ANZ New Zealand's cash profit has slumped 29 per cent to $1.371 billion in the financial year to September 30 as the bank was hit by a rise in credit impairments driven by Covid-19.
The country's largest bank, which is owned by ASX-listed ANZ, revealed its financial results this morning.
Its net profit after tax was down 27 per cent to $1.336b.
ANZ NZ chief executive Antonia Watson said the results reflected a significant uplift in the charge for expected credit losses due to changes in the economic environment.
The bank's credit impairment charges rose from $99 million to $401m.
"Covid-19 brought unprecedented challenges to our country and consequently for many businesses, including ANZ NZ, and this is reflected in our full-year result."
The results also reflected the sale of UDC Finance in September 2020, together with benefits in the previous financial year from the sales of OnePath Life and ANZ NZ's share in Paymark.
ANZ New Zealand saw its operating income fall from $4.326b to $4.049b while its expenses also rose from $1.585b to $1.736b due to higher regulatory costs and a goodwill impairment relating to the planned windup of the Bonus Bonds scheme.
Watson said despite the difficult year, ANZ NZ had continued to perform well, demonstrating the bank could weather challenging economic conditions and play an important role in supporting customers through the crisis.
So far ANZ NZ had provided financial help to around 43,000 personal, home and business loan customers through repayment deferrals, moving to interest-only, or loan adjustments covering lending of around $27 billion.
"The New Zealand economy has a lot going for it. As well as our management of Covid-19, our commodity prices are holding up as countries shore up their food-supply chains," Watson said.
"Business confidence and other indicators of economic activity have bounced back quickly. Businesses have some certainty about the future that simply doesn't exist in other countries."
Watson said the bank had also seen many customers take the opportunity to improve their financial situation by increasing savings and paying down their personal or home loan debt.
Net loans and advances were flat at $133b, while its deposits rose from $109.2b to $120.9b.
Watson said although she was optimistic many businesses would survive, the next few months would be difficult.
"While the efforts of people in New Zealand to contain the spread of Covid-19 have reduced its impact, we must remember that there has been a considerable cost to many in the community."
Watson said the full-year result was pleasing given the difficult economic circumstances.
"While the record-low interest-rate environment and fee reductions have impacted underlying revenue, customer deposits were up 11 per cent and underlying gross lending increased by 3 per cent (flat at a headline level after the sale of UDC)."
Despite an uplift in its credit provision charges, Watson said the bank's focus on responsible lending meant credit quality remained strong.
Watson said remediation and increased regulatory requirements had contributed to a 10 per cent rise in operating expenses on a cash basis.
That work had included a significant investment in a number of technology systems to ensure ANZ was able to meet Reserve Bank of New Zealand requirements to have a stand-alone bank.
Parent ANZ announced a net profit after tax of A$3.57b, down 40 per cent on the prior financial year.
Its cash profits from continuing operations was down 42 per cent to A$3.76b.
In a statement, the bank said the decrease was primarily driven by credit impairment charges of A2.74b, which increase from the prior year due to the impact of Covid-19 and a first-half impairment of Asian associates of A$815m.
It will pay a dividend of A60c per share down from A$1.60 in the prior year.
ANZ chief executive Shayne Elliott said the bank could never have forecast 2020 - a year that starting with devastating bush fires in Australia and unwound with the waves of a pandemic that continues today.
"As a bank, we entered 2020 in robust condition. We have a strong balance sheet with record levels of capital and liquidity as well as provisions for potential future losses."
Elliott said Covid-19 was contained in New Zealand and it remained well-positioned to benefit from its subsequent economic recovery.
"While it was a tough revenue environment, given low interest rates and a focus on reducing or simplifying fees, we have maintained market leadership in our targeted segments."
The ANZ New Zealand business had more than 529,000 home loan accounts with around 24,000 having received a deferral on their repayments.
As of October 15, there were around 10,000 accounts on a deferral plan - about 2 per cent of the bank's mortgage book.