Kiwibank’s holding company, which also owns Kiwi Wealth, New Zealand Home Loans and Kiwi Insurance, today reported an after tax profit of $131 million for the year ended 30 June 2016.
This was down by 0.8% on last year.
Kiwibank itself saw a 2.4% decline in its after tax profit, which was down to $124 million from $127 million last year.
The drop in profits came despite a 3.3% growth in net interest income, which went up to $373 million from $361 million last year.
A 6.0% increase in operating expenses – which went up to $301 million from $284 million last year – counterbalanced the increase in net interest income.
Kiwibank Group chief executive Paul Brock said the flat result reflected the challenging environment.
This included global uncertainty, increased funding costs for banks and a very competitive market.
“The relatively flat result builds on the solid profitable growth of the past few years in an increasingly competitive and volatile environment.”
However, the bank experienced healthy balance sheet growth, with customer loans up by 7.0% (to $1.09 billion) and customer deposits up by 7.6% (to $1.04 billion).
Kiwibank’s market share in the personal mortgage market was maintained at 7.0%, with two thirds of mortgage growth came from the existing customer base.
Brock said the bank’s margins held up better than expected, despite it passing on the OCR cuts to its customers where possible.
There is currently pressure on margin and funding costs and, given global volatility and low interest rates, they expect to see that continue for the foreseeable future, he said.
“We have passed on more of the OCR cuts than our peers and we plan to do our best to pass on as much of the rate cuts as possible to customers.
“It is challenging. It depends on the funding mix at the time, but we will continue to try to do what we can to pass on any future cuts”.
In response to follow up questions, Kiwibank communications manager Bruce Thompson said it was too early to gauge the impact of the new LVRS.
“We do expect some impact to lending volumes in the months immediately following the changes – particularly for investors.”
However, in the past interest. from other mortgage borrowers increased which meant overall credit growth was unaffected, he said.
“Given the strong demand for property we are seeing nationwide, and the often transitory nature of LVR policy changes, we expect the Reserve Bank will also announce debt-to-income ratio restrictions toward the end of this year.”
The introduction of a variety of macro-prudential policies has further protected against the risks of a housing market downturn, Thompson said.
“Low interest rates are making it easier for borrowers to service loans.
“But increasing household debt levels are likely to mean that when monetary policy eventually starts to tighten, OCR hikes will have more bite as servicing costs start to rise.”
