ANZ Banking Group is not expected to cut its interest rates by 0.5 per cent in May despite posting a record profit of almost $3 billion in six months.
Chief executive Mike Smith on Wednesday refused to speculate on any movement in ANZ’s interest rates, a day after the Reserve Bank of Australia made a surprise 50 basis point cut to the cash rate.
ANZ will stick with its new program of announcing its rates on the second Friday of each month, he said.
By contrast, its big four rival National Australia Bank dropped its standard variable home loan by 0.32 per cent.
Nearly three million ANZ deposit holders customers would be negatively impacted by a rate cut, compared to 800,000 mortgage holders who would benefit, Mr Smith said.
“I am a mortgage holder, and would I like mortgages to go down? Of course I would,” he told journalists.
“But we’ve got more savings customers who actually wouldn’t want rates to go down.”
His comments came as ANZ posted a net profit of $2.92 billion for the six months to March 31, up 10 per cent from the previous corresponding period.
Mr Smith said profitable banks were able to loan more money, and added that rising bank profits would also benefit everyone with superannuation.
“If you don’t have profitable banks you won’t have an economy that works,” he said.
ANZ’s profit growth was driven by improved performances from its growing businesses in Asia, the Pacific, Europe and America, plus higher profits in its New Zealand and institutional divisions.
That more than offset a weaker performance from ANZ’s Australian business, where underlying profit fell by seven per cent compared with the six months to the end of September, to $1.37 billion.
The cost of funding Australian loans continued to rise in the six months to March, as competition for deposits drove deposit interest rates higher.
The difference between the Reserve Bank of Australia’s (RBA) cash rate and the interest rate ANZ offers on deposit accounts had grown by 28 basis points in the first half, Mr Smith said.
The cost of wholesale funding for loans had grown by 15 basis points.
Patersons Securities economist Tony Farnham said a fall in ANZ’s margins were a result of weak demand for loans from consumers and businesses.
“It reflects the slow credit growth environment and funding challenges presenting at the moment in the domestic market, and justifies any decision by our banks not to pass on all of yesterday’s 50 basis point reduction by the RBA,” he said.
ANZ shed 263 full time employees in the six months to March to 17,669.
More jobs will go in the coming months, Mr Smith said, as the bank continues to adapt to the new global economic environment created by the global financial crisis.
ANZ’s first half profit narrowly missed analyst expectations, and ANZ shares dropped by x cents, or x per cent, to $x.
The bank’s growth strategy in Asia still makes it one of the most attractive of the Australian banks for investors, analysts said.
ANZ also increased its interim fully-franked dividend by three per cent to 66 cents.