Cooperative Bank lifts annual profit 16% on expanding loan book, seeks to raise $30 mln

Friday 3rd June 2016

The Cooperative Bank, which distributes rebates to its customer-shareholders, lifted annual profit 16 percent as its loan book grew at twice the pace of the wider financial system. The lender now wants to raise $30 million to build up its capital buffer to support that growth.

Net profit rose to $10.3 million in the 12 months ended March 31 from $8.9 million a year earlier, the Wellington-based bank said in a statement. Net interest income gained 5.5 percent to $51.5 million as its loan book expanded 16 percent to $1.8 billion and deposits grew 14 percent to $1.79 billion. It added 15,000 customers in the year, taking it to more than 147,000, who were paid a rebate of $2.1 million, up from $1.8 million a year earlier.

That growth saw Cooperative Bank's capital ratio slip to 15.8 percent as at March 31 from 16.5 percent a year earlier, still almost twice the 8 percent minimum. It plans to raise $30 million through a tier two debt security, which would likely be listed on the NZX. Chief executive Bruce McLachlan says it will provide an appropriate capital buffer, having grown at "double system" in the past year, and enable it to maintain that expansion in the current year.

"Our balance sheet growth picked up - we reported 15 percent in that year and we're growing quite a bit above that right now," McLachlan told BusinessDesk. "We think because of our scale we should have one of the higher capital ratios in the market and it's about making sure we continue to run the bank prudently while getting ready for this growth continuing."

Separately, Fitch Ratings assigned a BB+ rating to the proposed 10-year debt securities, a notch below the bank's investment grade bbb- rating, saying "the notes would be written down in part or in full should the Reserve Bank of New Zealand appoint a statutory manager or deem that without the write down, Co-op was non-viable." The interest rate on the notes will be fixed at 6 percent until July 28, 2021, after which it will be set at 3.5 percentage points above the three-month bank bill rate.

The Cooperative Bank focuses on retail banking, largely mortgages and personal lending, and in its annual report said it will launch a credit card this year.

McLachlan said the credit card had been a gap in the bank's product mix for some time. While it will be a Cooperative Bank-branded card, he wouldn't provide more details.

BusinessDesk.co.nz

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