ASB's profit run stalled by economy

By Richard Braddell

WELLINGTON - Years of double-digit earnings growth for ASB Bank have juddered to a halt with the bank reporting an 8.3 per cent rise in net profit to $116.9 million in the year to June 30.

The rise in profit falls well short of asset and lending growth of between 13 and 14 per cent, making it the first time since 1993 that the bank has reported sub-10 per cent earnings growth.

Comforting itself that the result was a still a "sound profit", ASB blamed the weaker performance on low interest rates and a sluggish economy.

But in spite of erosion of lending margins, which were down to 2.36 per cent from 2.65 per cent the previous year, ASB's managing director, Ralph Norris, took pride in the fact that net interest earnings still grew, by $10.5 million to $327.2 million.

The shining light in the result was continued growth in other income, up $15.4 million to $152.7 million.

Foreign exchange gains, insurance sales and fees from funds under management, which grew in value from $190.7 million to $353.9 million, were among contributors to other income growth.

The bank continued to make inroads into the business and rural markets, which now account for a quarter of all lending.

Business lending was up 10.5 per cent, rural by 37.5 per cent and retail by 14.2 per cent.

However, the bank's net profit would have been $4.5 million higher at $121.4 million with the inclusion of Sovereign, the financial services subsidiary ASB bought for $235 million earlier this year.

Sovereign operates as a separate entity from the bank.

In the year before it was acquired, Sovereign earned a net $11.2 million net profit and was forecasting a $17.3 million profit for the March 1999 year.