SBS posts ‘solid’ result, adds to bad-debt provisions

SBS Bank’s annual profit has fallen as its margins declined and bad debts rose.

SBS Group, which includes the subsidiaries SBS Insurance, SBS Wealth and Finance Now, reported an after-tax profit of $38.2 million for the 12-month period ended on March 31.

This was down from $44.9m in the previous financial year.

Chief executive Mark McLean described the result as ‘‘solid’’ but said the profit drop was a result of the combined effects of a lower interest margin and an increase in credit provisioning.

SBS increased its lending by $624m, an increase of 14%, taking its total loan book to more than $5 billion.

McLean said SBS grew its mortgage lending by 12%, which was well above the broader industry growth rate of closer to 3.5%. He said an important part of that was lending to first-home buyers. The bank lent to 1449 first-home buyers in the financial year, up from 850 a year earlier.

SBS is a building society that is owned by the people who bank with it, but it is also registered as a bank with the Reserve Bank.

Banks have been criticised for paying poor deposit rates, but McLean said SBS had been ‘‘responsive’’ to Reserve Bank official cash rate (OCR) rises. ‘‘We were determined to be responsive and moved as the first bank to offer a 4% 12-month term deposit special in June 2022, and we continued to lead the market all the way to 6% in January 2023.’’

SBS’s latest disclosure statement follows recent disclosure statements from ANZ and Westpac, showing the huge increase in the interest that households with

home loans have faced as the Reserve Bank hiked the OCR.

In the 12 months, borrowers paid SBS $287.5m in interest, well up from $192.3m in the previous 12-month period.

SBS Bank chairman Joe O’Connell said: ‘‘We recognise the uncertainty many Kiwi families are facing with higher living costs and a weakening economic cycle.

‘‘As a mutually-owned bank, it’s our priority to support members and ensure the group is in a strong position to help you through the challenges, and opportunities, in the year ahead,’’ O’Connell said.

SBS’s disclosure statement also notes that it had self-reported to the Commerce Commission that it may have breached lending disclosure laws. ‘‘SBS has selfreported some matters relating to Credit Contracts and Consumer Finance Act variation disclosure compliance pre-December 1, 2021,’’ it said.

‘‘This investigation is ongoing and the outcome is currently uncertain but could result in customer remediation or regulatory action.’’