KPMG report cautious on future of NZ Post bank

By RICHARD BRADDELL

New Zealand Post's banking debut early next year could lead to lower fees and sharper interest charges from the other banks, accountancy firm KPMG predicts.

In its annual banking survey, KPMG says New Bank's impact would go beyond a mere loss of customers for existing banks.

The Warehouse is expected to launch a banking service in conjunction with WestpacTrust several months before the NZ Post launch, but it is not expected to have the same impact.

"New Bank will be in a unique position to reshape customer service experience," the KPMG report said.

" If it can achieve a new level of customer satisfaction without the baggage of an existing customer base, then the conversion rate of new customers may be considerable."

But KPMG was guarded about the prospects for NZ Post's bank, noting that only time would tell if the 100,000 minimum customer target critical to its success would be achieved.

In any event, said the chairman of KPMG's banking group, Andrew Dinsdale, it was hard to imagine an all-out interest rate war because of the already tight margins on lending.

Last year, bank interest margins fell to 2.31 per cent, from 2.44 per cent the year before.

At those levels, they were at least half a percentage point below the levels of their parents in Australia and the UK.

Although interest margins remained under pressure, New Zealand banks boosted their collective net interest income by $239 million to $3.5 billion, due to a $25 billion jump in total assets to $175 billion.

While lending assets grew 9.1 per cent, underlying performance - profit before bad debts and abnormals - was up 16 per cent, helped by rapid growth in other income earning businesses including funds management and insurance services.

Mr Dinsdale said banks were still getting to grips with the internet, although NZ Post's intention to offer banking via the internet from the outset signalled its importance.

Although internet banking services can, in theory, be delivered much more cheaply than traditional services, online banking has appealed to only a niche market.

Nevertheless, internet banking when offered as an extra delivery channel for mainstream banking has surged in popularity, with 345,000 bank customers using it in the nine months to December.