Newsable: Big NZ banks making profits of $300-per-second

Tuesday, 20 June 2023

Finance Minister Grant Robertson and Commerce Minister Dr Duncan Webb announce a Commerce Commission investigation into the banking sector and their profits.

According to data from KPMG, banks in New Zealand made more than $7 billion in after-tax profits last year. No matter how you crunch the numbers, they’re eye-watering.

“That’s over $300 a second, every second of the day,” says Sam Stubbs, managing director of Simplicity.

“It’s over $1 million an hour. This sector is extremely profitable - more profitable than the electricity sector, the supermarkets, and the construction companies, put together.

“If you took $10 billion with the profits divided by the number of New Zealanders, that's an average of $2,000 each.

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“The sheer magnitude of it is cause for concern.”

Stubbs has long called for an investigation into bank profits - and on Tuesday, he got his wish, with the government directing the Commerce Commission to look into the matter.

Finance Minister Grant Robertson said there were “long-standing concerns” that New Zealanders did not feel the banking market was working for them - and Stubbs agrees.

“It would be OK if a company was making super profits and delighting its customers - if it was, say, a Nike or an Apple, the customers love them, love paying a premium for the products, that would be okay.

“But that is not the case in New Zealand. If you look at the net promoter scores for the banks, they're horrible. What it indicates is that the customers are paying a lot of money, (the banks are) making a lot of money, but they're not happy. That's not a good outcome.”

While the exact parameters of the investigation aren’t yet publicly-known, Stubbs says they stem from a lack of competition within the sector.

“Why is there no American retail bank? Why can't you bank with an American bank? Why can't you bank with a big Asian bank, why can't you bank with a big Chinese bank?

“How come Kiwibank isn't a big player? Kiwibank's got 5% of the market share and (is) supposedly owned and backed by the government. What's going on there?

“There're a whole lot of questions about getting a proper competitive market in a free market economy like ourselves. We just don't have the competition that we deserve.”

Stubbs says it’s not the profits themselves that are concerning - strong banks are a good thing for a country. It’s the level of profits, and the lack of competition that concerns him.

The Banking Association of New Zealand, which represents many banks operating in New Zealand, says it welcomes the inquiry and hopes it will ease concerns about competition and innovation in the sector.

It says New Zealand’s banks are profitable and well-regulated, insulating them from the fluctuations seen recently overseas.

The Association says intensified regulatory requirements have stymied innovation and hopes the Commerce Commission will also examine the regulatory environment in the course of the inquiry.

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