The ANZ Group said it saw even tighter profit margins from its New Zealand banking operation in the current second half of the financial year to September 30. ANZ made the comment in a trading update yesterday with its placement of new shares to institutional investors that raised A$2.5 billion.

The comment contrasts with those made by New Zealand politicians about the Australian-owned banks profiteering from their New Zealand operations. Higher funding costs on over NZ$100 billion of foreign funding have driven down the profit margins of the Australian owned banks over the last two years, although there are signs in recent weeks those funding costs may be starting to ease as conditions in financial markets ease.

"Market conditions in New Zealand remain challenging and the Group anticipates some further margin decline in the second half," ANZ said in this statement.

ANZ National reported its net interest margin for its New Zealand businesses fell 24 basis points to 210 basis points in the six months to March 31 from the same period a year ago. It was down 9 basis points from the September half. See more here on bank profits and calls from politicians and the Reserve Bank for the banks to pass on the Official Cash Rate cuts and sacrifice profits.

Elsewhere, the ANZ Group said it expected bad debt charges to rise later in the year.

"ANZ's expectation remains that the credit provision charge in the second half of financial year 2009 will be somewhat higher ( about 20%) than that of the first half (1H09 underlying provision charge A$1.435 billion)," ANZ said.

"At its Interim results, ANZ advised that consistent with the broader banking sector in Australia and New Zealand, additional stress had been noted in the commercial (middle market) segment during March. While this did not continue into April, ANZ believes the commercial segment will experience further difficulties in the second half of the calendar year," it said.

ANZ also appears determined to push ahead with its Super-Regional strategy of expanding into Asia.

ANZ raised A$2.5 billion through a placement of new shares to institutional investors at a 7.5% discount, building up its warchest ahead of a bid for Royal Bank of Scotland's Asian assets.

The placement was three times oversubscribed, which suggests strong demand and the minimal discount is good news.

ANZ said it waited until the ban on short selling of financial stocks was lifted to ensure a stable market, The Australian reports.