BNZ annual earnings up 1.4pc

BNZ chief executive Andrew Thorburn Photo / Herald On Sunday

Bank of New Zealand has reported cash earnings of $524 million for its New Zealand banking operations for the year to the end of September, up 1.4 per cent on the previous year.

BNZ said it had continued to focus on the importance of customer deposits which grew by 9.7 per cent in the year. Deposits from both retail and business customers of $2.5 billion increased BNZ's deposit market share to 17.6 per cent, up from 17 per cent the year before.

The move to abolish honour and dishonour fees from September 2009 had led to a $23m revenue fall, which was the main reason for a fall of 7.7 per cent to $442m in the other operating income category, BNZ said today. Net interest income rose 6.1 per cent to $1.23b

Asset quality indicators had stabilised - indicating that the peak of the cycle had been reached. The charge for bad and doubtful debts of $187m was flat year-on-year and reflected the slow economic recovery.

BNZ's New Zealand banking operations include retail, business, agribusiness, corporate and insurance businesses. It excludes BNZ's wholesale banking operations.

BNZ chief executive Andrew Thorburn said the bank had maintained a focus on ensuring balance sheet strength along with reinvesting in the bank for future growth.

"The recovery of New Zealand's economy has been slower than anticipated as it has undergone significant rebalancing in the last year. Deleveraging by businesses has also reduced the demand for credit as businesses delay investment decisions. As a result, overall lending volume growth has been modest," he said.

BNZ said it had continued to strengthen its balance sheet with capital levels well above regulatory minimums. The tier one capital ratio was at 8.85 per cent and the total capital ratio was 11.81 per cent at September 30.

While supporting the new bank liquidity policy, these new requirements had added costs to the business and put pressure on domestic funding with intense competition for retail deposits.

BNZ's net interest margin was 2.16 per cent, up 10 basis points year-on-year, but that remained well below levels before the global financial crisis.

The increase reflected risk repricing along with customers' preference for variable rate housing products. Margins were offset in part due to pressure on retail deposit margins and higher wholesale funding costs, BNZ said.

Having completed a domestic covered bond issue of $425m in June, a first for Australasia, investor discussions would be undertaken later this year to gauge interest in an international covered bond issue.

"Development of covered bonds in New Zealand is an important new market to create longer term funding sources and reduce reliance on short term international wholesale funding," Thorburn said.

BNZ supported the Reserve Bank's consultation on the introduction of a legislative framework for New Zealand issued covered bonds.

A $195m three-year investment programme in BNZ's retail and business centre network gained momentum, with 26 store upgrades completed so far. BNZ had also launched a dedicated small business hub offering expertise and support for the business sector.

BNZ's parent company National Australia Bank posted full year net profit of A$4.22 billion ($5.56b), up 63.2 per cent on the previous corresponding period's, due to lower bad debt charges.

NAB's preferred measure, cash earnings, was A$4.58 billion, up 19.3 per cent on the previous period's A$3.84 billion.

- NZPA