ASB Bank Increases Profit And Share Of Market
[Statement made by Gary Judd Q.C., Chairman, ASB Bank Limited]
Expansion into new areas of activity and increased market share helped increase ASB Bank’s audited after tax operating profit by 28% to $150.1 million for the year ended 30 June 2000.
A key area of growth in the past few years has been in business and rural lending and these areas now account for 28% of the Bank’s total advances (up from 25% last year).
Increasingly, businesses and farmers are recognising we have developed strong capabilities to support them.
Growth in these two sectors has been achieved through the greater use by customers of technology based products and services. This enables customers to undertake their banking at a time and place convenient to them through the telephone, PCs or the Internet.
In addition, the Bank has now established itself as a significant supplier of financial services in banking, insurance, funds management, stockbroking and investment and advisory services.
Total operating income for ASB Bank during the 12 months was $552.6 million, up 16%. After allowing for debt provisioning expenses of $11.4 million ($12.8 million) and operating expenses of $325.5 million (up 13%), operating profit before tax was $216 million (up 22%).
The taxation provision at $65.6 million is up 10%.
The Bank’s return on equity increased to 19.7% (17.5%) the return on total average assets was up at 0.91% (0.84%).
The Bank’s capital adequacy ratio was up at 9.57% (8.73%) against the Reserve Bank’s minimum requirement of 8%.
For the fifth consecutive year the Bank’s net interest margin (the difference between interest payments received and interest payments made) declined – to 2.31% from 2.36%.
This continual decline in interest rate margin reflects the fundamental change taking place in New Zealand banking where customers are charged fees for the specific services they use, rather than have those services subsidised through the interest margin.
Ultimately, such a charging policy is in the best interests of the majority of customers.
Total ASB Bank deposits at year end were $16.2 billion, up 17%, while total advances stood at $14.4 billion, up 16%. Total assets at year end were $17.4 billion, up 18%.
Our corporate, treasury and institutional operations had another exceptional year and performed well above budget. During the year we undertook two large structured financial transactions, a new area of activity for ASB Bank.
The Bank continued to perform strongly in its traditional sector of personal banking, increasing advances by 8%. We advanced $2.6 billion against residential properties during the year, up 11% on last year. This was an outstanding achievement during a period when the housing market was relatively flat and in decline in some regions.
Customer demand continues to drive the greater use of technology and only 6% of all financial transactions undertaken with us are now conducted within a branch. The main function of branches has moved to being sales centres, and the new generation of branches we are opening reflect this focus.
Funds management has been a success story for the Bank and at year end the level of funds under management had increased to $690 million, nearly double that 12 months previously. Three of our funds have reached the level of maturity which qualifies for industry ratings, and two have achieved maximum five star ratings (Easyplan Balanced and Easyplan Conservative) while Easyplan Cash Enhanced has a three star rating.
We increased the range of funds on offer including a Superannuation Master Trust, which enables companies to establish retirement savings schemes for employees.
During the first full year of operation ASB Securities established itself as an industry leader and has become an integral part of our portfolio of financial services. Through ASB Securities customers can trade on the New Zealand and Australian Stock Exchanges online.
Our virtual bank, BankDirect, continues to have the largest customer base of any like organisation in New Zealand, and ASB Bank has, proportionately, a wider penetration of Internet use by its customers than any other bank in Australasia.
Please note: This result is for ASB Bank Limited only. The results of the Bank’s sister company Sovereign Limited will be released on Thursday, 31 August.