FIPS Quarterly: June 2015

FIPS Quarterly: June 2015

Home-buyers and farmers support thriving banking sector. Despite growing headwinds in the global economy, New Zealand’s banking sector has enjoyed another profitable quarter – buoyed by our hot property market and increased farm lending.

John Kensington - KPMG NZ - Partner

Partner - Audit

KPMG in New Zealand


The Financial Institution Performance Survey (FIPS) Quarterly shows total bank assets reached yet another record high during the June quarter; with all major banks increasing the value of their loan books. Across all registered banks, there was an overall $9.8m increase in net profit after tax compared to the March 2015 quarter.

John Kensington, KPMG’s Head of Financial Services, says there are two driving factors keeping our local sector thriving – despite various uncertainties in the current global economy.

"Firstly, we’re seeing the high demand for residential mortgages continue, and the property market shows no signs of slowing down. Secondly, the downward pressure on international milk prices has put many farmers under cash-flow pressure and driven an increase in farm lending."

In fact, Reserve Bank data at June 30 shows total year-on-year growth at 7.6% for agriculture and 5.6% for housing lending. This is the fastest annual growth rate since September 2008 and November 2009 respectively.

A recent survey from Federated Farmers indicates farmers are generally happy with their banking relationships – with only 6.6% of dairy farmers feeling under financial pressure from banks.

The FIPS Quarterly for June 2015 also reported a new entrant in the banking sector – with a third peer-to-peer lender being licensed by the Financial Markets Authority in early August. Squirrel will join Harmoney Corp and LendMe in this emerging lending market.

John Kensington says while these alternative lenders are not a major threat to the banks - certainly not in the short to medium term - they can act as ‘disruptors’ within the sector.

“They tend to be fast-paced, quick movers that are adept at introducing new technology and platforms. The major banks will probably be watching with interest to see what they bring. However they’ll probably have less of a disruptive affect in New Zealand, given that our banks are already relatively dynamic and our banking system is on a par with the best in the world.”

Key findings from KPMG New Zealand’s June 2015 FIPS Quarterly:

  • There was an overall $9.8m increase in net profit after tax (NPAT) for registered banks during the June 2015 quarter compared to March.
  • Operating expenses increased by a total of $76m during the quarter, with some banks having significant investment projects underway developing technologies for mobile and other digital services.
  • Total assets reached yet another record high during the June quarter, growing from $412.4b at 31 March 2015 to $435.9b at 30 June 2015.
  • Standard & Poors (S&P) revised its New Zealand Banking Industry Risk Assessment from 3 to 4 (with 1 being the lowest risk and 10 the highest). This reflects the increased risk of a sharp correction occurring in Auckland’s property market.
For more about the latest FIPS Quarterly, contact John Kensington.

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