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The strength of recovery at Australia’s banks is putting the sluggishness of their New Zealand counterparts in sharp relief. Australia’s largest lender, Commonwealth Bank, recently reported record profits for the six months to December, with earnings rising 50% from the year before.
The lone sour note in the bank’s otherwise triumphant results came from its New Zealand franchise. Its Auckland-based subsidiary, ASB Bank, posted an unexpected loss. Granted, this was largely down to a one-off bill imposed by the state to make up for back taxes related to a settlement with the country’s largest banks (all Australian-owned) over controversial structured finance transactions.
But even excluding this extraordinary expense, ASB’s underlying business lags behind its parent across the Tasman. For various reasons, it is unlikely to be the only New Zealand bank to be a drag on its parent’s profits in the coming quarters.
Read more at Financial Services Briefing: “Left behind” (February 16th)