The bank today declared an after-tax profit of $52 million for the six months ended December 31, down from a record $58 million for the same period in 2012.
Kiwibank also announced it would be making a substantial investment, estimated to be more than $100 million over the next four years, upgrading its core banking systems.
Chief executive Paul Brock said total lending had increased by 5.7% over the period to $14 billion.
It moved to self-insure low-equity loans in August, a couple of months before the rules limiting low-deposit lending came into force.
Brock said that meant it had already pulled back on its lending in that area. “We were sorting that out anyway so were in good shape when the rules came out.”
He said Kiwibank gave about 9% of its new loans to borrowers with a deposit of less than 20% in January, just under the 10% required by the Reserve Bank. He said it was tracking well to remain within 10% over the first six-month period.
The bank had just $8 million in off-balance sheet home loan exposures for borrowers with LVRs over 90%, compared to $251 million for borrowers with equity of more than 20%.
Banks that had completely turned off low-deposit lending had forced customers to look elsewhere, he said.
“We have seen a lot of extreme reaction in the market, and that’s driven activity overall and we’ve seen some of that come to us. It’s been challenging for customers, who’ve had to figure out what they can do.”
Brock said most banks would target 2% or 3% below the 10% threshold to ensure they did not breach the rules.
He said the bank was seeing more pressure on interest rate margins, especially as customers shifted to fixed rates.
Brock expected that it would not be long before 70% of customers were on fixed rates, from the 60% at present.
Anti-money laundering legislation had required a significant investment in the half, he said. “It was not a cheap exercise, there was a lot of investment into the customer information part of the system.”
