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Kiwibank Ltd.

Primary Credit Analyst:

Derryl D'silva, Melbourne (61) 3-9631-2106; derryl_d'silva@standardandpoors.com Secondary Credit Analysts:

Brendan Flynn, Melbourne (61) 3-9631-2042; brendan_flynn@standardandpoors.com Alex White, Melbourne (61) 9631-2189; alex_white@standardandpoors.com

Table Of Contents

Major Rating Factors

Rationale

Outlook

Profile

Support And Ownership

Strategy

Profitability

Capital

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Major Rating Factors

Strengths:

• Unconditional guarantee from New Zealand Post Ltd.

• Good retail-funding position

• Good management team

• Satisfactory capitalization

Counterparty Credit Rating

AA-/Stable/A-1+

Weaknesses:

• Modest market position

• Unseasoned lending portfolio

• Difficult domestic credit conditions

• Moderate profitability

Rationale

The ratings on New Zealand-based Kiwibank Ltd. (Kiwibank) are equalized with those on its parent, New Zealand Post Ltd. (NZ Post; AA-/Stable/A-1+), reflecting the benefit of NZ Post's unconditional guarantee, which covers all of the bank's senior obligations.

The guarantee can be withdrawn at three months' notice, but creditors are protected by a "grandparenting" provision. Standard & Poor's Ratings Services views the New Zealand government as supportive of Kiwibank, although this support may vary with any government change.

Kiwibank's stand-alone credit quality is modest.

The credit quality is underpinned by Kiwibank's modest market position, moderate profitability, and relatively unseasoned loan book. While asset quality has experienced some deterioration since last year, arrears and loan losses remain low. Supporting the stand-alone credit profile are the bank's good retail-funding position, satisfactory capitalization, and good management team. The capable management team has successfully managed Kiwibank's start-up risks and developed a sound strategy, aided by a good reporting and management system framework and flexible IT systems.

Despite improving earnings and rapid annual growth averaging more than 50% since inception, Kiwibank's operations lack sufficient scale and remain substantially small compared to major banks.

While Kiwibank's profitability is improving, we believe that the bank's ability to maintain this improving trend would depend on its ability to continue strong business growth on the back of competitive pricing, while

maintaining good access to retail funds. It is one of the smallest retail banks in New Zealand, with a modest 3.5% share of the residential loans segment, and about 6.5% of the depositor market.

Additionally, Kiwibank's earnings may be vulnerable to volatility, as compared with more profitable and established local peers.

We believe growth will be challenged by the current recession in the New Zealand economy, a softening property sector, and potentially higher provisioning costs.

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Although Kiwibank began its operations about seven years ago, the bank's sustained rapid asset growth has led to a substantial portion of its loan book being unseasoned, which moderates the bank's stand-alone credit quality.

About half of its customer loans were written in the past 18 months and are untested over a reasonable period of time. While asset quality pressures have been managed reasonably well to date, we believe that there could be greater pressure on credit costs due to a weakening economic environment.

Further, although Kiwibank's risk-based capitalization is satisfactory, the bank has limited flexibility to absorb unexpected operating risk losses.

Given its moderate profitability, the bank has been dependent on NZ Post for capital support to maintain its strong asset growth, which is likely to remain available. Funding has also been sourced through raising subordinated debt.

Short-term rating factors

The short-term rating of 'A-1+' on Kiwibank reflects NZ Post's guarantee.

However, Kiwibank's good funding profile and liquidity position (about 20% of total assets at December-end 2008) mitigate any potential for financial stress in the near term. Retail deposits represented about 72% of total funds at six months ended Dec. 31, 2008. Cash holdings and good-quality liquidity are supplemented by Kiwibank's access to the New Zealand wholesale funding markets via its registered certificate-of-deposit program.

Outlook

The stable outlook on Kiwibank reflects the outlook on its parent, NZ Post.

The ratings on Kiwibank are likely to remain equated with those on NZ Post, unless there is a significant dilution in the guarantee provided by NZ Post.

An improvement in Kiwibank's stand-alone credit profile will depend on the bank's ability to demonstrate an improvement in operating performance and nature of earnings.

