ASB ramps up compliance and risk staff numbers

ASB bank has beefed up its compliance and risk staff and says more will be hired. Photo / 123RF

ASB has hired more than 100 extra staff in the last year to handle increased compliance and risks facing the bank and its chief executive says there are plans to hire even more.

Speaking after the bank announced a ninth record profit of $1.274 billion for the year to June 30, Vittoria Shortt, described the increase as substantial.

"It is a big shift. And there is more hiring in that space to go."

All the banks have faced increasing regulatory pressure in the wake of Australia's Royal Commission into misconduct in the finance industry and the investigation by New Zealand's own regulators into conduct and culture.

But the pressure remains high as the Reserve Bank looks to increase capital across the banking sector amid a review of the Reserve Bank Act and as the government looks to introduce a deposit guarantee scheme.

The 100 isn't large compared to the 5038 full time equivalent staff which ASB has on its books but is significant in an environment when banks are trying to cut costs in the face of increasing margin pressure.

Shortt said the bank faced a big programme of work and was making an investment in that space as well investing heavily into cyber security and to prevent financial crime such as money laundering.

"Scams are increasing in volume and in sophistication," she said.

Shortt said its financial result reflected the New Zealand economy.

The result was bolstered by a one off gain from the sale of its share of Paymark which netted the bank $46 million.

But excluding that gain the profit was still well up on the $1.18b it made in 2018.

Cash net profit at the bank was $1.191b - up 4 per cent on the prior year.

The bank's loans and advances rose 6 per cent to $88b while its deposits also grew 6 per cent to $66b.

But it saw a squeeze on its net interest margin which decreased by three basis points to 221 basis points on the prior year.

Shortt said the decline in the margin was predominantly driven by higher funding costs and a preference for fixed term mortgages, partly offset by lower costs relating to customers breaking fixed rate loans.

While the bank was seeing growth in both its loans and deposits as well as its funds management business that was being offset by lower margins and higher impairments and a lift in investment in the business.

Shortt said while the economy was still performing strongly there was also downward pressure from low business confidence and concerns over global growth.

She would not be drawn on future predictions for the bank's profit but said: "What I would say is we think conditions have got a little tougher. I think we will be seeing tougher conditions for this financial year."

Shortt said the bank had not changed its risk appetite for home lending. "But we see upwards and downward pressure across the different regions."

While Auckland house prices had come off she said there was still a supply and demand issue.

"There is a bit of a pull/push in the Auckland market."

The Wellington housing market was seeing significant price rises based on demand and Christchurch was flat.

"Demand and construction has caught up with each other."

"There is a different picture around the country."

She said affordability remained an issue particularly in Auckland.

Impairments rose over the year by 35 per cent to $108m but Shortt said the bank was "comfortable" with where they were at.

"We are keeping a watchful eye out on business impairments and rural and dairy."

She said the bank had seen a little bit of a lift in impairments in parts of the business excluding the impact of changes to the way it was accounted for but it was coming off a low point.

Shortt said the bank was keeping a close eye on the uncertain political situation with President Trump and the ongoing trade war between the US and China.

"I think you have always got to be aware of global volatility. We are certainly keeping an eye on it."