ANZ net profit slides amid pressures

ANZ's first quarter net profit dropped by nearly a fifth to $1.36 billion.

The statutory unaudited result for the three months to December 31 was about 20 per cent lower than the $1.7 billion net profit the bank recorded for the previous corresponding period.

The result was dragged down by accounting adjustments linked to foreign exchange rates and basis hedge valuations.

However, ANZ's unaudited underlying cash profit for the quarter rose 6.25 per cent, to $1.53 billion from $1.44 billion.

The cash profit results excludes what the bank calls non-core financial items and is the main focus for analysts.

ANZ said margins at its New Zealand, international and institutional banking divisions came under pressure during the quarter, offsetting revenue volume growth in Asia.

Chief executive Mike Smith described the bank's result as solid and in line with expectations outlined last October when it reported a record $5.66 billion full year net profit.

He said ANZ had continued to perform despite soft economic conditions in Australia and New Zealand, and cautious behaviour by consumers and business.

"Provisions were in line with expectations and there have been no developments, including the recent natural disasters in Australia, that would materially change our guidance for the year," he said in a statement on Friday.

Mr Smith said ANZ had won market share in Australia and New Zealand in regards to retail deposits and home loans during the quarter.

However, margins had been softer in New Zealand, where cost management was a priority.

Margins at ANZ's international and institutional banking arms also remained under pressure, albeit less so than in 2012.

Mr Smith said the trading environment had remained subdued for the bank's wealth division, but costs were being managed.

ANZ's global markets income rose 26 per cent to $544 million during the quarter, while average customer deposits increased 12.3 per cent and average lending assets were up 7.6 per cent.

Customer sales income increased four per cent on the bank's quarterly average for 2012, with ANZ's Australian business performing well and its Asian arm having its strongest ever customer sales result.

The bank said its credit quality trends were in line with expectations, with an impairment charge of $311 million.

Morningstar head of banking research David Ellis analyst said ANZ appeared to be on track for solid full year earnings growth.

"Our positive view is intact but constrained revenue growth and flat margins demonstrate challenges of soft economic conditions in Australia and New Zealand in calendar 2012," he said in a note to clients.

"Funding pressure remains, but we expect solid margins and improved revenue growth to deliver a full year profit around $6.4 billion and we maintain our number one ranking for this narrow-moat bank."

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