Boom helps BNZ to $548m profit

By PAULA OLIVER

Banks are the winners in the surging home-lending market - with BNZ the latest of the big players to report a strong annual profit.

The bank, owned by the National Australia Bank, yesterday unveiled a net profit for the year to September 30 of $548 million, and said it had been increasing its share of the mortgage market.

The profit figure was down on the previous year's $582 million, but one-off factors had played a big part.

Last year's figure included a significant gain from the sale of the bank's wealth management business, and this year's profit was dragged down by the $22 million implementation costs that came with a new technology system.

BNZ's managing director, Peter Thodey, said that without those factors underlying profit grew 9 per cent.

He was particularly pleased that BNZ's residential customer satisfaction rating had gone from fifth to second place in the annual University of Auckland Business School survey.

"To be able to deliver on both these fronts is very pleasing, as it means one area has not succeeded at the expense of another."

BNZ's strong result is the latest in a stream of good profits from banks in New Zealand, much of it driven by the housing boom.

BNZ yesterday said it had not yet seen a turnaround in that surge, although people were beginning to change their behaviour as a rise in interest rates neared.

"People are now taking a view we're probably at the bottom of the interest-rate cycle, and they're moving out of variable rate loans and into fixed ones," said Mark Hosking, general manager of finance.

"It's definitely going to be a challenging market next year, but we still have a buoyant housing market and a recovering world economy."

BNZ increased its share of the home lending market from 15.1 per cent to 15.6 per cent during the year.

Its home lending volume grew by 17.8 per cent.

However, competition is fierce and margins are tight - as evidenced by BNZ's parent yesterday saying of the New Zealand situation: "The current low interest rate environment combined with heightened competition, especially for housing, put increased pressure on the net interest margin."

Cuts in New Zealand's official cash rate had also affected margins in the second half of the year.

Thodey said the overall outlook for the economy was positive, although some risks remained, such as the weakness in certain export sectors from the high New Zealand dollar, and the reaction to a looming tightening in monetary policy.

He also sounded a challenge to those involved in ANZ's takeover of the National Bank.

"We are well positioned to take advantage of the new opportunities in the market that will arise in the year ahead. BNZ is a logical choice for any customers reviewing their banking arrangements."

BNZ's revenue growth was strong, and it cut its cost-to-income ratio - a crucial measure of profitability - to 43.9 per cent from 46 per cent.

Like home lending, business lending also surged ahead, growing by 11.4 per cent.

BNZ claimed that its decision to no longer deal with mortgage brokers had been vindicated by the result, which showed growth in market share.

Blair Vernon, general manager of personal financial services, said that showed BNZ's team was doing fine on its own.

BNZ is the only major bank in the country that does not deal with brokers.