All the major Australian-owned banks are experiencing a squeeze on margins as interest rates keep falling to previously unplumbed depths, but their reported results are only just starting to produce the evidence.
ANZ Bank reported its New Zealand subsidiary's net interest margin fell to 2.35 per cent in the six months ended September from 2.41 per cent in the previous second half, while National Australia Bank-owned Bank of New Zealand's NIM for the September year was down 2 basis points to 2.25 per cent.
Westpac NZ's NIM fell 8 basis points to an average 2.16 per cent for the latest year, but that disguised the deterioration in the second half, when the NIM averaged 2.09 per cent.
Back in August, Commonwealth Bank of Australia-owned ASB Bank, which has a June 30 balance date, had reported a 3-point NIM decline to 2.21 per cent.
The results from the other three banks and further rate declines since June 30, suggest ASB's results for the six months ending December will show a further decline.
And, given the Reserve Bank cut its official cash rate by 25 basis points in May, by 50 points in August, with another possible cut on Wednesday, there's more pain to come for the three that have just reported.
Their bottom lines were also subdued.
ANZ's net profit fell 8 per cent, BNZ's fell marginally and, while Westpac's rose 3 per cent for the year, that was down from its 15 per cent increase in the first half and it said core annual earnings were down 1 per cent.
Compare that with the year-earlier results when ANZ reported a 12 per cent increase and BNZ's rose 9.8 per cent.
Westpac's net profit rose only 3 per cent that year too, likely a reflection of the drag from the $1 billion of extra capital RBNZ slapped on it in 2017 after it discovered Westpac had been failing since 2008 to get a number of regulatory approvals.
Westpac, having worked out its penance and remedied its breaches, has now been released from the extra capital requirement.
Nevertheless, all the banks are awaiting RBNZ's final decisions due next month on how much they're going to have to increase their capital.
If RBNZ sticks to the proposals it announced nearly a year ago, all NZ's banks will collectively have to find an additional $20b in new equity over a five-year phase-in period – the four majors account for about 88 per cent of the NZ banking system.
Rising charges against profit for bad debts, though still small, were a feature of both the ANZ and BNZ results with ANZ's nearly doubling from $53 million to $99m and BNZ's rising 39 per cent to $114m.
However, Westpac was able to write back $10m of earlier provisions compared with the previous year's $25m charge.
But these charges are tiny next to the $1.83b net profit ANZ reported, BNZ's $1.02b bottom line result and Westpac's $964m in net earnings.
Westpac's commentary on the impact of falling rates was relentlessly positive, with chief executive David McLean talking about low interest rates providing opportunities for first-home buyers and others wanting to buy property.
"We've never seen interest rates this low in New Zealand. It helps with housing affordability and business investment and presents a great opportunity for existing borrowers to pay down debt," McLean said, adding that customers are taking advantage of low rates to pay off their mortgages faster.
Two-thirds of Westpac NZ's customers are ahead of their mortgage payments by a median average of eight months.
ANZ's acting NZ chief executive Antonia Watson was similarly upbeat about the low rates "providing a good opportunity" for first-home buyers and for other homeowners to repay debt faster. But she acknowledged it has been "a challenging 12 months for ANZ NZ reputationally".
By contrast, BNZ chief executive Angie Mentis only mentioned the "lower-rate environment" in passing to explain the bank's NIM decline.
Despite low interest rates, all three banks reported increasing deposits - ANZ's rose 5 per cent, BNZ's were up 5.1 per cent and Westpac's increased 4 per cent.
None of the banks addressed the emerging problem of how they're going to maintain deposits in such a low-interest-rate environment.
All three banks are currently offering two-year fixed-rate mortgages at 3.45 per cent, the most popular mortgage period, while ANZ's rate for a two-year term deposit is 2.6 per cent.
That's well above the 1 per cent OCR, but leaves a very skinny margin to cover the bank's costs and let it try to make a profit, let alone offering depositors fair compensation after inflation, currently running at 1.5 per cent.
RBNZ has required all the banks to rely more on deposits than offshore wholesale funding since the GFC but there's still a funding gap – BNZ, for example, reported gross lending of $87.2b in the latest year compared with customer deposits of $61.5m.
All of which suggests a conundrum and it isn't obvious how the banks will solve it.