Report finds banks performing well

Analysis released today shows New Zealand’s major banks continue to perform well in the face of increased operating costs and greater regulatory pressures.

The findings were contained in PwC’s Banking Perspectives report of the five major banks’ banks’ results for the second half of their 2012 financial years.

“The report shows our banks are among the best funded and regulated in the world, and that’s good for New Zealanders and the economy,” said New Zealand Bankers’ Association chief executive Kirk Hope.

The report notes a number of New Zealand banks appear in Global Finance Magazine’s World’s 50 Safest Banks list for 2012.

A 12 per cent increase in profits in the 2012 year compared to 2011 was largely driven by a reduction in banks’ bad debt expenses.

The average return on equity has decreased from 16 per cent in 2007 to 14 per cent in 2012. “We have found these returns fall in the middle of the pack compared to major NZX listed companies,” Hope said.

Bank operating expenses are up 16 per cent since the first half of 2010. This is in part driven by a significant volume of new regulation. This ranges from the enhanced anti-money laundering regime to needing to maintain higher capital levels and increasing reliance on domestic and longer term overseas funding. Other current regulatory initiatives include consumer and securities law reform, responding to US tax avoidance law, and preparing systems to help recapitalise a bank in case of potential failure.

Within this context competition remains high among banks, as does customer satisfaction at 92 per cent according to a Consumer NZ survey. “Banks work hard to attract and keep their customers,” Hope added.