Post up, Kiwibank squeezed
Kiwibank’s split from New Zealand Post has taken another step, but for once the bank appears to be under pressure while the mail business may have turned a corner.
Both Kiwibank and its majority owner reported half-year profits for the six months to December 31 yesterday, the first financial results since a 47 per cent stake in the bank was sold to ACC and the NZ Super Fund in October.
NZ Post previously owned Kiwibank entirely.
But while Kiwibank has for years been the star of the group, the Wellington-headquartered bank reported an 11 per cent drop in profit after tax to $63 million.
Meanwhile NZ Post’s mail business returned to profit on the back of a continued increase in parcel deliveries and cost-cutting.
Kiwibank said its lending grew 4.4 per cent during the period, but its operating expenses increased by 15 per cent.
The bank’s net interest margin – the difference between what it pays to borrow and the rate at which it lends – dropped to 1.94 per cent, the lowest since mid-2014.
Chief executive Paul Brock said while bank depositors may not believe it, the interest rates on deposits had climbed as banks looked for alternatives to ‘‘volatile’’ international funding markets.
‘‘The market has been very competitive,’’ Brock said.
As part of the partial sale to the two state-backed fund managers, Kiwibank was recapitalised, with about $90m of the $494 proceeds kept on the balance sheet, cutting the returns to NZ Post.
Brock said the decision to withhold cash reflected the new shareholders’ views of Kiwibank’s capital position and upcoming investment plans.
‘‘I think their view was – given the amount of investment that was going on in the bank – it was probably worth popping in a bit more [cash], and obviously that also means that the bank can continue to grow,’’ Brock said.
Kiwibank is undergoing a substantial technology transformation, which represented part of the increase in operating expenses.
While Brock would not put a final cost on the upgrade, the cost would be ‘‘significantly more’’ than the $100m initially flagged.
‘‘This is a very expensive and long programme that will go over many years, and I don’t intend to get into the detail of the costings around that.’’
Kiwibank’s results, while still part of the overall NZ Post group, came somewhat in contrast to the performance of the mail business.
NZ Post said its mail, parcels and logistics business reported a $14m profit in the six months to December 31, 2016, compared with a $1m loss in the second half of 2015.
Chief executive Sir Brian Roche said that, subject to market conditions, the result could be replicated or even improved.
A multi-year programme to cut costs has seen thousands of jobs cut, as mail volumes plunge by 8 per cent to 9 per cent a year.
‘‘When you look back at what we’ve done, the results are starting to come into line with what we’ve forecast,’’ Roche said, adding that the programme of cost-cutting was not complete.
‘‘I’d be misleading you if I said we weren’t going to continue to right-size this business.’’
Net profits after tax for the NZ Post group, including its stake in Kiwibank, fell 19 per cent to $89m, as its share of the bank’s profits was cut.