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Kiwibank reestablishes commitment to local market, despite drop in profit

Kiwibank has announced its full year financial results for the year ended 30 June 2019. The results show growth over customer lending and customer deposits, however, net profit after tax showed a decrease for the period.

More specifically, the New Zealand-owned bank recorded $2.1 billion of growth in customer lending and $2.1 billion in customer deposits.

In addition, it also delivered a net profit after tax (NPAT) of $108 million for the year ended 30 June 2019 - a decrease of $7 million year-on-year.

According to Kiwibank, NPAT decreased partly due to fee reductions made in the current year and one-off revenue received in the prior year.

Growth was mainly derived through more customers choosing to join Kiwibank, contributing to a $34 million increase in net interest income, the bank states.

The bank's commitment to leveraging technology and establishing more standalone branches to improve customer experience led to an increase in investment costs for the period, the company states.

Lower revenue was partly driven by a reduction of $12 million in banking fees as well as non-bank products, such as bill pay being returned to New Zealand Post, lowering income by a further $7 million. Kiwibank also received less income from insurance payments, $12 million lower when compared to the last financial year, the bank states.

Kiwibank CEO Steve Jurkovich says, “This result ensures we can continue to reinvest in future-proofing Kiwibank for the long term.”

He says, “We were made in New Zealand, by New Zealand, for New Zealand. Our results show Kiwis are making the fundamental choice to bank with us and keep returns local.”

“We had a record year for lending and deposit growth, margins generally remained firm, but profits were down slightly. A contributing factor was a reduction in fee income which is great for our customers,” he says.

According to a statement, Kiwibank is adjusting its business strategy to meet the changing preferences of customers.

Jurkovich says, “We are investing in our own branches where customers wish to interact with us face-to-face, as well as developing our technology capabilities.”

“Kiwibank and New Zealand Post businesses are responding to different customer demands. Although sometimes challenging, this move to increased independence for Kiwibank brings opportunity. In simplifying our business, we can focus on the areas that make the biggest difference for our customers and their long-term financial wellbeing,” he says.

“Kiwibank has a strong purpose and that is to make Kiwis better off. Our founding vision was for New Zealand to have a real and credible alternative to the offshore-owned banks, that remains at the heart of who we are and why we exist,” says Jurkovich.

According to Jurkovich, certain activities have been established specifically for the Kiwi market.

For instance, Kiwibank’s first home buyer package makes the move into home ownership more achievable, and over the past year the bank has helped almost 2,000 first-time buyers into their new homes.

In addition the bank is targeting local business owners.

“Helping small and medium businesses operate and grow has always been a core focus, but increasingly over the past 12 months we have been able to support some of New Zealand’s larger businesses.

“The coming year will see new capabilities and with that Kiwi businesses can choose to partner with a New Zealand bank rather than an offshore-owned option,” says Jurkovich.

According to Jurkovich, the bank’s lower rates has also contributed to 3,305 customers changing to Kiwibank.

He says, “This past year was like no other with its focus on reputation and ensuring we have the right culture that focuses on the long term needs of our customers. Our customer satisfaction results and corporate reputation ratings are higher than ever.

“That does not mean we are complacent - as an increasingly significant player in the financial services industry, Kiwibank will continue to focus on strengthening our unique culture, along with frameworks, and processes to ensure a safer and stronger bank that continually delivers on the long term needs of our customers.

“With strong customer growth and the investment in technology that we are undertaking, we expect this to flatten profitability until we have migrated to the new technology platforms.”

Over the past 12 months, Kiwibank's strategic decisions have been to reduce interest rates on low rate credit cards, committing to going cheque-free by February 2020 and investing more into technology.

“When it comes to cheques our customers have clearly indicated that they prefer faster, cheaper and safer payment options. But change isn’t easy, and we are very focused on the fact that some of our customers need greater support as they transition to alternative banking methods,” says Jurkovich.

Furthermore, through Kiwibank’s partnership with Digital Alliance Aotearoa, online banking training with Stepping UP is available in 120 locations country-wide, and DORA, the Digital On-Road Access bus, delivers training opportunities in more isolated communities.

Selected Kiwibank branches also offer one-on-one support and Tech Teas for those less familiar or confident around the change, Jurkovich says.

Kiwibank is also partnering with organisations in four key areas. 

In the environment space the bank has partnered with Department of Conservation to support Conservation Dogs.

Kiwibanks commitment to financial capability means working closely with Banqer, which saw 80,432 students using the financial literacy programme, and with Ng Tangata Microfinance where the bank enables $1 million in social lending for those vulnerable in NZ’s communities.

Mental wellbeing has been a new focus for the bank, which included supporting Mike King and the I AM HOPE Gumboot Friday campaign. The campaign raised $1.6 million to fund counselling services for young people.

Kiwibank also continued its commitment to celebrating exceptional Kiwis through Kiwibank Local Heroes and the New Zealander of the Year Awards. 

 Jurkovich says, “Over the coming year our priority is continued investment to ensure Kiwibank is fit to deliver on its purpose and meet its potential.

“By delivering on our strategy and supporting more customers we are more determined than ever to make a significant difference for New Zealanders and New Zealand.”