Equally important is the bank's ability to manage strong asset-growth expectations, particularly in current difficult economic and credit conditions, without a material increase in credit risk. A greater contribution to capital from internal earnings may also support a stronger stand-alone credit profile.

Conversely, a material deterioration of asset-quality parameters may weaken the bank's stand-alone credit profile.

Profile

Headquartered in Wellington, Kiwibank has a modest business position.

It is a small retail bank in New Zealand with about 3.5% market share of customer loans and 6.6% market share of deposits. While Kiwibank's product suite includes credit cards, insurance products, and business banking loans, residential mortgage loans are the dominant part of its business. At half year Dec. 31, 2008, residential mortgage loans formed 65% of its total adjusted assets, while the business-banking book (started in late 2004) accounted for about 15% of total adjusted assets. On the liabilities side, Kiwibank offers traditional term deposits, and savings and transaction accounts, of which core customer deposits formed 68% of total liabilities at end December 2008. Kiwibank also manages NZ Post's agency services, such as the bills payment services. At Dec. 31, 2008, Kiwibank had a customer base of about 600,000.

Kiwibank's business has grown rapidly since it started in 2002, primarily through a broad distribution platform and competitive pricing.

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with NZ Post to extend the bank's product reach. Kiwibank has a unique advantage because it distributes its products through about 300 NZ Post shop outlets. Other modes include a customer call center, ATMs, Electronic Funds Transfer Point of Sale (EFTPOS) services, telephone banking, and the Internet. NZ Post's shop network has been positioned to be the community face and primary sales channel for the bank.

Kiwibank continues to expand its scale of operations and strengthen its distribution capability.

Additionally, Kiwibank acquired about NZ$700 million of HSBC Bank's residential book in New Zealand,

strengthened its distribution capabilities with the acquisition of New Zealand Home Loans (NZHL; not rated), and entered into an agreement with AMP Group Holdings Ltd. to provide AMP-originated and AMP-branded mortgage products.

Support And Ownership

Kiwibank is wholly owned by NZ Post. It is a registered bank that is regulated, and supervised by the Reserve Bank of New Zealand.

The rating on Kiwibank is equated with that on its parent because NZ Post unconditionally guarantees full and timely payment on all of the bank's senior obligations.

Kiwibank's outstanding subordinated bonds are not covered under this guarantee. However, Standard & Poor's continues to equate Kiwibank's issuer credit rating with that on NZ Post because Kiwibank's nonguaranteed debt is likely to remain well below 5% of the bank's total liabilities in the medium term. The guarantee can be terminated at three months' notice, according to the guarantee provisions. However, a grandfathering clause provides

protection to creditors who rely on the guarantee. Although Kiwibank's stand-alone credit profile is considerably weaker than NZ Post's postal business, this weakness has been factored into the credit rating on the NZ Post group.

NZ Post maintains close oversight of Kiwibank's operations. The bank's board consists of three NZ Post board members, the NZ Post CEO, and three independent directors.

Although a majority of the board members are from NZ Post, the bank is managed independently.

Strategy

Kiwibank aims to maintain its strong asset growth--both organic and inorganic--using the bank's unique distribution network, competitive pricing, and ability to enhance product offerings.

The bank remains focused on its target market of middle-income retail customers, although its product offering has attracted a reasonable level of lower income customers. Standard & Poor's believes that Kiwibank's strategy is achievable, but ultimate success will depend on the bank's ability to manage credit and operating costs, while it pursues growth ambitions in a challenging economic environment.

In addition to strong asset growth, Kiwibank is looking to diversify its revenue sources.

Kiwibank plans to generate its funds-based income almost entirely from residential mortgages and the

small-and-medium enterprise (SME) sector. However, it is targeting a stronger growth in its non-interest income rather than interest income due to the fee income generated from its ATM roll-out. The bank has established a wealth development business that has advisory services across investments and insurance. In the medium term, Kiwibank plans to increase earnings diversity through steady expansion of this business.

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To maintain growth in its business-banking portfolio, Kiwibank plans to continue to target the SME sector by identifying more business accounts through the NZ Post relationship.

