Bank's profit drops after multimillion-dollar impairment on stock in mining company.
TSB Bank's annual profit took a hit after the New Zealand-owned lender booked a multimillion-dollar impairment on shares it holds in struggling state-owned mining firm Solid Energy.
The New Plymouth-based bank said its net profit for the year to March 31 was $50 million, 6 per cent down on the $53.1 million it reported for the previous year.
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TSB booked a $13.8 million impairment provision for its Solid Energy redeemable preferance shares. The bank ended up with the shares after a debt-to-equity conversion of a portion of its bond holdings in Solid Energy -- part of a debt restructuring deal announced last October aimed at getting the financially stressed mining firm back on its feet.
Other banks including ANZ, BNZ and Westpac also received shares as a result of the deal, which effectively wrote off $75 million of the mining company's close to $400 million debt.
Solid Energy's debts swelled following a failed diversification programme into new businesses such as biodiesel and a collapse in coal prices.
TSB said it was continuing to receive interest on its remaining Solid Energy bonds and the bank was "optimistic" about the mining company's future as it continued to restructure its business.
Solid Energy's recovery is dependent on an improvement in coal prices, which continue to be at low levels. TSB chief executive Kevin Murphy said it was a difficult market and there were no guarantees. He said TSB had better positioned itself to compete and build a sustainable financial future in the last financial year.
"I'm pleased with the result and confident that the bank is on the right track for continued growth," Murphy said. "Over the past 12 months we have experienced continued funding growth from customers all over New Zealand, which has seen depositor funds surpass the $5 billion mark."
The bank paid a $10.2 million dividend to the TSB Community Trust, which distributes community grants in Taranaki, and retained profits of $39.8 million, its financial statements showed.
The bank said its loan book grew 7.7 per cent year-on-year to $3.1 billion.