NZ$4 billion lending target set for Westpac in 2010 05 November 2009 5:52PM Sophia Rodrigues Westpac New Zealand expects to keep its focus on growing deposits as the bank has set a target of $4 billion for new loans in the next year. That may look like an ambitious target compared with net lending of only $1.2 billion in 2009, but chief financial officer Richard Jamieson believes this is achievable as the bank has seen improvement in business in the second half. "There is certainly a good appetite in the market," Jamieson said in an interview. "We are targeting four billion dollars including both business and consumer lending." And on the funding side, the bank will keep its "hard focus on deposits" and also tap wholesale markets. "Wholesale markets are showing signs of improvement…and the markets are far more friendly than six months ago," says Jamieson.Trading conditions were difficult in the second half of 2009. The bank's net interest income in the second half fell one per cent compared to the first half, net operating income dropped four per cent and impairment charges more than doubled. As a result cash earnings for Westpac New Zealand fell 83 per cent to NZ$34 million. Westpac isn't seeing as much pressure on the interest margin, a particular complaint of ANZ last week. Westpac NZ bank managed to increase its margin to 2.24 per cent from 2.17 per cent in 2009 when both ANZ National and Bank of New Zealand saw a drop. The reason, according to Jamieson, is an increase in its floating rate book, particularly in mortgages, as customers moved from fixed to floating rate products. The increase in margins came despite Westpac's margin on the deposit side falling 55 basis points due to increased competition on term deposit rates. Of the NZ$388 million impairment charges in the latest half year, 50 per cent was due to two businesses. Other impairments exposed to the business portfolio were to the tune of NZ$116 million, due to stress in commercial property loans, mainly from apartment developers. The balance comprised impairment in consumer lending, which rose to NZ$73 million from NZ $7 million in the first half. Westpac doesn't expect this to recur though. "We have seen an improvement in delinquency profile in the second half," says Jamieson. Westpac has only sounded caution on the agribusiness sector, with the bank noting that most stress was being felt in the property sectors with "early signs of stress in the agribusiness sector." It, however, notes that sector also presents a good opportunity to grow. "The sector needs to be carefully watched and managed."