Kiwibank has reported a full year profit of $174 million for the 12 months to 30 June 2026, down 9 percent on the $191 million it made the year before, in a result that shows the state owned bank trading margin for growth.
The bank put the fall down to a squeeze on its net interest margin, which slipped 15 basis points to 2.10 percent. That margin is the gap between what a bank earns on the money it lends and what it pays the people who deposit money with it, and it is the main engine of bank profit in New Zealand. A narrower margin means every dollar lent earns a little less, so a bank has to lend a lot more just to stand still.
Kiwibank lent a lot more. Total lending grew $3.1 billion to $38.9 billion, made up of $2.1 billion of extra home lending and $1 billion of extra business lending, a rate of growth the bank says outpaced all four of the Australian owned majors. Deposits rose $2.4 billion to $32.7 billion.
The income side of the ledger held up. Operating income rose 3 percent to $938 million and net interest income was up 2 percent to $873 million, according to figures reported by interest.co.nz. What went the other way was cost. Operating expenses climbed 6 percent to $656 million and the cost to income ratio rose 206 basis points to 69.9 percent, meaning nearly 70 cents of every dollar of income now goes on running the bank.
Chief executive Steve Jurkovich framed the year as a deliberate choice. “Regardless of the economy, our focus remains on maintaining momentum through customer and market share growth while helping more Kiwis be better off,” he said in comments reported by RNZ.
Behind those numbers are households. Kiwibank says it helped close to 8,000 customers into homes over the year, including more than 3,200 first home buyers, and refinanced about 5,500 more who moved their mortgage across from another bank. “More customers choosing Kiwibank for their home loans, business banking, and to grow their savings shows that more Kiwi are looking for a bank that makes banking fairer,” Jurkovich said in the bank’s results announcement.
The share figures put the growth in perspective. Kiwibank still holds only 6.3 percent of the country’s lending market and 6.6 percent of deposits, a long way behind ANZ, ASB, BNZ and Westpac. But it punched well above that on new business. “We did 11% of all net new mortgage growth overall, and we had consistently the lowest variable loan rate,” Jurkovich said. He also pointed to the cost of fighting for those customers in a market where the majors were paying people to switch. “When ANZ was offering up to 1.5% cashback, that turns out to be some pretty big numbers that you’re up against,” he said.
Two days after the result, Jurkovich went further and compared Kiwibank to the challenger bank that has been rattling the Australian majors across the Tasman. “We are growing faster and doing a better job of disrupting the four big competitors than Macquarie is in Australia percentage-wise,” he told interest.co.nz on 22 August. Macquarie has taken its share of the Australian mortgage market from a rounding error in 2010 to 7.33 percent by June this year, so the claim is a bold one, and it rests on Kiwibank’s argument that steady organic growth counts for more than headlines.
Growing a loan book quickly in a soft economy carries a risk, and there is a hint of it in the accounts. The charge Kiwibank set aside for bad debts jumped 41 percent to $41 million, up from $29 million the year before. The bank says the loans themselves are still in good shape, with 0.27 percent of gross loans and advances at least 90 days past due at 30 June.
The harder question sitting behind this result is capital. Banks cannot keep writing $3 billion of new loans a year without more of it, and Kiwibank’s plan to get some has stalled. A $500 million equity raise from New Zealand institutional investors fell over earlier this year, and in May State Owned Enterprises Minister Simeon Brown wrote to parent company Kiwi Group Capital asking it to draw up alternative growth scenarios and to work with Treasury on what each would cost the Crown, a move that put a partial sale back on the table. The Government has been clear it is in no position to hand over the money itself.
One route to scale would be buying it. Kiwi Group Capital chairman David McLean said the company would be open to talking to Toi Foundation, the Taranaki community trust that owns TSB, about a tie up. “We would have interest in engaging with Toi Foundation and exploring what we could do together but that would be at their discretion,” McLean said. TSB is already in a process with Heartland Bank that is waiting on a High Court judge. Jurkovich was more guarded about the idea, noting that “the history of mergers globally has proved that that’s quite tricky.”
In the meantime the bank keeps spending. Kiwibank says the year’s investment went into a new core banking platform, stronger fraud detection and security, and artificial intelligence tools in its customer service, alongside a new branch at Kerikeri and refurbishments elsewhere in what it calls the largest physical banking network in the country. Some of that spending explains why costs outran income.
Taken together, the result reads as a bank doing what a challenger is meant to do and paying for it in the short term. Customers who switched picked up cheaper variable rates and cashback offers from rivals trying to keep them. The shareholder, which is every New Zealander, collected $17 million less profit. Whether that trade keeps working depends less on Kiwibank’s sales effort than on a capital decision that now sits with ministers.
What do you think? Is a smaller profit a fair price for a bank that keeps the big four honest, or should Kiwibank be earning more for the taxpayers who own it? Leave a comment below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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