1 00:00:00,240 --> 00:00:02,600 Speaker 1: What to do with the banks. The ComCom reports reasonably 2 00:00:02,640 --> 00:00:04,280 Speaker 1: clear in the Finance Minister ran with it. 3 00:00:04,360 --> 00:00:08,720 Speaker 2: They lack innovation and they do not aggressively compete for customers. 4 00:00:09,080 --> 00:00:14,400 Speaker 1: Instead, competition resembles a cozy pillow fight. Government has accepted 5 00:00:14,440 --> 00:00:17,119 Speaker 1: all fourteen recommendations. Chief Executive of the A and z 6 00:00:17,239 --> 00:00:19,000 Speaker 1: Antonia Watson's with us good morning to you. 7 00:00:19,920 --> 00:00:20,760 Speaker 2: Good morning mate. 8 00:00:20,760 --> 00:00:23,320 Speaker 1: How much of what the ComCom seed yesterday is accurate 9 00:00:23,320 --> 00:00:23,919 Speaker 1: in your view? 10 00:00:25,200 --> 00:00:28,840 Speaker 2: Well, they've made fourteen recommendations and they are really sort 11 00:00:28,840 --> 00:00:31,000 Speaker 2: of recommendations are based on a lot of work they've 12 00:00:31,000 --> 00:00:33,800 Speaker 2: done over the last year, and we're broadly supportive of them. 13 00:00:34,280 --> 00:00:37,360 Speaker 2: What I would disagree with is their characterization of the 14 00:00:37,400 --> 00:00:39,880 Speaker 2: sect as uncompetitive. I think I sit in front of 15 00:00:39,920 --> 00:00:42,240 Speaker 2: groups of our staff and say, how competitive do you 16 00:00:42,280 --> 00:00:45,120 Speaker 2: think is out there? And they're fighting every day to 17 00:00:45,200 --> 00:00:48,880 Speaker 2: win and retain customers and have been since eighteen forty, 18 00:00:49,040 --> 00:00:52,519 Speaker 2: So we really back ourselves that it's a competitive industry. 19 00:00:52,920 --> 00:00:59,840 Speaker 2: And also the characterization of profitability is yes, look we 20 00:00:59,880 --> 00:01:02,640 Speaker 2: are we are amongst the more profitable banks in the world, 21 00:01:02,800 --> 00:01:05,080 Speaker 2: but we have to look at who we're comparing ourselves to. 22 00:01:05,200 --> 00:01:08,440 Speaker 2: We're comparing ourselves to banks and countries where they're earning 23 00:01:09,319 --> 00:01:12,120 Speaker 2: well below cost of capital, sometimes below the New Zealand 24 00:01:12,160 --> 00:01:14,280 Speaker 2: ten year government bond rate, which is a which you 25 00:01:14,440 --> 00:01:18,360 Speaker 2: call a risk free rate. We unfortunately in New Zealand. Gosh, 26 00:01:18,440 --> 00:01:19,760 Speaker 2: I mean, I'd love for us to be a key 27 00:01:19,800 --> 00:01:21,480 Speaker 2: we owned bank, right, I think we'd all love that, 28 00:01:22,000 --> 00:01:24,119 Speaker 2: But we can't afford to own our own banks. So 29 00:01:24,160 --> 00:01:27,240 Speaker 2: we need the tract offshore capital, and so we need 30 00:01:27,280 --> 00:01:29,640 Speaker 2: to provide a return that in our case is modestly 31 00:01:29,680 --> 00:01:30,800 Speaker 2: above our cost of capital. 32 00:01:30,920 --> 00:01:32,800 Speaker 1: Let me come back to the capitalization a qui bank 33 00:01:32,800 --> 00:01:34,800 Speaker 1: in just a moment, the fact you couldn't argue your 34 00:01:34,840 --> 00:01:37,479 Speaker 1: case to a point that the ComCom said, sorry, we're wrong, 35 00:01:37,520 --> 00:01:39,800 Speaker 1: and you are right after all. How come you couldn't 36 00:01:39,800 --> 00:01:40,920 Speaker 1: get that across the line. 37 00:01:41,600 --> 00:01:43,600 Speaker 2: We tried really hard, Mike. I think we're looking at 38 00:01:43,640 --> 00:01:46,560 Speaker 2: different things. We're looking at We're saying, you know, absolutely, 39 00:01:46,680 --> 00:01:49,640 Speaker 2: look around the world, we are among the more profitable, 40 00:01:50,120 --> 00:01:52,080 Speaker 2: and that to them is a proof that there isn't 41 00:01:52,080 --> 00:01:56,200 Speaker 2: competition to us. That's evidence that we've got strong, stable 42 00:01:56,240 --> 00:01:58,080 Speaker 2: banks that we need to have to be able to 43 00:01:58,200 --> 00:02:00,000 Speaker 2: track that strong capital here and to be able to 44 00:02:00,000 --> 00:02:01,120 Speaker 2: sport the Kiwi economy. 