Kiwibank's mortgage growth momentum slows; need $200m in fresh capital
Kiwibank's mortgage book continued to grow faster than its market share in the June quarter but its momentum continues to slow.
Wednesday, August 22nd 2012, 3:41PM
by Jenny Ruth
That's despite the bank's special promotions, including its 4.99% one-year fixed "special," which it said garnered significantly more than $200 million in new business in May.
In releasing the bank's results, chief executive Paul Brock also confirmed Kiwibank will need about $200 million of fresh capital to meet the Reserve Bank's new capital adequacy requirements.
The exact amount will depend on the new rules and the timeline will be staggered over the next three or four years, Brock says.
Clearly, some of that will need to come from its parent, New Zealand Post, or the government: "I don't think there will be enough retained earnings to make up all of it," Brock says.
Kiwibank made an $18 million net profit in the three months ended June, up from $6 million in the same three months last year, taking annual net profit to a record $79 million compared with $21 million last year.
Kiwibank's June quarter disclosure statement shows its mortgage book grew by $198 million to $11.63 billion in the three months, down from the $225 million growth in the March quarter.
It's Kiwibank's smallest quarterly increase since the December quarter of 2010 when its book grew by $194 million.
In the year ended June, Kiwibank's mortgage book grew by $1 billion, just a smidgeon more than the $0.97 billion growth the previous year.
Assuming Reserve Bank data will prove a reasonable proxy for the mortgage data shown in banks' disclosure statements, that means Kiwibank accounted for 12.1% of mortgages written by registered banks in the three months ended June, down from its 17.6% share in the March quarter.
However, both quarters' growth is ahead of its market share, 6.72% at June 30, 6.67% at March 31, and 6.31% at June 30, 2011.
Brock says while Kiwibank is getting significant front-end growth, net growth is less because customers are tending to repay debt faster than previously and a number of Christchurch customers have received insurance payouts and repaid their mortgages. Presumably, at some stage, those customers will take out new mortgages.
The bulk of the latest quarter's growth, $157 million, came from mortgages with loan-to-valuation ratios (LVRs) below 80% and a further $77 million came from those with LVRs between 80% and 90%. Mortgages with LVRs above 90% shrank by $36 million.
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The OCR ain't going anywhere
The new Reserve Bank governor, Graeme Wheeler, predicts that the official cash rate won't by going anywhere until 2014.
This is clear from the 90-day bank bill forecast graph in the December Monetary Policy Statement. It shows clearly how over the past year forecast increases kept getting pushed down each quarter.
A year ago the bank was predicting the 90-day bill rate would be up at 4.00% by March 2014. That forecast was wound back to 3.3% in March, 3.2% three months later and is now down at 2.8%.
The good news for borrowers is that, asssuming things pan out as forecast, then home loan rates aren't likely to be going up any time soon either.