AAP
ANZ Banking Group Ltd has increased its underlying profit after tax for the four months to January by 16 per cent to $1.6 billion on higher earnings, wider margins and lower bad debts.
Income growth was about eight per cent and cost growth was seven per cent on further investment in the business, especially the institutional and Asian divisions, Melbourne-based ANZ said in a statement on Friday.
The company's margins increased 14 basis points, excluding the markets division, compared with the second half of fiscal 2009.
ANZ chief executive Mike Smith said the outlook for Australia, New Zealand and Asia was now more positive than a year ago.
"The improved conditions are reflected in a more positive outlook for provisions," Mr Smith said in the statement.
"There are, however, good reasons for caution about the outlook at this early stage of the year.
"We are already seeing a sovereign debt crisis in Europe and there is likely to be further volatility as the global financial crisis continues to work its way through the system."
ANZ said credit quality stabilised in the latter stages of 2009 and has been showing signs of improvement.
The provision charge for the full year was expected to be modestly higher than that implied by the four month total of $670 million. Fiscal year to date provisions were down 35 per cent on the prior year average.
ANZ, the Australian bank with the biggest presence in the Asia Pacific, said lending growth grew slightly, with increases in mortgages and credit cards offset by lower demand from corporate and institutional clients.
Deposits grew 2.5 per cent, driven by the increase in Australian retail and Asia Pacific institutional deposits, offset by a decline in New Zealand.
"The Australian Retail and Commercial businesses are delivering good results. Asia Pacific Europe and Americas (APEA) is continuing to grow while a key focus in 2010 is integrating the business we acquired in Asia from RBS," Mr Smith said.
"The New Zealand economy is stabilising, holding out the prospect of improved business performance over the next year or two."
The bank said consumer asset quality was holding up well with the total provision coverage ratio remaining steady at 2.04 per cent.
ANZ said it had raised just over 60 per cent, or $15.2 billion, of its expected term funding requirements with an average maturity of five years.
The bank said funding costs remained high on a historical basis with the most significant increase coming from deposits.
The banks have been pushing up interest rates on deposit products to attract savings to fund lending.
ANZ said its pro forma Tier One ratio was 10.4 per cent with a core ratio of about 8.3 per cent, making the bank's capital ratio the highest amongst the big four.
The integration of recent takeovers ING, RBS and Landmark were on track.
Mr Smith said global economic growth was likely to be slower now than in the decade leading up to the financial crisis.
"Despite recent steps to temper growth in China, Asia is expected to remain the world's best performing region with growth of 7.7 per cent (excluding Japan) which confirms our confidence in the super regional strategy," Mr Smith said.
ANZ is aiming to have 20 per cent of its earnings coming from Asia by 2012.
