ASB's annual net profit has weighed in at another record high, nearing $1.5 billion, meaning the bank has posted record annual profit in 12 of the last 13 years. The only exception was 2020.
The bank's June year net profit after tax rose $150 million, or 11%, to $1.471 billion from its previous record high of $1.321 billion in the June 2021 year.
ASB's total operating income increased $279 million, or 9%, to $3.251 billion, with net interest income up $212 million, or 9%, to $2.599 billion.
Operating expenses rose $34 million, or 3%, to $1.175 billion, with the bank adding 157 full-time equivalent staff, giving a total of 5,879. The increase was driven by growth to support technology investment.
ASB's annual net interest margin was unchanged at 2.22%, with its cost to income ratio down 190 basis points to 37.1%.
Impairment losses on loans came in at $41 million versus a write-back of $5 million last year. This increase was attributed to higher collective provisions reflecting emerging risks such as inflationary pressures and rising interest rates.
'We're not seeing any areas of concern'
Despite significant rises in mortgage interest rates over the past year, and the highest consumer price index inflation in 32 years of 7.3%, ASB CEO Vittoria Shortt told interest.co.nz the bank isn't seeing any material rise in loan arrears for business or personal customers. Just 0.19% of the bank's lending was overdue by at least 90 days at June 30, up just one basis point year-on-year from 0.18%.
With the Official Cash Rate up 225 basis points since October, Shortt says about a third of ASB's home loan customers are on new interest rates that are about 1% (100 basis points) higher.
"And what we're seeing there is that they're all okay. We've been calling our customers to check in with them, we've also been looking at a lot of our data and metrics, and we're not seeing any areas of concern. So then the question is why is that? And we put that down to low LVRs [loan-to-value ratios], and we've also had a servicing test rate of 6.45%, which is now 7.85%," says Shortt.
"So that has given customers a real buffer for the increase in interest rates, but also for the increasing household inflationary impact. That's how affordable lending principles are supposed to work and we see them working."
Nonetheless Shortt says ASB staff are watching closely for signs of borrower stress.
"We keep looking. We're highly focused on trying to understand both first hand by talking to our customers, but also looking at different analysis and stress testing of our own [lending] book to see where we might find it," Shortt says.
Meanwhile, ASB says loans increased 5% to $105 billion, with home lending up 6%, versus 12% in the June 2021 year, to $73.624 billion. Total deposits increased 8% to $85 billion.
Figures released by ASB's parent, Commonwealth Bank of Australia (CBA), show ASB's home loan market share unchanged year-on-year at 21.6%, its deposit market share up to 18.3% from 18.2%, and its business lending market share down to 16.9% from 17.3%.
ASB paid $975 million in June year dividends versus none in its 2021 financial year when Reserve Bank restrictions on dividends were in place due to the Covid-19 pandemic.
The bank's common equity tier 1 capital ratio, as a percentage of risk weighted exposures, fell 40 basis points year-on-year to 12.3%.
'We are here to help'
In ASB's statement Shortt says in an environment where interest rates, inflation and cost of living are top of mind, ASB "continued to identify ways to help customers navigate uncertain times."
"We know the rising cost of living is keeping New Zealanders awake at night, but there is plenty we can do together to help take some pressure off. The first and most important step is to talk to us," Shortt says.
"Our purpose of accelerating the financial wellbeing of all New Zealanders has never been more relevant. We are here to help."
Shortt says ASB removed, rebated and reduced almost $50 million of fees over the June year.
She says business customers will "benefit from the deployment of a new cloud-based lending platform" that will simplify the experience for staff and customers.
CBA posted an 11% rise in annual cash net profit after tax to A$9.595 billon. CBA's net interest margin fell 18 basis points to 1.90%, and its common equity tier 1 capital ratio dropped 160 basis points to 11.5%.
CBA's paying a final dividend of A$2.10 per share, bringing its annual dividend to A$3.85 per share, fully franked, which is a 10% increase and equivalent to 68% of annual cash earnings.
According to CBA's annual report, Shortt's remuneration rose to A$3.65 million from A$2.87 million the previous year.
ASB's annual cash net profit after tax, its preferred profit measure, rose $122 million, or 9%, to $1.418 billion. (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).
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