KEY POINTS:
SYDNEY - ANZ Banking Group Ltd has posted a 13 per cent rise in annual earnings and says conditions in its key markets should remain reasonably supportive in the year ahead, despite some global uncertainty.
Net profit rose to A$4.180 billion ($5.06 billion) in the year ended September
30, from A$3.688 in the prior corresponding year.
"Despite a certain degree of global uncertainty, we expect conditions in Australia, New Zealand and Asia Pacific to remain supportive," chief executive Mike Smith said.
"New Zealand performed well," he said, as cash profit rose six per cent.
"Strong results are flowing through from our network business and banking partnerships in Asia."
Mr Smith said the personal division should continue to do well, even though opportunities to sustain the high levels of growth in recent years are becoming more limited.
"New Zealand should have reasonable performance, and I am confident of an improvement from institutional," he said.
"The growth we are now seeing from Asia will continue to become more material to the group."
"This provides a reasonable foundation for 2008."
Australia's third largest bank said the headline result was affected by a gain on the sale of its Fleetpartners international leasing business.
Adjusting for these, cash net profit was A$3.924 billion, up 9.4 per cent, while the cash profit before provisions was A$6.114 billion, up 11.5 per cent.
Cash earnings per share (EPS) rose 8.1 per cent to 210.3 cents.
Mr Smith said the result was a great platform from which ANZ could move.
"There's more juice in the tank," he told reporters.
"And I feel we can get far more out of this bank domestically.
"And also, obviously, I want to expand within the region because my belief is that the regional model makes most sense now as we move forward," he said.
Mr Smith said that mortgage rates were driven by market forces and that banks had been absorbing the cost of more expensive funding for a while.
The annual result was driven by growth in personal lending and deposits, however, growth from mortgage lending was trimmed by higher funding costs related to the global credit crunch late in ANZ's reporting year.
Mortgages grew by three per cent, with personal lending growth of 12 per cent offset by higher funding costs and continued competitive margin pressure, the bank said.
ANZ's net interest margin declined by 12 basis points in the year, although four basis points of that was due to accounting treatment of hedging instruments.
In the second half of its year, ANZ said income growth of six per cent was offset by margin compression of five basis points, due mainly to higher funding costs.
Mr Smith didn't offer any specific earnings guidance for the year ahead.
"But I think what is important is, that what I am saying is, that income growth will outstrip cost growth," he said.
During the year, ANZ's reported operating income grew by 12 per cent to A$11.385 billion.
Cost growth was 7.6 per cent, with the consolidation of its acquisition of ETrade Australia and Stadium Australia having a disproportionate impact.
"While credit quality still remains sound, credit costs rose by 39 per cent, in line with our earlier guidance to the market."
During the year, the personal division - comprising mortgages, consumer finance and banking products - generated cash profit growth of 16 per cent.
Institutional business earnings rose by six per cent.
"The recent liquidity issues in global markets have softened the downwards pressure on margins, and this should assist the business going into 2008."
Strong revenue growth in markets and corporate finance was offset by weaker performance from the other units, however, the second half saw a significant improvement from business banking.
Mr Smith, in the job for less than a month, said ANZ was addressing the mixed performance in the institutional division, with initiatives to improve its performance this year.
ANZ declared a final dividend of 74 cents per share, up from 69 cents in the same period last year.
The total dividend for the year is A$1.36, an 8.8 per cent improvement on fiscal 2006.
- AAP