PostBank in profit as ballast is ditched

Press, 23 January 1988, Page 29

PostBank in profit as ballast is ditched

By

NEILL BIRSS

Postßank, the People’s Bank, with more accounts than New Zealand has citizens, is shaping up after corporatisation. Postßank (Post Office Bank, Ltd) has made an after-tax profit of $6.1 million for its first six months of trading. There is no comparative amount for the previous period, but the old Post Office Savings Bank was trading at a loss.

The result reflects a much sharper organisation, with more changes to come. Three hundred of the POSB staff have elected voluntary redundancy for a total settlement that the Postßank chairman, Mr Robin Congreve, says will be “somewhat less” than an earlier-reported $8 million. Branches are down to 600. All staff of the corporation are being put through a three-day American motivational course.

New management and information systems will help administer the 3.7 million accounts. The bank was corporatised on April 1, the Government putting up $250 million, a once-only grant, to provide working capital and allow assets to match liabilities.

At the beginning all was chaos. Mr Congreve re-

lates how an order by the Post Office not long before corporatisation left Postßank, Telecom, and N.Z. Post each disclaiming 12,000 new desks.

The division of Post office staff among PostBank, N.Z. Post, and Telecom was often arbitrary: Postßank was initially assigned three of the 10 Post Office cycle repair persons who serviced posties’ transport. However, the Government has given the corporation a good start with its chairman, Mr Robin Congreve, an Auckland lawyer. He is also deputy chairman of Wilson Neill, and a director of L.D. Nathan and Company, and of Capital Markets. Mr Lindsay Pyne, the chief executive, is formerly of Citibank in South Africa and is a former chief executive of Broadbank in New Zealand. Mr Hilton Sack, the treasurer, has a background of corporate banking in Australia and South Africa.

The strategy of PostBank is to be a retailer at the bottom end of the market, or as the directors put it: the middle of the lower socio-economic area.

They accept the bank has a social responsibility, but say that profitability is essential for the organisation to survive, and will

be a measure of success. Mr Pye expects the high volatility in interest rates in the free market to accelerate. He believes there will be pressure on margins. The bank’s answer is to increase efficiency. Postßank will spend heavily on staff training, such as the “New Age” motivation courses, which, according to the report of a person who has been through it, is akin to “positive thinking.” Spending on technology has begun. An 11-month project by Arthur Young International is teaching staff techniques which will help them be efficient. Mr Sack, the treasury chief, has built up a staff of eight dealers, and developed a strategy for closer matching of assets and investments — traditionally the POSB borrowed short and invested long. The Government guarantee continues, but there is no suggestion of assuming more risk to lift returns. Rather, the drive is in aspects such as more efficiency at the counters, lower inventory (till money), and management of investments, assets, and leverage (loans to equity). With a Government stock protfolio closer to a billion dollars than to

SSOOM, Postßank will be more active in the securities market, perhaps as a market maker, and is interested in the associated futures markets. Compared with the Sack operation, the money-market and securities market activities of the old POSB were meagre. Before tax earnings in the first six months (ended September 30) were $13.4M. Investments at September 30 included $1485M in Government, local authority, and other securities, and S9IBM in mortgages and other investments. Fixed assets were $33.7M. Depositors’ accounts totalled $2602M, compared with $2553M at April 1. These results are provisional pending resolution of a Maori Council claim, and completion of the final statement of the old Post Office when it settles its negotiations with Telecom. Mr Pyne says profits in the next six months are likely to be lower as falling interest rates weigh on operating margins. The hoard of 3 per cent money in depositors’ accounts becomes less of a goldmine as interest paid to the bank falls.