The bank's fourth quarter profit rose just 3% to $5.1 million, bringing its full-year result to $25.5 million, up 61.4% on the previous year.
"The mortgage market has been challenging in that quarter," says managing director Sam Knowles. "People have largely stopped doing things unless they have to do them as interest rate rises have started to come through."
Even so, the bank's mortgage book grew by $340 million to $3.48 billion in the three months, taking its market share to 2.5% from 2.33% three months earlier and from 2.07% in June 2006.
Knowles says continued investment, including the acquisition of nearly $700 million in AMP branded homeloans from HSBC from July 1, have also curbed profit growth. "We're building a platform. That has quite a cost." Under new accounting rules, those costs are being written off in the year in which they fall.
Kiwibank also owns 51% of New Zealand Home Loans but Knowles says its contribution to the current result wasn't large. While there were a few pilot loans written before Christmas, NZHL didn't fully switch to Kiwibank funded loans (previously, Sovereign provided the funding) until February and March, he says.
Knowles says Kiwibank is likely to "have a really good look" at dealing with mortgage brokers generally in about a year.
The bank is already dealing with brokers with the AMP branded loans and is also participating in the www.fundit.co.nz mortgage auction site.
"We certainly see mortgage broking as the marginal business in mortgage lending. It's what you do when you've run out of all your other strategies," Knowles says.
"It's generally lower margin and lower value loans because the duration of the loans is lower."
The big challenge for mortgage brokers "is to be able to prove that the value of the loans they're originating is as high or higher than the loans the bank is originating. Brokers tend to focus more on volumes than on the value of loans, Knowles says.
