Chinese bank giant pushes into New Zealand mortgage market

Former Reserve Bank governor Don Brash is the chairman of ICBC New Zealand. Photo / Christine Cornege

China's biggest bank has begun making inroads into this country's mortgage market.

Industrial and Commercial Bank of China New Zealand began lending last year and made $11.2 million in home loans in the 12 months to December 31, according to a disclosure statement lodged with the Companies Office.

That would fund the purchase of about 19 Auckland houses, based on the median price in the city of $720,000 and borrowers having 20 per cent equity.

New Zealand's total mortgage lending runs to more than $200 billion, according to Reserve Bank figures.

While ICBC New Zealand's residential loan book is still just a drop in that bucket, chairman Don Brash said the bank was focused on growth.

"We're certainly keen to do business in that area," he said. "As you well know there are a lot of Chinese immigrants to New Zealand and a lot of them would have banked with ICBC in China."

Brash said all of the bank's residential borrowers in this country so far were migrants from China.

ICBC New Zealand, which gained registration with the Reserve Bank in 2013, operates a branch in Queen St and offers fixed one and two-year mortgage rates of 5.4 and 5.6 per cent, respectively, according to interest.co.nz.

China Construction Bank and Bank of China have also set up shop in this country recently, but have not yet released financial statements.

Last year Reserve Bank deputy governor Grant Spencer said the arrival of Chinese and Indian banking giants was a "watershed event" that would help keep the dominant Australian-owned lenders "on their toes".

Clearly the China relationship with New Zealand is a major one. We think it's a very important market for ICBC here, but we're not likely to rival any of the big four Australian banks any time soon.

Don Brash

Brash said it would take some time before Chinese banks began posing a real competitive threat.

"Clearly the China relationship with New Zealand is a major one," he said. "We think it's a very important market for ICBC here, but we're not likely to rival any of the big four Australian banks any time soon."

ICBC New Zealand reported total loans of $85.7 million for the 2014 calendar year, including $50.7 million in corporate lending and $24.3 million in syndicated loans.

ICBC, through a syndicated loan with other banks including BNZ, is contributing funding for Wellington's Transmission Gully project, New Zealand's first public-private partnership for a state highway.

The bank's New Zealand arm reported total operating income of $3.6 million for the year, with a net loss of $3 million after operating expenses of $6 million were taken into account.

Brash, a former Reserve Bank governor, said the bank expected to post another loss this year.

"We're building up staff capacity and systems capacity," he said. "Head office [in Beijing] wants us to break even just as soon as we can."

The disclosure statement also reveals ICBC New Zealand was issued with a breach of conditions of registration notice from the Reserve Bank in November over the appointment of a country compliance manager.

Approval from the central bank is required for all executives who report directly to a registered lender's chief executive.

Brash said the manager had been subject to a 90-day trial period and the bank had wrongly believed it could apply for approval during that period.

"Clearly it was a breach and we apologise for that."

The Reserve Bank did not enforce a penalty for the breach, the disclosure statement said.

ICBC has more than 280 million customers in China.