ANZ's trading update for the 10 months to August yesterday turned, unsurprisingly, into a discussion over the state of credit markets.The chief details of the trading update - revenue growth and expense growth "high in the target ranges" - merited little mention.Speaking broadly on the consequences of the turmoil in credit markets John McFarlane emphasised the unusual character of the current turmoil, and the lack of any "flight to quality".Rather, he said, investors were buying treasury bonds and notes, and not the debt securities of higher rated banks.Peter Marriott, though, added that ANZ completed its usual monthly term funding during August - just at higher rates.Pressed by one analyst to comment on the prospect that large banks might try to hold rates to win market share from non-banks McFarlane said "on the mortgage side, I can't sit and swallow a 25 basis points increase in the cost of funds, particularly in the broker market. "If it [the choppy markets] moves away quickly, which I doubt, then things will return to normal. If it doesn't then certainly there'll be serious consideration as to what mortgage rates generally should be across the book."We have no immediate plans to change rates."Chief financial officer Peter Marriott said markets and institutional banking may not expect the surge in September that the bank might have expected (and did achieve in 2006). "Normally September is our strongest month of the year, with a lot of deal closures coming out of the institutional business. For example, in 2006 income was up to $40 million to $50 million in September alone."And while there is a strong pipeline out there [it will not] have the same kicker."Marriott disclosed that a lot of the weakness in ANZ's institutional bank related to the division's operations in New Zealand. Australia and Asia, he said, were "businesses performing very well".Institutional's profit growth was below average and income growth at the bottom of the bank's target range, a pattern consistent with the first half of the year.One quirk in the second half result for ANZ will be that a favourable tax ruling on the bank's buy-back of its TrUEPrS hybrid security "will shelter the gain on sale of FleetPartners". The bank noted this will be partly offset by a write-down in the Future Income Tax Benefit associated with the recently announced tax rate change in New Zealand.