An increase in lending and a fall in bad debts has sent ASB Bank's annual profit barrelling through the billion dollar level.
ASB Bank. Photo: 123rf.com
The bank, which is the fourth biggest by assets, had a record net profit of $1.06 billion for the year ended June, compared with $913m the year before.
ASB has gone against the recent trend of shrinking bank profits, and its cash profit which leaves out one-off items was up 13 percent to $1.03bn.
"All our business units performed well and we continue to experience sustained momentum, despite some external headwinds and a rapidly evolving financial services market," said ASB chief executive Barbara Chapman.
Lending was up 8 percent to $78.1bn, while deposits rose 6 percent to $58.2bn, and investment funds and Kiwisaver business had 14 percent growth.
The bounce back in the dairy sector nearly halved the amount of bad and doubtful debts to $69m.
"We have been supporting our rural customers through a challenging period and ... this has reduced the amount of provision required to set aside," Ms Chapman said.
But she said the banking market was tight and competitive, and it was having to pay more to borrow and attract deposits, and is also being hit by consumers switching from fixed to floating mortgages, which is biting into its margins.
Its net interest rate margin - a measure of its profitability - fell to 2.18 percent from 2.33 percent, but its control of costs when its income is rising means ASB's cost of doing business is improved.
Ms Chapman said ASB would keep investing in technology to cater for changing consumer demands from banks.
She said the cooling in the housing market caused by the tightening of lending rules - loan to value ratios - was welcome, and she did not see it as early signs of a significant correction.
ASB's Australian parent - the Commonwealth Bank - reported a 7 percent rise in its net profit to $AU9.9bn.
The CBA has also announced it's talking to possible buyers of its insurance businesses, Sovereign in New Zealand and CommInsure in Australia.