HBOS Australia growth push

HBOS Australia's aggressive pursuit of growth is reflected in a set of numbers reported in the bank's interim results, announced yesterday, that include a 30 per cent year on year increase in operating expenses, a 35 per cent increase in the value of impaired loans and a 16 basis point fall in net interest margin.

HBOS Australia chief executive David Willis said the figures reflected the investment in the business.

Willis said: "Those figures are what we budgeted for. We have got the results."

The bank reported an underlying pre-tax profit of $368 million for the six months to June, a 16 per cent increase over the previous corresponding period.

Net operating income was up 25 per cent. Customer deposits grew by an annualised 22 per cent to $31.8 billion.

Impaired loans have matched a 32.8 per cent increase in loans and advances over the year. Impaired loans as a percentage of closing advances were 0.99 per cent.

The cost to income ratio rose from 48.1 per cent to 50.1 per cent over the past year.

The net interest margin has moved from 2.36 per cent at June 30 last year to 2.2 per cent.

The bank claims to be the fastest growing retail and business bank, based on APRA data, through its BankWest subsidiary and hopes that trend will continue as it proceeds with a plan to open 160 branches in the eastern states over the next three years.

The bank has been equally aggressive in pursuit of growth in its corporate banking division, BOS International. Corporate lending was up 22 per cent on an annualised basis.

Willis said: "We may be in for a period of sustained volatility in debt and equity markets.

"We don't have exposure to the US sub-prime mortgage market through direct dealing or through our insurance or investment portfolios

"We have been involved in financing mergers and acquisitions and private equity activity.

"Those markets have been quieter but we are also involved in infrastructure, resources and structured corporate loans. Those areas continue to generate strong business flows."

Asked if the bank's aggressive expansion plans were dependent on continued good business conditions for success, Willis said: "We have been investing in the growth of the business for the past four years.

"It has been going well all that time. We are taking it to the next stage now.

"Our impairment levels are consistent with the market.

"Our margin decline reflects the proportion of new business on our books. It is about growth.

"We are not just winning business on price. We have some aggressively priced products but we are also very strong on product features and service."