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However, its net interest income jumped 52% and its mortgage book appears to have continued to grow much faster than its market share.
Kiwibank's latest disclosure statement shows net profit for the three months ended March plummeted to just $0.8 million from $12.2 million in the same quarter of 2010. That took net profit for the nine months ended March to $14.7 million, down 59%.
Charges against profit jumped to $25.8 million from just $3.2 million in the March quarter last year, taking charges for the nine months ended March to $56.8 million from $12.9 million in the year-earlier nine months.
A disproportionate share of the bad loans are to businesses in Christchurch - Kiwibank started to lend to small to medium sized businesses about six years ago.
The bank says total impaired assets rose from $64 million to $90 million in the three months and of this, $14 million relates to businesses in Christchurch impacted by the earthquake. The remainder relates to a variety of corporate and residentially-secured loans, Kiwibank says.
David Tripe, head of banking studies at Massey University, says when most other banks were showing mounting bad loans over the past couple of years, Kiwibank was showing very low levels.
"Undoubtedly, some of it will be due to the quake but part of it is Kiwibank's taken much longer for the problems to hit home," Tripe says.
"That may be a consequence of less experience at identifying and managing problem loans." The latest quarter's bad loan charges equate to about 0.75% on an annualised basis of Kiwibank's total assets of $13.85 billion at March 31.
Westpac and ANZ Bank were reporting similar levels of bad loan charges a year or two ago, he says.
Kiwibank's net interest income rose to $51.3 million in the three months from $33.7 million in the year-earlier quarter. The bank attributes this to borrowers switching to higher margin floating rate loans away from fixed-rate loans and to a flattening cost of funds as hedging on its fixed-rate loan book rolled off.
Having adopted new reporting rules from the latest quarter, Kiwibank no longer provides the figures goodreturns.co.nz has been using to measure banks' mortgage books since 2002 in its "off" quarters - its first and third quarters.
Its loan-to-valuation ratio (LVR) table shows its on-balance sheet mortgage exposures grew by $245 million to $10.33 billion in the three months ended March.
That's faster than the $194 million growth by the same measure shown in the December quarter. In the year ended March, Kiwibank's mortgage book grew $1.03 billion by this measure. Unlike most of the other banks, Kiwibank didn't provide information about its off-balance sheet mortgage exposure, loans approved but not drawn down.
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