Kiwibank declined to compete as hard as some other players in terms of incentives offered in the June half year as the overall home loans market slowed, according to chief executive Steve Jurkovich.

Kiwibank’s disclosure statement showed its new lending on home loans slowed to $963 million compared with $1.6 million in the first half.

For the year, Kiwibank accounted for about 12% of net new lending on mortgages but only 9.7% in the second half, based on Reserve Bank data.

That RBNZ data showed mortgage lending slowed from $11.44 billion of net new lending in the six months ended December to $9.92 billion in the six months ended June.

“There was a lot of margin pressure, particularly from the big banks,” in terms of incentives offered such as cash back deals.

Kiwibank had done “not as much as others did, that’s for sure,” in the second six months.

The bank’s net interest margin still fell to 2.10% in the second half from 2.25% in the first half and that compares with 2.38% in the previous second half.

Jurkovich says the state of the market reflects the state of the economy. “I do think it’s been a much slower and longer and tough period than most people expected and I would say we’re out of the woods yet,” he says.

Jurkovich said while Kiwibank was pleased with its own lending, the market “has been very slow going, especially the overall business market.”

Kiwibank’s net profit for the year ended June fell 8.9% to $17 million. While it blamed the decline on the squeeze in margins, the bank’s total interest income fell 8.2% to $2.13 billion but its interest expense fell a much larger 14% to $1.26 billion, leaving net interest income up 1.7% at $873 million.

But charges against profit for bad debts jumped to $41 million from $29 million the previous year.

Kiwibank’s high loan-to-valuation ratio (LVR) lending increased to 11.4% of the book from 8.8% a year earlier, though that remains well below the RBNZ maximum of 25%.

“We’ve been pretty successful with first-home buyers and first-home buyers are always going to have higher LVRs,” Jurkovich says.

Jurkovich says more and more customers are using mortgage advisers and advisers account for more than 70% of Kiwibank’s home loan business now, including loans originated by sister company New Zealand Home Loans, compared with about two-thirds in the previous year.