KEY POINTS:
Kiwibank, which has received more than $200 million in funding from its parent New Zealand Post since it opened six years ago, is still "a year or two" away from financial independence, says chief executive Sam Knowles.
The state-owned bank yesterday reported a June year net profit of $36.8 million, a 19 per cent increase on the previous corresponding period. Last year's profit was up 61 per cent on the 2006 result, which itself was more than double the $7.2 million maiden profit in 2005.
However, Knowles yesterday said the apparent slowing growth was a result of the adoption of a particular set of International Financial Reporting Standards which required the restating of last year's numbers. The bank's underlying pretax profit, he said, was up 82 per cent.
Kiwibank's rapid growth, which has surprised even Knowles, has required NZ Post to inject capital in order to meet Reserve Bank capital adequacy requirements.
So far these injections have totalled more than $200 million, including $50 million tipped in during the June year.
Knowles said Kiwibank was "generally moving towards self-funding and we can see on the horizon the point where we will be paying dividends, but it's still a year or two off".
The bank raised about $75 million in capital from the markets over the last year, and Knowles said a further capital raising of about $50 million to $60 million was planned for the next couple of months.
Knowles said yesterday's result was "pretty much what we were targeting" and "very satisfactory" in a challenging economic environment.
The first half of the year had been impacted by negative domestic factors, including finance company failures, and the second half had seen the international credit issues affect the bank's margins and the competitive environment.
Kiwibank's margin, what it makes on loans and deposits, eased from 2.02 per cent to 1.92 per cent but Knowles believed his bank's large Australian-owned rivals were suffering greater margin pressure as they raised much of their funds overseas.
For that reason, Knowles didn't expect the big banks to compete aggressively on rates but he did anticipate they would seek to generate more revenue with small fee increases - factors which presented Kiwibank with good opportunities to grow market share.
During the year, the bank's lending portfolio increased by 57 per cent to $5.6 billion, including the acquisition of the $670 million AMP mortgage book in July last year. Retail deposits were up 46 per cent to $4.8 billion.
PROFIT UP
12 months to June 30
Total assets
2008 - $7.23b
2007 - $4.76b
Total operating revenue
2008 - $238m
2007 - $204m
Net profit
2008 - $36.82m
2007 - $30.85m*
*restated under IFRS