45 00:02:01,440 --> 00:02:05,400 Speaker 1: If you capitalized QWU Bank to whatever extent, by whatever means, 46 00:02:05,480 --> 00:02:07,520 Speaker 1: would it make a material difference. 47 00:02:08,600 --> 00:02:11,280 Speaker 2: Look, we welcome any competition. We back it like you do, Mike. 48 00:02:11,320 --> 00:02:14,200 Speaker 2: We back ourselves to work against against all competitions. So 49 00:02:14,720 --> 00:02:18,200 Speaker 2: if that is an outcome of this of the study, no, 50 00:02:18,360 --> 00:02:18,760 Speaker 2: bring it on. 51 00:02:19,160 --> 00:02:21,280 Speaker 1: Here's here's where I walk along because I'm just a punter. 52 00:02:21,600 --> 00:02:23,400 Speaker 1: I look at your profit, I look at your margins. 53 00:02:23,440 --> 00:02:26,360 Speaker 1: Your margins are higher here than they are in Australia. 54 00:02:26,400 --> 00:02:28,280 Speaker 1: I don't like the look of that. You would counter 55 00:02:28,360 --> 00:02:30,360 Speaker 1: that by saying, Adriana has got too many rules? Is 56 00:02:30,400 --> 00:02:30,720 Speaker 1: that fair? 57 00:02:31,120 --> 00:02:33,280 Speaker 2: No? I would counter that by saying, I'm so glad 58 00:02:33,280 --> 00:02:35,280 Speaker 2: you asked that question, Mike, because I just want to 59 00:02:35,280 --> 00:02:38,800 Speaker 2: do some misbusting here. In the first half of the year, 60 00:02:39,280 --> 00:02:41,799 Speaker 2: our parent A and Z reported a one point five 61 00:02:41,880 --> 00:02:44,480 Speaker 2: six percent margin that was for the entire A and 62 00:02:44,560 --> 00:02:47,720 Speaker 2: Z business all around the world thirty countries, including in 63 00:02:47,800 --> 00:02:52,280 Speaker 2: particular our institutional and markets businesses. Commentators who you know, 64 00:02:52,680 --> 00:02:54,880 Speaker 2: probably should have known better, were comparing that to their 65 00:02:55,000 --> 00:02:57,680 Speaker 2: number that they disclosed to New Zealand, which was two 66 00:02:57,720 --> 00:03:00,200 Speaker 2: point five six percent. So the yes that sounds a 67 00:03:00,200 --> 00:03:02,960 Speaker 2: big difference. The two point five six percent is for 68 00:03:03,120 --> 00:03:06,359 Speaker 2: our let's call it our consumer and our privately owned 69 00:03:06,400 --> 00:03:10,320 Speaker 2: business segments. If you compare that to the same segments 70 00:03:10,360 --> 00:03:14,320 Speaker 2: in Australia which are publicly disclosed, their combined margin is 71 00:03:14,360 --> 00:03:17,520 Speaker 2: two point five to two percent. So there is a 72 00:03:17,680 --> 00:03:20,360 Speaker 2: very small difference in margin that will fluctuate over time. 73 00:03:20,360 --> 00:03:22,360 Speaker 2: But we're not talking about the numbers that were being 74 00:03:22,400 --> 00:03:23,320 Speaker 2: talked about back then. 75 00:03:23,560 --> 00:03:25,600 Speaker 1: Okay, let's accept that what you're saying is correct, and 76 00:03:26,080 --> 00:03:27,760 Speaker 1: you'd put me in the commentary in that because I 77 00:03:27,800 --> 00:03:29,600 Speaker 1: got that wrong. Of what you've said is just correct. 78 00:03:31,200 --> 00:03:33,600 Speaker 2: You were listening to people who are commentating about it. 79 00:03:33,639 --> 00:03:34,560 Speaker 2: I don't blame you for that. 80 00:03:34,760 --> 00:03:38,120 Speaker 1: Okay. So you can't convince the government, and you can't 81 00:03:38,120 --> 00:03:40,920 Speaker 1: convince the ComCom You probably can't convince a lot of 82 00:03:40,920 --> 00:03:43,440 Speaker 1: punters who see hundreds of millions of dollars in profit. 83 00:03:43,800 --> 00:03:44,600 Speaker 1: What do we do. 84 00:03:46,360 --> 00:03:50,960 Speaker 2: Well? The comments Commission made fourteen really sound recommendations. Let's 85 00:03:50,960 --> 00:03:53,240 Speaker 2: give them a shot. As I say, we welcome more, 86 00:03:53,760 --> 00:03:55,360 Speaker 2: we welcome more competition in the sector. 