TSB's mortgage book stalls, SBS's book shrinks

TSB Bank's profit jumped but its mortgage book barely budged in the December quarter as customers tried to reduce debt and competitors ramped up incentives to attract borrowers.

Wednesday, February 29th 2012, 2:28PM

by Jenny Ruth

Meanwhile, Invercargill-based community-owned SBS Bank's profitability and mortgage book shrank, reflecting the continuing impact of Christchurch's earthquakes.

TSB's mortgage book grew just $0.1 million to $2.43 billion in the three months ended December.

"We're seeing quite of lot of deleveraging taking place," says TSB managing director Kevin Murphy.

Competitive activity in the form of more and more incentives being offered borrowers and an increase in above 90% loan-to-valuation ratios (LVRs) lending was also limiting his bank's growth, Murphy says. TSB isn't lending at 90% or more LVRs except on government-backed Welcome Home Loans.

"We still believe there are some issues in the New Zealand economy and it's not the time to open the loan market to aggressive lending by the banks," he says.

TSB's net profit rose 27.5% to $13.2 million in the three months ended December with net interest income rising 13.6% and charges against profit for bad loans falling to $0.5 million from $0.9 million previously.

Murphy says the profit increase reflects both the containment of costs - operating expenses rose just 5.3% in the quarter - and increased profit margins as customers continued to switch from fixed-rate loans to floating rate mortgages.

SBS's mortgage book shrank $20 million to $1.76 billion in the three months ended December after shrinking $22.7 million in the September quarter. It has fallen from $1.83 billion at December 31, 2010.

Historically, about 25% of SBS's mortgage lending has been in Christchurch where borrowers are receiving insurance payouts but aren't able to rebuild yet.

SBS has been building up its liquidity in the belief mortgage borrowing will surge again once the rebuilding gets underway. Cash, funds with financial institutions and investment securities jumped to $328.3 million at December 31 from $290.8 million at September 30 and $187.5 million at December 31, 2010.

SBS's net profit fell 16.3% to $3.8 million in the three months ended December. While net interest income rose 6.9% to $18.2 million, charges against profit for bad loans jumped 60.9% to $5.3 million.

« Co-operative Bank's Dec Qtr profit falls, mortgage book grows

ANZ's mortgage book continues to shrink »

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