Chris McKeen
Bank of New Zealand is the first of the big banks to post its half-year profit. ANZ and Westpac come next.
Bank of New Zealand made an after-tax profit of $805 million in the six months to the end of March.
That represented a 13.5% rise in profit on the same period last year when BNZ made an after-tax profit of $709m.
The record profit has come at a time when households with mortgages are struggling with huge repayment increases at the same time as coping with high inflation.
“We know our customers well and understand that many New Zealand households are feeling the pressure of cost of living increases, particularly those with home loans,” chief executive Dan Huggins said.
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“While we’re confident that our home loan customers are able to manage the current higher interest rate environment, for some, it will be challenging.”
Sam Stubbs, chief executive of Simplicity KiwiSaver, slammed the dislocation between the BNZ’s rise in profits and the stress under which households and businesses find themselves.
“This is what happens when your Australian masters want to squeeze more out of the provinces,” he said.
Reserve Bank of NZ
Recent house price boom is down to interest rates, as Kiwis jumped to buy better homes while rock-bottom rates were around.
Stubbs renewed calls for a competition inquiry into the banking sector.
“How bad does it have to get before the Government does something about it?” Stubbs said.
The result follows KPMG’s prediction last month that factors like the weakening economy, falling house prices, and rising bad debts may put an end to the run of record bank profits.
The BNZ half-year profit announcement is the first of a series of big bank results, with ANZ reporting its half-year profit on Friday and Westpac reporting its result on Monday.
Stubbs predicted BNZ’s result would be a “bellweather”, and that the other banks would similarly report large profit increases.
Huggins said BNZ was stable, well-capitalised, with strong liquidity. The bank increased its loan book by $3.2 billion to $101b, and households increased their deposits at the bank by $1b.
The profit increase came despite the bank’s margins falling, and an increase in provisions for bad debts, which spiked after extreme weather in the early months of the year.
Huggins said a strong banking sector was important for New Zealand’s economy.
Economists expect the economy to move into recession by the end of the year, with many households having to reduce their spending to cope with high home loan rates.
On Monday, the Reserve Bank Te Pūtea Matua said homeowners with a mortgage could expect to be paying 22% of their disposable income in interest payments on their home loan on average by the end of the year.
That would be up from a low of 9% in 2021, and the increase will be much higher for many recent home-buyers with hefty mortgages.
SUPPLIED
BNZ’s chief executive Dan Huggins says a strong banking system is important for the economy.
Information released onto the ASX sharemarket showed the popularity of banks as measured by their net promoter scores (NPS) had been crashing.
NPS measures the net likelihood of customers recommending an organisation to other people, and is calculated by subtracting the proportion of customers who are “detractors” who score it 0-6 on a scale of 0-10, from the proportion of customers who are “promoters” and score it 9 to 10.
BNZ’s net promoter score is 31, compared to 24, 16 and 10 at the other big banks.
Those scores were all sharply down on previous years, and according to BNZ not a single one of the big banks had a positive NPS amongst business customers.
There’s been pressure for the government to order the Commerce Commission to conduct a market study into competition in the banking sector.
Recent market studies have probed the grocery, and the building supplies sectors.
Huggins said BNZ’s efforts to simplify its business, meant that over the past six months it had been able to remove or reduce fees across a range of products, saving customers close to $15m per year.
This included removing international payment fees and monthly account fees on BNZ’s popular TotalMoney account.
