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UPDATE: Kiwibank comes of age, pays first annual dividend

UPDATE: Kiwibank comes of age, set to pay first annual dividend in 2015

(Adds chief executive comment from media briefing)

By Tina Morrison

Aug. 28 (BusinessDesk) - Kiwibank, the banking unit of state-owned New Zealand Post, will pay its first annual dividend after 13 years of operation, reflecting its increased size, record profits and its ability to fund its own activities.

Wellington-based Kiwibank increased profit 27 percent to $127 million in the year ended June 30, it said in a statement. Revenue gained 17 percent to $560 million while expenses rose 13 percent to $384 million.

Launched in 2002, Kiwibank now has 903,000 customers, up from 860,000 a year earlier, and accounting for about a quarter of all bank account holders in New Zealand. The bank is looking to grow its small business and wealth management activity. Over the past year, its share of the small business market rose to 7.8 percent from 6.3 percent, and its share of Kiwi Wealth KiwiSaver scheme members grew by 20 percent to 137,000. Kiwibank is expected to finalise the level of its annual dividend, to be paid to NZ Post, next month.

It paid a $22 million interim dividend in March from its first-half earnings.

"The dividends will be increasing over the next 12 months," chief executive Paul Brock told a media briefing.

However, profit growth may be "more moderate" this year, given the regional economy may be hit by a weaker agricultural sector following a slump in dairy prices.

In the year through June, Kiwibank's net banking interest revenue rose 24 percent to $359 million. Its net interest margin increased to 2.12 percent from 1.86 percent, driven by favourable funding conditions.

The company increased its loans and advances by 6.6 percent to $15.6 billion, while its customer deposits rose 7.8 percent to $13.7 billion. It said customer deposits account for 81 percent of all bank funding.

The bank is one year into a four-year $100 million core banking system upgrade. Brock said the project had so far cost "a little bit more" than expected, but was otherwise on track.

Kiwibank's cost to income ratio declined to 60 percent from 66.3 percent in the 2015 year and Brock said he wanted to see the ratio fall further into the "low to mid 50s" over the next five years or so.

The company is investing in more efficient digital services, which make up about 89 percent of customer service transactions.

Kiwibank contributed the bulk of NZ Post's $143 million profit in the past year.


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