ASB Bank profit jumps in September quarter

ASB Bank chief executive Barbara Chapman

ASB Bank's profit rose 12% to $260 million in the September quarter from $233 million a year earlier, as a lower official cash rate helped reduce the lender's funding costs.

The interest ASB received from borrowers was down 4.8% to $1 billion as at September 30 from $1.05 billion but the amount paid to depositors and other funders dropped 12% to $541 million from $617 million. The OCR was lowered to 2% in August this year while it was cut to 3% and then 2.75% between July and September a year ago.

The bank's mortgage book rose 11% to $49.2 billion from $44.4 billion, while its corporate loan book expanded 15% to $20.6 billion from $18 billion. Net interest income rose to $461 million from $436 million, a gain of 5.7%.

ASB's deposits increased to $54.5 billion from $53.4 billion, with depositors slightly tilting money away from term deposits toward on-demand or short-term deposits.

The lender impairment charges were $24 million in the quarter, up from $15 million a year ago.

Notes to the accounts show individually impaired assets in the corporate sector rose to $390 million from $271 million a year earlier, a gain of 44%. Impaired residential mortgages fell to $28 million from $46 million, reflecting the boom in house prices across most of the country.

Earnings at ASB's corporate, commercial and rural segment increased by 6.2% to $145 million, more than the residential and business banking unit which recorded earnings growth of 1.4% to $290 million.

Sections of the business recorded as other in the accounts showed a major turnaround, from a loss of $19 million to a profit of $15 million. This includes the bank's Treasury function and parts of the former institutional banking and markets segment.

ASB, which is owned by Australia's Commonwealth Bank, follows a different financial year to the other Australian owned lenders, with its accounts published for the year to the end of June. The others report for the year to the end of September and published their full-year results earlier this month.

ANZ New Zealand, the country's largest lender, said margins had shrunk due to higher wholesale funding costs from overseas, and it increased provisioning for losses in its agricultural and commercial portfolios. Its net interest income rose 5%, similar to ASB's 5.7%, although the figures are not directly comparable.

BNZ said its net interest income rose 1.3%, while Westpac's increased by 2%.

Shares of ASB's ASX-listed parent, Commonwealth Bank of Australia, edged up 0.1% to A$76.22, and have dropped 11% so far this year.


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ASB needs to take a leading role in allowing reasonable mortgage criteria to allow funding of property projects with the new Unitary Plan in place.

ASB needs to stand up to the Australian head office and allow Auckland to fund the Unitary Plan and free up buyer demand and enable developers.

The Australian Banks are pulling funding from NZ just as Auckland is starting its housing build to help the shortage crisis.

Are you Auckland's Savings Bank?
Or are you Australian Savings Bank??

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True, my first question was how much more of this profit is going to be repatriated into Australia to boost parent bank's capital?

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Isn't it strange how Banks ( not just ASB ) make larger profits from increased margins but then spin the story that their cost of funds is going up because of factors out of their control - so they can't pass on the drop in the OCR. This announcement just proves what liars the Banks are!!!

In a normal competitive business they would keep the increased margins and suck up the increased costs - net effect would be neutral or slightly increased profit. Problem with banking in NZ is they work as a cartel and also have no one managing them from a fair trade or consumer rights aspect.

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