Banks' profits up 45pc on last quarter - report
New Zealand's major banks made a net profit of $914 million for the three months ending June, up a whopping 45 per cent on the previous quarter, according to a KPMG report.
The combined bank profits are equal to $206.20 for every man, woman and child in New Zealand, or about $2.26 a day.
The profit turnaround was largely from a recovery in their investments, which took a big hit in the three months to the end of March, causing the banks' net profit to fall 45 per cent.
KPMG's Financial Institutions Performance Survey for the quarter found total lending for business and consumers inched upwards in the quarter by 0.88 per cent to $291.2 billion - a 2.4 per cent increase on the June quarter last year. The slight increase was likely to be the result of a lift in agricultural loans as dairy farms tended to change hands on May 1.
And bad debts from the Canterbury quake were also lower than feared. The ratio of impaired asset expense to average gross loans fell 31 per cent to 0.18 per cent in the quarter, with losses in Canterbury following the earthquakes below expectations, KPMG said.
The firm said the volatility in the banks' profits was caused by "fair value movements in their derivatives and instruments", with ANZ and BNZ making the biggest profit gains in the quarter after suffering the biggest blows in the three months ending March.
Massey University banking expert Claire Matthews said while $914m was erring on the high side for a combined quarterly profit, banks tended to report differently in the "off quarters" of June and December, compared with the half-year and full-year quarters of March and September.
ANZ National, Westpac and BNZ all worked to a financial year ending in September.
"In March they possibly were booking things through because it was the half year. And in the September quarter the profit will tend to be lower for the three banks because it's their full year and there's a lot of things they account for that they don't at other times of the year."
The average interest margin earned by banks fell six basis points to 2.25 per cent, a squeeze attributed to increased competition on home interest rates. That was likely to tighten further in the September quarter as the rivalry had heated up, Matthews said.
"There had been an expectation until recently that it wasn't too long before the Reserve Bank began increasing interest rates but that has been pushed out by quite a period now. So fixed rates have come down and that will also be impacting on the interest margin."
That squeeze was bad news for people dependent on interest from savings for their income - notably retired people - but could also mean that borrowers were able to spend more, given they were not paying as much interest.
KPMG warned the ongoing European debt crisis could ultimately affect New Zealand banks' access to funding, and said there were concerns about the impact of the slowing Australian and Chinese economies.
The survey included the results of eight banks: ANZ Banking Group, BNZ, ASB, Kiwibank, Southland Building Society, The Co-operative Bank, TSB Bank, and Westpac.