Chief executive Steve Jurkovich says actual lending will be a combination of additional home and business lending.
In the latest six months ended Dec 31, Kiwibank’s mortgage lending continued to accelerate, growing by $1.6 billion, and the bank said that was 1.6 times the growth in the total market, accounting for 13% of all net new banking lending on mortgages.
Kiwibank’s disclosure statement showed its on-balance sheet mortgage book stood at almost $32 billion at Dec 31, up from $30.39 billion at June 30 and up from $29.18 billion a year earlier.
However, its net interest margin (NIM) fell 7 basis points to 2.18% compared with June 30 and was down 11bp from the previous first-half.
Jurkovich says Kiwibank’s lending margins on home loans are equal to or higher than its competitors but that it lacks the advantage the major banks have on funding costs when interest rates fall.
He says a structural weakness Kiwibank has is its limited ability to attract business bank deposits because it has a much smaller share of that market.
“When interest rates are very low, business customers tend to hold a lot more in their transaction accounts,” he says.
That’s because the low interest rates paid on savings and other types of accounts make it hardly worth businesses’ while to transfer funds out of their transaction accounts.
The lower NIM also reflects the ending of the covid-era funding for lending programme – while it ended in December 2022, the cheap funding provided was for three years so the last of it didn’t roll off until early December last year.
Jurkovich says Kiwibank’s usage of mortgage brokers has risen slightly since June 30, when it was about two-thirds of mortgage lending, to about 69% or 70% including loans originated by sister company New Zealand Home Loans.
Kiwibank says its customers are repaying their home loans at a faster rate than the market and Jurkovich attributes much of this to the contribution from NZ Home Loans.
“Their core offer is about helping people repay their debt and we have a big share of the NZ Home Loans business.”
The change in capital rules meant Kiwibank was able to cancel plans to raise $500 million in third party equity late last year.
While finance minister Nicola Willis had indicated that Kiwibank would need to complete its current transformation first before it could, say, list on NZX, but Jurkovich says the potential third party investors Kiwibank had talked to, which included institutions, KiwiSaver funds and professional investment groups, including Māori institutions, hadn’t been concerned about that.
The transformation is currently between 50% and 60% complete and is targeted to finish in 2028.
Search
