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Record ASB Bank Result Achieved

August 21, 2002

Record ASB Bank Result Achieved By Growth And Productivity Gains

Statement made by Gary Judd QC, Chairman, ASB Bank Limited

Across the board growth and a sharp focus on cost management and margins assisted ASB Bank to lift audited operating profit by 23% to a record $225 million during the financial year ending 30 June, 2002.

In particular, our corporate, rural and personal banking divisions posted excellent performances, but our ongoing growth and its conversion into an excellent financial result is the sum of a total team effort.

This is reflected in our achievement of reducing the percentage of total operating expenses to income to 51.3% (from 54.5% last year), representing a significant productivity gain of 6%.

For the first time we have lifted our return on assets to above 1% (achieving 1.02%) which has been a key objective we have been working towards for some years.

At the same time we went against the banking trend by increasing our workforce by some 90 full-time equivalent employees, bringing staff numbers to 3050, and increased our branch network by 1 to 119.

ASB Bank continues to find its combination of technology based products and services, supported by customer services levels rated as the best in the industry, to be a winning formulae.

We achieved market share gains in all the major banking sectors, and grew personal banking assets by 16%, rural assets 29%, business assets 5% and corporate/treasury assets 38%.

New home lending approvals increased by 51% to $4.7 billion, the highest level of lending in a 12-month period.

Income from financial service activities such as insurance, wealth management and sharebroking increased 28%.

Total operating income for the Bank increased by 12% to $724 million, with net interest income increasing 11% to $508 million and other income 15% to $215 million.

Income from transaction fees was $68 million, representing an increase of 14%.

Total operating expenses at $371 million were up 6%.

Provisioning for debts at $18 million was up $4.5 million and that for taxation at $110 million up $13.3 million.

Total advances at year end were $19 billion, up 18%. While lending for housing remains our largest lending sector, ASB Bank is now a significant rural and business lender with advances at year-end exceeding $5 billion. During the year the Bank’s rural lending exceeded $2 billion, a milestone achieved five years ahead of our planned target date.

Total deposits at year end stood at $22.7 billion, up 21%, with a significant feature of our funding being the high level of support we receive from our customer base.

The Bank’s net interest rate margin for the year was 2.3% (down from 2.46%) and this is the lowest margin the Bank has achieved in recent years. Tight margins reflect the extremely competitive banking environment that exists in New Zealand.

Total assets at year end stood at $24.3 billion, up 21%.

The Bank’s return on equity was 24.26% (up from 22.3%) and its capital adequacy ratio 10.44% (up from 10.07%) against a Reserve Bank of New Zealand minimum requirement of 8%.

The Bank’s move into the broader range of financial services continues to make advances, and during the year the Bank passed the milestone of having $1 billion in funds under management.

Stockbroker ASB Securities is now well established as a market leader, and during the year the Bank appointed a team of specialist insurance managers to promote our range of life, disability and health products.

Note: ASB Bank’s result does not include the results of Sovereign Limited.

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