News

Finsec says the banks are avoiding participation in economic recovery initiatives or making commitments to keep local staff in work.

Finsec was responding to the annual KPMG banking survey which showed the banks increased their underlying profits by 5.1 per cent in the past year.

“It is remarkable these profit levels occurred at a time when the economy was souring. That shows the banks are well positioned and well insulated to be doing more to help out the overall economy,” said Finsec Campaigns Director Andrew Campbell.

In recent weeks the banks have scrambled to avoid participation in a 12 month mortgage holiday scheme like that negotiated between their parent companies and the Australian government. They have also wriggled out of the shared equity scheme agreed to by bank CEOs at the Jobs Summit.

“The banks can afford to be doing more for the local economy. It is scandalous that the government is not requiring them to help out people who lose their jobs or provide firms access to funding – especially while they are receiving tax payer support that is underwriting their business and supporting their profits,” said Campbell.

“An analysis of the Australian owned banks’ profits in recent years shows they are making a significant dividend return to their shareholders. If the banks are allowed to operate as business as usual then the New Zealand taxpayer will be simply underwriting the return of profits to rich shareholders,” said Campbell.

“It is time for the government to require more from the banks. They can afford it. This can include a 12 month mortgage holiday for those that lose their jobs, the shared equity fund for businesses that are cash strapped and ensuring bank staff stay in work and get a fair wage rise,” said Campbell.



Below is an analysis of Australian owned bank profits over recent years.



Distribution of profits for the four major banks in New Zealand

	2004	2005	2006	2007
ANZ National
Profit	680	917	1,072	1,168
Dividend payment	200	360	900	728
Dividend as % of profit	29.4	39.2	84.0	62.3
BNZ
Profit	471	525	605	683
Dividend payment	323	235	335	430
Dividend as % of profit	68.6	44.8	55.4	63.0
ASB
Profit	317	379	440	532
Dividend	35	59	890	856
Dividend as % of profit	11.0	15.6	202.3	160.9
Westpac
Profit	-	-	7	446
Dividend	-	-	0	217
Dividend as % of profit	-	-	0	48.6

Source: Registered bank disclosure statements

Notes: Dollar figures are in NZ$ million

Years are ended September, except for ASB Bank, which has years ended June Profit is Net Profit After Tax



In the case of Westpac, the figures are for the recently established New Zealand incorporated part of Westpac, which was established on 14 February 2006.



The distribution of profits by banks varies considerably across the banking sector, and varies from year to year. For example, in the period 2001 to 2006, the percentage of net profit after tax distributed by way of dividends or other distributions to shareholders across the New Zealand banking sector as a whole ranged from 32.2% in 2004 to 93.6% in 2006.



The average percentage of net profit after tax distributed to shareholders over the period 2001 to 2006 inclusive, for the banking sector as a whole, was around 60%.



Data referred to in this paragraph are sourced from the Reserve Bank of New Zealand database on financial institution statistics, accessible via the Reserve Bank website.