PSIS plans modest 'cherry on top' dividend for members

Wellington-based PSIS is planning to pay a dividend to its members after the end of the present financial year, but the amount is likely to be "very modest".

PSIS said it would be a "cherry on top", and PSIS would be the first consumer co-operative to do it in New Zealand, though farmer/ producer co-operatives commonly pay dividends.

In the past, that benefit was returned in "very competitive pricing" by PSIS. The co-operative would still retain "fair value pricing" around the middle of the pack of competitors, but excess profits would be used to reward members, depending on how much business they did with PSIS.

The financial services co-operative will also soon move into small business lending in a pilot project at a few branches around the country, before rolling out the service around the country next year, if all goes well. But small business loans will only be a small part of its PSIS lending in future.

PSIS yesterday reported that pre-tax profits dropped 44 per cent to 9.3 per cent in the year to March, after an "exceptional" year last year, when interest rate profit margins were high.

PSIS chairman Sir David Gascoigne said to make itself different in the financial services sector in the coming year, it would offer "member financial benefits".

A payout to its 124,000 members who are also customers would be in line with how much business a member did with PSIS, how long they had been a member and what services they used.

But the payout would only be after looking after the capital requirements of the group, setting aside prudent reserves and would be at the discretion of the board.

PSIS chief executive Girol Karacaoglu said: "The amounts will be very small ... very modest" but could give expected scale. The first payout would be after the end of the March 2012 financial year, assuming PSIS made a reasonable profit.

Overseas, some small financial services co-operatives pay as little as $5 to $200 a year to members to share the co-operatives' profits, to make them feel like owners of the business.

Small business banking "in a cautious way" was also on the cards, Sir David said.

Mr Karacaoglu said it would gradually diversify into small business banking and some insurance, beyond its existing core business of home loans and personal loans. PSIS had $1.16 billion in loans at the end of the March year.

There are between 20,000 and 30,000 members who have some link to small business, such as painters, electricians, hairdressers and the like, who already had home loans with PSIS.

Finance Facts

PSIS year to March 31, 2011 (previous year 2010)

Pre-tax profit: $9.3 million ($16.6m )

After-tax profit: $7.1 million ($13.1m)

Net interest income $43m ($49.6m )

Non-interest income: $18.4m ($18.3m)

Total income: $62.1m ($67.6m)

Total assets: $1.45 billion ($1.39b)

Deposits: $1.16b ($1.11b)

Loans: $1.16b ($1.12b)