ANZ Bank (ASX: ANZ) beat expectations with a $3.56 billion first-half profit but falling house prices and royal commission fallout mean Australia's third largest bank says the sector will remain under pressure "for the foreseeable future".

Cash profit for the six months to 31 March rose two per cent from $3.49 billion a year earlier, beating consensus forecasts of $3.4 billion and propelling ANZ shares to a near two-month high.

But operating income fell 0.7 per cent to $9.75 billion and net interest margin - the difference between interest charged on a loan and that paid to fund it - fell to 1.80 per cent from 1.93 a year earlier.

Chief executive Shayne Elliott pointed to the ongoing impact of sagging property markets and lower demand for home loans.

"While our performance this half was solid, there are headwinds facing the sector and we are taking appropriate action," Elliott said on Wednesday.

"Retail banking in Australia will remain under pressure for the foreseeable future."

The ANZ CEO also called out the continuing cost to the industry of compensating customers for issues such as poor financial advice and fees for no service.

ANZ paid another $175 million in remediation in the first half and, by 31 March, had made $928 million in pre-tax provisions over two years.

"We've screwed up in the past and we've got to get that money back into our customers' hands," Elliott said. "It's 2.6 million accounts we've got to rectify."

ANZ incurred $51 million in restructuring expenses and $13 million in royal commission legal costs over the period, bringing total legal costs to $88 million since the inquiry began.

Elliott admitted ANZ may have been too cautious in tightening mortgage purse strings against a backdrop of regulatory intervention, royal commission scrutiny of lending standards and falling house prices.

He said ANZ had improved the composition of its loan book over the past three years, but UBS analysts were concerned by a rise in mortgage 30 days overdue to 2.25 per cent at March 30 - from 1.8 per cent six months earlier.

Cash profit rose 22 per cent with the inclusion of the wealth and insurance businesses ANZ has agreed to sell to IOOF and Zurich, but only because those discontinued operations lost far less during this first half than in the prior corresponding period.

ANZ held its interim dividend at 80 cents and its shares hit $28.15 in early trade, their highest since March 4.

They were still 3.05 per cent higher at $28.03 at 1340 AEST, compared to a 1.5 per cent rise for the overall financial sector.

ANZ's solid first half

  • Cash profit from continuing operations up 2 per cent to $3.57b
  • Cash profit including discontinued operations up 22 per cent to $3.51b
  • Cash operating income down 1 per cent to $9.75b
  • Net profit down 5 per cent to $3.17b
  • Interim dividend flat at 80 cents, fully franked