Notably, its mortgage book shrank by $518 million between June 30 and Dec 31 last year.
Chief executive Vittoria Shortt blamed the fall in profitability on the weak New Zealand economy.
“Bank profitability is inextricably linked to the NZ economy and the environment in which we are operating and the interest rate cycle has been a big influencing factor on the results we've posted,” Shortt said in a statement.
“The past five years have seen the official cash rate fall to a record low, followed by the steepest increase in the history of the OCR [official cash rate]. This increase has had an impact on bank funding costs, including higher offshore funding costs.”
The statement said total lending for the six months fell by 1% with home business and rural lending down 1%, “reflecting a very competitive housing market and subdued agricultural and business lending market demand.”
ASB's disclosure statement showed its on-balance-sheet mortgages fell by $518 million between June and December last year after growing by $674 million in the previous six months.
Year-on-year, the on-balance-sheet book was $156 million higher at $75.51 billion.
Shortt said two-thirds of home loan customers are now paying mortgage rates higher than 6% and the “vast majority” are managing well.
The bank's net interest margin at Dec 31 fell by 11 basis points from June 30 and was down 26 points at 2.21% compared with 2.47% a year earlier.
Interest income was up 42.1% and its interest expense more than doubled , leaving net interest income down 4.8% at $1.47 billion.
Given the weak economy, it was surprising to see losses against profit for bad debts fell to just $10 million from $49 million in the previous first half.
Net profit for the latest six months fell to $749 million from $840 million in the previous first half, with ASB's preferred cash measure, which excludes the core banking activities of hedging and other wholesale activities, was down 12% at $707 million.
ASB's owner, Commonwealth Bank of Australia, reported a 7.7% drop in statutory net profit to $A4.84 billion.
ASB's deposits grew 4% in the six months. “This financial year, we've offered some of the best term deposit rates NZ has seen in 15 years,” Shortt said.
The bank's operating costs were up 6%, reflecting investment in technology and increased salary and wage costs.
Notably, ASB's capital fell by $200 million to $10.9 billion, although its capital ratio of 15.5% remained above the Reserve Bank's minimum requirement of 12.5% including a buffer.
Shortt said ASB invested more than $37 million regulatory and risk projects and $43 million in financial crime prevention, including fraud, scams and cybercrime.
Paragraph 10 has been updated with the correct figures
