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ASB September quarter profit rises 18% to NZ$177 mln despite NZ$646 mln quarterly lending drop

ASB September quarter profit rises 18% to NZ$177 mln despite NZ$646 mln quarterly lending drop

By Gareth Vaughan

Fresh from posting record annual profit of NZ$568 million in the year to June, ASB has kicked off its new financial year strongly with an 18% rise in September quarter profit to NZ$177 million.

ASB's general disclosure statement for the three months to September shows unaudited net profit after tax of NZ$177 million, up NZ$27 million, or 18%, from NZ$150 million in the same period of 2010.

The quarterly profit rise came as net interest earnings rose NZ$31 million, or 10%, to NZ$331 million with interest expense down NZ$103 million, or 15%, to NZ$571 million, falling at more than double the rate of interest income which fell NZ$72 million, or 7%, to NZ$902 million.

This happened as the bank's lending contracted in the quarter by NZ$646 million to NZ$52.507 billion at September 30 from NZ$53.153 billion at June 30. ASB did, however, eke out some growth in the home loan market with its residential mortgage book rising by NZ$153 million in the three months to September 30 to NZ$42.095 billion.

Total assets rose by NZ$204 million to NZ$63.254 billion and total liabilities also increased, by NZ$335 million to NZ$59.438 billion. Deposits from customers came in at NZ$37.553 billion, up strongly from NZ$33.706 billion at June 30.

ASB's record annual June year net profit after tax of NZ$568 million came as the country's big four banks (ANZ, ASB, BNZ and Westpac) made a combined NZ$2.778 billion in annual profit, which is NZ$78 million, or 3%, higher than their combined profit in the boom year of 2007 when double digit lending growth was the norm compared with the anemic, if any, lending growth of today.

Net interest margins have been rising as margins on loans increase. Fixed-term mortgages written by the banks several years ago, when credit was cheap and abundant but interest rates higher, were at much lower margins. So when customers, as they come off fixed-term rates and go back on to fixed rates or choose to float as most are currently doing, the margins for the banks on the new loans are higher. See more on this here.

Meanwhile, ASB's tier one capital ratio fell to 10.7% at September 30 from 11.2% at June 30 and its total capital ratio fell to 12.4% from 12.8%. Both are still well above the Reserve Bank's minimum requirements of 4% and 8%, respectively. However, the central bank's plans to adopt the Basel III global banking capital requirements will see the tier one capital ratio rise to 8.5% and total capital ratio to 10.5% from January 1, 2013 and potentially as high as 11% and 13%.

ASB is a subsidiary of Commonwealth Bank of Australia where one New Zealander, Ian Narev, succeeds another, Ralph Norris, as CEO today.

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