New Zealand's banks managed to post good results last year, despite the Asian economic crisis and a drought.
KPMG says in its annual survey of New Zealand's financial institutions that although the country was in a recession lending assets increased 8.3 per cent to $106.5 billion during the year. Most of this increase was achieved by three of the major banks - BNZ, ANZ and ASB.
As a sector the registered banks recorded a 17.8 per cent improvement in underlying performance driven by strong operating income.
A notable portion of that income came fee income was derived from early loan repayment fees as people refinanced their mortgages on lower interest rates.
While that has been a windfall this year it is likely to result in significant income losses in the next few years, KPMG banking and finance group chairman Andrew Dinsdale says.
To continue making profits banks will have to become more focused on their customers, he says.
"While many people want a relationship with their financial institution, most feel they do not get what they want out of that relationship."
He says banks and other financial institutions have an advantage because they hold a great deal of information about their customers. However, banks do not make their money when a product is purchased, but based on how the customer uses the product.
Other KPMG studies have found that some financial institutions have actually increased losses by blindly cross selling products to unprofitable customers.
"The challenge for financial institutions is to harness the knowledge they have about their customers and turn it into value."
He says for many customers, the relationship with their financial institution is tenuous, based more on apathy and inertia than on loyalty. As one of the main causes of customer defection is poor service, and customers demonstrate an increasing willingness to switch providers, financial institutions must deliver a much higher level of satisfaction to hold onto their customers. To find out more about how banks did visit the Mortgage News page.
New Zealand's banks managed to post good results last year, despite the Asian economic crisis and a drought.