IT shift and restructure hack into ANZ NZ's profits

ANZ New Zealand's profit for 2011 may be hit by around NZ$160 million as operating expenses rise to meet the cost of a management restructure and the move to a single banking platform.

The total cost of these two initiatives is around $220 million, with $60 million to be capitalised and the balance to be expensed. To put this into perspective, $160 million would be around 13 per cent of ANZ NZ's pre-tax profit for 2010.

In November, ANZ announced it would adopt The National Bank's Systematics core banking system across both the ANZ and The National Bank networks by late 2011.

Earlier this month, ANZ also announced a management restructure that will see a single management head for its key retail segment and for business banking. This is apart from consolidation of other divisions.

It's unclear if some of these expenses are captured in the report for the December 2010 quarter, for which expenses increased 11 per cent, to $418 million, compared with the same period the year before.  In the preceding September 2010 quarter, ANZ's expenses also moved up sharply, to $428 million, compared with an average spending of $379 million in the first three quarters of 2010.

These operating expenses and a rise in tax expenses meant ANZ's net profit in the December 2010 quarter rose just three per cent, to $260 million.

The bank thus achieved no real benefit from a rise of eight per cent in net interest income and a 77 per cent drop in the bad debt charge.

ANZ's net loans fell five per cent, to $96 billion, during the December quarter.  Deposits fell by a small 0.4 per cent, but this was largely due to a drop of 20 per cent in commercial paper, to $5.8 billion, while other deposits, including term deposits, rose two per cent, to $64.2 billion.