ANZ profit slumps by 16pc to $2.88b
ANZ is counting on a slimmer profile to help squeeze through tough times as lending standards tighten following banking royal commission revelations of lax background checks and poor record keeping.
The banking heavyweight yesterday reported a cash profit — a closely-watched industry measurement of underlying earnings — of $2.88 billion for the six months to March.
That tally was down 16 per cent from the same period a year earlier, largely because of a previously disclosed loss from two wealth businesses it has now offloaded.
Things looked rosier once the impact of those divestments was stripped out, with cash profit from continuing operations for the six months to March 31 rising 4.1 per cent to $3.49 billion, but that was only after expenses fell by $76 million. Net profit jumped 14 per cent to $3.32 billion.
Operating income from continuing operations dipped for a third straight half, slipping 1.7 per cent to $9.81 billion.
The group’s net interest margin — a key measure of profitability — dipped 0.05 percentage points over the half and 0.07 percentage points over the year as the benefit of previous mortgage rate rises faded.
Loan growth has already been slowing and chief executive Shayne Elliott said that could be exacerbated by ANZ toughening approval processes after the royal commission heard it did not fully verify mortgage applicants’ expenses. “There’‘ll be more likelihood we say ‘no,’” Mr Elliott said yesterday.
“Where in the past, on balance, we would have said ‘yes, we know you’re a good customer, I don’t have exactly all those documents perfect but I’ll make a judgement’ - I think that’s less likely in the future.”
And Mr Elliott said difficult underlying conditions were likely to continue into the foreseeable future.
“We expect revenue growth for the second half of 2018 to continue to be constrained,” Mr Elliott said.
“Historically high levels of household debt and low wage growth will offset some of the positive impact of recent strong employment data, so consumers are likely to remain cautious.”
ANZ had prepared the market for a report muddied by divestments and one-off costs, and Mr Elliott yesterday said it was a result of his efforts to simplify the lender’s business.
“We think that the only way for us to win in the eyes of our customers is to do a few things and do them really well and be operationally excellent,” he said.
“And in order to get there we need to sell some things, shrink some things, stop doing some things and that’s where the moving parts come in.” ANZ shares closed up 63c yesterday at $27.47.