Some of the public anger directed at Australian banks is justified and the only way to counter this is to treat customers well, Bendigo and Adelaide Bank says.
Chief executive Mike Hirst said the hostility came from the way banks had treated their customers, especially in the 1990s and early 2000s when they closed branches and raised fees.
Mr Hirst said the ANZ had gone from the best customer service of the four big banks to the worst.
Record profits and the industry's high executive remuneration packages had also caused the public to lose faith in the banks.
Mr Hirst's comments come less than a week after the big banks declined to pass on in full the cut to official interest rates by the Reserve Bank of Australia (RBA).
In response to the central bank cutting the cash rate by 0.25 percentage points, Bendigo and Adelaide Bank only reduced its standard variable home loan rate by 0.19 percentage points.
"There was a bit of rightful outrage of where the industry had gone," Mr Hirst told a financial services conference in Sydney on Wednesday.
"You look at the banks and what people thought of them, and it's very hard to explain why the banking industry, which is fundamental to the economy and in a privileged position, has a requirement of 20 per cent return on equity and the sort of salaries that we're all getting paid."
He said the only way to fight "bank bashing" was to treat customers well.
"I think you combat it by doing the right thing as a bank," he said.
Mr Hirst said the banks needed to better educate the public on how they were funded and clearly explain why they did not always pass on the Reserve Bank of Australia's cash rate cuts in full.
"The industry hasn't done a very good job at explaining to the public how it works," he said.
He said ANZ was doing the right thing by trying to distance its regular review of its interest rates from the RBA's monthly board meeting.
"I applaud the ANZ for the approach they're taking because they're trying to educate their customers," he said.
"(But) they've gone from the best customer service of the four big banks to the worst, so it probably hasn't worked that well. A brave decision had to be made."
He said politicians did understand why bank variable home loan rates did not automatically move with the cash rate but that their slamming of banks on interest rates was a vote winner.
"I think they do understand it and they also understand that there's no votes in high interest rates for home loans," he said.
"They're not interested into going into the whole spiel about why the nexus between the cash rate and home loan rates is not as sure as it once was because that's too complicated and they're not interested in talking rates up even though 70 per cent of people are savers.
"They get it, but they get politics better."
Keep reading - next article