Banks moving as fast on fraud as they did on Covid, says Kiwibank boss

Thursday, 22 February 2024

Kiwibank achieved net lending growth of $1.3 billion during the half, with home lending growing 2.7 times faster than the market.

Fraud is “the number one thing on our board’s mind”, says Steve Jurkovich, Kiwibank chief executive, and the big five banks are going as hard on it they did on Covid when that hit in 2020.

Jurkovich, speaking after the bank posted a 7% half-year profit increase, said the chief executives of the big five banks were meeting fortnightly to drive progress on fighting fraud.

“There’s no doubt in my mind that everyone is 100% focused on moving this forward,” he said. “It’s very similar to the Covid response.”

A network of fraud victims has been driving awareness of the devastating impact of fraud, and weaknesses in banks’ fraud protections, putting pressure on them to act.

Key in the defences is checking that bank account names and numbers match before allowing payments to go ahead, and while there is no deadline for that to be introduced, Jurkovich said a request for proposal was “just going out” for an industry-wide “confirmation of payee” solution design.

It’s not known how big the scam and fraud crime wave washing over New Zealand really is. The Ministry of Business, Innovation and Employment said last year that just under $200 million was lost to scams at 11 of New Zealand’s largest financial institutions, but Jurkovich believed that was just “scratching the surface”.

Kiwibank chief executive Steve Jurkovich.

It could easily be double that, Jurkovich said, with many victims too embarrassed to say anything.

“I don’t doubt that we can work faster than we have in the past, and we have to,” he said.

Jurkovich also renewed calls for the Government, police and social media companies to step up to help defend the country, and set up a national anti-scam centre.

“We also need minister of justice, police, GCSB all to step in and say we need a coordinated approach because the threat is growing so fast, and is so distributed,” he said.

It’s not loss of jobs, but rising costs that is behind mortgage pain for Kiwibank customers.

Social media companies, who sometimes earned money from scammers advertising their fake investments, also had to “step up” as a quarter of scams were instigated on social media, Jurkovich said.

The banks catch-up work on scam defences comes as Kiwibank’s result shone a light on how hard households are being hit by the rising cost of living.

Kiwibank’s profit after tax of $105 million for the last six months of 2023 rose 7% on the same period in the previous year.

Jurkovich said this was on the back of growing its lending book by of $1.3 billion, with the bank’s home lending growing 2.7 times faster than the market, partly as a result of the bank working more extensively with mortgage brokers.

The income hit households have taken from higher home loan rates is shown in the steep rise in interest income Kiwibank earned.

In the last six months of 2023, Kiwibank collected $935m in interest from borrowers, up from $628m in the same period in 2022.

Kiwibank customers have cut their spend on eating out by 12%.

Losses on loans also rose with Kiwibank, and it had identified 7400 customers as displaying signs of financial stress, of which 526 took short-term relief, Jurkovich said.

Around 400 had switched temporarily to interest-only, and another 100 dropped their repayment amounts, and 19 were currently not making any repayments, and another 55 in hardship.

The most common cause was reduction in income available to pay the mortgage, not loss of job, Jurkovich said.

Another way household and business financial pain was manifested was in a sharp increase in customers needing overdrafts.

Customers ended the year with $282m in overdrafts with Kiwibank compared to $226m at the same point a year earlier. Credit card debt rose from $346m to $361m.

Jurkovich said spend by the bank’s customers on eating out had dropped 12%, another sign they were feeling the cost of living pinch.

Jurkovich said business lending remained flat as businesses took a cautious approach to borrowing.

Kiwibank is fully-owned by the Government, which bought back full ownership from the New Zealand Superannuation Fund, ACC and NZ Post in late 2022, but the change of government appears to have peaked hopes among some that the bank could be at least partially listed on the New Zealand stock exchange for the likes of KiwiSaver funds to invest in.

Earlier this month Craigs Investment Partner Mark Lister renewed his call for a partial sharemarket listing for Kiwibank.

Jurkovich had little comfort for people with mortgages, as home loan rates remained stubbornly high.

“The Reserve Bank remains focused on domestic inflation and while we believe enough has been done to get inflation back to more normal levels, it looks like rate cuts are becoming a more distant possibility,” he said.