ASB 'doing well' despite hard trading conditions

ASB experienced good volume growth in home lending and deposits in the first quarter.

ASB performed well in the first quarter but operating conditions remain difficult in New Zealand, parent Commonwealth Bank of Australia (CBA) said yesterday.

CBA reported cash earnings for the September quarter of A$1.4 billion. There were no separate figures for New Zealand.

CBA said the New Zealand economy showed some signs of improvement in the quarter, but operating conditions remained challenging.

ASB experienced good volume growth in home lending and deposits in the quarter, but price competition for retail deposits had a negative impact on margins.

During a presentation the bank also noted stress in the dairy sector in New Zealand.

It said ASB's consumer arrears were improving.

CBA chief executive Sir Ralph Norris, who is a New Zealander and a former chief of ASB, said the CBA group had performed strongly during the quarter.

"The result particularly benefited from an improvement in our wealth management division as equity markets recovered through the quarter, which may not be repeated," Norris said.

While the economic outlook has improved since August, the pace and extent of the recovery remained unclear, Norris said.

"We will therefore continue to retain our conservative business settings until such time as a sustained improvement is evident."

"Our capital, provisioning, funding and liquidity levels all remain very strong."

However, the operating environment remains challenging, with average funding costs increasing and slower credit growth.

"Against this backdrop, the group continues to perform well," Norris said.

"The combination of good business momentum, continued progress on our strategic agenda and conservative business settings means we remain well-placed to meet the challenging operating environment from a position of relative strength."

CBA's impairment expense charge was about A$700 million forthe three months, ended September 30, with credit quality trends generally moving in line with expectations.

Total impaired assets increased slightly to 88 basis points of gross loans.

According to a statement from the bank, "consumer arrears remained broadly stable, with improvements in the credit cards and Bankwest home loan portfolios offset by a slight increase in CBA home loans, driven, in part, by customer take-up of repayment holidays offered under the group's customer assist programme".

CBA said competition remained strong, particularly in deposits where margins were under pressure, although its group net-interest margin improved slightly.

The bank's Tier 1 capital ratio strengthened to 8.70 per cent, while liquid asset balances were maintained at around A$87 billion.

The bank said it had "a continued prudent approach to wholesale funding, with unguaranteed long-term debt issuance accounting for 70 per cent of financial year-to-date funding".

- NZPA, AAP