Public Trust Reports $47.5 Million Loss For Year

News Release As at 14 October 2009

Public Trust Reports $47.5 Million Loss For Year

Public Trust today announced a $47.5 million after tax loss for the year ended 30 June 2009, due largely to unrealised mark to market losses of $29.2 million on Common Fund investments and mortgage provisions of $14.7 million. This result was in line with the Shareholding Ministers’ statement in July this year when they announced $30 million additional capital would be provided.

Chairman Donal Curtin said, “The year has been a year of mixed results for Public Trust. The performance has continued to be impacted by the weak financial and property markets for a second year.

“While the investment losses and mortgage provisions have been significant, it is pleasing that Public Trust’s underlying trustee business continues to improve, with core fee revenue increasing 5% in a recessionary environment.

“The Board has moved to further reduce Common Fund investment risk, improve short term performance and maintain focus on its core trustee services.”

The Crown has provided $30 million of additional capital on 10 August 2009 as a measure of prudence to strengthen Public Trust’s balance sheet and to ensure the utmost confidence in Public Trust is maintained. This follows an injection of $20 million in November 2008.

Chief Executive Grenville Gaskell said “The predominantly unrealised investment losses of $29.2 million came from the re-valuation of interest bearing securities and mortgage backed securities and represents a 3.8% loss on the full investment portfolio of $762.7 million. However, the majority of the unrealised losses on interest bearing securities is expected to revert to profit in coming years with the reversal of losses on mortgage backed securities being dependent on the future performance of the underlying assets.

“The continued deterioration in the property market is also of concern. We have seen a significant drop in the value of properties in some sectors and this has resulted in an increase in non-performing and impaired mortgages. The losses and provisions total $14.7 million, including a $4.4 million collective provision to cover latent risk in the mortgage portfolio.”

The operating surplus before change costs of $2.7 million is also below the budgeted surplus of $5.9 million due largely to continued pressure on Common Fund interest margins.

Deposits in the Common Fund continue to be covered by Public Trust’s own deposit guarantee. The guarantee on capital is provided under the Public Trust Act 2001 and is not time limited. The guarantee on interest is provided under the Public Finance Act and is effective until 12 October 2010.

“We continue to see encouraging trends in our core business performance. Family Trust revenue is up 9% and personal trust revenue has further increased 10%. We have also seen a 9% increase in the number of New Zealander’s choosing to write their Will with Public Trust.

“Our business segment has also seen a good result with 32 new charitable trusts established, and more than 360 private training establishments have now signed up to our student Fee Protect service.

“Fee Protect continues its strong growth up 22% with more than 200,000 students and almost $1 billion of students’ fees having been safeguarded since the service was launched.

“During the year $12.8 million was distributed to the wider community from the 450 Charitable Trusts that Public Trust administers,” Mr Gaskell said.

Public Trust’s Corporate Trustee Services division, which serves the corporate and business market, increased funds under supervision from $18 billion to $24 billion during the period.

“Customer satisfaction, as measured by an external research company, continued at high levels. Customers who had their Will prepared by Public Trust rated the service they received 8.2 on a 10 point scale” said Mr Gaskell

“Consistent high satisfaction levels underline the quality of service provided by our people who have embraced a number of changes to enhance our customers’ experience. We continue to deliver these changes as part of the PTON organisation wide change programme.

“New Zealanders need a safe and professional trustee organisation to help protect their interests. There remains much work to do this year, and the organisation still faces many challenges, in an uncertain economic environment, but we are making solid progress.

“The results for the first quarter of the 2009/10 financial year are encouraging, the operating surplus before change costs of $1 million is tracking above plan and we have seen $4.6 million of the unrealised investment losses return to profit.” said Mr Gaskell.

ENDS

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