Press Release – Green Party
NZ banks laughing all the way to the bank New Zealand banks, among the developed worlds most profitable, just got more profitable according to KPMGs Financial Institutions Performance Survey.NZ banks laughing all the way to the bank
New Zealand banks, among the developed world’s most profitable, just got more profitable according to KPMG’s Financial Institutions Performance Survey.
Despite difficult conditions throughout the rest of the economy, banks’ profits grew 13.6 percent in the year to September 30, 2012 and KPMG forecast profits will continue to grow out to 2014. Interest margins, another measure of bank profitability, are also up to 2.25 percent – a high level not seen since the height of the last property bubble.
“New Zealand banks, amongst the most profitable in the developed world, have just got more profitable and their excessive profitability is damaging the rest of the New Zealand economy,” said Green Party Co-leader Dr Russel Norman.
“Our banking sector is dominated by the big four foreign banks – ANZ/National, BNZ, ASB, and Westpac – who are sending their record profits offshore draining the New Zealand economy of much needed capital.
“Bank profits repatriated to Australia constitute the single biggest income outflow in our current account deficit making it even more difficult for us to rebalance our economy.”
Dr Norman offered several solutions that could help stem the capital drain and return bank profits to more reasonable levels.
“The banking sector needs a fresh injection of competition, particularly from New Zealand owned banks,” Dr Norman said.
“The National Government has dragged its heels on retendering New Zealand’s biggest banking contract – the Government’s own master banking contract – a contract that has been held by Westpac and untendered for 24 years.
“Retendering the master contract will give New Zealand-owned banks an opportunity to tender for some of the government’s banking needs and lower the government’s overall costs.
“Finance Minister Bill English announced that the contract was going to be retendered in the 2011/12 financial year. But he hasn’t done it.
“For too long, the National Government and the Reserve Bank have been complacent about the excess profitability of our foreign-owned banking sector.
“Instead of promoting competitive behaviour in our banking sector, they’ve argued that excessive profits were an important part of bank stability. This is lazy thinking. Proper regulatory oversight is what ensures bank stability.
“We can have a secure banking sector which makes reasonable profits that don’t come at the expense of the rest of the productive economy.”