Kiwibank makes $36.8m profit

State-owned Kiwibank has announced a 19 per cent increase in profits to $36.8 million.

Chief Executive Sam Knowles described the result as "very satisfactory in a challenging economic environment".

Kiwibank started in 2002, made its first profit in 2005 and has grown rapidly. It now has close to 650,000 customers on its books. "No one could have expected that kind of result after only six years of operation,” Knowles said.

Loans and advances increased 57 per cent from $3.6 billion to $5.6 billion, while retail deposits increased 46 per cent from $3.3 billion to $4.8 billion. The increase in the loan portfolio included the acquisition of the AMP home loan portfolio of $700 million.

Knowles said the continued growth in loans and deposits was an excellent result for the bank.

"Our very strong deposit growth enabled the bank to be largely self-funded for residential and small business loans. This reduced the bank’s exposure to the more expensive and volatile wholesale markets and enabled us to maintain competitive home loan rates. In fact the bank continually led the market down in loan interest rates, but still maintained some of the best term deposit and Online call rates available."

The bank has found itself in the spotlight in election year after National's deputy leader Bill English's suggested in a secretly recorded conversation that state-owned Kiwibank might be sold "eventually".

The main champion of the creation of Kiwibank was MP Jim Anderton. He launched into a defence of the bank and its retention as a state-owned asset today. "It is still signing up two thousand customers a week. It is lending two billion more than it was a year ago. Deposits are up by nearly half. The public are expressing their support for our bank very strongly," he said.

"The only cloud on the horizon is the National Party’s secret promises behind closed doors to sell the bank. National won’t sign a pledge to not sell Kiwibank. On every platform at this election campaign, I will be challenging National Party candidates to sign the pledge not to sell. I started in Christchurch last week with Nicky Wagner, Christchurch Central National Party candidate, who refused to sign.

Knowles said the underlying performance of the bank was very strong.

"The financial result has been affected by new accounting procedures that change the way in which the profitability of loans is assessed. The impact of that has been to increases last year’s profit, but slightly constrain the result for this year. But the really important fact is that the bank continues to increase profit month by month, year by year." He singled out small to medium business banking as one of the key strengths in the continued improved performance by the bank.

"We clearly have struck a chord with small businesses in New Zealand. They like our rates and they like our service. We are getting very solid growth in our business-banking portfolio, but at a level that we can ensure we maintain excellent service."

Mr Knowles said the deposit market in New Zealand over the last year had offered great opportunities for innovation.

"We launched the new PIE accounts that offer significant tax advantages for people in the higher tax brackets. The bank has been promoting Term Deposit and Online call PIE accounts and attracted more than $120 million of deposits in the first four weeks after the accounts were launched."

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