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Finance sector profits booming

Despite a sluggish economy New Zealand’s financial institutions have increased their profits and improved their balance sheets, with banks leading the charge.

Wednesday, February 27th 2013, 1:55PM

by Niko Kloeten

Accounting firm KPMG’s annual Financial Institutions Performance Survey (FIPS) found that bank profits had increased by 13.6% to just under $3.7 billion in the year to September 30, the result of improved lending margins and a reduction in impaired assets.

Lower funding costs saw banks achieve a net interest margin of 2.25% over the year, up from 2.22% in 2011.

The improved margin contributed $288 million towards the profit increase; meanwhile, lending assets grew by 3.2% and impaired asset expense reduced by 25.7% due to improved credit quality and a reduced number of delinquencies.

Kiwibank was the best performer with a 272% profit increase from $21 million to $79 million, while ANZ (16.6%), ASB’s owner CBA (19.3%) and Westpac (13.96%) also had good increases; BNZ, on the other hand, had a 13.6% profit decrease.

The finance company sector saw a 14.4% increase in profit from $205.0 million in 2011 to $234.6 million in 2012.

This was driven by a number of factors including an increase in net interest income ($542 million to $593 million) and a significant reduction in impaired asset expense from $117 million to $63 million. 

However, these were partly offset by a decrease in non-interest income from $197 million to $175 million and an increase in operating expenses from $335 million to $383 million.

The savings institutions sector has shrunk significantly as a result of The Co-Operative Bank (formerly PSIS) and SBS gaining registered bank status; Heartland also became a bank after the cut-off period for the latest survey.

Including Heartland’s result, the sector saw profitability increase 165% to $30.3 million. 

With Heartland removed from the result the sector reported a net profit of $6.7 million, an increase of $2.4 million or 56%.

KPMG partner John Kensington said that rather than bashing banks for their profitability, New Zealanders should be glad they are performing better than their overseas counterparts.

He said if the banks had been losing money over the past three years, credit ratings would have been cut, interest rates would have soared, jobs would have been lost and tax payments would have fallen.

“Our banks have credit ratings amongst the strongest in the world.  Perhaps it is time to look at these global market leaders and treat them more as we would our winning sports teams or Olympic medallists,” he said.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
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ASB Bank 8.64 7.14 6.75 6.39
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BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
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China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
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Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
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Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
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Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
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Resimac - Specialist Clear (Alt Doc) - - 8.99 -
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SBS Construction lending for FHB - - - -
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Median 8.64 7.19 7.17 6.65

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