Impairment losses eat into Kiwibank profit; No-term deposits attract 'several hundred million dollars'

Impairment losses eat into Kiwibank profit; No-term deposits attract 'several hundred million dollars'

Kiwibank recorded a 37% drop in September quarter profit as the state owned bank absorbed a 74% increase in impairment losses on loans with the bulk stemming from its business customers.

Kiwibank’s September quarter General Disclosure Statement (GDS) shows the bank’s profit after tax fell to NZ$8.66 million for the three months to September this year, down from NZ$13.86 million in the same period of last year. This came as impairment losses on loans and advances jumped to NZ$9.53 million from NZ$5.48 million.

Kiwibank CEO Paul Brock told interest.co.nz the increase in impairments could largely be attributed to a small number of business customers the bank had been working with for some time.

“And at the point that we’ve come to look at realizing those assets, obviously the market values are a bit lower than what we’d expected so the provisions consequently are higher,” Brock said.

“It’s not a surprise, it’s stuff we’ve been working through for some time.”

He said there was probably still a “bit more to come” in terms of working through impairments before they started improving.

“It really depends on the speed of the economic recovery,” said Brock.

“We seem to be stopping and starting a little bit so my sense is it has got a relatively long tail on it so it will take a little bit longer to come out.”

Kiwibank’s interest income also fell, down NZ$10.28 million to NZ$167.42 million.

'Hundreds of millions' flocks to no-term deposits

Meanwhile, Brock said Kiwibank’s recently launched ‘Notice Saver’ product, or no-term deposit which it touts as a New Zealand first, was going better than expected.

“We’ve probably got several hundred million dollars, and we’ve only been going a few weeks, already come into that account which is great,” Brock said.

“A lot of that has come to us from other banks as well, which is great.”

The Portfolio Investment Entity (PIE) compliant Notice Saver offers interest at 5.00% per annum and requires a minimum deposit of NZ$2,000. Savers can withdraw some, or all, of their money by giving Kiwibank 32 days notice. Brock said customers’ appeared to appreciate not having to “constantly ring up” when their deposit was due to mature.

In the September quarter Kiwibank's mortgage book grew by about NZ$279.3 million to NZ$9.9 billion. Of the other banks with September quarter GDSs out so far ANZ and Westpac recorded growth of about NZ$317 million and NZ$268 million, respectively, with ASB's mortgage book contracting.

Brock said although activity in the housing market had picked up a bit recently, it wasn't "anywhere near" the sort of lift normally seen at this time of year.

(Updates add mortgage book paragraphs).

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It is now clear why the present Gov't installed Cullen as Kiwibank Chairman.  Kiwibank is looking very vulnerable to any economic downturn and it can lay all the blame on Cullen and by association the Labour Party.  It couldn't happen to anybody more deserving.

FYI, Michael Cullen is chairman of Kiwibank's parent NZ Post and a Kiwibank director. Kiwibank's chairman is Ian Fitzgerald

When government-owned assets prosper, governments claim the credit. When those assets falter, governments seek to blame skapegoats.

Bulk of losses from business customers.  No wonder banks favour residential housing loans

Psssst!

Hey muzza.

The property pyramid scheme bubble has burst.

It burst a while ago.

Property prices are falling, listings are soaring, building consents are fading away to nothing, mortgage approvals are like hens' teeth, RE agents are all but extinct, PIs are too embarrassed to admit they are PIs, and no one intelligent, anywhere, is willing to waste money on property because it's still too expensive.

Rabobank has responded to Kiwibank's 32 day notice saver account by offering an inticement to maintain more on-call at 4%

It is offering a range of terms which are not spectacular and a small bait to tease money back of 6% for 6 months well ahead of the market. By only having a 48 hour offering you effectively must have the money sitting in Rabo. It is graba seat for banks.

Predictably this will encroach on Kiwi bank as people will return some in the hope of a bargain rate but the catch is they only get 4% instead of 5% while waiting. Rabo will initially offer frequent bargains and then turn the tap off as it has done in the past.

Kiwibank for me:although I have taken the bait. 6% for 6months  is too good to ignore.

Rabo's bankarate promotion is a joke.

The 6% for 6 months sold out well before the 48hours ended. It was like when the airlines offer $49 flights to somewhere and only have one seat to sell at that price.

I am a Rabo customer but the bulk of my funds are now in the Kiwibank notice saver.

I would rather get 5% PIE on 32 term than sit my money with Rabo at 4% fully taxed waiting for their stupid 5 minute promotions.

TSB offer draws to win cars when you sit your money in their no interest accounts.

Most savers can see through these stupid gimmiks. Banks should keep marketing to the borrowers. Savers aren't so stupid.

Marlarky,

I admit to owning some properties, but while any capital gain is always nice, that is not as important as having a good passive income stream. Not just property by the way. I am the last person who wants an expensive place to live in, no real point.  I'm young enough to go with the fluctuations and would agree with you that the  period 2001-07 was unusual, and prices needed to come back.  But as for a crash, I don't see house prices in NZ, other than in a few areas, as being very expensive, given most couples these days are dual income.  Guess time will tell what the situation will be in say 5 or 10 years time.