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Category: Company News / Banking / International Financial Crisis

ANZ profit rises despite hit from Asian debt exposure

Wednesday, 17 Feb 2016 06:26:32 | Michael Janda

ANZ bank logos are displayed on signs outside a bank branch in Sydney in April 2011. (AAP: Sergio Dionisio, file photo)

ANZ has reported a $1.6 billion unaudited quarterly profit, but also warned that its bad debt charges are likely to rise above $800 million on a slowdown in Asia and a weak resources sector.

With the release of its trading update for the three months to December, ANZ revealed a $1.6 billion statutory net profit and a $1.85 billion cash profit for the quarter - up about 4 per cent on the same period last year.

ANZ warned that its group credit charge - an amount set aside for bad debts - would be a little above $800 million.

That is ahead of forecasts from seven leading banking analysts, who typically predicted $735 million.

Conditions appear to be getting worse in the current quarter, with ANZ saying that it expected "impaired assets" - basically non-performing loans - to be steady at $2.7 billion in its half-year results, despite having fallen in the first quarter.

New ANZ chief executive Shayne Elliott said slowing economic growth in Asia is expected to affect the bank's earnings, but had not yet had much impact up to the end of last year.

"Our exposure in Asia is predominately short tenor, investment grade lending, nevertheless the slowdown in the region and increased market volatility are seeing credit conditions become more difficult in the second quarter," he noted.

"Our business in China remains steady, with the impact primarily in manufacturing and trade-exposed sectors in South-East Asia."

The bank said its Australian and New Zealand operations were performing well in response to low interest rates, with household and small business lending strong, but corporate borrowing remaining subdued.

ANZ did note that while its domestic credit quality was broadly stable, there are "pockets of weakness associated with low commodity prices".

Mr Elliott said the bank is responding by keeping costs controlled.

"With the environment presenting a number of challenges, the new management team has taken action to reduce costs, to tightly manage the credit environment and capital, and to simplify and reposition the business," he added.

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