Westpac boosts term deposits, records strong profit rise in June quarter

In what’s possibly the mostly hotly contested part of the banking market right now, Westpac secured NZ$329 million worth of new term deposit funding in the June quarter.

That’s ahead of the NZ$277 million added by the BNZ, the only of the other major banks’ figures available for the quarter so far.

All the major banks are targeting growth in term deposits following the introduction of the core funding ratio (CFR) by the Reserve Bank on April 1.The CFR sets out that banks must source at least 65% of their funding from retail deposits and bonds with durations of at least one year. The central bank wants to increase the CFR to 75% by mid-2012 to offset New Zealand banks previous reliance on international wholesale, or 'hot' money, markets.

Westpac New Zealand’s General Disclosure Statement for the nine months to June shows it grew term deposits to NZ$17.464 billion, up NZ$329 million from NZ$17.135 billion at March 31. Westpac chief financial officer Richard Jamieson told interest.co.nz in June the bank had trained staff up on the importance of deposits under the new regulatory environment, which he felt had been a factor behind its success in attracting new deposit money.

Outgoing Kiwibank CEO Sam Knowles complained last week that the new Reserve Bank rules had made New Zealand owned financial institutions less competitive with their bigger Australian owned rivals coming onshore to take “our funding.” Kiwibank grew retail deposits over the June year by just 3% to NZ$6.91 billion compared to 39% growth in the previous year. However, it did manage to more than double its wholesale deposits to NZ$3.38 billion.

Knowles said banking had changed over the past 12 months to become “very much a funding game.” Previously, he said, if you could find assets you could always find easy funding for them.

Meanwhile, Westpac’s term housing loans grew by NZ$365 million to NZ$33.981 in the three months to June, and total net loans rose NZ$343 million to NZ$49.712 billion.

The bank’s unaudited June quarter profit more than trebled, rising to NZ$97 million from NZ$28 million in the same period of 2009, as impairment charges on loans tumbled to just NZ$27 million from NZ$199 million.

The Westpac Group said today June quarter cash earnings rose to A$1.4 billion from A$1.1 billion in the same period last year.

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