Tax avoidance bill pushes ASB to $10m first-half loss

ASB Bank has taken $209 million of a $264 million tax and interest bill from tax avoidance settlements onto its books in the six months ended December 31, the Commonwealth Bank of Australia-owned lender announced today.

The one-off hit pushed ASB to a first-half loss of $10 million, compared with a 13 per cent increase in its parent's performance. CBA reported a A$2.9 billion net profit for the period. After adjustment for the tax settlement, ASB still had a tough first half, with underlying net earnings of NZ$199 million, down 16.4 per cent on a year earlier.

While CBA's announcements made no reference to the tax settlements, the Australian parent did note that profit for the period decreased 36 per cent, excluding the impact of realised gains on the hedging of New Zealand operations in "a very challenging environment" which saw a 79 per cent increase in impairment expenses to $127 million.

"Total provisions on the balance sheet now stand at $340 million ($157 million in December 2008)," ASB said, representing 0.53 per cent of total assets.

No dividends will be paid to CBA for the period, despite payment of a $70 million dividend to ASB's holding company.

Net interest margins remained tightly squeezed, falling 0.1 per cent to 1.63 per cent in the half year, and there was a "marked fall-off in demand for borrowing during the year", chairman Gary Judd said.

Judd said ASB had ridden out the New Zealand recession without staff lay-offs and was committed to a "no-offshoring" policy. A pay freeze for staff earning more than $50,000 was lifted in December.