New Zealand’s banks report lending growth, but profits are down
PwC analysis of the Banking Perspectives major banks’ results for the second half of their Major banks analysis February 2013 2012 financial years Introduction
New Zealand’s five major banks reported core earnings of $2,453 million in the second half of their 2012 financial years (2H12), down from $2,712 million for the previous six months (1H12). This was driven by a fall in other operating income (down by $156 million), increasing operating expenses (up by $102 million) while net interest income stayed effectively flat. Overall, profit before tax was down 11% or $261 million to $2,174 million (1H12: $2,435 million) as a result of bad debt expense for both 1H12 and 2H12 being slightly under $280 million for both periods.
This publication focuses on the major banks’ (ANZ Bank New Zealand, ASB, Bank of New Zealand, Kiwibank and Westpac) performance for the second half of their 2012 financial years with reference to the previous six months.
2 This fall in profit before tax was in One observable change since the spite of the major banks’ lending books previous six months is the banks are posting their biggest lending growth in locking in some fixed rate household 2H12 since 1H09, increasing 1.9% or lending. There has been a noticeable $5.2 billion to $287.1 billion. So what switch to fixed rate mortgages in the went wrong? period with 22% of the banks’ residential mortgage lending portfolio fixed for Well, actually, not a lot. Net interest greater than a year at September 2012 margin is down, but is still near a high compared with 15% at March 2012. since 2006; fee income remains stable; bad debts have stabilised, but operating The strong performance by the major expenses are continuing to increase and banks is supported on a year-on-year other operating income is noticeably basis, with profit before tax showing a down. The volatility of the financial 6% or $253 million increase on their markets continues to bring variability 2011 financial years (FY11) to $4,609 to the banks’ other operating income million in their 2012 financial years through financial instruments held (FY12). at fair value (up one period, down the next), but if these instruments are held to maturity this should only be a timing difference.
Figure 1: New Zealand major banks’ change in profit after tax
2,000 1,800 1,600 1,400 1,200
$NZ millions 1,000 800 600 400 200 -
Tax expenses Bad debt expense Profit after taxNet 1H12 interest income Operating expenses Profit after tax 2H12 Other operating income
Banking Perspectives 3 The fact the banks are It is not the only thing that has driven up the net interest margin since the GFC though. The losses performing well is reflected seen around the world caused the New Zealand banks to reassess their views on credit risk. As by all five of the New often happens after significant events, the views Zealand majors (or where on credit risk swung towards more conservative lending practices. As discussed in previous relevant, their Australian editions of Banking Perspectives, we have seen parent banks) appearing the pendulum slowly swinging back again. The willingness of the banks to compete on interest in the Global Finance rates for new lending reflects this. Magazine’s World’s 50 Whether the pendulum has swung too far the Safest Banks list for other way remains to be seen, but the attitude seen over covenants at the top end of town is 2012. The New Zealand softening. One thing is for certain, the pendulum banks continue to be seen is still moving. positively by the financial As well as reinforcing the security of the New Zealand banking sector, the other positive for markets when funding the early implementation date for the Basel III capital ratios is that the New Zealand banks have is required. resolved any potential concerns over their capital base before the overseas banks’ rush for capital The Reserve Bank of New Zealand (Reserve begins. Even with the downward revision of Bank) seems committed to maintaining this global growth expectations, many overseas banks position. As with the liquidity requirements are currently well short of capital requirements that came in a few years ago, the Reserve Bank and there is a potential capital shortage on the is one of the first regulators to implement the new horizon. The fact that the New Zealand banks Basel III capital ratio requirements. While their and their Australian parents (where applicable) supervisory regime differs from the Australian are well capitalised under the new rules and Prudential Regulation Authority (in Australia) thus well ahead of the rest of the world, should or the Financial Services Authority (in the United mean less pain for the New Zealand major banks’ Kingdom), they remain one of the most proactive shareholders further down the track, which will in terms of implementing new prudential benefit the New Zealand economy as a whole. requirements. This regulation obviously comes at a cost. It is one of the drivers that has forced operating expenses up 16% since the first half of 2010, a cost which is ultimately borne by the banks’ borrowers and shareholders through a higher net interest margin for borrowers and a reduction in dividend yields in the case of shareholders. Operating expenses are up 16% since 1H10
4 The make-up of the major banks’ funding The returns from the New Zealand majors on continues to change, with the proportion of this increased equity have been robust, albeit still customer deposits continuing to strengthen. This below those produced by the Australian majors. continues to lower the risk held by New Zealand As can be seen in figure 2 below, the New Zealand Inc as it reduces the reliance on offshore markets majors return on equity (ROE) has fallen post and signals the continuation of customers GFC, but only by circa 2% compared with a 5% deleveraging. This continued change to the drop in Australian ROEs and a massive 13% drop funding profile of the New Zealand banks has not in global ROEs from 20% to 7% as a result of impacted interest expense, which has remained the GFC which also caused government bail- relatively consistent with 1H12 ($5,743 million outs, tightening in prudential regulations and for 2H12 v $5,765 million for 1H12), due to the sovereign debt crises. banks’ cost of funding reducing over the period. One of the dominating factors for the results The other major source of long-term funding of the New Zealand majors since 2007, both for the banks, other than the money markets negative and positive, has been bad debt expense. and their customers, is their shareholders. Bad debt expense from households has now Shareholders’ equity has continued to grow from returned to the level seen in 2007, although just under $19 billion in 2H07 to just over $25 the non household bad debt expense is still 5.5 billion at the end of 2H12. The main driver for times the level seen in 2007. While we do not this is the Basel accord and we have seen equity expect any significant change to bad debt levels issuances of $450 million during FY12 to ensure in the household sector, we do expect the non- the Basel III requirements will be met. household sector to continue its downward, if still volatile, trajectory, giving further upside to the banks’ results.
Figure 2: Banks’ shareholder value Pre GFC (2007) Current (2012) Global Aus NZ Global Aus NZ Leverage 31x 17x 15x 19x 15x 15x Return on Equity 20% 20% 16% 7% 15% 14%
We have seen a massive 13% drop in global ROEs as a result of the GFC
Banking Perspectives 5 Five majors’ combined performance
Annual results
On an annual basis, a 12% increase in statutory profit from $3,019 million in FY11 to $3,378 million in FY12 has been driven by the major banks increasing their interest margins in the first half of the year and reducing their bad debt expense.
The 24% improvement in bad debt expense Offsetting these positive moves was a 7% from $734 million in FY11 to $556 million decrease in other operating income to $2,264 in FY12 was due to Christchurch earthquakes million in FY12 as market movements forced not having the expected negative impact on losses to be recognised on financial instruments the quality of the banks’ lending books, as held at fair value, and a 3% increase in operating well as general improvements in the economic expenses to $4,430 million in FY12 as one- environment in New Zealand. off expenses combined with continued costs associated with regulatory pressure. Tax also decreased year-on-year through the reduction of the corporate tax rate.
Bad debt expense has improved 24% year on year
6 The fall in statutory profit was Five majors’ caused by market volatility resulting in financial instruments held at fair combined performance value to be marked down.
Semi-annual results
Comparing 2H12 with 1H12 we see a 9% fall in statutory profit from $1,766 million in 1H12 to $1,612 million in 2H12.
Net interest income was consistent between Partially offsetting this fall was the reduction in the two halves, slightly moving from $3,666 tax expenses which fell due to the lower profit million in 1H12 to $3,665 in 2H12 with before tax as well as a lower effective tax rate in growth in the lending books being offset 2H12. The effective tax rate dropped from 27.1% by a fall in the average net interest margin in 1H12 to 25.5% in 2H12. of the New Zealand majors. The fall in statutory profits was caused by the market volatility resulting in financial instruments held at fair value being marked down, reducing other operating income by 13% from $1,210 million in 1H12 to $1,054 million in 2H12, and by continued upward pressure pushing operating expenses up 5% half-on-half to $2,266 million in 2H12.
