BNZ half-year profit clocks in at NZ$502m; Gets NZ$500m capital injection from parent NAB

BNZ's half year profit has risen almost 28% with income up nearly 17% and expenses falling slightly.

The bank's profit for the six months to March 31 rose $109 million, or 27.7%, to $502 million from $393 million in the same period of last year.

The rise came as net interest income rose 6% to $850 million, and total operating income surged 15.7% to $1.165 billion.

The operating income lift was helped by $133 million worth of gains less losses on financial instruments, such as the bank's term wholesale funding, versus a loss of $8 million in the March half last year.

Operating expenses fell $2 million to $420 million, and impairment losses on loans increased 23.7% to $47 million.

Cost to income ratio just 36.1%

BNZ reported a staggeringly low cost to income ratio of just 36.1%, down 580 basis points from 41.9% in the March half last financial year. The bank attributed this to outperformance from its market business.

Chief financial officer Adrienne Duarte suggested a 39.4% cost to income ratio, down from 40.2%, reported by parent National Australia Bank (NAB) for "NZ banking operations" as opposed to the "NZ banking group" one of 36.1%, was more indicative. 

Earlier this week ANZ NZ and Westpac NZ reported cost to income ratios of 38.3% and 40.6%, respectively.

Meanwhile, BNZ's net interest margin was unchanged at 2.27%, but down two basis points from the second-half of the bank's last financial year. ANZ's was also 2.27%, and Westpac's 2.29%.

"This result is an extremely pleasing one, reflecting the underlying growth momentum we are building, and is testament to the efforts of all of BNZ's people over the past six months to deliver for our customers," BNZ CEO Anthony Healy said in a statement.

Gross loans rose $1.5 billion, or 2.4%, in the six months to March 31 reaching $65 billion. Customer deposits were up $1.4 billion, or 3.2%, to $44.8 billion. BNZ's total assets rose $5.2 billion to $82 billion, and its total liabilities increased $4.4 billion to $75.5 billion.

Capital injection from NAB

The results also show NAB tipped NZ$500 million into BNZ on March 24 by subscribing for ordinary BNZ shares. That means as of March 31, BNZ's key regulatory capital ratios - common equity tier 1, tier 1 and total capital ratio - were at 10.79%, 11.85% and 12.90%, respectively. The Reserve Bank minimum requirements are 7%, 8.5%, and 10.5%.

BNZ, which in April announced it was resuming offering home loans through mortgage brokers for the first time in 12 years, said its share of housing lending dropped to 15.8% at March 31 from 15.9% at September 30 last year.

Healy said re-entry to the mortgage broker market should boost BNZ's home loan performance, and position it strongly in the high-growth Auckland market.

"We know that 25% of customers choose to use a broker, so our decision made strategic and commercial sense," said Healy.

NAB's A$5.5b rights issue

NAB itself unveiled plans for a A$5.5 billion rights issue to boost its capital position, which is the equivalent of 194 million new ordinary shares, or 8% of issued capital. NAB's interim cash earnings rose 5.4% to A$3.32 billion, and its half-year dividend was unchanged at A99 cents per share.

Now led by ex-BNZ CEO Andrew Thorburn, NAB also confirmed plans to exit its British subsidiary Clydesdale Bank by the end of 2015. And NAB announced chairman Michael Chaney will retire in December and be succeeded by former secretary to the Australian Treasury, Ken Henry.

Here's BNZ's press release.

Here's NAB's press release.

Here's NAB's presentation, and here's NAB's full results release.