(Reuters) -Australian lender ANZ Group reported lower-than-expected annual cash earnings and slashed its dividend on Friday as a challenging period of intense deposit and lending competition and high costs crimped its margins.
“Competition in the (core banking) sector has continued to be intense, particularly in home lending and deposits,” ANZ Chief Executive Shayne Elliott said in a statement.
Australian banks have been struggling to grow their profits because of stubbornly high expenses and a fierce price war between lenders as customers look for better deals on loans and their deposits.
The country’s fourth-largest lender by market value reported a cash profit of A$6.73 billion ($4.49 billion) for the year ended Sept. 30, missing the Visible Alpha consensus of A$6.82 billion and below last year’s A$7.41 billion.
Operating income slipped marginally to A$20.81 billion but beat the consensus view of A$20.77 billion.
“Overall a soft result that missed market expectations, despite the lower quality beat to markets revenues,” Citi analysts said.
The lender’s shares were trading 1.1% lower at A$31.37 as of 2327 GMT, as against the S&P/ASX200 benchmark index’s 0.8% gain.
ANZ proposed a final dividend of 83 Australian cents per share, below 94 Australian cents a share last year. It was, however, in line with market expectations.
The bank’s net interest margin, a key measure of profitability, fell 13 basis points from last year to 1.57%. Its common equity tier 1 ratio, a measure of spare cash, slipped more than a percentage point to 12.2% as of the end of the financial year.
“Higher interest rates are impacting customers and we saw an increase in those requiring hardship support,” Elliott said, referring to hardship packages that banks offer to borrowers in difficult circumstances to ease their repayment obligations.
Loan payments overdue for more than 90 days but not yet impaired grew by 47% to A$4.17 billion. Customer deposits were up 11% to A$715.21 billion, although the bank’s institutional division saw a marginal drop in its deposits.
Earlier in the week, larger rivals Westpac and National Australia Bank (OTC:NABZY) also reported modest declines in their annual cash profits due to fierce competition as well as a slight uptick in late loan payments.
($1 = 1.4972 Australian dollars)
Source: Economy - investing.com
