November 04, 2011
ANZ will stalk the Asian assets of European banks caught in the debt crisis as it seeks to jump-start the earnings growth that stalled in the second half of the financial year.
Unveiling a full-year net profit rise of 19 per cent, to $5.36 billion, chief Mike Smith revealed the bank's trading desk pursued a safety first strategy earlier this year.
"The daily volatility (in the last quarter) was more extreme than 2007 and 2008," Mr Smith said, as the bank posted figures revealing revenue from its global markets division fell by 28 per cent.
"Trying to judge what was going on and read the market became so difficult and it was so unpredictable it was better to move to a 'risk off' situation.
"It didn't allow the traders to make money but didn't allow us to lose it either," he said of the institution's large investment arm.
Investors reacted negatively, sending ANZ shares down 1.9 per cent as the group's results showed second-half profit growth slowed to just over 4 per cent.
But he said the bank was on the look out for opportunities to buy Asian assets from European banks who were struggling to raise cash.
"(They will have to) reduce their balance sheet or sell out," he said.
"We are already seeing opportunities with portfolios for sale."
The bank aims to double Asian contribution to profit to 30 per cent by 2017.
"Our focus on the growth markets of Asia and their connectivity with our key domestic franchises means we are in the right place, with the right strategy at the right time."
The bank's cash profit for the year to September climbed 9 per cent to $5.6 billion.
Mr Smith said trading in October had become "more predictable" but cautioned market volatility was set to continue for several years, driven by European debt woes.
"Europe is going to go from crisis to crisis, there will be a few sticky plasters and bandages. But these will wear off -- and it will get exciting again."
He said customer deposits grew 16 per cent, outstripping loans growth which was at 8 per cent, creating a stronger balance sheet in the face of tumultuous global wholesale markets.
Mr Smith said the bank had reduced offshore wholesale funding by $12 billion in the past three years.
The annual report showed costs were increasing across the business, and ANZ then made a concerted effort to rein in expenses as markets tightened in the second half.
ANZ Bank's group net interest margin slipped in the second half to 2.44 per cent, from 2.47 per cent in the previous six months. Operating expenses for the full year rose 10 per cent to $8 billion.
ANZ declared a fully-franked final dividend of 76c a share, up from 74c last year.
Article by Jeff Whalley From:Herald Sun