BNZ takes leap into cyberspace

By Richard Braddell

The Bank of New Zealand, which yesterday reported a first-half profit, is joining the trend to Internet banking. It plans to be online by August or September.

Announcing a 9.6 per cent rise in net profit to $170 million for the six months to March 31, managing director Mike Pratt said that full transactional services such as Internet cash transfers and bill payment were an essential ingredient in the bank's strategy.

He said the expected uptake would be sluggish to begin with and would reflect the experience of Internet competitors, "if they are really honest".

But research indicated the banking market would undergo a fundamental shift in the next two years, resulting in much stronger demand for Internet transactions.

The decision to enter Internet banking conformed with a three-pronged business approach framed around strategy, people and technology.

Since taking over as managing director a year ago, Mr Pratt has become known for spending a considerable portion of his time visiting branches.

Yesterday he described his people initiatives as embracing "organisational alignment" or getting staff familiar and comfortable with objectives such as the introduction of a new private banking service in July.

On the strategy front, the bank had segmented its business into clearly defined divisions including retail, rural and business.

The strategy appeared to have worked with a 1.2 per cent return on average assets setting a new earnings benchmark for the New Zealand banks in an industry where 1 per cent was regarded as quite satisfactory.

While the result owed much to expense control - full-time employee numbers were down 6.2 per cent or 311 - profit was also boosted by a $36 million jump in other income which more than compensated for a $19 million decline in net interest income.

Once again, the bank showed that it was leading the industry into other financial services with total funds under management jumping 35 per cent to $1.9 billion.

The bank confirmed its position as market leader in term life insurance, claiming 8.8 per cent of the existing term market, after its share of new policies issued jumped to 15.4 per cent.

Mr Pratt said the bank was the undisputed leader in the corporate market with 38 per cent of businesses regarding the BNZ as their primary bank.

* The BNZ's parent, National Australia Bank, yesterday reported a $A1.39 billion profit for the six months to March 31, up 25.3 per cent on the $1.11 billion in the same period in 1998.