Strong lending growth pushed Kiwibank profit up 16 per cent to $64m

Kiwibank has announced its half year result. Photo / File

Strong home and business lending growth have helped boost the half-year profit of Kiwibank by 16 per cent.

The state-owned bank saw a net profit of $64 million for the six months to December 31, 2021, up from $55m in the same period in 2020.

Chief executive Steve Jurkovich said the bank outperformed the market in home loan and business banking growth meaning it grew at a faster rate than the banking industry as a whole.

"Total lending growth of $1.9 billion for the half (up 20 per cent on the prior period) was driven by the strong housing market and solid demand, with above-market growth from our continued focus on the expansion of adviser channels.

"Business banking growth was flat on the prior half, but well above the rest of the market. This was due to a refreshed strategy focused on key customer segments and high demand from the business sector to work with a trusted New Zealand brand."

The bank's net interest income rose from $250m to $298m with its total operating income also rising from $276m to $328m.

Its expenses also rose, increasing from $198m to $232m although its cost to income fell from 71.7 per cent to 70.7 per cent.

Net deposit growth was $1.4b up 10 per cent from $1.3b.

Credit impairments rose from nothing in the prior comparable half to a $7m loss.

Jurkovich said the half-year result was pleasing as it also came at the same time as the bank nearly double its investment in its strategic transformation. It spent $50m during the period investing in technology.

"2022 is shaping up to be a hugely exciting and pivotal year as we progress the capabilities needed across people, process, and technology. This will enable us to build a solid foundation that helps us create more consistent, reliable, and intuitive experiences for our people and our customers."

He said the bank was partnering with fintechs and providers to support the delivery of its transformation including Thought Machine for core banking platforms, ACI Worldwide for real-time digital payments and nCino for the bank's lending origination platform.

Jurkovich said it hadn't seen material adviser impacts from the lockdowns or pandemic to date but continued to monitor the situation closely.

"We are very aware that many customers and their businesses are fatigued from the multi-year effort they have put in and they are doing all they can to navigate COVID and the uncertainties it brings."

Housing market

Jurkovich said after a year of strong growth the bank was forecasting a period of consolidation in the housing market and he acknowledged the possibility of modest price falls.

"A number of factors are at play including expected increases to the Official Cash Rate, tighter lending restrictions (including LVRs, DTIs and CCCFA), and an increased supply of new homes.

"We remain committed to supporting Kiwi to get into homes while ensuring they have the means to meet their repayment obligations. We'll be working with customers to understand what this looks like and the options available to them in this changing environment," he said.