BNZ profit propped up by 0% accounts

Bank of New Zealand’s customers helped it earn a record profit of $1.4 billion by leaving their money in low and no-interest accounts.

The bank announced a rise in its after-tax profit of 7% to $1.4b thanks, in part, to an increase in its net interest margin in the year to the end of September. The margin is the difference between the interest rates it pays for deposits and other funding, and the interest rates it charges borrowers.

‘‘Pre-Covid around 58% of customer deposits were in term deposits. That fell. It is around 38% now,’’ chief executive Dan Huggins said.

An investor presentation posted on the ASX sharemarket by National Australia Bank, which owns BNZ, showed at the end of September, BNZ customers had $17.6b in accounts paying interest of 0.25% or less.

Sam Stubbs, chief executive of the Simplicity KiwiSaver scheme, said fear of not being able to pay their bills was behind people keeping much more money in low and nointerest transaction accounts.

BNZ did not have to take advantage of it and could have kept margins steady, passing on any margin increases to borrowers, he said.

‘‘Every single lending rate, they chose,’’ Stubbs said.

Depositors seemed to be switching to higher interestearning accounts as inflation eroded the value of their savings, the investor presentation showed.

In September, BNZ customers had $27.1b in term deposits compared with $23.9b a year earlier.

BNZ increased its lending by $4.6b, or 4.9%. Deposits with the bank increased 4.3%, and its KiwiSaver funds under management increased by $256m, up 6%.