Figure 3: New Zealand major banks’ combined performance ($NZ millions) 2H12 1H12 2H12 V 1H12 FY12 FY11 FY12 v FY11 Interest income 9,408 9,431 0% 18,839 19,345 -3% Interest expense (5,743) (5,765) 0% (11,508) (12,390) 7% Net interest income 3,665 3,666 0% 7,331 6,955 5% Other operating income 1,054 1,210 -13% 2,264 2,422 -7% Operating expenses (2,266) (2,164) -5% (4,430) (4,287) -3% Core earnings 2,453 2,712 -10% 5,165 5,090 1% Bad debt expense (279) (277) -1% (556) (734) 24% Profit before tax 2,174 2,435 -11% 4,609 4,356 6% Tax expenses (552) (660) 16% (1,212) (1,315) 8% Outside equity interest (10) (9) -11% (19) (22) 14% Statutory profits 1,612 1,766 -9% 3,378 3,019 12%
Banking Perspectives 7 Net interest income
8 Net interest income Net interest income for the five Figure 4: Net interest income of NZ major banks majors is broadly consistent between Figure 4: Netin relation interest to income loans and of NZadvances major banksto customers in relation to loans and advances to customers 1H12 and 2H12, down only $1 320,000 320,000 million to $3,665 million for 2H12. 3,600 3,600 300,000 300,000 Interest income has dropped by $23 million 3,400 280,000 3,400 millions NZ$ to $9,408 million for 2H12 and the interest 280,000 NZ$ millions NZ$ 3,200 expense has dropped by $22 million to $5,743 260,000 3,200 million for 2H12. 260,000 3,000 240,000 NZ$ millions However these figures do not tell the story of 3,000 240,000 NZ$ millions what has been a testing but generally positive 2,800 220,000 six months for the five majors. As can be seen in 2,800 220,000 figure 4, the loan books of the major banks have 2,600 200,000 200,000 experienced their first noticeable increase since 2,600
1H10 1H11 2H11 1H12 the GFC but have experienced stabilisation in 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12 1H10 1H11 2H11 1H12 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12 their net interest income, which translated into Net interest income (LHS) Loans and advances to customers (RHS) a contraction in their net interest margin. Net interest income (LHS) Loans and advances to customers (RHS)
Figure 5: New Zealand registered banks’ net interest margin Figure 5: New Zealand registered banks’ net interest margin Margin 3.00 3.00 2.75 With interest rates for lending dropping 2.75 and interest rates offered on deposits 2.50 2.50 flat, we have witnessed a tightening of net 2.25 interest margins (NIMs) in the current 2.25 six months back to 2.24% from the semi- 2.00 annual high (since 2006) seen during 21..0705
1H12 of 2.27%. 11..7550 Figure 5 shows the historical NIMs for the 1.50 2010 2011 2012 New Zealand banking sector based on Reserve 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Bank data. In this we can see the impact of 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 the pre-GFC competition on the banks NIMs Net interest margin (NIM) (%)
with a reduction from 2.68% in the quarter Net interest margin (NIM) (%) ended September 2002 to 1.95% in the quarter Source: Reserve Bank of New Zealand ended March 2009. The average NIM has been Source: Reserve Bank of New Zealand increasing since this time but has recently (since the quarter ended June 2011) stayed within a In contrast,Figure Australian 6: Changes NIMs in NZincreased major banks’through lending portfolios narrow range. 2008 and 2009, held steady through 2010 and 1Figure5.0% 6: Changes in NZ major banks’ lending portfolios This narrow range has been driven by strong 2011 but have reduced significantly during 2012, 15.0% competition in a low growth market offset falling from 2.27% during 2H11 to 2.14% during 10.0% by a greater awareness of risk. We expect the 2H12. This recent fall has been precipitated by banks to continue to navigate within this range, a deposit10. 0war% amongst the Australian banks as even with the recent growth seen in the banks’ they seek5.0 to% prepare themselves for the liquidity lending books. We feel it is important that it regulations being implemented, similar to what we experienced5.0% in New Zealand in 2010. does (rather than decreasing as it did during the 0.0% previous credit growth phase) if we wish New New Zealand NIMs1H08 now2H0 8sit above1H09 those2H09 of1H the10 2H10 1H11 2H11 1H12 2H12 Zealand to retain its global reputation as having 0.0% Australian- 5.0% majors. The expectation of PwC a financially sound banking environment. Australia is that1H further08 2H0 degradation8 1H09 2H 0of9 the1H 10 2H10 1H11 2H11 1H12 2H12 Australian- 5.0% NIMs will occur over the coming periods- 1 0which.0% may lead to the widening of this gap.- 10.0% Household Corporate
Source: Reserve Bank of New ZealandHousehold Corporate
Source: Reserve Bank of New Zealand Banking Perspectives 9
Figure 7: Maturities of residential lending performed by New Zealand registered banks
Figure 7: Maturities of residential lending performed by New Zealand registered banks 180,000
160,000 180,000 140,000 160,000 120,000 140,000 100,000 120,000 80,000 100,000
NZ$ millions 60,000 80,000 40,000
NZ$ millions 60,000 20,000 40,000- 20,000
- Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Floating <1 year 1-2 year >2 year Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Source: Reserve Bank of New FloatingZealand <1 year 1-2 year >2 year
Source: Reserve Bank of New Zealand Figure 8 : New Zealand major banks’ net cash flows with customers
Figure15,000 8 : New Zealand major banks’ net cash flows with customers
10,000 15,000
5,000 10,000
- 5,000
NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (5,000) -
NZ$ millions (10,000) 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (5,000)
(15,000) (10,000) Net cash inflow/(outflow) (15,000)
Net cash inflow/(outflow) Figure 9: New Zealand major banks’ funding books
350,000 Amounts due to Figure 9: New Zealand major banks’ funding books related parties 300,000 350,000 Due to central bank anAdm ootuhnetrs f idnuaen ctoia l 250,000 inrsetiltautetiodn psarties 300,000 200,000 Due to central bank Saunbdo rodtihneatre fdin daenbctial 250,000
$ millions $ institutions 150,000 Other money market 200,000 deSpuobsoirtsd/ibnoantedds debt 100,000 and notes $ millions $ 150,000 Other money market 50,000 Deposits from customers deposits/bonds 100,000 and notes -
50,000 Deposits from customers
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 -
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Figure #: Chart title
10.00%
Figure9 #:.00 Chart% title
108.00%
97.00%
86.00%
75.00%
4.00% 6.00%
3.00% 5.00%
4.00% 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
3.00% Interest Income WAIR Interest Expense WAIR
2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Interest Income WAIR Interest Expense WAIR
Figure 10: Cost to income ratios of the New Zealand and Australian major banks
54.0
Figure52.0 10: Cost to income ratios of the New Zealand and Australian major banks
5540..0
5428..0
5406..0
4484..0
42.0 46.0
40.0 44.0
42.0 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Australia New Zealand 40.0
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Australia New Zealand
Figure 11: New Zealand major banks’ composition of bad debt expense
1,400 1,200 Figure 111:,00 0New Zealand major banks’ composition of bad debt expense s n o i
l 800 l i
m 1,400 600 $
Z 1,200 N 400 1,000 s 200 n o i
l 800 l i - m 600 $ Z N 400 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
200 Household Non-household -
1H10 2H10 1H11 2H11 1H12 2H12 Figure 12: New1H07 Zealand2H07 major1H08 banks’2H08 1H09asset 2H09quality and bad debt expense Household Non-household 1.8% 1.6% 0.6% 1.4% 0.5% Figure 12:1.2% New Zealand major banks’ asset quality and bad debt expense 0.4% 1.0% 10.8% 0.3% 1.6% 0.6% 0.6% 0.2% 10.4% 0.5% 1.2% 0.1% 0.2% 0.4% 10.0% 0.0% 0.8% 0.3% 0.6% 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 0.2% 0.4% 0.1% 0.2% Bad debt expense/gross loans and advances to customers (RHS) 0.0% 0.0% Impaired assets/gross loans and advances to customers (LHS)
1H07 2H0790 da1H08y past2H08 due a1H09ssets/g2H09ross l1H10oans a2H10nd ad1H11vances2H11 to cu1H12stome2H12rs (LHS)
Bad debt expense/gross loans and advances to customers (RHS)
Figure 13: New ZealandImpair emajord asse tsbanks’/gross lo basisans an dpoint advan loances to losscusto provisionsmers (LHS)
200 90 day past due assets/gross loans and advances to customers (LHS)
150 Figure 13: New Zealand major banks’ basis point loan loss provisions
2100 Basis pointsBasis 150
100-
Basis pointsBasis 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 50 Household Non-household
-
Figure 14: Average1H08 capital2H08 1H09 ratios2H09 of the1H10 New2H10 Zealand1H11 major2H11 banks1H12 2H12
13.0% Household Non-household
12.0%
11.0% Figure 14: Average capital ratios of the New Zealand major banks 10.0% 13.0% 9.0% 12.0% 8.0% 11.0%
2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 10.0% Average Tier 1 Average Total 9.0% Capital Ratio Capital Ratio
8.0%
2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Average Tier 1 Average Total Figure #: Funding offers byCa pbanksital Rati oin last 12 monthsCapita l Ratio to our treasury advisory clients
ANZ 10, 18%
Figure #: Funding offers by banks in last 12 months Westpac to our treasury advisory clients 18, 33% ANZ 10, 18%
ASB Westpac 9, 17% 18, 33%
TSB 1, 2% Rabobank ASB 2, 4% BNZ 9, 17% 8, 15% Mitso UFG BoTM 1, TSB2% 4, 7% 1, 2% HSBC Rabobank 1, 2% 2, 4% BNZ 8, 15% Mitso UFG BoTM 1, 2% 4, 7% HSBC 1, 2% Lending
Much of the talk of the last six to nine months has been on lending interest rates. Households have been focusing on them due to press reports suggesting customers should renegotiate borrowing rates, even in the middle of a fixed rate period.
