ANZ has beaten expectations to lift first-half cash profit two per cent to $3.56 billion but warned subdued credit growth, competition and compliance costs will keep bank sector earnings under pressure “for the foreseeable future”.
Cash profit for the six months to March 31 rose from $3.49 billion a year earlier, coming in slightly above consensus forecasts of about $3.4 billion.
But operating income fell 0.7 per cent to $9.75 billion and chief executive officer Shayne Elliott said tough conditions would continue as Australia’s property market sagged and demand for home loans remained significantly reduced.
“While our performance this half was solid, there are headwinds facing the sector and we are taking appropriate action,” Mr Elliott said
“Retail banking in Australia will remain under pressure for the foreseeable future.”
ANZ paid $175 million in customer remediation over the half and, by March 31, had made $698 million in provisions for remediation over issues such as poor financial advice and fees for no service.
“We’ve screwed up in the past and we’ve got to get that money back into our customers’ hands,” Mr Elliott said.
“It’s 2.6 million accounts we’ve got to rectify..
ANZ incurred $51 million in restructuring expenses and $13 million in royal commission legal costs – bringing total legal costs to $88 million since the inquiry began.
Looking at the business, Mr Elliott admitted ANZ may have been too cautious in tightening mortgage purse strings against a backdrop of regulatory intervention, royal commission scrutiny of lending standards and falling house prices.
“While our decision to step back from certain segments compounded this impact, being more risk averse in the current environment is prudent,” Mr Elliott said.
“However, we do accept we could have done a better job implementing our new risk settings and are taking steps to improve processes.”
Cash profit rose 22 per cent with the inclusion of the wealth and insurance businesses it has agreed to sell to IOOF and Zurich.
Those discontinued operations lost $50 million compared to $617 million a year ago.
ANZ held its interim dividend at 80 cents, fully franked.
ANZ’S SOLID FIRST HALF
* Cash profit from continuing operations up 2 per cent to $3.57b
* Cash profit including discontinued operations up 22 per cent to $3.51b
* Cash operating income down 1 per cent to $9.75b
* Net profit down 5 per cent to $3.17b
* Interim dividend flat at 80 cents, fully franked.