Big bankers leave little towns in the red

The Northland town that became unbankable in the ruins of industry closures is struggling back to life, defying the bankers who are turning their backs on New Zealand communities.

Moerewa stands as an example of what other provincial centres are desperate to avoid.

The once-thriving service town became a no-go zone for bankers when its dairy factory closed and the number of jobs at its freezing works was cut from 1500 to fewer than 250.

Despite reports of outsiders buying dilapidated houses for $18,000 to $30,000 to rent to impoverished locals for $120 to $160 a week, a trust trying to rebuild the shattered community says no bank will lend to new business ventures.

He Iwi Kotahi Tatou Trust has instead added its own sparse savings to grants from charitable organisations to paint the town's semi-deserted commercial strip and buy a line of seven empty shops for community businesses and crafts studios.

Community worker Ngahau Davis says the predominantly Maori population is determined to turn the town around, even if it doesn't figure in the strategic plans of banks run from boardrooms in Australia or Britain.

After losing all its own banking facilities, Moerewa suffered an added blow last year when WestpacTrust - the last of the four banks that once had branches in neighbouring Kawakawa - closed its office, installing a money machine as an afterthought.

That means a 25km drive to a bank in Kaikohe for Moerewa folk - if they have any way of getting there at all. Many of the depressed area's cars are unroadworthy, and some people cannot afford cars at all.

But the Far North is not the only area in which the banks are cutting back. Throughout the country, in the six years to the end of 1999, the number of bank branches shrank from 1543 to 866. Staff numbers dropped from 26,000 to 22,318.

From being "over-banked," we have tumbled to a position where we have fewer branches of banks and building societies per person than seven out of eight comparable countries, according to a Massey University study for the FinSec union. Only the United States has fewer.

New Zealand also has fewer money machines a head than six of the eight countries.

We have an extraordinary 77,000 Eftpos terminals - roughly three times as many per head as the United States, and far more than any other country in the study. But you can't deposit money or check your balance at an Eftpos terminal.

The fall in branch numbers follows a dramatic concentration of bank ownership since 1989. In the major changes:

* Melbourne-based ANZ Bank bought PostBank from the Government.

* Nine regional savings banks merged into Trust Bank, then sold out to Sydney-based Westpac.

* Countrywide took over the former United Building Society, then sold the combined business to the British-owned National Bank.

* The National Bank bought the Rural Bank.

* The National Australia Bank bought the Bank of New Zealand.

* The Commonwealth Bank of Australia bought 75 per cent of the ASB Bank.

The resulting big five banks - all owned in Australia or Britain - now control 90 per cent of the country's bank assets.

The ANZ and BNZ have moved their capital market operations to Australia.

The Auckland Methodist Mission, which operates a pooled account for 450 people who can no longer afford their own accounts, gets a daily printout of their incoming wages and benefits and outgoing withdrawals - from ANZ Direct in Melbourne.

The ANZ's New Zealand head office is not even listed in the Auckland telephone book. When the Weekend Herald rang the tollfree number listed "for all branch enquiries and service" and asked for the communications manager, we got the voicemail of someone in the Papatoetoe branch promising to "get back to you within two hours."

Ross McRobie, who managed the Waikato Savings Bank for more than 30 years until 1995, says banks have changed completely from their old emphasis on "personal contact."

"We encouraged our managers and staff to liaise with the public," he says.

"They got to know them very well, and that led to our success.

"Now there is a strong feeling of centralisation. When you ring up, you don't know whether you are talking to Wellington or Christchurch or Australia. They say it's progress."

Andrew Dinsdale, chairman of consultant KPMG's banking and finance group, says New Zealand's "very free and unregulated environment" has made our banks among "the most efficient in the world."

His figures show that the banks' interest margins - net interest income divided by interest-earning assets - have been shaved steadily from 3.1 per cent in 1995 to 2.4 per cent. Interest margins are still 3.1 per cent in Australia and the United States.

"When I took out my first home loan in 1980, the interest rate was 12.5 per cent," he says.

