NZ Herald
  • Home
  • Latest news
  • Herald NOW
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Herald NOW
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Politics
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Herald NOW
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business / Companies / Banking and finance

Bankers defend scale of profits

Liam Dann
By Liam Dann
Business Editor at Large·NZ Herald·
30 Mar, 2012 04:30 PM5 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

BNZ chief executive Andrew Thorburn and NAB Group chief Cameron Clyne want to 'balance' the conversation over earnings. Photo / Brett Phibbs

BNZ chief executive Andrew Thorburn and NAB Group chief Cameron Clyne want to 'balance' the conversation over earnings. Photo / Brett Phibbs

How much profit is too much? That's a hot topic these days, particularly when the profit maker in question is a bank.

To their credit, it isn't a topic that either BNZ chief executives Andrew Thorburn or his boss, visiting National Australia Bank chief executive Cameron Clyne, are shy of discussing.

Clyne in particular is used to the highly charged public debate across the Tasman.

In 2010 angry protesters were bashing effigies of Kiwi-born Commonwealth Bank chief executive Ralph Norris after politicians weighed into the debate on salaries for banking executives.

That kind of fervour was reignited earlier this year when Australian politicians criticised the big four banks for raising retail interest rates despite the Reserve Bank of Australia keeping the official rate on hold.

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

At its nub the argument comes back to the margins banks are charging on retail rates. So ultimately it is about how much profit banks should be making.

Clyne says the debate is one he is prepared to engage in, if just to inject some balance into the arguments.

"It is fair to say we don't get a lot of third party advocacy," he jokes.

Advertisement
Advertise with NZME.

"I absolutely accept that $5.5 billion profit is a large number," he says, referring to latest National Australia Bank annual result.

But the issue of what constitutes reasonable profit is complex and is therefore a difficult topic for the modern media to process.

It's not the sort of thing that fits easily into a 140-character tweet, he says. He then proceeds to mount a defence of bank profits with the Twitter-sized statement: "The only true measure of profitability is return on equity. Australian banks fall about halfway through the top 100 companies."

That profit, he adds, is made off an asset base of about $500 billion.

Discover more

Banking and finance

Kiwis get thrifty as borrowing flatlines

30 Mar 04:30 PM
Banking and finance

Big bank profits surge to $3.3b in 2011

23 Apr 06:30 PM
Banking and finance

Reserve Bank sticks to its guns on new bank capital rules

12 Sep 12:48 AM
Banking and finance

China challenge tipped for big Aussie banks

24 Nov 04:30 PM

Thorburn - a fellow Aussie who has headed the BNZ since October 2008, when he took over from Clyne - agrees.

"Margins have come up since the global financial crisis," he says.

"But margins are still generally on a long-term decline. If you want a strong banking system you have to have profitable banks.

"BNZ has 5000 staff over 200 outlets. To do that you need to have a margin that enables you to reinvest in that sort of thing."

In Australia the case for banks to maximise profits is easier to make because almost every member of the workforce has a stake in the banks through the compulsory superannuation fund.

"Given the huge penetration of super in the Australian market ... every working Australian is connected in some way to those profits."

Advertisement
Advertise with NZME.

Clyne says he often finds himself arguing with people who want to see banks make lower profits but still want them to pay strong dividends and offer the same high level of security.

"It just doesn't work like that," he says. "I'm happy to have the debate but what I always argue is that there are consequences.

"We can have lower profits but that may mean lower lending ... it will mean lower dividends."

If Australasian banks were to halve profits then they wouldn't be able to keep their AA investment ratings and that would add to the cost of borrowing for Australians and New Zealanders, Clyne says.

"Banks are managing some very delicate risks," says Thorburn.

"Liquidity risk, credit risk, maturity risks. Being profitable and building confidence of investors is vital to building a stable financial system."

Advertisement
Advertise with NZME.

The Australasian system stacks up exceptionally well, says Clyne, but the standout would be the Canadian system.

"It has this feature of five major banks. Which seems to be about the the right number to generate sufficient competition but also allow them to be of sufficient size to be stable and make investments."

When the Australian banks were downgraded from AA to AA- rating agencies highlighted the fact that Canadian banks don't rely on overseas funding.

So the Achilles heel of the Australasian banking system, and by proxy the New Zealand banking system, is the reliance on overseas money, Clyne says.

There is direct pressure on the Australian and New Zealand banks to move towards self-funding. The Basel III banking accord requires them to do so by 2018.

Australia's banks are about 65 per cent self-funding at present.

Advertisement
Advertise with NZME.

There are two ways to get to 100 per cent, Clyne says. One would be to cut lending - which would have drastic consequences for the economy. The more preferable option is to move slowly and steadily by growing the local bond market.

In reality New Zealand will always struggle to get to 100 per cent local funding, Thorburn says.

"In New Zealand we need to save more," he says.

"I don't have a problem with New Zealand financing some of our growth through offshore markets ... we're a trading nation.

"But we do need to get our 65 per cent to 80 per cent.

"This is where there are tremendous advantages for the linkage between he New Zealand and Australian banking systems," says Clyne.

Advertisement
Advertise with NZME.

"Under Basel we have to get to 100 per cent as a group. So if New Zealand only has the capacity to get to 80 it's far better it's in the group."

Save

    Share this article

Latest from Banking and finance

Premium
Companies|banking and finance

NZ’s largest taxpayers revealed - does big business play fair?

01 Jul 05:00 PM
Banking and finance

Watercare secures $3.4b debt facility, largest for NZ corporate

30 Jun 05:00 PM
Personal Finance

Big Reserve Bank scheme to protect Kiwis' savings launching

29 Jun 05:00 PM

There’s more to Hawai‘i than beaches and buffets – here’s how to see it differently

sponsored
Advertisement
Advertise with NZME.

Latest from Banking and finance

Premium
NZ’s largest taxpayers revealed - does big business play fair?

NZ’s largest taxpayers revealed - does big business play fair?

01 Jul 05:00 PM

Thirteen companies each pay more than $100m in annual income taxes.

Watercare secures $3.4b debt facility, largest for NZ corporate

Watercare secures $3.4b debt facility, largest for NZ corporate

30 Jun 05:00 PM
Big Reserve Bank scheme to protect Kiwis' savings launching

Big Reserve Bank scheme to protect Kiwis' savings launching

29 Jun 05:00 PM
Former CFO of failed insurer CBL to pay $1.2m for continuous disclosure breaches

Former CFO of failed insurer CBL to pay $1.2m for continuous disclosure breaches

26 Jun 11:50 PM
From early mornings to easy living
sponsored

From early mornings to easy living

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP