ANZ NZ yr profit up 9%, institutional returns disappoint

New Zealand profit for the year ended September rose 9% to $1.04 billion, on the back of a 5% increase in operating revenue. ANZ group profit rose 13 percent to $A4.18b ($NZ5.06b).

Cash profit, adjusted for non-core items including returns from the sale of vehicle fleet business Fleetpartners, rose 1 percent to $975 million.

The result included a 7% fall for the institutional trading business to $210m, short of an exceptional performance in 2006, ANZ NZ chief executive Graham Hodges said.

"There was less volatility for most of the year -- the currency had been expected to be more volatile and in fact fall for much of the year but it held up and so, in a less volatile environment, there are less opportunities for the traders to make money," Hodges said.

The bank was benefiting from increased deposits as a result of recent finance company failures, but there was little evidence yet that people were struggling with rising interest and household costs, he said.

Net interest income rose just 4% to $2.06b, despite higher lending volumes -- up 12% for the second consecutive year -- and 7 percent growth in customer deposits.

The net interest average margin fell 12 basis points to 2.20%, following the previous year's 21-basis-point fall, partly due to increased competition.

The annual result was also hit by a large increase in credit costs to $78m, from the previous year's unusually low $5m.

"Credit quality is extremely good with no evidence of stress in our book, but the provisioning levels jumped from unsustainably low levels in 2006," he said.

A 0.08 percent rise in net non-performing loans was well below that seen in Australia, the bank said.

Expenses grew 4%, including salary increases, investment in staff and business initiatives.

Increased market share in mortgages, business banking, consumer finance and rural banking reflected investment in the business, and the strategy of running two brands, Hodges said. ANZ bought National Bank bought from British bank Lloyds TSB in 2004.

ANZ has 33 percent of mortgages, 40 percent of business and small enterprise banking, just over 40 percent of rural banking -- including 50 percent of dairy farms -- and 40 percent of corporate banking.

The bank, which owns finance company UDC, was increasing its investment in consumer finance and private banking, and expanding branches to take advantage of growth in Auckland, Hamilton and the Bay of Plenty.

Bank workers' union Finsec said staff had been pressured to promote debt to customers, a segment which was a significant driver behind ANZ's annual profit increase.

"Bank staff have reported significant additional pressure over the past 12 months in relation to their lending targets," Finsec campaigns director Andrew Campbell said.

ANZ National staff were set sales and referral targets for products such as credit cards, personal loans and mortgages, he said.

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