Cuscal plots ATM expansion

The wholesale financial services provider Cuscal will focus on its plans for a big build-up in the ATM market during the second half of the financial year. The group is promoting its rediATM network to financial institutions that do not have a strong ATM channel and has committed to double the size of its 1400-strong network.

Cuscal managing director, Craig Kennedy, said yesterday the group had a number of deals in the pipeline.

Last month Cuscal signed up AMP Banking to the network. Under the direct charging ATM rules that come into effect on March 3, groups like AMP, which had absorbed the cost of its customers' foreign ATM fees, will need to be part of a network if they are going to be able to offer fee-free ATM transactions.

Kennedy said Cuscal was also looking at possible acquisitions. He expects to see rationalisation in ATM services, including some bank outsourcing, when the new rules take effect.

He said the ATM market was more competitive than he had seen for some time. "We have had trouble getting some of the sites we were after."

Cuscal yesterday released its results for the six months to December. Net operating profit was $10.4 million, up 20 per cent on the previous corresponding period. The group's return on equity was 11 per cent, up from 9.6 per cent in the December half in 2007.

Kennedy said the transaction services side of the business held up well, while the upside came from the group's treasury operations.

"With the volatility in bill swap rates and interest rates our trading team made some good calls.

"We are getting to the bottom of the cycle and it is hard to see the business sustaining that treasury performance in the second half. But we will look for the next opportunity."

He said the group faced some challenges. It was struggling to source wholesale funds to support its clients' lending activities.

The continuing consolidation in the credit union market, its main client base, would have a negative impact on Cuscal revenues.

Ongoing reductions in the cash rate would reduce earnings on its capital.