ANZ Q1 cash profit up 3.5% in tougher conditions

[SYDNEY] Australia and New Zealand Banking Group Ltd on Tuesday posted a 3.5 per cent rise in first quarter cash profit, warning that 2015 was shaping up to be a "slightly tougher, more volatile" environment.

ANZ reported cash profit of A$1.79 billion (S$1.89 billion) for the three months to Dec 31, compared with A$1.73 billion a year ago, led by a strong domestic performance, while lower trading income and higher expenses hurt revenue growth. "We have seen some tailwinds associated with the lower Australian dollar in the first quarter however these have been partially offset as a result of global economic conditions including lower commodity prices," Chief Executive Mike Smith said in a statement.

Mr Smith said the bank's global markets business was facing challenging conditions "although we expect this to improve through the year." ANZ, Australia's No. 3 lender by market value, expects its full-year dividend payout ratio to remain at the upper end of the target range of 65-70 per cent of cash profit.

Revenue for the quarter was above the quarterly average for FY14 of A$4.89 billion while expenses were also higher than the FY14 quarterly average of A$2.19 billion, the bank said, without providing specific figures.

Group net interest margins, a core measure of a bank's profitability, fell 6 basis points compared with the end of second half of FY14. Bad loan provisions were at A$232 million, up from A$191 million a year ago.

Australian banks have had a good run since the global financial crisis, posting fat profits and doling out hefty dividends, but the outlook is starting to look less rosy.

Onerous capital requirements globally coupled with a slowdown in the domestic economy and a regulatory crackdown on mortgage lending, the biggest profit contributor, are likely to weigh on future earnings. High stock valuations are also likely to keep large investors at bay.

ANZ is aiming to set itself apart from Australian banks by pursuing a super-regional strategy and expending the proportion of earnings it gets outside Australia.

REUTERS