Costs surge as ASB invests heavily in technology, compliance
ASB has posted a flat half-year profit as improved lending and margins were offset by sharply higher costs, interest.co.nz and RNZ reported.
Net profit after tax for the six months to 31 December 2025 edged up to $765m from $763m a year earlier, well below the record $840m interim profit in 2022. Total income rose to $1.84bn from $1.78bn, while operating expenses jumped to $839 million from $695 million.
Net interest income – the difference between what the bank borrows at and charges for loans – rose about 8% to $1.84 billion, while net interest margin, regarded as a measure of profitability, lifted six basis points year-on-year and 11 basis points over the half to 2.35%, helped by timing effects from interest rate hedges. The increase was driven in part by higher home lending margins.
Chief executive Vittoria Shortt (pictured) said the bank was starting to see a turn in conditions.
“We are seeing more confidence in the economy, supported by lower interest rates and good export earnings in key sectors,” Shortt said. “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.”
Housing growth, low arrears and intense competition
Overall lending rose 6% to $118.7 billion, driven by an 8% lift in housing loans and 4% growth in rural and business lending. Over the year, ASB’s home lending increased by $5.8 billion and total customer deposits rose 5% ($4.5b). That growth reflects an environment where banks are aggressively chasing housing market share as interest rates fall and a wave of borrowers refix their mortgages.
From a risk perspective, credit quality remains solid. The amount set aside for bad and doubtful debts fell to $3million from $17 million. CBA reported the percentage of ASB home loans 90+ days in arrears dropping to 0.53% from 0.71%.
Expenses, regulation, and what it means for advisers
The drag on profit came from costs. ASB's operating expenses surged 21% to $839m, mostly because of the $135.6million out-of-court settlement of a class legal action brought by former consumer for alleged breaches of credit disclosure rules.
ASB, owned by Australia's CBA, described the settlement as a “pragmatic” resolution and is also lifting investment in anti‑scam and financial crime controls, cyber security, and customer support. Shortt said the bank is improving its technology to simplify processes and products, and to support growth in areas such as social housing and business technology lending.
In an unusual move, ASB did not pay a half-year dividend, citing uncertainty over the Reserve Bank’s capital review.
For mortgage advisers, ASB’s stronger margins, rising housing book, and low arrears suggest it remains a powerful player in home lending – but one operating under tighter cost and regulatory scrutiny as the market gradually regains confidence.
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