The Finance Minister says he trusts banks but acknowledges there is a debate to be had about their profits and the experience they provide consumers.
It follows new Consumer NZ research which revealed nearly 40 percent of New Zealanders don't trust banks, the highest level of distrust recorded since tracking began two years ago.
Consumer NZ chief executive Jon Duffy said while banks aren't charities and should make a "reasonable" profit, "the question is what level of profit is reasonable and at what point does profit become excessive". People are also angry about bank fees, it found.
Consumer NZ highlighted ANZ's cash net profit after tax, which was $1.107 billion in the six months to March 31, a 14 percent increase from the same period a year prior. Other banks, like BNZ, also continue to record high profits, it said.
Finance Minister Grant Robertson gave a pre-Budget speech at a business event on Friday morning hosted by BNZ.
Following it, he was asked by reporters what he made of the Consumer NZ research.
Robertson said New Zealand has a "stable financial system" that we should be "pleased about".
"It certainly helped us a lot as we've gone through crises like COVID. But that doesn't mean that everything's perfect," he said. "It doesn't mean that we're all in absolute agreement about where banks or other financial institutions might be."
So does he trust banks?
"I actually do trust banks," Robertson said. "I mean there is a debate to be had about profits. There is a debate to be had about the way in which an individual consumer might have an experience with a bank.
"But overall do I trust them? Do I think that they're doing their job? And do I think that our financial system is stable? Then yes I do."
He said it is up to banks to justify, particularly in difficult economic circumstances, their level of profits in order to keep their social licence.
ANZ Bank New Zealand chief executive Antonia Watson acknowledged last week the bank's profit was a large number.
"However it needs to be put into the context of the size of our business and the role banks like ANZ NZ play in supporting economic activity in New Zealand, particularly during periods of uncertainty," she said.
"The actual profitability of ANZ NZ, which measures our returns versus the amount of capital committed by shareholders, is middle of the pack when compared to large companies listed on the New Zealand stock exchange."
The Reserve Bank's (RBNZ) Financial Stability Report last month said New Zealand's system is well placed to handle the increasing interest rate environment and disruptions being observed globally.
Banks' "funding and liquidity positions remain healthy and capital levels continue to gradually increase, ahead of increasing regulatory requirements", the report said. "Bank profitability has increased, with most metrics returning to around pre-pandemic levels.
"In the current environment, the benefit of profitable banks is particularly evident with New Zealand banks in strong positions to manage increasing stress in their lending books and a deterioration in global economic conditions."
The report said New Zealand banks "generally take on little interest rate risk and are required to hold capital buffers for this risk, incentivising prudent risk management".
Some banks overseas have taken on excessive risks during periods of low interest rates and have then faced difficulties, leading to the failure of three banks in the US and one in Europe earlier this year, the RBNZ said.
But banks operating here have come under some criticism from the RBNZ. Earlier this year, Governor Adrian Orr said banks are pushing mortgage rates up quickly but not following through at the same pace with interest rates on term deposits.
"What we are calling out across the banks is they have been very quick to increase their mortgage lending rates but deposit rates have lagged behind and bank margins are holding up."
The question of whether the Government will order a market study into bank profits also still lingers.
Robertson on Friday said Cabinet would be considering very soon what the next market study will look at.
It's never been ruled out by the Government, with the Commerce and Consumer Affairs Minister Duncan Webb saying in March advice was being sought from the Commerce Commission.
"It's really important to know where to look, the scope of the inquiry, whether it's into mortgage rates or whether it's a more broad-based inquiry," Dr Webb said. "We're certainly not going to let the banks off the hook."
The National Party has called for a Select Committee inquiry into the retail banking sector but that's been dismissed by the Government.
Last year, the Government announced it was working on legislation to enable open banking, which would require banks to share customer data with competitors if consumers want to shop around for a different provider.