TSB lifts mortgage market share but profit drops

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TSB Bank grew its share of the mortgage market slightly in the June quarter but net profit fell sharply due to factors such as interest expense growing faster than interest income and tax changes.

Tuesday, August 24th 2010, 5:46AM

by Jenny Ruth

According to its June quarter general disclosure statement, TSB's mortgage book grew $56.6 million to $2.24 billion in the three months.

Using Reserve Bank figures as a proxy for the market, TSB's share of mortgages written by registered banks rose to 1.36% at June 30 from 1.33% at March 31 and from 1.22% at June 30 last year.

Of TSB's mortgage book, 17.1% had loan-to-valuation ratios (LVRs) above 80%, up from 16.3% three months earlier, and 9.7% had LVRs above 9.7%, up from 8.9% at March 31. Much of those loans were government-backed Welcome Home loans which totalled $197.9 million at June 30 compared with $177.5 million at March 31.

TSB's net profit for the three months fell 41.6% to $8.7 million after a near $4 million one-off non-cash tax charge, reflecting changes to depreciation rules and the company tax rate dropping from 30% to 28%.

Net interest income was down 15.4% to $23.9 million. While interest income rose 4.7% to $62.6 million, interest expense was up 13% to $42.3 million. Changes in the value of derivatives accounted for the rest of the shortfall.

TSB's charges against profit for bad loans are falling, in line with other banks. Such charges fell to $376,000 in the latest three months from $454,000 in the June quarter last year.

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