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Decline in banking sector profits - KPMG

Bank profits dropped in the first part of this year – despite the housing loan driven growth of their loan books.

Wednesday, July 12th 2017, 11:26AM

by Miriam Bell

KPMG’s latest Financial Institutions Performance Survey reveals that New Zealand’s banking sector saw a 2.85% decrease in its net profits to $1.20 billion in the March quarter.

This was attributed to a reduction in both net interest income and non-interest income, as impaired asset expense increased from $2.07 million to $47.02 million.

KPMG’s head of banking and finance, John Kensington said the dip in profits reversed the previous quarter's bounce back to $1.24 billion in profits after two successive quarters of decreases.

“It is just a recognition of the competition in the market, the slightly uncertain geopolitical times and a reflection on the NZ economy as a whole: resilient, going well, but not booming.”

Five of the nine banks surveyed reported reductions in their profit in the March quarter.

Of the major banks, BNZ and Westpac reported reductions of 13.45% ($30 million) and 16.84% ($48 million) respectively.

Kiwibank reported the largest percentage decrease of all the major banks, with a 37.14% ($13 million) drop in profit.

ANZ went against the trend with a $63 million (15.63%) increase in profit over the quarter.

Overall, the amount that the banks lent over the quarter was up by 1.19% which the report said was mainly due to growth in housing loans of 1.5%.

However, this was the slowest quarterly increase for three years and, while the banks’ loan books were larger, interest income for the quarter is down 2.46% ($124.30m).

While banks may have seen a rise in housing loans from December figures, they lagged behind non-bank lending institutions which increased their books by 3.52%.

Despite this, non-bank lending institutions’ market share went up by just 0.01% to 0.73%.

Kensington said they have seen the industry continue to focus on quality lending, which has led to a decrease in total provisioning levels.

“This indicates the banks are generally confident in the quality of their loan books at the moment… The results showcases the sector’s resilience.”

The report also noted that the regulatory landscape remains busy with announcements across a range of topics including dashboard reporting, debt to income ratios, outsourcing, dual registration and the Capital Review.

This all comes at a time where there is increased focus on conduct and customer-centricity coming from sector participants and regulators alike, it said.

Tags: ANZ banks BNZ conduct Kiwibank KPMG Lending Markets regulation Westpac

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

Last updated: 15 November 2019 4:16pm

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