Banking
Bank Bashing, Pacific Style
Will Westpac revolution extend to the region?
"Is this going to be another one of those bank bashing articles?" asks Cook Islands Westpac manager, Terry Smith, at the start of an interview with Pacific Magazine.
Well, might he worry?
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Pacific Islanders pay much higher interest rates on bank loans than their cousins in Australia and New Zealand. They earn much less on deposits. Service fees are bigger. Or so the image goes.
In Australia and New Zealand, "bank bashing" is an art form, with the mainstream media tearing apart balance sheets to embarrass well-shod boards of directors.In the Pacific Islands, no one has really taken the two main regional banks to task over reported profit levels.
But the banks still get a fair share of bashing in bars and boardrooms. There has long been a sneaking suspicion that ANZ and Westpac must be making huge profits from its high charging island operations. Otherwise, why go to the trouble of being here?
For answers, ANZ and Westpac regional offices were asked the same set of questions as a rough stab at trying to get a per head level of profit.
ANZ claims itself as the largest island regional bank. But the bank refused to count profits against heads saying it doesn't measure profit that way.
"Without in-depth analysis on this topic it would be difficult to comment," says Sharon Hobson, Communications Manager, ANZ Pacific Division.
"However, as a general rule we would consider it inappropriate to compare the cost of services in any one country to that of another due to the numerous economic variables that effectively mitigate any meaningful comparison."
ANZ might be right. Australia and New Zealand would have much bigger corporate clients to boost profit levels, although the Pacific does have big companies like the mines in Papua New Guinea. It is unclear whether these would be enough to give the island region the same kind of split between big business and small business and private customers.
But Pacific Magazine went ahead and did its own rough calculations anyway. For ANZ, at first glance at least, the results look flattering. It reported a 2001 profit of $1,870 million, with $47million of that coming from the Pacific region, according to annual report figures.
If profits are spread over all Pacific Islanders, each island residents paid $6.83 into ANZ profit bins. This compares with $83.13 per person for Australia and New Zealand residents. A more realistic reading might be gained from calculating profits against customer numbers. But ANZ does not report those details in its annual report.
Westpac does. Reported profits for the Pacific were A$42 million. This gives a much closer profit split between regions, but still much lower in the Pacific. About 7.9 million business and private customers in Australia contribute an average of $235 each to Westpac profits, with "other" mainly Pacific customers, 300,000 in all, providing significantly less at $140 each.
Westpac Cook Islands manager, Terry Smith, agrees with this kind of scenario, using the same term. "If you did a measure by return on assets, we would be significantly under the 21% achieved by Westpac in worldwide terms."
The big red bank is confidently relaxed about its record in the Pacific, at least enough to entrust comments in a regional magazine on the regional scene to a branch manager. Gently reminded by Pacific Magazine about email responses to a set of questions, also sent to ANZ, Smith said he thought it was supposed to be a "face to face" interview.
This corresponds with Westpac's generally more open corporate style. When ANZ was approached for a comment about regional banking issues on a previous occasion, a reporter did not even get a reply. This time ANZ did respond with answers, through the corporate hierarchy. Sort of. Seven out of 16 questions were declined or fudged on the basis of "confidentiality" or the lack of "meaningful" comparisons and so forth.
Still, the four-page response to Pacific Magazine questions is a big step in the right direction. And the regional figures speak for themselves. As well as the fact that both banks have maintained branches beyond what might strictly be corporate duty, especially in places like the Solomon Islands.
Even so, back in Australia, Westpac has faced bank critics squarely. On the front page of its 2001 annual report, released last October, the bank pictures a deep red tomato under the title "Juicy result..."
Page two's headline features the same tomato, half splattered, under the continuation "...versus public resentment."
"Anti-bank sentiment is running red hot," the report states on the next page. "Many people feel our progress has been made at their expense or, at best, without benefits to them. We stand accused of abandoning our social responsibility by pursuing the bottom line, at any cost."
By the end of 76 impressively laid out pages including photos of management in au natural poses, it still seems unclear whether the bank has introduced a range of solidly progressive measures or has dressed up old priorities with a few public relations ploys like the "Board Committee on Social Responsibility", in an effort aimed at, as Westpac itself denies, "appeasing negative public sentiment."
Certainly the language is convincing, along with some of the measures, at least in Australia. Westpac promotes itself as one of only six banks in the world to sign the founding United Nations Environmental Programme Statement on Financial Institutions and the Environment in 1992. "We remain the only Australian bank to do so," states the annual report.
At the other end of the scale, Westpac provides fee-free savings accounts for pensioners, the disabled and other "economically disadvantaged Australians. We also provide fee-free basic accounts to students and young people. It's what the community says we should do. And we've done it."
It's unclear whether the same measures and services are offered across the less profitable Pacific as well. And that's where another perspective is offered, far away from Westpac galactic headquarters.
Smith says banks unpopularity may have more to do with proximity to people's money than realities of profit-making in the world of big business, he indicates.
"What people perhaps don't remember is that Westpac remains a large business with a huge range of assets, the same as, say, an airline. But people don¹t feel as strongly about airline profits as they do a bank."
Westpac describes its new-look annual report as being reflective of a revolution in banking. Gone are old-style atmospheres of bank-as-operating-theatre.
"It gets a bit clinical and we don't want our bank to be clinical."
No doubt, the bank bashing will continue in Australia. What Westpac has done is raise community expectations of how a bank runs itself. As they become more aware of the bank revolution, island region customers - and media - will be watching their efforts with increasing interest.
