New Zealand's big four Australian owned banks paid combined annual dividends of $4.2 billion this year, after Reserve Bank imposed Covid-19 restrictions were lifted.
ANZ New Zealand, the country's biggest bank and a subsidiary of the ANZ Banking Group, led the way with September year dividends of $1.880 billion.
ASB, a subsidiary of Commonwealth Bank of Australia (CBA), paid out $975 million for its June financial year.
Westpac NZ, a subsidiary of the Westpac Banking Corporation, paid out $788 million for its September year. And BNZ, whose parent is National Australia Bank (NAB), paid dividends totaling $560 million.
As a percentage of their annual cash profit, ANZ NZ's dividend weighed in at 91%, ASB at 69%, Westpac NZ at 68% and BNZ at 40%.
Across their parent banks by comparison, the ANZ Banking Group's dividend was equivalent to 59% of cash profit, Westpac Banking Group's 83%, while CBA and NAB were both at 68%.
In April 2020, in the early days of the Covid-19 pandemic, the Reserve Bank announced all locally-incorporated banks were being restricted from paying dividends on ordinary shares until “the economic outlook has sufficiently recovered.” At the time Reserve Bank Governor Adrian said the move was designed to keep public money being spent by the government to support NZ businesses in NZ.
This restriction was eased at the end of March 2021 to allow banks to pay up to 50% of their earnings as dividends to their shareholders, with the Reserve Bank stating an intention to remove them entirely on July 1, 2022, "subject to no significant worsening in economic conditions." All bank dividend restrictions were indeed lifted on July 1.
The initial block and subsequent limit on bank dividends helped NZ banks' increase regulatory capital through retained earnings. This is against the backdrop of them needing to increase capital to meet heightened Reserve Bank capital requirements being phased in by 2028, with the deadline pushed out at the onset of the pandemic.
Pre-Covid, in 2019, the big four NZ banks paid combined annual dividends of $2.385 billion.
This year all four major banks posted record annual net profit after tax. Combined this came in at $6.231 billion. That's up $738 million, or 13%, year-on-year from $5.493 billion in 2021.
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16 Comments
Good question....
When you don't have essential utilities and services offered by the state (ie. you've sold off assets and left it to the private market), where do you draw the line between gouging and simply making a profit? I guess it leads to a larger question about nationalisation of essential services (utilities, banking, housing, food)........
Yes , NZ Phoenix, the question about defining price gouging is a good one & I think, exceeding complex. But not sure it leads to your second comment, nationalization of "essential" (hard to define in itself), services.
Leaving aside the reality that the experience worldwide of nationalized industries has been pretty much all bad, let's just take the NZ experience of electrical utilities. Despite many remarks that they were unwisely sold by a National government, in fact they disposed of minority shareholdings only...many to NZ fund managers including kiwisaver. But the majority ownership and therefore power to appoint directors to act in their, the State's best interests remains with the government of the day.
Is there any strong evidence that even this diluted state ownership model is better than total nationalization? Supposedly the money liberated from the partial selloff was used by government for worthy alternative capital projects. Did we ever hear what the considerable funds where used for?
In my opinion, societies, world wide, have never found an answer to dominant players in any sphere, from abusing their power to price gouge, and more. (Refer Lord Acton..."power corrupts, absolute power corrupts absolutely) Out of a lot of bad outcomes it seems to me that the mixed state/private ownership model works reasonably well, but still needs good citizens to whistle blow any bad behaviour. eg the recent example where 2 state controlled power generators deliberately spilt water to try to jack up the spot price of electricity.
But again, yes, complex issues not solved by terms such 'price gougers'/'fat cats'/etc..Nor should the rose-tinted nostalgia for the 'good old days' of State Hydro/P&T/Telecom, and so on, deflect us from trying to find real answers to today's real problems. I don't think ANZ's temporary enlarged profit is one of them. Government will have / should have made similar one offs from it's own Kiwibank.
No problem with windfall taxes,....so long as there is a robust system from our "leaders" assuring shareholders that if the profits ever reduce, the taxpayer will step in to offer affected shareholders a "windfall" subsidy.
Or doesn't it work that way? In other words "the market" is a brutal system, sometimes rewarding those who put their savings into hopefully successful companies, and sometimes giving them a very cold shower when same companies have reduced profits to distribute. Personally ( whose personal and very modest share portfolio has dived somewhat over recent months) I would place more faith in a market operating freely,...good & bad, than I would in a beneficent gummit manipulating everything in their version of "fairness".
Wouldn't a windfall tax would be similar to how our income tax brackets operate. If I take a second job and it bumps my total salary take to above $180k, I'll have the "windfall" taxed at 39%. But if I'm made redundant from one job, does the Government subsidize my lost earnings? Nope.
Why should it be any different with shareholders? It requires little work to actually own a share and draw a dividend. But who knows, you might find the takings on a windfall tax could result in a tax surplus and a reduction of the standard RWT rate.
It is going to be very hard for them to ask for intervention in the years ahead if we do experience recession and a hard landing for the housing market.
"Please tax payer, can you save us please (again), promise we won't abuse the situation - but don't you know, we're too big to fail so you have no option"
My thoughts exactly, as many of us on this forum predicted this happening. Banks pay out the profit leaving no reserves then come groveling when the mortgagee sales ramp up next year and they're caught 'off guard'. Here's to hoping if it comes to that, the government shows some spine for the first time and tells them to deal with the consequences of their own decisions. The NZ Taxpayer is not a fallback to push all the banks risk onto and expect a bailout
Couldn't agree more. The global bailout in the 2008 GFC was an unfortunate thing. Perhaps some major financial institutions were "too big to fail",...in the interests of all, but it begs the questions of how did they get such a dominant position?....was this a competition failure?...did it demonstrate a failure of the much touted "free market"? ...Did we learn anything?
On the other hand, we have just been dealt an example of the failure of government intervention, whereby our government seemed to think swamping the market with "free" money wasn't going to have ongoing ramifications. Tell those young couples with mega $k mortgages that government beats the free market. Have we learnt anything?
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