Rural branches can stay if Govt pays, Jones told
Regional Development Minister Shane Jones is being told that, if he wants banks to continue to have branches in rural New Zealand, the Government may need to be willing to stump up the cash to make it happen.
Jones last week took aim at the Australian-owned banks for shutting branches in provincial Kiwi towns, suggesting they should be obligated to adequately service rural areas.
‘‘The Aussie-owned banks are incredibly profitable. Their level of profitability never seems to decline although the breadth of their services is in decline,’’ he told Stuff.
According to KPMG’s most recent survey of the banking sector, New Zealand banks made a cumulative profit of $5.19 billion in 2017.
The big four banks are all owned by Australian parent companies National Australia Bank, Commonwealth Bank of Australia, Westpac and ANZ.
They are publicly listed, with shareholders on both sides of the Tasman, but also have significant American ownership.
Massey University banking expert Claire Matthews was sceptical of a suggestion that New Zealand profits were being used to subsidise the banks’ Australian operations.
‘‘The Australian-owned banks may be using the profits from New Zealand to subsidise their regional branches in Australia, but only to the extent that the profits are used in the parent banks’ operations, and the banks may be subsidising some of their rural branches,’’ she said.
‘‘In fact, the parent banks’ profits are greater than their New Zealand profits and that’s after any subsidisation, so the New Zealand profits are really contributing to that profit.
‘‘The argument, if one exists, would be that the banks are subsidising rural branches in Australia, but not in New Zealand. But there’s no evidence that they are not subsidising branches in New Zealand – closing branches just means any subsidy being paid is too great to continue.’’
Her colleague, David Tripe, said most of the banks’ local profits were reinvested in New Zealand.
Kiwibank has also closed bank branches in recent years.
John Kensington, head of banking and finance at KPMG, said there was nothing to stop the state-owned bank opening branches in areas where others closed, if it thought it would be possible to make it work.
But he said bank branches in some smaller rural centres would simply not be profitable because the population was not big enough.
‘‘There’s no doubt that right across banking there is crosssubsidisation. Banks still have deposit slips. That cannot be profitable ... There’s an element of truth to what he [Shane Jones] is saying, but business doesn’t operate that way any more.’’
In other parts of the world where branches were needed but not profitable, they were propped up, he said.
‘‘If you said you could keep open these 50 branches but it would cost $300,000 a year each [in government funding] to do that – are New Zealanders going to want to pay for that?’’
In future it was likely that more non-bank businesses, such as pubs, would become hubs for some basic banking activities, he said.
Businesses that held large amounts of cash could save the hassle of doing their banking if they started to offer a way to withdraw cash for locals.
Matthews said the issue was an emotive one because people often felt a connection to bank branches, even if they did not use them regularly.
‘‘The community just sees it as fundamental – if they lose these things they think the community is going to die.’’
She said that, in the past, the local bank manager was seen as second to the mayor in many places, and it was a perception that persisted.