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ANZ National Profit Fall In Otherwise Spectacular Parent Result

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Oct 29 NZPA - Had it not been for New Zealand, it would have been a spectacular result, Australia and New Zealand Banking Group Ltd chief executive Mike Smith said today.

Subsidiary ANZ National, New Zealand's largest bank, recorded a 32 percent fall in underlying profit to $628 million in the year ended September 30, and an 80 percent fall in bottom line profit to $194m.

A tripling in bad debt provisions to $889m from $300m reflected that the downturn has been more pronounced and protracted in New Zealand than in Australia.

A $240m charge for disputed structured finance transactions was run through the income statement even though ANZ National has not been to court yet, and a $148m cost for sorting out problems at the now fully owned ING New Zealand fund management business helped take one-off charges to $434m.

ANZ National chief executive Jenny Fagg said the parent was committed to New Zealand and ANZ National was a profitable and well-managed bank positioned for future growth.

"I am pleased that ANZ National has been able to continue to support the New Zealand economy in this tough operating environment," she said.

The story of the New Zealand business is similar to other banks in that the core banking business recorded a 52 percent fall in underlying profit to $380m, but the institutional business recorded a 30 percent increase in profit to $362m.

The institutional divisions of banks in this part of the world have been making exceptional profits from trading, sales to customers and positioning of banks' balance sheets in volatile markets.

New Zealander Shayne Elliott now heads the institutional division of ANZ in Australia and that division contributed a $A1.4 billion profit to the parent.

ANZ National said it expected the profit of its institutional division to return to more normal levels over time.

The net interest margin, effectively a profit margin for the bank, declined by 26 basis points to 2.14 percent.

Ms Fagg said this was due to intense competition for deposits, higher wholesale funding costs, a timing lag in re-pricing of fixed rate lending, and increased costs from early repayment of fixed rate mortgages.

In New Zealand, about 75 percent of home mortgages are fixed rate loans, while in Australia most lending is at the variable rate.

Finsec, the finance workers' union said ANZ National was "still doing nicely" and should invest in its workforce.

The bank is under-going a cultural change and rebranding which includes New Zealand.

ANZ wanted to be "best of breed" for customer experience, Mr Smith said.

ANZ National has a 34 percent share of home loans in New Zealand, 29 percent of the credit card market, 33 percent of deposits and 30 percent of commercial loans. Parent ANZ said net profit fell to $A2.943b in the 12 months to September 30, from $3.319b in the previous year.

Cash earnings, its preferred measure of profitability because it leaves out unrealised gains or losses related to asset values, increased 12 percent to $A3.383b.

The market consensus forecast was for ANZ to deliver a 5 percent lift in cash earnings to $A3.18 billion.

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