New Zealand banks are continuing their run of record profits,
dispelling recent market concerns about the official cash
rate increase and the impact of LVR housing rules, KPMG head
of financial services John Kensington says.
KPMG New Zealand's latest Financial Institutions Performance
Survey, released this morning, shows the banks' collective
loan book has continued to grow with a 16.86% increase in
profits in the three months ended December from the three
months ended September.
The main Australian banks are now reporting with National
Australia Bank, the owner of the BNZ, set to report today.
ANZ and Westpac have already reported significantly increased
Mr Kensington said the strong performance of the banks went
hand-in-hand with the more buoyant outlook from New Zealand
''We're at the stage now where every quarter is a record
quarter. The banks are benefiting from the general headwind
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
Results of the quarterly report provided reassurance to the
market, given the New Zealand economy had come under
criticism recently, he said.
In February, ratings agency Standard and Poor's expressed
concerns about risks within the New Zealand market while
United States economist Jesse Colombo warned the country was
facing a housing bubble.
Those concerns were based on legitimate theories but they did
not take into account the realities of the New Zealand
environment, Mr Kensington said. There were ''subtle
differences'' in the New Zealand market.
''We have a lack of housing supply in New Zealand which is
driving prices up. That's different to other countries where
the housing market has crashed, like Ireland and the US.
"They were building housing to create jobs and there wasn't
enough demand. There are whole tracts of land locked up in
those countries where the owners have walked away and the
banks don't pursue them.''
The other difference was the Reserve Bank had recognised
there was a bubble and was taking measures to pull it back.
The bubble was only a problem if it burst, he said.
The latest report was not all good news for the banks with
the pace of regulation growing. The new legislation would add
further complexity to a sector already struggling under the
weight of regulation.
At a time when banks were in a position to lend more, they
were still being hamstrung by a multitude of regulation.
Banks would love to invest in frontline staff for
revenue-generating roles such as lending, insurance and
private banking. But they were having to devote more
resources to cope with the increasing levels of compliance
and reporting, Mr Kensington said.
• The total net profit from all survey participants in the
three months ended December was $1.1 billion, a 16.86%
increase from September.
• The increase in non-interest income of $143 million was
largely due to favourable fair value movements for ANZ and
BNZ and a gain on the sale of overseas equity securities for
• Total assets grew to an all-time quarterly high at $380.9
billion, driven by the continued increase in gross loans and