$12.5m dividend as TSB boosts annual profit

A big drop in interest expenses has helped to boost profit at TSB, with the bank paying out a $12.5 million dividend to its community trust owner — its biggest since 2018.

The bank’s net profit after tax rose 7 per cent to $38.086m in the year to March 31, from $35.636m the previous financial year. Its interest income fell from $255.96m to $229.68m while its interest expenses nearly halved from $112.3m to $67.89m.

TSB chief executive Donna Cooper said the past financial year had marked an important turning point for the bank.

“The last financial year saw a major compliance uplift, a significant upgrade of our systems and technology, an ongoing Covid19 response and considerable regulatory developments in the New Zealand banking industry,” she said.

“Despite this, we have delivered a solid financial result and shareholder dividend, along with some key customer initiatives.”

Last year the bank was ordered by the High Court at Wellington to pay $3.5m in civil penalties after it was found to have breached antimoney laundering laws.

The penalties were based on TSB’s acceptance that it did not have adequate and effective systems for monitoring and managing compliance with its AntiMoney Laundering and Countering Financing of Terrorism programme.

It has been working on improving its processes since 2019.

Cooper said its focus and investment in the past three years — and past 12 months in particular — was required to set it up for the future. “We’ve had a massive amount of work to do, but now we’re ready to springboard into a new era of profitable growth and innovation.”

Residential lending at the bank rose from $5.48 billion to $5.85b. Its commercial lending rose slightly from $537m to $537.7m while agricultural and personal lending was down.

Agricultural lending fell from $316m to $268m while personal went from $27.6m to $20.9m.

The bank’s deposit book rose from just shy of $8b to $8.18b.

Meanwhile, the bank’s impaired assets fell from $23m to $16.7m.

The bank’s annual report shows it has also seen change in its board over the past year. Longstanding former chair John Kelly retired in March, with new chair Mark Darrow becoming a director on February 1 and chair on March 18.

Peter Schuyt also resigned from the board in August to be replaced by Michael Schubert.

Total fees for directors rose to $1,034,788, up from $827,769.

The bank is wholly owned by community trust the Toi Foundation, which took a dividend of $12.5m during the year.

Last financial year the bank did not pay any dividends to the foundation.

The Reserve Bank stopped all New Zealand banks from paying out any dividends in March 2020 at the start of the global Covid-19 pandemic.

That was then eased in July last year to allow banks to pay out up to 50 per cent of their surplus in dividends, with all restrictions to be lifted next month.

TSB chair Darrow said the bank’s results came against the backdrop of significant regulatory developments within the banking industry, following the implementation of changes to the Credit Contracts and Consumer Finance Act.

We’ve had a massive amount of work to do, but now we’re ready to springboard into a new era of profitable growth and innovation.

TSB chief executive Donna Cooper