Record year for BNZ

Media release
28 October 2015

Strong underlying performance in its business banking (BNZ Partners) and wholesale (BNZ Markets) divisions has seen Bank of New Zealand (BNZ) report a statutory net profit for its banking group1 of NZ$1.04 billion for the year to 30 September, 2015.

“This result demonstrates the underlying strength of our business and our resolve to deliver in a testing and competitive year,” said BNZ CEO Anthony Healy. “It’s also been a year of building foundations – we’ve made bold strategic decisions and investments that will set us up for success in future years. I’ve never been more proud of our people and what they’ve achieved.”

Key financial results: (Note: comparisons are with year ending 30 September, 2014, unless otherwise stated for both BNZ banking group and New Zealand banking operations)

BNZ banking group1

  • Statutory net profit1 of NZ$1.04 billion
  • Cash earnings2 increased by NZ$71 million or 7.9% to $966 million driven by growth in lending volumes and a strong Markets result.
  • Common Equity Tier 1, Tier 1 and total capital ratios1 of 10.70%, 11.69% and 12.67%, respectively.

New Zealand banking operations3

  • Underlying profit3 increased by NZ$69 million or 5.8% as revenue growth outpaced expense growth.
  • Cash earnings2 showed a small increase of NZ$16 million or 2.0% to $823 million, reflecting the impact of increased charges for bad and doubtful debts.
  • Net interest income3 increased by NZ$113 million or 7.5% driven by growth in business and housing volumes and net interest margin.
  • Net interest margin3 increased by five basis points to 2.39% driven by lower funding costs. This was partially offset by further shifts in the portfolio mix from floating to fixed rate housing products in a competitive market.
  • Other operating income3 decreased by NZ$24 million or 4.9%, due to lower interchange income and accounting changes (leading to deferred recognition of fee income under IFRS9).
  • Operating expenses3 increased by NZ$20 million or 2.5% mainly due investment in people, technology and compliance.
  • Charges for bad and doubtful debts3 increased by NZ$47 million or 54.0%. This was driven by increased collective provision charges as a result of changes to the economic cycle adjustment. This reflects the New Zealand economic outlook, particularly given the outlook for dairy commodity prices.
  • Average customer deposits3 increased by NZ$2.3 billion or 5.4%, driven by a focus on higher quality personal deposits and managing deposit growth in line with asset growth. This resulted in a 1.3% decline in market share4, to 17.5%.
  • Average lending volumes3 grew by NZ$2.8 billion or 4.4%. Average housing volumes were up by NZ$1.4 billion or 4.8% and business lending by NZ$1.5 billion or 4.7%.

Mr Healy announced BNZ would boost its support of key initiatives that contribute to enabling a high-achieving New Zealand.

  1. Our community finance programme offers low and no interest loans to people who don’t meet typical bank borrowing criteria. BNZ will offer an additional $50 million in new lending to help low-income New Zealanders be good with money. We continue to work with our partners to expand the scheme, which has had a very successful first year of operation.
  2. BNZ will lend more than $1 billion to small and medium business owners looking to grow, expand or export. This enhances BNZ’s additional investment in at least 50 more small business bankers.
  3. We're pledging a billion dollars of lending to support housing growth in Auckland, including a range of initiatives targeted at the delivery of affordable housing solutions, working with other organisations including Community Housing Aotearoa and New Zealand Council for Infrastructure Development.

View full media release and financials PDF 577KB

Commentary – Anthony Healy

Market and business performance

“BNZ Markets had an outstanding year which is reflected in our financial results. BNZ Partners has delivered strong performance in a competitive environment in the business and commercial segments, with good momentum going into FY16.”


“We have a continued focus on supporting our agri customers dealing with volatile commodity prices. We have taken a conservative through-the-cycle approach to the dairy industry, with an economic cycle adjustment to our collective provisions to recognise a period of lower and more volatile dairy prices. “Asset quality in our agri and dairy book remains extremely sound. We are well-placed to continue supporting our farming customers through a more volatile trading period. They’ve been through these cycles before and their BNZ partners are well-placed to support them with good advice.

