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Kiwibank triples profit

State-owned Kiwibank has more than tripled its full-year net profit at $79.1 million for the year to June 30.

The result, up $57.9 million on the same time last year, was “a significant bounce back from the financial stresses of the last few years”, said the bank’s chief executive Paul Brock.

Growth was largely a result of customers switching from fixed to floating mortgage rates – boosting the bank’s net interest income from a margin (when compared to average assets) of 1.47% to 1.79%.

Although there had recently been some movement back to fixed-rate mortgages, a much larger proportion of customers (60%) were still on floating rates.

The ratio of fixed to floating was expected to remain roughly the same for the year ahead.

“Generally in a flat environment we see more people on floating rates.”

Mr Brock said it was a hard market to grow in as people were focussed on paying back debt.

But customer deposits were 9% or $1 billion higher at $11.6 billion and lending had grown 8% or $9 million to $12.4 billion.

Kiwibank is now closing in on 10% of the main bank market share with more than 800,000 retail customers.

Its small business market share is about 4%.

Mr Brock expected to keep expanding the bank's market share by about 1% a year.

To do that, the first focus was to increase the share of existing Kiwibank customer wallets.

“We don’t have all their business and that’s because we’re not operating in all the markets we need to be operating in,” Mr Brock said.

New small business banking products were on the way and a life insurance product will be launched later in the year.

"We need to build a more diversified bank and this is where performance will improve."

The bank also wants to capitalise on people wanting to switch banks and will be making people aware how easy that was to do, Mr Brock said.

“It seems to be a well-kept secret across the industry,” he said.

“We will continue to make sure people know how easy it is to switch.”

Despite the satisfying result, he cautions the economy is “not yet out of the woods” and provisioning for bad debts is still a concern.

Total provisions for bad debts rose $4 million during the year.

Kiwibank celebrated its 10th year in business this year and bought Gareth Morgan Investments and its $650 million KiwiSaver scheme.

Mr Brock confirmed Kiwibank had asked its shareholder, the government, for a cash injection to help meet the Reserve Banks new capital requirements for banks.

Although he wouldn’t say how much the bank needs to meet that in the years ahead, a ballpark figure of $200 million was about right.

Retained earnings would be one component to meet the requirements, but Mr Brock acknowledged there wouldn’t be enough to meet all of it.

More by Georgina bond

Comments and questions

Come on Kiwibank

If 800,000 customers = 10% market share, we must have 8m NZ clients ??

Many customers have mutliple accounts

It's a nebulous definition, but generally main bank share is the indicated bank preference of customers in surveys, e.g. "which is your main bank".

The 800,000 would include people who have Kiwibank as a secondary bank, for term deposits and so on.

Increasingly the real, and probably unrecorded, answer is "I don't know", which makes things interesting for the industry.

The best thing about all of this is that NONE of the profit leaves our shores!

yes your right, though a lot of the revenue does go of shore

I couldn't agree more

Where do you think this "thing" borrows from?
From whence it borrows, there goeth the "profits".

i think you'll see that they mostly fund their lending from deposits, which are likley to be mainly NZers.

Many Billions exit our shores via the other Aust owned banks, what leaves from Kiwi Bank are Business running costs not profits.... Stupid ......Durr..... DAH!!

Forgot the meaning of profit John?

Sure, while some funding will be source from overseas (though far less than the may four), Kiwibank has made a profit margin out of doing this. If Kiwibank didnt exist, theres a sure bet that a large share of this profit would have gone to the big four & overseas.

This is not too mention, Kiwibank will be keeping the big four from superprofiting (price setting) from their market share.

Maybe its time you went back to school John, and learn about profit & while youre there how about the multiplier effect as well.

DUH! see a speech therapist DUH!

Now they just need to raise capital from the public to expand further.

Or maybe they are waiting till they have the capabilities to take on the Governments banking, which will increase their size significantly, the float on the back of that which would be at a much higher price.

