Further IT project writedowns see Kiwibank profits drop by a third

Friday, 23 February 2018

Kiwibank's half year profits have fallen by a third as the state-owned bank continues to face costs from its troubled IT upgrade.

On Friday Wellington-based Kiwibank reported an after tax profit of $44 million for the six months to December 31, down from $65m in the same period a year earlier.

In September, Kiwibank announced it was writing off $90m off the value of its investment in the information-technology project, which it has dubbed CoreMod. Days before the writedowns were announced, Kiwibank announced its chief executive Paul Brock was leaving.

The project continues to incur costs for the bank. Kiwibank said it had written off another $8m related to CoreMod in the period covered by the latest results, while $7m in additional operating expenses were incurred due to winding down the project.

READ MORE: Kiwibank rethinks IT project

It was not clear from Kiwibank's statement whether the latest results marked the end of the impairments related to the upgrade.

The bank said that lower funding costs and 'market pricing opportunities' allowed it to lift net interest income by 9 per cent to $198m.

Acting Kiwibank chief executive Mark Stephen said the market experienced 'a significant slowdown in lending growth during the winter months and leading up to the election, [but] it has returned to more normal levels'.

Kiwi Wealth, the Kiwisaver provider previously known as Gareth Morgan Investments, now has $5 billion in funds under management.

Previously owned entirely by NZ Post, in 2016 a 47 stake was sold to ACC and the NZ Super Fund. While the deal was valued at $494m, a chunk of the deal was used to bolster Kiwibank's balance sheet.