ANZ's bottom line drops, but interest income up

The overall result for ANZ's New Zealand operations, including its subsidiary ANZ National Bank and the newly registered ANZ New Zealand branch, saw its bottom line profit drop 30.9% to $422 million for the six months ended March.

Wednesday, June 24th 2009, 9:07PM

by Jenny Ruth

The new branch was registered on January 5 to get around lending restrictions imposed by the Australian regulator, Australian Prudential Regulation Authority.

Its general disclosure statement (GDS) shows the main reasons for the drop was its $288 million in charges against profit for credit impairment, up from $93 million in the same period a year earlier, as well as its $166 million estimate of the cost of a proposed settlement with investors in two failed structured credit funds.

ANZ's net interest income actually rose 16.5% to $1.19 billion for the six months although other operating income fell 12% to $431 million. The latter is after the $166 million ANZ estimates will be its share of a proposed settlement with investors in the failed ING Diversified Yield Fund and ING Regular Income Fund.

Nevertheless, ANZ now values its 49% stake in ING New Zealand at $242 million, up from $201 million in March last year and $212 million in September last year. ANZ says it obtained an independent valuation of ING NZ at March 31.

The already published GDS for ANZ's New Zealand subsidiary showed a 29.5% drop in net profit to $488 million for the six months.

With no explanation, ANZ reported its capital adequacy under the old Basel 1 rules, not the Basel 11 rules which came into force on January 1, 2008.

Effectively, this makes it impossible to compare ANZ's total mortgage book with those of the other bank because under the Basel 1 rules all loans secured by residential mortgages, including business loans, are reported together whereas the Basel 11 rules separate out business loans. The other banks and ANZ's subsidiary are all reporting under Basel 11 rules.

Under the Basel 1 rules, ANZ's residential mortgages held by both the new branch and its NZ subsidiary totalled $54.68 billion, an apparent surge from $49.67 billion at December 31 under the Basel 11 rules.

The ANZ subsidiary's GDS, using the Basel 11 rules, showed its mortgage book apparently fell by $4.5 billion to $45.16 billion between December and March.

But the subsidiary sold the new branch $4.88 billion worth of mortgages on February 27.

« Bank defends its pricing of mortgages

Bill to force disclosure of break fees »

Special Offers