Maybe we should sell some assets, improve our capital markets, and maybe one day Kiwibank will be able to get access to enough capital to compete on scale with the Aussie banks and retain porifts here - fat chance when Kiwis can't sell that selling assets lets us but other ones.

Float 49% and properly capitalise KiwiBank and then watch the profit grow. In the meantime government ownership continues to hold back the profitability of this entity.

"Now they just need to raise capital"
The answer is simple sell the damned thing.
Why should the taxes of BNZ Westpac etc customers be used to prop up this "thing"?

Quite a simple answer to that one John, because we take back control of our money supply. It is interesting you talk about the "Taxes" paid by the other banks - check out their effective tax rates over the years and then tell me they are paying their fair share....

It is about time someone capitalised this baby properly, built out its business banking capability and then watch it run. We could send the Aussie banks packing in no time. Watch "Money as Debt" on Youtube if you want to see how.

For starters the Government should switch over all their accounts and mandate that all Departments etc do the same....much like the State Bank of North Dakota....interestingly the only US state not to enter recession in the crises.

"Why should the taxes of BNZ Westpac etc customers be used to prop up this "thing"?

They aren't. Kiwibank is PROFITABLE and cash flow positive so it is not a drain on the tax base. On the contrary it is earning a return for its shareholders (the NZ government).

Moreover, Kiwibank brings some much needed competitive tension to the marketplace, which otherwise would be a 4 bank (all Australian) oligopoly where all customers lose by paying excessive fees, excessive mortgage rates and earning too low deposit rates.

Didn't you read the announcement? Kiwibank is going to need $200m to meet increased capital requirements in the near future and it is going to look to the Government (aka the taxpayers) for some or all of that money because its retained profits are not high enough to cover this. There is also no evidence that Kiwibank has lead to reduced bank fees, lower mortgage interest rates, or higher deposit rates. If it did this everyone would be banking with them - and they are not. All Kiwibank does is satisfy xenophobes. The Australian banks don't treat their NZ customers any worse, or any better, than their Australian customers.

Funny how after Kiwibank entered the market some of the fees, etc did come down. Kiwibank also has had better interest rates for borrowing.

We had one problem after another with Westpac and have been much happier at Kiwibank. Plus they were first with txt banking, etc.

The Aussie banks have lost some big tax cases - clearly they weren't keen on paying much tax in NZ!

Ironic don't you think, that Bill English will need to hand over the tax that BNZ etc. pay to keep this thing going??

Arrogance is a dangerous tool in media Lindsay.

Doesnt keeping profits in this country make more sense than being seeing them leave for overseas? It does to me, as it means more money can circulate here, supporting local business and employment.

And another thing, go compare the mortgage rates & you'll find Kiwibank are more than competitive & most of the time leading the way.

As for the extra capital requirements, all businesses experiencing growth need extra. Cash is nothing more than extra stock when you are in the business of banking.

Now all we have to do is get the government & its departments to move their accounts across to Kiwibank from Westpac, and this will increase Kiwibanks profits further. Ever wondered why this hasnt happened. Simon Power will tell you (under torture).

What is the chance of this changing with a bankster in charge? Being a puppet for the money men, no chance!!

Lindsay is seems you have a poor understanding of business, and I suggest you restrict your comments to politics, sport or culture; wherever your strengths lie.

Hi Jason,
Lindsay is right, except he seems to deny the "competition" aspect. I do give them a bit, but only a bit :-).
The real danger is of course that in it's eagerness for market share it becomes a "soft touch" for the likes of borrowers from SCF Remember ol' man Hubbard? Lent 'n' lent 'til his cupboard was bare. Remember what that cost us?.
I just do not believe the taxpayer should be exposed to the risks of banking. Cheers.

Way the go kiwibank!!

Now, please tighten up the security measures (both over the counter & online platforms) for your banking customers.