The banks have generally played ball, This pressure on lending rates was As can be seen in figure 6, this growth especially with the more secure lending, not isolated to the household market. has come from the corporate sector paying out break fees and extending As a result of the confidence from growing by 2.2% or $2.3 billion in credit at rates significantly below having stronger balance sheets from 2H12 to $106.5 billion supporting the carded rates. recent deleveraging coupled with household sector’s continued growth the media activity in the household (growth of 1.7% or $2.9 billion in Extending this scrap for market share market, many corporates have also 2H12 taking gross lending to was the announcement in September taken the opportunity to renegotiate $180.6 billion). This is the first time 2012 that the National Bank brand was their borrowings packages. At the top the corporate sector has recorded being dropped. Widely expected, this end of town this has even seen the two consecutive periods of growth resulted in bank campaigns being run, relaxing of covenants given the general since 2009. ranging from advertising to interest improvement in the financial conditions rate specials. of many corporate borrowers. This is the typical activity we would expect in a flat market with the banks actively competing for what share of the market is available. This manifested in gross lending increasing by $5.2 billion or 1.9% in 2H12 to $287.1 billion, the highest six month increase since the first half of 2009.
This is the first time the corporate lending sector has recorded two consecutive periods of growth since 2009.
10 Figure 4: Net interest income of NZ major banks in relation to loans and advances to customers
320,000 3,600 Figure 4: Net interest income of NZ major300,000 banks 3,400 in relation to loans and advances to customers 280,000 NZ$ millions NZ$ 320,000 3,200 3,600 260,000 300,000 3,000 3,400 240,000 NZ$ millions 280,000 NZ$ millions NZ$ 2,800 3,200 220,000 260,000
2,600 200,000 3,000 240,000 NZ$ millions
1H10 2H10 1H11 2H11 1H12 2H12 1H07 2H07 1H08 2H08 2,8001H09 2H09 220,000
Net interest income (LHS) Loans and advances to customers (RHS) 2,600 200,000
1H10 1H11 2H11 1H12 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12 Figure 5: New Zealand registered banks’ net interest margin Net interest income (LHS) Loans and advances to customers (RHS) 3.00
2.75 The growth witnessed in the corporate WhileFigure the household5: New Zealand sector registeredhas banks’This net also interest represents margin a positive sign for sector has been driven2 .by50 the continued to grow, we have seen the economy with households beginning agricultural sector (4.0%2.25 increase) and interesting3.00 changes in this lending to hedge against increases in residential the property sector (3.4%2.00 increase). portfolio.2.75 There has been a move to mortgage interest rates, typically a sign The agricultural sector is particularly fixed rates during the period, as can be of a growing economy. We will have encouraging as this is 1the.75 backbone seen2 .in50 figure 7, with only 58% of the to see whether this heralds an actual of the New Zealand economy1.50 and portfolio2.25 floating at September 2012 improvement in the economy or is more generally has been under significant compared with 63% at March 2012. of a false dawn, with key indicators such 2.00 pressure from the banks to1996 reduce1997 1998 1999 2000 2001Furthermore,2002 2003 2004 2005 22%2006 of2007 the2008 portfolio2009 2010 2011 2012 as GDP from the first half of 2012 being leverage. This turnaround, with lending is fixed1.75 for greater than one year at revised downward. increasing from the $47 billion mark September 2012 compared to 15% at Net1 i.n5t0erest margin (NIM) (%) Also, this refixing represents the (seen since 2010) to $49 billion, is a March 2012. beginning of households reconsidering good indicator of improved confidence 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Reserve Bank of New Zealand how to restructure their borrowings. We in the economy. expect the competition in interest rates Net interest margin (NtoIM continue) (%) as banks attempt to lock-in Figure 6: Changes in NZ major banks’ lending portfolios market share over the coming months. Source: Reserve Bank of New Zealand 15.0%
10.0% Figure 6: Changes in NZ major banks’ lending portfolios
15.0% 5.0%
10.0% 0.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 5.0% - 5.0%
0.0% - 10.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Household- 5.0% Corporate
Source: Reserve Bank of New Zealand - 10.0%
Household Corporate
Source: Reserve Bank of New Zealand
Figure 7: Maturities of residential lending performed by New Zealand registered banks
180,000
160,000 Figure 7: Maturities of residential lending performed by New Zealand registered banks 140,000
120,000 180,000 100,000 160,000 80,000 140,000
NZ$ millions 60,000 120,000 40,000 100,000 20,000 80,000 -
NZ$ millions 60,000
40,000 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 20,000 Floating - <1 year 1-2 year >2 year
Source: Reserve Bank of New Zealand Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Floating <1 year Banking1-2 Perspectives year 11 >2 year Figure 8 : New Zealand major banks’ net cash flows with customers Source: Reserve Bank of New Zealand 15,000
10,000 Figure 8 : New Zealand major banks’ net cash flows with customers
5,000 15,000
- 10,000
NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (5,000) 5,000
(10,000) -
NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (15,000) (5,000)
Net cash inflow/(outflow) (10,000)
(15,000) Figure 9: New Zealand major banks’ funding books Net cash inflow/(outflow)
350,000 Amounts due to related parties 300,000 Figure 9: New Zealand major banks’ fundingDue to ce nbookstral bank and other financial 250,000 institutions 350,000 Amounts due to 200,000 related parties 300,000 Subordinated debt
$ millions $ Due to central bank 150,000 and other financial 250,000 Other money market deposits/bonds institutions 100,000 and notes 200,000 Subordinated debt
50,000 millions $ Deposits from customers 150,000 Other money market - deposits/bonds 100,000 and notes
1H07 2H07 1H08 2H08 1H0950,0002H09 1H10 2H10 1H11 2H11 1H12 2H12 Deposits from customers
-
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Figure #: Chart title
10.00%
9.00% Figure #: Chart title 8.00% 10.00% 7.00% 9.00% 6.00% 8.00% 5.00% 7.00% 4.00% 6.00% 3.00% 5.00%
2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 4.00% Interest Income WAIR Interest Expense WAIR 3.00%
2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Interest Income WAIR Interest Expense WAIR Figure 10: Cost to income ratios of the New Zealand and Australian major banks
54.0
52.0 Figure 10: Cost to income ratios of the New Zealand and Australian major banks
50.0 54.0 48.0 52.0 46.0 50.0 44.0 48.0 42.0 46.0 40.0 44.0
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 42.0 Australia New Zealand 40.0
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Australia New Zealand
Figure 11: New Zealand major banks’ composition of bad debt expense
1,400 1,200 1,000 Figure 11: New Zealand major banks’ composition of bad debt expense s n o i
l 800 l i
m 1,400 600 $
Z 1,200 N 400 1,000 s
200 n o i
