BNZ interim net profit after tax drops 15% to NZ$298 mln as expenses and impairments rise

BNZ's half-year net profit after tax fell 15% as operating expenses rose, operating income fell and impairments on loans increased.

For the six months to March 31 the BNZ Banking Group's net profit fell NZ$54 million, or 15%, to NZ$298 million from NZ$352 million in the same period of its previous financial year. The drop came as total operating income fell NZ$15 million, or 2%, to NZ$889 million, and operating expenses rose NZ$23 million, or 6%, to NZ$409 million.

Andrew Thorburn, BNZ's CEO, said the bank's investment programme had contributed to the rise in operating expenses through the likes of depreciation charges on upgrading BNZ's branch and partners networks. Technology and marketing costs also rose. BNZ's KiwiSaver scheme, which launched in late February, has thus far signed up 8,500 customers. A BNZ spokeswoman told interest.co.nz the KiwiSaver scheme has NZ$22.5 million under management with NZ$500,000 being invested daily. During the half-year BNZ also launched YouMoney, its youth oriented banking service.

Agriculture lending marketshare up

Net interest income rose NZ$31 million, or 4%, to NZ$778 million boosted by volume growth in housing and business lending. Year-on-year BNZ has grown agribusiness lending marketshare by 95 basis points to 21.9%. Housing loan marketshare is down 20 basis points to 16.2%.

Impairment losses on loans, meanwhile, more than doubled to NZ$73 million from NZ$30 million, which BNZ attributed to higher specific provision charges on business loans. BNZ said its ratio of loans at least 90 days overdue plus gross impaired assets to total gross loans fell 8 basis points to 1.13% over the March half-year.

Separate figures provided for BNZ's New Zealand Banking Operations, which exclude capital management and wholesale banking and include insurance operations, show half-year cash earnings up NZ$2 million to NZ$387 million.  Gross loans rose NZ$1.1 billion, or 2% during the six months to March 31 to NZ$59.4 billion. Customer deposits increased NZ$1.7 billion, or 5%, to NZ$37.1 billion.

'This is a robust result for BNZ, testament to our continued investment in the things that really matter; our customers, staff and network," Thorburn said. "It's a great time to be a customer and more than ever we're intensely focused on innovating and investing for the benefit of New Zealanders, and our customer satisfaction ratings continue to perform strongly."

Half-year cash earnings across the big 4 up 6%

BNZ is the last of the big four banks to report half-year financial results following ASB, ANZ and Westpac. Combined the four recorded a NZ$99 million, or 6%, rise in cash earnings to NZ$1.804 billion. ASB and Westpac both recorded 7% rises and ANZ a 14% increase. Last year the four posted a combined NZ$392 million, or almost 30%, rise in cash earnings.

Meanwhile, key profitability measures show BNZ's cash earnings on average assets down 3 basis points to 1.27% in the six months to March 31 versus the same period of last year, but up 9 basis points from the six months to September 30, 2012. The net interest margin was up 2 basis points to 2.40% from the equivalent period of the previous financial year, but down 1 basis point from the six months to September 30. And BNZ's cost to income ratio was 40.3% versus 39.7% in the same period of last year and 41.4% in the six months to September 30.

During the half-year to March 31, BNZ's total assets increased NZ$1.1 billion, or 2%, to NZ$61.3 billion. Separately the bank said it's still to raise NZ$500 million of the NZ$1.4 billion in wholesale term funding it requires for the financial year to September 30. In January BNZ raised £250 million of three-year funding, its first transaction in British pounds since 2007.

BNZ's parent, National Australia Bank, posted a 3.1% rise in interim cash earnings to A$2.915 billion, below the A$3.14 billion consensus of analysts' expectations. NAB lifted its fully franked interim dividend by A3 cents, or 3.3%, to A93 cents per share. NAB's return on equity fell 30 basis points to 14.7%.

See BNZ's press release here and NAB's presentation here, and its big results release here.

(Updates add additional detail including KiwiSaver funds under management).