New Zealand Bank Shareholders Face Declining Returns

Bank shareholders in New Zealand are facing declining returns on their investments, according to recent data from the Reserve Bank. The current return stands at 10%, down from a high of 13.7% four years ago.

The decline is attributed to compressed margins due to low demand for lending and high deposit flows. Wholesale costs have risen, while deposit rates remain sticky, putting pressure on banks to cut their deposit rates or raise their lending rates.

ANZ is the least affected by declining returns, but other banks such as Kiwibank are struggling with unusually low returns of 5%. The government-owned bank's owner may tolerate low returns for political reasons, but investors expect better returns on their investments. Returns below 5% make it unattractive to raise new capital.

The Reserve Bank data shows that all banks earned $7.036 billion in tax-paid profit on a shareholder investment of $67.032 billion in the year to June 2026. This is down from $7.003 billion in tax-paid profit on a starting shareholder investment of $51.1 billion four years ago.