Kiwibank's profit halved

Kiwibank’s profits have fallen $24.6 million or 54% in the last year and its chief executive says lingering effects of the GFC and earthquakes in Canterbury are to blame.

The state-owned bank reported a net profit of $21.2 million for the year to June 30 as operating revenue increased $51.6 million to $353 million.

Customer preferences for more lucrative floating mortgage rates helped lift net interest income by almost $58 million to $191.3 million.

Bad debts blew out to $87.1 million for the year, compared with $19.5 million last year, but chief executive Paul Brock said the majority were “one offs”, which allowed the bank to be confident in the year ahead.

“We feel we’re over the hump and through the one-offs – the last quarter has reflected that,” he said.

Fierce competition in the domestic loan and deposit had put pressure on margins, but that the bank continued to perform well in both sectors, said Mr Brock.

Retail deposits grew 14% from $6.9 billion to $7.9 billion and loans and advances rose 10% from $10.4 billion to $11.5 billion.

Deposits now contributed 80% of the bank’s funding and it would probably be next year before the bank returned to international markets for a top-up, he said.

Customer loyalty was strong and Mr Brock customer losses were expected to be below the rates of than other banks.

Kiwibank had captured more than its natural share of the mortgage market with aggressive short-term fixed and variable rate offers, said Mr Brock.

The bank’s personal banking market share was still growing and the bank had more than 750,000 customers.

Focused remained on growing its small and medium-sized business banking client base where there were “significant opportunities for growth, said Mr Brock.

Plans to enter the life and mortgage insurance market but were revealed but details were scant, other than that the products would represent "best value".

"We're looking at a broad, mainstream offer that represents good value for New Zealanders," he said.

New Zealand’s economic headwinds were taking a while to through to the bank, but Mr Brock said he believed the worst was behind them and there were positive signs for growth and an improved financial performance.

“The global financial crisis compounded by the earthquake has made things tough, but the bank is in strong shape and has weathered the storm,” Mr Brock said.

Mr Brock was part of the original team that established Kiwibank and replaced inaugural chief executive Sam Knowles in September.

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Lame excuses will not help....

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In line for quick SOE sale, eh?

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NZ Post used to earn income from the bill payment system they offered before KBk was established. That income was 'transferred' to KBk to 'prove' Jim Anderton was right. Take that put of the equation and KBk has probably never made a decent rate of return. It would be interesting to see whether they made a profit this year if those fees were taken out of the picture.

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Oh dear will this mean a downgrade from AA- when S+P come a knocking soon?

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At least it's not zero, as bad as Xero or as useless as Heartland

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if Kiwibank main customers are the residential market home owners, how did they manage to increase their bad debts from 19.5m to 87m?

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Wonder whether credit ratings of these bad borrowers were properly checked....

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Still a better proposition than Heartland Bank ( Marac regurgitated ).

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Kiwi Bank has kept interest rates down and is NZ owned. This keeps the Aussie banks honest and is a valuable asset for taxpayers. Banks make very good profits in business banking and that is what KB is targeting. Watch this space.

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well said

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/kiwi bank continues to shine despite challenging market conditions. well done

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