What happened Wednesday

Business / news

A review of things you need to know before you sign off on Wednesday; ASB profits rise, Ryman's lenders press, Fletcher profits drop, default KiwiSaver returns ugly, swaps firm, NZD firm, & more

15th Feb 23, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
No changes advised today.

TERM DEPOSIT RATE CHANGES
No changes to report here either, but there will be some tomorrow.

A CHALLENGE FOR THEM, NOT US
ASB interim profit jumped +10% to a fresh record high of $840 mln for six months to December 2022. Interest margins swelled. But the bank is highlighting a 'challenging' year for home loan customers (in a press release full of marketing-talk).

UNCOMFORTABLE LENDERS WITH DEBT LEVEL
Retirement village operator Ryman (RYM, #13) says it has higher debt than it is comfortable with in current market conditions and is seeking to pay some down with money raised from shareholders. (Ryman was ranked #5 on the NZX50 as recently as October 2021.)

BIG DECLINES
Median house price declines over the past year are now being measured in hundreds of thousands of dollars in some places, according to the REINZ HPI.

"A DYNAMIC OPERATING ENVIRONMENT"
Fletcher Building (FBU, #10) has reported a rise in revenues but a fall in profits. Net Profit After Tax was $92 mln (including $150 mln flagged construction provisions) for the half year to December 2022, -46% lower than $171 mln in the same period a year ago.

NO TIME FOR DEFAULT KIWISAVER
Even though KiwiSaver assets are rising by +$3 bln per quarter as contributions continue to pour into the finds management industry, Q4 performance has been tough. Morningstar reports that overall returns ranged in a modest band from +1.3% for the conservative category to +3.0% for the aggressive category. Default funds did it particularly hard, with SuperLife KiwiSaver Default (negative -10.6%), Westpac KiwiSaver Default Balanced (negative -10.8%), and Booster KiwiSaver Default Saver (negative -12.1%) all making grim reading. Almost 70% of all KiwiSaver funds are in the top six schemes (ANZ, ASB, Westpac, FisherFunds, KiwiWealth, Milford.)

'I WON'T GO'
Under-fire-from-politicians RBA Governor Lowe has been testifying in Canberra before politicians and said he won't be resigning. Further he rarked them up, reported saying "There is a risk that we have not yet done enough with interest rates.”

ASIC BARES TEETH
Staying in Australia, regulator ASIC is targeting predatory lending, and dodgy insurance pricing as a priority. It has laid 173 criminal charges in just six months.

SWAP RATES LIKELY STAY UP
Wholesale swap rates likely held their higher levels today (although they did in fact dip yesterday at the close). The real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is down -4 bps at 5.06%. The Australian 10 year bond yield is now at 3.78% and up +3 bps from yesterday. The China 10 year bond rate is little-changed at 2.92%. The NZ Government 10 year bond rate is now at 4.37% and up +5 bps, and still above the earlier RBNZ fix at 4.33% which was up another +5 bps. The UST 10 year is now at 3.74% and up +4 bps from this time yesterday.

EQUITIES UNDER PRESSURE
The S&P500 ended its Tuesday session unchanged on Wall Street today after the US CPI data earlier. Tokyo has opened higher but is now down a minor -0.1% in morning trade. Hong Kong is -1.6% lower at its open, and Shanghai is down -0.3%. The ASX200 is sliding in early afternoon trade and down -1.3% so far. The NZX50 is pretty much unchanged in late trade.

GOLD LITTLE-CHANGED
In early Asian trade, gold is now at US$1858/oz, and up +US$3 from this time yesterday.

NZD FIRMS
The Kiwi dollar is at 63.6 USc and up +70 bps from this time yesterday. Against the Aussie we are marginally firmer at 91.4 AUc. Against the euro we are firm at 59.3 euro cents. The TWI is now at 71 and up +50 bps from a day ago.

