Transcript Media Briefing Financial Results – 31 December 2006

Media Briefing
Financial Results – 31 December 2010
1
Topics Covered
 Key Milestones
 Financial Performance
 Credit Quality
 The Future
2
Key milestones

Profit after tax of $13.9m for the year ended 31 December 2010, a
41% decrease on prior year’s profit of $23.5m

Continued growth in balance sheet since December 2009:


Lending increased 12% by $1.2bn to $10.9bn
10% increase in retail deposits from $6.9bn to $7.6bn

Capital strengthened by $150m perpetual preference shares (PPS)
in May 2010

Government to provide uncalled capital on commercial terms to be
utilised as protection against a significant unforeseen external
event and provide credit rating support

Ian Fitzgerald appointed as new Kiwibank Chairman

Paul Brock appointed new Kiwibank CEO
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Key milestones continued
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
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
Launched Kiwibank Notice Saver product – a New Zealand first
in the savings and investment market. More than half a billion of
new to Bank dollars invested in the Notice Saver account
Launched our new Loaded for Travel prepaid Visa card which
proved to be very successful with customers. 492 card packs
sold with combined total of over $1m loaded onto them between
21-30 June
Awarded Bank of the Year by London-based The Banker
magazine for the second year in a row
Awarded the 2010 Sunday Star Times Cannex Canstar Best
Value Bank for the fifth year running
Awarded New Zealand’s most trusted bank brand by Reader’s
Digest for the fourth year running
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Key milestones continued

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In the 2010 NetGuide website awards held in August, Kiwibank’s
website www.kiwibank.co.nz was voted number one in the
Financial Services category
Kiwibank Kiwisaver Scheme won both the Investment Statement
of the Year award and the Best Other Workplace Savings or
Communication award in the industry Workplace Savings
Communications award on 9 December
Finalist in two categories of the 2010 Vero Excellence in Business
Supports Awards – Large Business and Individual
Heaps!, our free, personal financial management service won the
TUANZ Education and Commerce Awards categories on 2
September
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Financial Performance – Profit & Loss
 Financial performance impacted by significant increase in impairment
losses on loans and advances from $9.7m in Dec09 to $31m in Dec10
 Improvement in NII margins
Dollars in thousands
Dec-10
Dec-09
% growth
89,373
80,016
169,389
66,357
87,754
154,111
9.9%
(118,478)
(31,007)
(111,098)
(9,731)
6.6%
Net profit before tax
Income tax expense
19,904
(5,996)
33,282
(9,733)
(40.2%)
Net profit after tax
13,908
23,549
(40.9%)
Net interest income
Other income
Total operating income
Operating expenses
Impairment losses
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Financial Performance - historical summary

Solid underlying business performance impacted by increase in
impairment allowances, reflecting falling values of certain classes of
property collateral
Dollars in thousands
Dec-10
Dec-09
Dec-08
Dec-07
Dec-06
Dec-05
348,498
268,334
362,302
241,413
151,578
80,055
(259,125)
(201,977)
(282,707) (187,952) (107,820)
(57,117)
Net interest income
89,373
66,357
79,595
53,461
43,758
22,938
Other income
80,016
87,754
74,883
69,412
62,365
48,084
169,389
154,111
154,478
122,873
106,123
71,022
(118,478)
(111,098)
(110,375)
(89,232)
(80,566)
(61,696)
Impairment allowances
(31,007)
(9,731)
(6,153)
(705)
Profit before taxation
19,904
33,282
37,950
32,936
25,557
8,152
Income tax expense
(5,996)
(9,733)
(12,148)
(10,281)
(8,311)
(2,708)
Profit after tax
13,908
23,549
25,802
22,655
17,246
5,444
Interest income
Interest expense
Total operating income
Operating expenses
(1,174)
* Dec 09 excludes $0.8m profit from The New Zealand Home Loan Company and Kiwi Insurance which was sold to
100% owned NZ Post subsidiary, Kiwi Group Holdings Ltd in June 2009
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Financial Performance - Balance sheet
 Loans and advances continue to grow despite retail and business
customers de-leveraging as the economy remains weak
 Strong retail funding ratio as retail deposits grow by over 10%
 Capital base strengthened by $150m PPS issuance
10,933
2,035
12,969
9,726
2,292
12,018
12.4%
Financed by:
Liabilities
Retail deposits
Wholesale deposits
Securities issued & other liabilities
Total Liabilities
7,621
3,520
1,228
12,369
6,891
2,850
1,857
11,597
10.6%
23.5%
Shareholder's equity
*
Total liabilities and shareholder's equity
600
12,969
421
12,018
42.8%
Ratio retail deposits to retail lending
Dec-10
70%
Dec-09
%
growth
Dollars in millions
Assets
Loans and advances
Wholesale & other assets
Total assets
7.9%
6.6%
71%
* Includes $150m PPS issued in May 2010
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Financial Performance (key ratios)
Ratios in percentage terms (annualised)
Dec-10
Dec-09
Net interest inc./avg.total assets (annualised)
1.42%
1.19%
Net profit after tax/avg shareholder's funds (annualised)
8.29%
17.22%
69.9%
71.9%
1.8%
2.0%
Lending - Fixed Mortgages
149
147
Deposits - Term Deposits
82
83
Profitability measures
Efficiency measures
Operating expenses/total income
Operating expenses/avg total assets
Average Balances ($000's) per account
* Dec 10 excludes $150m perpetual preference shares issued in May 2010
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Financial Performance – Capital Adequacy

Total Capital ratio under Basel II is 11.7% compared to RBNZ’s
minimum regulatory capital ratio of 8%

Total Capital increased by $177.7m to $728.5m, a 32% increase
from Dec 09.

Sufficient capital for immediate growth plans, aided by $150m
perpetual preference share (PPS) issuance in May 2010

Strengthening of Tier 1 Capital ratio from 7.4% in Dec 09 to 9.5% in
Dec 10 following $150m PPS share issuance
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Credit Quality (Impaired Assets)
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The table shows our total impaired
assets as a % of total assets from latest
available Key Information Summaries.
Kiwibank remains favourably placed
against other banks
The ratio has remained consistent across
strong balance sheet growth as a result
of targeting low LVR, seasoned (i.e.
existing, switching) customers to
maintain the quality of our lending book.
Bank
Kiwibank
ASB
BNZ
Westpac
ANZ National
Latest KIS
Previous
Quarter KIS
0.49%
0.75%
1.11%
1.34%
1.72%
0.31%
0.77%
1.10%
1.38%
1.59%
Source: Dec 10 GDS for Kiwibank
Impaired Assets of $63.9m include all
assets where interest charges have been
suspended and a specific provision has
been raised
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Credit Quality (Total Credit Provisions to
Total Assets)
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A key focus from management and
RBNZ is the total credit provisioning to
total assets
Each bank has a different product and
risk portfolio to Kiwibank, which has a
high % secure mortgage book and LMI
insurance for assets over 80%.
Latest GDS
Previous
Quarter GDS
Kiwibank
0.35%
0.17%
ASB
0.37%
0.41%
BNZ
0.74%
0.79%
ANZ/National
1.20%
1.29%
Westpac
1.37%
1.28%
Bank
Source: Most recently available GDS’s
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The future
 Continue strong customer growth through being the banking leader
in “value for money”
 Strong focus on helping customers switch to Kiwibank and driving
change to make switching between banks easier
 Consider any investment opportunities in the market as they arise
 Active “customer care” programme to help financially distressed
customers.
 Growing insurance business – Bancassurance
 Asset financing – Kiwi Asset Finance
 Diversifying and tapping into more offshore funding resources
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