Stability amid economic challenges
Major banks are highly likely to receive timely financial support from their parent companies, ensuring stability in challenging times, S&P Global reported.
“We envisage no change in the strategic importance of the four major New Zealand bank subsidiaries to their Australian parents,” said Lisa Barrett, primary credit analyst at S&P Global.
Property market recovery
A mild recovery in property prices has reduced some downside risks, with house prices appreciating by about 1% in the 11 months to May.
High net migration is expected to continue supporting the recovery in New Zealand’s property market.
Low credit losses expected
Credit losses are projected to remain low over the next two years.
“Most borrowers should be able to absorb the pressures from high interest rates, rising consumer prices, and a slowing economy with ongoing low unemployment,” Barrett said.
Credit losses are estimated to rise to about 15 basis points in fiscal 2024 and then stabilize.
Bank profitability maintained
New Zealand banks are expected to maintain profitability despite slowing credit growth.
Return on equity is projected to stay at 11%-12% over the next two years.
Private sector credit growth is anticipated to slow to 1.5% in fiscal 2024 before slightly recovering to 3% in fiscal 2025.
Future economic projections
House prices are expected to continue their mid-single digit recovery over the next two years, supported by ongoing supply shortages, high net migration, easing interest rates, and slight loosening of lending restrictions.
Real GDP growth is forecast to stagnate at near zero in fiscal 2024 but recover to around 2.4% per year over the subsequent years. Inflation is anticipated to gradually fall within the RBNZ's 1%-3% target band, with the domestic labor market performing soundly and unemployment at 4%, S&P Global reported.
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