BNZ profit dives in December quarter

Bank of New Zealand's operating profit halved in the December 2009 quarter compared to the year before as net interest income fell and gains from financial instruments dropped significantly.

The bank made an operating profit before tax of NZ$182 million, down from NZ$369 million made in the same quarter of 2008.

Net profit after tax, however, rose to NZ$271 million from NZ$260 million thanks to the reversal of a NZ$143 million provision made previously for tax payable to the Inland Revenue Department for the structured finance transactions case.

BNZ struck a settlement with the IRD in December and under the deal with IRD, 80 per cent of the core tax, plus interest, was paid and an agreement made to discontinue legal proceedings. No penalties were assessed by the IRD.

BNZ made fresh provision for impairment losses of NZ$43 million during the quarter, of which NZ$25 million were related to corporate exposures. Retail loans accounted for NZ$13 million of provisions, and home loans NZ$5 million.

Total assets continue to fall at BNZ, largely driven by a fall in derivative financial instruments and trading securities. Assets fell to NZ$67.7 billion at December 2009, down from NZ$76.1 billion the year before and also down from NZ$69.9 billion at September 2009.

Loans to customers also fell slightly over the December quarter to NZ$54.6 billion.

Deposits, on the other hand, increased to NZ$28.2 billion from NZ$27.2 billion in September.

BNZ's assets past due by 90 days or more rose to 1.60 per cent of gross lending assets to NZ$230 million in December from 1.53 per cent, or NZ$210 million, in September. The increase in the December quarter was accounted for by a rise in delinquent residential mortgages, while the level of problem corporate loans fell slightly.