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ANZ flags slower revenue growth, cites more regulation and bank inquiry impact
[SYDNEY] Australia and New Zealand Banking Group Ltd warned on Tuesday that increased regulation and fierce competition is set to crimp revenue growth, as will more cautious lending practices in the wake of a powerful inquiry into the country's finance industry.
CEO Shayne Elliott also called an end to the "golden period" for Australia's banking industry, much of it marked by successive years of record profits, even as his bank posted a better-than-expected increase in first-half earnings.
"Our sector has had a golden period for 20 plus years and we don't think that's going to continue, it is going to be harder," he said in a video clip posted by the bank on its website.
"Revenue is going to be harder to come by for our sector."
The downbeat outlook underscores concern in the country's US$105 billion finance industry as a Royal Commission - a judicial inquiry - airs allegations of sector-wide misconduct and the government puts pressure on regulators to step up their game.
"(The) Royal Commission impact is real, people will still want to buy and own a home...but it will change the process and it probably will make it harder for people to be successful in their applications," Mr Elliott told an analysts conference call, adding that banks would now be more cautious in their lending practices.
Nearly three months into a year-long inquiry, executives of all large lenders including ANZ have admitted to financial planning practices they considered unsatisfactory, while wealth manager AMP Ltd has seen its CEO and chairwoman leave in the wake of allegations that it misled many customers and deceived the corporate regulator.
On Tuesday, Australia's banking regulator slugged Commonwealth Bank of Australia with an extra A$1 billion (S$1 billion) capital requirement as it released a scathing report into how the lender allowed money laundering to flourish.
The federal government has also proposed doubling prison terms and dramatically increasing fines for financial services companies which break the law, and boosting the investigative powers of the Australian Securities and Investments Commission.
For the first-half, ANZ said cash profit from continuing operations rose 4 per cent to A$3.49 billion for the six months to March 31, helped by a decline in bad debt charges and lower costs. Analysts had forecast a result of A$3.46 billion.
"The result was a couple of hundred million dollars better than we expected so the market should respond well to this result," said Hugh Dive, chief investment officer of Atlas Funds Management, which owns ANZ shares.
Indeed, ANZ shares climbed 1.9 per cent in afternoon trade, while the broader market was up 0.5 per cent.
The Melbourne-headquartered company has been selling non-core assets like wealth management and car finance, part of a broader industry trend to simplify business structure. The cash profit measure excludes one-off and non-cash accounting items.
"Because of the divestments, this result is quite messy, but going forward, ANZ will be a much cleaner business," Mr Dive added.
Net interest income, the bank's main earner, fell one per cent to A$7.35 billion, but this was offset by a 44 per cent slide in bad debt charges from the previous year.