Bank Of New Zealand Announces Strong Profit Result
Bank of New Zealand today announced a strong underlying profit result of $562 million for the financial year ending 30 September 2003. This represents an increase of 9% in underlying profit over the previous year, and reinforces the fundamental strength of the business.
A robust local economy leading to strong volume growth in core lending was a key contributor to the result. Growth was led by housing volume, which was up 17.8% and reflects the success of the Bank’s focus on home lending.
Bank of New Zealand Managing Director, Peter Thodey, said that a combination of a strong profit result combined with improved customer satisfaction levels pointed to a very balanced performance for the year.
“To be able to deliver on both these fronts is very pleasing, as it means one area has not succeeded at the expense of another,” he said. “Lending in the housing and business sectors is particularly strong and customer satisfaction levels continue to track upwards. With the overall outlook for the economy remaining positive, we are well positioned to take advantage of the new opportunities in the New Zealand market that will arise in the year ahead. Bank of New Zealand is a logical choice for any customers reviewing their banking arrangements following the ANZ takeover of National Bank of New Zealand.”
Mr Thodey said the Bank’s strong performance in housing reinforces the decision taken six months ago to stop distributing home loans through mortgage brokers. Bank of New Zealand is the only major New Zealand bank that does not lend through brokers.
“Our research shows our customers prefer a direct relationship with the Bank rather than working through a third party, and many customers have been coming to us because we do not use brokers. Their endorsement of our position is reflected in our rapidly growing market share for home loans.”
Mr Thodey says General Disclosure Statements of banks (June 2003), show that Bank of New Zealand is one of only two major banks to grow home loan market share over the six months to June.
Over the 12 months to September, its market share for home loans increased from 15.1% to 15.6%, and the Bank captured an average of 19% of overall systems growth each month throughout this period.
Initiatives to improve the customer experience were key drivers during the year, and the Bank undertook a brand programme to re-energise and grow its brand profile in the New Zealand market.
As a result of a range of customer focused activities, Bank of New Zealand’s residential customer satisfaction score in this year’s Auckland University Business School Bank Customer Survey increased from 57% to 71%, moving into second place. It was the only one of the major banks to increase its score this year.
Enhancements to internet banking significantly increased customer satisfaction levels, while improvements to telephone banking saw a reduction in the time required for customers to complete their telephone banking transactions.
“Our overall purpose is growth through excellent relationships and our vision is to become the leading financial services company in New Zealand,” says Peter Thodey. “Results over the past year indicate that we are on track to achieve these goals.”
Bank of New Zealand is a major provider of financial services to New Zealand businesses, and achieved 11.4% growth in lending to this sector, while maintaining excellent credit quality. During the year the Bank reviewed the way it services small businesses and introduced a new channel aimed at this sector, with results to date exceeding expectations. Agribusiness performed strongly, achieving lending growth of 14%, while the AC Nielsen Rural Banking Monitor (August) showed customer satisfaction continues to increase.
In October, BNZ Investment Management won the FundSource Fund Manager of the Year award for the third year in a row.
Growth in underlying profits was driven by an increase in underlying revenues of $97 million or 7%. Increases in other operating income of $46 million or 10%, (driven by an increase in lending volumes), was balanced by a shift of customers to lower cost channels.
The underlying cost to income ratio of 43.9% reflects an improvement of 2.1% - a result of the Bank’s continued commitment to efficiency and process improvements.
Mr Thodey says during the year ahead the Bank expects to see economic growth in New Zealand of 2.5% - 3%, supported by a recovering world economy, improving commodity prices, and a continuing demand for house construction. Firm net migration, a strong labour market and robust business balance sheets will also be contributors.
However he says some risks remain, including weakness in certain export sectors from the New Zealand dollar, and the reaction to a tightening monetary policy from the first half of 2004.