ASB chief executive Vittoria Shortt. Photo / Supplied
The chief executive of one of the country's largest banks says the full impact of Covid-19 is yet to be seen and is urging businesses to prepare for the expected rise in Omicron cases.
ASB chief executive Vittoria Shortt revealed a record half-year result on Wednesday morning with the bank's cash profit rising 22 per cent to $742 million for the six months to December 31.
Driven by strong lending growth in housing and business loans Shortt said the profit had come amid a "pretty uncertain period".
The bank's profits were also boosted by an improvement in impaired asset expenses but Shortt warned after last year's long Auckland lockdown there was still likely fallout to come.
"We haven't yet seen the full impact of Covid.
"Yes we haven't seen as many impairments as we might have thought - if you wind the clock back we were all thinking the impacts would be larger and sooner.
"But we are mindful that we know some businesses are doing it tough and I hear anecdotally businesses talking about the fact they have borrowed as much as they are willing to borrow, have tipped in as much equity as they are willing to tip in."
Shortt said some businesses were really going to find it tough - particularly if the next phase of Covid affected New Zealand in the same way as other countries.
"Omicron is really impacting the ability of businesses to operate. We are also seeing from overseas a lot of what I would describe as self-imposed lockdowns. Have a look around the CBDs and you can see that already."
Shortt said ASB still hadn't seen any material concerns arising from the tourism and hospitality sectors - those most impacted by Covid.
"A lot of those sectors have really changed and pivoted their business operating models.
"Some have recapitalised, we have seen M&A activity - but we still haven't seen the widespread defaults that many of us thought might have occurred."
But she warned about complacency.
"I think we have got to be very careful about assuming it is all over because it is just not."
Shortt said she kept reflecting on a comment made by an epidemiologist in 2020 that the pandemic would take five years to work its way through.
"At the time I thought that was just such a long period of time and as each month goes past it is seeming more real."
Shortt said it was similar to the economic fallout from the global financial crisis in 2008.
"When it first happened everyone thought the impact would happen quickly and it didn't - it actually took years to see some of those impacts unfold. That is why we have to be very cautious."
She said the bank was urging businesses, particularly SMEs, to plan and prepare now for disruption from Omicron.
"That is what we are trying to encourage businesses to really think about. If you were down by a third [of staff] - which if you are a sole trader that is a totally different conversation - people need to think about how they might cope under those settings.
"It is planning - really planning. If you think you need cashflow help to get through a tricky period it's flagging that early. These are all discussions that can be had to take some of the stress away."
ASB's home lending rose 8 per cent to $69.88 billion compared to the six months to December 31, 2020 but was below system growth of 10 per cent.
Short said higher inflation, as well as the introduction of a number of lending restrictions, meant it was taking a conservative approach.
The bank was forecasting housing credit growth to moderate this year from 12 per cent in 2021 to between 6 to 8 per cent.
"It is possible to see credit growth for housing halve."
That was likely to have a flow-on effect for the bank's bottom line in the second half of its financial year.
"Obviously when markets move we are a function of the market so it will play through. I think it is really important to keep focused on responsible lending and make sure that our settings are about making sure our customers are in the best possible position rather than worrying about the market share per se."
ASB's business lending grew faster than its home lending, up 10 per cent to $19.86b, and above system growth of 6 per cent, driven by strong commercial property lending.
The bank tapped into the Reserve Bank's funding-for-lending programme (FLP) with over $4 billion in loans including $1.5b for new-build lending and $1.3b for large businesses who had committed to developing infrastructure and sustainability initiatives.
Shortt said it would continue to use the FLP but would be guided by demand on how much more it would draw down.
"We do have a really good pipeline for those funds - there are a lot of businesses that are really thinking deeply about their environmental transition plans. Some of those businesses are really well progressed."
But she said it was also dependent on the ability of some businesses to get their plans executed and delivered.
"Which goes to some of the challenges around skill shortages - there is a lot there in the mix - it's not just a funding question, it's ability to execute as well."
The bank has been on hiring spree in the last year boosting full-time equivalent numbers by 312 to 5817.
But Shortt said she remained worried about the labour shortage even with the borders set to open.
"We have more vacancies than we have ever had in quite some time particularly in areas around digital, data, those technology areas.
"We used to find it much easier to attract people from overseas and, not withstanding the borders, people are now saying I don't want to be removed from my family because you never know what is going to happen."
That was making it harder to attract overseas workers while at the same time she expected the bank would lose some staff who choose to undertake an overseas experience once the borders opened.
"There is a lot of young people that want to do an OE. With other countries being more open I think we are going to see a flow - that is a real watch out."
She said New Zealand needed to do a lot more to grow its own talent and make sure the needs of businesses were being matched up with those being trained.
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