Kiwibank mortgage book vaults through the NZ$10 billion mark

Kiwibank mortgage book vaults through the NZ$10 billion mark

By Gareth Vaughan

Kiwibank’s mortgage book probably pushed through the NZ$10 billion level late in 2010, less than nine years since the then Labour-Alliance government launched the state owned bank.

Kiwibank’s latest General Disclosure Statement (GDS), for the three months to September 30, had its mortgage book at NZ$9.88 billion having grown by about NZ$279 million in the September quarter. That was Kiwibank’s slowest quarterly mortgage growth since the June 2008 quarter when it wrote about NZ$262 million worth of new business. The September quarter increase means Kiwibank’s mortgage book has now grown by almost NZ$5 billion since June 2008.

Kiwibank spokesman Bruce Thompson said the bank, a subsidiary of New Zealand Post that opened its doors for business in February 2002, wouldn’t release its December quarter data until its half-year results presentation on February 24. However, Thompson said Kiwibank’s “special” one-year fixed mortgage rate offer of 6.15%, was proving to be “very effective in driving new business and contact with prospective customers.”

At NZ$9.88 billion, Kiwibank's mortgages comprise a huge proportion of the bank's NZ$10.7 billion in total loans and advances as of September 30, which in turn make up the bulk of Kiwibank's NZ$12.6 billion in total assets. Despite its stellar mortgage growth over the past three years, Kiwibank is still well behind its big four Australian rivals. ANZ's mortgage book sat at about NZ$54.7 billion as of September 30, with ASB's at NZ$42 billion, Westpac's NZ$34.4 billion and BNZ's NZ$27.7 billion.

The September quarter data put Kiwibank’s share of the mortgage market at 5.5%.

In mid-January, in the first mortgage rate cut of 2011, Kiwibank dropped its fixed one-year mortgage rate by 30 basis points from 6.45% giving it the lowest advertised one-year rate offered by a bank. See all bank mortgage rates here. Thompson said the original intention had been to keep the limited time offer open until at least the end of January but no date had been set to withdraw it.

Meanwhile, after a long spell in the doldrums, data out late last year showed some life in the housing market. Firstly, the Real Estate Institute of New Zealand (REINZ) reported a late spring bounce in property sales and prices in November. REINZ said the volume of sales rose 31.6% in November to 5,138 from 3,903 in October.

And Reserve Bank data showed weekly residential mortgage approvals hit their highest overall value and highest average value for 2010 in early December .

Aside from its one-year fixed mortgage rate special, Kiwibank CEO Paul Brock also launched a push in October to encourage potential first home buyers to take the plunge.

However, Kiwibank’s bottom line in its interim results is unlikely to be as impressive as its mortgage growth. Its September GDS recorded a 37% drop in quarterly profit to NZ$8.66 million from NZ$13.86 million in the same period of 2009. The drop came as the bank absorbed a 74% increase in impairment losses on loans to NZ$9.53 million from NZ$5.48 million.

Brock told at the time 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.

The interim results could, however, include further news on Kiwibank’s wholesale funding plans. In December Brock, named as new CEO replacing founding CEO Sam Knowles on September 1 last year, told the bank had established a European commercial paper programme and was hoping to tap the Australian debt market again soon for at least A$250 million.

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Kiwibank is one of the best things that happened to our banking sector for some time.

FYI Kiwibank says it will raise its one-year fixed rate 30 basis points back to 6.45% from 8am Friday (Feb 4). So the end to the "limited time" offer.