The country's biggest bank, ANZ New Zealand, says although it's too early to fully calculate the likely financial impact of the devastating February 22 Christchurch earthquake, it believes it is adequately provisioned.
ANZ made the comment in its half-year results, for the six months to March 31, out today. They showed a 63% rise in half-year underlying profit to NZ$605 million from NZ$372 million in the same period of the previous year as provisions for credit impairment dropped to NZ$85 million from NZ$330 million.
Bottom line, or statutory, profit rose NZ$92 million, or 24%, to NZ$478 million from NZ$386 million. The bottom line profit reflects NZ$127 million of charges including a NZ$98 million charge in relation to moving the ANZ and National banks to a single core banking system.
ANZ CEO David Hisco said the February earthquake in Christchurch was likely to affect individual provisions over the short to medium-term.
"It is still too early to fully quantify the quake’s impact, however we believe we are adequately provisioned,” Hisco said.
The bank has re-allocated existing collective provisioning to cover earthquake costs. ANZ said provision coverage, the ratio of total provisions held to credit risk weighted assets, at 2.38% remained at a historically high level and was considered appropriate to absorb the one-off impacts to credit risk likely to result from the February earthquake.
Along with November's Christchurch earthquake and continued deleveraging across consumer and business sectors, February's earthquake was impacting New Zealand’s economic recovery.
"However deposits have grown strongly and it is expected the Rugby World Cup 2011 will deliver a boost to the economy in the second half of the year," said Hisco.
Lending contracts, inpaired assets rise
ANZ said net loans and advances fell 1% to NZ$95.4 billion from NZ$96 billion and customer deposits rose 5% to NZ$62.8 billion from NZ$59.7 billion, both in comparison with the half-year to September 30 last year. Net interest margins rose 5 basis points, also from the September half, to 2.44%. The bank's cost-to-income ratio fell to 44.8% from 49%. ANZ said total impaired assets rose by NZ$157 million between September and March to NZ$2.2 billion and now comprise 2.31% of its total assets.
Net interest income rose 6% versus the March 2010 half to NZ$1.3 billion with operating expenses up 2% to NZ$759 million.
With credit demand subdued, ANZ said revenue growth was boosted by the continuing switching of fixed rate lending to floating loans, although this benefit was partly offset by the cost of competition for deposits. Fixed rate loans now comprise 46% of ANZ's mortgage book, down from 68% in the same period last year. More than half the country's NZ$168.2 billion worth of mortgages are now on floating rates, the first time this has happened since Reserve Bank records began.
Hisco said since February's earthquake the bank had given funding support to more than 2,700 customers.
"This includes deferring payments on loans, interest free overdrafts and other assistance."
Westpac, which bought Trust Bank in the 1990s, is the only one of the major banks so far to have provided specific guidance on the likely impact of the February earthquake. Westpac expects credit losses of between NZ$30 million and NZ$100 million.
ANZ targets NZ migrants to Australia
Australian parent ANZ Group posted a 38% rise in statutory profit to A$2.7 billion. The group said it was striving to become "the bank of choice" for migrants from New Zealand, the Pacific and Asia.
"Examples of some of the initiatives supporting this drive include simplified account opening procedures for New Zealand customers."
A total of 3,908 New Zealand citizens left permanently during February to live in Australia, equivalent to about 139 each day. Prime Minister John Key said yesterday the government was aware of competitive threats from the Australian jobs market after the Australian government forecast the creation of 500,000 jobs in two years.
(Update adds additional detail and paragraph on ANZ targeting NZ migrants to Australia).
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