ANZ says strong momentum after record net profit

MELBOURNE - ANZ Banking Group Ltd says it has strong momentum going into fiscal 2007 and is confident about the year ahead, after posting a 16.2 per cent lift in annual net profit to a record A$3.688 billion ($4.29 billion) today.

ANZ, Australia's third-biggest lender by assets, said it had raised the top end of its annual revenue growth target, with the range now 7-10 per cent compared with 7-9 per cent previously.

Chief executive John McFarlane said the bank's New Zealand business was showing promising momentum and had a clear growth strategy to build on a strong foundation.

"Robust credit growth and good credit quality continue," Mr McFarlane said.

Earnings in New Zealand were up 20 per cent on the same period last year, to $1.006 billion, with the result assisted by lower credit provision charges.

Mr McFarlane said the adoption of the new Australian International Financial Reporting Standards (AIFRS) would require a A$141 million gain from New Zealand dollar hedges to be taken directly to retained earnings in 2007.

He said the bank had taken out additional hedges to mitigate the negative impact of a weaker New Zealand dollar on earnings, which is expected to mitigate the 2007 earnings per share (EPS) impact to less than one per cent.

"The impact of credit losses for the industry as a whole under IFRS is less predictable, though it is unlikely we will see current provisioning levels sustained at such low levels," Mr McFarlane said.

"Otherwise, with our strong momentum going into 2007, we are confident about the year ahead."

Mr McFarlane said the bank would continue to invest to underpin revenue growth, and work towards leadership in its major businesses over time.

"We believe this will build superior and sustainable value for shareholders over the medium to long term.

"In consequence, expense growth in 2007 is likely to be similar to that in 2006."

The bank's personal division had an outstanding year with revenue growth of 13 per cent driving earnings growth of 22 per cent, Mr McFarlane said.

All personal businesses, such as consumer finance, mortgages and investment and insurance products, recorded double digit earnings growth.

Institutional earnings grew 11 per cent over the 12 months to September 30, 2006, with revenue growth of eight per cent.

"This was offset by an 11 per cent increase in expenses, driven primarily by higher people costs," Mr McFarlane said.

ANZ's underlying result, excluding one-off items, of a cash profit of A$3.587 billion was above analyst forecasts.

Referring to ANZ's partnerships with other bank's in Asia, Mr McFarlane said discussions are proceeding satisfactorily in Shanghai and in other faster growing Asian countries.

ANZ has a 20 per cent stake in Tianjin City Commercial Bank in China and a 10 per cent interest in Sacombank in Vietnam.

"Our joint ventures in Indonesia, the Philippines and Cambodia are performing well, and the cards businesses are showing strong organic growth with one million cards now on issue in Indonesia and the Philippines," Mr McFarlane said.

He said the remediation work with the partnership with Dutch banking giant ING is nearing completion and the overall foundation of the business had improved substantially.

"We can now look forward to normal operation and growth in the years ahead," Mr McFarlane said.

ANZ declared a final dividend of A69 cents per share taking the full year total to A$1.25, which was a 13.6 per cent lift on the payout in the previous year.

- AAP