The ANZ division of Megabank has announced a solid performance for the second quarter of FY11 (Sept to Dec 2011) after yesterday’s lacklustre result from the Westpac division.
The headlines:
- unaudited profit after tax was $1.7 billion
- underlying profit increased 4.6% on the first quarter, or 4.1% on the same quarter in FY10
- customer deposits and lending grew at 2% during the quarter
- expenses grew at 3% during the quarter
- group margins decreased by 1 basis point, down 9 basis points in Australia due to funding and deposit costs
- provisions at $239 million for the quarter, with total impaired assets declining $65 million
- New Zealand lending volumes decreased 0.7%
Without further details on balance sheet quality it is still evident that ANZ is facing the same earnings vice as CBA and WBC – higher funding costs (regardless of composition) and a reliance on reducing provisions to boost headline profit whilst credit growth remains barely positive.
ANZ’s regional focus on Asia may help them out of the building society concentration quagmire that the other banks, and today’s results show this diversification is paying off with double digit growth in revenues across all divisions.
The heresy:
There will not be a return to the level of credit growth that banks experienced pre-crisis for the foreseeable future, particularly in our major domestic markets in Australia and New Zealand, as consumers reduce their gearing and businesses pace investments.
The jig is up.
The hubris:
It’s important to reflect that our customers, our staff and the broader community benefit from safe, well-run commercial banks – banks that also generate profits that underpin investor and superannuation returns and that can be re-invested to expand lending.
In other words, create more credit for Australians to purchase already existing houses off each other at ever increasing prices? This statement was presumably added to counter the attacks by the Gillard Govenrment on the banking sector and possibly the well-defined and plausible idea of a super profit tax on banks to reduce systemic risk and revert these “safe, well-run” building societies back into utilities.
Yet another stock that is rallying on reports it is sacking employees, ANZ is up nearly 2% after midday on the ASX.