Failed IT project weighs on Kiwibank’s profits

Lower funding costs helped to boost earnings at Kiwibank but more costs linked to its failed IT project continued to weigh on the business.

The state-owned bank saw its net profit after tax rise from $53m to $115m in the year to June 30.

But the big jump mainly reflected a poor result in 2017 after it took a big hit from its decision to quit its CoreMod IT project. The 2018 financial year result was still dragged down by higher expenses associated with the IT project. It booked an $8m impairment loss and incurred a further $7m in operating costs relating to the wind-down of the project.

New chief executive Steve Jurkovich, who joined the bank last month from ASB, said this would be the end of costs associated with the canned IT project.

But shareholders ACC, the New Zealand Superannuation Fund and New Zealand Post are said to be in a dispute over how much information NZ Post disclosed about the risks involved with the IT project.

Jurkovich confirmed there were discussions going on but said the bank was not directly involved. He said the board met this week and the shareholders were supportive of what the bank was doing.

It would not be paying out a dividend to shareholders this year. The bank’s underlying net profit rose $4m to $126m. Net interest income rose $43m to $411m while its margin improved from 1.92 per cent to 2.06 per cent.

Kiwi Group Holdings, which includes the bank, KiwiSaver business Kiwi Wealth, New Zealand Home Loans and Kiwi Insurance, saw its underlying profit rise 3 per cent to $133m. Its net profit after tax was up from $58m to $122m.