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Thursday, March 01, 2007

More complaints about banks high profits

Fiji Live continues with a report by economist, Paresh Narayan, about how banks are making substantial profits in Fiji at the expense of the businesses and the household sector. Again, I had raised this in my analysis of the profits reported by ANZ and Westpac for their financial year ended 30 September 2006 which was posted on my blog on 30 January 2007.

Now read on below the article from Fiji Live.

"Australian academic Paresh Narayan believes the concerns of retailers regarding the cost of doing business in Fiji are legitimate.

He claims the commercial banks are making substantial profits at the expense of the businesses and the household sector. And he suggested that banking regulations need to be reviewed in light of the "supernormal" profits made by the commercial banks.

Yesterday, Fiji Retailers Association president Himmat Lodhia urged the Government to come up with a budget or ideas to stop the declining trend of the economy. He said the retailing trend was changing for the worse with retail trade declining and business costs rising.

And he claimed 'a collapse in the economy is now more noticeable then ever'. Lodhia said there will be quite a few businesses in the small to medium enterprises which could collapse 'owing to the increasing costs of doing business and a relative decline in the sales trend'.

Last month, Fiji's two main banks ANZ and Westpac announced strong profits for the 2006 financial year. ANZ's net profit after tax was $42.9million (up by $13.6m over the previous year) while Westpac's was $30.1m (up by $5.8m over the previous year).

Narayan also says that the building investor confidence is crucial, and in this light tackling the issue of cost of doing business in Fiji is imperative. 'The sound law and order situation and absence of threat to both businesses and households (currently) have helped the retail sector. 'It is essential that this security situation continue,' Narayan says."

I still attribute the high profits recorded by banks in Fiji in the last financial year a direct result of interest rates hikes by the Reserve Bank of Fiji. Have they conducted a study on interest margins? I can only expect margins to have remained the same as in previous years or has widened as a result of the Reserve Bank of Fiji's interest rate policy. A good independent study is required of banks interest margins and spreads.

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