TSB annual profit more than doubles, bolstered by write-back in Solid Energy bond

Net profit rose to $61.6 million in the 12 months ended March 31.

TSB Bank, the Taranaki community-owned bank, more than doubled annual profit, bolstered by a gain in writing back some of the value in its debt exposure to stricken state-owned coal miner Solid Energy.

Net profit rose to $61.6 million in the 12 months ended March 31 from $25.5 million a year earlier, the New Plymouth-based bank's annual report said. Net interest income increased 1.7% to $127.8 million as its loan book expanded 17% to $3.83 billion and deposits grew 8.3% to $5.81 billion.

The bottom line was bolstered by a $13.7 million write-back in the value of its $75 million Solid Energy bonds, a security the bank had previously written off completely. That meant TSB recognised a net reversal of impairment charges of $8.7 million in the year, compared to a charge of $56.1 million in 2015.

"During the previous financial year we took a full writedown of our holdings in Solid Energy, given the uncertainty of their future trading potential," chairman John Kelly and managing director Kevin Murphy said in their report. "With more information being available as the Solid Energy sale process advanced, we used an independent report by KordaMentha to guide the revaluation of this debt."

The lender has been focusing on expanding its reach across the country, and Taranaki now accounts for 28% of its loans and assets compared to 33% at the end of the 2015 year. Its Taranaki deposit base was steady at 49%.

"While growth has been achieved across the country, we did experience above-market growth in the golden triangle area of Auckland, Hamilton and Tauranga with a 36% increase in registered loans in this area," Messrs Kelly and Murphy said. "This is reflective of the market conditions and is also driven by a combination of improved results from branches, an increased use of brokers and the expansion of our mobile mortgage service to better serve customers."

TSB bought a 26% stake in fund manager Fisher Funds Management for $32.8 million in 2013 and lifted that stake to 49% in October last year, restructuring its ownership through the use of a new holding company, TSB Group. The bank poured its Fisher Funds investment, valued at $36.8 million, into TSB Group, to which it advanced a $58.1 million loan.

The bank paid annual dividends of $19.85 million in the year to its shareholder, TSB Community Trust, including a $7 million special dividend, which was used to increase the group's shareholding. Ordinary dividends of $12.85 million were up from $5 million a year earlier.