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Bad debts halve while late loans double for ANZ National Bank

Thursday 28th October 2010

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ANZ National bank’s local profit climbed in the year to September 30 as it cut its expectations for loan defaults, while the value of its late loans almost doubled.

The New Zealand arm of ANZ made a net profit of $867 million in the year ended September 30, up from $194 million a year earlier – a result that bore the impact of provisioning for loss in a crucial tax avoidance case.

ANZ National paid Inland Revenue A$196 million in the previous financial year, before settling for a final total of A$158 million on Christmas Eve last year. The latest accounts show A$38 million in New Zealand tax provisioning flowing back to the Australian parent company.

The lender cut its provision for bad debt by $461 million, down from $890 million a year ago, even as it almost doubled its net impaired assets to $1.46 billion. The local unit makes up almost a quarter of the whole group’s assets which might not be repaid on time. Net impaired loans as a ratio of the loan book rose to 1.49% from 0.73% in 2009.

“The increase in New Zealand was driven by higher levels of default primarily in the rural and commercial segments and was also concentrated in the first half,” the company said in its annual report. The bank lifted its individual provision charge on rural banking 62% to $84 million, the only sector to increase in the New Zealand business.

Operating profit shrank 6% to $1.68 billion as gains in interest income lagged behind rising costs, while other revenue streams sagged.

“Lending and deposit growth were flat with both personal and business customers continuing to deleverage,” New Zealand chief executive David Hisco said in a statement. “Our costs were well-managed which is becoming increasingly important in the lower-margin, lower-growth environment.”

The local result contributed about 15% to ANZ’s group profit of A$4.5 billion as the Australian and New Zealand economies recover from the global recession in late-2008, early-2009.

The bank’s local net interest average rose 9 basis points to 2.27% while its total lending on housing was flat at $54.6 billion, and its term loans on non-housing shrank 2% to $38.8 billion.

ANZ’s local unit didn’t manage to swing too many new customers in the so-called ‘deposit rate war’, where financiers have ramped up returns in a bid to source more money locally to help meet the Reserve Bank’s new core funding ratio. Customer deposits rose 2% to $34.4 billion.

The shares rose 1.9% to $32.20 on the NZX and 2.6% A$24.66 on the ASX.

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