ANZ lifts earnings to $382m

By KEVIN TAYLOR

ANZ made a record profit of A$330 million ($382 million) in New Zealand in the September year, and its Australian parent broke the A$2 billion barrier for the first time.

The bank yesterday announced its September-year result, continuing a string of record profit results by the big banks.

ANZ's profit in New Zealand was up 20 per cent on last year's figure of $317.5 million.

Managing director Murray Horn said the bank had now had four years of good growth, but the latest net profit was inflated by a gain of A$32 million ($37 million) from the sale of the funds management business to the ING joint venture.

Excluding the gain on the sale, second-half profit growth was 6 per cent.

Horn said that figure was a better indication of the business' performance.

Operating income rose 11 per cent from A$890 million to A$986 million. Operating expenses increased 6 per cent from A$450 million to A$476 million.

That gap between income and expenses shows up in the cost-income ratio.

Horn pointed out that in the latest half-year, that ratio had fallen from 49 per cent to just 46.1 per cent, which he said was probably the best-ever result.

Horn joined the bank in 1997 and became managing director for New Zealand in March 1998. At that time the cost-to-income ratio was in the 70s.

"That's a huge improve in the efficiency - the cost of earning a dollar of income."

He said growth in the second half had come from the personal and corporate operations.

The bank was opening longer hours and part of the increase in expenses was for more frontline staff to reduce queues. There was also increased technology spending.

A slowdown in lending growth - from 11 per cent in the September 2001 year to 4.2 per cent in the latest year - was put down to better credit quality and a slowdown in mortgages.

Massey University's senior banking lecturer, David Tripe, said in his quarterly banking survey, out yesterday, that the June quarter had been another good one for the big banks.

All six - ASB, BNZ, Westpac, TSB, National and ANZ - achieved the benchmark 1 per cent return on assets. ANZ and Westpac showed "very strong profitability".

The aggregate return on assets for the banks of 1.76 per cent, was up from 1.47 per cent the previous quarter.

Tripe said profits had now been above the 1 per cent level for 15 successive quarters.

Horn said yesterday that ANZ now had a return on assets of 1.4 per cent, compared with 0.7 per cent when he joined in 1997, well above the benchmark 1 per cent.

Tripe has said in the past that banks' profits were verging on excessive when they consistently achieved a return of over 1 per cent.

Yesterday, he criticised the ANZ for producing its New Zealand figures in Australian dollars.

The ANZ Group posted a full-year net profit of A$2.32 billion, up 24 per cent on the previous year. ANZ's final dividend will also rise, to 46Ac from 40Ac.

Excluding significant transactions, the net profit was A$2.17 billion, up 16 per cent.

The record profit included A$170 million from the sale of businesses to the joint venture with the ING Group as well as A$159 million after tax from settlement of the long-standing dispute with India's National Housing Bank.

The result was well ahead of analysts' expectations, which averaged A$2.15 billion.