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ANZ profit slides 24pc to $5.7b, eyes wealth management sell-off

Thursday, 3 Nov 2016 05:11:36 | Michael Janda And Stephen Letts

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

ANZ's full-year profit has dropped 24 per cent to $5.7 billion, hit by nearly $1.1 billion of write-downs as the bank restructures away from Asian retail banking.

Key points:

  • ANZ profit hit by more than $1b in write-downs
  • Pro-forma cash profit down 3pc to $7b
  • ANZ considers offloading wealth management and life insurance

The bank said its preferred measure of cash profit was down 18 per cent to $5.9 billion while, if one-off charges were excluded, adjusted pro-forma cash profit was off 3 per cent to $7 billion.

The bank is paying an 80 cent final dividend - identical to the first half - and total payments for the financial year are down 12 per cent on the previous year.

The more than $1 billion worth of charges that eroded the cash profit largely related to changed accounting practices and the treatment of the value of the bank's IT platforms.

Restructuring costs associated with the loss of 500 jobs accounted for $100 million and there was also a $168 million write-down in the value of derivatives held in its markets business, which were pre-announced last week.

There was a noticeable weakening in credit quality, with total credit impairment charges rising 62 per cent from $1.2 billion to $1.9 billion in the past twelve months.

Impairment charges as a percentage of the total loan book rose 12 basis points from 0.22 per cent to 0.34 per cent.

"While in aggregate the credit environment is broadly stable, pockets of weakness continue to work their way through the economy, largely reflecting stress moving through the resources and resources related sectors," the ANZ noted in a statement released to ASX.

"The stress appears to have now largely passed through the institutional market and is progressively moving through the commercial and retail sectors."

Net interest margins fell by 4 basis point to 2 per cent reflecting tougher competition and rising cost pressures.

ANZ chief executive Shayne Elliott described the result as a "good performance" highlighted by consumer and small business lending and a disciplined approach to market share and cost management.

External Link: ANZ earnings

Mr Elliott also pointed to a turnaround in the bank's large institutional business.

"In institutional banking there has also been significant progress in improving returns and building a simpler business focussed on regional trade and capital flows," he said.

"This included a meaningful reduction in low yielding assets and improved productivity."

ANZ may exit life insurance and investment advice

Under Mr Elliott's leadership ANZ has been selling wealth management and retail businesses in Asia and Australia, pulling back to its core banking business.

Home lending rose 7 per cent, while small business lending grew by 9 per cent in Australia over the year.

Mr Elliott also signalled an exit from the life insurance and investment businesses - in other words the products that have been at the heart of consumer anger across the banking sector in recent years.

"The strategic review of ANZ's wealth businesses ... concluded that while the distribution of high quality wealth products and services should remain a core component of the group's overall customer proposition, ANZ does not need to be a manufacturer of life and investments products," Mr Elliott said.

Mr Elliott said the bank was now exploring a range of options including the sale of the life insurance, advice and superannuation and investment businesses.

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