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BNZ annual earnings rise 2.4% on lending growth, smaller bad debt charges

Thursday 30th October 2014

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Bank of New Zealand, the local unit of National Australia Bank, lifted annual earnings 2.4 percent as the lender lifted lending to businesses and households and reported smaller charges on bad debts.

BNZ's cash earnings rose to $807 million in the 12 months ended Sept. 30 from $788 million a year earlier, Australian parent NAB said in a statement. Net interest income rose 3.1 percent to $1.51 billion, while impairment charges on bad and doubtful debts (B&DD) shrank to $87 million from $99 million in 2013. Statutory net profit, which includes movements in the value of financial instruments and incorporates wholesale operations reported in NAB’s Australian banking unit, rose 22 percent to $850 million.

"Business lending experienced steady growth, and there was a solid pick-up in housing lending growth in the September 2014 half year," NAB said referring to its NZ banking unit. "Asset quality metrics improved and the charge for B&DDs fell over the year, but increased over the six months to September 2014 due to a small increase in specific charges."

The New Zealand unit contributed about 14 percent to Melbourne-based NAB's group cash earnings of A$5.18 billion in the year, which was down 9.8 percent from a year earlier due to A$1.5 billion of charges relating to higher costs of administering complaints in the UK,  software impairments, tax asset provisions and research and development tax changes. Group net profit, which includes movements in the value of financial instruments, fell 1.1 percent to A$5.3 billion.

NAB's board declared a final dividend of 99 Australian cents per share, payable on Dec. 16, and taking the annual payment to A$1.98.

The ASX-listed shares last traded at A$34.38, and have slipped 1. 3 percent this year.

The Australian group's BNZ unit increased its gross loans to $63 billion as at Sept. 30 from $60.6 billion a year earlier, grabbing market share in agribusiness and lifting mortgage lending 3.5 percent in the year. The residential lending growth was hampered by the Reserve Bank's restrictions on low equity lending from October last year and stiffer competition, the bank said.

BNZ chief executive Andrew Healy said that lending growth is expected to continue into the new financial year.

Net interest margins fell 2 basis points to 2.34 percent in the year, due to growing demand for fixed rate mortgage lending as a result of the Reserve Bank's four increases to the benchmark official cash rate, and increased competition. Still, cheaper funding costs offset the skinnier margins.

BNZ increased customer deposits to $42.6 billion from $38.5 billion a year earlier.

The bank's operating expenses rose 1.9 percent to $806 million mainly due to amortisation charges on completed projects, and the bank increased its full-time equivalent employees 1 percent to 4,718.

BNZ's KiwiSaver scheme, which it launched 18 months ago, has experienced rapid growth, and had $376 million under management as at Sept. 30.


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