BITCOIN SLIPS
The bitcoin price is up +1.7% from this time yesterday, still at US$22,124. Volatility has been modest at +/- 1.7%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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55 Comments

by HouseMouse | 15th Feb 23, 4:11pm 1676430667

Will be intriguing to watch Fletchers over the next short while. Their residential business is pretty damn exposed.

by Pa1nter | 15th Feb 23, 4:13pm 1676430827

To be honest lower revenues will potentially be of benefit to them considering the margins.

by Silvi | 15th Feb 23, 5:27pm 1676435252

Meanwhile Steel and Tube are doing a few laps.

by Pa1nter | 15th Feb 23, 4:12pm 1676430770

Net Profit After Tax was $92 mln (including $150 mln flagged construction provisions) for the half year to December 2022, -46% lower than $171 mln in the same period a year ago

There goes some of the belief the industry has been gouging in recent times.

I'd be surprised if many firms in the industry were able to retain margins in the past 24-36 months, let along increase them.

Aussie firms have been falling over left right and centre for the last 6 months so it's surprising there's been so few in NZ.

by Advisor | 15th Feb 23, 6:11pm 1676437888

That's right. Fletcher's business structure doesn't allow them to price gouge customers to the extent that the general public believe.

Sure, they run a monopoly in NZ's building materials market but manufacturing in this country doesn't come without significant costs and supply chain pressures in such an environment. Better companies have been wiped out for much less in tumultuous times.

by HouseMouse | 15th Feb 23, 4:16pm 1676431015

So aggressive KiwiSaver funds have been similar to cash funds, but with a whole lot more risk.

I think I will stay with cash a bit longer, even if there is potentially upside with aggressive this year, I don’t think it’s high upside.

by Poppyc | 15th Feb 23, 7:33pm 1676442780

It was 3% in q4 over q3 (but likely a loss year over year)

by Hemi Ti Wire | 15th Feb 23, 4:23pm 1676431400

Cullen's kiwisaver scheme not such a smart idea now - as retirement funds take a hammering for the " 60+ " with a short runway to retirement

by Hardly | 15th Feb 23, 5:30pm 1676435407

What are you talking about? Kiwi Saver has been awesome. What is the alternative to investing money for your retirement? All these loses come after years of supernormal gains.

by Poppyc | 15th Feb 23, 7:34pm 1676442858

Morningstar actually gave the 10yr return in their release

"Over 10 years, the aggressive category average has given investors an annualised return of 8.4 percent, followed by growth (8.1 percent), balanced (6.4 percent), moderate (4.1 percent), and conservative (4.2 percent)."

by powerdownkiwi | 15th Feb 23, 5:34pm 1676435656

All forward bets on an ever-bigger future, are just that; bets.

And the future was going to peak, then permanently wane - Limits to Growth was right 50 years ago, and has been the longest-running 'right' economic projection the planet has ever seen.

So at some fairly predictable point, forward betting was going to turn negative-return.

by Rob Reid | 15th Feb 23, 8:20pm 1676445655

Let's look on the bright side PDK - at least we are burning a bunch of the remaining affordable oil in a proxy war to fine tune an internal boundary in Europe. Energy well spent.

by nktokyo | 15th Feb 23, 6:08pm 1676437735

You couldn't possibly be more wrong if you tried.

Kiwisaver is his legacy. Millions of kiwis will have more money set aside for retirement than otherwise.

Short term market fluctuations don't make saving and investing for retirement a bad idea in hindsight.

by singautim | 15th Feb 23, 11:31pm 1676457074

KiwiSaver is good. It permits the well paid to become wealthy retirees so they can live a lifestyle that keeps them isolated from the low class, low paid with their minimal savings.

Super is a universal benefit. Everyone gets the same amount (except that being married leaves you worse off - is there a surge in people divorcing aged 65?). It is socialism in action.

by GV 27 | 16th Feb 23, 6:40am 1676482836

Kiwisaver is his legacy. Millions of kiwis will have more money set aside for retirement than otherwise.

...which will likely then disqualify them from super entitlements if some get their way. And that's assuming you make it to 65 or whatever the payout age ends up being.

