Kiwibank chief executive Steve Jurkovich. Photo / Supplied
Kiwibank chief executive Steve Jurkovich. Photo / Supplied
Changes to the credit law "choked the system" and Government tweaks to ease lending restrictions should be brought in sooner, the boss of Kiwibank says.
Speaking after the bank declared a record net profit after tax of $131 million for the year to June 30, Steve Jurkovich saidtightening of the Credit Contracts and Consumer Finance Act (CCCFA) in December had been tough.
It was one of the driving factors behind the slow-down in lending in the second half of the bank's financial year.
"CCCFA definitely choked the system and continues to. I think the settling-in period, trying to get used to the CCCFA, whether you are an adviser or customer or bank, was hard. We knew it was going to be hard but it was hard."
He said tweaks the Government made which came into force last month had made no significant difference.
"Ultimately the 'one size fits all' approach that was taken was the wrong one and has stifled and tried to solve issues that didn't exist with the big players," Jurkovich said.
Jurkovich said it was surprising the Government was going to wait until March next year to have another go at trying to improve the law.
Last month, Commerce and Consumer Finance Minister David Clark announced further measures to loosen the lending regulations.
Those changes included narrowing expenses considered by lenders to more explicitly exclude discretionary expenses, reducing 'double counting' of expenses associated with revolving credit contracts such as credit cards and buy now, pay later schemes, and helping make debt refinancing or debt consolidation more accessible if appropriate for borrowers.
The Ministry of Business, Innovation and Employment (MBIE) is consulting on the finer details of these changes ahead of them taking effect in March 2023.
Taking a targeted approach to the lending law which would have zeroed in on certain types of lending or lenders or higher-risk consumers was suggested as an option by MBIE but one the Government decided not to pursue.
Jurkovich said he expected home lending to stay slow in the first half of Kiwibank's 2023 financial year but was hopeful it would pick up heading into summer.
Poor weather over winter was likely putting a dampener on house sales while sellers were being cautious in a market where house prices were falling.
"If you think your house price might be flat or coming off a bit, that makes you a little bit cautious about selling an asset."
The bank's credit impairment losses turned from a $19m write-back in FY2021 to a $16m loss.
Jurkovich said it had been a hard call deciding whether to put that impairment provision into the accounts.
"The vast majority of that is management overlay which we are not seeing in the actual accounts but as we look at the world in front of us with jammed supply chains, salary increases, falling property and confidence then maybe things are a bit tougher."
He said a desktop exercise looking at those who'd bought property 18 months ago with a 5 per cent deposit and seen a 5 per cent drop in the price meant only around 70 customers could be faced with negative equity out of its one million customers.
That was only an issue if those customers were forced to sell.
"We are far more exposed to impairment from an increase in unemployment than we are to anything else. And our view at the moment is: If you really do want a job, you can get one."
Kiwibank made a record profit. Photo / Supplied
On the business lending front, Jurkovich said Kiwibank was maintaining its appetite to lend but the four major banks had pulled back.
"The market is dominated by the big four banks - 97 per cent - and you have seen them all move to home loans because of the better returns. For us, that feels like it gives us a good opportunity to keep the same appetite but grow."
Jurkovich said the big challenge ahead for businesses was getting enough staff.
"Hopefully we can get a significant improvement in being able to get people into the country because I think there is a lot of trapped capacity in businesses."
He said in tourism and horticulture, where demand for high quality products existed, it was critical to have staff in New Zealand.
Kiwibank was competing with tech workers at other big banks - as all were trying to undertake digital transformation projects.
"We are trying to hire people from overseas. That has been so difficult - it has recalibrated how we think we need to attract people."
He said balancing performance and purpose and working on the latest technology had been the biggest drawcards for new hires.
He said attrition had risen from a low of around 10 per cent to the high teens.
Kiwibank had moved to address that by making jobs in its call centre and enterprise operations "work from anywhere" roles.
