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

 


NZ banks set to stay profitable, Moody's says

NZ banks set to stay profitable in face of increasing competition, Moody's says

By Paul McBeth

July 30 (BusinessDesk) - New Zealand's banks should be able to maintain their strong levels of profitability, even as mounting competition puts pressure on their margins, according to ratings agency Moody's Investors Service.

The nation's banking system is stable, based on sustained growth expectations for the economy, and the relatively low level of bad loans on lenders' books, Moody's said in a report. Lower funding costs will help lender preserve their profits, even as the central bank increases interest rates and borrowers switch to fixed-rate loans, which typically have thinner margins for banks, it said. Lenders are also expected to benefit from lower costs to provide for impaired loans, and operating efficiencies.

"The banks' profitability metrics have likely peaked and may experience some marginal downward pressure in the coming 12 to 18 months," the report said. "Nonetheless, the industry's concentrated structure is likely to keep profitability at healthy levels."

In May, the Reserve Bank's twice-yearly financial stability report found that bank profitability was back to pre-global financial crisis levels, largely due to the fall in impairment charges, and future earnings would “likely be influenced by how borrowers respond to the outlook for higher domestic interest rates.”

The ratings company expects the big four banks - ANZ Bank New Zealand, Westpac Banking Corp, ASB Bank, and Bank of New Zealand - to continue their domination of the local market, accounting for about 88 pecent of all loans and 97 percent of deposits, as at March 31.

While that dominance supported the lenders' pricing power, competitive pressures will come from capital requirements driving demand for customer deposits, rising interest rates encouraging customers to switch to fixed-term mortgages, and banks not passing on interest rate increases to their customers.

Moody's today said funding conditions will likely stay favourable for New Zealand banks, with deposit growth likely to keep outstripping loan growth, albeit at a slowing pace.

The ratings company said the four Australian-owned banks benefited from support from their parents, while state-owned KiwiBank's benefited from the guarantee from parent New Zealand Post.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: RBNZ Keeps OCR At 3.5%, Signals Slower Pace Of Future Hikes

Reserve Bank governor Graeme Wheeler kept the official cash rate at 3.5 percent and signalled he won’t be as aggressive with future rate hikes as previously thought as inflation remains tamer than expected. The kiwi dollar fell to a seven-month low. More>>

ALSO:

Weather: Dry Spells Take Hold In South Island

Many areas in the South Island are tracking towards record dry spells as relatively warm, dry weather that began in mid-August continues... for some South Island places, the current period of fine weather is quite rare. More>>

ALSO:

Scoop Business: Productivity Commission To Look At Housing Land Supply

The Productivity Commission is to expand on its housing affordability report with an investigation into improving land supply and development capacity, particularly in areas with strong population growth. More>>

ALSO:

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

ALSO:

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news