WELLINGTON: Kiwibank has announced an after tax profit of $127 million for the year to 30 June. The state-owned bank’s profit is up 27 per cent from last year’s $100m.
Additional contributions from the Kiwi Wealth Kiwisaver business and the fledgling Kiwi Insurance business took to profit for Kiwi Group Holdings, which includes Kiwibank, to $132m.
Chief executive Paul Brock said the profit was largely driven by a focus on “more profitable and diversified revenue growth, backed by solid performance in mortgage lending and customer deposits combined with a strong improvement in credit performance”. The NZ Post-owned bank now has about 900,000 customers, up from around 860,000 a year ago , representing roughly a quarter of New Zealanders.
Brock said there was still considerable investment being made into the business, including continued investment in its core banking system, but there was also an on-going focus to improve the cost to income ratio. The cost to income ratio fell from 66 per cent to 60 per cent, with Brock saying the target was the low to mid 50s.
The improvements were driven by an increase in its net interest margin from 1.86 per cent to 2.12 per cent, meaning the bank earned more from the loans it made. Brock said the improvement in margin was a result of favourable funding conditions.
Kiwibank increased revenue from $400m to $473m, grown its loan book by 6.6 per cent from $14.6 billion to $15.6b, and increased customer deposits from $12.8b to $13.7b. Brock said the banking market was competitive.
“While we continue to attract more customers, the way they interact with us is rapidly changing with around 89 per cent of all our service transactions already being completed via digital channels.”
“Changing customer needs means that the focus for the future lies in continuing to innovate to transform the group into a digital business resulting in digitally-enabled sales supported by our people.”
Two key focus areas for the growth of the bank are in the small business and wealth management markets, which Brock said were critical to the continued prosperity of the country. The bank’s share of the small business market grew from 6.3 per cent to 7.8 per cent during the year.
The number of customers who said Kiwibank was their main financial institution rose by 37,000 to 427,000, Brock said, though it only has around 150,000 credit card customers.
It also now has 23,000 policyholders in its fledgling Kiwi Insurance operation, and 137,000 people in its Kiwi Wealth KiwiSaver scheme. Kiwi Wealth’s funds under management ended the year up 30 per cent at $3.59b.
During the year prime minister John Key opened Kiwibank’s new new regional office in Hastings, which will result in up to 200 jobs in Hawke’s Bay over the next three years.
Kiwibank raised $150m through an issue of perpetual capital notes in May. A continued refresh of branches is under way, but Brock said some branches were likely to close.
It saw a dramatic decline in bad loans, and now claims to have the lowest impaired loan ratio of any of the big banks. Kiwibank paid a $22m dividend to the Government. Brock would not be drawn on the size of future dividends, but expected them to continue rising.
