Bank profits dip as lending growth outpaces deposits

Profits across the banks were down in the June quarter. Photo/Michael Craig.

Profits across New Zealand's banks dipped in the June quarter driven in part by record lending outpacing funding.

KPMG's quarterly Financials Institutions Performance Survey (FIPs) report found bank profits fell from $1.19 billion in the March quarter to $1.18 billion in the three months ending June 30.

That was despite six out of the nine banks covered by the report seeing an increase in profits.

BNZ, ASB and Kiwibank were the banks which pulled down the result with BNZ's net profit falling $30 million to $229 million compared to the March quarter.

Kiwibank's net profit fell $5 million to $24 million while the ASB's profits declined $9 million to $211 million.

John Kensington, KPMG's head of financial services, said the profit reduction was because of income from interest-bearing assets, impairment charges and a reduction in non-interest income.

Net interest income across the sector grew $70.29 million but non-interest income fell by $81.66 million and impaired asset expenses were up $31.4 million.

Lending growth outpaced funding growth with gross loans growing at a five year high of 2.22 per cent or $8.08 billion for the quarter.

Amongst the major banks lending grew by 2.18 per cent or $7.69 billion but funding only rose by 2.08 per cent or $7.43 billion.

"The strong economy and improved business confidence has seen New Zealanders continue to invest in property, rather than putting money on deposit.

"New Zealanders appetite for borrowing is exceeding their appetite for depositing in the June quarter, in turn, putting pressure on banks funding requirements," Kensington said.