Brian Gaynor: Gizzards of Oz - Big four bank another $5b

COMMENT:

New Zealand's four big business heavies have released their report cards for the latest financial year and the figures demonstrate why they are indeed the heavyweights of the domestic economy.

The four Australian-owned banks — ANZ Bank NZ, ASB, Bank of New Zealand and Westpac NZ — reported statutory net profit after tax earnings of $5.085 billion for the 2018/19 year compared with $5.128b for the previous year (see accompanying table).

These companies completely dominate the domestic economy in terms of earnings because the four largest NZX listed companies — Meridian Energy, Fisher & Paykel Healthcare, Auckland International Airport and a2 Milk — reported aggregate net earnings of only $1.359b for the same period.

READ MORE:
• ANZ annual profit drops 8 per cent to $1.8 billion
• BNZ cracks the billion-dollar profit mark again
• Westpac cash profit rises to $1 billion

If the latter figure is adjusted for Auckland Airport's $254m unrealised property revaluation, the four largest NZX-listed companies had net earnings of $1.105b for the latest year, compared with a massive $5b-plus for the four large Australian-owned banks.

The contrast is even more extreme when compared with the four largest NZ-owned banks — Kiwibank, TSB Bank, Southland Building Society (SBS) and Heartland Bank. These domestic-owned banks reported aggregate net earnings of only $252m for the latest financial year compared with $262m for the previous year.

When it comes to dividend payments, the gap between the Australian-owned banks and our companies is even larger.

In the 2017/18 financial year, the last period for which we have dividend payment numbers for all 12 organisations, the four Aussie-owned banks paid total dividends of $7.781b, the four largest NZX companies distributed $787m to shareholders and the four largest NZ banks had dividend payments of only $54m.

The heavyweight quartet had fantastic 2018/19 years even though their bosses bemoaned reviews by the Financial Markets Authority (FMA) and the Reserve Bank of New Zealand (RBNZ), in addition to the Australian Royal Commission into banking misconduct.

The banks portrayed themselves as the good guys of the domestic business sector in their profit announcement, with ANZ acting chief executive Antonia Watson revealing that it had passed "on more than $20m in savings to customers" and had donated "$15m to local sponsorships and charities".

ASB chief executive Vittoria Short allocated a large section of her results commentary to the bank's sponsorship of St John and KidsCan. She noted that ASB employees are entitled to take 12 paid voluntary hours per year to support community groups and this "will deliver approximately 60,000 hours of service to New Zealand annually".

Bank of New Zealand chief executive Angie Mentis painted a particularly glowing picture of her bank's initiatives in relation to customers, the community and staff. Mentis was quoted as saying the BNZ had "new or increased lending issued to more than 16,000 small and medium businesses", had partnered with the Salvation Army in Porirua and Manurewa and from January 1, 2020 "all employees will receive six weeks' annual leave, an increase from four weeks".

Westpac chief executive David McLean, the only male in this elite group, also had an extremely positive profit announcement. He noted that he "was particularly proud that during the year Westpac NZ had become the first New Zealand bank to become accredited as a Living Wage Employer", it had spent $9m in sponsorship and contributions to the community, paid $478m in tax and "continued to work constructively with the FMA and RBNZ in relation to the regulators' recent Conduct and Culture Reviews of the banking and life insurance sectors".

These glowing self-assessments suggest that all four major Australian-owned banks should be declared co-winners of the Deloitte New Zealand Company of the Year award because of their focus on customers, staff and the local community, rather than their shareholders across the Tasman.

- Brian Gaynor is a director of Milford Asset Management.