It was somewhat bemusing to watch a One News piece last night about the banks making record profits again. The report wasn't really about how much profit they actually made, or on how exactly they made all that money; instead it was about how the banks' profits were justified and are somehow good for New Zealand.I found this completely lopsided coverage rather concerning because of just how ludicrous the report was. Even though a number of interviews showed people thought such money should stay in New Zealand and be put back into local communities, in general there wasn't any balance given to the story.
Of course the reporter, Nadine Chalmers-Ross, soon dismissed the idea of keeping profits in the country where they originate. In fact the biased report couldn't be anymore pro-banking if she tried. The deluded reporter also presented the topic as if she was talking to pre-schoolers, with a number of corresponding info-graphics that were insultingly childish.
Here's TVNZ's report:
New Zealand's banks collectively posted a record profit in the year to April.
The country's eight main banks together made almost $4.3 billion which is up 22% on the previous year, according to KPMG.
KPMG head of financial services John Kensington says the banks came through the global financial crisis largely unscathed and are now benefitting from an improving economy.
It's strange that John Kensington is claiming that the increase in bank profits is because they "came through the global financial crisis largely unscathed". The GFC officially ended in 2009, so it should no longer have any effect on bank profits.
Here's the video:
Basically the report is saying that the increase in profits is justified because:
Banks employ 26,000 New Zealanders.
They pay 1.5 billion in tax to the government.
There's a return on investment from Kiwisaver funds if Australian banks profit.What TVNZ is failing to tell you is that banks don't employ enough people, the banks aren't paying enough tax and the return on Kiwisaver investments from Australian owned banks is minuscule and certainly not justification for such exorbitant profits leaving New Zealand.
Nadine Chalmers-Ross then makes up some numbers about how the banks profit. She says banks make around 25% of their profits by moving money around and charging things like account fees and automatic payment fees, with the other 75% of their profits apparently from loans. She then asserts that all loans are made from people's savings, failing entirely to mention that most money a bank has to loan is gained at very low interest rates. She of course completely ignores the mechanisms of the Fractional Reserve Banking System.
However the most ludicrous claim Nadine makes is that banks would become insolvent if you defaulted on your loan repayments. In today's economic climate this is about the most ridiculous claim to make to justify such astronomical profits going overseas, especially when you consider the governments Open Bank Resolution process.
What Nadine Chalmers-Ross also failed to mention is that thousands of customers have become so disgruntled with their banks that they've registered for a class action to take the big banks to the high court over unfair default fees. This class action has been undertaken because the banks en masse haven't properly represented the true costs incurred for things like dishonour fees and late credit card payment fees. In other words they've been ripping their customers off and that's the real reason for so much of our hard earned cash disappearing overseas.
