Kiwibank on track for record annual profit for second straight year

By Gareth Vaughan

Kiwibank appears set for record annual profit for the second year running with its profit for the first nine months of its current financial year already ahead of last year's record high.

Kiwibank's General Disclosure Statement for the nine months to March 31 shows unaudited profit after tax of NZ$83 million, which is already NZ$4 million ahead of the NZ$79 million Kiwibank recorded in the year to June 30, 2012. Prior to that, Kiwibank's record annual profit had been 2009's NZ$63.6 million.

The nine month profit was bolstered by a strong March quarter where the state owned bank's profit rose NZ$2 million versus the March quarter of last year, or 9%, to NZ$25 million. The increase was driven by a NZ$7 million fall in impairment losses on loans to just NZ$2 million. That's down from NZ$25.8 million in the March quarter of 2011 following the Christchurch earthquakes.

Total operating income was unchanged at NZ$106 million and operating expenses rose NZ$4 million, or 6%, to NZ$69 million. Net interest income rose NZ$2 million, or 3%, to NZ$67 million.

Mortgage growth not coming from high LVR lending

Meanwhile, Kiwibank grew residential mortgage lending by NZ$160 million in the quarter, or about 1.3% to NZ$12.236 billion. Based on Reserve Bank sector credit data, the overall market grew at about 1.5% in the March quarter. All of ASB, BNZ and Westpac, the three other big five banks to issue March quarter disclosure statements thus far, have recorded higher volume growth than Kiwibank.

At NZ$152 million, or 95%, the bulk of Kiwibank's home loan growth came through loans where the borrower has a deposit of at least 20%, or equity in the property of at least 20%. The percentage of its residential mortgage book by value at loan-to-value ratios (LVRs) above 80% was unchanged at 19%.

Deposits from customers fell NZ$49 million, or about 0.40%, to NZ$12.237 billion in the three months to March 31.

Total assets increased NZ$139 million to NZ$15.371 billion, total liabilities rose NZ$109 million to NZ$14.532 billion.  Total equity rose NZ$30 million to NZ$839 million. However, the bank's tier one capital ratio (which represents shareholders' funds in the bank), expressed as a percentage of total risk weighted exposures fell to 10.3% at March 31 from 10.6% at December 31. Its total capital ratio dropped to 12.5% from 13.5%.

Assets at least 90 days past due but not impaired fell NZ$3 million to 20 million, and gross impaired assets rose NZ$5 million to NZ$61 million.

This article was first published in our email for paid subscribers. See here for more details and to subscribe.