The BNZ has found a silver lining in its massive structured finance transaction settlement with the Inland Revenue Department (IRD).
It has applied the unused portion of a provision made last year, before it settled the case, to reduce its income tax expense for the nine months to June this year to just NZ$4 million.
BNZ’s General Disclosure Statement (GDS) for the nine months to June shows unaudited net profit came in at NZ$576 million. That compares to a loss of NZ$183 million in the same period of last year, which included a NZ$661 million provision against the bank’s structured finance transactions, made after BNZ lost to IRD in the High Court.
The case was, however, ultimately part of a settlement between the major banks and the IRD announced last December 23. The banks agreed to pay 80% of the core tax in dispute, plus interest.
Following the settlement, BNZ reversed the unused portion of its provision resulting in a tax credit of NZ$167 million. Subtracting this from the bank’s NZ$171 million income tax for the nine months to June this year, effectively left it paying income tax of just NZ$4 million.
Meanwhile, for the nine months to June, BNZ's unaudited operating profit before income tax expense was down NZ$101 million, or 15%, to NZ$580 million from NZ$681 million. Net interest income fell NZ$88 million, or 9%, to NZ$947 million and operating expenses rose NZ$32 million, or 6%, to NZ$603 million.
Impairment losses on credit exposures dipped to NZ$135 million from NZ$142 million.
Term deposits increase
In a market that’s now a hotly contested source of bank funding, the BNZ secured NZ$277 million worth of new term deposit money during the three months to June. BNZ’s GDS shows the bank’s total term deposits at NZ$17.042 billion as of June 30. That’s up NZ$277 million, or about 1.6%, from NZ$16.765 billion at March 31.
All the major banks are targeting growth in term deposits following the introduction of the core funding ratio (CFR) by the Reserve Bank on April 1.The CFR sets out that banks must source at least 65% of their funding from retail deposits and bonds with durations of at least one year. The central bank wants to increase the CFR to 75% by mid-2012 to offset New Zealand banks previous reliance on international wholesale, or 'hot' money, markets.
The GDS also shows BNZ’s mortgage book grew by NZ$244 million during the June quarter to NZ$26.023 billion from NZ$25.779 billion. Other term lending was, however, slightly lower at NZ$25.3 billion, down from NZ$25.6 billion. Total unaudited net loans and advances to customers rose by NZ$114 million during the three months to June to NZ$54.76 billion.
The bank also grew its total assets by NZ$737 million to NZ$68.005 billion.
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