BNZ's annual profit slumped 23%, with the bank taking a hit from changes to its software capitalisation policy, its net interest margin falling, loan impairments rising and having eked out just a 1.5% income rise.
BNZ's September year net profit after tax fell $342 million, or 23%, to $1.157 billion from $1.499 billion in the September year last year.
In April BNZ said changes to the accounting process relating to its software capitalisation policy would reduce half-year profit by $253 million, saying the timeframe in which software is expected to generate economic benefits was shortening.
The bank reported an annual net interest income rise of just $8 million to $3.048 billion, with total operating income up $52 million, or 1.5%, to $3.536 billion. Operating expenses jumped $410 million, or 30%, to $1.789 billion with the increase attributed to technology investment, more frontline staff and inflationary pressures. Loan impairments surged $111 million to $138 million.
BNZ said its net interest margin dropped 10 basis points to 2.30% "in a highly competitive market for both lending and deposits." Its cost-to-income ratio surged 1100 basis points to 50.6% from 39.6%.
The bank said it continued to win market share with total lending up 7% to $118.5 billion, and total customer deposits up 5% to $91.4 billion.
BNZ CEO Dan Huggins says although there are strong conditions in the agriculture, tourism and infrastructure sectors, conditions remain challenging for some households, with higher living costs pressuring budgets and discretionary spending.
"Against this backdrop, we have continued to support our customers, helping businesses to invest and grow and New Zealanders to buy their first or next home. Barring any external shocks, we expect economic growth to strengthen through 2027. Backing business as confidence returns," says Huggins.
BNZ’s total business lending increased by $2.6 billion or 5.5% to $49.5 billion, with the bank saying it provided almost 40% of all new lending to SMEs, excluding commercial real estate.
"Looking to the year ahead, BNZ business customers have increased their lending limits by $4.8 billion or 8% year-on-year signalling growing confidence in their outlook," says Huggins.
"Home lending was up $4.9 billion or 7.7% on the prior year to $68.8 billion, with 2026 marking the fourth year in a row BNZ has consistently gained market share."
Huggins says BNZ provided lending for some 7,500 owner-occupier home loan customers in its September year, with first home buyers making up more than half that figure.
As of September 30, BNZ's individually impaired assets stood at $451 million, down $1 million year-on-year, with loans at least 90 days past due but not impaired unchanged at $290 million.
The National Australia Bank-owned BNZ paid annual ordinary dividends of $1.103 billion, up from $1.060 billion the previous year, and also issued $1 billion worth of ordinary shares under a dividend reinvestment programme.
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