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Bank profits drop 20%

Bank profits plummeted by 20% in the three months to March, with the early impact of Covid-19 hammering the sector, according to a new report from KPMG. 

Friday, July 3rd 2020, 6:20AM

John Kensington

Net profit across the sector fell by 20.4% in the March quarter, compared with the three months to December. The period included the first week of New Zealand's nationwide lockdown. 

The banking sector recorded a net profit of $895.6 million in the first three months of the year, but was hit with a "considerable" $659.2 million increase in impaired assets, KPMG said.

While profits fell significantly, the advisory firm warned the worst was yet to come. 

"The visible impact of the Covid-19 pandemic has only just started to be seen on the sector result and there is no doubt there will be further challenges to come," said KPMG's John Kensington, author of the report. 

The Financial Institutions Performance Survey said New Zealand's banks were in good shape to ride out the downturn, compared with the GFC.

"New Zealand is fortunate for two reasons: that comparatively, the New Zealand banking sector was in a strong position going into this crisis; and that the Government, Treasury, Reserve Bank of New Zealand, and the sector as a whole, are all working together to guide the country through the ongoing disruption," Kensington added. 

The advisory said mortgage lending was not impacted in the first quarter of 2020, as lockdown only affected the final week of March.

KPMG said the end of LVR restrictions would likely boost the lending market, but noted reports "that some are reluctant to lend".

The advisory firm said low interest rates and "mortgage wars" would continue to put pressure on banks' balance sheets in the months to come.

"While low interest rates can make borrowing an attractive option for customers, it compresses the banks’ operating margins which will result in them needing to review their costs and profitability models."

Tags: banks KPMG Lending mortgages

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online 2.95 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
Lender Flt 1yr 2yr 3yr
SBS Bank 4.54 3.05 2.99 2.99
SBS Bank Special - 2.55 2.49 2.49
The Co-operative Bank - First Home Special - - - -
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 ▼3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.49 2.69 2.79
Median 4.55 2.94 2.99 2.80

Last updated: 23 October 2020 5:00am

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