l 800 l - i m 600 $ Z N 1H07 2H07 1H08 2H08400 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
H2o0u0s ehold Non-household -
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 Figure 12: New Zealand major banks’ asset quality and bad debt expense Household Non-household
1.8% 1.6% 0.6% 1.4% Figure 12: New Zealand major banks’ asset quality0.5% and bad debt expense 1.2% 0.4% 1.0% 1.8% 0.8% 0.3% 1.6% 0.6% 0.6% 1.4% 0.2% 0.5% 0.4% 1.2% 0.1% 0.2% 0.4% 1.0% 0.0% 0.0% 0.8% 0.3% 0.6% 0.2% 1H07 2H07 1H08 2H08 01H09.4% 2H09 1H10 2H10 1H11 2H11 1H12 2H12 0.1% 0.2% Bad debt expens0e./0g%ross loans and advances to customers (RHS) 0.0% Impaired assets/gross loans and advances to customers (LHS)
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 90 day past due assets/gross loans and advances to customers (LHS)
Bad debt expense/gross loans and advances to customers (RHS)
Figure 13: New Zealand major banks’ basis Ipointmpaire dloan asse tlosss/gro sprovisionss loans and advances to customers (LHS) 90 day past due assets/gross loans and advances to customers (LHS) 200
150 Figure 13: New Zealand major banks’ basis point loan loss provisions
200 100
Basis pointsBasis 150 50
100 - Basis pointsBasis
1H08 2H08 1H09 2H09 50 1H10 2H10 1H11 2H11 1H12 2H12
Household Non-household -
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 Figure 14: Average capital ratios of the New Zealand major banks Household Non-household
13.0%
12.0% Figure 14: Average capital ratios of the New Zealand major banks 11.0%
10.0% 13.0%
9.0% 12.0%
8.0% 11.0%
10.0% 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 9.0% Average Tier 1 Average Total Capital Ra8t.io0% Capital Ratio
2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Average Tier 1 Average Total Capital Ratio Capital Ratio Figure #: Funding offers by banks in last 12 months to our treasury advisory clients
ANZ 10, 18% Figure #: Funding offers by banks in last 12 months to our treasury advisory clients Westpac 18, 33% ANZ 10, 18%
Westpac 18, 33% ASB 9, 17%
TSB 1, 2% ASB 9, 17% Rabobank 2, 4% BNZ TSB 8, 15% Mitso UFG BoTM1, 2% 1, 2% 4, 7% Rabobank HSBC 2, 4% BNZ 1, 2% 8, 15% Mitso UFG BoTM 1, 2% 4, 7% HSBC 1, 2% Funding
In order to meet the increased lending seen in the period, the New Zealand majors’ funding has grown from $306.3 billion at the end of 1H12 to $307.8 billion at the end of 2H12.
This is smaller than the $5.2 billion The major banks’ exposure to these This behaviour has also changed the increase in lending as the improvement overseas concerns is still significant but funding structure of the five majors in overseas conditions has allowed reducing. Since 2009, the New Zealand (see figure 9). The percentage of the the banks to use some of their liquid public have deposited more with the five majors’ funding which is obtained assets held in case of a dislocation in New Zealand major banks than they from deposits from customers has the wholesale funding markets in the have borrowed. If this continues, even increased from 52% or $155 billion Northern Hemisphere. with the restarting of credit growth, in 2009 to 64% or $196 billion at the this will reduce the risk of the New end of 2H12, including a $7.8 billion Zealand banks and of New Zealand Inc increase in the current period. This has to overseas events. Albeit volatile, figure allowed the five majors to reduce their 8 shows that the New Zealand public reliance on wholesale funding, reducing have deposited almost $29 billion more it from 48% of total funding, or $145 than they have borrowed since 2009. billion to 36% or $112 billion over the same timeframe.
Since 2009, the New Zealand public have deposited almost $29 billion more with the New Zealand major banks than they have borrowed.
12 Figure 4: Net interest income of NZ major banks Figure 4: Net interest income of NZ major banks in relation to loans and advances to customers in relation to loans and advances to customers 320,000 320,000 3,600 3,600 300,000 300,000 3,400 3,400 280,000 280,000 millions NZ$ NZ$ millions NZ$ 3,200 3,200 260,000 260,000
3,000 240,000 NZ$ millions 3,000 240,000 NZ$ millions
2,800 220,000 2,800 220,000
2,600 200,000 2,600 200,000
1H10 1H11 2H11 1H12 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12 1H10 1H11 2H11 1H12 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12
Net interest income (LHS) Loans and advances to customers (RHS) Net interest income (LHS) Loans and advances to customers (RHS)
Figure 5: New Zealand registered banks’ net interest margin Figure 5: New Zealand registered banks’ net interest margin
3.00 3.00 2.75 2.75 2.50 2.50 2.25 2.25 2.00 2.00 1.75 1.75 1.50 1.50
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Net interest margin (NIM) (%) Net interest margin (NIM) (%)
Source: Reserve Bank of New Zealand Source: Reserve Bank of New Zealand
Figure 6: Changes in NZ major banks’ lending portfolios Figure 6: Changes in NZ major banks’ lending portfolios
15.0% 15.0%
10.0% 10.0%
5.0% 5.0%
0.0% 0.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 - 5.0% - 5.0%
- 10.0% - 10.0% Household Corporate Household Corporate
Source: Reserve Bank of New Zealand Source: Reserve Bank of New Zealand
Figure 7: Maturities of residential lending performed by New Zealand registered banks Figure 7: Maturities of residential lending performed by New Zealand registered banks
180,000 180,000 160,000 160,000 140,000 140,000 120,000 120,000 100,000 100,000 80,000 80,000
NZ$ millions 60,000
NZ$ millions 60,000 40,000 40,000 20,000 20,000 - -
Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Floating <1 year 1-2 year >2 year Floating <1 year 1-2 year >2 year
Source: Reserve Bank of New Zealand Source: Reserve Bank of New Zealand
This change in funding composition Figure 8 : New Zealand major banks’ net cash flows with customers Figure 8 : New Zealand major banks’ net cash flows with customers has been driven in part by the liquidity ratios brought in by the Reserve Bank 15,000 15,000 in 2010. From 1 January 2013 the core funding ratio, which measures 10,000 10,000 long-term funding against loans and 5,000 advances, has increased to 75%. While 5,000 this increases the regulatory minimum, - and hence the safety of the banking -
system, we understand that the banks NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (5,000) have been funding in excess of this level (5,000) due to concerns abroad. (10,000) (10,000) However these overseas concerns reduced during the period, especially (15,000) (15,000) with the financial restructuring of Net cash inflow/(outflow) Greece being agreed, which has Net cash inflow/(outflow) lowered the banks’ incremental funding costs. The financial issues of the Northern Hemisphere are far from over Figure 9: New Zealand major banks’ funding books though, with concerns remaining for Figure 9: New Zealand major banks’ funding books Spain, Italy and Greece in the Eurozone 350,000 Amounts due to 350,000 Amounts due to in particular and the United States related parties related parties 300,000 continuing to walk along the edge of 300,000 Due to central bank Due to central bank the fiscal cliff. and other financial 250,000 and other financial 250,000 institutions institutions 200,000 200,000 Subordinated debt Subordinated debt $ millions $
