Advisers originated 71% of Kiwibank home loans in year ended June

Kiwibank only began working with mortgage advisers a few years back but has been actively courting them in the last couple of years.

Jurkovich says its accredited advisers have grown to about 1,000 now. That's up from 250 at June 30, 2022.

“I still believe there's a massive opportunity for us to grow into that relationship,” he says.

“Our strategy is really simple: to be where the customer makes a decision.”

The opportunity for advisers is also obvious since Kiwibank grew its mortgage book at 2.7 times the rate for banks as a whole in the year ended June 30, adding $2.48 billion in new home loans to take the total book to $27.76 billion.

By contrast, ASB, which is nearly three times larger than Kiwibank by total assets, grew its mortgage book by just over $1 billion in the same year.

Kiwibank's net profit for the year rose 15.4% to a record $202 million with charges against profit for bad debts falling to $24 million from $37 million the previous year.

“Some of the model assumptions and over-lays we had in place have not been the outcomes,” Jurkovich says, explaining that Kiwibank had expected high interest rates would have led to more defaults than it has actually experienced.

Kiwibank's customers have coped with the high rates by cutting back on spending on entertainment, hospitality, durable goods and cars, he says.

Customers have cut out “everything that wasn't keeping a roof over their heads, insurance and paying the rates.”

That degree of frugality also showed up in Kiwibank's credit card numbers – its revenue from card services fell to $60 million in the latest year from $63 million the previous year.

Jurkovich says this behaviour validates a survey of 1,000 customers Kiwibank conducted and it asked them what they thought security was. “They said a roof over my head.”

Kiwibank's fees and commission income also fell in the latest year to $104 million from $110 million the previous year.

Jurkovich says the bank has been simplifying a lot of its practices and withdrawing fees. “I suspect in the next couple of years fees will be almost zero.”

Kiwibank used to report the trail commissions it pays to mortgage advisers as part of its fees and commission expense but it has now changed its accounting treatment to bring it into line with how the major banks report such commission, its accounts show.

From the current year, such trail commissions are being recorded as part of the transaction costs in the calculation of the effective interest rate on the loans advisers originate.

In explaining the change, the bank revealed that it paid advisers $26 million in trail commissions in the year ended June, up from $23 million the previous year, and that the net present value of expected future trail commissions payable is $66 million.

The accounts made no mention of how Kiwibank treats the upfront commissions it pay advisers.

When TMM asked about this, the bank replied that “we don't have any additional commentary on the data in the disclosure statement.”