Westpac and BNZ say profits OK after price war

Monday 28th February 2005

Westpac and Bank of New Zealand's profitability doesn't appear to be suffering unduly as a result of last year's mortgage rate wars.

BNZ, which started the war, posted a $132 million net profit in the December quarter, up from $76 million in the September quarter and $130 million in the December 2003 quarter.

Using Reserve Bank of New Zealand figures on lending on housing by registered banks, that means its market share jumped to 16.3% at the end of December from 16.08% at the end of September with its mortgage book growing $803 million to $16.2 billion. Its market share was 15.8% in December 2003.

Westpac's December quarter disclosure document suggests its mortgage book is relatively stable, at $19.495 billion compared to $18.888 billion at the end of September.

That would put its market share at 19.59% compared to 19.4% in December 2003.

The bank's profitability isn't suffering. Net profit for the latest three months rose to $168 million from $146 million in the September quarter and $153 million in the December quarter of 2003.

David Tripe at Massey University's centre for banking studies says Westpac's quarterly profit is its highest ever with the exception of the June quarter of 2002 when it had one-off gains from the sale of AGC.

The BNZ's result is about normal. However, BNZ's net interest income dropped to 2.33% of average total assets from 2.46% in the September quarter. However, the September quarter figure was exceptionally high. Net interest income in the June quarter was 2.34%.

Westpac's net interest income fell to 2.54% of total assets from 2.59% in the September quarter and 2.66% in the June quarter.

Tripe says its hard to read too much into these figures. "If we guess that the banks did $10 billion of reduced margin lending, they've lost 100 basis points on around 10% of their loan book. The impact of that on overall gross interest margin would be to drag it down about 10 points. Westpac's down five and BNZ's down 15."

While ASB Bank is also claiming an increase in market share, it hasn't released its December quarter doecument yet.

The other major New Zealand bank, ANZ/National Bank, saw its market share slip to 35.09% at the end of December from 35.24% in September.

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