ANZ makes almost $2b from New Zealand banking

Wednesday, 31 October 2018

ANZ posts a bumper $1.99 billion profit in NZ.

ANZ made a record $1.99 billion profit in New Zealand in the past year.

The 10-digit result is equal to almost 40 per cent of the profits made by the entire banking sector in New Zealand last year.

It compares to profit of $390 million from Air New Zealand this year, a loss of $190m from Fletcher Building and $20m from Genesis Energy.

It works out at $222,222 for each one of its 9000 New Zealand employees - or 121 million hours' work on the minimum wage of $16.50. It is $416 for every New Zealander this year.

* ANZ posts record half-year result, could be on track for $2b**

Chief executive David Hisco said the result reflected the performance of the economy, credit quality improvements and ANZ's focus on digital innovation and customer service.

'The continued strength of the economy – strong exports and tourism sector aided by a lower dollar, continued demand for houses and growth in household incomes – has been good for our business,' Hisco said.

'The Government's investment in major infrastructure across the country and trade achievements are providing jobs and fuelling consumer spending and saving.

'We have also had a significant reduction in provision charges – funds set aside for bad debts – due to credit quality improvements across our retail, commercial and agri businesses.'

ANZ New Zealand's revenue increased 3 per cent to $4.18 billion comprising net interest income of $3.18 billion, up 3 per cent, and other operating income of $1 billion, up 1 per cent.

'It's hard for people to stick with you when you explain the size of the numbers,' Hisco said.

He said the bank made a strong contribution to the New Zealand economy and government accounts. It paid about $760 million corporate taxes, or 5 per cent of the corporate tax take for the country, and paid $810m in salaries.

As a group, the bank recorded profit of A$6.49b ($7.02b), down from A$6.81b last year.

Hisco said the bank had been helped by the strength of the economy. 'It's an extremely benign period - a bank of our size would normally be losing $300m a year but we're not so we look arbitrarily more profitable than we are.'

The growing number of ANZ customers indicated that New Zealanders were not uncomfortable with what it was doing, he said.

Hisco earnt $4.27 million last year. He did not disclose his salary this year. 'My salary will be published in the next couple of weeks.'

He said it reflected more than just his role running ANZ in New Zealand. He is also on the group board and runs operations in the Pacific Islands.

Banking expert Claire Matthews, of Massey University, said banks achieved such high levels of profit because their expenses were relatively low.

Do you feel you get value from your bank? Email susan.edmunds@stuff.co.nz

Banks did not have the costs a manufacturer might of getting goods around the country, she said

'It's mostly electronic these days so it's to do with the nature of the business.'

ANZ chief executive David Hisco: 'The continued strength of the economy – strong exports and tourism sector aided by a lower dollar, continued demand for houses and growth in household incomes – has been good for our business.'

She said they were also helped by the fact that bank services were a necessity for most people.

'It's hard to operate in the economy without a bank account. They are providing a service that everyone needs. And until there is a really good alternative they will continue to do well.'

She said bank profits would remain strong until their was an economic downturn that increased the number of bad debts on their books.

Sam Stubbs, founder of KiwiSaver provider Simplicity, said banks were taking advantage of their dominant market position to extract unreasonable profits.

'The ANZ will make more profit this year than Fonterra, Spark, Fletcher Building, Warehouse, Air NZ and all the supermarkets combined did last year. It's one bank, yet its profits are almost twice that of the top seven power companies combined. And it all goes back to Aussie.'

A recent report by research house Lafferty Global gave ANZ's parent, and other Australian banks, a scathing review.

The study blends a number of financial metrics and qualitative measures taken from a bank's annual report to arrive at a rating out of five.

Among the financial benchmarks it uses are return on assets, loans to deposits and cash to assets. Qualitative measures include statements about culture, transparency and digital reliability.

ANZ, NAB and Westpac achieved just two stars putting them alongside the 12.4 per cent lowest ranked banks by Lafferty Global. Australia's top rated bank was Commonwealth Bank with a three-star rating according to the survey but that alone was not cause for celebration.

But Hisco said it had focused on transforming its culture. New Zealand customers understood that what happened in Australia did not necessarily happen in this country, he said.

'We continue to remove and reduce fees. In FY18 we reduced or removed a further 41 fees including fees for using non-ANZ ATMs, the first bank to do so. We were also the only major bank to remove our overseas ATM fee, which our customers have appreciated.

'ANZ also introduced interest free loans so that New Zealanders can insulate their homes.

'We are committed to doing what is best for our customers and the community, being transparent and putting things right quickly. This will continue to be a strong focus for us in the future.'

BNZ and Westpac are also due to report their latest annual results.

Matthews said they could have similar results, proportionate to their size.