Kiwibank will continue to target small businesses and the public to grow its bottom line in the second half of the year, having yesterday unveiled a 53 per cent jump in interim profit.
The NZ Post-owned lender reported a profit of $58 million for the six months ending December 31, up from $38 million a year earlier.
That was driven by a 14 per cent improvement in net interest income to $140m, which chief executive Paul Brock attributed to customer growth and tight focus on bad debts in an otherwise competitive banking landscape.
Lending in the period rose 6 per cent to $12.8 billion and customer deposits gained 5 per cent to $12.3b. The ratio of impaired assets to gross loans and advances, meanwhile, fell to 0.43 per cent from 0.67 per cent previously, ranking among the lowest in the sector.
New Zealand Home Loans, Gareth Morgan Investments, and Kiwi Insurance, also contributed another $86m to the income statement, up $7m on the previous year. Brock said the bank was hoping to continue this pace in the second half of the year by targeting the small business sector, having chalked up 8 per cent market share growth in the first half of the year alone.
He also downplayed the spectre of the Reserve Bank enforcing tighter loan-to-value ratios (LVR), saying housing supply pressures appeared limited to Christchurch and Auckland, and any lending policy changes would have to take the entire economy into consideration.
"You can't look at a particular part of the market; you've got to look at the overall economy and what is driving economic performance," Brock said, adding that outside of the two centres confidence looked flat.
Even if macro-prudential controls were implemented, he believed they would apply only to high LVR loans, with the robust credit card and personal loan revenues remaining unaffected.
"As far as impact on our net interest income and those sorts of things, clearly we see growth right across the board, right across all LVR bandings."
The bank said it currently held a 10th of the personal banking market, a level it was hoping to grow at one percentage point per annum. To fund this expansion, Brock said the firm would have to tap NZ Post for further capital, with retained earnings and a $150m subordinated bond issue in the first half of the year insufficient to meet its needs.
Still, Brock said the bank had made progress in strengthening the balance sheet in the period, with a capital ratio of 13.5 per cent, 5.5 percentage points above the Reserve Bank's minimum level.
He said the bank's earnings were now firmly on an upward track, having more than fully recovered from the global financial crisis.
"We've been through that cycle and we've come out strongly on the other end."
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