Funds, insurance lift BNZ result

By RICHARD BRADDELL

WELLINGTON - As interest earnings faltered, funds management and insurance took up the slack in the Bank of New Zealand's latest half year.

Its net profit of $175 million in the six months ended in March was a mere $5 million ahead of the same six months ended in 1999, even though the bank's lending jumped 11.3 per cent to $26.8 million and its total assets grew 9 per cent to $32 billion.

With net interest income sliding $14 million to $307 million, the BNZ's first-half result provided graphic confirmation of a trend noted by financial consultants KPMG earlier this week of falling lending margins in the banking sector being rescued by higher non-interest income.

On a combination of profit and performance measures, KPMG this week reinstated the BNZ as New Zealand's top bank after WestpacTrust pushed it out of the top slot last year.

BNZ managing director Peter Thodey said the bank's strategy was focused on pushing internet banking, which now has 19,000 customers online sharetrading, expansion of its new private banking service and its recently launched GlobalPlus mortgages.

The mortgages build on the hugely successful Global Plus/Air New Zealand co-branded credit card which offers air points rewards for spending.

Again offering air points, GlobalPlus mortgages now accounted for between 60 and 70 per cent of new home lending, Mr Thodey said.

BNZ's first-half home lending grew only 7 per cent, or in line with the market which experienced reduced over-all demand. But Mr Thodey was expecting greater things to come as borrowers with other banks took the opportunity of switching to GlobalPlus when fixed-rate terms expired.

The flipside, he believed, was that once they moved, they would be less likely to switch again because of the air travel incentive. Mr Thodey also echoed KPMG in observing that the Reserve Bank's introduction of an official cash rate in March last year had reduced interest rate volatility, with the unfortunate side effects of reducing opportunities for treasury trading gains and also putting more competitive pressure on interest margins.

But while the BNZ's costs as a proportion of gross income rose to 54.5 per cent, from 52 per cent a year ago, they were still comfortably below the industry average of 57 per cent observed by KPMG.

Mr Thodey said the rise reflected costs associated with revamping bank branches (only one was closed) and the introduction of new services such as internet banking. The BNZ's parent, National Australia Bank, yesterday reported a record first-half net profit of $A1.57 billion, up from $A1.39 billion in 1999.