ANZ Trading Update
n a shareholder update today ANZ said its underlying business was continuing to perform well, however the global credit environment and market volatility will give rise to additional provisions.
While ANZ’s interim results are still being finalised, this update has been provided to inform shareholders that credit provisions for the first half will exceed the consensus of market expectations primarily due to a higher collective provision charge.
Key Points
• ANZ’s underlying business is performing well with growth in profit before provisions being driven by revenue growth of around 11% (compared to first half 2007).*
• Turmoil in global markets is continuing and the global economic outlook is weakening which is likely to impact credit quality in the Institutional portfolio.
• While the rise in actual losses on individual accounts in the Institutional portfolio has been contained, the increase in the collective provision reflects risks which are yet to crystallise, including a small number of downgrades in selected commercial property and broking industry segments. In addition the faster portfolio growth and an allowance for secondary impacts of the market turmoil generally have added to the collective provision.
• Credit quality in the Personal portfolio remains strong with no signs of deterioration.
• Total provision for credit impairment (including collective provision) for the half year is likely to be approximately $975 million (compared to $567 million for the full year in 2007).
ANZ Chief Executive Officer Mike Smith said: “ANZ’s underlying business is in good shape with profit before provisions in line with market expectations. Our Asia Pacific, Institutional and Personal divisions are delivering very good revenue growth with solid growth in New Zealand.
"As turmoil in global markets and the slowing of the US economy plays out and the Australian economy slows due to tighter monetary policy and credit conditions, there are likely to be flow-on effects for the commercial portfolios. There is a change taking place in the credit cycle and we intend to continue to take a conservative approach in reviewing our provisioning requirements,” Mr Smith said.
ANZ expects its total provision charge for credit impairment (including collective provision) to be in the vicinity of $975 million for the six months ended 31 March 2008.