That should make NAB and BNZ happy – NAB said it prefers the cash earnings measure because it "considers it is a better reflection of the group's underlying performance."
What the cash measure leaves out is things like changes in the value of hedging instruments, part of core banking operations.
BNZ's cash earnings of $562 million compare with $532 million in the previous first half.
While BNZ won't release its results, chief executive Angela Mentis said in a statement that her executive team will forgo the short-term at-risk components of their pay packages, "which can account for up to 50 per cent of their annual take-home salary for the 2020 financial year."
Mentis said that was "in recognition of the unprecedented challenges New Zealanders and New Zealand businesses are facing brought about by covid-19. The impact of covid-19 has affected us all and we have decided that this is the right decision to make as we support our customers."
BNZ chair Doug McKay said the board will donate 20 per cent of their directors fees for the next six months "to charities who support the most vulnerable in our communities."
NAB's statutory net profit fell 51.3 per cent to A$1.31 billion for the six months versus the previous six months, while its cash earnings were down 51.4 per cent at A$1.44 billion, suggesting its NZ arm was a bright spot for the group.
On top of the covid-19 impairment charge, NAB's result included A$293 million in costs to remediate problems revealed by Australia's royal commission into financial services, down from A$325 million in the previous first half.
NAB also announced a A$3 billion underwritten placement to institutions and a retail share purchase plan - with no underwrite - up to A$500 million to provide a "buffer in an uncertain environment" that "enables continued support for customers" through the coronavirus crisis. Notwithstanding the capital raising, NAB still declared a 30 Australian cents per share dividend, representing 35 per cent of earnings, excluding large notable items.
UBS analysts said the capital strengthening appeared prudent but that further top-ups may be required and "we question paying a dividend to shareholders while simultaneously raising A$3.5 billion in fresh equity below tangible book value."
The placement shares will be sold at A$14.15 compared to Friday's closing price on ASX at A$15.76.
The capital raising will lift NAB's common equity ratio - or CET - to 11.2 per cent of risk-weighted assets from 10.39 per cent currently. The Australian Prudential Regulation Authority regards any CET ratio above 10 per cent as "unquestionably strong."
According to Reserve Bank of New Zealand data, BNZ's CET ratio at Dec. 31 was 11.4 per cent and its total capital ratio was 14.4 per cent, compared to the statutory minimum of 8 per cent.
NAB's results show BNZ's housing lending rose to $44.8 billion at March 31 from $41.3 billion a year earlier while lending to business grew at a slower 3.3 per cent pace to $43.6 billion.
NAB also said BNZ's operating expenses fell, which was partly offset by a lower earnings rate on deposits and capital.
Charges against profit for bad debts fell to $42 million from $44 million in the previous first-half and net interest margin improved to 2.24 per cent at March 31 from 2.2 per cent at Sept. 30 last year but was still down from 2.3 per cent in March 2019.
Details provided on BNZ's housing portfolio show 15.2 per cent of its mortgages are on floating interest rates and that 66.4 per cent of its loans are to owner-occupiers with investors accounting for the remaining 33.6 per cent.
About 24.4 per cent of its mortgages were on interest-only payments at March 31, up from 21.4 per cent a year earlier, while the average loan-to-valuation at origination – when each mortgage was taken out – was 66.7 per cent, up from 66.3 per cent a year earlier.
Mortgages 90 days past due amounted to just 0.11 per cent of the portfolio, up from 0.1 per cent a year earlier, while impaired loans eased to 0.03 per cent from 0.04 per cent.
About 22.1 per cent of BNZ's new mortgages were written by mortgage brokers, up from 17.7 per cent a year earlier.
For 12 years until 2015, BNZ refused to deal with mortgage brokers, so its market share of broker-originated mortgages is probably still low relative to the other banks.
Mortgages account for 50 per cent of BNZ's total lending with agriculture, forestry and fishing its next largest category at 17 per cent.
Of the agribusiness portfolio, 50 per cent is lending to the dairy sector and another 5 per cent is to those servicing agriculture.
New Zealand lending to agribusiness accounts for 37 per cent of NAB's total exposure to the sector.
NAB is expecting unemployment in Australia to rise to 11.7 per cent by June this year but to then progressively reduce in calendar 2021 to 7.3 per cent. It expects unemployment in NZ to rise to 10 per cent this calendar year and to ease to 9.5 per cent the following year.
It expects New Zealand's economy will be hit harder by the coronavirus crisis, predicting GDP this calendar year will shrink 9.1 per cent compared to its expected 4.3 per cent shrinkage in Australia's GDP. It is forecasting GDP in Australia will bounce back to 3.5 per cent in calendar 2021, but New Zealand's economy will only grow 1.4 per cent.
