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UPDATE: ANZ New Zealand boosts FY profit 25%; loan book shrinks

Thursday 3rd November 2011

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Australia and New Zealand Banking Group reported a 25 percent rise in annual profit in New Zealand, beating the $1 billion barrier even as lending contracted.

The largest bank in New Zealand reported a $1.085 billion profit in the year to 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.

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 per cent 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.

The operator of ANZ and National Bank brands did not say anything about dropping the National Bank brand, which has been a source of speculation.

The company said tight management of costs contributed to the result. Costs fell 2 percent. The cost to income ratio was down 50 basis points to 46.8 percent in the September half.

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.

"After allowing for Christchurch earthquake related individual provisions and the matching unwind of the associated collective provision, individual provisions were modestly lower and the increased credit provision charge reflected a higher level of unwind in management overlays in the March 2011 half," the bank said.

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.

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