Media Briefing

Financial Results – 30 June 2009

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Topics Covered
 Key achievements
 Profit Performance
 Balance Sheet Growth
 Key Ratios
 Capital Adequacy
 Credit Quality
 The future
 Appendix 1

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 Key achievements
 Profit after tax on a normalised basis is $52.5m for the year ended 30
June 2009, a 43% increase on the prior year result.
 With Reserve Bank approval, NZ Post establish Kiwi Group Holdings
Ltd, a 100% subsidiary, to own the investment of Kiwibank Ltd.
 GDS profit is $63.6m which includes a one-off $11.1m gain through
the sale of subsidiaries to Kiwi Group Holdings Ltd (see Appendix 1)
 Very strong growth since 1 July 2008:
 lending portfolio increased by $2.9bn to $8.5bn, a 52% increase.
This compares to growth of $2bn in the corresponding period
 retail deposits increased by $1.9bn to $6.7bn, a 39% increase.
This compares to growth of $1.5bn in the corresponding period.

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Key achievements continued

 “Best Value Bank” four years in a row (Cannex and Sunday Star
Times)
 Most trusted bank brand : Reader’s Digest
 Profit per customer is down but overall profit is up because of the
steady addition of new customers
 Visa debit card launch with over 100,000 cards sold up to June.
 Implementation of Wealth Management strategy in year.
 Care for customers in financial stress – launch of “Money and You”
and other initiatives to help Kiwis through the recession
 Credit losses remain low due to conservative credit policy

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Key achievements continued
Strong growth supported by
 Kiwibank established a securitisation facility for use with the
Reserve Bank to allow securitisation as another funding option
with $600m of assets securitised
 Internal restructure of NZ Home Loans and Kiwi Insurance to
improve capital adequacy ratio
 First with PIE term deposits – total PIE balances of $967m as at
Jun 09
 Kiwibank has joined both the Retail and Wholesale Guarantee
scheme.

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Financial Performance – Profit & Loss

 A strong volume performance drove profitability growth but deposit

margins remain under pressure.
 A slower increase in costs ($45.8m) compared to revenue ($63.6m)

Dollars in thousands Jun-09 Jun-08 % growth

Net interest income 163,413 115,101

Other income * 138,328 122,997
Total operating revenue 301,741 238,098 26.7%

Total expenses (229,291) (183,529) 24.9%

Net profit before tax 72,450 54,569 32.8%

Income tax expense (19,975) (17,748)

Net profit after tax 52,475 36,821 42.5%

* Excludes $11m for sale of group subsidiaries to 100% NZ Post subsidiary, Kiwi Group Holdings Ltd

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Financial Performance - historical summary

 Strong profit growth trend continuing

Dollars in thousands Jun-09 Jun-08 Jun-07 Jun-06 Jun-05 Jun-04

Interest income 648,891 559,105 318,963 188,157 119,337 65,197

Interest expense (485,478) (444,004) (239,965) (136,222) (83,046) (42,791)

Net interest income 163,413 115,101 78,998 51,935 36,291 22,406

Other income * 138,328 122,997 124,558 98,373 75,038 58,839

Total operating revenue 301,741 238,098 203,556 150,308 111,329 81,245

Operating expenses (214,946) (179,432) (158,414) (125,155) (99,504) (79,929)
Impairment allowances (14,345) (4,097) (460) (1,892) (946) (1,887)

Net profit before tax 72,450 54,569 44,682 23,261 10,879 (571)

Income tax expense (19,975) (17,748) (13,830) (7,490) (3,640) 81

Net profit after tax 52,475 36,821 30,852 15,771 7,239 (490)

* Excludes $11m for sale of group subsidiaries to 100% NZ Post subsidiary, Kiwi Group Holdings Ltd

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Financial Performance - Balance sheet
 Strong depositor support continues to maintain retail funding ratio
 Wholesale assets maintained at high levels to reflect liquidity
requirements of uncertain environment throughout the year
Dollars in thousands Jun-09 Jun-08 % growth
Assets
Loans and advances 8,492,013 5,580,580 52%
Wholesale & other assets 1,879,022 1,638,648
Total assets 10,371,035 7,219,228 44%

Financed by:
Liabilities
Retail deposits 6,717,042 4,827,787 39%
Wholesale deposits 1,548,534 920,510
Securities issued & other liabilities 1,750,293 1,144,954
Total Liabilities 10,015,869 6,893,251 45%
Shareholder's equity * 355,166 325,977 9%
Total liabilities and shareholder's equity 10,371,035 7,219,228

Ratio retail deposits to retail lending 79% 87%

* Includes $20m capital injection

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Financial Performance (key ratios)

Ratios in percentage terms Jun-09 Jun-08

Profitability measures
Net interest inc./avg.total assets 1.9% 1.9%
Net profit after tax/avg shareholder's funds *15.4% 12.8%

Efficiency measures
Operating expenses/total income *71.2% 75.4%
Operating expenses/avg total assets 2.4% 3.0%

Average Balances ($000's)

Lending - Mortgages 142 135
Deposits - Term Deposits 74 73

* Excludes $11m for sale of group subsidiaries to 100% NZ Post subsidiary, Kiwi Group Holdings Ltd

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Financial Performance – Capital Adequacy

 Capital adequacy strengthened in the quarter through profit

generation and continued shareholder support
 Total Capital ratio under Basel II is 10.5% compared to RBNZ’s
minimum regulatory capital ratio of 8%

 Tier II - $60m raised in Sep 08 through sub debt issuance

 $20m share capital injection by NZ Post in Apr 09
 Kiwibank is now moving towards self-funding

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Credit Quality (Impaired Assets)

 The table shows our total impaired

assets as a % of total assets from latest
available Key Information Summaries.
Kiwibank remains favourably placed Previous Quarter
Bank Latest KIS KIS
against other banks
 The ratio has remained consistent across Kiwibank
ASB
0.19%
0.39%
0.09%
0.22%
strong balance sheet growth as a result ANZ/National 0.48% 0.30%
BNZ 0.56% 0.37%
of targeting low LVR, seasoned (i.e. Westpac 1.31% 0.71%
existing, switching) customers to
maintain the quality of our lending book. Source: June 09 KIS for Kiwibank and latest published
KIS’s for other banks
 Impaired Assets of $19m include all
assets where interest charges have been
suspended and a specific provision has
been raised

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Credit Quality (Total Credit Provisions to
Total Assets)
 A key focus from management and
RBNZ is the total credit provisioning to
Previous Quarter
lending assets Bank Latest GDS GDS

 Each bank has a different product and Kiwibank 0.14% 0.13%

risk portfolio to Kiwibank which has a ASB 0.42% 0.30%
BNZ 0.48% 0.41%
high % secure mortgage book and LMI ANZ/National 0.93% 0.73%
insurance for assets over 80%. Westpac 1.22% 0.83%

 Portfolio provisioning has increased Source: Most recently available GDS’s

coverage in the period as management

has increased its view of latent risk as
the credit crisis has worsened. Actual
write offs remain unchanged

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The future

 Continue strong customer growth through being the banking leader

in “value for money”.
 Consider any investment opportunities in the market as they arise.
 Active “customer care” programme to help financially distressed
customers.
 Considering an offshore funding program as alternative source of
funding.
 Securitisation available as a source of funding from the Reserve
Bank.

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Appendix 1: Kiwibank Group Structure

New Zealand
Post Limited

100%

Kiwi Group
Holdings Limited

100%

Kiwi Insurance The New Zealand

Limited Kiwibank Limited Home Loan Company
Limited (76%)

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