Banks: your new best friend

BNZ kept a skeleton staff this week so 3500 staff members could help with community projects. Photo / Martin Sykes

You may have noticed the big Australian-owned banks trying to cuddle up to you lately.

In one television commercial a big clumsy Westpac guy, prompted by wordless admonitions from a bunch of everyday Kiwis, eventually does the right thing by going to some inconvenience to retrieve his discarded icecream wrapper from the sea.

ASB Bank, on the other hand, is trying to convince people it is one of us, running adverts telling us it has been a "Kiwi bank" since 1847.

This week BNZ was "Closed For Good", running a skeleton staff to look after its banking business for the day while 3500 of its employees were out doing good deeds in the community.

"Banks just genuinely believe that we need to be a part of the community," says BNZ head of external communications Diane Maxwell.

"And if we're going to be a part of the community we need to do stuff that is tangible rather than just say it. Closed For Good was very tangible."

Maxwell points to recent comments from Cameron Clyne, formerly BNZ boss but now chief executive of parent National Australia bank, suggesting that the current hostility towards major Australian banks was not tenable for viable businesses.

Clyne's comments acknowledged there had been a loss of customer trust in the big banks, says Maxwell, "and we need to work hard to re-earn that trust".

She points to a "general kind of global loathing of banks as a result of the financial meltdown" which had spread to New Zealand, even though none of the banks here have had controversial taxpayer-funded bailouts.

However, that's just part of "a really messy mix" of factors including the subsequent recession, increasing redundancies, fees - including the anger-inducing early repayment charges imposed for breaking fixed-term mortgages - the massive "structured finance" tax cases, and state-owned Kiwibank being "a bit relentless" in its nationalistic marketing.

A well-seasoned spin doctor with banking industry experience says bank bashing is largely a pro-cyclical phenomenon.

"It's always easier in the good times," he said, speaking on condition of anonymity. "But when the big wheel turns, various commentators look around for someone to blame and the banks always cop a lot in that respect.

"You do see a lot of scrutiny of things like break fees, regular fees, interest rates - do they go down as quick as they go up? All those things become magnified in an environment where the economic wheel's turned."

A case in point would be Opposition finance spokesman David Cunliffe's campaign to focus attention on what he claimed was the big banks' reluctance to "share the pain" of the recession being experienced by their customers as they were encouraged to do in more diplomatic terms by both the Reserve Bank and Parliament's finance and expenditure committee.

"There's few more rewarding sports for a politician than bank bashing," observes Andrew Inwood, principal of Australian finance industry market intelligence and research consultancy, brandmanagement.

"That is of course, until you're in Government, when you've got to manage the situation."

To be fair to the big banks, their latest round of results released over the past two weeks indicates they are now suffering from the effects of the downturn a lot more than they appeared to be a year ago.

Aside from the effect of one-off items unrelated to the recession, our biggest bank ANZ National's underlying cash earnings were down 32 per cent to $628 million, Westpac's were down 40 per cent to $236 million and BNZ's were down 13 per cent to $420 million.

Meanwhile, the spin doctor says given all the negative press they've generated recently it's no surprise to see "various manifestations" of the banks' work to counteract it. Just how effectively this can be done remains to be seen.

If anything, ASB's "Kiwi bank" campaign testifies to the power of state owned rival Kiwibank's "superb" campaign using the catch phrase "It's Ours", the spin doctor says.

"I think it's brilliant to claim that moral high ground and they've done it pretty well."

Tough as Kiwibank's position is to attack, the banks face a more difficult challenge when it comes to their "structured finance" tax issues which are arguably the biggest tax avoidance cases in New Zealand history.

"It would take a s ... load of good PR to offset that!"

From a professional point of view, given the current environment "it's a fascinating time to be in the game", he says, adding that the banking industry has "the potential to do profound good but also to profoundly annoy people if you get it wrong".

However Inwood - who has 18 years' experience in the Australian financial services industry including stints as head of marketing at AMP Investments and Rothschild Australia Asset Management - suggests banks' potential for "profound good" beyond providing the service they are paid for, is minimal at best.

He says there might have been a time when banks, particularly state owned ones, were regarded as "social infrastructure", but not any more.

"Banks are profit-making enterprises. They're there to make money and because they have shareholders they have a very pure reason to exist. They don't exist to provide services to the community at large."

Massey University head of banking studies David Tripe takes a similar view: "They are generally looking to be sympathetic and considerate and all the rest of it but when it comes to the crunch, who will they ultimately owe and give their allegiance to?"

Given the reality of the situation, Inwood sees the banks' need to portray themselves as "warm and friendly and loveable" as curious and possibly even self-defeating.

"It causes this thing in people's brains that the psychologists will call cognitive dissonance.

"The more that the banks say 'we're lovely, nice and friendly' and the more you don't experience those things, the more that everything they say becomes suspect."

His company's research suggests that when it comes to banking, all customers really care about is price and ease of use.

"Everything else is largely irrelevant. Do you think anyone actually really believes banks are interested in them and want to actually help them?"

If his comments regarding the major banks appear somewhat uncharitable, bear in mind he started up non-bank mortgage lender Wizard Home Loans, which was in direct competition with them.

His company's finance industry blogsite, burningpants.com, is a reference to the "liar liar" refrain, "because one of the things banks do is they tell lies pretty persistently".

Talking about ASB's "Kiwi bank" advertising, Tripe is more circumspect than Inwood would be.

"It's interesting but not very true," he says. "One of the interesting things we found out when we did some survey work was that a significant proportion of people believed ASB was a Kiwi bank, but they are not and we shouldn't kid ourselves."

Tripe, a generally well-informed and balanced commentator on banking industry issues, was showing some signs of frustration with the quality of financial information provided by Westpac this week in its full year results, labelling some numbers "scurrilous and nonsensical".

The lack of clarity in financial information supplied to their New Zealand stakeholders is hardly likely to change his view expressed a day or two earlier that sometimes the banks "have not been as sensitive to the way in which the public might perceive them as they might have been".

"They have at times been a bit ham-fisted, careless, and not as attentive to the public as they could be or should be," says Tripe.

There are clearly now signs they are currently "trying to bolster, repair, or remedy the perceived deficiencies in their public image.

"Every now and then they have a burst of thinking their public image is not so good and they'd better do something about repairing it.

"They do some good work for a while and then they lapse back into clumsy arrogance again."