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TSB Bank: $67.8m Profit with Positive Underlying Growth

30 May 2014

TSB Bank Announces $67.8m Profit with Positive Underlying Growth

TSB Bank today announced a pre-tax profit for the 12 months to 31 March 2014 of $67.8 million, down $5.7 million on last year’s result due to an impairment provision for Redeemable Preference Shares held in the state owned enterprise, Solid Energy NZ Ltd.

Highlights of the result include:
• Depositor funds of $5.2 billion, up 4.38%.
• Total loan portfolio of $3.1 billion, up 7.68%
• Rural portfolio growth of 56%
• Sector-leading Cost to Income Ratio of 39.16%
• Strong Capital Adequacy Ratio of 14.21%

TSB Bank CEO Kevin Murphy said FY2014 saw the Bank better position itself to compete and build a sustainable financial future while maintaining its leadership position in customer satisfaction: “I’m pleased with the result and confident that the Bank is on the right track for continued growth. We continue to operate with a well-funded balance sheet and outrank much of the sector in efficiency, without compromising our robust risk profile and renowned customer centric focus.

“Over the past 12 months we have experienced continued funding growth from customers all over New Zealand, which has seen depositor funds surpass the 5 billion dollar mark.

“With a wide range of accounts on offer, customers are increasingly making use of the Bank’s newer online product suite. We have a strong desire and determination to grow market share without affecting our high customer satisfaction scores, and will continue to invest in technology and people to ensure the customer experience across the Bank’s various touch-points remains positive.”

Mr Murphy said TSB Bank has made good progress over the last twelve months in expanding services and implementing the changes required for growth, including:
• Diversifying its wealth management portfolio though the acquisition of a 26.39% stake in New Zealand-owned Fisher Funds. With wealth management and retirement savings an increasingly important issue for New Zealanders, this investment was made to broaden the range of services available to customers and is performing well.
• Investing in market-leading digital technologies. TSB Bank was the first bank in New Zealand to adopt the Government initiated and sponsored RealMe® identity verification system. The service allows new TSB Bank customers to complete 100% of the joining process through the Bank’s mobile banking app, [my]bank.
• Investing in people. Continuing to acknowledge its people as its greatest asset, an 8% increase in staff numbers reflects the Bank’s commitment to ensuring all customer experience interaction remains class-leading.
• Retaining its position as the longstanding industry leader in customer satisfaction – TSB Bank was named the 2013 Roy Morgan Customer Satisfaction ‘Financial Institution of the Year’, won the Canstar Blue ‘Most Satisfied Customers in Banking – 2013’ title; and was again acclaimed Sunday Star Times ‘People’s Choice’.

Key financial aspects of the result, compared to the previous 12-month period include:
• A continued focus on revenue growth and cost containment has seen a pre-tax profit of $67.8 million, enabling the payment of a dividend of $10.2 million to the TSB Community Trust.

• Impairment charges of $11.5 million include a provision for Redeemable Preference Shares converted from a bond holding in Solid Energy NZ Ltd. The Bank continues to receive interest on the remaining bonds held in the entity and is optimistic about the future of Solid Energy as it continues to successfully restructure its business.

• Customer deposits are up 4.38% to $5.2 billion as the Bank increases its spread of customers nationwide.

• Despite loan-to-valuation (LVR) limits reducing opportunities and intensifying competition in the LVR lending category, the Bank’s loan book is up 7.68% with rural lending experiencing strong gains, increasing 56% over the period. With a focus on maintaining robust credit risk management, 90-day past due and impaired loans sit at 0.36% of the lending portfolio and remain low relative to peer banks.

• At 14.21% the Bank’s Capital Adequacy Ratio continues to be one of the strongest of all New Zealand banks, and is well above the minimum Reserve Bank requirements of 10.5%.

Mr Murphy said that TSB Bank’s market share growth and prominence over the last 12 months, in what has been an extremely competitive environment, results from increasing resonance of the Bank’s unique ‘100% New Zealand owned and independent’ status and ‘putting customers first’ positioning.

“Continued recognition in the annual customer satisfaction results confirms that our promise to put customers first has cemented our foothold in New Zealand’s banking sector. We will continue to invest in people and technology to maintain our position and ensure our customers continue to receive the service they’ve come to expect, no matter how they choose to bank with us,” says Mr Murphy.

The year ahead will be one of further growth and development for TSB Bank, with a strategic focus on staff engagement, operational excellence and digital development as the key drivers for market expansion.

Mr Murphy says all staff are enthusiastic about the future direction of the Bank and proud of its independence.

“In 1985 TSB Bank put its customer’s interests first and fought to remain independent and 100% New Zealand owned. Twenty-five years on, and 164 years since inception we are a strong, vibrant bank supported by New Zealanders from Cape Reinga to Bluff.”

“We remain committed to making TSB Bank the bank of choice for New Zealanders; the bank which puts them first and goes the extra mile.”

TSB Bank, which celebrated 160 years of operation in August 2010, is proudly independent and 100 percent New Zealand-owned with all profits retained in New Zealand.

Funding is obtained solely through the deposit support of New Zealand customers.

For publication, video of TSB’s brand commercial is available here: ‘Bank Better’

A copy of the TSB Bank Summary Report 2014 is available here.


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