ASB posts $124m Sept qtr loss but underlying profitability rises

ASB Bank has reported a $124 million bottom line loss for the September quarter, reflecting a $77 million charge for bad loans plus a $208 million charge for tax due on structured finance transactions going back to 2001.

Thursday, November 19th 2009, 4:51PM | Read Comments

by Jenny Ruth

However, the bank's underlying profitability rose strongly.

ASB says it has provided for the structured finance transactions "in light of recent High Court judgements".

In early October, the High Court decided Westpac owes the Inland Revenue Department nearly $1 billion on its structured finance transactions and in July the National Australia Bank-owned Bank of New Zealand lost its case worth $564 million before penalty charges. Both banks are appealing.

ASB's net loss compares with a $94 million net profit in the September quarter last year.

Its $77 million charge for bad loans is up from just $19 million in the September quarter last year. Of this year's charges, $41 million, or 53.2%, relate to residential mortgages. In the year ended June, residential mortgages accounted for only 31% of total charges for bad loans.

The bank's net interest earnings were up 7.9% to $259 million for the quarter while total operating income was up 17% to $365 million. Total operating expenses rose just $2 million to $168 million.

ASB's mortgage book grew by $335 million to $37.47 billion in the three months ended September. Using Reserve Bank figures as a proxy for the market, ASB accounted for 21.9% of new lending on mortgages by registered banks in the quarter while its market share at September 30 was 23.3%.

ASB had another $4.62 billion in off-balance sheet mortgages, those approved but not drawn down.

ASB's mortgages with loan-to-value ratios (LVRs) above 80% fell to 15.3% of its book from 15.9% three months earlier.

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