ASB profit dips as it grows its workforce by 13% and puts $33m aside for customer compensation

ASB chief executive Vittoria Shortt won't elaborate on why ASB has put money aside to reimburse customers for breaches. Photo / Supplied

ASB’s profitability is down a smidge, as it hires 768 more staff and puts A$33 million aside to potentially compensate customers for mistakes it has made.

ASB’s statutory net profit after tax fell by 0.4% in the year to June to $1.45 billion.

While the bank’s net interest income rose by 5%, its operating expenses jumped by 10%.

The cost increase was primarily driven by wage inflation and ASB increasing its staffing numbers by 13% to support investment in technology, manage financial and cyber crime risk, and mitigate the impact of fraud and scams.

“The reality is, this investment is necessary,” ASB chief executive Vittoria Shortt told the Herald.

She said the increase in staffing levels wasn’t a one-off that would be unwound as projects were completed.

Rather, the investment was a “continuation of a theme you’ve seen with ASB over the years”.

ASB’s expansion comes as the Australian Financial Review reports Westpac Group made 790 staff redundant in the past two months, and ANZ’s new group chief executive talking up the need for a slimming of the company and more efficient ways of working.

Neither Westpac nor ANZ would tell the Herald whether jobs would be cut in New Zealand.

“Westpac NZ operates as a separate entity to Westpac’s Australian operations with a unique culture that supports our New Zealand customers and employees, however we welcome their focus on change and transformation,” a Westpac spokesman said.

“We continually review how we operate, and the composition of our workforce changes periodically as we adapt to meet customer demand and business requirements.

“We’ll be able to provide a full view of any movements up or down at our full-year results in November.”

Coming back to ASB, the other expense it flagged was A$33m ($36.18m) in customer “remediation provisions”.

Shortt declined to elaborate on why the bank had put money aside to potentially reimburse customers for a mistake, or various mistakes, the bank has made.

She said it was standard practice for the bank to notify regulators if it believed there was a breach, before looking to rectify the issue and pay out customers.

A A$33m payout to customers would be material for ASB.

Shortt clarified this provision was unrelated to the class action, currently before the courts, taken against ASB and ANZ for disclosure breaches dating back to the mid-2010s.

ASB increased its mortgage lending by 7% and its business and rural lending by 2% in the year to June.

The value of its interest-bearing customer deposits also rose by 3%.

ASB’s net interest margin inched up by 4 basis points to 2.27%, as it increased margins on its home lending.

Shortt said ASB customers hadn’t shifted their money around since the Reserve Bank-administered Depositor Compensation Scheme became operative on July 1.

The scheme ensures up to $100,000 per depositor, per institution is guaranteed. This means that if someone had $200,000 of savings at a bank that collapsed, they would get $100,000 back under the scheme.

Shortt said the Government hadn’t consulted with ASB on the possible introduction of a new bank tax or levy, further to Finance Minister Nicola Willis seeking advice from government officials on this.

Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.