ASB Bank lifts full-year cash earnings by 9% as parent prepares A$5 bln share offer

Wednesday 12th August 2015

ASB Bank, the New Zealand unit of Commonwealth Bank of Australia, reported a 9 percent increase in full-year earnings on rising interest income after lifting its home loan, business and rural lending books.

Cash earnings rose to $846 million in the 12 months ended June 30, from $776 million a year earlier, ASB said in a statement. Interest income advanced 13 percent to $4.1 billion and its interest expenses climbed 16 percent to $2.4 billion, resulting in an 8.7 percent increase in net interest earnings to about $1.7 billion. The impairment for bad debts rose to $89 million from $56 million. ASB's net interest margin edged up to 2.44 percent from 2.38 percent.

The gain in net interest margin "was largely due to favourable funding conditions, partly offset by a reduction in lending margins in a highly competitive environment and the continued customer preference for lower margin fixed-rate mortgages," ASB chief executive Barbara Chapman said in a statement.

Commonwealth Bank (CBA)'s full-year cash profit rose 5 percent to A$9.1 million, allowing it to announce a final, fully franked dividend of A$2.22 a share, bringing total annual payments to A$4.20, up 5 percent from a year earlier. CBA also announced plans to raise about A$5 billion via a fully-underwritten pro rata renounceable entitlement offer, becoming the last of Australia's big four banks to detail how it will strengthen its balance sheet in response to a regulatory requirement they hold more capital against potential home-loan losses.

National Australia Bank raised A$5.5 billion selling shares, Australia & New Zealand Banking Group is raising A$3 billion and Westpac Banking Corp raised A$2 billion. The Australian Prudential Regulation Authority also proposed last month that lenders lift their capital ratios by 200 basis points to be among the world's safest banks. The proposal would require Australia's largest banks to hold at least A$28 billion of extra capital, Bloomberg reported last month, citing Goldman Sachs and Credit Suisse.

CBA said its capital raising "places the group in the top quartile of its international peers in relation to its capital levels." It expects to issue about 71 million new shares, amounting to about 4.3 percent of shares on issue.

CBA shares last traded on the ASX at A$82.12 and have gained 2.1 percent in the past 12 months, outpacing a gain in the S&P/ASX 200 Index of just 0.3 percent. ANZ Bank's shares tumbled more than 8 percent since its capital raising was announced.

ASB's home loan book grew 5 percent to $43.7 billion, according to parent CBA's numbers. Business and rural lending rose 14 percent to $20 billion and other interest earning assets gained 10 percent to $1.8 billion. Customer deposits grew by 16 percent to $46.8 billion.

Sovereign Assurance, which is also owned by CBA, lifted profit 19 percent to $123 million on a 13 percent gain in insurance income to $250 million.

BusinessDesk.co.nz

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