BNZ books big profit on lending turnaround
BNZ chief executive Anthony Healy credits the bank's “strong” performance in the 12 months ending September 30 to a turn around in its lending operations.
Thursday, October 30th 2014, 2:07PM
BNZ lifted cash earnings 2.4% to $807 million, compared to the previous year. The result was largely driven by improved revenue and bad and doubtful debt charges.
Average lending volumes increased by 4% from $60.6 billion to $63 billion compared to the prior year. The business lending portfolio experienced steady growth. Mortgage lending was 3.5% during the year.
Healy says lending volumes recorded strong growth in and this was especially so in the home loan space in the second half of the year financial year.
The first half had been described as
Healy says “housing volumes grew by $600 million over the second half following a subdued first half influenced by the Reserve Bank’s high loan to value ratio lending limits and intense market competition.”
“The LVR restrictions disrupted volumes (when they were introduced).
He says BNZ’s new lending products such as Home Advantage and the “shred” campaign had contributed to the growth.
Home Advantage, which links a customer’s variable home loan rate to its credit card rate, had seen significant growth with half of the customers coming from other banks.
The "Shred" campaign is designed to help New Zealanders shred up to $156,000 of interest off a standard 30-year $300,000 home loan, with BNZ’s tailored home loan product which allows customers to make small increases every year in repayments.
Healy expects overall credit growth in the market to be “broadly similar” over the next 12 months to what was recorded in the past year. He expects agri lending to be a little flatter, however expects a pick up in business lending. Housing growth is “pretty hard to call,” he says.
Net interest margin was impacted by customers’ preference for lower margin fixed rate lending in a rising interest rate environment. The two basis point reduction in net interest margin to 2.34% compared with the same period last year was partially offset by reduced funding costs.
Provisions for bad and doubtful debts reduced by NZ$12 million or 12.1% due to ongoing improvements in the credit risk environment.
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