Kiwibank profit surges on strong lending

Thursday 20th August 2009

Kiwibank, the New Zealand-government owned lender, posted a 42.5% increase in after-tax profit for the year to June 30 to $52.475 million, backed by continuing strong growth in lending and deposit-taking, despite a margin squeeze created by competition for new deposits.

Loans and advances grew by 52% to $8.5 billion, while retail deposits increased by 39% to $6.7 billion, reflecting Kiwibank's continuing success in building a home-grown competitor to the big four Australian-owned banks.

"The bank has experienced sensational growth in residential home loans, outperforming many of the large Australian-owned banks, particularly in the last quarter of 2008. The lending was extremely high quality and we believe at fair interest rates."

Kiwibank had targeted high value, low risk customers for new lending and its total impairments reported for the year were substantially below competitor banks' at 0.19% of total assets. By comparison, the nearest competitor was ASB at 0.39% of assets impaired, while Westpac has reported impairment against 1.31% of total assets.

Despite heavy competition for deposits, Kiwibank was also now managing more than $1 billion in PIE funds, "the largest PIE portfolio of any bank operating in New Zealand".

Total operating revenue for the year came in at $301.74 million, up 26.7% on the previous year, and a far cry from the $81.25 million reported in June 2004 after its first year of operation, when the New Zealand Post subsidiary reported a loss of $490,000.

Operating expenses rose at a slightly slower rate of 24.9% to total $229,29 million, allowing the ratio of opex to average total assets to fall to 2.4% from 3.0% in the prior year, and to 71.2% of total income versus 75.4%.

Average return on shareholders' fundsd was 15.4%, compared to 12.8% the year before, placing it in the upper band of commercial performance by a state-owned enterprise.

All Kiwibank's results are reported without including a $11 million one-off gain from internal restructuring involving the sale of group subsidiaries to a wholly-owned Post subsidiary, Kiwi Group Holdings, during the year.

Looking to the future, Kiwibank says it is on the lookout for investment opportunities "as they arise" and is considering an offshore funding programme as an alternative source of funding, having successfully placed $60 million in an unsecured subordinated bond issue during the year under review.

The bank's more recently launched business banking division had performed well, and Knowles predicted "strong growth" in this area over the year ahead.

Businesswire.co.nz

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