Saving and investing for your retirement on a supplemental basis is a great idea and all well and good, but it's looking unlikely that you're going to have anything to supplement once you actually get there, in the event you've saved and invested wisely to begin with.

by Rhumline | 15th Feb 23, 7:55pm 1676444140

You really are a d...d. Kiwisaver is the reason why many households have anything at all beyond (not so) super. I'm in the 65-70 class and...even though my late property investments have turned to custard... KS has been a dependable backstop.

Stop beating up on anything that was initiated by Labour and show me what National has done for anyone else but their core electors... or admit that you're a bot?

by powerdownkiwi | 15th Feb 23, 9:00pm 1676448059

This is neither about Labour. Or National. Or any of them.

This is about the one-off exponentially-increasing rape of a finite planet; resources thereof.

The pile of planetary parts reduces; the pile of bets increases. No nee for maths degree to work out what happens.

Property-investments? Bets that a ponzi would continue (or that tenant ability to support you, would). Parasitic, either way. As is KS, by the way.

Sigh.

by Nzdan | 15th Feb 23, 9:30pm 1676449836

If those 60+ didn't vote Muldoon in the 70's they'd have a much more generous "Kiwisaver 1.0" known as compulsory super at the time.

by Noncents | 15th Feb 23, 4:46pm 1676432775

Great read today.

The banks are profiting at the expense of the country
The property manager that deals in oldies is over-leveraged due to point above. Expects investors to bail out poor management. Oldies lose and investors surely will too.
Govt sponsored gambling in the form of KS is seeing the expected result. Customers wear the losses while the house (Fund providers) always win.
House prices are tanking and causing chaos, but are still too high so are causing chaos.
Fletchers are showing continued mismanagement, poor planning, and subpar results. No point operating in a boom/bust environment if you never actually pocket the boom. How will the bust period treat them?

by HouseMouse | 15th Feb 23, 4:51pm 1676433110

Great, linked summation!

by rastus1 | 15th Feb 23, 4:58pm 1676433532

yes it is!

by dumbthoughts | 15th Feb 23, 5:12pm 1676434335

With respect to ASB's thick and juicy profit, the most insufferable bit must surely be the almost Orwellian doublespeak about standing by customers doing it tough, doing the right thing by the customer etc.

Be honest when you're rogering the public ... what actual benefit does the PR spin provide and who is actually dumb enough to swallow it?

Same goes for permanently understaffed customer service departments saying "your call is important to us". No it isn't, the money I gave you was important - if you could take the money and not give me the product, you probably would.

PR/marketing gobbledegook makes frustrating situations even worse.

by HouseMouse | 15th Feb 23, 5:13pm 1676434430

Comments on fire here

by HouseMouse | 15th Feb 23, 5:16pm 1676434585

Horticulture lands could take 50-100 years to fully recover:

https://www.nzherald.co.nz/business/cyclone-gabrielle-the-7-billion-hor…

But that’s right, this is good for the economy 🤦‍♂️

by Silvi | 15th Feb 23, 5:11pm 1676434273

Very, very sad about those Gimlett wines. sigh!

by HouseMouse | 15th Feb 23, 5:12pm 1676434378

Gimblett Gravels are my favourite, but I am much sadder for the business owners and employees than my taste buds.

by Silvi | 15th Feb 23, 5:22pm 1676434954

Well when the dairy farmers came down south and started diarying on the CHCH plains my farmer husband said then the land was too fragile to support cows and that the insects and the rest. would not survive..he knew which balance was required.. that kept that land as it was before, and of which seed other cropping activities didn't damage, some of our greed could be called into question long before a climate event.

Now we have slips and flooding where farmers have told them, don't build there. But the pollies and the Councils know better huh!

by nktokyo | 15th Feb 23, 5:10pm 1676434215

Can com com investigate margins of lending banks here?

Just like they did for supermarkets.

