New Zealand’s banks are back in the black, earning a combined net profit of $1.05 billion in the three months to Christmas.
After the sector lost $1.2 billion three months earlier – with profits of the foreign-owned banks eroded by the $2.1 billion ‘structured finance’ tax settlement with the IRD – the latest results from KPMG’s banking survey reveal a more positive performance from the country’s largest banks, underpinned by a general upswing in the economy.
The Financial Institutions Performance Survey ranks Westpac as the biggest earner with a net profit of $340 million in net profit for the three months to December 31, up from a loss of $802 million the previous quarter.
This was followed by Bank of New Zealand with a net profit of $271 million; ANZ on $253 million and Commonwealth Bank of Australia, which owns the ASB, on $164 million.
Local banks, which were not affected by the structured finance payments, did not share the big improvements.
More stable
Kiwibank’s net profit dropped to $10 million from $14 million for the quarter, TSB dropped one million to $13 million and Southland Building Society’s net profit rose $1 million to $3 million.
KPMG says the results indicate banks have returned to more stable positions after the volatility of last year.
Improvements in wholesale money markets had eased the cost of long-term funding and net bad debts had moderated at levels reflecting a broader economic recovery.
Most of the major banks announced reductions in fees and charges, particularly on default-type fees, and this was expected to flow through to results this year, KPMG said.
Impaired asset expenses improved significantly in the December 2009 quarter – possibly as banks waited to see the results of Christmas trading before considering further bad debt provisions.
Pressures remain on funding costs, exacerbated by the drive to lengthen deposit tenure to meet the Reserve Bank’s new prudential liquidity guidelines and competition for retail deposits remained intense.
Usage of the government’s wholesale deposit guarantee scheme had been minimal with only two guaranteed issuances made in the quarter to December.
Although the retail deposit guarantee scheme has been extended, the major banks are not expected to apply.
Georgina Bond
Tue, 06 Apr 2010