Strong term deposit margins and tight cost control helped Commonwealth Bank's New Zealand ASB subsidiary increase cash earnings by 12 per cent, to NZ$393 million, in the first half-year from the same half a year ago.ASB said it had grown faster than its rivals in the key Auckland housing market and in rural banking over the last year. It also reported costs grew seven per cent, which was less than the bank's revenue growth of eight per cent. This drove ASB's cost-to-income ratio down almost a full percentage point, to 39.3 per cent.ASB's chief executive, Barbara Chapman, said lower wholesale funding costs helped improve the bank's net interest margin by 13 basis points, to 2.35 per cent, but a major driver was a further improvement in term deposit margins.Term deposit costs surged through 2009 and 2010 for all New Zealand banks after the Reserve Bank of New Zealand mandated they obtain a higher proportion of their funding from more stable term deposits rather than more flighty overseas wholesale markets. This core funding ratio mandate has forced banks to fund at least 75 per cent of their loans via "stable" means, including long-term bonds and retail deposits."As we've all adjusted to that core funding ratio, margins in deposits are returning to more normal levels, so you've seen a margin expansion across the board because of that," Chapman said.Customer deposits grew 9.5 per cent, or NZ$3.8 billion, to $43.7 billion by December 31 from a year ago, while loans rose $2.2 billion, or 6.8 per cent, to $59.3 billion.