And then do nothing, just like they did for supermarkets.

by Silvi | 15th Feb 23, 5:12pm 1676434366

Christopher, not Chris has it right, stuff actually needs to get DONE. Not talked about.

by Sam B | 15th Feb 23, 5:18pm 1676434710

It gives me the proverbial s***s that the Co-operative Bank exists, locally owned and returning excess profit to its customers, providing all the usual retail banking services perfectly well, and yet it remains a minor player. People are extraordinarily lazy.

by Advisor | 15th Feb 23, 6:42pm 1676439723

Can't believe not a single think-tank or independent economist has quantified the long-term economic benefits for NZ if people were to take a small hit on their mortgage rates in the short run and moved their loan accounts to a locally owned bank.

How about the local banks pooling their resources together to fund an independent study? They could account that as strategic consulting expenses and claim tax deduction on it.

by OldSkoolEconomics | 15th Feb 23, 11:34pm 1676457242

Why would we take a small hit on mortgage rates. An nz bank surely is no better than an au bank.

by Chaosinflesh | 16th Feb 23, 1:51am 1676465518

I banked with Coop for 4.5 years.

Coops fees were not competitive, and their payout was a pittance. They also cut costs by reducing service personel, became impossible to get a meeting with an account manager at the branch, and the branch manager was doulbing as a teller.

Only advantage they provided was staff on the phones and a branch open for 1/2 of Saturday, plus when I lodged bug reports for the internet banking I actually got to talk to the tech team because they wanted to fix them.

Went back to Kiwibank.

by Silvi | 15th Feb 23, 5:17pm 1676434667

We can talk about the minutiae but if nothing else the last few days have drawn my own eyes to how we need to reject some of the so called advances and start strengthening our systems. When whole sections of New Zealand cannot even ring for emergency response, when the emergency responders have little or no communication, come on lets get the basics right.

All we need right now is an earthquake and the lot of us would be munted.

by HouseMouse | 15th Feb 23, 5:30pm 1676435434

Well put.

I have zero faith in Wellington’s preparedness for ‘The Big One’. With all due respect to Christchurch, when the big one hits Wellington it will be multiple times more severe and deadly.

by IT GUY | 15th Feb 23, 7:06pm 1676441207

lots of people used to have cb radio in there cars/utes, lots of ham radio operators around, now just people with the latest iphone or samsung. our local cell tower came on today at about 4pm, down for 3 days, power now down for 3.5 days.... genset humming by my garage has saved freezers. Hawkers bay etc are in for weeks of pain, feel for them big time

by jeremyr | 15th Feb 23, 9:13pm 1676448838

Correct. We need to not accept the climate change narrative on this. Politicians scream climate change, but it’s just a deflection from that fact that have not prepared for a known problem over years and years. If people accept the climate change lie for the 1 in 100 event that just happened, it means the planners get away with not planning and people will become depressed as they will assume there is no hope, and that is false.

hard decisions need to be made to ensure tax payer money is spent in the right places to mitigate risks and ensure essential services continue to operate and drainage and roading infrastructure is up to it.

We have spent the last five years virtue signaling and telling people that they must have EVs and cycles and not have gas heating or cooking, and get rid of our wood burners. This week all those ideas turned out to be completely pointless. People without power cannot drive, they can’t drive through water, they can’t cook without power, and they have no fire places so no heating either. You can’t operate in an environment with a whole lot of infrastructure that just doesn’t work when the power goes off.

in ChCh it has been ten years since the earthquakes. The city is better, but it’s still not rebuilt, there is no cathedral, there is no stadium. Major projects ate still not finished. People are still fighting for insurance claims to be settled.

most people have multiple heating sources, and electric cars seem to be rare in Christchurch. It’s not surprising.

I really hope we don’t stuff around and paper over the incompetence that exists in the public service around our preparedness and infrastructure and it doesn’t take ten years to recover from this like Christchurch.

by GV 27 | 16th Feb 23, 6:44am 1676483085

Electric cars might seem to be rare, but Chch is actually home to one of the most eagerly anticipated used-vehicle developments - a modern LFP battery replacement and cooling system for ageing Nissan Leafs. The innovation and desire is there, and probably the know-how. Backing it to the point it can get scale and deliver results is the key.

by jeremyr | 16th Feb 23, 8:55am 1676490925

Will this improve it's performance driving through water in a flood and will be able to charge without electricity ?