The bank's business-banking share of total assets has increased to 15% at Dec. 31, 2008, from 10% at Dec. 31 2007, and is expected to increase further. More international-banking services will be provided on the back of its tie-up with Citibank to offer related products. The bank has also started to identify large exposures that reside within its existing business-banking portfolio so that the bank is able to manage these exposures in a manner similar to that of corporate and commercial lending. Over the long term, the bank may expand its exposure to this segment.

Kiwibank is also committed to make technology improvements to enhance its infrastructure capacity and operational excellence.

Planned technological improvements include the introduction of a new core banking platform, implementing an ATM switch to bring acquired ATM transactions in-house, and the rebuilding of its Internet banking capabilities.

Credit risk

Kiwibank's credit losses to date have been under control, reflecting its exposure to low-risk residential mortgages, and its good underwriting standards.

However, the bank has strong growth ambitions, which are reflected in its rapid growth over the past five years, and is exposed to the deteriorating economic conditions in New Zealand. About 75% of its asset base is expected to be in the lower-risk residential sector in the medium term. Despite the lower risk nature of residential mortgages, declining economic conditions and falling property prices are expected to increase nonperforming assets, which were 0.25% of total loans at Dec. 31, 2008.

Kiwibank's underwriting standards are good, with developed comprehensive credit systems and policies that enable centralized approval and processing.

Although the bank provides loans with a loan-to-value (LTV) ratio of 95%, loans with an LTV above 80% are subject to mortgage insurance with QBE Lenders' Mortgage Insurance Ltd. (previously called PMI Mortgage Insurance Ltd.; AA-/Negative/--) or HNZC. To date, the bank's credit policies have supported its adequate asset quality. Some of these policies include approval by an internal credit committee for individual or group exposures greater than NZ$10 million, restriction of lending to certain sectors (including rural, orchardists, horticulture, forestry and commercial fishing), and no exposure to subprime borrowers. Currently, retail housing secures 74% of all business banking loans and 90% of the total loan portfolio. The bank's unsecured lending remains small, at about 3% of total loans at Dec. 31, 2008. Kiwibank also places a high emphasis on loan serviceability. Borrowers who receive a large proportion of their income as commission and overtime pay are looked upon less favorably, given that such income is likely to be reduced in times of economic stress.

Unlike similar small banks, Kiwibank's loan portfolio is relatively well diversified geographically, largely due to its well-spread distribution network.

Geographically, Kiwibank has a concentration of about 40% of its mortgage-lending, and 47% of its business-banking activities in Auckland.

Kiwibank's provisioning has yet to be tested against a more seasoned portfolio.

Loan loss reserves increased to 0.20% of the loan portfolio (0.09% at June 30, 2008), with collective provisions of NZ$7.0 million at Dec. 31, 2008 (NZ$2.9 million in fiscal 2008). Kiwibank has no arrears on any of its top 15 exposures at Dec. 31, 2008.

A key weakness in Kiwibank's credit risk profile is its relatively unseasoned loan portfolio that has experienced a rapid growth of about 50% in the past 18 months.

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a segment where it has less experience, and where losses are typically higher than those experienced for residential mortgages. Standard & Poor's currently gains comfort from the bank's reasonably conservative lending policies to help mitigate potential losses.

Funding and liquidity risk

Kiwibank's funding profile is good.

The profile is underpinned by a rapidly growing retail deposit base, and supplemented by wholesale, market-accessed, registered certificates of deposit (RCD), and a subordinated bond issue.

Strong deposit growth has supported the bank's ability to fund its loan book.

The bank's total deposits grew significantly to NZ$7.3 billion at Dec. 31, 2008 (see chart 1), with the loans-to-deposits ratio at a satisfactory 112.1%. High-value depositors (i.e. a deposit value of more than NZ$5,000), and retired customers collectively form a major share of the deposit base. While there is strong competition in New Zealand to raise low-cost retail deposits, Kiwibank's "Join the Movement" advertising campaign has enabled the bank to continue its strong deposit growth.

To date, Kiwibank has been successful in raising additional funding it needs by accessing the wholesale markets.

The bank's wholesale funding is predominantly related to the RCD program, which totaled NZ$716 million at Dec. 31, 2008.

