ASB Bank drove growth in first-half earnings for Commonwealth Bank of Australia's New Zealand businesses, with wider interest margins and gains in home loans, offsetting deteriorating claims at its Sovereign insurance unit.
CBA lifted cash profit from its New Zealand businesses to $433 million in the six months ended Dec. 31, from $389 million a year earlier, the Australian bank said in its first-half report. Of that, ASB contributed $393 million, up from $352 million in 2012, while Sovereign's earnings fell to $40 million from $44 million.
Banking income gained 10 percent to $910 million, funds management income rose 17 percent to $34 million and insurance income was flat at $97 million.
"The result was driven by a strong performance from ASB Bank with improved deposit margins, volume growth and an increase in funds management income, partly offset by higher operating expenses," the bank said. "Sovereign profit reduced on the prior comparative period with deterioration in claims experience more than offsetting the solid inforce growth."
The New Zealand businesses contributed 8.3 percent to CBA's group earnings, with cash profit up 14 percent to A$4.27 billion in the half. The Australian bank declared a first-half dividend of A$1.83 per share, up from A$1.64 a year earlier.
ASB typically releases its own set of numbers excluding other CBA operations in New Zealand. On that basis, net interest income rose 12 percent to $771 million.
ASB's net interest margin widened to 2.35 percent from 2.22 percent a year earlier, and it increased advances to customers to $59.3 billion as at Dec. 31 from $55.49 billion a year earlier. Customer deposits rose to $43.68 billion from $39.86 billion.
ASB chief executive Barbara Chapman said all of the bank's divisions contributed to the increased earnings, with especially strong growth in its wealth and insurance unit.
"The momentum we have maintained over the first half of the financial year is a product of better market conditions as well as continued success in executing our strategy, focusing on customers and improving the productivity of our business," Chapman said. "Improving economic conditions, particularly in Auckland and Christchurch have impacted favourably on impairments."
The bank's impairment charges on bad loans fell to $21 million from $28 million a year earlier.