KPMG’s Financial Institutions Performance Survey (FIPS) reports have provided insights into New Zealand’s financial services sector for over 30 years. Each edition presents industry commentary and analysis on the performance of New Zealand registered banks, together with a range of topical articles from industry experts, regulators and our own business leaders.
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Results
This quarter saw record profit for the banks, up 20.69% to $1,642.9M from $1,361.2M in December 2020. The main drivers of profit this quarter were an increase in lending (1.86%), an increase non-interest income (64.8%) and provisioning continuing to reverse. It's a positive sign for the economy, but there's still a lot of volatility and uncertainty to contend with.
Provisioning
This time last year (March 2020), economic forecasts were bleak and banks raised provision to around $600M. This March, the signs are more positive and so provisioning is increasingly being released; $200M has been released across the banking sector in the last two quarters. But have the models done what they were supposed to do in the face of economic uncertainty?
Customer vulnerability
Looking back at the last year, Covid-19 has challenged our perception of what a 'vulnerable customer' is. Banks - and customers - have realised that anyone can become vulnerable at any time. As a result, banks have had to adapt policies and procedures to prevent customers experiencing poor outcomes. But there are more steps to this journey.
Climate reporting
The Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill will require around 200 entities, including banks, insurers, listed companies and ‘large’ fund managers, to make climate-related disclosure in accordance with the climate standards issued by the External Reporting Board (XRB). Our IMPACT team believes banks have the opportunity to be true agents of change and lead New Zealand's reporting capability when it comes to tackling climate change.
Unexpected outcomes
Covid-19 has not yet fully tested the New Zealand economy - evidence shows that risks often don't surface until after a crisis. While early Government action is giving us a positive outlook, businesses' ability to weather the storm is still partly dependent on the vaccine roll out, future lockdowns and the recovery of international travel. Read our article 'Business failures in a post-Covid economy' to hear more about insolvency trends.