$ millions $ 150,000 150,000 Other money market Other money market deposits/bonds deposits/bonds 100,000 and notes 100,000 and notes
50,000 Deposits from customers 50,000 Deposits from customers
- -
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
The financial issues of the Northern Hemisphere are far from over in the Eurozone Figure #: Chart title in particularFigure #: andChart title the United States continuing 10.00% to walk along10.00 %the edge of the fiscal cliff. 9.00% 9.00% 8.00% 8.00% 7.00% 7.00% Banking Perspectives 13 6.00% 6.00% 5.00% 5.00% 4.00% 4.00% 3.00% 3.00%
2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 Interest Income WAIR Interest Expense WAIR Interest Income WAIR Interest Expense WAIR
Figure 10: Cost to income ratios of the New Zealand and Australian major banks Figure 10: Cost to income ratios of the New Zealand and Australian major banks
54.0 54.0
52.0 52.0
50.0 50.0
48.0 48.0
46.0 46.0
44.0 44.0
42.0 42.0
40.0 40.0
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 Australia New Zealand Australia New Zealand
Figure 11: New Zealand major banks’ composition of bad debt expense Figure 11: New Zealand major banks’ composition of bad debt expense
1,400 1,400 1,200 1,200 1,000 s 1,000 n s o n i
l 800 o l i i
l 800 l i m
m 600 $ 600 Z $ Z N 400 N 400 200 200 - -
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 Household Non-household Household Non-household
Figure 12: New Zealand major banks’ asset quality and bad debt expense Figure 12: New Zealand major banks’ asset quality and bad debt expense
1.8% 1.8% 1.6% 0.6% 1.6% 0.6% 1.4% 0.5% 1.4% 0.5% 1.2% 1.2% 0.4% 1.0% 0.4% 1.0% 0.8% 0.3% 0.8% 0.3% 0.6% 0.2% 0.6% 0.2% 0.4% 0.4% 0.1% 0.2% 0.1% 0.2% 0.0% 0.0% 0.0% 0.0%
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Bad debt expense/gross loans and advances to customers (RHS) Bad debt expense/gross loans and advances to customers (RHS) Impaired assets/gross loans and advances to customers (LHS) Impaired assets/gross loans and advances to customers (LHS) 90 day past due assets/gross loans and advances to customers (LHS) 90 day past due assets/gross loans and advances to customers (LHS)
Figure 13: New Zealand major banks’ basis point loan loss provisions Figure 13: New Zealand major banks’ basis point loan loss provisions
200 200
150 150
100 100 Basis pointsBasis Basis pointsBasis 50 50
- -
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Household Non-household Household Non-household
Figure 14: Average capital ratios of the New Zealand major banks Figure 14: Average capital ratios of the New Zealand major banks
13.0% 13.0% 12.0% 12.0% 11.0% 11.0% 10.0% 10.0% 9.0% 9.0% 8.0% 8.0%
2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Average Tier 1 Average Total Average Tier 1 Average Total Capital Ratio Capital Ratio Capital Ratio Capital Ratio
Figure #: Funding offers by banks in last 12 months Figure #: Funding offers by banks in last 12 months to our treasury advisory clients to our treasury advisory clients
ANZ 10, 18% 10, 18%
Westpac 18, 33% 18, 33%
ASB 9, 17% 9, 17%
TSB 1, 2% 1, 2% Rabobank 2, 4% BNZ 2, 4% BNZ 8, 15% BoTM 8, 15% Mitso UFG BoTM 1, 2% 4, 7% 1, 2% 4, 7% HSBC 1, 2% 1, 2% Other operating income
Other operating income has Both of these falls have been driven by Due to reduced half year disclosures we fallen 13% or $156 million the repricing of financial instruments can no longer see a breakdown of this in 2H12 to $1,054 million, held at fair value with a small increase movement on a six monthly basis but on in fee income being wiped out by an annual basis we can see: furthering the 7% fall seen significant valuation losses arising from • Fee income virtually flat, down $6 in 1H12. marking these financial instruments to million from FY11 to $2,048 million market in the current period. in FY12. • Trading income down 0.9% or $4 million to $460 million in FY12. • Losses on financial instruments held at fair value up $216 million from FY11 to $396 million in FY12. • Other income increasing from $2 million in FY11 to $69 million in FY12. The volatility in the losses on financial instruments held at fair value is hard to predict going forward, but if the banks continue to compete on interest rates rather than fees then the fee income for the banks should continue to remain solid around the $2 billion mark, as it has since FY08.
If the banks continue to compete on interest rates rather than fees then the fee income for the banks should continue to remain solid.
14 Figure 4: Net interest income of NZ major banks in relation to loans and advances to customers
320,000 3,600 300,000
3,400 280,000 NZ$ millions NZ$
3,200 260,000
3,000 240,000 NZ$ millions
2,800 220,000
2,600 200,000
1H10 1H11 2H11 1H12 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12
Net interest income (LHS) Loans and advances to customers (RHS)
Figure 5: New Zealand registered banks’ net interest margin
3.00
2.75
2.50
2.25
2.00
1.75
1.50
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Net interest margin (NIM) (%)
Source: Reserve Bank of New Zealand
Figure 6: Changes in NZ major banks’ lending portfolios
15.0%
10.0%
5.0%
0.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
- 5.0%
- 10.0%
Household Corporate
Source: Reserve Bank of New Zealand
Figure 7: Maturities of residential lending performed by New Zealand registered banks
180,000
160,000
140,000
120,000
100,000
80,000
NZ$ millions 60,000
40,000
20,000 -
Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Floating <1 year 1-2 year >2 year
Source: Reserve Bank of New Zealand
Figure 8 : New Zealand major banks’ net cash flows with customers
15,000
10,000
5,000
-
NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (5,000)
(10,000)
(15,000)
Net cash inflow/(outflow)
Figure 9: New Zealand major banks’ funding books
350,000 Amounts due to related parties 300,000 Due to central bank and other financial 250,000 institutions
200,000 Subordinated debt
$ millions $ 150,000 Other money market deposits/bonds 100,000 and notes
50,000 Deposits from customers
-
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
ExpensesFigure #: Chart title 10.00%
Operating9.00% expenses have increased a further 5% from 1H12, standing at $2,266 million8.00% for the current period compared to $2,164 million for 1H12. Given the lack of growth7.00% in the balance sheets of the major New Zealand banks, costs continue to
be an6. 0area0% of focus.
While costs5.00% remain a focus for the These pressures combined with the The tax expenses have decreased in the banks, IT upgrades, regulation and reduced other operating income in the current period, due to both a reduction significant4.00% internal changes (such as current period have driven the cost- in the profit before tax but also in the the decommissioning3.00% of the National to-income ratio for the New Zealand effective tax rate from 27.1% in 1H12 Bank brand) continue to place upward majors back up to 48.1%, compared to to 25.4% in 2H12. pressure on the costs that the major a reduction in the Australian majors’ to 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 banks face. 44.9%. Australia’s ratio is more stable Interest Income WAIR thanInt eNewrest E Zealand’sxpense WAIR reflecting their larger proportional size and diversity and the greater impact on our results of movements in the financial markets.
