By Gareth Vaughan
ASB has launched a new push in institutional banking, dropping the use of its parent Commonwealth Bank of Australia's (CBA) name to operate under the ASB Institutional brand as it strives to boost its anemic presence in the lucrative institutional banking market.
ASB and its Australian parent have until now operated in the New Zealand institutional and corporate banking market under both the CBA and ASB names. However, Kerry Francis, chief executive of ASB institutional banking and markets who will head up ASB Institutional, told interest.co.nz the group had now made the call to go with one name and one team in the New Zealand institutional market, where he estimates it has market share of between just 5% and 10%.
"That (one) brand is going to be ASB Institutional, which effectively we see as combining the ASB local experience and local heritage, but still leveraging off the global strength and expertise of CBA," said Francis.
"So there's still a strong linkage through to CBA, our parent, our shareholder. But more importantly in that corporate institutional space, the products and services they're able to offer into this market."
Seeking to double market share
Francis said it was difficult to definitively estimate ASB/CBA's share of the institutional banking market, because it differed depending on customer segments and products, meaning there was quite a lot of variance. That said, Francis estimated overall ASB/CBA had somewhere between 5% and 10% of the market.
"We think there's an opportunity over say, three to five years, to double our market share."
ASB is likely to be hoping that a bigger presence in the institutional and corporate banking market will boost its margins. KPMG's June quarter Financial Institutions Performance Survey out last month showed ASB's interest margins were significantly behind their big three rivals - ANZ, BNZ and Westpac - for the six months to June. Even after a 15 basis points rise, KPMG said ASB's margins were 1.67%, compared to ANZ's 2.25%, Westpac's 2.24% and BNZ's 2.12%.
Institutional banking is lucrative. In its annual results out last week ANZ said, at 37%, the biggest slice of its NZ$867 million annual net profit came from institutional banking, topping the 33% contribution from retail banking, 25% from commercial business and 5% from its wealth unit. Not surprisingly ANZ, the country's biggest bank, views itself as the market leader in institutional banking.
A spokeswoman said ANZ has banking relationships with about 82% of the New Zealand institutional market with many of these customers among the country's top 200 corporates. ANZ is lead bank for 47% of the institutional market, the spokeswoman said.
Meanwhile, a Westpac spokeswoman said her bank had a 25% share of the institutional market across customers and products.
'Whatever customers want'
Asked whether ASB Institutional would launch any new products or services, Francis said this would be driven by what customers want.
"As a group we're very strong in commodity hedging, so we think there's some opportunities there," he said.
"We have been, for many years, very strong in asset finance, large asset finance, (so) we think there's some further opportunities in that space. More broadly, the more vanilla products around transactional banking, debt funding in a variety of forms, and financial markets products, particularly those that help people manage risk or help organisations manage risk."
ASB Institutional will incorporate the CBA and ASB relationship teams, the CBA and ASB financial markets teams, ASB international trade services and global banking partnership staff, plus the transactional banking team. An ASB spokeswoman said no jobs would be cut.
(Update replaces original story with the version that first went out in our daily subscriber email).
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