Small and medium businesses are in for more economic pain, which could worsen if the Australian dollar rises again, ANZ boss Mike Smith warns.
The bleak assessment for the year ahead came despite another record full year net profit for ANZ, up six per cent from the previous year to $5.66 billion in the 12 months to September.
Mr Smith expects trading conditions to worsen as world economic growth slows because of ongoing problems in Europe and the United States.
“Although there is growing confidence policy makers will avoid an economic Armageddon scenario in Europe, the ripple effects of a chronically weak Europe are becoming more and more apparent,” Mr Smith told reporters on Thursday.
The bank has already seen a rise in bad debts, or unrecoverable loans, in rural and regional areas, Mr Smith said, as customers find it harder to make loan repayments.
“I think the SME (small and medium enterprise) market as well, I think we will see difficulty there,” he said.
Further pain could also be felt if commodity prices rebound from recent falls, something for which Mr Smith said he was “a little bit concerned”.
New rounds of quantitative easing, or money printing, in the US and Europe have boosted liquidity in the world economy, Mr Smith explained.
“If that was to flow into commodities, that would put pressure on the Australian dollar,” he said.
“That is possible, and of course that would have a negative impact on Australia … unless you are importing.
“But actually for the economy it is not terribly good.”
ANZ increased underlying profits in its Australian, New Zealand and rapidly expanding Asia Pacific divisions during its financial year, and posted an improved performance on costs in the second half.
That was in part due to staff reductions, which Mr Smith said were mainly made through natural attrition.
ANZ’s full-time staff numbers in Australia fell by 2,699 in the 12 months to September 30, or 11 per cent of its local workforce.
A rise in employees in Asia meant its total job losses totalled 2,058 in the year, or four per cent of its workforce.
“Any job cut is difficult to do, that’s the last measure that you want to take,” Mr Smith said.
The Financial Services Union said ANZ had no excuse for cutting jobs while it made record profits.
Analysts said ANZ’s results were in line with expectations, and showed a good underlying performance despite weak demand for loans and strong consumer caution.
However many noted a higher than expected rise in its bad debt expenses.
“Yes, there were some soft spots in its FY12 result, but the robust performance of the ANZ Asian operations was readily apparent,” Patersons Securities economist Tony Farnham said.
ANZ declared a fully-franked final dividend of 79 cents per share, taking its full-year dividends to $1.45, up from $1.40 in the previous year.
ANZ shares lost 22 cents to $25.38.
