ASB reveals record profit for third year in a row

ASB has revealed a record annual net profit, for the third year in-a-row, of $705 million – up 3% on last year’s result.

Cash net profit, the bank’s preferred measure of financial performance because it one-off distortions, rose 12% to $699 million in the year to June 30.

Across the Tasman, ASB’s parent bank the Commonwealth Bank of Australia this morning revealed its net profit rose 8% to $7.68 billion - reportedly the biggest profit recorded by an Australian bank.

ASB chief executive Barbara Chapman says the local bank’s strong performance was partly to do with productivity gains within the bank, and partly to do with  steadily improving economy.

“We have grown earnings and performed well against the market across our key segments, demonstrating the diversification and strength of our business.

“Over the past 12 months we noted an improvement in the average cost of new funding as some of the turbulence in the global markets abated,” Ms Chapman says.

“However, uncertainty remains around the recovery of Europe’s economies as well as the markets’ reaction over the Federal Reserve’s intentions around the unwinding of its quantitative easing programme. Both factors may put pressure on the financial markets and the consequent cost of funding over the next few years.

A focus on productivity inside the bank and controling costs had reduced operating expenses as a percentage of total income from 42.6% to 41.1%.

Customer deposits grew 6% over the year, particularly across ASB’s savings products.

Perforrmance was strong across the bank generally, and the rural and business divisions had grown at above-market levels. 

But it was the bank’s wealth and insurance business that is reported to have the biggest area of income growth of 22% over the year.

Improvements came as investment in ASB’s KiwiSaver scheme grew 29% to $2.9 billion. Making ASB KiwiSaver Scheme balances available on internet and mobile banking services had contributed to that growth by making the products more visible and accessible, Ms Chapman says.

“We have further developed our private wealth offering and consolidated our position as New Zealand’s largest bancassurance provider,” she says.

Bad debts expenses, at $56 million, were up 19% on the same time last year. But Ms Chapman says the increase was expected as provisioning returned to more normal levels after last year’s low - an outlier result which was related to an over-provision for the Christchurch post-earthquake.

Rapid evolution of the banking market continued and Ms Chapman says the pace of adoption of mobile banking is remarkable.

More than half of all log-ins to ASB's Fastnet internet banking now come via mobile phones.

Ms Chapman says she’s confident ASB will continue to deliver profitable growth.