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ASB's mortgage book shrank $518m from June

[UPDATED] ASB has reported a 10.8% fall in first-half statutory net profit, reflecting a sharp drop in profit margins as well as sharp drops in both interest income and interest expense.

Wednesday, February 14th 2024, 11:37AM 3 Comments

Notably, its mortgage book shrank by $518 million between June 30 and Dec 31 last year.

Chief executive Vittoria Shortt blamed the fall in profitability on the weak New Zealand economy.

“Bank profitability is inextricably linked to the NZ economy and the environment in which we are operating and the interest rate cycle has been a big influencing factor on the results we've posted,” Shortt said in a statement.

“The past five years have seen the official cash rate fall to a record low, followed by the steepest increase in the history of the OCR [official cash rate]. This increase has had an impact on bank funding costs, including higher offshore funding costs.”

The statement said total lending for the six months fell by 1% with home business and rural lending down 1%, “reflecting a very competitive housing market and subdued agricultural and business lending market demand.”

ASB's disclosure statement showed its on-balance-sheet mortgages fell by $518 million between June and December last year after growing by $674 million in the previous six months.

Year-on-year, the on-balance-sheet book was $156 million higher at $75.51 billion.

Shortt said two-thirds of home loan customers are now paying mortgage rates higher than 6% and the “vast majority” are managing well.

The bank's net interest margin at Dec 31 fell by 11 basis points from June 30 and was down 26 points at 2.21% compared with 2.47% a year earlier.

Interest income was up 42.1% and its interest expense  more than doubled , leaving net interest income down 4.8% at $1.47 billion.

Given the weak economy, it was surprising to see losses against profit for bad debts fell to just $10 million from $49 million in the previous first half.

Net profit for the latest six months fell to $749 million from $840 million in the previous first half, with ASB's preferred cash measure, which excludes the core banking activities of hedging and other wholesale activities, was down 12% at $707 million.

ASB's owner, Commonwealth Bank of Australia, reported a 7.7% drop in statutory net profit  to $A4.84 billion.

ASB's deposits grew 4% in the six months. “This financial year, we've offered some of the best term deposit rates NZ has seen in 15 years,” Shortt said.

The bank's operating costs were up 6%, reflecting investment in technology and increased salary and wage costs.

Notably, ASB's capital fell by $200 million to $10.9 billion, although its capital ratio of 15.5% remained above the Reserve Bank's minimum requirement of 12.5% including a buffer.

Shortt said ASB invested more than $37 million regulatory and risk projects and $43 million in financial crime prevention, including fraud, scams and cybercrime.

Paragraph 10 has been updated with the correct figures

Tags: ASB

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Comments from our readers

On 14 February 2024 at 12:33 pm valkyrie6 said:
ASB gave up on the Mortgage adviser industry years ago when their lending policy became abrasive, conditioning valuations on nearly every single deal and only allow one valuation provider that customers had to use monopolizing this customer cost.
ASB also took away advisers’ ability to manage their clients on going interest rate re fixes which was/still is a huge part of the adviser customer relationship, forcing customers to “re fix online without any independent human advice at all.
On top of this they also changed the time period for when a customer can re fix and lock in a new rate prior to rate expiry from 60 days out to only 35 days out, which in a rising interest rate market is really not in customers best interests or policy competitive with other banks.
Worst of all the major let down was the adviser units being under staffed or having incompetent people in these units especially Wellington, this would have cost ASB Millions in new lending.
On 15 February 2024 at 7:48 am Murray Weatherston said:
Is this statement for real "Interest income was down 42.1% and its interest expense more than halved, leaving net interest income down 4.8% at $1.47 billion."

Hard to see close to 50% fall in either interest income or interest expense - would need a mixture of big falls in interest rates which I didn't see, or a big collapse in loans and deposits - which I also haven't seen.

On 15 February 2024 at 9:20 am Amused said:
This result above ties in with Mortgage advisers not supporting ASB as reported in the latest edition of TMM. ASB’s strength has always been its staff and the service that they provide to customers and mortgage advisers alike. In recent years though ASB seem to have had an influx of new managerial types from other organisations who for want of a better word are just “yes men”. The innovation that ASB used to have around their policy for both borrowers and depositors that made them such a good bank to be with has now disappeared.

ASB’s home loan policy for example is currently not what it needs to be to win business from advisers required by law now to put the financial interests of their clients first. ASB are disadvantaging their existing home loan customers who change their borrowing entity during their fixed rate term i.e. customers are being forced now to give up the fixed rate they are currently on. ASB customers are now unable to negotiate and reserve an interest rate earlier than 35 days from their fixed rate expiry when other banks will let their customers do this 60 days out. It goes without saying that until recently ASB’s stance around its pricing on home loans has been embarrassing. Comparing an offer letter from a competitor bank such as ANZ has been night and day, but ASB regardless have seemed unable to grasp that they won’t be winning the business. ASB have been highly uncompetitve on pricing and only now do they seem to be waking up to this fact.

Feedback given to ASB about the above has been met with silence. ASB’s official stance to mortgage advisers around their refix policy (in place now since 2021) has been that the bulk of customers refix only 35 days out. Granted this might have been the case when interest rates were falling, but when interest rates increase customers want the ability to reserve a new fixed rate as soon as possible. A bank that limits a customer’s ability to do this isn’t going to find itself at the top of any recommendation being made by a mortgage adviser. ASB Head office seems to be choosing to ignore the feedback being supplied by advisers about the bank's many current policy discrepancies which make it uncompetitve. No surprise then that advisers have now stopped sending ASB business. Lord knows what ASB would uncover if they actually started having a good look at the amount of business they were getting from mortgage advisers 10 years ago compared to what they actually get nowadays. As an ASB mobile mortgage manager said to me last year “we don’t track those kinds of stats now because then someone would have to be accountable”.

I really hope that things can be turned around for ASB because mortgage advisers and our customers desperately need another competitive lender in market. ASB used to be a no brainer recommendation to clients wanting a home loan. Sadly, not anymore.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.75 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.75 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 8 April 2024 9:21am

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