ANZ Bank profit slumps, repositions for future

ANZ Bank's interim net profit slumped 22 percent Tuesday on the back of impairment and restructuring charges, but the result was welcomed by the market as the lender repositions for a challenging future. The Australia and New Zealand Banking Group's result for the six months to March 31 came in at Aus$2.73 billion (US$2.0 billion), while cash profit, which strips out one-off and other items, was Aus$2.78 billion. The drop was largely down to Aus$717 million in one-off net charges, including an accounting change to its software capitalisation policy, a write-down related to the value of its investment in Malaysia's AmBank, and restructuring. In a surprise move, ANZ slashed its interim dividend seven percent to 80 cents. Despite this, its share price rocketed after initially plunging, ending 5.56 percent higher at Aus$25.05. "Overall, while the result was a slight miss, it is pleasing to see ANZ taking the right actions to address the market's concerns," said Watermark Funds Management analyst Omar Joshi in explaining the share price reaction. IG Markets chief strategist Chris Weston added: "The cash earnings are well below consensus, but this seems a function of a sizeable restructuring charge and therefore they are not as bad as feared." With banks juggling new rules that demand they hold more reserves as a buffer against mortgages, and fears over rising bad loans, ANZ chief executive Shayne Elliott said the one-off charges better positioned the bank for future profit growth. "This result reflects a challenging period for banking and we have taken the opportunity to move decisively and adapt to the changing environment by building a simpler, better capitalised and more balanced bank," he said. "We have strong underlying drivers in our Australia and New Zealand consumer and small business franchise and we have seen good early progress in transforming Institutional Banking. "This has been supported by prudent capital management and tight control of costs with total expenses, excluding the impact of specified items, being lower for the first time in seven halves." Elliott added that banking was experiencing rapid shifts in technology and regulation against a backdrop of low economic growth, volatile financial markets and rising credit costs. "Our priority is to take bold action to ensure ANZ is fit and ready for this future," he said. The soft numbers follow Westpac posting a three percent rise in interim net profit to Aus$3.70 billion on Monday, disappointing investors who savaged the share price. National Australia Bank reports its half-yearly results on Thursday. The Commonwealth Bank, the country's biggest lender, follows a different cycle. In February it posted a modest two percent rise in first-half net profit to Aus$4.62 billion.