BNZ posts flat half-year profit of $265 million

Bank of New Zealand (BNZ) today reported a flat half-year net profit of $265 million, just 0.4 per cent up on the previous same period's profit of $264m.

Managing director Peter Thodey said the profit showed BNZ's focus on customer service and products, and steady growth in market share despite fierce competition.

The result for the six months to March 31 came from total income of $733m, against $704m a year earlier. BNZ's operating surplus before tax was $369m, from $360m.

However, the bank's expenses increased 8 per cent to $356m because of higher compliance costs, and investment in infrastructure and products.

The result came as its parent, National Australia Bank, announced some 2000 redundancies and a first half profit of A$2.54 ($2.72) billion, which was boosted by one-off items.

During the March half, BNZ said its share of the home loan market rose from 15.7 per cent to 16.2 per cent, thanks to its so-called Unbeatable fixed-rate mortgage scheme.

At the same time it had stopped using mortgage brokers, and improved its customer service.

Other operating income fell by 7 per cent to $255m because BNZ held or reduced fees in key markets.

Net interest income totalled $478m, which was up 11.4 per cent on the previous March stanza, thanks to home lending.

BNZ's net interest margin for the March half was 2.49 per cent, up four basis points.

"This result makes an interesting comparison with two of our competitors, both of whom have announced recently an erosion of their interest margins while also losing market share," he said.

"The doomsayers who say BNZ will pay for the home loan price war have to reflect closely today on their views," he said.

"Critics of our home loan strategy fail to understand the advantage that we enjoy because we own all of our distribution channels.

"Our major competitors are saddled with paying for an additional distribution channel, namely mortgage brokers. We simply don't have that cost and it allows us to pass savings to customers."

Meanwhile, Mr Thodey said BNZ had increased its share of the 15 to 29-year-old market to 8 per cent, from 6 per cent, over the past year.

It had also introduced a range of new products for small- and medium-sized businesses.

BNZ's customer base by 35,000 to 440,000 over the past year.

"Customers will see more innovative products at competitive prices from BNZ over the next 12 months," Mr Thodey said.

"Overall, the half-year has been very successful for BNZ given the competitive environment and the slowing economy," he said.

- NZPA