Home Loans,margins Lift Earnings For Advance

Advance Bank lifted restated earnings 28 per cent to $18.2 million in the six months to 30 November. It was boosted by strong demand for home loans and a widening of margins.

The improvement came despite a blowout in doubtful debts and written-off loans, which increased from $4.4 million to $17.6 million.

The earnings increase would have been half the size but for a change in Advance's accounting methods. It disqualified profits from the sale of properties in the earlier period, which it had originally counted as earnings.

Mr John Thame, Advance's managing director, said the increase in the bad-debt provision was because of declining property values.

He announced specific provisions of $14 million, general provisions of $2.2 million and the write-off of $1.4 million of bad debts.

Non-performing loans _ loans where borrowers have fallen behind on interest payments _ amounted to $83.2 million at the end of November.

The 17 per cent increase in management expenses was partly due to the acquisition of the Canberra Building Society on 1August. This ``performed significantly better than expectations".

Advance's interest margins widened significantly, because of the Canberra acquisition and a surge in housing loans of $501 million for the period. Mr Thame said home lending recovered ``strongly".

The total loan book expanded from $3.9 billion in November 1989 to $5.4 billion 12 months later. About 70 per cent of the Sydney-based bank's portfolio is lent to owner-occupied or investment housing.

Advance announced a fully franked interim dividend of 13 cents, up from 11 cents last time. The shares put on 27 cents to $4.50 in a bullish day for bank shares.

Advance, which is interested in acquiring more building societies, was not negotiating with any specific society, said Mr Arthur Delbridge, a spokesman.

Instead it was pushing ahead with internal expansion. It opened its first street-level branch in Melbourne's Collins Street in June and is looking to expand further in Victoria.

Advance's largest shareholders are State Bank of New South Wales (10 per cent), Brierley Investments (9.9 per cent), ANZ Bank (9.1 per cent) and Westpac (7.6 per cent).