The Bank of New Zealand is the latest big retail bank to report record profits on the back of strong lending growth, rising interest margins, and low bad debts, but is warning tougher times lie ahead for its customers.
Key numbers for the year ended September compared to the previous year:
- Net profit $1.41b vs $1.32b
- Cash profit $1.39b vs $1.29b
- Revenue $3.13b vs $2.86b
- Loans $99.3b vs $94.7b
- Net interest margin 2.1 pct vs 2.05 percent
- Impairments $89m vs credit reverse gain $37m
BNZ's net profit for the year ended September rose 7 percent on a year ago to $1.4 billion, while the cash profit excluding one-off items rose nearly 8 percent to $1.39b.
The result was driven by a $4.6b or 4.9 percent increase loans and advances, while deposits rose 4.5 percent.
Unlike the previous year it set aside $89m for bad and doubtful debts compared with a gain of $37m the previous when it reversed provisions set aside for impairments that did not eventuate.
BNZ chief executive Dan Huggins said the result reflected the strength of economic activity and the financial resilience of its customers.
"Businesses have proven to be the economy's shock absorber. Having more New Zealanders in stable employment has helped them better manage financial challenges like the rising cost of living."
Huggins said the BNZ was well placed to support its customers through continued economic uncertainty.
"With interest rate increases and the rising cost of living more New Zealanders are going to find it tough."
Huggins said about 40,000 of its customers would be repricing their mortgages in the enxt six months, and they were stress testing consumers at above 8 percent to ensure they could cope with higher rates. However, the level of arrears remained very low and there were options to help people cope.
"We've supported New Zealanders facing these sorts of challenges before. Our advice to customers is talk to us. The sooner you get in touch the more options we'll have to find a way forward together."
He said the size of the banking industry's profits reflected the size of the business they were carrying out, which was three times bigger than the total of the companies listed on the stock exchange, but the current debate was healthy.
"The conversation is really important, it's important that we have a discussion about the role of banks .. and the role that we play in supporting New Zealand and seeing New Zealand thrive ... that's an important conversation for us to be having."