ASB has posted record annual profit for the third straight year with net profit after tax up 3% year-on-year to $705 million. The rise came as lending rose 9% and net interest margins increased by nine basis points.
The bank said cash profit, its preferred measure of financial performance as it excludes items that introduce volatility and/or one-off distortions, rose 12% to $699 million.
ASB grew lending in the year to June by $4.724 billion, or 9%, to $57.726 billion, and deposits by $2.314 billion, or 6%, to $41.289 billion.
The bank said its net interest margin rose to 2.25% from 2.16%. Total operating expenses as a percentage of total operating income fell to 41.1% from 42.6%. Impairment losses on loans rose $9 million, or 19%, to $56 million.
"ASB's strengthened performance over the past financial year was achieved against the background of a steadily improving New Zealand economy," CEO Barbara Chapman said.
"Over the past 12 months we have grown earnings and performed well against the market across our key segments, demonstrating the diversification and strength of our business."
|Return on ordinary shareholder's equity||17%||19%|
|Return on total average assets||1.1%||1.1%|
|Net interest margin||2.25%||2.16%|
|Total operating expenses as a percentage of total operating income||41.1%||42.6%|
ASB's parent, Commonwealth Bank of Australia (CBA) posted a 10% rise in annual cash profit to A$7.819 billion. This was ahead of the A$7.6 billion expected by analysts and is reportedly the biggest profit ever reported by an Australian bank.
Chapman also talked up ASB's wealth and insurance operations, noting income growth of 22%. She said ASB now had one integrated wealth and insurance team focused on developing simple, easy and innovative products.
"Recent figures show that over 400,000 customers are now investing for their futures with ASB's KiwiSaver schemes. Investment in the ASB KiwiSaver Scheme has grown by 29% over the 12-month period to June 30, 2013 to $2.9 billion," Chapman added.
Meanwhile, CBA attributed ASB's increased net interest margins to prudent margin management across business and personal lending portfolios in a competitive marketplace. This was partly offset by a "slight" reduction in home lending margins as a result of competitive pressures and an increasing customer preference for lower margin fixed rate loans, plus lower margins on deposits, CBA said.
ASB's annual interest expense fell $172 million, or 8%, to $2.071 billion.
Funding costs down, home loan marketshare up
Chapman also said ASB's average cost of new funding over the past 12 months had dropped. According to KPMG, average bank funding costs have fallen to five-year lows this year, reaching 3.72% in the March quarter.
CBA provided the chart below detailing marketshare of its NZ operations at June 30 versus December 31 last year
New Zealand insurer Sovereign, also a CBA subsidiary, posted a $26 million, or 35%, rise in annual cash profit after tax to $100 million.
'Inforce growth continues to remain solid and persistency and claims experience have been better than expected despite the competitive, low growth environment," CBA said of Sovereign.
"Movement in interest rates together with an unfavourable actuarial policy valuation adjustment in the prior year has resulted in an improvement in investment experience."
CBA pays out 75.4% of cash profit in dividends
CBA will pay a fully franked final dividend of A$2 per share, taking its full year dividend to A$3.64, a 9% increase and equivalent to 75.4% of cash profit. CBA's return on equity was 18.4% down from 18.6%, and group net interest margins rose four basis points to 2.13%.
"Overall we believe that the underlying conditions for our business in the 2014 financial year will be similar to those we have experienced in the recently completed year," CBA CEO Ian Narev said. "However, we are well positioned to meet the needs of our customers should the economy rebound more quickly than anticipated."
ASB income statement