Banks change tack on staff cutbacks

By PAULA OLIVER

Banks appear to have rediscovered the key to customer service, with latest figures showing that staff numbers have been boosted by almost 4 per cent.

The annual KPMG Financial Institutions Performance Survey, released yesterday, painted a picture of banks returning big profits but also spending more to increase staff and branch numbers.

The country's 18 registered banks added 840 employees to their operations last year, with the big five accounting for 691 of those people.

Andrew Dinsdale, chairman of KPMG's banking group, said the increase was a significant change from the dramatic cutbacks seen during the 1990s.

"It's quite a turnaround," Dinsdale said. "I think we can say ... that banks have got the message that customers like to be able to deal with real people when they are carrying out their banking transactions."

ASB was at the front of the pack, adding 211 staff during the year. BNZ, the National Bank and ANZ all added between 125 and 155, and Westpac posted the smallest increase, 57.

Dinsdale said that many of the staff were frontline, and an increase in the number of branches throughout the country was also a signal that banks were heeding customer satisfaction requests.

The survey also reveals that there is no halting the banking sector's profit express train. Net profit for registered banks fell slightly over the year to $2.45 billion, but much of the fall was due to one-off events such as the sale of the National Bank.

Net interest income rose by more than $430 million to $5 billion, helped by an increase in lending volumes and a higher interest margin.

The red-hot real estate market accounted for part of the volume increase.

Dinsdale labelled mortgage growth as "spectacular", and said that despite it now becoming harder to afford a first home, many New Zealanders were obviously still wanting to own a home.

The National Bank is the country's biggest mortgage lender, with $20.5 billion on loan.

ASB and the National Bank increased their mortgage books the most during the year.

Dinsdale said he expected the rampant mortgage growth to cool this year, after two Reserve Bank increases in the Official Cash Rate and a drop in migration numbers.

The overall lift in interest margin for registered banks is also a turnaround from previous years - and one which will raise questions about the level of competition in the sector.

The interest margin is the difference between the interest that banks pay for money, as opposed to what they charge.

Last year the average figure across registered banks increased from 2.56 per cent to 2.65 per cent.

The spread between the country's big five banks is wide, with Westpac posting the highest interest margin of 2.96 per cent, while ASB had the lowest at 2.43 per cent.

The average New Zealand margin is around the same as Australian banks, lower than most in the United States and higher than some British operators.

A snapshot of 2003

* 88% of all payments made last year were made electronically.

* The big five banks took on an extra 691 staff.

* Real estate mortgage lending by all registered banks increased by $9.7 billion, or 13.3 per cent, to just over $80 billion.

* Residential property lending now represents 51% of total lending - which stands at $162 billion.

* Registered banks made a collective net profit after tax of $2.45 billion - or more than $600 for each New Zealander.