NZ bank profits dip as operating expenses rise in June quarter
By Sophie Boot
Oct. 3 (BusinessDesk) - New Zealand bank profits dropped in the second quarter as operating expenses rose, outpacing
gains from non-interest income.
Net profit dipped 1 percent to $1.19 billion in the three months ended June 30 for the country's licensed banks, KPMG's
quarterly financial institutions' performance survey (FIPS) showed. Net interest income rose 3 percent to $2.3 billion
and non-interest income rose 6 percent to $724.9 million, but that was more than offset by 14 percent growth in
operating expenses to $165.5 million. Net interest margin gained 6 basis points in the quarter to 2.07 percent.
"The banking sector has a continued focus on sustainable and diversified lending, but at a lower rate than previously
which is why we’re seeing this relatively flat, albeit still profitable and strong, performance," KPMG head of banking
and finance John Kensington said in a statement.
New Zealand's lenders have faced shrinking margins over the past year as intense competition for mortgages left them
with little wiggle room in boosting interest income while at the same time greater regulatory capital requirements and
the prospect of tighter global monetary policy has pushed up their own borrowing costs.
Kensington said the banks were continuing to focus on better quality lending, with provisioning down 6.8 percent from
the March quarter, and past due assets down 4.9 percent.
"It would be easy to be a bit gloomy about this result but it must be remembered the base numbers are very strong,"
Kensington said. "It should also be remembered that NZ has one of the strongest, most well-served and competitive
banking sectors in the world; this represents a period of consolidation by the banks."
Of the major banks, Bank of New Zealand and Westpac Banking Corp reported rising profit in the quarter, with BNZ up 43
percent to $276 million and Westpac rising 8 percent to $255 million. Australia & New Zealand Banking Group saw net profit fall 13 percent to $406 million, ASB Bank parent Commonwealth Bank of
Australia fell 3 percent to $248 million, and Kiwibank dropped to a loss of $32 million in the quarter, down by $54
million from the March quarter.
For the minnows, TSB Bank saw net profit up 123 percent to $10.7 million, after it lifted non-interest income 22 percent
and cut operating expenses by a quarter. The Cooperative Bank lifted profit 36 percent to $2.7 million, as its
non-interest income rose 71 percent to $5.7 million.
Across all the banks, gross loans rose 1.2 percent to $394.5 billion in the three months ended March 31 and were 6
percent higher than a year earlier.
(BusinessDesk)
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