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Financial results of Kiwi Group Holdings 6 mths to 31 Dec 18

Financial results of Kiwi Group Holdings (including Kiwibank) for the six months ending 31 December 2017

Kiwi Group Holdings (‘Group’), which includes the Kiwibank Banking Group (‘Kiwibank’), Kiwi Wealth, Kiwi Insurance and New Zealand Home Loans, has reported an unaudited net profit after tax for the six months ending 31 December 2017 of $44 million ($65 million for the six months ending 31 December 2016).

The Group’s unaudited underlying profit of $60 million was down $7 million compared with $67 million in the prior comparative period.
[Unaudited net profit after tax has been adjusted to exclude non-core items to arrive at underlying profit. These items relate to the earthquake and the IT project known as CoreMod. CoreMod was closed during the reported period and the full financial consequences of this have been re-flected in the financial statements. Refer to Summary of Key Financial Information for details of reconciling items between underlying profit and net profit after tax.]

Kiwibank, which provides the bulk of the Group’s earnings, achieved an unaudited net profit after tax1 for the six months ending 31 December 2017 of $42 million ($63 million for the six months ending 31 December 2016). Kiwibank’s unaudited underlying profit was $58 million compared with $65 million in the prior comparative period.

Acting Kiwibank Chief Executive Mark Stephen said that although the market experienced a significant slowdown in lending growth during the winter months and leading up to the election, it has returned to more normal levels. Lower funding costs and market pricing opportunities enabled Kiwibank’s net interest margin to improve, lifting net interest income to $198m (up 9% on the prior comparative period).

Other key financial metrics:
• Net loans and advances to customers up 3.4% on the prior comparative period
• Customer deposits up 3.9% on the prior comparative period
• Impaired assets remain low at just 0.05% of total gross loans and advances
• Net interest margin 2.00% for the 6 months to December 2017 (1.92% in June 2017)

Kiwibank’s net promoter scores for personal banking customers and small business banking customers continue to remain the highest among the major banks. Mr Stephen said it was pleasing to retain such high levels of customer advocacy in an extremely competitive market.

[ANZ, ASB, BNZ, Kiwibank, Westpac. Source: Retail Market Monitor. Data is reported on a ‘rolled’ basis with rolling averages reported over 6 months.]

[Limited companies only in $0-$5 million turnover bracket. Source: Business Finance Monitor (BFM) from TNS. Data is reported on a ‘rolled’ basis with rolling averages reported over 4 quarters. ]


Investment continues to be made in the branch network to further improve the customer experience. As part of the broader distribution strategy, Kiwibank established a standalone branch in the Christchurch CBD, in addition to the Kiwibank only branches in Hamilton and Auckland CBD. The creation of the Christchurch Kiwibank branch is a significant permanent move back to the CBD after the devastating earthquakes, and includes a new business bank customer centre and regional office. A fourth standalone branch was created in New Plymouth in early January with more anticipated for other locations around the country in the coming 1-3 years.

Kiwi Wealth continues to be an outstanding performer. During the six months ending 31 December 2017, revenue of $22m was up 20% year-on-year, driven by increasing KiwiSaver membership and strong investment performance. The Kiwi Wealth KiwiSaver scheme membership growth of 5.8% was almost 3.5 times the industry rate of 1.7%. At 31 December 2017, Kiwi Wealth had in excess of $5b of funds under management.

Looking ahead, Mr Stephen said that Kiwibank remains committed to keeping the customer front and centre as we undertake a strategic review of the business. Kiwibank remains well capitalised, with strong shareholder support, and sound underlying financial performance – all of which holds us in good stead to pursue the opportunities available to us.

Attachments

Financial presentation on the results

Formal disclosure statement.


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