ANZ reports 2008 Profit of $3,319 million
Strong underlying performance offset by increased provisions
Full year profit
Australia and New Zealand Banking Group Limited (ANZ) today announced a profit after tax of $3,319 million for the 12 months to 30 September 2008, down 21%. Cash profit* of $3,029 million was down 23%.
The full year dividend has been maintained at 136 cents per share fully franked.
Underlying revenue* grew 12%, with lending growth for the year of 16% and growth in deposits and other borrowings of 21% highlighting an increased reliance on AA-rated banks during the global financial turmoil, the relative strength of the regional economy and the quality of ANZ’s franchise.
The results were impacted by a $1.4 billion increase in credit impairment charges on lending to $1.9 billion along with a $0.7 billion charge for credit risk on derivatives. The collective provision has been strengthened by $829 million to sit at over 1% of credit risk weighted assets providing a strong position against the deteriorating global credit environment and softening economic conditions. The increase in the individual provision charge to $1.1 billion was driven principally by a small number of large single name exposures in the Institutional portfolio.
Net interest margin declined 18 basis points impacted by the dislocation in global credit markets , partly offset by actions taken by ANZ to recover margin losses incurred in the first half.
Operating expenses* grew 10% year on year reflecting continued substantial investment in the Asia Pacific business, remedial work in the Institutional division, lower than normal spend in the first half of 2007 and the full year impact of prior period investment in the Personal division.
ANZ Chief Executive Officer Mr Mike Smith said: “The solid underlying result shows the strength of the Australian banking system and highlights ANZ’s ability to weather an extremely challenging year. We have maintained our dividend, provided security and confidence for our customers and worked hard to meet community expectations with responsible, sustainable banking services.
“Since I joined ANZ in October 2007, we have done much to put the Bank on a new footing with a clear strategy focused on creating a super regional bank. We recognised the new reality in financial markets early and strengthened the balance sheet, increased capital and liquidity and systematically tackled some deficiencies in operating processes and controls. We have also created a new business model to lift customer focus and drive performance improvement.
“The growth in credit losses is disappointing but our ability to manage and absorb this shows a high level of resilience.
“Importantly the underlying performance of our business is sound. We delivered an excellent performance in Personal which has remained one of Australia’s best performing retail banks and one of Australia’s strongest deposit taking institutions. In Asia Pacific we are building a growth business which is delivering very good results leveraging the high economic growth in Asia and the deep regional liquidity pools.
“In Institutional, the business environment and operational issues have been more difficult, however we have adjusted our business model and tightened risk management to ensure we have a strong core customer franchise. In New Zealand, we have the leading market position and we are maintaining that franchise while driving productivity improvements.
“We are positioned well and will continue to take the necessary action to ensure ANZ remains one of the world’s leading banks with a strong credit rating.
“In the medium term, the main game at ANZ is our super regional strategy. What is clear is that ANZ has the right foundation to build upon although there will be a continuing period of remedial work in some areas. There are significant opportunities emerging from the environment. Continuing to manage the Bank in a steady decisive manner in the near term will set ANZ up to deliver on our aspiration to become a super regional bank. This is the key to creating greater value and out-performance for our shareholders over the longer term,” Mr Smith said.