ANZ to cut dividends by 25%

Thursday 26th February 2009

Australia and New Zealand Banking Group, owner of New Zealand's biggest combined lender, plans to cut dividend payments by 25% this year and may raise more capital as bad debts rise.

Full-year provisions will be in the range of A$2.4 billion to A$2.5 billion this year, the Melbourne-based lender said in a statement. It will also take a further mark-to-market charge of A$370 million on credit intermediation trades. Earnings fell 11% to about A$1.2 billion in the four months ended January 31, it said today.

"While Australia is better positioned than most other countries and has been remarkably resilient so far, it has not given us immunity - nor will it this year," chief executive Mike Smith said. "We are also facing difficult conditions in New Zealand."

Shares of ANZ Bank rose 2.7% to A$12.85 on the ASX and have declined 44% in the past 12 months. The cut to dividends, which will be finalized with the lender's first-half results, is the first in 18 years. It will free up about A$500 million of capital a year, according to the statement.

ANZ Bank is the smallest of Australia's big four banks, which have all said bad debts are eating into profits.

Smith said Australia's economic slowdown will be milder than experienced in major economies such as the US, Japan and Europe, with Asia remaining "the engine for growth in the global economy."

By Jonathan Underhill

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