Another major retail bank has reported a solid lift in profits on the back of growth in mortgage lending, low bad debts and costs, and is confident borrowers can cope with a slower housing market and higher interest rates.
Photo: RNZ / Nate McKinnon
Bank of New Zealand's net profit for the six months ended March rose 7.4 percent to $709 million from $660m the year before, while the cash profit, which strips out one off items, rose 7.1 percent to $675m.
BNZ chief executive Dan Huggins said the result reflected underlying economic strength and its own attention to quality lending.
"New Zealand's resilience and success can be seen in our results."
The bank, owned by Australia's NAB, had an 8 percent lift in lending to $97.8 billion driven by mortgage demand, while deposits rose 9.1 percent to $80.4b, and its cost of doing business also fell.
Huggins said a cooling housing market and tougher lending rules are starting to show through in a reduction in credit demand, but the BNZ had been "stress testing" borrowers and their ability to cope with rising rates.
"We have been lending responsibly to customers and they can continue to afford their loans moving forward ... we're currently testing borrowers at 6.75 percent, but that's under review and I'd expect that's going to move in the next week or so."
"We're comfortable that customers will be able to afford their rates but notwithstanding that there will be some customers who will need to tighten up their belts and manage their expenses quite carefully," Huggins said.
He said the outlook for the BNZ and the broader economy was positive although growth would be more restrained by a broad range of factors.
"The economy has done well, businesses and consumers have been resilient, but there are challenges that need to be navigated -- global uncertainties, inflation, supply chains and a transition to living with Covid, but we have confidence that New Zealand will do well, the bank will do well and our focus will be on supporting businesses and customers through that."
Huggins said the sector was likely to remain competitive as banks vied to hold and build market share.
Earlier this week the country's biggest bank, ANZ, posted a record half year result, and Westpac is due to report on May 9.
