By Gareth Vaughan
Total assets held by New Zealand banks rose to a record high in the December quarter and net profit climbed 17% with every quarter now a record quarter, KPMG says.
KPMG's December quarterly Financial Institutions Performance Survey (FIPS) shows quarterly net profit across the nine surveyed banks at $1.1 billion, representing a $165 million, or 17%, increase from the prior quarter. The auditing and financial advisory firm says this was driven by favourable movements in non-interest income and impaired asset expenses, accounting for a combined $244 million increase.
“We’re at the stage now where every quarter is a record quarter. The banks are benefiting from the general head wind in the New Zealand economy as dairy, agriculture and other aspects of the economy are starting to do well. All that growth and development comes about because the banks are funding it," KPMG head of financial services John Kensington said.
Total assets swelled $3.3 billion from the previous quarter, or about 0.90%, to an all time high of $380.9 billion. KPMG attributes this to the $3.7 billion quarterly increase in gross loans and advances as the housing market remained strong.
This is an abridged version of this article. The full version was published in our email for paying subscribers. See here for more details and how to subscribe.
4 Comments
Total assets swelled $3.3 billion from the previous quarter.
So in simple terms the commercial banks printed out of thin air $3.3 billion. Not bad work if you can get it. I used to naively think their main profits were interest margins less wages and rent costs. Actually it's the printing press in the basement.
I still don't really understand why the RBNZ don't take this onerous task off the commercial banks.
Grant,
Fair reply in that I have been more than a little disingenuous in implying the money printing done under the fractional reserve banking system is all profit. Printing they do do, it seems to me; but that printing in total largely comes back as a matching liability (in the form of deposits) fairly immediately. Does the chicken and egg in this equation matter? Intuitively it seems to me that it does. And is there at least a free margin in the printing? Certainly in the moral hazard government guarantee element there is. My understanding is a key benchmark in banking is return on assets. So pump up your assets as fast as you can through printing, then meet the benchmark. Maybe there is not a better way to grow the money supply- someone has to do the printing I understand, although again intuitively this role seems to sit better wth the Central Banks of the world it seems to me.
Governments and their central banks, (U.S., UK, NZ etc) are encouraging and fueling the creation of asset bubble wealth through cheap money. Money is created through debt. The public is enticed to take out debt far beyond their means of repaying it on the presumption that the asset will increase rapidly in worth over the short term, counter-balancing the risk and cost of the financing the debt. In short, encouraging speculation. The banks, meanwhile, sit back and watch the process inflate the value of their assets.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.