Profits go to least popular banks

Two New Zealand banks rated by customers as least satisfactory, ANZ and Westpac, are also two of the most profitable, Massey University's quarterly banking survey shows.

The June 2002 quarter survey, released yesterday, showed the Bank of New Zealand's profitability took a big hit, falling from about 2.5 per cent return on assets to under 1.5 per cent.

ANZ bank, whose New Zealand operations posted a 20 per cent rise in annual net profit yesterday, increased return on assets to 1.8 per cent, from the previous quarter's 1.4 per cent.

Profitability at Westpac, which has changed its name from WestpacTrust, soared to 2.6 per cent from 1.2 per cent.

David Tripe of Massey University's Centre for Banking Studies called the low home lending rates offered by several banks "a desperate pursuit of market share", and said the banks were unlikely to make money on the packages. "In my view it's lunacy," he said.

The arrival of Kiwibank had not affected banks' margins, despite its agenda of keeping interest rates low.

"Another possible explanation for the increase in interest margins would be that the general level of interest rates had risen, allowing the banks to increase their loan rates without increasing their deposit rates.

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"In this particular quarter, the deposit margin has increased by more than the revenue margin has decreased, resulting in some widening of the spread, but there is no indication that this is other than a temporary phenomenon."

All six of the large, predominantly retail banks surpassed the benchmark 1 per cent return on assets, with an aggregate return on assets for those banks of 1.76 per cent, up from 1.47 per cent in the previous quarter. Profits have been above the 1 per cent level for 15 successive quarters.

The survey did not include state-owned Kiwibank, which Tripe said was too new and too small, with deposits of just $86.2 million and loans of $43 million, to have much impact.

"For all that, the bank has reported significant revenue for the quarter, with non-interest income of $9.2 million, although this is rather less than operating expenses, which were $15.9 million."

Underlying profitability - before bad and doubtful debt expense, extraordinary items and tax - was less volatile between the six banks, and led by ANZ at 2.4 per cent return of average total assets.

Tripe said ANZ and Westpac appeared to have achieved their rise in quarterly profitability through the sale of parts of their businesses.

- NZPA