Owned Bank in New Zealand

New Zealand’s banking system has its roots in continental Europe. The first trading bank (the union bank of Australia) was established in 1840. After 1860, a numbers of other Australian and British banks followed, three were British overseas banks, two were Australian and one was local.

Therefore the New Zealand banking sector has a long history of foreign ownership The government began to ease the restrictions of financial institutions from 1975, and the deregulation of banking was introduced in 1986, the main effect of the deregulation programme was to remove the legislation that restricts competition within finance sector.Since 1987 there have been only two categories of financial institution: register banks and non-bank financial institutions. All banks have to be registered with Reserve Bank of New Zealand. The Reserve Bank has implemented an open door policy in 1987, therefore, the number of banks has increased significantly as new foreign banks have entered and domestic savings institutions have converted to bank status.Today, there are 15 foreign-owned banks were register with Reserve Bank of New Zealand four major Australian owned banks— ASB Bank, Australia New Zealand Bank (ANZ), BNZ, Westpac Trust, control about 85 percent market share at 30 Sep 2000(KPMG 2004). The one domestically owned bank—TSB Bank—is a small retail bank ASB ASB bank is one of the New Zealand’s commercial Bank and with reported total assets of NZ$59.

35 billion (as of 30 June 2008), ASB Bank is one of the five large retail banks operating in the New Zealand market.It began in 1847 as the Auckland Savings Bank. During the 1980s the association of savings banks amalgamated the local savings banks throughout New Zealand with ASB at their head, and adopted the name, ASB Trust Bank. In 1989, the ASB Bank Community Trust, the owner of the bank, sold 75 per cent of the shares to Commonwealth Bank.

In 2000, Commonwealth Bank bought the remaining 25 per cent of ASB's shares from the Trust. In 2005 the bank changed the ASB Bank brand to ASB to reflect the more integrated financial services provider that it had become.Before ASB Bank Community Trust approached Commonwealth Bank in Australia, Commonwealth Bank did not have any plans to acquire ASB and the idea of ASB Bank Community Trust became an opportunity for Commonwealth Bank to enter into New Zealand market. The Commonwealth Bank’s expansion to New Zealand reflected the first strand of IO theory, banks expand aboard to protect and maintain their relationship with customers, which reflected increased trade and investment between Australia and New Zealand (Tripe and Matthews 2003).ASB used to base in Auckland city and expanded their branches cover the whole of New Zealand for past twenty years, the growth of asset was increased for past twenty years, hence even ASB’s operation are profitable, but it still not reach it’s benchmark 1 percent return on asset for first year years after it was acquired by Commonwealth Bank.

ASB had achieved its benchmark in 2002 (ASB Annual Report).ASB’s deposit increased 13% in 2009 and the strength of the ASB brand has been instrumental in helping the Bank to attract strong funding from New Zealanders, with well over half of ASB’s advances being funded from local savings and investments, the brand of Commonwealth Bank does not help too much. Therefore, the advantage of acquirsition is not obviously and the commonwealth bank’s expansion cannot be adequately explained by any one theory alone (Tripe and Matthews 2003). Westpac Westpac was founded in 1817 in Australia and was incorporated in 1850 as the Bank of New South Wales.In 1861 the Bank of New South Wales opened seven branches in New Zealand.

In 1982, the Commercial Bank of Australia joins the Bank of New South Wales in New Zealand and the Bank changed its name to Westpac. During the early 1990s, because of incresed exposure to bad loads, Westpac had lost its leading position in the Australian banking industry. In order to remain competitive, in 1996, Westpac and Trust Bank merged to form Westpac Trust, creating New Zealand's largest bank, with over 1. 3 million customers.This clearly falls within the Eclectic theory, which accord with internalization incentives which encourage a firm to internalize operations for production to replace the need to utilize markets. The purchase uses some of Westpac’s surplus capital, which might fall with the strand of IO theory (Tripe and Matthews 2003).

After mergers, Westpac market share have increase from 10% to 20%(Tripe and Matthews 2003) and the profit of Westpac in New Zealand is 18% of total profit for Westpac Group(Westpac Annual Report. 009). Today Westpac is the second largest bank in New Zealand, whichoffers a whole range of consumer and corporate services to clients throughout New Zealand. It is the dominant provider of banking services to small to medium business, corporate and institutional organisations, and is the banker of the New Zealand government . ANZ ANZ was established in 1840, Union bank of Australia agreed with the New Zealand Company to accompany settlers to New Zealand to provide them with banking services.

UBA and the Bank of Australasia merged to become the Australia and New Zealand Banking 1951. In 1979, An Act of Parliament permitted ANZ to incorporate its branches in New Zealand as ANZ Banking Group (New Zealand) Ltd. ANZ sold 25% of the shares to the public. In 1985, ANZ moved its headquarter to Melbourne because of the disadvantage of foreign bank in Australia, this strategy clearly falls within Internalization theory, ANZ attempt to overcome goverment regulation by internalizing their operations.The ANZ sought to expand in early 1980s and bought post bank from the New Zealand government in a privatization.

One of reason that ANZ like to buy post bank was because of the source of deposit of Post Bank (Tripe and Matthews 2003) which reflect comparative advantage theory, Banks which have comparative advantage in load and deposit will tend to dominate the global banking market and will increase their market share due to their lower cost and higher profit. This merger had boosted the market share of ANZ by about 6% to 18% of all financial intermediation business (ANZ 1989).Also after the merger and some of their cross –selling products were integrated, their clients can get better service. This is explained by Eclectic theory. BNZ Bank of New Zealand (BNZ) is one of New Zealand's largest banks. New Zealand Banking Company formed as a private company by The New Zealand Bank Act 1861 creating the company and authorising it to issue banknotes.

First branch in New Zealand opened in Queen Street in Auckland. In 1992, BNZ was acquired by National Australia Bank in Australia.This operation quickly absorbed the group’s exiting operations in New Zealand and the profitability of the bank’s New Zealand activities has been much improved (Tripe and Matthews 2003). This may be explained by Eclectic theory that a firm must possess certain advantageous conditions related to firm specific advantages that are endogenous to the firm, location advantages which are external to a firm, and internalization incentives which encourage a firm to internalize operations for production to replace the need to utilize markets.