ASB racked up record half-year profit as its net interest margin, the difference between income generated from credit products like loans and mortgages, and payments made to deposit savers and others the bank borrows from, soared.
ASB's unaudited net profit after tax for the six months to December 31, 2022 jumped $78 million, or 10%, to $840 million from $762 million in the six months to December 31, 2021, its previous record interim profit.
The increase came as ASB's net interest margin jumped 33 basis points to 2.52% in a rising interest rate environment.
Net interest income rose $273 million, or 21%, to $1.548 billion, helping total operating income rise 16% to $1.826 billion. Total operating expenses rose $87 million, or 17%, to $609 million as salaries and other staff expenses rose, as did information technology costs. ASB's cost to income ratio fell 10 basis points to 33.9%.
The bank booked $49 million worth of loan impairment losses versus recoveries of $13 million in the first-half of its previous financial year.
'Challenging' year for home loan customers
ASB grew home loans by 2% between June and December last year to $73.4 billion. Business lending rose 3% to $21 billion, and rural lending fell 1% to $10.97 billion. Interest bearing customer deposits increased 4% to $65 billion.
ASB CEO Vittoria Shortt says ASB knows 2023 will be challenging for its home loan customers, especially those experiencing big interest rate rises.
"Even though loan approvals are tested at rates significantly higher than the approved rate, we want to make sure customers are well placed to manage as these rates come up for renewal. For many, it will be the first time they experience the impacts of increased interest rates," Shortt says.
"We've already reached out to more than 4,000 of our home loan customers to help them understand the options open to them, and by the end of the year, we expect to have contacted a further 9,000 customers who could face financial challenges."
ASB's parent, Commonwealth Bank of Australia (CBA) says 0.22% of ASB's home loans had been in arrears for at least 90 days as of December 31. That's up from 0.19% a year earlier, and 0.21% at June 30.
CBA itself posted a 9% rise in interim cash profit to A$5.153 billion, with its net interest margin up 18 basis points to 2.10%. CBA's paying an A$2.10 per share, fully franked, interim dividend, an increase of 20%.
CBA's common equity tier 1 capital ratio fell 10 basis points between June and December to 11.4%, as a percentage of risk weighted exposures. And its return on equity rose 80 basis points in the six months to December, reaching 14.1%. ASB's common equity tier 1 capital ratio was 14.1% at December 31, up from 12.9% a year earlier. The bank says it had $5.245 billion of capital in excess of its Reserve Bank regulatory requirements at December 31, when total capital stood at $10.804 billion.
ASB paid dividends of $400 million in the half-year, down from $650 million in the same period of the previous year.
Meanwhile CBA also announced an A$3 billion on-market share buyback.
Chart above from CBA.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.