ANZ lifts first half cash profit

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Australia and New Zealand Banking Group has posted a modest lift in first-half cash profit after managing to keep a lid on costs despite continuing strong competition in the home loan market.

Australia’s third-largest bank said cash profit from continuing operations for the six months ended March 31 rose four per cent to $3.1 billion, slightly ahead of analyst estimates.

Additionally, statutory net profit for the half year was up 20 per cent from the previous corresponding period to $3.5 billion as ANZ wound back provisions worth a net $284 million amid improving economic conditions.

The lender had previously flagged softer revenue and lower margins in the December quarter amid rising competition and slow processing times in its key home loans business but on Wednesday said investments in processing capacity in Australia drove positive balance sheet momentum in the first half.

“We are on target to grow in line with the Australian major banks by the end of our financial year but will do so with an eye to our margin performance,” CEO Shayne Elliott said.

The lender’s net interest margin – a key measure of its profitability – dropped six basis points from the preceding six months to 1.58 per cent amid a low rate environment. It had recorded a NIM of 1.63 per cent a year ago.

It is now forecasting an improvement in second-half margins, helped by higher deposit-driven earnings growth as interest rates rise.

The Reserve Bank of Australia on Tuesday lifted its cash rate for the first time in more than a decade in what is expected to be the first of a series of interest rate increases to combat rising inflation. The cash rate is up 25 basis points to 0.35 per cent.

ANZ, along with its big four peers CBA, NAB and Westpac – has already announced it will pass on the full increase to borrowers.

“Rising rates – that’s going to hurt some people, that’s going to take money out of people’s pockets. But at this point, people are well prepared for it,” Mr Elliott said.

Going forward, the bank expects a different operating environment characterised by greater uncertainty and rising interest rates and inflation but for now is seeing increased demand from its business customers.

The lender also announced it would apply to the prudential regulator to establish a non-operating holding company to separate its banking and non-banking businesses.

ANZ will pay a fully franked interim dividend of 72 cents per share, up two cents from the fiscal 2021 first half.

By 1030 AEST, ANZ shares were up 0.4 per cent at $27.37 in a firm Australian market.

ANZ FIRST-HALF LIFT

* Operating income up 14 per cent to $9.5 billion

* Cash profit up 4 per cent to $3.1 billion

* Net profit up 20 per cent to $3.5 billion

* Interim dividend 72 cents per share, up from 70 cents per share.

Prashant Mehra
(Australian Associated Press)

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