Kiwibank continues explosive growth; ASB profit drops

The government-owned Kiwibank's profitability and its mortgage book continued their explosive growth in the March quarter.

Wednesday, June 3rd 2009, 6:43AM

by Jenny Ruth

Kiwibank's net profit jumped 93.3% to $14.3 million in the three months, bringing the increase in profit for the nine months ended March to 33.5% to $40.1 million, its general disclosure document (GDS) shows.

Kiwibank's profit growth was despite its charge against profit for impaired loans jumping $3.6 million in the quarter, bringing the charge for the nine months to $9.7 million.

By contrast, the only one of the four major banks to publish its GDS so far, ASB Bank, saw its net profit slide 40.6% to $98 million in the quarter, taking its nine-months profit to $336 million, down 22.2% on the same nine months a year earlier.

ASB's profit was dragged down by an $80 million jump in charges for impaired loans in the March quarter, bringing the nine-months charges against profit to $147 million.

Kiwibank's mortgage book grew $603.5 million to $7 billion in the three months, not quite as much as the $869 million growth in the December quarter when it accounted for 89.7% of all new lending by registered banks, excluding the newly registered SBS Bank.

Kiwibank's mortgage book growth was more than double that of ASB Bank whose book grew $279 million to $36.71 billion, excluding off-balance sheet exposures which are mostly loans approved but not drawn down. In the December quarter, ASB's on-balance sheet mortgages grew just $23 million.

Using Reserve Bank figures as a proxy for the market, Kiwibank's new lending accounted for 37.6% of new lending by registered banks in the quarter and its market share rose to 4.4% from 4.1% in December.

ASB accounted for 17.4% of new lending in the quarter and its market share eased from 23.4% to 23.3%.

ASB's mortgages with loan-to-value ratios (LVRs) above 80% were steady at 16.9% of the mortgage book while Kiwibank's rose slightly to 17.3% of its book at March 31 compared with 16.8% at December 31.

Of Kiwibank's $521.2 million of loans with LVRs above 90%, $132.3 million were part of the government's Welcome Home scheme. Both banks have lender's mortgage insurance (LMI) protection.

ASB's GDS spells out that 0.5% of loans with LVRs between 80.1% and 90%, which totalled $4.91 billion at March 31, have 100% LMI and 21.7% have LMI cover for the top 20% of each loan. Of its $2.02 billion of loans with LVRs above 90%, 0.1% had 100% LMI cover and 24.7% had LMI cover for the top 20% of each loan.

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