Kiwibank customers help keep NZ Post shops open

Sam Knowles. Photo / Mark Mitchell

Surging profits at Kiwibank have topped those earned by all of parent NZ Post's other divisions put together, and the bank's customers are helping to keep NZ Post's national network of PostShops open.

NZ Post yesterday reported a June year net profit of $71.8 million "in a year of mixed results". Last year, the group reported a net profit of $110.2 million, having benefited from better economic conditions and one-offs.

While parts of the group, "particularly Kiwibank" continued to thrive, during the most recent June year, "others including Postal Services, Datamail and the courier joint ventures had been affected to varying degrees by the economic downturn", chairman Jim Bolger said.

As previously announced, Kiwibank or its new holding company which includes its insurance business and 76 per cent of New Zealand Home loans, reported a net profit of $51 million, up 42.7 per cent on a year earlier.

That shows net profit from the rest of the NZ Post group fell from $73.4 million a year ago to just $20.8 million - a steep fall even allowing for last year's $24.8 million one-off gain on the sale of assets.

With letter volumes falling at an unprecedented rate - 6.7 per cent against the one per cent or so seen in previous years - "we are at a cyclical low in our postal and courier businesses," said Kiwibank chief executive Sam Knowles, who is also acting NZ Post chief executive. Profit from the core Postal Services division at $25.39 million was less than half of last year's bottom line.

However, Knowles downplayed the suggestion NZ Post was rapidly becoming a banking business with a postal service in tow.

"The bank is becoming a large part of the business but we're also seeing some cyclical aspects there. I don't think you will necessary see the balance you're seeing now in the future."

Sceptics have questioned Kiwibank's viability as a stand-alone business, citing the support it receives from NZ Post in terms of the NZ PostShops from which it operates and the way certain services are now taken through the bank's accounts.

However Knowles, who acknowledged media coverage of PostShop closures, said the additional customer traffic generated by Kiwibank was a factor in maintaining the viability of the PostShop network.

The closures were not about a lack of commitment but "the outcome of reinvestment in an organisation confident with its postal and banking services".

"The success of the bank has meant a much higher level of service than we would have had otherwise."

Bolger said NZ Post would likely have been "forced to make an extraordinary reduction in its postal and retail network without the advent and success of Kiwibank".

Nevertheless, NZ Post injected a further $39.4 million into the bank over the year, the largest annual capital injection to date.

Knowles said much of that sum arose from the change to Kiwibank's capital structure and he said the bank was now increasingly capable of self-funding its rapid expansion through retained profits. NZ Post will pay the Government a dividend of $6.9 million against last year's $23.5 million.