The bank hasn’t grown market share across its home loan and deposit books but has managed to increase income.
BNZ chief executive Anthony Healy said the “very strong result is a result of our focus on the core franchise.”
He said there has been good and careful cost management which has seen the cost to income ratio fall from 40.2% to 39.4%
“The cost to income ratio is in a good space,” he said.
BNZ’s net interest margin was up from 2.34% in September to 2.41% in this period even though more customers had moved to fixed rate home loans which had lower margins.
Overall its lending margin had come down 13 basis points because of competition from other banks, but that had been offset by by funding benefits that includes rolling off some of the expensive GFC funding and repricing some of the lower quality deposits.
“Our earnings on capital have improved that’s probably the single biggest thing that’s driving the margin improvement,” chief financial officer Adrienne Duarte said.
She said in a rising interest rate environment the bank earns more on its capital, and BNZ had “picked the right time to move from two year to three year investment rate.”
Total housing lending rose from $30.6 billion to $31.4 billion however its share of the market remained flat at 15.8%.
Healy said that is a good result as the bank was only competing in 75% of the market. As it moved into the broker space he expected to see the bank’s market share increase.
However he would not put numbers around how much it is forecast to grow.
Healy said he expects BNZ’s recent re-entry into the mortgage broker market to boost the bank’s home loan performance, and to position the bank 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. It extends our reach and will enhance BNZ’s capacity to help more New Zealanders to buy their own home.”
He said BNZ was “skewing investment to Auckland where there’s more growth and we are a bit under our natural share in Auckland.”
Around 40% of BNZ’s mortgage portfolio was in Auckland and Christchurch comes in at 15%.
The portion of lending to the over 80% LVR market has shrunk significantly from $5,049 million in September 13 to $3,403 million which represents 10.5% of its overall book.
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