ANZ posts $2.97b first-half cash profit
ANZ Bank has reported first-half underlying profit of just under $3 billion, a bumper result that will add pressure on the bank to pass on in full yesterday's official interest rate cut.
- ANZ posts record earnings
- ANZ declines to comment on rate plans
- Bank warns of subdued local demand
The cash result, which strips out one-offs and investment losses or gains, rose 5 per cent to a record $2.973 billion, close the level expected by analysts in a Reuters survey.
The net profit for the half, though, rose 10 per cent from a year earlier to $2.92 billion, slightly less than analysts had expected.
Another big bank result - just as interest rates come into focus. Photo: Jessica Shapiro
ANZ shares opened slightly lower, dropping as much as 20 cents, or 0.8 per cent, to $23.79, compared with a modest rise for the overall market.
CBA bank analyst Ben Zucker said ANZ’s profit margins are under pressure in Australia, which would factor into the bank’s mortgage rate pricing decisions next Friday.
“There is still margin pressure,” he said. “There is a decline in margins and that still plays into funding cost pressure.”
“[But] at a headline level, the results look reasonably in line with expectations,” he said
Net profit rose on improving results from the bank’s operations in Asia, the Pacific, Europe and America, ANZ said, although it also warned that margins in its key Australian operations are declining.
ANZ's record earnings may well be followed by Westpac tomorrow when it discloses its first-half results and NAB next week with its interim profit. All up, the big four banks are likely to post cash profit of more than $12 billion for their half years, stoking expectations from the public that they pass on the great bulk of yesterday's surprise 50 basis-point interest rate cut by the central bank.
Earlier this year, the major banks acted on their own to raise interest rates, citing rising funding costs of their own and the need to maintain profit margins even as demand for banking services slows in Australia.
The Bank of Queensland is the first of the banks to announce its response the latest RBA rate cut, opting to pass on just 35 of the 50 basis-point cut.
The ANZ bank today made no comment on whether it would reduce its interest rates on loans, after the RBA rate cut. It will stick to its routine of announcing its lending rates on the second Friday of each month - or May 11 in this case.
ANZ declared an interim fully-franked dividend of 66 cents, up from 64 cents for the same period in the previous year.
‘‘In Australia, we made market share gains and customer satisfaction remained strong,’’ chief executive Mike Smith said in a statement.
‘‘Our financial performance, however, was subdued, significantly impacted by declining margins and the structural shift that’s occurred since the financial crisis with persistently lower demand for credit.’’
Mr Smith warned that business conditions may be subject to rapid shifts for some time.
“We are managing in what could be described as a ’work out’ phase in the global economy with the situation most acute in Europe,” Mr Smith said. “This will continue to cause volatility in global markets for many years.”
ANZ Bank shares have has surged 17 per cent this year, prior to today, making it the best performer among the big four banks - about twice the gain of the benchmark S&P/ASX 200 index.
The ANZ has sparked public anger twice this year by raising its rates independently of the RBA. While both moves, in February and April, were just 6 basis points, or just 0.06 percentage points, the move drew criticism from borrowers and politicians such as Treasurer Wayne Swan, who said the increases were not justified given the bank's string of record profits.
Further profit increases for the ANZ and other big Australian banks, though, are increasingly difficult to generate as demand growth for mortgages and other loans sinks to levels not seen in decades.
In February, ANZ announced it would cut its Australian workforce by 1,000 in a bid to squeeze costs.
In today's results, the bank said first-half margins declined because of the competition for deposits in the Australian banking industry, higher costs for long-term funding, and low demand for loans from consumers and businesses.
ANZ’s net interest margin for the six months to March was 2.38 per cent, down from 2.44 per cent in the six months to the end of September, 2011.
Net interest margin is a reflection of the profit the bank makes on loan interest.
Mr Smith said the bank was adapting to the changing financial environment, which would impact customers and staff.
‘‘Our recent decisions on interest rates for customers in Australia and on employment within the group reflect the need to reshape our business,’’ he said.
‘‘Clearly, though, we need to work harder to find new ways of responding to customer and community concerns about banking and to the changes that have been brought upon the banking sector by this environment.
‘‘We remain optimistic about Australia and New Zealand, and about the growth businesses we have created in Asia.’’
The bank's underlying provisions total $565 million, the bank said.
With Chris Zappone, BusinessDay and Bloomberg, AAP, Reuters