BNZ posts rise in cash earnings

The home mortgage market is growing at about 3 per cent a year but is nowhere near where it was before the global financial crisis. Photo / Martin Sykes

BNZ's cash earnings have picked up in the past six months but the bank says demand for business and household lending remains subdued.

The business, owned by National Australia Bank, yesterday reported cash earnings of $255 million for the six months to March 31 - down 8.6 per cent on the same period last year but an increase of 7.1 per cent on the $238 million it made in the six months to September 30.

Chief executive Andrew Thorburn described the result as sound and said it indicated the worst of the recession was behind New Zealand.

Thorburn said the bank had seen a 9.1 per cent increase in its retail deposit book and a small increase in home loan lending but its business lending had been flat.

"This half business credit growth has been flat to negative. There hasn't been big demand for lending, which means there hasn't been growth in our loan book."

He expected the low demand to continue for the rest of the year.

"We think that will be pretty much the case for 2010. Companies and households are still de-leveraging and paying off debt. It's just a cautious approach which means they are not making a big investment."

The bank's home lending had grown slightly over the six months and the company had held its market share.

Thorburn said the home mortgage market was growing at about 3 per cent a year but was nowhere near where it was before the global financial crisis.

"It is being impacted by a few things. Unemployment being high and people wanting to pay back debt."

Thorburn said he hoped home lending would continue to grow at a steady pace.

"I think hopefully it will be a more steady return, I don't think it will be very good for the economy if it is a fast rise."

But Thorburn said the economy needed to see more growth in business lending to create jobs and grow exports.

Overall the bank's loan book grew by 4 per cent to $55 billion compared to the same six-month period last year.

Thorburn said BNZ had focused on growing its domestic retail deposit book over the past six months and had increased its share of the market to 17.5 per cent, up from 16.1 per cent despite the competitive environment.

At $27.7 billion its retail deposit book was now at the highest level for two years. Chief financial officer Ken Christie said the bank was also working on lengthening its deposit maturities to meet new liquidity and capital requirements.

Recently it had been able to secure a new international funding line for a seven- year period which would not have been possible a few months ago.

New Zealand's banks were well regarded in the overseas markets but the funding still came at a cost, Christie said.

BNZ's provisioning for bad and doubtful debts had fallen from $99 million to $88 million and its net interest margin was up 12 basis points to 2.08 per cent.

Thorburn said while the margin was up it remained at a historical low.