Squeezed margins hit newest bank

The costs of becoming a bank and squeezed margins saw The Cooperative Bank's profit fall sharply in the September quarter but its mortgage book grew.

Monday, December 5th 2011, 3:43PM 1 Comment

by Jenny Ruth

The Cooperative Bank, reporting for its last quarter as PSIS ahead of gaining bank registration on October 26, saw net profit drop to $0.44 million in the three months ended September from $1.92 million in the same three months last year.

Net profit for the six months ended September fell to $1.75 million from $4.34 million in the first half last year.

Chief executive Girol Karacaoglu says becoming a bank cost the cooperative $860,000.

Having to pay more for deposits and fewer high-margin personal loans also meant the bank's profit margin was squeezed. Net interest income fell 26.3% to $9.9 million in the quarter.

On the positive side, charges against profit for bad loans are abating, falling to $553,000 in the latest quarter from $725,000 in the September quarter last year.

The bank's mortgage book is growing at about the same pace as the mortgage market generally, Karacaoglu says.

The book grew by $15 million in the September quarter to $1.08 billion and by $53.8 million in the year ended September.

That means HSBC remains the smallest of the home-lending banks. HSBC's September quarter disclosure statement shows its mortgage book shrank $11.9 million to $979.6 million in the three months, more than reversing the $7.9 million growth shown in the June quarter.

Nevertheless, HSBC's net profit jumped 63.8% to $19 million for the three months ended September, mainly because of a write-back of previous charges against profit and a surge in fee and commission income.

HSBC wrote back $0.2 million in charges against profit for bad loans in the September quarter compared with the $2.3 million charge in the September quarter last year.


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Comments from our readers

On 6 December 2011 at 10:31 am Andy Holler said:
I wrote 6 month ago that the OCR has to fall at lest another 50 points. Its in relation to the EC far to high. This artificial keeping high of the OCR has kept NZ economy cruising on an almost stagnant economy recovery if one could call this economy a positive one at all!!. Profit margins have been smaller for banks but still very good and one wonders how long the reserve bank can justify such a high OCR when the rest of the world is around zero%. The NZ economy needs a real stimulus to come out of an apathetic situation.
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