Figure 10: Cost to income ratios of the New Zealand and Australian major banks
54.0
52.0
50.0
48.0
46.0
44.0
42.0
40.0
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Australia New Zealand
Figure 11: New Zealand major banks’ composition of bad debt expense
1,400With the Reserve Bank responding to the global regulatory 1,200environment, banks have faced additional regulatory-driven 1,000 s changes. What sets the current environment apart is the sheer n o i
l 800 l i volume of significant new regulation being introduced. Indeed, m 600 $
Z the regulations require banks to address the way they do business N 400 200and so it commands a significant part of their annual budgets. -
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Household Non-household Banking Perspectives 15
Figure 12: New Zealand major banks’ asset quality and bad debt expense
1.8% 1.6% 0.6% 1.4% 0.5% 1.2% 0.4% 1.0% 0.8% 0.3% 0.6% 0.2% 0.4% 0.1% 0.2% 0.0% 0.0%
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Bad debt expense/gross loans and advances to customers (RHS)
Impaired assets/gross loans and advances to customers (LHS)
90 day past due assets/gross loans and advances to customers (LHS)
Figure 13: New Zealand major banks’ basis point loan loss provisions
200
150
100 Basis pointsBasis 50
-
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Household Non-household
Figure 14: Average capital ratios of the New Zealand major banks
13.0%
12.0%
11.0%
10.0%
9.0%
8.0%
2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Average Tier 1 Average Total Capital Ratio Capital Ratio
Figure #: Funding offers by banks in last 12 months to our treasury advisory clients
ANZ 10, 18%
Westpac 18, 33%
ASB 9, 17%
TSB 1, 2% Rabobank 2, 4% BNZ 8, 15% Mitso UFG BoTM 1, 2% 4, 7% HSBC 1, 2% Figure 4: Net interest income of NZ major banks in relation to loans and advances to customers
320,000 3,600 300,000
3,400 280,000 NZ$ millions NZ$
3,200 260,000
3,000 240,000 NZ$ millions
2,800 220,000
2,600 200,000
1H10 1H11 2H11 1H12 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12
Net interest income (LHS) Loans and advances to customers (RHS)
Figure 5: New Zealand registered banks’ net interest margin
3.00
2.75
2.50
2.25
2.00
1.75
1.50
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Net interest margin (NIM) (%)
Source: Reserve Bank of New Zealand
Figure 6: Changes in NZ major banks’ lending portfolios
15.0%
10.0%
5.0%
0.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
- 5.0%
- 10.0%
Household Corporate
Source: Reserve Bank of New Zealand
Figure 7: Maturities of residential lending performed by New Zealand registered banks
180,000
160,000
140,000
120,000
100,000
80,000
NZ$ millions 60,000
40,000
20,000 -
Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Floating <1 year 1-2 year >2 year
Source: Reserve Bank of New Zealand
Figure 8 : New Zealand major banks’ net cash flows with customers
15,000
10,000
5,000
-
NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (5,000)
(10,000)
(15,000)
Net cash inflow/(outflow)
Figure 9: New Zealand major banks’ funding books
350,000 Amounts due to related parties 300,000 Due to central bank and other financial 250,000 institutions
200,000 Subordinated debt
$ millions $ 150,000 Other money market deposits/bonds 100,000 and notes
50,000 Deposits from customers
-
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Figure #: Chart title
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Interest Income WAIR Interest Expense WAIR
Figure 10: Cost to income ratios of the New Zealand and Australian major banks
54.0
52.0
50.0
48.0
46.0
44.0
42.0
40.0
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Australia New Zealand Asset quality
The bad debt expense for Figure 11: New Zealand major banks’ composition of bad debt expense the New Zealand majors has levelled out, at $279 million 1,400 for 2H12 compared with 1,200 1,000 $277 million for 1H12. As s n o i
l 800 l illustrated in figure 11, this i m 600 has come from a $25 million $ Z reduction in the household N 400 sector to $72 million in 200 2H12 offset by a $27 million - increase in the non-household 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 sector to $206 million. Household Non-household
With historically low interest rates, The predicted long, dry summer won’t This buoyancy can be seen in the other we do not expect to see any increases help the dairy sector with the possibility figures reported by the major banks in Figure 12: New Zealand major banks’ asset quality and bad debt expense in the household bad debt expense due of a drought on the cards. The question 2H12 with the 90 day past due assets is will global demand improve prices dropping from 36bps at the end of to borrowers not being able to repay 1.8% enough to offset the impact of a dry 1H12 when compared to the gross their loans. 1.6% 0.6% summer? The latest forecast is still lending to 32bps at the end of 2H12, With the New Zealand property market 1.4% 0.5% below the1.2 2012% pay-out even without a levelling slightly but still continuing flourishing again, particularly in 0.4% possible 1dry.0% summer. The banks push the fall from the high of 51bps seen at Auckland, and the Christchurch rebuild for deleveraging0.8% over the last few years the end of 1H09. The impaired0. 3assets% beginning there could be further will no doubt0.6% alleviate some concerns figure continues to reduce, falling to improvements in the bad debt expense 0.2% in this area.0.4% 103bps of the gross lending books 0.1% due to the increasing value of the 0.2% at the end of the period, as more The major banks’ provisioning levels underlying security. 0.0% confidence is obtained and problem0.0% have continued to drop in the current loans continue to be worked through With the majority of the non-household period in both absolute terms and in 1H07 2H07 1H08 2H08 1H09 2H09 and1H10 are2H10 rehabilitated1H11 2H11 1H12 or 2H12written off. We sector also largely reliant on property comparison to the underlying lending expect to see continued improvement for security (either farming or property books. Household provisions dropped Bad debt expense/gross loanins a nthesed adv afigures,nces to cu salthoughtomers (RH Swe) expect companies), this buoyant property from $966 million at the end of 1H12 to Impaired assets/gross loans athend a impaireddvances to cassetsustome tors (stabiliseLHS) out well market will also aid the non-household $857 million at the end of 2H12, a drop above 10bps of the gross lending book, sector. However there still remains from 54bps to 47bps9 when0 day p comparedast due asset s/gross loans and advances to customers (LHS) the level seen at the end of 1H07. significant uncertainty, with the to the gross household lending. Non- possibility for significant ‘lumpy’ losses household provisioning still remained to be incurred by the banks. significantlyFigure 13: New higher Zealand than majorhousehold banks’ basis point loan loss provisions provisioning but dropped from $1,575 200 million to $1,476 million during the period, or from 151bps to 139bps when compared150 to the gross non- household lending. 100 Basis pointsBasis 50 The early indicators for bad debt expense show positive signs- of improvement. 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Household Non-household
16 Figure 14: Average capital ratios of the New Zealand major banks
13.0%
12.0%
11.0%
10.0%
9.0%
8.0%
2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Average Tier 1 Average Total Capital Ratio Capital Ratio
Figure #: Funding offers by banks in last 12 months to our treasury advisory clients
ANZ 10, 18%
Westpac 18, 33%
ASB 9, 17%
TSB 1, 2% Rabobank 2, 4% BNZ 8, 15% Mitso UFG BoTM 1, 2% 4, 7% HSBC 1, 2% Figure 4: Net interest income of NZ major banks in relation to loans and advances to customers
320,000 3,600 300,000
3,400 280,000 280,000 millions NZ$ NZ$ millions NZ$
3,200 260,000
3,000 240,000
NZ$ millions 240,000 NZ$ millions
2,800 220,000
2,600 200,000
1H11 1H07 2H07 1H08 1H09 1H10 2H10 2H11 1H12 2H12 2H08 2H09 1H10 1H11 2H11 1H12 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12
Net interest income (LHS) Loans and advances to customers (RHS)
Figure 5: New Zealand registered banks’ net interest margin
3.00
2.75
2.50
2.25
2.00
1.75
1.50
1996 1997 1998 1999 2001 2007 2010 2011 2012 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Net interest margin (NIM) (%)
Source: Reserve Bank of New Zealand
Figure 6: Changes in NZ major banks’ lending portfolios
15.0%
10.0%
5.0%
0.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
- 5.0%
- 10.0%
Household Corporate
Source: Reserve Bank of New Zealand
Figure 7: Maturities of residential lending performed by New Zealand registered banks
180,000
160,000
140,000
120,000
100,000
80,000
