CEO expects to see more defaults on loans
Kiwibank has released its half-year results for the six months to December 31, 2020, and has recorded a net profit after tax (NPAT) of $44 million – up by 8% on the prior corresponding period.
Operating income rose by 4% to $287 million, customer lending grew by $1.6 billion and customer deposits grew by $1.3 billion.
Chief executive Steve Jurkovich said the result reflected a strong increase in both home loans and business lending, and noted that customers were also benefiting from Kiwibank’s investment into technology and improving processes, which has resulted in quicker turnaround times and home loan decisions.
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Despite the positive result, he acknowledged that the recent cases of COVID-19 in the community had highlighted the ongoing uncertainty faced by the economy, and said Kiwibank was expecting to see a “significant rise” in mortgage and business loan defaults.
He also noted Kiwibank’s cuts to its variable interest rate last year, and said he is waiting for other banks to take the same step.
“We remain prepared to assist our customers and support New Zealand’s recovery,” Jurkovich said.
“An example of a meaningful show of support was the decision to lead the market with a significant change to our floating or variable interest rate, which was cut by 1% (100bps) in June 2020.”
“The change provided an opportunity for both our business and retail customers to pay back their loans faster, save, or buy local and support New Zealand’s economy,” he explained.
“We, like the rest of Aotearoa, are still waiting for the largest banks to respond to this challenge to lower floating or variable interest rates, despite a very low interest rate environment and access to Reserve Bank funding.”
Kiwibank’s chief economist Jarrod Kerr said that customers have been benefiting from relatively stable and low interest rates, and said New Zealand is unlikely to experience another major disruption in the form of a longer lockdown.
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“We’ve been telling customers that interest rates are going to stay where they are for at least the next year, and I think the probability of negative interest rates has evaporated at this stage,” Kerr commented.
“Our labour market is very resilient now, and we haven’t had any major COVID-related disruptions – just a small lockdown in Auckland, which didn’t have a very major impact.
“But of course, there’s still a chance of an outbreak happening here and us going into a longer lockdown, and the economy deteriorating as a result – but I think the chances of that happening has really fallen away to a large extent, so our outlook is positive.”
