ANZ’s profit soared

Photo by Mark Kolbe/Getty Images

ANZ Bank posted a 31% increase in first quarter cash profit on lower provisions for bad debts and cost controls.

Cash profit, which excludes one-time items, rose to $2 billion on a 7% growth in revenue.

ANZ was the first of the big four Australian lenders to focus on cost cuts to sustain profits amid challenges including sliding net interest margins, slowing loan growth and increased competition. The lender is also gained from the reduction of poor performing Asian loans and sale of assets.

Expenses fell 4%, driven initiatives aimed at boosting productivity, the bank said. Net interest margin declined several basis points. The lender said blamed lower earnings on capital and higher funding costs.

“The first quarter saw a positive start to the year. There was further momentum in executing our strategy to build a simpler, better balanced and fairer bank that more consistently meets customer expectations, and delivers improved shareholder returns,” CEO Shayne Elliott said.

The ANZ institutional banking unit, which includes Asian lending, reduced its assets by nearly $1 billion continuing a focus on exiting loans that deliver poor returns. Gross Impaired Assets increased 1.8% and total provision charge was $283 million.

Common equity tier 1 capital, a measure of the bank’s ability to absorb future losses, stood at 9.5%. The sale of assets from China to New Zealand will add 70 basis points or $2.7 billion to capital, ANZ said.