Kiwibank Sees Surge in Mortgage Adviser Originations, Reports Record Profit

Highlights:

• High Adviser-Originated Mortgages: Mortgage advisers accounted for 71% of Kiwibank's new home loans for the year ended June 30, 2024, contributing significantly to the total mortgage book.
• Record Profit and Loan Growth: Kiwibank achieved a record net profit of $202 million, a 15.4% increase, and grew its mortgage book by $2.48 billion, reaching a total of $27.76 billion.
• Customer Spending Adjustments: Customers have reduced spending on non-essential items due to high interest rates, impacting credit card revenue and fee income, while Kiwibank has streamlined its practices and reduced fees.

Advisers Drive Growth in Home Loans

Kiwibank (NZX: KWB) has reported that mortgage advisers originated 71% of its new home loans for the year ending June 30, 2024. This surge in adviser-originated mortgages has pushed their share of the total mortgage book to approximately 35%, according to CEO Steve Jurkovich. Kiwibank’s partnership with advisers, which began a few years ago, has expanded significantly, with the number of accredited advisers growing from 250 to around 1,000.

Rapid Expansion and Record Profit

The bank's mortgage book grew by $2.48 billion over the year, reaching a total of $27.76 billion—2.7 times the growth rate of the broader banking sector. This robust performance contributed to a record net profit of $202 million, marking a 15.4% increase. Kiwibank's provision for bad debts decreased from $37 million to $24 million, reflecting fewer defaults than anticipated despite high interest rates.

Adapting to Changing Customer Behaviors

In response to high interest rates, Kiwibank customers have reduced spending on non-essential items, focusing on essential expenses like housing and insurance. This shift is also evident in Kiwibank’s credit card revenue, which fell to $60 million from $63 million the previous year. The bank’s fees and commission income also declined to $104 million from $110 million, as Kiwibank simplifies its practices and reduces fees.

Kiwibank has reclassified trail commissions paid to advisers, now reporting them as transaction costs in the effective interest rate calculations. The bank paid $26 million in trail commissions for the year, up from $23 million the previous year, with a net present value of expected future commissions at $66 million. The treatment of upfront commissions remains undisclosed.

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