Kiwibank's good funding and liquidity profile mitigate any potential for financial stress in the near term.

Its liquidity management practices remain a crucial part of the bank's risk management program and are essential in further developing customers' confidence in the bank. NZ Post is also expected to support Kiwibank in a liquidity crisis.

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Chart 1

Market risks

Exposure to market risk is limited because the bank does not offer wholesale and treasury products to its customers, nor does it undertake proprietary trading.

With nearly 79% of the bank's home loan book on fixed rates at Dec. 31, 2008, the bank has an exposure to structural interest rate risk as longer dated loans are funded by short-term liabilities.

This is actively managed using traditional derivatives such as swaps, forward-rate agreements, futures, and options to ensure risks are maintained within set limits. These risks are regularly reported to its asset and liability committee (ALCO) and NZ Post equivalent, where there is a preferred policy of minimal net exposures. Kiwibank's

asset-and-liability management process appears well developed, and the ALCO and NZ Post-equivalent are provided with interest rate risk, liquidity, and capital management reports. Management's key focus has been on liquidity management and hedging the interest rate risk within the nontrading balance sheet to maintain compliance with internal policies.

Profitability

Despite improving earnings and rapid annual growth, Kiwibank's operations lack sufficient scale and remain substantially small compared to major banks.

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from the same period a year earlier. While Kiwibank's profitability is improving, we believe that the bank's ability to maintain this improving trend would depend on its ability to continue strong business growth on the back of competitive pricing, while maintaining good access to retail funds.

Additionally, Kiwibank's earnings may be vulnerable to volatility, as compared with more profitable and established local peers, particularly because growth will be challenged by the current recession in the New Zealand economy, a softening property sector, and potentially higher provisioning costs.

Kiwibank's margins have experienced a contraction due to the strong competition for home loans and low-cost retail deposits (see chart 2).

While the bank's non-interest expenses remain high, at 67.6% of revenues for the six months to Dec. 31, 2008, they have continued to show a declining trend (see chart 3).

Overall operating costs are high, mainly due to a relatively small scale, and a high level of customer acquisition, infrastructure expenditure, and an expansion of its product and processing capabilities. If the bank achieves greater economies of scale, it should be able to manage costs effectively, considering the growth in revenue.

The revenue base shows a degree of diversity, with net interest income accounting for a moderate 51.5% of total revenue for the six months to Dec. 31, 2008.

Although Kiwibank's non-interest income to revenues is gradually decreasing, the non-interest income from the management of NZ Post's agency business remains strong.

A combination of the slowdown in the New Zealand property market, deteriorating macroeconomic conditions, and heightened competitive pressures could undermine Kiwibank's earnings.

Profitability, to date, has been underpinned by core banking operations and predicated on stable credit conditions. Standard & Poor's believes that competitive pressures can lessen loan growth rates and negatively affect the bank's net interest margin and fee earnings.

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Chart 3

Capital

Kiwibank's capital resources are satisfactory for the bank's risk profile.

In fiscal 2008, the bank's ratio of adjusted total equity to risk-weighted assets of 8.4% is satisfactory. The bank has targeted to maintain its regulatory capital adequacy ratio above 10.0%, which is higher than the minimum 8.0% requirement for New Zealand banks.

Management of capital is largely driven by the rate of growth in the balance sheet.

As a consequence, Kiwibank remains reliant on its parent to supplement capital to achieve target capital adequacy ratios, as it has only started to generate profits. Moreover, no dividends have been distributed so far, given the bank's reliance on capital for strong asset growth. The bank's success in raising subordinated bonds is supportive of its ability to access funds outside of its parent.

The bank's stand-alone ability to absorb unexpected operating risks is constrained by its modest absolute capital size of NZ$306 million at Dec. 31, 2008.

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Table 1

Capital Injection By New Zealand Post Ltd.

--Year ended June

30--2009* 2008 2007 2006 2005 2004 2003 2002

Equity injection 20 50 55 35 15 40 0 80

(mil. NZ$)

* Six months ended Dec. 31, 2008

Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities. Standard & Poor's (Australia) Pty. Ltd. does not hold an Australian financial services license under the Corporations Act 2001. Any rating and the information contained in any research report published by Standard & Poor's is of a general nature. It has been prepared without taking into account any recipient's particular financial needs, circumstances, and objectives. Therefore, a recipient should assess the appropriateness of such information to it before making an investment decision based on this information.

