Record profit for banks, but mortgage rates could rise: KPMG

Banks reaped a record $5.77 billion after tax in 2018, driven by an improved net interest margin and asset growth. Despite the profit growth, KPMG warns banks will need to take action as the RBNZ capital proposals loom large.

John Kensington, head of banking and finance, KPMG New Zealand, says the capital rules pose the “biggest threat” to bank profitability, and predicts they could spell bad news for Kiwi borrowers.

He told TMM banks will either reduce their loan books or inject extra cash to meet the Reserve Bank’s demands. The latter option is likely to force a hike in mortgage rates and cut in term deposits, Kensington says: “Under both scenarios, there’s not the same level of freedom in terms of dishing out credit.”

The comments echo those made by investment bank UBS. The Swiss bank warned New Zealand mortgage rates could be forced up by $2 billion to cope with the new rules.