So its OK for a (rapacious) (government-owned) NZ bank to extract profits from its customers exactly the same way as the (rapacious and much vilified) Australian banks, but not the self-same Australian banks? And just because the profits stay in NZ? I for one am quite happy to have a wealth transfer from the kind and generous customers of Kiwi Bank to offset what might otherwise have been a bigger tax bill/larger government debt position! But it doesn't alter the fact that profits (over and above the use cost of capital employed) are a market rent - and wasn't KiwiBank supposed to compete with the Aussie banks so that no-one in the banking sector made rents?

Why are National not reducing foreign bank ownership/investment to 49% ? If its good enough for Energy companies why not banks?

Learn about money supply people please. 95% of money in circulation is bank credit. This is printed out of thin air.....when people realise this fact they will switch to locally owned banks overnight, unfortunately it is in the interests of many to keep this fact hidden.

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning" - Henry Ford

Awesome result - am 110% behind this bank and it has our business - their internet site is excellent. Great KIWI business - creating HIGH VALUE employment.
If you are happy to see outrageous amounts of $$$$$ flowing out of NZ via foreign banks then by all means stay with your foreign bank and support high value jobs overseas. Rock on KB!!!!!

All the Government did when rthey created this "bank" was move jobs from the private sector to the "bank". Jobs we did not need.

John Morrison - prove your main statement.

Such is your irrational contpemt for KBank you cannot even bring yourself to assign it its correct title - BANK!...............and the statement 'jobs we do not need'..what are you the CEO of one the foreign banks? - you surely have a hateful antipathy towads KBank - yuk!

A) The number of people employed in any country is limited by the amount of money in circulation.
B) Therefore a Government can only create jobs by one of two methods, that is, borrowing employment from the future, or taxing employment from its citizens.
C) There was no shortage of banking facilities, or banking competition before this thing was created.
D) The creation of this "thing" was a scam created by politicians abusing their authority to give Jim Anderson and his fellow xenophobes a warm fuzzy feeling. Exactly the same as happened in 2001 DIRA/Sutton legislation that created the evil monopoly they call Fonterra.
Tell me Wazzman? Do you know what the total cost of this "thing" you call a bank has cost the taxpayer to-date?

John - borrowing, taxing, or the third option that you missed - print money (i.e. currency debasement) which is exactly what banks is their M.O. Also known as inflation tax.

The problem with fractional reserve banking is that all banks charge interest (and therefore create profit) on money they print out of thin air. Now if you are fine with such profits going overseas then that's your call, but the control of the money supply belongs to the people and banks should be organised in this fashion. This is why the US Constitution only allows Congress to do such, until the 1913 Federal Reserve Act inserted the privately owned Federal Reserve (who have devalued the currency 95% in that time).

Don't get me wrong, I disagree with 99.9% of what Anderton ever said, but having worked in the banking industry I think Kiwibank is great and have switched all my accounts there. If not them, it would be TSB.

I hear you re "third option" you say I missed.

It is my belief that it is property that creates credit, namely the borrowers property.
If, as you say, banks create "money/credit they print out of thin air".
If that were true then can you explain to me, how the heck can a bank go broke?
BNZ 1990 and more lately a whole lot of banks around the world?

You really have no idea how banking works. Banks go down when there is a "run" on them. It is a giant ponzi scheme and works only if the amount of money in circulation continues to increase (hence why the Reserve Bank targets 0 - 3% (or whatever) inflation). Because banks effectively print money (based on their reserves), if everyone goes and asks for theirs back at the same time, they go down.

Property is a product of credit, not the other way around. Trust me on this point, the whole world is completely blinded to it and needs to learn why this crises happened....because the amount of money in circulation since the last one has increased dramatically. Read about the Crack-up boom (Austrian School) or anything by Marc Faber.

Libertarian claptrap

Wrong, not "Libertarian claptrap"at all, it is logical claptrap, which is the very best brand of claptrap you can get.
Cheers Wazz you have a nice day