December quarter complex for ANZ

A decent rise in pre-provision profit failed to lift the bottom line for ANZ over the December 2014 quarter, with net profit flat at A$1.65 billion compared with one year ago.

The September 2014 quarter net profit of $2.23 billion looks to be an aberration.

"Profit before provisions grew 5.2 per cent versus the prior comparable period," ANZ said, though the provision charge was inside the recent range at $232 million.

The bank's group net interest margin fell six basis points compared with the end of the September 2014 half, ANZ said. Of this, two bps "related to foreign exchange translation impacts [while] the remainder was largely attributable to global markets and the impact of higher liquidity requirements," the bank said.

Deposits were up nine per cent across the bank, while loans rose eight per cent as borrowers continued to pay down debt ahead of schedule.

ANZ chief executive Mike Smith told the bank's Blue Notes news site that the quarterly profit was "a pretty strong performance, much as to where we expected. Massive volatility in earnings is unlikely in the future."

"We are in a lower growth environment globally, and that's bound to make the results a little bit more boring," he said.

Confidence is a pervasive problem, with Smith echoing sentiments voiced in recent days by Commonwealth Bank Chief executive Ian Narev and Bendigo and Adelaide Bank chief Mike Hirst.

Smith said: "That is still an issue globally. There's definitely a recovery happening in the US though. That has improved and corporate US is now looking in much better shape and certainly is firing up, but Europe is still pretty desperate and, indeed, it's not clear how things will be resolved in Europe - you know, where does it go from here? So they are in for a long hard slog I think and therefore that does affect confidence.
 
"This part of the world is much better. Obviously the issues in Australia  around the politics hasn't made things any easier so definitely business confidence is still not probably where it should be."

Smith said ANZ "has done pretty well; the issue has been the trading side of global markets, actually the sales side of the market is being an all time high and that's continuing to grow.

"The issues in Asia are probably a little bit of competition, bit of margin compression, but nothing more than expected. I guess the issue for us has been more on the trade side where we have actually seen commodity prices come off. That's resulted in lower dollar amounts [but] the amount of shipping is continuing to rise, which is a good sign."

Smith said the "new reality" was that "we have got to expect that the world has entered a lower growth phase ,and particularly the OECD countries. To have a growth like we experienced pre-crisis is no longer realistic.

"Therefore, I think for the banking industry globally the issue will be about revenue growth. That's going to be the big challenge."

Asked by ANZ's house journalist about the departure of Phil Chronican as head of Australian banking and retail and whether that meant a "broader rejig" for management, Smith replied "no, not really."

"We have to continually be planning these sort of changes," he said.  "We'd been positioning that. Mark [Whelan] had gone on to the management board at the end of last year in anticipation of this and so this is one of those things you manage through."

"I am going to be around for some time," Smith said. "I have got lots to do, there is still a lot to do.

"Mark Whelan is part of the bench strength of the senior management of the bank. He's coming in a new stage in his career and that's a big job to fill, but I have still got lots to do."