Banks and non-bank lenders remain stable despite COVID-19 pandemic

by Roxanne Libatique16 Apr 2021

The COVID-19 pandemic has impacted many businesses in New Zealand. However, rating agency Standard & Poor’s (S&P) annual report on the NZ banking system suggests that banks and non-bank lenders have remained stable.

S&P’s report includes a review of non-banks Avanti, Liberty, and Asset Finance. It states that the economic risk trend for banks in New Zealand is now stable despite the pandemic’s impact on the industry.

“The country’s economy is recovering strongly after the COVID-19 pandemic,” S&P said, as reported by Good Returns.

Despite the impacts of the pandemic, S&P noted “limited losses to date.” It also predicts a steady recovery as the economy improves post-COVID-19.

“In our base case, we now forecast that the New Zealand banks’ credit losses in the next two years will remain at about 0.30% of gross loans and advances, broadly in line with our expected long-term average for New Zealand banks,” the agency said in its report.

S&P also revealed that its credit ratings for ANZ, ASB, BNZ, Westpac, Rabobank, and Kiwibank remain unchanged. Ratings for Avanti, Liberty, and Asset Finance were also unchanged.

S&P’s team of forecasters said lenders in New Zealand can absorb potential credit losses and retain “headroom in their earnings.” They also predicted a possible shake-up of the NZ banking landscape due to the Reserve Bank of New Zealand’s (RBNZ) new capital requirements, which could force other Australian banks to dispose of their Kiwi subsidiaries.

“Another possible scenario is that the Australian owners decide to allocate less capital to their New Zealand subsidiaries or look to divest their New Zealand operations because of the higher proposed capital requirements or for other reasons,” S&P concluded.

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