ANZ Group profit tumbles, but NZ performance 'solid'

Australian banking giant ANZ Group has today reported big losses for the half-year, although its New Zealand arm is saying its performance here has been 'solid' in a difficult trading environment.

Australia and New Zealand Banking Group reported a 5 per cent fall in underlying half-year profit from a year earlier to $494 million in its New Zealand operation.

But the result for the six months to the end of March was up 24 per cent from the preceding six months to the end of September.

The company, of which ANZ National Bank is a wholly owned subsidiary, said the result was hit by higher credit provisions.

ANZ National Bank credit provisions rose to $291m compared to $207m for the preceding half, and provisions for the full year 2009 were expected to be more than double those of 2008.

ANZ National chief executive Graham Hodges said the first half performance was helped by the scale and diversity of the bank.

An exceptional performance from the markets businesses reflected the ability to position the bank and its customers to take advantage of unusually high levels of market volatility in interest and exchange rates, Hodges said.

The institutional division's underlying profit rose 67 per cent from the September half-year and 82 per cent from a year earlier.

The effect of the domestic recession was felt most significantly in the retail business where profit fell 6 per cent on the preceding half and 17 per cent from a year earlier, on a pre-provisions basis, Hodges said.

The commercial business profit was up 5 per cent on the preceding half and up 9 per cent on a year earlier, on a pre-provisions basis, with the main contribution coming from the rural business where the bank had a strong market presence.

Provisioning and margin compression affected both the retail and commercial portfolios, with higher wholesale funding costs and competition for deposits, as well as mortgage break costs, contributing to a fall of 9 basis points in margins in the half, and of 24 basis points from a year earlier.

Individual provision increases were spread across the unsecured retail portfolio and the mortgage portfolio, although the number of mortgagee sales remained low.

The commercial sector had seen increased provisioning on a relatively small number of names reflecting the impact of the weakness in household spending flowing through to business activity and performance.

The bank continued to be solidly profitable, had strong liquidity and funding, and was well capitalised, Hodges said.

The ANZ Banking Group as a whole reported a sharp fall in first half profit and said tough market conditions would continue over the rest of the year and into fiscal 2010.

Net profit for the six months ended March 31 fell 28 per cent to A$1.417 billion ($1.81b), from A$1.963 billion in the previous corresponding half, after charges for bad debts rose.

Cash profit, adjusted for one-off items and movements on derivatives, fell 43 per cent to A$954 million.

Total credit impairment charges rose 28 per cent to A$1.435b, from A$726m in the previous first half and was up four per cent from A$1.364b in the second half of fiscal 2008.

- NZPA