New Zealand bank profits shrank in the first three months of the year as smaller lenders chased market share at the expense of margin.
Bundles of $50 New Zealand currency.
Net profit slipped 2.9 per cent to $1.2 billion in the three months ended March 31 for the country's licensed banks, with five of the nine lenders surveyed reporting smaller earnings, KPMG's quarterly financial institutions performance survey (FIPS) shows.
Net interest income shrank 3 per cent to $69b and net interest margin shrank 9 basis points in the quarter to 2.01 per cent.
"The overall dip in profits is just a recognition of the competition in the market, the slightly uncertain geopolitical times and a reflection on the NZ economy as a whole: resilient, going well, but not booming," KPMG head of banking and finance John Kensington said.
"A common theme across the sector is continued investment in technology enhancements to improve both customer delivery and productivity to meet performance objectives."
New Zealand's lenders have faced shrinking margins over the past year as intense competition for mortgages left them with little wiggle room in boosting interest income.
Greater regulatory capital requirements and the prospect of tighter global monetary policy have also pushed up their own borrowing costs.
That margin shrinkage was seen most acutely among New Zealand's smaller lenders in the March quarter, with Kiwibank, SBS Bank, the Cooperative Bank and TSB Bank all posting double-digit contractions.
Still, in giving up profitability, the smaller lenders largely expanded their loan books at a faster pace than the majors in the three-month period, with Kiwibank's gross loans rising 2.3per cent, SBS's gaining 5.1 per cent, Cooperative Bank boosting loans 3 per cent and TSB's loans expanding 4.8 per cent.
Across all the banks, gross loans rose 1.2 per cent to $389.92b in the three months ended March 31 and were 7 per cent higher than a year earlier.