Expert claims the banks remained strong despite the drop in profits
Banks have felt the bite of economic disruption caused by the COVID-19 lockdown and ongoing restrictions as they report a significant drop in profits, according to the Reserve Bank of New Zealand (RBNZ).
The latest data from the RBNZ revealed that the combined profit after tax of the registered banks in New Zealand totalled $821 million in the three months ended June, a significant drop compared to a whopping $1.5 billion in the same period last year.
The report showed that the most significant drop in the banks' income was from borrowers either paying lower interest or not making interest payments. Meanwhile, depositors were paid only $1.25 billion in the three months ended June compared to under $1.5 billion in the three months before that.
“Interest rates are low. That may be great for borrowers, but it's not good for depositors,” said Massey University associate professor Claire Matthews​, as reported by Stuff.co.nz.
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Despite the drop in bank profits, Matthews insisted that the banks in the country remained resilient, suffering only a “relatively modest drop in their net interest income.”
“Arguably this is more the level of profit we would like to see, but they can cope with this substantial hit they are taking and still be supportive of borrowers and businesses,” she said.
However, the banking industry is not yet off the hook – with the RBNZ data revealing that bank personnel costs reached $867 million, up by over $100 million on the same period last year.
Roger Beaumont, the chief executive of the New Zealand Bankers' Association, commented: “The support the banks are offering vulnerable customers and the work that's happening with customers in that situation is quite time and people-intensive.”
