Bank of New Zealand’s annual earnings stood out for National Australia Bank as local mortgage lending growth with fatter margins more than made up for higher spending on its digitisation programme.
Net profit climbed 9.8 percent to $1.03 billion in the 12 months ended Sept. 30 as the local lender boosted net interest income 8.5 percent to $1.95 billion. That was enough to outweigh a 12 percent rise in operating costs to $1.05 billion as BNZ continued to invest heavily in its digital platforms to get more transactions done online.
NAB’s New Zealand banking division, which excludes the trading division and capital management operations, lifted cash earnings 6.7 percent to $1 billion, with net interest margins widening 9 basis points to 2.27 percent.
The Kiwi unit outperformed for the Australian lender, which is contending with a slowing housing market across the Tasman and increased spending to address the shortcomings identified in the Royal Commission into financial services.
NAB’s cash earnings dropped 14 percent to A$5.7 billion and like the other ‘four pillar’ lenders it’s paring back the complexity of its business. Still, it maintained its final dividend of 99 Australian cents per share, taking the annual return to A$1.98.
BNZ is also simplifying its products and physical network, shutting branches and attempting to get its customers using digital services more frequently. That’s out of step with the government’s rhetoric, with Regional Economic Minister Shane Jones meeting with the Reserve Bank governor to see if maintaining a provincial presence could be made a condition of holding a banking licence.
Chief executive Angela Mentis today said BNZ is investigating ways to better service the provinces in addition to its existing 153 branches. That includes a new mobile branch likely to be on the road next year.
She said the bank will have $10 billion of lending available to businesses in the provinces over the next five years. BNZ’s loan book rose 4.7 percent, or $3.7 billion, to $83.1 billion in the year ended Sept. 30. Customer deposits grew 5.8 percent, or $3.5 billion, to $63.4 billion.
BNZ also plans to spend $250 million over the next three years on its digital programme. At $83 million a year, that amounts to about 8 percent of its current operating costs.
“The focus on delivering better customer experiences through smart technology to make banking faster and simpler helps set BNZ apart,” Mentis said. “Over the coming months our customers will be able to use a range of new products and services like our new selfie sign-up feature, helping make their experience with us seamless.”
The New Zealand banks are also awaiting a joint Financial Markets Authority-Reserve Bank report into sector conduct due on Monday. While the local industry isn’t seen as replicating the excesses across the Tasman, they’ve been highlighting the contribution they make to wider society.
Mentis today said BNZ has worked closely with the regulators and it’s already making changes to keep customer trust.