BNZ grows December quarter business lending at more than double pace of housing lending; Deposit growth outstrips both combined

By Gareth Vaughan

The Bank of New Zealand's December quarter profit surged 93%, boosted by gains on financial instruments and tumbling loan impairments. The BNZ also lent more than twice as much money to businesses as to residential mortgage customers, although deposit growth outstripped the bank's new lending.

BNZ's General Disclosure Statement (GDS) for the three months to December 31, 2011 - the first issued by a major bank that covers this period - shows it grew "other term lending", largely lending to businesses including farmers, by NZ$571 million in the quarter to NZ$26.704 billion.

The business lending growth is likely to be the strongest, or near strongest, among the major banks for the quarter. According to Reserve Bank credit sector data, business debt rose NZ$1.675 billion in the December quarter to NZ$73.718 billion and agriculture debt fell NZ$311 million to NZ$47.332 billion. In the September quarter BNZ grew lending to businesses by NZ$496 million, more than any other bank, which BNZ attributed to new lending across the agriculture, commercial and institutional sectors.

In the three months to December, BNZ grew its housing loans by NZ$244 million to NZ$27.626 billion with residential mortgages with loan-to-valuation ratios (LVRs) of 60-69%, 70-70%, 80-89% and over 90% all rising and only loans with LVRs of 0-59% falling. This continues a recent trend across the big banks of loans with LVRs above 80% rising.

Gross loans and advances overall grew by NZ$802 million to NZ$57.901 billion, with the increase well shy of the NZ$1.813 billion increase in deposits from customers to NZ$33.167 billion. This included an NZ$819 million rise in term deposits to NZ$19.805 billion.

Profit jumps to NZ$289 mln from NZ$150 mln

Meanwhile, BNZ's net profit after tax surged NZ$139 million, or 93%, to NZ$289 million in the December quarter from NZ$150 million in the same period of the previous year. This came as gains less losses on financial instruments - such as hedging, foreign exchange and fair value of financial assets and liabilities - at fair value jumped NZ$124 million to NZ$139 million and impairment losses on loans fell NZ$36 million to just NZ$3 million.

Net interest income rose NZ$24 million, or 7%, to NZ$358 million and operating expenses were unchanged at NZ$196 million. 

Total impaired assets fell NZ$45 million to NZ$614 million and 90 day past due assets fell NZ$11 million to NZ$191 million. BNZ's total assets fell NZ$2.598 billion to NZ$71.487 billion and total liabilities fell NZ$2.921 billion to NZ$66.815 billion with total shareholders' equity up NZ$323 million to NZ$4.672 billion.

The bank's tier one capital ratio fell to 8.76% at December 30 from 8.99% at September 30 and its total capital ratio rose to 12.17% from 11.84%. The Reserve Bank mandated minimums are 4% and 8% respectively, although BNZ, because it still has debt covered by the Crown Wholesale Funding Guarantee Scheme, must retain a tier one capital ratio of at least 6%. See more here from the Reserve Bank on bank capital adequacy ratios.

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