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New Zealanders were questioning who they banked with and whether they were happy with profits going back to Australia, SBS chief executive Shaun Drylie said yesterday.

Shaun Drylie

Speaking to the Otago Daily Times after SBS released its annual profit, Mr Drylie said he had the impression no-one was concerned about how Australian-owned banks operated in New Zealand.

However, they were reassessing who owned the banks and whether they were happy banking with Australian-owned banks or whether they would be happier with a New Zealand-owned institution.

Co-operative Bank chief executive David Cunningham said when releasing his financial results yesterday there had been considerable focus on the banking industry since the Australian Royal Commission started.

He believed a strong factor in Co-operative Bank's continued growth was concern about the scale of banking profits going offshore to Australia each year.

Mr Drylie said SBS did not separate out its customers but the Invercargill bank continued to gain new customers.

SBS had reported an 11% increase in deposits and 11% growth in lending - providing balanced growth for the year ended March.

SBS reported an operating surplus of $35 million, down on the $36.8 million reported in the previous corresponding period.

The reported profit of $26.7 million was down on the $27.5 million achieved in 2017.

Total operating income grew to $139.45 million from $123.4 million but operating expenses also grew to $89.2 million from $75.9 million.

Also, provisions for credit impairment rose to $14.9 million from $10.8 million.

Mr Drylie said the higher costs and provisions reflected the acquisition costs of The Warehouse Group Financial Services, which would assist in positioning the bank for the future.

The Warehouse Group Financial Services had a large credit card base worth about $60 million and a higher exposure to receivables.

The higher provisions came with the purchase.

Finance Now, SBS' consumer lending arm, had good processes in place and although the provisions might drop slightly, there would be no significant fall, Mr Drylie said.

SBS was expecting to launch its own credit card into the market this year, having postponed the launch until The Warehouse purchase was completed last September.

Consumer lending was likely to continue to rise but not as quickly as it had in the past.

There had been 10 years of strong economic growth in New Zealand but that was starting to ebb away, Mr Drylie said.

Residential lending still made up the bulk of SBS lending at 70% and there was no signs of that changing.

SBS has entered its 150th year, having started on March 23, 1869.

"The organisation remains in good financial health and continues to perform well.

"Our results reflects balanced growth. Our lending is up $388 million on last year, alongside strong retail funding growth, up $337 million.

"While SBS Bank has been a key contributor, this also reflects strong performance across the entire SBS Group, including subsidiaries Finance Now, FANZ and Southsure.''

The bank's total capital ratio had increased through the year to 12.8% and remained well above the regulatory minimum, despite the costs incurred for the acquisition of the financial services group, chairman John Ward said.

The acquisition was a strategic decision to aid growth and leverage various technology platforms existing within the financial services group for the benefit of SBS.

"The fact we've been able to complete this transaction, in the face of unique challenges a mutual bank has in respect of the capital instruments available to it, while at the same time improving our capital adequacy over the year, is a testament to the prudent approach our executive team and staff take to the bank's evolution.''

Members' equity was up $28 million on the pcp to $295 million. Total assets reached $4.5billion.

Other key developments for members during the year included the removal of other bank ATM fees as well as service improvements from recent investments in technology and staff development, Mr Ward said.

Asked about the Auckland market, Mr Drylie said the bank continued to invest in mobile managers and deal with fund managers rather than take office space.

Customers were prepared to deal with the bank digitally, through the phone or the mobile app.

"Our increased investment in the digital services is playing out quickly with the development of technology. And customers can still get some traditional Southland service when they phone us.''

The year ahead would mean the SBS continuing to "sell its story'' to New Zealanders.

The growth in its fund management business had shown New Zealanders were looking for alternative options for investments, he said.

"Members can have confidence in their bank's future, following another strong financial result.''