Interest rates

Australian ANZ sees margins improve on rate hike, cash profit rises

  • H1 cash profit increased by 4.1%
  • Said on track to grow in line with peers by year end
  • Increase in New Zealand home loan market share
  • Declares a dividend of A$0.72 per share
  • Share up around 2%, best intraday gain since mid-March

May 4 (Reuters) – The Australian and New Zealand Banking Group (ANZ.AX) beat first-half profit estimates on Wednesday, helped by the release of pandemic-era provisions and home loan growth in New Zealand. Zealand, and expects second half margins to improve as interest rates rise.

The lender said it expects margins to be helped in part by higher deposit-led earnings growth as the banking sector enters a new period of higher lending rates.

The Reserve Bank of Australia announced its first rate hike in more than a decade on Tuesday. The Reserve Bank of New Zealand has raised rates in its last four meetings to levels not seen since June 2019. read more

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“The rate hike – it’s going to hurt some people, it’s going to take money out of people’s pockets. But at this point people are well prepared for it,” chief executive Shayne Elliott said.

Shares in the lender rose 2.1% to AU$27.830, outpacing a 0.7% rise in the benchmark ASX 200 index (.AXJO) and marking ANZ’s biggest intraday pct jump since the March 17.

Driven by higher institutional client revenue, strong New Zealand home lending momentum, cost controls and the release of credit provisions worth A$284 million, cash profit from continuing operations rose 4.1% from a year ago to A$3.11 billion ($2.2 billion). ), ahead of a Visible Alpha consensus estimate of AU$2.99 ​​billion.

However, it fell 3% from the previous half.

“The weak core earnings result should worry investors today,” Citi analysts said in a note. “However, the second half should improve as rising rates begin to push net interest margins higher.”

Net interest margin – a key measure of profitability – rose to 1.58% in the half from 1.65% in the second half of 2021.

“When I look at the environment we had to operate in in the half, I actually think it was a very strong result…we managed margins tightly,” said chief financial officer Farhan Faruqui.

ANZ, which has lost Australian home loan market share since 2019 due to slow processing times, said its capacity had improved over the half-year and was on track to grow at the same pace. than the other major national banks by the end of the financial year.

It also announced plans to create a new listed parent holding company that would control two separate wholly-owned groups of entities: banking and non-banking groups, mirroring the organizational structure of global banks.

The bank declared an interim dividend of 72 Australian cents per share, up from 70 Australian cents a year earlier.

($1 = 1.4088 Australian dollars)

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Reporting by Sameer Manekar and Harish Sridharan in Bengaluru; Editing by Shailesh Kuber and Richard Pullin

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