TSB Bank, one of the six lenders that agreed to a debt restructuring for Solid Energy, reported a 5.9 percent decline in annual profit after writing down the value of preference shares held in the state-owned coal miner .
Net profit fell to $50 million in the 12 months ended March 31 from $53.1 million a year earlier, including the full impairment of the Solid Energy redeemable preference shares valued at $13.8 million, the Taranaki-based lender said. Net interest income rose 2.5 percent to $109.7 million, and the bank reported income of $4.4 million from its quarter-stake in fund manager Fisher Funds.
"If you did strip out the Solid Energy charge, the financials would be a record result for the bank," chief executive Kevin Murphy told BusinessDesk. "The prudent thing to do was to take the provision upfront."
Solid Energy was forced to go to the government for a bailout after global coal prices tumbled, having taken on too much debt to fund an ambitious expansion. The government negotiated a debt restructure, which saw lenders including TSB write off $75 million of the $369.7 million they were owed in exchange for the preference shares.
TSB grew its loan book 7.7 percent to $3.1 billion in the year, of which residential mortgages rose to $2.59 billion from $2.49 billion. It stepped up its expansion into rural lending, focusing on dairy in and around Taranaki, with lending growth of 56 percent to $214.7 million. Commercial lending grew to $239.2 million from $189.4 million.
Since the introduction of restrictions on low-deposit home lending in October last year, competition for residential mortgages at a sub-80 percent loan-to-value ratio has become more intense, Murphy said. TSB is "very mindful" of the recent downgrade in the dairy forecast, but has the scope to diversify more into agricultural lending, he said.
The bank spent $32.8 million buying 26.4 percent of Fisher Funds last year, and Murphy said the benefits have been greater than originally anticipated. TSB is in the process of training staff so they can sell the fund manager's products.
Deposits rose 4.4 percent to $5.16 billion as at March 31 from a year earlier.
TSB's board declared a dividend of $10.2 million for its shareholder, TSB Community Trust, down from $11 million in 2013.