ASB’s full year result reflects continued economic momentum
Improving economic conditions have contributed to ASB recording a 14% increase in Statutory Net Profit after Taxation (NPAT) to $806 million for the year ended 30 June 2014. For the prior year, the result was $705 million.
Cash NPAT was $776 million, an increase of 11% on the prior year. Cash NPAT is the preferred measure of financial performance as it presents ASB’s underlying operating results and excludes items which introduce volatility and/or one-off distortions, and are considered not representative of ASB’s on-going financial performance.(1)
Key financial points
· Cash NPAT of $776 million, an increase of 11% over the previous financial year
· Statutory NPAT of $806
million, an increase of 14%
· Net Interest Margin increased by 0.13% to 2.38%
· Loan impairment expense was $56 million, unchanged from the previous year
· Advances to customers up 5% to $60.664 billion
ASB’s Chief Executive Barbara Chapman said that the Bank achieved a strong annual result against the background of a steadily improving economy and favourable funding conditions.
“Our strategic goals have helped us achieve sustainable, profitable growth over the past several years. Over the course of the financial year, all areas of the business have performed well with solid lending growth across all key portfolios of 5%, despite heightened price assertiveness in the home loan market.”
“The improving New Zealand economy has undoubtedly played a role with rising confidence and solid lending growth, particularly among business and rural customers. Both deposit and lending volumes have been positive compared to the prior year. This broad momentum has resulted in business and rural lending rising by 8% against the previous financial year, significantly ahead of market.”
Changes to the mix of assets and funding, combined with favourable funding conditions, resulted in a solid 13 bps improvement in net interest margin year-on-year, increasing to 238 bps.
Operating expenses rose by 4% against the previous year due to a combination of increased costs including those associated with the move to ASB’s new North Wharf headquarters and on-going investment in IT infrastructure. At the same time, headcount remained flat over the course of the year. With operating income increasing 9%, the Bank’s cost to income ratio reduced 200bps to 38.9%. “Expense growth was partly offset by ASB’s strategic focus on driving productivity gains across the business, particularly around streamlining processes to make it as effortless as possible for our customers to bank with us,” said Ms Chapman.
Loan impairment expenses remained static at $56 million against the prior year due to strengthening economic conditions and a robust housing market, particularly in Auckland and Christchurch.
“We have seen increased customer migration to our digital channels, driven by changing customer preferences and our strategic investments in this area. Our focus has remained on ensuring we are delivering the highest quality online and mobile experiences in the market,” says Ms Chapman. “One example of this has been our drive to make it easier for customers to engage with their KiwiSaver by making balances visible in internet and mobile banking along with introducing the ability to make one off payments into KiwiSaver accounts instantly.”
ASB also launched a dedicated Mobile Business app in September 2013, offering a range of services to business customers including the ability to authorise payments securely from anywhere.
ASB’s focus on enhancing its mobile services contributed to the Bank being named ‘Bank of the Year’ by international magazine The Banker in December 2013. In addition, the June 2014 Retail Market Monitor rolling 12 month average confirmed that the ASB Mobile Banking app was rated first among major banks in terms of satisfaction around ease of use and functionality.
“At ASB we acknowledge the importance of balancing profitability with our role as a good corporate citizen and of creating value for our people, customers and the communities in which we operate,” says Ms Chapman. “With this in mind, in the 2014 financial year we contributed more than $12 million in sponsorships, donations, and investments to support the arts, diversity, sports, the environment and our communities.”
“For our people, we have worked hard to build a world-class working environment that embraces diversity and inclusiveness and allows everyone to achieve their full potential. Our annual employee engagement survey confirmed that ASB is at the top of the ‘best in class’ category, placing ASB as one of the most highly engaged workforces in the finance industry worldwide. In addition, we have continued to embed our diversity strategy over the past 12 months, focusing on the key areas of gender, culture, sexual orientation and gender identity. Highlights of the past year included winning the Supreme Award in the White Camellia awards in recognition of ASB’s commitment to gender equality and also our participation in the Rainbow Tick diversity and inclusiveness audit programme.”
In addition, ASB’s GetWise financial literacy programme celebrated another significant milestone in June 2014, with its 400,000th student attending a GetWise learning module, helping them on the path to improved financial literacy.