ANZ Bank Says Revenue Growth May Slow on Competition, Regulation

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  • Cash profit rises 18% to A$6.94 billion as bad debts decline
  • ‘It’s hard out there,’ Chief Executive Officer Elliott says

Australia & New Zealand Banking Group Ltd. warned revenue growth may slow as the lender faces a subdued economic outlook and increased regulation.

“The reality is, it is hard out there,” Chief Executive Officer Shayne Elliott said after reporting an 18 percent increase in full-year earnings. “We expect the revenue growth environment for banking will continue to be constrained as a result of intense competition and the effect of regulation, including a full year of impact of the Australian bank tax.

Unaudited cash profit, which excludes one-time items, rose to A$6.94 billion ($5.3 billion) in the 12 months ended Sept. 30, from A$5.9 billion a year earlier, the Melbourne-based bank said in a statement Thursday. That compares with the A$6.97 billion median estimate of 13 analysts surveyed by Bloomberg. Revenue fell 1 percent.

Read more: A breakdown of ANZ Bank’s full-year earnings

“We see little to capture investors’ imagination,” Citigroup Inc. analysts led by Craig Williams said in a note, which cut ANZ Bank to neutral from buy. “Revenue continues to decline and management is finding the task of delivering meaningful absolute cost reductions as an offset to be a challenge.”

ANZ Bank shares fell as much as 2.4 percent in Sydney trading, and were down 2 percent to A$29.89 at 12:07 p.m. local time.

Elliott is in the process of reshaping the bank to focus on its more profitable domestic banking operations. Over the past 18 months he has sold a range of overseas businesses, including a stake in Shanghai Rural Commercial Bank and retail operations in five Asian markets, a legacy of his predecessor’s ill-fated expansion. The bank is also slimming down domestically, last week selling its wealth advisory unit to IOOF Holdings Ltd., and is looking to spin off or sell its life insurance division.

“Some ‘bumps in the road’ are being encountered on the divestment program,” the Citi analysts said. “We believe the path management is taking is the right one, but the benefits of this seems slower to emerge.”

Headwinds for the banking industry are also increasing, with low income growth and increased household debt constraining economic growth.

In other highlights from the earnings report:

  • Net interest margin fell to 1.99 percent from 2.07 percent a year earlier
  • Bad-debt charges fell to A$1.19 billion from A$1.96 billion
  • The bank will pay a final dividend of 80 Australian cents a share
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