'Every quarter is a record quarter'

New Zealand bank assets rise to record high as some banks feel margin squeeze

7th May 14, 4:10pm by Gareth Vaughan

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By Gareth Vaughan

Total assets held by New Zealand banks rose to a record high in the December quarter and net profit climbed 17% with every quarter now a record quarter, KPMG says.

KPMG's December quarterly Financial Institutions Performance Survey (FIPS) shows quarterly net profit across the nine surveyed banks at $1.1 billion, representing a $165 million, or 17%, increase from the prior quarter. The auditing and financial advisory firm says this was driven by favourable movements in non-interest income and impaired asset expenses, accounting for a combined $244 million increase.

“We’re at the stage now where every quarter is a record quarter. The banks are benefiting from the general head wind in the New Zealand economy as dairy, agriculture and other aspects of the economy are starting to do well. All that growth and development comes about because the banks are funding it," KPMG head of financial services John Kensington said.

Total assets swelled $3.3 billion from the previous quarter, or about 0.90%, to an all time high of $380.9 billion. KPMG attributes this to the $3.7 billion quarterly increase in gross loans and advances as the housing market remained strong.

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4 Comments

by Stephen L | 7th May 14, 6:31pm 1399444273

Total assets swelled $3.3 billion from the previous quarter.

So in simple terms the commercial banks printed out of thin air $3.3 billion. Not bad work if you can get it. I used to naively think their main profits were interest margins less wages and rent costs. Actually it's the printing press in the basement.

I still don't really understand why the RBNZ don't take this onerous task off the commercial banks.

by Grant A | 7th May 14, 7:46pm 1399448784

I would love it if you could explain how they printed that amount Stephen. I know they had to raise several billion from investors, I wonder where that went ? Where do depositors funds go ? the never never land...look forward to the explanation

by Stephen L | 7th May 14, 8:59pm 1399453194

Grant,

Fair reply in that I have been more than a little disingenuous in implying the money printing done under the fractional reserve banking system is all profit. Printing they do do, it seems to me; but that printing in total largely comes back as a matching liability (in the form of deposits) fairly immediately. Does the chicken and egg in this equation matter? Intuitively it seems to me that it does. And is there at least a free margin in the printing? Certainly in the moral hazard government guarantee element there is. My understanding is a key benchmark in banking is return on assets. So pump up your assets as fast as you can through printing, then meet the benchmark. Maybe there is not a better way to grow the money supply- someone has to do the printing I understand, although again intuitively this role seems to sit better wth the Central Banks of the world it seems to me.

by Pathos | 9th May 14, 10:49am 1399589345

Governments and their central banks, (U.S., UK, NZ etc) are encouraging and fueling the creation of asset bubble wealth through cheap money. Money is created through debt. The public is enticed to take out debt far beyond their means of repaying it on the presumption that the asset will increase rapidly in worth over the short term, counter-balancing the risk and cost of the financing the debt. In short, encouraging speculation. The banks, meanwhile, sit back and watch the process inflate the value of their assets.