New Zealand major banks are crawling out of the recession gloom despite bad debt expenses and costs related to an Inland Revenue dispute.
The 2009 financial year for Westpac, ASB, ANZ National, BNZ, and Kiwibank shows both positive and negative results, according to PricewaterhouseCoopers' latest edition of New Zealand Banking Perspectives.
The analysis report focuses on the banks' performance in the second half of the financial year, with reference to the first half and 2008.
The firm's financial services partner, Sam Shuttleworth, said the last six months would be remembered for the large provisions recognised in respect of the conduit tax cases between various banks and the Inland Revenue, as well as public attention on residential mortgage interest rates.
"However, it should also be remembered for the resilient core earnings and sound capital bases the banks have maintained through careful efforts and well considered governance during a period of economic turmoil whilst combating escalating bad debt charges."
In the first half of the 2009 financial year, the five major banks showed a slight decline of 1.8 percent in profits when compared to six months earlier.
The banks had a noticeable lift in other incomes and experienced growth in net interest income.
For the second half however, a lower interest rate environment caused net interest income to fall 5.5 percent compared to the first half. Other income was also down 43.1 percent.
The analysis also showed a bad debt increase of 55.1 percent or $450 million over the previous six months, and a trebling in bad debt charges since 2008, reflecting domestic recession and global slow-down impact.
Combined with the total $2.2 billion set aside by four banks to settle Inland Revenue conduit tax disputes, overall results for the second half of the 2009 financial year received a hit.
The banks reported a statutory loss of $1.4 billion compared to a statutory profit of $1.3b for six months earlier.
The full 2009 year showed a statutory loss of $76m, compared to an overall statutory profit of $2.9b in 2008.
Mr Shuttleworth said it was important to remember banks' capital bases remained strong and well ahead of their total capital requirements -- there to enhance financial soundness of the banking system.
The performance of banks in 2009 was "considered to be resilient, given the turbulent economic and financial environments in New Zealand and abroad," the report said.
"Looking forward, it is inevitable the major banks will incur further loan write-offs in the next financial year and we share the same caution expressed by the banks that 2010 will also be a tough year."
The report also suggested a flat or even negative growth in corporate lending was expected to continue.
"We believe that the worst economic conditions are probably behind us and foresee low growth in the new financial year, with an expectation that banks are well set for a solid if unspectacular return to profit this year," Mr Shuttleworth said.
