Kiwibank's latest disclosure statement shows its net profit for the three months ended June dropped 35.5% to $6.5 million from $10.1 million in the same quarter last year.
That was despite net interest income leaping 52.2% to $50.7 million for the quarter because the bank added a further $22.2 million charge against profit for bad loans in the three months.
For the year ended June, profit fell 53.7% to $21.2 million after $79 million in charges for bad loans. Annual net interest income grew 43.4% to $191.3 million.
Chief executive Paul Brock says the big increase in net interest income reflects the increased preference for higher-margin floating mortgages and that in excess of 80% of Kiwibank's mortgages are now on floating rates.
Brock says the majority of Kiwibank's bad loans are small business loans secured by residential property - Kiwibank started to lend to small to medium sized businesses about six years ago.
Kiwibank's loan-to-valuation ratio (LVR) table (having adopted new reporting rules in the March quarter, Kiwibank no longer provides the figures GoodReturns previously used to measure banks' mortgage books in its March and September quarters, leaving the LVR table as the only available measure) shows its mortgage book grew $305.4 million to $10.63 billion in the three months ended June.
That's faster than the $245 million growth in the March quarter and the $194 million in the December quarter last year. In the year ended June, the mortgage book grew $1.03 billion. That was down from the $1.87 billion growth the previous year which had appeared unsustainably fast.
While Reserve Bank figures on mortgage lending have a poor correlation to the figures disclosed in banks' quarterly disclosure statements, they show mortgage lending by registered banks grew by $878 million to $168.4 billion in the June quarter compared with $472 million in the March quarter.
If the central bank's figures could be relied upon, that would put Kiwibank's market share at 6.3% and it would have accounted for 34.8% of new mortgage lending in the three months.
Brock says Kiwibank has been particularly focusing on refinancing as it gains new customers - it now has more than 750,000 customers.
