NZ bank profits fell 28 per cent in 2020 but they still made over $4 billion
23 Feb, 2021 04:00 PM
3 minutes to read
The big four banks accounted for 99 per cent of the $1.58 billion reduction in net profit after tax. Photo / File
New Zealand bank profits fell by a whopping 28 per cent in 2020 - a drop of $1.58 billion to $4.14 billion.
The fall was the largest in the 10-year history of KPMG s Financial Institutions Performance Survey as higher impairment expenses and operating costs took their toll on the banks.
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John Kensington, head of banking and finance at KPMG, said while Covid-19 appeared to have had a more immediate effect on banks net profits than the global financial crisis, the New Zealand financial system had to date proved to be strong and the banks resilient.
The banks’ net interest margin – the difference between what they charge for lending and pay for saving – dropped from 2.1 per cent to 1.96 per cent. It is a bigger profit hit than suffered in the immediate aftermath of the global financial crisis. Then, profits slipped 1.2 per cent in 2007 and 0.1 per cent in 2008 before plummeting 98.8 per cent in 2009.
RNZ
The banking sector s finances have taken their biggest annual hit in in a decade. KPMG head of banking and finance John Kensington said banks would have been braced for a Covid-19 effect on their profits. While the increase in impaired assets was large, he said it was off a low base. They were calculated on a scenario of what could be expected to happen and many banks might find their books in much better shape in reality, he said.
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15th Dec 20, 11:47am
By Gareth Vaughan
The Reserve Bank (RBNZ) has once again raised the old chestnut of having a tool to restrict high debt-to-income ratio mortgage lending included in its macro-prudential toolkit.
The latest request of the Government, whose acquiescence is required, comes in
the RBNZ s response to Finance Minister Grant Robertson, released on Friday, over his concerns about soaring house prices. We have also previously consulted on introducing debt serviceability restrictions, such as debt-to-income (DTI) limits, on mortgage lending. Although we consider that restrictions on high-DTI lending could complement the current LVR [loan-to-value ratio] policy, we note that this tool is not currently part of the Reserve Bank’s Memorandum of Understanding with the Minister of Finance. We request that the Government gives consideration to adding restrictions on debt serviceability (that would include DTI limits) to the permitted tools in 2021, the RBNZ said.