Auckland housing and housing market share

“BNZ re-entered the broker market as borrower preference for brokers has increased, especially in Auckland. We’ve only been back with brokers for four months and we’ve already exceeded our targets. So now we’re building capability and resource in our internal broker hub to meet this growing demand. Our primary focus in housing has been to expand our presence in Auckland, having already accredited 197 brokers and hired more than 30 additional mobile bankers.”

Small business

“Small business has always been integral for BNZ, as it is to the New Zealand economy. We were rewarded with being named Canstar’s small business bank of the year for the fifth year running. We’ve recruited more than 50 small business bankers including 20 people in a new hub in Hamilton, 10 people in Christchurch and the remaining 20 in Auckland.”

Digital investment

“We have accelerated our investment in digital platforms and technology so we can deliver seamless experiences and innovative solutions for our customers. We know 65% of our customers now log in through mobile channels and this figure is rising – a fundamental shift in how New Zealanders do their banking. That’s why we were the first with Touch ID for Apple phones and were a partner in offering New Zealand’s first digital wallet, Semble. “You Money, our internet banking platform, is award-winning and was integral in BNZ being named Canstar Everyday Bank of the Year 2015. We’re migrating all our retail customers to YouMoney by Christmas and the remainder of our business customers throughout 2016.”

Credit cards

“The decrease in our market share for credit cards is largely due to customer losses flowing from the departure from GlobalPlus. The new card and rewards programme, BNZ Advantage, is resonating really well with our customers. They have the choice to get cash back off their credit card bill or to save that cash back to a separate savings account. BNZ Advantage customers can earn Fly Buys at an accelerated rate and choose from a range of additional, exclusive rewards.”

Capital and Funding Position

BNZ maintains a robust capital structure, with a strong balance sheet that is well funded through diversified and stable funding sources.

BNZ’s Core Funding Ratio (CFR) exceeded the Reserve Bank of New Zealand minimum requirement of 75% as at 30 September, 2015. BNZ’s Common Equity Tier 1, Tier 1 and Total capital ratios of 10.70%, 11.69% and 12.67%, respectively, as at 30 September, 2015 were well above the RBNZ minimum capital ratio requirements of 7.00%, 8.50% and 10.50%, respectively. BNZ’s capital position was strengthened by a NZ$500million capital injection by NAB Group in March 2015. BNZ paid NZ$345 million in ordinary dividends during the financial year. BNZ remained active in term wholesale funding markets during the financial year, completing NZ$3.5 billion of term issuance in NZD, USD, EUR, CHF, HKD and AUD currencies, supporting its strategy of maintaining a diversified funding base. Collectively, BNZ’s funding and capital position is supportive of BNZ’s long-term senior unsecured issuer credit ratings of AA-/Aa3/AA- (S&P/Moody’s/Fitch).

 Small print

1. “Banking Group” means Bank of New Zealand’s financial reporting group, which consists of Bank of New Zealand, all of its wholly owned entities and other entities consolidated for financial reporting purposes.
2. Cash earnings is a common measure of financial performance which excludes items introducing volatility and one-off distortions that are unrelated to BNZ’s ongoing financial performance. Cash earnings is based on statutory net profit which is adjusted to exclude fair value movements, hedging gains/(losses) and the disposal of subsidiaries. These items are excluded from cash earnings as they introduce volatility and/or distortions and are shown in the cash earnings to net profit reconciliation included on the final page. Cash earnings is calculated in accordance with Group (NAB) policy.
3. “BNZ’s New Zealand banking operations”: excludes BNZ’s Group Capital Management and BNZ Markets operations (previously known as Wholesale Banking) from the “Banking Group” and includes the Insurance operation in New Zealand for management reporting purposes.
4. Source: RBNZ Market Share (August 15).