NZ$ millions 60,000 NZ$ millions 60,000
40,000
20,000 -
Mar 07 Jun 07 Jun 08 Mar 09 Jun 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Floating <1 year 1-2 year >2 year
Source: Reserve Bank of New Zealand
Figure 8 : New Zealand major banks’ net cash flows with customers
15,000
10,000
5,000
-
NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (5,000)
(10,000)
(15,000)
Net cash inflow/(outflow)
Figure 9: New Zealand major banks’ funding books
350,000 350,000 Amounts due to related parties 300,000 Due to central bank and other financial 250,000 institutions
200,000 Subordinated debt $ millions $ $ millions $ 150,000 Other money market deposits/bonds 100,000 and notes
50,000 50,000 Deposits from customers
-
1H07 1H09 1H10 2H10 1H11 2H11 1H12 2H12 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Figure #: Chart title
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
1H09 1H10 2H10 1H11 2H11 1H12 2H12 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Interest Income WAIR Interest Expense WAIR
Figure 10: Cost to income ratios of the New Zealand and Australian major banks
54.0
52.0
50.0
48.0
46.0
44.0
42.0
40.0
1H09 1H10 2H10 1H11 2H11 1H12 2H12 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Australia New Zealand
Figure 11: New Zealand major banks’ composition of bad debt expense
1,400 1,200 1,000 s 1,000 s n n o i o l i 800 l l 800 i l i m m
600 $ 600 $ Z Z N N 400 200 -
1H07 1H09 1H10 2H10 1H11 2H11 1H12 2H12 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Household Non-household
Figure 12: New Zealand major banks’ asset quality and bad debt expense
1.8% 0.6% 1.6% 0.6% 1.4% 0.5% 1.2% 0.4% 1.0% 0.8% 0.3% 0.6% 0.6% 0.2% 0.4% 0.1% 0.2% 0.0% 0.0%
1H07 1H09 1H10 2H10 1H11 2H11 1H12 2H12 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Bad debt expense/gross loans and advances to customers (RHS)
Impaired assets/gross loans and advances to customers (LHS)
90 day past due assets/gross loans and advances to customers (LHS)
Figure 13: New Zealand major banks’ basis point loan loss provisions
200
150
100 Basis pointsBasis Basis pointsBasis 50
-
1H09 1H10 2H10 1H11 2H11 1H12 2H12 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Household Non-household
Figure 14: Average capital ratios of the New Zealand major banks
13.0%
12.0% 12.0% The major banks’ provisioning 11.0%
10.0% levels have continued to drop in 9.0% the current period. 8.0%
1H09 1H10 2H10 1H11 2H11 1H12 2H12 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Average Tier 1 Average Total Capital Ratio Capital Ratio
Banking Perspectives 17
Figure #: Funding offers by banks in last 12 months to our treasury advisory clients
ANZ 10, 18%
Westpac 18, 33%
ASB 9, 17%
TSB 1, 2% Rabobank 2, 4% BNZ 8, 15% Mitso UFG BoTM Mitso UFG 4, 7% 1, 2% 4, 7% HSBC 1, 2% Figure 4: Net interest income of NZ major banks in relation to loans and advances to customers
320,000 3,600 300,000
3,400 280,000 NZ$ millions NZ$
3,200 260,000
3,000 240,000 NZ$ millions
2,800 220,000
2,600 200,000
1H10 1H11 2H11 1H12 1H07 2H07 1H08 2H08 1H09 2H09 2H10 2H12
Net interest income (LHS) Loans and advances to customers (RHS)
Figure 5: New Zealand registered banks’ net interest margin
3.00
2.75
2.50
2.25
2.00
1.75
1.50
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Net interest margin (NIM) (%)
Source: Reserve Bank of New Zealand
Figure 6: Changes in NZ major banks’ lending portfolios
15.0%
10.0%
5.0%
0.0% 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
- 5.0%
- 10.0%
Household Corporate
Source: Reserve Bank of New Zealand
Figure 7: Maturities of residential lending performed by New Zealand registered banks
180,000
160,000
140,000
120,000
100,000
80,000
NZ$ millions 60,000
40,000
20,000 -
Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
Floating <1 year 1-2 year >2 year
Source: Reserve Bank of New Zealand
Figure 8 : New Zealand major banks’ net cash flows with customers
15,000
10,000
5,000
-
NZ$ millions 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 (5,000)
(10,000)
(15,000)
Net cash inflow/(outflow)
Figure 9: New Zealand major banks’ funding books
350,000 Amounts due to related parties 300,000 Due to central bank and other financial 250,000 institutions
200,000 Subordinated debt
$ millions $ 150,000 Other money market deposits/bonds 100,000 and notes
50,000 Deposits from customers
-
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Figure #: Chart title
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Interest Income WAIR Interest Expense WAIR
Figure 10: Cost to income ratios of the New Zealand and Australian major banks
54.0
52.0
50.0
48.0
46.0
44.0
42.0
40.0
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Australia New Zealand
Figure 11: New Zealand major banks’ composition of bad debt expense
1,400 1,200 1,000 s n o i
l 800 l i m 600 $ Z
N 400 200 -
1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 Capital Household Non-household
Figure 12: New Zealand major banks’ asset quality and bad debt expense The major banks have continued to prepare for Basel III in the current period with 1.8% subordinated debt unable to qualify1.6 in% the long run as tier 2 capital under the new0.6% rules being redeemed. In its place, the1.4% New Zealand banks continue to accumulate0.5% 1.2% more tier 1 capital by retaining more earnings than are being paid in dividends0 . 4% 1.0% and from further issuances of ordinary0.8% share capital. 0.3% 0.6% In the current period the major banks shareholders’ equity has increased from $23.9 billion at the end of 1H12 to $25.20.2% billion 0.4% 0.1% at the end of 2H12. This has continued the trend seen0.2 %in recent years. 0.0% 0.0%
Capital adequacy 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
As at 2H12 the average tier 1 There is no change toB athed d etreatmentbt expense/ gross loansHowever, and advan cwithes to manycustom eoverseasrs (RHS) banks capital ratio was 11.2%, up of the regulatory overlaysImpaire ind a thesset snew/gros s loans acurrentlynd advance wells to c ushortstome rofs (theLHS )Basel III
from 10.8% as at 1H12, while regulations. This means90 d athaty pas thet du eNew asse ts/gross capitalloans an drequirements, advances to cus especiallytomers (LHS )in the total capital ratio was Zealand banks continue to have their Europe, New Zealand may have beaten unchanged at 12.7%. regulatory overlays included as part the rush by implementing this regulatory ofFigure their 13:capital New ratios Zealand (decreasing major banks’ the basischange point early. loan lossGlobally provisions it is anticipated The convergence of tier 1 capital to total ratios), as opposed to globally where that there will be a capital shortage and capital illustrates the greater importance overlays are200 not included in their many investors’ continued reluctance to placed on pure shareholders’ funds capital ratios. have an increased weighting in banks (i.e. share capital, retained earnings) 150 will not help solve this. rather than other innovative capital This means that New Zealand’s banks’ instruments. capital positions will continue to be This shortage is likely to lead to 100 conservatively reported when compared increases in the cost of capital. With New
From 1 January 2013, the banks need to their pointsBasis international peers. This does Zealand already complying with the 50 to comply with the new Basel III capital not seem to be causing problems in requirements and the Australian parents ratios as defined by the Reserve Bank. the global debt markets at the moment (where applicable) well capitalised, the As with the liquidity requirements, the as New Zealand- is in favour, and the New Zealand majors should be sheltered Reserve Bank has implemented these New Zealand banks are proactive in from the majority of these increases. ratios before the majority of the rest recognising the1H08 different2H08 approaches1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 and presenting their ratios as they would of the world, helping reinforce New Household Non-household Zealand’s reputation of having a safe appear in different jurisdictions. banking environment. However this does continue to place regulatory pressure on the New Zealand banks. Figure 14: Average capital ratios of the New Zealand major banks
13.0%
12.0%
11.0%
10.0%
9.0%
8.0%
2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12
Average Tier 1 Average Total Capital Ratio Capital Ratio
18
Figure #: Funding offers by banks in last 12 months to our treasury advisory clients
ANZ 10, 18%
Westpac 18, 33%
ASB 9, 17%
TSB 1, 2% Rabobank 2, 4% BNZ 8, 15% Mitso UFG BoTM 1, 2% 4, 7% HSBC 1, 2% The convergence of tier 1 capital ratios and total capital ratios illustrates the greater importance placed on pure shareholders’ funds rather than other innovative capital instruments.
