Tax avoidance settlement turns ASB to $10m 1H loss

Tax avoidance settlement pushes ASB to $10m first-half loss

By Pattrick Smellie

Feb. 10 (BusinessWire) - ASB Bank has taken $209 million of a $264 million tax and interest bill from tax avoidance settlements onto its books in the six months ended Dec. 31, the Commonwealth Bank of Australia-owned lender announced today.

The one-off hit pushed ASB to a first-half loss of $10 million, compared with a 13% increase in its parent's performance. CBA reported a A$2.9 billion net profit for the period. After adjustment for the tax settlement, ASB still had a tough first half, with underlying net earnings of NZ$199 million, down 16.4% on a year earlier.

While CBA's announcements made no reference to the tax settlements, the Australian parent did note that profit for the period decreased 36%, excluding the impact of realised gains on the hedging of New Zealand operations in "a very challenging environment" which saw a 79% increase in impairment expenses to $127 million.

"Total provisions on the balance sheet now stand at $340 million ($157 million in December 2008)," ASB said, representing 0.53% of total assets.

No dividends will be paid to CBA for the period, despite payment of a $70 million dividend to ASB's holding company.

Net interest margins remained tightly squeezed, falling 0.1% to 1.63% in the half year, and there was a "marked fall-off in demand for borrowing during the year", chairman Gary Judd said.

Judd said ASB had ridden out the New Zealand recession without staff lay-offs and was committed to a "no-offshoring" policy. A pay freeze for staff earning more than $50,000 was lifted in December.

(BusinessWire)