KPMG’s Financial Institutions Performance Survey for the 2016 financial year has found that the strength of the New Zealand banking sector continues to underpin its performance.
“The strength of New Zealand’s banks continues to provide a solid platform for our economic growth. Our banks are well capitalised and regulated, and highly competitive. That means they’re well-placed to meet the needs of businesses and households,” says New Zealand Bankers’ Association chief executive Karen Scott-Howman.
Overall profits in the sector were down in the last year. This was due to tightening margins, a decrease in non-interest income, rising operating costs, provisioning for bad loans, and global market volatility.
The average interest rate margin dropped from 2.28 to 2.15%, which was driven by strong competition and the rising cost of funding. Lending competition remains strong in an environment where interest rates are tipped to rise gradually.
“Interest rates are still at historic lows. It’s a good time to assess your circumstances and get your finances in order so you can manage any increase in the cost of borrowing.”
The report also identified further digitisation and innovation in banking services as a focus for 2017.
“This innovation is largely driven by changes in customer behaviour and preferences, along with competition inside and outside the banking sector. Banks need to keep their customers happy in this highly competitive environment. To enhance customer experience they’re constantly looking at ways to improve banking services,” says Scott-Howman.