Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant or accept liability for the accuracy or usefulness of the transcripts. These are copied directly from the broadcaster's website.
ANZ banking on more profit -

View in ParlViewView other Segments

ANZ banking on more profit
Peter Ryan reported this story on Thursday, October 25, 2012 12:14:00

ELEANOR HALL: Well, another bank result, another record profit.

The ANZ Bank has just released a full year profit of $5.7 billion.

The head of ANZ, Mike Smith, says he's happy for his bank to be consistent in releasing yet another monster profit but he complained that the bank's margins are still under pressure.

And he warned that bad debts could rise next year as the Australian economy cools.

Our business editor Peter Ryan has been looking at the figures and he joins us now.

So Peter, isn't it a bit rich for Mike Smith to be talking about pressures on the bank when it has just had another year of record breaking profits?

PETER RYAN: Well Eleanor, it has been said that there is only one thing less popular than a profitable bank and that is an unprofitable one, and indeed the $5.7 billion after-tax profit is a 6 per cent improvement on the previous year.

Lending is up 8 per cent , deposits are up 12 per cent but as a result the ANZ is having to pay more to fund the deposit war and to keep customers.

That has pushed ANZ's all important net interest margin, the way it measures profits, down by three basis points.

The ANZ's dividend is also creeping up, which is good news for investors - 4 per cent higher at 79 cents per share. This is all part of the dividend recovery after banks cut dividends at the height of the global financial crisis.

So this is all good news about record profits and it might sound monotonous and a bit dull but ANZ's CEO Mike Smith says being boring is quite good for a bank.

MIKE SMITH: Talking about ANZ as consistent and predictable and perhaps even boring is a significant change from the ANZ of the past. This consistent, no surprise performance is what investors and customers are looking for in a bank. To an extent I think it is always been the case but I think that's especially true in the volatile post-GFC world.

ELEANOR HALL: That's Mike Smith, the chief executive of ANZ, sounding very cheerful there.

Now Peter, Mike Smith has been vocal in recent years about the global outlook. Did he say anything about that today?

PETER RYAN: Well, Mike Smith knows all about this. He has taken the ANZ through the height of the global financial crisis - in 2008 and 2009 - but he certainly doesn't think it's time to be complacent.

He says there is no doubt the global economy is softening at the moment with a potential flashpoint in the United States after the budget deadlock known as the fiscal cliff appears to be becoming a real problem after the US election and of course there's still the debt crisis in Europe.

MIKE SMITH: Although I think there is now growing confidence that policy makers will avoid an economic Armageddon scenario in Europe, the ripple effects of a chronically weak Europe are becoming more and more apparent. The US recovery is, to be frank, painfully slow and although I am optimistic about the US decisions about fiscal policy in the coming months are also going to have a large impact on global growth outlook for 2013.

ELEANOR HALL: So that is the ANZ chief executive again, Mike Smith.

Now Peter, what does the ANZ's CEO say about where he thinks the Australian economy is heading?

PETER RYAN: Mike Smith says the ANZ's charge for provisions in 2012 was $1.2 billion, that's in line with the previous year, but the ANZ sees the need to make greater provisions for next year given that bad debts could rise as the economy slows and unemployment rises. Unemployment is currently 5.4 per cent. Some economists believe it is on the rise.

The ANZ share price today, by the way, is down by three-quarters of 1 per cent at $24.42. It was a good record profit as we've said but one that came in below estimates so a mild punishing today given that a good profit is never good enough.

ELEANOR HALL: Peter Ryan, our business editor, thank you.