Banking Perspectives 19 Return on equity
With reduced profit and While New Zealand’s return on equity increased equity levels to is still behind Australia’s, the New comply with Basel III, the Zealand majors have only dropped two percentage points since the GFC New Zealand majors’ average as opposed to Australia which has return on equity has fallen dropped five percentage points. While from 15.3% in 1H12 to the owners of the New Zealand majors 13.0% in 2H12. This means will be looking for improved return on that it has averaged around equity, this may be an unlikely scenario 14% for both of the last two in the current environment of regulatory change and the competition that comes years, down two percentage with limited growth in the top line. points from the pre-GFC level of 16%. When compared
internationally, this reduction Figure 15: Banks’ shareholder value is actually a good result for Pre GFC (2007) Current (2012) the New Zealand major banks Global Aus NZ Global Aus NZ albeit with them coming from Leverage 31x 17x 15x 19x 15x 15x a low base. Return on Equity 20% 20% 16% 7% 15% 14%
While the owners of the New Zealand majors will be looking for improved return on equity, this may be an unlikely scenario.
20 Banking Perspectives 21 0 6 0 (5) 11 59 81 50 37 33 (48) 106 608 102 372 (124) (270) 9.0% 6 0.92% 10.5% 67.8% 44.3% 0.41% 11,582 10,586 13,875 11,495 34.91% 2H11 months
0 0 38 53 71 81 44 48 25 (15) (18) 100 699 123 381 (133) (258) 6 0.82% 12.1% 10.1% 65.2% 39.7% 0.15% 12,160 11,716 14,386 12,068 48.00% 1H12 months Kiwibank
0 0 84 41 58 75 81 50 41 36 747 134 392 (17) (17) (140) (258) 6 0.67% 11.3% 10.4% 65.1% 37.7% 0.14% 12,536 11,565 14,745 12,445 48.81% 2H12 months 6 0 607 866 971 434 672 511 307 (259) (105) (778) 1,772 8,465 1,315 3,304 6 1.87% 13.0% 10.5% 44.5% 24.8% 0.11% 94,927 (1,989) 61,994 93,613 28.84% 129,083 2H11 months
9 0 615 837 940 442 639 511 295 (222) (103) (863) 1,626 9,002 1,361 3,276 6 1.71% 12.6% 11.3% 47.9% 24.5% 0.11% 95,164 (1,915) 64,179 93,817 31.43% 124,738 1H12 months ANZ (iii) 0 0 649 831 930 462 620 461 226 (99) (182) (880) 1,242 9,177 1,348 3,292 6 1.28% 12.2% 10.8% 48.6% 25.5% 0.10% 97,357 66,051 96,094 (1,944) 37.12% 130,868 2H12 months (9) 38 84 (62) 269 269 400 462 236 185 609 336 (122) (383) 4,182 1,911 6 0.47% 12.8% 11.2% 45.3% 27.9% 0.11% 56,675 (1,302) 34,178 68,674 56,419 31.23% 2H11 months
(8) 27 77 (32) 264 385 537 569 238 165 686 257 (144) (355) 4,309 1,899 6 0.46% 12.9% 11.2% 38.4% 25.8% 0.06% 56,907 (1,213) 39,056 71,337 56,680 29.17% 1H12 months CBA (ii) 53 (8) 219 301 315 453 495 237 149 651 101 (42) (130) (393) 4,497 1,844 6 0.52% 12.6% 11.7% 44.3% 26.7% 0.07% 57,347 39,391 69,515 57,109 (1,193) 33.55% 2H12 months 0 (2) 256 919 384 573 680 262 437 840 266 (187) (107) (422) 4,761 2,118 6 1.56% 13.0% 10.5% 38.3% 23.8% 0.18% 58,779 (1,278) 38,019 78,293 58,114 28.94% 2H11 months
0 (1) 226 (94) 899 376 520 614 292 438 749 283 (143) (427) 5,178 1,990 6 1.51% 13.7% 11.7% 41.0% 28.0% 0.16% 59,370 (1,241) 39,424 75,661 58,689 31.48% 1H12 months WBC (i)
0 (2) 184 868 379 531 621 290 366 776 277 (90) (150) (445) 5,515 1,975 6 1.43% 14.1% 12.0% 41.7% 27.2% 0.15% 60,499 41,967 77,854 59,892 (1,199) 31.91% 2H12 months
0
10 202 (57) 659 416 599 656 337 207 712 170 (183) (393) 9.0% 4,349 1,881 6 1.15% 11.8% 37.5% 32.1% 0.10% 57,099 (1,169) 31,354 74,085 56,661 25.80% 2H11 months 0 14 214 (30) 529 352 488 518 157 198 747 138 (136) (386) 9.6% 4,673 1,885 6 0.91% 12.4% 42.7% 17.4% 0.05% 58,296 (1,138) 33,883 71,716 57,834 BNZ 26.09% 1H12 months
0 20 250 459 228 301 332 172 756 132 (73) (31) (16) (408) 5,277 1,905 6 -2.2% 0.77% 13.3% 11.3% 55.1% 0.05% 59,376 37,090 73,111 58,919 (1,149) 28.76% 2H12 months 90 day past due assets Gross other assets under administration Gross impaired assets as a % of loans and advances Gross other individually impaired assets Gross loans and advances to customers Asset quality & provisioning Total shareholders equity Deposits from customers Total assets Net loans and advances to customers Balance sheet Net profit attributable to shareholders Net profit to minorities Income tax expense Total capital ratio (v) Total operating profit before income tax expense Tier 1 capital ratio (v) Impairment losses on credit exposures Expense/income ratio (iv) Core earnings Other operating income (% of total income) Operating expenses Other key data Bad debt charge as a % of loans and advances Other operating income Allowance for impairment losses on groups of financial assets Net interest income Individual assessed provision as a % of impaired assets Interest expense Allowance for impairment losses on individual financal assets Interest income Income statement Key Banking Statistics 2012 – Second Half Year $NZ millions New Zealand. Banking Corporation including Westpac of the New Zealand banking operations Westpac results the aggregated (i) Represents of the New Zealand banking operations Commonwealth Bank Australia including ASB Bank. results the aggregated (ii) Represents including ANZ Bank New Zealand. of the New Zealand banking operations Australia and Banking Group results the aggregated (iii) Represents income, other operating income and expenses. statements based on net interest the banks’ disclosure (iv) Recalculated from to Basel II. statements, in relation disclosure locally incorporated bank’s the relevant from (v) Taken
22 Notes:
Banking Perspectives 23 Get in touch
Sam Shuttleworth Partner Financial Services +64 9 355 8119 [email protected]
Paul Skillender Partner Financial Services +64 9 355 8004 [email protected]
Karl Deutschle Partner Financial Services +64 9 355 8067 [email protected]
Matt Hearley Associate Director Financial Services +64 9 355 8531 [email protected]
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