Antonia Watson: ANZ CEO disagrees with the Commerce Commission's report saying the banking sector isn't competitive

ANZ's chief executive believes New Zealand's banking system is competitive. 

The Commerce Commission's market study found there's little competition between the big four banks, and they take high profits by international standards.  

It recommends open banking and giving Kiwibank access to more capital, to better compete and become a disruptor. 

Antonia Watson told Mike Hosking they don't agree with the ComCom's characterisation of the sector.  

She says their staff are fighting every day to win and retain customers, so back themselves that it's a competitive industry. 

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Episode Transcript

Speaker 1 (00:00):
What to do with the banks. The ComCom reports reasonably
clear in the Finance Minister ran with it.

Speaker 2 (00:04):
They lack innovation and they do not aggressively compete for customers.

Speaker 1 (00:09):
Instead, competition resembles a cozy pillow fight. Government has accepted
all fourteen recommendations. Chief Executive of the A and z
Antonia Watson's with us good morning to you.

Speaker 2 (00:19):
Good morning mate.

Speaker 1 (00:20):
How much of what the ComCom seed yesterday is accurate
in your view?

Speaker 2 (00:25):
Well, they've made fourteen recommendations and they are really sort
of recommendations are based on a lot of work they've
done over the last year, and we're broadly supportive of them.
What I would disagree with is their characterization of the
sect as uncompetitive. I think I sit in front of
groups of our staff and say, how competitive do you
think is out there? And they're fighting every day to

(00:45):
win and retain customers and have been since eighteen forty,
So we really back ourselves that it's a competitive industry.
And also the characterization of profitability is yes, look we
are we are amongst the more profitable banks in the world,
but we have to look at who we're comparing ourselves to.
We're comparing ourselves to banks and countries where they're earning

(01:09):
well below cost of capital, sometimes below the New Zealand
ten year government bond rate, which is a which you
call a risk free rate. We unfortunately in New Zealand. Gosh,
I mean, I'd love for us to be a key
we owned bank, right, I think we'd all love that,
But we can't afford to own our own banks. So
we need the tract offshore capital, and so we need
to provide a return that in our case is modestly

(01:29):
above our cost of capital.

Speaker 1 (01:30):
Let me come back to the capitalization a qui bank
in just a moment, the fact you couldn't argue your
case to a point that the ComCom said, sorry, we're wrong,
and you are right after all. How come you couldn't
get that across the line.

Speaker 2 (01:41):
We tried really hard, Mike. I think we're looking at
different things. We're looking at We're saying, you know, absolutely,
look around the world, we are among the more profitable,
and that to them is a proof that there isn't
competition to us. That's evidence that we've got strong, stable
banks that we need to have to be able to
track that strong capital here and to be able to
sport the Kiwi economy.

Speaker 1 (02:01):
If you capitalized QWU Bank to whatever extent, by whatever means,
would it make a material difference.

Speaker 2 (02:08):
Look, we welcome any competition. We back it like you do, Mike.
We back ourselves to work against against all competitions. So
if that is an outcome of this of the study, no,
bring it on.

Speaker 1 (02:19):
Here's here's where I walk along because I'm just a punter.
I look at your profit, I look at your margins.
Your margins are higher here than they are in Australia.
I don't like the look of that. You would counter
that by saying, Adriana has got too many rules? Is
that fair?

Speaker 2 (02:31):
No? I would counter that by saying, I'm so glad
you asked that question, Mike, because I just want to
do some misbusting here. In the first half of the year,
our parent A and Z reported a one point five
six percent margin that was for the entire A and
Z business all around the world thirty countries, including in
particular our institutional and markets businesses. Commentators who you know,

(02:52):
probably should have known better, were comparing that to their
number that they disclosed to New Zealand, which was two
point five six percent. So the yes that sounds a
big difference. The two point five six percent is for
our let's call it our consumer and our privately owned
business segments. If you compare that to the same segments
in Australia which are publicly disclosed, their combined margin is

(03:14):
two point five to two percent. So there is a
very small difference in margin that will fluctuate over time.
But we're not talking about the numbers that were being
talked about back then.

Speaker 1 (03:23):
Okay, let's accept that what you're saying is correct, and
you'd put me in the commentary in that because I
got that wrong. Of what you've said is just correct.

Speaker 2 (03:31):
You were listening to people who are commentating about it.
I don't blame you for that.

Speaker 1 (03:34):
Okay. So you can't convince the government, and you can't
convince the ComCom You probably can't convince a lot of
punters who see hundreds of millions of dollars in profit.
What do we do.

Speaker 2 (03:46):
Well? The comments Commission made fourteen really sound recommendations. Let's
give them a shot. As I say, we welcome more,
we welcome more competition in the sector.

Speaker 1 (03:55):
Do you think anything material will actually come out of this?
And what I mean, what does it look like see
all the re I'm doing, for example, on open banking
in Australia in theory, fine, do it if you want to.
I don't care. It doesn't work. It hasn't worked. People
don't swap between banks for fundsis. It doesn't make a
material difference. You guys compete on money. The money is
the money. I just don't see where any of this goes,
apart from having them yet again a big gad fest.

Speaker 2 (04:18):
Well, one of the good things that one of the
advantages we have in New Zealand and being a fast
follower on open banking is we can look at what's
worked elsewhere in the world and do things that really
make sense to customers. You know, and some of the
other countries that implemented open banking. You need to think,
what are the use cases that customers want to do.
That want some easy payments, they want to be able

(04:39):
to have better budgeting tools, all those sorts of things.
How can we make our open banking work so customers
find it really valuable? And I think that's an opportunity
that we have.

Speaker 1 (04:49):
Will if I get you back on the program in
a year two years, will things be different that we
can all see or you don't think so well.

Speaker 2 (04:56):
I still beck ourselves to be the largest bank in
New Zealand. I'm really proud of that.

Speaker 1 (05:00):
You but that's not about me. It's about you, and
good on you for being that. But I'm saying, will things.
Will I be able to look at the banking system
in this country and go, oh, thank god we had
a ComCom report, thank god we had a government that
did something about it or not.

Speaker 2 (05:11):
I think you'll be able to look at open banking
and see material progress on it. And I think that's
a really good thing. What they do with things like
quwibank regulation, that's not up to me. So you know,
we may success and change here. It's a really hard
position for regulators to balance that competition versus you know,
safety and security of the banking system. So I don't
any of them.

Speaker 1 (05:31):
Okay, nice to talk to you. Appreciate it very much.
Antonio Watson, who's the A and ZED CEO.

Speaker 2 (05:36):
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