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Great Service and New Products Drive Result

03 November 2006
Media release – for immediate release

Great Service and New Products Drive Bank of New Zealand Result

Decade-high levels of customer satisfaction, outstanding customer service and innovative new products combined with tight control of margins and costs to improve Bank of New Zealand’s profit performance for the year ending September 2006, announced today.

“It’s a first-class result, and I’m very pleased,” said Bank of New Zealand managing director Peter Thodey.

“Over the past few years we have executed our strategy with the long-term interest of our customers and the business in mind, and we have been rewarded with a steady improvement in profit performance and other key measures.”

Highlights for the year include:

- Net Profit after Tax up 15.2%, $80 million to $605 million

- Net Profit after Tax (excluding Custom Fleet gain) up 7.7% to $560 million

- Net Interest Income up 11.5%, $114 million to $1102 million

- Margin decline held to 6 basis points

- Branch network expanded by two and six branches relocated or refurbished

- Winning the Contact Center World Award for the best customer service in Asia Pacific, and New Zealand’s best contact centre for the third straight year

- Pig Tales advertisements improve Bank’s advertising awareness.

Mr Thodey was cautious on the outlook for the Bank in the coming year: “While this year’s result is an improvement on our achievement in 2005, it includes a significant one-off gain from the sale of Custom Fleet. New Zealand remains a difficult market and the outlook for growth in underlying profit is more modest.”

Market conditions over the past twelve months were extremely competitive across all sectors, with inevitable pressure on interest margins. “We have increased our net interest income by 11.5 per cent this year, and restricted our margin decline to 6 bps. Our approach to writing profitable business combined with disciplined margin management has helped us do better than our competitors. Our client base is excellent which means that credit quality has not been affected despite softening economic conditions.”

Bank of New Zealand held or grew its share of key markets during the year with growth in Youth share particularly pleasing, said Mr Thodey. “This year we doubled the number of Campus Pack accounts opened compared to 2005.”

In other markets this year, Bank of New Zealand:

- Launched a comprehensive package of on-line services for personal customers including text and mobile alerts

- Provided enhanced security for personal Internet banking customers

- Launched a low-interest VISA card, BNZ Lite Visa

- Streamlined its lending processes for small business customers

During the year, a new switching service was launched to take away the hassle for customers who wish to move their accounts to Bank of New Zealand, said Mr Thodey. “This free service provides an incentive for those attracted by our competitive home loan rates but put off by the work involved to switch.”

Home loans remain a focus for the Bank that brought new meaning to the term Unbeatable. “We want to make the goal of home ownership a reality for as many kiwis as we can. We will continue to offer sharp home loan rates that are not available through brokers. In this context it is interesting to note several other banks acknowledging that two-year broker-introduced business is not profitable.”

Also striking the right note with consumers and customers is the Bank’s new advertising campaign. In six months the Pig Tales campaign had broadened the Bank’s appeal beyond its traditional strongholds.

In the past twelve months Bank staff had been very active in the community with the adopt an athlete programme, part of the Bank’s support as principal partner for New Zealand’s Commonwealth Games Team.

August saw the Bank announce a new sponsorship partnership with Preventing Violence in the Home, New Zealand’s largest single agency in the domestic violence field. “Changing our country’s sad record of domestic violence is a complex, difficult challenge,” said Mr Thodey. “We are in a unique position to support this new partnership. Our staff are a caring, positive group of New Zealanders and their enthusiasm will be a real asset to this cause.”

Interest rates are not expected to ease until mid 2007, said Mr Thodey, and certain sectors of the economy are under pressure. In particular, the collapse of several finance companies in recent months was of concern and “it is important that investors understand the relationship between interest rate and risk.”

Mr Thodey said the past year had been a successful one on many levels and the Bank was well-positioned continue to meet the challenges of a competitive market.

“Going forward, we will continue to compete strongly for business across all our markets, and provide our customers with outstanding products and excellent customer service. We will look for new and innovative ways of serving our customers and fulfilling our promise of being ‘better off’ with Bank of New Zealand.”

ENDS

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