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ANZ delivers 31pc lift in 1Q17 cash profit

Nicholas Grove  |  17 Feb 2017Text size  Decrease  Increase  |  

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Australian and New Zealand Banking Group's (ASX: ANZ) cash net profit for the first quarter to 31 December 2017 rose 31 per cent on the same quarter in the previous year to $2 billion, following a good performance in the bank's Australia and New Zealand Retail, and Institutional divisions.

The result also benefitted from a lower bad debt charge and the sale of the bank's old headquarters at 100 Queen Street, Melbourne, ANZ said in a statement to the ASX on Friday.

Statutory net profit for the quarter rose 8 per cent year over year to $1.6 billion.

Productivity initiatives and tight cost management saw costs fall 4 per cent, while revenues rose 7 per cent, the bank said.

However, group net interest margin (NIM)--or the difference between what banks charge for loans and their cost of funds--declined several basis points in the quarter, reflecting lower earnings on capital, and higher funding costs driven by improving liability mix from strong deposit growth, ANZ said.

In the Retail & Commercial operations, home lending in Australia and New Zealand was strong, the bank said, while commercial lending volumes were "more subdued".

The bank also said initiatives including ApplePay and AndroidPay were continuing to attract retail customers.

In the Institutional division, Global Markets income of $706 million benefited from favourable trading conditions arising from a strengthening US dollar and rising yield curves, ANZ said.

ANZ chief executive officer Shayne Elliott was upbeat on the bank's outlook for bad debts.

"It is still too early to be definitive about the year as a whole, however, the first quarter together with our experience during first six weeks of the second quarter suggests the credit environment is marginally better than we expected at the time of our 2016 full-year result, which was for the provision charge in 2017 to remain broadly the same as a percentage of gross lending assets," he said.

"Overall, we have seen good progress in the first quarter. Clearly though, there is still a great deal to do to sustain this progress in a low-growth environment and to deliver a winning proposition that meets our customers' rapidly changing needs."

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Nicholas Grove is a Morningstar journalist.

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