2009 Shareholder Review

Highlights

Resilient performance in tough economic climate

BNZ Partners makes strong contribution in its first year

First major bank in New Zealand to abolish overdrawn account fees

Operating under the BNZ and BNZ Partners brands, our retail, business, agribusiness and insurance franchises provide banking services to more than one million customers across New Zealand.

A domestic recession, coupled with ongoing volatility in global credit markets, created a very challenging environment in New Zealand in 2009. BNZ's response has been to continue working on our long-term strategic agenda while maintaining balance sheet strength. We have held conservative levels of liquid assets, diversified and lengthened the term profile of customer deposits and wholesale funding, and maintained physical capital levels well above prescribed levels. Our focus on balance sheet strength, combined with increased bad and doubtful debt charges, led cash earnings to decline by 12.9% to NZ$420 million. Underlying profit was up 1.7% to NZ$776 million and costs remained flat for the fourth year.

BNZ partners performs well in first year

Despite difficult economic conditions, our core strengths in relationship banking, asset quality, retail innovation and culture have allowed us to continue building the foundations for longer term growth
and returns.

BNZ Partners – BNZ's version of the Group's iFS relationship banking model – made a strong contribution in its first full year.

Our strong asset quality capability meant we continued to lend and were able to assist customers at a time when overall system growth slowed considerably. Business lending volume rose by 8% year on year with increased market share in lending across all key business segments.

Helping our customers and communities to be better off

BNZ continued to help customers and communities achieve their goal of being 'better off'. In September, BNZ became the first major bank in New Zealand to stop charging dishonour, honour and unpaid bill fees on transaction and savings accounts for both business and personal customers. In addition, BNZ has boosted resources to help customers through difficult times. Our banking advisors are spending more time with customers talking about their banking needs, while a financial literacy program has been developed for customers and the wider community.

Innovative retailing

BNZ has pioneered a number of innovative concepts designed to provide customers with a retail, rather than a traditional banking, experience. During the year we introduced new concept stores, mobile banking carts and trailers and a refreshed Out of the Box system that provides packaged solutions to meet customer needs.