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Bank profits plummet ... to $4.4 billion

New Zealand banks suffered a 27.57% drop in profits in 2020 because of Covid-19, but still made $4.4 billion, according to a new report published by KPMG.

Wednesday, February 24th 2021, 8:14AM 1 Comment

The advisory firm's latest Financial Institutions Performance Survey, which profiles NZ's 20 biggest banks, reveals post-tax profits fell by $1.58 billion in 2020 compared with the previous year. 

Net profit after tax still came in at $4.14 billion, but earnings were hit by impaired asset expenses, which rose by 275%. Operating expenses jumped by 9%. 

KPMG said Covid-19 "appears to have had a more immediate effect on banks’ net profit after tax than the likes of the global financial crisis".

The banking sector's net interest margin fell by 14 basis points, and net interest income fell by 46 basis points. Interest-earning assets saw an increase of 6.70%.

KPMG said the huge increase in impaired asset expense reflected a cautious approach from the banks, but noted the Reserve Bank's data has highlighted only a small increase in non-performing loans. 

The report noted a healthy transition out of mortgage deferrals. From May to December, the total of mortgages on deferrals fell from $22 billion to less than $3 billion. 

KPMG's banking head John Kensington said the banking sector remained resilient, but sounded a note of caution about the economic outlook. 

"While the high house prices and low interest rates are contributing to confidence amongst homeowners, there are a lot of people for whom the ending of government assistance could have had a huge impact," he said. 

Tags: banks KPMG Lending

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Comments from our readers

On 24 February 2021 at 2:07 pm dweusten said:
Just what was the figure for "earnings were hit by impaired asset expenses, which rose by 275%" as this is likely to be added back into profit if/when not needed.

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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.25 2.59 2.89
ANZ 4.44 2.85 3.19 3.49
ANZ Special - 2.25 2.59 2.89
ASB Back My Build 1.79 - - -
ASB Bank 4.45 2.25 2.59 2.89
Basecorp Finance 5.49 - - -
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.25 2.55 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.85 3.15 3.39
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
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 Bank - Online ▼1.95 ▼1.85 2.35 2.45
Heretaunga Building Society 4.99 3.40 3.50 -
HSBC Premier 4.49 2.25 2.35 2.65
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.40 3.64
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.55 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 2.69 2.99 3.29
SBS Bank Special - 2.19 2.49 2.79
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.25 2.59 2.79
The Co-operative Bank - Standard 4.40 2.75 3.09 3.29
TSB Bank 5.34 3.05 3.29 3.59
TSB Special 4.54 2.25 2.49 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 2.85 3.19 3.49
Lender Flt 1yr 2yr 3yr
Westpac - Offset 4.59 - - -
Westpac Special - 2.25 2.59 2.89
Median 4.55 2.68 2.99 2.89

Last updated: 17 May 2021 9:05am

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