New Zealand's banks managed to retain profits despite less investments caused by the European crisis.
According to KPMG's Financial Institution Performance Survey, profiling the nation's big four banks plus Kiwibank, profits had dropped 45 per cent to an aggregate $618 million in the three months compared to the previous period, chiefly related to losses from investing surplus funds in the market.
The declines were led by BNZ, with a 78 percent drop in first quarter profit to $63m versus the previous period. ANZ's profits dropped 52 percent to $200m.
These investments had been a driver of record profits in the previous three quarters, but market volatility has seen "reductions in the fair value movements on investments, notably derivative instruments", according to KPMG.
The New Zealand banks were in good shape versus their European peers, and able to source funding at a cost of 1.19 per cent, versus 1.8 per cent for their major euro zone peers.
In the three-month period, the New Zealand banking sector saw interest margins increase by 4 basis points to 2.31 per cent, led by BNZ and Kiwibank.
Deposit growth was also a positive for the five banks, reducing their reliance on volatile global funding markets, a feature already remarked upon by the international ratings agencies.
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