt and strengthening their financial position.

Strong financial discipline, including tight management of costs and risk, had played an important part in ensuring the bank's financial performance had held up well despite the moderating effect of the deleveraging on revenue growth.

"Our performance is particularly pleasing given the difficult trading environment and highly competitive nature of the New Zealand banking market," he said.

Westpac New Zealand chief executive George Frazis said the bank's customer-focused strategy, with local decision-making and ongoing simplification of processes, was the foundation of the bank's strong performance.

BNZ owner National Australia Bank (NAB) said BNZ's performance reflected improved revenue through growth in variable-rate housing products, re-pricing of the business lending portfolio to reflect current market conditions and a lower bad and doubtful debts charge.

Mortgage lending volumes increased with market share higher at 16.2% NAB said.

The bank profits did not impress First Union secretary Robert Reid who represents 28,000 people working in finance, industrial, retail, stores and transport.

Westpac's strong cash earnings growth showed that the big Australian banks had not only survived but thrived during a global recession on the back of their own staff and customers.

"Westpac is not alone. BNZ announced an 11.5% increase in annual net profit after tax last week.

"All of the big banks' profits are well and truly back in the cycle of making huge profit jumps each year while holding down the wages of staff and keeping the pressure on customers with high interest rates."

Westpac's profit announcement came on top of the revelation earlier this year that Mr Frazis was earning $5.8 million a year, Mr Reid said.

Westpac workers go into bargaining with the company next week.

"We want the bank to demonstrate that their own workers were just as much a priority as paying out high dividends or $5.8 million CEO salaries."

The $1.1 billion profit of ANZ-National should cause the bank to reconsider its plans to wind down the National Bank side of the business, he said.

The bank had not only shared too little of its profits with staff, whose 3% pay rise this year fell short of cost-of-living increases, but also had plans to next year phase out the National Bank brand.

With billion-dollar profits, the country's biggest bank should be investing in its staff and in its retail network, not trying to cut costs in a greedy grab for more, Mr Reid said.