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ASB loses market share in deposits, loans; asset quality worsens

ASB Bank lost 10 basis points in market share for retail deposits in the six month period to December 2010 compared to the year earlier despite the bank continuing to offer highly competitive investment rates.

Thursday, February 10th 2011, 12:19PM

by Sophia Rodrigues

Its market share stood at 21.2% at the end of December.

The bank, however, managed to increase its deposit book by 3% to around $31 billion compared to the year before but it's unclear if retail deposits saw an increase in the recent quarter. The bank said deposit margins remained under pressure in an extremely competitive market.

During the recent three month period, ASB was mostly active in the short-term segment and has been a market leader in the 90-day term following a sharp 125-basis-point hike in November. ASB has also been offering top rate in the one-year segment.

Apart from retail deposits, ASB lost market share in both the home loan and the business lending segment, losing by a big 60 basis points in the home loan market share to 22.4% and 10 basis points  in business lending to 9.2%.

Still, the bank saw a sharp rise in net interest margins which went up by a whopping 28 basis points to 1.92% compared with June 2010. The rise in margins was due to improvement mainly in the home loan margins caused by a continued shift in portfolio mix as customers switched from fixed to variable rate loans. Some repricing because of increase in funding costs also boosted margins, ASB said.

The rise in net interest margins coupled with fall in impairments and the effect of a big tax charge last year, all jointly contributed in ASB reporting a sharp rise in net profit in the December half to $283 million from a $10 million net loss in the same period of 2009.

Other banking income fell 14% as the effect of early repayment adjustment fees on home loan switching paid by customers last year wore off.

Impairment provisions fell sharply to $36 million from $127 million but asset quality has deteriorated in the last three months. Provisions rose to $37 million in the December quarter from a $1 million provision release in the September quarter.


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