ANZ boss Mike Smith is optimistic about ongoing strength in the Australian and Chinese economies, which he says will drive profit growth for country’s most Asia-exposed bank.
The bank made a cash profit of $4.8 billion in the nine months to June, up 11 per cent on the same period last year.
That puts ANZ on track to make a full year cash profit of about $6.4 billion, up from a $6.01 billion profit last year.
Mr Smith is confident that low interest rates and a falling Australian dollar will help drive the bank’s profit growth.
“I’m optimistic that we are going to see stronger consumer confidence and stronger economic activity in the medium term due to the effects of lower interest rates, a more competitive currency and the removal of pre-election uncertainty,” Mr Smith told analysts on Friday.
ANZ has pinned much of its growth strategy on expanding into Asian markets, and Mr Smith says the bank is continuing to make progress in the region.
Despite concerns about slowing growth in China, Mr Smith said the world’s second largest economy was rebalancing to a more sustainable rate of growth, with was good news for Australian businesses.
“I think its clear the concerns about China have been overdone,” he said.
“We need to remember that the world’s second largest economy is still growing at around 7.0 to 7.5 per cent per annum and this is like adding an economy the size of Switzerland each year.”
Despite ANZ’s profit growth, investors were concerned about static revenue growth a declining margins, sending the banks shares down 94.5 cents, or 3.1 per cent, to 29.41 by 1245 AEST.
The company’s net interest margin – a key measure of profitability on its loans – declined by two basis points during the June quarter, due to lower interest rates.
The bank expects a further small drop in margins in the final three months of its fiscal year.
Morningstar analyst David Ellis said lower provisions for bad debts – loans unable to be repaid by customers – were likely to offset lower margins.
He welcomed Mr Smith’s assessment of the Australian and Chinese economies.
“Mike Smith’s more optimistic economic outlook is very important and we agree wholeheartedly,” he said.
ANZ lifted consumer deposits by 12 per cent, and its loans grew by eight per cent over the three quarters.
