ANZ lifts first half profit

ANZ is cautious about the outlook for its New Zealand banking division, saying a lot hinges on the Reserve Bank's position on interest rates.

Lower credit provision charges helped the local division, which includes ANZ and the National Bank, lift its first half net profit by 14 per cent to A$335 million ($402.7 million).

The rise, for the six months to March 31, would have been just 3 per cent on the same period last year if not for the lower credit provision.

ANZ chief executive John McFarlane said that while credit growth was expected to remain strong, the bank was wary about further short-term volatility in the New Zealand economy.

"It really depends on how the Reserve Bank takes to interest rates," Mr McFarlane told an analysts' briefing.

"Our current assumption is that the economy is going to soften but credit growth is going to remain reasonably strong."

RB Governor Alan Bollard today left the official cash rate unchanged at 7.25 per cent for the third time since December, warning that inflation pressures made the prospect of interest rate cuts unlikely this year.

Mr McFarlane said New Zealand mortgage rates were coming back to more "sensible levels" following last year's battle over home loans that ripped into banks' margins.

The bank was also starting to see merger benefits from its 2003 purchase of the National Bank.

Lending volumes in New Zealand were up 13 per cent on the same year ago period, but net interest margins were down 18 basis points, reflecting the impact of competition, a switch from variable rate to fixed rate loans, and a change in funding mix to more expensive deposit and wholesale products.

Including results from the bank's Institutional banking division -- which services big corporates, multinationals and institutional clients, the half-yearly profit after tax was up 20 per cent on a year earlier in New Zealand dollar terms to $461 million.

Operating expenses rose 9 per cent, including the $10 million cost of a Commerce Commission settlement on credit card fees, salary increases and an increase in frontline staff. Those costs were partly offset by a reduction in support staff.

The provision for credit impairment was down $36 million due to an improved risk profile, with lending growth mainly in lower risk residential mortgages.

ANZ, Australia's third largest bank, today reported a A$1.81 billion first half net profit, up 16 per cent, with strong performances from its personal and business banking operations in Australia.

BBY Ltd analyst John Buonaccorsi said the headline result was better than anticipated, "mainly due to a much better than expected improvement in their bad debt charge".

ANZ lifted its interim dividend to A56 cents per share compared with A51 cents in the same period a year ago.

Mr McFarlane said the profit jump showed the benefits from several years' restructuring were beginning to show through.

Changes included adding 4000 new staff, expanding into Asia and the 2003 acquisition of the National Bank.

"This has been the right agenda but it has been tougher than we anticipated," Mr McFarlane said.

New Zealand bank workers' union Finsec today called for some of the bank's profit to be spent on rewarding its workers.

Finsec campaigns director Karen Skinner said the hundreds of millions of dollars taken out of the New Zealand economy each year by Australian bank directors and shareholders was a significant loss.

"One way that the bank could give something back to the New Zealand economy and invest in local New Zealand communities would be to return some of that profit to its staff in the form of a fairer wage increase at the upcoming staff negotiations," she said.

Finsec was holding nationwide stopwork meetings for ANZ and National Bank workers to discuss their pay and pay systems.

Negotiations between Finsec and ANZ National begin in June for one of the country's largest private sector employment agreements.

- NZPA