SBS Bank boosts annual profit 24% as property investment drives lending growth

See also: SBS Bank lifts net profit more than 29% but margins squeezed

SBS Bank, New Zealand's biggest building society, lifted annual profit 24% as increased lending to property investors underpinned growth in the firm's loan book.

Net profit rose to $19.4 million in the 12 months ended March 31 from $15.6 million a year earlier, the Invercargill-based company said in a statement. Net interest income climbed 17% to $81.1 million, with its loan book expanding to $2.39 billion as at March 31 from $2.28 billion a year earlier. Of that, residential lending growth advanced 2.3% to $1.46 billion, while residential investment loans expanded 16% to $338.2 million.

"Early portfolio declines have been replaced with solid asset growth for the group, achieved in the face of a pronounced increase in competitive intensity," chief executive Wayne Evans said in the bank's annual report. "Despite this volatility, our operating surplus, total assets and members' equity saw very pleasing growth."

Last month the Reserve Bank cited the rapid growth in lending to property investors as driving house price rises in Auckland, which is suffering from a shortage of available properties, and signalled plans to introduce lending limits on banks writing mortgages to property investors with small deposits.

SBS doesn't break down its exposure to Auckland, though $1.07 billion of loans are in the North Island.

The bank bought half of Staples Rodway Asset Management (SRAM) in March for an undisclosed sum as it tries to build scale in wealth management and expand its presence in the North Island. The management rights were valued at $1.3 million in the bank's intangible assets. SBS spent $7.2 million on purchasing property, plant and equipment, and intangible assets, and investing in associates and joint ventures in the year.

The bank held $536.7 million in funds under management as at March 31, up from $442.2 million a year earlier. Income from management fees advanced to $5.6 million from $4.6 million in 2014.

Evans said its subsidiaries in consumer finance, wealth management and insurance provided opportunities to build the bank's value, and it will roll out a capital expenditure programme investing in brand, digital capability and a branch upgrade.

SBS's redeemable shares, customer deposits and subordinated redeemable shares were largely flat at $2.52 billion as at March 31.

(BusinessDesk)