Flat interim profit for ASB

RICHARD MEADOWS
Last updated 11:24 13/02/2013

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Bad debts and increased expenses have left ASB Bank just shy of another record-breaking first half-result, posting $365 million of net profit in the six months to December.

Although ASB has bumped up the net interest margin that it earns from customers by 10 basis points, its overall profit has fallen 2 per cent from the same period the previous year.

Operating income also grew by 7 per cent, but was partially offset by higher expenses and a big increase in bad debts.

However, on a normalised profit basis, which is the bank's preferred measure of performance as it excludes one-off distortions, profit was up 7 per cent to $348 million.

ASB chief executive Barbara Chapman said the result was driven by solid balance sheet growth and the sustainable control of expenses.

"This result builds on the positive momentum established in the previous financial year with good balance sheet growth across all customer segments including home, business and rural lending."

Rural and business lending both grew above market levels, recording growth of 12.7 per cent and 9.4 per cent respectively.

ASB grew its home loan balances by 3 per cent in the highly competitive mortgage market, and expanded its deposit base by the same amount.

"Lifting our New Zealand deposit base has contributed to funding the lending growth, although competition has increased the cost of deposits," said Chapman.

Meanwhile, operating expenses increased by 2.3 per cent and expenses for impaired loans doubled to $28 million. The bank said the latter was coming off cyclical lows, and arrears across retail lending continued to trend downwards.

ASB is the biggest Kiwisaver provider with around 370,000 customers.

Growth in funds under management slowed down to a still respectable 31 per cent in the year to December from 44 per cent at the same period last year, as many New Zealanders are now enrolled in the scheme.

However, the bank's fund management income jumped 21 per cent to $29m in the first half, compared to the same corresponding period.

ASB's parent company, the Australian-listed Commonwealth Bank, beat market expectations to post A$3.66 billion (NZ$4.48b) in net profit, an annual increase of 6 per cent.

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- BusinessDay.co.nz

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