Table 2

Balance Sheet Statistics

--Year ended June 30-- Breakdown as a % of assets (adj.)

(Mil. NZ$) 2009* 2008 2007 2006 2005 - 2009* 2008 2007 2006 2005

Assets

Cash and money market instruments 384.43 408.15 289.49 50.12 21.34 4.10 5.69 6.13 1.63 1.15

Securities 1839.97 1117.67 772.95 378.47 238.50 19.64 15.58 16.36 12.32 12.82

Trading securities (marked to market) 1137.40 420.31 245.12 0.00 0.00 12.14 5.86 5.19 0.00 0.00

Nontrading securities 702.57 697.36 527.83 378.47 238.50 7.50 9.72 11.18 12.32 12.82

Customer loans (gross) 7010.85 5583.49 3561.36 2614.06 1577.25 74.82 77.85 75.40 85.07 84.79

Residential real estate loans 6990.84 5583.49 3561.36 2614.06 1577.25 74.61 77.85 75.40 85.07 84.79

All other loans 20.01 0.00 0.00 0.00 0.00 0.21 0.00 0.00 0.00 0.00

Loan loss reserves 7.02 2.91 0.72 5.49 3.60 0.07 0.04 0.02 0.18 0.19

Customer loans (net) 7003.83 5580.58 3560.64 2608.57 1573.65 74.74 77.81 75.38 84.89 84.60

Earning assets 8947.92 6877.63 4345.45 2994.61 1817.34 95.49 95.89 92.00 97.45 97.70

Intangibles (nonservicing) 59.84 47.11 36.98 0.00 0.00 0.64 0.66 0.78 0.00 0.00

Fixed assets 18.57 19.18 17.61 29.90 24.20 0.20 0.27 0.37 0.97 1.30

Derivatives credit amount 68.64 31.83 76.03 N.A. N.A. 0.73 0.44 1.61 N.A. N.A.

Accrued receivables 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

All other assets 54.89 14.70 6.59 5.76 2.49 0.59 0.21 0.14 0.19 0.13

Total reported assets 9430.18 7219.23 4760.29 3072.82 1860.18 100.64 100.66 100.78 100.00 100.00

Less nonservicing intangibles+ I/O strips (59.84) (47.11) (36.98) 0.00 0.00 (0.64) (0.66) (0.78) 0.00 0.00

Adjusted assets 9370.33 7172.11 4723.31 3072.82 1860.18 100.00 100.00 100.00 100.00 100.00

Breakdown as a % of liabilities + equity

2009* 2008 2007 2006 2005 2009* 2008 2007 2006 2005

Liabilities

Total deposits 7340.54 6080.27 3970.68 2442.14 1471.14 77.84 84.22 83.41 79.48 79.09

Noncore deposits 1083.80 1252.48 653.09 65.50 42.51 11.49 17.35 13.72 2.13 2.29

Core/customer deposits 6256.73 4827.79 3317.59 2376.65 1428.63 66.35 66.87 69.69 77.34 76.80

Repurchase agreements 544.34 153.71 N.A. N.A. N.A. 5.77 2.13 N.A. N.A. N.A.

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Table 2

Balance Sheet Statistics (cont.)

Other liabilities 390.93 96.92 37.94 15.02 13.22 4.15 1.34 0.80 0.49 0.71

Total liabilities 9138.09 6893.25 4510.93 2900.40 1738.52 96.90 95.48 94.76 94.39 93.46

Total shareholders' equity 292.08 325.98 249.36 172.42 121.65 3.10 4.52 5.24 5.61 6.54

Common shareholders' equity (reported) 292.08 325.98 249.36 172.42 121.65 3.10 4.52 5.24 5.61 6.54

Share capital and surplus 275.00 275.00 225.00 170.00 135.00 2.92 3.81 4.73 5.53 7.26

Revaluation reserve (73.47) (13.77) (3.57) N.A. N.A. (0.78) (0.19) (0.08) N.A. N.A.

