ANZ has burst out the blocks in the 2017 financial year, reporting a 31 per cent jump in first quarter cash profit to $2 billion.
The news follows two days after the Commonwealth Bank, Australia’s biggest lender, unveiled a record first-half profit of $4.9 billion. That was a 6 per cent rise on the previous period and added to the debate about policy action to rein in booming house prices.
CBA said its standard variable investor home loans will rise by 12 basis points — or about half an RBA move — to 5.68 per cent from April 3.
ANZ key statistics
- ANZ statutory profit up 8pc to $1.6 billion for December quarter
- Revenue up 7pc, net interest margin down
- ANZ shares up 1.5pc by 10:15am to $30.65
The ANZ bank said it had benefited from a good performance in its core retail business, falling bad debts and the sale of its old headquarters on Queen Street in the heart of Melbourne’s financial district.
Statutory net profit was up a solid 8 per cent to $1.6 billion.
In the three months to December 31, revenue rose 7 per cent, driven by an increase in home lending, while costs fell 4 per cent.
Like CBA, the ANZ reported net interest margins narrowing slightly. It said a large part of this was due to a successful campaign to boost deposits with more attractive term-deposit rates.
ANZ chief executive Shayne Elliott said the momentum was building on plans to create a simpler, better balanced and fairer bank.
The results did not include proceeds from the sale of ANZ’s 20 per cent stake in the Shanghai Rural Commercial Bank and a number of wealth and finance businesses across the Asia-Pacific region.
However, the sales, when completed, will deliver another $2.7 billion – or 70 basis points – to the bank’s already solid top tier capital ratio of 9.5 per cent.
That should put ANZ at the head of the “big four” pack in the race to boost capital buffers ahead of APRA’s determination of what makes an “unquestionably strong” bank.
Investors welcomed the update, pushing ANZ’s shares 1.5 per cent higher to $30.65 by 10:15am (AEDT).
Bad debts ‘marginally better’
Mr Elliott said the transformation of the bank was providing capacity to invest in new initiatives for customers, including a move to digital wallet products such as ApplePay and AndroidPay.
Mr Elliott said the digital wallet strategy was delivering a net gain in customers.
Institutional banking was a standout performer, benefitting from favourable trading conditions including a stronger US dollar and rising interest rates, which delivered a 77 per cent increase in global markets’ income to $706 million.
At the same time, the institutional bank also managed to cut its exposure to riskier assets.
The bank’s outlook on credit quality had picked up since its rather downbeat assessment at the time of its 2016 full-year results.
Year ahead unclear
“It is still too early to be definitive about the year as a whole, however the first quarter, together with our experience during the first six weeks of the second quarter, suggests the credit environment is marginally better,” Mr Elliott said.
“Overall we have seen good progress in the first quarter. Clearly though, there is still a great deal to do to sustain this progress in a low growth environment.”
Morgan Stanley analyst Richard Wiles said the first quarter profit was 25 per cent ahead of his estimate, describing the result as strong despite benefiting from some lumpy items and seasonality.
“Even so, underlying revenues are in line with our forecast, cost cutting is on track, loan losses are falling and capital is trending up strongly,” Mr Wiles concluded.