Kiwibank book and bad debts grow

Kiwibank appears to still be growing its mortgage book at much faster than its market share even as bad loans continue to mount and profitability is under pressure.

Friday, February 25th 2011, 3:08PM

by Jenny Ruth

However, Kiwibank chief executive says Paul Brock says most of those bad loans are business loans. They are still secured against residential housing.

Kiwibank's latest general disclosure statement (GDS) shows its mortgage book grew by $214.5 million to $10.17 billion in the three months ended December, its smallest quarterly increase since Kiwibank adopted the Basel ll rules in the March quarter of 2008.

That's using the same capital adequacy-based measure GoodReturns has used since December 2002 and it compares with the $293.6 million increase Kiwibank recorded in the September quarter and with the $0.97 billion increase in the December 2008 quarter, its largest ever quarterly increase.

Reserve Bank figures, which often don't marry at all well with figures derived from all the

home-lending banks' GDSs, show all bank lending on housing grew $422 million in the December quarter. Using the central bank figures as a proxy, Kiwibank accounted for nearly 51% of new mortgage lending by banks in the quarter. Its market share stood at 6.25% at September 30.

Impaired mortgages rose to $63.9 million at December 31 compared with $52.1 million at September 30 while past due mortgages rose to $24.2 million from $15.8 million.

Wesptac's change in how it calculates its equivalent figures will mean these December quarter figures for all banks will be so distorted as to be meaningless

Using Kiwibank's loan-to-valuation ratio (LVR) figures, which are entirely consistent with the capital adequacy-based measure excluding impaired and past due mortgages, its mortgage book grew by 194.2 million to $10.1 billion in the December quarter.

Of this total, 19.4% had LVRs above 80%, down from 20.3% three months earlier, while those with LVRs above 90% eased to 5.4% from 6.3%. Of the $541 million of mortgages with LVR's above 90%, $347 million related to government-based Welcome Home Loans and the rest of its loans with LVRs above 80% are covered by mortgage insurance.

While some banks break down their lending in a separate note on loans and advances, Kiwibank provides only totals.

Its net profit for the three months fell to $5.2 million from $9.7 million in the December quarter of 2009 as charges against profit for impaired loans jumped more than four-fold to $21.5 million from $4.2 million.

However, net interest income jumped 39.4% to nearly $46 million in the quarter. Brock says the increase was mostly driven by borrowers switching to higher margin floating rate loans away from fixed-rate loans.

« Economists expect 50 basis point OCR cut

ANZ's market share looks to have fallen »

Special Offers