ASB profit up, lending down

ASB reported a 27.6 percent rise in full year statutory net profit to $568 million, as impairment charges fell and customers continued to shift from fixed to floating rate loans.

The result for the year to the end of June compared to the year earlier figure of $445m, when a one-off tax charge of $209m was excluded.

Incoming ASB chairman Gavin Walker said the 42.4 percent reduction in ASB's impairment charges to $72m over the year was clear evidence that New Zealand was continuing along the road to recovery.

Another key factor had been customers continuing to shift from fixed to floating rate loans, while the re-pricing of some new fixed loans had also contributed, Mr Walker said.

Demand for lending had definitely weakened as customers continued to choose to deleverage debt.

"Looking ahead, New Zealand’s improved export commodity prices, growing demand for limited housing stock in some regions and low interest rates are all expected to contribute to New Zealand’s steady economic recovery," Walker said.

Net interest earnings rose to $1.27 billion from $1.03 billion the year before, as interest expense fell more than interest income, which dropped to $3.81 billion from $3.98 billion.

The net interest margin rose 0.4 percent to 2.08 percent, while operating profit before impairment and tax rose 15.7 percent to $886m, ASB said.

Operating income rose 12.8 percent to $1.6b, while operating expenses rose 9.4 percent to $721m, driven by investment in strategic initiatives and Christchurch assistance and support packages, and partially offset by cost and efficiency gains.

Lending fell 1.2 percent to $53.2b, as ASB's share of the home loan market held steady at 22.2 percent, ASB said.

Deposits fell 1.1 percent to $55.6b, although retail deposits were up 7.1 percent to $33.7b.

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