Big five bleed to Kiwibank

A report on New Zealand's five main banks shows these Australian-owned institutions are bleeding customers heavily to New Zealand institutions, in particular state-owned Kiwibank.

"The Australian banks as a group are losing market share in New Zealand," Merrill Lynch's Sydney-based analyst Hamish Carlisle writes in the 65-page report.

Based on Roy Morgan Research, the survey found 180,000 main bank customers switch banks every year and half of these are being lost to the likes of Kiwibank, building societies and credit unions.

Carlisle says the loss is a "remarkable statistic" which "begs the question as to why customers are leaving the big banks".

"The answer, according to Roy Morgan Research, is price and service."

"There is a strong relationship between customer satisfaction and net customer acquisition. However, price also appears to be an important determinant," said Carlisle.

Given the strong economic performance and high immigration in recent years, this is seen as poor performance. However, while Merrill has not done similar research in Australia, Carlisle said there was a world trend towards smaller niche operators.

Of the big banks, only the Commonwealth Bank of Australia-owned ASB is likely to increase its market share of retail customers in the foreseeable future, said Carlisle.

"Contrary to management mantra, high fees and better deals elsewhere are important determinants of customer switching behaviour."

Merrill's report says that in the scramble for market share, "we envisage substantial pressure on revenue margins in New Zealand over the short to medium-term".

It ranks the banks according to five criteria and ANZ comes out worst in all categories except the customer acquisition rate, where it is third.

The bank it has taken over, National Bank of New Zealand, tops the list on footings (volume of business) per customer, customer satisfaction, and acquisition to grab top overall ranking.

ASB comes second overall, Bank of New Zealand comes third and Westpac, fourth.

- NZPA