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A tight control of costs helped Government-owned Kiwibank report an operating profit of $111 million for the year ended June, nearly three and a-half times the profit reported last year.
The bank's interest income rose to $773 million in the period from $720 million in the previous corresponding period (pcp). But interest expense was $516 million, down on the $529 reported in the pcp.
In part, the reduced interest expense was because of reduced deposits by customers, the notes to the financial accounts showed.
Total operating income, including banking and lending fee income, rose to $419 million ($353 million in the pcp) and impairment losses on loans and advances more than halved to $35 million.
Kiwibank's reported profit rose to $79 million from $21 million in the pcp.
The bank has been in business for 10 years.
Bank chief executive Paul Brock said the result represented a significant bounce back from the financial stresses of the past few years.
The financial result was largely attributable to net interest income that had increased during the year, as customers switched from fixed to floating mortgages. The margin compared to average assets had increased from 1.47% to 1.79% in the period.
Customer deposits accounted for 83% of all bank funding.
Kiwibank had "stirred up the market" with short-term home loan specials, Mr Brock said.
That included four-year and six-month specials and an overwhelming response to a one-year fixed rate of 4.99% in May that set off a rate war among competing banks.
"We had to bring on extra staff to take phone calls as customers, both ours and those from other banks, sought to take up a very good offer and have some certainty in turbulent economic times."
On the retail front, Kiwibank and New Zealand Post had been piloting a new shop layout in the Kapiti Coast, as part of a programme of activity to transform the store network, he said. A three-year programme would change how NZ Post and Kiwibank interacted with customers.
During the year, Kiwi Group Holdings bought Gareth Morgan Investments which managed more than $1.5 billion of funds - of which $650 million was KiwiSaver related - on behalf of more than 57,000 clients.
Mr Brock said the purchase was an opportunity for Kiwibank to grow its wealth and KiwiSaver businesses while remaining true to the values that had built the bank.
Looking ahead, the challenges for the new year were to continue to increase market share in the retail banking market and push harder into small and medium-enterprise business banking.
"The prospects for growth in this area are immense and Kiwibank has much to achieve."