ASB Bank profit jumps 12% in September quarter

Tuesday 15th November 2016

ASB Bank's profit rose 12 percent to $260 million in the September quarter from $233 million a year earlier, as a lower official cash rate helped reduce the lender's funding costs.

The interest ASB received from borrowers was down 4.8 percent to $1 billion as at Sept. 30 from $1.05 billion, but the amount paid to depositors and other funders dropped 12 percent to $541 million from $617 million. The OCR was lowered to 2 percent in August this year, while it was cut to 3 percent and then 2.75 percent between July and September a year ago.

The bank's mortgage book rose 11 percent to $49.2 billion from $44.4 billion, while its corporate loan book expanded 15 percent to $20.6 billion from $18 billion. Net interest income rose to $461 million from $436 million, a gain of 5.7 percent.

ASB's deposits increased to $54.5 billion from $53.4 billion, with depositors slightly tilting money away from term deposits towards on-demand or short term deposits.

The lender impairment charges were $24 million in the quarter, up from $15 million a year ago.

Notes to the accounts show that individually impaired assets in the corporate sector rose to $390 million from $271 million a year earlier, a gain of 44 percent. Impaired residential mortgages fell to $28 million from $46 million, reflecting the boom in house prices across most of the country.

Earnings at ASB's corporate, commerical and rural segment increased by 6.2 percent to $145 million, more than the residential and business banking unit which recorded earnings growth of 1.4 percent to $290 million.

Sections of the business recorded as other in the accounts showed a major turnaround, from a loss of $19 million to a profit of $15 million. This includes the bank's Treasury function and parts of the former institutional banking and markets segment.

ASB, which is owned by Australia's Commonwealth Bank, follows a different financial year to the other Australian owned lenders, with its accounts published for the year to the end of June. The others report for the year to the end of September and published their full-year results earlier this month.

ANZ New Zealand, the country's largest lender, said margins had shrunk due to higher wholesale funding costs from overseas, and it increased provisioning for losses in its agricultural and commercial portfolios. Its net interest income rose 5 percent, similar to ASB's 5.7 percent, although the figures are not directly comparable.

BNZ said its net interest income rose 1.3 percent, while Westpac's increased by 2 percent.

Shares of ASB's ASX-listed parent, Commonwealth Bank of Australia, edged up 0.1 percent to A$76.22, and have dropped 11 percent so far this year.

BusinessDesk.co.nz

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