ANZ today announced an unaudited cash profit of $1.79 billion and an unaudited statutory net profit of $1.65 billion for the 3 months to 31 December 2014, declaring it was a “solid result in a tough environment”. We say, “below expectations, in an increasingly complex and competitive market!” Profit before Provisions grew 5.2% versus the prior comparable period and rose 3.6% on a constant Foreign Exchange (FX) basis. This result was below consensus estimates, with margins squeezed, institutional banking revenue down, and provisions lower than expected. The share price fell on the day.
Revenue was above the quarterly average for FY14 with benefits from the decline in the Australian dollar exchange rate partially offset by lower Global Markets trading income. Expenses were also higher than the FY14 quarterly average reflecting exchange rate impacts along with several key business enhancement projects becoming operational. This included a new digital platform for the Australian business which provides better product speed to market and customer interface. ANZ continues to invest in growth opportunities and enablement capability.
Customer deposits grew 9% with net loans and advances up 8%. Deposit growth was strong across all geographies with lending demand varied across the Group and customer pay-down levels remaining elevated.
Group Net Interest Margin declined 6bps compared with the end of the second half FY14, 2bps of which related to foreign exchange translation impacts. The remainder was largely attributable to Global Markets and the impact of higher liquidity requirements.
Portfolio quality improvement, with further reductions in impaired assets. The provision charge of $232m was slightly lower than the FY14 quarterly average with no reduction in the management overlay balance during the period.
Excluding the impact of the FY14 final dividend payment, CET1 capital improved by around 20 bps. At 31 December the capital ratio on an APRA CET1 basis was 8.4% (11.9% Basel 3 Internationally Comparable basis). Risk Weighted Assets in creased $17.4 billion of which $8.2 billion was attributable to FX translation which has a negligible impact on Group CET1.
Looking at the segmentals,
The Australia Division is performing strongly, with all core segments contributing. Home lending has continued to grow at above system rates, with the fastest growth occurring in New South Wales. Targeted campaigns, leveraging our digital sales capabilities, have seen the Credit Cards business rebound, posting the highest market share gains of the major banks in the past 6 months. Commercial lending momentum has been maintained following the trend in the second half of FY14, particularly in Small Business Banking. Deposit growth trends were also positive, especially in Commercial, and ANZ has maintained market share in Household Deposits.
The New Zealand Division is also performing strongly delivering balance sheet growth with market share steady in the competitive mortgages market and deposit growth also strong. Ongoing benefits from the brand and systems merge continue to contribute to positive income expense jaws and the credit environment remains benign.
Global Wealth continues to build momentum, delivering strong in-force premiums growth, stable claims and lapse experience together with further growth in Funds under Management. Innovations including ANZ Smart Choice Super, the GROW by ANZ digital platform and the ANZ Grow Centre are driving greater adoption of Wealth products by both new to bank and existing ANZ customers.
International and Institutional Banking had a mixed start to the year. Trade volumes have been consistent; however significant reductions in commodity prices are impacting the value of shipments and providing a revenue headwind. Cash Management saw significant growth in volumes, particularly in Asia, with margins slightly improved. The Global Markets business delivered its strongest quarterly customer sales result in two years; however total Markets revenues (1Q15 $555 million) were down on the quarterly average for last year reflecting lower trading income. The business settings remain cons ervative with the value at risk (VaR) tracking below 2014 levels.
