Superbank says business as usual

Superbank's mortgage book and deposit base showed strong growth in the year ended September but it will take longer for it to become profitable than originally projected.

Thursday, December 29th 2005, 9:51PM

The bank, a joint venture between Australia's St George Bank and Foodstuffs, lost $11.5 million in the year ended September, up slightly from its $11.4 million loss the previous year.

The bank's losses since it started operating in February 2003 now total $35.5 million. As St George chief executive Gail Kelly said earlier this month, Superbank will no longer break even in 2006, reflecting the economic outlook and the "significant compression" of margins, particularly in the mortgage market.

Kelly said St George is reviewing its New Zealand operations and that one option is to exit this market.

However, Foodstuffs Auckland chief executive Tony Carter says that "at this stage, we remain committed to Superbank."

He wouldn't be drawn on what Foodstuffs would do if St George chooses to exit New Zealand. "We can't comment on what St George's position is."

Neither would Carter say when Superbank is expected to become profitable, saying that's commercially sensitive. Superbank's latest disclosure document shows its mortgage book grew from just $46.3 million at September 30 last year to $442.5 million at September 30 this year. Its deposit base rose 52.2% to $500.1 million.

While net interest income more than doubled from $2.16 million to $4.69 million over the year, its operating expenses rose 14% from $13.46 million to $15.34 million.

Superbank chief operating officer James Munro says questions of ownership aren't for him to answer. "It remains very much business as usual. We're still a start-up and we've still growing."

Both deposit growth and growth in the mortgage book slowed in the September quarter, reflecting the price war in the mortgage market. "We simply decided we didn't want to grow that fast while margins are that compressed."

There has been some easing in margin pressure in the last two-and-a-half weeks but it's too early to say whether that pressure has peaked Munro says. There was a period earlier this year when it looked as though pressure on margins was easing but that proved only temporary, he says.

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