KPMG's annual Financial Institutions Performance Survey shows bank funding costs the lowest they've been for at least 34 years

KPMG's annual Financial Institutions Performance Survey shows bank funding costs the lowest they've been for at least 34 years

New Zealand banks' funding costs fell to a new low for the fourth consecutive year, KPMG's annual Financial Institutions Performance Survey (FIPS) shows, helped by lower deposit rates paid to savers.

Funding costs across the 20 banks surveyed dropped 61 basis points to 1.98% last year, KPMG says. That's the fourth straight year the now 34-year-old survey has recorded a new low. Of the banks participating in the survey, 18 achieved a decrease in funding costs. 

ANZ and BNZ managed the biggest funding cost drop, both down 78 basis points to 1.73% and 1.74%, respectively. Bank of Baroda and Rabobank were the only banks to record an increase in funding costs, rising eight basis points to 2.81% and one basis point to 2.20%, respectively.

KPMG largely attributes the industry-wide drop to the Reserve Bank slashing the Official Cash Rate (OCR) to a record low of just 0.25% at the onset of the COVID-19 pandemic where it has remained. Against this backdrop banks cut their interest expense paid for borrowed money by almost 20%, or $2.33 billion, to $9.38 billion.

"The majority of the decrease can be attributed to the five major banks, who have achieved a combined decline of $2.32 billion, or 22.15%, accounting for 99.60% of the overall $2.33 billion decrease," KPMG says.

In the year to September 2020, the period covered by the FIPS, household term deposits dropped by more than $6.5 billion to $96.918 billion, while total gross deposits including business and household deposits, grew $35.1 billion to $394.3 billion. Thus term deposit volumes have fallen, whilst total deposit volumes, including call and current account deposits paying minimal to no interest, have grown.

The FIPS also notes that the large majority of banks have benefited from the Reserve Bank's action, with billions of dollars worth of interest expense cut, while interest bearing liabilities, such as deposits and other forms of borrowing, increased.

"Earlier in the [2020] year the RBNZ Governor floated the possibility of negative interest rates and with it the possibility of further reductions to the OCR, and while that subject has cooled a little and there remains few indicators of increases in sight, it is likely that 2021 will bring another record low year of funding costs," KPMG says.

Since December the Reserve Bank has been offering billions of dollars worth of cheap funding for banks through its Funding for Lending Programme (FLP). Up to $28 billion of funding is available to banks priced at the 0.25% OCR. This three-year funding is available over a two-year period.

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The misallocation of cheap credit is clear for all to see. Numerical details:

Debt data published by the RBNZ is seriously delayed given their Accellion troubles. Today they released this data for December and it showed total housing debt almost touched $300 bln ($299.4 bln), up +8.2% in a year. It has likely risen from there in January and February given the hot housing market. That December growth is the fastest in almost four years (April 2017). Debt owed to financial institutions by both the business and rural sector is actually shrinking (-3.3% and -1.2% respectively on year-on-year basis).Link


Well, I've got a clear conscience, I didn't vote for them.


The FLP was the final weapon developed by an immoral RBNZ on top of 12 years of stimulunacy to destroy utterly the economic lives of the elderly. These reckless central bankers, worldwide, should all end up in criminal courts. They make Madoff look harmless.


Don't hold back, tell us how you really feel.


I've never seen a trailer on the back of a hearse. No tears shed because some oldy wanted to squeeze borrowers for 10% on their $1m term deposit while pulling a benefit paid from taxes taken from young people in a far worse financial position. Time to tap that principal grandpa.

The $30,000 Income Tax paid on the TD interest went a long way to covering the pension Payment they received - if not covering all of it.
Now, not only do the Government get $0 tax to Offset their Pension payment, but the oldy doesn't have a net $70,000 to spend into the community.
In fact, the less they get; the lower interest rates go, the more they will save.
Seems about right.

Way to miss the point, they have $1m to spend in the community.

As for the $30k tax paid, the banks get a corresponding deduction so net $0 gain to tax base. Government's real income is from bank profits and those are chugging along nicely.

Ah, yes. But the Bank would have applied the principal of those funds - at more than the deductible cost - and so paid tax of those. We can talk about application of bank taxes all day as another topic. (I was a banking Group Treasurer, and yes, Tax is actually an optional expenditure).

The point remains - the lower interest rates go, the less individuals will spend, the lower aggregate economic activity will be compared to where it could be. Ask Mark "How much are you spending compared to what you were?" and multiply that by a million other savers.

Correct, bw.

Low rates have zombified the world economy via that mechanism also, and there's no way back from the damage that has been done with central banks having destroyed free market price discovery.

As for the generational war the other correspondent is trying to have, it's pointless, and childish. Not interested.

The generational war is only relevant if anyone is trying to keep arguing that the elderly are the hard done by.
Which you are.

