Small is beautiful for TSB

By Richard Braddell

WELLINGTON - Being a small fry has proved no impediment to Taranaki-based TSB Bank, which has reported profit and asset growth to match the best of its foreign-owned peers.

Proud to be the sole remaining New Zealand-owned bank, TSB announced a 20 per cent jump in bottom line profit for the March year to $11.26 million for a respectable 1 per cent return on total assets.

But the bank is almost embarrassed by its success, after a 26 per cent surge in deposits boosted total assets by 25 per cent to top $1 billion for the first time.

The problem is that higher profit lending growth has not kept pace with new deposits, despite the fact that the number of new loans written is 56 per cent higher than the year before.

The managing director, Kevin Rimmington, said the bank's policy was to hold 30 per cent of its assets in liquid securities such as Government and local body stock. But with deposits racing ahead, that ratio now stands at 50 per cent of the bank's $1.1 billion in total assets.

The imbalance arises from TSB's decision to go national two years ago through a telephone-based direct bank.

With a stranglehold in its home market nearly 60 per cent of bank customers in Taranaki regard TSB as their main bank the bank is also attracting national customers, who now provide two-thirds of its new deposits.

Apart from the appeal of being New Zealand-owned, Mr Rimmington said national customers have been attracted by the bank's no fees policy, with a surge in interest noticeable every time the other banks lift their fees.

But national customers are not borrowing at nearly the same rate. Mr Rimmington will not say what proportion of new mortgage business national customers account for, although the imbalance between their saving and borrowing prompted the bank to set up Loan Direct last year in an attempt to woo them through reduced fees and deals on legal expenses.

Mr Rimmington said: "The local Taranaki market could simply not absorb the level of loan finance available. Early indications are that this division is producing the results anticipated."


A 20 per cent jump in bottom-line profit for Taranaki-based bank.