Kiwibank lifts FY profit 3%, eyes dividend in next three years

Friday 29th August 2014

Kiwibank, the state-owned lender, lifted annual profit 3 percent as it widened net interest margins, and is looking to start paying dividends to its owner in the next three years.

Net profit rose to $100 million the 12 months ended June 30 from $97 million a year earlier, the Wellington-based bank said in a statement. Kiwi Group Holdings, the New Zealand Post holding company which includes wealth management, insurance and home loans units, lifted profit 7 percent to $107 million.

The bank increased net interest income 6.2 percent to $293 million, widening its net interest margin 5 basis points to 1.86 percent, even as a shift to fixed interest mortgages put pressure on those margins.

The banking unit contributed the bulk of NZ Post's annual profit and is seen as the state-owned enterprise's main vehicle for growth in the coming years.

Kiwibank chief executive Paul Brock told a briefing in Wellington the lender is gearing up to making a return on NZ Post's investment after 12 years of operation.

"We are starting to come into that stage where we're paying returns," Brock said, and confirmed the bank will look to pay dividends in the next three years.

The lender is clamping down on costs to help prepare its return on investment to NZ Post, and Brock said that's expected to strip out about 2 percent in the 2015 financial year.

"We can't just continue to drive for growth without a return overall," Brock said.

Kiwibank increased its loan book 11 percent to $14.6 billion and increased customer deposits 5.8 percent to $12.8 billion.

The lender anticipates spending a further $100 million on infrastructure in the coming four years, and NZ Post last year said the bank faced higher capital requirements due to the increased regulatory requirements and a planned upgrade of its banking systems.

The bank's parent injected $40 million of new equity in the past year, and Kiwibank raised $100 million through a capital note issue earlier this year.

Brock said he expects to fund future capital needs from increased profitability.

Kiwibank's capital notes, which pay annual interest of 6.61 percent, last traded on the NZX debt market at a yield of 6 percent, while its preference shares, which pay annual interest of 8.15 percent, last traded at $103 per $100 bundle, according to NZX data.

BusinessDesk.co.nz

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