Banks struggle as profits grow by not quite enough millions

New Zealand’s major banks are all suggesting that growing their profits may be harder than it has been in the next few years. All except the BNZ have reported smaller growth than previous years in their recent half yearly reports to shareholders and have been making comments suggesting tough times ahead.

But, wait, let’s keep this in context. No one is talking about losing money here. What banks are worried about is that they will not be able to grow their very large profits by quite as much as they were able to grow them last year. Even if ANZ National has 0% growth it’s profit would be over a billion dollars next year. In fact, to have a profit of a billion dollars it could afford to have negative growth of 6%.

Given that we believe a key driver of the ever increasing profits made by New Zealand’s major banks is the pressure placed on staff to meet targets, it would be astounding to see banks crying poor next year because their massive profits were only 8% larger than last year rather than 12%.

Having said that, there is obviously nothing wrong with recording a strong profit. It just needs to be to the benefit of the staff who help generate it rather than at their expense. That means investing it back into staffing, customer service and training.

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