New Zealand banks pulled in record combined profit in 2017

Tuesday, 13 February 2018

The banks made a combined profit of more than $5 billion last year.

2017 was a good year for New Zealand banks.

KPMG's latest Financial Institutions Performance Survey shows the country's banks had a 7.35 per cent profit boost last year on the year before.

They made a record combined $5.19 billion in the year.

That reverses a year-on-year profit dip recorded the year before.

Head of banking and finance John Kensington said it was due to a reduction in impaired asset expense, and an increase in non-interest income.

'An improved dairy sector paired with a stable economy over the last 12 months has contributed to a reduction in impaired asset expense, while favourable gains on financial instruments has helped increase non-interest income.'

All five major banks reported growth in their loan books for the year of between 1 per cent and 7.57 per cent - or 4.68 per cent across the sector. But Kensington said growth in loans slowed among the big banks and it was the smaller operators that boosted their lending activity to a greater extent over the year.

Banks' move to more selective, sustainable lending and the loan-to-value rules meant slower home loan lending growth than previous years, he said. Mortgage growth fell from 9.23 per cent in 2016 to 5.54 per cent.

The sector's assets reached a new high of $504.19b.

Kensington said banks were working to keep pace with changing customer expectations of service.

'Unsurprisingly, the banking sector is gazing into a crystal ball right now, trying to determine what will be expected and valued in their future financial products, tools and platforms. The ability to digitise, innovate and adapt is crucial.

'Even as an ever-increasing number of customers transact online, some loyalty to bricks and mortar branches and a human touch remains. We see banks rationalising the way they balance their branch services and opening hours with their online, telephone and smart ATM offerings, with the biggest challenge being how to quickly solve a problem that only human interaction can resolve. Whether chat bots and AI will have the sophistication to fill this void in the near-future, only time will tell.'