Jump in net interest income pushes Kiwibank's half-year profit to almost $100 million

Kiwibank's half-year profit surged 53% as income, boosted by a strong rise in net interest income, jumped.

Kiwibank's unaudited net profit after tax for the six months to December 31, 2022 rose $34 million, or 53%, to a record high of $98 million from $64 million in the first-half of its previous financial year.

The bank's total operating income rose $87 million, or 27%, to $415 million, with net interest income up $88 million, or 30%, to $386 million.

Net interest income is the difference between the revenue generated from a bank's interest-bearing assets such as loans and the expenses associated with paying on its interest-bearing liabilities such as deposits.

Operating expenses rose $31 million, or 13%, to $263 million. Loan impairments increased $5 million, or 71%, to $12 million.

CEO Steve Jurkovich said Kiwibank grew home lending by $600 million, or 1.5 times banking system growth, during the first half, as it continued deepening its relationship with mortgage advisers and grew its own home loan specialist team.

Lending growth to businesses came in at $500 million, which was 4.2 times banking system growth.

“Being 100% New Zealand owned is a key reason why New Zealand businesses continue to choose us,” said Jurkovich.

As of December 31, Kiwibank's gross lending sat at $28.975 billion. Of that, $23.822 billion was housing lending, with other term lending at $4.155 billion. Total credit impairment provisions were at $75 million.

Kiwibank has seen no significant increase in home lending defaults within normal seasonal levels Jurkovich said, adding this could change "over the following period" and had been reflected in the bank’s loan provisioning. He said the second half of Kiwibank's financial year, the six months to June 30, would likely be dominated by the impact of higher interest rates, rising inflation, and recent extreme weather events in the North Island.

“Banks have to be able to be resilient to significant shocks, tougher market cycles and conditions. We are ready to do that,” Jurkovich said.

“Right now, our team is focused on providing customers with access to the information and tools they need to make informed decisions. We continue to encourage customers to contact us if they need to discuss their situation, and we’re contacting customers directly who we think may need support,” said Mr Jurkovich.

“The exact support we can offer will depend on personal circumstances but could include reducing repayments to the minimum regular amount, restructuring the loan, extending the loan term or temporary interest-only repayments.”

Kiwibank will make an initial donation of $250,000 to the storm recovery effort, he said, in addition to support it has already provided through the donation of generators to isolated communities.

As of December 31, Kiwibank's common equity tier one capital ratio, as a percentage of risk weighted assets, was 10.4%. That was unchanged year-on-year. Total capital stood at $2.307 billion.