Markets with Madison: Bank profits have peaked, Apple eats their lunch

The head of the country’s biggest bank ANZ expects its margins - a key measure of profitability - have peaked and will decline from here, as more profits go out the door to customers through higher paying deposit savings rates.

Antonia Watson told Markets with Madison the bank’s margins had expanded over the past year by 21 per cent, but that would be short-lived as savers chased higher returns.

“It tends to get wittled away and so I suspect we’ve seen the peak now.

“We’d hate to see it fall off a cliff because we want strong, stable banks ... But, I feel like there’s probably more tailwind on margins now.”

Defending its increase in margins to date, Watson said ANZ had not passed on the full 5 per cent increase in the official cash rate to lending interest rates, nor to depositors.

“It’s always a careful balancing act.”

Watson explains how the the bank decides the scale and timing of increases to lending and deposit rates, determining how much profit it makes between the two, in today’s episode of Markets with Madison.

Banks now had an unsuspecting competitor in Apple, with the iPhone maker launching a high-yield savings account offering a 4.15 per cent annual interest rate.

CMC Markets analyst Tina Teng explained the benefit Apple’s deepening position in fintech could bring to its bottom line, following a consecutive drop in its quarterly revenue.

Get investment analysis and insights from the experts on Markets with Madison every Monday and Friday on the NZ Herald.

Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.