15 Jul 2015

Banks' profits surge 8 percent in first quarter

9:36 am on 15 July 2015

Banks' quarterly profits have jumped close to all-time highs despite the so-called mortgage wars cutting into margins.

New Zealand money.

Photo: RNZ / Alexander Robertson

KPMG's Financial Institutions Performance Survey shows the banking sector's profit rose by 8 percent to $1.25 billion in the first three months of the year compared with the same period a year ago, just short of the quarterly record in September last year.

Increased lending pushed total assets to a record $412 billion.

KPMG head of financial services John Kensington said strong employment growth and low interest rates have helped New Zealand banks become some of the top performers in the developed world

But, he said, weaker dairy prices and slowing economic activity could make it harder for banks to maintain the high profits.

"The defining factor will be whether the banks can continue to be able to lend more, and a large factor there will be whether New Zealanders have the confidence to borrow more."

Mr Kensington said new lending rules for Auckland investors would take the cream off banks' profits at a time when they were under pressure.

The survey also shows ANZ has cut lending to dairy farmers, from $13.1 billion to $11.3 billion, while ASB and BNZ have lent more money.

Mr Kensington noted that BNZ was holding resilience workshops for more than 2000 farmers, while recognising that its huge reliance on the agriculture sector was a concern.

KPMG advises all the nine banks surveyed.