ASB boss: “The low interest rate environment was abnormal”

ASB chief executive Vittoria Shortt announced an after-tax profit of $1.42 billion on Wednesday.  She was paid A$3.66 million for her year on the job.

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ASB chief executive Vittoria Shortt announced an after-tax profit of $1.42 billion on Wednesday. She was paid A$3.66 million for her year on the job.

The ultra-low interest rates homeowners experienced in 2020 and 2021 were “abnormal,” said ASB chief executive Vittoria Shortt.

A return to higher mortgage rates represented a return to a more normal environment, she said.

“The message is; the low rate environment was abnormal. What we’re seeing now is a return to more normalized interest rates,” said Shortt, who reported after-tax profit for the bank of $1.42 billion in the 12 months to the end of the year. June.

As Reserve Bank Te Pūtea Matua raised the official exchange rate by 225 basis points between October and July, ASB responded by raising its service test rate from 6.45% to 7.85%.

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This is the rate the bank uses to calculate whether new borrowers can afford the loans they apply for.

Because of the higher test rates, Shortt said his borrowers are coping as their loans come to the end of fixed rate periods and their loans transition to higher rates.

“About a third of borrowers moved to new rates during this time, which are about 1% higher,” Shortt said.

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“What we were seeing is that these clients are doing very well,” she said.

Figures presented to investors on Australia’s ASX equity market showed that $144 million in home loans that had been restructured due to the economic impact of the Covid pandemic were reduced to normal levels in the 12 months ending at the end of June.

The bank made sure borrowers coming to the end of a fixed loan period were aware of what to expect and, if they needed it, offered help to prepare, she said. declared.

Shortt acknowledged that ASB’s earnings looked strong at a time when households were squeezed by high inflation and mortgage lending rates, but she said: “Earnings are really a function first of the neo-economics. zeelandic.

“There has been growth even though we are in a difficult operating environment.”

“The second thing is our size,” she said.

Shareholders had deployed $10 billion of capital in ASB in New Zealand and now had a loan portfolio of more than $100 billion, she said.

“A combination of these factors means that we will always have a very large profit,” she said.

The annual report from ASB’s parent company, the Commonwealth Bank of Australia, showed it was paid A$3.66 million (NZ$4.04 million), down from A$2.88 million. Australian dollars the previous year.

ASB has reduced the fees for its KiwiSaver program, like many other providers.

Kirk Hargreaves / Stuff

ASB has reduced the fees for its KiwiSaver program, like many other providers.

Despite the rise in mortgage rates, it is the depositors who seem to have been treated less well by the banks.

The bank’s overall net interest margin remained stable, but it recorded higher margins on deposits, and people kept more money in transaction accounts during the year, documents show. published on the ASX.

Shortt said margins on deposits go up and down over time.

“It’s our job to find the right balance within the context of our operating environment,” she said.

“We have a context right now where we have a lot of people who have borrowed, they are experiencing higher interest rates, they are experiencing a very significant increase in consumer prices. We balance all of that,” she said.

She said ASB operated in a highly competitive banking market.

Changes to responsible lending rules introduced in December by Commerce and Consumer Affairs Minister David Clark have made it harder to get loans.

“Recent tweaks haven’t really made a big difference,” she said.

Over the past 12 months, the bank has lowered its KiwiSaver fees, including waiving its annual membership fee entirely, like many other KiwiSaver providers.

But Shortt failed to see that as an admission the fee was too high.

She said it was part of a banking industry-wide movement that has seen many fees reduced or eliminated across the industry.

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