ASB posts $10m loss for half year

A big tax bill and a near doubling in bad debt has resulted in ASB Bank posting a $10 million loss after tax for the half year to December.

The bank agreed in December to pay $264m in tax and interest in a settlement with Inland Revenue involving four disputed foreign loans.

ASB said $209m of the settlement figure was accounted for in the half.

Excluding the one-off tax hit the bank made a profit of $199m after tax, down 16.4 percent on the same time the previous year.

ASB, along with ANZ National, Bank of New Zealand and Westpac, agreed to a collective $2.2 billion settlement with Inland Revenue over disputed structured finance transactions, which the High Court ruled to be tax avoidance last year.

The banks paid 80 percent of the tax and interest owed.

ASB's impaired loans nearly doubled to $127m compared to December last year, and total provisioning for bad and doubtful debt grew to $340m from $157m, accounting for about 0.53 percent of total assets.

The funding costs and higher interest rates paid on retail deposits led to the bank's net interest margin reducing by 1 basis point in December from the previous six month period.

Total assets were slightly lower at $64.6b due to a significant fall in demand for borrowing. Total lending grew by 3 percent to $54.1b. Home loan balances increased by 3.2 percent during the year to December to $38.3b, with market share remaining steady at 23.3 percent, while rural, commercial and corporate lending was up 2.5 percent to $13.5b. Total deposits increased slightly to $57.6b from a year earlier.

Retail deposits were up 2.9 percent to $31b, with market share remaining steady at 21.4 percent.

No dividend was paid to Australian parent Commonwealth Bank of Australia (CBA), even though a $70m dividend was paid to ASB's holding company. A pay freeze for staff earning more than $50,000 a year was also lifted.

CBA reported a cash profit of A$2.94b (NZ$3.7b), its biggest half-yearly cash profit in a decade, but said funding costs were rising and volatile international markets could hurt it in the short-term.

The result was up from pro-forma cash earnings of A$1.91b a year ago and in line with its own forecast of A$2.9b given in January.

The bank attributed the 54 percent surge in earnings to cost cutting, loan growth and gains in wealth management, an area targeted by all the major banks as a key growth business.

CBA raised its interim dividend by 6 percent to A$1.20 but the increase was shy of market expectation for A$1.25 and could potentially hurt the stock, analysts and fund managers said.

Australian banks are in a strong position after raising US$120b (NZ$170b) in capital last year to guard against a jump in bad debts, which was milder than feared.

- © Fairfax NZ News