ASB lifts profit and shrugs off loan drop

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ASB bank says a drop in its home loan market share last year was down to being more careful about whom it lent money to rather than the change in its marketing campaign.

The bank, which is owned by Commonwealth Bank of Australia, yesterday reported an after-tax profit of $283 million for the six months to December 31, up from a pre-abnormal profit of $199 million in the same prior period.

ASB chairman Gary Judd said the main reason behind the improved result was a drop in impairment losses, which fell from $127 million to $36 million.

The bank increased its operating profit by 7.1 per cent to $440 million but its operating expenses also increased by 9 per cent to $349 million.

Acting chief executive Ian Park said the increased costs were down to reinvestment in the business through the opening of seven new branches and the launch of its new virtual branch programme on Facebook.

"At the end of our financial year last year we indicated strong investment in our business. We are very committed to continuing to invest in the business despite the economy."

The bank's liabilities fell from $61 billion to $60 billion but its assets also reduced from $65 billion to $63 billion after its home loan market share fell from 23 per cent to 22.4 per cent.

In November ASB ditched its popular Goldstein advertising campaign for a new campaign called "Creating Futures".

Park said the drop in market share was not linked to the marketing change.

"It was related to our credit standards at the time as we were a little bit concerned with the economic outlook."

Park said the bank was more confident in the outlook now and was seeing an increased volume in loan approvals.

The bank benefited from people switching from fixed to floating home loans, pushing its net interest margin from 1.6 per cent to 2 per cent.

Park said that while the economy remained fragile he expected confidence to pick up this year.

The bank was focused on its investment programme and planned to open six more branches before August, he said. It was also in the process of finding a new chief executive.