SBS Bank CEO hits out at "larger banks" discounting interest rates and incentives for new customers "at the expense" of existing customers as annual profit falls

SBS Bank CEO hits out at "larger banks" discounting interest rates and incentives for new customers "at the expense" of existing customers as annual profit falls

SBS Bank has posted a 17% fall in annual profit after tax and says its chairman Acton Smith, a "key player" in preventing the sale of SBS to Westpac in 1991,  is retiring.

The bank's CEO Ross Smith has also hit out at "larger banks" adopting a strategy of discounting interest rates and incentives for new customers "at the expense" of existing customers. recently reported that some banks are now prepared to pay, or contribute towards, break fees to help win business from customers on fixed-term mortgages with rival banks.

SBS's annual report out today shows the bank's net surplus after tax fell NZ$2.5 million, or 17%, in the year to March 31 to NZ$11.7 million from NZ$14.3 million the previous year. The main reason for the fall was a NZ$588,000 net loss from financial instruments designated at fair value compared with a NZ$5.1 million net gain in the year to March 2011. The operating surplus before this financial instrument loss,tax and the revaluation of investment properties was up NZ$348,000 to NZ$17.7 million.

Ross Smith said this operating surplus increase, growth in total assets and the strengthening of members’ equity (SBS is also a building society) were among the year's highlights.

“Our (asset) growth over the past 12 months has been a modest NZ$28 million (to NZ$2.84 billion), on the back of a slow housing market and aggressive competitor activity," Ross Smith said.

“Our priority, as always, is to look after both new and existing customers and to offer the same competitive rates and superior service to all, unlike the strategy the larger banks seem to have adopted whereby new customers get discounted rates and incentives at the expense of existing customers.”

In April SBS was named the Financial Institution of the Year in Roy Morgan Research's inaugural annual New Zealand customer satisfaction awards.

Meanwhile, Ross Smith said chairman Acton Smith, "instrumental" in shaping the course of SBS Bank over the last 21 years including 18 years as chairman, is retiring at SBS's annual general meeting on July 18. A new chairman is likely to be appointed from among the bank's existing directors.

“Acton was a key player in defeating the sale of SBS to Westpac in 1991. He pushed for bank registration as a mutual in 2008 and was an inspirational leader throughout the (2010) merger process with Hastings Building Society," Ross Smith said.

“There is no doubt Acton Smith will be remembered fondly as one of the most important directors in SBS Bank history."

SBS's annual report shows net interest income up NZ$6.3 million, or 10%, to NZ$69.9 million. Total operating income rose NZ$6.6 million, or 8%, to NZ$88.6 million, well ahead of a NZ$1.4 million, or 3%,rise in operating expenses to NZ$48.9 million. The bank's provision for credit impairment increased NZ$4.9 million, or 29%, to NZ$21.9 million.

At NZ$2.45 billion as of March 31, gross loans were down just under NZ$47.5 million from December 31 with residential mortgage lending NZ$17.2 million lower at NZ$1.749 billion. Agricultural loans fell NZ$18.1 million to NZ$385.4 million.

Assets at least 90 days past due rose NZ$3.3 million to NZ$11.7 million in the March quarter, and the year end net carrying amount of impaired assets was down NZ$4.7 million, year-on-year, to NZ$20.9 million.

Equity increased by NZ$2.5 million in the three months to March 31 to NZ$215.4 million, and members' equity rose NZ$12.8 million year-on-year to NZ$208.5 million. SBS' tier one capital ratio rose to 12.52% from 12.02% at December 31, and its total capital ratio fell to 14.35% from 14.58%. The Reserve Bank mandated minimums are 4% and 8%, respectively.

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i think sbs needs to grow by aquisitions .
heartland would be an obvious choice  for them to join with and issuing shares to all their customers.
then we would have a a reasonable size nz owned bank listed on the nzx as opposed to anz,westpac nab etc

Can't see an SBS-Heartland hook up, at least for now, given one's a mutual and the other's listed on the sharemarket. However, I did float this idea a while back -

Totally agree.
The Australian owned banks in NZ are extracting oligopoly (near monopoly) profits. We need to see mergers of a number of the smaller NZ banks & mutuals & building societies to provide some serious competition.

Just what is wrong with Australian Owned banks . Some kiwi folks  in this country and overseas need to get over their petty small minded bank xenophobia .
Aussie banks employ many many many Kiwis and are quite likely in the top 10 ten biggest taxpayers in the NZ  . Based on that they are a significant source of Govt Cashflow.
NZ run financial insitutions on the other hand  like SBS are high risk , likely to be bailed out and cost the taxpayer an arm and leg. e.g. Kiwibank  old BNZ , SCF , Bridgecorp , Blue Chip etc etc
I see you are a Kiwi overseas .. Stay there.

This may become reality if we do that -

Ask a mortgage broker hw hard it is to retain existing customers when the big players decide to acquire customers by luring them with paying break costs and other incentives. A big question on the authorities who are monitoring compliance matters as there is clear churning of business

SBS seems to be hitting out at a competitive market, perhaps they could give us some insights into the parent vs group result this year and the large dividend that looks to prop up their surplus

Discounts "are being offered  " to new and existing clients of the BANKS so the love is being shared but clearly not by the good folk at SBS , HBS, NBS and other small time finance companies .
Possibly the rationale is because they are in a pretty flaky financial position and could  not afford the impact it may have on something like Actons salary.
These are the very same insitutions who promote they do not lend over 80% to home borrowers however they do the welcome home loans like no tomorrow where a client gets the other 20% from the state.
Go figure.
Also I wonder what the % of salaries to net profit was in SBS. By all accounts Acton enjoy your retirement fella.

Not sure the chairman's salary is relevant your you make some other good points.

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