Colonial to explore NZ banking scene

By RICHARD BRADDELL

MELBOURNE - Colonial will dip its toe into the waters of New Zealand banking with a "few simple products" distributed through its adviser and franchise network later this year.

Colonial's managing director of international financial services, Rob Garnsworthy, said mortgages were likely to be offered from the group's banking operations in Sydney.

Colonial, which has taken the growth line honours in the past two years for Australasian life and financial services companies, yesterday reported a calendar 1999 net profit of $A455 million, at the top end of analysts' expectations and up 49 per cent on the previous year's $A306 million.

With the help of several takeovers, the banking and life insurance group also expanded its asset base to $A87 billion from $A72.5 billion. Colonial is seen as the front runner in the Bank of Scotland's planned sale of BankWest, which is thought to be worth $A2.5 billion.

The result included a net New Zealand contribution of $A35 million ($42.74 million), up from $A12 million ($14 million) the year before.

In common with the rest of the Colonial group, organic profit growth in New Zealand was heavily boosted by recent acquisitions.

New business sales in New Zealand soared from $A75 million ($88 million) to $A165 million ($201 million). This was on the back of a first full year's return from Prudential's life and fund management operations - acquired towards the end of 1998. As a comparison, if Prudential had been owned for all the previous year, new business would have been up 12 per cent in New Zealand currency terms.

Cost savings through the integration amounted to an annualised $A20 million. In Australia, integration of Legal & General brought further cost savings of $A162 million.

Colonial's reach has been expanded by several fund manager and banking acquisitions, most recently with the takeover of Tasmania's Trust Bank and the upcoming takeover of Britain's Stewart Ivory fund management company.

However, Colonial's managing director, Peter Smedley, confirmed that it was still looking for critical mass in Britain, previously stated as double its current size there.

Even though Colonial was on the look out for further British acquisitions, discussions over the possible sale of UK assets continued.

As to their outcome: "Hopefully ... one that is satisfactory to the ongoing structure of the group in the UK," Mr Smedley said.

Asked if the same considerations of critical mass applied to Colonial's smaller New Zealand business, chief financial officer Tim Wade responded that of all Colonial's "developed markets," New Zealand had the lowest costs to income. These fell from 27.6 per cent to 17 per cent during 1999.

Mr Garnsworthy said that 12 per cent organic growth in new business was good given the static market, but the asset base here has been growing slowly at between 5 and 8 per cent. This reflected the fact that most of the income growth had been in risk (insurance) services rather than in savings products.