Australia & New Zealand Banking Group Ltd. (ANZ), Australia’s third-largest bank by market value, said its first-quarter cash profit climbed 13 percent from a year earlier on higher lending and lower bad-debt charges.
Unaudited cash profit, which excludes one-time items, rose to A$1.73 billion ($1.55 billion) in the three months ended Dec. 31 and unaudited net profit climbed 21 percent to A$1.64 billion, the Melbourne-based bank said in a statement today. ANZ said it plans to issue capital notes to raise about A$1 billion.
The earnings increase follows five consecutive years of record profits for the lender, which has boosted its mortgage market share for the past four years, data from the Australian Prudential Regulation Authority show. ANZ’s variable mortgage rate has been the joint lowest with National Australia Bank Ltd. since August.
“The standout was the improvement in loan quality reflecting continued low interest rates and low levels of corporate leverage,” David Ellis, a Sydney-based analyst at Morningstar Inc. said in an e-mail. “We expect solid underlying earnings growth to continue for Australian banks.”
ANZ shares climbed 2.4 percent, the biggest intraday advance in more than three months, to A$30.64 at 1:55 p.m. in Sydney. The gain trimmed losses for the year to 5 percent, still the most among the four largest Australian lenders.
ANZ set aside A$191 million for bad debts compared with A$311 million a year earlier and expected the provision charge to be 10 percent lower in the year year ending Sept. 30 than the A$1.2 billion it set aside in 2013.
It reiterated its forecast for annual revenue growth of 4 percent to 5 percent and expenses growth of 2 percent. Customer deposits increased 4 percent and net lending climbed 3 percent in the quarter. The bank said that while it gained mortgage market share for the 16th consecutive quarter, business lending was softer.
“Lower bad-debt expenses are driving earnings now, though with consumer activity increasing ANZ has room to lift its revenue forecast,” Paul Xiradis, Sydney-based chief executive officer at Ausbil Dexia Ltd., which manages about $9 billion in assets including ANZ shares, said by phone.
First-quarter global markets revenue climbed 5.7 percent from a year earlier to more than A$600 million, led by customer sales, the bank said.
Group net interest margin, a key measure of lending profitability, was slightly lower due to low interest rates, the lender said without giving more details.
“The Australia division again grew market share in both retail and corporate and commercial during the quarter,” Chief Executive Officer Mike Smith said in today’s statement. “Our performance in the first quarter means we are on track to deliver a solid 2014.”
Core tier 1 capital, a measure of the bank’s ability to absorb losses, was 7.9 percent at the end of December under APRA’s standards, from 8.5 percent in September, after providing for payment of the 2013 final dividend, it said. The bank said it plans to raise A$1 billion through a capital notes offer to boost its tier 1 capital.
Commonwealth Bank of Australia, the nation’s biggest lender, reports first-half earnings tomorrow. National Australia Bank (NAB) releases its quarterly results on Feb. 21. Westpac Banking Corp. (WBC) doesn’t update investors on its quarterly performance. At CBA, the fiscal year ends in June, compared with September for its main competitors.
Australian banks provide few details in their quarterly earnings updates as full disclosure is only mandatory every six months.
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