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ASB annual net profit rises 14% to record high of NZ$806 mln

ASB annual net profit rises 14% to record high of NZ$806 mln

ASB has posted record annual net profit after tax for the fourth straight year as income grew at more than twice the pace of expenses and loan impairments were unchanged.

The bank's net profit after tax for the year to June 30 rose $101 million, or 14%, to $806 million from $705 million the previous year.

ASB's total operating income rose $166 million, or 9%, to $1.972 billion. Operating expenses increased $29 million, or 4%, to $767 million. Loan impairments were unchanged at $56 million.

The bank's net interest income rose $155 million, or 11%, to $1.560 billion.

In a statement CEO Barbara Chapman said the strong annual results came against a background of a steadily improving economy and favourable funding conditions.

"Our strategic goals have helped us achieve sustainable, profitable growth over the past several years. Over the course of the financial year, all areas of the business have performed well with solid lending growth across all key portfolios of 5%, despite heightened price assertiveness in the home loan market," Chapman said.

"The improving New Zealand economy has undoubtedly played a role with rising confidence and solid lending growth, particularly among business and rural customers."

In the year to June 30 ASB's home loan book grew 3%, business and rural loans grew 8%, and customer deposits lifted 6%. Total advances to customers were up  5% to $60.664 billion.

Net interest margins up 13 basis points; Dividend jumps

Good funding conditions for banks, and changes to ASB's mix of assets and funding, pushed net interest margins up 13 basis points year-on-year to 2.38%. The bank's cost to income ratio was cut by 200 basis points to 38.9% from 40.9%.

ASB, which is owned by Commonwealth Bank of Australia (CBA), paid annual dividends of $400 million, up from just $90 million the previous year. This was equivalent to 17.72 cents per share versus 4c a share.

ASB's annual cash net profit after tax rose $78 million, or 11%, to $776 million from $698 million in the previous year.

Cash net profit is the bank's preferred measure of financial performance, with ASB saying it presents its underlying operating results and excludes items that introduce volatility and/or one-off distortions, and are considered not representative of ASB’s ongoing financial performance. These volatile or distorting items include hedging and International Financial Reporting Standards volatility, plus the notional cost of capital charged by CBA.

However, the way cash profit is reported has come under fire from some banking analysts.

Chapman attributed ASB's 4% rise in costs to the move to new headquarters at Auckland's Wynyard Quarter with higher head office rental and depreciation charges. She said head count was flat over the year, but costs also rose due to ongoing IT infrastructure investment.

ASB 2014 2013
Return on ordinary shareholder's equity 17.4% 17%
Return on total average assets 1.2% 1.1%
Net interest margin 2.38% 2.25%
Cost to income ratio 38.9% 40.9%

Insurer Sovereign, ASB's sister company, recorded a 3% rise in annual cash profit to $103 million with CBA attributing this to strong persistency experience and solid growth in inforce premiums.

Meanwhile, CBA posted a 12% rise in annual cash profit to A$8.68 billion, with return on equity up 50 basis points to 18.7%. It's annual dividends per share rose 10% to A$4.01, the equivalent of 75% of cash net profit after tax.

CBA's results included the table below showing the group's percentage marketshare of some key NZ markets. The figures in yellow are share as of June 30 this year, the middle column is as of December 31 last year, and the right hand column is as of June 30 last year.

Here's ASB's press release.

Here's CBA's press release. And here's CBA's analysts' presentation, and its full results release.

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Proof that their margins are obscene. Bargain hard when you are looking for a mortgage - should be able to get half a percent off their published rates


Increased profits, mainly from increased net interest margins, will be a similar story for all the banks. 

Margin expansion has come from rising wholesale rates allowing the full cost to be passed to borrowers while only a protion of depsitors funds have received a small benefit.


The bank is doing a great job for its shareholders and depositors. Anyone leading money to the bank should be very pleased with this result as it means their funds are safe.


Crikey, sounds like a paid advertisement!

Please explain how you equate increasing profit margins and the safety of one's deposits at a bank?