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Kiwibank expects to continue to grow its profits in the second half of its financial year but says it will face challenges from rising interest rates and more people moving onto fixed mortgage rates.
"What we are seeing generally is an improving economy," Kiwibank chief executive Paul Brock said. "We expect to see continued growth in the second half."
But margins would come under pressure as more people moved from floating mortgage rates to fixed rates.
The bank was also investing money in its retail network following the roll-out of a new store format on Auckland's North Shore.
Brock said he expected to see the split between floating and fixed rates move back to historical levels.
"My view is that it will get closer to where we were a few years ago."
In the past New Zealand had a split of 30 per cent floating and 70 per cent on fixed rates.
Kiwibank's ratio was presently 40/60.
"I think we will end up 30/70."
Brock said the bank was also switching its focus from growing customer numbers to increasing the number of products held by existing customers.
As of the end of December Kiwibank had 840,000 customers representing 23 per cent of New Zealand bank customers.
But only 385,000 were considered main bank customers representing a 10.7 per cent market share.
"The main opportunity for us is in our existing customer base," he said.
Brock said Kiwibank was slightly below the rest of the market in terms of how many products its customers had that were with the same bank.
"We are below the rest of the market. We want to catch up in those areas."
But he said the challenge in getting more existing customers to use its products was that many only dealt with the bank in a digital form.
- By Tamsyn Parker of the NZ Herald