Uptick in business lending a sign of confidence returning – ASB

ASB expects the appetite of its business customers for loans will keep getting stronger this year.

Stronger business lending helped drive ASB’s 7% gain in first-half cash profit – yesterday revealed at $348 million, up from $324 million at the same time last year.

Rural and business lending both grew above market levels, recording growth of 12.7% and 9.4%, respectively.

“The performance of these two key market segments is a reflection of growing confidence among farmers and business owners as business conditions in New Zealand steadily improve,” ASB chief executive Barbara Chapman says.

Cash profit is the bank’s preferred method to report performance, as it excludes any one-off distortions.

Net profit, at $365 million, was $7 million or 2% short of the record set last year at $372 million as bad debts and expenses weighed down the bottom line.

But strong business lending was a highlight of the result, alongside greater mortgage lending.

As a share of total loans, business lending rose to 9.8% from 8.9%.

Ms Chapman says the increase has been slow and steady, across all sectors, and she expected this to continue in the second half of the financial year.

“Post-GFC we’ve seen more businesses who have come through strongly and are looking to invest.

“There’s good appetite from business feeling now is a good time to expand."

Ms Chapman told NBR ONLINE another catalyst of the growth had been her decision to separate ASB’s rural and wealth management units after she started at the bank in 2011.

“That’s given us a good focus on commercial markets.”

ASB’s fund management income increased 21% to $29 million in the first half, compared to the same time last year.

The bank has17.7% of retail funds under management, compared to 15.1% at the same time last year.

Growth in funds under management for ASB KiwiSaver, the country’s biggest KiwiSaver scheme, slowed to 31% in the year to December – down from 44% growth in 2011.

Although bad debts doubled to $22 million, Ms Chapman says she is comfortable with that level – coming off a cyclical low.

ASB’s total assets grew $1.772 billion or 2.8% to $65.309 billion during the six months to December 31. Total liabilities increased $1.25 billion or 2% to $60.6 billion.

ASB’s parent bank, The Commonwealth Bank of Australia, exceeded market expectations with a half-year net profit of $3.66 billion ($NZ4.48 billion) – up 6%.

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And also because of our low interest rates.

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