ASB’s business lending has grown 6% over the last year, as confidence returns to companies.
The bank’s annual result, released today, reveals a 21% or $117 million leap in net profit to $685 million in the year to June 30.
Chief executive Barbara Chapman says the bank has seen a marked increase in business activity, particularly during the second half of the year.
And the growth in lending had been to businesses of all sizes.
Although many business owners had taken a conservative approach to get through the last few years, Ms Chapman says they are now much more prepared to invest in their own businesses.
“We see that momentum continuing into the first quarter of this year,” she says.
“ASB has produced a solid annual result despite the combined headwinds of global economic turbulence and subdued credit growth,” says Ms Chapman.
The rise in ASB”s operating income to $1,731 million (up from $1,613 million last year) was partly driven by the large number of customers shifting from fixed to higher-margin floating home loans, although that trend had subsided in recent months.
Although ASB’s branded home loan lending grew above market share, the bank’s total lending book remains flat due to a decline in its third-party distribution book.
Impairment losses on loans fell $25 million to $47 million as arrears and hardship levels in Christchurch had improved, meaning the significant Christchurch earthquake provision made last year was not repeated for a second year.
Customer deposits balances, up 7%, had outpaced growth in lending as the bank continued to focus on attracting deposits in a competitive market.
ASB now has a 22.5% share of the total customer deposits market, said Ms Chapman.
“We are experiencing strong support for customer deposits, which has reduced our reliance on wholesale funding markets,” she said.
“Wholesale funding is still expensive but definitely available.”
During the year ASB has launched an enhanced ASB mobile app which allows customers to make payments using mobile numbers, email addressees and – in a first for New Zealand, using Facebook contact details.
Uptake of mobile phone banking was occurring at a rate four-times that of internet banking when it was launched in the late 1990s, says Ms Chapman.
ASB will continue to make “the right strategic investment decisions” in mobile and online banking to ensure it was engaging with customers and meeting their needs, says Ms Chapman.
“Looking ahead, the ongoing global volatility creates a degree of uncertainty for our local economy. In addition, funding costs remain under pressure. However, despite this uncertainty, New Zealand’s situation continues to gradually improve and we anticipate increased momentum for the domestic economy,” says Ms Chapman.
Earnings at a glance: ($ millions)
Net interest earnings: $1,304 ($1,220)
Total operating income: $1,731 ($1,613)
Total operating income after impairment losses: $1,684 ($1,541)
Net profit before tax: $947 ($814)
Tax: $262 ($246)
Net profit after tax: $685 ($568)
Net interest margin: 2.16% (2.01%)