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Bank customers see green as they make the switch

Kiwibank chief executive Paul Brock is crediting a lift in profit with industry-wide moves to make it easier to switch banks.

But Mr Brock says an eagerness by customers to reduce their debt levels while interest rates are low is making growth harder for the bank.

The New Zealand Post-owned bank lifted its half-year profit to December 31 to $58 million – a $20 million boost from the same period a year earlier.

In the same period two years ago, the bank made $14 million.

The profit helped New Zealand Post return a 68% jump in its own half-year result, which offset a continued slide in demand for core postal services.

Mr Brock says Kiwibank’s private market share has reached 10%. The figure represents a 1% growth on the same period a year ago. In the first half of last year the bank marked 800,000 customers.

“They’re the people who see us as their main bank – the ones they owe the most money to.”

He is coy about the bank’s ultimate customer-base target but says he has a goal to achieve 1% per annum.

Mr Brock says moves by the New Zealand Bankers’ Association two years ago to revise its Electronic Credit Systems Codes and Direct Debit Systems Code to assist with the ease of information swapping have encouraged more customers to Kiwibank.

“It’s easier than ever to change banks ... and can be effectively done with one simple phone call.”

May get more complicated

He admits swapping banks may get more complicated as the trend back to fixed mortgage rates gathers speed.

“Kiwibank was out there initially with some pretty good home loan offers and we still do today both in our variable and fixed rate loans. What you’re now seeing though is other banks getting out there and putting out reasonably aggressive rates as well, which shows the demand in the market is picking up.”

He is hesitant to overstate the confidence in the market and says he is still seeing plenty of economic uncertainty and “flatness” affecting the market.

Mr Brock says while the economic uncertainty and low interest rates continue, people are taking the opportunity to reduce some of their debts. 

He has also hinted at changes to the bank’s in-store “customer experience” as people’s postal habits change.

Lunch-time queues could be out and self-service kiosks in as foot traffic to New Zealand Post shops dwindles.

“As people start to use other channels and start to use the internet and mobile phone for more activity, there may be fewer people going through those doors.

"The key area is how to make transactions in stores more efficient and a good example of that is the self-service kiosks – similar to the ones offered at airport check-in.”

bcunningham@nbr.co.nz

More by Blair Cunningham

Comments and questions

Interest margins may have reduced but rates are still high enough to attract queues of foreign investors and lenders. If Kiwibank focuses on good product and slightly smaller margins then it will get its growth from the resultant increased customer base. There are plenty of Kiwis out there still who will join if the products are superior and the profits stay onshore.

Seeing as they are a govt.-owned bank, I'm just wondering if customer's data is more or less private from govt. data-trawling with Kiwibank than with other banks? And further if this is hindering wide-adoption at all?

Kiwi Bank is a wonderful New Zealand success story. Why would you bank with Julia Gillard and Anthony Swan's lot when they do stuff all for NZ but rip interest income out of NZ.

Moved from the dark side Aussie blue/green bank to a pure green Kiwibank and has been very impressed with how all my needs could be accommodated in no time and the switch was a breeze - highly recommended to keep that profit in NZ. Just need a bit more capital to assist with that growth. Sure mums, dads and customers would like to invest in a part-float.

Don't care about where the profits go - I am switching because they offer the best rates.

I oppose the whole idea of the Jim Anderton Bank. Sure, borrowers might benefit from marginally lower rates from time to time but this has been at the expense of the taxpayer. Government has sunk tens of millions of dollars into this hole without a skerrick of dividend to date and none likely to come in the foreseeable future as the Bank will want more and more capital to support its growth. For those who see Kiwibank as putting a brake on the "excesses" of the Australian banks, we already have other home-grown competitors such as TSB, SBS, Heartland and the Co-operative Bank.

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