The Bank of New Zealand has posted a double-digit increase in
its cash profit for 2011-12, driven mostly by a 35 per cent
reduction in bad debt but also by improved margins and
The BNZ said its New Zealand cash earnings rose by 21.1 per
cent to $741 million in the September year, building on a 17
per cent increase in the 2010-11 year.
The increase in cash profit was in inverse proportion to that
of BNZ's parent, National Australia Bank, which reported a
21.8 per cent fall in its statutory net profit to A$4.1
billion - driven mostly by bad debt arising from its
troublesome United Kingdom operations.
The BNZ's underlying profit, which removes fluctuations in
provisions for bad debt, and which the bank said provided a
truer reflection of its performance, was $1.12b, up 8.8 per
cent from the previous year.
BNZ's net interest margin - what the bank earns on funds it
takes in - increased to 2.39 per cent from 2.4 per cent a
year earlier, driven by continued demand for variable rate
mortgages, re-pricing of the business lending portfolio and
strong deposit growth.
Between the first and second halves, there was a 3 basis
point contraction in the margin.
Customer deposits grew strongly over the year, with average
volumes increasing by $3.4b or 10.9 per cent as the business
continued to focus on growing deposits to support asset
growth, reducing reliance on offshore funding markets, and
further strengthening liquidity and capital positions.
The bank expects to see the trend in strong deposit growth to
continue by about 7 or 8 per cent into 2012-13, BNZ chief
executive Andrew Thorburn said.
The full year charge for bad and doubtful debts fell by $53m
or 35.1 per cent from 2011 driven by lower collective
provisions as customers benefited from low interest rates.
Thorburn said BNZ had grown market share in key segments over
the past year, including agribusiness from 20.8 per cent to
21.9 per cent. BNZ's share of the business lending marked
increased from 26.5 per cent to 26.7 per cent.
Asked whether he thought the bank's profit was excessive, he
repeated what has became the bankers' mantra: A strong bank
is more preferable than the alternative.
"Weak banks, as we can see around the world, stress the
economy because they can't lend, which puts pressure on
taxpayers, and do not facilitate growth in the economy," he
"Strong banks might not be something that that people
intuitively think are good, but the opposite to that is a
BNZ has about $5b in capital and about $70b in assets. "So
you have to look at the size of the company to put the profit
in perspective," Thorburn added.
The BNZ's result follows a string of similarly strong bank
profits from the New Zealand operations of the
Last week, ANZ reported a 10 per cent increase in its
underlying net profit to a record $1.37b for the September
year. In August, Commonwealth Bank of Australia's
Auckland-based unit, ASB, reported a 15 per cent lift in
earnings to $580m in the June year.
Lachlan Colquhoun, banking analyst with East and Partners in
Sydney, said he expected increased "political noise" to arise
from the stronger bank earnings.
"The New Zealand subsidiaries of the Australian banks are
humming along pretty nicely," he told APNZ.
"I would still think that if there was a challenger bank who
could get their act together in New Zealand, that they would
find some traction there," he said.
Green Party co-leader Russel Norman said the near record
profits from the BNZ today came at high cost to New Zealand
businesses and households.
"Most of these profits will flow offshore and they constitute
the single biggest income outflow in our current account
deficit," Norman said in a statement.
The so-called Big Four Australian banks - National Australia
Bank, Westpac, Commonwealth Bank of Australia and ANZ -
dominate the local banking scene. State-owned Kiwibank
represents about 4 per cent of New Zealand's total banking
Westpac is set to report its result next week.