Low rates pushing down bad debts for major

by Calida Smylie01 May 2014
ANZ's half-year results show record-low rates have pushed down bad debts, with impaired assets down 32% over the last two years.

This is lower than at any point since September 2008 despite 46% growth in their lending book in that time.

While ANZ expects the provision charge for FY14 will be around 10% lower than for FY13, it maintains a strong provision balance. 

ANZ announced their half-year results this morning, showing statutory profit was up 15% to $3.4 billion and cash profit up 11% to $3.5 billion compared to the first half of last year.

Customer deposits grew 13% compared to the first half of 2013, with net loans and advances up 12%.

While income was up 3.6%, expenses also rose by 1.7% over the year.

Chief executive officer Mike Smith rather tamely termed the results “good”.

“They demonstrate consistent progress with ANZ’s long-term strategy to grow in our core franchises in Australia and New Zealand, to build a significant and profitable franchise in Asia Pacific, and to establish common infrastructure and processes that improve productivity and reduce risk.

“The diversification this strategy provides is now delivering a differentiated proposition for our customers and improved returns for shareholders.”

The bank is performing particularly well in Asia, where it launched six years ago, with a compound annual growth rate in earnings from Asia at 37%, Smith said.

 ANZ had the strongest home loan growth of the major banks over the past year and has grown home loans above system for 17 consecutive quarters, the bank said.

“We have developed greater scale based on market share growth in home lending, small business lending and retail deposits. 

Business confidence in Australia is recovering more slowly than expected however, and in some segments growth remains subdued with competition placing pressure on margins. Costs were carefully managed in this environment,” Smith said.

The bank said its quality of loan book is strengthening, with the provision charge of $528 million 12% lower over the year.

The fully franked dividend of 83cps is up 14%, and equates to a $2.3 billion pay-out to shareholders.

In other changes at ANZ, ex-director David Gonski takes over the reins from John Morschel as the group’s chairman from today after Morschel’s retirement from the ANZ board.

The bank announced the take-over in December, and the two head honchos have been working together since February to ensure a smooth transition.

Morschel has been a director since 2004 and chairman for the past four years, and Gonski, aged 60, previously served as an ANZ director from 2002 to 2007.

The businessman and University of New South Wales chancellor gave up his chairmanship of the Future Fund board to take up the ANZ position.