5 Nov 2013

Tougher times ahead for banks - academic

7:00 am on 5 November 2013

Massey University's Centre for Financial Services and Markets director, David Tripe, says New Zealand banks will find it increasingly difficult to increase their profits.

"Earning good profits in banking is challenging: the competitive pressures are not making it any easier," Dr Tripe says.

"If there gets to be problems in the loan market ... then we could see a significant hit to profitabilty".

No significant improvement in profitability can be expected until there is growth in the economy and lending volumes increase, he says.

Banks such as Westpac have now made the biggest gains available for reductions of bad debts, and the trend to fixed rate lending has trimmed the margins they can charge, and this is helping squeeze profitability.