What is worse
1) a retiree with the floor whipped out under them in their retirement home days ... OR
2) a young person with the entire Future whipped out from under them

Debt is tanking.
That's what is provides jobs / incomes.
Not low rates = the symptom.
Its resource limits & the end of real growth & now the end of road of leverage.
You really think the Central Banks are destroying the world economy in spite? Engage your brain.
They have HAD to do it to delay total collapse of supply chains.

Which is why the youth should be our concern

"What is worse
1) a retiree with the floor whipped out under them in their retirement home days ... OR
2) a young person with the entire Future whipped out from under them."

Obviously (1) is by far the worse because unlike the young person the retiree has no time to change their circumstances or to earn more income: they're simply stuffed, whereas the young person has their whole life, and energy, ahead of them. Also, young people right now have so many more opportunities than I ever had when leaving school: it just needs application and getting off the internet to build qualifications, experience, etc. But this world is full of opportunity.

"this world is full of opportunity"

Hmmm - Yet I recall you pondering the lack of options available around decent investment returns...

You might find this interesting


Your hatred of eldery savers, or any savers for that matter, is baffling. A saver has gone from a respected and revered member of society to being reviled as some sort of shyster and greed-merchant: lowest of the low. Meanwhile bingeing borrowers are the celebrated hero's of our age.
In any case, lowering interest rates by central bank chicanery is not 'helping' young would-be home owners at all, because they are facing rocketing house prices as a consequence.

Well said Tom. Somewhere after the GFC we've all gone down some strange rabbit hole, and across so many issues from economics to politics.

The reason is staring at us in plain sight:

"Free Trade"Agreements, in reality are anything but free. NZ ended up swapping jobs for debt - China got the jobs, NZ got the debt and virtually no tax receipts from those global corporations operating in our territory.

I don't hate them, I just have no pity for them. hard to feel sorry for someone sitting on $1m in cash but too tight to spend it or too lazy or risk averse to do anything other than putting it in term deposits.

The "woe is me" narrative on this site for elderly savers is probably due to the fact they make up a majority of the posters.

No I will respond.

Go around a retirement village and see how many are sitting on $1 million term deposits. I suspect average savings across the board would be $200k or thereabouts. It helps out with a few bills and a few luxuries after a life of working. Most of their house money would have gone to buy the retirement unit. And yes, they will now be using up the capital, which will be worrisome for them.

Elderly should not be taking risk: I would have no exposure to risk markets that exist now if I had a choice because these markets are going to correct and correct badly if reality still means anything.

And to say that an elderly person prudently not taking risk (excessive risk right now) is some sort of coward is as I said above, childishness, and frankly offensive. And as for also calling them lazy ... I give up. After you've worked for 40 years, see if you don't think you deserve a bit of a break.

Goodness me.

Being able to afford a retirement village life + having 1 mil cash is plenty comfortable? How you could not make that work is beyond me - why do you need 10% on top of that?

You didn't actually read my comment did you?

Sure did. I don't understand how someone in a retirement village that is 70+ years old, has 1 million cash and receives pension can't make that last. Life expectancy would suggest they'll make 86ish so 14 years with 1 million + 20k a year from super seems pretty easy?

I said I don't know of a single retiree in a village - for example the Rymans where my mother is - who is sitting on a $1 million term deposit. Not one. The average savings would be around $200k. My mother has nothing; she's poor, so I and my sisters largely pay her a living over and above the state subsidy as she is in care. After my father died, the amount of equity in her meager house barely paid for her to go into care.

You have all these preconceived notions and they are WRONG.

You are absolutely right. There ARE boomers with investment properties, but the majority are living month to month and worrying about those unplanned expenses. I know a few who try to save money by not heating their homes.

If they are that poor what do they care about the OCR and TD rates?

Try reading the thread in good faith.

He said he suspected average savings across the board would be $200k or thereabouts. So how did you get $1 Million and 2 thumbs up (so far) out of that?

wow..this thread is one of the stupidest I've seen in awhile...the old blame game..pathetic. I must go back to fox entertainment and get the 'honest' scoop.

Really its you that has missed the point


I suppose asking you for evidence would be too much trouble. Of course there are pensioners with $1m in the bank, but how many? What percentage of pensionrs have that much cash? 1%? 10%?
This country would be a great deal better off if we saved more and spent less.


I suppose asking you for evidence would be too much trouble. Of course there are pensioners with $1m in the bank, but how many? What percentage of pensionrs have that much cash? 1%? 10%?
This country would be a great deal better off if we saved more and spent less.


Yes, but elderly with investment properties are laughing all the way to the bank.

They are doing far worse to the young than they are to the elderly, who will at least generally have inflating assets.

Our central bankers are appointed by and ultimately answer to our daft and inept prime minister.

Labour's only worried about child poverty it seems.

It will be interesting to see what happens here in the next few months. Interest rates ticking up elsewhere: bonds, swaps, US mortgages, etc. Will FLP hold lending rates down here?

'New Zealand banks' funding costs fell to a new low for the fourth consecutive year, KPMG's annual Financial Institutions Performance Survey (FIPS) shows, helped by lower deposit rates paid to savers.'

