ASB profit rises 23% despite static lending

Wednesday 15th February 2012

ASB Bank turned in a 23 percent improvement in cash net profit of $302 million in the six months to Dec. 31, compared with the same period a year earlier, the New Zealand bank’s Australian owner, Commonwealth Bank of Australia, announced.

While lending growth was weak, especially to businesses, customer deposit growth was strong and interest rate margins improved slightly, while impairment losses and provisioning was lower than in the previous year as the New Zealand economy stabilised following the global financial crisis.

CBA’s total New Zealand operations, which include the Sovereign insurance company, were up 15 percent to $336 million on an after-tax profit basis, excluding revaluations of financial instruments.

The ongoing shift to variable interest rate loans by both home and business borrowers assisted margin restoration, with net interest margins rising 0.15 percent to 2.19 percent across the bank’s operations.

Some 63 percent of home lending was on variable rates in December, compared with 48 percent in December 2010. Business borrowers also favoured variable rate loans, up from 82 percent to 87 percent of the total over the 12 months.

CBA put ASB’s total operating income at $787 million for the December half, compared with $746 million in the same half of 2010, although ASB announced different figures in its separate press statement to New Zealand media, and did not include pro forma financial statements.

The CBA announcement said “volume growth in customer deposits was solid” at ASB, with lending growth “subdued in a low credit growth environment.”

Lower transaction account and credit card fees saw other income fall by 10 percent over the prior period to $161 million, partly offset by better cross-selling of insurance products to ASB customers.

Customer deposit margins remained under pressure “due to continued intense market competition”, with new business margins deteriorating in the last three months of the year, partly because of uncertainty emanating from Europe and because customers were moving to “higher yielding products.”

Loan impairment expenses dropped dramatically, down 61 percent to $14 million on the same period a year earlier, largely thanks to strong performance in rural lending, especially to the dairy sector, which enjoyed strong international prices.

Unsecured delinquencies in the retail sector and fewer home loan write-offs were also a feature.

Operating expenses for the half were largely unchanged at $355 million.

(BusinessDesk)

BusinessDesk.co.nz

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