Drop in bad loans lifts ANZ's profits

ANZ's local full-year result is up and the parent company's cash profits surpassed analysts' predictions. Photo / Christchurch Star

ANZ's New Zealand operations posted a 40 per cent rise in full-year underlying profit to $882 million, helped by a fall in bad loans.

The charge for credit impairment in the year to September fell 48 per cent to $461 million; second-half charges of $131 million were down 60 per cent on the first half.

ANZ National Bank chief executive David Hisco, who took over the job last month, said the bank's performance highlighted the steady turnaround in the economy and the underlying strength of ANZ's customer franchise.

The improving economic environment had seen the provision charge fall dramatically, but so far the recovery had not been consistent in all sectors.

Customers remained cautious about taking on debt. Lending and deposit growth were flat as personal and business customers continued to deleverage, Hisco said.

Economic growth was likely to remain soft over the medium term, but the Government's focus on rebalancing the economy with a shift towards savings and exports was setting New Zealand on the right path.

"After getting a good feel for New Zealand in the past six weeks, I'm relatively upbeat about the outlook," Hisco said.

Net interest income rose 4 per cent from the previous year to $2.49 billion, while other external operating income dropped 13 per cent to $721 million.

Operating expenses rose 5 per cent to $1.53 billion over the previous year, while statutory profit rose to $867 million from $194 million.

Mike Smith, chief executive of parent company Australia and New Zealand Banking Group, said the New Zealand economy was improving, but there was still weakness in patches of the agricultural sector.

The Australia-based firm posted a 51.7 per cent jump in cash profit to A$5.13 billion ($6.69 billion) for the year. It expected corporate lending to increase in the first half of fiscal 2011.

The cash earning result beat consensus estimates by more than A$200 million, and the final dividend of A74c was A5c above analysts' consensus estimates.

ANZ's bank-defined underlying profit increased 33 per cent to A$5.025 billion. The bank's statutory profit increased 53 per cent to A$4.501 billion, of which A$509 million, or 11.3 per cent, came from its Asia-Pacific operations.

Operating revenue rose 15 per cent to A$15.692 billion, even as income from ANZ's global markets operation dropped by 12 per cent over the year. Operating costs increased 17 by per cent to A$7.304 billion.

ANZ is Australia's biggest lender in Asia and Smith confirmed it was on track to achieve its stated target that the Asia-Pacific unit would generate 20 per cent of group net income by 2012.

- AAP, NZPA