ANZ chief executive Mike Smith yesterday made a sombre forecast for the banking sector, saying that shareholders could not look forward to the high returns they have enjoyed in recent years.Smith said return on equity for the next few years would be closer to 15 than 20 per cent as banks focused on building up their balance sheets and extracting profits from tighter margins.He also predicted that as the effects of the global financial crisis flowed through to "the real economy" provisioning levels would return to higher, long term average levels.ANZ yesterday reported a net profit of $3.3 billion for the year to September, 21 per cent down on the 2007 results. On the bank's preferred cash earnings basis, after taking out one-offs such as the  $248 million from the sale of the bank's share of the Visa IPO, the result was $3.01 billion, down 23 per cent on the previous year.The provision for credit impairment rose from $522 million in 2007 to $1.9 billion. ANZ squeezed as much into the collective provision as it considered it could get away with under accounting and prudential rules. Non-performing loans rose $1.06 billion to $1.17 billion.  Most of the bank's performance measures deteriorated. Return on equity fell from 19.6 to 13.2 per cent (and to only 11.2 per cent in the second half).  Return on assets fell from 1.15 to 0.76 per centThe expense to income ratio was up from 43.7 to 46.8 per cent. The net interest margin fell 18 basis points from 2.19 to 2.01 per cent.ANZ chief financial officer Peter Marriott said the result was distorted by a requirement under the accounting standards that a charge against the credit risk on derivatives (first disclosed to the market in February) had to go through the income line.The bank recognised $721 million of credit risk on derivatives during the year. Changes to the creditworthiness of counterparties to ANZ's structured credit intermediation trades accounted for $531 million of that amount. Defaults on customer derivative exposures with two mining companies and a financial institution accounted for $156 million. Changes to counterparty credit ratings accounted for $35 million.Adjusting for these charges the bank claimed a 12 per cent increase in underlying revenue, compared to reported growth of 4.3 per cent, and argued revenue was ahead of the 10 per cent increases in expenses.After saying: "don't get me started on the bloody accounting standards", Smith said the mark to market rules on derivatives were absurd. He said the industry would push for change.One of the bank's weak points is the lack of control over expenses. Operating expenses of $5.7 billion were up 15 per cent on the previous year.After adjusting for $218 million of what it called transformation initiatives and a $34 million impairment of an intangible the bank said its core operating expenses rose 10 per cent.In September the bank announced the results of an organisational review. Among the changes was a simplified organisational structure with fewer management layers. Smith said the bank's management