Strong banks fuel economic growth – FIPS

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EMBARGOED UNTIL 6:00AM ON WEDNESDAY 25 FEBRUARY 2015

Strong banks fuel economic growth – FIPS

KPMG’s Financial Institutions Performance Survey for the 2014 financial year has found that New Zealand’s strong banking sector is fueling the country’s economic growth.

“The strength of our banks supports the New Zealand economy by funding the needs of households and businesses. This is particularly important in the current context of economic uncertainty in other parts of the world,” said New Zealand Bankers’ Association chief executive Kirk Hope.

“Bank profits are a key measure of the banking industry’s strength. As well as supporting economic growth, profits allow banks to continue to invest heavily in New Zealand. In 2014 banks made a direct contribution of $6.6 billion to the New Zealand economy. They spent $4.8 billion running their businesses here, which includes employing over 25,000 people and paying a range of local businesses for goods and services. Banks also paid $1.8 billion in tax.”

Banks’ average return on equity in 2014 was 16.13 per cent. “Independent research shows that bank returns on equity fall firmly in the middle of the pack compared to major businesses listed on the New Zealand Stock Exchange.”

“Bank profits are largely a result of good management. Household credit growth is under five per cent, which is relatively low. Banks have had to carefully manage their operating costs. Average operating expenses as a proportion of operating income are down from 42.40 per cent in 2013 to 39.25 per cent in 2014. The reduction in bad debts is also an important part of the profits story, and reflects both the buoyant state of the New Zealand economy and banks’ responsible lending practices.”

“The strength of our banks means they’re able to access funding at good rates. Competition among our banks remains intense. All of this is great news for New Zealand consumers,” Hope added.

ENDS

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