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.
Results for the year
KPMG's analysis of the banking sector’s quarter ending December 2022 show's that profits have levelled off after a strong year, with reported earnings of $1.77 billion (net profit after tax - NPAT), unchanged from the September 2022 quarter.
The sector saw a 4.5% ($159 million) increase in net interest income, driven by a 0.6% increase in gross loans and advances of the major banks and most major banks reporting around a 10 bps increase in net interest margin (NIM). This was offset by a decrease of $166 million in non-interest income.
Tougher times ahead?
It may be that record profits are now behind us as the sector, like the rest of the economy, faces continued high inflation, an OCR that continues to rise, house prices that many believe have yet to bottom out and the distinct possibility of a recession.
As Kiwi households brace for impact, the market still saw new mortgage lending up 5% on the previous quarter at, however perhaps tellingly it was down 32% on the December 2021 quarter. Collective provisioning rose, indicating that lenders may be starting to see some households struggle to meet their repayments.
The result represents a slowing in growth for the banking sector, however the December 2022 quarter’s results are largely driven by the decrease in the always volatile non-interest income. The results show a strong finish to the calendar year, with overall record profits for 2022.