Firms better placed than in GFC — bank
BUSINESSES have taken decisive action and many are in a better position to cope with Covid19 than they were to weather the Global Financial Crisis, BNZ chief executive Angela Mentis says.
‘‘They’ve got stronger balance sheets, more manageable debt and cash reserves,’’ she said.
A strong response from the Government and the Reserve Bank was also helping, although Ms Mentis warned the real test would come in the longer term when that support was lifted.
On Tuesday, BNZ announced a statutory net profit of $367 million for the first half of the financial year — down 33% compared with the first half of 2019.
That included a Covid19 impairment of $108 million and a software capitalisation policy change that reduced the bank’s capitalised software balance.
Excluding those items, statutory net profit decreased by $74 million, or just 13.5%, compared with 2019.
BNZ had cash earnings of $562 million for the half — up 5.6% compared with $532 million in the previous first half.
‘‘We went into the crisis with a well capitalised balance sheet and funding and liquidity,’’ Ms Mentis said.
‘‘We’ve done topups for our credit reserves to ensure that we’re well positioned for the tougher economic conditions ahead.’’
The bank was working off an assumption that the economy would contract by 9% in 2020, unemployment would rise to 10% and house prices drop by 10%.
But there was a range of possible scenarios, Ms Mentis said.
For some sectors and businesses, the path to recovery would be very challenging, she said.
‘‘The response from the Government, Reserve Bank and the banks has been very decisive. We’ve all moved at pace. That is going to help cushion and help many more customers get through this than might otherwise have been the case.’’
BNZ had been working closely with large numbers of business customers to get a picture of the economic impact of Covid19.
It had also been crunching data on cash flows using credit card and debit card statistics.
To date it had provided assistance for more than 17,000 business customers to a value of $16 billion — using a mix of its own support measures and the governmentguaranteed loan scheme.
It also had 21,000 home loan customers seeking to adjust the structure of their mortgages.
About 55% of those were opting for interest only, about 19% had switched to lower repayments and 26% had taken up the sixmonth payment deferral.
In total more than 230,000 customers had been in contact to discuss their banking situation at some level, Ms Mentis said.
She said she did not expect the level of impaired loans to rise dramatically in the next six months because there would still be high levels of government support.
‘‘As they come off, that’s when you’re going to see more of the stress,’’ she said.
Bank data highlighted the stress points in the economy; credit card and debit card use offered insight into cashflow by sector and region.
Unsurprisingly the biggest falls had been in areas like travel, hotels and restaurants, down 98%, 70% and 65% respectively.
However, some parts of the economy had gone the other way, Ms Mentis said.
The IT and software sector had seen a 60% rise in positive cashflow and the food category a 47% rise.
The data showed the biggest stress was occurring around micro and small business, Ms Mentis said.
Sectors such as accommodation, cafes and restaurants had been most stressed in the past three weeks with outgoing costs twice as large as incoming revenue.
More than 28,000 BNZ business customers had taken government wage subsidies — predominantly cafes, accommodation and restaurants, she said.
Smaller regions also appeared to be disproportionately affected.
Dunedin, the Western Bay of Plenty and Hamilton, Stratford and the Grey district were all seeing microbusinesses experience declines in cashflow faster than average.
‘‘I’ve talked to many business owners across the country and they all want transparent conversations about their business so they can make sound decisions,’’ Ms Mentis said.
‘‘We know that for some sectors the path to recovery is going to be very difficult. And difficult enough without further increasing their debt levels . . . so really important that we all work together.’’
However, she was broadly optimistic.
‘‘Businesses can’t wait to get back to work,’’ she said.
‘‘Every business customer I’ve spoken to is really using this as an opportunity to think about their business, to change the way they’re operating, to think about digital and to think about their fixed costs.’’ — The New Zealand Herald