Retained profits 90.55 64.75 27.93 2.42 (13.35) 0.96 0.90 0.59 0.08 (0.72)

Total liabilities and equity 9430.18 7219.23 4760.29 3072.82 1860.18 100.00 100.00 100.00 100.00 100.00

Equity Reconciliation Table

Common shareholders' equity (reported) 292.08 325.98 249.36 172.42 121.65

- Revaluation reserves 73.47 13.77 3.57 0.00 0.00

- Nonservicing Intangibles (59.84) (47.11) (36.98) 0.00 0.00

Adjusted common equity 305.71 292.64 215.96 172.42 121.65

+ General Reserves 0.00 0.00 0.00 5.49 3.60

- Capital of Insurance Subsidiaries 0.64 0.64 0.00 N.A. N.A. N.A. N.A.

Adjusted total equity 306.35 293.27 215.96 177.92 125.25

*Data as of Dec. 31, 2008. Ratios annualized where appropriate. N.A.--Not available.

Table 3

Profit and Loss Statement Statistics

--Year ended June 30-- Adj. avg. assets (%)

(Mil. NZ$) 2009* 2008 2007 2006 2005 - 2009* 2008 2007 2006 2005

Profitability

Interest income 362.30 558.92 318.96 188.16 119.34 8.76 9.40 8.18 7.63 7.54

Interest expense 282.71 444.00 239.96 136.22 83.05 6.84 7.47 6.16 5.52 5.25

Net interest income 79.59 114.91 79.00 51.94 36.29 1.92 1.93 2.03 2.11 2.29

Operating noninterest income 74.88 123.19 124.56 98.37 75.04 1.81 2.07 3.20 3.99 4.74

Fees and commissions 71.74 129.30 120.40 98.37 75.04 1.73 2.17 3.09 3.99 4.74

Trading gains (112.00) (41.83) 65.39 0.00 0.00 (2.71) (0.70) 1.68 0.00 0.00

Other market-sensitive income 115.15 35.71 (61.22) N.A. N.A. 2.78 0.60 (1.57) N.A. N.A.

Operating revenues 154.47 238.10 203.56 150.31 111.33 3.74 4.00 5.22 6.09 7.03

Noninterest expenses 104.38 168.68 151.36 123.34 98.36 2.52 2.84 3.88 5.00 6.22

Personnel expenses 26.07 45.12 38.28 0.00 0.00 0.63 0.76 0.98 0.00 0.00

Other general and administrative expense 75.74 119.13 109.61 115.89 93.12 1.83 2.00 2.81 4.70 5.88

Depreciation 2.58 4.44 3.47 7.45 5.25 0.06 0.07 0.09 0.30 0.33

Net operating income before loss provisions 50.09 69.42 52.20 26.97 12.97 1.21 1.17 1.34 1.09 0.82

Credit loss provisions (net new) 6.15 4.10 0.46 3.71 2.09 0.15 0.07 0.01 0.15 0.13

Net operating income after loss provisions 43.93 65.32 51.74 23.26 10.88 1.06 1.10 1.33 0.94 0.69

Amortization of goodwill and intangibles 5.99 10.76 7.05 0.00 0.00 0.14 0.18 0.18 0.00 0.00

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Table 3

Profit and Loss Statement Statistics (cont.)

Net income before extraordinaries 25.80 36.82 30.85 15.77 7.24 0.62 0.62 0.79 0.64 0.46

Net income after extraordinaries 25.80 36.82 30.85 15.77 7.24 0.62 0.62 0.79 0.64 0.46

Core Earnings Reconciliation

Net Income (before Minority Interest) 25.79 36.81 30.86 15.77 7.24

+ Amortization/ Impairment of Goodwill/ Intangibles 5.99 10.76 7.05 0.00 0.00

Core earnings 31.78 47.57 37.91 15.77 7.24 0.77 0.80 0.97 0.64 0.46

2009* 2008 2007 2006 2005

Asset Quality

Nonperforming assets 24.41 12.83 2.26 0.75 0.72

Nonaccrual loans 6.01 4.07 0.25 0.06 N.A. N.A.

