ASB says half-year result reflects improving economy

ASB Bank has reported an improved first half net profit after tax of $283 million for the six months to December 31, 2010.

The previous first half result was a profit of $199 million before a provision of $209 million for the conduit tax dispute (which has also affected many  other banks).

“As the New Zealand economy slowly stabilises, we’ve seen loan impairment expenses reduce significantly, the impairment loss charge of $36 million recorded for the six months ended December 31, 2010 comparing very favourably to the $127 million for the same period in 2009. This shift has been the main contributor to the improved first half year profit result,” ASB chairman Gary Judd said.

He said the bank’s balance sheet had strengthened: whilst total deposits have remained steady, finishing the half-year at $56 billion, retail deposits grew 5.8 percent year on year to $33 billion (December 2009: $31 billion).

“Lending volumes have remained steady in an environment where consumers of credit are justifiably cautious. This meant home loan balances were flat, with demand across the rural and business markets also being weak as we saw a continued business focus on debt deleveraging and contraction,” Mr Judd said.

Financial Highlights

• Operating performance (profit before impairment and tax) is up 7.1% to $440 million (December 2009: $411 million), operating income increasing 8 percent to $789 million (December 2009: $730 million) and operating expenses moving up 9% to $349 million (December 2009: $319 million); 
• Net interest margin has increased 0.4% to 2.0% (December 2009: 1.6 percent), primarily as a result of home loan customers choosing to shift from fixed to floating rate mortgages;
• Total Assets reduced to $63 billion (December 2009: $65 billion) with ASB’s overall home lending market share moving back to 22.4% (December 2009: 23.0%).
• Total liabilities stand at $60 billion (December 2009: $61 billion).
• In addition to the significantly improved loan impairment expense, the loan Impairment provisions as at the end of December 2010 have decreased by 23.2% to $261 million (December 2009: $340 million). Collective and individually assessed impairment provisions now represent just 0.41% of total assets (0.53% in December 2009).
• Ordinary dividends totalling $80 million were paid to ASB’s New Zealand holding company for the six month period. No dividends were paid across the Tasman to Commonwealth Bank of Australia, as it maintains its commitment to supporting its business in New Zealand.