ASB Bank reports increased profits

Strong balance sheet growth and market share gains in targeted areas helped ASB Bank report increased profits for the six months ended December.

The bank's owner, Commonwealth Bank of Australia, is the first of the big banks which operate in New Zealand to report for the December interim or full-year periods.

The ASB reported a cash profit of $475 million for the period, an increase of 8% on the previous corresponding period (pcp).

The statutory profit, before taking into account hedging, inter-group charges and reporting structure differences, was $474 million, up 7% on the pcp.

Interest income of $2.04 billion was up slightly from the $2.03 billion reported in the pcp.

Interest expense was unchanged at $1.2 billion.

CBA reported an interim statutory profit of $A4.62 billion ($NZ4.93 billion), up 2%, and a cash profit of $A4.8 billion, up 4%.

ASB chief executive Barbara Chapman said the bank's strategy had meant continuing to invest in building frontline capability in specialist areas such as commercial and rural teams.

‘‘At the same time, we have remained focused on maintaining our leadership position in technology and innovation. This has allowed us to deliver a solid first half performance in a highly competitive market.''

Customer advances were up 10% to $68.7 billion, reflecting the continuing strong growth of business, commercial, rural and personal lending.

Home loan growth improved to be in line with the market. Customer deposits had grown by 9%.

ASB's loan impairment expense was $41 million, up 11% on the pcp after recent lows.

The increase was in line with expectations following strong lending growth and increased rural provisioning, partly offset by improvements in home loan arrears.

Cash net interest margin fell by 0.13% on the pcp and 0.06% on the previous half to 2.27%.

The largest single contribution to the change in net interest margin was the trend of customers taking advantage of the current low interest rate environment, Ms Chapman said.

‘‘Against the background of a highly competitive market ... we have also seen a continued customer preference for lower margin fixed-rate mortgages.''

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