BNZ cash earnings rise 5.6% in first half of year

AUCKLAND: The Bank of New Zealand’s cash earnings rose 5.6% in the six months ended March, mainly reflecting 8.5% growth in housing lending and lower charges against profit for bad loans.

Earnings at its parent, National Australia Bank, more than halved, largely due to an $A807 million impairment charge as the lender booked the potential effect of the Covid19 outbreak on its loan book.

The New Zealand bank’s earnings were reported along with NAB yesterday. However, BNZ said it would not release its results until today because of NZX reporting requirements as the local market is closed by the observance of Anzac Day.

While that means BusinessDesk cannot report BNZ’s statutory net profit until today, just about every other detail about the bank’s performance is included in the NAB results.

That should make NAB and BNZ happy — NAB said it preferred the cash earnings measure because it ‘‘considers it is a better reflection of the group’s underlying performance’’.

What the cash measure leaves out is things such as changes in the value of hedging instruments, part of core banking operations.

BNZ’s cash earnings of $562 million compare with $532 million in the previous first half.

While BNZ did not release its results, chief executive Angela Mentis said in a statement her executive team would forgo the shortterm atrisk components of their pay packages, ‘‘which can account for up to 50% of their annual takehome salary for the 2020 financial year’’.

BNZ chairman Doug McKay said the board would donate 20% of its directors’ fees for the next six months ‘‘to charities who support the most vulnerable in our communities’’.

NAB’s statutory net profit fell 51.3% to $A1.31 billion ($NZ1.4 billion) for the six months versus the previous six months, while its cash earnings were down 51.4% at $A1.44 billion, suggesting its New Zealand arm was a bright spot for the group.

According to Reserve Bank of New Zealand data, BNZ’s common equity ratio ratio at December 31 was 11.4% and its total capital ratio was 14.4%, compared to the statutory minimum of 8%.

NAB’s results show BNZ’s housing lending rose to $44.8 billion at March 31 from $41.3 billion a year earlier while lending to business grew at a slower 3.3% pace to $43.6 billion.

NAB also said BNZ’s operating expenses fell, which was partly offset by a lower earnings rate on deposits and capital.

Charges against profit for bad debts fell to $42 million from $44 million in the previous firsthalf and net interest margin improved to 2.24% at March 31 from 2.2% at September 30 last year but was still down from 2.3% in March 2019.

Details provided on BNZ’s housing portfolio show 15.2% of its mortgages are on floating interest rates and that 66.4% of its loans are to owneroccupiers, investors accounting for the remaining 33.6%.

About 24.4% of its mortgages were on interestonly payments at March 31, up from 21.4% a year earlier, while the average loantovaluation at origination — when each mortgage was taken out — was 66.7%, up from 66.3% a year earlier.

Mortgages 90 days past due amounted to just 0.11% of the portfolio, up from 0.1% a year earlier, while impaired loans eased to 0.03% from 0.04%.

Mortgages account for 50% of BNZ’s total lending with agriculture, forestry and fishing its next largest category at 17%.

NAB is expecting unemployment in Australia to rise to 11.7% by June this year but to progressively reduce in 2021 to 7.3%. It expects unemployment in New Zealand to rise to 10% this calendar year and to ease to 9.5% the following year.

It expects New Zealand’s economy will be hit harder by the Covid19 crisis, predicting GDP this calendar year will shrink 9.1% compared with its expected 4.3% shrinkage in Australia’s GDP. It forecasts GDP in Australia will be back to 3.5% in calendar 2021, but New Zealand’s economy will only grow 1.4%. — BusinessDesk