BNZ annual profit falls 25% as bank braces for Covid-19 pain

Thursday, 5 November 2020

BNZ has set aside $300 million as it braces for bad debts in the future.

BNZ’s annual profit in New Zealand fell by a quarter as the bank braces for $300 million of bad debts due to Covid-19.

After-tax profit dropped to $762m in the year to the end of September from $1.022 billion a year earlier, BNZ said on Thursday.

Banks have been hard hit by the coronavirus pandemic, offering more flexibility and writing down the value of loans as customers struggled to make payments.

BNZ has helped 30,000 of its consumer and business customers with Covid support, including repayment deferrals, interest-only payments, loan top-ups, extensions and covenant waivers covering about $10b of lending. More than 70 per cent of customers have since returned to pre-Covid terms and conditions.

The bank has set aside $300m for expected lending losses due to the weaker economic conditions, up from $114m last year.

BNZ chief executive Angela Mentis says customers are increasingly using digital and self-service banking.

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”It has been a challenging year,” said BNZ chief executive Angela Mentis. “Many of our business customers have acted quickly to change what they do and how they work, and home loan support measures have given many New Zealanders confidence in their financial position.”

BNZ has also supported vulnerable New Zealanders on limited incomes with $8.4m of no and low interest loans through its community finance initiative and launched a domestic and economic abuse banking team to help those in need.

Mentis said customers are increasingly using digital and self-service options, resulting in cash and cheque transactions in branches falling by more than half, while 80 per cent of transactions previously happening over the counter at branches had migrated to ATMs.

“Covid-19 has fast tracked trends we’ve seen for some time with nearly three quarters of all our customers online or using our app,” she said.

BNZ did not pay a dividend to its Australian parent after the Reserve Bank introduced a temporary ban on payouts in April, to support financial stability during the period of economic uncertainty brought about the Covid-19 pandemic.

In addition, no cash bonus will be paid to BNZ’s executive team this year, and the board has donated 20 per cent of directors’ fees to charities who support vulnerable people.

BNZ’s parent National Australia Bank posted a 37 per cent drop in cash profit to A$3.71b (NZ$3.9b), as bad debt provisions tripled to A$2.76b.

National Australia will pay a A30 cents a share final dividend, taking the full-year payout to A60c, from A$1.66 last year.