(Bloomberg) -- New Zealand’s leading bank chief executives have welcomed government plans to grow Kiwibank, saying it will add to already intense competition between lenders.
The CEOs of the four biggest banks, speaking at the INFINZ conference Tuesday in Auckland, were responding to Finance Minister Nicola Willis’ plans to boost the capital of state-owned Kiwibank so it can be a bigger disruptor in the banking sector. She has described competition between the big four as “a cosy pillow fight, with profit margins coming first and everyday Kiwis coming second.”
“If I look at my experience of bigger markets and then being here, I would say competition is well and truly alive and kicking in the New Zealand market,” said Catherine McGrath, chief executive of Westpac New Zealand. “In terms of Kiwibank, absolutely bring it on. It’s great to have more competition. It sharpens everybody up.”
Willis is focused on lifting competition between the four dominant Australian-owned banks in order to improve services and reduce costs for consumers. She plans to look at a range of options to increase capital at Kiwibank so it can play a role in markets such as business and rural lending.
McGrath, who has worked overseas including at Barclays Bank in the UK, said she was surprised on her return that New Zealand consumers expect to be able to individually negotiate mortgage and term-deposit rates. In the UK, it was a case of “that’s just the price and you take the price,” she said.
While Kiwibank has a 9% market share overall, it has had a much larger share — around 20-30% — of new home lending this year, according to ANZ Bank New Zealand Chief Executive Antonia Watson.
“We want to see Kiwibank going from strength to strength,” she said. “That’s good for competition.”
‘Losing Customers’
Bank of New Zealand Chief Executive Dan Huggins was more blunt.
“They have done a bloody good job and they’re growing quickly,” he told the conference. “I am losing customers to them and we need to defend against that. And that’s good for Kiwis and it’s good for competition.”
He said he will defend BNZ’s market share against any rival, be it existing lenders or Kiwibank.
“It’s important that they’ve got the capital that they need to compete,” he said. “My job for the BNZ is to make sure I’m offering services and the appropriate prices to my customers such that they don’t choose to go to a competitor.”
The executives warned against a fixation on the scale and profitability of the big four banks, noting there are a range of other non-bank competitors in what is a relatively small market and always the possibility of new, different players emerging.
“You look around the world and you see other really big competitors evolving,” said ASB Bank Chief Executive Vittoria Shortt, adding that Apple Inc. for example has got a growing presence in the Indian market.
“We’ve got to broaden the way we think about competition,” she said. “We’ve got to work out what kind of market, who’s participating and regulate activity rather than just banks. This competition discussion’s got to be a whole lot more forward thinking in my mind than just who’s here today.”
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