Confidence in banks plummets after announcement of surge in profits.
Friday, May 12, 2023, 6:28 p.m.
Trust in banks is on the decline with 39% of New Zealanders saying they don’t trust them, according to a new Consumer NZ survey. This is the highest level of distrust since consumers began tracking sentiment in June 2021.
About 39% say they don’t trust their banks. This comes on top of booming bank profits and the government considering the need for a Commerce Commission market study in this area.
Commerce Minister Duncan Webb said the bank’s interests will be considered first when considering the next market study, but no decision has yet been made. Prime Minister Chris Hipkins also refused to rule out the possibility when asked at his weekly press conference.
“We have previously expressed concerns about the level of profits at banks, and we will take time to consider that. .
Bank customers are also dissatisfied with the level of bank charges.
“Even before the latest bank earnings were announced, we knew people felt they were being overcharged by their banks,” said John Duffy, CEO of Consumer NZ.
“Our latest sentiment tracker data shows that bank charges are a growing burden for those with personal debt, highlighting the growing burden of these costs. he says.
ANZ last week announced after-tax cash earnings of $1.17 billion for the six months, up 14 percent year-over-year. BNZ’s first-half profit was $805 million, up 13.5% year-on-year.
“I understand that banks are not charities and should make a reasonable profit, but the question is what level of profit is reasonable and at what point is it excessive?” says Duffy.
Westpac’s latest after-tax profit was $426 million, down 33% year-over-year. The bank said the drop in profits was partly due to its pooling of funds to cover its bad debts. Earnings before this provision for bad debts increased 8%.
A recent consumer survey of bank satisfaction found a correlation between bank size and service satisfaction, with the four largest banks scoring the worst in customer surveys. Hundreds of bank branches have closed over the last decade.
“More than a quarter of those surveyed said the worst aspect of banking had to do with branches and access to branches,” says Duffy.
Consumer research shows that satisfaction with customer and call center services increases over time. However, satisfaction with in-office services and advice on products and services is declining.
“Given the level of profits banks are making, we can expect reinvestment in services to improve overall customer satisfaction,” he said.
Earlier this week, Westpac was criticized for deducting direct debits from some customers’ accounts twice, leaving many of them out-of-pocket.
Duffy said banks could somehow help reduce customer frustration if they reinvested some of their big profits into innovating and improving the customer experience.
“Time and again we see that the sectors that generate the most profits are those with low levels of competition and low levels of customer satisfaction. Competition benefits consumers, but providers needs to step up its strategy to retain customers.”
Only 4% of New Zealanders switched banks last year, suggesting less competition for customers. “If you are not satisfied with your bank, we recommend that you consider switching. There is a perception that switching banks is difficult. However, 75% of those who changed banks last year said the process was easy. Did.”
Duffy said consumers want more competition and new entrant activity in New Zealand’s banking sector.
“The message is clear: while the profits are huge, our customers are not getting a competitive banking experience from the ground up.”
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