Kiwibank boss Steve Jurkovich: How this lockdown is different

Kiwibank chief executive Steve Jurkovich. Photo / Supplied

Kiwibank chief executive Steve Jurkovich says this level 4 lockdown has been very different for the bank compared to the one New Zealand went into last year in March.

"Last year we had thousands and thousands of calls and we were really under the kosh. Now it is a handful of calls.

"We've had a handful of business banking customers saying to us 'can we start talking about what we might need to do if this lockdown goes for a while?'."

He was speaking after the bank delivered a near record net profit of $126 million for the year to June 30 - up 121 per cent on the prior year. It was Kiwibank's second best profit in its 20-year history, only beaten by its 2015 financial year when it made $127m.

Jurkovich, who has been three years in the top job, says the bank's transition to working from home has been much easier this time around.

He said whether businesses or individuals needed more support from their bank would depend how long this lockdown went for.

"A lot will depend on the announcement next week. If it is a couple of weeks then I think people could see their way through but if you say to a cafe or tourism business no customers for six weeks then I think we would get a lot more phone calls."

Last year the bank provided support to more than 6000 personal and 2000 business customers. It also approved close to its allocation of Business Finance Guarantee Scheme loans supporting nearly 180 businesses with $120m in term loans.

Jurkovich said the Government's Wage Subsidy Scheme and Resurgent Support Payment were both seeing strong demand.

"They are easy to get - it's a pretty simple process, a high trust model - which means people can get access to the dough and they do."

He said the wage subsidy was a bit different this time because businesses had to apply every two weeks to get it. Last time it was paid out in a bigger lump sum.

"I can't see how Auckland is not going to get another two weeks personally at least - you would think a fair chunk of that would go out again on the subsidy."

A large driver for the bank's net profit rise was a write back in impairments that were put in place due to Covid-19.

A credit impairment loss of $51m was turned into a reversal gain of $19m.

Jurkovich said it was too early to say if it would need to bring some of those impairments back.

"We are always running scenarios, we have to run stress tests for the Reserve Bank.

"But ultimately you have to take those on the basis of evidence of defaults and there is no defaults. Our [support] packages are open - we are there and ready to support if we need to. But ultimately you can only take impairments when we start to see troublesome accounts and that is at least 90 days."

Jurkovich said he did not see the need to bring back the mortgage deferral scheme.

"I don't at the moment."

He said there were a lot of customers that went into deferral last time and didn't need to.

"They are probably more reluctant to go into deferral knowing there is still an interest cost and if you don't need to take it why would you take it?"

The other big driver for the bank's profits has been the booming housing market.

Jurkovich says he sees no sign of a slow-down yet.

"I don't see a big drop off. Obviously during the Covid lockdown where people can't go see places. If it is three or four weeks I don't see a big impact - I think the biggest impact is supply chain - trying to get stuff into the country means that supply, it was already tough going, but now you can't get heat pumps, ovens, might not be able to get the appliances. I think that holds up prices pretty strongly."

For now Jurkovich says the biggest challenge ahead for the bank is the uncertainty and how quickly things keep changing.

"For years people used to talk about working in an environment that is volatile - things change so quickly for us - from being a week away from our final numbers to go into a level 4 lockdown - that's a clear example of having to be more adaptable and more flexible, so that is the challenge."