BNZ annual earnings slip 12% on lower trading income

Bank of New Zealand's annual earnings slipped 12 percent as the local unit of National Australia Bank attracted a smaller take from its markets division, while the dominant retail banking unit was relatively stable.

Net profit fell to $913 million in the 12 months ended Sept. 30 from $1.04 billion a year earlier, the Auckland-based lender said in a statement. Excluding the capital management and markets operations, BNZ's retail banking operations increased cash earnings 1.6 percent to $836 million as net interest income rose 1.3 percent to $1.76 billion and impairment charges dipped 6.3 percent to $120 million.

The reduced group earnings were put down to "lower trading income in BNZ markets and losses on hedging derivatives from both the strengthening NZD and interest rate movements" while the local banking operation's gain was helped by "a lower charge for bad and doubtful debts reflecting the strength of economic conditions outside the dairy sector," BNZ said.

The lender's net interest margins shrank to 2.19 percent from 2.33 percent due to the highly competitive mortgage market and increased funding costs, and while BNZ's total capital ratio of 12.04 percent remained above the regulated minimum 10.5 percent, it shrank 63 basis points from a year earlier.

"Our strategy is delivering for the bank, despite a challenging year in a highly competitive banking environment and with higher funding costs affecting margins," BNZ chief executive Anthony Healy said.

The New Zealand banking division contributed A$774 million to NAB's group cash earnings of A$6.48 billion, an increase of 4 percent from a year earlier. The Australian bank's board declared a final dividend of 99 Australian cents per share, fully franked, and payable on Dec. 13. That takes the annual return to A$1.98, unchanged from a year earlier.

BNZ lifted its headcount in the year as it focused on the small business, broker and housing markets in Auckland, New Zealand's biggest city. Full-time equivalents rose to 4,963 as at Sept. 30 from 4,784 a year earlier, lifting the lender's operating costs 1 percent to $834 million.

The bank's loan book grew 9 percent to $74.38 billion while customer deposits were up 10 percent to $51.48 billion.

NAB's ASX-listed shares last traded at A$27.46.

(additional reporting BusinessDesk)