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Fatter floating rate margins help Kiwibank to triple profit

Wednesday 22nd August 2012

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State-owned Kiwibank more than tripled annual profit as it reaped the rewards from fatter margins in the drift to floating mortgage rates, and halved the charge on earnings caused by bad debts.

Net profit climbed to a record $79 million in the 12 months ended June 30, from $21 million a year earlier, the Wellington-based lender said in a statement. The bank squeezed more from its 800,000 strong customer base, with net interest income jumping 35 percent to $257 million on a 7.4 percent increase in gross interest income to $773 million.

Chief executive Paul Brock said the switch to floating rates from fixed rates helped boost the net interest margin compared to average assets to 1.79 percent from 1.47 percent in 2011.

The result is "a significant bounce back from the financial stresses of the last few years," Brock said.

The lender's result was bolstered by a smaller charge on impaired assets of $35 million in the 2012 year, compared to $79 million a year earlier. The bank increased its provisioning for bad debt to $91 million from $87 million.

Kiwibank boosted its loan book 8 percent to $12.4 billion as at June 30, while term deposits grew 9 percent to $11.56 billion.

The lender didn't pay a dividend to parent New Zealand Post, which is backing Kiwibank to deliver growth for the group as it expands beyond personal lending and into other financial services.

During the year, Kiwibank's immediate parent company bought Gareth Morgan Investments for an undisclosed sum. GMI manages more than $1.5 billion in funds, of which $640 million is held in KiwiSaver accounts, for more than 57,000 clients.

Brock said the bank will continue its push to nab market share in retail banking, and pursue small and medium-sized businesses more aggressively.

The lender's pitch to grab more of New Zealand's banking market share posed a potential threat to its AA credit rating with Fitch Ratings. The agency tagged the risk when assigning the rating in June.

Kiwibank's listed preference shares, which pay annual interest of 8.15 percent, fell 0.6 percent to $104.25 per $100 face amount.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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