ANZ set for $3b record net profit

MELBOURNE - The market is tipping a record net profit of around A$3 billion when ANZ Banking Group reports its annual result today.

The only cloud on the horizon for Australia's third biggest bank is likely to be the flat performance of its subsidiary, the National Bank of New Zealand (NBNZ).

The key drivers will come from growth in personal banking, which includes mortgages, deposits and margin lending, as well as in the bank's traditional strength in corporate banking.

A record result has been anticipated by the market since an August strategy briefing where chief executive John McFarlane said ANZ was on target for earnings per share (EPS) growth of eight per cent.

But it's the New Zealand part of ANZ, which accounts for around 28 to 29 per cent of net profit, that is acting as a drag on the group.

ANZ acquired NBNZ from London's Lloyds TSB for A$4.9 billion in December 2003 to become the biggest bank in New Zealand.

Deutsche Bank analysts are expecting a weak performance from New Zealand, where competition is driving further margin compression.

ANZ has strong momentum in its Australian franchise and analysts believe the bank is gaining market share in every line of business, including business lending and credit cards.

"What's dragging down the momentum is New Zealand and the severe margin pressure they are experiencing over there," Commonwealth Securities analyst Carlos Castillo said.

Analysts say that over a two to three year period New Zealand is more vulnerable to an economic slowdown than Australia, with implications for credit and profit growth.

- AAP