ANZ chief executive Mike Smith and chief financial officer Peter Marriott were on the back foot yesterday, defending some of the options they had taken in the preparation of the bank's financial report for the March 2009 half year.Smith talked to what he called the bank's underlying profit rather than the cash earnings figure usually preferred by banks, saying that shareholders had asked to see the "underlying trends in the core business".While the underlying profit showed a four per cent increase on the previous corresponding period, the statutory net profit was down 28 per cent on last year's March half and cash earnings were down 43 per cent.Smith was also queried by analysts on the bank's decision to reduce the collective provision charge during the half, which resulted in a release of $96 million. With the bank reporting a big jump in charges for bad and doubtful debts and forecasting further increases in impaired assets in the September 2009 half and also the March half in 2010, investors were wondering about the logic of reducing provisions.The bank's net profit was $1.4 billion, down 28 per cent on the previous corresponding period. Income was up seven per cent but expenses were up 14 per cent. The charge for bad and doubtful debts was $1.4 billion, up from $681 million in the previous corresponding period.Non-cash items that were removed to come up with cash earnings included a $461 million gain on economic hedges used to manage the bank's interest rate and foreign exchange risk.With this and a couple of other minor adjustments the cash earnings came out at $954 million, a fall of 43 per cent on the March half last year.To achieve its underlying profit result the bank removed items which it deemed not part of core business. A couple of these were controversial.One was the bank's share of a settlement with investors in a couple of failed high yield fixed interest funds sold by ING New Zealand. ANZ will contribute $97 million after tax to a guaranteed payout to investors.Selling dud funds might be bad business but it is hard to argue that losses associated with funds management are not core business to a bank that owns half of ING Australia and ING NZ and has $34 billion of funds under management.The other contentious item was losses incurred by business groups within the bank's institutional division. The bank conducted a strategic review of the division and decided to get out of some areas, including alternative assets, private equity and structured credit intermediation.The bank took a hit of $664 million on its credit intermediation trades and $114 million on its private equity and alternative assets businesses during the half.With these and some other adjustments the modest cash earnings turned into a far more robust underlying profit of $1.9 billion, up four per cent on the previous corresponding period.One analyst's comment about the bank's decision to remove items relating to discontinued institutional business was that "they were continuing businesses when they made