ASB's impairment losses tapering

Profits are recovering for ASB Bank in New Zealand, on a quarterly basis, though the CBA subsidiary reported a net loss of NZ$10 million for the December 2009 half year, having finally paid the tax and interest penalties to the Inland Revenue Department over long disputed structured finance transactions.

While the trend in net interest income was stable during the half year, an increase in other income and lower impairments meant the bank was more profitable in the second quarter of the December half.

Net profit was NZ$199 million for the December 2009 half year, with NZ$115 million of that profit generated in the December quarter.

ASB Bank's impairment losses seem to be on a downtrend with the impairment charges in the quarter ending December at NZ$50 million compared with NZ$77 million in the quarter before.

For the half year ending December, impairment losses came to NZ$127 million. This compares with NZ $238 million in the full year ending June 2009.

Net interest margins stabilised in New Zealand at 163 basis points in December 2009 from 164 basis points in the prior half, with both higher cost of funding and higher deposit rate contributing to the drop. The bank's NIM has been dropping from about 220 basis points in June 2005.

Profit metrics are improving, but the assets base of ASB has reduced, reflecting the generally dour economic conditions.

After peaking at NZ$65.2 billion at December 2008, ASB's total assets fell to NZ$64.8 billion at the end of 2009.

Loans, however, continued their small uptrend, rising to NZ$54.11 billion in December from NZ$53.39 in June 2009 and NZ$51.14 the year before.

Deposits also rose to NZ$57.6 billion in the December quarter from NZ$56.7 billion in June, with the bank having managed to keep its retail deposit share steady at 21.4 per cent.

The bank paid a NZ$18.5 million fee to the government for the guarantee provided under the Retail Deposit Guarantee Scheme.

ASB said that with the "emerging recovery in the economy", it has lifted the salary freeze it had for staff earning more than NZ$50,000 and introduced unilaterally in the middle of 2009.