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ANZ profit up, riding on institutional banking

ANZ profit up, riding on institutional banking

Sarah Simpkins
— 1 minute read

While its Australian division’s profit went down and New Zealand flatlined in the half year, ANZ’s institutional business saw an increase in profit of 32 per cent.

ANZ posted a cash profit on a continuing basis of $3.5 billion, increasing by 2 per cent year-on-year.

Statutory profit for the half fell by 5 per cent to $3.1 billion.

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The Australian division generated a profit of $1.7 billion, shrinking by 13 per cent from the prior corresponding period.

In New Zealand, profit slightly grew by 1 per cent to $753 million. The Pacific business’ profit of $33 million stagnated from the year before.

Meanwhile, the Institutional division saw a profit of $1 billion, rising by around a third from the previous year.

Chief executive Shayne Elliott expects the retail banking environment will remain tough, but stated institutional banking is well positioned to provide positive earnings diversification and help to offset the headwinds in other segments.

“Retail banking in Australia will remain under pressure for the foreseeable future with subdued credit growth, intense competition and increased compliance costs impacting earnings.

“We knew three years ago there would be strong headwinds and have taken action to respond head-on, including restructuring our Australian business.”

Restructuring the company cost ANZ $51 million in the first half, compared to $149 million in the prior half and $78 million a year ago.

ANZ saw a loss from its discontinued wealth businesses of $632 million in the half, with customer remediation coming to $53 million post-tax, 59 per cent less than what it had been in the prior half.

Customer remediation charges totalled at $100 million for the half year, adding to the prior half’s amount of $352 million and $67 million in the prior corresponding period.

The group also saw a reduction of around 5 per cent in its staff from the year before, although the number of employees rose by around 1,500 from the last half to 39,360.

In Australia, ANZ maintained the number of staff it had in the prior half, which decreased by 6 per cent from the first half in 2018.

The bank also cited the slowing demand for home loans in Australia.

“While our decision to step back from certain segments compounded this impact, being more risk averse in the current environment is prudent,” Mr Elliott said.

“However, we do accept we could have done a better job implementing our new risk settings and are taking steps to improve processes.”

The bank’s common equity tier 1 ratio (CET1) was up by 45 basis points from the year before to 11.5 per cent.

The bank also had a fully franked dividend per share of 80 cents, with earnings per share up 5 per cent to $1.11.

External legal costs for the bank in responding to the royal commission came to $13 million for the half, as opposed to $39 million in the September half last year and $16 million in the prior corresponding period.

 

ANZ profit up, riding on institutional banking
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