By Gareth Vaughan
The country's smaller banks all managed strong profit growth in the June quarter, but found housing lending growth hard to come by in a market dominated by strong competition among the big banks.
The Co-operative Bank, SBS Bank, TSB Bank and HSBC posted rises in unaudited net profit after tax of 74%, 59%, 22%, and 22%, respectively, for the three months to June 30, their latest general disclosure statements show. But although three of the four grew total lending, the only one to grow residential mortgage lending was the Co-operative Bank, formerly PSIS, and the bulk of its growth came through loans with loan-to-valuation-ratios (LVRs) above 90%.
The June quarter saw banks battle hard for home loans in a low growth market by cutting advertised - or carded - fixed rates, offering significant discounts to advertised rates, paying cash incentives, and in some cases even paying break fees for other banks' fixed mortgage customers in order to win their business. Reserve Bank sector credit data shows housing loans up NZ$1.545 billion, or about 0.88%, to NZ$175.789 billion in the June quarter. ANZ New Zealand, the country's biggest bank and owner of both the ANZ and National banks, dominated, - growing its residential mortgage book by NZ$1.09 billion in the quarter.
In the three months to June 30 SBS' gross loans fell NZ$38.2 million, or 2%, to NZ$2.4 billion, and its residential mortgages, based on its LVR disclosure, fell NZ$24.7 million to NZ$1.71 billion. HSBC grew advances to customers by NZ$16.7 million to NZ$3.4 billion, but its residential mortgage book fell NZ$18.7 million to NZ$943.8 million.
The Co-operative Bank grew total loans by NZ$15.5 million to NZ$1.22 billion, with home loans up NZ$14.9 million to NZ$1.12 billion with the strongest growth from loans with LVRs above 90%, up NZ$8.8 million to NZ$61.6 million. TSB grew gross loans by NZ$23.8 million to NZ$2.78 billion thanks to growth in commercial and farming loans, as residential mortgages fell NZ$3.8 million to NZ$2.44 billion.
TSB's growth in commercial and farming loans - up NZ$16.8 million and NZ$12.3 million, respectively - comes after managing director Kevin Murphy outlined targeting growth in lending to these sectors, through a "conservative" diversification drive, to interest.co.nz earlier this year.
In terms of profit, TSB's rose NZ$2.6 million, compared with the same quarter last year, to NZ$14.4 million as net interest income rose 12%, net operating income 10%, and operating expenses fell 1% and impairment losses dropped 61%, or NZ$623,000 to NZ$395,000.
SBS' profit rose NZ$1.9 million to NZ$5.2 million, as net interest income and total operating income rose 10% and 12%, respectively, and operating expenses and provisions for credit impairment both recorded small, less than 1%, drops.
The Co-operative Bank's profit jumped NZ$969,000 to NZ$2.3 million with members' reserves rising NZ$1.4 million to NZ$130.9 million. Profit was helped by NZ$457,000 of fair value gains on swap contracts, and a 20% fall in impairment losses. Operating expenses fell 2% and net operating income rose 12%, well ahead of a rise of less than 1% in net interest income.
HSBC's profit rose NZ$2.6 million to NZ$14.5 million with net interest income up 6%, operating income rising 3%, provisions for loan impairments down 26%, or NZ$199,000 to NZ$557,000, and operating expenses down 15%.
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