ANZ National profits plunge 80pc to $194m

ANZ National chief executive Jenny Fagg.

Profits have fallen dramatically at New Zealand's largest bank, ANZ National.

ANZ National chief executive Jenny Fagg said the result reflected the New Zealand economic downturn, which was "more protracted and pronounced than in Australia", and also the impact of one-off adjustments.

Net profit after tax for the September 2009 year fell 80 per cent to $194m compared to the previous year, impacted by one-off adjustments of $434m.

Underlying profits for the New Zealand operation fell 32 per cent to $628 million for the year, largely driven by an almost three-fold increase in credit provisions as households and business felt the impacts of the recession.

Underlying profit before provisions increased 8 per cent.

There was "intense deposit competition" said Fagg, along with higher wholesale funding costs.

"Despite the difficult operating environment, ANZ National continues to be profitable, costs have been well-managed and we have very strong liquidity, funding and capital. We hold a dominant market share, leading all the key customer segments," she said.

"We are well positioned for future growth, focussing on the core of our business - our people, our processes and the products and services we deliver to our customers.

Across the whole ANZ group, there was an 11 per cent fall in annual net profits and the company said the market was "close to a peak" in the bad debt cycle.

Cash earnings, the bank's preferred measure of profitability because it leaves out unrealised gains or losses related to asset values, increased 12 per cent to $3.383 billion, from $3.029 billion.

The market consensus forecast was for ANZ to deliver a five per cent lift in cash earnings to $3.18 billion.

Chief executive Mike Smith said while fiscal 2009 had been a difficult year for bad debts for the bank, the rate of growth in gross impaired loans had slowed in the second half.

"The economic slow-down is continuing to play out much as we expected," he said.

"In this phase, we have seen bad debts emerge from highly leveraged entities and more recently from the commercial sector and higher risk personal customers.

"We expect this will continue into 2010.

"However, given the resilience of the Australian economy, the stabilisation we are beginning to see in the New Zealand economy and the strength of the Asian economies, particularly China, we believe credit quality has now stabilised."

- NZ HERALD STAFF / AAP