Wellington, Aug 11 NZPA - ASB is earning lower margins on deposits in an extremely competitive market, but a move by customers from fixed-rate to higher margin floating-rate home loans is an offsetting influence, according to parent Commonwealth Bank of Australia (CBA).

ASB reported bottom line profit fell to $236 million for the year ended June 30 from $425 million the previous year. Excluding one-off items, including a tax charge of $209m, the net profit of $428m was little changed from $431m last year.

Loan impairments decreased by 47 percent due to an improvement in the economy, but were still significant at $125m.

Other bank income decreased 33 percent, reflecting reduced trading income when financial markets stabilised.

ASB is also making less from fees from early repayment of home loans.

"Early repayment adjustment fees have continued to decline in the second half of the year to more normal levels," CBA said.

A key driver of ASB's result was a continued change in portfolio mix from fixed rate to higher margin floating home loans, offset by lower margins on deposits, CBA said.

Its net interest margin on interest bearing assets was stable at 1.6 percent.

ASB's retail deposits grew 3 percent to $NZ31 billion as at June 30 as the bank offered competitive term investment rates as part of a strategy to grow local funding and reduce reliance on the wholesale funding market, CBA said.

The bank's market share for retail deposits improved slightly to 21.6 percent. Its home loan market share was little changed at 23 percent but there was a 2 percent increase in home loan balances.

"ASB continues to maintain a strong and stable position in a difficult market," chairman Gary Judd said.

CBA is investing $460m in the business following a strategic review. This includes $200m in technology renewal and a move in July 2013 to a $160m new head office building based at Auckland's North Wharf in the Wynyard Quarter.

The bank is also spending $100m on its branch network, with 25 new branches and 117 refurbishments, in the next five years.

Total assets declined by 2.6 percent to $NZ63.6b during the 12 months. This was largely due to volatility in the derivative instrument market. Lending increased by 0.8 percent to $NZ53.8b.

ASB said there has been an overall decline of 7.3 percent in the business lending market across New Zealand.

Against this background, ASB's business lending fell only by 1.9 percent to $6.8b, increasing ASB's market share by 0.5 percent to 9.3 percent. Rural lending remained flat.