"The banks were probably paying me 2.5 per cent on my savings account. That's a margin of 10 per cent.

"Those margins are just so fine today - the customer is getting really cheap money."

In Australia, bank mergers have been halted, and huge political pressure is being mounted to keep branches open in "the bush."

"I think the New Zealand public is much more receptive to change," Mr Dinsdale says.

For many, electronic banking systems are a boon. Wages, pensions, benefits and even farmers' meat and dairy earnings are now direct-credited, saving the need for trips to the bank.

Anyone can check balances and pay bills over the telephone or the Internet, and cash is available through Eftpos at most of our 47,000 shops, petrol stations, hotels and restaurants and at thousands of other businesses.

But not everyone has benefited. Small towns and suburbs, the elderly, people with disabilities, bank workers and the poor are seeing the downside.

Kawakawa shopkeepers estimate that business has dropped about 10 per cent since WestpacTrust left a year ago.

The 20-minute drive to the nearest banks is over a windy and hilly road, making it hard on the elderly, and local bookseller Marie Byrne says the "Kiwi bank" proposed by Deputy Prime Minister Jim Anderton cannot come soon enough.

Further north, in Doubtless Bay, a cash exchange scheme modelled on others in Northland foundered less than two months after the only bank closed, but a new BNZ money machine on trial at Coopers Beach is doing well.

Even so, says community worker Hemi Toia, there are countless hidden costs, such as when work stopped on his home for half a day while the builder visited a Kaitaia bank.

Another money exchange at Waipu is fighting for survival, and the only such scheme managing to thrive in the absence of banks is the prototype opened in Maungaturoto a year ago.

Suburban businesses are suffering too. Shops in Green Bay, West Auckland, say trade has dropped 10 to 20 per cent since their ASB branch closed two years ago.

"People stick with you for a while, but they do business after a while wherever they now do their banking," says local chemist Paul Henwood.

Residents of the Crestwood Retirement Village, who used to walk to the ASB in 10 minutes, now wait for a monthly minibus trip to a Blockhouse Bay bank where, they say, they often have to stand and wait in "queues a mile long."

FinSec union secretary Don Farr says the cuts are stressful for bank workers. At a central Wellington bank last year, he saw only two tellers on duty at lunchtime, left to deal with a queue "out the door."

"When I got to the front of the queue, the teller was in tears."

Some banks have introduced swanky lounges for "high value" customers, but in their drive for efficiency many don't want to know about the poor.

The ANZ now requires a minimum $100 deposit for its most basic account, or $300 for a savings account. The BNZ requires $240 for a basic account.

North Shore budget adviser Sue Deason says many beneficiaries can't afford to open a bank account - yet they need one because welfare benefits can now be paid only into bank accounts.

Many use the accounts of friends, who sometimes make use of the money.

That is why the Methodist Mission has set up its "safe account."

Even quite big business customers are being alienated. Hokitika entrepreneur Gray Eatwell formed a "bank customer action collective" after the BNZ overcharged him $1000 a month on one account and $800 a month on another, then sold up all his assets when his businesses ran into trouble because of the overcharging.

"The more we complained, the tougher they got," he says.

His collective has also campaigned for the banks to honour their stated policy of waiving basic account fees for accounts which superannuitants use to receive their pensions.

As recently as April 12, the ANZ turned down a claim from two Huntly pensioners for refunds of fees they had paid since qualifying for national super.

In other cases, the collective has won refunds of up to $1000 for some pensioners.

But the ANZ and the National Bank say the fee exemption is available only "on application."

Northland Federated Farmers says banks are flouting voluntary industry protocols agreed to last year to avoid mortgage foreclosures. President Ian Walker says banks are failing to turn up to mediation meetings.

Operations manager Bill Guest says the federation intervened six times in the past 18 months to protect farmers and sharemilkers facing foreclosure by the BNZ, although none had defaulted on repayments.

BNZ agribusiness general manager Mike Skilling won't comment on individual cases, but says the bank never forecloses without good reason and is lending a record amount of money to Northland farmers.

The banks - a Herald series

Next week: bank charges

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