ANZ posts 13% rise in underlying interim profit to NZ$684 mln, says lending volumes subdued as households and businesses continue deleveraging

ANZ posts 13% rise in underlying interim profit to NZ$684 mln, says lending volumes subdued as households and businesses continue deleveraging

ANZ New Zealand, the second of the country's big four banks to post half-year financial results so far in 2012, is also the second to deliver record interim profit.

ANZ, which includes the ANZ and National banks, UDC Finance and fund manager OnePath, today reported a NZ$79 million, or 13%, rise in underlying profit - which excludes non-core items - to NZ$684 million. Net profit after tax rose NZ$137 million, or 29%, to NZ$615 million. Both the underlying and net profit figures are new record highs.

In February ASB reported a NZ$89 million, or 31%, rise in half-year net profit after tax for the six months to December 31, 2011, to a record NZ$372 million. Westpac reports its half-year results tomorrow and BNZ on May 10.

ANZ said profit rose as income growth outstripped rising expenses and an increase in credit impairments. An ongoing switch by mortgage customers to floating rate loans has helped net interest margins continue rising.

The group said net interest income rose NZ$78 million, or 6%, to NZ$1.363 billion, with total operating income up NZ$102 million, or 6%, to NZ$1.796 billion. Operating expenses rose NZ$5 million, or 1%, to NZ$764 million, and provisions for credit impairment rose NZ$14 million, or 16%, to NZ$99 million.

Fixed to floating switch continues to boost margins

A detailed results briefing from Australian parent, the ANZ Banking Group, shows ANZ NZ's net interest margin rose 12 basis points to 2.65% in the half-year to March 31 from 2.53% in the six months to September 30 last year. The parent's investor presentation shows this net interest margin as a "New Zealand businesses" one, with a separate, "New Zealand geography" net interest margin of 2.50% given, up 10 basis points from 2.40% at September 30.

The margin growth comes after ANZ Banking Group CEO Mike Smith said in February ANZ NZ's margin growth was nearly an end due to stiff competition among banks for deposits.

In the results briefing the ANZ Banking Group said ANZ NZ's rising net interest income was driven by "favourable lending mix from an increased proportion of variable rate lending, lower mortgage break costs, and improved deposit margins."

Meanwhile, ANZ NZ said it had maintained its commitment to responsible lending by avoiding mortgage lending above 95% of home value. See more on this here.

Banks do better out of floating mortgages because the margin between the variable rate and short end of the yield curve, such as three month bank bills, is higher than the margin between the swap rate and fixed rate mortgages. However, when customers are floating it's easier for them to switch between banks.

Based on Reserve Bank figures, 62%, of the total NZ$171.5 billion value of industry wide home loans were on floating rates at the end of February. That's the highest level since the Reserve Bank bank began keeping records on fixed versus floating in June 1998. Overall 85% by value were either floating or fixed but up for renewal within 12 months. These figures are the culmination of a big switch by borrowers to floating mortgages in recent years with 87% of home loans by value on fixed-term rates as recently as January 2008.

ANZ NZ's figures show 57% of its home loan customers' mortgages on floating, or variable, rates as of March 31 and 43% on fixed-term rates. The floating percentage is up from 53% at September 30 last year and 48% last March 31, 2011.

Return on assets rise, lending drops

Meanwhile, ANZ NZ's return on average assets rose to 1.16% from 1.02%, and operating expenses to operating income fell to 45% from 46.3%.

ANZ NZ's net loans and advances were down slightly to NZ$86.576 billion as of March 31 from NZ$86.766 billion at September 30. Customer deposits rose 4% to NZ$52.287 million from NZ$50.235 billion. ANZ NZ said its funding gap - the difference between what it lends to customers and borrows itself to fund this - has reduced by NZ$1.9 billion so far this financial year, driven by rising customer deposits with call and savings accounts up 14%.

"Our improved performance reflects an increase in revenue and further reductions in funds set aside to cover bad debts as the economy continues its gradual recovery," ANZ NZ CEO David Hisco said.

Borrowing volumes had been relatively subdued, Hisco added, as households and businesses continued to repay debt. See ANZ NZ's press release here.

Parent delivers nearly A$3 billion of profit

The ANZ Banking Group posted half-year underlying profit of A$2.97 billion, up 6%, and net profit after tax up 10% to A$2.92 billion. The group will pay an A66 cents per share fully franked interim dividend, up 3%.

Smith said the New Zealand division had delivered a solid performance across all business lines. The New Zealand business simplification process - which involves changes to the management structure, shifting ANZ and National Bank staff onto one IT system and reducing the number of products on offer from 140 to about 100 - resulted in zero cost growth both compared with the same period of the last financial year and the six months to September last year. See more on ANZ NZ's simplification process here.

Across ANZ's New Zealand divisions, the retail division was the standout with profit up NZ$47 million, or 29%, at its retail business to NZ$210 million.

Meanwhile, ANZ NZ said Dryden Spring will retire both as a director and as chairman on June 22. A current director, John Judge, will take over as chairman.

(Updates add further detail).

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The group, which includes the ANZ and National banks, UDC Finance and fund manager OnePath, said net interest income rose NZ$78 million, or 6%, to NZ$1.363 billion, with total operating income up NZ$102 million, or 6%, to NZ$1.796 billion.
 
Nice if you can get it?  Sorely tested cash rich depositors hardly can.
 
Despite ill informed protestations from carnival barkers on behalf of the banking cartel the RBNZ has willfully seen to it that a substantial wealth transfer has transpired by holding the OCR at declared emergency levels for so long.
 
The only emergency is the net after tax returns to depositors leaves them at the bottom of the cliff.

Heads we win, tails you loose.  If that doesn't work your elected representatives will bail us out and run the ecconomy in a manner that will sacrifice just about any other sector to serve our bottom line.

Curious. Big-4-banks major cost is wholesale borrowing from EU area. Cost therefore is same in AU as in NZ. Mortgage Lending rates in NZ are approx 1% lower than in AU. Yet ANZ.NZ increases profit by 13% compared to ANZ.AU profit increase of 10%. Whassup?

Great farming profits....did ya feel their fingers in your pocket....what a rort.

Big profits equals big whinging whining and complaining from those who would rather the banks didn't make a profit, went down the gurgler and required other countries to buy good ol' NZ out (ala Greece).  Gee which would I rather have. 
Oh, and not to mention that the banks are one of the biggest employers in the country - would you rather have some 25,000 extra on the dole, oh, that's right what dole when the country is going down the toilet.
Yes I don't disagree that the level of profits is over the top and there needs to be some balance - I have a mortgage too!  Which bank is going to have the balls to be the market leader in dropping mortgage rates while increasing deposit rates therefore giving some of the profits back to the masses.  Can you see that happening?

What you are trying to justify is nothing more than a transfer of wealth from savers to the large banks. If they can make profits like this then obviously deposit rates are far to low.
We  know that sometime in the future after the housing market has collapsed these same banks will coming running back to the taxpayer for support, its a disgrace and our leaders are ignoring the voters which could end up with dire conseqences.  
 France and the rest of Latin block are soon going to swing to the left and go for the 'easy answer' , then its going to get very ugly for the rest of us.

Maybe the question therefore is what happens to the profits - where are they invested, is it back into the local economy (and no they cannot just farm it all back off to Australia as the RBNZ imposed restrictions on this).
Profits are not only generated from the gap between lending and deposit interest rates hence my comment about perhaps they could consider narrowing the gap to return some of the profits to their customers.
As far as the housing market collapsing well we all still need somewhere to live!  PS, I re-waterproofed my tent last summer...