ASB Bank reported a cash net profit after tax (NPAT) of $822 million for the six months to 31 December 2022, an increase of $80 million or 11% on the prior comparative period.
The result was driven by 4% growth in total lending, with home lending up 5% and business lending up 6%.
Total regulatory capital held by ASB increased in the 12 months to December 2022 by $1.9 billion to $10.8 billion.
Key factors driving ASB Bank’s strong performance
There were a number of key factors driving ASB Bank’s strong performance in the first half of 2023, including:
- Strong lending growth: ASB Bank’s total lending grew by 4% in the first half of 2023, driven by both home and business lending. This growth was supported by a strong New Zealand economy, with low unemployment and high terms of trade.
- Net interest margin expansion: ASB Bank’s net interest margin expanded by 33 basis points in the first half of 2023, to 252 basis points. This was due to a number of factors, including rising interest rates and a shift in the composition of ASB’s lending portfolio towards higher-margin products.
- Cost control: ASB Bank was able to control costs effectively in the first half of 2023, with operating expenses increasing by only 17%. This was despite continued investment in people, technology, and regulatory compliance.
Challenges facing ASB Bank in the second half of 2023
ASB Bank is facing a number of challenges in the second half of 2023, including:
- Rising inflation and interest rates: Inflation and interest rates are both expected to continue to rise in the second half of 2023. This could put pressure on household and business incomes and spending, and could lead to an increase in loan defaults.
- A more challenging housing market: The New Zealand housing market is expected to cool in the second half of 2023. This could lead to a decline in house prices and a slowdown in housing market activity.
- Geopolitical uncertainty: The ongoing war in Ukraine and other geopolitical tensions are creating uncertainty in the global economy. This could have a negative impact on the New Zealand economy and on ASB Bank’s business.