ANZ New Zealand, the country's biggest bank, posted a 2% drop in annual profit as expenses rose faster than income, losses on hedges used to manage interest rate and foreign exchange risk rose, and its net interest margin fell.
ANZ NZ's September-year net profit after tax fell $44 million, or 2%, to $2.091 billion from $2.135 billion the previous year.
The ANZ Group reported a seven basis points fall in its NZ unit's annual net interest margin, the difference between the interest earned on lending and the interest paid on deposits, to 2.57%. ANZ NZ CEO Antonia Watson says was caused by costumers' preference for higher earning term deposits and "sharp price competition."
Operating income rose $33 million, or 1%, to $5.046 billion with net interest income rising $77 million, or 2%, to $4.316 billion. Operating expenses rose $101 million, or 6%, to $1.760 billion which Watson attributes to "inflationary pressures on staff and vendor costs."
ANZ NZ's cost-to-income ratio, as reported by the ANZ Group, surged 230 basis points to 38.8%.
The bank's credit impairment charge fell $139 million to $44 million. However, its fair value losses on economic hedges used to manage interest rate and foreign exchange risk rose $68 million, or 54%, to $195 million.
Home lending increased $4 billion, or 4%, year-on-year to $111 billion. Deposits rose $3.34 billion, or 3%, to $109.8 billion, whilst business lending "remained subdued," Watson says.
She says about 29% of ANZ's home loan accounts are ahead by six months or more, with more than half of customers having a savings buffer in place with about 20% regularly contributing into a savings account.
"As interest rates come down, inflation is controlled and businesses feel more confident, there is a sense of cautious optimism surrounding New Zealand's economic future," Watson says.
For its personal banking unit ANZ NZ says annual profit rose $1 million to $1.130 billion, while at its business and agriculture unit profit fell $14 million, or 3%, to $530 million. Institutional banking profit climbed $31 million, or 6%, to $573 million.
The ANZ Group, meanwhile, posted a 9% drop in annual cash profit to $6.725 billion. Its net interest margin fell to 1.57% from 1.70%, and its return on equity dropped to 9.4% from 10.5%. The Group's cost-to-income ratio rose to 52.3% from 49.5%. It's paying annual dividends of A$1.66 per share, down from A$1.75, which is equivalent to 76% of profit.
*The charts and tables below come from the ANZ Group.
ANZ NZ's press release is here.
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