Kiwibank goes into profit for first time

Chief executive Sam Knowles says Kiwibank is on target to make its first annual profit in the year to June 31. Picture / Mark Mitchell

Kiwibank posted its maiden half-year profit yesterday and claimed targeting other banks' mortgage customers would shelter it from a slowdown in the housing market.

Its unaudited profit was $2.5 million for the six months to December 31, versus a loss of $1.5 million in the same period of 2003.

Chief executive Sam Knowles said the New Zealand Post subsidiary had achieved steady growth and was on target to post its first annual profit for the year to June 30.

Knowles acknowledged the price war among bigger rivals had crimped Kiwibank's home-lending growth in the December quarter.

Home loans grew by $232 million in the half-year, versus growth of $290 million in the equivalent period of 2003. Kiwibank's mortgage book now stands at $1.22 billion.

Knowles said mortgage business had picked up since December with phones "running pretty hot".

Because Kiwibank focused on refinancing existing loans rather than writing new business, Knowles was not concerned about a slowdown in house sales or rising interest rates.

"We're not highly reliant on underlying growth in the market."

Kiwibank's net interest income, from which most banks generate about 80 per cent of their income, rose to $16.7 million from $9.5 million.

Other operating revenue - including bill payment services and international money exchanges operated at NZ Post branches - was $35.5 million, lifting total income to $52.3 million.

Scepticism remains over just how profitable the Government-owned Kiwibank really is.

David Tripe, senior lecturer in banking studies at Massey University, said revenue and costs appeared "atypical" of a banking business. This made it hard to interpret Kiwibank's performance.

"On the assumption their accounting policy has remained the same throughout, things are getting better for them. But that's probably as much as we can say with any confidence," Tripe said.

Act leader Rodney Hide said a $2.5 million profit was small compared with the $120 million of taxpayers' money pumped into the bank.

Kiwibank will launch business banking services, initially in Auckland, late next month. Knowles said it aimed to lend "small numbers of millions" to firms with up to 50 staff.

"We're positive we'll get the same levels of growth and uptake in the business markets as we've had in the personal markets," he said.

Knowles pointed to growth in the size of average transaction accounts to $2900 from $2200 and a 25 per cent increase in average term deposits to $41,805 as evidence Kiwibank was moving "steadily upmarket".