ASB announces profit up 10%, says thousands of customers may face financial challenges

Wednesday, 15 February 2023

ASB has announced an 11% increase in profit.

ASB has announced it made an after-tax profit of $840 million in the last six months of 2022, up 10% compared to the same period the year before.

The increase was driven by 4% growth in lending, with home and business lending up 5% and 6%, respectively, year-on-year.

Chief executive Vittoria Shortt said the result came at a challenging time when people were feeling the effects of rising interest rates and a higher cost of living.

“Keeping people in their family homes, assisting businesses to thrive, and supporting our customers’ broader financial wellbeing is fundamental to our purpose. We understand the expectation for banks to play their part.”

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She said the increase was driven by the environment the bank was operating in.

Vittoria Shortt, chief executive of ASB.

“What we’ve seen in the last 12 months, we’ve had additional lending to customers of $4.5 billion, we’ve also had additional deposits of $5.3b across business and personal. When we have increases in volume that’s going to contribute to an increase in profit.”

She said margins also played a part. Its net interest margin – the difference it makes between what it borrows money for and what it charges borrowers – increased by 33 basis points to 252 basis points.

“When we see the official cash rate (OCR) increase as it has we get a return of margins to more normal levels for the deposit book. We see the opposite on home lending… it’s a factor of what’s been going on with the OCR – we’ve never been through a period where there’s been such big shifts in the OCR.”

She said the bank was focused on helping customers who needed it the most. It tried to pass on the best term deposit rates possible, and was offering competitive long-term home loan rates because people valued certainty. It had also reduced or removed fees on some products, such as small business transaction accounts.

“We know 2023 will be challenging for our home loan customers, particularly those experiencing large interest rate increases,” she said.

“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. We’ve already reached out to more than 4000 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 9000 customers who could face financial challenges.”

ASB’s economists expect a peak-to-trough decline in house prices of 25%. But Shortt said that followed a 30% increase.

She said most people who bought homes, particularly owner-occupiers, planned to hold them for some time so they were less affected by short-term movements.

ASB recently established a new process to support customers who are becoming financially stressed due to cost-of-living impacts which gives customers more time to help reset their finances, including referral to an external financial mentoring agency to independently assess their position and consideration of short-term relief options.

The bank’s operating expenses increased 17%.