John Kensington - KPMG NZ - Partner

Partner - Audit, Head of Banking & Finance

KPMG in New Zealand


KPMG’s Financial Institutions Performance Survey (FIPS) reports have provided insights into New Zealand’s financial services sector for over 30 years. Each edition presents industry commentary and analysis on the performance of New Zealand registered banks, together with a range of topical articles from industry experts, regulators and our own business leaders.

The banking sector’s quarter ending December 2021 shows another strong profit result, with a 6.7% increase in Net Profit After Tax (NPAT) to $1.61 billion.

Strong profit result for December 2021 quarter

KPMG’s analysis of the banking sector’s quarter ending December 2021 shows another strong profit result, with a 6.7% increase in Net Profit After Tax (NPAT) to $1.61 billion.

The firm’s Financial Institutions Performance Survey report shows that the strong result was primarily driven by large decreases in operating expenses, particularly from three of the larger banks, highlighting a continued focus from banks to control costs and that certain expenditure can’t naturally occur within Covid-19 restrictions.

Operating expenses/operating income decreased to the second lowest level since the Covid-19 pandemic began, falling from 43.1% in the September 2021 quarter to 39.7% in the December 2021 quarter.

The increase in net profit was also supported by an increase in net interest income of 3.05% to 2.9 billion, driven by continued growth in gross loans and advances partially offset by slightly lower interest margins. Gross loans and advances increased by 1.63% to $487.6 billion.

There was a 5.3% reduction in total loan provisioning down to $2.44 billion, reflecting a 3.3% decrease in collective provisioning and a 17.1% decrease in individual provisioning. These reduced provisioning levels led to a fifth consecutive quarter of net impairment writebacks as provisions raised near the beginning of the pandemic continued to be unwound.


Increase in net income to 2.9 billion


Increase in gross loans and advances


Reduction in total loan provisioning


Decrease in individual provisioning

Triple threat of inflation, interest rates and lending regulations

While the results reported for the December 2021 quarter are strong, since then New Zealand has seen both inflation and interest rates rise significantly, and quickly. At the same time, lending rates have slowed slightly as a result of loan to value ratio (LVR) restrictions and the impact of the CCCFA regulations. Housing prices have dropped and the time to settle has extended. Lastly this has caused general business confidence to fall.

With none of these changes conducive to strong banking results, it looks to be a challenging time ahead for the economy and sector.