ASB 'poised and ready to grow when its customers are' says new CEO Barbara Chapman

By Gareth Vaughan

New ASB CEO Barbara Chapman has distanced herself from recent comments by her BNZ and Westpac counterparts who urged businesses, in particular, and individuals to put the deleveraging of the past couple of years behind them and start to borrow for growth.

Speaking in an interview with interest.co.nz Chapman, who took the reins as CEO and managing director on April 26, had a subtly different message to those of BNZ's Andrew Thorburn and Westpac's George Frazis as the major banks continue to struggle to find lending growth in a stubbornly weak market.

"The message that I would have is that we are poised and ready to grow when our customers are poised and ready to grow and as we see the economy starting to pick up," Chapman said.

"It's slow but as we see it starting to pick up, then I do think that growth will come through and we're certainly ready for it and able to support our customers when that does happen."

Speaking after releasing BNZ's half-year results last month Thorburn said following necessary deleveraging, corporates were now in good shape. It was now time for businesses to back themselves, start to invest, and begin to "leverage their balance sheets sensibly," and BNZ wanted to support that.

And Frazis said both business and personal balance sheets had seen a "huge deleveraging" over 18 months placing them in a really good position to invest for growth.  New Zealand now needed to move from "caution to confidence." And Westpac was "match fit and ready to help."

'Confidence starting to build up a bit'

General disclosure statements from the big four banks - ANZ, ASB, BNZ and Westpac - for the March quarter show only BNZ grew its overall lending in the three month period as the big banks continue to struggle to grow their lending books. ASB's advances to customers fell NZ$179 million to NZ$52.8 billion.  Chapman said whilst banks were seeing deleveraging across the market, lending growth in the medium-term was likely to come from sectors where confidence is starting to build a bit.

 "There is a bit more business confidence coming through, I think retail's probably a little flat and might be at the end of the curve," Chapman said. "But I do think in some sectors there is some confidence and I'd expect to see a bit of investment going on.  You've only got to look at Christchurch and the (post earthquake) rebuild that's going to go on. That will give some sort of boost to the construction sector, for example, and as those things start to emerge that will ripple through the rest of the economy reasonably strongly."

Given ASB's origins as a savings bank, Chapman said she was keen to see it grow in the institutional, rural, commercial and business markets.

"If I was to look back in five years time I'd like to see good business performance and growth in those areas without losing our eye, of course, on our very core retail banking market," said Chapman. "Also I want to see our lead in customer service among the major banks maintained."

ASB's net interest margins have tendered to trail those of its big three rivals which Chapman put down to its roots as the Auckland Savings Bank. However, as ASB expands more into areas such as business banking, there should be a "change" in its net interest margins.

"But we're really comfortable with our position in the retail banking market," Chapman said. "Margins are lower in that market but it's a different risk profile so on a risk-return basis I think things are comfortable in that space. But as we move out into rural and corporate and institutional and business banking more, yes I would expect to see a change in our margin just to reflect the risk you take on in those areas."

Rural growth sought

As for rural lending, Chapman said ASB was "certainly interested" in growing its lending in that market. As of the end of its last financial year, June 30, 2010, ASB had 9.7% of its total credit exposures in the agriculture, forestry, fishing and mining sectors.

"I would consider us to be underweight in rural at the moment. We are committed to the agricultural sector and our aim is to grow our presence in that market," she said.

According to auditing firm KPMG's Financial Institutions Performance Survey Review of 2010, specialist rural lender Rabobank accounted for about 65% of the country's new rural lending last year. New Reserve Bank rules mean the big four banks will have to hold capital worth up to 90% of a loan to a farmer instead of the current 50% from June 30.

Chapman replaced acting CEO Ian Park, ASB's head of retail banking, who filled in after previous CEO Charles Pink departed last November. Meanwhile, she also confirmed ASB was preparing to follow BNZ, Westpac and ANZ towards issuing covered bonds.

"We are looking at a programme that would allow us to issue bonds both domestically and offshore," Chapman said. That's a work in progress for us but it's certainly something we're very interested in," she said.

However, the bank had no timeframe set yet for a covered bond issue, which Chapman acknowledged would depend on the bank's funding needs. BNZ is so far the only New Zealand bank to have issued covered bonds, having raised about NZ$2.57 billion, but Westpac and ANZ have programmes ready to go.

Separately, Chapman said the message from ASB's board has been along the lines of "you're the best candidate for the job, off you go." Chapman returned from ASB's parent Commonwealth Bank of Australia where she'd held executive roles for the past five years. Prior to that  she worked for 12 years as a senior ASB executive specialising in marketing, human resources and retail banking, and then as managing director of Sovereign Insurance.

"I've had a very broad experience of this business," Chapman said. "I've spent time in the HR function, the marketing function, I ran the retail bank here for a while and Sovereign. So I think in terms of my candidacy for the role it was that breadth of understanding of the business that's really positioned me in this role."

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