MPs grill Westpac bosses over profit, climate ‘dishonesty’

Wednesday, 20 November 2024

Westpac chairperson Pip Greenwood and Catherine McGrath, chief executive officer, address the Finance and Expenditure select committee's banking inquiry.

Westpac’s top bankers faced the most aggressive line of questioning yet at Parliament’s banking inquiry as MPs’ demonstrated an increasingly in-depth understanding, and scepticism of the sector.

Westpac’s Pip Greenwood and Catherine McGrath were the fourth bank chairperson and chief executive combo to face the committee following ANZ, ASB and Rabobank.

The questioning included name-checks to media articles from The Post, The Spinoff and Interest.co.nz, all raising concerns about bank behaviour and profits.

ACT MP Mark Cameron challenged McGrath on The Post reports highlighting Westpac’s tougher climate emissions targets for Kiwi dairy farmers compared with its parent company’s emissions targets for its Australian dairy farmers.

He asked whether banks weren’t “behaving like a cartel” in setting climate emissions reductions targets.

“We have a functioning ETS [Emissions Trading Scheme] in New Zealand,” he said.

More than 1000 climate activists at the latest School Strike 4 Climate in Christchurch demanded 'more radical' action on climate change from elected representatives. (First published September 23, 2022)

McGrath responded by saying farmers welcomed Westpac’s focus on emissions, which was intended to help farmers retain access to markets in places like Europe where customers were putting emissions targets in place.

Green MP Steve Abel followed up by asking Greenwood and McGrath whether there was “dishonesty” about Westpac’s professed concern for the climate when its parent company had about A$9 billion invested in companies extracting fossil fuels.

“Is there not… for want of a better word, a kind of a dishonesty in your argument that you actually are committed to climate action when you're actively funding the most polluting industries that we have on this planet?” he asked.

McGrath said Westpac was focused on working with fossil fuel borrowers to help them down a greener path: “I think the right way to do that is to work with long-standing customers who have an intent to transition and support them in that transition”.

National MP Stuart Smith challenged Westpac over its high profit, citing quotes from former ANZ bank economist Cameron Bagrie, who has pointed out that while banks like to compare their return on equity to large NZX50 companies, they have far lower profit volatility, continuing to make high profits regardless of how the rest of the economy is performing.

Greenwood was unable to answer his line of questioning: “I think we'd have to go and go away and have a look at that,” she said.

Green MP Francisco Hernandez quoted a Spinoff story from two days ago questioning Westpac over its KiwiSaver scheme decision to sell out of Israeli banks, however, he was seemingly unaware that several of the bank’s KiwiSaver funds have investments in Motorola and Caterpillar, which have both been the focus of anti-war protesters.

Divestment campaigners from Justice For Palestine protesting outside an ASB branch in Wellington earlier this month.

The banking inquiry, which follows a Commerce Commission bank market study, is being held with cross-party support and grew out of the frustrations of farmers and the Government over lacklustre agriculture sector lending by the big four banks.

Farmers have grumbled about banks’ decarbonisation plans, their apparent desire to aggressively grow their city home loan businesses at the expense of rural lending and the high price banks charge for farm loans.

MPs attempted to probe rural lending, including farmers’ belief that banks are overcharging them on loans when compared with urban homeowners taking out home loans.

Greenwood admitted the bank had not had a forced sale of a farm since 2016, and that urban mortgagee sales were rising, but she said the higher margins it charged on rural loans were justified by higher risk from weather events and volatile commodity prices.

MPs also sought to find out whether banks were treating customers differently, with well-informed, higher-earning customers able to get better home loan rates.

Labour MP Arena Williams was concerned more vulnerable people were not able to negotiate over loan rates, while well-informed homeowners were.

McGrath said 65% of Westpac mortgages came through mortgage brokers, saying that pointed to a high level of shopping around for loans.

She acknowledged the bank had a “pricing desk” that handled these negotiations.

Westpac’s profits have been under scrutiny, as have banker salaries.

But she claimed not all banks were doing as much as Westpac to assist disadvantaged New Zealanders, including the reluctance of some to give bank accounts to people coming out of prison.

“Our view is that you can’t step back into society well without a bank account,“ she said.

MPs also sought to test the banking sector’s claim that there is fierce competition, and not a “cost pillow fight” between the big four banks, ANZ, ASB, BNZ and Westpac.

“I’m very comfortable there’s fierce competition,” McGrath said.

She said pricing on mortgages was so competitive that if Westpac did not have sharp rates, it saw an immediate drop in market share of new mortgages.

“We have ranged in the last year from being seriously behind market growth to being seriously above market growth,” she said.

There was never any collusion on pricing between big banks, she said.

National MP Ryan Hamilton was unimpressed and said it looked like customers were fighting “for scraps at the margin“, and were being “milked”.

“We don’t milk our customers at all,“ said McGrath, who told the inquiry she was one of four executives at the bank to have annual pay of more than $1 million.