Coronavirus: BNZ predicts tough times ahead for some customers

Monday, 27 April 2020

BNZ chief executive Angie Mentis will give up part of her pay.

BNZ is expecting the New Zealand economy to contract by 9 per cent over 2020, unemployment to rise to 10 per cent and house prices to drop 10 per cent as the country recovers from the outbreak of Covid-19.

It has released its latest half-year result, which showed the New Zealand banking arm of its parent group NAB made $562 million in the six months, up 5.6 per cent compared to the same time a year ago.

BNZ announced a statutory net profit of $367 million, a decrease of $183m, affected by a software capitalisation policy change and an increased credit impairment charge.

Chief executive Angela Mentis said BNZ's success was predicated on its customers being successful. It has topped up its cash reserves to ensure it was well provisioned for tougher times ahead, she said.

* BNZ profit tops $1b as Aussie business feels heat**

NAB as a group made A$1.44 billion (NZ$1.53b) in cash earnings, down 51.4 per cent from the first half of 2019.

That included a A$1.61b credit impairment charge.

NAB said it had already felt the impact of the Covid-19 pandemic. It has begun a A$3.5b capital raising, although it will continue to pay a dividend to shareholders, albeit more than 50 per cent smaller.

In New Zealand, housing lending was up 8.5 per cent year-on-year to $44.8b. Mortgages are half of the BNZ lending mix.

Mentis said the market would be softened by less wage growth, higher unemployment and a decline in rents.

She said there would be a sharp decline but the recovery should also happen relatively quickly.

Mentis and the executive management team will give up the short-term 'at-risk' components of their pay packages, which can make up 50 per cent of take-home pay.

Twenty per cent of board directors' fees will be donated to charities for the next six months.

Mentis said: '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.'

It has provided home loan support to more than 16,000 New Zealand customers, business assistance to more than 17,200 customers, and has had more than 1000 applications to the Government-backed business loan scheme.

Mentis said BNZ was standing by its commitment not to close regional branches until 2022 but had noticed that the pandemic had hastened the shift to online banking. Use of ATMs had dropped sharply and 5000 of the bank's older customers had moved to adopt new ways of banking. 'That has challenged our belief that it would be hard for older customers to move to digital.'