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Media Briefing
Financial Results – 30 June 2010
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Topics Covered
Key Achievements
Profit Performance
Balance Sheet Growth
Key Ratios
Capital Adequacy
Credit Quality
The Future
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Key achievements
Profit after tax of $45.8m for the year ended 30 June 2010, a 13% decrease on previous year’s profit of $52.5m *
Continued growth in balance sheet since June 2009: Lending increased 23% by $1.93bn to $10.42bn (52% 2008/9) 3% increase in retail deposits from $6.72bn to $6.91bn
( 39% 2008/9) wholesale deposits from $1.55bn to $3.38bn, (118%)
Continued growth in market share – Main Bank from 6.9% to 7.8% (Roy Morgan)
Capital strengthened by $150m perpetual preference shares in May 2010
A$250m five year fixed rate Kangaroo bonds issued in Oct 09
* (June 2009 excludes $11.1m one-off gain for sale of group subsidiaries to 100% NZ Post subsidiary, Kiwi Group Holdings Ltd)
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Launched Kiwibank Kiwisaver with more transparent pricing and opportunity to actively manage investment
Loaded for Travel card which is a pre-paid, 5 currency reloadable travel card launched in June 2010 – a world first
Prime sponsor of the New Zealander of the Year Awards
“Best Value Bank” four years in a row (Canstar and Sunday Star Times)
Coveted Bank of the Year award by London-based The Banker magazine
Awarded New Zealand’s most trusted bank brand by Reader’s Digest
Launched Heaps! personal financial management tool as part of internet banking
Key achievements continued
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Key achievements continued
Launched 3 new Go Fly (Air New Zealand) credit cards with family bundling of airpoints and grabaseat Thursdays
Created Kiwi Connector, a youth website providing information, competitions and music
Payments introduced Passport renewal service for British High Commission
Relaunched Business Banking internet banking
Launched Kainga Whenua loan scheme with Housing New Zealand Corporation
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Financial Performance – Profit & Loss
Financial performance impacted by very strong competition in the domestic retail deposit market reducing margins between borrowing and lending.
* June 09 excludes $11m for sale of group subsidiaries to 100% NZ Post subsidiary, Kiwi Group Holdings Ltd
Dollars in thousands Jun-10 Jun-09 % growth
Net interest income 133,390 163,413
Other income * 168,052 138,328
Total operating revenue 301,442 301,741 -0.1%
Total expenses (236,762) (229,291) 3.3%
Profit before tax 64,680 72,450 -10.7%
Income tax expense (18,832) (19,975)
Profit after tax 45,848 52,475 -12.6%
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Financial Performance - historical summary
Bank emerged from recession with good volume growth, strengthened capital base and is on track to increase profit over the coming year
* June 09 excludes $11m for sale of group subsidiaries to 100% NZ Post subsidiary, Kiwi Group Holdings Ltd
Dollars in thousands Jun-10 Jun-09 Jun-08 Jun-07 Jun-06 Jun-05 Jun-04
Interest income 563,886 648,891 559,105 318,963 188,157 119,337 65,197
Interest expense (430,496) (485,478) (444,004) (239,965) (136,222) (83,046) (42,791)
Net interest income 133,390 163,413 115,101 78,998 51,935 36,291 22,406
Other income * 168,052 138,328 122,997 124,558 98,373 75,038 58,839
Total operating revenue 301,442 301,741 238,098 203,556 150,308 111,329 81,245
Operating expenses (218,902) (214,946) (179,432) (158,414) (125,155) (99,504) (79,929)
Impairment allowances (17,860) (14,345) (4,097) (460) (1,892) (946) (1,887)
Profit before tax 64,680 72,450 54,569 44,682 23,261 10,879 (571)
Income tax expense (18,832) (19,975) (17,748) (13,830) (7,490) (3,640) 81
Profit after tax 45,848 52,475 36,821 30,852 15,771 7,239 (490)
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Financial Performance - Balance sheet
Lending growth continues despite slowdown in the housing market
Strong depositor support continues to maintain retail funding ratio
Wholesale assets maintained at high levels to reflect liquidity requirements of uncertain environment throughout the year
Dollars in thousands Jun-10 Jun-09 % growthAssetsLoans and advances 10,418,502 8,492,013 23%Wholesale & other assets 1,819,873 1,879,022 Total assets 12,238,375 10,371,035 18%
Financed by:LiabilitiesRetail deposits 6,911,909 6,717,042 3%Wholesale deposits 3,383,416 1,548,534 118%Securities issued & other liabilities 1,354,287 1,750,293 Total Liabilities 11,649,612 10,015,869 16%
Shareholder's equity * 588,763 355,166 66%Total liabilities and shareholder's equity 12,238,375 10,371,035
Ratio retail deposits to retail lending 66% 79%
* Includes $15m capital injection in Dec 2009 and $150m perpetual preference shares issued in May 2010
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Financial Performance (key ratios)
* June 10 excludes $150m perpetual preference shares issued in May 2010* *June 09 excludes $11m for sale of group subsidiaries to 100% NZ Post subsidiary, Kiwi Group Holdings Ltd
Ratios in percentage terms Jun-10 Jun-09
Profitability measures
Net interest inc./avg.total assets 1.2% 1.9%
Net profit after tax/avg shareholder's funds * 11.5% 15.4%
Efficiency measures
Operating expenses/total income ** 72.6% 71.2%
Operating expenses/avg total assets 1.9% 2.4%
Average Balances ($000's)
Lending - Fixed Mortgages 148 142
Deposits - Term Deposits 81 84
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Financial Performance – Capital Adequacy
Total Capital ratio under Basel II is 12.0% compared to RBNZ’s minimum regulatory capital ratio of 8%
Total capital increased by $203.1m to $722.1m, a 39% increase from June 09.
$150m perpetual preference share issue in May 2010
$15m share capital injection by NZ Post to support business growth in December 09
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Credit Quality (Impaired Assets)
The table shows our total impaired assets as a % of total assets from latest available Key Information Summaries. Kiwibank remains favourably placed against other banks
The ratio has remained consistent across strong balance sheet growth as a result of targeting low LVR, seasoned (i.e. existing, switching) customers to maintain the quality of our lending book.
Impaired Assets of $37.8m include all assets where interest charges have been suspended and a specific provision has been raised
Source: June 10 GDS for Kiwibank and latest published GDS’s for other banks
Bank Latest KISPrevious Quarter
KIS
Kiwibank 0.31% 0.37%
ASB 0.60% 0.50%
BNZ 1.09% 0.91%
Westpac 1.30% 1.23%
ANZ/National 1.51% 1.00%
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Credit Quality (Total Credit Provisions to Total Assets)
A key focus from management and RBNZ is the total credit provisioning to total assets
Each bank has a different product and risk portfolio to Kiwibank which has a high % secure mortgage book and LMI insurance for assets over 80%.
Source: Most recently available GDS’s
Bank Latest GDSPrevious Quarter
GDS
Kiwibank 0.17% 0.13%
ASB 0.49% 0.48%
BNZ 0.76% 0.66%
Westpac 1.26% 1.02%
ANZ/National 1.28% 1.08%
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The future
Continue strong customer growth through being the banking leader in “value for money”
Strong focus on helping customers switch to Kiwibank and driving change to make switching between banks easier
Continued development and promotion of financial management tools (heaps!) and encouraging savings
Consider any investment opportunities in the market as they arise
Active “customer care” programme to help financially distressed customers.
Growing insurance business – Bancassurance
Not currently intending to renew Government Retail Guarantee (comes up for renewal in October)