Loans in arrears but accruing 18.40 8.76 2.01 0.69 0.72

Net charge-offs 2.05 1.91 1.02 1.82 1.14

Average balance sheet

Average customer loans 6292.21 4570.61 3084.61 2091.11 1304.69

Average earning assets 7912.77 5611.54 3670.03 2405.98 1553.68

Average assets 8324.70 5989.76 3916.56 2466.50 1582.54

Average total deposits 6710.40 5025.47 3206.41 1956.64 1216.34

Average interest-bearing liabilities 7771.75 5634.66 3679.19 2305.34 1458.65

Average common equity 309.03 287.67 210.89 147.04 110.53

Average adjusted assets 8271.22 5947.71 3898.07 2466.50 1582.54

Other data

Commitments and contingencies 282.10 302.30 92.92 96.37 71.61

Off-balance-sheet credit equivalents 371.25 209.95 185.86 118.54 73.15

*Data as of Dec. 31, 2008. Ratios annualized where appropriate. N.A.--Not available.

Table 4

Ratio Analysis

--Year ended June

30--2009* 2008 2007 2006 2005

ANNUAL GROWTH (%)

Customer loans (gross) 51.13 56.78 36.24 65.74 51.89

Loss reserves 282.24 304.31 (86.89) 52.54 35.63 Adjusted assets 61.30 51.84 53.71 65.19 42.55 Customer deposits 59.20 45.52 39.59 66.36 48.77 Total equity (20.80) 30.73 44.62 41.73 22.37 Operating revenues 29.75 16.97 35.43 35.01 37.02 Noninterest expense 23.77 11.44 22.72 25.39 23.63

Net operating income before provisions 44.30 32.98 93.55 108.01 668.58

Loan loss provisions 200.37 790.65 (87.60) 77.94 (7.74)

Net operating income after provisions 34.51 26.24 122.44 113.78 N.M.

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Table 4

Ratio Analysis (cont.)

Net income 40.13 19.29 95.68 117.80 N.M.

2009* 2008 2007 2006 2005

PROFITABILITY (%) Interest Margin Analysis

Net interest income (taxable equiv.)/avg. earning assets 2.01 2.05 2.15 2.16 2.34

Net interest spread 1.88 2.08 2.17 1.91 1.99

Interest income (taxable equiv.)/avg. earning assets 9.16 9.96 8.69 7.82 7.68

Interest income on loans/avg. total loans 7.19 7.80 7.20 7.52 7.30

Interest expense/avg. interest-bearing liabilities 7.28 7.88 6.52 5.91 5.69

Interest expense on deposits/avg. deposits 5.77 6.41 5.56 4.66 4.49

Revenue Analysis

Net interest income/revenues 51.52 48.26 38.81 34.55 32.60

Fee income/revenues 46.44 54.31 59.14 65.45 67.40

Market-sensitive income/revenues 2.04 (2.57) 2.05 0.00 0.00

Noninterest income/revenues 48.48 51.74 61.19 65.45 67.40

Personnel expense/revenues 16.88 18.95 18.80 0.00 0.00

Noninterest expense/revenues 67.58 70.84 74.36 82.06 88.35

Noninterest expense/revenues less investment gains 265.45 83.35 57.16 82.06 88.35

Net operating income before provision/revenues 32.42 29.16 25.64 17.94 11.65

Net operating income after provisions/revenues 28.44 27.43 25.42 15.48 9.77

New loan loss provisions/revenues 3.98 1.72 0.23 2.47 1.87

Pretax profit/revenues 24.56 22.92 21.95 15.48 9.77

Tax/pretax profit 32.02 32.53 30.95 32.20 33.45

Core Earnings/Revenues 20.58 19.98 18.62 10.49 6.50

2009* 2008 2007 2006 2005

Other Returns

Pretax profit/avg. risk assets (%) 2.15 1.87 2.30 1.85 1.37

Revenues/avg. risk assets (%) 8.75 8.18 10.47 11.97 14.05

Net operating income before LLP/LLP 813.99 1694.36 11348.26 726.98 621.87

Net operating income before loss provisions/avg. risk assets (%) 2.84 2.38 2.69 2.15 1.64 Net operating income after loss provisions/avg. risk assets (%) 2.49 2.24 2.66 1.85 1.37

