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Tax avoidance settlement pushes ASB to first-half loss

Wednesday 10th February 2010

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ASB Bank has taken $209 million of a $264 million tax and interest bill from tax avoidance settlements onto its books in the six months ended December 31, it announced today.

The one-off hit pushed ASB to a first-half loss of $10 million, compared with a 13% increase in its parent's performance. CBA reported a A$2.9 billion net profit for the period. After adjustment for the tax settlement, ASB still had a tough first half, with underlying net earnings of $199 million, down 16.4% on a year earlier. 

While CBA's announcements made no reference to the tax settlements, the Australian parent did note that profit for the period decreased 36%, excluding the impact of realised gains on the hedging of New Zealand operations in "a very challenging environment" which saw a 79% increase in impairment expenses to $127 million.  

"Total provisions on the balance sheet now stand at $340 million ($157 million in December 2008)," ASB said, representing 0.53% of total assets.

No dividends will be paid to CBA for the period, despite payment of a $70 million dividend to ASB's holding company.

Net interest margins remained tightly squeezed, falling 0.1% to 1.63% in the half year, and there was a "marked fall-off in demand for borrowing during the year", chairman Gary Judd said.

Judd said ASB had ridden out the New Zealand recession without staff lay-offs and was committed to a "no-offshoring" policy. A pay freeze for staff earning more than $50,000 was lifted in December.

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