Stronger lending drives profit: ASB

ASB Bank boss Barbara Chapman is pleased with the broad result across the company. Photo / Dean Purcell

ASB Bank chief executive Barbara Chapman says she hopes to continue with the company's strong momentum but admits impairments are likely to continue to rise as its loan book grows.

The Australian-owned bank yesterday reported a 2 per cent drop in after tax net profit to $365 million but cash profit, which excludes some one-time items, increased 7 per cent to $348 million.

Chapman said the cash profit growth was driven by strengthening its lending across the board, acquiring more quality customers and a focus on improving productivity.

'This result builds on the positive momentum established in the previous financial year with good balance sheet growth across all customer segments including home, business and rural lending," Chapman said.

The bank's share of the home loan lending market was little changed at 22.1 per cent in the first half while its share of retail deposits fell to 20.2 per cent from 20.6 per cent.

Business lending share rose to 9.8 per cent from 8.9 per cent.

But the bank's impairment losses on advances increased from $14 million to $28 million. Chapman said the increase in impaired losses was driven partly from growth in its retail portfolio but it was relatively flat compared to the previous six months. She said the six months to December 2011 had been extraordinarily low for impairments and the bank was coming off that low.

However, Chapman said its 90-day loan arrears was trending down.

The value of home loans rose 3 per cent to $38.7 billion in the first-half and other interest bearing assets rose 11 per cent to $17 billion. Rural lending rose 12.7 per cent and business lending gained 9.4 per cent. Deposits rose 3 per cent.

Chapman said she was comfortable with the bank's core funding ratio. "It is a very broad result. There is no one part of the business which is doing poorly. The whole result is good."

Sydney-based Commonwealth Bank's total cash profit from New Zealand rose 7 per cent to $393 million, including $44 million from its Sovereign insurance unit, down from $49 million a year earlier.

The parent company, Australia's biggest lender, lifted first-half profit by 1 per cent to A$3.66 billion ($4.5 billion), helped by gains in retail banking and wealth management. Its net interest margin widened by 4 basis points to 2.1 per cent.

Earnings from retail banking rose 13 per cent to A$1.5 billion and earnings from wealth management profit rose 10 per cent to A$334 million.

- additional reporting BusinessDesk