Bank profits have come through the recession and edged to a record high despite rising costs, flat margins, and regulatory pressures.
Collective profits for the sector rose 0.25 percent, about $18 million, to a record $7.22 billion in 2024, with increased net-interest income, static margins, and a fall in the amount lost in bad debts.
Head of banking at advisory firm KPMG John Kensington said the banks’ improvement really reflected the resilience of its customers, who had come through high interest rates and cost of living.
He said bank attention was now on recovery and a desire to participate in funding it.
“Concern was expressed by all participants about the state of the economy and a range of related challenges including: a lack of productivity within the New Zealand economy, a feeling that New Zealand needed to change and move away from the heavy focus on risk management and a move to more of a can-do or yes mantra to ensure that it would be an attractive place for investors and their capital.
“Participants were unanimously of the view that now was the time for bi-partisan politics across the board,” Kensington said, adding there was a concern that “fringe elements” in coalition governments would contribute to significant problems not being resolved.
Litany of concerns
The KPMG report detailed a broad list of concerns to the sector ranging from the impact of regulations on the industry, cyber security, the dominance of five large banks over the rest of the sector, and climate change reporting.
Kensington said the industry was making progress in combating scams and fraud, but wanted better collaboration from technology and social media concerns, including Google, Facebook and Instagram.
“Many identified that the very advertisers who are involved in frauds and scams are their advertisers. It was also noted by participants that once a fraud has been successful, it is often repeated on the victim in one of two ways.”
He said the industry wanted to see more leadership from and participation by the government in co-ordinating security efforts.
But he observed that the industry also noted the need for a change in public attitude on the issue.
“Very few customers appear willing to pay, say, a monthly fee to cover the costs of banks’ antifraud programmes and would undoubtedly object to, say, $5 being charged monthly to their account, however, once they have sustained a loss they are of the view that they should be 100 percent remunerated regardless of the circumstances.”
The issue of regulation loomed large for the industry as well including changes to the Credit Contracts and Consumer Finance Act (CCCFA) which has been tinkered with by this and the previous government.
The looming Deposit Compensation Scheme and Deposit Takers Act were also causing concern, because there were few details about how they will operate.
Kiwibank the maverick
Moves to beef up the financial strength of Kiwibank to better compete against the big four Australian owned banks also caused comment.
Kensington said the topic was discussed with a “slight degree of humour”.
“There was a largely unanimously sentiment that if the issue in the market was a lack of competition the government would be seen as unwise trying to pick a winner … if some form of relief from capital or other restrictions was to be applied to increase competition, it should be available to all market participants.”
He said the smaller New Zealand owned banks also had a feeling that the banking system was administered and operated to their disadvantage, and that a much greater regard to their size was needed in the application of regulations.
