Thursday, 29 August 2019 08:41

A fair go — Editorial

Written by 

OPINION: If you borrow money from the bank, it holds a grip (‘death pledge’) over you.

And the bank is not in it primarily for their fun or your enjoyment, despite what its advertising schmooze says.

The shareholders in the big-four Australian banks, ie the parents of their NZ subsidiaries, get a dividend yield averaging 6.10% (source Morningstar). And those parent banks make a return on equity (RoE) averaging 12.84%. 

But wait! The Australians’ subsidiary banks in NZ -- ASB, Westpac, ANZ and BNZ -- are reckoned to average 14-15% RoE.

The Australian Royal Commission looked at banking scandals there and told the banks, ‘Clean up your act!’ So they’ll be wanting their NZ subsidiaries to continue strip-mining every available cent out of their Kiwi customers -- while they close the high street branches. 

If the bank is ANZ it’ll be needing extra cash to cover its embarassing real estate dealing in Auckland, and to tidy up after the Ross Asset Management Ltd ponzi scheme, over which it now faces a class action lawsuit by Ross’s victims.

Do such banks have an enshrined right to 14-15% returns on equity -- out of New Zealand? Ponder the question at 4am in the dairy shed or the lambing paddock, or on hearing the bank has devalued your farm by 25%, or that your loan is called in and it’s all over.

Then listen to the governor of the Reserve Bank of New Zealand (RBNZ), Adrian Orr. Why, he asked, are Australian owned NZ banks are so profitable relative to their parent banks. He told newsroom.co.nz that these NZ banks are “among the world’s most profitable -- second highest in the world”. That’s pleasing, said Orr, “we want profitable banks... but why so profitable relative to others, in particular their parent banks?” he mused.

The obvious answer to Orr’s question is that, in a world of growing opportunism by the increasingly powerful, the banks behave this way simply because they may.

Governor Orr made this key point (the quotes are his):

NZ farms, “for 10 years the banks have been over-lending... and now they’re somehow wanting to withdraw,” Orr said. “But they need to be there in good times and bad... so they’re [now] learning how to be good citizens of New Zealand.”

Kiwis still believe a fair go is still a fair go, regardless of how that works in the Western Isles.

More like this

Export prices set to remain elevated

Horticultural prices are set to remain elevated this year, reflecting the balance between demand in key export markets and an increase in supply.

Featured

LIC Space folds for good

Farmer co-operative LIC has closed its satellite-backed pasture measurement platform – Space.

Editorial: Time for common sense

OPINION: The case of four Canterbury high country stations facing costly and complex consent hearing processes highlights the dilemma facing the farming sector as the country transitions into a replacement for the Resource Management Act (RMA).

National

Machinery & Products

Calf feeding boost

Advantage Plastics says it is revolutionising calf meal storage and handling, making farm life easier, safer, and more efficient this…

JD's precision essentials

Farmers across New Zealand are renowned for their productivity and efficiency, always wanting to do more with less, while getting…

» Latest Print Issues Online

The Hound

Are they serious?

OPINION: The Greens aren’t serious people when it comes to the economy, so let’s not spend too much on their…

A hurry up!

OPINION: PM Chris Luxon is getting pinged lately for rolling out the old 'we're still a new government' line when…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter