BNZ's asset quality stabilises for first time post-GFC

After many quarters of worsening deterioration in asset quality, National Australia Bank's New Zealand banking business finally saw some stabilisation in the quarter ending June 2010.

Asset quality as measured by the ratio of 90-plus days past due and impaired assets to gross loans was at 1.83 per cent at the end of June, compared with around 1.85 per cent at the end of March.  

The ratio had steadily increased from 0.98 per cent in March 2009 to 1.53 per cent in September and 1.59 per cent at the end of December 2009.

NAB's NZ banking business comprises Bank of New Zealand and its controlled entities.

The banking group also managed to grow revenue in the June quarter thanks to a higher proportion of variable home loans to total mortgages, a metric that has benefited from a rising interest rate environment.  NAB said revenue grew "as the ongoing focus on repricing for risk continued to have a positive impact."

The Reserve Bank of New Zealand hiked its cash rate in early June for the first time since the global financial crisis, to 2.75 per cent from 2.50 per cent.

Banks followed up with an increase in floating and short-term mortgage rates while longer-term lending rates were cut. No impact was seen on deposit rates.