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FIPS Quarterly March 2019

FIPS Quarterly March 2019

Banks profits up 8.98%, conduct and capital outcomes still hover.

John Kensington - KPMG NZ - Partner

Partner - Audit, Head of Banking & Finance

KPMG in New Zealand


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FIPS March 2019

KPMG’s Financial Institution Performance Survey (FIPS) March 2019 quarterly analysis has revealed an 8.98% increase in in the New Zealand banking sector’s net profit after tax (NPAT), when compared to the quarter ending December 2018. Profits rose to $1,454 million for the quarter ending March 2019.

The increase was primarily driven by large growth in non-interest income (up $190 million). This follows a 10.36% decrease in non-interest income in the prior quarter that drove an overall decrease in NPAT, demonstrating the volatile nature of this figure and the consequent impact on results.

“The movement in non-interest income might be the biggest driver of the result, but the slow-down in the mortgage lending stats likely holds a better barometer to how things are running at present,” says John Kensington, Head of Banking and Finance at KPMG.

Other drivers include a decrease in net interest income of $69 million, and a small increase in impaired asset expenses of $27 million. The banking sector continued to have steady loan growth over the quarter, up 1.48%, growing from 1.16% in the period, and up 5.25% for the year. Asset quality also remained fairly steady.

With conduct and culture submissions in and the capital consultation period finishing, the major activity at the end of June was the announcement of further proposals around the in-principle decisions for Phase 2 of the Review of the Reserve Bank of New Zealand (RBNZ) Act. These included a deposit protection regime, review of the strength of the RBNZ’s enforcement tools and available penalties and combining the regulatory regimes for the bank and non-bank deposit takers.

“In the current market this represents a mixed bag of new tools, and further indication that the RBNZ is looking to change things up. This quarter has seen the sector experience a high volume of media interest, with coverage across a range of diverse topics,” says John.

Mortgage lending data for the quarter shows a seasonal decline and that first home buyers are increasing their share of new lending, as well as use of Kiwisaver as their first home deposit. The data indicates that over a third of first home buyers’ deposits are coming from Kiwisaver, with the real number probably closer to the scheme contributing to half of all first home deposits.

In the midst of the spotlight on conduct and culture, New Zealand’s financial services sector has maintained the highest sector score for customer experience for the second year running, as revealed in KPMG’s 2019 Customer Experience Excellence Report. While the sector held onto the top spot, it was not without a -2% difference in score from the year prior. TSB took out first place overall, with Kiwibank and BNZ also making the top 10 for 2019. BNZ were noted as the biggest mover of the year, experiencing the most significant upwards shift between 2018 and 2019.

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