ANZ National prepares for more attacks

John McFarlane, ANZ National Bank chief executive, says it is working on areas of low market share. Picture / Martin Sykes

Forced to defend its dominant market share during the recent Bank of New Zealand-initiated mortgage wars, unwilling combatant ANZ National Bank is readying attacks on its rivals on other fronts, says chief executive John McFarlane.

In Auckland yesterday for a speech to the Trans-Tasman Business Circle, the tough-talking Scotsman said the BNZ's "Unbeatable" campaign had been "problematic". The fact it began as ANZ and National Bank worked through their awkward New Zealand marriage made it even worse.

"It's been tough ... but the point is you have to defend your market position," he said.

"We've been an easier target for the competitors while we've been integrating, but it's not had much effect ... we've not had any distraction in service."

The campaign had reduced interest rate margins faster than ANZ National Bank had seen before. "Price competition is with us all the time but price discounting is a very unusual thing to do on the interest side," he said. ANZ National had little choice but to play along or risk losing market share.

"Under price discounting campaigns there's nothing you can do about lower industry returns - that becomes the normal benchmark temporarily.

"If you match at a later point all you've done is lost share and had lower industry returns. If you match straight away you keep share."

While the lower rates were a "short-term phenomenon that can't be sustained" the fact they were primarily on two-year mortgage rates meant the effects would be felt for some time.

But McFarlane was sceptical about the overall effectiveness of the BNZ's campaigns.

"They haven't led to sustainable changes in market share and they're not sustainable economically."

Having toughed out the mortgage war and the integration period, due to finish this year, ANZ National would look at developing its business.

"We've been consumed by a very comprehensive integration programme and a very substantial regulatory programme. Everybody in the company has been affected by it and therefore people have been inward-looking as a consequence."

McFarlane said the next stage for the bank would be to preserve its strategic position and develop areas where it had low market share including credit cards, rural, corporate and institutional banking.