Kiwiwbank Profit Halves

25 August 2011 - Which Way to Pay

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Kiwiwbank Profit Halves

The annual profit of Kiwibank has fallen by 54% to $21.2 million in comparison to last year’s profit after tax of $45.8 million. The $24.6 million tumble marks the fact that demand for bad debt has surged more than four times what it was as upon June 2010.

The state owned bank, known for establishing itself in PostShops, has grown net interest margins despite their substantial fall in profit. This comes as a reaction to home loan customers switched to more lucrative floating mortgages from fixed-term ones. Kiwibank also increased lending by $1.08 billion to $11.5 billion, a notable 10% up on last June. This figure is even more significant given the fact that the overall loan market saw a severely stinted growth rate; as such Kiwibank greatly out-did its bigger Australian-owned competitors.

The drop came amidst figures showing that provisions for bad debt surged $67.6 million to $87.1 million from just $19.5 million upon the previous year. However, the chief executive of Kiwibank Paul Brock said that he “vast majority” of bad debt provisioning to date have been “one-offs” and as such, he said to have “considerable” confidence for the present financial year as he “strongly believed” the worst was behind Kiwibank.

"The Global Financial Crisis compounded by the [Christchurch] earthquake has made things tough, but the bank is in strong shape and has weathered the storm," Brock said.

Kiwibank have also reported a retail deposit rise of 14% to $7.9 billion from $6.9 billion. Meanwhile, the bank's net interest income increased from $57.9 million to $191.3 million (up 43%) as customers changed from fixed to floating mortgages. The Kiwibanks’ net interest margin also grew by 29 basis points to 147 basis points.

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