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ASB Profit Falls 17.5 Percent, Bank Defends Its Role

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Aug 12 NZPA - The perception of an Australian bank reaping profits for its own benefit is far from the reality, ASB Bank Ltd said in reporting a $NZ425 million annual profit.

The after-tax operating profit in the year to June 30 is down 17.5 percent on last year.

ASB's parent, Commonwealth Bank of Australia (CBA), which is run by New Zealander Sir Ralph Norris, today reported a cash profit of $A4.42 ($NZ5.56) billion down 7 percent. The net profit of $A4.72b was little changed. The dividend was cut 25 percent.

ASB was committed to supporting its customers, colleagues and communities during these difficult times, said chairman Gary Judd.

Labour, the Greens and the Progressive Party are holding an inquiry into bank interest rates after government MPs used their majority on the finance and expenditure select committee to block an inquiry.

Mr Judd said that while ASB's profit appeared to be large it was significantly reduced and it should not be viewed either in isolation or in absolute terms.

ASB's return on assets was 0.68 percent, and its return on equity was 14.9 percent. Both numbers were low to average compared to other major New Zealand companies, he said.

"The profit ASB makes represents the return due to our shareholders for investing in our business. In this respect, the common perception of an Australian shareholder bank reaping profits for its own benefit is far from the reality.

"In truth our underlying shareholders are the 777,000 Australians and New Zealanders who hold 80 percent of the shares in CBA, both directly and indirectly through pension, superannuation and other managed funds.

"They need to derive a reasonable return on their investments to help them to achieve their savings and retirement aspirations."

ASB said g rowth in lending continued with total assets increasing 9.9 percent.

Treasury and financial markets income rose 89 percent to $153m, contributing significantly to this overall result. Like other banks it has made money in volatile markets.

An increase in the cost of wholesale funding and competition for deposits put pressure on margins.

ASB's net interest margin declined 21 basis points from 1.78 percent in June 2008 to 1.57 percent at year end.

Home loan balances increased by 3.5 percent during the year to $37.7b, giving ASB a market share of 23.3 percent.

Total deposits increased to $56.7b, up 5.1 percent for the year.

The bank experienced 8 percent growth in retail deposits to $30b, with market share steady at 21.2 percent.

ASB paid the Government an $18.3m fee in respect of the Retail Deposit Guarantee Scheme. The bulk of the fees for the scheme are paid by the four largest New Zealand registered banks, even though they are amongst the least risky of the financial institutions.

ASB lifted its loan impairment charge by $198m to $238m, with total provisions on the balance sheet now standing at $261m up from $109m in June 2008.

Provisions represent only 0.4 percent of total assets, up from 0.18 percent in June 2008.

ASB has stuck to its core banking principles, with virtually 100 percent of its lending activity remaining within the country, Mr Judd said. The bank has an AA Stable credit rating from Standard and Poor's.

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