BNZ posts half-year profit drop of 5.3%
Bank of New Zealand made an after-tax profit of $762 million in the six months to the end of March.
That represented a $43m fall in profit on the same period last year when BNZ made an after-tax profit of $805m.
The announcement on the Australian ASX sharemarket by BNZ’s parent bank National Australia Bank (NAB) came the day after the Reserve Bank Te Pūtea Matua said bank profitability was declining.
It also comes a day after NAB completed the sale of its wealth and investment business to the newly-established FirstCape, which it has taken a 45% ownership stake in.
FirstCape brings together JBWere New Zealand, Jarden Wealth, Harbour Asset Management and BNZ Investment Services, and has 113 advisers and manages and advises on $44b of investor funds.
BNZ chief executive Dan Huggins said the drop in profit was expected, but still showed resilience in a subdued economic environment.
“We were expecting that.
“Our expenses were up a bit. We are seeing the same sort of inflationary pressures other businesses are seeing. Competition is intense.
“That’s impacted margins,” he said.
He acknowledged the pressure households were under from high mortgage rates.
“High interest rates and cost of living pressures continue to impact business and household finances,” he said.
“While easing inflation is encouraging, it is expected to remain outside of the Reserve Bank’s target band until the end of year.
“Economic conditions are likely to remain challenging until there is a material reduction in interest rates.”
The proportion of BNZ home loans that are in arrears has doubled since late 2022, and Huggins expected that trend to continue until home loan rates started to come down.
BNZ expected the Reserve Bank to start cutting the official cash rate (OCR) later this year.
The Reserve Bank said on Wednesday that around 85% of home loans had now repriced from low rates. It also forecast a rise in households falling behind on their home loans.
BNZ increased its total lending by $2.4b or 2.4% in the first six months, with home lending up $1.1b or 1.9% and business lending up $1.3b or 3%.
Total customer deposits increased by $1.5b or 1.9%.
After a year in the media spotlight has been trained on bank fraud protections, Huggins said BNZ continued to invest heavily in fraud protections, which contributed to BNZ’s operating expenses rising by $64m.
BNZ’s parent bank NAB said its anti-fraud systems had prevented and recovered more than A$260m in scam losses for customers.
BNZ has not revealed numbers on its fight against fraud, but it had been investing in fraud defences, and educating customers, Huggins said.
“That has seen the amount of scams and fraud that we are seeing come down quite materially,” he said.
But, he said: “We’ve got more work to do.”
Part of that work looks likely to come to fruition by the end of the year, with the Banking Association saying late last month that confirmation of payee systems for banks would start to be rolled out at the end of the year.
Banks have been under fire for not having a confirmation of payee system, which checks to see whether the name and number of an account to which a person is sending money match.
BNZ’s growth strategy is focused on increasing lending into less capitalintensive sectors, which means prioritising growing its home loan and other household lending, not its business banking.
Huggins defended that saying BNZ was a strong business bank, but had an opportunity to grow in the household segment
BNZ claims a 16.7% share of the home loan market, but a 22.5% share of business lending.