Kiwibank annual profit surges 276% to record high of NZ$79.1 mln on higher net interest income and falls in expenses and impairment allowances

Ten year-old Kiwibank has posted record annual profit, and a 276% year-on-year profit jump, as customers switching from fixed to floating mortgages helped push up net interest income 35%. The bank also benefited from a drop in expenses and lower impairment allowances.

The bank, a subsidiary of state owned enterprise New Zealand Post, said today profit after tax for the year to June 30 surged NZ$57.9 million to NZ$79.1 million from just NZ$21.2 million the previous year.  The record annual profit came despite Kiwibank recording its lowest annual lending growth yet of 8%, which was below last year's 10%. Annual deposit growth, at 9%, was the second lowest recorded after 3% in 2010.

Kiwibank's previous record annual profit of NZ$63.6 million was made in the year to June 30, 2009.

Chief executive Paul Brock said lending over the year rose about NZ$900 million to NZ$12.4 billion and customer deposits increased about NZ$1 billion to NZ$11.6 billion.

Brock said the strong results were largely attributable to net interest income increasing during the year as customers switched from fixed to floating mortgages. Kiwibank's net interest margin rose to 1.79% from 1.47%.

Banks' bottom lines have been bolstered by customers' switching to floating, or variable, rate mortgages from fixed-term ones over the past couple of years. Banks do better out of floating mortgages because the margin between the variable rate and short end of the yield curve, such as three month bank bills, is higher than the margin between the swap rate and fixed rate mortgages.

The overall industry percentage of home loans by value on floating rates hit its highest level of 63% in April since the Reserve Bank began keeping fixed v floating records in 1998, but has since dropped back slightly. Brock said about 60% of Kiwibank's home loans by value were now floating up from about 56% at June 30 last year and 38% at June 30, 2010.

Kiwibank's net interest income rose NZ$66 million to NZ$257 million. The bank's impairment allowances more than halved to NZ$35 million from NZ$79 million and total annual expenses fell NZ$13 million, or 4%, to NZ$308 million.

Brock said customer deposits accounted for 83% of all bank funding and the annual result represented “a significant bounce back from the financial stresses of the last few years”. However, he said the economy was “not yet out of the woods” and provisioning for bad debts remained a concern. Total provisions for impairment losses stood at NZ$91 million as at June 30, up NZ$4 million year-on-year.

Meanwhile, Kiwibank said its operating expenses to total income ratio fell to 65.1% from 68.5% and its impaired assets fell NZ$22 million to NZ$84 million, or 0.67% of gross loans from 0.92%. Total capital increased NZ$48 million, or 7%, to NZ$785 million.

See Kiwibank's media briefing document here.

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10 Comments

good - we can expect  no more huge queues at their branches then  -  yeah right !

I've seen a Kiwibank at lunch time with no queue whilst the Aussie bank on the other side of the mall had a queue out of the door.  Play fair.

where was that ?                 plus  ask elderly  Miramar clients what they think about having to go to Kilbirnie

Henderson Mall.

'Making off like a robbers dog'

This is very good news , but I have 2 controversial  questions :
1) when are we going to get a chance to buy some shares in KIWIBANK ?
and 
2) When does the Tender for Government Banking work ( currently with Westpac) come up for review ?

i doubt we will be offered shares in kiwibank anytime soon.
it would be political suicide.
kiwibank is run by nz post so the odds of them going public are minimal.
may i suggest purchasing shares in heartland before they become a bank and then hopefully the shares will climb rapidly until an overseas bank gobbles them up.

I guess the depositors subsidising the profits will no doubt be expecting a "surprise" postal invitation to accept a higher deposit interest rate. It is obvious from Westpac's mortgage rate discount offer to accountants that there is a fair bit of fat in the sytem for the "entitled".
 
When will the RBNZ Governor see fit to lift the "emergency"  2.5% OCR rate to allow all cohorts in the community to get a fair suck at the teat?

KBank service is just fine - I use the Ponsonby and the Customs St (I think! - building with US consulate in) very often and these are busy places - I have not had to wait very long and even if I wait a few minutes the staff almost certainly thanks me for my patience - great service attitudes! Having the dedicated Kiwi Bank queues works pretty well too. Good on ya Kiwibank - great bank  creating high value jobs in NZ instead of Melbourne......nice!

Don't they run Aussie software?