The St George and Bank of South Australia businesses are underperforming their parent Westpac, with the bank taking remedial action to restore rates of growth in consumer and business lending, the bank disclosed yesterday. The bank deliberately curtailed growth on loans, for both households and businesses, at St George over 2010 as the bank reduced its reliance on finance brokers to source new business and it cut its exposure to commercial property. However, "I really was disappointed that the mortgage growth fell away quite as sharply as it did," Gaily Kelly, Westpac's chief executive, told an investor briefing yesterday. "We were keen to continue to grow at least at system growth in New South Wales and South Australia, and we really should have been able to do that with the strength of footprint that we have there. But it fell away more than I would have liked." Otherwise, Westpac is claiming gains in market share in home loans over the last four months, which the bank puts at 40 basis points. However, APRA data suggests that Westpac's market share was flat over the four months to December 2010. Yesterday, Westpac published a trading update for the December 2010 quarter, which put its cash earnings for the quarter at A$1.55 billion, or up five per cent. The bank said operating income increased by two per cent. Asset quality improved, with the ratio of stressed assets to total exposures down slightly to 3.03 per cent, the lowest level for four quarters. The bank said the bad debt charge for the quarter was "around $280 million" and included $20 million for the recent flooding events. The bank's net interest margin increased three basis points to 2.02 per cent. Kelly told the briefing that "at the end of the quarter, the margin was higher than the average for the quarter, so that does bode well for the second quarter, and really even into the third quarter." However, Phil Coffey, the bank's chief financial officer, noted that recent margin gains in institutional banking related to the rapid recognition of new lending fees, as corporates refinanced loans early. A hoped-for rise in corporate lending in the second half of the year might lead to lower margins as international banks compete more assertively for business. "At the top end of the market we are seeing a more competitive environment with some of the global [banks] looking to utilise their balance sheet, as well as obviously  the domestic banks all being pretty competitive, and in that environment we would expect to see some negative impact on margins in institutional banks," Coffey said.