Banks have talked the talk on reducing fees over the past two years. Have their actions matched this?

Banks have made much of reducing the fees they charge customers since the start of the Covid-19 pandemic. So does the evidence match their words?

Based on figures from the Reserve Bank's Bank Financial Strength Dashboard, there have been significant reductions in bank fee and commission income over the past couple of years.

Fee and commission income across New Zealand's key retail banks totalled $518.6 million in the December quarter of 2019. That, of course, is pre-Covid. In the December quarter of 2021 it was down to $435.8 million. That's a drop of $82.8 million, or 16%, over two years.

Of the major banks, ANZ's fee and commission income fell $16.7 million, or 11%, to 132.2 million. ASB's dropped $25.6 million, or 19%, to $112 million, BNZ's fell $9.1 million, or 9%, to $97 million, and Westpac's slipped $1.8 million, or 3%, to 68.4 million.

Big Kiwibank drop

But the biggest fall came from Kiwibank. It's fees and commission income plummeted $26.2 million, or 71%, from $36.9 million in the December 2019 quarter to $10.7 million in the December 2021 quarter.

 A Kiwibank spokeswoman says the key reason was an accounting change.

“For the year ended 30 June 2021, the Banking Group reclassified certain operating expenses to net amounts against fees and commission income after completing a reassessment of expenses incurred directly in relation to the fulfilment of performance obligations,” Kiwibank says.

Among the smaller banks Heartland Bank's fee and commission income fell by 45% between the December quarters of 2019 and 2021, Rabobank's by 38%, The Co-operative Bank's by 17%, TSB by 8% and SBS Bank by 4.5%.

Banks have certainly been trumpeting fee reductions over the past couple of years. Below are a couple of examples.

“One of the ways we made a difference for our customers was through reviewing and streamlining our fees. We delivered more than $21 million in fee reductions, rebates, and removals to customers in the six months to December 2021. One of the important changes was the removal of the administration fee across all ASB KiwiSaver accounts in October. This led to an additional $3.9 million dollars being invested on behalf of our customers by the end of December 2021 and we expect that benefit to be almost $12 million by the end of FY22,” ASB said in its interim financial results announced last month.

And in its October 2020 annual results announcement ANZ said: "Our focus on digitisation and efficiencies means this year we have cut fees on a range of products and services, passing on around $50 million in savings to customers."

Major banks also temporarily waived debit card contactless merchant fees for business customers in 2020 and 2021. These did, however, come against the backdrop of the Government moving to regulate fees charged by banks and card companies such as Visa and Mastercard, that are paid by retailers and other small and medium sized businesses. The Government says this will reduce the profit margins of banks and the Visa and Mastercard debit/credit card schemes in New Zealand, and estimates regulating merchant service fees, including interchange, will save consumers and merchants $74 million annually.

Meanwhile, a multi-million dollar class action claim was filed last year alleging ANZ and ASB ought to refund 150,000 customers money they shouldn't have taken and shouldn't keep. The case is being brought under the Credit Contracts and Consumer Finance Act and relates to issues the two banks have already settled with the Commerce Commission over.

Banks' fee and commission income

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