Latest / Best of Business / Antonia Watson: ANZ Chief Executive on the bank's annual profit going up by 21 percent

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Antonia Watson: ANZ Chief Executive on the bank's annual profit going up by 21 percent · Best of Business

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  Speaker 1: You're listening to a podcast from newstalk SEDB. Follow this
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  Speaker 2: Nine two nine two texts. That's the text number, standard
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  Speaker 2: text fee supplied Barry Soop will have more to say
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  Speaker 2: than to er off level after five o'clock. Now, let's
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  Speaker 2: talk about banks, because yet another bank has posted an
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  Speaker 2: increased profit. A and Z New Zealand has reported an
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  Speaker 2: after tax profit of two point five billion dollars for
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  Speaker 2: the year to September, which is up more than twenty percent.
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  Speaker 2: Antonio Watson is the chief executive and is with us. Now,
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  Speaker 2: Hi Antonio, Hi, Heather, Now, how are you guys doing
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  Speaker 2: so well when the economy has been such a turd?
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  Speaker 3: Really well? I have to first story your attention to
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  Speaker 3: these strange things called economic hedges, which are a fluctuating
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  Speaker 3: big number due to accounting treatment. And if you look
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  Speaker 3: through that, it's based on it's basically us valuing our
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  Speaker 3: derivatives boring. If you look through that and you look
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  Speaker 3: at our actual underlying customer business, our profit is up
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  Speaker 3: four percent, which is about the same amount that our
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  Speaker 3: lending was up and our deposits were up, so growing,
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  Speaker 3: our profits growing in line with the growth of our
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  Speaker 3: balance sheet.
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  Speaker 2: Okay, so up four percent but still Antonia. Up four
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  Speaker 2: percent at a time when the economy is going backwards
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  Speaker 2: by you know, one percent in a quarter. How did
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  Speaker 2: you manage to do that?
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  Speaker 3: So a couple of things. One is that we grew
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  Speaker 3: our balance sheet and the other one is the other
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  Speaker 3: main one is that, you know, in a sign of
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  Speaker 3: green shoots, as we said in our media release, we've
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  Speaker 3: actually released some of the credit provisions that we took
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  Speaker 3: in previous years. So last year we had a charge
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  Speaker 3: and this year we've had a release.
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  Speaker 2: How much of you growing balance sheet by just out
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  Speaker 2: of interest?
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  Speaker 3: Over two hundred billion dollars. It's the size of our
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  Speaker 3: assets and our balance sheet. So ok, while I understand
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  Speaker 3: that people really think it's a big I mean two
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  Speaker 3: point five were underlying two point three is a big number.
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  Speaker 3: But we're a really really big company.
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  Speaker 2: Yeah. Are we paying more in interest margins in New
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  Speaker 2: Zealand than the Aussies are.
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  Speaker 3: A little bit more so when we do a direct
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  Speaker 3: light for light comparison with Ourustralian business, we pay New
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  Speaker 3: Zealanders pay about twenty one basis points more. That is
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  Speaker 3: more than accounted for by the additional capital that we
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  Speaker 3: need to hold in New Zealand.
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  Speaker 2: So when the reform Coalition, the Banking Reform Coalition said,
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  Speaker 2: if the margins were the same as A and Z
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  Speaker 2: Australia's margins, our mortgages would be one hundred basis points lower.
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  Speaker 2: Are they wrong?
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  Speaker 3: They are comparing apples and oranges. They're comparing then the
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  Speaker 3: margins in New Zealand to the margins of our entire
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  Speaker 3: A and Z group in every country including New Zealand,
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  Speaker 3: and importantly includes our institutional business, which has a big
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  Speaker 3: markets business that doesn't focus on margins. It focuses on
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  Speaker 3: returns and it has a big The rest of the
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  Speaker 3: institutional business focuses a lot on other operating income, not
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  Speaker 3: just margin because they get fees for transaction band.
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  Speaker 2: So in New Zealand and bas really our net interest
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  Speaker 2: margin is two point six percent. Yeah, in New z
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  Speaker 2: And what's the Australia for?
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  Speaker 3: And if you could so if you add together, if
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  Speaker 3: you add together the same equivalent businesses, which is our
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  Speaker 3: retail business and our business and private being business, there's
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  Speaker 3: is two point three nine percent, So twenty one basis
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  Speaker 3: points flower.
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  Speaker 2: Okay, why do we pay more.
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  Speaker 3: As I said, we have we're required to hold more
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  Speaker 3: capital in New Zealand. And when you think about our capital,
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  Speaker 3: our shareholders invest nearly twenty billion dollars in our business
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  Speaker 3: and we have to provide them a return on that.
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  Speaker 3: They've had to invest another one point two billion this
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  Speaker 3: year alone just because of the increased capital requirements from
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  Speaker 3: the rbn Z. That would translate into a ten basis
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  Speaker 3: point increase in capital if we were to hold returns flat.
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  Speaker 3: So the fact that we've increased our NIM by three
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  Speaker 3: basis point nine ten just shows that the shareholders are
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  Speaker 3: wearing some of the increase in capital, not just the customers.
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  Speaker 2: Okay, when so Nikola will lison them are obviously attending
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  Speaker 2: to this. At the moment, when it's all sorted, will
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  Speaker 2: we be paying the same in the interest margin as
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  Speaker 2: the Australians.
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  Speaker 3: Well, it depends on what is sorted, because at the
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  Speaker 3: moment the proposals from the Reserve Bank, one of them
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  Speaker 3: makes us hold more CET one capital, which is the
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  Speaker 3: most expensive form of capture.
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  Speaker 2: It's not going to happen though, you know that.
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  Speaker 3: Well we'd like to hope not. But the other one
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  Speaker 3: requires us to hold more in sort of capital like
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  Speaker 3: instruments all together. So at the moment the proposals don't
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  Speaker 3: really change the dial match neither, and of course don't
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  Speaker 3: know and don't forget hither. Also that we're talking about
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  Speaker 3: stopping increases going forward, we're not going back in time,
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  Speaker 3: so we're not going to really expect significant reductions and interest.
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  Speaker 3: We're just going to expect less pressure on mats going up.
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  Speaker 2: Okay, So Antonia, if we took away, if we took
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  Speaker 2: that away all together, we flattened it out to the
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  Speaker 2: same place in terms of capital requirements as the Australians
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  Speaker 2: would be paying the same.
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  Speaker 3: We'd be well, if we allowed for the amount of
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  Speaker 3: capital they hold and did nothing else, we'd actually be
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  Speaker 3: paying a little bit less here.
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  Speaker 2: Well, that sounds awesome. I like that. I've got to
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  Speaker 2: ask this question. You're going to hate it. Are you
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  Speaker 2: getting a bonus?
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  Speaker 3: Yes? I am. You'll be able to see that in
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  Speaker 3: the room report on prubished today. It's very complicated, but
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  Speaker 3: overall this year I'll be paid just under two point
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  Speaker 3: eight million dollars.
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  Speaker 2: Nice, you got any plans with it?
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  Speaker 3: Invested wisely?
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  Speaker 2: And you do not have to answer Tony you're so game,
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  Speaker 2: you don't have to answer that question.
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  Speaker 3: Mate.
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  Speaker 2: What you say is buger off here than none of
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  Speaker 2: your business. Listen, thanks, thanks very much. I really appreciate
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  Speaker 2: your time. That Antonia Watson A and Z in New
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  Speaker 2: Zealand's Chief executive.
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