ANZ bank lifts half year cash profit 23%

Photo: William West / AFP / Getty Images

The ANZ bank posted a 23% jump in cash profit to $3.41 billion for the half year, in line with analyst expectations, as expenses and charges for bad debts fell.

Statutory profit after tax for the half year ended March rose 6% to $2.9 billion.

Operating income was down 3% to $9.99 billion but this was offset by lower expenses, down 14% to $4.73 billion.

The company says the result reflects further benefits from a significant reshaping of the business to create a simpler, better capitalised and more balanced bank with key metrics such as return on equity and capital ratio climbing.

The lender set aside $719 million for bad debts, 20% lower than the previous year.

Net interest margins, a key measure of lending profitability, slid 6 basis points from a six months earlier to 2% underscoring the challenges Australian banks face from higher funding cost and deposit competition. The drop in the measure came despite the bank increasing its mortgage rate.

CEO Shayne Elliott said: “In 2016 we refreshed ANZ’s strategy to ensure we were on a path to rapidly adapt to the changing environment and deliver materially better outcomes for our customers, the community and shareholders.”

However, Elliott says the environment for banking remains constrained with intense competition and pressure on margins, subdued lending growth, rapidly changing customer expectations and increasing regulation.

“The provision charge has improved and the outlook for the second half remains broadly neutral.

“We are responding decisively to these continuing pressures through a financial, digital and cultural transformation of ANZ.”

The bank declared a fully franked interim dividend of 80 cents a share, steady on the same period last year.

Common equity tier 1 ratio, a measure of its ability to absorb future losses, climbed to 10.1% from 9.8% the focus on less capital intensive loans, sale of assets from Asia to New Zealand freed up capital.

“We are in a very strong position ahead of anticipated changes to capital requirements by APRA,” Elliott said.

Over 50% of group Capital is now allocated to the retail and Commercial businesses in Australia and New Zealand up from 44% earlier in line, the bank said with Eliott’s plan to focus on the capital light business and away from certain capital hungry institutional lending business. The institutional banks total risk weighted Assets have reduced by $23 billion during
the past 12 months, ANZ said.

Return on Equity, a measure of how efficiently a company invests shareholders funds, climbed to 130 basis points to 12.5%, the first “material” increase since 2010, the bank said.

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