China Construction Bank posts five-fold increase in New Zealand profit

Jun Qi, CEO of China Construction Bank local unit, says it has made significant progress in the last 3.5 years in building its client business. Picture / Greg Bowker

China Construction Bank's New Zealand subsidiary almost tripled its net interest income last year and recorded a five-fold increase in profit by adding commercial and retail customers and lending to the infrastructure, energy and resources sectors.

Last year China's second-largest lender opened a local branch, becoming the first overseas bank approved under the Reserve Bank's dual-registration rules, in addition to its subsidiary China Construction Bank (New Zealand) which registered on January 30, 2014. Its local directors include former Prime Minister Dame Jenny Shipley and professional directors John Shewan and Michael Allen.

The subsidiary's disclosure statement shows net interest income jumped to $24.5 million in calendar 2017 from $8.8m a year earlier and up from $1.4m in the 11 months of its inaugural year 2014. Profit jumped to $10.4m from $1.8m. Its provision for impairments on loans rose to $1.6m last year from $745,000 in 2016.

The bank's residential mortgage book jumped 93 per cent to about $735m and its corporate loans soared 151 per cent to $913m. Total gross loans and advances rose to $1.65 billion from $745m.

While it remains a minnow compared with the big four Australian-owned banks in New Zealand (ANZ Bank's gross loans were about $126b at the end of 2017), if its rate of growth continues it is potentially snapping at the heels of the smallest of the 'big nine' - the Co-operative Bank, whose gross loans were $2.27b, according to KPMG's quarterly survey.

"China Construction Bank has made significant progress in the last 3.5 years in building its client business" in New Zealand, Jun Qi, the New Zealand unit's chief executive, told BusinessDesk.

The bank's "well-defined strategy, clear focus and risk management framework" culminated in the solid operating performance in 2017, he said.

Qi said the outlook for 2018 was "to continue to grow on our success".

Its corporate and institutional banking team has made inroads into the infrastructure, energy and resources sectors in New Zealand.

In addition, it has been a lead arranger role for a transportation infrastructure PPP, provided corporate financing for three of New Zealand's primary international airports and ports, and to several NZX-listed energy and property sector companies, the lender said.

"These sectors align with the core strengths of the wider CCB Group and more importantly, are key areas of economic stability and growth in New Zealand," Qi said.