NZ banks eke out another quarter of sub-1% lending growth, KPMG says

Tuesday 27th March 2018

New Zealand banks managed a combined 0.9 percent increase in lending in the fourth quarter, a period when operating expenses and impaired asset charge jumped more steeply.

The nine biggest registered banks had $401.65 billion of lending, up from $398.05 billion three months earlier, according to KPMG's quarterly financial institutions' performance survey (FIPS).

Growth in loans has slowed from a 1.5 percent rate in the fourth quarter of 2016. Operating expenses rose 4.5 percent in the latest quarter, reversing almost half of the previous quarter's 8.7 percent decline. Profits rose in the final quarter of 2017 by 1.6 percent to $1.4 billion but the growth was largely due to an increase in non-interest income, which rose 16 percent to $882 million while net interest income fell 0.4 percent to $2.4 billion.

The economy grew 0.6 percent in the fourth quarter, the same rate as in the third, and slower than economists had expected. Still, the weaker pace was largely due to weather-related farm output being down while service industries recorded growth of about 1.1 percent. KPMG cited real estate metrics showing the seasonally adjusted median residential property price rose 7.1 percent year-on-year in February, while an average two-year mortgage rate is is currently around 4.7 percent, according to interest.co.nz.

The FIPS survey showed the impaired asset expense jumped 70 percent to about $46 million, with seven of the nine banks recording increases. Past due assets fell by 2.1 percent to $561 million.

Gross loans had remained relatively stable and the ratio of impaired asset expense to average gross loans and advances increased by 2 basis points to 0.05 percent, KPMG said. "Although all banks increased the value of their gross loan books, the mixed experience with respect to impaired asset expense meant that no clear trend was observable in this ratio across the survey participants," it said in the report.

ANZ Bank remained the biggest by total assets at $157 billion, ahead of Bank of New Zealand and Commonwealth Bank of Australia on $97 billion apiece. Of the big four, Westpac Banking Corp recorded the weakest growth in total assets in the quarter with $95.4 billion, up from about $95 billion three months earlier.

Profitability showed a similar pattern. ANZ's rose to $520 million from $505 million, BNZ climbed to $275 million from $245 million and CBA 's earnings fell to $275 million from $292 million. Westpac net profit of $268 million in the fourth quarter was down from a profit of $282 million three months earlier.

Of the smaller banks, Kiwibank total assets were little changed at about $23 billion while its profit jumped to $28 million from $14 million.

(BusinessDesk)

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