Net income before minority interest/avg. adjusted assets 0.62 0.62 0.79 0.64 0.46

Non-interest expenses/average adjusted assets 2.52 2.84 3.88 5.00 6.22

Core earnings/average risk-weighted assets 1.80 1.63 1.95 1.26 0.91

Core earnings/average adjusted assets 0.77 0.80 0.97 0.64 0.46

Core earnings/ Average ACE (ROE) 21.25 18.71 19.52 10.73 6.55

2009* 2008 2007 2006 2005

FUNDING AND LIQUIDITY (%)

(15)

Table 4

Ratio Analysis (cont.)

Customer loans (net)/assets (adj.) 74.74 77.81 75.38 84.89 84.60

Parent Only Analysis

2009* 2008 2007 2006 2005

CAPITALIZATION (%)

Adjusted common equity/risk assets 8.58 8.37 9.28 11.05 12.80

Internal capital generation/prior year's equity 15.83 14.43 17.55 12.96 7.28

Tier 1 capital ratio 7.30 8.30 9.20 11.00 12.80

Regulatory total capital ratio 10.00 10.40 12.40 11.00 12.80

Adjusted total equity/adjusted assets 3.27 4.09 4.57 5.79 6.73

Adjusted total equity/adjusted assets + securitizations 3.27 4.09 4.57 5.79 6.73

Adjusted total equity/risk assets 8.60 8.39 9.28 11.40 13.18

Adjusted total equity plus LLR (specific)/customer loans (gross) 4.47 5.30 6.08 6.81 7.94

Common dividend payout ratio 0.00 2.27 1.91 0.00 0.00

2009* 2008 2007 2006 2005

ASSET QUALITY (%)

New loan loss provisions/avg. customer loans (net) 0.20 0.09 0.01 0.18 0.16

Net charge-offs/avg. customer loans (net) 0.07 0.04 0.03 0.09 0.09

Loan loss reserves/customer loans (gross) 0.10 0.05 0.02 0.21 0.23

Gen. loan loss reserves/customer loans (net of specifics) 0.00 0.00 0.00 0.21 0.23

Credit-loss reserves/risk assets 0.20 0.08 0.03 0.35 0.38

Nonperforming assets (NPA)/customer loans + ORE 0.35 0.23 0.06 0.03 0.05

NPA (excl. delinquencies)/customer loans + ORE 0.09 0.07 0.01 0.00 0.00

Net NPA/customer loans (net) + ORE 0.25 0.18 0.04 (0.18) (0.18)

NPA (net specifics)/customer loans (net specifics) 0.25 0.18 0.04 0.03 0.05

Loan loss reserves/NPA (gross) 28.75 22.69 31.80 729.48 498.06

*Data as of Dec. 31, 2008. Ratios annualized where appropriate. N.M.--Not meaningful. Ratings Detail (As Of June 11, 2009)*

Kiwibank Ltd.

Counterparty Credit Rating AA-/Stable/A-1+

Certificate Of Deposit

Local Currency A-1+

Subordinated (2 Issues) A+

Counterparty Credit Ratings History

20-Aug-2008 AA-/Stable/A-1+

26-Apr-2007 AA-/Negative/A-1+

28-Nov-2001 AA-/Stable/A-1+

Sovereign Rating New Zealand

Foreign Currency AA+/Stable/A-1+

(16)

Ratings Detail (As Of June 11, 2009)*(cont.)

Related Entities New Zealand Issuer Credit Rating

Foreign Currency AA+/Stable/A-1+

Local Currency AAA/Stable/A-1+

Commercial Paper A-1+

Senior Unsecured (1 Issue) A-1+

Senior Unsecured (20 Issues) AA+

Senior Unsecured (10 Issues) AAA

Short-Term Debt (1 Issue) A-1+

New Zealand Post Ltd.

Issuer Credit Rating AA-/Stable/A-1+

Certificate Of Deposit

Local Currency A-1+

Commercial Paper

Local Currency A-1+

Senior Unsecured (2 Issues)

AA-Subordinated (1 Issue) A

*Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.

(17)

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