ASB Bank posts 21 per cent rise in net profit

Leading home mortgage borrower ASB Bank, owned by Commonwealth Bank of Australia, today said it had increased its net operating profit 21 per cent to $382.8 million in the June year.

The tax provision, the subject of past controversy, rose 18 per cent to $180.2m.

The bank's return on total average assets rose to 1.07 per cent from 1.05 per cent a year earlier despite a fall in its net interest margin to 2.17 per cent from 2.27 per cent.

The interest expense rose sharply to $1.9 billion from $1.4 billion a year earlier.

The interest margin has fallen in each of the past five years from 2.46 per cent. However, that has not stopped the net profit from increasing at the same time, up from $183.4m in 2001.

One reason is the fall in operating expenses to income. While operating expenses for the year increased by 5 per cent to $470m, the ratio of expenses to income fell to 44.81 per cent from 47.65 per cent last year and from 54.45 per cent five years ago.

Operating income rose to $1.05 billion from $936.8m. It was made up of net interest earnings of $781m, up 14 per cent, and other income of $268m, up 8 per cent.

Chairman Gary Judd said the result was underpinned by growth in the business and rural sectors together with "continued leadership" in the mortgage market.

The bank increased total advances during the year by 21 per cent to $35.0 billion. Total assets rose 17 per cent to $38.8 billion.

Personal advances, mostly mortgages, rose 19 per cent.

Commercial and business lending grew 23 per cent and rural lending 22 per cent. Mr Judd said excellent contributions to profit came from corporate, securities, wealth management and financial services operations.

Deposits grew 21 per cent to $32 billion during the year.

Earnings from transactions and service fees rose 8.0 per cent, reflecting growing customer numbers.

Debt provisioning at year end stood at $132m, up 13 per cent.

Funds under management sold rose 12 per cent to $1.8 billion.

Mr Judd said a mortgage price war between banks during the year resulted in ASB actually increasing lending volumes and market share.

"It also accelerated the move by borrowers from floating mortgage rates to fixed lending rates, particularly the two-year term. "ASB's experience is that home mortgage borrowers appreciate that cost of interest over the life of the loan, flexibility to make modifications as their circumstances change, and customer service are more important to them than the headline interest rate."

ASB had attracted over $2 billion into a new internet-based savings account that pays a higher rate of interest in recognition of the cost efficiency of the service.

- NZPA