ASB Bank says its margins are being squeezed as rivalry for domestic cash heats up among banks.All financiers are competing more heavily for local cash now the Reserve Bank requires 65% of all funding to be raised locally or from short-term sources, in or
ASB Bank says its margins are being squeezed as rivalry for domestic cash heats up among banks.
All financiers are competing more heavily for local cash now the Reserve Bank requires 65% of all funding to be raised locally or from short-term sources, in order to reduce vulnerability of the banks should international wholesale markets freeze.
The comments were made in the March quarter trading update from ASB’s parent, the Commonwealth Bank of Australia (CBA), to the Australian Stock Exchange today.
It revealed a rise in CBA’s cash earnings for the three months to March 31 of $A1.5 billion, up from $A1.15 billion a year ago.
Provision for bad debts of $500 million in the quarter fell from $A640 million last year.
The bank said deposit growth was relatively strong in a competitive market and retail customer numbers exceeded one million in the quarter.
Chief executive Ralph Norris said despite a brighter economic outlook, operating conditions remained challenging.
“Credit growth remains muted and margins continue to come under pressure from higher average funding costs and strong price competition.
“Although we have clearly passed the peak in the bad debt cycle, key credit quality indicators remain at elevated levels and we continue to expect gradual, rather than dramatic improvement.
The update said New Zealand’s economy was showing signs of improvement and locally, the bank had maintained a strong market positioning in home lending and deposits.
CBA said margins from its general insurance business had taken a hit from major weather events in Melbourne and Perth during the quarter.
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