ASB profit up 11%

By Jane Shanahan

Wednesday 13th August 2008

ASB Bank, the New Zealand lender owned by Commonwealth Bank of Australia, posted an 11% gain in annual profit as business and rural lending made up for waning home mortgage demand.

Profit rose to $532 million in the year ending June 30, the company said in a statement. Assets rose 12% to NZ$59 billion.

"ASB's profit result is pleasing in an economy which, while slowing and undergoing change, remains fundamentally sound," chairman Gary Judd said.

Parent Commonwealth Bank today reported profit rose 7% to A$4.79 billion. Cash earnings of $4.73 billion beat analysts' forecasts. The bank increased its charge for under-performing loans to $930 million from $496 million a year earlier.

ASB Bank's loan impairment charge rose to $40 million, bringing the total provisions to $109 million, or 0.18% of assets.

Home building consents tumbled 20% in June, according to government figures, adding to evidence the housing market is contributing to a shrinking economy. By contrast, farming communities have been buoyed by soaring prices for dairy products that have bumped up their payments.

Though home lending had declined sharply, ASB had experienced less of a drop than the market overall, the bank said.

The bank has also expanded, opening 10 new branches and increasing staff by 6%.

Judd said that despite the subdued market ASB had increased its retail market share, lifted business operations 16% and rural business 31%.

New Zealand-based funding continued to grow, and the new ASB cash fund attracted more than $200 million in deposits since its inception early last month, Judd said.

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