BNZ’s growth in profitability also slowed in the latest quarter. Net profit rose 7.4% to $188 million in the three months ended September, taking net profit for the year ended September to $785 million, up 14.9%.
The bank’s on-balance sheet residential mortgages totalled $24.24 billion at September 30 with another $2.13 billion off-balance sheet, generally loans approved but not yet drawn down. Its June quarter general disclosure statement (GDS) showed residential mortgage backed loans at $25.53 billion.
Using Reserve Bank figures as a proxy for the market, BNZ’s mortgage book at September 30 accounted for 15.8% of housing loans by registered banks. The June 30 figure suggested a 17.56% market share.
Under the Basel 1 rules, banks had an incentive to classify as many loans as possible as being backed by residential mortgages because such loans required less capital. By contrast, the Basel ll rules require banks to assess the actual level of risk of all loans, rather than to apply blanket formulas.
From the September quarter of 2007, BNZ reclassified a large number of business loans as being backed by residential mortgages. It was able to identify those loans as being backed by residential mortgages after upgrading its computer systems in preparation for the Basel ll regime.
At June 30, 2007, when its mortgage book was reported as $22.51 billion, its market share was 16.15%, which suggests BNZ, which doesn’t deal with mortgage brokers, has been gradually losing market share in the intervening period.
BNZ’s latest GDS shows only 11.4% of its mortgage book had loan-to-value ratios (LVRs) above 80% at September 30 while 36.9% of its book had LVRs below 60%.
