Aussie banks want to cut costs but customers just want good service

By Peter V O'Brien

Friday 17th May 2002

The three Australian-based banks that have most of New Zealand's banking business expressed again their fetish about lowering cost/income ratios when they reported for the six months ended March 31.

They were also heavy on a desire to have good relationships with customers and staff.

The issue of reducing cost/income ratios - see table - was put into perspective when ANZ Banking Group chief executive John McFarlane appeared on Australia's channel Nine business programme, shown on Prime Television (April 28).

Mr McFarlane said his bank wanted to get its cost/income ratio into the mid-40 percentage and leave it at that.

"I would be unhappy if it goes further."

He wanted to see growth in the bank and that would involve a short-term rise in costs, thus eating into the ratio.

ANZ's interim report quoted Mr McFarlane as saying the bank continued to face the challenge of achieving real balance between the interests of shareholders, staff, customers and the community.

"It is no longer about promises. It is about urgent tangible action that demonstrates we put customers first, that we lead and inspire our people and that we are worthy of the community's trust, while meeting shareholders' expectations.

"This is an enormous task. We know we have much still to do but we have made substantive progress in each of these areas.

"We are now intent to finish the job. Only then can we stand up and be truly proud of our achievements."

Mr McFarlane is a Scot, a member of a race that speaks bluntly and is not afraid to front up to a penetrating but courteous TV interview.

Some of TVNZ's self-appointed rock stars could learn from their Australian counterparts, as could Radio New Zealand's constantly interrupting and self-opinionated interviewers.

Mr McFarlane's openness and concern for human values was not shown in New Zealand when a bank spokesman was left to deal with the suicide of an investment manager. A coroner's inquest said the deceased was placed under extreme pressure.

Where was ANZ's top New Zealand executive?

The bank's emphasis on reducing cost/income ratios as much as possible has resulted, in New Zealand at least, in dissatisfaction among customers who face teller counters with up to 10 dealing points but only two to three being staffed.

Anyone who has dealt with the generally friendly, polite and efficient tellers know the staff share customers' dissatisfaction.

Deputy Prime Minister Jim Anderton's Kiwibank may succeed or fail. The massive sign-up of customers, albeit most of them with relatively small assets, should have sent a message to the big banks.

They may want to be rid of such people, who provide little profit.

The table shows bank profit and share-price appreciation display no signs of slowing down, due to the "big deal" approach to business.

Possibly shortsighted bank executives may eventually regret that philosophy.

Some small customers become desirable clients when they overcome economic odds and build businesses.

They can have elephantine memories when it comes to recognising who were sympathetic and who raised obstacles.

The banking fraternity/ sorority is often charged with unreasonableness, given its domination of the financial system and a perception it does what it likes, irrespective of the existence of a banking ombudsman.

Reserve Bank control of registered banks is confined to capital adequacy requirements.

The banks have a problem that may be beyond solution. They are companies with shareholders who demand top financial performance.

That demand may conflict with customers' requirements and the views of staff.

The table shows the major banks were healthy at March 31. A corresponding improvement in share prices occurred between The National Business Review's examination of the sector in November and on May 10.

ANZ got it right on April 28 when Mr McFarlane said there was an ultimate to efficiency.

There is, or should be, a person-to-person element in banking.

The onward march of electronics, including call centres and "thank you for your call; your business is important to us" messages infuriate bank customers.

Put people back in charge and banks will get better customer relations.

That could be at a short-term cost to shareholders.

HOW THE BANKS PERFORMED

Bank	Profit 31.03.02	Change ¹	Price 10.5.02	Change Nov-May	2002 high	2002 low	Cost/ income September	Cost/ September March

ANZ	$A89.5	+17.3%	$A18.92	+4.7%	$A19.53	$A17.02	48.3%	46.5%
NAB	$A225.6	+11.4%	$A34.95	+11.4%	$A35.85	$A30.95	49.6%	48%
Westpac	$A101.8	+10.2%	$A16.08	+3.5%	$A17.01	$A14.93	51.5%	49.4%

¹ On corresponding half-year ended March 2001

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