NEW ZEALAND BUSINESS NEWS
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BNZ, the New Zealand bank owned by National Australia Bank, has reported a 23% fall in annual profit after tax to $1.157 billion for the year to September, down from $1.499 billion a year earlier. The result reflects a $253 million hit from a change to how the bank accounts for software, a narrower gap between what it pays depositors and charges borrowers, and a sharp rise in bad-debt provisions.
For small and medium businesses, the numbers matter for a simple reason: BNZ says it supplied almost 40% of all new lending to SMEs, excluding commercial real estate, over the year. Any shift in how the bank prices risk or manages costs will be felt by the business customers who borrow from it.
In April, BNZ flagged that changes to its software capitalisation policy would cut half-year profit by $253 million. Software capitalisation treats the cost of building or buying software as a long-term asset rather than an immediate expense, which spreads the cost over the software’s useful life and lifts short-term profit. BNZ said the period over which its software is expected to generate economic benefits was getting shorter, so more of that spending now lands on the income statement sooner.
Operating expenses rose $410 million, or 30%, to $1.789 billion. Technology investment, more frontline staff, and inflation all contributed. The cost-to-income ratio, which measures how much of each dollar of income is eaten by running the bank, jumped to 50.6% from 39.6%.
Total operating income edged up just 1.5%, or $52 million, to $3.536 billion. Net interest income, the core of a retail bank’s earnings, rose only $8 million to $3.048 billion.
The net interest margin, the difference between what a bank pays for deposits and what it earns on loans, fell 10 basis points to 2.30%. BNZ attributed the squeeze to intense competition on both sides of the balance sheet, with lenders and depositors both driving harder bargains. Loan impairments surged $111 million to $138 million, a sign that some borrowers are struggling.
Despite the margin pressure, the bank grew. Total lending rose 7% to $118.5 billion, and customer deposits lifted 5% to $91.4 billion. Mortgage lending increased $4.9 billion, or 7.7%, to $68.8 billion, and BNZ recorded a fourth consecutive year of market share gains in home loans. Housing market share rose to 17.2% from 16.9%, according to parent company NAB.
Business lending grew $2.6 billion, or 5.5%, to $49.5 billion. Agribusiness market share edged up to 21.6% from 21.3%, and total business lending share reached 22.8% from 22.7%. Deposit market share rose to 18.6% from 18.4%.
Chief executive Dan Huggins said conditions remain difficult for some households, with higher living costs pressing on budgets and discretionary spending. He pointed to strength in agriculture, tourism, and infrastructure, and said the bank expects economic growth to strengthen through 2027 barring external shocks.
Huggins also noted that BNZ business customers had raised their lending limits by $4.8 billion, or 8%, year-on-year, which he described as a signal of growing confidence in their outlook.
A bank with a thinner margin and higher costs has less room to absorb risk. BNZ’s impaired assets stood at $451 million at 30 September, down $1 million on the year, while loans at least 90 days past due but not impaired were unchanged at $290 million. Those figures suggest arrears are stable rather than improving.
For SME owners, the practical read is that credit is still flowing, and BNZ is competing hard for it, but the price of that credit is being set in a market where the bank’s own funding costs and technology spending are rising. Businesses renewing facilities or seeking new lending should expect scrutiny of their numbers.
BNZ paid ordinary dividends of $1.103 billion, up from $1.060 billion, and issued $1 billion of ordinary shares under a dividend reinvestment programme. Its combined retail branches and business banking centres fell by two to 122.
NZ Business News reports on the decisions, deals and numbers shaping New Zealand business — the companies making them, the policy and market conditions they work within, and what it means for the people running businesses here.