BNZ reports strong half year profit result

9 May 2008
Media Release – For Immediate Release

Bank of New Zealand reports strong half year profit result

Bank of New Zealand has announced a strong underlying half year result for the six months ending March 2008 with a 14.9 per cent increase in cash earnings after tax to $239 million for its New Zealand Banking division compared to the same period last year.

Bank of New Zealand Chief Executive Officer Cameron Clyne, said he was satisfied with the bank’s first half performance in a highly competitive and challenging market. Key elements driving these results were profitable income growth, simplification and sound asset quality.

“Bank of New Zealand is secure and well positioned in a market characterised by rising wholesale funding costs and slowing economic activity. These results reflect the success of our strategic focus on profitable growth and preserving asset quality.”

Bank of New Zealand’s two key operating units, New Zealand Banking and Corporate and Institutional Banking, both had strong results producing double digit cash earnings growth in the half year to March 2008.

New Zealand Banking

 NZ Banking which includes the Retail, Agri, Business banking and BNZ Insurance businesses increased cash earnings after tax to $239 million, up 14.9 per cent on the March 2007 half year and 7.7% on the September half. This result was produced on the back of solid volume growth coupled with a focus on simplification and asset quality
 Average lending volume increase of 11.1 per cent over the March 2007 half year
 Average retail deposit volumes were up by 8.3 per cent on the same period last year

Mr Clyne said, “A business focus on Kaizen principles of continuous improvement and simplification has reduced complexity in processes and products making banking easier for staff and customers.

During the March half year period Bank of New Zealand introduced new initiatives across the business including ‘Out of the Box 2’, BNZ AgriCapital and a strategic partnership with China Union Pay.

Cameron Clyne said, “Bank of New Zealand will maintain a focus on profitable volume growth delivering innovative products and customer solutions while also ensuring the quality of the bank’s loan book.”

In the current slowing economy NZ Banking has increased its charge for impairment losses on credit exposures to $30 million, up $3 million on the same period last year. The increase is from a low base and the overall asset quality remains strong.

Corporate and Institutional Banking

The BNZ Corporate and Institutional Banking team posted a strong result with revenues up 18 per cent March half-on-half to $140 million. Anthony Grayson, General Manager of Corporate and Institutional Banking said, "Through our close relationship with nabCapital's global business lines, we are accessing broader skills and new products for our clients in BNZ. Excellent collaboration with global and local colleagues also resulted in the recent placement of NZD450 million of BNZ Tier 1 Perpetual Preference Shares in the New Zealand market. Our Markets team have delivered a strong financial result, despite increased bank funding costs and higher liquidity requirements, in what have been very turbulent conditions."

Customer, Employee and Community

To assist customers facing financial stress Bank of New Zealand launched a Customer Care Line in October last year as an early intervention tool. Customers are proactively identified and contacted with the offer of advice and solutions to help them manage their debt.

Cameron Clyne said, “Culture plays an integral role in the Bank’s success and results. The Bank of New Zealand was one of ten Australasian organisations awarded a 2007 Human Synergistics Culture Transformation Achievement for a dramatic culture shift. Greater staff empowerment and engagement is promoting a constructive culture and better customer service.”

In April Bank of New Zealand won a 2008 New Zealand Safety Award for the best significant health and safety initiative by a large organisation for our My Wellbeing programme that encourages employees to manage their wellbeing and adopt a healthy lifestyle.

In recognition of the new multi-lingual capability of BNZ ATM’s, the bank won an award in October 2007 from the Human Rights Commission for improving services to customers without English as a first language.

“These awards and initiatives represent our commitment to continually improving banking for our customers and ensuring Bank of New Zealand is an employer of choice,” said Mr Clyne.

Bank of New Zealand has an AA Standard & Poor’s rating.

Ends.

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