Kiwibank racks up short-term foreign debt

Kiwibank borrowed $927.275 million through a European commercial paper programme within about five months of establishing it, the bank's latest General Disclosure Statement (GDS) shows.

The state owned bank's GDS, for the nine months to March 31, lists the debt under a "short term paper" category not present in previous disclosure statements.

Paul Brock, Kiwibank's CEO, said at the end of November last year the bank had established a European commercial paper programme within the last month as part of its drive to diversify funding sources.

He declined to say how big the programme was.

"It's basically a programme that has been put in place so we can draw down what we need (when we need it) so I'm not going to go into specifics about what numbers," Brock said then. In a more recent interview, in March, Brock indicated Kiwibank had borrowed hundreds of millions of dollars in short-term loans through the programme.

Kiwibank's push into short-term, overseas lending comes at a time when its big Australian owned rivals are competing fiercely for domestic retail deposits in order to meet the Reserve Bank's Core Funding Ratio (CFR).

In place since April 1 last year, the CFR sets out that banks must secure at least 65 per cent of their funding from a combination of retail sources and wholesale sources - such as bonds - with durations of more than 12 months. The CFR will be increased to 70 per cent from July this year and then 75 per cent from July next year.

This competition for retail money has hit the cost of funding for New Zealand owned institutions such as Kiwibank and TSB Bank.

The latter posted a 22 per cent fall in annual profit last week with CEO Kevin Murphy saying TSB's net interest margins dropped to 1.88 per cent from 2.19 per cent because of competition for retail deposits.

Kiwibank's GDS also shows a $266.6 million drop in the bank's deposits to NZ$10.8 billion, with a $444.6 million drop in wholesale deposits offsetting a $178 million rise in retail deposits.

Meanwhile, the GDS also has Kiwibank's mortgage book up NZ$244.713 million in the March quarter to $10.325 billion.

That puts it ahead of ASB's $48 million growth and Westpac's $170 million, but behind BNZ's $311 million March quarter rise. ANZ is yet to release its March quarter New Zealand Branch GDS.

Total net loans and advances, (after a $67.4 million allowance for impairments up almost NZ$22 million), rose $251.3 million to $11.2 billion, Kiwibank said.

Total assets rose $877.6 million to $13.8 billion and total liabilities increased $883.5 million to $13.25 billion.

The GDS also showed a rise in Kiwibank's assets past due by more than 90 days to $38.7 million at March 31 from NZ$29.6 million at June 30 last year, with impaired assets having more than doubled over the same time period to $90.3 million from $37.7 million.

- INTEREST.CO.NZ