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ASB banks $908m full-year profit

NZ Newswire logoNZ Newswire 9/08/2016 Paul McBeth

ASB Bank boosted annual earnings by 5 per cent as increased business and mortgage lending boosted the lender's income streams facing tighter margins in a highly competitive market.

Cash profit rose to $908 million in the 12 months ended June 30 from $864m a year earlier, ASB's parent Commonwealth Bank of Australia said in its accounts.

Total banking income gained 6 per cent to $2.14 billion with the bank's loan book expanding 5 per cent to $72.32b from a year earlier. The bank took a $130 million impairment charge in the year, up from $89m in 2015, due to increased provisioning of dairy sector loans and higher unsecured retail loan provisioning.

"The result was driven by operating income growth of 6 per cent representing strong lending and deposit growth, partly offset by margin compression across key products, higher operating expenses, and increased loan impairment expense," CBA said.

Local lenders are expected to get a break on Thursday with the Reserve Bank poised to cut interest rates to a new record low, with speculation they might not pass on all of the reduction to borrowers as credit growth outstrips deposits. A lack of ready depositors means the banks have to go to more expensive international wholesale markets for funding.

CBA's Sovereign Assurance insurance unit posted a 15 per cent drop in annual cash profit to $105m as expenses rose 9 per cent to $135m on increased staff costs and spending on new technology. That outpaced a 2 per cent increase in insurance income to $230m as unfavourable claims offset annual premium growth.

The New Zealand units contributed $A877m ($NZ938.07m) to CBA's $A9.45b ($NZ10.11b) cash profit in the year, up 3 per cent from 2015. The Australian lender's banking income rose 6 per cent to $A21.8b ($NZ23.32b), with its dominant retail banking services division delivering the biggest increase to the group's earnings.

CBA's board declared a final dividend of A$2.22 a share, payable on Sept. 29 and taking the annual payment to A$4.20.

The ASX-listed shares last traded at A$78.41 and have dropped 8.3 per cent so far this year.

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