In a market update today, ANZ reported an unaudited underlying profit after tax1 for the four months to 31 January 2010 of approximately $1.6 billion around 16% above the prior corresponding period (PCP).
Income growth was around 8%. Cost growth has also been around 7% based on further investment in the business, particularly in Institutional and Asia.
Group margins are up 14 bps (ex Markets) on the second half 2009 reflecting recovery of higher funding costs and more sustainable pricing for risk.
Global Markets income is down 2% PCP. Although 2009 was an exceptional year, the Global Markets business is continuing to demonstrate strong underlying income growth against 2008 reflecting the strength of the regionally focussed model.
Credit quality stabilised in the latter stages of 2009 and has since been showing signs of improvement. ANZ continues to monitor stress levels particularly in the middle market, along with some uncertainties around provisions on a small number of larger existing impaired loans.
The provision charge for the full year is currently expected to be modestly higher than that implied by the first 4 months total of $0.67 billion. Financial year to date (YTD) provisions are down 35% on the Financial Year 2009 average run rate. While the trend in provisions and arrears is positive, ANZ believes that caution is required.
Group lending growth was slightly up (flat FX adjusted), with growth in mortgages and credit cards offset by lower demand in corporate and Institutional and the continued repositioning of the institutional book.
Customer deposits are up around 2.5% (3.5% FX adjusted) from the end of financial year 2009, driven by increases in Australia retail and strong performance in Asia Pacific institutional deposits, offset by a decline in New Zealand.