ANZ warned today that the impact of global financial crisis would continue to wash over a ''fragile'' Australian economy next year after it unveiled an 11 per cent fall in net profits to $2.94 billion for its 2009 financial year.
In a result which largely mirrored yesterday's result from its rival big four institution, NAB, the Melbourne-based ANZ blamed a huge rise in bad debts - up 46 per cent to $3 billion - and one-off items such as provisions for tax and investment setbacks in New Zealand totalling $829 million for the drop in its annual earnings.
That blighted a ten per cent increase in underlying pre-tax profit of $3.7 billion, the detail of which revealed a 17 per cent jump in revenue across the group driven by a recovery in its once-struggling institutional business and strong growth in its retail banking arm.
The fall in net profits was also reflected by a 23 per cent drop in earnings per share which was hit by not only the depressed bottom line figure but also a $5.7 billion cash-raising exercise and its accompanying huge issue of new equity.
Shareholders have seen their pay-out of dividends hit as a consequence. ANZ flagged earlier this year that the full year dividend could be cut by as much as 25 per cent and that proved to be the case with a final payment of 56 cents a share, down a quarter on last year.
Together with the half year dividend of 46 cents a share, that will make a $1.02 for the whole of 2009.
ANZ's fund-raising moves did, however, significantly strengthen the bank's capital base in the year ending September 30. It also allowed the group to take advantage of the fall-out from the GFC by acquiring businesses such as assets from the Royal Bank of Scotland to expand its Asian operations.
While abating, the financial crisis continues to dog the world and ANZ said today that 2010 would still present challenges in the shape of increased bad debts among its commercial and personal customers.
''The economic slow down is continuing to play out much as expected,'' said ANZ chief executive Mike Smith this morning in a statement to the ASX. ''It is prudent to remain cautious. The global economy is still facing many difficulties and the Australian economy remains fragile.''
The last financial year - described by Mr Smith as the most difficult seen for decades - was marked by corporate failures and huge write-downs by both the commercial sector and the banking industry.
The bank's total of gross impaired loans now stands at $4.4 billion after the $3 billion jump seen over the past 12 months.
ANZ saw increases in sour loans across its entire area of operations but particularly in New Zealand where it has been forced to make provisions for a long-standing tax case that may result in hundreds of millions of dollars in penalties incurred by all big four Australian banks.
The one bit of good news on the bad debt front is that ANZ, like NAB yesterday, reported that it had experienced a slowing in the rate of increase in its second half of the amount of soured loans coming through.
And just like its rivals, ANZ has also benefited from strong revenue growth which has allowed it to offset much of the rise in its bad debt charges.
While group costs were up by 12 per cent as a reflection of its drive into Asia and Mr Smith's re-organisation of the bank in the wake of the Opes Prime affair and the re-shaping of its institutional division, the rise in revenue more than covered that.
This was particularly helped by continuing deposit growth as customers opted for safety with the big banks during the GFC. Margins also improved during the year.
Analysis of the figures released by ANZ today showed that the group's improvement in profit before bad debt charges which was seen at the underlying level at the first half continued into the last six months of the year.
The interim half year pre-tax figure of $3.4 billion was topped by a 12 per cent increase to $3.9 billion but that was cut by a 19 per cent jump in bad debt provisions of $1.6 billion over the same second half period.
djohn@smh.com.au
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