BNZ cracks a record billion-dollar profit

BNZ's statutory profit for the year has jumped to $1.04b from $850 million in the same period a year earlier. Photo / Michael Craig.

BNZ has cracked the billion-dollar profit mark for the first time amid strong annual lending growth and favourable wholesale funding costs.

The bank's statutory profit for the year to September 30 jumped to a record $1.04 billion from $850 million in the same period a year earlier.

However, the profit was bolstered by a $322 million gain on the valuation of financial instruments, up from $69 million in the previous year.

Cash earnings, which exclude volatile and one-off items, rose 7.9 per cent to $966 million.

"This result demonstrates the underlying strength of our business and our resolve to deliver in a testing and competitive year," said BNZ chief executive Anthony Healy.

"It's also been a year of building foundations - we've made bold strategic decisions and investments that will set us up for success in future years."

BNZ said the performance in its business banking and wholesale divisions had been particularly strong.

The bank's total operating income rose to $2.4 billion from $2.1 billion a year earlier.

Gross loans increased 4.4 per cent to $65.8 billion, while customer deposits lifted 5.4 per cent to $44.9 billion, the bank said.

Average housing lending volumes lifted by $1.4 billion, or 4.8 per cent, while business lending rose by $1.5 billion, or 4.7 per cent.

BNZ's net interest margin rose five basis points to 2.39 per cent as a result of lower funding costs.

"This was partially offset by further shifts in the portfolio mix from floating to fixed rate housing products in a competitive market," the bank said.

This result demonstrates the underlying strength of our business and our resolve to deliver in a testing and competitive year.

BNZ chief executive Anthony Healy.

Charges for bad and doubtful debts increased by 54 per cent to $134 million as collective provision charges increased following changes in the economic outlook, particularly for dairy prices.

Healy said the bank was continuing to focus on supporting agri customers through the commodity price volatility.

"We have taken a conservative through-the-cycle approach to the dairy industry, with an economic cycle adjustment to our collective provisions to recognise a period of lower and more volatile dairy prices," he said.

Healy said asset quality in the bank's agri and dairy book remained "extremely sound".

BNZ chief executive Anthony Healy. Photo / Brett Phibbs

"We are well-placed to continue supporting our farming customers through a more volatile trading period. They've been through these cycles before and their BNZ partners are well-placed to support them with good advice."

Meanwhile, Healy said the decision to re-enter the mortgage broker market was already paying dividends for BNZ.

"We've only been back with brokers for four months and we've already exceeded our targets," he said.

"So now we're building capability and resource in our internal broker hub to meet this growing demand. Our primary focus in housing has been to expand our presence in Auckland, having already accredited 197 brokers and hired more than 30 additional mobile bankers."