Bank profit to be squeezed in 2016

Bank earnings and profits are likely to be squeezed next year due to a slowing economy and lower lending growth, according to a new study.

The five main trading banks in the country - ANZ, ASB, Bank of New Zealand, Westpac, and Kiwibank - had a collective net profit before tax of nearly $1.7 billion in the three months to September, up slightly on the previous quarter.

However, business advisory firm PwC expects the banking sector to get tighter, with stronger competition for business and record low interest rates forcing banks to cut lending margins.

"Those 4 percent fixed rates are a boom for the borrowers but fixed interest rates put a lot of pressure on banks, and they'll maker a lower margin and that will put pressure on their profitability," said Sam Shuttleworth, the leader of PwC's Banking & Capital Markets division.

Shuttleworth said the banks have had two strong years of growth and profits but that will probably plateau next year, although he said the banks remain financially strong and well capitalised.