ASB Bank lifts profit by 12pc to $699m

ASB chief executive Barbara Chapman at the new ASB headquarters in Auckland. Photo / Richard Robinson
ASB chief executive Barbara Chapman at the new ASB headquarters in Auckland. Photo / Richard Robinson

ASB Bank, the New Zealand unit of Commonwealth Bank of Australia, boosted full-year cash profit 12 per cent as it grew its wealth and insurance business and kept a lid on costs.

Cash profit, which excludes one-time items that don't reflect the underlying business, rose to $699 million in the 12 months ended June 30, the company said in a statement. The bank's wealth and insurance business posted income growth of 22 per cent.

"ASB's strengthened performance over the past financial year was achieved against the background of a steadily improving New Zealand economy," ASB chief executive Barbara Chapman said in a statement. The earnings "have been underpinned by our continued focus on executing our long-term strategy while at the same time maintaining disciplined cost control and a prudent risk management profile."

Commonwealth Bank, Australia's largest lender, posted a record annual cash profit of A$7.82 billion on higher earnings from retail banking, fees and trading income.

As the first of Australia's big four banks to report profits, Commonwealth Bank is seen a barometer for upcoming industry earnings.

Sydney-based Commonwealth Bank has been boosting loan profitability by increasing the margin between the central bank's benchmark interest rate and the interest rate it offers lending customers. In the latest year, ASB said it had a strong net interest margin performance, rising to 2.25 per cent from 2.16 per cent the year earlier.

"Over the past 12 months we noted an improvement in the average cost of new funding as some of the turbulence in the global markets abated," Chapman said. "However uncertainty remains around the recovery of Europe's economies as well as the markets' reaction over the Federal Reserve's intentions around the unwinding of its quantitative easing programme. Both factors may put pressure on the financial markets and the consequent cost of funding over the next few years."

Still, Chapman said she was confident ASB would continue to deliver profitable growth.

ASB's Wealth and Insurance business improved as investment in its KiwiSaver scheme grew 29 per cent to $2.9 billion.

The New Zealand business has been managing costs relative to revenue growth and focusing on increasing productivity, resulting in a reduction of operating expenses as a percentage of total income to 41.1 per cent from 42.6 per cent, the company said.

Customer deposits increased 6 per cent to $41.3 billion, while loans to customers rose 8.9 per cent to $57.7 billion.

ASB set aside $56 million for bad debts, up 19 per cent on the year earlier. The company said the increase was expected as provisioning returned to more normal levels from a low in the prior period.

Australia & New Zealand Banking Group is scheduled to report third-quarter earnings on Aug. 16 and National Australia Bank announces its quarterly results on August 20. Westpac Bank doesn't update investors on its quarterly performance. For Commonwealth Bank, the fiscal year ends in June, compared with September for its main competitors.

- BusinessDesk

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