By Pam Graham of NZPA

Wellington, March 6 NZPA - ANZ National Bank's institutional business, which includes its dealing room, has upped its earnings by 87 percent in volatile markets while the retail bank posted a loss.

New Zealand's largest bank today reported a n after-tax profit of $210 million in the three months to December 31, down on the $310m in the same period last year.

The underlying core profit after-tax of $311m is up 4 percent on the same period last year.

The result included an already signalled charge of $161m for the cost of an offer to investors in 49 percent owned fund manager ING New Zealand, which has frozen funds.

There is also a provision of $94m, up from $32m last year, for bad debts.

"ANZ National remains sound and well-capitalised with a strong balance sheet, and we are getting on with the sensible steps to navigate through a difficult environment," said chief executive Graham Hodges.

A breakdown of the profit showed the institutional part of the bank had net operating income of $216m, up from $128m in the same period last year. Its profit before income tax was $168m, up from $90m in the same period last year.

The bank's retail banking business posted a pre-tax $41m loss, including the provision for ING. It made a $188m profit in the same period last year.

The quarterly numbers are volatile but bank analysts expected ANZ National and other banks to have strong results in their markets divisions when markets are volatile and interest rates are falling.

Customers seek out banks' institutional services when markets are volatile, increasing business volume. Also, banks' holdings of fixed interest securities post gains in a falling interest rate environment. The accounts also showed that ANZ National had $312m of mortgages that had payments past due for 90 days or more, up from $99m in the same three months last year. These are not classified as impaired. It had $57m of corporate loans 90 days or more past due, up from $20m in the same period last year.

The bank has tier one capital of 8.19 percent and total capital of 11.68 percent, both above the regulatory minimum ratios of 4 percent and 8 percent respectively.

ANZ National is a unit of Australia's ANZ.

On February 26 ANZ chief executive Mike Smith said the bank faced headwinds in New Zealand.

"The economy there is well and truly in recession and like many New Zealand businesses we are doing it tough," Mr Smith said.

ANZ National reported a $1.163 billion profit last fiscal year. It will report its interim result on April 29. NZPA WGT pjg nb