New Zealand banks deliver stellar performance

New Zealand banks deliver stellar performance

KPMG’s latest Financial Institutions Performance Survey (FIPS) shows that New Zealand’s banking sector delivered an outstanding performance in 2015.

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Partner - Audit, Head of Banking & Finance

KPMG in New Zealand

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KPMG’s latest Financial Institutions Performance Survey (FIPS) shows that New Zealand’s banking sector delivered an outstanding performance in 2015.

John Kensington, KPMG’s Head of Financial Services, reports that New Zealand banks achieved a “very positive scorecard” in 2015. As well as recording an all-time high of $5.17 billion in net profit, the sector improved several metrics across the board.

“The New Zealand banking sector can be justifiably proud of the 2015 result,” says Kensington.

“Our banks have really proven themselves as well-run businesses that are helping to drive New Zealand’s economic engine.”

Throughout 2015, New Zealand’s banking sector strengthened its position – with increased operating efficiencies and lending growth of 7.1% - despite global volatility and further domestic regulation. Even the new tax rules and LVR limits resulted in better quality loan books (with the proportion of loans over the 80% bracket declining from 15.72% to 13.17% for the five major banks).

John Kensington says the banking sector is “well-poised to continue its growth” in 2016, although it does face some headwinds.

“There is some uncertainty ahead; including global volatility, ongoing concern around low dairy prices, and the continued threat of a sharp housing price correction.”

The Survey also shows the sector is concerned about the potential impact of the Reserve Bank’s proposed outsourcing rules. John Kensington says the Reserve Bank is “seemingly reversing its position” on outsourcing – by requiring major banks to return key operations onshore.

“From the banks’ perspective, they will argue that part of the reason they’re so efficient is that they’ve set up global workforces capable of servicing their needs. This has allowed them to reduce the pricing that is passed on to New Zealand consumers.”
 

Key findings from KPMG New Zealand’s FIPS Survey for 2015

  • Profits rose 6.94% in 2015, achieving an all-time record profit of $5.17 billion.
  • The result was based on margin growth of four basis points, lending growth of 7.11%, and improved operating efficiencies.
  • The pace of lending has continued to increase over the past five years – largely driven by the Auckland housing market.
  • New Zealand banks are stronger than ever; with total capital adequacy ratios and Tier 1 Capital ratios rising to record highs of 13.16% and 11.86% respectively.
  • The only slight blemish in the 2015 results was a $173.08m increase in impaired assets; however that represents more of a return to normalised levels.
  • Banks contributed a total $1.98 billion in tax to New Zealand in 2015, an increase of $161.42 million compared to the previous year.

Financial Institutions Performance Survey: Review of 2015

Financial Institutions Performance Survey: Review of 2015

KPMG’s Financial Institutions Performance Survey (FIPS) Review of 2015 shows that NZ’s banks delivered outstanding performance.

© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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