Brokers write 40% of BNZ loans

The bank is now generating 40% of its business through mortgage advisers, BNZ chief financial officer Adrienne Duarte says.

In the 12 months to September 30 the bank wrote $1.8 billion through advisers.

While it started with NZFSG and Loan Market it now has accreditation agreements with Mortgage Link, Kepa, Global Financial Services and Mortgage Express.

The Mortgage Supply Company has indicated that it expects o get accredited soon.

DTI ratios have unintended consquences

Duarte indicated BNZ wasn’t overly keen on the Reserve Bank’s idea of introducing debt-to-income ratios as another way of slowing the housing market.

She says the problem is an affordability issue rather than an LVR one.

While tools like the DTI ratios have a place, banks are already assessing lenders on their ability to service and repay loans.

“We already have rules in place,” she says. “(DTI) doesn’t change the fundamental, underlying issue which is excess demand.”

She says policies, such as DTI ratios, all have unintended consequences.

BNZ chief executive Anthony Healy says, in the results announcement: “Housing affordability continues to be an issue, and as long as migration and supply are key factors the recent loan-to-value restrictions will only have a short term effect.

Like all banks, we anticipate that there will be increased pressure on lending margins in the coming months which will influence interest rates.”

Digital advance

BNZ is pushing its digital capabilities and says it has migrated 500,000 customers to a new online banking platform, and in doing so rationalised thousands of accounts and products.

“We encourage our customers to increase their home loan payments through internet banking, and we have a compelling new feature that shows how a small repayment reduces the term and the interest paid.

“Since launching this feature, around 1,600 customers have already cut 7,000 years off their home loans,” BNZ chief executive Anthony Healy says.

While funding remains a key issue for all banks, BNZ says its Core Funding Ratio sits at 86.07%, which is well in excess of the Reserve Bank’s minimum requirement of 75%.

The results

Duarte described BNZ’s results as “pleasing” in what is a very competitive and difficult environment.

BNZ reported a 3.4% decline in cash earnings to $933 million in the 12 months ended September 30, with a relatively flat performance from its dominant banking unit as net interest margins were squeezed 14 basis points to 2.19%

Most of the contraction, 7 basis points, in its net interest income came from the funding side and the lending margins contracted two basis points.

BNZ's loan book grew 9% to $74.38 billion, while customer deposits were up 10% to $51.48 billion.

Durate says the bank had a strong second half.

• Charges for bad and doubtful debts decreased by $9 million or 6.7%. Lower specific provisions broadly reflected the strength of economic conditions. This was partly offset by higher general provisions, being mainly due to the dairy sector downturn in the first half.
• Average customer deposits increased by $3.7 billion or 8.2% with spot balances growing by $4.7 billion.
• Average lending volumes increased by $5 billion or 7.6% with spot balances growing by $6.1 billion. Average housing volumes increased by $2.1 billion or 6.6% and business lending by $3.0 billion or 9.2%.