Lighter provisioning charges and a revenue surge from institutional trading activities propelled ANZ to higher than expected earnings in the three months to the end of June.
The bank posted an unaudited net profit of A$1.6 billion for the period – a result that beat consensus forecasts and freed directors to declare an interim dividend.
ANZ, which deferred a decision on the first half dividend in April, will now pay a 25 cent distribution per ordinary share to all investors on the company’s register on 25 August.
Shareholders might have missed out on the dividend had it not been for a stellar returns from trading desks in the bank’s international markets division.
Chief executive Shayne Elliott said the markets division posted a 60 per cent increase in revenue compared to the average for the first two quarters of the year.
Given that ANZ generated first half revenue of $1.16 billion from the markets division, the third quarter revenue contribution likely exceeded $850 million.
“As a result of strong customer flows and underlying volatility, our markets business was up sixty per cent on the first half quarterly average, while a reduction in risk weighted assets from our international business also delivered a capital benefit to the group,” Elliott said.
The ANZ boss also highlighted the contribution of the bank’s simplification strategy to the June quarter result.
“We continued the simplification of our business with the announced sale of UDC in New Zealand to Shinsei Bank and an agreement to sell our off-site ATM fleet in Australia to Armaguard,” he said.
“We are better placed than when we went into the GFC with investments in data analytics and real time monitoring systems allowing us to spot trends quickly and respond to our customers’ needs promptly.”
The June quarter bottom line also benefitted from lower provisioning charges.
Provisioning soaked up $500 million in the third quarter, compared to an average of $837 million for the December and March quarters.
Collective provisioning was topped up by only $236 million after the record $1.04 billion taken in the first half.
Elliott attributed the lighter provisioning charges to improved economic forecasts for unemployment and the economy as whole.
“I just want to cast your mind back, we were in the eye of the storm on 31 March, we thought unemployment might hit 13 per cent,” he told the ANZ Bluenotes website.
“Now most people are saying maybe it’s nine or 10, so it’s a little bit better.
“And similarly for some of the other indicators.”
After several years of underperformance in the home loan market, ANZ has begun to claw back market share.
While the bank is now selling mortgages at double the system growth rate, margin contraction in the June quarter dampened benefits to the revenue line.
ANZ’s net interest margin tapered by 10 basis points to 1.59 per cent during the quarter.
Margin contraction has been a prominent feature at each of the major banks in the declining rate environment, although it has been more pronounced at ANZ.
The bank has the lowest NIM of all the major banks and the gap appears to be