ASB lifts profit 6 per cent as rising rates bolster margins

The mortgage market remains highly competitive. Photo / Peter de Graaf

ASB Bank’s annual profit rose 6 per cent as wider margins more than offset increased costs, with the country’s third-biggest lender noticing the slowdown through the second half of the financial year.

Net profit rose to $1.56 billion in the 12 months ended June 30 from $1.47b a year earlier, with net interest income up 17.2 per cent at $3.05b. Net interest margins widened 22 basis points to 2.44 per cent, which parent CBA said reflected higher deposit margins in the rising interest rate environment, offset by lower lending margins due to swap rates, mortgage competition and an unfavourable lending mix.

Cash profit – the favoured measure among the banks which excludes some accounting adjustments – rose 9 per cent to $1.55b, outpacing the 6 per cent growth of the wider CBA group.

Residential mortgage lending grew 2.8 per cent to $75.65b, lagging behind the wider credit growth, while corporate lending grew 6.1 per cent to $30.32b.

ASB’s impairment charges rose to $64 million in the year from $41m a year earlier as inflationary pressures, rising interest rates and declining house prices started to bite.

“We are seeing clear signs that growth is slowing which reflects the broader economic environment,” chief executive Vittoria Shortt said in a statement.

“However, our balance sheet remains strong and resilient which positions us well to continue to support our customers and the New Zealand economy.”

A friendly hand

Like other lenders, ASB is working with its customers to help them through the rising interest rate environment, which is a first for many customers who’ve enjoyed prolonged periods of cheap finance.

“We’ve proactively contacted more than 12,000 customers to provide support as they refix their home loan,” Shortt said.

“While the majority seem to be well prepared and managing, we’ve deepened our support options for those feeling pressure.”

The bank set up a specialist team to help customers concerned about their position, completing more than 72,000 assessments.

The local unit of CBA accounted for A$1.36b of the group’s A$10.16b cash profit, and outperformed the group’s 2.07 per cent net interest margin.

Group chief executive Matt Comyn said the operating performance reflected strong volume growth and a wider margin, and that the tighter financial conditions warranted a prudent approach to managing risks.

CBA’s board declared a final dividend of A$2.40 per share, taking the annual return to A$4.50, up 17 per cent from the year earlier.