The ANZ Bank has confirmed that the big banks are through the worse of rising bad debts, weak revenues and higher capital demands with a surprisingly solid third quarter trading update this morning.
Like rivals the CBA and NAB, plus the smaller regional, Bendigo (on Monday), the ANZ has lifted cash earnings, and unlike its rivals, reported a steady net interest margin for the quarter
The bank said its Cash Profit of $1.79 billion was up 5.3% quarter on quarter, after a small 0.3% rise in profit before provisions (indicating, like the nAB and the CBA, that falling and debts and impairments improved the bottom line.
This year’s third quarter update is different to that of last year when the bank provided nine month figures. Today’s release provides brief data on the bank’s third quarter performance.
The bank said revenue in the quarter fell 0.3% “which in part reflected a normalisation of the Markets business performance after an unusually strong first half along with the sale of 100 Queen Street” (in Melbourne).
"Expenses reduced 1% and continue to be well managed. As flagged the proceeds of the sale of 100 Queen Street are being reinvested in the business with approximately two thirds occurring in the second half, largely in the final quarter.
"The Group Net Interest Margin (NIM) was stable, up several basis points excluding Markets. Australia Division NIM improved offsetting a decline in Institutional NIM. The Australian Bank Levy will impact the NIM in the fourth quarter being reflected within the cost of funds.
"The reshaping of the Institutional Division asset base continued with Risk Weighted Assets (RWA) reducing a further $3 billion to $156 billion, with a cumulative reduction of $12 billion (-7%) during the Financial Year to date. The changing profile of the book has resulted in a decline in the Division’s provision charge and an improvement in the risk adjusted return (NII/Average Credit Risk Weighted Assets (CRWA)).
"Above system growth in residential mortgages in Australia has been primarily driven by the Owner Occupier segment. The Division is tracking well in respect of meeting various macro prudential requirements regarding mortgage growth,” the bank said.
In the statement, ANZ CEO, Shayne Elliott said: “This period has seen further progress in improving returns based on rebalancing our business portfolio, ongoing cost management discipline and improved capital efficiency. Although we are in period of lower sector revenue growth with some parts of the economy experiencing challenges, credit quality has improved.
“We are seeking to deliver sustainable returns to our shareholders and at the same time to live up to the expectations of our customers and the community. To do this we are changing the way we work and thinking differently to ensure we continue to provide a compelling service to our customers and make a meaningful contribution to the communities in which we operate,” Mr Elliott said.
