Booming BNZ sets aside rural cushion

BNZ's statutory profit for the year has jumped to $1.04b from $850 million in the same period a year earlier. Photo / Michael Craig.

BNZ's annual profit cracked the $1 billion mark for the first time but a darkening economic outlook, particularly for rural customers hit by the dairy price slump, has seen the lender put aside a big pile of cash for potential bad debts.

Statutory profit for the 12 months to September 30 soared to a record $1.04 billion from $850 million a year earlier, BNZ said yesterday.

The bottom-line result was bolstered by a $322 million gain on the valuation of financial instruments, up from $69 million in the previous year. Cash earnings, which exclude volatile and one-off items, rose 7.9 per cent to $966 million.

BNZ chief executive Anthony Healy said it was taking a cautious approach to the economic environment.

The bank's provisions for bad and doubtful debts rose to $134 million from $87 million 12 months earlier.

"We've taken a through-the-cycle view on provisioning," he said. "I do think it's very conservative."

Healy said asset quality in the bank's agri and dairy book remained "extremely sound".

"We are well-placed to continue supporting our farming customers through a more volatile trading period."

Loans rose 5.9 per cent to $68.2 billion, while customer deposits lifted 2.9 per cent to $46.7 billion, the bank said.

Healy said it had been a "testing" year, with the bank facing challenges such as losing its GlobalPlus air points relationship with Air New Zealand and high levels of competition, especially in the home loan market.

BNZ chief executive Anthony Healy. Photo / Brett Phibbs

"Those things have challenged us but I think we've come out the other side in really good shape," he said. "On the GlobalPlus front, we've retained the vast majority of customers from that programme, 85 to 90 per cent of them, so that's really pleasing."

He said existing customers had been transitioned to the new BNZ Advantage programme, which allows customers to earn cash rewards or Fly Buys points.

Over the year BNZ lost market share in the home lending and credit card markets, as well as in deposits following a shift of focus to higher-quality personal deposits.

But Healy said the bank had grown its share of the business and commercial banking segments, to about 25 per cent and 31 per cent respectively.

Meanwhile, he said BNZ's decision to re-enter the mortgage broker market this year was already paying dividends.

"We've only been back with brokers for four months and we've already exceeded our targets," Healy said. "That's going to see us capture more market share as the broker share of the housing market increases."

Healy said BNZ had roughly doubled the size of its Auckland mobile mortgage manager team to 80 to 90 staff.

BNZ's parent, National Australia Bank, reported a 15.5 per cent lift in cash earnings to A$5.84 billion ($6.2 billion).