ANZ, Westpac try to regain market share

New Zealand's two largest banks - Australian-owned ANZ National and Westpac - say they need to tackle a loss of market share to smaller rivals such as state-owned Kiwibank.

At a briefing for analysts yesterday in Auckland, ANZ National chief executive Graham Hodges said the bank had largely fought off "relentless attacks" by competitors including Kiwibank during the integration of the National Bank which it acquired in 2003, but had lost "some market share" over the last three years. He put that loss at about one percentage point.

Last month Westpac chief executive Anne Sherry said her bank had seen its share of the consumer market fall by one per percentage point per year over the last two or three years.

Yesterday, she told analysts this had been due to the bank's "undue focus on profitability at the expense of competitiveness".

Westpac's consumer banking general manager Henry Ford said the division's performance had been "disappointing" over the last two years.

Market share had decreased, aspirations to increase customer numbers in the key Auckland market had not been achieved and customer satisfaction improvements had proved insufficient to catch the market leaders.

Hodges said Kiwibank - which this week reported a twofold increase in net profit - was "small, very aggressive and quite an effective competitor to the main banks".

Kiwibank chief executive Sam Knowles said this week that the big four Australian-owned banks' low income-to-cost ratios showed a level of profitability "unsustainable in the long term".

But Hodges said market leader ANZ National, with an income to cost ratio of 46 per cent as against Kiwibank's 83 per cent, had sufficient scale and cost efficiencies to sustain profitability and grow market share at an even lower ratio.

Knowles said this week that competition on price led to better value for customers "right across the market".

Westpac had moved to meet the interest rate and product offerings of its competitors to retain customers and the results were encouraging, Sherry said.

ANZ National aimed to meet group targets of 7 to 9 per cent revenue and profit growth over the period. The bank believed credit growth over the next year would help it lift revenue.

"We will be opening up what we call the financial jaws, meaning that revenue growth will grow more quickly than cost growth," Hodges said.