9 November 2005
Media release – for immediate release
Increased Market Share Drives Financial Result for Bank of New Zealand
Bank of New Zealand has reported a strong year-end result to 30 September 2005, with net profit after tax up 14.8% to $541 million from $471 million the previous year.
Other main points in the year-end result and highlights for Bank of New Zealand are:
- Net interest income up 7.5%, $67 million, to $961 million
- Margin decline held to 5bps
- Now the number two bank as measured by lending assets (September 2005)
- Credit quality remains sound
Bank of New Zealand Managing Director Peter Thodey said the result was an excellent one given the highly competitive dynamics of the New Zealand banking market in the last year.
“This year we introduced new products, some of which featured lower prices, and we also offered leading rates on home loans.
“Our growing share in key markets proves to us that customers of other banks are increasingly attracted by our excellent products and services.
“The 2005 underlying net profit after tax (excluding abnormals) at $549 million is equal to that of the previous year.”
Mr Thodey said major launches by Bank of New Zealand in the 2005 year included:
- The Business First initiative, which features new flat rate products and improved service aimed at the small and medium-sized enterprise market
- The Unbeatable home loan campaigns, in which Bank of New Zealand undertook to beat its big bank competitors on fixed-rate home loans
“The Unbeatable campaigns have brought Bank of New Zealand a lift in market share in the home loans market, and re-established Bank of New Zealand as a leading home loans provider.
“On top of this, our customers have enjoyed outstanding home loan deals. Because we won’t pay mortgage brokers to sell our home loans we are able to reduce our costs and pass savings on in the form of competitive mortgage interest rates.”
Commenting on last week’s speech by the Governor of the Reserve Bank, Mr Thodey said: “We have a very competitive mortgage market in New Zealand which is healthy for consumers and providers alike. New Zealanders’ long-established preference for fixed-rate mortgages does make it difficult for the Reserve Bank to slow the housing market by increasing short-term interest rates.
“While it is true that the banks compete strongly for market share, they also have strict lending and – most importantly – debt-servicing criteria. In an open and de-regulated market it makes no sense for banks to turn away customers who can meet these lending and debt servicing standards.”
Bank of New Zealand’s net interest margin declined five basis points to 2.44%, Mr Thodey said. “This is an excellent result in light of competition in the market and testimony to the strength of the business that we could undertake a campaign such as Unbeatable and have only a small margin decline.”
In other markets this year, Bank of New Zealand:
- Piloted on-line term deposits, a new initiative in the New Zealand market
- Launched the HotLink mobile phone credit top-up product - in conjunction with Vodafone - an initiative which lays the groundwork for bigger advances in mobile commerce
- Won New Zealand’s major award for the performance of customer contact centres for the second consecutive year
- Continued to provide the best in-branch service, on-average over the last 12 months, of the major banks as measured by ACNielsen
Key market share results for Bank of New Zealand in 2005 are:
- Home loan share up to 16.2%*
- Business lending volumes grew 15%, cementing the Bank’s position as New Zealand’s leading business bank
- Agribusiness share, (measured as net lending assets), up to 17.9%*
- Growth in customer deposits of 8.6% with retail deposit share up to 19.1%*. This included a successful term deposit campaign celebrating the Bank’s sponsorship of the New Zealand Commonwealth Games Team
Mr Thodey said: “Given the intense
competition in New Zealand retail banking this year, Bank of
New Zealand’s approach has been to focus on a few key
markets which it has identified as offering potential for
growth. The two most notable markets on which we have
focused are small and medium-sized business, and home loans.
The under-30 year olds market is another example of a market
we have identified with growth potential.
“Our focus on those markets, characterised by strong product offerings at competitive prices, and backed by high-quality service, has been the basis of our success.
“In managing the business, we have focused on firm control of costs, disciplined management of margins, and maintaining excellent credit quality.”
Other operating income was down 4.4% to $516 million, said Mr Thodey. “We continue to improve on our customer-value proposition by migrating customers to lower-cost channels and offering flat rate products such as Business First.”
Bank of New Zealand’s underlying returns on equity and assets for 2005 are 21.0% and 1.32% respectively.
Mr Thodey said the Bank is well placed for the business challenges of the coming year. “My view is that the economy will soften in 2006. Inflationary pressures will be reflected in higher interest rates, and reduced levels of consumer spending. Nonetheless, I am confident that we have the right business model and strategies to continue on the path that we have set.”
Key data for the full year to 30 September 2005 (year to 30 September 2004):
- Net interest income $961m ($894m) + 7.5%
- Other operating income $516m ($540m) -4.4%
- Total income $1,477m ($1,434m) +3.0%
- Net profit after tax $541m ($471m) +14.8%
- Net interest margin contracted five basis points to 2.44%
- Total assets $43,942m ($39,310m) +11.8%
*share of registered banks