TSB Bank celebrates solid profit performance

EMBARGOED UNTIL 6AM, FRIDAY 27 MAY 2011

TSB Bank celebrates solid profit performance in its 160th year

TSB Bank announces today its results for the 12-month period ended 31 March 2011.

Key Highlights

Increase of 1.55% in underlying profit.

Depositors' funds increased by $418 million or 10%, to a record $4.4 billion.

Loan portfolio increased by $219 million to $2.6 billion.

The Bank's Capital Adequacy Ratio, an industry measure of financial strength, remains the highest of all New Zealand retail banks at 15.78%.

"We can report a pre-tax profit of $60.2 million with an increase in underlying profit of 1.55%. Allowing for the extraordinary derivative-based income that artificially inflated last year's profit, this is a solid result in what continues to be tough economic conditions for many sectors of the community," says TSB Bank CEO, Kevin Murphy.

"We continue to focus on efficiencies and are pleased to report a 12% decrease in operating expenses before impairments and a cost to income ratio of 39.8%, which is significantly better than International Benchmarks."

TSB Bank, which celebrated 160 years of operation in August 2010, is proudly independent and 100 percent New Zealand-owned with all profits retained in New Zealand. The Bank continues to experience strong funds growth with depositors' funds increasing by $418 million to a milestone $4.4 billion.

"Ten percent growth in funds, achieved in an exceptionally competitive market, confirms we're continuing to gain market share. A contributor to this growth was our enhanced product offering with the successful launch of our new WebSaver account, which received a Cannex 5-star award for Best Value Savings Account," says Mr Murphy.

Changes by the Reserve Bank to the liquidity rules and the introduction of a new measure, the Core Funding Ratio, intensified competition between banks for funding and saw TSB Bank's margin excluding derivatives fall to a record low of 1.88%. Despite margin pressures, the Bank retained its low or no fees policy.

TSB Bank continues to follow a sound and responsible New Zealand-focused investment strategy and a prudent and conservative approach to lending risk. Loan approvals for the year totaled $600 million, a 15% decrease from the previous year mainly due to lower credit demand in a slowing New Zealand economy.

"We are proud to report a 9% growth in our loan portfolio. This is significantly higher than New Zealand's annual bank lending growth of less than 1%, and something we've achieved without compromising our standards for quality lending," says Mr Murphy.

TSB Bank continues to out-perform all New Zealand banks in the customer satisfaction arena, achieving 'Best Bank' rating for a record eleventh year and 'New Zealand's most recommended bank' in independent customer advocacy research. TSB Bank Direct was also named 'New Zealand's Best Banking Contact Centre' at the 2010 CRM Contact Centre awards.

"The CRM Award is a testament to the quality of staff we have in this key service area. We will continue to invest in service quality leadership, while at the same time providing our customers with an increasing mix of choices, ranging from face-to-face to technology-based self service options," says Mr Murphy.

The Bank's national branch network continues to expand, with offices in Nelson and Newmarket opening in the past year. Further Service Centres will open throughout New Zealand over the next few years as part of the Bank's expansion and growth strategy.

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