Bank profits safe for now
ANZ yesterday reinforced the message that there's plenty of earnings capacity, and pricing power, among Australia's leading banks, and thus for now at least little likelihood that the developing global recession will reduce their profits in a severe way.The bank said cash earnings increased 18 per cent over the four months to January 2009, though excluding provisions (and which also excludes the losses, that are floating around, on the credit trades that ANZ first owned up to a year ago).ANZ said statutory net profit fell 11 per cent to $1.2 billion over the four months to January 2009.The bank said income growth was up 16 per cent, a level more or less in line with the experience of National Australia Bank and Westpac, which have also published trading updates in recent weeks.The bank published growth measures for two divisions: Australia, where income was up 14 per cent and Asia, where profit increased by 125 per cent for the four-month period.Higher interest margins and decent trading profits from the markets business are lifting income in institutional banking, though ANZ did not say by how much. The bank said it will take charges of $100 million to exit private equity, alternative assets and some other businesses making poor returns.New Zealand was the odd business unit out, with margins under pressure and also no volume growth. Provisions in New Zealand may double in 2009, the bank said.ANZ endorsed forecasts by sell-side analysts for impaired assets of between $2.4 billion and $2.5 billion and said losses from institutional banking were tracking at 2008 levels.