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ASB Bank Grows At Twice The Market Rate

August 11, 2004

Financial results statement

ASB Bank Grows At Twice The Market Rate

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

ASB Bank grew its business at twice the average being achieved by other banks during the 12 months ended 30 June 2004, and in the process lifted audited after tax operating profit by 14% to $317 million.

The result includes the expensing of $9 million (post tax) of additional software development costs. Taking this into account, underlying after tax operating profit has increased by 17%.

By year end total assets had grown to $33 billion and our total lending stood at $28.8 billion, up 29% on 12 months previously.

A buoyant housing market, within which we lent record levels to people to buy homes, and a vibrant business economy, were at the heart of our excellent result.

However, through getting the balance right between developing outstanding customer service, providing leading edge IT based products and services, and competitive pricing, ASB Bank achieved more than our natural share of market growth.

During the year we increased our net lending by an exceptional $6.5 billion. Within this figure net housing loans during the 12 months increased by $4.5 billion, net business lending by more than $1 billion, and net rural lending by more than $550 million.

The focus we have placed on building our business banking presence over the past two years has seen us make impressive inroads into this sector. In November 2003 a separate Corporate Banking division was established to reflect our focus and growth in this area.

Business lending growth year on year was 26% while our business customer base grew 15%.

We also continued to build our share of the rural market, growing our business by 22%, and in the process maintained our position as the country’s third largest lender to the important farming sector. Our customer base grew 20%, providing a solid base for ongoing penetration of this important sector of the economy. The Bank continued to be a major manager of business and community savings and investment. Total bank deposits increased by 20% to $30.8 billion through the strong savings and investment support of our 1 million customer base.

It is a tribute to our staff that for the sixth successive year ASB Bank was rated “best overall major bank” in the annual University of Auckland survey of banks, and was rated “best business bank” for the fifth consecutive year.

Other awards to come ASB Bank’s way during the year were

two from the Telephone Users Association of New Zealand (TUANZ) - to ASB Bank Fastnet Classic service for “best financial service” (for the third consecutive year) and to our Customer Service Centre for being the country’s “best large” customer service centre. Our service centre answers more than 3.7 million telephone calls and emails a year.

Our “Ira” campaign being voted “people’s choice” at the Axis Awards and making the “fab all time 5” in a survey of the last decade’s top advertising campaigns, and BankDirect’s “Roland” advertising winning the Consumer Services category of the 2004 Marketing Magazine awards.

The Bank’s employee “satisfaction” level, as measured by the international survey firm Gallup, was at a best practice 91st percentile. Gallup has advised us it is the highest for any financial institution they have measured world wide.

Total operating income for the Bank at $937 million was up 10%, with $688 million being achieved through net interest earnings. The net interest margin at 2.27% was down by 11 basis points and was at the lowest level ever recorded.

Income derived from transaction fees and services was 9% of total income at $84 million, while that from the provision of financial services, including card services and managed funds was $97 million.

Productivity improvements saw the expense to income ratio fall slightly to 47.65% (from 47.86%) with operating expenses increasing by 10% to $446 million.

The debt provisions expense was $21 million ($25 million), bringing the total provision to $117 million ($98 million), while taxation expense was $153 million ($141 million).

Return on ordinary shareholder’s funds for the year was 24.51% (25.43%) and return on total average assets was 1.05% (1.07%). The risk weighted capital adequacy ratio was 10.18% against a Reserve Bank of New Zealand requirement of 8%.

At year end the Bank employed 3575 full time equivalent employees, up by 314 positions.

ENDS

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