Southern Cross Building Society profit $5.2m

Southern Cross Building Society is reporting annual net profit of $5.2 million, as its net interest margin rose and bad-debt expense fell.

The result for the year to the end of June included a one-time net gain of $800,000, and compared to $2.7m the previous year. Net interest income rose to $11m from $9m, while operating expenses eased to $7.9m from $8.4m.

Chief executive Bob Smith said Southern Cross underwent significant change in the past year, after being restructured.

"It is now well positioned to continue to withstand the headwinds the whole financial sector has been facing, and which will be a catalyst for further consolidation in the savings sector," he said.

The latest year's result was particularly pleasing given the volatility in financial markets.

Mr Smith said he attributed the society's performance to its conservative lending policies and control over operating costs.

The society, which celebrated its 85th anniversary this year, lent almost exclusively on a first mortgage basis on properties in New Zealand.

The average loan to value ratio across the society's loan portfolio was less than 60 percent.

Total liquidity, including undrawn bank facilities, was $177m at June 30 – almost three times higher than required under the society's trust deed.

The healthy liquidity position was achieved by careful balance sheet management, resulting in total assets reducing slightly to $456m from $493m the previous year, Mr Smith said.

"We felt it was prudent to slow our lending growth slightly to maintain a strong liquid position."

Following last year's strategic review, the society sold its non-core investment property in November for $19m, further increasing liquidity reserves.

Chairman Geoff Ricketts said the result represented a substantial turnaround from the previous year.

That was mainly because of an increase in net interest margin, lower bad-debt expense than the previous year, and tight control over operating costs.

- NZPA