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Kiwibank annual profit nears $100 mln, parent NZ Post flags need for more capital

Posted in Business Updated

Kiwibank has posted record annual profit for the second straight year as loan impairments fell, costs were contained and revenue rose.

The state owned bank's net profit after tax rose $18 million, or 23%, to $97.1 million in the year to June 30 from $79.1 million the previous year.

Kiwibank's profit rise was helped by a $28 million, or 80%, drop in loan impairments to just $7 million. Impairments are down from $35 million last year and $79 million in 2011.

Net interest income rose $19 million, or 7%, to $276 million, and total operating revenue increased $27 million, or 6%, to $446 million. Total expenses were up just $3 million, or 1%, to $311 million.

CEO Paul Brock said over the year Kiwibank grew total net loans and advances by 6% to $13.2 billion and increased total customer deposits by 5% to $12.1 billion. Customer deposits accounted for 84% of all funding.

Over the year Brock said there had been a strong recovery from the impact of the Global Financial Crisis and the impact of the Christchurch earthquakes.

"Again the year was characterised by a static home loan rate market with no changes to the Official Cash Rate," said Brock. "Kiwibank and (parent) New Zealand Post continue to make progress on the project to enhance the look and service levels of the retail network and are well advanced with the transformation of the first group of shops on Auckland’s North Shore."

"A three year programme will change how both New Zealand Post and Kiwibank interact with customers. Kiwibank continues to target growth in the personal retail banking market and is making strong growth in the SME (small and medium enterprise) business banking sector," added Brock.

SME growth, capital requirements

In the SME market he said Kiwibank had grown its customer base by about 8% in the year to about 34,500 in a market that was "at best flat."

Brian Roche, CEO of NZ Post, said the Group's financial services portfolio dominated by Kiwibank continued to be a key growth driver.

"That growth and Reserve Bank regulatory requirements however create the demand for more capital," Roche said.

“Kiwibank’s own earnings, planned market issuances and support from the Group will meet those demands in the short-to-medium term. Discussions around the long-term capital support for the Bank are ongoing,” said Roche.

Earlier this year Treasury hired investment bank Goldman Sachs to prepare a report on Kiwibank's future capital needs. However, Treasury rejected a request from interest.co.nz, made under the Official Information Act, for it to release a copy of the report.

Over the year to June 30 Kiwibank's total capital increased $157 million, or 20%, to $942 million. As of June 30, Kiwibank's common equity tier 1 ratio was 8.4%, comfortably above the Reserve Bank mandated minimum of 4.5%.

Total assets rose 3% to $15.209 billion and total liabilities rose 3% to $14.351 billion.

Kiwibank 2013 2012
Net interest margin 1.81% 1.8%
Return on equity 12.1% 11.7%
Expense to income ratio 68.1% 65.1%
Impaired assets as a percentage of gross loans 0.41% 0.67%
Credit provisions as a percentage of gross loans 0.54% 0.73%

Here's Kiwibank's full presentation.

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4 Comments

 "however create the demand

 "however create the demand for more capital "     haha    and thats the catch with the peoples bank . You, dear tax payer will need to stump up $ hundreds of millions to keep it going....

So despite us being in the

So despite us being in the GFC, probably the biggest financial event since the Great Depression, banks are actually making record profits?
If that doesnt smack of monoply to the disadvantage of other businesses and NZers I dont know what does.
regards

NZ and Aussie banks largely

NZ and Aussie banks largely avoided the damages of the GFC. Good legislation ensured safe practice (to an extent) which has meant minor (comparative) losses due to defaulting and a healthy debt/risk ratio has also attributed to good returns.
I personally think that the banks making profits are a good indication of an economy's health provided they are not over charging on interest or fees.
Margins are tight and the banks are currently very competitive on Interest rates and with recent LVR changes this will only add to the competitive environment. Good for New Zealand home owners and Businesses.

yeah - service doesnt have to

yeah - service doesnt have to up to much either  so that saves costs     eg  look at the queues at Kiwibank branches. Imagine if we ran our business like that and charged what we felt like to boot