ASB Bank Limited Analysis

Overview

ASB Bank provides a variety of financial services including retail, business and rural banking, funds management, insurance and investment and securities services. Opened in 1847 as the Auckland Savings Bank, it became a fully owned subsidiary of Commonwealth Bank of Australia in 2000.

Performance

The following information was extracted from ASB Bank Limited's half year results, released 12 February 2025:

ASB half year result: Profit up 1%

ASB has reported a cash net profit after tax (NPAT) of $716 million for the six months to 31 December 2024, an increase of 1% on the prior comparative period, as the economy moves towards recovery. Statutory NPAT is $763 million, a 2% increase on the prior comparative period.

The increase in profit reflects a 4% rise in operating income driven by increased lending volumes and favourable interest rate hedging, partially offset by an 8% rise in operating expenses. Home lending grew 5% and business and rural lending grew 2% on the prior comparative period. Margins across lending and deposits remained flat overall.

Profitability, measured by return on equity, fell 0.6% on the prior comparative period. The increase in profit was more than offset by additional capital requirements, with the total capital ratio rising 80 basis points to 16.3%. During the period there was additional shareholder investment of $700 million, bringing total shareholder investment in ASB to $11.4 billion, supporting growth in New Zealand.

Chief Executive Vittoria Shortt says ASB has supported its rural, personal and business customers through more than two years of extremely challenging economic conditions and is well positioned to continue backing them as the economy enters the early stages of recovery.

New Zealand has been through the most difficult economic cycle in a generation, and we need to be patient with what looks like a gradual recovery. With lower interest rates and inflation providing some relief, and export incomes looking up for a number of sectors, our focus remains on supporting customers and providing capital for the next phase of economic growth.

Financial overview

Compared to six months to June 2024 (cash basis)

• Total lending increased $2.6 billion or 2% to $112 billion
• Total customer deposits increased $2.3 billion or 3% to $85 billion
• Impairment losses on financial assets decreased $43 million or 72% to $17 million

Compared to the December 2023 prior comparative period (cash basis)

• Total lending increased $4.0 billion or 4% to $112 billion
• Total customer deposits increased $3.4 billion or 4% to $85 billion
• Impairment losses on financial assets increased $7 million or 70% to $17 million
• Net interest margin increased 9 basis points from 2.21% to 2.30%
• Cost to income ratio increased 140 basis points to 40.7%

Compared to December 2023 prior comparative period (stat basis)

• NPAT increased 2% to $763 million
• Return on equity decreased 60 basis points to 13.5%