87 00:03:55,560 --> 00:03:58,000 Speaker 1: Do you think anything material will actually come out of this? 88 00:03:58,040 --> 00:03:59,440 Speaker 1: And what I mean, what does it look like see 89 00:03:59,600 --> 00:04:01,720 Speaker 1: all the re I'm doing, for example, on open banking 90 00:04:01,720 --> 00:04:04,600 Speaker 1: in Australia in theory, fine, do it if you want to. 91 00:04:04,640 --> 00:04:06,640 Speaker 1: I don't care. It doesn't work. It hasn't worked. People 92 00:04:06,720 --> 00:04:09,480 Speaker 1: don't swap between banks for fundsis. It doesn't make a 93 00:04:09,520 --> 00:04:12,760 Speaker 1: material difference. You guys compete on money. The money is 94 00:04:12,760 --> 00:04:15,360 Speaker 1: the money. I just don't see where any of this goes, 95 00:04:15,400 --> 00:04:17,920 Speaker 1: apart from having them yet again a big gad fest. 96 00:04:18,760 --> 00:04:20,560 Speaker 2: Well, one of the good things that one of the 97 00:04:20,560 --> 00:04:23,320 Speaker 2: advantages we have in New Zealand and being a fast 98 00:04:23,360 --> 00:04:25,480 Speaker 2: follower on open banking is we can look at what's 99 00:04:25,560 --> 00:04:29,640 Speaker 2: worked elsewhere in the world and do things that really 100 00:04:29,680 --> 00:04:31,479 Speaker 2: make sense to customers. You know, and some of the 101 00:04:31,520 --> 00:04:35,479 Speaker 2: other countries that implemented open banking. You need to think, 102 00:04:35,520 --> 00:04:37,400 Speaker 2: what are the use cases that customers want to do. 103 00:04:37,440 --> 00:04:39,720 Speaker 2: That want some easy payments, they want to be able 104 00:04:39,760 --> 00:04:43,400 Speaker 2: to have better budgeting tools, all those sorts of things. 105 00:04:43,680 --> 00:04:46,479 Speaker 2: How can we make our open banking work so customers 106 00:04:46,520 --> 00:04:48,720 Speaker 2: find it really valuable? And I think that's an opportunity 107 00:04:48,760 --> 00:04:49,080 Speaker 2: that we have. 108 00:04:49,560 --> 00:04:51,279 Speaker 1: Will if I get you back on the program in 109 00:04:51,320 --> 00:04:53,760 Speaker 1: a year two years, will things be different that we 110 00:04:53,800 --> 00:04:56,680 Speaker 1: can all see or you don't think so well. 111 00:04:56,720 --> 00:04:59,000 Speaker 2: I still beck ourselves to be the largest bank in 112 00:04:59,000 --> 00:05:00,400 Speaker 2: New Zealand. I'm really proud of that. 113 00:05:00,440 --> 00:05:02,360 Speaker 1: You but that's not about me. It's about you, and 114 00:05:02,480 --> 00:05:04,640 Speaker 1: good on you for being that. But I'm saying, will things. 115 00:05:04,640 --> 00:05:06,159 Speaker 1: Will I be able to look at the banking system 116 00:05:06,160 --> 00:05:07,640 Speaker 1: in this country and go, oh, thank god we had 117 00:05:07,640 --> 00:05:09,400 Speaker 1: a ComCom report, thank god we had a government that 118 00:05:09,400 --> 00:05:10,880 Speaker 1: did something about it or not. 119 00:05:11,880 --> 00:05:14,000 Speaker 2: I think you'll be able to look at open banking 120 00:05:14,040 --> 00:05:16,560 Speaker 2: and see material progress on it. And I think that's 121 00:05:16,600 --> 00:05:19,159 Speaker 2: a really good thing. What they do with things like 122 00:05:19,200 --> 00:05:22,320 Speaker 2: quwibank regulation, that's not up to me. So you know, 123 00:05:22,800 --> 00:05:24,920 Speaker 2: we may success and change here. It's a really hard 124 00:05:25,000 --> 00:05:28,719 Speaker 2: position for regulators to balance that competition versus you know, 125 00:05:28,800 --> 00:05:30,920 Speaker 2: safety and security of the banking system. So I don't 126 00:05:30,960 --> 00:05:31,440 Speaker 2: any of them. 127 00:05:31,720 --> 00:05:33,400 Speaker 1: Okay, nice to talk to you. Appreciate it very much. 128 00:05:33,400 --> 00:05:35,600 Speaker 1: Antonio Watson, who's the A and ZED CEO. 129 00:05:36,160 --> 00:05:39,080 Speaker 2: For more from the Mic Asking Breakfast, listen live to 130 00:05:39,200 --> 00:05:42,279 Speaker 2: news talks. It'd be from six am weekdays, or follow 131 00:05:42,320 --> 00:05:43,880 Speaker 2: the podcast on iHeartRadio.