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Banking business booms – KPMG survey

New Zealand banks have had the highest growth in profit on record, according to the accountancy and research firm KPMG.

Wednesday, March 9th 2022, 10:40AM 1 Comment

by Eric Frykberg

The information has come in the company's Financial Institutions Performance Survey (FIPS) review for 2021.

KPMG says the banking sector recovered strongly from the shock of Covid-19 in 2020.

Its results show net profit after tax (NPAT) up $1.99 billion, or 47.92% from 2020.

This pushed total profits up for the year to $6.13 billion.

KPMG says the key driver for the increase in NPAT was a huge reversal in impairments, based on high level provisions for Covid-related costs in 2020 that turned out not to be needed.

In addition, net interest income rose by 7.07% to $765.62 million, aided by a 1 basis point increase in the Net Interest Margin (NIM) for the banking sector and a 6.55% increase in total bank lending across the sector.

This was fuelled by a strong property and mortgage market.

But while income rose markedly, expenses only inched up, by 0.80%.The head of banking and finance at KPMG, John Kensington, sounded a note of caution over these strong results.

He said the true impact of Covid-19 was blunted by Government policies, including the unintended consequence of monetary policy which saw significant amounts of cheap funding available for housing.

“This gave Kiwis the confidence to continue their love affair with housing at a time when many other avenues for spending were curtailed. These factors saw phenomenal mortgage growth off the back of them.”

Kensington also took a swipe at the Credit Contracts and Consumer Finance Act (CCCFA).

“The changes have resulted in a slow-down in processing times of loans and an increase in declines, meaning at the very time many sectors of society need funding, it is being turned down.”

He said change needed to come from the current review into the rules by the Ministry of Business Innovation and Employment.

“The hope is that a transparent and factual approach is adopted, leading to a balanced outcome,” Kensington said.

Tags: KPMG

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Comments from our readers

On 9 March 2022 at 11:22 am Andy the adviser said:
The banks have made the most of the poor government and Reserve Bank decisions. Too much money injected into the system had pushed house prices up - cheap money chasing a supply shortage.

Trying to fix the problem, the OCR has gone up .75%, and jumping at the opportunity (excuse) the banks have increased their rate 1.3%.

In summary - without doing anything better for their customers, the banks have:
-significantly increased interest income
-Improved their balance sheets (due to the property prices increasing)
-Cut costs by closing branches

Thereby increasing their margins and profit significantly.

And a further secret out of the bag - they are now relying on financial advisers (previously called mortgage brokers) to weed out bad deals, so that only the good proposals make it to the lending managers. (One bank says 41% of its home loan business comes from advisers).

So has Kiwibank really changed the face of banking in New Zealand? And has it done anything to reduce the gouging enjoyed by the other banks?

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Lender Flt 1yr 2yr 3yr
AIA 5.95 4.85 5.35 5.65
ANZ 5.94 ▲5.95 ▲6.40 ▲6.59
ANZ Blueprint to Build - - - -
ANZ Special - ▲5.35 ▲5.80 ▲5.99
ASB Bank 5.85 ▲5.35 ▲5.80 ▲5.99
Avanti Finance 5.95 - - -
Basecorp Finance 6.95 - - -
Bluestone 5.89 7.49 8.09 8.19
BNZ - Classic - ▲5.35 ▲5.69 ▲5.99
BNZ - Mortgage One 5.94 - - -
BNZ - Rapid Repay 5.94 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.94 ▲5.95 ▲6.29 ▲6.59
BNZ - TotalMoney 5.94 - - -
CFML Loans 6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Co-operative Bank - First Home Special - ▲4.75 - -
Co-operative Bank - Owner Occ 5.85 ▲4.85 ▲5.35 ▲5.65
Co-operative Bank - Standard 5.85 ▲5.35 ▲5.85 ▲6.15
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.95 5.45 -
Heartland Bank - Online 4.10 ▲4.40 ▲4.90 ▲5.10
Lender Flt 1yr 2yr 3yr
Heretaunga Building Society 6.10 5.00 5.75 -
HSBC Premier 5.89 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.25 4.39 5.09 5.45
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 5.50 5.85 6.19 6.39
Kiwibank - Offset 5.50 - - -
Kiwibank Special 5.00 4.85 5.19 5.39
Liberty 4.84 - - -
Lender Flt 1yr 2yr 3yr
Nelson Building Society 6.45 ▲5.55 ▲6.15 -
Pepper Money 4.49 - - -
Resimac 6.19 5.60 6.16 6.29
SBS Bank 5.79 5.05 5.69 5.89
SBS Bank Special - 4.55 5.19 5.39
Select Home Loans 4.09 4.29 4.86 5.09
TSB Bank 5.59 5.14 5.79 6.15
TSB Special 4.79 4.34 4.99 5.35
Unity 5.65 4.95 5.55 -
Wairarapa Building Society 5.74 4.95 5.75 -
Westpac 5.94 ▲5.95 ▲6.29 ▲6.59
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.94 - - -
Westpac Special - ▲5.35 ▲5.69 ▲5.99
Median 5.85 5.00 5.69 5.99

Last updated: 23 June 2022 9:02am

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