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Home / Business / Economy / Official Cash Rate

ASB enjoys profit from Australian connection

By Rachel Pannett
14 Feb, 2006 11:47 PM3 mins to read

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ASB Bank Ltd today posted a 19 per cent rise in first half profit, as it bulked up its business banking division and strengthened trans-Tasman links with the aid of its parent, the Commonwealth Bank of Australia (CBA).

ASB reported a net after tax profit of $217 million for the
six months to December 31, shrugging off fierce competition in the local home loan market - which saw a decline in interest rate margins.

While ASB is a market minnow compared to CBA, which booked a first half profit of over $2 billion, ASB said it had benefited from CBA's Australian muscle - in particular its strong corporate banking links - which had allowed ASB to grow its business banking division on both sides of the Tasman.

"Much of this trans-Tasman growth is being achieved as a direct consequence of our strong corporate banking relationship with our Australian parent, CBA," ASB chairman Gary Judd said.

"ASB is offering a more flexible, customer oriented service that is relevant to specific business requirements in the two separate markets."

CBA is Australia's largest retail bank and its second-biggest bank overall.

The tie-up between ASB and CBA is perhaps greater now than ever, with ex-pat Kiwi and former Air New Zealand chief executive, Ralph Norris, taking over the helm at CBA in September.

"Nurturing relationships on both sides of the Tasman brings very real benefits for New Zealand business and our economy in general," Mr Judd said.

Within New Zealand, Mr Judd said ASB continued to improve its share of the business, rural, corporate and personal banking markets.

Commercial and business lending grew by 8 per cent and rural lending by 7 per cent over the 6 month period.

Personal lending was up 8 per cent on June 2005.

ASB said it was feeling the squeeze of tough competition in the home loan market, however.

While interest income increased to $1.5b, up 20 per cent, the bank's interest rate margin declined to 1.95 per cent from 2.19 per cent.

The fall was due to both the extremely competitive banking environment and the impact of New Zealand International Financial Reporting Standards, under which loan origination costs and fee income were amortised over the life of the loans, Mr Judd said.

During the six-month period, ASB's assets surpassed the $40 billion mark. As at December 31, total assets stood at $41.7 billion, up 8 per cent from June 2005, and 14 per cent from the same period a year ago.

Speaking on the overall CBA result, Mr Norris was upbeat about full year prospects.

"The earnings momentum from the prior fiscal year has been maintained despite some slowing in economic activity, particularly consumer credit growth," Mr Norris said.

"We remain on track to deliver earnings per share growth for the 2006 fiscal year which equals or exceeds the average of our peers."

- NZPA

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