Survey finds ANZ most likely to lose to Kiwibank

The New Zealand bank most likely to lose market share to newcomer Kiwibank was ANZ Bank, KPMG said in its banking survey released today.

KPMG banking and finance group chairman Andrew Dinsdale said state-owned Kiwibank had seen some successes since it became a registered bank in February. However, it would take about 12 months before Kiwibank's performance could be properly assessed.

Kiwibank was attracting a greater proportion of wealthier customers than originally expected, which would improve profitability, although there had been some delay in signing up its franchisees.

Mr Dinsdale said ANZ Bank was most likely to cede business to the newcomer, partly because it had a bulk of customers who fit the lower socio-economic Kiwibank customer profile.

"Because of its acquisition in 1989 of PostBank (ANZ) has got a demographics of its customer base that is slightly skewed, to that sort of Postbank customer base.

"It has moved on a lot since 1989 ... but I think you (also) have to recognise ANZ has not performed well in the customer satisfaction survey. If someone wanted to test the water, someone who's not so satisfied with their existing main bank may try Kiwibank," Mr Dinsdale said.

Kiwibank was unable to continue discounting in fees and interest rates long term -- its main point of difference from other banks -- if it wanted to make a profit, he said.

Kiwibank did not charge application fees for home loans and would provide free transactional banking to customers with a home loan. With the advent of Kiwibank's low fee banking, other banks had also lowered some fees.

Kiwibank's introductory floating and one-year fixed home loan rates were also between 40 and 60 basis points lower than the major banks'.

Banks such as WestpacTrust had shown they were prepared to lose their margins in order to build an asset base or attract customers by reducing fees, but not permanently, Mr Dinsdale said.

Kiwibank's fixed costs were lower, as it used cheaper technology which did the same job, but the other banks had also spent a lot of money making their equipment more cost-effective.

The jury was still out on internet banking, which had risen to 26 per cent of customers signed-up, from 15 per cent in 2000.

However, when it came to lending, customers used the internet banking sites as a search engine for the best deals but preferred to meet the bank face to face.

Despite an increasing use of technology, 300 more staff were added last year, the first increase in the industry since 1995, KPMG said in its 16th Financial Institutions Performance Survey released today.

One reason for that was a slowdown in the closure of branches. Though 654 branches have closed since 1994, only 15 branches shut last year.

New Zealand banks saw significant rises in lending assets and strong profit results in 2001 but rising interest rates could peg back that growth this year.

The Reserve Bank has raised the Official Cash Rate -- which influences other banks' interest rates -- twice this year to 5.25 per cent, and is set to do so again tomorrow.

Registered banks' combined after-tax profit rose by about 19 per cent in 2001, and their cost to income ratio fell to 48.4 per cent from 54.1 per cent, the said.

For the 2001 year WestpacTrust remained New Zealand's largest and most profitable bank, with total assets of $37.9 billion and a record after-tax profit of $465 million for the year ended September.

Little separated WestpacTrust from the second and third largest banks -- Bank of New Zealand and National Bank respectively -- in terms of size.

Customer satisfaction rose during the year, according to a University of Auckland customer satisfaction survey included in the report.

TSB Bank continued to achieve extremely high customer satisfaction scores. Significantly improving their performance were ASB Bank, National Bank and WestpacTrust; and BNZ and ANZ Bank remained static, resulting in lost ground to the competition.

WestpacTrust and ANZ had the lowest proportion of satisfied and very satisfied customers, according to the survey.

- NZPA