by rastus1 | 16th Feb 23, 9:26am 1676492809

If its fully charged when the disaster hits and you have the set up, you can run the home form the car battery.

by jeremyr | 16th Feb 23, 11:40am 1676500848

Seriously? They have almost no storage (24KW, enough for less than a day running a standard household) and something like a 160km range. You can power the house for a few hours tops. Good luck with that. A leaf is good for going to the dairy or supermarket, but not much else. Other than that they are crap.

by Silvi | 15th Feb 23, 5:25pm 1676435156

$7.3 million Chris Hipkins announced. I wondered how much that will be abused.

I saw the Henderson shelters set up. Really close to Muriwai! They had to go to the Surf Club!

by Neonlights | 15th Feb 23, 7:49pm 1676443761

The nearest shelter to Henderson is Titirangi, it’s in the hall there. Trusts Arena is a CDC, definitely no need to go out to Muriwai or anywhere near it

by Audaxes | 15th Feb 23, 5:58pm 1676437104

Under-fire-from-politicians RBA Governor Lowe has been testifying in Canberra before politicians and said he won't be resigning. Further he rarked them up, reported saying "There is a risk that we have not yet done enough with interest rates.” Yeah, Right!!!! RE: RBNZ:

On Treasury forecasts the CPI in 2025 will have been 13.3 per cent higher than if the Reserve Bank had simply done its core job and delivered inflation on average at 2 per cent per annum (the Reserve Bank’s own projections are very similar). It is a staggering policy failure – especially when you recall that the Governor used to insist that public inflation expectations were securely anchored at around 2 per cent. It is an entirely arbitrary redistribution of wealth that no one voted one, few seem to comment on, and no one seems to be held to account for, even though avoiding such arbitrary redistributions (benefiting the indebted at the expense of depositors and bondholders) was a core element of the Reserve Bank’s job. We don’t – and probably shouldn’t – run price level targets, but let’s not lose sight of what policy failures of this order actually mean to individuals. Link

by Audaxes | 15th Feb 23, 6:57pm 1676440676

Orr today repeated to FEC the outright spin (or worse) claim that if the Bank had raised the OCR earlier we'd still have inflation in excess of 6% because of energy/food price shocks. Core inflation (ex food & energy) accounts for most of NZ's inflation Link

by IT GUY | 15th Feb 23, 7:09pm 1676441386

I wonder if NZ insurance companies have enough reinsurance cover here?

by Noncents | 15th Feb 23, 10:02pm 1676451770

I imagine they do for the recent events. Whether they are able to easily get ongoing reinsurance for future events will be the question.

by redheadonist | 16th Feb 23, 11:42am 1676500943

well, https://www.interest.co.nz/insurance/119544/auckland-flooding-take-fina…

by Squishy | 15th Feb 23, 7:21pm 1676442068

Under-fire-from-politicians RBA Governor Lowe has been testifying in Canberra before politicians and said he won't be resigning. Further he rarked them up, reported saying "There is a risk that we have not yet done enough with interest rates.”

Good for him, it's important now that Reserve Banks are seen to be independent.

by Justa comment | 15th Feb 23, 7:29pm 1676442551

So Ryman comes out today with a cap raise at $5. The shares started falling to $5.50 about 2 months ago. Talk about leakage.............

by False economies | 15th Feb 23, 8:20pm 1676445627

Who was the A-hole commentator making light of the storm the other day? Hope they're hanging their head in shame now.

by HouseMouse | 15th Feb 23, 8:56pm 1676447782

He has zero shame, and zero empathy.

by Nzdan | 15th Feb 23, 9:33pm 1676450000

by Yvil | 13th Feb 23, 5:16pm

What storm?

Had 5 upvotes too.

by HouseMouse | 15th Feb 23, 10:07pm 1676452051

Curious, right?

by Nzdan | 16th Feb 23, 8:04am 1676487892

When I mentioned that 5 upvotes, the spinning wheel in my head revealed 5 potential names of the smurf accounts used to generate upvotes.