Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Banks show real growth after long adjustment

MEDIA RELEASE – 4th March 2014

FIPS Financial Institutions Performance Survey review of 2013

Banks show real growth after long adjustment

Strictly embargoed until 6.00am Tuesday 4th March 2014

New Zealand’s banking sector had a solid 2013, with the slow economic recovery picking up the pace and beginning to flow through into results, KPMG’s latest Financial Institutions Performance Survey shows.

Profits rose 8.61% across the banking industry in 2013, with an increase in lending assets of 4.35%. Return on assets recovered to 1.0%, now sitting just below the level last seen before the global financial crisis (GFC).

Return on equity remains at 14.21%, similar with 2012. Crucial to the post-GFC adjustment, impaired asset expenses dropped $153 million from $659 million in 2012 to $506 million a decrease of 23.21%. This is now the fourth consecutive year impaired asset expenses have declined.

“There are strong, green shoots emerging now,” says KPMG head of financial services John Kensington.

"Our banks saw real loan growth on their balance sheets in 2013. Most worked hard to improve their profitability, achieving this through a combination of margin retention, a drop in the cost of funds, improved credit quality and pressing on with cost reduction initiatives in their organisations.

"Shielding these 'green shoots' from the frost of regulatory reform is likely a challenge for 2014. The Reserve Bank's restrictions on high LVR lending, anti-money laundering legislation coming on-stream and Foreign Account Tax Compliance Act (FATCA) reporting have all proved burdensome for our banks in 2013.

“In addition the change from floating to fixed mortgages and competition across the sector will be a challenge.”

Within the sector, competition intensified over 2013, as banks competed harder for ‘good customers’. This is set against a backdrop of historically low interest rates and the anticipation that these low rates will soon end.

Strong growth in retail deposits indicates that banks are less reliant on the wholesale debt markets as they look for more stable sources of funding.

The themes of the year was certainly the adjustment to the Reserve Bank’s new loan-to-value ratio (LVR) rules, an adjustment which has been long and involved for both banks and customers.

“Before the LVR rule change the banks were probably writing 20 to 30 percent of theirmortgages a month with a greater than 80 percent LVR, now, they’re probably writing 4 to 6 percent of them with a greater than 80 percent LVR. In short, there’s going to be spirited competition for anyone who’s a good loan, be it a household mortgage or a corporate.

“For our banks, the feeling is if markets global markets particularly don’t have an upset, the funding costs will remain suppressed and this will help them retain their margins in 2014.”

To find out more about FIPS go to kpmg.com/nz/fips2013 [URL available from March 4th06.00am]

Ends

Link to a short video interview with John Kensington – KPMG Head of Financial Services

John Kensington video

About KPMG’s FIPS Review of 2013

FIPS Review of 2013 provides an in-depth analysis on the performance of New Zealand’s registered banks, major finance companies and savings institutions with balance dates between 30 September 2012 and 30 September 2013. A combination of quantitative and qualitative research is used to compile our analysis which takes information from publicly available annual reports and disclosure statements and validates this through nearly 30 one-on-one interviews with senior leaders within the banks and finance companies. We partner with and work alongside Massey University for the data collection and analysis.

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

BusinessDesk: SkyCity Lifts Minimum Convention Centre Investment To $430M

SkyCity Entertainment Group, the casino operator, has lifted the minimum it will invest in the Auckland International Convention Centre to $430 million and said total costs including land may be $450 million to $470 million. More>>

Statistics: Drop In Dairy Prices Leads Fall In Exports

Total goods exports fell $240 million (5.5 percent) to $4.2 billion in April 2015 compared with April 2014, Statistics New Zealand said today. More>>

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>

BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>


Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>

BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Housing: More House Price Gains Expected

House price expectations remain high, with a net 56% of respondents expecting house prices will increase. Fears of higher interest rates are fading, consistent with the RBNZ’s signals this year. Affordability and a lack of houses for ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news