UPDATED: ANZ Bank cost cutting in NZ brings channels into focus

Thursday 3rd November 2011

Australia and New Zealand Banking Group, with a $1 billion annual profit under its belt in New Zealand, said it is working on significant cost reductions including channel rationalisation.

The lender has previously denied speculation that it may merge its ANZ and National Bank businesses into one brand. It is migrating to a single core banking system across the two networks to simplify its business and is reducing its suite of products and services.

"We are working through channel rationalisation,” Mike Smith, chief executive of the parent bank in Melbourne, said on a webcast. “I suspect there is a fair amount of benefit in that too."

ANZ posted a $1.085 billion profit in New Zealand in the year ended Sept. 30, up 25 percent on the previous year, driven by a 59 percent fall in the annual provision for bad and doubtful debts to $187 million. It increased profit even as lending contracted.

ANZ wants to have the lowest cost-to-income ratio in the New Zealand market, Smith said. The ratio fell 50 basis points to 46.8 percent in the second half.

"I'm actually optimistic about our New Zealand business," he said.

A spokesman for the bank in New Zealand said no decisions have been made on branding and the issue is not being treated with any urgency. The lender holds the rights to the Lloyd’s black horse trade mark until 2014.

It would remain New Zealand’s biggest lender by branch network, the spokesman said.

The latest annual profit should cause the bank to reconsider its plans to wind down the National Bank side of the business, First Union general secretary Robert Reid said.

“The bank has been very slow to guarantee to staff that jobs won’t be lost a result of the demise of the National Bank,” he said.

ANZ National Bank’s lending volumes declined 2 percent in the second half compared to the first half, which the bank attributed to deleveraging in the agriculture sector.

Customer deposits declined 2 percent in the second half compared to the first half. Still, net interest income increased 1 percent in the same period.

The bank said there was a six basis point improvement in margins as home owners moved from fixed rate mortgages to more profitable floating rate mortgages, which was offset by higher funding costs as cheaper term funding rolled off during the year.

Yesterday, Westpac NZ said it boosted annual home lending credit growth by 2.4 percent, beating the market’s growth of 1.2 percent. Westpac's business lending book grew 2.5 percent, ahead of the 0.1 percent contraction in the total market.

ANZ has a banking relationship with one in two New Zealanders and says it accounts for around one percent of New Zealand’s gross domestic product. It employs 8,884 people in this country, down 2 percent.

The second-half profit of $607 million is up 27 percent on the first half. The underlying annual profit of $1.24 billion is up 41 percent on last year.

A breakdown of the annual result showed a 44 percent rise in earnings from the retail division, a 61 percent rise from the commercial division and a 5 percent fall in earnings from the institutional division.

The provision for credit impairment charge increased by $21 million in the second half compared to the first half.

Smith said the impact of the Christchurch earthquake on its business had not been as pronounced as it first thought.

The Australian parent reported a 19 percent rise in profit to A$5.36 billion and increased its final dividend by 11 percent.

ANZ’s shares fell 0.9 percent to $27 on the NZX and declined 1.2 percent to A$20.64 on the ASX.

(BusinessDesk)

BusinessDesk.co.nz

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