Cooperative Bank profit dips to $5.6m

Cooperative Bank posted a 2.4 per cent decline in first-half profit as lower banking fees and increased spending on staff and new technology dented earnings.

Net profit fell to $5.6 million in the six months ended September 30 from $5.8m a year earlier. Net interest income rose 15 per cent to $31.1m as the bank expanded its loan book. However, that wasn’t enough to offset a 34 per cent decline in fees and other income to $4.6m and a 5.6 per cent increase in operating costs to $30.4m.

The bank’s insurance division outperformed with a 34 per cent lift in earnings to $2m on a 13 per cent rise in operating income to $4.2m.

“The decline in profit was due to fee reductions of several million dollars offset by benefits of continued customer and balance sheet growth,” chair Brendon O’Donovan said. “Expenses were up 5.6 per cent, due to increased technology spend and higher staff costs.”

The former PSIS refreshed its strategy in the March 2018 financial year, embracing new technology. The lender added $3.5m to its software assets in the year through March, taking the total spend to $36.7m as at March 31.

New Zealand’s smaller banks scored well in maintaining customer trust in a survey by the Reserve Bank and Financial Markets Authority for its conduct review. However, the minnows were seen as lagging behind their larger peers in considering conduct risks. O’Donovan said the bank welcomed the review and would implement relevant recommendations.

Cooperative Bank’s gross loans grew to $2.39 billion as at September 30, up 4 per cent from a year earlier. Of that, residential mortgages were $2.21b, up from $2.12b, while nonresidential loans rose to $184.2m from $177m.

Its provisioning for bad debt grew to $5.9m from $4.8m. Customer deposits expanded to $2.25b from $2.2b a year earlier.