An ASB spokesperson also said they were disappointed to not be participating but supported the group decision.
This year's event has been marred with controversy as critics said the parade did not represent the diverse rainbow community and had become too commercialised.
Gender Minorities Aotearoa national coordinator Ahi Wi-Hongi told the Herald the parade felt more like a tourism event and said they should rename it the "Wellington International Tourism Parade".
"We don't want to see the Wellington event be just about making money or bringing in tourists or how it looks to the outside world, we want it to be about the community."
Despite the controversy, the parade is celebrating its third year in the capital and is anticipating double the number of attendees of last year's event, which attracted 20,000 spectators.
Founder and director Amanduh la Whore said it was deeply saddening to hear the banks had withdrawn and felt bad her friends would not be marching.
"Because of this boycott, the banks pulled out and I just feel for the employees that Identify as LGBTI, because that was taken away from them, it wasn't their choice."
She said the banks had put a lot of time and effort into coming together and working on their "fabulous" float and it was sad to see it go.
"It will have an effect on the parade."
Ivy Bar and Cabaret owner and manager Steven Mawhinney welcomed the banks' decision and said they were grateful to have their voices heard by local banks.
"Our focus is now on creating the best, brightest, and most inclusive Pride in 2021."
He said they knew it would have been a hard decision, and they hoped everyone would have a happy Pride.
Controversy surrounding the commercialisation of Pride parades isn't unique to the capital, with divisions over the purpose of Pride events springing up globally.
Rainbow Wellington committee member Craig Watson said the banks' decision to forego this year's parade ultimately sends a message that corporates are interested in how the rainbow community feels, but didn't think it would impact the day's success.
"At the end of the day, Pride for a large part of our community is about celebrating our diversity and our groups, and the progress we have made and that is what Wellington International Pride Parade will be about on Saturday."
He said a letter had been sent by the affiliation groups which outlined that if the parade board agreed to a public hui in the days following the event they would call off their planned boycott and write a public letter of support.
Watson said it was understood the Parade board was currently writing a response.
This comes a year on from the Auckland Pride Parade debacle where the parade was swapped for a Pride Walk following controversy over Police in uniform participating.
Time is now ticking as the open letter sits firmly on the table, and with both groups hoping to avoid another 'Auckland situation', it will be decided over the next 48 hours whether a resolution is on the cards.
