ANZ chief Mike Smith has signalled the long borrowing strike from businesses may be nearing an end, as the country’s third-largest bank by market value posted a softer-than-expected 8 per cent rise in profit for the nine months to June 30. “On the whole, the result was weaker than expected on a cash earnings basis and also of low quality given the contribution from a materially lower bad debt charge,” said Omkar Joshi an analyst at Watermark Funds Management, citing the declining margins and capital headwinds facing ANZ.
ANZ’s bad debt charge for the third quarter was $246 million, which it said reflected lower new provisions, fewer top-ups and steady write-backs and recoveries. “Corporate balance sheets remain in good shape across the region, leading to strengthening credit quality and a corresponding reduction in provisions,” Mr Smith said. “Combined with weak business investment, surplus global liquidity and strong competition though these trends also saw a further small contraction in loan spreads.
The bank’s first half profit was $3. 5bn, meaning the third quarter came in at $1. 7bn. “Subject to economic conditions and excluding the impact of the sale of ANZ Trustees, ANZ expects earnings (foreign exchange adjusted) to be in line with guidance, with revenue at the lower end of guidance range and costs well controlled ensuring revenue to cost jaws are positive,” the bank said. “Jaws” refers to revenue growth outpacing costs.
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