SBS Bank profit rises as term deposits grow at twice the rate of lending

By Gareth Vaughan

SBS Bank recorded a 19% rise in net profit for the December quarter as net interest income rose and its provision for credit impairment fell.

SBS's latest General Disclosure Statement (GDS) shows net profit of NZ$4.5 million in the three months to December, up about NZ$719,000 from NZ$3.8 million in the same period of 2009.

For the nine months to December SBS's net interest income rose NZ$2.6 million, or 6%, to NZ$46.5 million. Its provision for credit impairment fell NZ$1.7 million, or 16%, to NZ$8.9 million.

SBS, which acquired the Hastings Building Society (HBS) last October in what it sees as its first step towards creating a national community bank, recorded a big drop in 90 day past due assets. In contrast to the bigger banks most of whom are seeing their 90 day past due assets rise, SBS's fell by NZ$6.4 million, or 47%, to NZ$7.3 million at December 31 from NZ$13.6 million at September 30.

However, the carrying value of its individually impaired assets rose by NZ$5.9 million, or 62%, to NZ$15.5 million. And SBS's assets past due by less than 90 days climbed in value by NZ$11 million, or 45%, to NZ$35.4 million in the December quarter.

Gross lending rose NZ$149 million, or 6%, to NZ$2.62 billion in the three months to December. Redeemable shares, the source of the bulk of SBS's term deposit money given that as a building society SBS's investors are its shareholders, rose by NZ$240.5 million, or 12%, to NZ$2.2 billion.

Meanwhile, SBS increased the acquisition value, or deemed consideration, for HBS to NZ$15.7 million from the NZ$15.3 million provisional value in its previous GDS.

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