ASB reveals 7% drop statutory profit as a result of ‘challenging economic conditions’

Wednesday, 14 August 2024

ASB saw its statutory full-year profit after tax fall by 7% to $1.46 billion thanks to tough economic conditions.

The result, for the 12-month financial year to the end of June, was not unexpected as the bank had a tough first half of its financial year as a result of lower lending growth, higher costs, and narrower margins.

ASB chief executive Vittoria Shortt said the bank’s cash net profit after tax, reflecting its ordinary ongoing operations and excluding things like losses on interest rate hedges, was down 10%.

The result reflected the challenging economic conditions, with slow lending growth and higher costs, ASB said.

But, Shortt had words of reassurance for struggling mortgage borrowers.

“We believe fixed term home loan rates have now peaked, which is positive, however we are conscious most of our home loan customers are now on interest rates above 6%,” she said.

“Around 20% of customers are yet to roll off rates below this but we expect increases for the majority of them to be small if interest rates continue to drop.”

ASB’s parent company Commonwealth Bank of Australia reported a 6% drop in net profit after tax.

The year saw a rise in the number of ASB borrowers behind on their home loans, CBA’s annual report said.

Despite the drop in profit, the average Australian-based CBA shareholder earned a dividend of A$3618 during the year, with 12.6% of the net profit attributed to its New Zealand operations, which are predominantly made up of ASB.

CBA has 830,000 shareholders, and 76% of them live in Australia, though New Zealanders also own shares in the bank, including through their KiwiSaver schemes.

The bank’s annual report said Shortt received total remuneration during the year of A$4.7m, which equates to just over NZ$5m.

ASB’s result comes at a sensitive time in banking.

On August 20, the Commerce Commission, which says New Zealand banks are extremely profitable compared to banks in other countries, will release its final report and recommendations to enhance competition in personal banking.

In Parliament, a select committee inquiry into banking is also set to get under way.

The CBA annual report said ASB continued to “vigorously defend” a class action lawsuit with the potential to cost the bank millions of dollars, although the lawyer heading the action does not expect to see it resolved for another three to five years.

The claim, being taken by solicitor Scott Russell, alleges ASB bank failed to provide full legal disclosure to tens of thousands of borrowers between June 2015 and June 2019, and is legally required to repay them all the interest and fees the bank charged those borrowers.

The bank has until August 16 to lodge an appeal against a decision by the Court of Appeal in July to allow a class action lawsuit to go ahead on an “opt out” basis.

The CBA annual report says the entire banking operation now faced seven class actions, including the New Zealand one.