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ANZ New Zealand boosts FY earnings 21% as costs fall on smaller workforce; bad debts decline

Thursday 26th October 2017

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ANZ New Zealand, the local unit of Australia & New Zealand Banking Group, boosted annual earnings 21 percent as the country's biggest lender cut costs by shrinking its workforce and bad credit charges fell as concerns about the rural sector eased. 

Cash profit, the favoured earnings measure of the Australian-owned banks, rose to $1.86 billion in the 12 months ended Sept. 30 form $1.53 billion a year earlier. Net interest income edged up 2 percent to $3.08 billion while operating expenses shrank 8 percent to $1.45 billion and credit impairment charges more than halved to $59 million. The bank's net profit rose a more modest 15 percent to $1.78 billion, which included fair value losses on financial instruments and insurance policy valuations. 

ANZ's New Zealand staff shrank to 7,755 as at Sept. 30 from 7,869 a year earlier, although the bulk of that is in the group's Kiwi banking division where full-time equivalent staff was trimmed to 6,207 from 6,317 a year earlier. The Melbourne-based parent said operating costs in the NZ banking division "decreased as a result of a reduction in FTE driven by automation and transaction migration to lower cost channels, partially offset by inflation". 

David Hisco, ANZ New Zealand chief executive, said the reduction in costs took it below the lender's 2010 levels, while at the same time maintaining high customer satisfaction levels. 

"That's a remarkable achievement and reflects our team's strong discipline, high productivity and our digital push," he said in a statement. "The strength in some parts of the economy also meant fewer bad loans to contend with and a more benign credit environment saw the provision charge trend lower." 

The Australian group's cash earnings rose 18 percent to A$6.94 billion, although it didn't include the impact of ANZ selling its wealth businesses to IOOF or the 40 percent stake it held in Metrobank Card Corp. Under chief executive Shayne Elliot the lender has been restructuring to quit less profitable lines of business and introduce more agile working styles to strip out bureaucratic waste. The board declared a final dividend of 80 Australian cents per share taking the annual return to A$1.60, unchanged from a year earlier. 

ANZ's New Zealand lending business, which will see former Prime Minister John Key take over as chair in the new year, grew its mortgage book 5 percent in the year to $72.35 billion, while commercial loans increased 1 percent to $40.96 billion. Total net loans were up 4 percent to $117.24 billion, while customer deposits increased 7 percent $81.86 billion. 

The heightened level of competition in the market continued to put the squeeze on net interest margin which shrank 6 basis points to 2.31 percent in the year, although ANZ's New Zealand lending division increased return on assets 3 basis points to 1.22 percent. 

ANZ's dual-listed shares were unchanged at $34.32 on the NZX. 


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