Kiwibank Reports Record Profit
22 August 2012
Kiwibank Reports Record Profit
Kiwibank has announced an after-tax profit of $79.1 million for the year ended 30 June 2012, a significant increase on the previous year’s profit of $21.2 million, according to figures released today by the Kiwibank Board.
Kiwibank Chief Executive Paul Brock said the result represented “a significant bounce back from the financial stresses of the last few years”.
In the last year,
• Increased loans and advances by 8% from $11.5 billion to $12.4 billion
• Increased customer deposits by 9% from $10.6 billion to $11.6 billion
• Customer numbers now exceed 800,000 (nearly 10% of main bank market share)
Mr Brock said the end of year result was very satisfying, although he cautioned that the economy was “not yet out of the woods” and provisioning for bad debts was still a concern. Total provisions for impairment losses stood at $91m as at 30 June 2012, slightly higher than 30 June 2011 at $87m.
Mr Brock said the positive financial result was largely attributable to Net Interest Income (NII) that has increased during the year as customers switched from fixed to floating mortgages. This margin compared to average assets has increased from 1.47% to 1.79% year on year.
Mr Brock said customer deposits accounted for 83% of all bank funding.
Commenting on activities and achievements during the year, Mr Brock highlighted the purchase of Gareth Morgan Investments (GMI) . The purchase was made by, Kiwi Group Holdings Ltd, the holding company subsidiary of New Zealand Post that owns Kiwibank.
GMI manages over $1.5 billion of funds, of which $650 million is KiwiSaver related, on behalf of more than 57,000 clients.
Mr Brock described the purchase as “a unique opportunity to grow our Wealth and KiwiSaver businesses, while remaining true to the values that have built Kiwibank”.
Early in this calendar year, Kiwibank’s credit rating was confirmed at AA- by international credit rating agency Standard & Poor’s. This is the same rating as the Australian-owned banks operating in New Zealand. However, the outlook for the rating has been amended from stable to negative.
The year was characterised by a static home loan rate market with no changes to the Official Cash Rate and little activity by competing banks.
Kiwibank “stirred up the market” according to Mr Brock with short term home loan specials. This included four-year and six-month specials, and an overwhelming response to a one-year fixed rate of 4.99% in May that set off a rate war among competing banks.
“We had to bring on extra staff to take phone calls as customers, both ours and those from other banks, sought to take up a very good offer and have some certainty in turbulent economic times,” Mr Brock said.
On the retail front, Kiwibank and New Zealand Post have been piloting a new shop layout in the Kapiti Coast area. This is part of a programme of activity to transform the store Network. A three year programme will change how both New Zealand Post and Kiwibank interact with customers.
Mr Brock said the challenges for the new year were to continue to increase market share in the retail banking market and to push harder into small and medium enterprise business banking. “The prospects for growth in this area are immense and Kiwibank has much to achieve”.
In March this year, Kiwibank celebrated 10 years since it officially opened for business.