ASB posts big half-year profit jump as impairments drop and net interest income rises; Total assets and mortgage share drop

ASB posts big half-year profit jump as impairments drop and net interest income rises; Total assets and mortgage share drop

The ASB group, including insurer Sovereign, posted a 57.7% 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 (CBA), said today ASB's first-half year cash net profit rose to NZ$293 million, or by NZ$107 million, from NZ$186 million in the same period of 2009.

The increase came as the bank's impairment expense was cut by 71.6% to NZ$36 million from NZ$127 million in the same period of the previous year. Net interest income, meanwhile, rose 23.8% to NZ$540 million from NZ$436 million.

The results from the previous comparable period included a NZ$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 NZ$56 billion, retail deposits grew 5.8% year on year to NZ$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% to 2% which Judd attributed primarily to home loan customers shifting to floating from fixed rate mortgages. Total assets dropped NZ$2 billion to NZ$63 billion with ASB’s overall home lending market share falling to 22.4% from 23%.

Total Liabilities also dropped, to NZ$60 billion from NZ$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% to NZ$261 million from NZ$340 million in December 2009. Collective and individually assessed impairment provisions now represent just 0.41% of total assets compared with 0.53% in December 2009."

Operating expenses rose 11.5% to NZ$447 million from NZ$401 million due to higher staff costs and increased marketing spend as ASB launched its "creating futures" campaign.

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 CBA, with it maintaining "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 currently the bank's acting CEO.

ASB's cash net profit after tax, excluding Sovereign, rose to NZ$246 million from NZ$157 million. Sovereign's climbed to NZ$45 million from NZ$27 million with claims volume reductions in death, trauma and disability income insurance and risk and health lapse rates down.

Meanwhile CBA, headed up by New Zealander and ex-ASB CEO Ralph Norris, posted a 13% rise in first-half cash profit to A$3.34 billion, a record. See CBA's analysts' presentation here.

(Updates add operating costs figures, Sovereign detail and link to CBA analysts' presentation).

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Doesn't it make the heart glad that the banks interest margin has increased.

Yeah I'm sure am crying in my beer glass cos of the margin they are crippling the NZ ecomony with. Like I've said before, the sooner we start switching to the New Zealand owned banks like Kiwibank the better.