KEY POINTS:
The "credit crunch" bedevilling international money markets is being felt by local banks but is unlikely to result in higher interest rates for homebuyers and other customers, says ASB Bank chief executive Hugh Burrett.
The bank yesterday reported an underlying June year net profit to $480 million, an
increase of 9 per cent on last year but a marked deceleration from the 16 per cent growth in 2005-2006.
The bank's assets grew by 19 per cent to $52.9 billion against overall market growth of 15 to 16 per cent.
"We still have had very good growth," said Burrett.
However, the slowing growth in net profit was down to competition and the resulting erosion of the margins the bank earns on money it lends homebuyers and other borrowers.
ASB's net interest margin for the year fell to 1.83 per cent from 1.93 per cent a year ago and 2.2 per cent in 2005.
Nevertheless, Burrett said 9 per cent increase in net profit in the current market was "still a pretty credible result" and would be probably be the envy of ASB's rivals.
He didn't believe the problems in international money markets related to the fallout from the US sub prime mortgage woes would have a big impact on New Zealand banks and their customers "at this point".
"We are seeing some effect in the wholesale markets where we raise money offshore. We would probably see an extra cost of 6 to 8 points [0.06 to 0.08 percentage points] coming in.
"We will gradually over time be hurt a little. You won't be able to pass that on because it's a competitive market. I don't think the consumer's going to see much of that."
ASB, which is owned by Commonwealth Bank of Australia, said it held its share of the local mortgage market over the year despite stiff competition but made gains in other areas including business and rural banking.
However, Burrett said the housing market was now clearly softening.
"We definitely saw a bit of a slowdown in early July, that's continued on."
The number of new loans being written by the bank had now fallen by about 20 per cent.
"We have definitely seen a slowing in the last couple of weeks."
Burrett put that down to the impact of the Reserve Bank's four interest rate increases rather than any anxiety about the overseas market turmoil.
Despite those issues, he was confident the local economy and ASB would have "a good solid year". The dollar's recent fall would provide "considerable relief, in time, for the exporters".
