Tex Edwards says UBS reports on ANZ show ‘alpha’ profits; the bank says they don’t tell the whole story
Wednesday, 8 October 2025
Investment bank UBS reports on ANZ say the bank’s New Zealand business is extremely profitable, which according to the country’s leading anti-monopoly crusader puts it at odds with what the bank told MPs at recent banking inquiry hearings.
“The New Zealand franchise based on this analysis is a stand out,” says UBS in its June analysis of the entire ANZ Group. “It accounts for 15% of net loans, 13% of implied capital and delivers 22% of group profits, 16% of revenue and only 11.9% of overall costs.”
The bulk of ANZ Group’s business is in Australia.
ANZ’s New Zealand division, which does not include its New Zealand institutional banking and treasury operations, had an “implied” return on tier 1 capital of over 20%, the second highest of any of the group’s divisions, bettered only by its Australian commercial banking operations, UBS analysts reported.
“Tier 1 capital” is a bank’s core capital, including fully paid-up share capital.
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For Tex Edwards, anti-monopolist, and founder of the 2degrees telecoms business, the UBS Australia research note provides a “gotcha” moment, showing just how profitable institutional investors think ANZ is in New Zealand.
“ANZ’s New Zealand operations are propping up Australia,” he says, describing ANZ as having “alpha” returns in New Zealand.
According to Edwards, the UBS report from June, and an earlier one from May, paint a different profitability picture from the one banking industry lobbyists presented to Parliament’s banking inquiry.
“It equals a bad story,” said Edwards, who is publicising the UBS reports as part of a long-term campaign by Monopoly Watch to jog politicians to act to inject more competition into banking.
ANZ pushed back on the UBS reports, with a spokesperson telling The Post: “UBS’s implied return on equity (RoE) figure doesn’t tell the full story, and doesn’t represent ANZ NZ’s profitability.”
The New Zealand arms of Australian banks have been under fire here for their profitability, which has remained largely intact despite a weak economy.
The Government has developed a strategy to drive competition by beefing up Kiwibank, and driving the adoption of “open banking” in hopes that would see a new generation of lower-cost digital banks emerge.
That follows reports from the Commerce Commission and the Reserve Bank Te Pūtea Matua, which reported the big four Australian-owned banks in New Zealand were more profitable than most of their overseas peer banks, a conclusion which a Parliamentary banking inquiry accepted, and which ANZ disagreed with.
The two UBS notes, published by the investment bank’s global research arm, were an exercise to compare “implied” RoE for the divisions the ANZ Group reports on to shareholders.
The object of the UBS exercise was to indicate areas where the group’s deployed capital was getting the best returns for shareholders, indicating the areas where new group chief executive Nuno Matos might want to focus to lift ANZ’s share price.
The conclusion of the UBS analysts was that ANZ was unique among Australian bank peers “with a strong Institutional and New Zealand tilt”.
“An objective would be to grow in Commercial banking, and to defend its New Zealand franchise,” the UBS note from May said, though the June note said New Zealand was a small market with no real room for growth.
But an ANZ spokesman challenged UBS’s calculations and the characterisation of the four big Australian-owned banks as excessively profitable, saying they were similar to global peer banks.
“As at 30 September 2024 RoE for ANZ NZ was around 12%. Cash Return on Equity for ANZ Group was 9.7%. This includes global operations, the Australian business including Suncorp and Markets, New Zealand, and around 30 other countries,” the ANZ spokesperson said.
The ANZ NZ that the spokesperson referred to was ANZ’s New Zealand legal banking entity, which is different from the New Zealand division the ANZ Group reports on to shareholders, and which UBS used for its calculations.
The ANZ spokesperson said UBS’s implied RoE calculation did not reflect the different regulatory and capital regime of ANZ NZ.
“UBS have taken the ANZ Group CET1 (common equity tier 1), and used this to calculate implied RoE for all the divisions (including New Zealand). These figures will not reflect the actual capital held by ANZ NZ,” the spokesperson said.
ANZ NZ was subject to stricter capital rules in New Zealand than in Australia, and UBS did not account for the extra capital ANZ NZ was required to hold for goodwill relating to the purchase of National Bank, the spokesperson said.
“These differences will not be reflected in UBS’s implied RoE figure for ANZ NZ,” the spokesperson said.
UBS declined to make public comments on its notes, but is standing by them.
The ANZ spokesperson said return on equity for New Zealand banks had declined over the past three decades, and an independent adviser to Parliament’s Finance and Expenditure Select Committee had described the 12% return on equity of the big four banks as approaching levels that could be regarded as reasonable and sustainable in the long term.
“It is critical that any analysis of the profitability of New Zealand banks is robust. The profitability of our banks has been treated as important evidence for how competitive, and fair, banking markets are, so it forms the basis for policy discussion and public debate,” the spokesperson said.
“Our profitability is also how we attract capital from overseas to our business and the New Zealand economy,” she said.
Edwards said all the big four Australian banks had been shrinking business lending as a proportion of their lending, and expanding mortgage lending as business loans were considered more risky, and banks had to hold more capital against them.
That had fed a housing bubble, and was having a serious effect on the economy, he said.