What a disgrace! If you know a saver, give them a kick in the guts from me as well. As per the famous line in Hamlet: 'Neither a Saver Nor a Deposit Holder Be'.

It was Richard the Third silly!
A house, a house, your savings for my house!"


My modest plan was to retire and have income from super, share dividends, term deposits and rent.

The destruction of term deposit interest seemed a bit of a blow but then I realized that was covered by the big reduction in mortgage interest and increases in rents so all good.

But then I got thinking. It works out okay for me but not those poor buggers who saved all their life and just put it in the bank. It's a little like we stole the income of decent, simple, pensioners and gave it to landlords and speculators.

Exactly. Current policy rewards the speculative risk taker (borrowers), and punishes the conservative saver. It looks wrong, but it has enjoyed nothing but Govt sponsorship for some time.

Exactly. On a personal note, I may be a retiree, but am doing ok. As for a number of my friends - they are like the poor buggers you talk about. Every day we hear about rates, insurance, electricity, groceries, etc going up and now they don't have a buffer (TD interest) to go to. Like Mark Hubbard, I won't get into generalisations of generations as I admit, a few of my friends are sitting pretty. The majority, however, are NOT.

"It's a little like we stole the income of decent, simple, pensioners and gave it to landlords and speculators"

So ask yourself Why this had to happen / why is noone acting to deter this?
Because we need more Debt & leverage & speculation to keep the Ponzi we call an economic system going.

All debt/ wealth is just a call on the Future's ability to deliver a product of energy.
If the future is constrained by Physics, Not pixels, then leverage on leverage is all we have.

Oldies with any sense will, rather than sit on debasing currency, put some of their savings toward child/grandchild that they are closest too for FHB deposit who will then be in a better position to assist oldy ie not forced to bung them into a home as too busy working 2 jobs, with more time to visit & help when oldies cognitive abilities decline.

The savings of the prudent and those with excessive capital are supposed to be the engine-room of capitalism (its in the name folks) - those savings flow to productive investment & the saver makes a fair return as their reward. But look - here comes a central bank printing money & giving it to the banks to keep their costs low. Here comes the central bank - the state - usurping the role of the saver & kicking them to the curb. So is capitalism therefore dead?

Replaced with Debtalism. The ponz of ponzes

$1m in the bank now earns you after tax about $150 a week if your lucky. Accordingly the comment on the income from deposits (when they were work something) paying a large chunk of super is interesting. The govt is going to have to find an untapped alternative tax source, and the only one left is the most scared of cows being a land tax focused around the appreciation of dirt. People long on debt, low on income all waiting for appreciation are taking a risk, even though it has paid off in spades in the last twenty years.

Cant wait for the Govts property announcement in mid March. Its their big chance to show they are not total sell out to the global debt agenda.

For the love of god don't get your hopes up.

If it was going to do anything of use, they wouldn't be doing it.

Just a little tinker here and a handout there.


I agree 100%.
I would bet some serious money that this coward and inept government will only come up with some BS declaration of principles and strategies, and with very little and useless concrete action - be ready for Kiwibuild 2.0 (PS: I am no National supporter, they have been as bad as Labour if not worse, when it comes to inflating the NZ housing Ponzi).

March? Oh, another crisis has popped up and we can't make the announcement until May... sorry we forgot we were supposed to make a policy and need a working group to tell us what to do, they have to have time to study the problem (at least 6 months), then we have to formulate policy which we can't do quickly so it will be October next year... sorry at that point we are within a year (or thereabouts) of an election and all announcements regarding housing will be made as part of our election promises next August...

Oh what to do with all this money not earning much interest? Stock is overpriced, buying a business is risky in pandemic times; let's buy a house!

Pump your money into 'Sharsies', buy DogeCoin or Ethereum or BitCoin, try to desperately outbid some other 'greater fool' at a local property auction, hand your dosh to a managed fund to have a play with......but for the love of God, don't put it in the bank! If you are not throwing money as some risky speculative 'investment' you just ain't livin'!

I think it’s worth asking whether people *should* expect extremely low-risk deposits to accrue interest well above inflation. I don’t see why that should be an entitlement, exactly; after all, it amounts to a to a wealth transfer from *someone* in favour of the deposit-holder.
Of course, we’ve designed a system around that expectation after decades of growth, and people have planned their life affairs accordingly, so if this is the end of the road for guaranteed returns in general (which I think it might be), we should keep the social consequences in mind.

I think it's worth asking why a deposit holder has to pay tax on the absolutely pitiful rate of interest they earn on their money, while the river of capital gains being enjoyed from the housing ponzi go untaxed.

I'm with you on that. I don't think any asset class should be privileged -- if we really want to 'encourage' a particular outcome, we should straight-up nationalise it, otherwise hands off.

well...they need to get the money from somewhere. It is going to cost a lot to replace the Beehive once the next big one hits Wellington. Never mind that the money in those TD accounts got there after being taxed numerous times on the way and is just the pathetic residual left over. Yes, well done.

As they say in banking:
"We're in the money,
The sky is sunny..."