The government’s fledgling Kiwibank had a homeloan book of $43 million by the end of June, after 4 and a half months of operation, and has since built it to more than $100 million.
The speeding up of growth in the current quarter reflects the delays between approval and actually setting up a loan, says chief executive Sam Knowles.
Deposits reached $86.1 million by the end of June and have since risen to $160 million.
Kiwibank’s variable home loan rate has been consistently between 0.5 and one percentage point lower than the major banks, which means a saving of between $500 and $1,000 a year in interest costs on a $100,000 mortgage, Knowles says.
Kiwibank’s variable rate is currently 6.95% compared for 7.85% for four of the big five banks and 7.8% for National Bank.
The bank hasn’t been operating long enough to have any bad or doubtful debts, but Knowles says its credit criteria is consistent with the rest of the market and it ensures anything over 80% of valuation.
While it was receiving an exceptionally high number of home loan applications from people who don’t get anywhere near normal credit criteria, "we’ve probably got through that now." Some applicants had been "looking for something that banks would never provide."
He won’t reveal the bank’s current conversion rate between applications and actual home loans.
Kiwibank, which is planned to become profitable in its third year of operation, made a $10.2 maiden loss. Knowles says that’s about $1 million better than budget, largely because costs have been less than anticipated.
The bank currently has 260 branches, easily beating the next largest branch network, WestpacTrust with 201, and plans to have between 290 and 300 open by Christmas, Knowles says.
It continues to attract an "amazingly consistent" 500 customers a day on average, he says. "If anything, there’s a higher regard for us over time."
It has so far attracted slightly more than expected numbers of children and superannuitants and the amount on deposit per customer is about what was expected, but Knowles won’t disclose actual numbers.
Competitors have responded to Kiwibank’s initiatives, ANZ Bank the most noticably and "the others have tweaked their fees, but the actual value margin we’ve got hasn’t changed significantly."
Among other innovations, which include a guarantee that its home loans will be cheaper over the next six years than those offered by the five major banks, Kiwibank is offering "sweep" accounts. That means when a customer’s money on deposit in their current account exceeds a pre-set limit, the excess automatically transfers to a higher interest earning account. Kiwibank also takes into account a customer’s entire business with the bank before dishonouring a cheque, he says. It will be launching a credit care early next year.
