Excluding last year's one-off tax hit, TSB Bank June quarter profit fell 7% on rising expenses and impairments

By Gareth Vaughan

TSB Bank's June quarter profit fell 7%, when a one-off tax hit is stripped out of last year's June quarter, as operating expenses rose faster than operating income and impairment losses on loans more than doubled.

TSB's net profit after tax for the three months to June was NZ$11.758 million, up NZ$3.067 million, or 35%, from NZ$8.691 million in the same period of last year.

However, last year's figure was trimmed by a NZ$3.985 million deferred tax adjustment stemming from the government’s removal of depreciation on buildings. If that's added back, profit in the June quarter last year was NZ$12.676 million, NZ$918,000, or 7%, higher than this year.

TSB's June quarter net operating income rose NZ$344,000, or 1%, to NZ$27.937 million with net interest income up NZ$231,000, or less than 1%, to NZ$24.103 million. Meanwhile, operating expenses climbed NZ$1.527 million, or 17%, to NZ$10.588 million and impairment losses more than doubled to NZ$1.018 million from NZ$423,000.

TSB, which is owned by the TSB Community Trust, delivered a stronger quarter than fellow New Zealand owned bank Kiwibank. The state owned Kiwibank's June quarter net profit after tax fell NZ$3.575 million, or 35%, to NZ$6.506 million from NZ$10.081 million in the June quarter of 2010 with its impairment losses on loans NZ$22.2 million up from just NZ$4.9 million.

TSB grew total assets NZ$62.940 million to NZ$4.912 billion in the quarter, and total liabilities NZ$51.352 million to NZ$4.542 billion. Total gross loans rose NZ$33.596 million to NZ$2.676 billion.
 Meanwhile, 90 day past due - but not impaired - assets fell NZ$268,000 to NZ$7.719 million, and individually impaired assets rose NZ$513,000 to NZ$4.504 million. Retail deposits rose NZ$64.496 million to NZ$2.206 billion.

The bank's tier one capital ratio fell slightly to 15.64% from 15.78% at March 31, but its total capital ratio rose to 16.16% from 15.78%. The Reserve Bank prescribed minimums are 4% for the tier one capital ratio, which represents the shareholders' funds in the bank, and 8% for the total capital ratio.

TSB says so far it hadn't been hit by any individually impaired assets or significant past due, but not impaired assets, stemming from the February 22 Christchurch earthquake.

"The collective provision for doubtful debts has been reviewed following the February 2011 Christchurch Earthquake and the provision is considered sufficient," the bank says.

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