A lack of business confidence on both sides of the Tasman has been a drag on ANZ’s quarterly profit, something the bank has dismissed as a temporary aberration.
The smallest of Australia’s four major banks posted a 20 per cent drop in net profit to $1.36 billion for the December quarter.
However its underlying cash profit, the bank’s preferred measure, rose $1.53 billion from $1.44 billion.
ANZ shares had slumped 19 cents, or 0.68 per cent, to $27.87 by 1500 AEDT, on a day the other major banks were all posting strong gains.
The bank blamed the fall in net profit on accounting adjustments the whole sector has experienced with foreign exchange and basis hedge valuations.
Chief executive Mike Smith described the result as solid and in line with expectations since it reported a record $5.66 billion full year net profit last October.
However he noted business confidence was weak in Australia and New Zealand.
Soft margins there and at ANZ’s international and institutional banking arms had offset revenue volume growth in Asia.
“The global economic situation stabilised in 2012 but it is still pretty tough out there,” Mr Smith told analysts.
“Economic growth is a little softer in Australia and New Zealand and consumer business confidence continues to be weak despite low unemployment and low interest rates.”
ANZ, similarly to National Australia Bank, is more leveraged to business banking while the Commonwealth Bank and Westpac are heavily focused on retail banking – including deposits and home loans – where there is revenue growth.
However ANZ said it had won market share in those areas during the quarter.
“This is a point in time where the business mix affects us,” Mr Smith said
“Last year we had the benefit of a smaller mortgage book.
“Those banks with mortgage books are now benefiting more, so it’s a temporary aberration isn’t it.”
ANZ’s result looked soft compared to Commonwealth Bank’s record first-half $3.78 billion profit reported this week and National Australia Bank’s better than expected recent quarterly $1.45 billion profit.
Morningstar head of banking research David Ellis said he thought ANZ’s net interest margins of 2.28 per cent – borrowing to lending interest rates – could improve and it appeared on track for solid full year earnings growth.
“Funding pressure remains, but we expect solid margins and improved revenue growth to deliver a full year profit around $6.4 billion and we maintain our number one ranking for this narrow-moat bank,” he said.
ANZ’s point of difference from the other three banking pillars is Asia and it now generates more than 20 per cent of revenue from overseas operations, aiming to increase the Asian share to 30 per cent by 2017.
“Recent data is brighter from the key emerging economies, especially China, and that’s good for Australia and New Zealand,” he said.
The bank said its credit quality – or bad debt – trends were in line, with an impairment charge of $311 million and guidance for a 10 per cent rise on last year.
