Aussie banks get strong Kiwi warning

By Lachlan Colquhoun

Friday 21st May 2004

Australia's top four banks can ill-afford to take their profitable New Zealand operations for granted, with a report from broking house Merrill Lynch warning that they are bleeding customers in New Zealand to local institutions.

The New Zealand subsidiaries of the National Australia Bank, ANZ, Commonwealth Bank and Westpac produce 12-15% of the parent companies' profit. But they are all losing market share, with Kiwibank the main benefactor, Merrill Lynch Sydney-based analyst Hamish Carlisle says.

Carlisle used Roy Morgan Research data for his claim that 180,000 New Zealand bank customers switch banks each year, with half of them leaving ASB, BNZ, Westpac and ANZ for a locally owned bank, building society or credit union,

Carlisle says price and service are the main motivators, and that only the CBA-owned ASB is likely to increase its market share in the near future.

Carlisle's views will be poorly received in Australia, particularly at the ANZ which added to its New Zealand portfolio with the National Bank purchase last year.

In its most recent six month result for the half to the end of March, ANZ reported $A71 million in new profits out of New Zealand, with only a four month contribution from the National Bank.

In the $A1.39 billion interim ANZ profit result, New Zealand operations contributed $A172 million, or just over 12%. Westpac, which has just reported interim results for the period to March 31, saw a $A171 million profit contribution from New Zealand, represent just under 14% of the total profit.

But with Westpac Institutional Bank straddling both Australia and New Zealand and contributing $A224 million, the actual percentage of profits from New Zealand is likely to be several percentage points higher, possibly as high as 17%.

Of the other Australian banks, ASB's $A154 million profit for the half-year to the end of December was 12.4% of the total result.

The NAB, which has invested significantly in under-performing UK assets, received 13% of its $A1.86 billion half-yearly profit for the period to December 31 from BNZ.

Merrill's report rates the banks against five criteria, with ANZ last in all categories but one. Analyst Hamish Carlisle sees no end to the customer churn at the ANZ, and sees a danger that adding the National Bank ranked New Zealand's best bank will drag the new bank into mediocrity.

The survey also gives a depressing view of New Zealand bank customers, estimating that as many as 60% are break-even or loss-making. The top 20% of customers generate 90% of the profits, with ANZ, BNZ and Westpac all losing customers from this segment to other banks.

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