Cameron Bagrie says banks deserve to make 'fair chunk of money' after ANZ records $2.26 billion cash profit

A leading economist has played down people's concerns about ANZ recording a multi-billion cash profit.  

ANZ announced on Monday it recorded a $2.26 billion cash profit for the last 12 months to September 30, 2023, but the bank warned there could be tough times ahead for some customers. 

It comes after fellow banks BNZ posted a net annual record of more than $1.5 billion, and Westpac $963 million. 

But despite the cash profit its statutory profit was down seven percent.  

Independent economist Cameron Bagrie told AM on Tuesday the big difference is the statutory profit is going to include provisioning for potential losses down the track. 

"What we're seeing is what's called a turn in the credit cycle. So as we start to see loan arrears start to move up slowly from very low levels, banks are starting to provision for a little bit more tougher times over the next 12 months," he said.  

"So what that does is it pulls your statutory profit down, but your cash profit is still basically driven by underlying volume growth and you need interest margin." 

But when asked by AM co-host Ryan Bridge if people should be "outraged" with the amount of money ANZ is making, Bagrie said banks deserve to make a "fair chunk of money" as they're large businesses. 

But he questioned the amount of profit they were making in comparison to their counterparts around the world. 

"Banks in New Zealand seem to be a lot more efficient than global peers, but that might be a reflection of underinvesting," he said. 

"These are some of the questions that the Commerce Commission is going to have to dig into because what we know at the moment is we want banks that are strong and healthy, that are profitable because you need to put your money into them. But if you look at the profitability metrics compared to most banks around the globe, they're right up there.  

"So questions need to be asked in regard to whether there are some competitive issues which are holding the sector back." 

ANZ New Zealand's chief executive Antonia Watson was quick to defend her company's big cash profit saying it's a big number from a New Zealand perspective, but not globally.  

Watson said the bank's research in terms of profitability puts it in the middle when compared with the companies that make up the S&P/NZX50 index, or when compared with similar banks around the world. 

But Bagrie was quick to hit back saying that was an "apple and a pear comparison".  

"If you look at investing in any asset, you want to get a return, but you want to get a return that compensates for risk. What we know about New Zealand banks is they tend to deliver superior returns and they don't see an awful lot of volatility within their earnings strips," he said.  

"That volatility is really important because if you're investing in an asset and you're at risk of seeing bigger volatility than earnings, you're going to want a little bit more return on the other side to compensate for that.  

"So I'd be pretty wary of comparing New Zealand banks with a whole lot of other entities that are listed on the New Zealand Stock Exchange. You are better off comparing them to international banking peers."

Watch the full interview with Cameron Bagrie in the video above.