BNZ takes $352m hit as bank accounts for fact AI is seeing software age increasingly quickly
The rate at which one of the country’s largest banks is replacing its software is escalating to the point the change is having a notable impact on its financials.
BNZ is changing the accounting treatment of its software to reflect the fact it is having to replace these assets more often to keep up with technological developments, particularly artificial intelligence (AI).
“Previously, you might have said, we expect to be using that for five years, and so the cost of that would then be amortised over five years,” BNZ chief executive Dan Huggins told the Herald.
“Now you look at it and go, well, actually the world’s changing so fast that in three years’ time, we might want to replace that and do something different because the world’s changed and so accordingly, the useful life of that gets reduced.”
BNZ’s modernised approach saw its operating expenses rise by $352 million in the six months to March, compared with the same period the prior year.
This made a $253m dent in its statutory net profit in the half year.
At $494m, it was down $301m, or 38%, from the six months to March 2025.
In an announcement to the NZX, BNZ said its new approach better aligned its accounting policies with “a rapidly evolving technology environment with more frequent enhancements and faster obsolescence, including from increased AI adoption”.
“This means the time that software is expected to generate economic benefits is shortening.”
Had it not been for this change, BNZ’s profit would only have been $48m lower.
While the bank lent more, and collected more deposits, Huggins said competition – particularly for deposits – saw its margins squeezed.
“I think you’re seeing small players, you’re seeing new entrants. It’s a pretty dynamic sort of marketplace. Customers have lots of choice,” he said.
BNZ’s net interest margin was down four basis points compared to the same period the prior year, to 2.35%.
Huggins said it was hard to isolate the impact of the new Depositor Compensation Scheme on the movement of deposits between banks and other deposit-takers.
In July last year, the Reserve Bank stood up the scheme, which insures up to $100,000 of deposits per depositor per bank in the event of a collapse.
Theoretically, the scheme may incentivise those with more than $100,000 to divide their money up between deposit-takers. It could give those worried about putting their savings with riskier institutions that pay higher rates of interest some degree of comfort that their money will be safe.
Looking to the future, Huggins was on a similar page to ANZ chief executive Antonia Watson, who spoke to the Herald on Friday.
“While it was pleasing to see a return to confidence in the New Zealand economy, the Middle East conflict has eroded that positive sentiment and our customers have once again had to adjust quickly,” Huggins said.
“New Zealanders have shown resilience in recent years, but the impact of higher fuel prices on households and businesses has seen a change in sentiment from growing confidence to one of caution.
“We continue to monitor the situation closely, but right now it is difficult to predict how the conflict in the Middle East and its impacts here will evolve, which means uncertainty is prevailing.”
Like Watson, Huggins didn’t see the need for Government to support banks, like the Australian Government is, by underwriting some bank loans.
He said conflict in the Middle East contributed to BNZ increasing its credit impairment provisions by $20m year-on-year to $995m. Of the $20m change, he put $15m down to the impact of the conflict.
Huggins believed BNZ customers’ balance sheets were generally resilient and the vast majority were managing to meet their loan obligations.
Around 55% of those with mortgages were ahead on their repayments.
Sector-wide data gathered by the Reserve Bank shows banks’ non-performing housing loan ratio rose from 0.2% pre-pandemic to a peak of 0.7% in early to mid-2025, thanks to a period of high interest rates and negative growth. By March this year, the ratio sat at 0.6%.
As for banks’ non-performing business loan ratio, this rose from 0.5% pre-2020 to a peak of 1.2% in mid-2025. By March, it fell to 1.1%.
Jenée Tibshraeny is the Herald‘s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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