ANZ profit falls; mortgages sold to new branch

New Zealand's largest bank, ANZ National Bank saw its profit drop sharply in the March quarter as charges for impaired loans soared.

Wednesday, June 17th 2009, 5:44AM

by Jenny Ruth

ANZ's net profit fell 27.2% to $278 million for the three months compared with the same period a year earlier while charges for impaired loans jumped by $191 million from December 31. Profit for the six months ended March was down 29.5% to $488 million while charges for impaired loans for the six months totalled $285 million.

The bank's latest general disclosure statement (GDS) also shows its mortgage book apparently fell by $4.5 billion to $45.16 billion between December and March.

But the bank established a New Zealand branch in January, separate from its New Zealand subsidiary, and the subsidiary sold the branch $4.88 billion worth of mortgages on February 27.

Adding those mortgages back, suggests ANZ's total mortgage book grew by about $360 million in the three months. The exact figures won't be available until the GDS for the new branch is published - it has to be published by June 30.

Reserve Bank figures, which don't exactly match figures disclosed in banks' GDSs, show mortgage lending by registered banks grew $1.61 billion in the March quarter. Based on that figure, to maintain its market share, which was 33.6% at December 31, ANZ's mortgage book needed to have grown about $540 million.

ANZ spokewoman Virginia Stracey-Clitheroe says the bank's overall New Zealand mortgage portfolio remained "fairly flat" over the quarter with new business offsetting normal customer repayments.

David Tripe at Massey University says Australian prudential rules prevent an Australian bank from lending more than 50% of its equity to a subsidiary. This limitation doesn't apply to a branch so ANZ established its branch to ease funding pressures.

The subsidiary's GDS shows it had a further $5.67 billion in off-balance sheet retail mortgages, generally loans approved but not drawn down. Of the total book, 22.3% had loan-to-value ratios (LVRs) above 80%, down from 26.3% at December 31.

Loans with LVRs above 90% eased to 10.5% of the book from 11.9% at December 31 and 12.3% at September 30.

The GDS shows ANZ's individually impaired assets at March 31 totalled $609 million of which $200 million was retail mortgages.

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