Kiwibank saves face for New Zealand Post

An improved interim profit from Kiwibank in the six months to December helped save face for its parent New Zealand Post, which continues to suffer from falling letter volumes and revenue.

The NZ Post group reported an operating profit of $78.4 million for the period, up from the $35.4 million in the previous corresponding period (pcp).

The reported profit of $59.6 million was 68% up on the $35.4 million reported in the pcp.

Kiwibank, in a separate release, reported a profit of $58 million, up 53% on the $38 million in the pcp.

NZ Post will pay the Government an interim dividend of $2.5 million for the half-year, the same as the first half of the previous financial year.

NZ Post group chief executive Brian Roche said the result was boosted by the performance of Kiwibank and the group's financial services businesses.

''Kiwibank's first-half performance builds on its market position. The bank performed well in a highly competitive market, particularly in the face of aggressive competition in the home loan environment.''

There were mixed results across the logistics and mail businesses, he said.

The result reflected the benefits of the full consolidation of the courier business - Express Couriers Ltd - following the acquisition of the remaining 50% of the business in June 2010. However, that was against a continued decline in letter volumes and revenue.

The courier's performance was ''very encouraging'' in the extremely competitive courier market, Mr Roche said.

Challenges remained for the mail business, with total mail volume falling by 35 million items compared with the corresponding period the previous year - a drop of 8.1%. Tight cost management helped offset the fall in revenue.

''Thirty-five million fewer pieces of mail in the network is a stark reminder of the need for change. NZ Post is confident it can maintain a viable and sustainable physical network if it is given the flexibility to make necessary changes in the future.''

Making those changes could still be achieved in a measured and planned manner working in the best interests of the community and the businesses, Mr Roche said.

''But the latest mail volume statistics are further evidence that the ability to make the right decisions needs to be given now rather than put off.''

The group's full-year financial outlook was to meet expectations, he said.

Despite an increasingly competitive residential banking sector, Kiwibank had maintained strong levels of profitability, although further pressure was expected towards the end of the year.

The mail business continued to manage the fall in letter volumes with operation changes to ensure the business remained viable while longer term initiatives were implemented.

Other key decisions made in the first half of the financial year included the sale of the shareholding in Datacom, which would result in a one-off gain on the sale, and the sale of two office buildings in Auckland and Wellington. All of that would free up capital for both the bank and continuing change in the logistics and mail business, Mr Roche said.

KiwibankIn the six months ended December, Kiwibank's lending increased from $12.4 billion to $12.8 billion and customer deposits increased 6% from $11.6 billion to $12.3 billion.

Chief executive Paul Brock said the bank was building on the solid growth it had achieved over the past 18 months.

Deposits now accounted for 85% of all bank funding. The impaired assets to gross loans and advances ratio had improved from 67% in June last year to 0.43% at the end of December.

The bank had successfully launched a $150 million subordinated bond offer late last year and the level of support indicated strong confidence in the company's strength and future earnings, he said.

The bank had ''captured'' 10% of the personal customer market and still believed there was strong potential for growth in the small and medium business banking market, Mr Brock said.


At a glance

Total revenue: $872.3 million

Operating expenditure: $793.1 million

Before tax profit: $78.4 million

Reported profit: $59.6 million

Dividend to Government: $2.5 million



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