KEY POINTS:
A strong half year by Kiwibank is being attributed in large part to gains made as other banks backed out of the market.
The subsidiary of state-owned enterprise New Zealand Post today reported a 13.7 per cent rise in net profit to $25.8 million for the six months to the end of December.
The lending portfolio was up 25 per cent, or $1.4 billion, from the corresponding period a year earlier to $7 billion. Retail deposits were up 31 per cent, or $1.5b, to $6.3b.
Kiwibank chief executive Sam Knowles said his company's strong growth was primarily driven by the competition "moving differently in the market", in an "unprecedented change in the past six months in banking in New Zealand".
Early in the six-month period there had been uncertainty around creditworthiness at banks globally, which led to quite a lot of flow into Kiwibank.
Then, as other banks found conditions challenging they become much less competitive in mortgage and small business markets, Mr Knowles said.
"On both sides of the balance sheet we've benefited from that environment."
He thought the size of the growth opportunities in the half year was probably more a one-off and largely due to the fact other banks backed out of competing.
While strong growth was continuing for now - with Kiwibank adding 400 to 500 customers a day - he did expect other banks to come back into the market with stronger competition through this year.
Kiwibank said 0.06 per cent of its assets were classed as impaired, below the level of the other major banks.
Mr Knowles said Kiwibank had made a small number of mortgagee sales so far and there could be a small number more - "well under 10" - from customers the bank was now working hard with.
But of about 500 mortgagee sales on Trade Me now, none were by Kiwibank customers.
Kiwibank had also found in recent weeks an increase in the number of would-be first home-owners with pre-approved mortgages finding homes to buy, compared to previously when pre-approvals were not being converted into purchases.
Some people with good jobs, now that funding costs were lower, were finding they could get into the housing market when they could not do so before, Mr Knowles said.
He had not seen any statistics to indicate that move was significant.
"At the same time, there's plenty of people who are overgeared who are looking to sell out."
Kiwibank was moving towards self-funding in capital. It did not have any additional capital from NZ Post in the latest six months, but did expect "small amounts" from NZ Post in the year ahead, probably $10m to $20m.
Kiwibank has yet to say when it expected to pay a dividend to NZ Post, and was not looking to do so in the next year.
Increasing Kiwibank's level of growth delayed the payment of a dividend because capital was needed to support the growth, Mr Knowles said.
"It increases the size of the dividend when we eventually pay it. It increases the value of the organisation."
Jim Anderton, the Progressive Party MP behind the establishment of Kiwibank, said it was generating almost enough income for the government in a year to equal its $80m set-up cost.
"Ownership of Kiwibank is paying off in a big way, both for the people of New Zealand and for the government as its shareholder," Mr Anderton said.
"It's great that we have our own bank performing so well at a time of international financial crisis. We don't have to be dependent on overseas financial markets."
- NZPA
