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BNZ annual cash earnings rise 7.9% as increased lending, fatter margins offset dairy write-downs

Wednesday 28th October 2015

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Bank of New Zealand, the local unit of National Australia Bank, increased annual cash earnings by 7.9 percent as the lender took fatter margins from an expanding loan book, offsetting increased write-downs on its dairy sector loans.

Cash earnings for the BNZ group, which includes the bank's capital management and market operations units, rose to $966 million in the 12 months ended Sept. 30 from $895 million a year earlier, the lender said in a statement. Net profit jumped 22 percent to $1.04 billion, with operating income up 14 percent to $2.43 billion.

Stripping out the capital management and market operations units, the New Zealand banking segment's cash earnings rose 2 percent to $823 million on a 4.4 percent increase in operating income to $2.09 billion. lagging behind gains in NAB's other divisions.

"Good underlying profit growth was partly offset by higher collective provision charges in the September 2015 half year, predominantly relating to the dairy sector," NAB said in its group results. "Revenue rose 4 percent with improved lending volumes and higher margins."

The wider NAB group reported a 16 percent increase in cash earnings to A$5.84 billion on a 4.2 percent rise in operating income to A$19.3 billion. Net profit climbed 20 percent to A$6.34 billion, and the board declared a final dividend of 99 Australian cents per share, fully franked.

NAB also announced the sale of 80 percent of its life insurance business to Japan's Nippon Life Insurance Co for A$2.4 billion, which will result in a loss on sale of about A$1.1 billion, and confirmed an initial public offering of its UK based Clydesdale Bank.

Australian banks have been raising capital to firm up their balance sheets in response to more stringent regulatory capital requirements.

NAB's New Zealand banking arm expanded its gross loans and acceptances to $65.8 billion as at Sept. 30 from $63 billion a year earlier, though lost market share in home lending after strong competition and the use of mortgage brokers left it behind until it started using brokers in May of this year. BNZ also lost ground in cards after losing its GlobalPlus rewards programme, which was tied to Air New Zealand's AirPoints loyalty scheme.

Still, margins widened to 2.39 percent from 2.34 percent a year earlier, as cheaper funding costs and higher returns on capital offset the stiff competition in the mortgage market.

The bank's collective provisions rose to $375 million from $278 million a year earlier, with a lower dairy payout expected to put pressure on farmers' cash flows. The lender's market share of agribusiness was largely unchanged at 22.2 percent.

BNZ chief executive Anthony Healy said the lender has taken a conservative approach to the dairy sector to recognise a period of lower and more volatile prices.

"Asset quality in our agri and dairy books remains extremely sound," Healy said. "We are well placed to continue supporting our farming customers through a more volatile trading period."

 

 

 

 

BusinessDesk.co.nz



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