ANZ New Zealand, the local unit of the Australian bank, reported an 11 percent decline in cash profit as growth in net interest income was offset by a charge against software.
Cash profit, the preferred earnings measure for banks which strips out non-core items, fell to $751 million in the six months ended March 31, from $841 million a year earlier.
Net interest income rose 5 percent to $1.49 billion but was offset by a 21 percent decline in other operating income to $402 million, which resulted in an overall 2 percent decline in operating income to about $1.9 billion.
This result reflects a challenging period for banking and we have taken the opportunity to move decisively and adapt to the changing environment by building a simpler, better capitalised and more balanced bank.
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ANZ is New Zealand's biggest lender, with more than $100 billion deployed across the economy. Its parent, Australian & New Zealand Banking Group, today posted a 24 percent decline in first-half cash profit to A$2.78 billion. The result included A$717 million of charges such as restructuring costs, an accounting change for software capitalisation and an impairment against AmBank.
Its credit impairment charge jumped to A$904 million, or 0.31 percent of average gross loans and advances, from A$494 million, or 0.18 percent a year earlier. Its net interest margin was 2.01 percent, just down from the year-earlier 2.02 percent. The bank cut its first-half dividend by 7 percent to 80 Australian cents.
"This result reflects a challenging period for banking and we have taken the opportunity to move decisively and adapt to the changing environment by building a simpler, better capitalised and more balanced bank," said chief executive Shayne Elliott. "We have strong underlying drivers in our Australia and New Zealand consumer and small business franchise and we have seen good early progress in transforming institutional banking."
In New Zealand, the overall net interest margin fell 15 basis points from a year earlier to 2.37 percent.
"Net interest income rose by 5 percent compared with the March 2015 half, primarily reflecting continued lending growth, while interest margins have contracted due to strong lending competition and a customer preference for fixed-rate mortgages," it said in a statement. "In other operating income, the first-half last year reflected a strong performance in the markets business compared with a difficult trading period this half."
A breakdown of ANZ New Zealand's earnings shows 8 percent growth in its retail business to $395 million, while commercial fell 9 percent to $221 million, for an overall 3 percent gain for its New Zealand businesses. Of the other operations that fall under its umbrella, earnings from wealth management rose 1 percent to $68 million while institutional earnings tumbled 42 percent to $98 million.
The lender said the drop in institutional earnings reflected a strong year-earlier performance in markets compared with a difficult trading period in the latest half.
ANZ shares rose 0.4 percent to $25.64 on the NZX. The ASX-listed stock has declined 29 percent in the past 12 months.