But the figures suggest Kiwibank can’t continue lending at such a rate unless the government gives it more capital. All of which suggests mortgages are going to me much harder to come by.
With all the banks having lodged their general disclosure statements (GDSs) for the quarter, the figures show Kiwibank accounted for a staggering 89.7% of new lending in the quarter, excluding the newly registered SBS Bank’s $1.63 billion mortgage book.
Without SBS, mortgage lending by registered banks rose $0.97 billion in the quarter and Kiwibank accounted for $0.87 billion of that. That was more than double its $0.42 billion mortgage lending in the September quarter.
That’s despite Kiwibank’s market share being just 4.32% at December 31, up from 3.8% three months earlier.
When Kiwibank reported its results in February, chief executive Sam Knowles said it had taken "a very aggressive position" during the quarter.
Three of the big four Australian-owned banks increased their mortgage books only slightly – the largest, ANZ National Bank’s mortgage book grew just $0.05 billion, Commonwealth Bank of Australia-owned ASB Bank’s rose just $0.03 billion and Westpac’s $0.06 billion while National Australia Bank-owned Bank of New Zealand’s fell $0.02 billion.
Community owned TSB Bank, whose market share was just 1.26% at the end of December, increased its mortgage book by $0.03 billion while HSBC bank continued to run down its mortgage book. SBS’s mortgage book fell $0.01 billion in the quarter.
"If you look at the economic climate, which banks would you think were following the more sensible policy?" asks David Tripe, head of Massey University’s centre for banking studies.
"Is it sensible for a government-owned entity to be taking risks which the privately-owned banks aren’t willing to?"
Nevertheless, Tripe says Kiwibank’s mortgage book probably isn’t particularly risky.
Kiwibanks’s GDS shows the proportion of its mortgages with loan-to-value ratios (LVRs) above 80% fell to 16.8% of its total book at December 31 from 17.5% at September 30 and from 17.7% at June 30. At least some of those high LVR loans will be government-guaranteed Welcome Home Loans, although the bank doesn’t provide a breakdown. Like the other banks, Kiwibank’s asset quality is under pressure although impaired loans remain a very small part of its total assets.
Tripe says Kiwibank’s aggressive lending, coupled with the impact on its balance sheet of marking-to-market its swap book in a falling interest rate environment, means it’s likely Kiwibank will become capital constrained. "To continue being so aggressive, they would need more capital."
Kiwibank’s capital adequacy ratio, its capital as a percentage of risk-weighted assets, fell from 11.7% at September 30 to 10.4% -- under the former Basle I banking rules, banks had to have a minimum 8% capital adequacy ratio. A large part of that deterioration occurred because Kiwibank’s liabilities from derivative financial instruments jumped to $321.3 million at December 31 from $109.7 million at September 30
Given interest rate falls since December 31, "one can realistically expect that to be a much bigger number at the end of March," Tripe says.
