Kiwibank profit drops 5% amid challenging economic conditions

Kiwibank's net profit fell by 5% in the June year. Photo / Supplied

A “challenging” economic environment helped drive Kiwibank’s net profit down by 5% to $191 million in the June year, the bank says.

Kiwibank said strong balance sheet growth over the year was offset by a lower net interest margin - the difference between a bank’s interest income and the amount paid to its depositors and other lenders.

The bank grew total lending by 10% to $35.8 billion.

Home lending grew by $2.3b and business lending grew by $1b.

Kiwibank’s deposit book grew 8% to $30.3b.

Chief executive Steve Jurkovich said the bank delivered strong underlying growth in the highly competitive home lending and deposit markets.

“Business banking was a standout in a subdued market and a clear signal of our commitment to backing Kiwi businesses through uncertain times,” he said.

“At the same time, we continued building the Kiwibank of the future by investing to be more adaptable and customer focused.”

Jurkovich said the bank believed strongly in technology but recognised that being a face-to-face service was still highly valued by customers.

Kiwibank continued to have the largest physical banking network in the country and there was ongoing investment in the branch network.

“Over the past five years, Kiwibank has doubled its balance sheet, and we’re aiming to do it again,” he said.

Cabinet’s approval for the parent company Kiwi Group Capital (KGC) to explore a capital raise of up to $500 million was designed to accelerate the bank’s growth and strengthen its competitive edge, he said.

Jurkovich said the Reserve Bank’s decision to cut the official cash rate this week was positive for homeowners and businesses.

“It is a strong signal of further easing ahead, aimed at supporting households and businesses amid a slowing economy.”

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.