ASB made up for lost time with $2.28b net new mortgages in 1H

ASB Bank looks to be making up for lost time in the mortgage market with its home loan book swelling by $2.28 billion in the six months ended Dec 31.

In the same six months a year earlier, ASB’s mortgage book actually shrank by $518 million, although it managed to report positive growth for the year ended June, 2024 of $488 million.

Between Dec 31, 2023 and Dec 31, 2024, the book grew by $3.28 billion to $78.79 billion.

Chief executive Vittoria Shortt has previously admitted that her bank had lost ground with mortgage advisers in 2023 because of its uncompetitive pricing.

The bank, the New Zealand subsidiary of Commonwealth Bank of Australia, lifted first-half net profit 2% and cited falling interest rates as “providing some relief” for customers.

“New Zealand has been through the most difficult economic cycle in a generation and we need to be patient with what looks like a gradual recovery,” said chief executive Vittoria Shortt in announcing the results.

“Falling interest rates bring very welcome relief for Kiwi borrowers but we’re aware most are on fixed mortgages and the benefit is yet to be felt by many households,” Shortt said.

About 45% of fixed home loan customers are expected to roll over onto a lower rate by the end of June and 70% by next Christmas.

“Since April 2024, we’ve seen borrowers shift toward shorter terms with close to half of our fixed mortgage customers choosing to fix for just six months.”

Since July 2024, ASB has cut its one-year fixed home loan rate by 1.65 percentage points and its six-month rate by 1.36 points.

Earlier today, the bank announced a 10 basis point cut to its six-month rate to 5.89%, a five basis point cut to its one-year rate to 5.49% and its 18-month rate by 15 basis points to 5.19%.

“Since April 2024, we’ve seen borrowers shift toward shorter terms with close to half of our fixed mortgage customers choosing to fix for just six months.”

The Reserve Bank began cutting its official cash rate (OCR) from 5.5% in August last year and it currently stands at 4.25% with most economists expecting a further 50 basis point cut to 3.75% when its monetary policy committee next meets on Feb 19.

ASB’s net profit for the six months ended Dec 31 rose to $763 million from $749 million in the same six months a year earlier with charges against profit for bad debts rising to $17 million from $10 million in the previous period.

ASB said that the profit increase “was more than offset by additional capital requirements.”

CBA invested a further $700 million in the half year, taking its total investment in ASB to $11.4 billion, the bank said.

ASB and the other three Australian-owned banks have come under regulatory and political fire with accusations that they’re too profitable.

Today’s announcement said ASB’s profitability measured by return on equity fell 0.6% from the previous first half to 13.5%.

Total lending rose 4% to $112 billion while customer deposits also rose 4% to $85 billion.

Net interest margin (NIM) rose nine basis points from 2.21% to 2.30%.

CBA’s net profit rose 6% to A$5.14 billion in the six months from the same six months a year earlier with its NIM rose 2 basis points (excluding liquid funds and pooled facilities) to 2.08%.