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���㣨Leyu����������’s Financial Institutions Performance Survey (FIPS) reports have provided insights into New Zealand’s financial services sector for over 30 years.  Each edition presents industry commentary and analysis on the performance of New Zealand registered banks, together with a range of topical articles from industry experts, regulators and our own business leaders.

���㣨Leyu����������'s analysis of the banking sector showed an overall decrease in net profit after tax (NPAT) of 13.0%, falling from $1.77 billion in the quarter ended December 2022 to $1.54 billion in the quarter ended March 2023.

This movement was mainly driven by some of the major banks further increasing their provisions on loans. These rose by 10.4%, from $2.69 billion in December 2022 to $2.97 billion in March 2023. It’s likely that this action is the banks preparing for expected future credit losses that will likely arise from the forecasted economic downturn.

The ���㣨Leyu���������� Financial Institutions Performance Survey (FIPS) also reports a 2.8% decrease in net interest income, driven by slight reduction in the net interest margins (NIM).

The usually volatile non-interest income was relatively flat compared to the prior quarter, as was operating expenses.

Whether profits continue to decrease will largely depend on whether we’ve come to the end of the interest rate rising cycle, how deep of a recession we slip into, and how this this then flows into the sector’s provisioning.