BNZ has posted record annual profit, topping last year's previous high, as net interest income growth offset higher expenses and increased loan impairments.
BNZ's net profit after tax for the September year rose $95 million, or 7%, to $1.509 billion from $1.414 billion in the September 2022 year.
Total income increased $366 million, or 12%, to $3.497 billion, led by a $393 million, or 16%, rise in net interest income to $2.897 million. The bank's annual net interest margin rose 25 basis points to 2.40%. Net interest margin measures the amount of money a bank is earning in interest on loans compared to the amount it's paying in interest on deposits.
Operating expenses increased $146 million, or 14%, to $1.222 billion, and credit impairments on loans almost doubled to $172 million from $89 million.
The bank's annual cost to income ratio rose 57 basis points to 34.9%.
BNZ says lending grew $2.5 billion to $102 billion in its September year, with home loans up 5% to $57.7 billion. Customer deposits grew 6% to $78.5 billion.
Second-half got tougher
CEO Dan Huggins says BNZ's profit fell 12.5% in the second half-year versus the first-half to $704 million reflecting a broader economic slowdown in New Zealand. The second-half net interest margin dropped nine basis points to 2.36% from 2.45% in the first-half. Second-half loan impairments were $93 million versus $79 million in the first-half.
"Inflation, while softening, remains high, and as the Official Cash Rate has risen, businesses and households have taken a more cautious approach to borrowing," Huggins says.
"While most of our home lending customers have moved onto higher rates, we continue to proactively contact those who we have identified as potentially needing additional support," Huggins says.
He says BNZ is "cautiously optimistic" that business and household confidence will begin to rebuild in 2024.
Home loan loss rate zero
Presentation material released by BNZ's parent National Australia Bank (NAB) shows BNZ's home loan loss rate running at 0.00% at the end of its September financial year, unchanged year-on-year. Its 90+ day past due home loan rate was 0.17% versus 0.16% at March 31, and 0.11% at September 30 last year. BNZ's impaired home loan rate was 0.2% versus 0.1% at both March 31 and September 30 last year.
Housing lending as a percentage of BNZ's total lending stood at 56% at September 30, versus 55% a year earlier.
Figures released by NAB put BNZ's housing lending market share at 16.6% at September 30, up from 16.3% a year earlier. Its agricultural lending market share was 21.5% versus 21.4%, its business lending was unchanged at 22.4%, and its share of deposits up to 18.1% from 17.8%.
Meanwhile NAB posted a 9% increase in annual cash earnings to A$7.73 billion. It's annual dividends weighed in at A$1.67 per share up from A$1.51, with return on equity up 120 basis points to 12.9%. The group's net interest margin rose nine basis points to 1.74%. NAB's common equity tier one capital ratio at September 30 was 12.22%, up 71 basis points.
*The charts below, for BNZ, come from NAB. Note, GLA is gross loans and advances.
53 Comments
Frogs in boiling water. The temperature (corporate greed and public hardship) rising everyday, will it be turned down? Or ever-hopeful a temp change is just around the corner, will we allow ourselves to be boiled to death? I wonder who will be left to feed on our miserable carcass.
This "business" of creating money and charging people to use it remains one of the best earners possible. No capital required, no risk required, genius.
The mighty Audaxes and myself have made comments to this effect over the years on this site. When I refer to it at the water cooler, the reaction is mute.
Given away ..
The new National government, which was elected on Oct 27, 1990, was under intense public pressure to initiate an external inquiry into the bank. Finance minister Ruth Richardson refused, but flew to Christchurch on Thursday, Nov 22, to meet the BNZ board and encourage it to undertake an internal inquiry. She continued to emphasise that the new government would sell the BNZ, as originally outlined in the National Party’s 1987 election manifesto. Her main issue was timing, as the international banking sector remained fragile in the aftermath of the 1987 global sharemarket crash. Richardson was later quoted as saying: “All actions taken by the government have been designed to protect and enhance the taxpayers’ investment in the BNZ.” It was hard to argue with this statement as the crown was clearly putting its own interests ahead of minority shareholders who had paid $1.75 a share in the March 1987 IPO.
What is it with NZ banks increasing their operating expenses by far more than the inflation rate ? For example, Westpac increasing by 12%, and BNZ by 14% ? Shareholders should start asking the hard questions - such increases are unacceptable unless there are specific, sound reasons for it.
The over reaction of the RBNZ over the Covid window is coming home to roost.
The banks are squeezing the life out of a generation of kiwis. The stupidly in-debt are increasingly waking up to the fact they are last man contracted to the financial risk as the music grinds to a halt. They are looking pleadingly for the next sucker to pass the parcel before it's to late, but Bank regulation enforced lending standards means the next sucker cannot qualify regardless of want. Those that can do math are rejecting the required financial enslavement to allow boomers a soft retirement pillow, and are exiting stage left generally to Australia to start a lifetime of paying tax there instead. Add in the $2m threshold for a foreign parachute promised by National is now very much in question.
Bank shareholders laughing. All the way to the bank.
Would a change happen if all government banking was taken away from Westpac and given to Kiwibank? (I know the article is about BNZ but hear me out).
I'm thinking as Kiwibank gets stronger, it could be a more attractive alternative to the general public than the Australian owned banks.
The introduction of Open Banking would help as well, making it easier for customers to switch banks.
So long ago now and people forget or just never realized but KB made such an amazing difference to the bank charges when they first appeared. It would be great to return it to that disrupter role for the benefit of NZ as a whole. Any capital requirement from the govt would be returned to the economy simply by the slowing of profits drained from the economy.
Oh well, nice dream.
Looks like "helping" all the destressed mortgagors move from 20-year mortgages to 30-year mortgages, and/or allowing them to go interest only, is very profitable indeed. The banks have more power to "tax" than the government has ... And they don't need to get elected first!
Meanwhile, in Aussie, the media opens its property ponzi stories with how the indebted can seek relief.
Mortgage customers underwater on repayments are likely to be offered deferred repayment plans if they call up their bank, and even those who aren’t struggling are securing big discounts on interest rates just by picking up the phone.
Borrowers who negotiate with their bank, during a refinancing or otherwise, can save an average of 66 basis points on their interest rate – equivalent to two-and-a-half standard, official rate hikes – according to RateCity’s analysis of Reserve Bank data. This represents almost $2400 a year less in repayments on an average $500,000 loan.
https://www.afr.com/companies/financial-services/banks-willing-to-cut-r…
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