Kiwibank's annual profit fell 9% as its net interest margin dropped 15 basis points to 2.10% against the backdrop of aggressive competition in the home loan market including from ANZ New Zealand, CEO Steve Jurkovich says.
The net interest margin is the difference between what a bank borrows money at through the likes of deposits and what it lends it out at.
Kiwibank's net profit after tax for the June year fell $17 million, or 9%, to $174 million from $191 million in the June 2025 year.
Operating income rose 3% to $938 million and operating expenses climbed 6% to $656 million. That saw the bank's cost-to-income ratio rise 206 basis points to 69.9%. Net interest income rose 2% to $873 million. Net gains on financial instruments, such as interest rate swaps and hedging, rose $8 million to $18 million.
Meanwhile, Kiwibank's credit impairment charge rose 41% to $41 million. The bank says 0.27% of its gross loans and advances were at least 90 days past due at June 30, and another 0.18% were impaired.
Kiwibank says it grew home loan and business lending by $3.1 billion, topping key competitors, and lifting total lending to $38.9 billion. Home loans grew $2.1 billion and business lending grew $1 billion.
Deposits increased $2.4 billion to $32.7 billion. Kiwibank says, as of June 30, it had 6.3% lending market share and 6.6% deposit market share.
Kiwibank aims to be competitive & consistent in home loan market
Jurkovich told interest.co.nz the second-half of the bank's financial year was very competitive, notably with ANZ NZ, the country's biggest home lender, having an aggressive cashback offer to home loan borrowers, and rising wholesale interest rates.
"When ANZ was offering up to 1.5% cashback, that turns out to be some pretty big numbers that you're up against. So that's just one example of where the bank behavior [is] around the way they feel about the lifetime value of a loan, what they want to do to attract business, to get momentum and all those sorts of things," Jurkovich says.
"I'm not in someone like Antonia or Ben's head, but that was very competitive." Antonia Watson is ANZ NZ's CEO, and Ben Kelleher, ANZ NZ's Chief Risk Officer, is succeeding Watson as CEO on October 1.
Jurkovich says Kiwibank didn't match the ANZ NZ cashback offer, but has been offering cashbacks of its own. The bank wants to be very competitive but not "the cheapest or the most generous every day."
"We don't come and go from [mortgage] brokers. So those are the sorts of things that I hope they value. And actually through the course of the year, they showed pretty good support for that."
"We did 11% of all net new mortgage growth overall, and we had consistently the lowest variable loan rate, and we had the lowest or the joint lowest 12-month rate 83% of the time, and the joint lowest 24 [month rate] 50% of the time. So for a player that's our size, I think we've proved that we can be competitive. But more importantly, I think we proved we're consistent," says Jurkovich.
'Scrapping for deposits'
In terms of the interest rate outlook, Jurkovich says there are probably "a couple of OCR [Official Cash Rate] rises coming in the next little while with inflation where it's at." And he says competition is also strong among banks for savers.
"That [savings] is the fuel that supports our lending. We did well there on deposits, we grew by $2.4 billion. But it is competitive. And for those people that rely on deposits as being the primary income, a bit of inflation and higher OCR is a net positive for them."
"But we have to keep scrapping for the deposits. Everyone's after them," he says.
Regardless of the state of the economy, Jurkovish says Kiwibank's focus is on maintaining momentum through customer and market share growth.
"Kiwibank helped nearly 8,000 Kiwi get on the home ownership ladder, including more than 3,200 first-home buyers, and supported nearly 5,500 customers to refinance."
Jurkovich says Kiwibank's "investing more than ever" to boost digital capabilities and its physical banking network.
Eye on TSB, albeit bank mergers 'quite tricky'
Meanwhile, Kiwibank's parent company Kiwi Group Capital, has an eye on the proposed Heartland Group Holdings takeover of TSB, with TSB shareholder the Toi Foundation facing a legal challenge.
"We believe in building a stronger New Zealand-owned banking alternative for the good of New Zealanders and we consider opportunities that support that. We would have interest in engaging with Toi Foundation and exploring what we could do together but that would be at their discretion and following the outcome of the current process between TSB and Heartland," says Kiwi Group Capital Chairman David McLean.
On top of the TSB situation, NZ First leader Winston Peters wants to buy BNZ from National Australia Bank and merge it with Kiwibank.
Despite this backdrop Jurkovich says he's not worried about Kiwibank being a political football, and the bank's staff have to focus on what they can control. He also acknowledges bank mergers have traditionally proved challenging to pull off, and almost all NZ banks are undergoing technology transformations of some sort.
"And if you think about bringing one of those banks together with another bank who's got its own set of interesting and fascinating things to do, that's not trivial. And so the history of mergers globally has proved that that's quite tricky," Jurkovich says.
"So if you're growing 8% year-on-year and you're winning [market] share, I think that's the thing I want to focus on."
The table and chart below come from Kiwibank's annual results investor presentation.
1 Regulatory Loan-to-Valuation Ratios (LVR) are calculated in compliance with the Reserve Bank’s requirements.
Kiwibank's press release is here, and the bank's investor presentation is here.
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