Corporate impairments worsening for Kiwibank

Kiwibank's impaired assets increased by over 2.5 times in the nine-month period to March 2010 as the bank transferred a large chunk of corporate loans from the productive category to impaired.

As of March 2010, net impaired assets stood at NZ$38.6 million, up sharply from NZ$14.4 million at the end of June 2009. The sharp increase was accounted for by classifying NZ$40.2 million of corporate loans as impaired, including NZ$15 million in the recent March quarter. With NZ$7.8 million of loans deleted from the impaired group and NZ$5.2 million written off, the gross balance of impaired corporate loans swelled to NZ$40.7 million from just NZ$13.5 million in June.

Impaired assets of mortgages, however, showed a pleasing trend with the bank deleting NZ$2.3 million loan which was earlier classified as impaired. The gross balance of impaired mortgage loans thus reduced to NZ$3.4 million from NZ$5.6 million in June.

Retail loans also showed an improving trend with the gross balance of impaired loans dropping to NZ$106,000 from NZ$227,000 though a significant part of that was due to writing off NZ$301,000 of retail loans.

However, retail loans formed a big portion of the bank's collective allowance for impairment losses at NZ$4.2 million of the total collective allowance of NZ$9.3 million. In the individual impairment category, the corporate portion of nearly NZ$5.0 million took up most of the total allowance of NZ$5.7 million.

Meanwhile, the bank's retail deposits were flat at NZ$6.8 billion at the end of March compared with December, and the total rise in deposits was only due to an increase in wholesale deposits, which rose to NZ$3.07 billion from NZ$2.85 billion the quarter before.