Cash NPAT was $1.03 billion, an increase of 13% on the prior comparative period. Cash NPAT is the preferred measure of financial performance as it presents ASB’s underlying operating results and excludes items that introduce volatility and/or one-off distortions, and are not considered representative of ASB’s on-going financial performance.
ASB chief executive Barbara Chapman said the strong annual result was the product of sustained lending and deposit growth across the business, generated against the backdrop of an uncertain global economy, volatile offshore funding costs and pressure on margins.
“Over the past year, we have remained focused on delivering sustainable, diversified balance sheet growth across our key customer portfolios. All our business units performed well and we continue to experience sustained momentum, despite some external headwinds and a rapidly evolving financial services market.”
Home loans increased by 7% against the prior year while business, commercial and rural lending grew by 11%. This contributed to an increase in total customer lending of 8% on the previous financial year. At the same time, customer deposits grew by 6% in a highly competitive market for bank deposits.
ASB’s cash net interest margin (NIM) remained under pressure, declining by 15bps. “This reduction was driven by a combination of increased funding costs and higher net costs relating to customers breaking fixed rate loans,” Chapman says in a statement.
Operating income growth
Operating income growth was 5% (on a cash basis). This, combined with a prolonged period of near flat expense growth, contributed to a cost to income ratio of 35.8%, an improvement of 140 basis points over the prior year.
“Thanks to our strategic focus on productivity, we have succeeded in containing costs, simplifying our processes and improving efficiency,” Chapman says. “Ultimately this allows us to invest in providing exceptional experiences to customers across our business, whether they choose to interact with us in person or digitally.
“With this in mind, we have continued our strong investment in technology and innovation and have introduced a range of practical new enhancements to our digital offerings. Just one example is our digital home loan re-fix functionality, which means customers no longer require staff assistance to re-fix their home loan rate. Instead, they can access personalised pricing and complete their re-fix when and where it suits them.”
Reduction in impairments
Loan Impairment Expense (LIE) reduced by 47% (-$61m), following decreased provisioning, primarily due to the continuing recovery of the dairy sector. “We have been supporting our rural customers through a challenging period and as we enter the next phase of the cycle, this has reduced the amount of provision required to set aside for bad and doubtful debts,” Ms Chapman says.
