ASB lifts half-year profit

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The ASB group, including insurer Sovereign, posted a 57.7 per cent jump in cash net profit after tax in the six months to December as its impairment expense dropped and net interest income rose.

ASB's parent, Commonwealth Bank of Australia, said today ASB's first-half year cash net profit rose to $293 million, or by $107 million, from $186 million in the same period of 2009.

The increase came as the bank's impairment expense was cut by 71.6 per cent to $36 million from $127 million in the same period of the previous year.

Net interest income, meanwhile, rose 23.8 per cent to $540 million from NZ$436 million.

The results from the previous comparable period included a $209 million provision for the structured finance transaction dispute with the Inland Revenue Department.

ASB chairman Gary Judd said as the New Zealand economy slowly stabilises, the bank was seeing loan impairment expenses reduce significantly with this being the main contributor to the improved first-half year profit result.

"Our Balance Sheet has again strengthened. Whilst total deposits have remained steady, finishing the half-year at $56 billion, retail deposits grew 5.8 per cent year on year to $33 billion from NZ$31 billion at December 2009, a result of our continued strong performance in a highly competitive market," Judd said.

Lending volumes had remained "steady" against a backdrop where consumers of credit were "justifiably" cautious.

"This meant home loan balances were flat, with demand across the rural and business markets also being weak as we saw a continued business focus on debt deleveraging and contraction," Judd added.

The bank's net interest margin increased 0.4 per cent to 2 per cent which Judd attributed primarily to home loan customers shifting to floating from fixed rate mortgages.

Total assets dropped $2 billion to $63 billion with ASB's overall home lending market share falling to 22.4 per cent from 23 per cent.

Total Liabilities also dropped, to $60 billion from $61 billion.

"In addition to the significantly improved loan impairment expense, the loan impairment provisions as at the end of December 2010 have decreased by 23.2 per cent to $261 million from $340 million in December 2009. Collective and individually assessed impairment provisions now represent just 0.41 per cent of total assets compared with 0.53 per cent in December 2009."

ASB said ordinary dividends totalling NZ$80 million were paid to ASB's New Zealand holding company for the half-year, with no dividends going across the Tasman to Commonwealth Bank of Australia.

The bank maintained "its commitment to supporting" ASB, whose chief executive Charles Pink surprisingly departed last November after less than two years at the helm.

Ian Park, formerly ASB's head of retail, is the bank's acting chief executive.

ASB's cash net profit after tax, excluding Sovereign, rose to $246 million from $157 million.

Sovereign's climbed to $45 million from $27 million.

- INTEREST.CO.NZ