ASB's annual profit is up 38% to a new record high, helped by a big drop in loan impairments and strong housing lending growth.
The bank's net profit after tax* for the year to June 30 surged $363 million, or 38%, to $1.321 billion from the $958 million reported last year.
ASB says loan impairment expense of $306 million last year turned around to a $5 million recovery this year, a move of $311 million. Up $7.4 billion year-on-year to just under $69.5 billion at June 30, housing lending grew 12.2% versus 11.7% system-wide growth.
The bank's net interest margin increased six basis points to 2.18%. ASB attributed the increase to stable funding costs and "changes" in its deposit and lending portfolios, with customers showing an increased preference for fixed-term loans and at call accounts in a low interest rate world.
Last year's profit drop was ASB's first in a decade, after reaching its previous record high of $1.274 billion in 2019.
Total operating income rose $223 million, or 8%, to $2.972 billion with net interest income also up 8% to $2.354 billion. Operating expenses rose $26 million, or 2%, to $1.141 billion.
"While the global pandemic is far from over, ASB's full year performance reflects New Zealand's stronger than expected recovery," ASB CEO Vittoria Shortt says.
"A decisive response from government and our banking system supported Kiwi businesses and households to be resilient during the pandemic. While a balanced recovery is still a significant way off, ASB is in a strong position to keep supporting Kiwis as we work together towards a productive and sustainable New Zealand," Shortt says.
ASB's cost-to-income ratio fell 80 basis points to 39%. The bank's return on equity rose to 15.2% from 12.3%. ASB's common equity Tier 1 capital ratio, as a percentage of risk weighted lending exposures, rose to 12.7% from 10.8%.
ASB's parent Commonwealth Bank of Australia (CBA) posted a 20% rise in annual cash profit to A$8.653 billion with loan impairment expenses down 78%. CBA also announced an A$6 billion off-market share buyback.
CBA's net interest margin fell four basis points to 2.03%, It's paying A$3.50 per share in fully franked annual dividends, up 17% year-on-year and equivalent to 71% of cash earnings. Its common equity Tier 1 capital ratio rose 150 basis points to 13.1%.
ASB's not paying ordinary dividends to CBA for the June 2021 year. However, it will pay a $650 million dividend in September, equivalent to 12.63 cents per share.
CBA's results presentation is here, and its press release is here.
*Note, interest.co.nz focuses on what the major banks describe as their statutory net profit after tax as opposed to the banks' favoured measure of cash net profit after tax. The reasons for this are detailed here and here.
28 Comments
PM mission is house price growth......anybody hhelping her inachueve that goal is welcome and pat on the back from her and knights - Robertson and Orr.
Do anything and as long housing ponzi is supported and continue, have her support and will get a personalised signed Thank you card from her.
Banks have no control of OCR, RBNZ does. Their profits surged due to housing market being extremely hot. Yes, raising OCR helps with bank net interest margin profits. However, the drawbacks of cooling housing market by OCR hikes would also affect their home loan market and their mortgage customer base.
Commercial banks are always a large player and benefactor in housing bubbles.
How Do Banks Create Money? A Walk-Through of Richard Werner's Papers
Money is available much more at a cheaper rate for the Banks from overseas. They then lend it at the prevailing rates here (which go up or down based on OCR). So in conducive circumstances as now, the margin increases. Treasury operations of the Banks take care of this wholesale dealings. They are on the job 24/7 in many cases.
And also the spread is much more because of the very low rates they give to depositors. The percentage of OCR increase passed on is not the same between the two.
Financialization’s business plan: Privatizing rents and paying them as interest and fees
Financialization requires going into debt in order to get basic needs – housing for instance. Instead of paying rent to the landlords, like you did ever since feudalism through the 19th century, housing now is bought on credit. So the rent that used to be paid to landlords is now paid to the banks as interest. Renters pay interest, and over the course of a 30-year mortgage the banks end up receiving more money and interest than the seller receives when he or she sells the property. So the idea of paying rent as interest for a loan to get property is how commercial real estate investors as well as homeowners operate.
This debt leveraging goes right throughout the economy. Instead of funding pensions or healthcare on a pay-as-you-go basis as they do in most of Europe, current income has to be set aside in advance and invested in the financial markets – in stocks and bonds, or in just plain financial gambling. The hope is to make money financially. But the way that the financial sector makes money involves exploiting labor. So labor obtains its pensions by financing the exploitation of labor in order go get financial returns to pay its pensions. That’s what Marx called an internal contradiction.
The financialization process is basically anti-labor. Inasmuch as the policy aim of financialization is privatization, it wants to become the government. Financialization wants the banks to be the government and allocate credit and resources, not democratically elected officials. So financialization and libertarian free markets aim at centralizing control in the hands of banks. You have a more centralized control under financialization than you do under democracy or even many state-run economies that are controlled by the financial sector.
That sector uses this control to force the state to sell off its public enterprises, railroads, pension plans, it’s healthcare and all of this, and to privatize education, healthcare and other basic social utilities. Financial charges, management charges and stock buybacks are built into the cost of providing these basic needs. So financialization sharply increases the cost of the economy and it increases the cost of the economy in the form of rents, interest and financial charges paid to the Finance, Insurance and Real Estate FIRE sector – the FIRE sector, in a way that ends up shrinking the economy and preventing its ability to pay the debts. So financialization leads to crises, because its business plan is to get all the money for itself and impoverish the economy. But by impoverishing the economy, it does what Rome did, it leads to austerity and a Dark Age.
You can see this in education that’s been financialized in the United States. It’s provided freely from Germany to China, but to get a college education or even for many high schools in America, you have to take out a loan, at high interest (about 8%). As is the case with housing, the cost of getting an education is however much a bank is willing to lend the student.
The problem is that this leads to debt deflation. Financialization siphons off more and more of the economy’s income in the form of interest, financial fees, penalties and economic rents to the sectors that the financial and banking sector supports. Link
Thanks J.C. Another example:
The crisis in social care in the UK does not have just one cause, nor one simple solution. Chronic underfunding, an ageing population, the Brexit-induced labour shortage and the devastation wreaked by Covid-19 have all played a part. But the problems forcing the care system to the brink of collapse don’t just come from a series of exogenous shocks – they are internal too. The very structure of the sector is unstable.
The growing involvement of private equity, hedge funds and real estate investment trusts in the care sector in recent decades has brought about a rise in the use of predatory financial techniques, justified in the name of enticing capital into a sector that the government has persistently failed to adequately fund. According to data from the Care Quality Commission, these firms now own one in eight care home beds in England.
A screen of financial jargon helps investors avoid public scrutiny, but a slew of recent reports has begun to detail the many tactics used to ensure “healthy” returns on investment – and the profound and troubling consequences that these strategies have for the care sector. Link
The banking industry is decrepit and now solely reliant on ripping people off and reliant its legislated privilege. The boomers can crow about how it's all been manipulated to their advantage. But the writing's on the wall. The sooner the banks and boomers die off, the better.
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