Significant and successful year for SBS Bank

MEDIA RELEASE

30 June 2009

Significant and successful year for SBS Bank

New Zealand’s newest bank, SBS Bank has announced a solid annual result in what has probably been the most significant year in its 140-year history.

SBS Bank has continued to perform well while many banks around the world have been impacted by the severe economic recession. The underlying operating surplus of $22 million is in line with that achieved in 2008 and the net surplus after tax and after International Financial Reporting Standards adjustments is down by $2.3 million to $12 million.

The major items to impact the net surplus were an increase in provisioning for credit impairment, up $3.3 million to $12.4 million, and a loss on the revaluation of financial instruments to fair value following the rapid decline in interest rates, up $4.7 million to $6 million.

SBS Bank chief executive Ross Smith said it was a particularly pleasing result that reflected the trust of SBS Bank’s members and the conservatism taken by the Society in the midst of an economic crisis that continued to challenge financial institutions and redefine banking globally.

“The highlight of the year was gaining bank registration. It was particularly pleasing to achieve bank registration without changing our mutual, member-owned structure as this allowed SBS Bank to ensure the continued protection of members’ assets.

“The response to bank registration from our members and the wider market was instant. From October through to the end of the financial year, our depositors’ funds grew by over $200 million – up 400 percent on the same period the previous year.

“The corresponding impact to key measures of commercial strength – capital ratio and liquidity – was significant. In addition, SBS Bank’s operating income increased 8.4 percent to $77.5 million, while operating expenses increased only 4.5 percent,” Mr Smith said.

SBS Bank’s total assets increased to $2.54 billion and total lending climbed $68 million, to $2.4 billion.

SBS Bank’s subsidiaries - Funds Administration NZ Limited (FANZ), Southsure Assurance and Finance Now Limited (FNL) – all recorded notable performances, contributing a combined $6.7 million to the pre-tax operating surplus.

Mr Smith said while SBS Bank had to prosper, the interest of its members and their communities would always be paramount in commercial decisions.

“Whether it is better rates, better services or community support, we strive to ensure SBS Bank delivers benefits back to its members.

“During the past year SBS Bank has been able to reward its loyal investors with exclusive access to our five-year Premier Bond capital product on its initial launch offer, while investors and non-profit community clubs and charities were able to benefit through the SBS Star banking package and associated Star Investment Special.

“It is clear that this recession will be the toughest that anyone has experienced in their working lives and SBS Bank will not be immune. However, SBS Bank has stood the test of time and faced adversity many times in its 140 years and is well positioned to manage through the recession.

“Our investments are all in New Zealand, with more than 96 percent of lending secured by mortgage over property and no exposure to bonds of the type that have crippled many banks overseas.

“Despite the severe economic recession and expected challenging times ahead, SBS Bank remains in good heart. We remain committed to traditional values, supporting our people and their communities, to mutual ownership and to good, prudent business management to ensure long-term sustainability,” Mr Smith said.

SBS Bank will hold its Annual General Meeting at the Invercargill, Head Office, 51 Don Street on Wednesday 29 July, at 5.30pm.

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