Today’s updated RBNZ Financial Strength Dashboard shows that New Zealand’s largest banks are on track to meet the increasing capital ratio requirements.

This after a temporary set-back in the first quarter of the year, when new rules on the calculation of risk weights kicked in. Westpac was particularly hard hit by the new calculations, but the third-largest bank in New Zealand recovered well, it reports a CET1 ratio of 11.5 percent, up from 11.3.

Since last year June, the five largest banks, excluding Kiwibank, increased total equity by $3.6 billion. In doing so, these banks kept a substantial amount of profits in the country.

Kiwibank’s capital continued its downward trajectory, but in the hands of the government, this will unlikely pose a problem going forward.

Profitability remains bi-modal as always: the big banks offer a higher ROE than Rabobank and Kiwibank.

This quarter, three of the five largest foreign-owned banks reported a higher profit than last. Again, a weak performance by Kiwibank – which probably justifies its bailout.