ASB accelerates mortgage lending and profit margins

ASB’s disclosure statement showed it added $3.03 billion in net new mortgages in the six months, taking its on-balance sheet mortgage book to $84.44 billion.

That compares with the $2.61 billion of mortgage lending in the six months ended June and $2.28 billion in the six months ended  December 2024.

ASB’s parent, Commonwealth Bank of Australia, said ASB’s net interest margin rose 11 basis points to 2.35% from June 30 last year and that was also up from 2.29% in the previous first half.

Higher home loan margins and other gains were partly offset by lower deposit margins “from increased competition.”

ASB’s home lending in the latest six months was 1.3 times system while its deposit growth was 1.2 times system. Turn-around times to decisions in applications through the proprietary channel averaged two days.

ASB’s ability to both grow its mortgage lending so fast and to increase margins at the same time is remarkable in that in the six months ended December 2023 the bank had shrunk its mortgage book by $518 million, with CBA chief executive Matt Comyn having complained about “pricing conduct” in New Zealand eroding margins.

ASB’s net interest income rose 7.4% and its charges against profit for bad debts fell to $3 million from $17 million in the previous first half, but that was offset by a 20.7% jump in operating expenses.

ASB said the latter reflected the impact of it settling the class action against it for failing to advise customers in writing of loan changes.

In October, ASB agreed to settle the case for $135.6 million and the High Court approved the settlement on January 14.

ASB said its investment in people, technology modernisation, digital experience and regulatory compliance also rose.

The settlement meant ASB’s bottom-line net profit barely rose to $765 million from $763 million in the previous first half.

The bank highlighted its KiwiSaver performance, saying that funds under management (FUM) rose more than $1.7 billion to more than $20.6 billion, “thanks to continued strong returns to customers and top quartile performing funds.”

Including other investment products, ASB has more than $31 billion in FUM.

“While the geopolitical outlook remains uncertain, we are seeing more confidence in the economy, supported by lower interest rates and good export earnings in key sectors,” said chief executive Vittoria Shortt.

“This is evident in the uptick we’ve seen in business lending, with more lending growth across small business, commercial and rural this half than in the previous financial year,” Shortt said.

“We remain well-positioned to support our personal and business customers as they continue to tackle higher costs, navigate volatility or transition to growth.”
In November, ASB extended the capability to lodge single home loan applications through its ASB mobile app to include joint home loan applications, she said.
“Customers can track the progress of their application and view indicative pricing in the ASB mobile app so they remain informed at every step.”
CBA reported its net profit for the six months rose 5% to A$5.41 billion with ASB contributing 11%.