Kiwibank profit falls despite record growth
Extra scrutiny on the big banks provides an opportunity for Kiwibank to flourish, its chief executive says.
Kiwibank reported a profit of $108 million for the year to June 30, down $7m on the year before due in part to a $12m reduction in fees this year and the boost in insurance receipts from the Kaikoura earthquake received the year before.
Customer lending grew $2.1 billion over the year and customer deposits $2.1b. Net interest income was up $34m.
Chief executive Steve Jurkovich said that was a record level of lending and deposit growth. He said the result was in line with what had been expected. Significant investment had been made in people, technology and processes.
Kiwibank branches have closed during the year after NZ Post’s decision to separate its post shop services from the bank. It withdrew banking from 18 sites and opened 30 standalone stores.
The big four Australian-owned banks – ASB, BNZ, ANZ and Westpac – have been under increased scrutiny in the year.
An Australian royal commission of inquiry found misconduct by their parent banks across the Tasman. The Reserve Bank and Financial Markets Authority followed up with their own review of the sector here.
Jurkovich said Kiwibank’s lending and deposit books had grown at a rate of 12 per cent year-on-year, which was twice the rate of the rest of the market.
That was in part driven by New Zealanders’ desire to put their money and do business with a bank that was New Zealand-owned, he said. Just over 3300 home loan customers had switched to Kiwibank in the year, he said.
Jurkovich said he expected the regulatory pressure on banking to continue. But he said it was important customers had confidence in the sector. He said it was a difficult market for Kiwibank to compete in, with four large foreign owned competitors. But he said it also made it easier for Kiwibank to stand apart.
‘‘Kiwibank is adjusting its business strategy to meet the changing preferences of customers. We are investing in our own branches where customers wish to interact with us face-to-face, as well as developing our technology capabilities,’’ Jurkovich said. ‘‘With strong customer growth and the investment in technology that we are undertaking, we expect this to flatten profitability until we have migrated to the new technology platforms. Kiwibank and NZ Post businesses are responding to different customer demands.
‘‘Although sometimes challenging, this move to increased independence for Kiwibank brings opportunity. In simplifying our business, we can focus on the areas that make the biggest difference for our customers and their long-term financial wellbeing.’’
Kiwibank is wholly owned by Kiwi Group Holdings Ltd (KGH) which is in turn owned by the New Zealand Government via three government entities: NZ Post, ACC and the NZ Superannuation Fund.
Banking commentator Claire Matthews, of Massey University, said New Zealand-owned banks did not seem to have benefited much from anti-big bank sentiment.
‘‘You get all these complaints about Australian banks and the shocking things they do … I saw one person saying it was too hard to change but it is not. You just have to decide that is what you want to do … you are not stuck with the big Australian banks; if you don’t like it, move. But it is not clear that Kiwibank and the others are getting the benefit of those attitudes that you might expect.’’
‘‘We are investing in our own branches.’’