18 Aug 2022

Increase in interest income adds impetus to Kiwibank result

6:06 pm on 18 August 2022

Kiwibank has delivered another solid full-year result, driven by rising interest income, despite lending levels slowing as the housing market cools down.

Part of Kiwibank's new look as the bank unveils a new logo and digital banking services.

It was a year of two halves, Kiwibank says. Photo: Kiwibank

Key numbers for the 12 months ended June compared to a year ago:

  • Net profit $131 million versus $126m
  • Net interest income $630m versus $528m
  • Home lending growth $1.8 billion versus $2.2b
  • Deposit growth $1.8b versus 1.8b

Kiwibank chief executive Steve Jurkovich said it was a year of two halves, with second-half lending affected by tighter credit criteria and weaker housing.

"The first half of our financial year was really strong, and then the CCCFA [Credit Contracts and Consumer Finance Act], ongoing illness and the rolling pandemic definitely influenced confidence in the second half," Jurkovich said.

"I think as I look forward, probably I'm thinking that it's going to be that mirror image of slower first half and hopefully a stronger second half."

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Steve Jurkovich Photo: Kiwibank

But higher interest rates marked a return to "business as usual" for banks, with Kiwibank's net interest income up 19.3 percent.

"We did have that spell where [the interest rate was] really unusually low and that's quite a difficult operating environment for banks," Jurkovich said.

But the tougher economic environment meant home lending growth of $1.8b was lower than the year earlier.

"Potential buyers are being a lot more circumspect - whether that's first home buyers holding off, existing owners looking to upsize, or property investors taking a wait and see approach," Jurkovich said.

"History shows that different cycles occur and the market will recover. At the same time, we continue to make great progress supporting our customers to achieve their home ownership goals."

The bank was focused on ensuring customers could repay debt amid the challenging economic environment, he said.

"One of the challenges we had at the end of the financial year was - as we thought about the year ahead and possible impairments - there was actually very little to go on because people have managed to be really resourceful and stay up-to-date on their payments."

Jurkovich said questions remained on how much wriggle room customers had, but Kiwibank had not seen distress signals on scale yet.

The bank's credit impairment losses were $16m, compared to a $19m reversal a year ago.

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