Box D: New statistics on the financial performance of banks
This page contains new statistics on the financial performance of banks from the November 2014 Financial Stability Report.
The Reserve Bank has a long tradition of collecting and publishing banking and other financial statistics. Over the last decade the financial sector and how regulators supervise the sector has changed rapidly, which has required new and more timely data. International standards for financial statistics have also changed. In 2012 the Reserve Bank began a project to renew and redevelop its statistical and prudential data collections with the aim of ensuring that current and future data collections produce high quality and relevant statistics for the monitoring of the financial system and policymaking.
The first phase of the project focused on improving the data on the financial performance of registered banks. At the time the only performance data available were the income statements published in banks’ quarterly Disclosure Statements. However, there are several limitations in using this data for prudential supervision, including: a 2-3 month lag in data becoming available; the level of detail published varied across banks and throughout the year; and some item definitions were not consistent across banks.
A new monthly registered bank Income Statement Survey was introduced in 2013 to provide detailed and timely data to help the Reserve Bank improve its monitoring of the soundness and efficiency of the banking sector. The Reserve Bank publishes aggregate statistics from all its data collections to provide the public with high quality data to inform discussion on the financial sector. Aggregate data from the new Income Statement Survey was first published in October 2014.
The data from the new survey provide more detail on the sources of banks’ income and expenses than is currently available (figure D1).1 In the June 2014 quarter, banks earned $5.4 billion in interest. Almost half of this was from interest on housing loans and 43 percent from interest on other types of loans (business lending, credit cards etc.). Over the same period banks paid $3.2 billion in interest, of which 62 percent was interest paid on deposits. While both the interest earned and paid by banks have increased over the last two quarters as interest rate rises take effect, the net interest margin has remained steady at 2.1 percent.
Figure D1: Interest income and expense (percent of total assets)
Source: Registered banks’ Disclosure Statements, RBNZ Income Statement Survey.
Note: Data prior to September 2013 are from Disclosure Statements. Other interest income includes interest income from cash and deposits, debt securities, derivatives and other interest income. Other interest expense includes interest expense from debt securities, derivatives and other expenses.
The new data also provide more insight into the other drivers of bank profitability. The income banks earn from non-interest sources can fluctuate from quarter to quarter as it includes income from derivatives, trading gains and losses, and fair value adjustments. In the past these types of fluctuations have significantly impacted individual bank profitability. The new data identify these items separately and show that over the past year they have had little impact on profitability (table D1).
Table D1: Components of profitability (percent of total assets)
|Sep 13||Dec 13||Mar 14||Jun 14|
|Net interest income||2.1||2.1||2.2||2.1|
|Fair value adjustments||0.0||-0.1||0.0||-0.1|
|All other income||0.5||0.6||0.7||0.6|
|Impaired asset expense||-0.1||-0.1||0.0||-0.1|
|Return on assets||1.0||1.1||1.2||1.1|
Source: RBNZ Income Statement Survey.
The next phase of the project will focus on integrating the Reserve Bank’s existing statistical and prudential balance sheet collections with the aim of bringing them into line with the new income statement data and reducing the reporting load placed on banks.
1 Banks are still required to publish quarterly Disclosure Statements and key items (such as profit, net interest income, and impairment expenses) will be consistent with data reported in the Income Statement Survey.