Kiwibank half-year profit almost trebles to NZ$37.9 mln with impairments down and net interest income up

State owned Kiwibank says its profit almost trebled in the six months to December as net interest income surged and impairments on loans fell. The bank also said it received a NZ$50 million capital injection in December.

Kiwibank said net profit rose NZ$24 million to NZ$37.9 million from NZ$13.9 million in the same period of last year. Net interest income rose 38% to NZ$123 million from NZ$89 million with net interest margins up 27 basis points to 1.69% with customers switching to more lucrative floating mortgages from fixed-term ones continuing to help. Impairments fell NZ$13 million, or 42%, to NZ$18 million from NZ$31 million.

The bank raised NZ$50 million in fresh equity in the period by issuing 50 million new shares to its parent NZ Post. Total capital rose NZ$96 million, or 13%, year-on-year to NZ$824 million helped also by retained earnings.

Lending rose by NZ$1.1 billion, or 10%, to NZ$12.1 billion with CEO Paul Brock attributing much of the growth to Kiwibank winning customers over from rival banks in a deleveraging environment. The lending growth came "right across the country," Brock said, although the majority was in Auckland.

Kiwibank grew retail deposits by 13% to NZ$8.6 billion.

Its cost to income ratio improved to 65% from 70% with a NZ$35 million, or 21%, rise in total operating income to NZ$204 million outstripping a NZ$15 million, or 13%, rise in operating expenses to NZ$133 million.

See Kiwibank's press release below and see the bank's briefing document here

Kiwibank has declared a profit of $37.9 million after tax for the six months ended December 31, 2011. This compares with a profit after tax of $13.9 million for the same period in 2010, and $23.5 million in 2009.

In the six months from July 1, 2011 to December 31, 2011:

Total lending (home loans, business banking and credit cards) increased 5% from $11.5 billion to $12.1 billion

Retail deposits increased 8.6% from $7.9 billion to $8.6 billion

Kiwibank Chief Executive Paul Brock said the bank was clearly continuing a very positive growth path after its results for the previous reporting period were severely undermined by the global financial crisis and the Christchurch earthquakes.

“Our underlying performance has always been strong with consistent growth in lending and deposits and improving margins. We have largely worked through the set backs associated with the global economy and with the events in Christchurch . However there is still much to be done in Christchurch and Kiwibank is committed to being involved in the city’s recovery.”

Mr Brock said that throughout the year Kiwibank has maintained a strong focus on customer funding with deposits now accounting for 86% of all bank funding.

Impaired assets to total asset ratio has improved from 0.76% in June 11 to 0.69% in December 11.

Mr Brock said the bank is now approaching its 10th anniversary and the success of the bank is beyond question.

“We have retained our AA- credit rating”. Importantly we have moved through a very challenging economic cycle in very good shape and the bank’s profitability continues to grow.”

Mr Brock said the bank is determined to offer a competitive alternative in the home loan and deposit markets and to grow its market share, particularly in the small to medium business sector.

“We now have more than 800,000 customers and have absolute confidence that we can continue on our growth path.”

(Updates with video interview with CEO Paul Brock, adds additional detail).