Kiwibank grows its lending book 9.3% to $32.4 billion and says it is up for the challenge of 'taking on' the big four banks

The would be 'maverick' of the New Zealand banking scene, Kiwibank, has posted a record $202 million after-tax profit for the year to June and says it is up for the challenge of taking on the big four banks.

The announcement of the 100% crown-owned bank's record earnings comes amid the backdrop of release of the Commerce Commission's final report into competition for personal banking services.

The Government response has included Finance Minister Nicola Willis asking Treasury to work with Kiwibank’s parent company, Kiwi Group Capital, to provide advice before the end of 2024 on options for raising new capital, including from KiwiSaver funds, New Zealand investment funds and investment from regular New Zealanders.

Willis said she shares the Commerce Commission’s vision for a stronger, more disruptive Kiwibank. "I want it to have the growth capital it needs to become a ‘maverick’ that exerts real competitive pressure on the big four."

Well, Kiwibank's saying it's ready for it.

In announcing a 15% climb in after-tax profits and 9.3% growth in the lending book to $$32.4 billion, Kiwibank's chief executive Steve Jurkovich said Kiwibank was "up for the challenge of fulfilling the role of 'maverick' and taking on the large four banks".

"Kiwibank has been successfully growing market share for some time now, supported in part by $225 million of additional capital injected in July 2023 by our 100% shareholder, Kiwi Group Capital. 

"We would welcome more access to capital over time to deliver on our Purpose. Kiwibank is currently focussed on a multi-year transformation that will deliver more scalable systems to enable it to further accelerate its current growth. Any future capital investment would need to take timing of the transformation into account in order to maximise value."

In terms of the financial year just finished, Jurkovich said Kiwibank had "once again outperformed the New Zealand banking market" while continuing to invest more than ever in its transformation to enable future growth and "deliver on its Purpose of Kiwi making Kiwi better off".

"For the fifth consecutive year, Kiwibank has improved its profitability and grown faster than our competition, as we continue to build a stronger asset for New Zealand with all our earnings staying right here.

"We know there’s plenty of choice out there, but today’s result shows once again that we are fulfilling our role as a disruptor, more Kiwi are choosing us, and momentum is on our side.”

Mr Jurkovich said Kiwibank recorded positive gains across nearly all key financial metrics in FY24, in a challenging economic environment.

The bank achieved net lending growth of $2.8 billion, growing its lending book by 9.3% to $32.4 billion. Home lending grew 2.7 times faster than the market and business lending more than 3 times faster than market. Deposits increased by $2.4 billion, growing the deposit book by 9.4% to $28.2 billion and 2.6 times faster than market growth.

"We’ve worked incredibly hard to build and maintain the trust of our customers during FY24 and to be there in those moments that matter."

Jurkovich said the Reserve Bank's decision to cut the Official Cash Rate last week [from 5.5% to 5.25%] was the "right thing to do" and that Kiwibank was forecasting twelve, 25 basis-point cuts, or 300bps in total. 

"The magnitude of these rate cuts will be positive for Kiwi households and businesses looking to borrow and create momentum for the New Zealand economy.

"As inflation and interest rates come down, we expect to see a rise in confidence and a much more positive outlook heading into 2025 and beyond."