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Kiwibank's annual profit eases as fee income drops

Kiwibank’s annual net profit fell $7 million, reflecting both lower fee income and one-off gains in the previous year.

Friday, August 23rd 2019, 1:12PM

by BusinessDesk

Steve Jurkovich

Net profit fell to $108 million for the year ended June despite net interest income rising 8.3 percent to $445 million.

Gross fee and other income fell to $185 million in the year from $211 million.

“We had a record year for lending and deposit growth, margins generally remained firm, but profits were down slightly. A contributing factor was a reduction in fee income which is great for our customers,” says chief executive Steve Jurkovich in the results announcement.

Kiwibank’s customer lending and deposits both grew by $2.1 billion for the year, up 12 percent and 13 percent respectively at $20.4 billion and $18.24 billion. Net interest margin fell to 2.11 percent from 2.20 percent.

Jurkovich says the rise in net interest income reflects more customers joining Kiwibank while the bank cut banking fees by $12 million and revenue from bill paying for New Zealand Post fell by $7 million.

Income from insurance payments also fell $12 million.

NZ Post owns 53 percent of Kiwibank and its other two shareholders are the New Zealand Superannuation Fund with 25 percent and ACC with 22 percent.

“Kiwibank is adjusting its business strategy to meet the changing preferences of customers. We are investing in our own branches where customers wish to interact with us face-to-face as well as developing our technology capabilities,” Jurkovich says.

“Kiwibank and NZ Post businesses are responding to different customer demands. Although sometimes challenging, this move to increased independence for Kiwibank brings opportunity,” he says.

“In simplifying our business, we can focus on the areas that make the biggest difference for our customers and their long-term financial well-being.”

Kiwibank’s purpose is to make Kiwis better off, Jurkovich says.

“Our founding vision was for New Zealand to have a real and credible alternative to the offshore-owned banks. That remains at the heart of who we are and why we exist.”

Kiwibank’s return on equity fell to 6.4 percent from 7.3 percent due to retained profit reinvested.

Bad debts increased by $10.7 million which the bank says was driven by “select business loans” – business lending grew 36 percent in the year.

“Over the past 12 months, we have made progress in supporting more of New Zealand’s medium-sized businesses,” it says.

The cost-to-income ratio rose from 69.2 percent to 69.7 percent, reflecting investment in technology, people, the physical footprint and other costs.

Kiwibank’s tier 1 common equity ratio fell to 12.4 percent at June 30 from 13.4 percent a year earlier.

Total capital fell from 15.8 percent to 14.5 percent. Kiwibank says “uncertainties remain” because the Reserve Bank’s bank capital proposals remain under consultation.

If RBNZ sticks to its current plans, Kiwibank will have to increase its tier 1 common equity to 15 percent over a five-year period.

Tags: Kiwibank

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ANZ 5.19 4.15 ▼4.04 4.49
ANZ Special - 3.65 ▼3.54 3.99
ASB Bank 5.20 4.15 4.09 4.39
ASB Bank Special - 3.65 3.59 3.89
BNZ - Classic - 3.65 ▼3.49 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp 5.19 ▼4.15 ▼4.09 ▼4.39
HSBC Premier 5.24 3.35 3.35 3.35
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 4.30 4.34 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.59 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 5.30 4.86 4.14 4.19
Lender Flt 1yr 2yr 3yr
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.69 3.69 ▼3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.65 3.59 3.99
The Co-operative Bank - Standard 5.15 4.15 4.09 4.49
TSB Bank 6.09 4.65 4.59 4.85
TSB Special 5.29 3.85 3.79 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.34 - - -
Westpac Special - 3.65 ▼3.54 3.99
Median 5.35 4.15 4.09 4.19

Last updated: 20 September 2019 9:30am

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