ASB plans 25 new branches as tax charge hits net profit

The economy is improving, but conditions remain difficult, ASB Bank chief executive Charles Pink says.

The bank, which is owned by Commonwealth Bank of Australia, yesterday reported a full-year net profit after tax of $236 million.

The net profit was hit by the one-off cost of its $209 million tax charge, accrued after all the major banks lost a tax case against the Inland Revenue last year, and a $17 million perpetual dividend payment.

Excluding the one-offs the net profit was $428 million, marginally down on the $431 million the bank made in the year to June 2009.

Pink said it was a solid result amid a backdrop of an economy that was improving but still fragile.

"It is improving but it is a slow improvement. We are certainly seeing very different conditions to what we have experienced for the past 20 years.

"We have gone from double digit growth to zero and we don't see a lot of change to that in the next year."

The improvement in the economy was reflected in its impairments, which fell 47.5 per cent from $238 million to $125 million.

Total assets declined by 2.6 per cent to $63.6 billion during the 12 months. This was largely because of volatility in the derivative instrument market. Lending increased by 0.8 per cent to $53.8 billion.

Home loan balances were up 2 per cent to $38.4 billion, maintaining ASB's market share at 23 per cent.

The lack of growth in the mortgage market was a feature of low demand, Pink said. "It's all very subdued. We don't see a strong recovery there."

Business lending was down 1.9 per cent to $6.8 billion but it was better than the overall market decline of 7.3 per cent. Pink said businesses were continuing to deleverage and were being cautious.

Rural lending was also subdued.

The bank announced a $460 million investment in the business. Of that, $100 million would go to opening 25 new branches over five years and refurbishing 117 others. Twelve new branches would open in the next year.

"A number will be in Auckland. Clearly we have a particularly strong position in Auckland, but we will be investing across the country."

The refurbishment involved a new concept format which it was already using in about 30 branches.

The format was more open plan, dropping screens and barriers.

The bank was also spending $200 million on technology renewal and $160 million on its new head office in the Wynyard Quarter.

Massey University's David Tripe described the result as a reflection of the economic times. "Last year wasn't great for them either."

He said opening 25 new branches was a bold move. "It's more than any other bank has done in some time."

The question was now whether the gain in new customers would justify the cost of opening the new branches.

Meanwhile, parent company CBA posted a 20 per cent increase in full-year net profit to A$5.66 billion ($7.11 billion), but issued a cautious outlook because of global uncertainty.

Australia's biggest bank said lower business and consumer confidence, from concerns about the strength of economic recovery in the United States and Europe, had hurt the momentum of its business in the second half of the financial year.

"As a result, it is appropriate to maintain a degree of caution about the prospects for our business for the coming year," chief executive Ralph Norris said.

"We intend to retain conservative capital and liquidity settings for the foreseeable future."