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TSB Bank increased its net profit by 20% in the six months ended September 30 from the same period a year ago as net interest income rose 18% and impairment losses remained relatively stable, the bank’s latest General Disclosure Statement shows.

TSB recorded a net profit after tax of NZ$29.3 million for the six months. Interest income fell 10% (NZ$14.7 million) to NZ$131.2 million from a year ago, while interest expenses fell 23.8% (NZ$23.4 million) to NZ$74.9 million. This meant net interest income for the bank rose 18.2% to NZ$56.3 million.

TSB charged NZ$1.285 million of impairment losses to its income statement, up only slightly from NZ$1.25 million in the six months to September 30, 2008. Other banks have reported a tripling of bad debt charges over the last year.

Past Due assets rose by near 40% from a year ago to a balance of NZ$19.3 million at the end of the period, although this was down from NZ$24.4 million at March 31. Of the past due assets, NZ$5.3 million were over 90 days. This was up from NZ$4.2 million a year ago, but down from NZ$8.1 million at March 31.

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By Bernard Hickey

Commonwealth Bank of Australia’s New Zealand operation, ASB Bank, has reported a 10% fall in underlying profit in the September quarter as lending margins contracted and bad debt charges more than tripled. New ASB Chief Executive Charles Pink forecast a tough period for banks and the economy in the years ahead as individuals and companies ‘hunkered down’ to de-leverage in the wake of the Global Financial Crisis (GFC).

“I don’t see when we’re going to get back to double digit lending growth,” Pink told Interest.co.nz in an interview.

“I think the GFC has bought a significant change to the world and New Zealand. People are deleveraging rather than leveraging and companies are de-leveraging rather than leveraging. People in companies are hunkering down,” he said.

“We probably will see low single digit lending growth going forward, which is not the world we’ve been used to in the last 10-20 years globally or in New Zealand.”

ASB’s underlying profit in the three months to September 30 fell 10% to NZ$85 million from NZ$94 million in the same period a year ago, driven by a fall in its overall net interest margin from 180 basis points in mid 2008 to 160 basis points a year later and an increase in loan impairment charges, Pink said.

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New Zealand’s largest bank, ANZ National, has reported a 14% fall in underlying profit for the 9 months to June 30, citing a tripling of bad debt charges and a contraction in net interest margins. (Updates with comments from interview with CEO Jenny Fagg)

ANZ National’s result was the poorest in the ANZ Banking Group and a reflection of the New Zealand economy being weaker than those in Australia and Asia where ANZ also operates.

Hot competition for term deposits in New Zealand and higher foreign funding costs squeezed ANZ National’s margins, contrary to claims by politicians that New Zealand’s big four banks are profiteering.

ANZ National also said it had lost out “tens of millions of dollars” on break fees paid by customers who broke their fixed mortgages. It has also increased its provision for compensation paid to ANZ investors in ING’s Diversified Income and Regular Income funds.

“This result reflects the tough recessionary times in which we are operating,” ANZ National CEO Jenny Fagg said.

“Initially it was the household sector, and now we’re seeing a deterioration in all sectors,” Fagg told interest.co.nz in an interview, adding that credit quality in the rural sector had also weakened recently.

“We’re seeing it remaining tough for at least another 12 months,” she said.

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TSB took advantage of a sharp fall in term deposit rates in the June quarter to boost its net interest margins and its profits, but still managed to gather an extra NZ$103 million in deposits in a hotly competitive market. Its lending growth was a more modest NZ$42 million for the quarter.

TSB’s reliance on domestic term deposits for its funding meant it benefited more from the fall in the Official Cash Rate than its Australian-owned competitors, who ironically have been accused of using the falling OCR to boost their profit margins but have seen little to date because of their reliance on more expensive foreign wholesale funding.

TSB’s General Disclosure Statement for the June quarter showed its tier one capital ratio dropped slightly in the quarter to 16.2% from 16.9% at the end of March and 17.1% a year earlier. But this remains almost twice as high as the big four banks who are around the 8-9% mark. TSB’s BBB+ credit rating compares to the big four’s AA ratings.

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Kiwibank’s new mortgage lending surged 59.9% or NZ$419 million to NZ$5.528 billion in the September quarter from growth of NZ$262 million in the June quarter, according to its General Disclosure Statement.

The New Zealand Post-owned bank punched well above its weight in the quarter as it took advantage of its relatively higher proportion of domestic retail funding to offer lower rates than the big four Australian banks, which rely on foreign wholesale borrowing to fund around 40% of their books.

This means Kiwibank’s share of new mortgage lending rose sharply, given ASB showed growth of NZ$559 million for the quarter and ANZ National grew NZ$153 million.

See our updated competitive analysis page here especially for newsletter subscribers. Our analysis shows non-bank mortgage lending fell NZ$100 million to NZ$5.149 billion.

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Kiwibank profit up to NZ$36.8 mln with a profit to assets ratio of 0.6% down from 0.8%.
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