Home loans boost BNZ profit despite static market share

The higher profitability of its home lending book helped drive a "pleasing" increase in first-half net profit though its "Unbeatable" marketing campaign had not helped it wrest market share from rivals over the last 12 months, says BNZ.

Adjusted for the impact of new accounting standards, BNZ's net profit for the six months to March was up $19 million, about 8 per cent, to $270 million compared with the same period a year ago.

Chief executive Peter Thodey said, "It was particularly pleasing in light of challenging market conditions arising from intense competition and a slowing economy."

BNZ's rise in net interest income of 9.6 per cent to $524 million was "an outstanding result" with sound interest margin management being "a big part of our continued success".

"We have restricted our margin decline to eight basis points when most of our competitors have experienced much larger contractions."

Thodey pointed to the 26 basis point and 25 basis point margin rate contractions recently reported by ANZ National and Westpac respectively.

The bank's housing lending has increased by 6.8 per cent since the September half, with market share remaining constant at 16.2 per cent.

Thodey was not bothered by the bank's static market share despite driving competition with "Unbeatable" over the last couple of years.

He said the bank's better profitability on home lending was because it does not use mortgage brokers.

"Because the average mortgage duration now is two year fixed, and our competitors are paying away about half of their margin to brokers ... if we're maintaining 16.2 per cent with system growth of 15 per cent then we're doing very well."

The housing loan market had remained firmer than expected with growth still in double digits. While the market was slowing, it was doing so much more gradually than forecast. Nevertheless it would slow further later in the year, he said.

Elsewhere, the bank said it had held its share of other key markets over the half. It also held its income to expense ratio to 46.8 per cent, not much higher than its target of 45 per cent. Thodey said the bank expected the economy to experience a softer than expected landing although energy prices remained a key risk to outlook.