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Tax credit boosts BNZ profits despite underlying profit dropBank of New Zealand's December quarter net profit rose, thanks to a tax credit as a result of its settlement with the Inland Revenue Department over its structured finance transactions.Thursday, February 25th 2010, 2:57PMby Jenny Ruth The profit rise was despite a sharp fall in net interest income while its share of the mortgage market slipped. BNZ's net profit for the three months ended December rose 4.2% to $271 million, boosted by an $83 million tax credit. On December 23, BNZ agreed to pay 80% of the tax owed as a result of the High Court ruling last August against it on its structured finance transactions. BNZ had provided $661 million against profit for the year ended September against its tax bill. The bank's interest income plunged 34.4% in the three months but its interest expense fell an even greater 40.9%, leaving net interest income down 19.2% at $311 million. BNZ's charges against profit for bad loans rose to $43 million compared with $35 million in the same three months a year earlier. Only $5 million of the latest charges related to mortgage lending. The bank's mortgage book grew $129 million to $25.64 billion in the December quarter, accounting for only 8.3% of new mortgage lending by registered banks, based on Reserve Bank figures. That meant BNZ's share of mortgages held by registered banks slipped to 15.81% at December 31 from 15.88% at September 30. BNZ had a further $2.08 billion in off-balance sheet mortgages at December 31, mortgages approved but not drawn down, compared with $2.19 billion at September 30. The proportion of mortgages with loan-to-value-ratios (LVRs) above 80% rose slightly to 10.4% from 10.3% three months earlier. Comments from our readersOn 26 February 2010 at 4:27 pm brendan said:
The banks were saying they were not overcharging on loans, that there we passing on the savings. But the truth is in the numbers, interest expense fell 40.9%, and interest income only dropped 34.4%. Add your comment: |
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Analysis falls in favour of fixing two or three years Floating rates to rise but not as fast or far as expected Bollard lifts OCR, predicts more moderate pace of increases PRESS RELEASE: RBNZ raises OCR to 3% Economists and markets say interest rates up this week Does weak data mean the RBNZ should stop raising interest rates? |
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Flattening yield curve
The above graph shows the journey in which the home loan interest rates have taken over the past couple of years compared with the five-year median. With the considerable cuts to long-term fixed rates this month and the increases we saw to floating rates in June this year, the yield curve is starting to show signs of flattening out. MORE » |
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