ASB Bank annual profit record $806 million

00:04, Aug 13 2014

Higher profit margins and increased interest income have pushed ASB Bank's net profit for the year to a record $806 million.

The Australian-owned bank's profit for the year to June 30 rose 14 per cent from last year's $705m haul.

ASB's home-loan book increased by just 3 per cent, in the face of intense competition and the Reserve Bank's loan-to-value ratio restrictions.

However, lower funding costs meant its net interest margin, which represents the premium it adds before lending money, rose from 2.25 per cent to 2.38 per cent.

The bank achieved above market average growth in business and rural lending, up 8 per cent, and funds management income up 6 per cent.

Costs associated with the move to ASB's new North Wharf headquarters and ongoing investment in IT infrastructure pushed expenses up by 4 per cent.


However, that was more than offset by an overall 9 per cent increase in operating income.

Loan impairment expenses were flat, remaining near historical lows at $56m.

ASB chief executive Barbara Chapman said the improving New Zealand economy had "undoubtedly played a role" in the overall result, with rising confidence and solid lending growth.

"Both deposit and lending volumes have been positive compared to the prior year," she said.

On a cash profit basis, which is the bank's preferred measure because it excludes one-off distortions, profits were up by 11 per cent to $776m.

The record bank profits of recent years have been heavily criticised by politicians and trade unions.

Chapman said ASB acknowledged the importance of balancing profitability with "our role as a good corporate citizen".

ASB is the first of the major banks to report its annual result, as it follows a different financial year from its competitors.

Parent company the Commonwealth Bank of Australia delivered its fifth consecutive record annual profit, as expected by the market.

CBA's profit rose 13 per cent to A$8.63 billion (NZ$9.5b), while its cash profit of A$8.68b is the biggest ever recorded by an Australian bank.

CBA said it would lift its final dividend to A$2.18 per share, beating analysts' expectations.