Kiwibank reports strong first half growth; profit in line with expectations

21/02/2020

Kiwibank half year results for the six months to 31 December 2019.

Kiwibank today announced that it had maintained its momentum and support for the New Zealand economy with growth of $1.1 billion in customer lending and $1.0 billion in customer deposits for the six months to 31 December 2019.

Kiwibank Chief Executive, Steve Jurkovich, said the bank again outperformed the market in both its lending and deposit books, and that profit was in line with expectations.

“Our purpose is to be the New Zealand-owned bank that makes Kiwis better off. We deliver on this purpose when we support more Kiwis with their home ownership goals, business growth, and savings ambitions. As we position ourselves for the future our focus is providing simple, relevant and competitive offerings.

“Business lending was up 17% and home loans were up by 4% in the six months to 31 December 2019 showing more than ever Kiwis are choosing to support a New Zealand-owned bank, and in turn Kiwibank is there backing Kiwi dreams.”

The bank reported a net profit after tax (NPAT) of $51 million for the half. As expected the bank faced rising operating costs due to customer growth, accelerated investment in its transformation programme, and increased its risk and compliance investment.

“Our founding purpose, of being the bank that is the Kiwi-owned alternative in a market dominated by Australian-owned banks, has never been more relevant. To deliver on our potential, New Zealanders need us to adjust and adapt to meet the needs of our customers in an ever-changing world,” Mr Jurkovich said.

Modest growth in operating income was achieved by above-system growth in both lending and deposits and a one-off gain on sale of the Prezzy card business.

Key points: for the six months to 31 December 2019, compared to the prior corresponding year period, 31 December 2018 (unless stated otherwise):

  • Operating income up 1% to $277 million
  • Cost to income ratio 74.7% vs 67% from December 2018
  • NPAT $51 million, down 18% from December 2018 but up 10.9% from the six months to 30 June 2019
  • Net interest margin (NIM) 1.97% vs 2.13% from December 2018
  • Customer lending net growth $1.1 billion (5.3% for the six months)
  • Customer deposit net growth $1.0 billion (5.4% for the six months)

Update on Kiwibank branch transformation and going cheque-free

Mr Jurkovich said Kiwibank continued to transform its retail branch network, with new standalone branches providing dedicated banking staff, specialist services, and private spaces for those important banking conversations.

“Investment in standalone branches does mean changes to our extensive network but we continue to maintain the largest retail footprint of any bank in New Zealand, while responding to our customers’ clear preference to carry out their day-to-day banking online.”

Our founding purpose, of being the bank that is the Kiwi-owned alternative in a market dominated by Australian-owned banks, has never been more relevant.
Kiwibank Chief Executive, Steve Jurkovich

Mr Jurkovich said Kiwibank was on track to go cheque-free from the end of February, and he was confident the bank was supporting its customers through the change.

“Since we announced we were going cheque-free nine months ago, we have provided training to thousands of customers through one-on-one and small supportive group sessions at our branches, with our Stepping UP digital banking workshops, and utilising the convenience of our digital support hub,” he said.

Sustainability update:

Mr Jurkovich said Kiwibank continued to make good progress on its sustainability commitments in the first half. Highlights included:

  • 5% reduction in overall carbon emissions (vs FY19)
  • More than 90% of people leaders completed Kiwibank’s leadership development programme – the Leadership Code
  • Progress on the bank’s Gender Tick commitment, with women now accounting for 31% of senior leadership roles
  • Progress towards achieving Rainbow Tick accreditation, with high levels of engagement from Kiwibank people

“Making Kiwis better off starts right here with our team at Kiwibank, and I’m incredibly proud of what we’ve achieved and the impact it will have on the Kiwibank team. While it’s great to see progress on all these initiatives we are only really just getting started and we have much more we can and will do.”

Outlook:

Looking ahead, Mr Jurkovich said continued investment is required to ensure Kiwibank is fit to deliver on its purpose, as it transforms to become a better, bolder and more sustainable bank, and achieve its goal of powering more Kiwis to get ahead.

In relation to the RBNZ Capital Review, Mr Jurkovich said he welcomed the certainty that came with the revised changes announced at the end of last year and that Kiwibank continues to work with the Reserve Bank ahead of the capital framework coming into effect from approximately July 2020.

Download the Half Year Results for 31 December 2019 (PDF 3.8 MB).

Download the General Disclosure Statement December 2019 (PDF 2.5 MB).

Kiwibank Banking Group financials for the half-year ended 31 December 2019

$m

6 months to 31 Dec 19*

6 months to 31 Dec 18*

12 months to 30 Jun 19

Interest income

461

462

933

Interest expense

(236)

(239)

(488)

Net interest income

225

223

445

Net gains on financial instruments at fair value

6

2

3

Net fee and other income

46

48

90

Operating expenses

(207)

(183)

(375)

Credit impairment losses

(5)

(4)

(12)

Net profit before taxation

65

86

151

Income tax expense

(14)

(24)

(43)

Net profit after tax

51

62

108

Cost-to-income ratio

74.7%

67.0%

69.7%

$m

As at 31 Dec 19*

As at 31 Dec 18*

As at 30 Jun 19

Assets

Loans and advances

21,523

19,316

20,443

Other assets

2,563

2,724

2,291

Total assets

24,086

22,040

22,734

 

Liabilities

Deposits and other borrowings

19,217

17,430

18,240

Debt securities issued

2,463

2,253

2,078

Other liabilities

817

829

867

Total liabilities

22,497

20,512

21,185

 

Shareholder’s equity

Share capital

737

737

737

Reserves

852

791

812

Total shareholder's equity

1,589

1,528

1,549

Total liabilities and shareholder's equity

24,086

22,040

22,734

*31 Dec 19 and 31 Dec 18 are unaudited


Media enquiries contact: Kara Tait, Kiwibank External Communications Manager - 027 475 3521