ANZ hits earnings record

By Phil Boeyen, ShareChat Business News Editor

Thursday 25th October 2001

ANZ Banking Group (NZSE: ANZ) has rewarded shareholders with a record profit of A$1.87 billion for the year ended September and is cautiously positive on the future.

The profit is an increase of 7% on last year's result and has pushed earnings per share up by 10% to A117.4 cents.

CEO, John McFarlane, says the result was a new record level and at the upper end of analysts' expectations.

"Our good first half performance was repeated in the second half, despite the more subdued economy and weaker credit environment.

"Earnings per share growth of 10% matched our minimum target. Return on equity of 20.2% exceeded our 2003 target of 20% and is the highest level in the last 20 years. As promised, we continued to improve the cost income ratio, achieving 48.3% for the year, and 47.3% for the second half. This is now reaching world-class levels."

Mr McFarlane says although the overall outlook is positive the bank is expecting a slowing in revenue opportunities until the economy rebounds.

"The credit environment is likely to remain subdued, but barring significant deterioration, losses will be containable.

"We are accordingly taking a deliberately cautious approach to our business, and will continue to manage cots towards a target cost-income ratio in the mid 40's, and constrain asset growth in economically sensitive areas."

"Talking account of all factors, we remain positive about future performance, and are leaving our 2002 and 2003 financial targets unchanged."

The bank says it has also increased its economic loss provisions (ELP) by $41 million to reflect the potential risk arising from global economic uncertainty and the events of September 11th.

"As we predicted in the first half, we have seen deterioration in asset quality in Australia as a result of the recent downturn. This has been evidenced particularly through some large corporate collapses and our specific provisions have therefore risen," Mr McFarlane says.

"Our specific provisions are now broadly in line with ELP for the year, albeit higher for the half. We have provided for all known problem exposures."

ANZ says the Australian and New Zealand economies are currently performing reactively well, but it is likely that the higher level of uncertainty will have a tangible effect.

Mr McFarlane says the bank is also planning more work on improving its image amongst both customers and the communities in which it operates.

"It is well known than banks are not held in high regard by personal customers or by the community. Changing this perception of ANZ and contributing to changes in the wider industry is a major priority of ours over the next few years."

ANZ was recently ranked last by overall bank performance in a survey by New Zealand consumer rights organisation, Consumers' Institute.

The bank's final dividend has been increased by 5 cents to A40 cents per share.

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