ANZ joins the growth party Bank heads for record half
The Age
Saturday February 27, 2010
ANZ says the economy is at a "turning point", after a fall in its bad debts and fatter margins are set to propel the Asian-focused lender to a record half-year profit of as much as $2.4 billion.ANZ yesterday rounded off a flurry of updates among the big four banks over the past two weeks that showed they have emerged from the global financial crisis among the best-performing in the world.Commonwealth Bank and Westpac, which have the biggest exposure to the nation's resilient housing market, have both delivered updates that position each for record earnings.While not directly comparable with ANZ's four-month effort, CBA recently reported a 54 per cent jump in first-half profit to $2.9 billion while Westpac's first-quarter result of $1.6 billion was 33 per cent more than last year.But National Australia Bank, which has a bigger exposure to business lending and the troubled British market, returned flat first-quarter profit growth.In a regular update to investors, ANZ reported an underlying profit after tax of $1.6 billion for the four months to the end of January, representing a better than expected 16 per cent jump on last year.The result comes as long-serving ANZ chairman Charles Goode retires this weekend after nearly two decades on the bank's board. Director John Morschel was last year named to head the board of the Melbourne-based bank.Although ANZ did not provide a forecast, its four-month effort implies an annualised profit of $4.8 billion. In October, the bank reported a full-year underlying profit of $3.72 billion.The latest update is likely to trigger a round of earnings upgrades among analysts, given the stronger performance on revenue and lower provision charges to cover bad debts.While the bank's 35 per cent drop in lending losses €” particularly across mortgages and personal lending €” is a sign of improved health in the economy, ANZ chief executive Mike Smith expressed caution over the immediate outlook for bad debts given fresh jitters in European bond markets.ANZ achieved revenue growth of about 8 per cent for the four months.But this was largely offset by cost growth of 7 per cent for the period, with new acquisitions in Asia soaking up additional expenses.Lending growth was modest, but earnings were boosted by a 14-basis-point rebound in interest margins over the past few months.The fatter margins €” a key driver of profits €” came after the bank passed on higher funding costs to mortgage customers and increased lending charges to big business customers.ANZ shares rose 89, or 4 per cent, to $23.14 and other major banks also advanced.After missteps in recent years, particularly in its institutional banking arm, Mr Smith said ANZ had been rebuilt and was more predictable for shareholders.Mr Smith also railed against the prospect of tougher global banking regulations, which threaten to crimp profits.
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