90% of New Zealand banking is Australian owned

Tasmanian DevilThe Herald, which has been running a series on Banking in New Zealand, concluded today with a look at the impact of having 90% of our banking owned by Australian banks.

“When the current account deficit blew out this year to a size economists described as “monstrous”, Statistics New Zealand fingered foreign-owned banks as major culprits. (link to pdf file)

And bank workers’ union Finsec probably spoke for many New Zealanders when it said: ‘We are seeing New Zealand’s overall economic well being worsened by the Australian-owned banks sending higher profits back across the Tasman.'”

Yesterday we noted that the Australian Bankers Association was defending huge bank profits being returned as dividends. Interestingly, the Herald notes that very few of those shareholders are Kiwis:

New Zealand ownership of the Australian banks is paltry. Just over 2 per cent of Westpac’s shares are owned by New Zealanders. And Kiwis own little over half a per cent of the stock of ASB and BNZ parent banks, the Commonwealth Bank of Australia and National Australia Bank respectively.

Later in the article Finsec Campaigns Director, Andrew Campbell, comments on a growing concern that Australian banks are not investing in New Zealand banking.

“If you’re Australian-owned, the incentive to invest and really promote a different model of operating in New Zealand is possibly not there.”

The cost to income ratios between entire Australian banks and the New Zealand segment of their operation are significantly different. Westpac ‘s cost to income ratio for its entire business in 2005 was 47.5% but in New Zealand it was only 40.3%. National Australia Bank’s was 59.2%, but at the BNZ (which is owned by NAB) it was only 48.9%. Commonwealth Bank’s ratio was 47.7% but at ASB, which it owns, the ratio was only 44.8%. Only at ANZ were the two figures similar (46.6% c.f. 47.9%). What this appears to show is that most Australian banks are investing less in New Zealand than they are elsewhere to make a profit.

With the Australian-owned banks’ cost-to-income ratios lower here than Australia, “to a degree the business model which has been practised in New Zealand … has really been to use us as, in effect, a cash cow”.

“Our concern about that is that … that’s not good both for the workforce here and the country.”

But, as Campbell notes, the New Zealand owned banks are hardly covering themselves with glory either. TSB and PSIS, for instance, have some of the lowest pay rates in the sector.

“Whilst those banks, credit unions and building societies have maintained a media profile as a result of being New Zealand-owned, and often do good deeds in their community, often that has been at the expense of wages.

“The key issue for us is not necessarily who owns them per se, the key thing is how they behave.”

(thansk to Jean et Melo for the photo)



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