A major bank has warned that higher lending costs for borrowers is only a matter of time
Bank of New Zealand (BNZ) has reported a statutory net profit for its banking group of NZ$416 million and a ‘significant increase’ in cash earnings of 9% on the 2016 prior comparable period.
BNZ CEO Anthony Healy says New Zealand’s economic strength is providing benefits and challenges, “which is reflected in very sound credit quality and lower bad and doubtful debts, but with increasing margin compression as credit growth continues to exceed deposit growth in the system.
He said housing affordability remains an issue, though house prices have recently appeared to plateau as a result of the loan-to-value restrictions.
“We anticipate there will be increased pressure on lending margins in the coming months which will influence interest rates. Essentially, while funding costs have fallen they haven’t fallen by as much as our lending rates, which means our margins have reduced.
“Today there are more people looking to borrow, so banks are paying more to win customers deposits so this will lead to higher lending costs being passed through to borrowers.”
Healy said the bank is focused on sustainable growth and “the broker market is key for us achieving that”.
BNZ saw growth of $900 million in broker home loans this year and a portfolio of six broker partners connected to more than 800 advisors.
“We’ve made improvements to our processes and we’re realising the productivity benefits of this.”
BNZ’s investment in digital and online banking and payments technology has also helped their customers reach their financial goals, he said.
“Our home loan repayment calculator allows them to increase their home loan payments from the comfort of their couch. So far, customers who have made increases to their payments stand to save $187m and take 43,000 years off their home loans. On average, customers using this tool to increase their payments have taken two years and three months off their home loan.”
BNZ CEO Anthony Healy says New Zealand’s economic strength is providing benefits and challenges, “which is reflected in very sound credit quality and lower bad and doubtful debts, but with increasing margin compression as credit growth continues to exceed deposit growth in the system.
He said housing affordability remains an issue, though house prices have recently appeared to plateau as a result of the loan-to-value restrictions.
“We anticipate there will be increased pressure on lending margins in the coming months which will influence interest rates. Essentially, while funding costs have fallen they haven’t fallen by as much as our lending rates, which means our margins have reduced.
“Today there are more people looking to borrow, so banks are paying more to win customers deposits so this will lead to higher lending costs being passed through to borrowers.”
Healy said the bank is focused on sustainable growth and “the broker market is key for us achieving that”.
BNZ saw growth of $900 million in broker home loans this year and a portfolio of six broker partners connected to more than 800 advisors.
“We’ve made improvements to our processes and we’re realising the productivity benefits of this.”
BNZ’s investment in digital and online banking and payments technology has also helped their customers reach their financial goals, he said.
“Our home loan repayment calculator allows them to increase their home loan payments from the comfort of their couch. So far, customers who have made increases to their payments stand to save $187m and take 43,000 years off their home loans. On average, customers using this tool to increase their payments have taken two years and three months off their home loan.”
