According to KPMG’s latest Financial Intuitions Performance Survey (FIPS) quarterly analysis, the banking sector experienced an increase in NPAT from $1.38b in the June 2017 quarter to $1.4b in the December quarter.

John Kensington, KPMG’s Head of Banking and Finance, says this in part reflects the strength of the underlying economy and in part the slowing of the economy in the uncertain period post the election as business confidence declined.

The main contributing factor to the slight rise was the increase in non-interest income, which was up by $120.07 million (15.76%) from the previous quarter. However, this was partly offset by a 4.50% increase in operating expenses of $55.71 million and a surge in impaired asset expense of 70.02% ($19.10 million).

Banks saw loans remain stable with an increase of 0.90% to $401.65 billion, and the recent focus on diversified and sustainable lending is reflected in the results. The slight growth in lending saw net interest margin decrease from 2.15% to 2.11%, showing mixed effects with four of the nine banks showing decreases of between 4 bps and 20 bps.

“Without the growth in non interest income the result would have been flat and this shows that the market remains very competitive,” says Kensington. “While the banks continue to lend carefully, the overall economy - which is solid - is suffering from the reduction in confidence caused by uncertainty post the election.”

The December 2017 quarter has seen a moderate increase of 1.56% in NPAT, moving from $1.38b in the June quarter to $1.4b in the December quarter.

• The level of gross loans and advances remained relatively stable, increasing slightly by 0.90% to $401.65 billion.

• Net interest income decreased by 0.40% due to interest expense raising at a higher rate than interest income.

• As a result of the changes, net interest margin decreased from 2.15% to 2.11%.

December 2017 FIPS Quarterly

New Zealand banks' net profit after tax hit $1.4 billion