ASB posts 11% decline in earnings

Wednesday 11th February 2009

ASB Bank, the lender owned by Commonwealth Bank of Australia, posted an 11% drop in first-half profit reflecting shrinking lending margins and one-time accounting adjustments.

ASB's operating profit after tax fell to $238 million from $267 million a year earlier, the Auckland-based lender said in a statement. The latest earnings include $41 million of accounting losses under IFRS accounting, it said.

The bank's total assets rose 16% from a year earlier to $65.3 billion while lending balances climbed 8.6% to $52.5 billion. Still, "robust competition" drove down its net interest margin to 1.5% from 1.8%.

"These record low margins are an indication of the challenging economic environment for New Zealand banks, which has seen higher wholesale funding costs and ongoing demand for competitively priced retail deposits," it said. "Against this background, ASB Bank increased home loan balances by 6.3% over the prior comparative year, marginally increasing its market share to 23.4%.

Growth in assets was coupled with increased loan impairment charges, a sign that the recession in New Zealand is making it harder for some businesses and individuals to make interest payments. Total provisions rose to $157 million, or 0.24% of total assets, from 0.18% as at June 30 last year.

Total deposits rose 12.9% to $57.1 billion. The bank said its ASB Cash Fund and ASB Term Fund, both PIE savings options, are having "strong growth."

By Jonathan Underhill

Comments from our readers

No comments yet