Kiwibank ekes out 1.4% gain in first-half profit, on track to beat 2015 annual earnings

Kiwibank, state-owned New Zealand Post Group's banking unit, increased first-half profit 1.4 percent and says it's on track to beat its 2015 annual earnings, growing its loan book faster than the broader banking sector, particularly in residential and business lending.

Wellington-based Kiwi Group Holdings, which includes the lender's wealth management and insurance businesses, posted a net profit of $73 million in the six months ended Dec. 31 from $72 million a year earlier, with total operating revenue up 5.4 percent to $271 million, it said in a statement. The banking unit on its own delivered unchanged earnings of $71 million on a 5.2 percent increase in revenue to $245 million.

Kiwibank paid a dividend of $24 million to NZ Post, its second cash distribution to its shareholder, and chief executive Paul Brock said Kiwibank is on target to meet or exceed its 2015 earnings of $127 million.

"We have plans for an upward track and that's a steady upward track overall and similar levels of growth to what we're currently seeing," Brock told a briefing in Wellington. The bank has "similar plans for steadily continuing to pay the level of dividends that we've been paying to our parent."

NZ Post today reported a 10 percent lift in first-half profit to $110 million, largely due to one-off gains from asset sales.

Since its launch in 2002 on a promise from the then Labour-led government to its coalition partner, Jim Anderton's Alliance party, Kiwibank has grown its customer base to 920,000, up from 880,000 a year earlier, and is the country's fifth largest lender. In recent years it has expanded into other financial services.

Its loan book grew 8.6 percent to $16.33 billion as at Dec. 31 from a year earlier, with mortgage lending accounting for the bulk of its book. Residential loans grew an annual 8.5 percent to $14.35 billion, while business lending expanded 8.9 percent to $1.64 billion.

The bank's impairment charges on bad debt fell to $6 million in the half from $9 million a year earlier, and 0.8 percent, or $135 million, of loans were past due but not impaired.

However, Brock said the lender's strong asset quality won't continue as the economy starts to slow.

"How long can that continue when the economy is doing what it's doing?" Brock said. "You'd expect to see some impact, but you're not seeing that impact yet."

Brock said wholesale funding costs were increasing for banks, though Kiwibank was largely funded through local deposits, growing customer deposits 8.6 percent in the year to $14.41 billion.

(BusinessDesk)