KEY POINTS:
ANZ Banking Group Ltd is set to post record first half earnings around A$2 ($2.27) billion on the back of strong revenue growth in a high interest rate environment, as the bank continues to expand its branch network.
Australia's third biggest bank is expected to report a net profit of A$1.94 billion for the first half of fiscal 2007, analysts forecasts show.
The result due this Thursday, will be up from A$1.81 billion in the same half last year, and should set the bank on track to a full year profit of $4 billion.
ANZ's revenue growth its tipped to be at the upper end of guidance of seven to 10 per cent, even as costs rise about six to seven per cent as the bank continues to invest in its future, analysts said.
And while its bad debt charge is likely to have increased from earlier low levels, it probably won't be enough to spook the market.
"It has to increase a little bit but the bad debt cycle is not going to crunch banks for a couple of years yet," Shaw Stockbroking banking analyst David McDonald said.
"If they can demonstrate asset quality is still strong and they've increased their (bad debt) provisioning a little bit to bring it back to normal, it wouldn't surprise me if the market responded positively."
ANZ has been busy opening branches and acquiring new customers during the six months to March 31, with around 15 branches opened during the period.
The bank is also expanding in Asia and is looking at opportunities for joint ventures in India and Thailand.
ANZ's New Zealand asset -- the National Bank of New Zealand -- contributes about 30 per cent of revenue.
As the biggest bank in New Zealand, it also has the most exposure of the four major Australian banks to the NZ economy.
Mr McDonald said while volume growth remains strong across the Tasman, margin growth is getting weaker.
"ANZ's main focus is probably still on integrating the two businesses and getting it on to one solid platform for the longer term," Mr McDonald said.
Burdett, Buckeridge & Young analyst John Buonaccorsi says ANZ's business and credit card lending operations are underperforming.
"Where they should be doing well is business lending, with all the market activity around takeovers, but they are actually lagging on that," Mr Buonaccorsi said.
"They are an institutional-focussed bank and all the growth in lending has been at the top end of town, so you think they would have cleaned up."
And while ANZ was also trailing in credit card lending, it was not as far behind as National Australia Bank and Westpac, he added.
ANZ has the first bank to offer a low interest rate credit card product, but admits it generally has a higher loss rate than other cards in its portfolio.
Wilson HTM analyst Brett le Mesurier said the key items to look for in the bank's result this week are margins and asset growth, following three central bank cash interest rate hikes last year.
"We have seen that the increase in the cash rate should lead to reasonably strong margin outcomes," Mr Le Mesurier said.
"Low unemployment should lead to good asset quality outcomes and the strong economy should lead to strong asset growth."
- AAP
