Post work lifts Kiwibank

Kiwibank's latest quarterly disclosure statement shows the state-owned bank's revenue and expenses are being inflated by business traditionally the domain of its parent, New Zealand Post.

In the three months ended September 30, Kiwibank's operating expenses and non-interest revenue were 7.12 per cent and 5.17 per cent of average total assets, respectively. Operating expenses will normally be below 2 per cent of a bank's average total assets and non interest income around 1.2 per cent.

Craig Stewart, Kiwibank's finance chief, says the revenue and expenses figures include bill payment services and international money exchange services operated at NZ Post branches.

He says Kiwibank manages this business even though some of it is still branded NZ Post.

And Stewart says this business and Kiwibank being in "growth mode" inflates its ratios compared with other banks.

Kiwibank's net interest income for the quarter was $8 million. Other operating revenue of $17.5 million lifted the bank's total revenue to $25.5 million. Operating expenses were $24.1 million.

Kiwibank's operating profit for the quarter ended September 30 was $723,000 versus a loss of $1.6 million in the same period of last year.

Kiwibank spokesman Bruce Thompson says the bank now has 290,000 customers.

Kiwibank's loan book stood at $1.15 billion at September 30, up $117.6 million over the quarter.

Kiwibank has adopted a conservative approach towards the two-year fixed home loan price war being led by BNZ. The BNZ charges 6.9 per cent interest per annum on loans and says it can afford to undercut rivals because unlike Westpac, ASB, ANZ and the National Bank, it does not use mortgage brokers. Nor does Kiwibank, yet it offers two-year fixed home loans at 7.35 per cent per annum.

"We're trying to price rationally in the market," Stewart says. "We believe we have been an honest and innovative participant."

The two-year swap rate, which represents banks' marginal cost of funds, was at 6.55 per cent on Friday. That is just 0.35 per cent below what BNZ charges customers.

Kiwibank started a business banking pilot programme with about 40 small Wellington firms last month. This will expand to other regions next year.

Thompson says several hundred people have asked to become business customers.

With growth set to continue, Stewart says Kiwibank will "potentially" need more funding from NZ Post, adding to the $120 million received so far. 

BANK ON IT

Kiwibank has adopted a conservative approach towards the two-year fixed home loan price war.

It is offering loans at 7.35pc, compared with the BNZ's 6.9pc, even though neither use mortgage brokers.

Set up with $80 million of taxpayers' funds, Kiwibank will 'potentially' need more funding from NZ Post.