Latest / Early Edition with Ryan Bridge / Claire Matthews: Massey University Head of Accountancy, Economics and Finance on Kiwibank's financial results

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Claire Matthews: Massey University Head of Accountancy, Economics and Finance on Kiwibank's financial results · Early Edition with Ryan Bridge

• 0:00
  Speaker 1: Now back home. Kiwibank posted a week of result this
• 0:03
  Speaker 1: year as it says, competition in the sector is heading
• 0:05
  Speaker 1: up a n Z quite aggressive. They had a net
• 0:08
  Speaker 1: profit of one hundred and seventy four million four the
• 0:11
  Speaker 1: year to June. Last year it was one hundred and
• 0:12
  Speaker 1: ninety one down nine percent physically. In Matthew's, head of
• 0:15
  Speaker 1: School of Accountancy, Economics and Finance at Massi University with
• 0:18
  Speaker 1: me this morning, clear, good morning, Well there are I
• 0:21
  Speaker 1: am so that their actual share is still growing. It's
• 0:24
  Speaker 1: just the margin down right.
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  Speaker 2: Yeah, and the margin is important because that's a key
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  Speaker 2: driver of their profitability.
• 0:32
  Speaker 1: Does that tell you that they are foregoing some profitability
• 0:36
  Speaker 1: in order to grow long term?
• 0:41
  Speaker 2: Possibly? It certainly indicates that the difference between what they're
• 0:44
  Speaker 2: having to pay for deposits and what they're having to
• 0:48
  Speaker 2: charge on their loans has shrunk. And that suggests in
• 0:51
  Speaker 2: particular that they're having to cut what they're paying on
• 0:54
  Speaker 2: their loans, sorry, what they're charging on their loans in
• 0:58
  Speaker 2: order to get the lending that they get. And that's
• 1:01
  Speaker 2: fine in the short term, but it's not maintainable in
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  Speaker 2: the long term.
• 1:06
  Speaker 1: It was interesting listening to the CEO yesterday Claire Kibank
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  Speaker 1: come out and saying basically an Z very aggressive in
• 1:12
  Speaker 1: the home loan market. They are one and a half
• 1:14
  Speaker 1: percent up to one and a half percent. Cash backs
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  Speaker 1: have been very competitive.
• 1:21
  Speaker 2: Well, cash back is always popular and consumers borrowers are
• 1:26
  Speaker 2: always looking at what is the best deal and they
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  Speaker 2: do switch around a little bit, so they are looking
• 1:31
  Speaker 2: at what's happening in the market. I think also the
• 1:34
  Speaker 2: fact that the market was a little bit slower, so
• 1:36
  Speaker 2: the banks were having to compete to get what market
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  Speaker 2: share there was available.
• 1:40
  Speaker 1: What does that tell us about the state of competition
• 1:43
  Speaker 1: in the banking sector.
• 1:46
  Speaker 2: Well, it's interesting, an interesting question because it depends on
• 1:49
  Speaker 2: your perspective. It does indicate that there is competition, and
• 1:54
  Speaker 2: it supports my argument that there is a good level
• 1:56
  Speaker 2: of competition. And it shows that when the big banks
• 2:02
  Speaker 2: in particular feel that they need to really compete and
• 2:06
  Speaker 2: really want to improve their market share, that they can
• 2:08
  Speaker 2: come in and give the really good deals. Perhaps some
• 2:12
  Speaker 2: of the time they don't fell the need to because
• 2:14
  Speaker 2: PEPs of markets at a point where they just don't
• 2:16
  Speaker 2: want the extra ending it doesn't fit with their plans,
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  Speaker 2: But it indicates that there is the competition because the
• 2:23
  Speaker 2: banks are fighting to get the share when they want it,
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  Speaker 2: and I suspect that we'll be going into another period
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  Speaker 2: of quite intense competition because Spring does tend to be
• 2:32
  Speaker 2: a period when there's a lot of housebuying going on
• 2:35
  Speaker 2: and when the banks do tend to be competitive.
• 2:37
  Speaker 1: What about mergers? Clear there's talk, well we get a
• 2:39
  Speaker 1: decision I think next Tuesday about Heartland TSB. There's talk
• 2:43
  Speaker 1: of Kiwibank TSB, do mergers like that going to move
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  Speaker 1: the dial.
• 2:49
  Speaker 2: I don't think they're going to move the dial. I'll
• 2:50
  Speaker 2: make a difference. And to be honest, I've been thinking
• 2:53
  Speaker 2: about it and I'm I think actually that Kiwibank and
• 2:58
  Speaker 2: TSB merging could she potentially reduce competition in a different
• 3:03
  Speaker 2: in a way that the Heartland tesB wouldn't. Heartland do
• 3:07
  Speaker 2: compete in the marketplace, but to a lesser extent, whereas
• 3:10
  Speaker 2: TSB and Kwibank are much more competing on equal terms.
• 3:14
  Speaker 2: So actually, if you combine them, it is taking a
• 3:16
  Speaker 2: competitor out in a way that I don't see that
• 3:19
  Speaker 2: a merger with Heartland would do. But it would have
• 3:23
  Speaker 2: the advantage of creating a bigger entity but in reality
• 3:26
  Speaker 2: Kiwibank and TSB combined is still not quite up to
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  Speaker 2: the level of the other.
• 3:31
  Speaker 1: Big banks in fascinating stuff. Professorically Matthew's always good to chat,
• 3:35
  Speaker 1: head of School of Accountancy, Economics and Finance at Massi University.
• 3:39
  Speaker 2: For more from earlier edition with Ryan Bridge.
• 3:41
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• 3:45
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