ASB high on housing boom

By PAULA OLIVER

ASB Bank has continued on a path of explosive growth, riding the housing market boom to post a record annual profit of $278 million.

The profit is 24 per cent up on last year and it signals the fourth consecutive time the bank has increased its profit by more than 20 per cent.

The bank pinpointed across-the-board growth and information technology initiatives as reasons.

ASB still has a long way to go before it reaches the dizzying heights of its biggest competitors, which post annual results closer to $500 million.

But its aggressive activities in markets it is not traditionally associated with appear to be paying.

Rural lending, dominated by the National Bank and Rabobank, now has ASB sitting in position three.

Head of retail banking and marketing Barbara Chapman said the division had performed exceptionally well and made a 23 per cent increase in lending.

She was reluctant to disclose market share figures, but information released by ASB's parent Commonwealth Bank of Australia yesterday showed that the bank's share of the rural lending market was 12.9 per cent at the end of April. That is likely to have increased by the end of June.

The bank has also increased its share of lending to the business, commercial and institutional sectors, increasing the total by 12 per cent to $3.7 billion.

During the financial year, ASB's home turf of Auckland was targeted by Westpac, which wants to increase its share of the home lending market there.

Westpac claims its advances have been successful, but ASB also claimed yesterday that it had increased its market share in the region.

"We are definitely growing in and out of Auckland, particularly in home lending," Chapman said.

The bank advanced $6 billion in home loans nationally during the financial year, up from $4.7 billion the year before.

Asked if there were any signs of a housing slowdown, Chapman said not yet.

Immigration, favourable economic conditions and stable interest rates have fuelled the boom.

The bank has cut its crucial cost-to-income ratio, which has traditionally been higher than that of all of its major competitors, despite a 10 per cent increase in operating expenses to $407 million. ASB now sits at 47.9 per cent.

Chapman said the cut was pleasing. Part of the reason the ratio was still higher than that of other big players, which usually sit in the low 40s, was because ASB was expanding so quickly.

She said the bank was comfortable with its present level.

Much of the increase in expenses came from growth in staff numbers, which went up by 211 to 3261.

That is in contrast to ASB's parent, CBA, which is cutting as many as 1500 staff.

Chapman said ASB would be unaffected by the cuts because it was run as a separate business and with growth reaching 20 per cent a year more staff were needed.

"You simply need to have more people around to keep customer service levels high," she said. "Some go into branches, some into rural, some into business. We're growing our frontline numbers."

Gross operating income for the bank was up 18 per cent to $851 million, with $620 million of that coming from net interest margin.

ASB's parent formally ruled itself out of the race to buy the National Bank on Monday.

Chapman said the bank was on a "switch banks" campaign now, and it was more than ready for new clients if they wanted to join.